UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6666
SALANT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3402444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1114 Avenue of the Americas, New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (212) 221-7500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities 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 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 August 6, 1997, there were outstanding 14,848,353 shares of the Common
Stock of the registrant.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
<PAGE>
SALANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 81,391 $ 91,889 $ 169,601 $ 185,434
Cost of goods sold 64,824 74,725 133,246 146,629
-------- -------- --------- ---------
Gross profit 16,567 17,164 36,355 38,805
Selling, general and
administrative expenses (20,806) (21,736) (41,360) (42,985)
Royalty income 1,428 1,399 2,535 2,527
Goodwill amortization (470) (608) (940) (1,220)
Reversal of/(provision for)
restructuring costs (Note 5) 410 (11,417) 1,164 (11,578)
Other income 71 48 188 66
-------- -------- --------- ---------
Loss from continuing operations
before interest, income taxes and
extraordinary gain (2,800) (15,150) (2,058) (14,385)
Interest expense, net 3,941 3,831 7,378 7,556
-------- -------- --------- ---------
Loss from continuing operations before
income taxes and extraordinary gain (6,741) (18,981) (9,436) (21,941)
Income taxes/(benefit) 62 (58) 104 (36)
-------- -------- --------- ---------
Loss from continuing operations before
extraordinary gain (6,803) (18,923) (9,540) (21,905)
Discontinued operations (Note 3):
Income/(loss) from operations before
extraordinary gain (7,361) 61 (8,136) 130
Estimated loss on disposal (580) -- (580) --
Extraordinary gain (Note 4) 600 -- 600 --
-------- -------- --------- ---------
Net loss $(14,144) $(18,862) $ (17,656) $ (21,775)
======== ======== ========= =========
Income/(loss) per share:
Loss per share from continuing
operations $ (0.45) $ (1.25) $ (0.63) $ (1.46)
Income/(loss) per share from
discontinued operations (0.53) -- (0.58) 0.01
Extraordinary gain 0.04 -- 0.04 --
-------- -------- -------- ---------
Net loss per share $ (0.94) $ (1.25) $ (1.17) $ (1.45)
======== ======== ======== =========
Weighted average common stock and common
stock equivalents outstanding 15,118 15,085 15,108 15,063
======== ======== ======== =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
SALANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
June 28, December 28, June 29,
1997 1996 1996
(Unaudited) (*) (Unaudited)
ASSETS
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 1,336 $ 1,498 $ 1,321
Accounts receivable, net 40,391 40,133 37,413
Inventories (Note 2) 123,272 98,497 117,367
Prepaid expenses and other current assets 3,930 3,869 4,497
Net assets of discontinued
operations (Note 3) -- 6,988 9,041
---------- ---------- ----------
Total current assets 168,929 150,985 169,639
Property, plant and equipment, net 28,711 25,173 25,353
Other assets 58,995 59,093 59,973
---------- ---------- ----------
Total assets $ 256,635 $ 235,251 $ 254,965
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 53,432 $ 7,677 $ 31,473
Accounts payable 28,453 27,562 30,829
Accrued liabilities 16,961 17,986 18,202
Current portion of long term debt -- 3,372 --
Reserve for business restructuring (Note 5) 1,344 2,969 4,617
---------- ---------- ----------
Total current liabilities 100,190 59,566 85,121
Long term debt 104,879 106,231 109,545
Deferred liabilities 8,453 8,863 11,130
Shareholders' equity
Common stock 15,394 15,328 15,328
Additional paid-in capital 107,232 107,130 107,121
Deficit (74,803) (57,147) (69,599)
Excess of additional pension liability
over unrecognized prior service cost (3,182) (3,182) (2,185)
Accumulated foreign currency
translation adjustment 86 76 118
Less - treasury stock, at cost (1,614) (1,614) (1,614)
---------- ---------- ----------
Total shareholders' equity 43,113 60,591 49,169
---------- ---------- ----------
Total liabilities and shareholders' equity $ 256,635 $ 235,251 $ 254,965
========== ========== ==========
</TABLE>
(*) Derived from the audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
SALANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 28, June 29,
1997 1996
---------- ----------
Cash Flows from Operating Activities:
<S> <C> <C>
Loss from continuing operations $ (9,540) $ (21,905)
Adjustments to reconcile loss from continuing
operations to net cash used in operating activities:
Depreciation 2,225 2,079
Amortization of intangibles 2,134 2,180
Write-down of fixed assets -- 231
Write-off of other assets -- 6,251
Loss on disposal of fixed assets -- 17
Change in operating assets and liabilities:
Accounts receivable (258) (2,536)
Inventories (24,775) (2,002)
Prepaid expenses and other current assets (61) 410
Other assets -- (1,502)
Accounts payable 891 5,796
Accrued liabilities and reserve for
business restructuring (2,913) 746
Deferred liabilities (1,162) (238)
---------- ----------
Net cash used in operating activities (33,459) (10,473)
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (5,807) (3,222)
Store fixture expenditures (2,037) (959)
Acquisition -- (694)
Proceeds from sale of assets -- 45
---------- ----------
Net cash used in investing activities (7,844) (4,830)
---------- ----------
Cash Flows from Financing Activities:
Net short-term borrowings 45,755 17,051
Retirement of long-term debt (3,372) --
Exercise of stock options 168 104
Other, net 10 (12)
---------- ----------
Net cash provided by financing activities 42,561 17,143
---------- ----------
Net cash provided by continuing operations 1,258 1,840
Cash used in discontinued operations (1,420) (1,914)
---------- ----------
Net decrease in cash and cash equivalents (162) (74)
Cash and cash equivalents - beginning of year 1,498 1,395
---------- ----------
Cash and cash equivalents - end of quarter $ 1,336 $ 1,321
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 7,125 $ 7,975
========== ==========
Income taxes $ 101 $ 69
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
SALANT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Amounts in Thousands of Dollars, Except Share Data)
(Unaudited)
Note 1. Basis of Presentation and Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements include
the accounts of Salant Corporation ("Salant") and subsidiaries (collectively,
the "Company").
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 results of operations for the three and six months ended June 28, 1997 and
June 29, 1996 are not necessarily indicative of a full year's operations. In the
opinion of management, the accompanying financial statements include all
adjustments of a normal recurring nature which are necessary to present fairly
such financial statements. Significant intercompany balances and transactions
are eliminated in consolidation. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. These
condensed consolidated financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
annual report to shareholders for the year ended December 28, 1996.
