1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 11, 1997 (this
"Agreement"), between MICHAEL A. LUBIN (the "Employee") and SALANT CORPORATION,
a Delaware corporation (the "Corporation").
WHEREAS, the Employee and the Corporation desire to enter into an
agreement of employment; NOW, THEREFORE, in consideration of the
premises and of the mutual covenants hereinafter set forth,
the parties hereto agree as follows:
1. Employment. During the Employment Period (as hereinafter
defined), the Corporation shall employ the Employee and the Employee shall serve
as President and Chief Operating Officer of the Corporation. The Employee shall
perform such services and duties of a senior executive character for the
Corporation and any division, subsidiary or affiliate thereof as shall be
assigned to him from time to time by the Chief Executive Officer of the
Corporation during the Employment Period. The Employee agrees that, except as
otherwise provided herein, he shall devote substantially all of his business
time, attention and energy to the business of the Corporation, its subsidiaries
and affiliates in the advancement of the best interests of the Corporation, its
subsidiaries and affiliates. The Employee will perform his duties hereunder
principally in the metropolitan New York area. During the Employment Period it
shall not be a violation of this Agreement for the Employee to (a) serve on
corporate, civic or charitable boards or committees, (b) deliver lectures,
fulfill speaking engagements or teach at educational institutions, (c) serve as
a director and executive officer of Lexington Precision Corporation
("Lexington") and its affiliates provided that such activities do not exceed
twenty (20) business days annually (it being understood that there may be
intervals during any year during which the Employee's involvement with such
entities may be greater than during other periods of such year) and (d) manage
personal investments and serve as a partner of Lubin, Delano & Co., an
investment bank ("Lubin Delano"), so long as such activities do not interfere,
in any material respect, with the performance of Employee's responsibilities as
an employee of the Corporation in accordance with this Agreement.
2. Term of Agreement. (a) For purposes of this Agreement, the term
"Employment Period" shall mean the period commencing February 11, 1997 and
ending June 30, 1998. In the event of the Employee's death prior to June 30,
1998, the Employment Period shall terminate on the last day of the calendar
month within which such death shall have occurred. In the event that the
Employee shall become totally disabled (either mentally or physically) for a
period of three (3) consecutive months or more prior to June 30, 1998, the
Employment Period shall terminate at the end of such three (3) consecutive month
period. (b) Notwithstanding anything contained herein to the contrary, the
Corporation shall have the right to terminate the Employment Period immediately,
upon three (3) days prior written notice to the Employee, if the Employee (i)
engages in conduct which is determined by a court of competent jurisdiction to
be guilty of a felony or act of moral turpitude, (ii) commits any act of willful
misconduct, malfeasance or gross negligence that is injurious to the Corporation
in any material respect, (iii) commits a material violation of the Corporation's
Code of Conduct, or (iv) breaches this Agreement in any material respect
(collectively, "For Cause Termination").
(c) The Employee shall have the right to terminate the Employment
Period for "good reason" (as hereinafter defined), provided that the Employee
shall have given the Corporation written notice of the Employee's decision to
terminate his employment (specifying the alleged "good reason" in reasonable
detail) and the Corporation shall not have cured the same within three (3)
business days after receipt of such notice, such cure to be retroactive in the
case of any reduction in the "Adjusted Salary" (as hereinafter defined). For
purposes of the foregoing, "good reason" shall mean (i) the assignment to the
Employee of duties inconsistent with, or the diminution of, the Employee's
positions, titles, offices, duties, responsibilities or status with the
Corporation, or a change without good cause in the Employee's reporting
responsibilities, or any removal of the Employee from or any failure to elect
the Employee to any positions, titles or offices specified in this Agreement and
held by the Employee or (ii) a reduction in the Adjusted Salary.
(d) Notwithstanding anything contained herein to the contrary, in
the event that the Employee's employment hereunder is terminated (i) by the
Corporation prior to the expiration of the Employment Period (other than as a
result of a For Cause Termination or as a result of death or disability of the
Employee) or (ii) by the Employee for good reason, the Corporation shall
continue to pay to the Employee the Adjusted Salary for the period commencing on
the date of such termination until the later of (x) the last day of the
Employment Period or (y) six months (the "Separation Period"). During the
portion of the Separation Period prior to June 30, 1998, and no other portion,
the Employee shall (i) be entitled to any pro rata bonus as provided for in
Section 3(c) herein and (ii) be deemed an employee of the Corporation for all
benefit determination and eligibility purposes, including, without limitation,
insurance and the right to exercise stock options.
