<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
Salant Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[SALANT LOGO]
TO OUR STOCKHOLDERS
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Salant Corporation on Tuesday, May 9, 2000, 10:00 a.m., at the Company's
offices, 1114 Avenue of the Americas, 36th Floor, New York, New York.
The information enclosed includes the formal notice of the meeting and the
Proxy Statement. The Proxy Statement describes the agenda and procedures for the
meeting as well as specific agenda items. The operations of Salant Corporation
may also be discussed. We welcome your comments and hope you will attend the
meeting.
Whether or not you plan to attend in person, it is important that your
shares be represented at the Annual Meeting. The Board of Directors recommends
that stockholders vote FOR each of the matters described in the Proxy Statement
to be presented at the Annual Meeting.
PLEASE DATE AND SIGN YOUR PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE
AS SOON AS POSSIBLE.
Thank you.
Sincerely,
/s/ Michael J. Setola
Michael J. Setola
Chairman of the Board and
Chief Executive Officer
April 13, 2000
<PAGE> 3
SALANT CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2000
------------------------
To the Stockholders of Salant Corporation:
The Annual Meeting of Stockholders of Salant Corporation ("Salant" or the
"Company") will be held at the Company's offices, 1114 Avenue of the Americas,
36th Floor, New York, New York on Tuesday, May 9, 2000, at 10:00 a.m., New York
City time, for the following purposes:
(1) Electing ONE (1) director for a term ending at the 2003 Annual
Meeting of Stockholders;
(2) Approving the Salant Corporation 1999 Stock Award and Incentive
Plan;
(3) Ratifying the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal years ending December 30,
2000 and December 29, 2001; and
(4) Transacting such other business as may properly come before the
Annual Meeting or any postponements or adjournments thereof.
The close of business on April 5, 2000 has been fixed as the record date
for the determination of the stockholders entitled to vote at the Annual Meeting
or any postponements or adjournments thereof.
Stockholders, whether or not they expect to attend the Annual Meeting
personally, are requested to complete, date, sign and return the enclosed proxy
in the accompanying envelope which requires no postage. Stockholders may revoke
their proxy at any time before it is voted by filing with the Secretary of
Salant a written revocation or a proxy bearing a later date, or by attending and
voting at the Annual Meeting.
By Order of the Board of Directors,
/s/ Louis Matielli
Louis Mattielli
Secretary
New York, New York
April 13, 2000
<PAGE> 4
SALANT CORPORATION
1114 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
------------------------
PROXY STATEMENT
APRIL 13, 2000
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished to holders of common stock, par value
$1.00 per share (the "Common Stock"), of Salant Corporation (the "Company" or
"Salant") in connection with the solicitation by the Board of Directors of the
Company (the "Board") of proxies to be voted at the Annual Meeting of
Stockholders to be held on Tuesday, May 9, 2000 (the "Annual Meeting"), or any
postponements or adjournments thereof. The cost of this solicitation will be
borne by the Company. In addition to solicitation of proxies by mail, some of
the officers, directors, and/or regular employees of the Company, none of whom
will receive additional compensation therefor, may solicit proxies by telephone,
telegraph, facsimile or in person. Proxies may also be solicited by ChaseMellon
Shareholder Services at a cost of approximately $3,200 plus out-of-pocket
expenses. The Company will, upon request, reimburse banks and brokers for their
reasonable out-of-pocket expenses incurred in forwarding proxy material to their
principals. The Company's principal executive offices are located at 1114 Avenue
of the Americas, New York, New York 10036, and its telephone number is (212)
221-7500. The mailing of this Proxy Statement to stockholders of the Company
will commence on or about April 13, 2000.
Each share of Common Stock is entitled to one vote on all matters to be
voted upon at the Annual Meeting. The presence in person or by proxy of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the Annual Meeting constitutes a quorum for the transaction of business. On
matters brought before the Annual Meeting as to which a choice has been
specified by stockholders on the proxy, the shares will be voted accordingly. If
no choice is so specified, the shares will be voted (i) FOR the election of the
ONE nominee for director listed in this Proxy Statement, (ii) FOR the approval
of the Salant Corporation 1999 Stock Award and Incentive Plan (the "Stock Award
and Incentive Plan"), which, among other things, provides for the issuance of
stock options, stock appreciation rights and restricted stock to the directors
and certain employees of the Company, and (iii) FOR the ratification of the
appointment of Deloitte & Touche LLP as independent auditors for the Company for
its fiscal years ending December 30, 2000 and December 29, 2001. The director
listed in this Proxy Statement will be elected by a majority of the votes of the
shares present in person or represented by proxy at the Annual Meeting. The
Stock Award and Incentive Plan and the ratification of the appointment of
Deloitte & Touche LLP will be approved by the affirmative vote of the majority
of shares present in person or represented by proxy at the Annual Meeting. Other
business, if any, brought before the Annual Meeting shall be voted FOR or
AGAINST by the persons designated to vote the proxies as they, in their
discretion, determine. In connection with the election of the director,
abstentions and broker non-votes will have no effect since the director will be
elected by a majority of the votes cast at the Annual Meeting. In connection
with the proposals relating to the Stock Award and Incentive Plan and the
ratification of the appointment of Deloitte & Touche LLP, abstentions will have
the effect of votes against these proposals and broker non-votes will have no
effect since these votes will not be considered for this purpose as shares of
Common Stock represented at the Annual Meeting.
A stockholder may revoke a proxy by delivering notice in writing, or a
later dated proxy, to the Secretary of the Company, in either case, at any time
before it is voted. Execution of a proxy will not in any way affect a
stockholder's right to attend the Annual Meeting and vote in person.
Stockholders who wish to vote in person at the Annual Meeting despite execution
of a proxy should contact the Secretary of the Company.
<PAGE> 5
Only stockholders of record on April 5, 2000 are entitled to vote at the
Annual Meeting. At that date, the Company had outstanding and entitled to vote
9,901,140 shares of Common Stock held by 975 stockholders of record. For
information regarding the current ownership of Common Stock by the Company's
principal stockholders and management, see "Security Ownership of Principal
Stockholders" and "Security Ownership of Management" herein.
A copy of the Annual Report to Stockholders for the fiscal year ended
January 1, 2000 (the "1999 fiscal year") accompanies this Proxy Statement.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Salant's Board of Directors consists of five (5) members, divided into
three classes, the first class consisting of one member, the second class
consisting of two members and the third class consisting of two members. The
term of office of the first class ("Class One") elected at this Annual Meeting
will expire at the 2003 Annual Meeting; the term of the second class ("Class
Two") expires at the 2001 Annual Meeting; and the term of the third class
("Class Three") expires at the 2002 Annual Meeting.
The names, principal occupations (currently and for at least the preceding
five years) and other information concerning the nominee proposed for election
to the Board and continuing directors are presented below. The nominee for the
office of director is currently a director of Salant and has served continuously
since the year indicated. Proxies will be voted for such nominee, unless marked
to the contrary.
Salant believes that the nominee will serve as a director, but should the
nominee be unable to serve as a director or withdraw from nomination, proxies
will be voted for the election of such substitute nominee as the Board may
propose.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF TALTON R.
EMBRY AS A CLASS ONE DIRECTOR FOR THE TERM ENDING AT THE 2003 ANNUAL MEETING OF
STOCKHOLDERS. PROXIES WILL BE VOTED FOR THE ELECTION OF TALTON R. EMBRY UNLESS
OTHERWISE SPECIFIED IN THE PROXY.
NOMINEE FOR CLASS ONE DIRECTOR FOR THE TERM ENDING AT THE 2003 ANNUAL MEETING OF
STOCKHOLDERS
Talton R. Embry, age 53, is currently the Chairman and Chief Investment
Officer of Magten Asset Management Corp. ("Magten"). He has been with Magten
since 1978. Mr. Embry is also a director of Anacomp, Inc., BDK Holdings, Inc.
and Imperial Parking Corporation. Mr. Embry became a director of the Company
effective May 11, 1999.
CONTINUING DIRECTORS
Michael J. Setola, age 41, a Class Three director, was elected Chief
Executive Officer and Chairman of the Board of the Company on December 29, 1998.
Prior to that time, Mr. Setola was President of Salant's Perry Ellis Division
since January 1994 and President of Salant's Children's Division from October
1991 to January 1994.
G. Raymond Empson, age 62, a Class Two director, is currently the President
of Keep America Beautiful, Inc., a non-profit, public education organization
dedicated to the enhancement of American communities through beautification,
litter prevention, recycling and neighborhood improvement programs. Prior to
that, from 1994 to early 1997, Mr. Empson was an independent business consultant
to institutional investors, boards of directors and corporate management with
respect to strategic and operational issues. From 1991 to 1994, he was President
and Chief Executive Officer of Collection Clothing Corp. Prior to that, until
1990, Mr. Empson was President and Chief Executive Officer of Gerber
Childrenswear, Inc. From 1976 to 1986, he was Executive Vice President of Buster
Brown Apparel, Inc. Mr. Empson became a director of the Company effective May
11, 1999.
Ben Evans, age 70, a Class Two director, joined S.D. Leidesdorf & Company,
a predecessor firm to Ernst & Young, in 1954 as a junior accountant. He became a
partner at that firm in 1968. From 1978 through 1989, Mr. Evans was a member of
the corporate financial service group of Ernst & Whinney, also a predecessor
firm to Ernst & Young, concentrating on bankruptcy assignments generally on
behalf of unsecured creditors' committees, with special emphasis in the apparel,
retailing, food, drug, and pharmaceutical
2
<PAGE> 6
industries. From 1989 to 1999, Mr. Evans was a consultant for Ernst & Young in
its corporate financial services group continuing his work in the bankruptcy
area. He retired in 1999. Mr. Evans became a director of the Company effective
May 11, 1999.
Rose Peabody Lynch, age 50, a Class Three director, is currently the
President of Marketing Strategies, LLC, a marketing strategy consulting firm
based in New York City. From 1996 to 1999 Ms. Lynch was an independent
consultant and in 1999 founded Marketing Strategies, LLC. From 1993 to 1996 Ms.
Lynch was the Vice President and General Merchandise Manager of Victoria's
Secret Bath and Fragrance in Columbus, Ohio. Prior to that, Ms. Lynch was
President of Trowbridge Gallery, from 1989 to 1993. From 1987 to 1989 Ms. Lynch
was President of Danskin, Inc. From 1982 to 1987 Ms. Lynch held marketing
director positions at Elizabeth Arden and Charles of the Ritz. Ms. Lynch became
a director of the Company effective May 11, 1999.
OTHER INFORMATION REGARDING THE DIRECTORS
During the 1999 fiscal year, there were three meetings of the Board of
Directors. Directors who are not employees of Salant are paid an annual retainer
of $13,000 and an additional fee of $600 for attendance at each meeting of the
Board or of a committee of the Board (other than the Executive Committee) as
well as $5,000 per year for service on the Executive Committee, $3,000 per year
for service on the Audit Committee, $2,000 per year for service on the
Compensation Committee, $2,000 per year for service on the Qualified Plan
Committee and $1,000 per year for service on the Nominating Committee. In
addition, the Chairman of each Committee is paid an annual fee of $1,000. During
the 1999 fiscal year, none of the directors attended fewer than 75 percent of
the aggregate number of meetings held by (i) the Board during the period that he
or she served as a director, and (ii) the Committees of which he or she was a
member during the period that he or she served on these Committees.
The Board has established six standing committees to assist it in the
discharge of its responsibilities.
The Executive Committee did not formally meet during the 1999 fiscal year.
The members of this Committee are Messrs. Setola (Chairperson) and Embry. The
Committee, to the extent permitted by law, may exercise all the power of the
Board during intervals between meetings of the Board.
The Audit Committee met twice during the 1999 fiscal year. The members of
the Committee, Messrs. Evans (Chairperson) and Empson, are independent
directors. The Committee meets independently with representatives of the
Company's independent auditors and reviews the general scope of their work and
the results thereof. In addition, the Audit Committee reviews the Company's
financial statements and other documents submitted to shareholders and other
regulators, and affirms the independence of the independent auditors. The Audit
Committee also reviews the fees charged by the independent auditors and matters
relating to internal control systems and meets periodically with the Company's
Chief Financial Officer. The Committee is responsible for reviewing and
monitoring the performance of non-audit services by the Company's independent
auditors and for recommending to the Board the selection of Salant's independent
auditors. At the next meeting of the Board of Directors, the Company intends to
adopt a written charter for the Audit Committee.
The Compensation Committee met once during the 1999 fiscal year. The
members of the Committee are Messrs. Embry (Chairperson) and Empson and Ms.
Lynch. The Committee is responsible for reviewing and recommending to the Board
compensation for officers and certain other management employees.
The Stock Plan Committee met twice during the 1999 fiscal year. The members
of the Committee are Messrs. Embry (Chairperson) and Empson and Ms. Lynch. The
Committee is responsible for administering and granting awards under the Stock
Award and Incentive Plan.
The Nominating Committee did not meet during the 1999 fiscal year. The
members of the Committee are Ms. Lynch (Chairperson) and Mr. Evans. The
Committee is responsible for proposing nominees for director for election by the
stockholders at each Annual Meeting and proposing candidates to fill any
vacancies on the Board.
The Qualified Plan Committee met twice during the 1999 fiscal year. The
members of the Committee are Mr. Empson (Chairperson) and Ms. Lynch. The
Committee is responsible for overseeing the administration of the Company's
pension and savings plans.
3
<PAGE> 7
EXECUTIVE OFFICERS
The following table sets forth certain information, as of April 5, 2000
with respect to the executive officers of Salant:
<TABLE>
<CAPTION>
OFFICER OF
NAME AGE POSITIONS AND OFFICES SALANT SINCE
- ---- --- --------------------- ------------
<S> <C> <C> <C>
Michael J. Setola.................... 41 Chairman of the Board and Chief December 1998
Executive Officer
Awadhesh K. Sinha.................... 54 Chief Operating Officer July 1999
Chief Financial Officer February 1999
William O. Manzer.................... 47 Executive Vice President of May 1999
Merchandising
Jerry J. Kwiatkowski................. 38 Executive Vice President of Design May 1999
Howard Posner........................ 44 Executive Vice President of Sourcing May 1999
Robert J. Lange, Jr.................. 38 Executive Vice President of Sales May 1999
Louis Mattielli...................... 50 Senior Vice President of Corporate August 1999
Affairs and General Counsel
Secretary November 1999
</TABLE>
Each of the executive officers of the Company was elected at a meeting of
the Board of Directors and will serve until the next Annual Meeting of the Board
or until his successor has been duly elected and qualified.
Awadhesh K. Sinha was elected Chief Financial Officer of Salant on February
1, 1999 and to the additional office of Chief Operating Officer on July 1, 1999.
Prior to this time, Mr. Sinha was Executive Vice President of Operations and
Chief Financial Officer of the Perry Ellis division since 1998, Executive Vice
President and Chief Financial Officer of the Perry Ellis division since 1992,
Vice President of Finance of the Manhattan Industries group since 1983 and
joined the Company as a Division Controller in 1981.
William O. Manzer was elected Executive Vice President of Merchandising for
the Company on May 27, 1999. Prior to this, Mr. Manzer was Executive Vice
President of Merchandising of the Perry Ellis division since January 1995.
Jerry J. Kwiatkowski was elected Executive Vice President of Design for the
Company on May 27, 1999. Prior to this, Mr. Kwiatkowski was Vice President of
Design for the Perry Ellis division since June 1994.
Howard Posner was elected Executive Vice President of Sourcing for the
Company on May 27, 1999. Prior to this, Mr. Posner was Executive Vice President
of Global Sourcing for the Company since 1996, and Executive Vice President of
Dress Shirt Sourcing for the Company since 1992.