Income/(loss) per share is based on the weighted average number of common shares
(including, as of June 28, 1997 and June 29, 1996, 323,544 and 344,730 shares,
respectively, anticipated to be issued pursuant to the Company's plan of
reorganization) and common stock equivalents outstanding, if applicable. Loss
per share does not include common stock equivalents, inasmuch as their effect
would have been anti-dilutive.
Note 2. Inventories
<TABLE>
<CAPTION>
June 28, December 28, June 29,
1997 1996 1996
<S> <C> <C> <C>
Finished goods $76,150 $57,827 $79,618
Work-in-Process 22,666 14,800 14,968
Raw materials and supplies 24,456 25,870 22,781
------ -------- ----------
$123,272 $98,497 $117,367
======== ======= ========
</TABLE>
Note 3. Discontinued Operations
In June 1997, the Company discontinued the operations of the Made in the Shade
division, which produced and marketed women's junior sportswear. The loss from
operations of the division for the three and six months ended June 28, 1997 was
$7,361 and $8,136, respectively which included a second quarter charge of $4,459
for the write-off of goodwill. Net sales of the division were $977 and $2,199
for the three and six months ended June 28, 1997, respectively. Net sales of the
division were $5,121 and $10,769 for the three and six months ended June 29,
1996, respectively.
Additionally, in 1997 the Company recorded a second quarter charge of $580 to
accrue for expected operating losses during the phase-out period through
September 1997. No income tax benefits have been allocated to the division's
1997 losses.
The net assets of the discontinued operations have been reclassified on the
balance sheets as net assets of discontinued operations, and consist principally
of accounts receivable, inventory, goodwill and accounts payable. Net
liabilities of discontinued operations have been included in accrued
liabilities.
Note 4. Extraordinary Gain
In the second quarter of 1997, the Company recorded an extraordinary gain of
$600 related to the reversal of excess liabilities previously provided for the
anticipated settlement of claims arising from the prior chapter 11 proceeding.
Note 5. Division Restructuring Costs
In the second quarter of 1997, the Company reversed a previously recorded
restructuring provision by $410, as these amounts were no longer needed. This
provision was for estimated liabilities related to the previously disclosed
closure of a manufacturing facility.
In the first quarter of 1997, the Company reversed a previously recorded
restructuring provision of $754. The provision was for net liabilities related
to the JJ. Farmer sportswear product line. These net liabilities were settled
for less than the carrying amount, resulting in the reversal of the excess
portion of the provision.
In the second quarter of 1996, the Company recorded a provision for
restructuring of $11,417, consisting of (i) $5,691 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) $1,842 primarily related to
employee costs in connection with the closing of a manufacturing and
distribution facility in Thomson, Georgia, (iv) $547 primarily relate to
employee costs in connection with the closing of a manufacturing facility in
Americus, Georgia and (v) $479 related primarily to other severance costs.
Note 6. Financing and Factoring Agreements
On August 8, 1997, the Company and The CIT Group/Commercial Services, Inc.
executed the Eleventh Amendment to a revolving credit, factoring and security
agreement. The Eleventh Amendment modified the covenant related to stockholders'
equity, waived a default resulting from the Company's non-compliance with this
covenant as of June 28, 1997, increased the interest rate charged on direct
borrowings by 25 basis points and increased the borrowings allowed against
eligible inventory from 50% to 60% for the additional period of September 1,
1997 through October 25, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
Second Quarter of 1997 Compared with Second Quarter of 1996
Net Sales
The following table sets forth the net sales of each of the Company's three
principal business segments for the three months ended June 28, 1997 and June
29, 1996 and the percentage contribution of each of those segments to total net
sales:
<TABLE>
<CAPTION>
Percentage
Three Months EndedIncrease/
June 28, 1997 June 29, 1996 (Decrease)
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Men's Apparel $70.3 86% $80.5 87% (12.6%)
Children's Sleepwear
and Underwear 5.5 7% 4.4 5% 24.0%
Retail Outlet Stores 5.6 7% 7.0 8% (19.8%)
--- -- --- ----
Total $81.4 100% $91.9 100% (11.4%)
===== ===== ===== ====
</TABLE>
Sales of Men's apparel decreased by $10.2 million, or 12.6%, in the second
quarter of 1997, as compared to the second quarter of 1996. This decrease
resulted from (a) a $5.4 million decrease in sales of men's jeans, primarily
related to a planned reduction in unprofitable programs for department stores,
(b) a $5.1 million reduction in sales of men's slacks, of which $3.7 million was
a planned reduction based upon the Company's decision to eliminate unprofitable
programs, and $1.4 million of the decrease related to manufacturing delays for
the Perry Ellis slack line, (c) a planned $2.0 million reduction in sales of
certain dress shirt lines, which was based upon the Company's decision to
eliminate unprofitable businesses and (d) a $1.7 million decrease in sales of
men's accessories, primarily due to the slow-down of the novelty neckwear
business in the first half of 1997. These sales decreases were partially offset
by a $3.1 million increase in sales of Perry Ellis dress shirts due to the
addition of new distribution and the continued strong acceptance of these
products by consumers.
Sales of children's sleepwear and underwear increased by $1.1 million, or 24.0%,
in the second quarter of 1997, as compared to the second quarter of 1996. This
increase was primarily a result of the continuing expansion of the Joe Boxer
children's product lines.
Sales of the retail outlet stores decreased by $1.4 million, or 19.8%, in the
second quarter of 1997, as compared to the second quarter of 1996. This decrease
was primarily due to a decrease in the number of retail outlet stores, from 71
in June 1996 to 62 in June 1997.
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 the three months ended June 28, 1997 and June 29, 1996:
<TABLE>
<CAPTION>
Three Months Ended
June 28, 1997 June 29, 1996
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel $13.5 19.2% $14.3 17.7%
Children's Sleepwear and
Underwear 0.6 10.3% 0.6 14.2%
Retail Outlet Stores 2.5 44.6% 2.3 32.9%
--- ---
Total $16.6 20.4% $17.2 18.7%
===== =====
</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 increase is primarily related to the elimination
of unprofitable programs in 1997, as previously discussed.
The gross profit margin of the retail outlet stores increased primarily as a
result of a decrease in the transfer prices (from a negotiated rate to standard
cost) charged to the retail outlet stores for products made by other divisions
of the Company.
