UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 28, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6666
SALANT CORPORATION
(Exact name of registrant as specified in its charter)
1114 Avenue of the Americas, New York, New York 10036
Telephone: (212) 221-7500
Incorporated in the State of Delaware
Employer Identification No. 13-3402444
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par
value $1 per share, registered on the New York Stock Exchange.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No __
As of March 24, 1997, there were outstanding 14,780,082 shares of the
Common Stock of the registrant. Based on the closing price of the Common Stock
on the New York Stock Exchange on such date, the aggregate market value of the
voting stock held by non-affiliates of the registrant on such date was
$33,930,555. For purposes of this computation, shares held by affiliates and by
directors and executive officers of the registrant have been excluded. Such
exclusion of shares held by directors and executive officers is not intended,
nor shall it be deemed, to be an admission that such persons are affiliates of
the registrant.
Documents incorporated by reference: The definitive Proxy Statement of Salant
Corporation relating to the 1997 Annual Meeting of Stockholders is incorporated
by reference in Part III hereof.
<PAGE>
TABLE OF CONTENTS
PART I
Item 1.Business
Item 2.Properties
Item 3.Legal Proceedings
Item 4.Submission of Matters to a Vote of Security Holders
PART II
Item 5.Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6.Selected Consolidated Financial Data
Item 7.Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 8.Consolidated Financial Statements and Supplementary Data
Item 9.Disagreements on Accounting and Financial Disclosure
PART III
Item 10.Directors and Executive Officers of the Registrant
Item 11.Executive Compensation
Item 12.Security Ownership of Certain Beneficial Owners and Management
Item 13.Certain Relationships and Related Transactions
PART IV
Item 14.Exhibits, Financial Statement Schedule and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction. Salant Corporation ("Salant"), which was incorporated in Delaware
in 1987, is the successor to a business founded in 1893 and incorporated in New
York in 1919. Salant designs, manufactures, imports and markets to retailers
throughout the United States brand name and private label apparel products
primarily in three product categories: (i) menswear; (ii) children's sleepwear
and underwear; and (iii) other products, as described below. Salant sells its
products to department and specialty stores, national chains, major discounters
and mass volume retailers throughout the United States. (As used herein, the
"Company" includes Salant and its subsidiaries, but excludes Salant's Vera Scarf
division.)
Men's Apparel. In 1996, Salant substantially restructured its men's apparel
business to focus on those businesses that the Company believes offer the
opportunity for greater profitability by either (i) providing its customer and
the retail consumer with products under well-known brands or designer labels, or
(ii) developing private label programs that capitalize on the Company's
sourcing, merchandising and marketing expertise. As a result of this
restructuring, the men's apparel business is comprised of the Perry Ellis
division and Salant Menswear Group. The Perry Ellis division markets dress
shirts, slacks and sportswear under the PERRY ELLIS, PORTFOLIO BY PERRY ELLIS
and PERRY ELLIS AMERICA trademarks. Salant Menswear Group is comprised of the
Accessories division, the Texas Apparel division and all pant and dress shirt
businesses other than those selling products bearing the PERRY ELLIS trademarks.
The Accessories division markets neckwear, belts and suspenders under a number
of different trademarks, including PORTFOLIO BY PERRY ELLIS, JOHN HENRY, SAVE
THE CHILDREN and PEANUTS. The Texas Apparel division manufactures men's and
boys' jeans, principally under the Sears, Roebuck & Co. ("Sears") CANYON RIVER
BLUES trademark. The Salant Menswear Group also markets dress shirts, primarily
under the JOHN HENRY and MANHATTAN trademarks, and pants under the THOMSON
trademark. Commencing in 1997, the Salant Menswear Group will manufacture men's
casual slacks under Sears' CANYON RIVER BLUES KHAKIS trademark. Prior to the
restructuring, the Company marketed sportswear under the JJ. FARMER and
MANHATTAN trademarks. As a result of the restructuring, the Company (i) ceased
marketing sportswear under the JJ. FARMER label and determined to sell or
license the trademark and (ii) discontinued marketing sportswear under the
MANHATTAN trademark.
Children's Sleepwear and Underwear. The children's sleepwear and underwear
business is conducted by the Company's Children's Apparel Group (the "Children's
Group"). The Children's Group markets blanket sleepers primarily using a number
of well-known licensed cartoon characters created by DISNEY and WARNER BROS.,
among others. The Children's Group also markets pajamas under the OSHKOSH B'GOSH
trademark, and sleepwear and underwear under the JOE BOXER trademark. Commencing
in the fall of 1997, the Children's Group will begin marketing boys' sportswear
under the JOE BOXER trademark.
Other Businesses. The other businesses of the Company consist of (i) the women's
junior apparel business, conducted by the Company's Made in The Shade division
("Made In the Shade"), and (ii) a chain of factory outlet stores (the "Stores
division"), through which the Company sells its own products and those of other
apparel manufacturers.
Principal Product Lines. The following table sets forth, for fiscal years 1994
through 1996, the percentage of the Company's total net sales contributed by
each category of product:
<TABLE>
<CAPTION>
Fiscal Year
1994 1995 1996
<S> <C> <C> <C>
Men's Apparel 82% 85% 81%
Children's Sleepwear and Underwear 8% 8% 10%
Other Businesses 10% 7% 9%
</TABLE>
For more detailed information regarding the Company's product categories, see
Note 10 to the Consolidated Financial Statements.
In 1996, approximately 13% of the Company's net sales were made to Sears.
Approximately 11% of the Company's net sales in 1996 were made to Federated
Department Stores, Inc. ("Federated"), which includes all 1996 net sales to
Macy's Department Stores ("Macy's"), which was acquired by Federated in 1994,
and the Broadway Stores, Inc. ("Broadway"), which was acquired by Federated in
February 1996. In 1995 and 1994, net sales to a combined
Federated/Macy's/Broadway would have represented approximately 12% and 15% of
the Company's net sales, respectively. In each of 1995 and 1994, approximately
11% of the Company's net sales were made to TJX Corporation ("TJX"), which
includes all 1995 and 1994 net sales to Marshall's Corporation, which was
acquired by TJX in February 1996.
In 1995, approximately 13% of the Children's Group's net sales were made to
Dayton Hudson Corporation. In 1996, approximately 27% and 22% of the net sales
of Other Businesses were made to K-Mart Corporation and JC Penney Company,
respectively. In 1995, net sales to JC Penney represented 19% of the net sales
of the other businesses segment.
No other customer accounted for more than 10% of the net sales of the Company or
any of its business segments during 1994, 1995 or 1996.
The markets in which the Company operates are highly competitive. The Company
competes primarily on the basis of brand recognition, quality, fashion, price,
customer service and merchandising expertise.
A significant factor in the marketing of the Company's products is the consumer
perception of the trademark or brand name under which those products are
marketed. Approximately 71% of the Company's net sales for 1996 was attributable
to products sold under Company owned or licensed designer trademarks and other
internationally recognized brand names and the balance was attributable to
products sold under retailers' private labels, including Sears' CANYON RIVER
BLUES. The following table lists the principal owned or licensed trademarks
under which the Company's products were sold in 1996 and the product lines
associated with those trademarks. Trademarks used under license are indicated
with an asterisk; all other listed trademarks are owned by the Company.
<TABLE>
<CAPTION>
Trademark Product Lines
<C> <S>
101 DALMATIANS *................................................. Children's sleepwear
BATMAN *......................................................... Children's sleepwear
DISNEY Characters *.............................................. Children's sleepwear and underwear
DR. DENTON....................................................... Children's sleepwear and underwear
GANT *........................................................... Men's dress shirts, neckwear, belts and suspenders
JJ. FARMER....................................................... Men's and women's sportswear
JOE BOXER *...................................................... Children's sleepwear and underwear
JOHN HENRY....................................................... Men's dress shirts, neckwear, belts and suspenders; men's jeans
MADE IN THE SHADE................................................ Women's junior sportswear
MANHATTAN........................................................ Men's dress shirts and sportswear
OSH KOSH B'GOSH *................................................ Children's sleepwear
PEANUTS *........................................................ Men's dress shirts and neckwear
PERRY ELLIS *.................................................... Men's sportswear, dress shirts, neckwear, belts and suspenders
PERRY ELLIS AMERICA *............................................ Men's casual sportswear and jeans
PORTFOLIO BY PERRY ELLIS *....................................... Men's dress slacks, dress shirts, neckwear, belts and suspenders
SAVE THE CHILDREN *.............................................. Men's neckwear and suspenders
SPACE JAM *...................................................... Children's sleepwear
THOMSON.......................................................... Men's casual and dress slacks
UNICEF *......................................................... Men's neckwear
</TABLE>
During 1996, approximately 35% of the Company's net sales was attributable to
products sold under the PERRY ELLIS, PORTFOLIO BY PERRY ELLIS and PERRY ELLIS
AMERICA trademarks; these products are sold through leading department and
specialty stores. Products sold to Sears under its exclusive brand CANYON RIVER
BLUES accounted for 11% of the Company's net sales during 1996. No other line of
products accounted for more than 10% of the Company's net sales during 1996.
Trademarks Owned by the Company and Related Licensing Income. The Company
owns the DR. DENTON, JJ. FARMER, JOHN HENRY, LADY MANHATTAN, MADE IN THE SHADE,
MANHATTAN and THOMSON trademarks, among others. All of the significant brand
names owned by the Company have been registered or are pending registration with
the United States Patent and Trademark Office.
The Company has sought to capitalize on consumer recognition of and interest in
its trademarks by licensing various of those trademarks to others. As of the end
of 1996, licenses were outstanding to approximately 21 licensees to make or sell
apparel products and accessories in the United States and to 34 licensees in 31
other countries under the MANHATTAN, LADY MANHATTAN, JOHN HENRY, THOMSON and
VERA trademarks, which produced royalty income of approximately $6.2 million in
1996. Products under license include men's belts, dress shirts, gloves,
handkerchiefs, leather accessories, neckwear, optical frames, outerwear,
pajamas, robes, scarves, shorts, slacks, socks, sportcoats, sunglasses,
suspenders and underwear, and women's blouses and tops, gloves, intimate
apparel, lingerie, optical frames, scarves and shirts.
Trademarks Licensed to the Company. The name Perry Ellis and related trademarks
are licensed to the Company under a series of license agreements with Perry
Ellis International, Inc. ("PEI"). The license agreements contain renewal
options which, subject to compliance with certain conditions contained therein,
permit the Company to extend the terms of such license agreements. Assuming the
exercise by the Company of all available renewal options, the license agreements
covering men's apparel and accessories will expire on December 31, 2015. The
Company also has rights of first refusal worldwide for certain new licenses
granted by PEI for men's apparel and accessories.
The Company is also a licensee of various trademarks, including certain DISNEY
characters (including 101 DALMATIANS), GANT, JOE BOXER, OSH KOSH B'GOSH,
PEANUTS, SAVE THE CHILDREN, UNICEF and certain WARNER BROS. characters
(including BATMAN and SPACE JAM), for various categories of products under
license agreements expiring between 1997 and 2002.
The agreements under which the Company is licensed to use trademarks owned by
others typically provide for royalties at varying percentages of net sales under
the licensed trademark, subject to a minimum annual royalty payable irrespective
of the level of net sales. The Company anticipates that it should be able to
extend, if it so desires, the term of any material licenses when they expire.
Design and Manufacturing. Products sold by the Company's various divisions are
manufactured to the designs and specifications (including fabric selections) of
designers employed by those divisions. In limited cases, the Company's designers
may receive input from one or more of the Company's licensors on general themes
or color palettes.
During 1996, approximately 17% of the products produced by the Company (measured
in units) were manufactured in the United States, with the balance manufactured
in foreign countries. Facilities operated by the Company accounted for
approximately 81% of its domestic-made products and 30% of its foreign-made
products; the balance in each case was attributable to unaffiliated contract
manufacturers. In 1996, approximately 44% of the Company's foreign production
was manufactured in Mexico, approximately 12% was manufactured in Guatemala and
approximately 10% was manufactured in the Dominican Republic .
The Company's foreign sourcing operations are subject to various risks of doing
business abroad, including currency fluctuations (although the predominant
currency used is the U. S. dollar), quotas and, in certain parts of the world,
political instability. Although the Company's operations have not been
materially adversely affected by any of such factors to date, any substantial
disruption of its relationships with its foreign suppliers could adversely
affect its operations. Some of the Company's imported merchandise is subject to
United States Customs duties. In addition, bilateral agreements between the
major exporting countries and the United States impose quotas, which limit the
amounts of certain categories of merchandise that may be imported into the
United States. Any material increase in duty levels, material decrease in quota
levels or material decrease in available quota allocations could adversely
affect the Company's operations.
Raw Materials. The raw materials used in the Company's manufacturing operations
consist principally of finished fabrics made from natural, synthetic and blended
fibers. These fabrics and other materials, such as leathers used in the
manufacture of various accessories, are purchased from a variety of sources both
within and outside the United States. The Company believes that adequate sources
of supply at acceptable price levels are available for all such materials.
Substantially all of the Company's foreign purchases are denominated in U.S.
currency. No single supplier accounted for more than 10% of Salant's raw
material purchases during 1996. The Company has not engaged in financial
activities through the use of derivatives or otherwise to hedge or diminish
currency risks or fluctuations.
Employees. As of the end of 1996, the Company employed approximately 3,800
persons, of whom 3,200 were engaged in manufacturing and distribution operations
and the remainder were employed in executive, marketing and sales, product
design, engineering and purchasing activities and in the operation of the
Company's factory outlet stores. Substantially all of the manufacturing
employees are covered by collective bargaining agreements with various unions,
which expire between 1997 and 2000. The Company believes that its relations with
its employees are satisfactory.
Management. On March 7, 1997, the Company announced that Nicholas P. DiPaolo,
Chairman and Chief Executive Officer, had notified the Board of Directors of his
intent to leave the Company in 1997. On April 1, 1997, Jerald S. Politzer will
join the Company as Chief Executive Officer and a member of the Board of
Directors.
Competition. The apparel industry in the United States is highly competitive and
characterized by a relatively small number of multi-line manufacturers (such as
the Company) and a larger number of specialty manufacturers. The Company faces
substantial competition in its markets from manufacturers in both categories.
Many of the Company's competitors have greater financial resources than the
Company. The Company seeks to maintain its competitive position in the markets
for its branded products on the basis of the strong brand recognition associated
with those products and, with respect to all of its products, on the basis of
styling, quality, fashion, price and customer service.
Environmental Regulations. Current environmental regulations have not had, and
in the opinion of the Company, assuming the continuation of present conditions,
are not expected to have a material effect on the business, capital
expenditures, earnings or competitive position of the Company.
Bankruptcy Court Cases. On June 27, 1990 (the "Filing Date"), Salant and its
wholly owned subsidiary, Denton Mills, Inc. ("Denton Mills"), each filed with
the United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") a separate voluntary petition for relief under chapter 11 of
title 11 of the United States Code (the "Bankruptcy Code") (Case Nos. 90-B-12037
(CB) and 90-B-12038 (CB)) (the "Chapter 11 Cases"). The Company's other United
States subsidiaries on the Filing Date did not seek relief under the Bankruptcy
Code. On July 30, 1993, the Bankruptcy Court issued an order confirming the
Third Amended Joint Plan of Reorganization of Salant and Denton Mills (the
"Reorganization Plan"). The Reorganization Plan was consummated on September 20,
1993 (the "Consummation Date"), as further described in Item 3. Legal
Proceedings and in Note 18 to the financial statements.
Vera Scarf Division - Discontinued Operation. In February 1995, the Company
discontinued its Vera Scarf division, which imported and marketed women's
scarves under (i) the Company-owned trademarks VERA and ACUTE, (ii) trademarks
licensed to the Company, including PERRY ELLIS, and (iii) retailers' private
labels. The Company closed the Vera Scarf division in 1995. The financial
statements of the Company included in this report treat the Vera Scarf division
as a discontinued operation.
Seasonality of Business and Backlog of Orders. This information is included
under Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
ITEM 2. PROPERTIES
The Company's principal executive offices are located at 1114 Avenue of the
Americas, New York, New York 10036. The Company's principal properties consist
of six domestic manufacturing facilities located in Alabama, Georgia (2), New
York, Tennessee and Texas, four manufacturing facilities located in Mexico, and
six distribution centers located in Georgia, New York, South Carolina (2) and
Texas (2). At the end of 1996, the Company was in the process of closing the two
manufacturing facilities and one distribution facility in Georgia. The Company
owns approximately 1,279,000 square feet of space devoted to manufacturing and
distribution and leases approximately 554,000 square feet of such space. The
Company owns approximately 34,000 square feet of combined office, design and
showroom space and leases approximately 163,000 square feet of such space. The
Children's Group has exclusive use of the Tennessee manufacturing facility,
shares one of the Mexican manufacturing facilities with the Texas Apparel
division and has its distribution center in a building in Texas which it shares
with the Texas Apparel division. As of the end of 1996, the Company's Stores
division operated 65 factory outlet stores, comprising approximately 204,000
square feet of selling space, all of which are leased. Except as noted above,
substantially all of the owned and leased property of the Company is used in
connection with its men's apparel business or general corporate administrative
functions.
The Company believes that its plant and equipment are adequately maintained, in
good operating condition, and are adequate for the Company's present needs.
ITEM 3. LEGAL PROCEEDINGS
(a) Chapter 11 Cases. On June 27, 1990, Salant and Denton Mills each filed with
the Bankruptcy Court a separate voluntary petition for relief under chapter 11
of the Bankruptcy Code. On July 30, 1993, the Bankruptcy Court issued an order
confirming the Reorganization Plan.
The Reorganization Plan was consummated on September 20, 1993. From that date
through December 28, 1996 (approximately 39 months), the Company made cash
payments of $9.4 million, issued $111.9 million of new 10-1/2% senior secured
notes, and issued 11.0 million shares of common stock in settlement of certain
undisputed and disputed claims in the chapter 11 proceedings. Salant anticipates
that an additional $4.2 million in cash and an additional 325 thousand shares of
common stock will ultimately be distributed in connection with the resolution of
all remaining claims. Provisions for such distributions were made in the
consolidated financial statements at the time of emergence from the bankruptcy
during the year ended January 1, 1994. The process of resolving claims is
continuing and, pursuant to the Reorganization Plan, remains under the
jurisdiction of the Bankruptcy Court.
(b) Other. The Company is a defendant in several other legal actions. In the
opinion of the Company's management, based upon the advice of the respective
attorneys handling such cases, such actions are not expected to have a material
adverse effect on the Company's consolidated financial position or results of
operations.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of the Company's shareholders was held on May 14,
1996 (the "Annual Meeting"). Subsequent to that date, there have been no other
matters submitted to a vote of the Company's shareholders.
(b) At the Annual Meeting, the shareholders approved the election of
four Directors for a three-year term expiring at the 1999 Annual Meeting of the
Company's shareholders, with the votes for such election as follows:
<TABLE>
<CAPTION>
Director For Withheld
<S> <C> <C>
Mr. Robert H. Falk 13,566,487 91,524
Ms. Ann Dibble Jordan 13,565,186 92,825
Mr. Robert Katz 13,567,186 90,825
Mr. John S. Rodgers 13,566,793 91,218
</TABLE>
(c) At the Annual Meeting, the shareholders approved the 1996 Stock
Plan, which provides for 600,000 shares of Common Stock for the granting of
options, stock appreciation rights and restricted stock to employees of the
Company and the granting of options to non-employee directors of the Company.
The shares voting for the 1996 Stock Plan were 12,262,974, the shares voting
against were 1,333,543 and the shares abstaining were 61,484.
(d) At the Annual Meeting, the shareholders ratified the reappointment of
Deloitte & Touche LLP as the Company's independent auditors for the 1996 fiscal
year. The shares voting for the ratification were 13,616,171, the shares voting
against the ratification were 20,258 and the shares abstaining were 21,580.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Salant's Common Stock is traded on the New York Stock Exchange (the "NYSE")
under the trading symbol SLT.
The high and low sale prices per share of Common Stock (based upon the NYSE
composite tape as reported in published financial sources) for each quarter of
1995 and 1996 are set forth below. The Company did not declare or pay any
dividends during such years. The indenture governing Salant's 10-1/2% Senior
Secured Notes due December 31, 1998, and the revolving credit, factoring and
security agreement, dated September 20, 1993, as amended, with the CIT
Group/Commercial Services, Inc. require the satisfaction of certain net worth
tests prior to the payment of any cash dividends by Salant. As of December 28,
1996, Salant was prohibited from paying cash dividends under the most
restrictive of these provisions.
<TABLE>
<CAPTION>
High and Low Sale Prices Per Share of the Common Stock
Quarter High Low
1996
<S> <C> <C> <C> <C>
Fourth $3 7/8 $3 1/8
Third 4 2 3/4
Second 4 7/8 3 1/2
First 5 3/4 3 1/8
1995
Fourth $ 5 7/8 $ 3 3/8
Third 6 3 1/4
Second 4 1/4 2 3/4
First 5 7/8 3 1/4
</TABLE>
On March 11, 1997, there were 1,098 holders of record of shares of Common Stock,
and the closing market price was $5.00.
All of the outstanding voting securities of the Company's subsidiaries are owned
beneficially and (except for shares of certain foreign subsidiaries of the
Company owned of record by others to satisfy local laws) of record by the
Company.
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(Amounts in thousands except share, per share and ratio data)
The following selected consolidated financial data presented for fiscal years
1994 through 1996 has been derived from the Consolidated Financial Statements of
the Company, which has been audited by Deloitte & Touche LLP, whose report
thereon appears under Item 8, "Financial Statements and Supplementary Data". The
selected consolidated financial data for fiscal years 1992 and 1993 has been
derived from audited consolidated financial data which are not included herein.
Such consolidated financial data should be read in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with the Consolidated Financial Statements, including the
related notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
Dec. 28, Dec. 30, Dec. 31, Jan. 1, Jan. 2,
1996 1995 1994 1994 1993
(52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks)
For The Year Ended:
Continuing Operations:
<S> <C> <C> <C> <C> <C>
Net sales $438,119 $501,522 $419,285 $402,098 $411,021
Restructuring costs (a) (11,730) (3,550) - (5,500) (4,824)
Income/(loss) from
continuing operations (9,323) (498) 3,507 7,816 (4,687)
Discontinued Operations:
Loss from operations, net
of income taxes - - (9,639) (589) (1,299)
Estimated loss on disposal,
net of income taxes - - (1,796) - (11,772)
Reversal of estimated loss on disposal,
net of income taxes - - - 11,772 -
Extraordinary gain (b) - 1,000 63 24,707 -
Net income/(loss)(a) (9,323) 502 (7,865) 43,706 (17,758)
Income/(loss) per share from continuing
operations before
extraordinary gain $(0.62) $(0.03) $0.23 $1.10 $(1.35)
Income/(loss) per share from discontinued
operations - - (0.76) 1.57 (3.78)
Income per share from
extraordinary gain - 0.06 - 3.48 -
Net income/(loss) per share (a) (0.62) 0.03 (0.53) 6.15 (5.13)
Cash dividends per share - - - - -
</TABLE>
<TABLE>
<CAPTION>
At Year End:
<S> <C> <C> <C> <C> <C>
Current assets $147,203 $160,826 $168,411 $157,622 $160,146
Total assets 236,038 255,720 267,216 253,232 259,466
Current liabilities 60,353 63,454 72,163 45,713 55,093
Long-term debt 106,231 110,040 109,908 111,851 -
Deferred liabilities 8,863 11,373 13,479 16,766 2,462
Liabilities deferred pursuant
to chapter 11 cases - - - - 266,420
Working capital 86,850 97,372 96,248 111,909 105,053
Current ratio 2.4:1 2.5:1 2.3:1 3.4:1 2.9:1
Shareholders' equity/(deficiency) $60,591 $70,853 $71,666 $78,902 $(64,509)
Book value per share $4.01 $4.71 $4.78 $5.34 $(18.62)
Number of shares outstanding 15,094 15,041 15,008 14,781 3,463
</TABLE>
(a) Includes, for the year ended December 28, 1996, a provision of $11,730
(78 cents per share; tax benefit not available) for restructuring costs
principally related to (i) the write-off of goodwill and the write-down of other
assets for a product line which has been put up for sale, (ii) the write-off of
certain assets and accrual for future royalties for a licensed product line and
(iii) employee costs related to closing certain facilities; for the year ended
December 30, 1995, a provision of $3,550 (24 cents per share; tax benefit not
available) for restructuring costs principally related to (i) fixed asset
write-downs at locations to be closed and (ii) inventory markdowns for
discontinued product lines; for the year ended January 1, 1994, a provision of
$5,500 (77 cents per share; tax benefit not available) for restructuring costs
principally related to the costs incurred in connection with the closure of
certain unprofitable operations, including (i) inventory markdowns associated
with those product lines and (ii) fixed asset write-downs at closed locations;
and for the year ended January 2, 1993, (a) a provision of $4,824 ($1.39 per
share; tax benefit not available) for restructuring costs principally related to
(i) the estimated costs to be incurred in connection with the closure of certain
unprofitable operations, (ii) the rejection, pursuant to the Bankruptcy Code, of
certain lease obligations, and (iii) the write-off of leasehold improvements,
and buildings and equipment at closed locations, and (b) the write-off of
certain intangible assets of $6,759 ($1.95 per share; tax benefit not
available).
(b) Includes, for the year ended December 30, 1995, a gain of $1,000 (6 cents
per share) related to the reversal of excess liabilities previously
provided for the anticipated settlement of claims arising from the Chapter
11 proceeding; for the year ended December 31, 1994, a gain of $63 (no per
share effect) related to the purchase and retirement of a portion of the
Company's 10 1/2% Senior Secured Notes at a price below the principal
amount thereof; and for the year ended January 1, 1994, a gain of $24,707
($3.48 per share) related to the settlement and anticipated settlement of
claims arising from the Chapter 11 proceeding.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
In the second half of 1995, the Company formulated a strategic business plan to
enhance the profitability of its men's apparel operations and to further improve
its overall liquidity. At the core of the plan was a decision to concentrate the
Company's resources on a limited number of key menswear brand names (including
continuing to emphasize and cohesively market the Company's leading Perry Ellis
brand) to further expand the Company's private label business, and to
selectively target the sale of the Company's products to those channels of
distribution deemed most likely to generate higher profit margins.
Implementation of this plan, which began in the fourth quarter of 1995 and will
have been substantially completed by the end of the first quarter of 1997,
included (i) the discontinuation of unprofitable or marginally profitable brands
and product lines (including the Company's JJ. Farmer and Manhattan sportswear
lines and its Nino Cerruti, Liberty of London, Thomson, Ron Chereskin, and AXXA
dress shirt lines), (ii) the liquidation of remaining inventories within those
discontinued brands and product lines, (iii) the closure of two of the Company's
six domestic manufacturing facilities and one of its domestic distribution
centers, and (iv) the consolidation of the Company's sourcing, manufacturing,
and distribution functions under a central corporate operations group in order
to eliminate duplicate sourcing functions and to maximize the impact of its
corporate buying power.
As more fully discussed under "Results of Operations" below, these actions
significantly affected the Company's operating results in 1996. The
discontinuation of various product lines and the redirection of other product
lines to different channels of distribution in accordance with the strategic
plan resulted in a $58.8 million reduction in net sales compared to 1995. The
implementation of the strategic plan also involved the incurrence of significant
charges during 1996, including the write-down of goodwill and other assets
associated with discontinued product lines, expenses related to the shut-down of
manufacturing and distribution facilities, markdowns related to the liquidation
of inventories of product lines being discontinued or redirected, and severance
costs related to terminated employees. In connection therewith, during 1996, the
Company recorded a restructuring charge of $11.7 million and incurred other
charges related to the implementation of the strategic plan of approximately
$5.2 million to cost of goods sold and $1.1 million to selling, general and
administrative expenses. As a result of these actions, however, gross profits as
a percentage of sales increased in the men's apparel business segment and on a
Company-wide basis compared to 1995, and the Company significantly reduced its
inventory levels through the liquidation of excess inventories and the
manufacture of fewer stock keeping units. The cash savings associated with the
elimination of unprofitable product lines and business units and lower
investment in inventory enabled the Company to significantly reduce its average
outstanding revolving credit borrowings and associated interest expense.
<PAGE>
Results of Operations
Fiscal 1996 Compared with Fiscal 1995
Net Sales
The following table sets forth the net sales of each of the Company's
three principal business segments for the fiscal years ended December 28, 1996
("Fiscal 1996") and December 30, 1995 ("Fiscal 1995") and the percentage
contribution of each of those segments to total net sales:
<TABLE>
<CAPTION>
Percentage
Increase/
Fiscal 1996 Fiscal 1995 (Decrease)
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Men's Apparel $354.7 81% $423.9 85% (16.3%)
Children's Sleepwear
and Underwear 45.8 10% 39.9 8% 14.8%
Other Businesses (a) 37.6 9% 37.7 7% (0.3%)
Total $438.1 100% $501.5 100% (12.6%)
</TABLE>
(a) Represents the Made in the Shade division (a women's junior sportswear
business) and the retail outlet stores division (the "Stores division").
As noted under "Overview," $58.8 million (85.0%) of the $69.2 million decline in
net sales in the men's apparel segment was attributable to the discontinuation
of various product lines and the redirection of other product lines to different
channels of distribution pursuant to the Company's strategic business plan. Of
the balance, $7.4 million resulted from a decision by Sears, Roebuck & Co.
("Sears") to source its knit and woven Canyon River Blues tops through its own
internal sourcing operations and $3.6 million was due to reduced sales of Perry
Ellis sportswear as a result of a reduction of $12.3 million in sales to
off-price retailers, partially offset by an increase of $8.7 million in sales to
department stores.
Sales of children's sleepwear and underwear increased by $5.9 million, or 14.8%,
in Fiscal 1996. This increase was primarily a result of the continuing expansion
of the Joe Boxer children's product lines.
Gross Profit
The following table sets forth the gross profit and gross profit margin (gross
profit as a percentage of net sales) for each of the Company's business segments
for each of Fiscal 1996 and Fiscal 1995:
<PAGE>
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1995
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel $74.4 21.0% $79.1 18.7%
Children's Sleepwear
and Underwear 11.5 25.1% 10.8 26.9%
Other Businesses 12.0 31.9% 14.0 37.1%
Total $ 97.9 22.3% $103.9 20.7%
</TABLE>
The decline in gross profit in the men's apparel segment and for the Company as
a whole was primarily attributable to the reduction in net sales discussed
above. The gross profit margin for the men's apparel segment and the Company as
a whole, however, improved significantly, primarily as a result of (i) a greater
percentage of sales of the Company's higher margin Perry Ellis product lines as
a percentage of net sales, (ii) planned reductions in sales of lower-margin
brands and products, (iii) increased efficiencies at the Company's manufacturing
facilities in Mexico, and (iv) reduced markdowns of accessories due to improved
consumer acceptance of the Company's neckwear product lines. The gross profit
margin for the men's apparel segment was adversely affected, however, by charges
of (i) $3.0 million (0.8% of men's apparel net sales) for markdowns related to
the discontinuation of the JJ. Farmer and Manhattan sportswear product lines and
a change in the primary channel of distribution for products sold under the John
Henry label and (ii) $1.9 million (0.5% of men's apparel net sales) related to
the closing of manufacturing and distribution facilities in Americus and
Thomson, Georgia.