Robert J. Lange, Jr. was elected Executive Vice President of Sales for the
Company on May 27, 1999. Prior to this, Mr. Lange was Sales Manager of the Perry
Ellis division since March 17, 1997. Prior to this, Mr. Lange was an Account
Executive at Liz Claiborne, Inc. from March 1995 until March 1997 when he joined
the Company.
Louis Mattielli was elected Senior Vice President of Corporate Affairs and
General Counsel for the Company on August 16, 1999 and Secretary of the Company
on November 8, 1999. Prior to this, Mr. Mattielli was an independent consultant
from June 1998 to August 1999 when he joined the Company. Mr. Mattielli was a
Vice President of Axsys Technologies, Inc. from June 1997 to June 1998. Prior to
this, Mr. Mattielli was an independent consultant from September 1996 to June
1997 and Senior Vice President of The Pullman Company from September 1995 until
September 1996.
For a summary of the business experience for the past five years of Mr.
Setola, see "Election of Directors -- Continuing Directors" herein.
4
<PAGE> 8
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of April 5, 2000 with
respect to each person who is known to the Company to be the "beneficial owner"
(as defined in regulations of the Securities and Exchange Commission) of more
than 5% of the outstanding shares of Common Stock.
BENEFICIAL OWNERS OF MORE THAN 5% OF THE
OUTSTANDING SHARES OF SALANT COMMON STOCK
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(A)
- ------------------- -------------------- ----------
<S> <C> <C>
Magten Asset Management Corporation......................... 6,385,652(b) 64.5%
35 E. 21st Street
New York, NY 10010
High River Limited Partnership.............................. 1,807,898(c) 18%
100 South Bedford Road
Mount Kisco, NY 10549
Riverdale LLC............................................... 1,807,898(c) 18%
100 South Bedford Road
Mount Kisco, NY 10549
Carl C. Icahn............................................... 1,807,898(c) 18%
C/O Icahn Associates Corporation
767 Fifth Avenue, 47th Floor
New York, NY 10153
Pichin Corporation Master Trust for TWA Retirement Plans.... 886,693(d) 9%
767 Fifth Avenue
New York, NY 10153
New Generation Advisers, Inc................................ 886,693(d) 9%
225 Friend Street, Suite 801
Boston, MA 02114
</TABLE>
- ---------------
(a) This percentage is calculated on the basis of 9,901,140 shares outstanding
as of April 5, 2000.
(b) Magten Asset Management Corp. ("Magten"), a Delaware corporation, is a
registered investment adviser, has investment discretion over certain
managed accounts of its investment advisory clients and certain private
investment funds for which it serves as general partner or investment
manager. Investment advisory clients, on whose behalf the shares are held in
managed accounts, have the right to receive and the power to direct the
receipt of dividends from, or the proceeds from the sale of the shares. Mr.
Talton R. Embry, a managing director and the sole shareholder of Magten, is
a director of the Company and has investment discretion over various pension
plans of Magten. As of April 5, 2000, Magten and Mr. Embry are deemed to
beneficially own 6,375,144 (64.39%) and 6,385,652 (64.49%) shares of Common
Stock, respectively. All shares are held by managed accounts. The Common
Stock deemed to be beneficially owned by Magten and Mr. Embry is held for
investment purposes. Notwithstanding the foregoing, Mr. Embry, as a member
of the Board of Directors of the Company, has had discussions with
management. Mr. Embry and Magten have not entered into any agreements or
arrangements relating to the Common Stock. Of the amount shown above, Mr.
Embry holds sole voting power as to 10,508 shares of Common Stock and Magten
holds sole voting power as to no shares of Common Stock. Mr. Embry and
Magten have the shared power to vote or direct the vote of 4,952,577 shares
and do not have the power to vote or direct the vote of 1,422,567 shares.
Mr. Embry and Magten have the power to dispose of or direct the disposition
of all 6,385,652 shares. Pursuant to SEC Rule 13(d)-4 under the Securities
Exchange Act of 1934, Mr. Embry and Magten have declared that filings made
thereunder shall not be construed as an admission that each is the
beneficial owner of the Common Stock. The foregoing information has been
taken from filings made with the Securities and Exchange Commission.
(c) High River Limited Partnership ("High River") has the sole power to vote and
dispose of the 1,807,898 shares of Common Stock beneficially owned by it.
High River does not share the power to vote or to direct the vote of, or the
power to dispose or to direct the disposition of, the Common Stock owned by
it. Riverdale LLC ("Riverdale") as general partner of High River, may be
deemed, for purposes of
5
<PAGE> 9
determining beneficial ownership pursuant to United States Securities and
Exchange Commission ("SEC") Rule 13d-3, to have the shared power with High
River to dispose or direct the disposition of, the 1,807,898 shares of
Common Stock owned by High River. Mr. Carl C. Icahn, as the sole member of
Riverdale, may be deemed, for the purpose of determining beneficial
ownership pursuant to SEC Rule 13d-3, to have the shared power with High
River to dispose or direct the disposition of the 1,807,898 shares of Common
Stock owned by High River. The foregoing information has been taken from
filings made with the Securities and Exchange Commission.
(d) Pichin Corp. Master Trust for TWA Retirement Plans is indirectly controlled
by New Generation Advisers, Inc. ("New Generation"), a Massachusetts
Corporation and a registered investment adviser, by virtue of the fact that
New Generation has the authority to vote and dispose of the Company's
shares. The parties have stated that they are not acting as a "group" for
purposes of Section 13(d) under the Securities Exchange Act of 1934 and that
they are not otherwise required to attribute to each other the "beneficial
ownership" of securities "beneficially owned" under SEC Rule 13d-3. The
foregoing information has been taken from filings made with the Securities
and Exchange Commission.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of April 5, 2000 with
respect to the beneficial ownership of Common Stock by each of the directors of
the Company, the Chief Executive Officer and each of the four most highly
compensated other executive officers of the Company (the "Named Executive
Officers") and all directors and executive officers of the Company as a group.
BENEFICIAL OWNERSHIP OF SALANT COMMON STOCK BY
DIRECTORS AND EXECUTIVE OFFICERS OF SALANT
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(A) CLASS(B)
- ------------------------ ----------------------- ----------
<S> <C> <C>
Michael J. Setola........................................... 206,776(c) 2%
Awadhesh K. Sinha........................................... 55,515(d) *
Talton R. Embry............................................. 6,385,652(e) 64.5%
G. Raymond Empson........................................... 3,500(f) *
Ben Evans................................................... 3,500(f) *
Jerry J. Kwiatkowski........................................ 16,667(g) *
Rose Peabody Lynch.......................................... 3,500(f) *
William O. Manzer........................................... 16,667(g) *
Howard Posner............................................... 16,667(g) *
All directors and executive officers as a group (11
persons).................................................. 6,728,444(h) 68%
</TABLE>
- ---------------
* Represents less than one percent.
(a) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stock which such person has
the right to acquire within 60 days following April 5, 2000.
(b) As of April 5, 2000, there were 9,901,140 shares outstanding. For purposes
of computing the percentage of outstanding shares of Common Stock held by
each person or group of persons named above, any security which such person
or persons has the right to acquire within 60 days following April 5, 2000
is deemed to be outstanding, but is not deemed to be outstanding for the
purpose of computing the percentage of ownership of any other person.
(c) This amount includes 21,591 shares held directly and 185,185 shares
issuable upon the exercise of stock options which such person has the right
to acquire within 60 days following April 5, 2000.
(d) This amount includes 22,181 shares held directly and 33,334 shares issuable
upon the exercise of stock options which such person has the right to
acquire within 60 days following April 5, 2000.
(e) This amount includes 6,385,652 shares beneficially owned by Magten Asset
Management Corporation. Mr. Embry disclaims beneficial ownership of any
shares of Common Stock held by Magten Asset Management Corporation.
6
<PAGE> 10
(f) This amount represents 3,500 shares issuable upon the exercise of stock
options which such person has the right to acquire within 60 days following
April 5, 2000.
(g) This amount represents 16,667 shares issuable upon the exercise of stock
options which such person has the right to acquire within 60 days following
April 5, 2000.
(h) The 6,728,444 shares held by all directors and executive officers of Salant
include (i) 6,429,424 shares held directly by, or attributable to, directors
and executive officers and (ii) 299,020 shares issuable upon the exercise of
stock options held by all directors and officers that are exercisable on, or
may become exercisable within sixty days of, April 5, 2000.
Section 16(a) of the Securities Exchange Act of 1934 (the "Securities
Exchange Act") requires the Company's directors and executive officers and
holders of more than 10% of the Common Stock to file with the Securities and
Exchange Commission reports of ownership and changes in beneficial ownership of
Common Stock and other equity securities of the Company on Forms 3, 4 and 5.
Based on written representations of the reporting persons, the Company believes
that during the fiscal year ended January 1, 2000, such persons complied with
all applicable Section 16(a) filing requirements with the following exceptions:
A Form 3 was not filed within ten days after the appointment of the executive
officers in 1999.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded or earned for
fiscal years 1997 through 1999 for services in all capacities to the Company by
the Chief Executive Officer, each of the four most highly compensated other
executive officers of Salant who were serving in such capacity on the last day
of fiscal year 1999, and one individual who would have been one of the four most
highly compensated executive officers, but was not serving as an executive
officer on the last day of fiscal year 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(A) COMPENSATION
--------------------------- ------------
NUMBER OF
SECURITIES
UNDERLYING
PRINCIPAL OPTIONS ALL OTHER
NAME POSITIONS YEAR SALARY($) BONUS($) GRANTED COMPENSATION($)
- ---- -------------------------------- ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Setola...... Chairman of the Board and Chief
Executive Officer 1999 672,269 780,000 277,777 81,645(c)
Chief Executive Officer(b) and
President of Perry Ellis
Division 1998 450,468 270,000 0 2,000(d)
President of Perry Ellis
Division 1997 407,391 280,000 100,000 1,900(d)
Awadhesh K. Sinha...... Chief Operating Officer and
Chief Financial Officer(e) 1999 320,982 260,000 100,000 2,000(d)
Executive Vice President of
Operations and Chief Financial
Officer of
Perry Ellis Division 1998 236,335 84,000 0 2,000(d)
Executive Vice President and
Chief Financial Officer of
Perry Ellis Division 1997 216,720 84,000 0 1.900(d)
Todd Kahn.............. Chief Operating Officer, General
Counsel and Secretary(f) 1999 171,958 412,500 0 2,000(d)
Executive Vice President,
General Counsel and Secretary 1998 304,314 150,000 0 2,000(d)
Executive Vice President,
General Counsel and Secretary 1997 258,077 75,000 65,000 1,900(d)
William O. Manzer...... Executive Vice President of
Merchandising(g) 1999 355,844 175,000 50,000 0
Executive Vice President of
Merchandising of
Perry Ellis Division 1998 281,338 92,750 0 0
Executive Vice President of
Merchandising of
Perry Ellis Division 1997 243,262 227,000 0 0
Howard Posner.......... Executive Vice President of
Sourcing(h) 1999 273,697 192,500 50,000 2,000(d)
Executive Vice President of
Global Sourcing 1998 269,412 132,500 0 2000(d)
Executive Vice President of
Global Sourcing 1997 254,720 50,000 0 1,900(d)
Jerry J. Kwiatkowski... Executive Vice President of
Design(i) 1999 295,904 165,000 50,000 0
Vice President of Design of
Perry Ellis Division 1998 250,965 89,250 0 0
Vice President of Design of
Perry Ellis Division 1997 227,115 98,000 0 0
</TABLE>
- ---------------
(a) Includes amounts earned in fiscal year, whether or not deferred.
(b) Mr. Setola was elected Chief Executive Officer on December 29, 1998.
(c) Consists of (i) housing allowance of $35,446, (ii) costs of $44,199
associated with retention of legal counsel for Mr. Setola relating to
employment agreement negotiations and (iii) matching contributions of $2,000
under the Company's Long Term Savings and Investment Plans (the "Savings
Plan").
(d) Matching contributions under the Savings Plan.
(e) Mr. Sinha was elected Chief Financial Officer on February 1, 1999 and Chief
Operating Officer on July 1, 1999.
(f) Mr. Kahn served as the Company's Chief Operating Officer, General Counsel
and Secretary from January 1, 1999 through June 30, 1999.
(g) Mr. Manzer was elected Executive Vice President of Merchandising on May 27,
1999.
(h) Mr. Posner was elected Executive Vice President of Sourcing on May 27, 1999.
(i) Mr. Kwiatkowski was elected Executive Vice President of Design on May 27,
1999.
8
<PAGE> 12
OPTION GRANTS FOR FISCAL YEAR 1999
The following table sets forth information with respect to stock option
grants to each of the Named Executive Officers during the last completed fiscal
year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
---------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO TERM(1)
OPTIONS EMPLOYEES IN OPTION EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR PRICE($/SH) DATE 5% 10%
- ---- ---------- ------------ ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Setola............ 277,778(2) 15.3421 $5.875 8/11/09 $1,026,318.22 $2,600,891.87
277,777(3) 15.3421 $4.125 8/11/09 $ 706,191.96 $1,781,485.97
Awadhesh K. Sinha............ 100,000(2) 5.5232 $5.875 8/11/09 $ 369,475.59 $ 936,323.70
100,000(3) 5.5232 $4.125 8/11/09 254,229.82 $ 641,336.74
William O. Manzer............ 50,000(2) 2.7616 $5.875 8/11/09 $ 184,737.80 $ 468,161.85
50,000(3) 2.7616 $4.125 8/11/09 $ 127,114.91 $ 320,668.37
Howard Posner................ 50,000(2) 2.7616 $5.875 8/11/09 $ 184,737.80 $ 468,161.85
50,000(3) 2.7616 $4.125 8/11/09 $ 127,114.91 $ 320,668.37
Jerry J. Kwiatkowski......... 50,000(2) 2.7616 $5.875 8/11/09 $ 184,737.80 $ 468,161.85
50,000(3) 2.7616 $4.125 8/11/09 $ 127,114.91 $ 320,668.37
</TABLE>
- ---------------
(1) The assumed 5% and 10% annual rates of appreciation over the term of the
options are set forth in accordance with rules and regulations adopted by
the Securities and Exchange Commission and do not represent the Company's
estimate of stock price appreciation.
(2) These options were (i) granted on August 11, 1999 with an exercise price per
share equal to the fair market value on the date of grant, (ii) cancelled on
October 8, 1999 and (iii) replaced with an option covering an equivalent
number of shares (one option less in the case of Mr. Setola) and having an
exercise price per share equal to the fair market value on the date of such
cancellation and replacement.
(3) The options were vested and exercisable with respect to 33 1/3 percent of
the shares covered thereby on August 11, 1999 (the date of grant) and will
be vested and exercisable with respect to an additional 33 1/3 percent on
each of August 11, 2000 and August 11, 2001 (December 31, 1999 and December
31, 2000 in the case of options granted to Mr. Setola). The options will
become immediately and fully vested and exercisable in the event of a Change
in Control of the Company (as such term is defined in the Stock Award and
Incentive Plan).
OPTION EXERCISES AND VALUES FOR FISCAL YEAR 1999
The following table sets forth, as of December 31, 1999, for each of the
Named Executive Officers (i) the total number of shares of Common Stock received
upon exercise of options during fiscal year 1999, (ii) the value realized upon
such exercise, (iii) the total number of unexercised options to purchase Common
Stock (exercisable and unexercisable) held at December 31, 1999 and (iv) the
value of such options which were in-the-money at December 31, 1999 (based on the
difference between the closing price of the Common Stock on December 31, 1999,
the last trading day of the fiscal year ended January 1, 2000, and the exercise
price of the option). The Company has not issued any stock appreciation rights.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES TOTAL VALUE OF UNEXERCISED,
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS HELD AT FISCAL
ACQUIRED FISCAL YEAR-END YEAR-END (A)
ON VALUE --------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Setola............. 0 0 185,185 92,592 0 0
Awadhesh K. Sinha............. 0 0 33,334 66,666 0 0
William O. Manzer............. 0 0 16,667 33,333 0 0
Howard Posner................. 0 0 16,667 33,333 0 0
Jerry J. Kwiatkowski.......... 0 0 16,667 33,333 0 0
</TABLE>
- ---------------
(a) The closing price of the Common Stock on December 31, 1999, the last trading
day of the fiscal year ended January 1, 2000, was $2.75 per share.