Reversal of/(Provision for) Restructuring Costs
In the second quarter of 1997, the Company reversed a previously recorded
restructuring provision by $0.4 million, as these amounts were no longer needed.
This provision was for estimated liabilities related to the previously disclosed
closure of a manufacturing facility.
In the second quarter of 1996, the Company recorded a provision for
restructuring of $11.4 million, consisting of (i) $5.7 million 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) $2.9 million 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) $1.8
million primarily related to employee costs in connection with the closing of a
manufacturing and distribution facility in Thomson, Georgia, (iv) $0.5 million
primarily related to employee costs in connection with the closing of a
manufacturing facility in Americus, Georgia and (v) $0.5 million related
primarily to other severance costs.
Income/(Loss) from Continuing Operations Before Interest, Income Taxes and
Extraordinary Gain
The following table sets forth the loss 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 the three months ended June 28, 1997 and June 29, 1996:
<TABLE>
<CAPTION>
Three Months Ended
June 28, 1997 June 29, 1996
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel $0.7 1.1% $(12.4) (15.4%)
Children's Sleepwear and
Underwear (1.2) (22.8%) (0.6) (13.9%)
Retail Outlet Stores (1.0) (17.5%) (0.8) (11.1%)
------ ------
(1.5) (1.8%) (13.8) (15.0%)
Corporate expenses (2.4) (2.5)
Licensing division income 1.1 1.1
--- ---
Loss from continuing
operations before
interest, income taxes
and extraordinary gain $(2.8) (8.3%) $(15.2) (16.5%)
====== ======
</TABLE>
(a) Includes the reversal of restructuring charges of $0.4 million in the second
quarter of 1997 and a restructuring provision of $11.4 million in the second
quarter of 1996.
The $12.4 million decrease in the loss from continuing operations before
interest, income taxes and extraordinary gain in the second quarter of 1997 was
primarily a result of the absence of the $11.4 million restructuring charge in
the prior year.
Interest Expense, Net
Net interest expense was $3.9 million for the second quarter of 1997 compared
with $3.8 million for the second quarter of 1996.
Discontinued Operations
In the second quarter of 1997, the Company recognized a charge of $7.9 million,
or $(0.53) per share, related to the discontinuance of the Made in the Shade
division. This charge included a write-off of goodwill of $4.5 million and an
accrual of $580 thousand for estimated operating losses during the phase-out
period. The division was closed primarily due to the lack of synergy with the
other businesses of the Company, poor recent performance and low expectations
for future profitability. Net sales of the division for the three months ended
June 28, 1997 and June 29, 1996 were $0.9 million and $5.1 million,
respectively.
Extraordinary Gain
In the second quarter of 1997, the Company recorded an extraordinary gain of
$0.6 million related to the reversal of excess liabilities previously provided
for the anticipated settlement of claims arising from the prior chapter 11
proceeding.
Net Loss
In the second quarter of 1997, the Company reported a net loss of $14.1 million,
or $(0.94) per share, as compared with a net loss of $18.9 million, or $(1.25)
per share, in the second quarter of 1996.
Earnings/(Loss) Before Interest, Taxes, Depreciation, Amortization,
Restructuring Charges, Discontinued
Operations and Extraordinary Gain
Earnings/(loss) before interest, taxes, depreciation, amortization,
restructuring charges, discontinued operations and extraordinary gain was ($1.0)
million ((1.2%) of net sales) in the second quarter of 1997, compared to ($1.4)
million ((1.5%) of net sales) in the second quarter of 1996, an increase of $0.4
million, or 29%. 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.
Year to Date 1997 Compared to Year to Date 1996
Net Sales
The following table sets forth the net sales of each of the Company's three
principal business segments for the six months ended June 28, 1997 and June 29,
1996 and the percentage contribution of each of those segments to total net
sales:
<TABLE>
<CAPTION>
Percentage
Six Months Ended Increase/
June 28, 1997 June 29, 1996 (Decrease)
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Men's Apparel $149.8 88% $165.3 89% (9.4%)
Children's Sleepwear and
Underwear 9.9 6% 8.6 5% 14.6%
Retail Outlet Stores 9.9 6% 11.5 6% (13.8%)
--- -- ---- --
Total $169.6 100% $185.4 100% (8.5%)
====== ==== ====== ====
</TABLE>
Sales of Men's apparel decreased by $15.5 million, or 9.4%, in the first half of
1997, as compared to the first half of 1996. This decrease resulted from (a) an
$11.2 million reduction in sales of men's slacks, of which $8.8 million was a
planned reduction based upon the Company's decision to eliminate unprofitable
programs and the balance was primarily due to operational difficulties
experienced in the first quarter of 1997 related to the move of manufacturing
and distribution out of the Company's facilities in Thomson, Georgia, (b) a $5.8
million reduction in sales of men's sportswear, which included a $7.3 million
planned reduction based upon the Company's decision to eliminate its JJ. Farmer
and Manhattan sportswear lines, as offset by a $1.5 million increase in sales of
Perry Ellis sportswear product, and (c) a planned $5.6 million reduction in
sales of certain dress shirt lines, which was based upon the Company's decision
to eliminate unprofitable businesses. These sales decreases were partially
offset by a $6.8 million increase in sales of Perry Ellis dress shirts due to
the addition of new distribution and the continued strong acceptance of these
products by consumers.
Sales of children's sleepwear and underwear increased by $1.3 million, or 14.6%,
in the first half of 1997, as compared to the first half of 1996. This increase
was primarily a result of the continuing expansion of the Joe Boxer children's
product lines.
Sales of the retail outlet stores decreased by $1.6 million, or 13.8%, in the
first half of 1997, as compared to the first half of 1996. This decrease was
primarily due to a decrease in the number of retail outlet stores, from 71 in
June 1996 to 62 in June 1997.
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 the six months ended June 28, 1997 and June 29, 1996:
<TABLE>
<CAPTION>
Six Months Ended
June 28, 1997 June 29, 1996
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel $31.0 20.7% $33.4 20.2%
Children's Sleepwear and
Underwear 1.4 13.8% 1.5 17.6%
Retail Outlet Stores 4.0 40.2% 3.9 34.3%
--- ---
Total $36.4 21.4% $38.8 20.9%
===== =====
</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 increase is primarily related to the elimination
of unprofitable programs in 1997, as previously discussed.