(e) If the Corporation and the Employee fail to agree to extend the
Employee's employment beyond the Employment Period (other than as a result of a
For Cause Termination or as a result of death or disability of the Employee),
the Corporation will continue to pay the Employee (the "Severance Payment") on a
bi-weekly basis the Adjusted Salary for the period commencing on the Employee's
last day of employment until the earlier of (i) the day the Employee commences
Full Time Employment (as hereinafter defined) or (ii) six (6) months (the
"Severance Period"). During the Severance Period, the Corporation shall provide
the Employee with the same life, medical and dental insurance benefits that the
Employee would have had if the Employment Period would have been extended for
such period of time. The Employee will not be entitled to (i) any pro-rata bonus
for the Severance Period or (ii) any other severance pursuant to any severance
policy then in effect. In addition, the Corporation's obligation to make the
Severance Payment is contingent upon the Employee's execution of a mutual
general release as reasonably established by the Corporation from time to time.
For purposes of this Agreement "Full Time Employment" shall mean any employment
as owner, principal, agent, partner, director, officer or employee for any
entity, corporation, partnership or individual, other than Lexington or
consulting engagements as a principal of Lubin Delano, where such employment
equals or exceeds thirty (30) hours per week.
The Employee hereby acknowledges that the Severance Payment is
greater than the amount provided by the Corporation's normal severance policy
and is being offered to the Employee in reliance upon the Employee's agreement
to release the Corporation from any liability and to waive any claims the
Employee may have against the Corporation, including, without limitation, any
claims relating to the Employee's employment or separation from employment.
Notwithstanding anything to the contrary contained herein or in any release
executed by the Employee at any time hereafter, nothing shall impair the
Employee's (i) right to enforce the obligations of the Corporation as set forth
in this Agreement or (ii) right to seek indemnification or contribution from the
Corporation in the event the Employee is the subject of any third-party claim or
claim by or on behalf of the Corporation arising out of or relating to any act
or omission by the Employee during the course of his employment by the
Corporation, to the extent such right would have otherwise existed.
3. Compensation. (a) The Corporation agrees to pay to the Employee
during the Employment Period as compensation for the services to be rendered by
the Employee a current base salary at the rate of $400,000 per annum (the "Base
Salary") payable in equal bi-weekly installments during the Employment Period.
On January 1, 1998, the Base Salary shall be adjusted upward for inflation by a
percentage equal to the percentage increase in the "Consumer Price Index" (as
hereinafter defined) for the period from October 1995 through December 31, 1997.
For purposes of this Agreement, the term "Consumer Price Index" shall mean the
"Consumer Price Index" published by the Bureau of Labor Statistics of the U.S.
Department of Labor, New York City, all items. The Base Salary, as adjusted in
accordance with this provision, shall be referred to as the Adjusted Salary.
If the Consumer Price Index shall become unavailable to the public,
the Corporation will substitute for it a comparable index based upon changes in
the cost of living or purchasing power of the consumer dollar published by any
other governmental agency, or if unavailable, a comparable index published by a
major bank or other financial institution or by a university or a generally
recognized financial publication.
(b) In respect of each year of the Employment Period, in addition
to the salary provided in (a) above, a bonus, if any, calculated as follows:
(i) If the Corporation attains or exceeds its Pre-tax Income Budget
for the any fiscal year, commencing with the 1997 fiscal year (a copy of each
fiscal year's budget will be furnished to the Employee in December of the prior
year), the Corporation shall pay a bonus to the Employee for such fiscal year in
which such Pre-tax Income Budget was attained or exceeded by the Corporation
equal to one hundred percent (100% ) of the base salary paid during such fiscal
year plus an additional bonus equal to twenty percent (20%) of such then current
base salary for each full five percent (5% ) (after rounding to the nearest
1/100th of a percent) by which the actual Pre-tax Income of the Corporation
exceeds its Pre-tax Income Budget. For example, if the Pre-tax Income Budget for
the Corporation for 1997 is $20,000,000 and the Corporation's actual Pre-tax
Income is $21,000,000 the Employee shall be entitled to a bonus of one hundred
and twenty percent (120%) of his 1997 current base salary of $400,000 or a bonus
of $480,000,
(ii) Notwithstanding anything contained herein to the contrary, if
the actual Pre-tax Income of the Corporation is less than one hundred percent
(100%) of its Pre-tax Income Budget in any fiscal year, the Employee shall not
be entitled to any bonus for such fiscal year. The Employee shall not be
entitled to any minimum or guaranteed bonus in respect of any fiscal year.
(c) The amount of such bonus, if any, shall be calculated on or
before ninety (90) days following the last day of each fiscal year of the
Corporation commencing with the 1997 fiscal year. A written statement of the
calculation and the amount of the bonus, if any, shall be delivered to the
Employee within such ninety (90) day period.