PERFORMANCE GRAPH
The following graph and table compares the cumulative total shareholder
return on Salant Common Stock with the cumulative total shareholder returns of
(x) the S&P 500 Textile-Apparel Manufacturers index and (y) the Wilshire 5000
index from December 1994 to December 1999. The return on the indices is
calculated assuming the investment of $100 on December 31, 1994 and the
reinvestment of dividends.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
SALANT WILSHIRE 5000 S&P TEXTILE
------ ------------- -----------
<S> <C> <C> <C>
Dec 94 100.00 100.00 100.00
Dec 95 67.39 136.46 112.24
Dec 96 54.35 165.41 154.20
Dec 97 30.43 217.16 166.28
Dec 98 0.82 268.05 143.92
Dec 99 2.39 331.21 107.46
</TABLE>
10
<PAGE> 14
EMPLOYMENT AGREEMENTS
On December 29, 1998 (the "Filing Date"), Salant filed a voluntary petition
under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court for the
Southern District of New York (the "1998 Case") in order to implement a
restructuring of its 10 1/2% Senior Secured Notes due December 31, 1998. Salant
also filed its plan of reorganization (the "Plan of Reorganization") with the
Bankruptcy Court on the Filing Date in order to implement its restructuring. On
April 16, 1999, the Bankruptcy Court issued an order confirming the Plan (the
"Confirmation Order"). The Plan was consummated on May 11, 1999 (the "Effective
Date"). In connection with the Plan, the Company entered into an employment
arrangement with Michael J. Setola, Chairman and Chief Executive Officer of the
Company, to provide for (i) Mr. Setola's new position as Chairman and Chief
Executive Officer of the Company, and (ii) Mr. Setola's new base salary of
$650,000 per annum. On the Effective Date, the Company entered into an
employment agreement with Mr. Setola (the "Setola Agreement").
The Setola Agreement governs the terms of Mr. Setola's continuing
employment with the Company. The Setola Agreement superceded all prior
agreements pertaining to Mr. Setola's employment with the Company. Pursuant to
the terms of the Setola Agreement, Mr. Setola serves as the Chairman of the
Board and Chief Executive Officer of the Company through December 31, 2000.
Thereafter, the term of employment shall be automatically renewed for successive
one year terms, unless prior notice by either party shall have been given within
one hundred eighty (180) days of the expiration of the then existing term. The
Setola Agreement provides for the payment of a base salary in the amount of
$650,000 for 1999 and $700,000 for 2000. For each year following 2000 that the
term of Mr. Setola's employment under the Setola Agreement is renewed, the
annual base salary shall be equal to the base salary in effect for the
immediately preceding year plus $75,000.
The Setola Agreement provides that Mr. Setola is entitled to receive a cash
bonus for the Company's 1999 fiscal year: (i) if the Company's Perry Ellis
Division (the "Division") attains 100% of its Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA") budget set for the Company's 1999
fiscal year (the "EBITA Budget"), in an amount equal to $650,000; (ii) if the
Division exceeds 100% of the EBITDA Budget, in an amount equal to the sum of (A)
$650,000 plus (B) 1% of $650,000 for each full 1% by which the Division exceeds
the EBITDA Budget; (iii) if the Division exceeds 90% but does not attain at
least 100% of its EBITDA Budget, in an amount equal to (A) $650,000 minus (B) 2%
of $650,000 for each full 1% by which the Division's performance for that fiscal
year is less than the EBITDA Budget; (iv) if the Division attains 90% of its
EBITDA Budget, in an amount equal to 80 percent of base salary (i.e. $520,000);
and (v) if the Division does not attain at least 90% of its EBITDA Budget, in an
amount equal to $325,000. In accordance with the foregoing, a bonus in respect
of the Company's 1999 fiscal year was paid to Mr. Setola in the aggregate amount
of $780,000.
For fiscal years 2000 and beyond, Mr. Setola shall be eligible for an
annual bonus in respect of each such year in accordance with the formula for
fiscal year 1999 described above; provided, however, that (i) the amount of each
such bonus shall be based upon the Company's performance (as opposed to the
Company's Perry Ellis Menswear division's performance) in respect of each year
as compared to its budget for each such year (which performance and budget need
not be based upon EBITDA) and (ii) no portion of any such bonus shall be
guaranteed. Any bonus earned by Mr. Setola during the Company's 2000 fiscal year
will be paid to Mr. Setola within 90 days following the close of such year.
If Mr. Setola's employment is terminated prior to the end of the Company's
2000 fiscal year, the amount of Mr. Setola's bonus will be calculated on the
basis of the results of the full fiscal year and prorated based upon the
proportion that the number of months of employment completed during the fiscal
year bears to 12.
Consistent with the Setola Agreement, in 1999 Mr. Setola received a grant
of options to purchase 2.5% of the issued and outstanding shares of the
Company's Common Stock, on a fully diluted basis. The options: (i) have an
exercise price per share of $4.125; (ii) vest and become exercisable with
respect to 1/3 of the total number of shares subject thereto on each of: (A) the
date of grant; (B) December 31, 1999; and (C) December 31, 2000; and (iii) have
a duration of 10 years. Upon a "change in control" (as defined in the Setola
Agreement) during the period that Mr. Setola shall be actively employed by the
Company: (i) the options, to the extent not thereto vested and exercisable,
shall immediately become fully vested and
11
<PAGE> 15
exercisable; and (ii) to the extent that the aggregate value derived by Mr.
Setola from the options is less than an amount equal to the greater of (A) 0.8%
of the aggregate value of the consideration received by the Company or its
shareholders in connection with the "change in control" and (B) $675,000, the
Company shall immediately after the "change in control", make a lump sum cash
payment to Mr. Setola equal to such difference, but such amount shall be reduced
pro rata based on the number of shares of Common Stock acquired upon any
exercise of an option and sold or otherwise disposed of by Mr. Setola prior to
such "change in control".
The Setola Agreement provides that if Mr. Setola's employment is terminated
(i) by the Company without "cause" or other than as a result of death or
"disability" or (ii) by Mr. Setola for "good reason," Mr. Setola shall be
entitled to: (A) base salary through the date of termination; (B) base salary at
the annualized rate then in effect from the date of termination until (1) in the
event that termination shall occur prior to a "change in control," the 12-month
anniversary of the date of termination, or (2) in the event termination shall
occur after a "change in control," the earlier of (I) the 12-month anniversary
of the date of termination and (II) December 31, 2000 (the "Setola Severance
Period"); (C) pro-rated bonus; (D) continued participation in Company benefit
plans during the Setola Severance Period; (E) the right to exercise each stock
option then held by Mr. Setola, each of which shall remain exercisable until the
earlier of (1) 6 months following the date of termination and (2) the remainder
of the exercise period of each such option; and (F) any other amounts earned,
accrued or owing to Mr. Setola through the date of termination but not yet paid
under the Setola Agreement.
Mr. Sinha is a party to an agreement, dated as of February 1, 1999, and
amended by letter agreement dated July 1, 1999, (collectively, the "Sinha
Agreement") which provides for his employment as Chief Operating Officer and
Chief Financial Officer of the Company, effective February 1, 1999 through
December 31, 2001. The Sinha Agreement provides for the payment of a base salary
in the amount of $325,000 per annum until December 31, 1999, $350,000 per annum
for the second twelve months of his employment and $375,000 for the third twelve
months of his employment. Under the terms of the Sinha Agreement, Mr. Sinha is
entitled to receive a bonus (the "Bonus") in accordance with the following
schedule comparing the Company's performance during each fiscal year that ends
within a particular year of employment, to operating targets for each such
fiscal year: if the Company's actual pre-tax income in a fiscal year is equal to
or greater than 100% of the budgeted pre-tax income for such year, Mr. Sinha
shall receive a cash bonus equal to 60% of his base salary. If the actual
pre-tax income is less than 100% of the budgeted pre-tax income, the bonus shall
be reduced by 1.2% for each full 1% decrease. If the actual pre-tax income
exceeds 100% of the budgeted pre-tax income, Mr. Sinha shall receive additional
cash bonuses, each equal to 1% of his annual base salary, for each full 1%
increment by which actual pre-tax income exceeds the budgeted pre-tax income. In
accordance with the foregoing, a bonus in respect of the Company's 1999 fiscal
year was paid to Mr. Sinha in the aggregate amount of $260,000. If Mr. Sinha's
employment is terminated by him for "good reason" (as defined in the Sinha
Agreement) or by the Company without cause, Mr. Sinha will receive: (i) salary
through the date of termination; (ii) his base salary at the annualized rate on
the date his employment ends for a period ending on the later of (x) the
Employment Period (as defined in the Sinha Agreement) or (y) twelve months
following termination; (iii) any pro-rata bonus earned in the year his
employment ends; (iv) the right to exercise any stock options (whether or not
then vested) for six months from the date his employment ends; (v) any amounts
earned, accrued or owing to Mr. Sinha but not yet paid under the Sinha
Agreement; (vi) continued participation in Company Benefit plans until the
earlier of the end of the Employment Period or the date Mr. Sinha receives
equivalent coverage and benefits under the plans of a subsequent employer; and
(vii) any other benefits then due or earned under the applicable plans and
programs of the Company. If Mr. Sinha's employment ends as a result of death or
disability (as defined in the Sinha Agreement) he will receive (i) his base
salary through the date of death or disability and any bonus for any fiscal year
earned but not yet paid, (ii) any pro-rata bonus earned through the date of
death or disability, (iii) in the case of death only, a lump sum payment equal
to three months salary, (iv) the right to exercise any stock option (whether or
not vested) for one year period and (v) any amounts earned, accrued or owing to
Mr. Sinha under the Sinha Agreement but not yet paid. Pursuant to the Sinha
Agreement, Mr. Sinha is to receive a grant of non-qualified stock options
representing the right to purchase 100,000 shares of the Company's Common Stock
pursuant to the Stock Award Incentive Plan. The Sinha Agreement provides that
12
<PAGE> 16
the stock options shall have an exercise price equal to the fair market value at
the date of grant. All stock options outstanding will immediately vest upon a
"Change of Control" (as defined in the Sinha Agreement).
The compensation arrangements for Messrs. Manzer, Kwiatkowski and Posner,
require, among other things, a salary continuation for a maximum period of six
months following their termination by the Company for reasons other than cause
or voluntary resignation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Stock Plan Committees during
fiscal year 1999 were Messrs. Embry and Empson and Ms. Lynch, none of whom was
(i) during the 1999 fiscal year, an officer of the Company or any of its
subsidiaries or (ii) formerly an officer of the Company or any of its
subsidiaries.
REPRICING OF OPTIONS IN FISCAL YEAR 1999
In October, 1999, the Stock Plan Committee unanimously recommended to the
Board of Directors of the Company that the options granted to executive officers
and all other option recipients in 1999 should be repriced from the August 11,
1999 market price of $5.875 for the Company's Common Stock to the October 8,
1999 market price of $4.125 for such Common Stock. The Board of Directors
unanimously approved such repricing in November, 1999. The following table sets
forth information with respect to such repricing of options held by any
executive officer of the Company during the last ten completed fiscal years.
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
NUMBER OF MARKET PRICE OPTION PRICE
SECURITIES OF STOCK AT OF STOCK AT NEW LENGTH OF ORIGINAL
UNDERLYING TIME OF TIME OF OPTION OPTION TERM
DATE OF OPTIONS REPRICING REPRICING PRICE REMAINING AT
NAME REPRICING REPRICED ($/SH) ($/SH) ($/SH) DATE OF REPRICING
- ---- --------- ---------- ------------ ------------ ------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Setola........ 10/8/99 277,777 4.125 5.875 4.125 9 yrs, 10 mos
Awadhesh K. Sinha........ 10/8/99 100,000 4.125 5.875 4.125 9 yrs, 10 mos
William O. Manzer........ 10/8/99 50,000 4.125 5.875 4.125 9 yrs, 10 mos
Howard Posner............ 10/8/99 50,000 4.125 5.875 4.125 9 yrs, 10 mos
Jerry J. Kwiatkowski..... 10/8/99 50,000 4.125 5.875 4.125 9 yrs, 10 mos
Robert J. Lange, Jr. .... 10/8/99 50,000 4.125 5.875 4.125 9 yrs, 10 mos
Louis Mattielli.......... 10/8/99 10,000 4.125 5.875 4.125 9 yrs, 10 mos
</TABLE>
JOINT REPORT OF THE COMPENSATION AND STOCK PLAN COMMITTEES ON EXECUTIVE
COMPENSATION
This report sets forth the compensation policies that guide decisions of
the Compensation and Stock Plan Committees with respect to the compensation of
the Company's executive officers reported for fiscal year 1999. This report also
reviews the rationale for pay decisions that affected Mr. Setola during the 1999
fiscal year, and, in that regard, offers additional insight into the figures
that appear in the compensation tables which are an integral part of the overall
disclosure of executive compensation. Any consideration of pay-related actions
that may become effective in future fiscal years are not reported in this
statement.
Committee Responsibility. The central responsibility of the Compensation
Committee is to oversee compensation practices for the Company's executive
officers. In this capacity, it reviews salaries, benefits, and other
compensation paid to the Company's executive officers and recommends actions to
the full Board of Directors with respect to these matters. The Stock Plan
Committee administers the Company's Stock Award and Incentive Plan and, in this
role, is responsible for granting stock options to all of the Company's eligible
employees, including its officers.
Statement of Compensation Policy. In the context of their oversight roles,
the Compensation and Stock Plan Committees are dedicated to ensuring that the
Company's financial resources are used effectively to support the achievement of
its short-term and long-term business objectives. In general, it is the policy
of the Company that executive compensation: (a) reflect relevant market
standards for individuals with superior
13
<PAGE> 17
capabilities so as to ensure that the Company is effectively positioned to
recruit and retain high-performing management talent; (b) be driven
substantially by the Company's performance as measured by the achievement of
internally generated earnings targets; and (c) correlate with share price
appreciation, thereby coordinating the interests of management and shareholders.
Percentile objectives are not specified in setting executive compensation.
The members of the Compensation and Stock Plan Committees believe that the
Company's executive compensation program is well structured to achieve its
objectives. These objectives are satisfied within the context of an overall
executive pay system that is comprised of a market driven base salary, variable
incentive compensation and options to purchase the Company's Common Stock.
Description of Compensation Practices. It is the Company's practice to
enter into employment agreements with its executive officers. These agreements
specify the various components of compensation, including, among others, base
salary and incentive compensation.
Base Salary. Base salaries for the Company's executive officers are
defined in their respective employment agreements, and, in the view of the
Compensation Committee, reflect base pay levels that generally are being
commanded by high-quality management in the marketplace. The Compensation
Committee's normal practice is to review each executive officer's salary at the
time of contract renewal, at which point adjustments are recommended to ensure
consistency with pay expectations in the apparel industry and to reflect the
extent of the executive's contribution to corporate performance over time. Mr.
Setola's compensation represents a negotiated rate that reflects market prices
for executives of his caliber and experience.