The gross profit margin of the retail outlet stores increased primarily as a
result of a decrease in the transfer prices charged to the retail outlet stores
for products made by other divisions of the Company.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses for the first half of 1997
were $41.4 million (24.4% of net sales) compared with $43.0 million (23.2% of
net sales) for the first half of 1996. S,G&A expenses in the first half of 1996
included $1.1 million of charges related to the restructuring of the men's
apparel businesses.
Reversal of/(Provision for) Restructuring Costs
In the first half of 1997, the Company reversed previously recorded
restructuring provisions of $1.2 million. These provisions were for net
liabilities which were settled for less than their carrying amounts.
The cash portion of the remaining reserve for restructuring is expected to be
expended in the following manner: $0.5 million in the last half of 1997, $0.5
million in 1998 and $0.3 million in 1999.
In the first half of 1996, the Company recorded a provision for restructuring of
$11.6 million, consisting of (i) $5.7 million 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) $2.9 million 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) $1.8 million primarily related
to employee costs in connection with the closing of a manufacturing and
distribution facility in Thomson, Georgia, (iv) $0.5 million primarily related
to employee costs in connection with the closing of a manufacturing facility in
Americus, Georgia and (v) $0.7 million related primarily to other severance
costs.
Income/(Loss) from Continuing Operations Before Interest, Income Taxes
and Extraordinary Gain
The following table sets forth the loss 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 the six months ended June 28, 1997 and June 29, 1996:
<TABLE>
<CAPTION>
Six Months Ended
June 28, 1997 June 29, 1996
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel (a) $5.4 3.6% $ (8.1) (4.9%)
Children's Sleepwear and
Underwear (2.2) (22.7%) (1.0) (12.3%)
Retail Outlet Stores (2.6) (26.6%) (2.6) (22.4%)
----- -------
0.6 0.4% (11.7) (6.3%)
Corporate expenses (4.6) (4.6)
Licensing division income 1.9 1.9
--- --------
Loss from continuing
operations before
interest, income taxes
and extraordinary gain $(2.1) (1.2%) $(14.4) (7.8%)
===== ======
</TABLE>
(a) Includes the reversal of restructuring charges of $1.2 million in 1997 and a
restructuring provision of $11.6 million in 1996.
The $12.3 million decrease in the loss from continuing operations before
interest, income taxes and extraordinary gain in the first half of 1997 was
primarily a result of the absence of the $11.6 million restructuring charge in
the prior year.
Interest Expense, Net
Net interest expense was $7.4 million for the first half of 1997 compared with
$7.6 million for the first half of 1996.
Discontinued Operations
In the first half of 1997, the Company recognized a charge of $8.7 million, or
$(0.58) per share, related to the discontinuance of the Made in the Shade
division. This charge included a write-off of goodwill of $4.5 million and an
accrual of $580 thousand for estimated operating losses during the phase-out
period. Net sales of the division for the six months ended June 28, 1997 and
June 29, 1996 were $2.2 million and $10.8 million, respectively.
Extraordinary Gain
In the second quarter or 1997, the Company recorded an extraordinary gain of
$0.6 million related to the reversal of excess liabilities previously provided
for the anticipated settlement of claims arising from the prior chapter 11
proceeding.
Net Loss
In the first half of 1997, the Company reported a net loss of $17.7 million, or
$(1.17) per share, as compared with a net loss of $21.8 million, or $(1.45) per
share, in the first half of 1996.
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 were $1.1 million (0.7%
of net sales) in the first half of 1997, compared to $1.5 million (0.8% of net
sales) in the first half of 1996, a decrease of $0.4 million, or 26.7%. 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.
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 through September 30, 1998, 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 August 8, 1997 the Company
and CIT executed the Eleventh Amendment to the Credit Agreement. The Eleventh
Amendment modified the covenant related to stockholders' equity, waived a
default resulting from the Company's non-compliance with this covenant as of
June 28, 1997, increased the interest rate charged on direct borrowings by 25
basis points and increased the borrowings allowed against eligible inventory
from 50% to 60% for the additional period of September 1, 1997 through October
25, 1997.
Pursuant to the Credit Agreement, the interest rate charged on direct borrowings
is 0.75% in excess of the base rate of The Chase Manhattan Bank, N.A. (the
"Prime Rate", which was 8.5% at June 28, 1997) or 3.00% above the London Late
Eurodollar rate (the "Eurodollar Rate", which was 5.78125% at June 28, 1997).
Pursuant to the Credit Agreement, the Company sells to CIT, without recourse,
certain eligible accounts receivable. The credit risk for such accounts is
thereby transferred to CIT. The amounts due from CIT have been offset against
the Company's direct borrowings from CIT in the accompanying balance sheets. The
amounts which have been offset were $9.7 million at June 28, 1997 and $8.9
million at June 29, 1996.
On June 28, 1997, direct borrowings (including borrowings under the Eurodollar
option) and letters of credit outstanding under the Credit Agreement were $53.4
million and $25.3 million, respectively, and the Company had unused availability
of $13.8 million. On June 29, 1996, direct borrowings and letters of credit
outstanding under the Credit Agreement were $31.5 million and $34.4 million,
respectively, and the Company had unused availability of $21.1 million. During
the first half of 1997, the maximum aggregate amount of direct borrowings and
letters of credit outstanding under the Credit Agreement was $92.8 million at
which time the Company had unused availability of $10.3 million.
During the first half of 1996, the maximum aggregate amount of direct borrowings
and letters of credit outstanding under the Credit Agreement was $85.6 million
at which time the Company had unused availability of $18.3 million.
The instruments governing the Company's outstanding debt contain certain
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 following table indicates the
Company's compliance with the two financial covenants contained in the Credit
Agreement:
<TABLE>
<CAPTION>
June 28, 1997
Credit Agreement Covenants Covenant Level (a) Actual Level
<S> <C> <C>
Stockholders' Equity no less than $42.5 million $43.1 million
Maximum Loss (b) no more than $(10.0) million $(5.2) million
</TABLE>
(a) The covenant levels reflect all modifications in the Credit Agreement made
pursuant to the Eleventh Amendment.
(b) 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 used in operating activities for the first half of 1997 was
$33.5 million, which reflects a $24.8 million increase in inventories, a
significant portion of which was planned to occur in the first half of 1997.
Cash used for investing activities in the first half of 1997 was $7.8 million,
which represented capital expenditures of $5.8 million and the installation of
store fixtures in department stores of $2.0 million. During the second half of
1997, the Company plans to make additional capital expenditures of approximately
$5.9 million and to spend an additional $0.9 million for the installation of
store fixtures in department stores.