The gross profit margin of the children's sleepwear and underwear segment
declined as a result of an increased percentage of off-price sales of licensed
character products in that segment's total sales mix. The gross profit margin of
the Company's other businesses declined primarily as a result of margin
pressures in both the Company's juniors' sportswear business and the Company's
outlet store business as well as charges of $0.3 million (0.8% of other
businesses net sales) due to markdowns of discontinued product lines at the
Company's outlet stores.
Selling, General and Administrative Expenses
Selling, general and administrative ("S,G&A") expenses for Fiscal 1996 were
$85.9 million (19.6% of net sales) compared with $85.4 million (17.0% of net
sales) for Fiscal 1995. While implementation of the Company's strategic plan
resulted in the elimination of certain S,G&A expenses in Fiscal 1996, such
eliminations were partially offset by higher amortization costs attributable to
the installation of new store fixtures for Perry Ellis sportswear shops in
department stores and Canyon River Blues shops in Sears stores, which
installations commenced in 1995. The amortization of these store fixtures
accounted for approximately $1.6 million of the total S,G&A expenses in Fiscal
1996 as compared with $0.4 million in Fiscal 1995. The Company's merchandise
coordinator and retail specialist programs, which provide support for the
presentation and coordination of the Company's products in retail stores was
also enlarged in 1996, primarily to support the expansion of the Perry Ellis
sportswear shop program; this increase accounted for a further $1.2 million of
the S,G&A expense increase in Fiscal 1996. Total expenses related to these
programs were $3.3 million in Fiscal 1996, as compared with $2.1 million in
Fiscal 1995. As indicated in the "Overview", S,G&A expenses for Fiscal 1996 also
included charges of $1.1 million principally associated with the reorganization
of the men's apparel segment.
Other Income
Other income for Fiscal 1996 included a gain of $2.7 million related to the sale
of a leasehold interest in a facility located in Glen Rock, New Jersey.
Provision for Restructuring
As noted under "Overview," the Company recorded a restructuring charge of $11.7
million in Fiscal 1996 as a consequence of the implementation of its strategic
business plan. Of this amount, (i) $5.7 million was primarily related to the
write-off of goodwill and the write-down of other assets of the JJ. Farmer
product line, (ii) $2.9 million was attributable to the write-off of certain
assets related to the licensing of the Gant brand name for certain of the
Company's dress shirt and accessories product lines and the accrual of a portion
of future royalties payable under the Gant licenses that are not expected to be
covered by future sales, (iii) $1.8 million was primarily related to employee
costs associated with the closing of a manufacturing and distribution facility
in Thomson, Georgia, (iv) $0.7 million was primarily related to employee costs
associated with the closing of a manufacturing facility in Americus, Georgia and
(v) $0.6 million related to other severance costs.
The restructuring charge was comprised of $5.1 million of non-cash charges and
$6.6 million requiring cash payments over a period of time. Of the cash portion,
$2.5 million was expended during 1996 and the balance is expected to be expended
in the following manner: $2.1 million in 1997, $1.2 million in 1998 and $0.8
million in 1999.
Income from Continuing Operations Before Interest, Income
Taxes and Extraordinary Gain
The following table sets forth income from continuing operations before
interest, income taxes and extraordinary gain for each of the Company's three
business segments, expressed both in dollars and as a percentage of net sales,
for each of Fiscal 1996 and Fiscal 199
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1995
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel (a) $ 6.4 1.8% $ 19.8 4.7%
Children's Sleepwear
and Underwear 5.4 11.8% 5.2 13.0%
Other Businesses (3.9) (10.4%) (2.2) (5.9%)
7.9 1.8% 22.8 4.5%
Corporate expenses (b) (6.2) (9.2)
Licensing division income 5.0 5.6
Income from continuing
operations before interest, income
taxes and extraordinary gain $ 6.7 1.5% $ 19.2 3.8%
</TABLE>
(a) Includes restructuring charges of $11.7 million in Fiscal 1996 and $3.6
million in Fiscal 1995. (b) Includes other income of $2.7 million in Fiscal 1996
related to the sale of a leasehold interest.
The $12.5 million reduction in income from continuing operations before
interest, income taxes and extraordinary gain in Fiscal 1996 was primarily a
result of the $11.7 million restructuring charge (compared with $3.6 million in
Fiscal 1995) and $6.3 million of other charges associated with the
implementation of the strategic business plan, which was partially offset by a
$2.7 million gain on the sale of a leasehold interest, as previously discussed.
Interest Expense, Net
Net interest expense was $16.0 million for Fiscal 1996 compared with $19.4
million for Fiscal 1995. The $3.4 million decrease is a result of lower average
borrowings during Fiscal 1996 primarily due to reduced average levels of
inventory.
Loss from Continuing Operations
In Fiscal 1996, the Company reported a loss from continuing operations of $9.3
million, or $0.62 per share, as compared with a loss from continuing operations
before extraordinary gain of $0.5 million, or $0.03 per share, in Fiscal 1995.
Extraordinary Gain
The extraordinary gain of $1.0 million recorded in the fourth quarter of Fiscal
1995 related to the reversal of excess liabilities previously provided for the
anticipated settlement of claims arising from the Company's prior chapter 11
cases.
Earnings Before Interest, Taxes, Depreciation, Amortization,
Restructuring Charges and Extraordinary Gain
Earnings before interest, taxes, depreciation, amortization, restructuring
charges and extraordinary gain was $26.8 million (6.1% of net sales) in Fiscal
1996, compared to $30.9 million (6.2% of net sales) in Fiscal 1995, a decrease
of $4.1 million, or 13.2%. The Fiscal 1996 amount was negatively affected by
$6.3 million of charges primarily associated with the implementation of the
Company's strategic business plan. The Company believes this information is
helpful in understanding cash flow from operations that is available for debt
service and capital expenditures. This measure is not contained in Generally
Accepted Accounting Principles and is not a substitute for operating income, net
income or net cash flows from operating activities.
Fiscal 1995 Compared with Fiscal 1994
Net Sales
The following table sets forth the net sales (and relative contributions to
total sales) of each of the Company's business segments for Fiscal 1995 and the
fiscal year ended December 31, 1994 ("Fiscal 1994")
<TABLE>
<CAPTION>
Percentage
Increase/
Fiscal 1995 Fiscal 1994 (Decrease)
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Men's Apparel $423.9 85% $343.5 82% 23.4%
Children's Sleepwear
and Underwear 39.9 8% 35.5 8% 12.5%
Other Businesses 37.7 7% 40.3 10% (6.5%)
Total $501.5 100% $419.3 100% 19.6%
</TABLE>
Of the total increase in net sales of men's apparel, $41.7 million (51.9%) was
attributable to the introduction of the Company's Canyon River Blues jeans
product line at Sears, $18.2 million (22.6%) was attributable to the growth of
the Company's Perry Ellis sportswear business, $11.2 million (13.9%) was a
result of increased dress shirt sales and $6.0 million (7.5%) was attributable
to higher sales of sportswear under the Manhattan brand. Excluding net sales of
dress shirts under the Gant label, for which the Company obtained a license in
June 1994, net sales of dress shirts increased by 7.4% in Fiscal 1995.
The increase in net sales of children's sleepwear and underwear was primarily a
result of the expansion of the Joe Boxer children's product lines, which were
introduced in Fiscal 1994. The decrease in net sales of other businesses was
attributable primarily to lower shipments by the Made in the Shade division in
response to declining margins.
Gross Profit
The following table sets forth the gross profit and gross profit margin of each
of the Company's business segments for each of Fiscal 1995 and Fiscal 1994:
<TABLE>
<CAPTION>
Fiscal 1995 Fiscal 1994
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel $79.1 18.7% $70.9 20.6%
Children's Sleepwear
and Underwear 10.8 26.9% 7.9 22.2%
Other Businesses 14.0 37.1% 14.4 35.7%
Total $103.9 20.7% $93.2 22.2%
</TABLE>
The reduction in gross profit as a percentage of net sales in the men's apparel
segment was primarily a result of continuing pressure on selling prices in all
product categories and at all levels of distribution, which were, in large part,
a result of the slow retail economy. In addition, certain product lines
introduced or expanded in Fiscal 1995 (Canyon River Blues and Manhattan
sportswear) yielded a lower gross profit margin than traditionally earned by the
Company's merchandise. The Company's gross profit margin was also negatively
affected by costs associated with the start-up of the Canyon River Blues
program.
Selling, General and Administrative Expenses
S,G&A expenses increased by $6.1 million (7.7%) in Fiscal 1995. However, as a
percentage of net sales S,G&A expenses declined to 17.0% from 18.9% in Fiscal
1994 due, in part, to the introduction or expansion of certain businesses in
Fiscal 1995 (as indicated above) that required minimal incremental expenses.
Provision for Restructuring
The restructuring charge of $3.6 million related primarily to the planned
closing in Fiscal 1996 of a manufacturing facility in Thomson, Georgia, as well
as certain expenses related to the planned discontinuation of several dress
shirt lines, including Liberty of London, Nino Cerruti and Ron Chereskin.
Income From Continuing Operations Before Interest,
Income Taxes and Extraordinary Gain
The following table sets forth income from continuing operations before
interest, income taxes and extraordinary gain for each of the Company's business
segments, expressed both in dollars and as a percentage of net sales, for each
of Fiscal 1995 and Fiscal 1994:
<TABLE>
<CAPTION>
Fiscal 1995 Fiscal 1994
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel (a) $ 19.8 4.7% $ 17.4 5.1%
Children's Sleepwear
and Underwear 5.2 13.0% 3.1 8.8%
Other Businesses (2.2) (5.9%) (0.5) (1.3%)
22.8 4.5% 20.0 4.8%
Corporate expenses (9.2) (6.2)
Licensing division income 5.6 5.7
Income from continuing
operations before interest, income
taxes and extraordinary gain $ 19.2 3.8% $ 19.5 4.6%
</TABLE>
(a) Includes a restructuring charge of $3.6 million in Fiscal 1995
Income from continuing operations before interest, income taxes and
extraordinary gain as a percentage of net sales decreased to 3.8% in Fiscal 1995
from 4.6% in Fiscal 1994 primarily as a result of the decreases in gross
margins, S,G&A expense changes and the provision for restructuring discussed
above.
Interest Expense, Net
Net interest expense for Fiscal 1995 increased by $3.8 million compared with
Fiscal 1994. Of this amount, $2.7 million was attributable to a higher average
outstanding loan balance in Fiscal 1995. The remainder was attributable to an
increase in the weighted average interest rate on borrowings from 7.8% in Fiscal
1994 to 9.9% in Fiscal 1995, due primarily to an increase in the average prime
rate.
Loss From Continuing Operations
The loss from continuing operations before extraordinary gain was $0.5 million,
or $0.03 per share, in Fiscal 1995 compared with income from continuing
operations before extraordinary gain of $3.5 million, or $0.23 per share, in
Fiscal 1994, primarily as a result of the $3.6 million restructuring charge in
Fiscal 1995.
Loss From Discontinued Operations
In Fiscal 1994, the Company recorded a charge of $11.4 million, or $0.76 per
share, for the discontinuance of the Vera Scarf division. The Vera Scarf
division had net sales of $5.1 million in 1994
Extraordinary Gain
In the fourth quarter of Fiscal 1995, the Company recorded an extraordinary gain
of $1.0 million related to the reversal of excess liabilities previously
provided for the anticipated settlement of claims arising from its prior chapter
11 cases.
Earnings Before Interest, Taxes, Depreciation, Amortization,
Restructuring Charges, Discontinued Operations and Extraordinary Gain
Earnings before interest, taxes, depreciation, amortization, restructuring
charges, discontinued operations and extraordinary gain was $30.9 million (6.2%
of net sales) in Fiscal 1995, compared with $27.0 million (6.4% of net sales) in
Fiscal 1994, an increase of $3.9 million, or 14.4%. The Company believes this
information is helpful in understanding cash flow from operations that is
available for debt service, taxes and capital expenditures. This measure is not
contained in Generally Accepted Accounting Principles and is not a substitute
for operating income, net income or net cash flows from operating activities.
Liquidity and Capital Resources
The Company is a party to a revolving credit, factoring and security agreement,
as amended (the "Credit Agreement"), with The CIT Group/Commercial Services,
Inc. ("CIT"). The Credit Agreement provides the Company with working capital
financing, in the form of direct borrowings and letters of credit, up to an
aggregate of $135 million (the "Maximum Credit"), subject to an asset-based
borrowing formula. As collateral for borrowings under the Credit Agreement,
Salant has granted to CIT a security interest in substantially all of the assets
of the Company.
On February 20, 1997, the Company and CIT executed the Tenth Amendment to the
Credit Agreement (the "Amendment"). The Amendment extended the term of the
Credit Agreement from March 31, 1997 until September 30, 1998. The Amendment
provided for a reduction in the interest rate charged on direct borrowings from
one percent in excess of the base rate of the Chase Manhattan Bank, N.A. (the
"Prime Rate", which was 8.25% at December 28, 1996) to one-half of one percent
in excess of the Prime Rate. The Amendment also provided the Company with the
option to borrow funds at 2.75% above the London Late Eurodollar rate (the
"Eurodollar Rate", which was 5.625% at December 28, 1996). Based upon Eurodollar
Rates currently in effect, the Company's effective rate of interest under the
Eurodollar option is approximately 100 basis points below its borrowing rate in
effect prior to the Amendment. The Amendment also modified or eliminated certain
financial covenants. As a result of the Amendment, the Company will only be
required to maintain certain minimum levels of stockholders' equity and to
comply with one other financial covenant limiting the maximum loss the Company
may incur over any four or eight consecutive calendar quarters.
At the end of Fiscal 1996, direct borrowings and letters of credit outstanding
under the Credit Agreement were $7.7 million and $32.3 million, respectively,
and the Company had unused availability of $28.1 million. At the end of Fiscal
1995, direct borrowings and letters of credit outstanding under the Credit
Agreement were $14.4 million and $31.4 million, respectively, and the Company
had unused availability of $27.5 million. During Fiscal 1996, the maximum
aggregate amount of direct borrowings and letters of credit outstanding under
the Credit Agreement was $101.0 million at which time the Company had unused
availability of $19.6 million. During Fiscal 1995, the maximum aggregate amount
of direct borrowings and letters of credit outstanding under the Credit
Agreement was $134.2 million at which time the Company had unused availability
of $828,000.
On October 28, 1996, the Company completed the sale of a leasehold interest in a
facility located in Glen Rock, New Jersey. Pursuant to the indenture governing
the Company's outstanding 10 1/2% Senior Secured Notes due 1998 (the "Senior
Secured Notes"), the $3,372,000 net cash proceeds of that sale were applied to
the repurchase of a like principal amount of the Senior Secured Notes
immediately following the end of the 1996 fiscal year.
The instruments governing the Company's outstanding debt contain numerous
financial and operating covenants, including restrictions on incurring
indebtedness and liens, making investments in or purchasing the stock, or all or
a substantial part of the assets of another person, selling property and paying
cash dividends. In addition, under the Credit Agreement, the Company is required
during the year, to maintain a minimum level of stockholders' equity and to
satisfy a maximum cumulative net loss test. The Company was at December 28,
1996, and currently is, in compliance with all of its covenants. The following
table indicates the Company's compliance with the two remaining financial
covenants contained in the Credit Agreement:
December 28, 1996
Credit Agreement Covenants Covenant Level
Actual Level
Stockholders' Equity no less than $52.0 million
$ 60.6 million
Maximum Loss (a) no more than $(10.0) million
positive income
(a) Maximum loss excludes write-offs for goodwill, restructuring expenses or
other unusual or non-recurring expenses during the first two quarters of 1996,
up to a maximum of $13.0 million.
The indenture governing the Company's outstanding Senior Secured Notes requires
the Company to reduce its outstanding indebtedness (excluding outstanding
letters of credit) to $20 million or less for fifteen consecutive days during
each twelve month period commencing on the first day of February. This covenant
has been satisfied for the balance of the term of the Senior Secured Notes.
The Company's cash flow from operating activities for Fiscal 1996 was $16.9
million, which reflects a $17.5 million reduction in inventories due to improved
inventory management, and the effects of the implementation of its strategic
business plan for the men's apparel group. The lower inventory balance was
partially offset by an increase in accounts receivable, due to changes in the
Company's factoring arrangements with CIT, which reduced the amount of accounts
receivable sold to CIT and the related factoring costs.
Cash used in Fiscal 1996 for investing activities was $9.8 million and primarily
related to capital expenditures of $7.1 million and the installation of store
fixtures in department stores of $3.9 million, partially offset by the sale of
assets of $1.9 million. During Fiscal 1997, the Company plans to make capital
expenditures of approximately $10.7 million and to spend an additional $4.2
million for the installation of store fixtures in department stores.
Cash used in financing activities in Fiscal 1996 was $6.7 million, which
represented repayments of short-term borrowings under the Credit Agreement using
cash generated from operations.
The Company's principal sources of liquidity, both on a short-term and a
long-term basis, are cash flow from operations and borrowings under the Credit
Agreement. Based upon its analysis of its consolidated financial position, its
cash flow during the past twelve months, and the cash flow anticipated from its
future operations, the Company believes that its future cash flows together with
funds available under the Credit Agreement will be adequate to meet the
financing requirements it anticipates during the next twelve months. There can
be no assurance, however, that future developments and general economic trends
will not adversely affect the Company's operations and, hence, its anticipated
cash flow.
The Company's Senior Secured Notes, of which $104.9 million principal amount was
outstanding at March 24, 1997, mature December 31, 1998. The Company does not
expect to generate sufficient cash flow from operations to repay those notes at
maturity and will seek to refinance the notes prior to maturity. There can be no
assurance that the Company will obtain such refinancing or that the terms of
such refinancing, if obtained, will not be less favorable to the Company than
those of the Senior Secured Notes.
Seasonality
Although the Company typically introduces and withdraws various individual
products throughout the year, its principal products are organized into the
customary retail seasonal lines: for the Spring, Fall and Christmas. The
Company's products are designed as much as one year in advance and manufactured
approximately one season in advance of the related retail selling season.
Backlog
The Company does not consider the amount of its backlog of orders to be
significant to an understanding of its business primarily due to increased
utilization of EDI technology, which provides for the electronic transmission of
orders from customers' computers to the Company's computers. As a result, orders
are placed closer to the required delivery date than had been the case prior to
EDI technology. At March 1, 1997, the Company's backlog of orders was
approximately $99.0 million, 13% less than the backlog of orders of
approximately $114.0 million that existed at March 2, 1996.
Factors that May Affect Future Results and Financial Condition.
This report contains or incorporates by reference forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Where any such forward-looking statement includes a statement of the assumptions
or bases underlying such forward-looking statement, the Company cautions that
assumed facts or bases almost always vary from the actual results, and the
differences between assumed facts or bases and actual results can be material,
depending on the circumstances. Where, in any forward-looking statement, the
Company or its management expresses an expectation or belief as to future
results, there can be no assurance that the statement of the expectation or
belief will result or be achieved or accomplished. The words "believe",
"expect", "estimate", "project", "seek", "anticipate" and similar expressions
may identify forward-looking statements. The Company's future operating results
and financial condition are dependent upon the Company's ability to successfully
design, manufacture, import and market apparel. Taking into account the
foregoing, the following are identified as important factors that could cause
results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the Company:
Competition. The apparel industry in the United States is highly competitive and
characterized by a relatively small number of multi-line manufacturers (such as
the Company) and a large number of specialty manufacturers. The Company faces
substantial competition in its markets from manufacturers in both categories.
Many of the Company's competitors have greater financial resources than the
Company. The Company also competes for private label programs with the internal
sourcing organizations of many of its own customers.
Apparel Industry Cycles and other Economic Factors. The apparel industry
historically has been subject to substantial cyclical variation, with consumer
spending on apparel tending to decline during recessionary periods. A decline in
the general economy or uncertainties regarding future economic prospects may
affect consumer spending habits, which, in turn, could have a material adverse
effect on the Company's results of operations and its financial condition.
Retail Environment. Various retailers, including some of the Company's
customers, have experienced declines in revenue and profits in recent periods
and some have been forced to file for bankruptcy protection. To the extent that
these financial difficulties continue, there can be no assurance that the
Company's financial condition and results of operations would not be adversely
affected.
Seasonality of Business and Fashion Risk. The Company's principal products are
organized into seasonal lines for resale at the retail level during the Spring,
Fall and Christmas Seasons. Typically, the Company's products are designed as
much as one year in advance and manufactured approximately one season in advance
of the related retail selling season. Accordingly, the success of the Company's
products is often dependent on the ability of the Company to successfully
anticipate the needs of the Company's retail customers and the tastes of the
ultimate consumer up to a year prior to the relevant selling season.
Substantial Level of Indebtedness. The Company had indebtedness of $117.3
million as of December 28, 1996. This level of indebtedness could adversely
affect the Company's operations because a substantial portion of the Company's
cash flow from operations must be dedicated to the payment of interest and
would, therefore, not be available for other purposes. Further, this level of
indebtedness might inhibit the Company's ability to obtain financing in the
future for working capital needs, capital expenditures, acquisitions,
investments, general corporate purposes or other purposes.
Foreign Operations. The Company's foreign sourcing operations are subject to
various risks of doing business abroad, including currency fluctuations
(although the predominant currency used is the U.S. dollar), quotas and, in
certain parts of the world, political instability. Any substantial disruption of
its relationship with its foreign suppliers could adversely affect the Company's
operations. Some of the Company's imported merchandise is subject to United
States Customs duties. In addition, bilateral agreements between the major
exporting countries and the United States impose quotas which limit the amount
of certain categories of merchandise that may be imported into the United
States. Any material increase in duty levels, material decrease in quota levels
or material decrease in available quota allocation could adversely affect the
Company's operations.
Dependence on Contract Manufacturing. The Company currently produces 61% of all
of its products (in units) through arrangements with independent contract
manufacturers. The use of such contractors and the resulting lack of direct
control could subject the Company to difficulty in obtaining timely delivery of
products of acceptable quality. In addition, as is customary in the industry,
the Company does not have any long-term contracts with its fabric suppliers or
product manufacturers. While the Company is not dependent on one particular
product manufacturer or raw material supplier, the loss of several such product
manufacturers and/or raw material suppliers in a given season could have a
material adverse effect on the Company's performance.
Because of the foregoing factors, as well as other factors affecting the
Company's operating results and financial condition, past financial performance
should not be considered to be a reliable indicator of future performance, and
investors are cautioned not to use historical trends to anticipate results or
trends in the future. In addition, the Company's participation in the highly
competitive apparel industry often results in significant volatility in the
Company's common stock price.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
To the Board of Directors and Stockholders of Salant Corporation:
We have audited the accompanying consolidated balance sheets of Salant
Corporation and subsidiaries as of December 28, 1996 and December 30, 1995, and
the related consolidated statements of operations, shareholders' equity and cash
flows for the years ended December 28, 1996, December 30, 1995 and December 31,
1994. Our audits also included the financial statement schedule listed in the
index at Item 14. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule 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, such financial statements present fairly, in all material
respects, the financial position of Salant Corporation and subsidiaries as of
December 28, 1996 and December 30, 1995, and the results of their operations and
their cash flows for the years ended December 28, 1996, December 30, 1995 and
December 31, 1994 in conformity with generally accepted accounting principles.
Also, in our opinion, the financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
March 4, 1997
New York, New York
<PAGE>
<TABLE>
<CAPTION>
SALANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Year Ended
December 28, December 30, December 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales $ 438,119 $ 501,522 $ 419,285
Cost of goods sold 340,203 397,630 326,059
Gross profit 97,916 103,892 93,226
Selling, general and administrative expenses (85,867) (85,372) (79,273)
Royalty income 6,154 6,606 6,699
Goodwill amortization (2,372) (2,575) (2,376)
Other income/(expense) 2,642 244 1,196
Division restructuring costs (Note 2) (11,730) (3,550) --
Income from continuing operations before interest,
income taxes and extraordinary gain 6,743 19,245 19,472
Interest expense, net (Notes 8 and 9) 15,963 19,425 15,617
Income/(loss) from continuing operations
before income taxes and extraordinary gain (9,220) (180) 3,855
Income taxes (Note 11) 103 318 348
Income/(loss) from continuing operations
before extraordinary gain (9,323) (498) 3,507
Discontinued operations (Note 17):
Loss from operations -- -- (9,639)
Estimated loss on disposal -- -- (1,796)
Extraordinary gain (Notes 3 and 9) -- 1,000 63
Net income/(loss) $ (9,323) $ 502 $ (7,865)
Income/(loss) per share:
Income/(loss) per share from continuing
operations before extraordinary gain $ (0.62) $ (0.03) $ 0.23
Loss per share from discontinued operations -- -- (0.76)
Extraordinary gain -- 0.06 --
Net income/(loss) per share $ (0.62) $ 0.03 $ (0.53)
Weighted average common stock outstanding 15,078 15,102 14,954
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SALANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
December 28, December 30,
1996 1995
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,501 $ 1,400
Accounts receivable - net of allowance for doubtful accounts
of $2,806 in 1996 and $3,007 in 1995 (Notes 8 and 9) 40,214 35,290
Inventories (Notes 4 and 8) 101,619 119,120
Prepaid expenses and other current assets 3,869 5,016
Total current assets 147,203 160,826
Property, plant and equipment, net (Notes 5 and 8) 25,185 24,526
Other assets (Notes 6, 9 and 11) 63,650 70,368
$ 236,038 $ 255,720
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable (Note 8) $ 7,677 $ 14,422
Accounts payable 28,327 26,755
Reserve for business restructuring (Note 2) 2,969 1,569
Accrued salaries, wages and other liabilities (Note 7) 18,008 20,708
Current portion of long term debt (Note 9) 3,372 --
Total current liabilities 60,353 63,454
Long term debt (Notes 9 and 16) 106,231 110,040
Deferred liabilities (Note 14) 8,863 11,373
Commitments and contingencies (Notes 8, 9, 12, 13 and 15)
Shareholders' equity (Note 13): Preferred stock, par value $2 per share:
Authorized 5,000 shares; none issued -- --
Common stock, par value $1 per share:
Authorized 30,000 shares; 15,328 15,275
issued and issuable - 15,328 shares in 1996;
issued and issuable - 15,275 shares in 1995
Additional paid-in capital 107,130 107,071
Deficit (57,147) (47,824)
Excess of additional pension liability over
unrecognized prior service cost adjustment (Note 12) (3,182) (2,185)
Accumulated foreign currency translation adjustment 76 130
Less - treasury stock, at cost - 234 shares (1,614) (1,614)
Total shareholders' equity 60,591 70,853
$ 236,038 $ 255,720
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SALANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
Excess of
Additional
Pension
Liability
Over
Unrecog- Cumulative
nized Foreign Total
Common Stock Add'l Prior Currency Treasury Stock Share-
Number Paid-In Service Translation Number of holders'
of Shares Amount Capital Deficit Cost Adjustment Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 15,016 $15,016 $106,726$(40,461) $ (986) $ 221 234 $(1,614) $78,902
Stock options exercised 226 226 291 517
Net loss (7,865) (7,865)
Excess of additional pension
liability over unrecognized
prior service cost adjustment 213 213
Foreign currency translation
adjustments (101) (101)
Balance at December 31, 1994 15,242 15,242 107,017 (48,326) (773) 120 234 (1,614) 71,666
Stock options exercised 33 33 54 87
Net income 502 502
Excess of additional pension
liability over unrecognized
prior service cost adjustment (1,412) (1,412)
Foreign currency translation
adjustments 10 10
Balance at December 30, 1995 15,275 15,275 107,071 (47,824) (2,185) 130 234 (1,614) 70,853
Stock options exercised 53 53 59 112
Net loss (9,323) (9,323)
Excess of additional pension
liability over unrecognized
prior service cost adjustment (997) (997)
Foreign currency translation
adjustments (54) (54)
Balance at December 28, 1996 15,328 $15,328 $107,130$(57,147) $ (3,182) $ 76 234 $(1,614) $60,591
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SALANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended
December 28, December 30, December 31,
1996 1995 1994
Cash Flows from Operating Activities
<S> <C> <C> <C>
Income/(loss) from continuing operations $ (9,323) $ (498) $ 3,507
Adjustments to reconcile income from continuing operations to net cash provided
by/(used in) operating activities:
Depreciation 5,986 5,542 5,113
Amortization of intangibles 2,372 2,575 2,376
Write-down of fixed assets 263 1,850 --
Write-down of other assets 6,264 -- --
Loss on sale of fixed assets 17 132 --
Changes in operating assets and liabilities:
Accounts receivable (4,924) 1,293 (11,965)
Inventories 17,501 5,479 (19,262)
Prepaid expenses and other current assets 1,066 248 (947)
Other assets (760) 916 (1,302)
Accounts payable 1,572 (1,838) 6,869
Accrued salaries, wages and other liabilities (2,410) (191) (5,786)
Reserve for business restructuring 1,400 1,569 (2,038)
Deferred liabilities (2,148) (598) 330
Net cash provided by/(used in) operating activities 16,876 16,479 (23,105)
Cash Flows from Investing Activities
Capital expenditures, net (7,103) (4,286) (4,926)
Store fixture expenditures (3,855) (2,988) --
Acquisition (694) -- (5,720)
Proceeds from sale of assets 1,854 122 294
Net cash used in investing activities (9,798) (7,152) (10,352)
Cash Flows from Financing Activities
Net short-term borrowings/(repayments) (6,745) (9,484) 36,516
Retirement of long-term debt -- -- (3,537)
Exercise of stock options 112 87 517
Other, net (54) 10 (101)
Net cash (used in)/provided by financing activities (6,687) (9,387) 33,395
Net cash provided by/(used in) continuing operations 391 (60) (62)
Cash used in discontinued operations (290) (505) (119)
Net increase/(decrease) in cash and cash equivalents 101 (565) (181)
Cash and cash equivalents - beginning of year 1,400 1,965 2,146
Cash and cash equivalents - end of year $ 1,501 $ 1,400 $ 1,965
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 16,307 $ 20,280 $ 16,150
Income taxes $ 189 $ 331 $ 674
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
SALANT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in Thousands of Dollars, Except Share and Per Share Data)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The Consolidated Financial Statements include the accounts of Salant Corporation
("Salant") and subsidiaries. (As used herein, the "Company" includes Salant and
its subsidiaries but excludes Salant's Vera Scarf division.) In February 1995,
Salant discontinued its Vera Scarf division. As further described in Note 17,
the Consolidated Financial Statements and the Notes thereto reflect the Vera
Scarf division as a discontinued operation, and the financial results of the
Vera Scarf division are not included in the presentation of income/(loss) from
continuing operations. Significant intercompany balances and transactions are
eliminated in consolidation.