Incentive Compensation. Incentive compensation payments to executive
officers are based on the Company's performance and are intended to motivate the
Company's executive officers to maximize their efforts to meet and exceed key
earnings goals. The specific terms of each incentive arrangement are
individually negotiated, but, in general, executive officers can earn
incremental cash compensation based on the extent to which the Company achieves
and exceeds annual earnings targets. Ordinarily, executive officers are paid a
fixed cash award in years when operating income (before amortization of
intangibles and after any reserve for contingencies) equals 100% of the annual
business plan. Smaller awards are paid when earnings fall below plan levels, and
greater payments are made when results exceed plan levels. There is no limit on
the overall incentive opportunity; however, in a year in which operating income
falls below 90% of the annual business plan, no incentive compensation payments
are made.
Stock Plans. The Company reinforces the importance of producing attractive
returns to shareholders over the long term through the operation of its Stock
Award and Incentive Plan to provide recipients with the opportunity to acquire
an equity interest in the Company and to participate in the increase in
shareholder value reflected in an increase in the price of Company shares.
Exercise prices of options are ordinarily equal to 100% of the fair market value
of the Company's shares on the date of grant of the options. This ensures that
executives will derive benefits while shareholders realize corresponding gains.
To encourage a long-term perspective, options are assigned a 10-year term, and
most options become exercisable in equal installments on the grant date and the
first and second anniversaries of the date of grant. Stock option grants to
executive officers typically are considered when employment agreements are
initiated or renewed. The Stock Plan Committee has based its decision to grant
stock options on (i) competitive factors, (ii) its understanding of current
industry compensation practices and (iii) its assessment of individual potential
and performance. By granting stock options, the Committee is not only addressing
market demands with respect to total compensation opportunities, but is also
effectively reinforcing the Company's policy of encouraging executive stock
ownership in support of building shareholder value. The Stock Plan Committee
made recommendations for option grants to Mr. Setola and other executive
officers in 1999.
Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code ("Section 162(m)") generally disallows a federal income tax
deduction to any publicly-held corporation for compensation paid in excess of $1
million in any taxable year to the chief executive officer or any of the four
other most highly compensated executive officers who are employed by the Company
on the last day of such taxable year. The Company's policy is, primarily, to
design and administer compensation plans which support
14
<PAGE> 18
the achievement of long-term strategic objectives and enhance shareholder value.
Where it is consistent with this compensation philosophy, the Committees will
also attempt to structure compensation programs that are tax-deductible by the
Company.
Summary. The Compensation and Stock Plan Committees are responsible for a
variety of compensation recommendations and decisions affecting the Company's
executive officers. By conducting their decision-making within the context of a
highly integrated, multicomponent framework, the Committees ensure that the
overall compensation offered to executive officers is consistent with the
Company's interest in providing competitive pay opportunities which reflect its
pay-for-performance orientation and support its short-term and long-term
business mission. The Compensation and Stock Plan Committees will continue to
actively monitor the effectiveness of the Company's executive compensation plans
and assess the appropriateness of executive pay levels to assure prudent
application of the Company's resources.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE STOCK PLAN COMMITTEE
---------------------- --------------------
<S> <C>
Talton R. Embry, Chairperson Talton R. Embry, Chairperson
G. Raymond Empson G. Raymond Empson
Rose Peabody Lynch Rose Peabody Lynch
</TABLE>
SALANT CORPORATION RETIREMENT PLAN
Salant sponsors the Salant Corporation Retirement Plan (the "Retirement
Plan"), a noncontributory, final average pay, defined benefit plan. A
participant becomes vested upon completion of 5 years of service. The Retirement
Plan provides pension benefits and benefits to surviving spouses of participants
who die prior to retirement. There is no offset for Social Security benefits.
The following table shows the annual pension benefits which would be payable to
members of the Retirement Plan at normal retirement after specific periods of
service at selected salary levels, assuming the continuance of the Retirement
Plan.
ESTIMATED ANNUAL PENSION PAYABLE TO MEMBER UPON RETIREMENT AT AGE 65
<TABLE>
<CAPTION>
AVERAGE ANNUAL COMPENSATION IN HIGHEST NUMBER OF YEARS OF SERVICE(2)
FIVE CONSECUTIVE YEARS OF THE LAST 15 YEARS ---------------------------------------------------
PRECEDING RETIREMENT(1) 10 20 25 30 35
- ------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 60,000.................................. $ 4,723 $ 9,446 $11,807 $14,169 $16,530
80,000.................................. 7,223 14,446 18,057 21,669 25,280
100,000.................................. 9,723 19,446 24,307 29,169 34,030
120,000.................................. 12,223 24,446 30,557 36,669 42,780
150,000.................................. 15,973 31,946 39,932 47,919 55,905
180,000.................................. 18,473 36,946 46,182 55,419 64,655
200,000.................................. 18,473 36,946 46,182 55,419 64,655
</TABLE>
- ---------------
(1) Effective from 1989 through 1993, no more than $200,000 of compensation
(adjusted for inflation) may be recognized for the purpose of computing
average annual compensation. Subsequent to 1993, no more than $150,000 of
compensation (adjusted for inflation) may be recognized for such purpose.
(2) Messrs. Setola, Kahn, Sinha, Posner, Kwiatkowski and Manzer have,
respectively, 8 years, 6 years, 18 years, 19 years, 6 years, and 5 years of
credited service under the Retirement Plan.
15
<PAGE> 19
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
No transactions have occurred since January 3, 1999 (the first day of
Salant's 1999 fiscal year) to which Salant was or is to be a party and in which
directors, executive officers or control persons of Salant, or their associates,
had or are to have a direct or indirect material interest.
PROPOSAL 2 -- APPROVAL OF THE SALANT CORPORATION 1999 STOCK
AWARD AND INCENTIVE PLAN
THE STOCK AWARD AND INCENTIVE PLAN -- GENERAL
On August 11, 1999, the Company's Board of Directors approved the Salant
Corporation 1999 Stock Award and Incentive Plan (the "Stock Award and Incentive
Plan"). The purpose of the Stock Award and Incentive Plan is to advance the
interests of the Company and its subsidiaries and to promote continuity of
management by encouraging and providing for the acquisition of an equity
interest in the Company by key employees and directors, thereby enabling the
Company to attract and retain the services of key employees and directors upon
whose judgment, interest, skills and special effort the successful conduct of
its operations is largely dependent.
DESCRIPTION OF STOCK AWARD AND INCENTIVE PLAN
Awards granted during 1999 under the Stock Award and Incentive Plan are
subject to approval by Salant's stockholders. The Stock Award and Incentive Plan
is designed with the intention that compensation resulting from options, stock
appreciation rights and certain other awards may qualify as "performance-based
compensation" under Section 162(m) ("Section 162(m)") of the Tax Code, and to
comply with the conditions for exemption from the short-swing profit recovery
rules under Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company now submits the Stock Award and
Incentive Plan for stockholder approval. The summary that follows is not
intended to be complete and is qualified in its entirety by the actual terms of
the Stock Award and Incentive Plan, a copy of which is attached as Exhibit A.
Capitalized terms used but not otherwise defined in the summary that follows
shall have the respective meanings ascribed to them in the Stock Award and
Incentive Plan.
A. PURPOSE OF THE STOCK AWARD AND INCENTIVE PLAN
The purpose of the Stock Award and Incentive Plan is to strengthen Salant
by providing an incentive to its directors, officers and employees thereby
encouraging them to devote their abilities and industry to the success of the
Company's business enterprise.
B. ELIGIBILITY
Awards may be made by the Committee designated under the Stock Award and
Incentive Plan (the "Committee") in its discretion, to directors (other than
directors who are not employees of Salant), officers and employees of Salant and
its subsidiaries. Directors of Salant who are not also employees of Salant or
any of its subsidiaries are entitled to automatic option grants under the Stock
Award and Incentive Plan as described below.
C. PLAN ADMINISTRATION AND SHARES SUBJECT TO THE STOCK AWARD AND
INCENTIVE PLAN
An aggregate of 1,111,111 shares of Common Stock (subject to adjustment as
provided in the Stock Award and Incentive Plan), representing, on a fully
diluted basis, 10% of the aggregate shares of Common Stock outstanding on May
11, 1999, will be reserved for Awards to be granted under the Stock Award and
Incentive Plan. Upon the occurrence of a Change in Capitalization, the Stock
Award and Incentive Plan permits the Committee to make appropriate adjustments
to the type and maximum number of shares subject to the Stock Award and
Incentive Plan or any Award, the purchase or exercise price to be paid or the
amount
16
<PAGE> 20
to be received in connection with the realization of any Award, and the
Performance Objectives applicable to any Award.
1. Discretionary Awards. These Awards will be granted (subject to
stockholder approval) by the Committee, which shall consist of at least two (2)
directors of Salant and may consist of the entire Board of Salant; provided,
however, that (A) if the Committee consists of less than the entire Board of
Salant, each member of the Committee shall be a "non-employee director" within
the meaning of Rule 16b-3 promulgated under the Exchange Act, and (B) to the
extent necessary for any Award intended to qualify as performance-based
compensation under Section 162(m) of the Tax Code to so qualify, each member of
the Committee, whether or not it consists of the entire Board of Salant, shall
be an "outside director" within the meaning of Section 162(m) of the Tax Code
and the regulations promulgated thereunder. No individual who is eligible to
receive a discretionary award may be granted Options or Awards with respect to
more than a total of 555,555 shares during any one calendar year period under
the Stock and Incentive Plan. In addition, the Committee may specify that the
maximum dollar amount of cash or the Fair Market Value of shares of Common Stock
that any individual may receive in any calendar year in respect of Performance
Units denominated in dollars may not exceed $2,000,000. Shares subject to the
Stock Award and Incentive Plan may either be authorized and unissued shares or
previously issued shares acquired or to be acquired by the Company and held in
its treasury. Subject to the terms of the Stock Award and Incentive Plan, the
Committee has the right to grant Awards to eligible participants and to
determine the terms and conditions of Agreements evidencing such Awards,
including the vesting schedule, duration of the agreement and exercise prices of
such Awards.
2. Automatic Awards. Only stock options may be granted automatically under
the Stock Award and Incentive Plan. The terms of these grants are set forth
below.
D. AWARDS
Stock Options. Stock options granted pursuant to the Stock Award and
Incentive Plan may either be incentive stock options within the meaning of
Section 422 of the Tax Code ("ISOs"), or non-qualified stock options ("NQSOs")
as determined by the Committee. The option exercise price may be paid, in the
discretion of the Committee, in cash or by the delivery of shares then owned by
the participant or, as determined by the Committee, pursuant to cashless
exercise procedures through a registered broker-dealer.
1. Discretionary Option Awards. The exercise price for each Share subject
to an option will be determined by the Committee at the time of grant and set
forth in an Agreement, provided that the exercise price may not be less than the
Fair Market Value of the Share on the date the option is granted. No option will
be exercisable later than ten years after the date on which it is granted,
provided that the Committee may provide that an NQSO may, upon the death of a
participant, be exercised for up to one year following the date of such
participant's death, even if such period extends beyond ten years from the date
such option is granted. ISOs may not be granted to any participant who owns
stock possessing (after application of the attribution rules of Section 424(d)
of the Tax Code) more than 10% of the total combined voting power of all
outstanding classes of stock of Salant or its subsidiaries, unless the option
price is at least 110% of the Fair Market Value at the date of grant and the
option is not exercisable after five years from the date of grant.
2. Automatic Option Awards. The Stock Award and Incentive Plan provides
for automatic option grants ("Formula Options") to certain directors of Salant
who are not also employees of Salant and its subsidiaries. Such directors will
be granted initial Formula Options in respect of 3,500 Shares when becoming a
director for the first time as well as annual Formula Options in respect of 500
Shares at each subsequent annual stockholders meeting provided that such
individual is a director on such date. Each initial Formula Option shall become
fully vested and exercisable on the date of grant. Each annual Formula Option
shall become fully vested and exercisable on the first business day preceding
the first annual stockholders' meeting following the date of grant, provided
that the Optionee is a director on such day. Formula Options will be granted
with per share exercise prices equal to the Fair Market Value on the date of
grant. No option will be exercisable later than ten years after the date on
which it is granted, provided that the Committee shall provide that an NQSO may,
upon the death of a participant, be exercised for up to one year following the
date of such participant's death, even if such period extends beyond ten years
from the date such option is granted.
17
<PAGE> 21
Stock Appreciation Rights. Under the Stock Award and Incentive Plan, a
stock appreciation right in respect of a share of Common Stock represents the
right to receive payment in cash and/or Shares in an amount equal to the excess
of the Fair Market Value of such share of Common Stock on the date the right is
exercised over the Fair Market Value on the date preceding the date on which the
right was granted (or in the case of a stock appreciation right granted in
connection with an Option, the date on which the related Option was granted).
The Committee may grant stock appreciation rights to the holders of any options
under the Stock Award and Incentive Plan. Such rights may also be granted
independently of options.
Dividend Equivalent Rights. The right to receive all or some portion of
the cash dividends which are or would be payable with respect to the Shares may
be granted to Eligible Individuals in connection with an Option, Award or a
separate award under the Stock Award and Incentive Plan. The terms and
conditions applicable to each Dividend Equivalent Right shall be specified in
the Agreement under which the Dividend Equivalent Right is granted. Amounts
payable in respect of Dividend Equivalent Rights may be payable currently or
deferred until the lapsing of restrictions on such Dividend Equivalent Rights or
until the vesting, exercise, payment, settlement or other lapse of restrictions
on the Option or Award to which the Dividend Equivalent Rights relate. If
amounts payable in respect of Dividend Equivalent Rights are to be held in cash,
there may be credited at the end of each year (or portion thereof) interest on
the amount of the account at the beginning of the year at a rate per annum as
the Committee, in its discretion, may determine. Dividend Equivalent Rights may
be settled in cash or Shares or a combination thereof, in a single installment
or multiple installments.
Restricted Stock. The Committee will determine the terms and conditions
applicable to Restricted Stock at the time of grant, including the price, if
any, to be paid by the grantee for the Restricted Stock, the restrictions placed
on the shares, and the time or times when the restrictions will lapse. In
addition, at the time of grant, the Committee, in its discretion, may decide (i)
whether any dividends will be held for the account of the grantee or deferred
until the restrictions thereon lapse, (ii) whether any deferred dividends will
be reinvested in additional Shares or held in cash and (iii) whether interest
will be accrued on any dividends not reinvested in additional shares of
Restricted Stock. Unless the Committee determines otherwise and as set forth in
the Agreement, the Grantee of Restricted Stock shall have all of the rights of a
stockholder with respect to such Shares, including the right to vote the Shares
and to receive all dividends or other distributions paid or made with respect to
such Shares.
Performance Units and Performance Shares. Performance Units and
Performance Shares will be awarded as the Committee may determine, and the
vesting of Performance Units and Performance Shares will be based upon Salant's
attainment within an established period of specified performance objectives to
be determined by the Committee. Upon granting Performance Units or Performance
Shares, the Committee may provide, to the extent permitted under Section 162(m)
of the Tax Code, the manner in which performance will be measured against the
performance objectives, or may adjust the performance objectives to reflect the
impact of specified corporate transactions, accounting or tax law changes, and
other similar extraordinary and nonrecurring events. Performance Units may be
denominated in dollars or in Shares, and payments in respect of Performance
Units will be made in cash, Shares, shares of Restricted Stock or any
combination of the foregoing, as determined by the Committee. The Agreement
evidencing Performance Shares or Performance Units will set forth the terms and
conditions thereof. Performance objectives may be expressed in terms of one or
more of the following factors: earnings per share, Share price, pre-tax profits,
net earnings, return on stockholders' equity or assets or any combination of the
foregoing. Except as restricted by the terms of the Agreement, the Grantee shall
have, in the discretion of the Committee, all of the rights of a stockholder
with respect to such Shares, including the right to vote the Shares and to
receive all dividends or other distributions paid or made with respect to the
Shares. Restrictions upon Performance Shares shall lapse and such Performance
Shares shall become vested at such time or times and on such terms, conditions
and satisfaction of Performance Objectives as the Committee may, in its
discretion, determine at the time an Award is granted. In addition, at the time
of grant, the Committee, in its discretion, may decide (i) whether any dividends
will be held for the account of the Grantee or deferred until the restrictions
thereon lapse, (ii) whether any deferred dividends will be reinvested in
additional Shares or held in cash and (iii) whether interest will be accrued on
any dividends not reinvested in additional Shares.