In the event of the termination of the Employment Period prior to
the close of a complete fiscal year of the Corporation, the calculation for
purposes of determining a bonus shall be computed on the basis of the results of
the full fiscal year within which the termination of the Employment Period
occurs; provided, however, that the amount of the actual bonus, if any, payable
to the Employee with respect to such year shall be prorated based on the
proportion that (x) the number of days from January 1 of such year to the date
of the termination of the Employment Period bears to (y) 365.
Notwithstanding anything to the contrary contained in this
Agreement, if the Employee voluntarily leaves the employ of the Corporation
prior to the completion of the Employment Period (other than in connection with
a breach of this Agreement by the Corporation) or the Employment Period is
terminated by the Corporation pursuant to Section 2(b) hereof, the Employee
shall not be entitled to any bonus or pro rata bonus for the year in which such
termination takes place or any subsequent year.
(d) The following principles shall apply in calculating the
"Pre-tax Income of the Corporation" which term shall mean the aggregate
consolidated income of the Corporation before provision for all Federal, State
and local income taxes thereon. In calculating such "Pre-tax Income", all items
of income and deductions shall be determined in accordance with generally
accepted accounting principles applied on a consistent basis, subject, however,
to the provisions of the following subparagraphs:
(i) There shall be excluded from income: all extraordinary items of
income such as gains and losses on the sale of fixed assets or intangible
assets; all insurance recoveries other than for business interruption;
non-recurring gains or losses including, without limitation, gains or losses on
the termination of any employee benefit plans or gains or losses realized on the
sale of quota.
(ii) Deductions from income shall include all interest expenses,
fixed charges and reasonable provisions for depreciation, amortization and
obsolescence, inventory write-offs and the salary and bonus payable to all of
the employees of the Corporation and the Employee hereunder.
4. Employee Benefit Plans. Nothing herein contained
shall affect the right of the Employee
to participate and receive benefits under and in accordance with the provisions
of any present or future pension or profit sharing plan, pension plan, insurance
plan, medical plan, stock option plan, plan of deferred compensation or other
similar plan or policy of the Corporation for the benefit of its employees.
5. Covenant Not to Compete. The Employee covenants and agrees that
he will not, at any time during the Employment Period (determined without giving
effect to any termination of employment), whether as owner, principal, agent,
partner, officer, employee, independent contractor, consultant, shareholder,
licensor or otherwise, alone or in association with any other person, either
directly or indirectly, carry on, be engaged or take part in, render services to
or own, share in the earnings of, or invest in the stocks, convertible bonds or
other convertible securities of, or be interested in any way in any business
competing with the businesses of the Corporation or its subsidiaries without the
written consent of the Board of Directors of the Corporation, provided that the
Employee may hold a passive investment in a business which is competitive with
or similar to any of the businesses of the Corporation if the investment is in
securities which are listed on a national securities exchange or NASDAQ and the
investment in any class of securities does not exceed 2% of the outstanding
shares of such class or 2% of the aggregate outstanding principal amount of such
class, as the case may be. In addition, for one year after the end of the
Employment Period (determined without giving effect to any termination of
employment), the Employee covenants and agrees that he will not, directly or
indirectly, (i) hire any person who is employed by the Corporation on the
Employee's last day of employment whose annual compensation on such date is
equal to or greater than $100,000 or (ii) solicit, induce, entice or hire any
such person to leave the employment of the Corporation.
6. Non-Disclosure Covenant. The Employee further agrees that during
the Employment Period and thereafter without limit, he will not, either directly
or indirectly, communicate or divulge to any person, firm or corporation other
than the Corporation, its subsidiaries and affiliates, any information (except
that which is generally known or available to the public) relating to the
business, customers and suppliers, or other affairs of the Corporation, its
subsidiaries or affiliates ("Confidential Information") except (a) for the
purpose of, or in connection with, the advancement of the business of the
Corporation or (b) in the event that the Employee is required (by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar legal process) to disclose Confidential
Information, and the Employee is compelled to disclose such Confidential
Information or else stand liable for contempt or suffer other censure, penalty
or violation in a court proceeding. In the event that the Employee is required
to disclose such Confidential Information in the circumstances described in
Section 6(b), the Employee will either (i) give the Corporation at least ten
days' written notice (or shorter, but prompt, notice to the extent the Employee
is required to respond to legal process in fewer than ten days) so that the
Corporation may seek an appropriate protective order or (ii) make such
disclosure to a court under seal.