The Company's principal business is the designing, manufacturing, importing and
marketing of apparel. The Company sells its products to retailers, including
department and specialty stores, national chains, major discounters and mass
volume retailers, throughout the United States.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities (such as accounts
receivable, inventories, restructuring reserves and valuation allowances for
income taxes), disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
On June 27, 1990 (the "Filing Date"), Salant and one of its subsidiaries, Denton
Mills, Inc. ("Denton Mills"), filed separate voluntary petitions for relief
under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code")
with the United States Bankruptcy Court for the Southern District of New York
(the "Bankruptcy Court"). On July 30, 1993, the Bankruptcy Court issued an order
confirming the Third Amended Joint Plan of Reorganization of Salant and Denton
Mills, Inc. (the "Reorganization Plan"). The Reorganization Plan was consummated
on September 20, 1993 (the "Consummation Date"), as further described in Note
18.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to December 31. The 1994,
1995 and 1996 fiscal years were each comprised of
52 weeks.
<PAGE>
Reclassifications
Certain reclassifications were made to the 1994 and 1995 Consolidated Financial
Statements to conform with the 1996 presentation.
Cash and Cash Equivalents
The Company treats cash on hand and deposits in banks as cash and cash
equivalents for the purposes of the statements of cash flows.
Accounts Receivable
The Company is a party to an agreement with a factor, as further described in
Note 8, whereby it sells, without recourse, certain eligible accounts
receivable. The credit risk for such accounts is thereby transferred to the
factor. The amounts due from the factor have been offset against advances from
the factor in the accompanying balance sheets. The amounts which have been
offset were $16,355 at December 28, 1996 and $33,792 at December 30, 1995. The
decrease in the amounts which have been offset resulted from a change in the
agreement with the factor.
Inventories
Inventories are stated at the lower of cost (principally determined on a
first-in, first-out basis for apparel operations and the retail inventory method
on a first-in, first-out basis for outlet store operations) or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated or
amortized over their estimated useful lives, or for leasehold improvements, the
lease term, if shorter. Depreciation and amortization are computed principally
by the straight-line method for financial reporting purposes and by accelerated
methods for income tax purposes.
<TABLE>
<CAPTION>
The annual depreciation rates used are as follows:
<S> <C> <C>
Buildings and improvements 2.5% - 10.0%
Machinery, equipment and autos 6.7% - 33.3%
Furniture and fixtures 10.0% - 50.0%
Leasehold improvements Over the life of the asset or the term of the lease, whichever is
shorter
</TABLE>
<PAGE>
Other Assets
Intangible assets are being amortized on a straight-line basis over their
respective useful lives, ranging from 7 1/2 to 40 years. Costs in excess of fair
value of net assets acquired, which relate to the acquisition of the net assets
of Manhattan Industries, Inc. ("Manhattan") are assessed for recoverability on a
periodic basis. In evaluating the value and future benefits of these intangible
assets, their carrying value would be reduced by the excess, if any, of the
intangibles over management's best estimate of undiscounted future operating
income of the acquired businesses before amortization of the related intangible
assets over the remaining amortization period.
Long-Lived Assets
In 1996, the Company adopted Statement of Financial Accounting Standard No. 121,
which requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may no longer be recoverable. Adoption of
this statement did not have a material impact on the Company.
Income Taxes
Deferred income taxes are provided to reflect the tax effect of temporary
differences between financial statement income and taxable income in accordance
with the provisions of Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes".
Fair Value of Financial Instruments
For financial instruments, including cash and cash equivalents, accounts
receivable and payable, and accruals, the carrying amounts approximated fair
value because of their short maturity. Long-term debt, which was issued at a
market rate of interest, currently trades at approximately 93% of principal
amount. In addition, deferred liabilities have carrying amounts approximating
fair value.
Income/(Loss) Per Share
Income/(loss) per share is based on the weighted average number of common shares
(including, as of December 28, 1996 and December 30, 1995, 324,810 and 375,889
shares, respectively, anticipated to be issued pursuant to the Reorganization
Plan) and common stock equivalents outstanding, if applicable. Loss per share
for 1994 and 1996 did not include common stock equivalents, inasmuch as their
effect would have been anti-dilutive.
Revenue Recognition
Revenue is recognized at the time the merchandise is shipped. Retail factory
outlet store revenues are recognized at the time of sale.
Note 2. Restructuring Costs
In 1996, the Company recorded a provision for restructuring of $11,730,
consisting of (i) $5,718 in connection with the decision to sell or license the
JJ. Farmer sportswear product line, which charge is primarily related to the
write-off of goodwill and write-down of other assets, (ii) $2,858 related to the
write-off of certain assets related to the licensing of the Gant dress shirt and
accessories product lines, and the accrual of a portion of the future minimum
royalties under the Gant licenses, which are not expected to be covered by
future sales, (iii) $1,837 primarily related to employee costs in connection
with the closing of a manufacturing and distribution facility in Thomson,
Georgia, (iv) $714 primarily related to employee costs in connection with the
closing of a manufacturing facility in Americus, Georgia and (v) $603 related
primarily to other severance costs.
In the fourth quarter of 1995, the Company recorded a $3,550 restructuring
provision, which included (i) fixed asset write-downs at locations to be closed
and (ii) inventory markdowns for discontinued product lines.
Note 3. Extraordinary Gain
In the fourth quarter of 1995, the Company recorded an extraordinary gain of
$1,000 related to the reversal of excess liabilities previously provided for the
anticipated settlement of claims arising from the chapter 11 proceeding.
Note 4. Inventories
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
<S> <C> <C>
Finished goods $ 58,663 $ 72,850
Work-in-process 16,011 15,829
Raw materials and supplies 26,945 30,441
$101,619 $119,120
</TABLE>
Finished goods inventory includes in transit merchandise of $5,400 and $6,500 at
December 28, 1996 and December 30, 1995, respectively.
<PAGE>
Note 5. Property, Plant and Equipment
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
<S> <C> <C>
Land and buildings $14,975 $14,779
Machinery, equipment, furniture
and fixtures 30,815 40,347
Leasehold improvements 6,895 8,315
Property held under capital leases 117 1,345
52,802 64,786
Less accumulated depreciation and amortization 27,617 40,260
$25,185 $24,526
</TABLE>
Note 6. Other Assets
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
Excess of cost over net assets acquired,
net of accumulated amortization of
<S> <C> <C>
$13,058 in 1996 and $12,014 in 1995 $45,008 $50,641
Trademarks and license agreements,
net of accumulated amortization of
$3,619 in 1996 and $3,274 in 1995 13,943 14,588
Leasehold interests, net of accumulated
amortization of $965 in 1995 -- 1,478
Other 4,699 3,661
$63,650 $70,368
</TABLE>
In June 1996, the company wrote-off other assets of $4,325 which consisted of
$4,075 for the unamortized portion of the excess of cost over net assets
acquired related to the JJ. Farmer division and $250 related to the license
agreements for the Gant product lines.
In November 1996, the Company sold its leasehold interest in a closed facility
in Glen Rock, New Jersey, resulting in a gain of $2,712, which is included in
other income.
Note 7. Accrued Salaries, Wages and Other Liabilities
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
<S> <C> <C>
Accrued salaries and wages $ 1,765 $ 3,268
Accrued pension and retirement benefits 4,080 3,737
Accrued royalties 1,959 1,716
Accrued interest 3,716 3,716
Other accrued liabilities 6,488 8,271
$18,008 $20,708
</TABLE>
Note 8. Financing and Factoring Agreements
The Company is a party to a revolving credit, factoring and security agreement,
as amended (the "Credit Agreement"), with The CIT Group/Commercial Services,
Inc. ("CIT") which provides the Company with seasonal working capital financing,
consisting of direct borrowings and letters of credit, of up to $135,000 (the
"Maximum Credit"), subject to an asset based borrowing formula. As collateral
for borrowings under the Credit Agreement, the Company has granted to CIT a
security interest in substantially all of the assets of the Company.
On February 20, 1997, the Company and CIT executed the Tenth Amendment to the
Credit Agreement (the "Amendment"). The Amendment extended the term of the
Credit Agreement from March 31, 1997 until September 30, 1998. The Amendment
provided for a reduction in the interest rate charged on direct borrowings from
one percent in excess of the base rate of the Chase Manhattan Bank, N.A. (the
"Prime Rate", which was 8.25% at December 28, 1996) to one-half of one percent
in excess of the Prime Rate. The Amendment also provided the Company with the
option to borrow funds at 2.75% above the London Late Eurodollar rate (the
"Eurodollar Rate", which was 5.625% at December 28, 1996). Based upon Eurodollar
Rates currently in effect, the Company's effective rate of interest under the
Eurodollar option is approximately 100 basis points below its borrowing rate in
effect prior to the Amendment. The Amendment also modified or eliminated certain
financial covenants. As a result of the Amendment, the Company will only be
required to maintain certain minimum levels of stockholders' equity and to
comply with one other financial covenant limiting the maximum loss the Company
may incur over any four or eight consecutive calendar quarters.
As of December 28, 1996 and December 30, 1995, direct borrowings were $7,677 and
$14,422, respectively. As of December 28, 1996 and December 30, 1995, letters of
credit outstanding under the Credit Agreement were $32,337 and $31,415,
respectively. The weighted average interest rate on borrowings under the Credit
Agreement for the years ended December 28, 1996 and December 30, 1995 was 9.4%
and 9.9%, respectively.
In addition to the two financial covenants discussed above, the Credit Agreement
contains a number of other covenants, including restrictions on incurring
indebtedness and liens, making investments in or purchasing the stock, or all or
a substantial part of the assets of another person, selling property and paying
cash dividends.
Note 9. Long-Term Debt
On September 20, 1993, Salant issued $111,851 principal amount of 10 1/2% Senior
Secured Notes due December 31, 1998 (the "Secured Notes"). The Secured Notes may
be redeemed at any time prior to maturity, in whole or in part, at the option of
the Company, at a premium to the principal amount thereof plus accrued interest.
The premium on redemption declines annually from 2.1% in 1997 to 0% in 1998. The
Secured Notes are secured by a first lien (subordinated to the lien securing
borrowings under the Credit Agreement to the extent of $15,000) on certain
accounts receivable, certain intangible assets, the capital stock of Salant's
subsidiaries and certain real property of the Company, and by a second lien on
substantially all of the other assets of the Company.
The indenture governing the Secured Notes (the "Indenture") contains various
restrictions pertaining to the incurrence of indebtedness, the purchase of
capital stock and the payment of dividends. Under the most restrictive of these
provisions, the Company currently may not purchase or redeem any shares of its
capital stock, or declare or pay cash dividends.
On October 28, 1996, the Company completed the sale of a leasehold interest in a
facility located in Glen Rock, New Jersey. The Net Cash Proceeds (as defined in
the Indenture) of such sale were $3,372. Such amount was included in current
liabilities at December 28, 1996. Pursuant to the Indenture, on December 30,
1996, the Company repurchased Secured Notes in a principal amount equal to the
Net Cash Proceeds at 100% of the principal amount thereof.
In May 1994, the Company purchased and retired $3,600 of the Secured Notes in an
open market transaction at a price below the principal amount thereof. As a
result of this transaction, the Company recorded an extraordinary gain of $63 in
1994.
Note 10. Segment Information and Significant Customers
The Company's principal business is the designing, manufacturing, importing and
marketing of apparel. The Company sells its products to retailers, including
department and specialty stores, national chains, major discounters and mass
volume retailers, throughout the United States. As an adjunct to its apparel
manufacturing operations, the Company operates 65 factory outlet stores in
various parts of the United States. Foreign operations, other than sourcing, are
not significant. The Company's products have been classified in the following
industry segments: (i) men's apparel, (ii) children's sleepwear and underwear
and (iii) other products, consisting of women's junior apparel and retail
factory outlet store operations. Information concerning the Company's business
segments in 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
NET SALES
<S> <C> <C> <C>
Men's Apparel $354,723 $423,894 $343,455
Children's Sleepwear
and Underwear 45,754 39,936 35,513
Other Businesses 37,642 37,692 40,317
Total net sales $438,119 $501,522 $419,285
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPERATING INCOME
<S> <C> <C> <C>
Men's Apparel $ 6,400 $ 19,819 $ 17,366
Children's Sleepwear
and Underwear 5,401 5,184 3,119
Other Businesses (3,912) (2,205) (522)
7,889 22,798 19,963
Corporate expenses (6,137) (9,176) (6,171)
Licensing division income 4,991 5,623 5,680
Interest expense, net (15,963) (19,425) (15,617)
Income/(loss) from continuing
operations before income taxes
and extraordinary gain $ (9,220) $ (180) $ 3,855
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
<S> <C> <C> <C>
Men's Apparel $138,024 $170,203 $161,751
Children's Sleepwear
and Underwear 20,709 16,349 14,273
Other Businesses 18,846 20,179 18,092
Corporate 58,459 48,989 73,100
Total identifiable assets $236,038 $255,720 $267,216
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
<S> <C> <C> <C>
Men's Apparel $ 4,046 $ 1,389 $ 2,629
Children's Sleepwear
and Underwear 546 492 435
Other Businesses 439 584 1,140
Corporate 2,072 1,821 722
Total capital expenditures $ 7,103 $ 4,286 $ 4,926
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION
<S> <C> <C> <C>
Men's Apparel $ 3,672 $ 2,960 $ 2,549
Children's Sleepwear
and Underwear 399 345 311
Other Businesses 526 514 473
Corporate 3,761 4,298 4,156
Total depreciation and
amortization $ 8,358 $ 8,117 $ 7,489
</TABLE>
In 1996, approximately 13% of the Company's net sales were made to Sears,
Roebuck & Co. ("Sears"). Approximately 11% of the Company's net sales in 1996
were made to Federated Department Stores, Inc. ("Federated"), which includes all
1996 net sales to Macy's Department Stores ("Macy's"), which was acquired by
Federated in 1994, and the Broadway Stores, Inc. ("Broadway"), which was
acquired by Federated in February 1996. In 1995 and 1994, net sales to a
combined Federated/Macy's/Broadway would have represented approximately 12% and
15% of the Company's net sales, respectively. In each of 1995 and 1994,
approximately 11% of the Company's net sales were made to TJX Corporation
("TJX"), which includes all 1995 and 1994 net sales to Marshall's Corporation,
which was acquired by TJX in February 1996.
In 1995, approximately 13% of the Children's Group's net sales were made to
Dayton Hudson Corporation. In 1996, approximately 27% and 22% of the net sales
of Other Businesses were made to K-Mart Corporation and JC Penney Company,
respectively. In 1995, net sales to JC Penney represented 19% of the net sales
of the Other Businesses.
No other customer accounted for more than 10% of the net sales of the Company or
any of its business segments during 1996, 1995 or 1994.
Note 11. Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
December 28, December 30, December 31,
1996 1995 1994
Current:
<S> <C> <C> <C>
Federal $(106) $100 $100
State -- -- 20
Foreign 209 218 228
$ 103 $318 $348
</TABLE>
The following is a reconciliation of the tax provision/(benefit) at the
statutory Federal income tax rate to the actual income tax provision:
<TABLE>
<CAPTION>
1996 1995 1994
Income tax provision/
<S> <C> <C> <C>
(benefit), at 34% $(3,135) $ (61) $1,097
Loss producing no current
tax benefit 3,135 61
Utilization of net operating loss
carryforward (1,097)
Alternative minimum tax 100 100
Tax refunds from prior years (106)
State, local and foreign taxes 209 218 248
Income tax provision $ 103 $ 318 $ 348
</TABLE>
<PAGE>
The following are the tax effects of significant items comprising the Company's
net deferred tax asset:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
Deferred tax liabilities:
Differences between book and tax
<S> <C> <C>
basis of property $(3,659) $ (6,253)
Deferred tax assets:
Reserves not currently deductible 13,983 17,155
Operating loss carryforwards 45,041 43,182
Tax credit carryforwards 2,958 3,055
Expenses capitalized into inventory 4,657 4,959
66,639 68,351
Net deferred asset 62,980 62,098
Valuation allowance (62,980) (62,098)
Net deferred tax asset $ -- $ --
</TABLE>
At December 28, 1996, the Company had net operating loss carryforwards ("NOLs")
for income tax purposes of approximately $115,000, expiring from 1999 to the
year 2011, which can be used to offset future taxable income. Approximately
$51,000, which arose from the acquisition of Manhattan in April 1988, will
offset goodwill when utilized. The implementation of the Reorganization Plan and
transactions that have occurred within the three-year period preceding the
Consummation Date have caused an "ownership change" for federal income tax
purposes as of the Consummation Date. As a result of such ownership change, the
use of the NOLs to offset future taxable income has been limited by the
requirements of section 382 of the Internal Revenue Code of 1986, as amended.
The annual limit under section 382 is approximately $7,200. Upon consummation of
the Reorganization Plan, the Company realized cancellation of indebtedness
income for tax purposes of approximately $917 and the NOLs have been reduced or
limited accordingly.
In addition, at December 28, 1996, the Company had available tax credit
carryforwards of $2,798 which expire between 1997 and 1999. Of these tax
credits, $1,986 will reduce goodwill and the balance will reduce income tax
expense when utilized. Utilization of these credits may be limited in the same
manner as the NOLs, as described above.
Note 12. Employee Benefit Plans
Pension and Retirement Plans
The Company has several defined benefit plans for virtually all full-time
salaried employees and certain nonunion hourly employees. The Company's funding
policy for its plans is to fund the minimum annual contribution required by
applicable regulations.
The Company also has a nonqualified supplemental retirement and death benefit
plan covering certain employees. The funding for this plan is based on premium
costs of related insurance contracts.
Pension expense includes the following components:
<TABLE>
<CAPTION>
1996 1995 1994
Service cost-benefit earned
<S> <C> <C> <C>
during the period $1,270 $1,029 $1,125
Interest cost on projected
benefit obligation 2,912 2,714 2,626
Loss/(return) on assets (4,126) (4,697) 1,331
Net amortization 1,564 2,286 (3,437)
Net periodic pension cost $1,620 $1,332 $1,645
</TABLE>
The reconciliation of the funded status of the plans at December 28, 1996 and
December 30, 1995 is as follows:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
Accumulated Accumulated
Plan Plan
Benefits Benefits
Exceed Exceed
Plan Assets Plan Assets
Actuarial present value of benefit obligation
<S> <C> <C>
Vested benefit obligation $(41,578) $(36,211)
Nonvested benefit obligation (661) (597)
Accumulated benefit obligation $(42,239) $(36,808)
Projected benefit obligation (46,811) $(40,833)
Plan assets at fair value 35,980 30,900
Projected benefit obligation in
excess of plan assets (10,831) (9,933)
Unrecognized net obligation at date of
initial application, amortized over 15 years 624 810
Unrecognized net loss 7,188 4,616
Unrecognized prior service cost (1,222) (1,176)
Recognition of minimum liability
under SFAS No. 87 (3,332) (2,524)
Accrued pension cost $ (7,573) $ (8,207)
</TABLE>
Assumptions used in accounting for defined benefit pension plans are as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994 1994
Non- Qualified Non- Qualified Non- Qualified
Qualified Plans Qualified Plans Qualified Plans
Plan Plan Plan
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.25% 7.25% 7.0% 7.0% 8.5% 8.5%
Rate of increase in
compensation levels N/A 5.0% N/A 5.0% N/A 5.5%
Expected long-term rate of
return on assets 8.0% 8.5% 8.0% 8.5% 8.0% 8.0%
</TABLE>
Assets of the Company's qualified plans are invested in directed trusts. Assets
in the directed trusts are invested in common and preferred stocks, corporate
bonds, money market funds and U.S. government obligations. The nonqualified
supplemental plan assets consist of the cash surrender value of certain
insurance contracts.
The Company also contributes to certain union retirement and insurance funds
established to provide retirement benefits and group life, health and accident
insurance for eligible employees. The total cost of these contributions was
$4,095, $4,263 and $4,693 in 1996, 1995 and 1994, respectively. The actuarial
present value of accumulated plan benefits and net assets available for benefits
for employees in the union administered plans are not determinable from
information available to the Company.
Long Term Savings and Investment Plan
Salant sponsors the Long Term Savings and Investment Plan, under which eligible
salaried employees may contribute up to 15% of their annual compensation,
subject to certain limitations, to a money market fund, a fixed income fund
and/or an equity fund. Salant contributes a minimum matching amount of 20% of
the first 6% of a participant's annual compensation and may contribute an
additional discretionary amount in cash or in the Company's common stock. In
1996, 1995 and 1994 Salant's aggregate contributions to the Long Term Savings
and Investment Plan amounted to $229, $239 and $239, respectively.
Note 13. Stock Options, Warrants and Shareholder Rights
On May 14, 1996, the stockholders of the Company approved the 1996 Stock Plan.
Pursuant to the 1996 Stock Plan, directors receive an automatic grant of stock
options pursuant to a formula contained in such plan, and options or awards may
be granted to key employees of the Company for the purchase of an aggregate of
600,000 shares of the Company's common stock.
The 1993, 1988 and 1987 Stock Plans authorized the Company to grant stock
options or stock awards aggregating 1,800,000 shares of Salant common stock to
officers, key employees and, in the case of the 1993 and 1988 Stock Plans,
directors.
The 1996, 1993, 1988 and 1987 Stock Plans authorized such grants (subject to
certain restrictions applicable to 1996 and 1993 Stock Plan stock options
granted to directors) at such prices and pursuant to such other terms and
conditions as the Stock Plan Committee may determine. Options may be
nonqualified stock options or incentive stock options and may include stock
appreciation rights. Exercise prices of options are ordinarily equal to 100% of
the fair market value of the Company's shares on the date of grant of the
options. Options expire no later than ten years from the date of grant and
become exercisable in varying amounts over periods ranging from the date of
grant to five years from the date of grant.
The following table summarizes stock option transactions during 1994, 1995 and
1996:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price Range Price
Options outstanding at
<S> <C> <C> <C>
January 1, 1994 1,362,774 $1.00-15.125
Options granted during 1994 61,050 $4.94-6.69
Options exercised during 1994 (226,666) $2.00-2.63
Options surrendered or canceled
during 1994 (39,950) $5.125-12.00
Options outstanding at
December 31, 1994 1,157,208 $1.00-15.125
Options granted during 1995 205,300 $3.3125-5.1875
Options exercised during 1995 (33,334) $2.625
Options surrendered or canceled
during 1995 (65,601) $3.00-12.00
Options outstanding at
December 30, 1995 1,263,573 $1.00-15.125 $6.50
Options granted during 1996 51,600 $3.32-3.94 $3.62
Options exercised during 1996 (53,000) $1.00-2.00 $1.94
Options surrendered or canceled
during 1996 (228,433) $2.75-12.00 $6.63
Options outstanding at
December 28, 1996 1,033,740 $1.625-15.125 $6.56
Options exercisable at
December 28, 1996 910,028 $1.625-15.125 $6.88
Options exercisable at
December 30, 1995 904,209 $1.00-15.125
</TABLE>
The Company has a shareholder rights plan (the "Rights Plan"), which provides
for a dividend distribution of one right for each share of Salant common stock
to holders of record of the Company's common stock at the close of business on
December 23, 1987. The rights will expire on December 23, 1997. With certain
exceptions, the rights will become exercisable only in the event that an
acquiring party accumulates 20 percent or more of the Company's voting stock, or
if a party announces an offer to acquire 30 percent or more of such voting
stock. Each right, when exercisable, will entitle the holder to buy one
one-hundredth of a share of a new series of cumulative preferred stock at a
price of $30 per right or, upon the occurrence of certain events, to purchase
either Salant common stock or shares in an "acquiring entity" at half the market
value thereof. The Company will generally be entitled to redeem the rights at
three cents per right at any time until the 10th day following the acquisition
of a 20 percent position in its voting stock. In July 1993, the Rights Plan was
amended to provide that an acquisition or offer by Apollo Apparel Partners,
L.P., or any of its subsidiaries, will not cause the rights to become
exercisable.
In summary, as of December 28, 1996, there were 1,033,740 shares of Common Stock
reserved for the exercise of stock options and 953,175 shares of Common Stock
reserved for future grants of stock options or awards.
All stock options are granted at fair market value of the Common Stock at the
grant date. The weighted average fair value of the stock options granted during
1996 and 1995 was $3.42 and $4.52, respectively. The fair value of each stock
option grant is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions used for grants in
1996: risk-free interest rate of 6.18%; expected dividend yield of 0%; expected
life of 4.44 years; and expected volatility of 220%. The outstanding stock
options at December 28, 1996 have a weighted average contractual life of 5.65
years. The number of stock options exercisable at December 28, 1996 was 910,028.
These stock options have a weighted average exercise price of $6.88 per share.
The Company accounts for the 1987, 1988, 1993 and 1996 Stock Plans in accordance
with Accounting Principles Board Opinion No. 25, under which no compensation
cost is recognized for stock option awards. Had compensation cost been
determined consistent with Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), the Company's pro forma
net income/(loss) for 1996 and 1995 would have been $(9,692) and $192,
respectively. The Company's pro forma net income/(loss) per share for 1996 and
1995 would have been ($0.64) and $0.01, respectively. Because the SFAS 123
method of accounting has not been applied to options granted prior to 1995, the
resulting pro forma compensation cost may not be representative of that to be
expected in future years.
Note 14. Deferred Liabilities
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
<S> <C> <C>
Lease obligations $ 93 $ 1,206
Deferred pension obligations 4,865 5,087
Liability for settlement of chapter 11 claims 3,905 4,600
Other -- 480
</TABLE>
$ 8,863 $11,373
Note 15. Commitments and Contingencies
(a) Lease Commitments
The Company conducts a portion of its operations in premises occupied under
leases expiring at various dates through 2012. Certain of the leases contain
renewal options. Rental payments under certain leases may be adjusted for
increases in taxes and operating expenses above specified amounts. In addition,
certain of the leases for outlet stores contain provisions for additional rent
based upon sales.
In 1996, 1995 and 1994, rental expense was $7,563, $7,265 and $5,914,
respectively. As of December 28, 1996, future minimum rental payments under
noncancelable operating leases (exclusive of renewal options, percentage
rentals, and adjustments for property taxes and operating expenses) were as
follows:
<TABLE>
<CAPTION>
Fiscal Year
<S> <C> <C>
1997 $ 6,907
1998 6,004
1999 4,739
2000 3,015
2001 2,566
Thereafter 15,709
Total $38,940
</TABLE>
(b) Employment Agreements
The Company has employment agreements with certain executives, which provide for
the payment of compensation aggregating approximately $2,108 in 1997 and $490 in
1998 . In addition, such employment agreements provide for incentive
compensation based on various performance criteria.
Note 16. Acquisition
On June 10, 1994, the Company acquired all the capital stock of JJ. Farmer
Clothing Inc. (a Canadian corporation) and the assets of JJ. Farmer
International Limited (a Hong Kong corporation) (collectively "JJ. Farmer") for
approximately $5,311 in cash. The purchase price is subject to adjustment based
on a number of items, including the future profitability of JJ. Farmer. As part
of the acquisition, the Company agreed to pay to the former owners of JJ.
Farmer, certain minimum amounts in the years 1996 through 1999. The present
value of such future payments is $1,352, which is included in long-term debt.
Through December 28, 1996, the Company had made additional payments of $1,157 in
accordance with the acquisition agreement. The acquisition has been accounted
for as a purchase, and accordingly, JJ. Farmer's operating results have been
included in the Company's consolidated results of operations commencing June 11,
1994. Pro forma results of operations have not been presented as the effect
would not be significant. JJ. Farmer's net sales for the five months ended May
31, 1994 were $3,392. The excess of cost over the book value of net assets
acquired ($4,589 subject to adjustment) was being amortized over a period of not
more than 15 years on a straight-line basis, prior to the write-off in the
second quarter of 1996.
Note 17. Discontinued Operations
In February 1995, the Company discontinued the operations of the Vera Scarf
division, which imported and marketed women's scarves. The loss from operations
of the division in 1994 was $9,639, which included a fourth quarter charge of
$9,004 for the write-off of goodwill and other intangible assets. Net sales of
the division were $1,673 and $5,087 in 1995 and 1994, respectively.
Additionally, in 1994 the Company recorded a fourth quarter charge of $1,796 to
accrue for expected operating losses during the phase-out period through June
1995. No income tax benefits have been allocated to the division's 1994 loss.
Note 18. Consummation of the Plan of Reorganization
From the Consummation Date through December 28, 1996, pursuant to the
Reorganization Plan, the Company made cash payments of $9,400, issued $111,851
of new 10-1/2% senior secured notes and issued 11.0 million shares of common
stock to creditors in settlement of certain claims in the chapter 11
proceedings. Salant anticipates that an additional $4,161 in cash and an
additional 325 thousand shares of common stock ultimately will have been
distributed to creditors upon the final resolution of all remaining claims.
Provisions for such distributions had previously been made in the consolidated
financial statements.
Note 19. Quarterly Financial Information (Unaudited)
Fiscal year ended December 28, 1996
<TABLE>
<CAPTION>
Total 4th Qtr.3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C>
Net sales $438,119 $119,317 $122,599 $97,010 $99,193
Gross profit 97,916 27,371 29,935 18,030 22,580
Net income/(loss) (9,323) 6,116 6,335 (18,862) (2,912)
Net income/(loss) per share (a) $ (0.62) $ 0.40 $ 0.42 $ (1.25) $ (0.19)
</TABLE>
Fiscal year ended December 30, 1995
<TABLE>
<CAPTION>
Total 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C>
Net sales $501,522 $127,347 $148,313 $122,061 $103,801
Gross profit 103,892 23,152 33,752 24,521 22,467
Income/(loss) from
continuing operations (498) (5,509) 6,318 392 (1,699)
Extraordinary gain
(See note 3) 1,000 1,000 -- -- --
Net income/(loss) 502 (4,509) 6,318 392 (1,699)
Income/(loss) per share from
continuing operations (a) $ (0.03) $ (0.36) $ 0.42 $ 0.03 $ (0.11)
Income per share from
extraordinary gain 0.06 0.06 -- -- --
Net income/(loss) per share (a) 0.03 (0.30) 0.42 0.03 (0.11)
</TABLE>
Reference is made to Notes 2, 3 and 6 concerning fourth quarter adjustments
during the years ended December 28, 1996 and December 30, 1995.
(a) Income/(loss) per share of common stock is computed separately for each
period. The sum of the amounts of income/(loss) per share reported in
each period differs from the total for the year due to the issuance of
shares and, when appropriate, the inclusion of common stock equivalents.
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from the Proxy
Statement of Salant Corporation.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the Proxy
Statement of Salant Corporation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from the Proxy
Statement of Salant Corporation.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from the Proxy
Statement of Salant Corporation.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
Financial Statements
The following financial statements are included in Item 8 of this Annual Report:
Independent Auditors' Report
Consolidated Statements of Operations
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Statement Schedule
The following Financial Statement Schedule for the years ended December 28,
1996, December 30, 1995 and December 31, 1994 is filed as part of this Annual
Report:
Schedule II - Valuation and Qualifying Accounts and Reserves
All other schedules have been omitted because they are inapplicable or not
required, or the information is included elsewhere in the financial statements
or notes thereto.