18
<PAGE> 22
E. CHANGE IN CONTROL
In the event of a Change in Control, the vesting of options and stock
appreciation rights will accelerate, and to the extent set forth in an
Agreement, under certain circumstances, unexercised Options may be surrendered
for cash. In addition, to the extent set forth in an Agreement evidencing the
grant of a stock appreciation right unrelated to an option, a Grantee will be
entitled to receive a payment in cash or stock. Unless otherwise determined by
the Committee at the time of grant, the restrictions on Restricted Stock will
lapse. With respect to Performance Units or Performance Shares, the Grantee
shall become vested in all or a portion of the Performance Units or the
Performance Shares as determined by the Committee at the time of the Award of
such Performance Units or Performance Shares.
F. TRANSFERABILITY
Options and stock appreciation rights will not be transferable except by
will or the laws of descent or distribution. However, at the discretion of the
Committee, any option, other than an ISO, may be transferred by a participant to
certain family members or trusts for the benefit of such family members. Until
all restrictions upon the Shares of Restricted Stock, Performance Units and
Performance Shares have lapsed under the plan, such Shares will not be sold,
transferred or otherwise disposed of.
G. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain relevant federal income tax effects
applicable to certain awards granted under the stock award and incentive plan.
ISOs. In general, a recipient will not recognize income upon the grant or
exercise of an ISO, and Salant will not be entitled to any business expense
deduction with respect to the grant or exercise of an ISO. However, upon the
exercise of an ISO, the excess of the fair market value on the date of exercise
of the shares received over the exercise price of the option will be treated as
an adjustment to alternative minimum taxable income. In order for the exercise
of an ISO to qualify as an ISO, a recipient generally must be an employee of
Salant or a subsidiary (within the meaning of Section 422 of the Tax Code) from
the date the ISO is granted through the date three months before the date of
exercise (one year preceding the date of exercise in the case of a recipient
whose employment is terminated due to disability). The employment requirement
does not apply where a recipient's employment is terminated due to his or her
death.
If a recipient has held the shares acquired upon exercise of an ISO for at
least two years after the date of grant and for at least one year after the date
of exercise, when the recipient disposes of the shares, the difference, if any,
between the sales price of the shares and the exercise price of the option will
be treated as long-term capital gain or loss. If a recipient disposes of the
shares prior to satisfying these holding period requirements (a "Disqualifying
Disposition"), the recipient will recognize ordinary income (treated as
compensation) at the time of the Disqualifying Disposition, generally in an
amount equal to the excess of the fair market value of the shares at the time
the option was exercised over the exercise price of the option. The balance of
the gain realized, if any, will be short-term or long-term capital gain,
depending upon whether the shares have been held for at least twelve months
after the date of exercise. If the recipient sells the shares in a Disqualifying
Disposition at a price below the fair market value of the shares at the time the
option was exercised, the amount of ordinary income (treated as compensation)
will be limited to the amount realized on the sale over the exercise price of
the option. In general, Salant will be allowed a business expense deduction to
the extent a recipient recognizes ordinary income, subject to any deduction
limitation under Section 162(m) of the Tax Code and Salant's compliance with
applicable reporting requirements.
NQSOs. In general, a recipient who receives a NQSO will not recognize
income at the time of the grant of the option. Upon exercise of a NQSO, a
recipient will recognize ordinary income (treated as compensation) in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option. The basis in shares acquired
upon exercise of a NQSO will equal the fair market value of such shares at the
time of exercise, and the holding period of the shares (for capital gain
purposes) will begin on the date of exercise. In general, if Salant complies
with the applicable income reporting requirements and with Section 162(m), it
will be entitled to a business expense deduction in the same amount
19
<PAGE> 23
and at the same time as the recipient recognizes ordinary income. In the event
of a sale of the shares received upon the exercise of a NQSO, any appreciation
or depreciation after the exercise date generally will be taxed as capital gain
or loss.
The foregoing discussion assumes that at the time of exercise, the sale of
the shares at a profit would not subject a recipient to liability under Section
16(b) of the Exchange Act. Special rules may apply with respect to persons who
may be subject to Section 16(b) of the Exchange Act. Participants who are or may
become subject to Section 16 of the Exchange Act should consult with their own
tax advisors in this regard.
Excise Taxes. Under certain circumstances, the accelerated vesting or
exercise of options in connection with a change in control of Salant might be
deemed an "excess parachute payment" for purposes of the golden parachute tax
provisions of Sections 280G and 4999 of the Tax Code. To the extent it is so
considered, a recipient may be subject to a 20% excise tax pursuant to Section
4999 of the Tax Code and Salant may be denied a tax deduction pursuant to
Section 280G of the Tax Code.
Section 162(m) Limitation. Section 162(m) generally disallows a federal
income tax deduction to any publicly held corporation for compensation paid in
excess of $1 million in any taxable year to each of the chief executive officer
and the four other most highly compensated executive officers (other than the
chief executive officer) who are employed by such corporation on the last day of
such corporation's taxable year. However, Section 162(m) does allow a deduction
for qualified "performance-based compensation," the material terms of which are
disclosed to and approved by stockholders. Salant has structured the Stock Award
and Incentive Plan with the intention that compensation resulting from options,
stock appreciation rights, Performance Shares and Performance Units may qualify
as "performance-based compensation" and, if so qualified, would be deductible.
The Company does not expect that the application of Section 162(m) will result
in any material non-deductibility of compensation awarded pursuant to the Stock
Award and Incentive Plan, provided that the plan is approved by stockholders.
H. AMENDMENT AND TERMINATION
The Stock Award and Incentive Plan shall terminate on the day preceding the
tenth anniversary of the date of its adoption by the Board and no Option or
Award may be granted thereafter. The Board may sooner terminate the Stock Award
and Incentive Plan, and the Board may at any time and from time to time amend,
modify or suspend the Stock Award and Incentive Plan; provided, however, that
(i) no such amendment, modification, suspension or termination shall impair or
adversely alter any Options or Awards theretofore granted thereunder, except
with the consent of the Optionee or Grantee, nor shall any amendment,
modification, suspension or termination deprive any Optionee or Grantee of any
Shares which he or she may have acquired through or as a result of the Stock
Award and Incentive Plan, and (ii) to the extent necessary under any applicable
law, regulation or exchange requirement, no amendment will be effective unless
approved by the stockholders of the Company.
I. TREATMENT OF OLD OPTIONS
Pursuant to the Plan of Reorganization, all options held by directors,
officers and employees of Salant to purchase shares of the Company's Common
Stock outstanding as of the commencement of the 1998 Case, which options were
granted under plans adopted prior to or in effect on the Filing Date, were
terminated and of no further force or effect as of the consummation of the Plan
of Reorganization. In addition, any and all plans for the issuance of options
prior to the Filing Date were terminated and of no further force or effect as of
the consummation of the Plan of Reorganization.
The following table sets forth information concerning options granted in
fiscal year 1999 under the Stock Award and Incentive Plan. These grants are
subject to stockholder approval of the Stock Award and Incentive Plan and are
not necessarily indicative of awards that may be made in the future.
20
<PAGE> 24
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
SHARES SUBJECT TO
OPTIONS GRANTED
UNDER THE STOCK
AWARD AND
NAME INCENTIVE PLAN(#)
- ---- -----------------
<S> <C>
Michael J. Setola........................................... 277,777
Awadhesh K. Sinha........................................... 100,000
William O. Manzer........................................... 50,000
Howard Posner............................................... 50,000
Jerry J. Kwiatkowski........................................ 50,000
All current executive officers as a group (includes 7
persons including those named above)...................... 587,777
All current directors (including nominees for director) who
are not executive officers as a group (4 persons)*........ 10,500
All employees (other than current executive officers and
directors who are not executive officers) as a group who
were granted options under the Stock Award and Incentive
Plan (53 persons)......................................... 310,000
</TABLE>
* Mr. Embry waived his entitlement to formula options under the Stock Award and
Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1999 STOCK
AWARD AND INCENTIVE PLAN. PROXIES WILL BE VOTED FOR APPROVAL OF THE 1999 STOCK
AWARD AND INCENTIVE PLAN UNLESS OTHERWISE SPECIFIED IN THE PROXY.
MISCELLANEOUS
The last reported price of the Common Stock on April 5, 2000, as reported
on the Bulletin Board for Over-the-Counter stocks was $2.00 per share.
PROPOSAL 3 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
Deloitte & Touche LLP currently serves as independent auditors for the
Company. Deloitte & Touche LLP and its predecessors have served as independent
auditors for Salant since 1951. Upon the recommendation of the Audit Committee,
the Board of Directors has appointed Deloitte & Touche LLP to serve as Salant's
independent auditors to audit its books and accounts for its 2000 fiscal year
which ends on December 30, 2000 and its 2001 fiscal year which ends on December
29, 2001. Such appointment is conditioned upon ratification by the stockholders,
and the matter will be presented at the Annual Meeting. If the stockholders do
not ratify the appointment, the selection will be reconsidered by the Board of
Directors. A representative of Deloitte & Touche LLP will be present at the
Annual Meeting. The representative will have an opportunity to make a statement
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF DELOITTE &
TOUCHE LLP AS INDEPENDENT AUDITORS FOR SALANT FOR THE FISCAL YEARS ENDING
DECEMBER 30, 2000 AND DECEMBER 29, 2001. PROXIES WILL BE VOTED FOR THE
APPOINTMENT OF DELOITTE & TOUCHE LLP UNLESS OTHERWISE SPECIFIED IN THE PROXY.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any proposal of a stockholder to be presented at the Annual Meeting of
Stockholders in 2001 must be received by the Secretary of Salant at its
principal offices, prior to 5:00 p.m., New York City time, on December 13, 2000,
in order to be considered for inclusion in Salant's 2001 proxy materials. Any
such proposal must be in writing and signed by the stockholder.
21
<PAGE> 25
OTHER MATTERS
Management knows of no other matters that will be presented at the meeting.
If any other matters arise at the meeting, it is intended that the shares
represented by the proxies in the accompanying form will be voted in accordance
with the judgment of the persons named in the proxy.
By Order of the Board of Directors,
/s/ Louis Matielli
Louis Mattielli
Secretary
22
<PAGE> 26
EXHIBIT A
SALANT CORPORATION
1999 STOCK AWARD INCENTIVE PLAN
1. PURPOSE.
The purpose of this Plan is to strengthen Salant Corporation, a Delaware
corporation (the "Company"), by providing an incentive to its employees,
officers and directors and thereby encouraging them to devote their abilities
and industry to the success of the Company's business enterprise. It is intended
that this purpose be achieved by extending to employees, officers and directors
of the Company and its Subsidiaries an added long-term incentive for high levels
of performance and unusual efforts through the grant of Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Dividend Equivalent
Rights, Performance Awards and Restricted Stock (as each term is herein
defined).
2. DEFINITIONS.
For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a Change in
Control, the greater of (i) the highest price per Share paid to holders of the
Shares in any transaction (or series of transactions) constituting or resulting
in a Change in Control or (ii) the highest Fair Market Value of a Share during
the ninety (90) day period ending on the date of a Change in Control.
2.2 "Affiliate" means any entity, directly or indirectly, controlled by,
controlling or under common control with the Company or any corporation or other
entity acquiring, directly or indirectly, all or substantially all the assets
and business of the Company, whether by operation of law or otherwise.
2.3 "Agreement" means the written agreement between the Company and an
Optionee or Grantee evidencing the grant of an Option or Award and setting forth
the terms and conditions thereof.
2.4 "Award" means a grant of Restricted Stock, a Stock Appreciation Right,
a Performance Award, a Dividend Equivalent Right or any or all of them.
2.5 "Board" means the Board of Directors of the Company.
2.6 "Cause" means, unless otherwise provided in an Agreement:
(a) in the case of an Optionee or Grantee whose employment with the
Company or a Subsidiary is subject to the terms of an employment agreement
between such Optionee or Grantee and the Company or Subsidiary, which
employment agreement includes a definition of "Cause", the term "Cause" as
used in this Plan or any Agreement shall have the meaning set forth in such
employment agreement during the period that such employment agreement
remains in effect;
(b) for purposes of Section 6.4, the commission of an act of fraud or
intentional misrepresentation or an act of embezzlement, misappropriation
or conversion of assets or opportunities of the Company or any of its
Subsidiaries; and
(c) in all other cases, (i) intentional failure to perform reasonably
assigned duties, (ii) dishonesty or willful misconduct in the performance
of duties, (iii) involvement in a transaction in connection with the
performance of duties to the Company or any of its Subsidiaries which
transaction is adverse to the interests of the Company or any of its
Subsidiaries and which is engaged in for personal profit or (iv) willful
violation of any law, rule or regulation in connection with the performance
of duties (other than traffic violations or similar offenses).
2.7 "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, in the case of a
spin-off, dividend or other distribution in respect of Shares, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger,
A-1
<PAGE> 27
consolidation, reorganization, spin-off, split-up, issuance of warrants or
rights or debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, combination or exchange of shares, repurchase of
shares, change in corporate structure or otherwise.
2.8 A "Change in Control" shall mean the occurrence during the term of the
Plan of:
(a) An acquisition (other than directly from the Company or pursuant
to the Plan of Reorganization) of any voting securities of the Company (the
"Voting Securities") by any "Person" (as such term is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of fifty percent (50%) or more of the then outstanding Shares or the
combined voting power of the Company's then outstanding Voting Securities;
provided, however, in determining whether a Change in Control has occurred,
Shares or Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A "Non-Control Acquisition" shall
mean an acquisition by (i) Magten Asset Management Corp., in its capacity
as the beneficial owner, or the investment manager on behalf of the
beneficial owners, of the issued and outstanding Shares from and after the
consummation of the Plan of Reorganization ("Magten"), (ii) an employee
benefit plan (or a trust forming a part thereof) maintained by (A) the
Company or (B) any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (iii) the Company or its Subsidiaries, (iv) a merger or
other business combination between the Company and/or its Subsidiaries, on
the one hand, and Perry Ellis International, Inc. and/or its subsidiaries
on the other hand, or (v) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined);
(b) The individuals who, as of the Effective Date are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's common stockholders,
of any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Plan, be
considered as a member of the Incumbent Board; provided further, however,
that no individual shall be considered a member of the Incumbent Board if
such individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board (a
"Proxy Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(c) The consummation of:
(i) A merger, consolidation or reorganization with or into the
Company or in which securities of the Company are issued, unless such
merger, consolidation or reorganization is a "Non-Control Transaction."
A "Non-Control Transaction" shall mean a merger, consolidation or
reorganization with or into the Company or in which securities of the
Company are issued where:
(A) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own directly or indirectly
immediately following such merger, consolidation or reorganization,
at least fifty percent (50%) of the combined voting power of the
outstanding voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their ownership
of the Voting Securities immediately before such merger,
consolidation or reorganization,
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least a
majority of the members of the board of directors of the Surviving
Corporation, or a corporation beneficially directly or indirectly
owning a majority of the Voting Securities of the Surviving
Corporation, and
A-2
<PAGE> 28
(C) no Person other than (i) Magten, (ii) the Company, (iii) any
Subsidiary, (iv) any employee benefit plan (or any trust forming a
part thereof) that, immediately prior to such merger, consolidation
or reorganization, was maintained by the Company or any Subsidiary,
or (v) any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of fifty
percent (50%) or more of the then outstanding Voting Securities or
Shares, has Beneficial Ownership of fifty percent (50%) or more of
the combined voting power of the Surviving Corporation's then
outstanding voting securities or its common stock, other than as a
result of the consummation of the transactions contemplated under the
Plan of Reorganization.