Cash provided by financing activities in the first half of 1997 was $42.6
million, which represented short-term borrowings under the Credit Agreement of
$45.8 million, partially offset by cash used to retire $3.4 million of Senior
Secured Notes.
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 June 28, 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.
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", ("SFAS
130") and No. 131 "Disclosure about Segments of an Enterprise and Related
Information", ("SFAS 131"). SFAS 130 established standards for reporting
comprehensive income and its components in a full set of general-purpose
financial statements. This Statement requires that an enterprise (a) classify
items of other comprehensive income by their nature in a financial statement and
(b) display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section of a
statement of financial position. SFAS 131 establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. Both of these
statements are effective for fiscal periods beginning after December 15, 1997.
The Company has not yet determined the impact, if any, of adopting these
standards.
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 $158.3
million as of June 28, 1997. 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. In 1996, the Company produced 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of the Company's shareholders was held on May 13, 1997
(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 2000 Annual Meeting of the
Company's shareholders, with the votes for such election as follows:
<TABLE>
<CAPTION>
Director For Withheld
<S> <C> <C>
Mr. Nicholas P. DiPaolo 13,871,259 231,032
Mr. Jerald S. Politzer 14,057,344 44,947
Mr. Harold Leppo 13,869,837 232,454
Mr. Edward M. Yorke 13,873,759 228,532
</TABLE>
(c) At the Annual Meeting, the shareholders approved the Amended and Restated
1996 Stock Plan, which provides for 800,000 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 13,366,861, the shares
voting against were 704,372 and the shares abstaining were 31,058.
(d) At the Annual Meeting, the shareholders ratified the reappointment of
Deloitte & Touche LLP as the Company's independent auditors for the 1997 fiscal
year. The shares voting for the ratification were 14,083,053, the shares voting
against the ratification were 14,367 and the shares abstaining were 4,871.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K
During the second quarter of 1997, the Company did not file any reports on Form
8-K.
Exhibits
Number Description
<TABLE>
<CAPTION>
<C> <C>
10.44 Employment Agreement, dated as of May 1, 1997, between Todd Kahn and Salant
Corporation.
10.45 Employment Agreement, dated as of August 18, 1997, between
Philip A. Franzel and Salant Corporation.
10.46 Eleventh Amendment to Credit Agreement, dated as of August 8, 1997, to the Revolving
Credit, Factoring and Security Agreement, dated as of September 20, 1993, as amended,
between Salant Corporation and The CIT Group/Commercial Services, Inc.
10.47 Letter Agreement, dated as of July 18, 1997, between Michael A. Lubin, Lubin Delano &
Company and Salant Corporation
27 Financial Data Schedule.
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SALANT CORPORATION
Date: August 12, 1997 /s/ Thomas W. Busch
-----------------
Thomas W. Busch
Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 1,336
<SECURITIES> 0
<RECEIVABLES> 40,391
<ALLOWANCES> 0
<INVENTORY> 123,272
<CURRENT-ASSETS> 168,929
<PP&E> 28,711
<DEPRECIATION> 0
<TOTAL-ASSETS> 256,635
<CURRENT-LIABILITIES> 100,190
<BONDS> 104,879
0
0
<COMMON> 15,394
<OTHER-SE> 27,719
<TOTAL-LIABILITY-AND-EQUITY> 256,635
<SALES> 169,601
<TOTAL-REVENUES> 172,324
<CGS> 133,246
<TOTAL-COSTS> 175,546
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (1,164)
<INTEREST-EXPENSE> 7,378
<INCOME-PRETAX> (9,436)
<INCOME-TAX> 104
<INCOME-CONTINUING> (9,540)
<DISCONTINUED> 8,716
<EXTRAORDINARY> 600
<CHANGES> 0
<NET-INCOME> (17,656)
<EPS-PRIMARY> (1.17)
<EPS-DILUTED> (1.17)
</TABLE>
1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this Agreement), dated May 1, 1997 (the
"Commencement Date"), between SALANT CORPORATION, a Delaware corporation, (the
Corporation) and Todd Kahn (the "Employee").
WHEREAS, the Employee and the Corporation are parties to an Employment
Agreement, dated June 1, 1993, as amended by a Letter Agreement dated April 12,
1995; and
WHEREAS, the Employee and the Corporation desire to enter into a new
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, Executive
Vice-President, General Counsel and Secretary 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 Chief Executive Officer of the Corporation, 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 May 1, 1997 and end on December 31, 1999 (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 immediately prior to the Renewal Term)
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. May 1, 1997 to December 31, 1999) 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 $275,000 per annum
payable in equal bi-weekly installments during the Employment Period (the
Salary). Commencing in March of 1998, the Salary shall be reviewed for increase.
In no event shall the Salary be less than $275,000 per year.
(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. 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.
Section 5. Expenses and 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) 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);
(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);
(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 thirty (30) days after receipt
of such notice, or, if cure cannot be fully accomplished within thirty (30)
days, the Corporation shall not have commenced cure within thirty (30) 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.
<PAGE>
(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. At all times during the Employment Period, the Corporation shall pay
for and maintain professional liability insurance for the benefit of the
Employee to the extent provided on the Commencement Date.
Section 10. Stock Options. The Corporation shall grant to the Employee
non-qualified Stock Options (the Stock Options) representing the right to
purchase 65,000 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 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: Jerald S. Politzer
If to the Employee, then to the following:
Todd Kahn
c/o Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
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:_____________________________________
Jerald S. Politzer
Chairman of the Board
and Chief Executive Officer
----------------------------------------
Todd Kahn
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 50% 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 40% 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 5% of his Annual Salary, for each
full 5% 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.
1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), August 18 , 1997 (the
"Commencement Date"), between SALANT CORPORATION, a Delaware corporation, (the
"Corporation") and Philip A. Franzel (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, Executive Vice
President and Chief Financial 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 Chief Executive Officer of the Corporation, 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 shallcommence on the Commencement Date and end
on December 31, 1999 (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 immediately prior to the Renewal Term)
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. the Commencement Date to December 31, 1999) 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 $300,000 per annum
payable in equal bi-weekly installments during the Employment Period (the
"Salary"). Commencing in August of 1998, the Salary shall be reviewed for
increase. In no event shall the Salary be less than $300,000 per year.
(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. The Employee shall not receive a minimum or guaranteed bonus for any year,
except that for the 1997 Fiscal Year the Employee shall receive a minimum bonus
equal to $150,000 (the "Minimum Bonus"). 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. 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 or Minimum 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.