<PAGE>
SALANT CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
(1) (2)
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions at End
Description of Period Expenses -- Describe -- Describe of Period
YEAR ENDED DECEMBER 28, 1996:
Accounts receivable allowance
<S> <C> <C> <C> <C> <C>
for doubtful accounts $3,007 $(112) $ -- $89 (A) $2,806
Reserve for business
restructuring $1,569 $11,730 $ -- $10,330 (B) $2,969
YEAR ENDED DECEMBER 30, 1995:
Accounts receivable - allowance
for doubtful accounts $2,565 $1,510 $ -- $1,068 (A) $3,007
Reserve for business
restructuring $ -- $3,550 $ -- $1,981 (B) $1,569
YEAR ENDED DECEMBER 31, 1994:
Accounts receivable - allowance
for doubtful accounts $2,261 $1,068 $ -- $ 764 (A) $2,565
Reserve for business
restructuring $2,038 $2,038 $ -- $ -- $ --
</TABLE>
NOTES:
(A) Uncollectible accounts written off, less recoveries. (B) Costs incurred in
plant closings and business restructuring.
<PAGE>
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
December 28, 1996.
<PAGE>
Exhibits
<TABLE>
<CAPTION>
<PAGE>
Incorporation
Number Description By Reference To
<C> <C> <C>
2.1 Third Amended Disclosure Exhibit 1 to
Statement of Salant Form 8-A dated
Corporation, and Denton July 28, 1993.
Mills, Inc., dated
May 12,1993.
2.2 Third Amended Joint Included as
Chapter 11 Plan of Exhibit D-1
Reorganization of to Exhibit 1
Salant Corporation to Form 8-A
and Denton Mills, Inc. dated July 28, 1993.
3.1 Form of Amended and Included as Exhibit
Restated Certificate of D-1 to Exhibit 2
Incorporation of Salant to Form 8-A dated
Corporation. July 28, 1993.
3.2 Form of Bylaws, as amended, of
Salant Corporation, effective September 21, 1994.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
December 8, 1987 between Salant on Form 8-K dated December 8, 1987.
Corporation and The Chase
Manhattan Bank, N.A.,
as Rights Agent. The Rights
Agreement includes as Exhibit B the
form of Right Certificate.
4.2 Form of First Amendment Exhibit 3 to
to the Rights Agreement Amendment No. 1 to
between Salant Corporation Form 8-A dated
and Mellon Securities. July 29, 1993.
4.3 Indenture, dated as of Exhibit 10.34 to
September 20, 1993, between Salant Quarterly Report
Corporation and Bankers on Form 10-Q for
Trust Company, as trustee, the quarter ended
for the 10-1/2% Senior October 2, 1993.
Secured Notes due
December 31, 1998.
10.1 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated September 29, 1993, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial October 2, 1993.
Services, Inc.
10.2 Salant Corporation 1987 Stock Plan. Exhibit 19.2 to Annual Report on Form 10-K for fiscal year 1987.
10.3 Salant Corporation 1987 Stock Plan Exhibit 10.12 to Form S-2
Agreement, dated as of June 13, Registration Statement filed
1988, between Nicholas P. DiPaolo June 17, 1988.
and Salant Corporation.
10.4 Salant Corporation 1988 Stock Plan. Exhibit 19.3 to Annual Report on
Form 10-K for fiscal year 1988.
10.5 First Amendment, effective Exhibit 19.1 to Quarterly Report
as of July 25, 1989, to the Salant on Form 10-Q for the quarter
Corporation 1988 Stock Plan. ended September 30, 1989.
10.6 Form of Salant Corporation 1988 Exhibit 19.7 to Annual Report on
Stock Plan Employee Agreement. Form 10-K for fiscal year 1988.
10.7 Form of Salant Corporation Exhibit 19.8 to
1988 Stock Plan Director Annual Report on
Agreement. Form 10-K for fiscal
year 1988.
10.8 Employment Agreement, dated as of Exhibit 19.4 to
December 31, 1990, between Herbert Annual Report on
R. Aronson and Salant Corporation. * Form 10-K for fiscal
year 1990.
10.9 Letter Agreement, dated Exhibit 19.1 to Quarterly
June 20, 1992, amending the Report on Form 10-Q for
Employment Agreement, dated as of the quarter ended October 3, 1992.
December 31, 1990, between Herbert
R. Aronson and Salant Corporation. *
10.10 License Agreement, dated Exhibit 19.1 to Annual Report
January 1, 1991, by and between on Form 10-K for fiscal year 1992.
Perry Ellis International Inc.
and Salant Corporation regarding
men's sportswear.
10.11 License Agreement, dated Exhibit 19.2 to Annual Report
January 1, 1991, by and between on Form 10-K for
Perry Ellis International Inc. fiscal year 1992.
and Salant Corporation regarding
men's dress shirts.
10.12 Employment Agreement, Exhibit 10.32 to
dated as of June 1, 1993, Quarterly Report on
between Todd Kahn Form 10-Q for the
and Salant Corporation. * quarter ended July 8, 1993.
10.13 Employment Agreement, dated Exhibit 10.36 to
as of September 20, 1993, between Quarterly Report on
Nicholas P. DiPaolo and Form 10-Q for the
Salant Corporation. * quarter ended October 2, 1993.
10.14 Employment Agreement, dated Exhibit 10.38 to
as of July 30, 1993, between Quarterly Report on
Richard P. Randall and Form 10-Q for the
Salant Corporation. * quarter ended October 2, 1993.
10.15 Employment Agreement, dated Exhibit 10.32 to Annual Report on
as of December 21, 1993, between Form 10-K for Fiscal Year 1993.
Elliot M. Lavigne and Salant
Corporation. *
10.16 Agreement, dated as of Exhibit 10.33 to Annual Report on
September 22, 1993, between Nicholas Form 10-K for Fiscal Year 1993.
P. DiPaolo and Salant Corporation. *
<PAGE>
10.17 Forms of Salant Corporation 1993 Exhibit 10.34 to Annual
Stock Plan Directors' Option Report on Form
Agreement. * 10-K for Fiscal Year 1993.
10.18 Letter Agreement, dated as of Exhibit 10.45 to
August 24, 1994, amending the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated quarter ended October 1, 1994.
September 20, 1993,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.19 Letter Agreement, dated Exhibit 10.46 to
October 18, 1994, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
December 31, 1990, between Herbert quarter ended October 1, 1994.
R. Aronson and Salant Corporation. *
10.20 Letter Agreement, dated Exhibit 10.47 to
October 25, 1994, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
July 30, 1993, between Richard quarter ended October 1, 1994.
Randall and Salant Corporation. *
10.21 Third Amendment to Credit Agreement, Exhibit 10.48 to Current Report on
dated February 28, 1995, to the Form 8-K, dated March 2, 1995.
Revolving Credit, Factoring and
Security Agreement, dated
September 20, 1993, as amended,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.22 Salant Corporation Retirement Plan, Exhibit 10.23 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.23 Salant Corporation Pension Plan, Exhibit 10.24 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.24 Salant Corporation Long Term Savings Exhibit 10.25 to Annual Report on
and Investment Plan as amended Form 10-K for Fiscal Year 1994.
and restated. *
10.25 Letter Agreement, dated Exhibit 10.26 to Annual Report on
February 15, 1995, amending the Form 10-K for Fiscal Year 1994.
Employment Agreement, dated
July 30, 1993, between Richard
Randall and Salant Corporation. *
10.26 Fourth Amendment to Credit Exhibit 10.27 to
Agreement, dated as of March 1, Quarterly Report
1995, to the Revolving Credit, on Form 10-Q for
Factoring and Security Agreement, the quarter
dated as of September 20, 1993, ended April 1,
as amended, between Salant 1995.
Corporation and The CIT Group/
Commercial Services, Inc.
10.27 Letter Agreement, dated April 12, Exhibit 10.28 to
1995, amending the Employment Quarterly Report
Agreement, dated June 1, 1993, on Form l0-Q for
between Todd Kahn and Salant the quarter
Corporation. * ended April 1,
1995.
10.28 Fifth Amendment to Credit Exhibit 10.29
Agreement, dated as of to Quarterly
June 28, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.29 Sixth Amendment to Credit Exhibit 10.30
Agreement, dated as of to Quarterly
August 15, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.30 Letter from The CIT Group/ Exhibit 10.31
Commercial Services, Inc., to Quarterly
dated as of July 11, 1995, Report on
regarding the waiver of a Form l0-Q for
default. the quarter
ended July 1,
1995.
10.31 Letter Agreement between Exhibit 10.31
Salant Corporation and The to Quarterly
CIT Group/Commercial Services, Report on
Inc. dated as of July 11, 1995, Form l0-Q for
regarding the Seasonal Overadvance the quarter
Subfacility. ended July 1,
1995.
10.32 Letter Agreement, dated as of Exhibit 10.33 to
August 31, 1995, amending the Quarterly Report
Employment Agreement, dated on Form l0-Q for
September 20, 1993, between the quarter
Nicholas P. DiPaolo and ended September
Salant Corporation. * 30, 1995.
10.33 Letter Agreement, dated Exhibit 10.33 to
December 1, 1995, between Annual Report on
Lubin, Delano & Company and Form 10-K for
Salant Corporation. fiscal year 1995.
10.34 Seventh Amendment to Credit Exhibit 10.34 to
Agreement, dated as of Annual Report on
March 27, 1996, to the Form 10-K for
Revolving Credit, Factoring fiscal year 1995.
and Security Agreement,
dated as of September 20,
1993, as amended, between
Salant Corporation and The
CIT Group/Commercial Services,
Inc.
10.35 First Amendment to the Salant Exhibit 10.35 to
Corporation Retirement Plan, dated Quarterly Report on
as of January 31, 1996. Form 10-Q for the
quarter ended
March 30, 1996.
10.36 First Amendment to the Salant Exhibit 10.36 to
Corporation Long Term Savings and Quarterly Report on
Investment Plan, effective as of Form 10-Q for the
January 1, 1994. quarter ended
March 30, 1996.
10.37 Eighth Amendment to Credit Agreement, Exhibit 10.37 to
dated as of June 1, 1996, to the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated as of quarter ended
September 20, 1993, as amended, June 29, 1996.
between Salant Corporation and
The CIT Group/Commerical Services,
Inc.
10.38 Ninth Amendment to Credit Agreement, Exhibit 10.38 to
dated as of August 16,1996, to the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated as of quarter ended
September 20, 1993, as amended, June 29, 1996.
between Salant Corporation and
The CIT Group/Commerical Services,
Inc.
10.39 Employment Agreement, dated as
of January 1, 1997, between
Nicholas P. DiPaolo and
Salant Corporation. *
10.40 Salant Corporation 1996 Stock Plan
10.41 Tenth Amendment to Credit Agreement,
dated as of February 20, 1997, to the
Revolving Credit, Factoring and
Security Agreement, dated as of
September 20, 1993, as amended,
between Salant Corporation and
The CIT Group/Commerical Services,
Inc.
10.42 Employment Agreement, dated as
of February 11, 1997, between
Michael A. Lubin and
Salant Corporation. *
10.43 Employment Agreement, dated as
of March 24, 1997, between
Jerald S. Politzer and
Salant Corporation. *
21 List of Subsidiaries of the Company
27 Financial Data Schedule
</TABLE>
* constitutes a management contract or compensatory plan or arrangement.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
SALANT CORPORATION
Date: March 28, 1997 By: /s/ Richard P. Randall
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated and on March 28, 1997.
Signature Title
<S> <C>
/s/ Nicholas P. DiPaolo Chairman of the Board,
Nicholas P. DiPaolo President and Chief Executive Officer
(Principal Executive Officer); Director
/s/ Michael A. Lubin Executive Vice President and
Michael A. Lubin Chief Operating Officer
/s/ Richard P. Randall Senior Vice President
Richard P. Randall and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Craig M. Cogut /s/ Jerald S. Politzer
Craig M. Cogut Director Jerald S. Politzer
Director
/s/ Robert Falk /s/ Bruce F. Roberts
Robert Falk Director Bruce F. Roberts
Director
/s/ Ann Dibble Jordan /s/ John S. Rodgers
Ann Dibble Jordan Director John S. Rodgers
/s/ Robert Katz /s/ Marvin Schiller
Robert Katz Director Marvin Schiller Director
/s/ Harold Leppo /s/ Edward M. Yorke
Harold Leppo Director Edward M. Yorke Director
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
to
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
<PAGE>
SALANT CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
<PAGE>
Incorporation
Number Description By Reference To
<C> <C> <C>
2.1 Third Amended Disclosure Exhibit 1 to
Statement of Salant Form 8-A dated
Corporation, and Denton July 28, 1993.
Mills, Inc., dated
May 12,1993.
2.2 Third Amended Joint Included as
Chapter 11 Plan of Exhibit D-1
Reorganization of to Exhibit 1
Salant Corporation to Form 8-A
and Denton Mills, Inc. dated July 28, 1993.
3.1 Form of Amended and Included as Exhibit
Restated Certificate of D-1 to Exhibit 2
Incorporation of Salant to Form 8-A dated
Corporation. July 28, 1993.
3.2 Form of Bylaws, as amended, of
Salant Corporation, effective September 21, 1994.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
December 8, 1987 between Salant on Form 8-K dated December 8, 1987.
Corporation and The Chase
Manhattan Bank, N.A.,
as Rights Agent. The Rights
Agreement includes as Exhibit B the
form of Right Certificate.
4.2 Form of First Amendment Exhibit 3 to
to the Rights Agreement Amendment No. 1 to
between Salant Corporation Form 8-A dated
and Mellon Securities. July 29, 1993.
4.3 Indenture, dated as of Exhibit 10.34 to
September 20, 1993, between Salant Quarterly Report
Corporation and Bankers on Form 10-Q for
Trust Company, as trustee, the quarter ended
for the 10-1/2% Senior October 2, 1993.
Secured Notes due
December 31, 1998.
10.1 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated September 29, 1993, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial October 2, 1993.
Services, Inc.
10.2 Salant Corporation 1987 Stock Plan. Exhibit 19.2 to Annual Report on Form 10-K for fiscal year 1987.
10.3 Salant Corporation 1987 Stock Plan Exhibit 10.12 to Form S-2
Agreement, dated as of June 13, Registration Statement filed
1988, between Nicholas P. DiPaolo June 17, 1988.
and Salant Corporation.
10.4 Salant Corporation 1988 Stock Plan. Exhibit 19.3 to Annual Report on
Form 10-K for fiscal year 1988.
10.5 First Amendment, effective Exhibit 19.1 to Quarterly Report
as of July 25, 1989, to the Salant on Form 10-Q for the quarter
Corporation 1988 Stock Plan. ended September 30, 1989.
10.6 Form of Salant Corporation 1988 Exhibit 19.7 to Annual Report on
Stock Plan Employee Agreement. Form 10-K for fiscal year 1988.
10.7 Form of Salant Corporation Exhibit 19.8 to
1988 Stock Plan Director Annual Report on
Agreement. Form 10-K for fiscal
year 1988.
10.8 Employment Agreement, dated as of Exhibit 19.4 to
December 31, 1990, between Herbert Annual Report on
R. Aronson and Salant Corporation. * Form 10-K for fiscal
year 1990.
10.9 Letter Agreement, dated Exhibit 19.1 to Quarterly
June 20, 1992, amending the Report on Form 10-Q for
Employment Agreement, dated as of the quarter ended October 3, 1992.
December 31, 1990, between Herbert
R. Aronson and Salant Corporation. *
10.10 License Agreement, dated Exhibit 19.1 to Annual Report
January 1, 1991, by and between on Form 10-K for fiscal year 1992.
Perry Ellis International Inc.
and Salant Corporation regarding
men's sportswear.
10.11 License Agreement, dated Exhibit 19.2 to Annual Report
January 1, 1991, by and between on Form 10-K for
Perry Ellis International Inc. fiscal year 1992.
and Salant Corporation regarding
men's dress shirts.
10.12 Employment Agreement, Exhibit 10.32 to
dated as of June 1, 1993, Quarterly Report on
between Todd Kahn Form 10-Q for the
and Salant Corporation. * quarter ended July 8, 1993.
10.13 Employment Agreement, dated Exhibit 10.36 to
as of September 20, 1993, between Quarterly Report on
Nicholas P. DiPaolo and Form 10-Q for the
Salant Corporation. * quarter ended October 2, 1993.
10.14 Employment Agreement, dated Exhibit 10.38 to
as of July 30, 1993, between Quarterly Report on
Richard P. Randall and Form 10-Q for the
Salant Corporation. * quarter ended October 2, 1993.
10.15 Employment Agreement, dated Exhibit 10.32 to Annual Report on
as of December 21, 1993, between Form 10-K for Fiscal Year 1993.
Elliot M. Lavigne and Salant
Corporation. *
10.16 Agreement, dated as of Exhibit 10.33 to Annual Report on
September 22, 1993, between Nicholas Form 10-K for Fiscal Year 1993.
P. DiPaolo and Salant Corporation. *
<PAGE>
10.17 Forms of Salant Corporation 1993 Exhibit 10.34 to Annual
Stock Plan Directors' Option Report on Form
Agreement. * 10-K for Fiscal Year 1993.
10.18 Letter Agreement, dated as of Exhibit 10.45 to
August 24, 1994, amending the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated quarter ended October 1, 1994.
September 20, 1993,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.19 Letter Agreement, dated Exhibit 10.46 to
October 18, 1994, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
December 31, 1990, between Herbert quarter ended October 1, 1994.
R. Aronson and Salant Corporation. *
10.20 Letter Agreement, dated Exhibit 10.47 to
October 25, 1994, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
July 30, 1993, between Richard quarter ended October 1, 1994.
Randall and Salant Corporation. *
10.21 Third Amendment to Credit Agreement, Exhibit 10.48 to Current Report on
dated February 28, 1995, to the Form 8-K, dated March 2, 1995.
Revolving Credit, Factoring and
Security Agreement, dated
September 20, 1993, as amended,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.22 Salant Corporation Retirement Plan, Exhibit 10.23 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.23 Salant Corporation Pension Plan, Exhibit 10.24 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.24 Salant Corporation Long Term Savings Exhibit 10.25 to Annual Report on
and Investment Plan as amended Form 10-K for Fiscal Year 1994.
and restated. *
10.25 Letter Agreement, dated Exhibit 10.26 to Annual Report on
February 15, 1995, amending the Form 10-K for Fiscal Year 1994.
Employment Agreement, dated
July 30, 1993, between Richard
Randall and Salant Corporation. *
10.26 Fourth Amendment to Credit Exhibit 10.27 to
Agreement, dated as of March 1, Quarterly Report
1995, to the Revolving Credit, on Form 10-Q for
Factoring and Security Agreement, the quarter
dated as of September 20, 1993, ended April 1,
as amended, between Salant 1995.
Corporation and The CIT Group/
Commercial Services, Inc.
10.27 Letter Agreement, dated April 12, Exhibit 10.28 to
1995, amending the Employment Quarterly Report
Agreement, dated June 1, 1993, on Form l0-Q for
between Todd Kahn and Salant the quarter
Corporation. * ended April 1,
1995.
10.28 Fifth Amendment to Credit Exhibit 10.29
Agreement, dated as of to Quarterly
June 28, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.29 Sixth Amendment to Credit Exhibit 10.30
Agreement, dated as of to Quarterly
August 15, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.30 Letter from The CIT Group/ Exhibit 10.31
Commercial Services, Inc., to Quarterly
dated as of July 11, 1995, Report on
regarding the waiver of a Form l0-Q for
default. the quarter
ended July 1,
1995.
10.31 Letter Agreement between Exhibit 10.31
Salant Corporation and The to Quarterly
CIT Group/Commercial Services, Report on
Inc. dated as of July 11, 1995, Form l0-Q for
regarding the Seasonal Overadvance the quarter
Subfacility. ended July 1,
1995.
10.32 Letter Agreement, dated as of Exhibit 10.33 to
August 31, 1995, amending the Quarterly Report
Employment Agreement, dated on Form l0-Q for
September 20, 1993, between the quarter
Nicholas P. DiPaolo and ended September
Salant Corporation. * 30, 1995.
10.33 Letter Agreement, dated Exhibit 10.33 to
December 1, 1995, between Annual Report on
Lubin, Delano & Company and Form 10-K for
Salant Corporation. fiscal year 1995.
10.34 Seventh Amendment to Credit Exhibit 10.34 to
Agreement, dated as of Annual Report on
March 27, 1996, to the Form 10-K for
Revolving Credit, Factoring fiscal year 1995.
and Security Agreement,
dated as of September 20,
1993, as amended, between
Salant Corporation and The
CIT Group/Commercial Services,
Inc.
10.35 First Amendment to the Salant Exhibit 10.35 to
Corporation Retirement Plan, dated Quarterly Report on
as of January 31, 1996. Form 10-Q for the
quarter ended
March 30, 1996.
10.36 First Amendment to the Salant Exhibit 10.36 to
Corporation Long Term Savings and Quarterly Report on
Investment Plan, effective as of Form 10-Q for the
January 1, 1994. quarter ended
March 30, 1996.
10.37 Eighth Amendment to Credit Agreement, Exhibit 10.37 to
dated as of June 1, 1996, to the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated as of quarter ended
September 20, 1993, as amended, June 29, 1996.
between Salant Corporation and
The CIT Group/Commerical Services,
Inc.
10.38 Ninth Amendment to Credit Agreement, Exhibit 10.38 to
dated as of August 16,1996, to the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated as of quarter ended
September 20, 1993, as amended, June 29, 1996.
between Salant Corporation and
The CIT Group/Commerical Services,
Inc.
10.39 Employment Agreement, dated as
of January 1, 1997, between
Nicholas P. DiPaolo and
Salant Corporation. *
10.40 Salant Corporation 1996 Stock Plan
10.41 Tenth Amendment to Credit Agreement,
dated as of February 20, 1997, to the
Revolving Credit, Factoring and
Security Agreement, dated as of
September 20, 1993, as amended,
between Salant Corporation and
The CIT Group/Commerical Services,
Inc.
10.42 Employment Agreement, dated as
of February 11, 1997, between
Michael A. Lubin and
Salant Corporation. *
10.43 Employment Agreement, dated as
of March 24, 1997, between
Jerald S. Politzer and
Salant Corporation. *
21 List of Subsidiaries of the Company
27 Financial Data Schedule
</TABLE>
* constitutes a management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Birdhill, Limited, a Hong Kong corporation
Carrizo Manufacturing Co., S.A. de C.V., a Mexican corporation
Clantexport, Inc., a New York corporation
Denton Mills, Inc., a Delaware corporation
JJ. Farmer Clothing, Inc., a Canadian corporation
Frost Bros. Enterprises, Inc., a Texas corporation
Manhattan Industries, Inc., a Delaware corporation
Manhattan Industries, Inc., a New York corporation
Manhattan Industries (Far East) Limited, a Hong Kong corporation
Maquiladora Sur S.A. de C.V., a Mexican corporation
Salant Canada, Inc., a Canadian corporation
SLT Sourcing, Inc., a New York corporation
Vera Licensing, Inc., a Nevada corporation
Vera Linen Manufacturing, Inc., a Delaware corporation
TENTH AMENDMENT TO CREDIT AGREEMENT
TENTH AMENDMENT TO CREDIT AGREEMENT, dated as of February __, 1997
(this "Amendment"), to the Revolving Credit, Factoring and Security Agreement,
dated as of September 20, 1993, as amended by letter agreement Re: Amendment to
Credit Agreement with respect to the Mississippi Property, dated June 14, 1994
(the "First Amendment") and by letter agreement Re: Amendment to Credit
Agreement with respect to Additional Guarantors, dated August 24, 1994 (the
"Second Amendment"), and by the Third Amendment to Credit Agreement, dated as of
February 28, 1995 (the "Third Amendment"), and by the Fourth Amendment to Credit
Agreement, dated as of March 1, 1995 (the "Fourth Amendment"), and by the Fifth
Amendment to Credit Agreement, dated as of June 28, 1995 (the "Fifth Amendment")
and by the Sixth Amendment to Credit Agreement, dated as of August 15, 1995 (the
"Sixth Amendment") the Seventh Amendment to Credit Agreement, dated as of March
27, 1996 (the "Seventh Amendment"), by the Eighth Amendment to Credit Agreement,
dated as of June 1, 1996 (the "Eighth Amendment"), and by the Ninth Amendment to
Credit Agreement, dated as of August 16, 1996 (the "Ninth Amendment") (as so
amended, and as further amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), between THE CIT GROUP/COMMERCIAL SERVICES, INC.
("Lender") and SALANT CORPORATION ("Borrower").
W I T N E S S E T H :
WHEREAS, Lender and Borrower are parties to the Credit Agreement;
WHEREAS, Borrower has requested Lender to amend the Credit
Agreement to (i) extend the Renewal Date, as defined therein, (ii) provide
Borrower with the option of requesting a portion of the Revolving Loans that
bear interest at the Effective Eurodollar Rate (as defined below) and (iii) to
amend certain financial covenants set forth therein; and
WHEREAS, Lender is willing to make such amendments to the
Credit Agreement upon the terms and subject to the conditions set forth in this
Amendment;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree, effective as of the Effective Date, as defined below, as
follows:
1. Credit Agreement Defined Terms. Initially capitalized terms used and not
otherwise defined
herein shall have their respective meanings as defined in the Credit Agreement.
2. Amendments to Section 1. Section 1 of the Credit Agreement is hereby
amended as follows:
(a) The following subsection is hereby added to Section 1 of the Credit
Agreement as Section 1.5A thereof:
"1.5A 'Applicable Margin' shall mean (a)(i) in the case of
Prime Rate Loans, one-half (.50%) percent, and (ii) in the
case of Eurodollar Loans, two and three-quarters (2.75%)
percent, and (b) from after the occurrence of (i) declaration
by Lender of any Event of Default (so long as such Event of
Default is continuing and unwaived), (ii) termination of this
Agreement, or (iii) the non-renewal of this Agreement on the
Renewal Date pursuant to Section 10.1(a) hereof, the amount
described in clause (a)(i) and clause (a)(ii) of this
definition plus one (1%) percent."
(b) The following subsection is hereby added to Section 1 of the Credit
Agreement as Section 1.13A thereof:
"1.13A 'Business Day' shall mean any day that is not a
Saturday, Sunday or day on which commercial banks in New York,
New York are required or permitted to close."
(c) The following subsection is hereby added to Section 1 of the Credit
Agreement as Section 1.27A thereof:
"1.27A 'Effective Eurodollar Rate' shall mean, for each
Eurodollar Loan, a rate per annum equal to the Eurodollar Base
Rate in effect for the Interest Period with respect to such
Eurodollar Loan, plus the Applicable Margin."
(d) The following subsection is hereby added to Section 1 of the Credit
Agreement as Section 1.27B thereof:
"1.27B 'Effective Prime Rate' shall mean, for each Prime Rate
Loan, a rate per annum equal to the Prime Rate plus the
Applicable Margin."
(e) The following subsection is hereby added to Section 1 of the Credit
Agreement as Section 1.33A thereof:
"1.33A 'Eurodollar Base Rate' shall mean, with respect to each
day during each Interest Period pertaining to a Eurodollar
Loan, the rate of interest published in The Wall Street
Journal, Eastern Edition, two business days prior to the first
day of such Interest Period as the highest rate in the range
of rates quoted for one, two or three month 'London Late
Eurodollars'. In the event that The Wall Street Journal,
Eastern Edition, is not published or such rate does not appear
in The Wall Street Journal, Eastern Edition, the 'Eurodollar
Base Rate' shall be the rate determined by Lender to be the
rate at which deposits in Dollars are offered by The Chase
Manhattan Bank to first class banks in the interbank
eurodollar market where the eurodollar and foreign currency
and exchange operations in respect of its eurodollar loans are
then being conducted at approximately 11:00 a.m., New York
City time, two Business Days prior to the beginning of such
Interest Period, in an amount approximately equal to the
principal amount of the Eurodollar Loan to which such Interest
Period is to apply and for a period of time comparable to such
Interest Period."
(f) The following subsection is hereby added to Section 1 of the Credit
Agreement as Section 1.33B thereof:
"1.33B 'Eurodollar Loan' shall mean a Revolving Loan bearing interest based
on the Eurodollar Rate."
(g) The following subsection is hereby added to Section 1 of the Credit
Agreement as Section 1.33C thereof:
"1.33C 'Eurodollar Rate' shall mean with respect to each day
during each Interest Period pertaining to a Eurodollar Loan, a
rate per annum determined for such day in accordance with the
following formula (rounded upward to the nearest 1/100 of 1%):
Eurodollar Base Rate
1.00 -- Reserve Requirements"
(h) The following subsection is hereby added to Section 1 of the Credit
Agreement as Section 1.37A thereof:
"1.37A 'Funding Date' shall mean, with respect to any
Revolving Loan, the date of the funding of such Revolving
Loan, and in the case of a Eurodollar Loan which is continued
pursuant to Section 3.1A(c), the first day of the Interest
Period with respect thereto."
(i) The following subsection is hereby added to Section 1 of the Credit
Agreement as Section 1.39A thereof:
"1.39A 'Governmental Authority' shall mean any nation, state,
sovereign, or government, any federal, regional, state, local
or political subdivision thereof and any entity exercising
executive, legislative, regulatory or administrative functions
of or pertaining to government."
(j) Section 1.47 of the Credit Agreement is hereby deleted in its entirety
and the following is substituted therefor:
"1.47 'Interest Period' shall mean, with respect to each
Eurodollar Loan, the period commencing on the Funding Date for
such loan and ending, as Borrower may select, pursuant to
Section 3.1A(a), on the numerically corresponding day in the
first, second or third calendar month thereafter, provided,
however, that:
(i) An Interest Period based on a one, two or three
calendar month period which commences on the last Business Day
of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month;
(ii) In no event shall an Interest Period extend beyond the Renewal Date;
and
(iii) If an Interest Period would end on a day that
is not a Business Day, such Interest Period shall be extended
to the next Business Day, unless such Business Day would fall
in the next calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day."
(k) The following subsection is hereby added to Section 1 of the Credit
Agreement as subsection 1.62A.1 thereof:
"1.62A.1 'Notice of Borrowing' shall mean, with respect to a
request for a Eurodollar Loan pursuant to Section 3.1, a
written notice in substantially the form of Exhibit O (or
telephonic or telecopy notice, as provided in Section 3.1A(a)
hereof)."
(l) Section 1.69 of the Credit Agreement is hereby amended by
deleting therefrom all references to "Chemical Bank" and substituting "The Chase
Manhattan Bank" in lieu thereof in each instance where such term appears.
(m) The following subsection is hereby added to Section 1 of the Credit
Agreement as subsection 1.69A thereof:
"1.69A 'Prime Rate Loans' shall mean any and all Revolving
Loans (or any portion thereof) requested to be made by Lender
as Revolving Loans bearing interest when, and to the extent
that, the interest rate therefor is determined by reference to
the Prime Rate."
(n) The following subsection is hereby added to Section 1 of the Credit
Agreement as subsection 1.72A thereof:
"1.72A 'Reserve Requirements' shall mean for any day as
applied to a Eurodollar Loan, the aggregate (without
duplication) of the rates (expressed as a decimal fraction) of
reserve requirements in effect on such date (including,
without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Federal
Reserve Board or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of
the Board of Governors of the Federal Reserve System of the
United States) maintained by a member bank of the Federal
Reserve System. Eurodollar Loans shall be deemed to constitute
Eurocurrency Liabilities and to be subject to such reserve
requirements without benefit of or credit for proration,
exceptions or offsets which may be available from time to time
to Lender or any Participant or any Affiliate of Lender or of
any Participant under Regulation D."
3. Amendment of Section 3.1(a) (iii). Section 3.1(a) (iii) of the Credit
Agreement is amended in its entirety to read as follows:
"(iii) Fifty percent (50%) of the value of Eligible Inventory,
provided, however, that solely for, and at all times during
the months of May, June, July and August of 1997 and of 1998,
such advance rate shall be sixty percent (60%) of the value of
Eligible Inventory."
4. (i) Amendment of Section 3.1(c). Section 3.1(c) of the Credit Agreement
is amended in its entirety to read as follows:
"(c) Notwithstanding anything to the contrary
contained herein or in any of the other Financing Agreements,
except in Lender's discretion, the aggregate unpaid principal
amount of Revolving Loans outstanding at any time based on the
value of all Eligible Inventory shall not exceed $60,000,000
(the "Inventory Sublimit"), provided, however, that solely
for, and at all times during, the months of May, June, July
and August of 1997 and of 1998, the Inventory Sublimit shall
not exceed $70,000,000. On or before September 10, 1997 and
September 10, 1998, respectively, Borrower shall pay in full
to Lender that portion of the Revolving Loans which is equal
to the difference (such amount, the "Inventory Overadvance")
between: (i) the aggregate amount of Revolving Loans then
outstanding with respect to Eligible Inventory, and (ii) the
lesser of: (A) the maximum amount of Revolving Loans with
respect to Eligible Inventory to which Borrower is entitled on
September 1 of the applicable Contract Year based on an
advance rate of fifty percent (50%) of the value of Eligible
Inventory, and (B) the Inventory Sublimit as in effect on
September 1 of such Contract Year. Borrower's failure to pay
the Inventory Overadvance in full on or before September 10,
1997 or on or before September 10, 1998 (as applicable) shall
constitute an Event of Default under Section 8.1(a) of this
Agreement."
5. Additions to Section 3.1. Section 3.1 of the Credit Agreement is hereby
amended by adding thereto the following subsections as subsections (g) and (h)
thereof:
"(g) Eurodollar Loans made on any Funding Date shall be in the
aggregate minimum amount of $5,000,000 and in integral
multiples of $1,000,000 in excess of that amount."
"(h) There shall not exist at any time more than three (3)
borrowings (or any portion thereof) of Eurodollar Loans
outstanding, including, without limitation, Eurodollar Loans
arising as a result of the conversion of a Prime Rate Loan to
a Eurodollar Loan in accordance with the provisions of Section
3.1A(b) hereof or the continuation of a Eurodollar Loan as
such upon the expiration of an Interest Period with respect
thereto in accordance with the provisions of Section 3.1A(c)
hereof."
6. Addition of Section 3.1A. The Credit Agreement is hereby amended by
adding thereto the following Section 3.1A immediately following Section 3.1(h)
thereof:
"3.1A. Notice of Borrowing; Interest Rate Option.
(a) Notice of Borrowing. (i) Each borrowing of a Eurodollar
Loan under Section 3.1 shall be made on notice given by
Borrower to Lender no later than three (3) Business Days prior
to the requested Funding Date for such Eurodollar Loan. The
Notice of Borrowing shall specify (i) the requested Funding
Date (which shall be a Business Day), (ii) the amount of the
proposed borrowing, and (iii) the Interest Period elected by
Borrower with respect to such proposed Eurodollar Loan.
Failure by the Borrower to deliver a Notice of Borrowing with
respect to a request for a Eurodollar Loan or a request for a
borrowing of a Eurodollar Loan which would exceed the
limitations set forth in Section 3.1(h) shall be deemed and
shall constitute the Borrower's election that such proposed
borrowing shall be a Prime Rate Loan; and failure by Borrower
to make such election described in the immediately preceding
clause (iii) shall be deemed and shall constitute Borrower's
election that the Interest Period with respect to the proposed
borrowing shall be a one (1) month period. In lieu of
delivering a Notice of Borrowing, Borrower may give Lender
telephonic notice of any requested borrowing of a Eurodollar
Loan by the time required under this Section 3.1A(a);
provided, that such notice shall be confirmed in writing by
delivery to Lender (x) on the same Business Day, of a telecopy
of a written Notice of Borrowing which has been signed by an
authorized officer of Borrower and (y) promptly (and in no
event later than three (3) Business Days after the Funding
Date in respect of the applicable Eurodollar Loans), of a
Notice of Borrowing containing the original signature of an
authorized officer of Borrower.
(ii) Borrower shall notify Lender in writing of the names of
the officers authorized to request Revolving Loans on behalf
of Borrower, and shall provide Lender with a specimen
signature of each such officer. Lender shall be entitled to
rely conclusively on such officers' authority to request
Revolving Loans on behalf of Borrower, the proceeds of which
are requested to be transferred to an account of Borrower,
until Lender receives written notice to the contrary. Lender
shall have no duty to verify the authenticity of the signature
appearing on any Notice of Borrowing or other writing
delivered pursuant to Section 3.1A(a)(i) above and, with
respect to an oral request for Revolving Loans, Lender shall
have no duty to verify the identity of any individual
representing himself as one of the officers authorized to make
such request on behalf of Borrower.
Lender shall not incur any liability to Borrower as a
result of acting upon any telephonic notice referred to in
this Section 3.1A(a) which notice Lender believes in good
faith to have been given by a duly authorized officer or other
individual authorized to request Revolving Loans on behalf of
Borrower or for otherwise acting in good faith under this
Section 3.1A(a) and, upon the funding of Revolving Loans by
Lender in accordance with this Agreement, pursuant to any such
telephonic notice, Borrower shall be deemed to have requested
and received Revolving Loans hereunder.
Any Notice of Borrowing made pursuant to this Section
3.1A(a) shall be irrevocable.
(b) Conversion Option. Borrower may elect from time to time to
convert, on a Business Day, Eurodollar Loans to Prime Rate
Loans and Prime Rate Loans to Eurodollar Loans by giving
Lender at least three (3) Business Days prior irrevocable
written notice of such election, provided that any such
conversion of a Eurodollar Loan shall only be made on the last
day of an Interest Period with respect thereto. Each
conversion of a Eurodollar Loan to a Prime Rate Loan or of a
Prime Rate Loan to a Eurodollar Loan shall be for an amount of
$5,000,000, or, if more, in increments of any multiple of
$1,000,000, in each instance. Notwithstanding anything to the
contrary set forth herein, the conversion provided for in this
Section 3.1A(b) shall be subject to the limitations contained
in Section 3.1(h) and shall be permitted only so long as no
Event of Default has occurred and is continuing.
(c) Continuation of Eurodollar Loan. Any Eurodollar Loan may
be continued as such upon the expiration of an Interest Period
with respect thereto by compliance by Borrower with the notice
provisions contained in Section 3.1A(a) above for request of a
Eurodollar Loan; provided, however, that (i) the Effective
Eurodollar Rate with respect to any such continued Eurodollar
Loan shall be determined by Lender with respect to such
Eurodollar Loan as of two (2) Business Days prior to the first
day of the continued Interest Period elected by Borrower with
respect thereto, and (ii) any Eurodollar Loan may be continued
as such subject to the limitations contained in Section 3.1(h)
and only so long as no Event of Default has occurred and is
continuing, in either of which events, any such Eurodollar
Loan shall be automatically converted to a Prime Rate Loan on
the last day of the then current Interest Period with respect
thereto.
(d) Revocation of Interest Rate Election. With respect to each
requested Eurodollar Loan, in the event that Lender shall have
determined (which determination shall be conclusive and
binding upon Borrower) that by reason of circumstances
affecting the London interbank market and/or the interbank
eurodollar market where the eurodollar and foreign currency
and exchange operations of The Chase Manhattan Bank in respect
of its eurodollar loans are then being conducted, adequate and
reasonable means do not exist for ascertaining the Effective
Eurodollar Rate, then Lender shall forthwith give written or
telephonic notice of such determination to Borrower at least
one (1) Business Day prior to (i) the requested Funding Date
for such Eurodollar Loan, (ii) the conversion date of such
Prime Rate Loan, or (iii) the last day of such Interest
Period, as the case may be.
In the event such notice is given, then (i) any
requested Eurodollar Loan shall be made as a Prime Rate Loan,
(ii) any Prime Rate Loan which Borrower elected to have
converted to a Eurodollar Loan shall be continued as a Prime
Rate Loan, and (iii) any outstanding Eurodollar Loan shall be
converted to a Prime Rate Loan on the last day of the then
current Interest Period with respect thereto. Further, until
such notice has been withdrawn by Lender, no further
Eurodollar Loans shall be made or continued, nor shall
Borrower have the right to convert any Prime Rate Loan to a
Eurodollar Loan."
7. Amendment of Section 3.2(c). The last sentence of Section 3.2(c) of
the Credit Agreement is hereby amended by deleting therefrom the previously
existing defined term, "Interest Rate", and substituting "Effective Prime Rate"
in lieu thereof.
8. Amendment of Section 3.3. Section 3.3 of the Credit Agreement is amended
in its entirety to read as follows:
"3.3 Maximum Credit
The aggregate principal amount of the Revolving Loans and
Letter of Credit Accommodations at any time outstanding shall
not exceed $120,000,000, provided, however, that solely for,
and at all times during, the months of March, April, May,
June, July, August, September and October of 1997 and the
months of March, April, May, June, July, August and September
of 1998, such outstanding amount shall not exceed the amount
set forth opposite each such month and provided, further,
however, that during the first twenty (20) days of each month,
the Maximum Credit may equal but shall not exceed the higher
of (i) the Maximum Credit on the last day of the immediately
preceding month or (ii) the amount set forth below opposite
such month:
<TABLE>
<CAPTION>
Month Amount
<S> <C> <C>
March, 1997 $132,000,000
April, 1997 $135,000,000
May, 1997 $130,000,000
June, 1997 $132,000,000
July,1997 $130,000,000
August, 1997 $135,000,000
September, 1997 $135,000,000
October, 1997 $130,000,000
March, 1998 $132,000,000
April, 1998 $135,000,000
May, 1998 $130,000,000
June, 1998 $132,000,000
July, 1998 $130,000,000
August, 1998 $135,000,000
September, 1998 $135,000,000
</TABLE>
Notwithstanding anything to the contrary contained herein,
from and after November 21, 1997 and through and including
February 28, 1998, the Maximum Credit shall not exceed
$120,000,000."
9. Interest. Section 3.5(a) of the Credit Agreement is hereby amended in
its entirety to read as follows:
"(a) Each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date such Revolving Loan is
made until it is paid in full at a fluctuating rate per annum
equal to (i) in the case of Prime Rate Loans, the Effective
Prime Rate, and (ii) in the case of Eurodollar Rate Loans, the
Effective Eurodollar Rate. Interest accrued on the Revolving
Loans in any calendar month shall be payable in arrears (i) on
the first Business Day of the immediately succeeding calendar
month, and (ii) upon the termination of this Agreement or, in
the event this Agreement is not renewed in accordance with
Section 10.1(a) hereof, on the Renewal Date. Interest on the
Revolving Loans shall be computed on the basis of the actual
number of days elapsed in the period during which interest
accrues and a year of 360 days."
10. Amendment of Section 3.6(g). The first sentence of Section 3.6(g)
of the Credit Agreement is hereby amended by deleting therefrom the previously
existing defined term, "Interest Rate", in each instance where such term appears
and substituting "Effective Prime Rate" in lieu thereof.
11. Amendment of Section 3.6(k). Section 3.6(k) of the Credit Agreement is
hereby amended in its entirety to read as follows:
"3.6(k) Notwithstanding anything to the contrary contained in
this Agreement, Borrower shall have the right to cease
factoring Notification Accounts upon not less than sixty (60)
days prior written notice to Lender, provided, however, that
all Accounts shall at all times constitute security for all
Obligations."
12. Addition of Sections 3.10, 3.11 and 3.12. Section 3 of the Credit
Agreement is amended hereby by adding thereto the following Sections 3.10, 3.11
and 3.12:
"3.10 Increased Costs for Revolving Loans and Letters of
Credit Accommodations. If any Governmental Authority, central
bank or other comparable authority shall at any time impose,
modify or deem applicable any reserve (including, without
limitation, any reserve imposed by the Federal Reserve Board,
including, but not limited to, in respect of the making and
maintaining of Eurodollar Loans), special deposit or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, Lender, or by any
Participant, or shall impose on Lender, or on any Participant,
or the market for revolving loans or letters of credit, any
other condition affecting a revolving loan or letter of credit
(any such event, an "Increased Cost Event"); and the result of
any Increased Cost Event is to increase the cost to Lender or
to such Participant of making or participating in a Revolving
Loan or the cost to Lender or to any other issuer issuing,
maintaining or creating a Letter of Credit Accommodation, as
the case may be, or to reduce the amount of any sum received
or receivable by Lender or such Participant in respect of any
Revolving Loan or by Lender or any such other issuer of any
Letter of Credit Accommodations, then, upon demand by Lender,
Borrower shall pay to Lender for the account of Lender, such
other issuer of a Letter of Credit Accommodation, or such
Participant, as the case may be, such additional amount or
amounts as will compensate Lender, such other issuer of a
Letter of Credit Accommodation or such Participant, for such
increased cost or reduction. Lender will promptly notify
Borrower of any Increased Cost Event occurring after the date
hereof, of which it has knowledge, which would entitle Lender
to compensation pursuant to this Section 3.10. A certificate
of Lender delivered to Borrower claiming compensation under
this Section 3.10 and setting forth the additional amount or
amounts to be paid to Lender hereunder, determined by Lender
on a reasonable basis and prepared in good faith and in
reasonable detail, shall, in the absence of manifest or
demonstrable error, be conclusive and binding for all
purposes. Notwithstanding the foregoing, Lender shall only
seek such compensation from Borrower for any such increased
cost or reduction if Lender, or such Participant (as
applicable), in connection with the Increased Cost Event that
has given rise to such increased cost or reduction, similarly
seeks such compensation generally from other commercial
borrowers of Lender or such Participant in respect of which
borrowers the respective financing agreements then in effect
between Lender or such Participant (as applicable) and each
such borrower give Lender or such Participant the right to
demand compensation from such borrower upon the occurrence of
such Increased Cost Event."
"3.11 Increased Capital. If either (i) the introduction of or
any change in or in the interpretation of any law or
regulation or (ii) compliance by Lender or Participant with
any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law
and whether or not the failure to comply therewith would be
unlawful), including, without limitation, any "Reserve
Requirement" used in determining the Eurodollar Base Rate,
affects or would affect the amount of capital required or
expected to be maintained by Lender or any corporation
controlling Lender or any Participant and Lender or such
Participant reasonably determines that the amount of such
capital is increased by or based upon the existence of the
commitments to make Revolving Loans and/or other commitments
of this type on the terms and conditions set forth in this
Agreement (any such event, an "Increased Capital Event") then,
upon demand by Lender, Borrower shall immediately pay to
Lender, from time to time as specified by Lender, additional
amounts sufficient to compensate Lender, such corporation
controlling Lender or such Participant (as applicable) in the
light of such circumstances, to the extent that Lender or such
Participant reasonably determines such increase in capital to
be allocable to the occurrence of the Increased Capital Event.
A certificate as to such amounts delivered by Lender to
Borrower, determined by Lender or such Participant (as
applicable) on a reasonable basis and prepared in good faith
and in reasonable detail by Lender or such Participant (as
applicable) shall, in the absence of manifest or demonstrable
error, be conclusive and binding for all purposes.
Notwithstanding the foregoing, Lender or such Participant
shall only seek such compensation from Borrower if Lender or
such Participant, in connection with the Increased Capital
Event that has given rise to such increased capital
requirement, similarly seeks such compensation generally from
other commercial borrowers of Lender or such Participant in
respect of which the respective financing agreements then in
effect between Lender or such Participant (as applicable) and
each such borrower give Lender or such Participant the right
to demand compensation from such borrower upon the occurrence
of such Increased Capital Event."
"3.12 Funding Loss Indemnification. Borrower shall pay to
Lender for the account of Lender or of a Participant (as
applicable) such amount or amounts as shall be certified by
Lender or such Participant in good faith to compensate Lender
or such Participant for any loss, cost, or expense incurred by
Lender or such Participant as a result of:
(a) Payment of a Eurodollar Loan on a date other than the last
day of the Interest Period relating thereto, including but not
limited to, as a result of acceleration of the Obligations
pursuant to Section 8.2 hereof; or
(b) The failure by Borrower to (i) borrow or continue a
Eurodollar Loan on the Funding Date specified in the Notice of
Borrowing relating thereto, or (ii) convert a Prime Rate Loan
to a Eurodollar Loan pursuant to irrevocable written notice of
its election thereof pursuant to Section 3.1A(b) including but
not limited to as a result of the operation of the last
sentence of Section 3.1A(b)."
13. Deletion of Section 7.18.
Section 7.18 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
"7.18 [Intentionally Deleted]"
14. Amendment of Section 7.19. Section 7.19 of the Credit Agreement is
amended in its entirety to read as follows:
"7.19 Stockholders' Equity
Borrower shall not permit its consolidated stockholders'
equity to be less than $55,000,000 at any time during the
period from the Consummation Date through the day before the
last day of its 1993 fiscal year, $60,000,000 at any time
during the period from the last day of its 1993 fiscal year
through June 28, 1996, $45,000,000 during the period from June
29, 1996 through the day before the last day of its 1996
fiscal year, $52,000,000 during the period from January 1,
1997 through the day before the last day of its 1997 fiscal
year and $68,000,000 thereafter. Notwithstanding anything to
the contrary contained herein, write-offs for goodwill arising
during Borrower's 1997 fiscal year which Borrower would
otherwise be required to include in the determination of
Borrower's consolidated stockholders' equity under this
Section 7.19 shall, in an aggregate amount not to exceed
$5,000,000, be excluded from such determination of such
consolidated stockholders' equity solely during the period
from and after the last day of Borrower's 1997 fiscal year."
15. Deletion of Section 7.20. Section 7.20 of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:
"7.20 [Intentionally Deleted]"
16. Deletion of Section 7.21. Section 7.21 of the Credit
Agreement is hereby deleted in its
entirety and replaced with the following:
"7.21 [Intentionally Deleted]"
17. Amendment of Section 7.22. Section 7.22 of the Credit Agreement is
amended in its entirety to read as follows:
"7.22 Maximum Loss
Borrower shall not incur, in any four consecutive fiscal
quarters, commencing after the date of this Agreement, on a
cumulative basis, a net loss of $10,000,000 or more, or in any
period of eight consecutive fiscal quarters, commencing after
the date of this Agreement on a cumulative basis, a net loss
of $15,000,000 or more. Notwithstanding anything to the
contrary contained herein, write-offs for goodwill,
restructuring expense or other unusual or non-recurring
expense arising during the first two fiscal quarters of
Borrower's 1996 fiscal year (ending June 29, 1996) in
connection with or pursuant to a restructuring and which
Borrower would otherwise be required to include in the
determination of Borrower's net loss under this Section 7.22,
shall, in an aggregate amount not to exceed $13,000,000, be
excluded from such determination of such net loss of
Borrower."
18. Deletion of Section 7.23. Section 7.23 of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:
"7.23 [Intentionally Deleted]" 19. Amendment of Section 8.1(l). Section
8.1(l) of the Credit Agreement is amended in its entirety to read as follows:
"(l) one or more judgments are entered against Borrower or any
Guarantor in excess of $750,000 in any one case or in the aggregate and
the same shall not have been paid, vacated, discharged, stayed or
bonded pending appeal on or before the earlier of (x) the date required
by the terms (if any) of such judgment for the completion of the
foregoing and (y) thirty (30) days after the entry thereof."
20. Amendment of Section 9.1(a). Section 9.1(a) of the Credit Agreement is
amended in its entirety to read as follows:
"(a) All invoices relating to Non-Notification Accounts and
Non-Factored Accounts shall indicate that remittances with respect
thereto are to be made to: SALANT CORPORATION, P.O. BOX 4076, CHURCH
STREET STATION, NEW YORK, NEW YORK 10261-4076, a lock box opened by
Lender pursuant to a Lock Box Deposit Service Agreement dated June 25,
1990 with Manufacturers Hanover Trust Company, predecessor-in-interest
to The Chase Manhattan Bank (the "Lock Box Agreement"). Notwithstanding
the foregoing, upon not less than thirty (30) days prior written
request made by Borrower to Lender, Lender shall, as soon as possible
thereafter, open a new lock box pursuant to an agreement entered into
between Lender and a different bank designated by Borrower in such
written request and reasonably acceptable to Lender ("Successor Lock
Box Bank"). Upon execution of such agreement with such Successor Lock
Box Bank, such agreement shall be deemed and shall constitute the "Lock
Box Agreement" for all purposes of this Agreement, and all invoices
relating to Non-Notification Accounts and Non-Factored Accounts shall
indicate, from and after the date of execution of such agreement, that
remittances with respect thereto are to be made to the lock box address
designated in the Lock Box Agreement entered into with the Successor
Lock Box Bank. All such remittances shall be deposited in Lender's
account with The Chase Manhattan Bank or with the Successor Lock Box
Bank (as applicable) pursuant to the Lock Box Agreement (the "CIT
Account")."
21. Amendment of Section 10.1(a). Section 10.1(a) of the Credit Agreement
is amended in its entirety to read as follows:
"10.1 Term.
(a) This Agreement and the other Financing Agreements
shall become effective as of the date hereof and shall continue in full
force and effect for a term ending on September 30, 1998 (the "Renewal
Date") and from year to year thereafter, unless sooner terminated
pursuant to the terms hereof."
22. Amendment of Section 10.2(c). The first sentence of Section 10.2(c)
of the Credit Agreement is hereby amended by deleting therefrom the previously
defined term, "Interest Rate", and substituting "Effective Prime Rate" in lieu
thereof.
23. Addition of Exhibit O. The Credit Agreement is hereby amended by
adding to the List of Exhibits, "EXHIBIT O -- Form of Notice of Borrowing", and
by adding to the Exhibits attached to and made a part of the Credit Agreement
the "EXHIBIT O -- Form of Notice of Borrowing" attached to and made a part of
this Amendment.
24. Representations and Warranties. Borrower hereby represents and
warrants to Lender that the representations and warranties set forth in Section
6 of the Credit Agreement are true on and as of the date hereof as if made on
and as of the date hereof after giving effect to this Amendment, except to the
extent any such representation or warranty expressly relates to a prior date,
and breach of any of the representations and warranties made in this paragraph 8
shall constitute an Event of Default under Section 8.1(b) or 8.1(c) of the
Credit Agreement, as applicable. Borrower further represents and warrants that,
after giving effect to this Amendment, no Event of Default or event which, with
the lapse of time or the giving of notice or both, would become an Event of
Default has occurred and is continuing.
25. Effectiveness. This Amendment shall become effective on the date (the
"Effective Date") Lender shall have received each of the following:
(a) The written consent of all Participants to the execution and delivery
of this Amendment by Lender.
(b) Counterparts of this Amendment, duly executed and delivered by Borrower
and Lender.
(c) A duly executed copy of the Consent of Guarantors substantially in the
form of Exhibit A hereto.
26. Continuing Effect of Credit Agreement. This Amendment shall not
constitute a waiver or amendment of any provision of the Credit Agreement not
expressly referred to herein and shall not be construed as a consent to any
further or future action on the part of Borrower that would require consent of
Lender. Except as expressly amended, the provisions of the Credit Agreement are
and shall remain in full force and effect.
27. Counterparts. This Amendment may be executed in counterparts, and all
of such counterparts taken together shall be deemed to constitute one and the
same instrument.
28. Governing Law. This Amendment shall be governed by, and construed and
interpreted in accordance with, the laws of the state of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By:
Title:
SALANT CORPORATION
By:
Title:
EXHIBIT O
FORM OF NOTICE OF BORROWING
NOTICE OF BORROWING
THE CIT GROUP/COMMERCIAL SERVICES, INC.
1211 Avenue of the Americas
New York, New York 10036
Attn: Kenneth Wendler
Gentlemen:
The undersigned, SALANT CORPORATION (the "Borrower"), refers
to the Revolving Credit, Factoring and Security Agreement dated as of September
20, 1993 (as amended, the "Credit Agreement", the terms defined therein being
used herein as therein defined), between Borrower and The CIT Group/Commercial
Services, Inc. ("Lender"), and hereby gives Lender notice, irrevocably, pursuant
to Section 3.1A of the Credit Agreement, that the Borrower hereby requests a
Eurodollar Loan under the Credit Agreement, and sets forth below the information
relating to such Eurodollar Loan (the "Proposed Eurodollar Borrowing") as
required by Section 3.1A of the Credit Agreement:
(A) The Business Day of the Proposed Eurodollar Borrowing is ,
199 .
(B) The aggregate principal amount of the Proposed Eurodollar
Borrowing is $_____________.
(C) The Interest Period elected with respect to the to the
Proposed Eurodollar Borrowing is (check appropriate box):
|_| one (1) month
|_| two (2) months
|_| three (3) months
The Borrower hereby certifies that before and after giving
effect to the Proposed Eurodollar Borrowing, no Event of Default shall have
occurred or would result from such extension of credit.
Very truly yours,
SALANT CORPORATION
By:
Title:
EXHIBIT A
CONSENT OF GUARANTORS
Each of the undersigned, CLANTEXPORT, INC., DENTON MILLS,
INC., FROST BROS. ENTERPRISES, INC., SLT SOURCING, INC., each a Guarantor under
its respective Guarantee, each dated as of September 20, 1993, and SALANT CANADA
INC. and J.J. FARMER CLOTHING INC., each a guarantor under its respective
Guaranty (Unlimited Liability), each dated as of September 20, 1994
(individually, in the case of each of the foregoing Guarantors, its
"Guarantee"), made in favor of the CIT Group/Commercial Services, Inc.
("Lender"), pursuant to the Credit Agreement as defined in the Tenth Amendment
to Credit Agreement, dated as of February __, 1997 between Lender and Salant
Corporation (the "Amendment"), to which this Consent is attached, hereby
consents to the Amendment and the matters contemplated thereby, and hereby
confirms and agrees that its Guarantee is, and shall continue to be, in full
force and effect and is hereby ratified and confirmed in all respects except
that, on and after the effective date of the Amendment, each reference in its
Guarantee to "the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement shall mean and be a reference to the
Credit Agreement as amended by the Amendment.
IN WITNESS WHEREOF, each of the undersigned has caused this
Consent of Guarantors to be duly executed and delivered by its authorized
officer this __ day of February, 1997.
CLANTEXPORT, INC. FROST BROS. ENTERPRISES, INC.
By: By:
Title: Title:
DENTON MILLS, INC. SLT SOURCING, INC.
By: By:
Title: Title:
VERA LICENSING, INC. SALANT CANADA INC.
By: By:
Title: Title:
JJ. FARMER CLOTHING, INC.
By:
Title:
- 14 -
SALANT CORPORATION
1996 STOCK PLAN
SECTION 1. Establishment, Purpose, and Effective Date of Plan
1.1 Establishment. Salant Corporation, a Delaware corporation
(the "Company"), hereby establishes the "1996 STOCK PLAN" (the "Plan") for key
employees and directors. The Plan permits the grant of Stock Options, Stock
Appreciation Rights and Restricted Stock.
1.2 Purpose. The purpose of the Plan is to advance the interests
of the Company and its Subsidiaries and promote continuity of management by
encouraging and providing key employees and directors with the opportunity to
acquire an equity interest in the Company and to participate in the increase in
shareholder value as reflected in the growth in the price of the shares of the
Company's Stock and by enabling the Company to attract and retain the services
of key employees and directors upon whose judgment, interest, skills, and
special effort the successful conduct of its operations is largely dependent.
1.3 Effective Date. The Plan shall become effective on
May 15, 1996.
SECTION 2. Definitions; Construction
2.1 Definitions. Whenever used herein, the following
terms shall have their respective
meanings set forth below:
(a) "Act" means the Securities Exchange Act of
1934, as amended.
(b) "Board" means the Board of Directors of the
Company.
(c) A "Change in Control" means a change in control of
a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Act, as amended; provided that, without limitation, such a
change in control shall be deemed to have occurred (i) if,
during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board (the
"Continuing Directors") cease for any reason to constitute at
least two-thirds thereof, unless the election or nomination for
election by the Company's stockholders of each new director was
approved by a vote of at least two-thirds of the directors then
in office who were then Continuing Directors, (ii) when the
Company acquires actual knowledge that any person (as such term
is used in Sections 13(d) and 14(d)(2) of the Act) (other than
an employee benefit plan of the Company or any Subsidiary, or
trustee thereof, acting on behalf of such plan) is or has become
the beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Act) directly or indirectly, of securities
of the Company representing 25% or more of the outstanding
shares of the Company's capital stock entitled to vote generally
in the election of directors, (iii) upon any purchase pursuant
to a tender or exchange offer, which purchase results in a
person (as such term is used in Sections 13(d) and 14(d)(2) of
the Act) (other than an employee benefit plan of the Company or
any Subsidiary, or trustee thereof, acting on behalf of such
plan) beneficially owning, directly or indirectly, 25% or more
of the outstanding shares of the Company's capital stock
entitled to vote generally in the election of directors, (iv)
upon the approval by the Company's stockholders of (A) a merger
or consolidation of the Company with or into another corporation
(other than a merger or consolidation in which the Company is
the surviving corporation and which does not result in any
reclassification or reorganization of the Company's then
outstanding shares of common stock), (B) a sale or disposition
of all or substantially all of the Company's assets or (C) a
plan of liquidation or dissolution of the Company; provided,
however, that the acquisition of Stock by Apollo Apparel
Partners, Inc. shall not constitute a "Change of Control" under
this Plan.
(d) "Cause" - mean an Eligible Employee's (i)
commission of an act of fraud or intentional misrepresentation
or an act of embezzlement, misappropriation or conversion of
assets or opportunities of the Company or any Subsidiary, (ii)
intentional failure to perform reasonably assigned duties, (iii)
dishonesty or willful misconduct in the performance of duties,
(iv) involvement in a transaction in connection with the
performance of duties to the Company or any of its Subsidiaries
thereof which transaction is adverse to the interests of the
Company or any of its Subsidiaries and which is engaged in for
personal profit or (v) willful violation of any law, rule or
regulation in connection with the performance of duties (other
than traffic violations or similar offenses).
(e) "Change in Capitalization" means any increase or
reduction in the number of shares of Stock, or any change
(including, but not limited to, a change in value) in the shares
of Stock or exchange of shares of Stock for a different number
or kind of shares or other securities of the Company or any
other corporation or other entity, by reason of a
reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or
rights or debentures, stock dividend, stock split or reverse
stock split, extraordinary dividend, property dividend,
combination or exchange of shares or otherwise.
(f) "Code" means the Internal Revenue Code of
1986, as amended.
(g) "Committee" means a committee of the Board
designated to administer the Plan which shall consist of two or
more members of the Board each of whom is "disinterested" within
the meaning of Rule 16b-3 under the Act and an Outside Director.
(h) "Company" means Salant Corporation,
a Delaware corporation.
(i) "Director Option" means an Option granted to
a Nonemployee Director pursuant to Section 6.
(j) "Disability" shall have the meaning assigned to the
terms "total disability" or "totally disabled" in the Salant
Corporation long-term disability program for salaried employees,
provided the Participant remains totally disabled for six
consecutive months; or, if the Company does not maintain a
long-term disability program, an individual shall have a
"Disability" if he is unable to engage in any substantial
activity by reason of any medically determinable, physical or
mental impairment that can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than 12 months.
(k) "Eligible Employee" means any person
designated by the Committee as eligible to
participate in the Plan pursuant to Section 3.1.
(l) "Employee Option" means an Option granted to
an Eligible Employee pursuant to Section 7.
(m) "Fair Market Value" means the mean between the
highest and lowest sale price of the Stock for the date in
question, as published in The Wall Street Journal for such date,
or, if no sale prices are quoted in The Wall Street Journal for
such date, for the next preceding date for which such sale
prices are quoted.
(n) "Nonemployee Director" means a director of
the Company who is not otherwise an
employee or consultant of the Company or any Subsidiary.
(o) "Option" means the right to purchase Stock at a
stated price for a specified period of time. For purposes of the
Plan an Option may be either (i) an "incentive stock option"
within the meaning of Section 422 of the Code or (ii) a
"nonstatutory stock option."
(p) "Option Price" means the price at which an
Option states Stock may be purchased.
(q) "Optionee" means a person to whom an Option
has been granted under the Plan.
(r) "Outside Director" means a member of the Board who
is an "outside director" within the meaning of Section 162(m) of
the Code and the regulations promulgated thereunder.
(s) "Participant" means an Eligible Employee or
Nonemployee Director who has been granted and, at the time of
reference, holds an Option or share of Restricted Stock.
(t) "Period of Restriction" means the period during
which the transfer of shares of Restricted Stock is restricted
pursuant to Section 10 of the Plan.
(u) "Restricted Stock" means Stock granted to an
Eligible Employee pursuant to
Section 10 of the Plan.
(v) "Retirement" shall have the meaning assigned to
such term in the Salant Corporation Retirement Plan, or if such
plan is not in effect, such term shall mean the termination of
employment with the Company by reason of the attainment of the
age which the Company, by policy or otherwise, has established
as the age at which salaried employees may or shall be required
to terminate their employment and receive retirement benefits.
(w) "Stock" means the Common Stock of the Company,
par value of $1.00 per share.
(x) "Stock Appreciation Right" means the right to
receive the increase in the value of Stock subject to an Option
in lieu of purchasing such Stock.
(y) "Subsidiary" means any present or future
subsidiary of the Company, as defined
in Section 424(f) of the Code.
2.2 Number. Except when otherwise indicated by the
context, the singular shall include the
plural, and the plural shall include the singular.
SECTION 3. Eligibility and Participation
3.1 Eligibility and Participation. Eligible Employees in the
Plan shall be selected by the Committee from among those officers and other key
employees of the Company and its Subsidiaries who, in the opinion of the
Committee, are in a position to contribute materially to the Company's continued
growth and development and to its long-term financial success. All Nonemployee
Directors shall participate in the Plan in accordance with Section 6.
SECTION 4. Stock Subject to Plan
4.1 Number. The total number of shares of Stock subject to
issuance under the Plan may not exceed 600,000; provided, however, that the
maximum number of shares of Stock subject to an Option (whether or not connected
with Stock Appreciation Rights) granted to any Eligible Employee may not exceed
150,000. The total number of shares of Stock that may be awarded under the Plan
and the maximum number of shares of Stock that may be awarded to any Eligible
Employee are subject to adjustment upon occurrence of any of the events
indicated in Subsection 4.4. The shares to be delivered under the Plan may
consist, in whole or in part, of authorized but unissued Stock or treasury
Stock, not reserved for any other purpose.
4.2 Unused Stock; Unexercised Rights. In the event any shares of
Stock are subject to an Option, which for any reason, expires or is terminated
unexercised as to such shares, or any shares of Stock, subject to a Restricted
Stock grant made under the Plan are reacquired by the Company pursuant to
Section 10 of the Plan, such shares again shall become available for issuance
under the Plan.
4.3 Exercise of Stock Appreciation Right. Whenever a Stock
Appreciation Right is exercised and payment of the amount determined in
Subsection 9.1(b) is made in cash, the shares of Common Stock allocable to the
portion of the Option surrendered may again be the subject of Options and Awards
hereunder. Whenever a Stock Appreciation Right is exercised and payment of the
amount determined in Subsection 9.1(b) is made in shares of Common Stock, no
shares of Common Stock with respect to which the Stock Appreciation Right is
exercised may again be the subject of Options and Awards hereunder.
4.4 Adjustment in Capitalization.
(a) In the event of a Change in Capitalization, the
Committee shall conclusively determine the appropriate
adjustments, if any, to the (i) maximum number and class of
shares of Stock or other securities with respect to which
Options or Restricted Stock may be granted under the Plan or to
any individual, (ii) the number and class of shares of Stock or
other securities which are subject to Director Options issuable
under Section 6; and (iii) the number and class of shares of
Stock or other securities which are subject to outstanding
Options or Awards granted under the Plan, and the purchase price
therefor, if applicable.
(b) Any such adjustment in the shares of Stock or other
securities subject to outstanding incentive stock options
(including any adjustments in the purchase price) shall be made
in such manner as not to constitute a modification as defined by
Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
(c) Any stock adjustment in the shares of Stock or
other securities subject to outstanding Director Options
(including any adjustments in the purchase price) shall be made
only to the extent necessary to preserve, without exceeding, the
value of such Director Option.
(d) If, by reason of a Change in Capitalization, a
grantee of Restricted Stock shall be entitled to, or an Optionee
shall be entitled to exercise an Option or Stock Appreciation
Rights with respect to, new, additional or different shares of
stock or securities, such new, additional or different shares
shall thereupon be subject to all of the conditions,
restrictions and performance criteria which were applicable to
the Restricted Stock, or shares of Stock or Stock Appreciation
Rights subject to the Option, as the case may be, prior to such
Change in Capitalization.
SECTION 5. Duration of Plan
5.1 Duration of Plan. The Plan shall remain in effect, subject
to the Board's right to earlier terminate the Plan pursuant to Subsection 13.3
hereof, until all Stock subject to it shall have been purchased or acquired
pursuant to the provisions hereof. Notwithstanding the foregoing, no Option or
Restricted Stock may be granted under the Plan on or after May 14, 2006.
SECTION 6. Option Grants for Nonemployee Directors.
6.1 Grant.
(a) Initial Grant. An initial grant of Director
Options shall be made to each
Nonemployee Director upon the date the individual becomes
a Nonemployee Director (an "Initial
Grant").
(b) Annual Grant. Director Options shall be granted in
each year that the Plan is in effect to (i) each Nonemployee
Director who participated in the Salant Corporation 1993 Stock
Plan (the "1993 Stock Plan") on each anniversary (or the next
business day if such anniversary is not a business day) of the
"First Initial Grant Date," as that term is defined in the 1993
Stock Plan, and (ii) each other Nonemployee Director on each
anniversary (or the next business day if such anniversary is not
a business day) of his Initial Grant (each an "Annual Grant");
provided, however, that no Annual Grant shall be made to a
Nonemployee Director unless such person has been a director of
the Company for at least six months prior to the date of grant.
6.2 Option Agreement. Each Director Option shall be evidenced by
an Option Agreement that shall reflect the Option Price, the duration of the
Option, the number of shares of Stock to which the Option pertains, all as
specified in this Section 6, and such other terms and conditions not
inconsistent with the provisions of this Plan as determined by the Board;
provided that such terms shall not vary the timing of awards of Director
Options, including provisions dealing with forfeitures or termination of such
Director Options.
Director Options shall be nonstatutory stock options.
6.3 Number of Shares. Each Initial Grant shall be in respect of
a number of shares of Stock equal to 1,000 (in each case adjusted
proportionately pursuant to Section 4.4), less any shares of Stock being made as
an "Initial Grant" at the same time pursuant to Section 6.1(a) of the 1993 Stock
Plan, and each Annual Grant shall be in respect of a number of shares of Stock
equal to 300 (in each case adjusted proportionately pursuant to Section 4.4),
less any shares of Stock being made as an "Annual Grant" at the same time
pursuant to section 6.1(b) of the 1993 Stock Plan.
6.4 Option Price. The Option Price for shares of Stock under
each Director Option shall be equal to 100% of the Fair Market Value of a share
of Stock on the date the Director Option is granted.
6.5 Duration of Director Options. Director Options shall
be for a term of ten years.
6.6 Vesting. Director Options shall be exercisable
in whole or in part at any time from the
date of grant thereof.
6.7 Amendments. Notwithstanding anything in this Plan to the
contrary, neither the provisions in this Section 6 nor any other provision of
the Plan to the extent it relates to Director Options may be amended more than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations thereunder, if such an amendment would cause any Nonemployee
Director to be other than a "disinterested" person within the meaning of Rule
16b-3 under the Act or would cause the provisions of the Plan relating to the
granting of Director Options to fail to qualify under Rule 16b-3(c)(2)(ii) of
the Act.
SECTION 7. Option Grants for Eligible Employees
7.1 Grant of Employee Options. Subject to the provisions of
Sections 4 and 5, Employee Options may be granted to Eligible Employees at any
time and from time to time as shall be determined by the Committee. The
Committee shall have complete discretion in determining whether to grant
Employee Options and, subject to Section 4.1, the number of Options granted to
each Eligible Employee. The Committee also shall determine whether an Employee
Option is to be an incentive stock option within the meaning of Section 422 of
the Code or a nonstatutory stock option. Nothing in this Section 7 of the Plan
shall be deemed to prevent the grant of nonstatutory stock options in excess of
the maximum established by Section 422 of the Code.
7.2 Option Agreement. Each Employee Option shall be evidenced by
an Option Agreement that shall specify the type of Option granted, the Option
Price, the duration of the Option, the number of shares of Stock to which the
Option pertains and such other provisions as the Committee shall determine.
7.3 Option Price. The Option Price for each Employee Option
shall be determined by, or in the manner specified by, the Committee; provided,
that no incentive stock option granted pursuant to the Plan shall have an Option
Price that is less than the Fair Market Value of the Stock on the date the
Option is granted (110% of Fair Market Value in the case of an incentive stock
option granted to any person who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any
Subsidiary (a "Ten Percent Stockholder")).
7.4 Duration of Employee Options. Each Employee Option shall
expire at such time as the Committee shall determine at the time it is granted;
provided, however, that no Employee Option shall be exercisable later than the
tenth anniversary date of its grant (the fifth anniversary in the case of an
incentive stock option granted to a Ten Percent Stockholder).
7.5 Exercise of Employee Options. Employee Options granted under
the Plan shall be exercisable at such times and be subject to such restrictions
and conditions as the Committee shall in each instance approve, which need not
be the same for all Eligible Employees.
SECTION 8. Terms and Conditions Applicable to All Options.
8.1 Exercise. Options shall be exercised by an Optionee only by
a written notice delivered in person or by mail to the Secretary of the Company
at the Company's principal executive office, specifying the number of shares of
Stock with respect to which the Option is being exercised. If requested by the
Committee, the Optionee shall deliver the agreement evidencing the Option being
exercised to the Secretary of the Company who shall endorse thereon a notation
of such exercise and return such agreement to the Optionee. In addition, Options
may be exercised through a registered broker-dealer pursuant to such cashless
exercise procedures as are, from time to time, deemed acceptable by the
Committee.
8.2 Payment. The Option price upon exercise of any Option shall
be payable to the Company in full either (i) in cash or its equivalent, or (ii)
in the case of Employee Options, at the discretion of the Committee, and in the
case of Director Options, in all instances, by tendering shares of previously
acquired Stock having a Fair Market Value at the time of exercise equal to the
total Option Price or (iii) by a combination of (i) and (ii). The proceeds from
such a payment shall be added to the general funds of the Company and shall be
used for general corporate purposes.
8.3 Restrictions on Stock Transferability. The Committee may
impose such restrictions on any shares of Stock acquired pursuant to the
exercise of an Option under the Plan as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities law, under
the requirements of any stock exchange upon which such shares of Stock are then
listed and under any blue sky or state securities laws applicable to such
shares.
8.4 Termination of Employment Due to Death or Disability. In the
event the employment of the Optionee is terminated by reason of death or
Disability, the Committee may provide in the Option Agreement, and in the event
the service as a Nonemployee Director is terminated by reason of death, the
Option Agreement shall provide, that any outstanding Options granted to the
Optionee shall become immediately exercisable and shall thereafter be fully
exercisable at any time prior to the expiration date of the Options or within
twelve months after the date of death or Disability, whichever period is the
shorter. In the event the employment of an Optionee who is an Employee is
terminated by reason of death or Disability and the Committee has made no
special provision in the Option Agreement, the rights under any then outstanding
Option granted to the Optionee pursuant to the Plan shall, to the extent not
then exercisable, terminate immediately and, to the extent then exercisable,
terminate upon the expiration date of the Option or sixty days after such date
of termination of employment, whichever first occurs.
8.5 Termination of Employment Due to Retirement. In the event
the employment of the Optionee is terminated by reason of Retirement, the rights
under any then outstanding Employee Option granted to the Optionee pursuant to
the Plan shall, to the extent not then exercisable, terminate immediately and,
to the extent then exercisable, terminate upon the expiration date of the Option
or three months after such date of termination of employment, whichever first
occurs, subject to such exceptions applicable only to Employee Options (which
shall be set forth in the Option Agreement) as the Committee may, in its sole
discretion, approve.
8.6 Termination of Employment Other than for Death, Disability
or Retirement. If the employment of the Optionee shall terminate for any reason
other than death, Disability or Retirement or, in the event the service of a
Nonemployee Director is terminated for any reason other than death, the rights
under any then outstanding Option granted to the Optionee pursuant to the Plan
shall, to the extent not then exercisable, terminate immediately and, to the
extent then exercisable, terminate upon the expiration date of the Option or
sixty days after such date of termination of employment or service, whichever
first occurs, subject to such exceptions applicable only to Employee Options
(which shall be set forth in the Option Agreement) as the Committee may, in its
sole discretion, approve. Notwithstanding the foregoing, if the employment of
the Optionee is terminated by the Company for Cause, any then outstanding Option
granted pursuant to the Plan to the Optionee shall terminate immediately upon
the termination of employment; provided, that the Committee may with respect to
Employee Options, in its sole discretion, waive, in whole or in part, the
automatic forfeiture of such Employee Options and may set forth such waiver or
condition in the Option Agreement or at any other time, including following the
termination of employment.
8.7 Nontransferability and Exercisability of Options. No Option
granted under the Plan may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, otherwise than by will or by the laws of descent and
distribution. Further, all Options granted to an Optionee under the Plan shall
be exercisable during his lifetime only by such Optionee. Notwithstanding any
provision of the Plan to the contrary, no Option shall be exercisable prior to
the time a registration statement under the Securities Act of 1933 is effective
with respect to the shares of Stock issuable upon the exercise of such Option.
8.8 Modification. Subject to the terms of the Plan, the
Committee may modify outstanding Options or accept the surrender of outstanding
Options (to the extent not exercised) and grant new Options in substitution for
them. Notwithstanding the foregoing, no modification of an Option shall
adversely alter or impair any rights or obligations under the agreement granting
such Option without the Optionee's consent.
SECTION 9. Stock Appreciation Rights.
9.1 Stock Appreciation Rights. The Committee may, in its
discretion, in connection with the grant of an Employee Option, grant to the
Optionee Stock Appreciation Rights, the terms and conditions of which shall be
set forth in an Agreement. A Stock Appreciation Right shall cover the same
shares of Stock covered by the Option (or such lesser number of shares of Stock
as the Committee may determine) and shall, except as provided in this Section 9,
be subject to the same terms and conditions as the related Option. Stock
Appreciation Rights shall be subject to the following terms and provisions:
(a) A Stock Appreciation Right may be granted:
(i) either at the time of grant, or at any time thereafter
during the term of
the Option if related to a nonstatutory stock option; or
(ii) only at the time of grant if related to an
incentive stock option.
(b) A Stock Appreciation Right will entitle the holder
of the related Option, upon exercise of the Stock Appreciation
Right, to surrender such Option, or any portion thereof to the
extent unexercised, and to receive payment of an amount
determined by multiplying (i) the excess of the Fair Market
Value of a share of Stock on the date of exercise of such Stock
Appreciation Right over the purchase price of a share of Stock
under the related Option, by (ii) the number of shares as to
which such Stock Appreciation Right has been exercised.
Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation
Right by including such a limit in the agreement evidencing the
Stock Appreciation Right at the time it is granted.
(c) A Stock Appreciation Right will be exercisable at
such time or times and only to the extent that a related Option
is exercisable, and will not be transferable except to the
extent that such related Option may be transferable. A Stock
Appreciation Right granted in connection with an incentive stock
option shall be exercisable only if the Fair Market Value of a
share of Stock on the date of exercise exceeds the purchase
price of a share of Stock specified in the related Option.
(d) Upon the exercise of a Stock Appreciation Right,
the related Option shall be canceled to the extent of the number
of shares of Stock as to which the Stock Appreciation Right is
exercised, and upon the exercise of an Option granted in
connection with a Stock Appreciation Right, the Stock
Appreciation Right shall be canceled to the extent of the number
of shares of Stock as to which the Option is exercised or
surrendered.
(e) Stock Appreciation Rights shall be exercised by an
Optionee only by a written notice delivered in person or by mail
to the Secretary of the Company at the Company's principal
executive office, specifying the number of shares of Stock with
respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Optionee shall
deliver the agreement evidencing the Stock Appreciation Right
being exercised and the agreement evidencing any related Option
to the Secretary of the Company who shall endorse thereon a
notation of such exercise and return such agreement to the
Optionee.
(f) Payment of the amount determined under Subsection
(b) may be made in the discretion of the Committee, solely in
whole shares of Stock in a number determined at their Fair
Market Value on the date preceding the date of exercise of the
Stock Appreciation Right, or solely in cash, or in a combination
of cash and Stock. If the Committee decides to make full payment
in Stock and the amount payable results in a fractional share,
payment for the fractional share will be made in cash.
Notwithstanding the foregoing, no payment in the form of cash
may be made upon the exercise of a Stock Appreciation Right
pursuant to Subsection (b) to an individual who may be subject
to liability under Section 16(b) of the Exchange Act, unless the
exercise of such Stock Appreciation Right is made during the
period beginning on the third business day and ending on the
twelfth business day following the date of release for
publication of the Company's quarterly or annual statements of
sales and earnings.
(g) No Stock Appreciation Right may be exercised
before the date six months after
the date it is granted.
(h) Subject to the terms of the Plan, the Committee may
modify outstanding awards of Stock Appreciation Rights or accept
the surrender of outstanding awards of Stock Appreciation Rights
(to the extent not exercised) and grant new awards in
substitution for them. Notwithstanding the foregoing, no
modification of an award of Stock Appreciation Rights shall
adversely alter or impair any rights or obligations under the
agreement granting such Stock Appreciation Rights without the
Optionee's consent.
SECTION 10. Restricted Stock
10.1 Grant of Restricted Stock. Subject to the provisions of
Sections 4 and 5, the Committee, at any time and from time to time, may grant
shares of Restricted Stock under the Plan to such Eligible Employees and in such
amounts as it shall determine in its sole discretion. Each grant of Restricted
Stock shall be in writing.
10.2 Transferability. Except as provided in this Section 10, the
shares of Restricted Stock granted hereunder may not be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated for such period of time
as shall be determined by the Committee and shall be specified in the Restricted
Stock grant, or upon earlier satisfaction of other conditions as specified by
the Committee in its sole discretion and set forth in the Restricted Stock
grant; provided that Restricted Stock granted to an individual who may be
subject to liability under Section 16(b) of the Exchange Act may not be sold for
at least six months after the date of grant.
10.3 Other Restrictions. The Committee may impose such other
restrictions on any shares of Restricted Stock granted to any Eligible Employee
pursuant to the Plan as it may deem advisable including, without limitation,
restrictions under applicable federal or state securities laws, and may legend
the certificates representing Restricted Stock to give appropriate notice of
such restrictions.
10.4 Certificate Legend. In addition to any legends placed on
certificates pursuant to Subsection 10.3 hereof, each certificate representing
shares of Restricted Stock granted pursuant to the Plan shall bear the following
legend:
"The sale or other transfer of the shares of stock
represented by this certificate, whether voluntary, involuntary
or by operation of law, is subject to certain restrictions on
transfer set forth in Salant Corporation's 1996 Stock Plan,
rules of administration adopted pursuant to such Plan and a
Restricted Stock grant dated . A copy of the Plan, such rules
and such Restricted Stock grant may be obtained from the
Secretary of Salant Corporation."
10.5 Removal of Restrictions. Except as otherwise provided in
this Section 10, shares of Restricted Stock covered by each Restricted Stock
grant made under the Plan shall become freely transferable by the Eligible
Employee after the last day of the Period of Restriction. Once the shares are
released from the restrictions, the Eligible Employee shall be entitled to have
the legend required by Subsection 10.4 removed from his Stock certificate.
10.6 Voting Rights. During the Period of Restriction,
Eligible Employees holding shares of
Restricted Stock granted hereunder may exercise full voting rights with
respect to those shares.
10.7 Dividends and Other Distributions. During the Period of
Restriction, Eligible Employees holding shares of Restricted Stock granted
hereunder shall be entitled to receive all dividends and other distributions
paid with respect to those shares while they are so held. If any such dividends
or distributions are paid in shares of Stock, the shares shall be subject to the
same restrictions on transferability as the shares of Restricted Stock with
respect to which they were paid.
SECTION 11. Beneficiary Designation.
11.1 Beneficiary Designation. Subject to Sections 8.7, 9.1(c)
and 10.2, each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of the Participant's death
before he or she receives any or all of such benefit. Each designation will
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee and will be effective only when filed by the
Participant in writing with the Committee during the lifetime of the
Participant. In the absence of any such designation, benefits remaining unpaid
at the Participant's death shall be paid to the estate of the Participant.
SECTION 12. Rights of Employees and Directors
12.1 Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant's
employment or service at any time nor confer upon any Participant any right to
continue in the employ or service of the Company.
12.2 Participation. No employee shall have a right to be
selected as an Eligible Employee or, having been so selected, to be selected
again as an Optionee or recipient of Restricted Stock. The preceding sentence
shall not be construed or applied so as to deny an employee any participation in
the Plan solely on the basis that the employee was a Participant in connection
with a prior grant of benefits under the Plan.
SECTION 13. Administration; Powers and Duties of the Committee
13.1 Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, to provide for conditions and assurances
deemed necessary or advisable to protect the interests of the Company, and to
make all other determinations necessary or advisable for the administration of
the Plan, but only to the extent not contrary to the express provisions of the
Plan. Determinations, interpretations, or other actions made or taken by the
Committee pursuant to the provisions of the Plan shall be final and binding and
conclusive for all purposes and upon all persons whomsoever. No member of the
Committee shall be personally liable for any action, determination or
interpretation made or taken with respect to the Plan and all members of the
Committee shall be fully indemnified by the Company with respect to any such
action, determination or interpretation.
13.2 Change in Control. Without limiting the authority of the
Committee as provided herein, the Committee, either at the time Employee Options
or shares of Restricted Stock are granted, or, if so provided in the applicable
Employee Option agreement or Restricted Stock grant, at any time thereafter,
shall have the authority to accelerate in whole or in part the exercisability of
Employee Options and/or the last day of the Period of Restriction upon a Change
in Control. The Employee Option agreements and Restricted Stock grants approved
by the Committee may contain provisions whereby, in the event of a Change in
Control, the acceleration of the exercisability of Employee Options and/or the
last day of the Period of Restriction may be automatic or may be subject to the
discretion of the Committee or may depend upon whether the Change in Control
shall be approved by a majority of the members of the Board or such other
criteria as the Committee may specify. Nothing herein shall obligate the
Committee to take any action upon a Change of Control.
13.3 Amendment, Modification and Termination of Plan. The Board
may at any time terminate, and from time to time may amend or modify the Plan,
provided, however, that no such action of the Board, without approval of the
stockholders, may:
(a) Increase the total amount of Stock which may be
issued under the Plan, except as provided in Subsections 4.1 and
4.3 of the Plan.
(b) Materially increase the cost of the Plan or
materially increase the benefits to Participants.
(c) Extend the period during which Options or
Restricted Stock may be granted.
(d) Extend the maximum period after the date of
grant during which Options may be exercised.
(e) Change the class of individuals eligible to
receive Options or Restricted Stock.
No amendment, modification or termination of the Plan shall in
any manner adversely affect any Options or Restricted Stock theretofore granted
to any Participant under the Plan, without the consent of that Participant.
SECTION 14. Tax Withholding
14.1 Tax Withholding. Whenever shares of Stock are to be issued
under the Plan, the Company shall have the power to require the recipient of the
Stock to remit to the Company an amount sufficient to satisfy federal, state and
local withholding tax requirements prior to issuance of the certificate for
shares of Stock.
SECTION 15. Requirements of Law.
15.1 Requirements of Law. The granting of Options or Restricted
Stock, and the issuance of shares of Stock upon the exercise of an Option shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
15.2 Governing Law. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the State of
New York without giving effect to the choice of law principles thereof, except
to the extent that such law is preempted by federal law.
13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated March 24, 1997 (the
"Commencement Date"), between SALANT CORPORATION, a Delaware corporation, (the
"Corporation") and Jerald S. Politzer (the "Employee"). WHEREAS, the Employee
and the Corporation desire to enter into an agreement of employment between
them. NOW THEREFORE, in consideration of the respective premises, mutual
covenants and agreements of the parties hereto, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows: Section 1. Nature of Employee's Services . The
Corporation agrees to employ the Employee and the Employee agrees to serve the
Corporation as the senior executive officer of the Corporation, having the
title, Chief Executive Officer of the Corporation. On the Commencement Date, the
Employee shall be elected to the Board of Directors of the Corporation (the
"Board of Directors") for a three year term. Upon the termination of his
employment under this Agreement, the Employee agrees to resign from the Board of
Directors. The Employee shall perform such services and duties as shall be
assigned to him or delegated to him from time to time by the Board of Directors
or the Executive Committee of the Board of Directors during the Employment
Period (as hereinafter defined) provided, however, that such duties shall be
consistent with those customarily performed by the senior executive officer of
other entities doing business in the industries in which the Corporation is
primarily engaged. The Employee's duties shall include, without additional
compensation, the performance of similar services for any subsidiaries of the
Corporation. The Employee agrees that, except as otherwise provided herein, he
shall devote substantially all of his business time, attention and energy to the
business of the Corporation and its subsidiaries in the advancement of the best
interests of the Corporation and its subsidiaries. The Employee will perform his
duties hereunder principally in the New York metropolitan area. During the
Employment Period it shall not be a violation of this Agreement for the Employee
to (a) serve on corporate, civic or charitable boards or committees or otherwise
engage in charitable activities and community affairs, (b) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (c)
manage personal investments, so long as such activities do not materially
interfere with the performance of Employee's responsibilities as an employee of
the Corporation in accordance with this Agreement. Section 2. Term of Employment
. The term of Employee's employment under this Agreement shall commence on April
1, 1997 and end on March 31, 2000 (the "Employment Period"). The Employment
Period shall be automatically renewed for successive one-year terms (the
"Renewal Terms") on the same terms set forth herein (except salary which shall
be at the annual rate for the third Employment Year) unless at least 180 days
prior to the expiration of the original Employment Period or any Renewal Term,
either Party notifies the other Party in writing that he or it is electing to
terminate this Agreement at the expiration of the then current Employment
Period. "Employment Period" shall mean the original Employment Period (i.e.
April 1, 1997 to March 31, 2000) and all Renewal Terms. In the event that this
Agreement is not renewed because the Corporation has given the 180-day notice
prescribed in the preceding paragraph on or before the expiration of the
original Employment Period or any Renewal Term, such non-renewal shall be
treated as a termination following non-renewal pursuant to Section 6 (f) below.
Section 3. Annual Compensation . Subject to the terms hereof, the Corporation
agrees to pay to the Employee, subject to all applicable laws and requirements,
including, without limitation, laws with respect to withholding of federal,
state or local taxes, the annual compensation set forth below. (a) Salary. As
annual salary for the services to be rendered by the Employee the Corporation
shall pay a salary at the rate of $650,000 per annum for the first twelve month
period of the Employment Period, $700,000 for the second twelve month period of
the Employment Period and $750,000 for the third twelve month period of the
Employment Period (each such twelve month period being hereafter referred to as
an "Employment Year") payable in equal bi-weekly installments during the
Employment Period (the "Salary"). (b) Incentive Compensation. Employee shall be
entitled to receive a bonus (the "Bonus") in accordance with the schedule
annexed hereto as Exhibit 1 comparing the Corporation's performance during each
fiscal year which ends within a particular Employment Year, to operating targets
for each such fiscal year. Each bonus shall be paid by the Corporation to the
Employee within ninety (90) days after the end of the fiscal year to which such
bonus relates. For the 1997 Fiscal Year, and no other Fiscal Year thereafter,
the Employee shall receive as a minimum bonus the amount provided in paragraph
(a) of Exhibit 1. If the employment of the Employee is terminated or if the
Employment Period terminates on a day other than the last day of a fiscal year,
the bonus amount payable with respect to such fiscal year shall be the amount to
which the Employee would have been entitled had his employment continued for all
of that fiscal year, prorated by the proportion that the number of months of
employment completed by the Employee during that fiscal year bears to twelve
(12). Notwithstanding anything contained herein to the contrary, no bonus shall
be payable to the Employee (i) if the Employment Period is terminated pursuant
to Section 6(c) or (ii) if the Employee terminates the Employment Period other
than pursuant to Section 6(e). Section 4. Employee Benefit Plans . The Employee
shall, during the Employment Period, be eligible to participate in and receive
benefits under and in accordance with the provisions of any pension plan,
welfare plan or other similar plan or policy of the Corporation maintained for
the benefit of the Corporation's senior level executives or its employees
generally (together, the "Benefit Plans"). In the event any new Benefit Plan is
established which is in addition to, and not an alternative to, any existing
Benefit Plan, the Employee shall also be entitled to participate in such Benefit
Plan to the extent permitted by the terms thereof. The Corporation shall have
the right, however, to make changes in Benefit Plans applicable to its senior
executives or employees generally and the Employee agrees that such changes
shall also be applicable to the Employee. A list of the existing Benefit Plans
is annexed hereto as Exhibit 2. Section 5. Expenses: Apartment; Other
Perquisites. (a) Subject to compliance by the Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Corporation, the Employee is authorized to incur reasonable expenses in
the performance of his duties hereunder in the furtherance of the business of
the Corporation and its subsidiaries, and the Corporation shall reimburse the
Employee for all such reasonable expenses. (b) In order to enable the Employee
to devote additional time to his duties hereunder, the Corporation also agrees
to reimburse the Employee during the Employment Period, up to a maximum of
$3,000 per month (the "NYC Amount") for the reasonable expenses actually
incurred by the Employee in either (i) renting in his own name and occupying an
apartment in New York City or (ii) staying a hotel in New York City. (c) The
Corporation shall pay all reasonable legal expenses, up to $10,000 incurred by
Employee in connection with the negotiation of this Agreement. (d) During the
Employment Period, the Corporation will provide the Employee with an automobile
allowance in the amount of $680 per month, payable with the first pay period of
each month. Section 6. Termination. (a) Definition of the Termination Date The
"Termination Date" shall be the date which is earlier of (i) the last day of the
Employment Period, (ii) the effective date of termination of employment as set
forth in the notice which Corporation delivers to the Employee indicating that
the Employee's employment hereunder is terminated, or (iii) the date on which
Employee delivers written notice to the Corporation that he is terminating his
employment hereunder. (b) Termination Due to Death or Disability. In the event
the Employee's employment is terminated due to his death or Disability (as
hereinafter defined), he, his estate or his beneficiaries, as the case may be
shall be entitled to: (i) Salary through the date of death or disability and any
Bonus for any Fiscal Year earned but not yet paid; (ii) pro-rated Bonus through
the date of death or Disability, payable in accordance with Section 3(b),
provided that if the death or Disability occurs in the first Employment Year,
the full amount of the minimum Bonus shall be paid promptly after his death or,
in the case of Disability, promptly after his termination, with any additional
amount due paid in accordance with Section 3(b); (iii) in the case of death
only, a lump sum payment equal to three months Salary at the annual rate in
effect at the date of death, paid promptly after his death; (iv) the right to
exercise all stock options granted to Employee at the time of his death or
Disability (whether or not then vested) for a period of one year following such
event or for the remainder of the exercise period, if shorter; (vi) any amounts
earned, accrued or owing to the Employee but not yet paid under Sections 4 or 5;
(vii) the right to receive all applicable benefits pursuant to the Corporation's
Employee Long Term Disability Coverage plan (the "Plan") as if he were fully
covered thereunder, provided however, if the Employee is precluded from
receiving such benefits (e.g. due to the fact that he is no longer employed by
the Corporation), the Corporation shall pay to Employee cash payments equal, on
an after-tax basis, to the amount of benefits he would have received had he
continued to be eligible to participate in the Plan; and (viii) other or
additional benefits then due or earned in accordance with applicable plans and
programs of the Corporation. For purposes of this Agreement, "Disability" shall
mean any physical or mental illness which as a result thereof, the Employee is
unable to discharge his duties for a period of six (6) consecutive months or for
a total of 180 days during any twelve month period. (c) Termination by the
Corporation for Cause . (i) "Cause" shall mean: (A) the Employee is convicted of
a felony or engages in conduct which is determined by a court to constitute an
act involving moral turpitude; or (B) the Employee engages in conduct that
constitutes (i) willful gross neglect, (ii) willful gross misconduct in carrying
out his duties under this Agreement or (iii) a violation of the Company's Code
of Conduct, resulting, in each case, in material harm to the financial condition
or reputation of the Corporation. (iii) In the event the Corporation terminates
the Employee's employment for Cause he shall be entitled to: (A) Salary through
the Termination Date; (B) any amounts earned, accrued or owing to the Employee
but not yet paid under Sections 4 or 5; and (C) other or additional benefits
then due or earned in accordance with applicable plans or programs of the
Corporation. (d) Termination by the Corporation Without Cause . In the event the
Employee's employment is terminated by the Corporation without Cause (which
termination shall be effective as of the date specified by the Corporation in a
written notice to the Employee), other than due to death or Disability the
Employee shall be entitled to and his sole remedies under this Agreement shall
be: (i) Salary through the Termination Date; (ii) Salary, at the annualized rate
in effect on the Termination Date for a period which is the longer of twelve
(12) months following such termination or the balance of the then existing
Employment Period (the "Severance Period"); (iii) pro-rated Bonus for the Fiscal
Year in which termination occurs, payable in accordance with Section 3(b), and
any Bonus for any Fiscal Year earned, but not yet paid, including, without
limitation, the entire minimum Bonus for the first year of the Employment
Period, payable in a lump sum within fifteen (15) days after the Termination
Date; (iv) the right to exercise any stock option held by the Employee at the
Termination Date (whether or not then vested), such option to remain exercisable
for six (6) months after the Termination Date, or for the remainder of the
exercise period, if shorter; (v) Any amounts earned, accrued, or owing to the
Employee but not yet paid under Sections 4 or 5; and (vi) continued
participation in all medical, dental, health and life insurance plans and in
other employee benefit plans or programs at the same benefit level at which he
was participating on the Termination Date until the earlier of: (A) the end of
the Severance Period; or (B) the date, or dates, he receives equivalent coverage
and benefits under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); provided that if the Employee is precluded from
continuing his participation in any benefit plan or program as provided in this
clause (vi) of this Section 6(d) as a matter of law or in the case of life
insurance, as a result of the requirements of such benefit plan or program, the
Corporation shall have no obligation to continue to provide such benefits; and
(vii) other or additional benefits then due or earned in accordance with
applicable plans and programs of the Corporation. "Termination Without Cause"
shall mean the Employee's employment is terminated by the Company for any reason
other than death, Disability or Cause (as defined in Section 6 (c)). (e)
Termination by Employee for Good Reason . The Employee shall have the right to
terminate the Employment Period for "good reason" (as hereinafter defined),
provided that the Employee shall have given the Corporation written notice of
the Employee's decision to terminate his employment (specifying the alleged
"good reason" in reasonable detail) and, if it is possible to cure, the
Corporation shall not have cured the same within sixty (60) days after receipt
of such notice, or, if cure cannot be fully accomplished within sixty (60) days,
the Corporation shall not have commenced cure within sixty (60) days after
receipt of such notice and cured the alleged "good reason" as soon as possible
thereafter. For purposes of the foregoing, "good reason" shall mean (i) the
assignment to the Employee of duties inconsistent with, or the diminution of,
the Employee's positions, titles, offices, duties, responsibilities or status
with the Corporation as its most senior executive officer, or a change without
good cause in the Employee's reporting responsibilities, or any removal of the
Employee from, or any failure to elect the Employee to any positions, titles or
offices specified in this Agreement and held by the Employee, (ii) a reduction
in the Employee's Salary, (iii) a material reduction in the Employee's benefits
or perquisites (other than a reduction pursuant to the second to last sentence
of Section 4 hereof); or (iv) a requirement that Employee change his place of
principal employment to a location other than the metropolitan New York area. In
the event that the Employment Period is terminated by the Employee for "good
reason", the Employee shall be entitled to, and his sole remedies shall be, the
same benefits provided for in Section 6(d) "Termination by the Corporation
Without Cause". (f) Termination following Non-renewal. In the event that the
Corporation notifies the Employee in writing at least 180 days prior to the
expiration of the original Employment Period or any Renewal Term that it is
electing to terminate this Agreement at the expiration of the then current
Employment Period and the Employee's employment terminates upon such expiration,
whether at the Corporation's initiative or the Employee's initiative, the
Employee shall be entitled to: (i) Salary through the Termination Date; (ii)
Salary, at the annualized rate in effect on the Termination Date for a period of
six (6) months following the Termination Date (the "Non-renewal Severance
Period"); (iii) pro-rated Bonus for the Fiscal Year in which termination occurs
payable in accordance with Section 3(b) and any Bonus for any Fiscal Year earned
but not yet paid, payable in a lump sum within fifteen (15) days after the
Termination Date; (iv) the right to exercise any stock option held by the
Employee at the date of his termination, to the extent vested at such date,
during the Non-renewal Severance Period and for sixty (60) days thereafter, or
for the remainder of the exercise period, if shorter; (v) any amounts earned,
accrued or owing to the Executive but not yet paid under Sections 4 or 5; and
(vi) continued participation in all medical dental health and life insurance
plans at the same benefit level at which he was participating on the Termination
Date until the earlier of: (A) the end of the Non-renewal Severance Period; or
(B) the date, or dates, he receives equivalent coverage and benefits under the
plans and programs of a subsequent employer (such coverage and benefits to be
determined on a coverage-by-coverage, or benefit-by benefit, basis); provided
that if the Employee is precluded from continuing his participation in any
benefit plan or program as provided in this clause (vi) of this Section 6(f), as
a matter of law or in the case of life insurance, as a result of the
requirements of such benefit plan or program, the Corporation shall have no
obligation to continue to provide such benefits; and (vii) other or additional
benefits then due or earned in accordance with applicable plans and programs of
the Corporation. (g) Voluntary Termination. In the event of a termination of
employment by the Employee on his own initiative, other than a termination due
to death, Disability or Good Reason, the Employee shall have the same
entitlement as provided in Section 6 (c) above for a termination for Cause. (i)
Condition to Receipt of Severance Payments. The Employee hereby acknowledges
that the "Severance Payment" (as hereinafter defined) is greater than the amount
provided by the Corporation's normal severance policy and is being offered to
the Employee in reliance upon the Employee's agreement to release the
Corporation from any liability and to waive any claims the Employee may have
against the Corporation, including, without limitation, any claims relating to
the Employment or separation from employment. Notwithstanding anything to the
contrary contained herein, nothing shall impair the Employee's (i) right to
enforce the obligations of the Corporation as set forth in this Agreement, or
(ii) right to seek indemnification or contribution from the Corporation in the
event the Employee is the subject of any third-party claim arising out of or
relating to any act or omission by the Employee during the course of his
employment by the Corporation, to the extent such right would have otherwise
existed. For purposes of this Agreement, Severance Payment shall mean any amount
paid to the Employee during a Severance Period or a Non-renewal Severance
Period, as the case may be. Section 7. Covenant Not to Compete . The Employee
covenants and agrees that he will not, at any time during the Restriction Period
(as defined below), whether as owner, principal, agent, partner, director,
officer, employee, independent contractor, consultant, shareholder, licensor or
otherwise, alone or in association with any other person, either directly or
indirectly , carry on, be engaged or take part in, render services to own, or
share in the earnings of, or invest in the stocks, bonds or other securities of,
or be interested in any way in any business competing with, or similar to, the
business in which the Corporation, or any of its subsidiaries are primarily
engaged, including, without limitation, any retail customer of the Corporation
that accounts for 5% or more of the Company's net sales on an annualized basis,
without the written consent of the Board of Directors, provided that the
Employee may hold a passive investment in a business which is competitive with
or similar to any of the businesses of the Corporation if the investment is in
securities which are listed on a national securities exchange and the investment
in any class of securities does not exceed 1% of the outstanding shares of such
class or 1% of the aggregate outstanding principal amount of such class, as the
case may be. In addition, for one year after the end of the Restriction Period,
the Employee covenants and agrees that he will not, directly or indirectly, hire
any person who is employed by the Corporation on the Termination Date whose
annual salary on such date is equal to or greater than $100,000, or solicit,
induce, entice or hire any such person to leave the employment of the
Corporation. For purposes of this Section 7, the "Restriction Period" shall mean
the period beginning with April 1, 1997 and ending on the last day of either (i)
the Employment Period (determined without giving effect to any termination of
employment), (ii) the Severance Period or (iii) the Non-renewal Severance
Period, whichever is longer. Section 8. Non-Disclosure Covenant . The Employee
further agrees that during the Employment Period and thereafter without limit,
he will not, either directly or indirectly, communicate or divulge to any
person, firm or corporation other than the Corporation and its subsidiaries, any
information (except that which is generally known to the public) relating to the
business, customers and suppliers, or other affairs of the Corporation or its
subsidiaries ("Confidential Information") except (a) for the purpose of, or in
connection with, the advancement of the business of the Corporation, or (b) in
the event that the Employee is required (by oral questions, interrogatories
requests for information or documents, subpoena, civil investigative demand or
similar legal process) to disclose Confidential Information, and the Employee is
compelled to disclose such Confidential Information or else stand liable for
contempt or suffer other censure, penalty or violation in a court proceeding. In
the event that the Employee is required to disclose such Confidential
Information in the circumstances described in clause (b) above, the Employee
will, to the extent legally permissible either (i) give the Corporation at least
ten days' written notice (or shorter, but prompt, notice to the extent the
Employee is required to respond to legal process in fewer than ten days ) so
that the Corporation may seek an appropriate protective order, or (ii) make such
disclosure to a court under seal. The provisions of this Section 8, shall not be
applicable to information which (i) was at the time of the disclosure by the
Corporation to the Employee, in the public domain; (ii) has subsequent, to the
disclosure by the Corporation, become part of the public domain, through no
fault, act or omission of the Employee, directly or indirectly, in violation of
such obligation; (iii) was, at the time of the disclosure by the Corporation to
the Employee, in the Employee's possession and was not otherwise, directly or
indirectly acquired from the Corporation; (iv) was received by the Employee from
any third party, provided that such information was not obtained by said third
party from the Corporation improperly, directly or indirectly, and was not
improperly disclosed by the third party. Section 9. Indemnification . On the
same terms and conditions applicable to other directors and officers of the
Corporation, the Corporation shall continue to indemnify the Employee against
all liability and loss with respect to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation or any of its subsidiaries or Affiliates (as hereinafter
defined), against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that he did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding any
other provision of this Agreement, the Corporation's obligation to indemnify the
Employee shall survive the expiration of this Agreement, provided that in the
event that the Employee is terminated pursuant to Section 6(c) of this
Agreement, the Corporation shall have no obligation to indemnify the Employee
under this Section 9 against any liability, loss or expense arising from conduct
that constitutes grounds for the Corporation to terminate the Employment Period
pursuant to Section 6(c) of this Agreement. Section 10. Stock Options. Upon the
Commencement Date, the Corporation shall grant to the Employee non-qualified
Stock Options (the "Stock Options") representing the right to purchase 400,000
shares of the Corporation's common stock, par value $1.00 per share (the "Common
Stock"), pursuant to the Corporation's 1996 Stock Plan. The exercise price for
the Stock Options will be the market price of the Common Stock on the
Commencement Date. Stock Options representing the right to purchase 100,000
shares of common stock will vest upon each of the first two anniversaries of the
grant date for the Stock Options, and Stock Options representing the right to
purchase 200,000 shares of Common Stock will vest on the third anniversary of
the grant date. The Stock Options shall be subject to the terms and conditions
set forth in the Corporation's 1996 Stock Plan and an agreement or agreements to
be entered into, pursuant to such plan (the "Stock Option Agreements"), between
the Corporation and the Employee, provided however, there shall be no
restrictions on any Common Stock acquired by Employee by exercise of any options
granted by the Corporation, except for those restrictions pursuant to applicable
law. Notwithstanding anything contained herein or in the Stock Option Agreements
to the contrary, all Stock Options outstanding shall immediately vest upon a
"Change of Control" (as hereinafter defined). During the Employment Period,
Employee shall also receive such additional options as the Board deems
appropriate in its sole discretion. Section 11. Vacations . The Employee shall
be entitled to paid vacations in accordance with the policies of the Corporation
in effect from time to time, but not less than four weeks in any of the Fiscal
Years during which the Employee is employed. To the extent the Employee does not
use the full vacation period during a Fiscal Year the unused balance shall
accrue and be carried over into subsequent Fiscal Years; provided, however, that
no more than an aggregate of two weeks of unused vacation time may be carried
forward from one Fiscal Year to the next Fiscal Year. Section 12. Legal
Expenses. The Corporation shall pay all legal fees and related expenses incurred
by the Employee as a result of (i) the Employee's termination of employment
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination to employment) if the Corporation has been found
to be in breach of its obligations hereunder or (ii) the Employee's seeking to
obtain or enforce any right or benefit provided by this Agreement, if the
Employee prevails against the Corporation in any proceeding in which rights
hereunder are contested. Section 13. Successors and Assigns . In the event that
the Corporation shall at any time be merged or consolidated with any other
corporation or shall sell or otherwise transfer substantially all of its assets
or business to another corporation or entity, the provisions of this Agreement
shall be binding upon and inure to the benefit of such corporation or entity
surviving or resulting from such merger or consolidation or to which such assets
or business shall be so sold or transferred; provided, however, that nothing
contained in this Section 13 shall in any way limit, or be construed to limit,
the obligations to the Employee under this Agreement or the obligations of the
Corporation or the Corporation's successors or assigns. This Agreement shall not
be assignable by the Employee. Section 14. Notice. Any notice or other
communication which is required or permitted by this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person,
transmitted by telecopy or five (5) days after being mailed by registered or
certified mail, postage prepaid, return receipt requested, to such party at the
address shown below:
If to the Corporation, care of the following:
Salant Corporation
1114 Avenue of the Americas
New York New York 10036
Attention: Todd Kahn, Esq.
If to the Employee, then to the following:
Jerald S. Politzer
c/o Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
With a copy to :
Peter Alkalay, Esq.
McLaughlin & Stern, LLP
260 Madison Avenue
New York, New York 10016
Each party may, by notice or other party, change the above address.
Section 15. Entire Agreement; Amendments. This Agreement embodies the
entire agreement and understanding between the parties and supersedes all prior
agreements and understandings as to the employment of the Employee. No
amendment, waiver, modification or discharge of any of the terms of this
Agreement shall be valid unless in writing and signed by the party against which
enforcement is sought. Section 16. Waiver. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach thereof. Section 17. Counterparts. This
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original. Section 18. Governing Law; Resolution of Disputes. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York. The Employee hereby acknowledges that irreparable damage
will occur in the event that Sections 7 and 8 of this Agreement are not
performed in accordance with their specific terms or are otherwise breached by
the Employee. It is accordingly agreed that the Corporation shall be entitled to
an injunction or injunctions to prevent breaches or such provisions in any Court
of the United States or any states having jurisdiction, this being in addition
to any other remedy to which the Corporation may be entitled to at law or in
equity. Except in the event the Corporation is attempting to seek injunctive or
other equitable relief for a breach by the Employee of Sections 7 and 8 of this
Agreement, the parties agree that as a condition precedent to the filing of any
claim as set forth below, the parties and their attorneys must attempt to confer
at least twice, in person, in an effort to resolve any dispute. Should such
efforts not be successful, such dispute shall be resolved by binding
arbitration, to be held in New York City in accordance with the rules and
procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. Each party shall bear his or its own costs of the arbitration or
litigation, including, without limitation, attorneys' fees. Pending the
resolution of any arbitration or court proceeding, the Corporation shall
continue payment of all amounts and benefits due the Employee under this
Agreement. Section 19. Certain Definitions "Affiliate" shall mean any person,
firm, corporation, partnership or other legal entity that, directly or
indirectly, controls, is controlled by or is under common control with, the
Corporation. "Change of Control" shall mean an event or series of events by
which (i) any Person is or becomes the "beneficial owner" (as defined in rules
13d-3 and 13d-5 under the Securities and Exchange Act of 1934, as amended,
except that a person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or after the passage of time), directly or indirectly,
of a majority of the aggregate Voting Stock of the Corporation; or (ii) the
Corporation consolidates with or merges into another Person or conveys,
transfers or leases all or substantially all of its assets to any Person, or any
Person consolidates with or merges into the Corporation, in either event
pursuant to a transaction in which the outstanding Voting Stock of the
Corporation is changed into or exchanged for cash, securities or other
properties, other than any such transaction where the holders of the Voting
Stock of the Corporation immediately prior to such transaction own, directly or
indirectly, immediately after such transaction Voting Stock of such surviving
corporation entitling them to not less than 50% of the aggregate voting power of
all Voting Stock of such surviving corporation. Notwithstanding the foregoing, a
Change of Control shall not be deemed to occur if the Person described in clause
(i) or (ii) is Apollo Apparel Partners, L.P. or is an Affiliate of Apollo
Apparel Partners, L.P. "Voting Stock" shall mean securities of any class or
classes (or equivalent interests) of any entity, if the holders of the
securities of such class or classes (or equivalent interests) are ordinarily, in
the absence of contingencies, entitled to vote for the election of the directors
(or natural persons or entities performing similar functions) of such entity,
even though the right to so vote has been suspended by the happening of such a
contingency. "Control" shall mean the power to direct the affairs of any person,
firm, corporation, partnership or other legal entity by reason of ownership of
voting stock, by contract or otherwise. "Person" shall mean any natural person,
corporation, partnership, trust, association, governmental authority or unit, or
any other entity, whether acting in an individual, fiduciary or other capacity,
or any group of Persons acting in concert. IN WITNESS WHEREOF, the parties have
executed this Agreement as of the dates set forth below.
SALANT CORPORATION
By:_____________________ Date_______, 1997
Todd Kahn
Vice President,
Secretary and General Counsel
________________________Date_____., 1997
Jerry S. Politzer
<PAGE>
EXHIBIT 1
INCENTIVE COMPENSATION SCHEDULE
(a) If the Corporation's "Pre-tax Income", as shown on its audited
financial statements for any Fiscal year during the Employment
Period ("Actual Annual Pre-tax Income"), is equal to or
greater than 100% of the amount of Pre-tax Income provided for
in the Corporation's annual business plan for that Fiscal Year
("Planned Annual Pre-tax Income"), the Employee shall receive
a cash bonus equal to 100% of his annual Salary at the end of
the applicable Fiscal year ("Annual Salary").
(b) If Actual Annual Pre-tax Income is equal to or greater than
90% and less than 100% of Planned Annual Pre-tax Income, the
Employee shall receive a cash bonus equal to 50% of his Annual
Salary.
(c) If Actual Annual Pre-tax Income exceeds 100% of Planned Annual
Pre-tax Income, then in addition to the bonus specified in
paragraph (a) above, the Employee shall receive additional
cash bonuses, each equal to 1% of his Annual Salary, for each
full 1% increment (after rounding to the nearest 1/100th of a
percent) by which Actual Annual Pre-tax Income exceeds 100% of
Planned Annual Pre-tax Income.
(d) The following principles shall apply in calculating the
"Pre-tax Income" which term shall mean the aggregate income of
the Corporation before provisions for all Federal, State and
local income taxes thereon. In calculating such "Pre-tax
Income", all items of income and deductions shall be
determined in accordance with generally accepted accounting
principles applied on a consistent basis, subject, however, to
the provisions of the following subparagraphs:
(i) There shall be excluded from income: all
extraordinary items of income such as gains and losses on the
sale of fixed assets or intangible assets; all insurance
recoveries other than for business interruption; non-recurring
gains or losses including, without limitation, gains or losses
on the termination of any employee benefit plans or gains or
losses realized on the sale quota.
(ii) Deductions from income shall include all
interest expenses, fixed charges and reasonable provisions for
depreciation,amortization and obsolescence, inventory
write-offs and the salary and bonus payable to all of the
employees of the Corporation and the Employee hereunder.
(iii) The amount of "Planned Annual Pre-tax Income"
for each Fiscal Year shall be determined by the Corporation's
Board of Directors.
EXHIBIT 2
EXISTING EMPLOYEE BENEFIT PLANS
6
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1997 (this
"Agreement"), between SALANT CORPORATION, a Delaware corporation, (the
"Corporation") and NICHOLAS P. DiPAOLO (the "Employee").
WHEREAS, pursuant to the Employment Agreement, dated September
20, 1993, between the Employee and the Corporation, as modified by the
Agreement, dated September 22, 1993, between the Employee and the Corporation
and the Letter Agreement, dated August 31, 1995, between the Employee and the
Corporation, the Employee is currently the Chairman of the Board of Directors,
Chief Executive Officer and President of the Corporation; and
WHEREAS, the Board of Directors of the Corporation has
determined that it would be in the best interest of the Corporation to extend
the term of employment for a one year period.
NOW THEREFORE, in consideration of the respective premises,
mutual covenants and agreements of the parties hereto, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Nature of Employee's Services. The Corporation agrees
to employ the Employee and the Employee agrees to serve the Corporation as
Chairman of the Board, President and Chief Executive Officer of the Corporation.
The Employee shall perform such services and duties as shall be assigned to him
or delegated to him from time to time by the Board of Directors of the
Corporation (the "Board of Directors") or the Executive Committee of the Board
of Directors during the Employment Period (as hereinafter defined). The
Employee's duties shall include, without additional compensation, the
performance of similar services for any subsidiaries of the Corporation. The
Employee agrees that, except as otherwise provided herein, he shall devote
substantially all of his business time, attention and energy to the business of
the Corporation and its subsidiaries in the advancement of the best interests of
the Corporation and its subsidiaries. The Employee will perform his duties
hereunder principally in the metropolitan New York area. During the Employment
Period it shall not be a violation of this Agreement for the Employee to (a)
serve on corporate, civic or charitable boards or committees, (b) deliver
lectures, fulfill speaking engagements or teach at educational institutions and
(c) manage personal investments, so long as such activities do not interfere
with the performance of Employee's responsibilities as an employee of the
Corporation in accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been conducted by the
Employee prior to the Employment Period, the continued conduct of such
activities (or the conduct of activities similar in nature and scope thereto)
during the Employment Period shall not thereafter be deemed to interfere with
the performance of the Employee's responsibilities to the Corporation.
Section 2. Term of Employment. For purposes of this Agreement,
the term Employment Period shall mean the period commencing January 1, 1997 and
ending December 31, 1997, or, if earlier, the Termination Date (as hereinafter
defined).
Section 3. Annual Compensation. Subject to the terms hereof, the
Corporation agrees to pay to the Employee, subject to all applicable laws and
requirements, including, without limitation, laws with respect to withholding of
federal, state or local taxes the annual compensation set forth below.
(a) Salary. As annual salary for the services to
be rendered by the Employee a
salary at the rate of $625,000 per annum from January 1, 1997 through December
31, 1997, payable in equal bi-weekly installments during the Employment Period
(the "Salary").
(b) Incentive Compensation. Incentive
compensation, payable in accordance with the
Corporation's customary practices for executive employees, based upon the
schedule comparing the Corporation's performance during each fiscal year which
ends within the Employment Period to operating targets for each such fiscal
year, which schedule is set forth in Exhibit 1 hereto. Each bonus shall be paid
by the Corporation to the Employee within ninety (90) days after the end of the
fiscal year for which such bonus is payable. If the employment of the Employee
is terminated or if the Employment Period terminates on a day other than the
last day of a fiscal year, the bonus amount payable shall be the amount to which
the Employee would have been entitled had his employment continued for all of
that fiscal year, prorated by the proportion that the number of months of
employment completed by the Employee during that fiscal year bears to twelve
(12). Notwithstanding anything contained herein to the contrary, no bonus shall
be payable to the Employee (i) if the Employee is terminated pursuant to Section
6(d), (ii) if the Employee breaches this Agreement or (iii) if the Employee
terminates the Employment Period other than pursuant to Section 6(e).
Section 4. Employee Benefit Plans. The Employee shall, during
the Employment Period, be eligible to participate in and receive benefits under
and in accordance with the provisions of any pension plan, welfare plan or other
similar plan or policy of the Corporation maintained for the benefit of its
employees (together, the "Benefit Plans") in which he now participates, and the
Employee shall be entitled to continue to participate in such plans (or any
successors thereto) during the Employment Period, to the extent permitted by the
respective terms thereof. In the event any new Benefit Plan is established which
is in addition to, and not an alternative to, any Benefit Plan in which the
Employee now participates, the Employee shall be entitled to participate in such
Benefit Plan to the extent permitted by the terms thereof. The Corporation will
not take any action directed solely at the Employee, with respect to the Benefit
Plans or the Employee's participation in the Benefit Plans, that results in a
material adverse change from the benefits the Employee now enjoys. The
Corporation shall have the right, however, to make changes in Benefit Plans
applicable to its senior executives or employees generally and the Employee
agrees that such changes shall also be applicable to the Employee.
Section 5. Expenses. Subject to compliance by the Employee with
such policies regarding expenses and expense reimbursement as may be adopted
from time to time by the Corporation, the Employee is authorized to incur
reasonable expenses in the performance of his duties hereunder in the
furtherance of the business of the Corporation and its subsidiaries, and the
Corporation shall reimburse the Employee for all such reasonable expenses.
Section 6. Termination.
(a) Termination Date and Termination of Rights
and Obligations. On the date (the
"Termination Date") which is the earlier of (i) December 31, 1997 or (ii) the
date on which the Company delivers to the Employee written notice that the
Employee's employment hereunder is terminated for any reason, including a
termination of the Employment Period which becomes effective pursuant to
subsections (b) through (e) of this Section 6, the Employee's salary and other
rights under this Agreement (except as otherwise provided in subsections (e),
(f) and (g) of this Section 6) shall terminate, provided, however, that the
Corporation shall pay to the Employee his Salary and benefits accrued prior
thereto and the Employee shall be entitled to receive an incentive bonus to the
extent provided in Section 3(b).
(b) Death of Employee. In the event of the death
of the Employee, the Employment
Period shall terminate on the last day of the third full month after such death.
(c) Disability of Employee. The Corporation
shall have the right to terminate the
Employment Period, upon written notice to the Employee, if the Corporation
determines that the Employee has been disabled (either mentally or physically)
so as to be unable to substantially perform his duties hereunder for a period of
six months or more.
(d) Termination for Cause. The Corporation
shall have the right to terminate the
Employment Period, upon written notice to the Employee, if the Employee (i)
engages in conduct which is determined by a court to constitute a felony or act
of moral turpitude or (ii) commits any act of willful misconduct, malfeasance or
gross negligence that is injurious to the Corporation (collectively referred to
as "For Cause").
(e) Termination by Employee for Good Reason.
The Employee shall have the right to
terminate the Employment Period for "good reason" (as hereinafter defined),
provided that the Employee shall have given the Corporation written notice of
the Employee's decision to terminate his employment (specifying the alleged
"good reason" in reasonable detail) and the Corporation shall not have cured the
same within ninety (90) days after receipt of such notice, or, if cure cannot be
fully accomplished within ninety (90) days, the Corporation shall not have
commenced cure within ninety (90) days after receipt of such notice and cured
the alleged "good reason" as soon as possible thereafter. For purposes of the
foregoing, "good reason" shall mean (i) the assignment to the Employee of duties
inconsistent with, or the diminution of, the Employee's positions, titles,
offices, duties, responsibilities or status with the Corporation, or a change
without good cause in the Employee's reporting responsibilities, or any removal
of the Employee from or any failure to elect the Employee to any positions,
titles or offices specified in this Agreement and held by the Employee, (ii) a
reduction in the Employee's Salary, (iii) a material reduction in the Employee's
benefits (other than a reduction pursuant to the last sentence of Section 4
hereof), or (iv) a "Change of Control" (as such term is defined in Section 19).
(f) Severance. Notwithstanding anything to the contrary set
forth in Section 6(a), in the event that the Employee's employment hereunder is
terminated by the Corporation (other than pursuant to subsections (c) or (d) of
this Section 6) or by the Employee for good reason or the Employment Period
continues to December 31, 1997 and the Corporation does not offer to extend the
Employee's employment on at least as favorable terms for an additional one year
term, the Corporation shall pay to the Employee as severance (the "Severence")
(i) a lump sum of $312,500 within ten (10) days of the Termination Date and (ii)
if the Separation Period (as hereinafter defined) is greater than six months, an
additional amount equal to $12,019.23 multiplied by the number of full weeks
remaining in the Separation Period after the first six months have elapsed,
payable in equal bi-weekly installments commencing at the end of the first six
months of the Separation Period. For purposes of this Agreement, the term
Separation Period shall mean the period commencing on the Termination Date and
ending on the later of (i) December 31, 1997 or (ii) six months after the
Termination Date. Notwithstanding anything to the contrary set forth in this
Agreement, all Severance paid to the Employee as a result of a Change of Control
will be paid in a lump sum within ten (10) days of the Termination Date. The
provisions of this subsection (f) shall be in lieu of any other rights or claims
which the Employee may have under this Agreement or otherwise with respect to
damages except pursuant to subsection (a) of this Section 6. (g) Assignment of
Life Insurance on Termination. Except in the case of termination of employment
pursuant to subsection (d) of this Section 6, at the end of the Separation
Period, the Corporation shall assign to the Employee the life insurance policies
of the Connecticut Mutual Life Insurance Company numbered 4639537, 4639538 and
4706956 (collectively, the "Insurance Policies") owned by the Corporation on the
life of the Employee. The Corporation hereby covenants that it shall during the
Employment Period (i) pay any and all premiums on the Insurance Policies, (ii)
keep the Insurance Policies in effect at all times and (iii) not borrow against
the value of the Insurance Policies.
Section 7. Covenant Not to Compete. The Employee covenants and
agrees that he will not, at any time during the Employment Period (determined
without giving effect to any termination of employment) and the Separation
Period, whether as owner, principal, agent, partner, director, officer,
employee, independent contractor, consultant, shareholder, licensor or
otherwise, alone or in association with any other person, either directly or
indirectly, carry on, be engaged or take part in, render services to or own,
share in the earnings of, or invest in the stocks, bonds or other securities of,
or be interested in any way in any business competing with or similar to any of
the businesses of the Corporation or its subsidiaries without the written
consent of the Board of Directors, provided that the Employee may hold a passive
investment in a business which is competitive with or similar to any of the
businesses of the Corporation if the investment is in securities which are
listed on a national securities exchange and the investment in any class of
securities does not exceed 1% of the outstanding shares of such class or 1% of
the aggregate outstanding principal amount of such class, as the case may be. In
addition, for one year after the later of the end of the Employment Period
(determined without giving effect to any termination of employment) or the end
of the Separation Period, the Employee covenants and agrees that he will not,
directly or indirectly, hire any person who is employed by the Corporation on
the Termination Date who's annual salary on such date is equal to or greater
than $100,000 or solicit, induce, entice or hire any such person to leave the
employment of the Corporation.
Section 8. Non-Disclosure Covenant. The Employee further agrees
that during the Employment Period and thereafter without limit, he will not,
either directly or indirectly, communicate or divulge to any person, firm or
corporation other than the Corporation and its subsidiaries, any information
(except that which is generally known to the public) relating to the business,
customers and suppliers, or other affairs of the Corporation or its subsidiaries
("Confidential Information") except (a) for the purpose of, or in connection
with, the advancement of the business of the Corporation or (b) in the event
that the Employee is required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar legal
process) to disclose Confidential Information, and the Employee is compelled to
disclose such Confidential Information or else stand liable for contempt or
suffer other censure, penalty or violation in a court proceeding. In the event
that the Employee is required to disclose such Confidential Information in the
circumstances described in Section 8(b) the Employee will either (i) give the
Corporation at least ten days' written notice (or shorter, but prompt, notice to
the extent the Employee is required to respond to legal process in fewer than
ten days) so that the Corporation may seek an appropriate protective order or
(ii) make such disclosure to a court under seal.
Section 9. Indemnification. On the same terms and conditions
applicable to other directors and officers of the Corporation, the Corporation
shall continue to indemnify the Employee against all liability and loss with
respect to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation or any of its
subsidiaries or Affiliates (as hereinafter defined), against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that he did not act in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful. Notwithstanding any other provision of this Agreement, the
Corporation's obligation to indemnify the Employee shall survive the expiration
of this Agreement, provided that in the event that the Employee is terminated
pursuant to Section 6(d) of this Agreement, the Corporation shall have no
obligation to indemnify the Employee under this Section 9 against any liability,
loss or expense arising from conduct that (a) constitutes grounds for the
Corporation to terminate the Employment Period pursuant to clause (ii) of
Section 6(d) of this Agreement or (b) constitutes grounds for the Corporation to
terminate the Employment Period pursuant to clause (i) of Section 6(d) of this
Agreement and such conduct is injurious to the Corporation. The term "Affiliate"
shall mean any person, firm, corporation, partnership or other legal entity
that, directly or indirectly, controls, is controlled by or is under common
control with, the Corporation. The term "control" shall mean the power to direct
the affairs of any person, firm, corporation, partnership or other legal entity
by reason of ownership of voting stock, by contract or otherwise.
Section 10. Automobile. During the Employment Period, the
Corporation will provide the Employee with the vehicle currently used by the
Employee, a 1993 Mercedes Benz Model 500SL. The cost and maintenance of such
automobile (including insurance, gasoline, repairs, etc.) shall be paid by the
Corporation, subject to compliance by the Employee with such policies regarding
automobiles and the use thereof as may be adopted from time to time by the
Corporation. Unless this Agreement shall have been terminated pursuant to
Section 6(d) hereof, the Employee shall have the option, to the extent the
Corporation may legally give such option, within twenty (20) days after the end
of the Employment Period, to purchase such automobile at its then depreciated
book value or, if such automobile is leased, at the purchase price under the
lease.
Section 11. Vacations. The Employee shall be entitled to paid
vacations in accordance with the policies of the Corporation in effect from time
to time, but no less than four weeks in any of the Fiscal Years during which the
Employee is employed. To the extent the Employee does not use the full vacation
period during a Fiscal Year, the unused balance shall accrue and be carried over
into subsequent Fiscal Years; provided, however, that no more than an aggregate
of two weeks of unused vacation time may be carried forward from one Fiscal Year
to the next Fiscal Year.
Section 12. Legal Expenses. The Corporation shall pay all legal
fees and related expenses incurred by the Employee as a result of (i) the
Employee's termination of employment (including all such fees and expenses, if
any, incurred in contesting or disputing any such termination of employment) if
the Corporation has been found to be in breach of its obligations hereunder, or
(ii) the Employee's seeking to obtain or enforce any right or benefit provided
by this Agreement, if the Employee prevails against the Corporation in any
proceeding in which rights hereunder are contested.
Section 13. Successors and Assigns. In the event that the
Corporation shall at any time be merged or consolidated with any other
corporation or shall sell or otherwise transfer substantially all of its assets
or business to another corporation or entity, the provisions of this Agreement
shall be binding upon and inure to the benefit of such corporation or entity
surviving or resulting from such merger or consolidation or to which such assets
or business shall be so sold or transferred; provided, however, that nothing
contained in this Section 13 shall in any way limit, or be construed to limit,
the obligations to the Employee, under this Agreement, of the Corporation or the
Corporation's successors or assigns. This Agreement shall not be assignable by
the Employee.
Section 14. Notice. Any notice or other communication which is
required or permitted by this Agreement shall be in writing and shall be deemed
to have been duly given when delivered in person, transmitted by telecopy or
five (5) days after being mailed by registered or certified mail, postage
prepaid, return receipt requested, to such party at the address shown below:
If to the Corporation, care of the following:
Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
Attention: Todd Kahn, Esq.
If to the Employee, then to the following:
Mr. Nicholas P. DiPaolo
1114 Avenue of the Americas
New York, New York 10036
With a copy to:
Roger M. Deitz, Esq.
437 Madison Avenue
New York, New York 10022-7302
Each party may, by notice to other party, change the above address.
Section 15. Entire Agreement; Amendments. This Agreement
embodies the entire agreement and understanding between the parties and
supersedes all prior agreements and understandings as to the employment of the
Employee. No amendment, waiver, modification or discharge of any of the terms of
this Agreement shall be valid unless in writing and signed by the party against
which enforcement is sought.
Section 16. Waiver. The waiver by either party of a breach
of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach thereof.
Section 17. Counterparts. This Agreement may be executed
in several counterparts, each of which
shall be deemed to be an original.
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Section 18. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York. For
purposes of any action or proceeding involving this Agreement, the Corporation
and the Employee hereby submit to the jurisdiction of all federal and state
courts of competent jurisdiction sitting within the area comprising the Southern
District of New York. The Employee hereby acknowledges that irreparable damage
will occur in the event that Sections 7 and 8 of this Agreement are not
performed in accordance with their specific terms or are otherwise breached by
the Employee. It is accordingly agreed that the Corporation shall be entitled to
an injunction or injunctions to prevent breaches of such provisions in any Court
of the United States or any states having jurisdiction, this being in addition
to any other remedy to which the Corporation may be entitled to at law or in
equity.
It is the intention of the parties to the fullest extent possible to resolve
disputes without recourse to the judicial system. Except in the event the
Corporation is attempting to seek injunctive or other equitable relief for a
breach by the Employee of Sections 7 and 8 of this Agreement, the parties agree
that as a condition precedent to the filing of any claim the parties and their
attorneys must confer at least twice, in person, in an effort to resolve any
dispute. Should such efforts not be successful, the parties shall submit their
dispute to non-binding mediation at the offices of J.A.M.S./Endispute, Inc., in
the City of New York. Should mediation not be successful, suit may be brought in
any Court in accordance with this Section 18. The fees and expenses, including
actual attorneys' fees, of the prevailing party shall be paid by the
non-prevailing party.
Section 19. Certain Definitions. When used in this Agreement,
the following terms shall have the following meanings (such meanings will be
applicable to both the singular and plural forms of the terms defined):
"Affiliate" shall mean any natural person, firm, corporation,
partnership or other legal entity that, directly or indirectly, controls, is
controlled by or is under common control with, the Corporation.
"Change of Control" shall mean an event or series of events by
which (i) any Person is or becomes the "beneficial owner" (as defined in rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended, except
that a Person shall be deemed to have "beneficial ownership" of all shares that
any such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of a
majority of the aggregate Voting Stock of the Corporation; or (ii) the
Corporation consolidates with or merges into another Person or conveys,
transfers or leases all or substantially all of its assets to any Person, or any
Person consolidates with or merges into the Corporation, in either event
pursuant to a transaction in which the outstanding Voting Stock of the
Corporation is changed into or exchanged for cash, securities or other property,
other than any such transaction where the holders of the Voting Stock of the
Corporation immediately prior to such transaction own, directly or indirectly,
immediately after such transaction, Voting Stock of such surviving corporation
entitling them to not less than 50% of the aggregate voting power of all Voting
Stock of such surviving corporation.
"Control" shall mean the power to direct the affairs of any
natural person, firm, corporation, partnership or other legal entity by reason
of ownership of Voting Stock, by contract or otherwise.
"Person" shall mean any natural person, corporation,
partnership, trust, association, governmental authority or unit, or any other
entity, whether acting in an individual, fiduciary or other capacity.
"Voting Stock" shall mean securities of any class or classes (or
equivalent interests) of any entity, if the holders of the securities of such
class or classes (or equivalent interests) are ordinarily, in the absence of
contingencies, entitled to vote for the election of the directors (or natural
persons or entities performing similar functions) of such entity, even though
the right to so vote has been suspended by the happening of such a contingency.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first set forth above.
SALANT CORPORATION
By:
Todd Kahn, Esq.
Vice President,
Secretary and General Counsel
Nicholas P. DiPaolo
EXHIBIT 1
INCENTIVE COMPENSATION SCHEDULE
? If the Corporation's "Pre-tax Income", as shown on its audited
financial statements for any Fiscal Year during the Employment
Period ("Actual Annual Pre-tax Income"), is equal to or greater
than 100% of the amount of Pre-tax Income provided for in
Salant's annual business plan for that Fiscal Year ("Planned
Annual Pre-tax Income"), the Employee shall receive a cash bonus
equal to 100% of his Salary at the end of the applicable Fiscal
Year ("Annual Salary").
? For each full five percentage points (after rounding to the
nearest 1/100th of a percent) by which the Corporation's Actual
Annual Pre-tax Income exceeds 100% of Planned Annual Pre-tax
Income, the Employee shall receive an additional cash bonus
equal to 20% of his Annual Salary.
? The following principles shall apply in calculating the "Pre-tax
Income" which term shall mean the aggregate income of the
Corporation before provision for all Federal, State and local
income taxes thereon. In calculating such "Pre-tax Income", all
items of income and deductions shall be determined in accordance
with generally accepted accounting principles applied on a
consistent basis, subject, however, to the provisions of the
following subparagraphs.
(i) There shall be excluded from income: all extraordinary
items of income such as
gains and losses on the sale of fixed assets or intangible
assets; all insurance recoveries other than for business
interruption; non-recurring gains or losses including, without
limitation, gains or losses on the termination of any employee
benefit plans or gains or losses realized on the sale of quota.
(ii)Deductions from income shall include all interest expenses,
fixed charges and
reasonable provisions for depreciation, amortization and
obsolescence, inventory write-offs and the salary and bonus
payable to all of the employees of the Corporation and the
Employee hereunder.
1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 11, 1997 (this
"Agreement"), between MICHAEL A. LUBIN (the "Employee") and SALANT CORPORATION,
a Delaware corporation (the "Corporation").
WHEREAS, the Employee and the Corporation desire to enter into an
agreement of employment; NOW, THEREFORE, in consideration of the
premises and of the mutual covenants hereinafter set forth,
the parties hereto agree as follows:
1. Employment. During the Employment Period (as hereinafter
defined), the Corporation shall employ the Employee and the Employee shall serve
as President and Chief Operating Officer of the Corporation. The Employee shall
perform such services and duties of a senior executive character for the
Corporation and any division, subsidiary or affiliate thereof as shall be
assigned to him from time to time by the Chief Executive Officer of the
Corporation during the Employment Period. The Employee agrees that, except as
otherwise provided herein, he shall devote substantially all of his business
time, attention and energy to the business of the Corporation, its subsidiaries
and affiliates in the advancement of the best interests of the Corporation, its
subsidiaries and affiliates. The Employee will perform his duties hereunder
principally in the metropolitan New York area. During the Employment Period it
shall not be a violation of this Agreement for the Employee to (a) serve on
corporate, civic or charitable boards or committees, (b) deliver lectures,
fulfill speaking engagements or teach at educational institutions, (c) serve as
a director and executive officer of Lexington Precision Corporation
("Lexington") and its affiliates provided that such activities do not exceed
twenty (20) business days annually (it being understood that there may be
intervals during any year during which the Employee's involvement with such
entities may be greater than during other periods of such year) and (d) manage
personal investments and serve as a partner of Lubin, Delano & Co., an
investment bank ("Lubin Delano"), so long as such activities do not interfere,
in any material respect, with the performance of Employee's responsibilities as
an employee of the Corporation in accordance with this Agreement.
2. Term of Agreement. (a) For purposes of this Agreement, the term
"Employment Period" shall mean the period commencing February 11, 1997 and
ending June 30, 1998. In the event of the Employee's death prior to June 30,
1998, the Employment Period shall terminate on the last day of the calendar
month within which such death shall have occurred. In the event that the
Employee shall become totally disabled (either mentally or physically) for a
period of three (3) consecutive months or more prior to June 30, 1998, the
Employment Period shall terminate at the end of such three (3) consecutive month
period. (b) Notwithstanding anything contained herein to the contrary, the
Corporation shall have the right to terminate the Employment Period immediately,
upon three (3) days prior written notice to the Employee, if the Employee (i)
engages in conduct which is determined by a court of competent jurisdiction to
be guilty of a felony or act of moral turpitude, (ii) commits any act of willful
misconduct, malfeasance or gross negligence that is injurious to the Corporation
in any material respect, (iii) commits a material violation of the Corporation's
Code of Conduct, or (iv) breaches this Agreement in any material respect
(collectively, "For Cause Termination").
(c) The Employee shall have the right to terminate the Employment
Period for "good reason" (as hereinafter defined), provided that the Employee
shall have given the Corporation written notice of the Employee's decision to
terminate his employment (specifying the alleged "good reason" in reasonable
detail) and the Corporation shall not have cured the same within three (3)
business days after receipt of such notice, such cure to be retroactive in the
case of any reduction in the "Adjusted Salary" (as hereinafter defined). For
purposes of the foregoing, "good reason" shall mean (i) the assignment to the
Employee of duties inconsistent with, or the diminution of, the Employee's
positions, titles, offices, duties, responsibilities or status with the
Corporation, or a change without good cause in the Employee's reporting
responsibilities, or any removal of the Employee from or any failure to elect
the Employee to any positions, titles or offices specified in this Agreement and
held by the Employee or (ii) a reduction in the Adjusted Salary.
(d) Notwithstanding anything contained herein to the contrary, in
the event that the Employee's employment hereunder is terminated (i) by the
Corporation prior to the expiration of the Employment Period (other than as a
result of a For Cause Termination or as a result of death or disability of the
Employee) or (ii) by the Employee for good reason, the Corporation shall
continue to pay to the Employee the Adjusted Salary for the period commencing on
the date of such termination until the later of (x) the last day of the
Employment Period or (y) six months (the "Separation Period"). During the
portion of the Separation Period prior to June 30, 1998, and no other portion,
the Employee shall (i) be entitled to any pro rata bonus as provided for in
Section 3(c) herein and (ii) be deemed an employee of the Corporation for all
benefit determination and eligibility purposes, including, without limitation,
insurance and the right to exercise stock options.
(e) If the Corporation and the Employee fail to agree to extend the
Employee's employment beyond the Employment Period (other than as a result of a
For Cause Termination or as a result of death or disability of the Employee),
the Corporation will continue to pay the Employee (the "Severance Payment") on a
bi-weekly basis the Adjusted Salary for the period commencing on the Employee's
last day of employment until the earlier of (i) the day the Employee commences
Full Time Employment (as hereinafter defined) or (ii) six (6) months (the
"Severance Period"). During the Severance Period, the Corporation shall provide
the Employee with the same life, medical and dental insurance benefits that the
Employee would have had if the Employment Period would have been extended for
such period of time. The Employee will not be entitled to (i) any pro-rata bonus
for the Severance Period or (ii) any other severance pursuant to any severance
policy then in effect. In addition, the Corporation's obligation to make the
Severance Payment is contingent upon the Employee's execution of a mutual
general release as reasonably established by the Corporation from time to time.
For purposes of this Agreement "Full Time Employment" shall mean any employment
as owner, principal, agent, partner, director, officer or employee for any
entity, corporation, partnership or individual, other than Lexington or
consulting engagements as a principal of Lubin Delano, where such employment
equals or exceeds thirty (30) hours per week.
The Employee hereby acknowledges that the Severance Payment is
greater than the amount provided by the Corporation's normal severance policy
and is being offered to the Employee in reliance upon the Employee's agreement
to release the Corporation from any liability and to waive any claims the
Employee may have against the Corporation, including, without limitation, any
claims relating to the Employee's employment or separation from employment.
Notwithstanding anything to the contrary contained herein or in any release
executed by the Employee at any time hereafter, nothing shall impair the
Employee's (i) right to enforce the obligations of the Corporation as set forth
in this Agreement or (ii) right to seek indemnification or contribution from the
Corporation in the event the Employee is the subject of any third-party claim or
claim by or on behalf of the Corporation arising out of or relating to any act
or omission by the Employee during the course of his employment by the
Corporation, to the extent such right would have otherwise existed.
3. Compensation. (a) The Corporation agrees to pay to the Employee
during the Employment Period as compensation for the services to be rendered by
the Employee a current base salary at the rate of $400,000 per annum (the "Base
Salary") payable in equal bi-weekly installments during the Employment Period.
On January 1, 1998, the Base Salary shall be adjusted upward for inflation by a
percentage equal to the percentage increase in the "Consumer Price Index" (as
hereinafter defined) for the period from October 1995 through December 31, 1997.
For purposes of this Agreement, the term "Consumer Price Index" shall mean the
"Consumer Price Index" published by the Bureau of Labor Statistics of the U.S.
Department of Labor, New York City, all items. The Base Salary, as adjusted in
accordance with this provision, shall be referred to as the Adjusted Salary.
If the Consumer Price Index shall become unavailable to the public,
the Corporation will substitute for it a comparable index based upon changes in
the cost of living or purchasing power of the consumer dollar published by any
other governmental agency, or if unavailable, a comparable index published by a
major bank or other financial institution or by a university or a generally
recognized financial publication.
(b) In respect of each year of the Employment Period, in addition
to the salary provided in (a) above, a bonus, if any, calculated as follows:
(i) If the Corporation attains or exceeds its Pre-tax Income Budget
for the any fiscal year, commencing with the 1997 fiscal year (a copy of each
fiscal year's budget will be furnished to the Employee in December of the prior
year), the Corporation shall pay a bonus to the Employee for such fiscal year in
which such Pre-tax Income Budget was attained or exceeded by the Corporation
equal to one hundred percent (100% ) of the base salary paid during such fiscal
year plus an additional bonus equal to twenty percent (20%) of such then current
base salary for each full five percent (5% ) (after rounding to the nearest
1/100th of a percent) by which the actual Pre-tax Income of the Corporation
exceeds its Pre-tax Income Budget. For example, if the Pre-tax Income Budget for
the Corporation for 1997 is $20,000,000 and the Corporation's actual Pre-tax
Income is $21,000,000 the Employee shall be entitled to a bonus of one hundred
and twenty percent (120%) of his 1997 current base salary of $400,000 or a bonus
of $480,000,
(ii) Notwithstanding anything contained herein to the contrary, if
the actual Pre-tax Income of the Corporation is less than one hundred percent
(100%) of its Pre-tax Income Budget in any fiscal year, the Employee shall not
be entitled to any bonus for such fiscal year. The Employee shall not be
entitled to any minimum or guaranteed bonus in respect of any fiscal year.
(c) The amount of such bonus, if any, shall be calculated on or
before ninety (90) days following the last day of each fiscal year of the
Corporation commencing with the 1997 fiscal year. A written statement of the
calculation and the amount of the bonus, if any, shall be delivered to the
Employee within such ninety (90) day period.
In the event of the termination of the Employment Period prior to
the close of a complete fiscal year of the Corporation, the calculation for
purposes of determining a bonus shall be computed on the basis of the results of
the full fiscal year within which the termination of the Employment Period
occurs; provided, however, that the amount of the actual bonus, if any, payable
to the Employee with respect to such year shall be prorated based on the
proportion that (x) the number of days from January 1 of such year to the date
of the termination of the Employment Period bears to (y) 365.
Notwithstanding anything to the contrary contained in this
Agreement, if the Employee voluntarily leaves the employ of the Corporation
prior to the completion of the Employment Period (other than in connection with
a breach of this Agreement by the Corporation) or the Employment Period is
terminated by the Corporation pursuant to Section 2(b) hereof, the Employee
shall not be entitled to any bonus or pro rata bonus for the year in which such
termination takes place or any subsequent year.
(d) The following principles shall apply in calculating the
"Pre-tax Income of the Corporation" which term shall mean the aggregate
consolidated income of the Corporation before provision for all Federal, State
and local income taxes thereon. In calculating such "Pre-tax Income", all items
of income and deductions shall be determined in accordance with generally
accepted accounting principles applied on a consistent basis, subject, however,
to the provisions of the following subparagraphs:
(i) There shall be excluded from income: all extraordinary items of
income such as gains and losses on the sale of fixed assets or intangible
assets; all insurance recoveries other than for business interruption;
non-recurring gains or losses including, without limitation, gains or losses on
the termination of any employee benefit plans or gains or losses realized on the
sale of quota.
(ii) Deductions from income shall include all interest expenses,
fixed charges and reasonable provisions for depreciation, amortization and
obsolescence, inventory write-offs and the salary and bonus payable to all of
the employees of the Corporation and the Employee hereunder.
4. Employee Benefit Plans. Nothing herein contained
shall affect the right of the Employee
to participate and receive benefits under and in accordance with the provisions
of any present or future pension or profit sharing plan, pension plan, insurance
plan, medical plan, stock option plan, plan of deferred compensation or other
similar plan or policy of the Corporation for the benefit of its employees.
5. Covenant Not to Compete. The Employee covenants and agrees that
he will not, at any time during the Employment Period (determined without giving
effect to any termination of employment), whether as owner, principal, agent,
partner, officer, employee, independent contractor, consultant, shareholder,
licensor or otherwise, alone or in association with any other person, either
directly or indirectly, carry on, be engaged or take part in, render services to
or own, share in the earnings of, or invest in the stocks, convertible bonds or
other convertible securities of, or be interested in any way in any business
competing with the businesses of the Corporation or its subsidiaries without the
written consent of the Board of Directors of the Corporation, provided that the
Employee may hold a passive investment in a business which is competitive with
or similar to any of the businesses of the Corporation if the investment is in
securities which are listed on a national securities exchange or NASDAQ and the
investment in any class of securities does not exceed 2% of the outstanding
shares of such class or 2% of the aggregate outstanding principal amount of such
class, as the case may be. In addition, for one year after the end of the
Employment Period (determined without giving effect to any termination of
employment), the Employee covenants and agrees that he will not, directly or
indirectly, (i) hire any person who is employed by the Corporation on the
Employee's last day of employment whose annual compensation on such date is
equal to or greater than $100,000 or (ii) solicit, induce, entice or hire any
such person to leave the employment of the Corporation.
6. Non-Disclosure Covenant. The Employee further agrees that during
the Employment Period and thereafter without limit, he will not, either directly
or indirectly, communicate or divulge to any person, firm or corporation other
than the Corporation, its subsidiaries and affiliates, any information (except
that which is generally known or available to the public) relating to the
business, customers and suppliers, or other affairs of the Corporation, its
subsidiaries or affiliates ("Confidential Information") except (a) for the
purpose of, or in connection with, the advancement of the business of the
Corporation or (b) in the event that the Employee is required (by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar legal process) to disclose Confidential
Information, and the Employee is compelled to disclose such Confidential
Information or else stand liable for contempt or suffer other censure, penalty
or violation in a court proceeding. In the event that the Employee is required
to disclose such Confidential Information in the circumstances described in
Section 6(b), the Employee will either (i) give the Corporation at least ten
days' written notice (or shorter, but prompt, notice to the extent the Employee
is required to respond to legal process in fewer than ten days) so that the
Corporation may seek an appropriate protective order or (ii) make such
disclosure to a court under seal.
7. Indemnification. To the fullest extent permitted under the
Delaware General Corporation Law and, in any event, on terms and conditions no
less favorable than those applicable to directors or other officers of the
Corporation, the Corporation shall indemnify the Employee against all liability
and loss with respect to any threatened, pending or completed action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation or any of its subsidiaries or affiliates,
against expenses (including, without limitation, reasonable attorneys' fees and
the costs of enforcing this Section 7), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, proceeding or investigation by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that he did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding any
other provision of this Agreement, the Corporation's obligation to indemnify the
Employee shall survive the expiration or termination of this Agreement, provided
that in the event that the Employee is terminated pursuant to Section 2(b) of
this Agreement, the Corporation shall have no obligation to indemnify the
Employee under this Section 7 against any liability, loss or expense arising
from conduct that constitutes grounds for the Corporation to terminate the
Employment Period pursuant to Section 2(b) of this Agreement.
8. Business Expenses; Auto Allowance. The Employee will submit, on
a timely basis, to the Corporation periodic reports of travel and other expenses
in connection with his employment hereunder, in such form and at such times as
may reasonably be required by the Corporation. Such travel and other expenses
will be subject to approval by the Corporation and the Employee will be
reimbursed for such expenses as are reasonably incurred by the Employee in
accordance with this Section 8. During the Employment Period, the Corporation
will provide the Employee with an automobile allowance in the amount of $680 per
month, payable with the first pay period of each month.
9. Continuity of the Corporation. In the event that the Corporation
shall at any time be merged or consolidated with any other corporation or
corporations or shall sell or otherwise transfer a substantial portion of its
assets to another corporation or entity, the provisions of this Agreement shall
be binding upon and inure to the benefit of the Corporation or entity surviving
or resulting from such merger or consolidation or to which such assets shall be
sold or transferred. Except as provided in the preceding sentence, this
Agreement shall not be assignable by the Employee.
10. Stock Options. Upon the commencement of the Employment Period,
the Corporation shall grant to the Employee nonqualified stock options
representing the right to purchase 162,500 shares of the Corporation's common
stock, par value $1.00 per share (the "Common Stock"), pursuant to the
Corporation's 1987 Stock Plan, 1988 Stock Plan and/or 1993 Stock Plan. The
purchase price for such options will be the market price on the grant date.
Stock options representing the right to purchase 99,997 shares of Common Stock
will vest on the grant date for such options. Thereafter, stock options
representing the right to purchase 8,929 shares of Common Stock will vest
monthly for each of seven (7) months. The stock options shall be subject to the
terms and conditions set forth in the Corporation's 1987 Stock Plan, 1988 Stock
Plan and/or 1993 Stock Plan, as the case may be, and an agreement or agreements
to be entered into, pursuant to the applicable plan or plans, between the
Corporation and the Employee. The Corporation represents and warrants that the
stock options granted to the Employee shall qualify for the exemptions afforded
by the Securities and Exchange Commission Rule 16b-3 as in effect as of the date
of this Agreement.
11. Notice. Any notice or other communication provided for or
permitted herein shall be deemed to be fully given if in writing and mailed by
registered or certified mail, return receipt requested, to such party at the
addresses shown below; if to the Corporation care of the following:
Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
Attention: Todd Kahn, Esq.
if to the Employee, then to the following:
Mr. Michael A. Lubin
C/0 Lubin, Delano & Company
767 Third Avenue
29th Floor
New York, New York 10017
Each party may change its or his respective address by written notice as
described above.
12. Complete Agreement; Modification and Termination. This Agreement
constitutes the full and complete understanding and agreement of the parties,
supersedes all prior understandings and agreements as to the employment of the
Employee and cannot be amended, changed, modified or terminated without the
consent in writing of the Corporation and the Employee. 13. Waiver. The waiver
by either party of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach thereof. 14. Counterparts.
This Agreement shall be executed in several counterparts, each of which shall be
deemed to be an original. 15. Arbitration. The Employee and the Corporation
agree that any dispute of any kind, nature or description between the parties
hereto, with respect to, relating to or arising out of the Employee's employment
with the Corporation or the terms of this Agreement, shall be submitted to
binding arbitration before the American Arbitration Association in New York, New
York in accordance with its rules then in effect. The costs and expenses of
arbitration (including, without limitation, reasonable attorneys' fees and
expenses) of the prevailing party, shall be paid by the party against whom the
issue is determined. 16. Definitions. For purposes of this Agreement, the term
"affiliate" shall mean any person, firm or corporation controlling, controlled
by or under common control with, the Corporation. The term "control" shall mean
the power to direct the affairs of any person, firm or corporation by reason of
ownership of voting stock, by contract or otherwise. 17. Headings. The headings
in this Agreement are solely for convenience of reference and shall not affect
its interpretation. 18. Governing Law. The Agreement shall be governed by and
construed according to the laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
---------------------------
MICHAEL A. LUBIN
SALANT CORPORATION
By__________________________
Nicholas P. DiPaolo
Chairman, Chief Executive
Officer and President
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