(ii) A complete liquidation or dissolution of the Company; or
(iii) The sale or other disposition of all or substantially all of
the assets of the Company to any Person (other than a transfer to a
Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding Shares or
Voting Securities as a result of the acquisition of Shares or Voting Securities
by the Company which, by reducing the number of Shares or Voting Securities then
outstanding, increases the proportional number of shares Beneficially Owned by
the Subject Persons, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Shares or
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Shares or Voting Securities which increases the percentage of the then
outstanding Shares or Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
2.9 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.10 "Committee" means a committee, as described in Section 3.1, appointed
by the Board from time to time to administer the Plan and to perform the
functions set forth herein.
2.11 "Company" means Salant Corporation.
2.12 "Consummation Date" means the date of consummation of the Plan of
Reorganization.
2.13 "Director" means a director of the Company.
2.14 "Disability" means, unless otherwise provided in an Agreement:
(a) in the case of an Optionee or Grantee whose employment with the
Company or a Subsidiary is subject to the terms of an employment agreement
between such Optionee or Grantee and the Company or Subsidiary, which
employment agreement includes a definition of "Disability", the term
"Disability" as used in this Plan or any Agreement shall have the meaning
set forth in such employment agreement during the period that such
employment agreement remains in effect; and
(b) in all other cases, the term "Disability" as used in this Plan or
any Agreement shall mean a physical or mental infirmity which impairs the
Optionee's or Grantee's ability to perform substantially his or her duties
for a period of one hundred eighty (180) consecutive days.
2.15 "Division" means any of the operating units or divisions of the
Company designated as a Division by the Committee.
2.16 "Dividend Equivalent Right" means a right to receive all or some
portion of the cash dividends that are or would be payable with respect to
Shares.
2.17 "Effective Date" has the meaning given such term in Section 21.3
hereof.
2.18 "Eligible Director" means a director of the Company who is not an
officer or employee of the Company or any Subsidiary.
A-3
<PAGE> 29
2.19 "Eligible Individual" means any director (other than an Eligible
Director), officer or employee of the Company or a Subsidiary, designated by the
Committee as eligible to receive Options or Awards subject to the conditions set
forth herein.
2.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
2.21 "Fair Market Value" on any date means the average of the high and low
sales prices of the Shares on such date on the principal national securities
exchange on which such Shares are listed or admitted to trading, or, if such
Shares are not so listed or admitted to trading, the average of the per Share
closing bid price and per Share closing asked price on such date as quoted on
the National Association of Securities Dealers Automated Quotation System or
such other market in which such prices are regularly quoted, or, if there have
been no published bid or asked quotations with respect to Shares on such date,
the Fair Market Value shall be the value established by the Board in good faith
and, in the case of an Incentive Stock Option, in accordance with Section 422 of
the Code.
2.22 "Formula Option" means an Option granted pursuant to Section 6.
2.23 "Grantee" means a person to whom an Award has been granted under the
Plan.
2.24 "Incentive Stock Option" means an Option satisfying the requirements
of Section 422 of the Code and designated by the Committee in an Agreement as an
Incentive Stock Option.
2.25 "Nonemployee Director" means a Director who is a "nonemployee
director" within the meaning of Rule 16b-3 promulgated under the Exchange Act.
2.26 "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.
2.27 "Option" means a Nonqualified Stock Option, an Incentive Stock Option
and/or a Formula Option.
2.28 "Optionee" means a person to whom an Option has been granted under the
Plan.
2.29 "Outside Director" means a director of the Company who is an "outside
director" within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
2.30 "Parent" means any corporation which is a parent corporation (within
the meaning of Section 424(e) of the Code) with respect to the Company.
2.31 "Performance Awards" means Performance Units, Performance Shares or
either or both of them.
2.32 "Performance Cycle" means the time period specified by the Committee
at the time Performance Awards are granted during which the performance of the
Company, a Subsidiary or a Division will be measured.
2.33 "Performance Objectives" has the meaning set forth in Section 11.
2.34 "Performance Shares" means Shares issued or transferred to an Eligible
Individual under Section 11.
2.35 "Performance Units" means Performance Units granted to an Eligible
Individual under Section 11.
2.36 "Plan" means the Salant Corporation 1998 Stock Award and Incentive
Plan, as amended and restated from time to time.
2.37 "Plan of Reorganization" means the First Amended Chapter 11 Plan of
Reorganization for Salant Corporation, dated February 3, 1999.
2.38 "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
2.39 "Restricted Stock" means Shares issued or transferred to an Eligible
Individual pursuant to Section 10.
A-4
<PAGE> 30
2.40 "Shares" means the shares of New Common Stock, as defined in the Plan
of Reorganization, par value $1.00 per share, of the Company.
2.41 "Stock Appreciation Right" means a right to receive all or some
portion of the increase in the value of the Shares as provided in Section 8
hereof.
2.42 "Subsidiary" means any corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the Company.
2.43 "Successor Corporation" means a corporation, or a parent or subsidiary
thereof within the meaning of Section 424(a) of the Code, which issues or
assumes a stock option in a transaction to which Section 424(a) of the Code
applies.
2.44 "Ten-Percent Stockholder" means an Eligible Individual, who, at the
time an Incentive Stock Option is to be granted to him or her, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
or of a Parent or a Subsidiary.
3. ADMINISTRATION.
3.1 The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A quorum shall consist
of not fewer than two (2) members of the Committee and a majority of a quorum
may authorize any action. Any decision or determination reduced to writing and
signed by a majority of all of the members of the Committee shall be as fully
effective as if made by a majority vote at a meeting duly called and held. The
Committee shall consist of at least two (2) directors of the Company and may
consist of the entire Board; provided, however, that (A) if the Committee
consists of less than the entire Board, each member shall be a Nonemployee
Director and (B) to the extent necessary for any Option or Award intended to
qualify as performance-based compensation under Section 162(m) of the Code to so
qualify, each member of the Committee, whether or not it consists of the entire
Board, shall be an Outside Director. For purposes of the preceding sentence, if
one or more members of the Committee is not a Nonemployee Director and an
Outside Director but recuses himself or herself or abstains from voting with
respect to a particular action taken by the Committee, then the Committee, with
respect to that action, shall be deemed to consist only of the members of the
Committee who have not recused themselves or abstained from voting.
3.2 No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to this
Plan or any transaction hereunder. The Company hereby agrees to indemnify each
member of the Committee for all costs and expenses and, to the extent permitted
by applicable law, any liability incurred in connection with defending against,
responding to, negotiating for the settlement of or otherwise dealing with any
claim, cause of action or dispute of any kind arising in connection with any
actions in administering this Plan or in authorizing or denying authorization to
any transaction hereunder.
3.3 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:
(a) determine those Eligible Individuals to whom Options shall be
granted under the Plan and the number of such Options to be granted and to
prescribe the terms and conditions (which need not be identical) of each
such Option, including the exercise price per Share subject to each Option,
and make any amendment or modification to any Option Agreement consistent
with the terms of the Plan;
(b) select those Eligible Individuals to whom Awards shall be granted
under the Plan and to determine the number of Stock Appreciation Rights,
Performance Awards, Shares of Restricted Stock and/or Dividend Equivalent
Rights to be granted pursuant to each Award, the terms and conditions
(which need not be identical) of such Award, including the restrictions or
Performance Objectives relating to Shares, the maximum value of each
Performance Share and make any amendment or modification to any Award
Agreement consistent with the terms of the Plan;
A-5
<PAGE> 31
(c) to construe and interpret the Plan and the Options and Awards
granted hereunder and to establish, amend and revoke rules and regulations
for the administration of the Plan, including, but not limited to,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the
extent it shall deem necessary or advisable, including so that the Plan
complies with Rule 16b-3 under the Exchange Act, the Code, and other
applicable law, and otherwise to make the Plan fully effective. All
decisions and determinations by the Committee in the exercise of this power
shall be final, binding and conclusive upon the Company, its Subsidiaries,
the Optionees and Grantees, and all other persons having any interest
therein;
(d) to determine the duration and purposes for leaves of absence which
may be granted to an Optionee or Grantee on an individual basis without
constituting a termination of employment or service for purposes of the
Plan;
(e) to exercise its discretion with respect to the powers and rights
granted to it as set forth in the Plan; and
(f) generally, to exercise such powers and to perform such acts as are
deemed necessary or advisable to promote the best interests of the Company
with respect to the Plan.
4. STOCK SUBJECT TO THE PLAN.
4.1 The maximum number of Shares that may be made the subject of Options
and Awards granted under the Plan is 1,111,111. No Eligible Individual may be
granted Options and Awards in the aggregate in respect of more than 555,555
Shares in any one calendar year period. The maximum dollar amount of cash or the
Fair Market Value of Shares that any Eligible Individual may receive in any
calendar year during the term of the Plan in respect of Performance Units
denominated in dollars may not exceed $2,000,000. Upon a Change in
Capitalization, the maximum number of Shares referred to in the first two
sentences of this Section 4.1 shall be adjusted in number and kind pursuant to
Section 13. The Company shall reserve for the purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the Company's treasury,
or partly out of each, such number of Shares as shall be determined by the
Board.
4.2 Upon the granting of an Option or an Award, the number of Shares
available under Section 4.1 for the granting of further Options and Awards shall
be reduced as follows; provided, however, that if any Option is exercised by
tendering Shares, either actually or by attestation, to the Company as full or
partial payment of the exercise price, the maximum number of Shares available
under Section 4.1 shall be increased by the number of Shares so tendered.
(a) In connection with the granting of an Option or an Award (other
than the granting of a Performance Unit denominated in dollars), the number
of Shares shall be reduced by the number of Shares in respect of which the
Option or Award is granted or denominated.
(b) In connection with the granting of a Performance Unit denominated
in dollars, the number of Shares shall be reduced by an amount equal to the
quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date
the Performance Unit is granted.
4.3 Whenever any outstanding Option or Award or portion thereof expires, is
canceled or is otherwise terminated for any reason without having been exercised
or payment having been made in respect of the entire Option or Award, the Shares
allocable to the expired, canceled or otherwise terminated portion of the Option
or Award may again be the subject of Options or Awards granted hereunder.
5. OPTION GRANTS FOR ELIGIBLE INDIVIDUALS.
5.1 Authority of Committee. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible
Individuals who will receive Options, and the terms and conditions of the grant
to such Eligible Individuals shall be set forth in an Agreement.
A-6
<PAGE> 32
5.2 Purchase Price. The purchase price or the manner in which the purchase
price is to be determined for Shares under each Option shall be determined by
the Committee and set forth in the Agreement; provided, however, that the
purchase price per Share under each Option shall not be less than 100% of the
Fair Market Value of a Share on the date the Option is granted (110% in the case
of an Incentive Stock Option granted to a Ten-Percent Stockholder).
5.3 Maximum Duration. Options granted hereunder shall be for such term as
the Committee shall determine and set forth in the Agreement, provided that an
Incentive Stock Option shall not be exercisable after the expiration of ten (10)
years from the date it is granted (five (5) years in the case of an Incentive
Stock Option granted to a Ten-Percent Stockholder) and a Nonqualified Stock
Option shall not be exercisable after the expiration of ten (10) years from the
date it is granted; provided, however, that the Committee may provide that an
Option (other than an Incentive Stock Option) may, upon the death of the
Optionee, be exercised for up to one (1) year following the date of the
Optionee's death even if such period extends beyond ten (10) years from the date
the Option is granted. The Committee may, subsequent to the granting of any
Option, extend the term thereof, but in no event shall the term as so extended
exceed the maximum term provided for in the preceding sentence.
5.4 Vesting. Subject to Section 7.4, each Option shall become exercisable
in such installments (which need not be equal) and at such times as may be
designated by the Committee and set forth in the Agreement. To the extent not
exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date the
Option expires. The Committee may accelerate the exercisability of any Option or
portion thereof at any time.
5.5 Limitations on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined as of the date of the grant) of Shares
with respect to which Incentive Stock Options granted under the Plan and
"incentive stock options" (within the meaning of Section 422 of the Code)
granted under all other plans of the Company or its Subsidiaries (in either case
determined without regard to this Section 5.6) are exercisable by an Optionee
for the first time during any calendar year exceeds $100,000, such Incentive
Stock Options shall be treated as Nonqualified Stock Options. In applying the
limitation in the preceding sentence in the case of multiple grants of Options,
Options which were intended to be Incentive Stock Options shall be treated as
Nonqualified Stock Options according to the order in which they were granted
such that the most recently granted Options are first treated as Nonqualified
Stock Options.
6. OPTION GRANTS FOR NONEMPLOYEE DIRECTORS.
6.1 Grant.
(a) Each Eligible Director who is a Director on the Consummation Date shall
be granted a Formula Option in respect of 3,500 Shares on the Consummation Date.
(b) Each Eligible Director who becomes a Director for the first time after
the Consummation Date shall, upon becoming a Director, be granted a Formula
Option in respect of 3,500 Shares.
(c) Each Eligible Director shall be granted a Formula Option in respect of
500 Shares on the first business day after the annual meeting of the
stockholders of the Company (other than any annual meeting pursuant to which
such Eligible Director receives a grant pursuant to paragraph (a) or (b) of this
Section 6.1) in each year that the Plan is in effect provided that the Eligible
Director is a Director on such date.
All Formula Options shall be evidenced by an Agreement containing such
other terms and conditions not inconsistent with the provisions of this Plan as
determined by the Board; provided, however, that such terms shall not vary the
price, amount or timing of Formula Options provided under this Section 6,
including provisions dealing with vesting, forfeiture and termination of such
Formula Options.
6.2 Purchase Price. The purchase price for Shares under each Formula Option
shall be equal to 100% of the Fair Market Value of such Shares on the date the
Formula Option is granted.
A-7
<PAGE> 33
6.3 Vesting. Subject to Sections 6.4 and 7.4:
(a) Each Formula Option granted pursuant to paragraph (a) or (b) of
Section 6.1 shall become fully vested and exercisable with respect to 100%
of the Shares subject thereto on the date of grant.
(b) Each Formula Option granted pursuant to paragraph (c) of Section
6.1 shall become fully vested and exercisable with respect to 100% of the
Shares subject thereto on the first business day preceding the first annual
meeting of the stockholders of the Company following the date of grant of
such Formula Option; provided, that the Optionee is serving as a Director
on such day.
If an Optionee ceases to serve as a Director for any reason, the
Optionee shall have no rights with respect to any Formula Option (or
portion thereof) which has not then vested pursuant to paragraph (a) or (b)
of this Section 6.3 and the Optionee shall automatically forfeit any
Formula Option which remains unvested.
6.4 Duration. Subject to Section 7.4, each Formula Option (or portion
thereof) shall terminate on the date which is the tenth anniversary of the date
of grant (or if later, the first anniversary of the Director's death if such
death occurs prior to such tenth anniversary), unless terminated earlier as
follows:
(a) If an Optionee's service as a Director terminates for any reason other
than Disability, death or Cause, the Optionee may for a period of three (3)
months after such termination exercise his or her Option to the extent, and only
to the extent, that such Option or portion thereof was vested and exercisable as
of the date the Optionee's service as a Director terminated, after which time
the Option shall automatically terminate in full.
(b) If an Optionee's service as a Director terminates by reason of the
Optionee's resignation or removal from the Board due to Disability, the Optionee
may, for a period of one (1) year after such termination, exercise his or her
Option to the extent, and only to the extent, that such Option or portion
thereof was vested and exercisable, as of the date the Optionee's service as
Director terminated, after which time the Option shall automatically terminate
in full.