Section 5. Expenses and 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) 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);
(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);
(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 thirty (30) days after receipt
of such notice, or, if cure cannot be fully accomplished within thirty (30)
days, the Corporation shall not have commenced cure within thirty (30) 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 a 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 on the
Commencement Date 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. At all times during the Employment Period, the Corporation shall pay
for and maintain professional liability insurance for the benefit of the
Employee to the extent provided on the Commencement Date.
Section 10. Stock Options. The Corporation shall grant on the
Commencement Date to the Employee non-qualified Stock Options (the "Stock
Options") representing the right to purchase 75,000 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. 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
Executive Vice President
General Council
If to the Employee, then to the following:
Philip A. Franzel
c/o Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
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:_______________________________
Jerald S. Politzer
Chairman of the Board
and Chief Executive Officer
----------------------------------
Philip A. Franzel
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 50% 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 40% 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 5% of his Annual Salary, for each
full 5% 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.
- 1 -
July 18, 1997
Michael A. Lubin
767 Third Avenue
New York, N.Y. 10017
Dear Mike:
This letter (this "Letter Agreement") will confirm the
understanding between you and Lubin Delano & Company ("Lubin Delano"), on the
one hand and Salant Corporation, a Delaware corporation (together with all of
its subsidiaries and affiliates, "Salant") on the other hand, concerning your
separation of employment with Salant. Salant and you have mutually agreed as
follows:
1. Cancellation of Employment, Employment Agreement and Stock
Options. Subject to the Effective Date (as defined below), your employment with
Salant will end on July 31, 1997 (the "Separation Date"). As of the Separation
Date (i) the Employment Agreement dated February 11, 1997 (the "Employment
Agreement"), (ii) the Salant Corporation 1993 Stock Plan Nonstatutory Employee
Stock Option Agreement dated October 10, 1995 and, to the extent not therefore
exercised, all options thereunder, and (iii) the Letter Agreement dated December
1, 1995 between Salant and Lubin Delano (the "Lubin Delano Agreement") shall
each be considered null and void. At 6:00 P.M. eastern standard time, on
December 31, 1997, the Salant Corporation 1993 Stock Plan Nonstatutory Employee
Stock Option Agreement dated February 11, 1997 and all options thereunder (the
"1997 Options"), to the extent not therefore exercised, shall be considered null
and void.
2. Effective Date. The term "Effective Date" means the date that
Salant receives this Letter Agreement executed by you and you have not revoked
this Letter Agreement pursuant to Paragraph 16 herein. In the event that (i) you
fail to sign and return this Letter Agreement on or prior to August 15, 1997 or
(ii) you revoke the Letter Agreement pursuant to Paragraph 16 herein, the
Effective Date and this Letter Agreement shall be null and void.
3. Monetary Obligations. Subject to the Effective Date and your
continued performance and compliance with the terms of this Letter Agreement (i)
Salant shall continue to pay you your salary in effect on the date hereof and
pay Lubin Delano its consulting fee pursuant to the Lubin Delano Agreement, in
each case until July 31, 1997 and (ii) on the Effective Date Salant shall pay to
Lubin Delano a one-time lump sum payment of $368,149. Salant shall reimburse
Lubin Delano within ten (10) business days following submission thereof for
actual business expenses incurred by you or it on or prior to July 31, 1997 in
connection with the performance by you or Lubin Delano of services for Salant in
an amount not to exceed $_______. Until April 30, 1998 you agree to make
yourself available to Salant by phone for consultation from time to time.
4. Non-Disclosure and Covenant Not to Compete. (a) Both you and
Lubin Delano agree not to communicate with any person or entity, including
without limitation, any of Salant's creditors, customers, suppliers, licensors,
licensees or employees or any member of the press, about any proprietary or
confidential aspect of the business, prospects, operations or financial
condition of Salant, unless such communication is (i) authorized in writing by
the Board of Directors of Salant or any successor to Salant, or (ii) legally
required in the written opinion of counsel; provided that in the event you or
Lubin Delano are so required to disclose such confidential information, you or
Lubin Delano as the case may be, will give Salant at least ten (10) days' notice
(or shorter, but prompt, notice to the extent you are required to respond to
legal process in fewer than ten (10) days) prior to any disclosure of
confidential information, setting forth the reasons for the disclosure of the
confidential information, and you will not oppose any appropriate protective
order sought by Salant. Notwithstanding anything contained herein to the
contrary, you and Lubin Delano understand that Salant may be legally required to
disclose the existence and terms of this Letter Agreement.
(b) You covenant and agree that if at any time while the 1997
Options remain outstanding, you or Lubin Delano engage or take part in, 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, 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 Salant or its subsidiaries, as in existence on
the date hereof, without the written consent of the Board of Directors of Salant
(other than a passive investment in a business which is competitive with or
similar to any of the businesses of Salant 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) the 1997 Options shall immediately be considered null and void. In
addition, until April 30, 1998, you covenant and agree that you will not,
directly or indirectly, (i) hire any person who is employed by Salant as of July
1, 1997 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 Salant.
5. Future Employment. You agree that you will neither seek nor
accept employment with Salant or any other company affiliated with Salant at any
time in the future. You understand and agree that by entering into this
Agreement, you waive the right to reinstatement of employment with Salant.
6. Proprietary Documents. All written materials, records and
documents made by you or coming into your possession during your employment by
Salant concerning the business or affairs of Salant are the sole property of
Salant and, prior to the Separation Date, you shall deliver the same to Salant.
7. Company Property. You agree that prior to the Separation
Date you will return any and all of
Salant's credit cards, cars, keys, office equipment, computers and any and all
other property of Salant.
8. Cooperation. You hereby agree that, at the request of Salant,
from time to time, on a reasonable basis, you will be available to Salant, its
counsel and accountants to discuss any aspects of Salant's businesses,
prospects, operations or financial condition with which you are familiar. Salant
agrees to reimburse you for all out-of-pocket expenses reasonably incurred by
you in connection with any activities you undertake at Salant's request.
9. Further Actions. From and after the date of this Letter
Agreement, you and Lubin Delano, on the one hand, and Salant, on the other hand,
shall, at the other party's request , execute and deliver all documents and
instruments and take such other action as the other party may reasonably request
in order to effect the transactions contemplated by this Letter Agreement. Each
of Salant and Lubin Delano represents and warrants that this Letter Agreement
has been duly and validly authorized, executed and delivered by it, and
constitutes a valid and binding obligation of each of Salant and Lubin Delano
enforceable in accordance with its terms.