7. Indemnification. To the fullest extent permitted under the
Delaware General Corporation Law and, in any event, on terms and conditions no
less favorable than those applicable to directors or other officers of the
Corporation, the Corporation shall indemnify the Employee against all liability
and loss with respect to any threatened, pending or completed action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation or any of its subsidiaries or affiliates,
against expenses (including, without limitation, reasonable attorneys' fees and
the costs of enforcing this Section 7), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, proceeding or investigation by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that he did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding any
other provision of this Agreement, the Corporation's obligation to indemnify the
Employee shall survive the expiration or termination of this Agreement, provided
that in the event that the Employee is terminated pursuant to Section 2(b) of
this Agreement, the Corporation shall have no obligation to indemnify the
Employee under this Section 7 against any liability, loss or expense arising
from conduct that constitutes grounds for the Corporation to terminate the
Employment Period pursuant to Section 2(b) of this Agreement.
8. Business Expenses; Auto Allowance. The Employee will submit, on
a timely basis, to the Corporation periodic reports of travel and other expenses
in connection with his employment hereunder, in such form and at such times as
may reasonably be required by the Corporation. Such travel and other expenses
will be subject to approval by the Corporation and the Employee will be
reimbursed for such expenses as are reasonably incurred by the Employee in
accordance with this Section 8. During the Employment Period, the Corporation
will provide the Employee with an automobile allowance in the amount of $680 per
month, payable with the first pay period of each month.
9. Continuity of the Corporation. In the event that the Corporation
shall at any time be merged or consolidated with any other corporation or
corporations or shall sell or otherwise transfer a substantial portion of its
assets to another corporation or entity, the provisions of this Agreement shall
be binding upon and inure to the benefit of the Corporation or entity surviving
or resulting from such merger or consolidation or to which such assets shall be
sold or transferred. Except as provided in the preceding sentence, this
Agreement shall not be assignable by the Employee.
10. Stock Options. Upon the commencement of the Employment Period,
the Corporation shall grant to the Employee nonqualified stock options
representing the right to purchase 162,500 shares of the Corporation's common
stock, par value $1.00 per share (the "Common Stock"), pursuant to the
Corporation's 1987 Stock Plan, 1988 Stock Plan and/or 1993 Stock Plan. The
purchase price for such options will be the market price on the grant date.
Stock options representing the right to purchase 99,997 shares of Common Stock
will vest on the grant date for such options. Thereafter, stock options
representing the right to purchase 8,929 shares of Common Stock will vest
monthly for each of seven (7) months. The stock options shall be subject to the
terms and conditions set forth in the Corporation's 1987 Stock Plan, 1988 Stock
Plan and/or 1993 Stock Plan, as the case may be, and an agreement or agreements
to be entered into, pursuant to the applicable plan or plans, between the
Corporation and the Employee. The Corporation represents and warrants that the
stock options granted to the Employee shall qualify for the exemptions afforded
by the Securities and Exchange Commission Rule 16b-3 as in effect as of the date
of this Agreement.
11. Notice. Any notice or other communication provided for or
permitted herein shall be deemed to be fully given if in writing and mailed by
registered or certified mail, return receipt requested, to such party at the
addresses shown below; if to the Corporation care of the following:
Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
Attention: Todd Kahn, Esq.
if to the Employee, then to the following:
Mr. Michael A. Lubin
C/0 Lubin, Delano & Company
767 Third Avenue
29th Floor
New York, New York 10017
Each party may change its or his respective address by written notice as
described above.
12. Complete Agreement; Modification and Termination. This Agreement
constitutes the full and complete understanding and agreement of the parties,
supersedes all prior understandings and agreements as to the employment of the
Employee and cannot be amended, changed, modified or terminated without the
consent in writing of the Corporation and the Employee. 13. Waiver. The waiver
by either party of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach thereof. 14. Counterparts.
This Agreement shall be executed in several counterparts, each of which shall be
deemed to be an original. 15. Arbitration. The Employee and the Corporation
agree that any dispute of any kind, nature or description between the parties
hereto, with respect to, relating to or arising out of the Employee's employment
with the Corporation or the terms of this Agreement, shall be submitted to
binding arbitration before the American Arbitration Association in New York, New
York in accordance with its rules then in effect. The costs and expenses of
arbitration (including, without limitation, reasonable attorneys' fees and
expenses) of the prevailing party, shall be paid by the party against whom the
issue is determined. 16. Definitions. For purposes of this Agreement, the term
"affiliate" shall mean any person, firm or corporation controlling, controlled
by or under common control with, the Corporation. The term "control" shall mean
the power to direct the affairs of any person, firm or corporation by reason of
ownership of voting stock, by contract or otherwise. 17. Headings. The headings
in this Agreement are solely for convenience of reference and shall not affect
its interpretation. 18. Governing Law. The Agreement shall be governed by and
construed according to the laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
---------------------------
MICHAEL A. LUBIN
SALANT CORPORATION
By__________________________
Nicholas P. DiPaolo
Chairman, Chief Executive
Officer and President