(c) If an Optionee's service as a Director terminates for Cause, the Option
granted to the Optionee hereunder shall immediately terminate in full and no
rights thereunder may be exercised.
(d) If an Optionee dies while a Director or within three (3) months after
termination of service as a Director as described in clause (a) of this Section
6.4 or within twelve (12) months after termination of service as a Director as
described in clause (b) of this Section 6.4, the Option granted to the Optionee
may be exercised at any time within twelve (12) months after the Optionee's
death by the person or persons to whom such rights under the Option shall pass
by will, or by the laws of descent or distribution, after which time the Option
shall terminate in full; provided, however, that an Option may be exercised to
the extent, and only to the extent, that the Option or portion thereof was
exercisable on the date of death or earlier termination of the Optionee's
services as a Director.
(e) The Formula Option (or portion thereof), to the extent not yet
vested and exercisable as of the date the Director's service as a Director
terminates for any reason shall terminate immediately upon such date.
7. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
7.1 Non-Transferability. No Option shall be transferable by the Optionee
otherwise than by will or by the laws of descent and distribution or, in the
case of an Option other than an Incentive Stock Option, pursuant to a domestic
relations order (within the meaning of Rule 16a-12 promulgated under the
Exchange Act), and an Option shall be exercisable during the lifetime of such
Optionee only by the Optionee or his or her guardian or legal representative.
Notwithstanding the foregoing, the Committee may set forth in the Agreement
evidencing an Option (other than an Incentive Stock Option) at the time of grant
or thereafter, that the Option may be transferred to members of the Optionee's
immediate family, to trusts solely for the benefit of such immediate family
members and to partnerships in which such family members and/or trusts are the
only partners, and for purposes of this Plan, a transferee of an Option shall be
deemed to be the
A-8
<PAGE> 34
Optionee. For this purpose, immediate family means the Optionee's spouse,
parents, children, stepchildren and grandchildren and the spouses of such
parents, children, stepchildren and grandchildren. The terms of an Option shall
be final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Optionee.
7.2 Method of Exercise. The exercise of an Option shall be made only by a
written notice delivered in person or by mail to the Secretary of the Company at
the Company's principal executive office, specifying the number of Shares to be
purchased and accompanied by payment therefor and otherwise in accordance with
the Agreement pursuant to which the Option was granted; provided, however, that
Options may not be exercised by an Optionee for twelve months following a
hardship distribution to the Optionee, to the extent such exercise is prohibited
under Treasury Regulation Section 1.401(k)-1(d)(2)(iv)(B)(4). The purchase price
for any Shares purchased pursuant to the exercise of an Option shall be paid, as
determined by the Committee in its discretion, in either of the following forms
(or any combination thereof): (i) cash or (ii) the transfer, either actually or
by attestation to the Company, of Shares that have been held by the Optionee for
at least six (6) months (or such lesser period as may be permitted by the
Committee), prior to the exercise of the Option, such transfer to be upon such
terms and conditions as determined by the Committee. In addition, Options may be
exercised through a registered broker-dealer pursuant to such cashless exercise
procedures which are, from time to time, deemed acceptable by the Committee. Any
Shares transferred to the Company as payment of the purchase price under an
Option shall be valued at their Fair Market Value on the day preceding the date
of exercise of such Option. The Optionee shall deliver the Agreement evidencing
the Option to the Secretary of the Company who shall endorse thereon a notation
of such exercise and return such Agreement to the Optionee. No fractional Shares
(or cash in lieu thereof) shall be issued upon exercise of an Option and the
number of Shares that may be purchased upon exercise shall be rounded to the
nearest number of whole Shares.
7.3 Rights of Optionees. No Optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (i) the Option
shall have been exercised pursuant to the terms thereof, (ii) the Company shall
have issued and delivered Shares to the Optionee, and (iii) the Optionee's name
shall have been entered as a stockholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other ownership
rights with respect to such Shares, subject to such terms and conditions as may
be set forth in the applicable Agreement.
7.4 Effect of Change in Control. Upon the occurrence of a Change in
Control, all Options outstanding on the date of such Change in Control shall
become immediately and fully exercisable. In addition, to the extent set forth
in an Agreement evidencing the grant of an Option, an Optionee will be permitted
to surrender to the Company for cancellation within sixty (60) days after such
Change in Control any Option or portion of an Option to the extent not yet
exercised and the Optionee will be entitled to receive a cash payment in an
amount equal to the excess, if any, of (x) (A) in the case of a Nonqualified
Stock Option, the greater of (1) the Fair Market Value, on the date preceding
the date of surrender, of the Shares subject to the Option or portion thereof
surrendered or (2) the Adjusted Fair Market Value of the Shares subject to the
Option or portion thereof surrendered or (B) in the case of an Incentive Stock
Option, the Fair Market Value, on the date preceding the date of surrender, of
the Shares subject to the Option or portion thereof surrendered, over (y) the
aggregate purchase price for such Shares under the Option or portion thereof
surrendered.
8. STOCK APPRECIATION RIGHTS.
The Committee may in its discretion, either alone or in connection with the
grant of an Option, grant Stock Appreciation Rights in accordance with the Plan,
the terms and conditions of which shall be set forth in an Agreement. If granted
in connection with an Option, a Stock Appreciation Right shall cover the same
Shares covered by the Option (or such lesser number of Shares as the Committee
may determine) and shall, except as provided in this Section 8, be subject to
the same terms and conditions as the related Option.
8.1 Time of Grant. A Stock Appreciation Right may be granted (i) at any
time if unrelated to an Option, or (ii) if related to an Option, either at the
time of grant, or at any time thereafter during the term of the Option.
A-9
<PAGE> 35
8.2 Stock Appreciation Right Related to an Option.
(a) Exercise. A Stock Appreciation Right granted in connection with
an Option shall be exercisable at such time or times and only to the extent
that the related Options are exercisable, and will not be transferable
except to the extent the related Option may be transferable. A Stock
Appreciation Right granted in connection with an Incentive Stock Option
shall be exercisable only if the Fair Market Value of a Share on the date
of exercise exceeds the purchase price specified in the related Incentive
Stock Option Agreement.
(b) Amount Payable. Upon the exercise of a Stock Appreciation Right
related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a
Share on the date preceding the date of exercise of such Stock Appreciation
Right over the per Share purchase price under the related Option, by (B)
the number of Shares as to which such Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation
Right at the time it is granted.
(c) Treatment of Related Options and Stock Appreciation Rights Upon
Exercise. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent of
the number of Shares as to which the Stock Appreciation Right is exercised,
and upon the exercise of an Option granted in connection with a Stock
Appreciation Right, the Stock Appreciation Right shall be canceled to the
extent of the number of Shares as to which the Option is exercised or
surrendered.
8.3 Stock Appreciation Right Unrelated to an Option. The Committee may
grant to Eligible Individuals Stock Appreciation Rights unrelated to Options.
Stock Appreciation Rights unrelated to Options shall contain such terms and
conditions as to exercisability (subject to Section 8.7), vesting and duration
as the Committee shall determine, but in no event shall they have a term of
greater than ten (10) years. Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the Fair Market Value of a Share on the date the Stock Appreciation Right was
granted, by (B) the number of Shares as to which the Stock Appreciation Right is
being exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation Right
at the time it is granted.
8.4 Non-Transferability. No Stock Appreciation Right shall be transferable
by the Grantee otherwise than by will or by the laws of descent and distribution
or pursuant to a domestic relations order (within the meaning of Rule 16a-12
promulgated under the Exchange Act), and such Stock Appreciation Right shall be
exercisable during the lifetime of such Grantee only by the Grantee or his or
her guardian or legal representative. The terms of such Stock Appreciation Right
shall be final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Grantee.
8.5 Method of Exercise. Stock Appreciation Rights shall be exercised by a
Grantee only by a written notice delivered in person or by mail to the Secretary
of the Company at the Company's principal executive office, specifying the
number of Shares with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Grantee shall deliver the
Agreement evidencing the Stock Appreciation Right being exercised and the
Agreement evidencing any related Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreement to
the Grantee.
8.6 Form of Payment. Payment of the amount determined under Sections
8.2(b) or 8.3 may be made in the discretion of the Committee solely in whole
Shares in a number determined at their Fair Market Value on the date preceding
the date of exercise of the Stock Appreciation Right, or solely in cash, or in a
combination of cash and Shares. If the Committee decides to make full payment in
Shares and the amount payable results in a fractional Share, payment for the
fractional Share will be made in cash.
A-10
<PAGE> 36
8.7 Effect of Change in Control. Upon the occurrence of a Change in
Control, all Stock Appreciation Rights shall become immediately and fully
exercisable. In addition, to the extent set forth in an Agreement evidencing the
grant of a Stock Appreciation Right unrelated to an Option, a Grantee will be
entitled to receive a payment from the Company in cash or stock, in either case,
with a value equal to the excess, if any, of (A) the greater of (x) the Fair
Market Value, on the date preceding the date of exercise, of the underlying
Shares subject to the Stock Appreciation Right or portion thereof exercised and
(y) the Adjusted Fair Market Value, on the date preceding the date of exercise,
of the Shares over (B) the aggregate Fair Market Value, on the date the Stock
Appreciation Right was granted, of the Shares subject to the Stock Appreciation
Right or portion thereof exercised.
9. Dividend Equivalent Rights.
Dividend Equivalent Rights may be granted to Eligible Individuals in tandem
with an Option or Award or as a separate award. The terms and conditions
applicable to each Dividend Equivalent Right shall be specified in the Agreement
under which the Dividend Equivalent Right is granted. Amounts payable in respect
of Dividend Equivalent Rights may be payable currently or deferred until the
lapsing of restrictions on such Dividend Equivalent Rights or until the vesting,
exercise, payment, settlement or other lapse of restrictions on the Option or
Award to which the Dividend Equivalent Rights relate. In the event that the
amount payable in respect of Dividend Equivalent Rights are to be deferred, the
Committee shall determine whether such amounts are to be held in cash or
reinvested in Shares or deemed (notionally) to be reinvested in Shares. If
amounts payable in respect of Dividend Equivalent Rights are to be held in cash,
there may be credited at the end of each year (or portion thereof) interest on
the amount of the account at the beginning of the year at a rate per annum as
the Committee, in its discretion, may determine. Dividend Equivalent Rights may
be settled in cash or Shares or a combination thereof, in a single installment
or multiple installments.
10. Restricted Stock.
10.1 Grant. The Committee may grant Awards to Eligible Individuals of
Restricted Stock, which shall be evidenced by an Agreement between the Company
and the Grantee. Each Agreement shall contain such restrictions, terms and
conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share certificates. Awards of Restricted Stock
shall be subject to the terms and provisions set forth below in this Section 10.
10.2 Rights of Grantee. Shares of Restricted Stock granted pursuant to an
Award hereunder shall be issued in the name of the Grantee as soon as reasonably
practicable after the Award is granted provided that the Grantee has executed an
Agreement evidencing the Award, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other documents which
the Committee may require as a condition to the issuance of such Shares. If a
Grantee shall fail to execute the Agreement evidencing a Restricted Stock Award,
the appropriate blank stock powers and, in the discretion of the Committee, an
escrow agreement and any other documents which the Committee may require within
the time period prescribed by the Committee at the time the Award is granted,
the Award shall be null and void. At the discretion of the Committee, Shares
issued in connection with a Restricted Stock Award shall be deposited together
with the stock powers with an escrow agent (which may be the Company) designated
by the Committee. Unless the Committee determines otherwise and as set forth in
the Agreement, upon delivery of the Shares to the escrow agent, the Grantee
shall have all of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares and to receive all dividends or other
distributions paid or made with respect to the Shares.
10.3 Non-transferability. Until all restrictions upon the Shares of
Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth
in Section 10.4, such Shares shall not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated, nor shall they
be delivered to the Grantee.
A-11
<PAGE> 37
10.4 Lapse of Restrictions.
(a) Generally. Restrictions upon Shares of Restricted Stock awarded
hereunder shall lapse at such time or times and on such terms and conditions as
the Committee may determine. The Agreement evidencing the Award shall set forth
any such restrictions.
(b) Effect of Change in Control. Unless the Committee shall determine
otherwise at the time of the grant of an Award of Restricted Stock, the
restrictions upon Shares of Restricted Stock shall lapse upon a Change in
Control. The Agreement evidencing the Award shall set forth any such provisions.
10.5 Treatment of Dividends. At the time an Award of Shares of Restricted
Stock is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends, or a specified portion thereof, declared or
paid on such Shares by the Company shall be (i) deferred until the lapsing of
the restrictions imposed upon such Shares and (ii) held by the Company for the
account of the Grantee until such time. In the event that dividends are to be
deferred, the Committee shall determine whether such dividends are to be
reinvested in shares of Stock (which shall be held as additional Shares of
Restricted Stock) or held in cash. If deferred dividends are to be held in cash,
there may be credited at the end of each year (or portion thereof) interest on
the amount of the account at the beginning of the year at a rate per annum as
the Committee, in its discretion, may determine. Payment of deferred dividends
in respect of Shares of Restricted Stock (whether held in cash or as additional
Shares of Restricted Stock), together with interest accrued thereon, if any,
shall be made upon the lapsing of restrictions imposed on the Shares in respect
of which the deferred dividends were paid, and any dividends deferred (together
with any interest accrued thereon) in respect of any Shares of Restricted Stock
shall be forfeited upon the forfeiture of such Shares.
10.6 Delivery of Shares. Upon the lapse of the restrictions on Shares of
Restricted Stock, the Committee shall cause a stock certificate to be delivered
to the Grantee with respect to such Shares, free of all restrictions hereunder.
11. PERFORMANCE AWARDS.
11.1 Performance Units. The Committee, in its discretion, may grant Awards
of Performance Units to Eligible Individuals, the terms and conditions of which
shall be set forth in an Agreement between the Company and the Grantee.
Performance Units may be denominated in Shares or a specified dollar amount and,
contingent upon the attainment of specified Performance Objectives within the
Performance Cycle, represent the right to receive payment as provided in Section
11.3(c) of (i) in the case of Share-denominated Performance Units, the Fair
Market Value of a Share on the date the Performance Unit was granted, the date
the Performance Unit became vested or any other date specified by the Committee,
(ii) in the case of dollar-denominated Performance Units, the specified dollar
amount or (iii) a percentage (which may be more than 100%) of the amount
described in clause (i) or (ii) depending on the level of Performance Objective
attainment; provided, however, that, the Committee may at the time a Performance
Unit is granted specify a maximum amount payable in respect of a vested
Performance Unit. Each Agreement shall specify the number of Performance Units
to which it relates, the Performance Objectives which must be satisfied in order
for the Performance Units to vest and the Performance Cycle within which such
Performance Objectives must be satisfied.
(a) Vesting and Forfeiture. Subject to Sections 11.3(c) and 11.4, a
Grantee shall become vested with respect to the Performance Units to the
extent that the Performance Objectives set forth in the Agreement are
satisfied for the Performance Cycle.
(b) Payment of Awards. Subject to Section 11.3(c), payment to
Grantees in respect of vested Performance Units shall be made as soon as
practicable after the last day of the Performance Cycle to which such Award
relates unless the Agreement evidencing the Award provides for the deferral
of payment, in which event the terms and conditions of the deferral shall
be set forth in the Agreement. Subject to Section 11.4, such payments may
be made entirely in Shares valued at their Fair Market Value as of the day
preceding the date of payment or such other date specified by the
Committee, entirely in cash, or in such combination of Shares and cash as
the Committee in its discretion shall determine at
A-12
<PAGE> 38
any time prior to such payment; provided, however, that if the Committee in
its discretion determines to make such payment entirely or partially in
Shares of Restricted Stock, the Committee must determine the extent to
which such payment will be in Shares of Restricted Stock and the terms of
such Restricted Stock at the time the Award is granted.