10. Releases. (a) Effective as of the date hereof, but excluding
any liabilities or obligations of Salant arising under this Letter Agreement,
you hereby, on behalf of yourself, your heirs, administrators, executors,
forever release and discharge Salant and all other affiliates, divisions,
subsidiaries and each of their predecessors, successors, assigns, agents,
directors, officers, employees, representatives, attorneys, and all persons
acting by, through, under or in concert with any of them (collectively referred
to in this Paragraph 10 as "Salant") from any and all charges, claims, demands,
judgments, actions, causes of action, damages, expenses, costs, attorneys' fees,
and liabilities of any kind whatsoever, whether known or unknown, vested or
contingent, in law, equity or otherwise (collectively referred to as "Causes of
Action"), which you ever had, now have, or may hereafter have against Salant for
or on account of any matter, cause or thing whatsoever which has occurred at any
time up to the date of this Letter Agreement, including without limitation of
the generality of the foregoing, any and all rights or claims which are related
to your employment and separation from employment by Salant, and any and all
rights or claims which you have or may have under any law, rule or regulation,
including without limitation, Title VII of the Civil Rights Act of 1964, as
amended; the Civil Rights Act of 1991, as amended; the Age Discrimination in
Employment Act of 1967, as amended; the Employee Retirement Income Security Act,
as amended; 42 U.S.C. '1981, as amended; the Older Workers Benefit Protection
Act; the Americans with Disabilities Act; the Family and Medical Leave Act of
1993; or other state or municipal statutes or ordinances which regulate
employment; and the laws of contracts, torts, including but not limited to
intentional infliction of emotional distress, and other subjects. The release
set forth herein is in consideration of the receipt of the sum stated herein
which you acknowledge is in addition to anything of value to which you are
otherwise entitled. Nothing in this Letter Agreement shall be deemed an
admission of liability by Salant relating in any way to your employment by
Salant, the terms of your separation, or the obligations of Salant with respect
to any of the foregoing. Notwithstanding the foregoing, nothing in this Letter
Agreement shall be deemed to affect in any way (i) your or Lubin Delano's right
to seek indemnification or contribution from Salant in the event you or Lubin
Delano are hereafter the subject of any third-party claim or derivative claim on
behalf of Salant arising out of or relating to any act or omission by you or
Lubin Delano during the course of your employment by Salant or Lubin Delano's
engagement by Salant, to the extent such right would have otherwise existed or
(ii) any rights or assets which you may have with respect to pension, 401(K)
plan or other qualified plan under the Employment Retirement Income Security Act
of 1974 or under the Comprehensive Budget Reconciliation Act of 1985.
(b) Effective as of the date hereof, but excluding any of your
liabilities or obligations arising under this Letter Agreement, Salant, on
behalf of itself, its affiliates, and subsidiaries and their respective
successors and assigns, forever releases and discharges you, and your respective
heirs, administrators, executors, relatives, affiliates, subsidiaries,
predecessors, successors, assigns, representatives, attorneys, and all persons
acting by, through, under or in concert with any of them (collectively referred
to in the paragraph 10(b) as "you") from any and all Causes of Action, which
Salant or any one or more of them ever had, now has, or may hereafter have
against you for or on account of any matter, cause or thing whatsoever which has
occurred at any time up to the date of this Letter Agreement, including without
limitation of the generality of the foregoing, any and all rights or claims
which are related to your employment and separation from employment from Salant,
and any and all rights or claims which Salant or any of the foregoing persons
has or may have under any law, rule or regulation, state or municipal statutes
or ordinances, and the laws of contracts, torts and other subjects. The release
set forth herein is in consideration of the execution and delivery of this
Letter Agreement by you which Salant acknowledges is in addition to anything of
value to which it is otherwise entitled. Nothing in this Letter Agreement shall
be deemed an admission of liability by you or any of the foregoing persons
relating in any way to your relationship with Salant, the terms of your
separation, or your obligations that you or any of the foregoing persons with
respect to any of the foregoing. Notwithstanding anything contained herein to
the contrary, you are not released and Salant reserves its rights in law, equity
or otherwise, from any and all Causes of Action which are a result of or
predicted on conduct described in Section 2(b) of the Employment Agreement.
11. Entire Agreement; Amendments. This Letter Agreement embodies
the entire agreement and understanding between you and Salant and supersedes all
prior agreements and understandings relating to the subject matter hereof. No
amendment, waiver, modification or discharge of any of the terms of this Letter
Agreement shall be valid unless in writing and signed by the party against which
enforcement is sought.
<PAGE>
12. Successors and Assigns. This Letter Agreement shall be binding
upon and inure to the benefit of the successors, assigns, representatives,
affiliates, parents, subsidiaries, heirs, executors and administrators of the
parties hereto and their officers, directors, stockholders, employees, servants
and agents.
13. Governing Law; Submission to Jurisdiction. The validity,
performance and enforcement of this Letter Agreement shall be governed by the
internal laws of the State of New York. For purposes of any action or proceeding
involving this Agreement, you, Lubin Delano and Salant hereby expressly submit
to the jurisdiction of all federal and state courts of competent jurisdiction
sitting within the area comprising the Southern District of New York on the date
of this Letter Agreement and consent to service of any process or papers by
registered mail or by personal service within or without the State of New York.
14. Headings. The headings of the various sections hereof are
for convenience of reference only
and will not modify any of the terms or provisions of this Letter Agreement.
15. Method of Notice. All notices or other communications required
to be given pursuant to this Letter Agreement shall be in writing and shall be
mailed, by registered or certified mail, return receipt requested, and shall be
addressed as follows:
a) if to Salant:
Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
Attn: Todd M. Kahn
Vice President and General Counsel
b) if to Michael A. Lubin or Lubin Delano
Michael A. Lubin
c/o Lubin, Delano & Company
767 Third Avenue
New York, N.Y. 10017
Any party may, from time to time, change its address for future notices and
other communications hereunder by giving notice in the manner described herein
to the other party hereto.
16. Revocation Period. YOU UNDERSTAND THAT YOU HAVE TWENTY-ONE (21)
DAYS WITHIN WHICH TO CONSIDER AND SIGN THIS AGREEMENT AND THAT YOU MAY REVOKE
THIS AGREEMENT BY WRITTEN NOTICE SENT IN ACCORDANCE WITH PARAGRAPH 15 HEREIN,
ANY TIME BEFORE THE EXPIRATION OF SEVEN (7) DAYS FOLLOWING EXECUTION OF THIS
AGREEMENT.