11.2 Performance Shares. The Committee, in its discretion, may grant
Awards of Performance Shares to Eligible Individuals, the terms and conditions
of which shall be set forth in an Agreement between the Company and the Grantee.
Each Agreement may require that an appropriate legend be placed on Share
certificates. Awards of Performance Shares shall be subject to the following
terms and provisions:
(a) Rights of Grantee. The Committee shall provide at the time an
Award of Performance Shares is made the time or times at which the actual
Shares represented by such Award shall be issued in the name of the
Grantee; provided, however, that no Performance Shares shall be issued
until the Grantee has executed an Agreement evidencing the Award, the
appropriate blank stock powers and, in the discretion of the Committee, an
escrow agreement and any other documents which the Committee may require as
a condition to the issuance of such Performance Shares. If a Grantee shall
fail to execute the Agreement evidencing an Award of Performance Shares,
the appropriate blank stock powers and, in the discretion of the Committee,
an escrow agreement and any other documents which the Committee may require
within the time period prescribed by the Committee at the time the Award is
granted, the Award shall be null and void. At the discretion of the
Committee, Shares issued in connection with an Award of Performance Shares
shall be deposited together with the stock powers with an escrow agent
(which may be the Company) designated by the Committee. Except as
restricted by the terms of the Agreement, upon delivery of the Shares to
the escrow agent, the Grantee shall have, in the discretion of the
Committee, all of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares.
(b) Non-transferability. Until any restrictions upon the Performance
Shares awarded to a Grantee shall have lapsed in the manner set forth in
Sections 11.2(c) or 11.4, such Performance Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee. The Committee may
also impose such other restrictions and conditions on the Performance
Shares, if any, as it deems appropriate.
(c) Lapse of Restrictions. Subject to Sections 11.3(c) and 11.4,
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such
terms, conditions and satisfaction of Performance Objectives as the
Committee may, in its discretion, determine at the time an Award is
granted.
(d) Treatment of Dividends. At the time the Award of Performance
Shares is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on Shares represented by such Award which have been issued
by the Company to the Grantee shall be (i) deferred until the lapsing of
the restrictions imposed upon such Performance Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in shares of Stock (which shall be held as
additional Performance Shares) or held in cash. If deferred dividends are
to be held in cash, there may be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of
the year at a rate per annum as the Committee, in its discretion, may
determine. Payment of deferred dividends in respect of Performance Shares
(whether held in cash or in additional Performance Shares), together with
interest accrued thereon, if any, shall be made upon the lapsing of
restrictions imposed on the Performance Shares in respect of which the
deferred dividends were paid, and any dividends deferred (together with any
interest accrued thereon) in respect of any Performance Shares shall be
forfeited upon the forfeiture of such Performance Shares.
(e) Delivery of Shares. Upon the lapse of the restrictions on
Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares,
free of all restrictions hereunder.
A-13
<PAGE> 39
11.3 Performance Objectives
(a) Establishment. Performance Objectives for Performance Awards may be
expressed in terms of (i) earnings per Share, (ii) Share price, (iii) pre-tax
profits, (iv) net earnings, (v) return on equity or assets, or (vi) any
combination of the foregoing. Performance Objectives may be in respect of the
performance of the Company, any of its Subsidiaries, any of its Divisions or any
combination thereof. Performance Objectives may be absolute or relative (to
prior performance of the Company or to the performance of one or more other
entities or external indices) and may be expressed in terms of a progression
within a specified range. The Performance Objectives with respect to a
Performance Cycle shall be established in writing by the Committee by the
earlier of (x) the date on which a quarter of the Performance Cycle has elapsed
or (y) the date which is ninety (90) days after the commencement of the
Performance Cycle, and in any event while the performance relating to the
Performance Objectives remain substantially uncertain.
(b) Effect of Certain Events. At the time of the granting of a Performance
Award, or at any time thereafter, in either case to the extent permitted under
Section 162(m) of the Code and the regulations thereunder without adversely
affecting the treatment of the Performance Award as Performance-Based
Compensation, the Committee may provide for the manner in which performance will
be measured against the Performance Objectives (or may adjust the Performance
Objectives) to reflect the impact of specified corporate transactions,
accounting or tax law changes and other extraordinary and nonrecurring events.
(c) Determination of Performance. Prior to the vesting, payment,
settlement or lapsing of any restrictions with respect to any Performance Award
that is intended to constitute Performance-Based Compensation made to a Grantee
who is subject to Section 162(m) of the Code, the Committee shall certify in
writing that the applicable Performance Objectives have been satisfied.
11.4 Effect of Change in Control. In the event of a Change in Control:
(a) With respect to Performance Units, the Grantee shall (i) become
vested in all or a portion of the Performance Units as determined by the
Committee at the time of the Award of such Performance Units and as set
forth in the Agreement and (ii) be entitled to receive in respect of all
Performance Units which become vested as a result of a Change in Control a
cash payment within ten (10) days after such Change in Control in an amount
as determined by the Committee at the time of the Award of such Performance
Unit and as set forth in the Agreement.
(b) With respect to Performance Shares, all or a portion of any
unissued Performance Shares shall be issued and restrictions shall lapse
immediately on all or a portion of the Performance Shares in each case as
determined by the Committee at the time of the Award of such Performance
Shares and as set forth in the Agreement.
(c) The Agreements evidencing Performance Shares and Performance Units
shall provide for the treatment of such Awards (or portions thereof) which
do not become vested as the result of a Change in Control, including, but
not limited to, provisions for the adjustment of applicable Performance
Objectives.
11.5 Non-transferability. Until the vesting of Performance Units or the
lapsing of any restrictions on Performance Shares, as the case may be, such
Performance Units or Performance Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated.
12. EFFECT OF A TERMINATION OF EMPLOYMENT.
The Agreement evidencing the grant of each Option and each Award shall set
forth the terms and conditions applicable to such Option or Award upon a
termination or change in the status of the employment of the Optionee or Grantee
by the Company, a Subsidiary or a Division (including a termination or change by
reason of the sale of a Subsidiary or a Division), which shall be as the
Committee may, in its discretion, determine at the time the Option or Award is
granted or thereafter.
A-14
<PAGE> 40
13. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of a Change in Capitalization, the Committee shall, in its
sole discretion, determine the appropriate adjustments, if any, to (i) the
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted under the Plan, (ii) the maximum number
and class of Shares or other stock or securities with respect to which Options
or Awards may be granted to any Eligible Individual during any calendar year,
(iii) the number and class of Shares or other stock or securities which are
subject to outstanding Options or Awards granted under the Plan and the purchase
price therefor, if applicable, and (iv) the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or securities subject
to outstanding Incentive Stock Options (including any adjustments in the
purchase price) shall be made in such manner as not to constitute a modification
as defined by Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a Grantee of an Award
shall be entitled to, or an Optionee shall be entitled to exercise an Option
with respect to, new, additional or different shares of stock or securities,
such new, additional or different shares shall thereupon be subject to all of
the conditions, restrictions and performance criteria which were applicable to
the Shares subject to the Award or Option, as the case may be, prior to such
Change in Capitalization.
14. EFFECT OF CERTAIN TRANSACTIONS.
Subject to Sections 7.4, 8.7, 10.4(b) and 11.4 or as otherwise provided in
an Agreement, in the event of (i) the liquidation or dissolution of the Company
or (ii) a merger or consolidation of the Company (a "Transaction"), the Plan and
the Options and Awards issued hereunder shall continue in effect in accordance
with their respective terms, except that following a Transaction each Optionee
and Grantee shall be entitled to receive in respect of each Share subject to any
outstanding Options or Awards, as the case may be, upon exercise of any Option
or payment or transfer in respect of any Award, the same number and kind of
stock, securities, cash, property or other consideration that each holder of a
Share was entitled to receive in the Transaction in respect of a Share;
provided, however, that such stock, securities, cash, property, or other
consideration shall remain subject to all of the conditions, restrictions and
performance criteria which were applicable to the Options and Awards prior to
such Transaction.
15. INTERPRETATION.
Following the required registration of any equity security of the Company
pursuant to Section 12 of the Exchange Act:
(a) The Plan is intended to comply with Rule 16b-3 promulgated under
the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith.
Any provisions inconsistent with such Rule shall be inoperative and shall
not affect the validity of the Plan.
(b) Unless otherwise expressly stated in the relevant Agreement, each
Option, Stock Appreciation Right and Performance Award granted under the
Plan is intended to be performance-based compensation within the meaning of
Section 162(m)(4)(C) of the Code. The Committee shall not be entitled to
exercise any discretion otherwise authorized hereunder with respect to such
Options or Awards if the ability to exercise such discretion or the
exercise of such discretion itself would cause the compensation
attributable to such Options or Awards to fail to qualify as
performance-based compensation.
16. POOLING TRANSACTIONS.
Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event of a Change in Control which is also intended to
constitute a Pooling Transaction, the Committee shall take such actions, if any,
as are specifically recommended by an independent accounting firm retained by
the Company to the extent reasonably necessary in order to assure that the
Pooling Transaction will qualify as such,
A-15
<PAGE> 41
including but not limited to (i) deferring the vesting, exercise, payment,
settlement or lapsing of restrictions with respect to any Option or Award, (ii)
providing that the payment or settlement in respect of any Option or Award be
made in the form of cash, Shares or securities of a successor or acquirer of the
Company, or a combination of the foregoing, and (iii) providing for the
extension of the term of any Option or Award to the extent necessary to
accommodate the foregoing, but not beyond the maximum term permitted for any
Option or Award.
17. TERMINATION AND AMENDMENT OF THE PLAN OR MODIFICATION OF OPTIONS AND AWARDS.
17.1 Plan Amendment or Termination. The Plan shall terminate on the day
preceding the tenth anniversary of the date of its adoption by the Board and no
Option or Award may be granted thereafter. The Board may sooner terminate the
Plan and the Board may at any time and from time to time amend, modify or
suspend the Plan; provided, however, that:
(a) no such amendment, modification, suspension or termination shall
impair or adversely alter any Options or Awards theretofore granted under
the Plan, except with the consent of the Optionee or Grantee, nor shall any
amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a
result of the Plan; and
(b) to the extent necessary under any applicable law, regulation or
exchange requirement, no amendment shall be effective unless approved by
the stockholders of the Company in accordance with applicable law,
regulation or exchange requirement.
17.2 Modification of Options and Awards. No modification of an Option or
Award shall adversely alter or impair any rights or obligations under the Option
or Award without the consent of the Optionee or Grantee, as the case may be.
18. NON-EXCLUSIVITY OF THE PLAN.
The adoption of the Plan by the Board shall not be construed as amending,
modifying or rescinding any previously approved incentive arrangement or as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.
19. LIMITATION OF LIABILITY.
As illustrative of the limitations of liability of the Company, but not
intended to be exhaustive thereof, nothing in the Plan shall be construed to:
(i) give any person any right to be granted an Option or Award other
than at the sole discretion of the Committee;
(ii) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(iii) limit in any way the right of the Company or any Subsidiary to
terminate the employment of any person at any time; or
(iv) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
20. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
20.1 Except as to matters of federal law, the Plan and the rights of all
persons claiming hereunder shall be construed and determined in accordance with
the laws of the State of Delaware without giving effect to conflicts of laws
principles thereof.
A-16
<PAGE> 42
20.2 The obligation of the Company to sell or deliver Shares with respect
to Options and Awards granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
20.3 The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority, or to obtain
for Eligible Individuals granted Incentive Stock Options the tax benefits under
the applicable provisions of the Code and regulations promulgated thereunder.
20.4 Each Option and Award is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing, registration
or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or Award or the
issuance of Shares, no Options or Awards shall be granted or payment made or
Shares issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee.
20.5 Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer
to the extent required by the Securities Act and Rule 144 or other regulations
thereunder. The Committee may require any individual receiving Shares pursuant
to an Option or Award granted under the Plan, as a condition precedent to
receipt of such Shares, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the Securities Act or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
21. MISCELLANEOUS.
21.1 Multiple Agreements. The terms of each Option or Award may differ
from other Options or Awards granted under the Plan at the same time, or at some
other time. The Committee may also grant more than one Option or Award to a
given Eligible Individual during the term of the Plan, either in addition to, or
in substitution for, one or more Options or Awards previously granted to that
Eligible Individual.
21.2 Withholding of Taxes.
(a) At such times as an Optionee or Grantee recognizes taxable income in
connection with the receipt of Shares or cash hereunder (a "Taxable Event"), the
Optionee or Grantee shall pay to the Company an amount equal to the federal,
state and local income taxes and other amounts as may be required by law to be
withheld by the Company in connection with the Taxable Event (the "Withholding
Taxes") prior to the issuance, or release from escrow, of such Shares or the
payment of such cash. The Company shall have the right to deduct from any
payment of cash to an Optionee or Grantee an amount equal to the Withholding
Taxes in satisfaction of the obligation to pay Withholding Taxes. In
satisfaction of the obligation to pay Withholding Taxes to the Company, the
Optionee or Grantee may make a written election (the "Tax Election"), which may
be accepted or rejected in the discretion of the Committee, to have withheld a
portion of the Shares then issuable to him or her having an aggregate Fair
Market Value equal to the Withholding Taxes.
(b) If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share or
Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.
21.3. Effective Date. The Plan shall be effective on the date on which the
plan of reorganization of the Company is consummated (the "Effective Date");
provided, however, that any Awards granted under the Plan shall be subject to
the requisite approval of the stockholders of the Company.
A-17
<PAGE> 43
- --------------------------------------------------------------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SALANT CORPORATION
The undersigned hereby appoints Awadhesh K. Sinha and Louis Mattielli
proxies, each with power to act without the other and with full power of
substitution, and hereby authorizes them to represent and to vote, as
designated on the other side, all the shares of stock of Salant
Corporation standing in the name of the undersigned with all powers which the
undersigned would possess if present at the Annual Meeting of Stockholders of
the Corporation to be held May 9, 2000 or any postponement or adjournment
thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
SALANT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
May 9, 2000, 10:00 a.m.
Salant Corporation Headquarters, 36th Floor
1114 Avenue of the Americas
New York, New York 10036
<PAGE> 44
Please mark your votes as indicated in this example [X]
1. Election of Director. NOMINEE: Talton R. Embry
FOR the nominee WITHHOLD (INSTRUCTION: To withhold
listed to the right AUTHORITY authority to vote for the
(except as marked to vote for the nominee nominee, print the name in
to the contrary) listed to the right the space provided below.)
[ ] [ ] __________________________
2. Approval of the 3. Ratification of 4. In their discretion,
Salant Corporation Deloitte & Touche the proxies are
1999 Stock Award LLP as independent authorized to vote
and Incentive Plan. auditors of the upon such other
Corporation. business as may
FOR AGAINST ABSTAIN properly come before
[ ] [ ] [ ] FOR AGAINST ABSTAIN the meeting.
[ ] [ ] [ ]
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: __________________________________________________________________, 2000
_______________________________________________________________________________
Signature/Title
_______________________________________________________________________________
Signature If Held Jointly
PLEASE SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- FOLD AND DETACH HERE -
Admission Ticket
ANNUAL MEETING
OF
SALANT CORPORATION STOCKHOLDERS
TUESDAY, MAY 9, 2000
10:00 A.M.
SALANT CORPORATION HEADQUARTERS, 36TH FLOOR
1114 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
================================================================================
AGENDA
------
- - Election of Director
- - Approval of the Salant Corporation 1999 Stock Award and Incentive Plan
- - Ratification of the appointment of independent auditors
- - Informal discussion among stockholders and management in attendance
================================================================================