<PAGE>
THIS AGREEMENT SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION
PERIOD HAS EXPIRED.
17. Acknowledgement. YOU ACKNOWLEDGE THAT SALANT HAS ADVISED YOU
TO CONSULT WITH AN ATTORNEY PRIOR
TO THE EXECUTION OF THIS AGREEMENT. YOU FURTHER ACKNOWLEDGE THAT YOU HAVE HAD
THE
OPPORTUNITY TO ASK QUESTIONS ABOUT EACH AND EVERY PROVISION OF THIS
AGREEMENT AND THAT YOU FULLY UNDERSTAND THE EFFECT OF THE PROVISIONS CONTAINED
HEREIN UPON YOUR LEGAL RIGHTS. SALANT ACKNOWLEDGES THAT YOU HAVE CONSULTED WITH
AND BEEN ADVISED BY NIXON, HARGRAVE, DEVANS & DOYLE LLP CONCERNING THIS LETTER
AGREEMENT AND WAIVES ANY CONFLICT OF INTEREST THAT MAY ARISE OUT OF OR RELATE TO
SUCH REPRESENTATION OF YOU BY NIXON, HARGRAVE, DEVANS & DOYLE LLP.
Very truly yours,
SALANT CORPORATION
By:
Todd Kahn
Executive Vice President and
General Counsel
ACCEPTED AND AGREED TO as of _______________, 1997:
MICHAEL A. LUBIN
LUBIN, DELANO & COMPANY:
By:_________________________
Its
<PAGE>
STATE OF ____________,
COUNTY OF
On ______________, 1997, before me personally came Michael A. Lubin to me known,
and known to me to be the individual(s) described in, and who executed the
foregoing Letter Agreement, and duly acknowledged to me that he executed the
same.
STATE OF ____________,
COUNTY OF
On ______________, 1997, before me personally came __________________ to me
known and known to me to be the _______________________ of Lubin, Delano &
Company, and who executed the foregoing Letter Agreement on behalf of Lubin,
Delano & Company, and duly acknowledged to me that he executed the same .
ELEVENTH AMENDMENT TO CREDIT AGREEMENT
ELEVENTH AMENDMENT TO CREDIT AGREEMENT, dated as of August __,
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"), the Ninth
Amendment to Credit Agreement, dated as of August 16, 1996 (the "Ninth
Amendment") and by the Tenth Amendment to Credit Agreement, dated as of February
20, 1997 (the "Tenth 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 that Lender (a) waive a
certain existing Event of Default under the Credit Agreement and (b) amend the
Credit Agreement to (i) amend certain provisions relating to Revolving Loans in
respect of Eligible Inventory provided for in the Credit Agreement and (ii)
amend the stockholders' equity financial covenant set forth therein; and
WHEREAS, Lender is willing to waive such existing Event of
Default and to make such amendments to the Credit Agreement upon the terms and
subject to the conditions set forth in this Eleventh Amendment to Credit
Agreement (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. Waiver of Event of Default. Borrower has defaulted under Section
7.19 of the Credit Agreement, as a result of its breach of the financial
covenant set forth therein (the "Subject Covenant") for the period ended June
28, 1997. As a result of the foregoing, an Event of Default (the "Subject
Default") has occurred under Section 8.1(d) of the Credit Agreement and is
continuing. In response to Borrower's request on or about the date hereof for a
waiver of the Subject Default, Lender hereby waives the Subject Default,
provided, however, that nothing contained herein shall be construed to limit,
impair or otherwise affect any rights of Lender in respect of any future
non-compliance with the Subject Covenant, as amended by this Amendment, or with
any other covenant, term or provision of the Credit Agreement or any of the
other Financing Agreements.
3. Amendments to Section 1.5A. Clause (a) of the definition of
"Applicable Margin" set forth in
Section 1.5A of the Credit Agreement is hereby amended in its entirety to read
as follows:
"(a)(i) in the case of Prime Rate Loans, three-quarters (.75%)
percent, and (ii) in the case of Eurodollar Loans, three (3%)
percent,..."
4. 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
(x) the period from May 1, 1997 through and including October
25, 1997 and (y) for the months of May, June, July and August
of 1998, such advance rate shall be sixty percent (60%) of the
value of Eligible Inventory."
5. 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, (x) the period from May 1, 1997
through and including October 25, 1997 and (y) for the months
of May, June, July and August of 1998, the Inventory Sublimit
shall not exceed $70,000,000. On or before October 25, 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 October 16, 1997 and on September 1, 1998,
respectively, based on an advance rate of fifty percent (50%)
of the value of Eligible Inventory, and (B) the Inventory
Sublimit as in effect on October 16, 1997 and on September 1,
1998, respectively. Borrower's failure to pay the Inventory
Overadvance in full on or before October 25, 1997 or on or
before September 10, 1998 (as applicable) shall constitute an
Event of Default under Section 8.1(a) of this Agreement."
6. 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 at any time during the
period from June 29, 1996 through the day before the last day
of its 1996 fiscal year, $52,000,000 at any time during the
period from January 1, 1997 through May 31, 1997, $47,000,000
at any time during the period from June 1, 1997 through
September 27, 1997, $52,000,000 during the period September
28, 1997 through the day before the last day of its 1997
fiscal year and $58,000,000 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 1996 fiscal year."
7. Waiver and Amendment Fee. In consideration of Lender's waiver of the
existing Event of Default and the Amendments to the Credit Agreement requested
by Borrower and provided for in paragraphs 3, 4, 5 and 6 of this Amendment,
Borrower is obligated to pay to Lender, contemporaneously with the execution
hereof, an amendment fee in the amount of $100,000. Such amendment fee is earned
in full as of the date hereof, shall not be refundable in whole or in part for
any reason whatsoever, and may be charged, at Lender's sole option, to any
account of Borrower maintained by Lender.
8. 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.
9. 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.
10. 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.
11. Counterparts. This Amendment may be executed in counterpart,
and all of such counterparts
taken together shall be deemed to constitute one and the same instrument.
12. 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 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 Eleventh
Amendment to Credit Agreement, dated as of August __, 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 August, 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:
J.J. FARMER CLOTHING, INC.
By:
Title:
