1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), August 18 , 1997 (the
"Commencement Date"), between SALANT CORPORATION, a Delaware corporation, (the
"Corporation") and Philip A. Franzel (the "Employee").
WHEREAS, the Employee and the Corporation desire to enter into an
agreement of employment between them. NOW THEREFORE, in consideration
of the respective premises, mutual covenants and agreements of the
parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Nature of Employee's Services. The Corporation agrees to
employ the Employee and the Employee agrees to serve the Corporation as the
senior executive officer of the Corporation, having the title, Executive Vice
President and Chief Financial Officer of the Corporation. The Employee shall
perform such services and duties as shall be assigned to him or delegated to him
from time to time by the Chief Executive Officer of the Corporation, the Board
of Directors or the Executive Committee of the Board of Directors during the
Employment Period (as hereinafter defined) provided, however, that such duties
shall be consistent with those customarily performed by the senior executive
officer of other entities doing business in the industries in which the
Corporation is primarily engaged.
The Employee's duties shall include, without additional compensation,
the performance of similar services for any subsidiaries of the Corporation. The
Employee agrees that, except as otherwise provided herein, he shall devote
substantially all of his business time, attention and energy to the business of
the Corporation and its subsidiaries in the advancement of the best interests of
the Corporation and its subsidiaries. The Employee will perform his duties
hereunder principally in the New York metropolitan area.
During the Employment Period it shall not be a violation of this
Agreement for the Employee to (a) serve on corporate, civic or charitable boards
or committees or otherwise engage in charitable activities and community
affairs, (b) deliver lectures, fulfill speaking engagements or teach at
educational institutions, and (c) manage personal investments, so long as such
activities do not materially interfere with the performance of Employee's
responsibilities as an employee of the Corporation in accordance with this
Agreement.
Section 2. Term of Employment. The term of Employee's
employment under this Agreement shallcommence on the Commencement Date and end
on December 31, 1999 (the "Employment Period").
The Employment Period shall be automatically renewed for successive
one-year terms (the "Renewal Terms") on the same terms set forth herein (except
salary which shall be at the annual rate immediately prior to the Renewal Term)
unless at least 180 days prior to the expiration of the original Employment
Period or any Renewal Term, either Party notifies the other Party in writing
that he or it is electing to terminate this Agreement at the expiration of the
then current Employment Period. "Employment Period" shall mean the original
Employment Period (i.e. the Commencement Date to December 31, 1999) and all
Renewal Terms.
In the event that this Agreement is not renewed because the Corporation
has given the 180-day notice prescribed in the preceding paragraph on or before
the expiration of the original Employment Period or any Renewal Term, such
non-renewal shall be treated as a termination following non-renewal pursuant to
Section 6 (f) below.
Section 3. Annual Compensation. Subject to the terms hereof, the
Corporation agrees to pay to the Employee, subject to all applicable laws and
requirements, including, without limitation, laws with respect to withholding of
federal, state or local taxes, the annual compensation set forth below.
(a) Salary. As annual salary for the services to be rendered by the
Employee the Corporation shall pay a salary at the rate of $300,000 per annum
payable in equal bi-weekly installments during the Employment Period (the
"Salary"). Commencing in August of 1998, the Salary shall be reviewed for
increase. In no event shall the Salary be less than $300,000 per year.
(b) Incentive Compensation. Employee shall be entitled to receive a
bonus (the "Bonus") in accordance with the schedule annexed hereto as Exhibit 1
comparing the Corporation's performance during each fiscal year which ends
within a particular Employment Year, to operating targets for each such fiscal
year. The Employee shall not receive a minimum or guaranteed bonus for any year,
except that for the 1997 Fiscal Year the Employee shall receive a minimum bonus
equal to $150,000 (the "Minimum Bonus"). Each bonus shall be paid by the
Corporation to the Employee within ninety (90) days after the end of the fiscal
year to which such bonus relates. If the employment of the Employee is
terminated or if the Employment Period terminates on a day other than the last
day of a fiscal year, the bonus amount payable with respect to such fiscal year
shall be the amount to which the Employee would have been entitled had his
employment continued for all of that fiscal year, prorated by the proportion
that the number of months of employment completed by the Employee during that
fiscal year bears to twelve (12). Notwithstanding anything contained herein to
the contrary, no bonus or Minimum Bonus shall be payable to the Employee (i) if
the Employment Period is terminated pursuant to Section 6(c) or (ii) if the
Employee terminates the Employment Period other than pursuant to Section 6(e).
Section 4. Employee Benefit Plans. The Employee shall, during the
Employment Period, be eligible to participate in and receive benefits under and
in accordance with the provisions of any pension plan, welfare plan or other
similar plan or policy of the Corporation maintained for the benefit of the
Corporation's senior level executives or its employees generally (together, the
"Benefit Plans"). In the event any new Benefit Plan is established which is in
addition to, and not an alternative to, any existing Benefit Plan, the Employee
shall also be entitled to participate in such Benefit Plan to the extent
permitted by the terms thereof. The Corporation shall have the right, however,
to make changes in Benefit Plans applicable to its senior executives or
employees generally and the Employee agrees that such changes shall also be
applicable to the Employee.
Section 5. Expenses and Other Perquisites.
(a) Subject to compliance by the Employee with such policies regarding
expenses and expense reimbursement as may be adopted from time to time by the
Corporation, the Employee is authorized to incur reasonable expenses in the
performance of his duties hereunder in the furtherance of the business of the
Corporation and its subsidiaries, and the Corporation shall reimburse the
Employee for all such reasonable expenses.
(b) During the Employment Period, the Corporation will provide the
Employee with an automobile allowance in the amount of $680 per month, payable
with the first pay period of each month.
Section 6. Termination.
(a) Definition of the Termination Date. The "Termination Date" shall be
the date which is earlier of (i) the last day of the Employment Period, (ii) the
effective date of termination of employment as set forth in the notice which
Corporation delivers to the Employee indicating that the Employee's employment
hereunder is terminated, or (iii) the date on which Employee delivers written
notice to the Corporation that he is terminating his employment hereunder.
(b) Termination Due to Death or Disability. In the event the
Employee's employment is terminated due to
his death or Disability (as hereinafter defined), he, his estate or his
beneficiaries, as the case may be shall
be entitled to:
(i) Salary through the date of death or disability and any
Bonus for any fiscal year earned
but not yet paid;
(ii) pro-rated Bonus through the date of death or Disability,
payable in accordance with
Section 3(b);
(iii) in the case of death only, a lump sum payment equal to
three months Salary at the annual rate in effect at the date of death, paid
promptly after his death;
(iv) the right to exercise all stock options granted to
Employee at the time of his death or Disability (whether or not then vested) for
a period of one year following such event or for the remainder of the exercise
period, if shorter;
(vi) any amounts earned, accrued or owing to the Employee
but not yet paid under Sections 4 or
5;
(vii) the right to receive all applicable benefits pursuant to
the Corporation's Employee Long Term Disability Coverage plan (the "Plan") as if
he were fully covered thereunder, provided however, if the Employee is precluded
from receiving such benefits (e.g. due to the fact that he is no longer employed
by the Corporation), the Corporation shall pay to Employee cash payments equal,
on an after-tax basis, to the amount of benefits he would have received had he
continued to be eligible to participate in the Plan; and
(viii) other or additional benefits then due or earned in
accordance with applicable plans and programs of the Corporation.
For purposes of this Agreement, "Disability" shall mean any physical or
mental illness which as a result thereof, the Employee is unable to discharge
his duties for a period of six (6) consecutive months or for a total of 180 days
during any twelve month period.
(c) Termination by the Corporation for Cause.
(i) "Cause" shall mean:
(A) the Employee is convicted of a felony or
engages in conduct which is determined
by a court to constitute an act involving moral turpitude; or
(B) the Employee engages in conduct that
constitutes (i) willful gross neglect, (ii)
willful gross misconduct in carrying out his duties under this Agreement or
(iii) a violation of the Company's Code of Conduct, resulting, in each case, in
material harm to the financial condition or reputation of the Corporation.
(iii) In the event the Corporation terminates the Employee's
employment for Cause he shall be entitled to:
(A) Salary through the Termination Date;
(B) any amounts earned, accrued or owing to the
Employee but not yet paid under
Sections 4 or 5; and
(C) other or additional benefits then due or earned
in accordance with applicable
plans or programs of the Corporation.
(d) Termination by the Corporation Without Cause.
In the event the Employee's employment is terminated by the Corporation
without Cause (which termination shall be effective as of the date specified by
the Corporation in a written notice to the Employee), other than due to death or
Disability the Employee shall be entitled to and his sole remedies under this
Agreement shall be:
(i) Salary through the Termination Date;
(ii) Salary, at the annualized rate in effect on the
Termination Date for a period which is the longer of twelve (12) months
following such termination or the balance of the then existing Employment Period
(the "Severance Period");
(iii) pro-rated Bonus for the fiscal year in which
termination occurs, payable in accordance
with Section 3(b);
(iv) the right to exercise any stock option held by the
Employee at the Termination Date (whether or not then vested), such option to
remain exercisable for six (6) months after the Termination Date, or for the
remainder of the exercise period, if shorter;
(v) Any amounts earned, accrued, or owing to the Employee
but not yet paid under Sections 4 or
5; and
(vi) continued participation in all medical, dental, health
and life insurance plans and in other employee benefit plans or programs at the
same benefit level at which he was participating on the Termination Date until
the earlier of:
(A) the end of the Severance Period; or
(B) the date, or dates, he receives equivalent
coverage and benefits under the plans
and programs of a subsequent employer (such coverage and benefits to be
determined on a coverage-by-coverage, or benefit-by-benefit, basis); provided
that if the Employee is precluded from continuing his participation in any
benefit plan or program as provided in this clause (vi) of this Section 6(d) as
a matter of law or in the case of life insurance, as a result of the
requirements of such benefit plan or program, the Corporation shall have no
obligation to continue to provide such benefits; and
(vii) other or additional benefits then due or earned in
accordance with applicable plans and programs of the Corporation.
"Termination Without Cause" shall mean the Employee's
employment is terminated by the Company for any reason other than death,
Disability or Cause (as defined in Section 6 (c).
(e) Termination by Employee for Good Reason. The Employee shall have
the right to terminate the Employment Period for "good reason" (as hereinafter
defined), provided that the Employee shall have given the Corporation written
notice of the Employee's decision to terminate his employment (specifying the
alleged "good reason" in reasonable detail) and, if it is possible to cure, the
Corporation shall not have cured the same within thirty (30) days after receipt
of such notice, or, if cure cannot be fully accomplished within thirty (30)
days, the Corporation shall not have commenced cure within thirty (30) days
after receipt of such notice and cured the alleged "good reason" as soon as
possible thereafter. For purposes of the foregoing, "good reason" shall mean (i)
the assignment to the Employee of duties inconsistent with, or the diminution
of, the Employee's positions, titles, offices, duties, responsibilities or
status with the Corporation as a senior executive officer, or a change without
good cause in the Employee's reporting responsibilities, or any removal of the
Employee from, or any failure to elect the Employee to any positions, titles or
offices specified in this Agreement and held by the Employee, (ii) a reduction
in the Employee's Salary, (iii) a material reduction in the Employee's benefits
or perquisites (other than a reduction pursuant to the second to last sentence
of Section 4 hereof); or (iv) a requirement that Employee change his place of
principal employment to a location other than the metropolitan New York area.
In the event that the Employment Period is terminated by the Employee
for "good reason", the Employee shall be entitled to, and his sole remedies
shall be, the same benefits provided for in Section 6(d) "Termination by the
Corporation Without Cause".
(f) Termination following Non-renewal. In the event that the
Corporation notifies the Employee in writing at least 180 days prior to the
expiration of the original Employment Period or any Renewal Term that it is
electing to terminate this Agreement at the expiration of the then current
Employment Period and the Employee's employment terminates upon such expiration,
whether at the Corporation's initiative or the Employee's initiative, the
Employee shall be entitled to:
(i) Salary through the Termination Date;
(ii) Salary, at the annualized rate in effect on the
Termination Date for a period of six (6) months following the Termination Date
(the "Non-renewal Severance Period");
(iii) pro-rated Bonus for the fiscal year in which termination
occurs payable in accordance with Section 3(b) and any Bonus for any fiscal year
earned but not yet paid, payable in a lump sum within fifteen (15) days after
the Termination Date;
(iv) the right to exercise any stock option held by the
Employee at the date of his termination, to the extent vested at such date,
during the Non-renewal Severance Period and for sixty (60) days thereafter, or
for the remainder of the exercise period, if shorter;
(v) any amounts earned, accrued or owing to the Executive
but not yet paid under Sections 4 or
5; and
(vi) continued participation in all medical dental health and
life insurance plans at the same benefit level at which he was participating on
the Termination Date until the earlier of:
(A) the end of the Non-renewal Severance Period; or
(B) the date, or dates, he receives equivalent
coverage and benefits under the plans
and programs of a subsequent employer (such coverage and benefits to be
determined on a coverage-by-coverage, or benefit-by benefit, basis); provided
that if the Employee is precluded from continuing his participation in any
benefit plan or program as provided in this clause (vi) of this Section 6(f), as
a matter of law or in the case of life insurance, as a result of the
requirements of such benefit plan or program, the Corporation shall have no
obligation to continue to provide such benefits; and
(vii) other or additional benefits then due or earned in accordance
with applicable plans and programs of the Corporation.
(g) Voluntary Termination. In the event of a termination of
employment by the Employee on his own
initiative, other than a termination due to death, Disability or Good Reason,
the Employee shall have the same
entitlement as provided in Section 6 (c) above for a termination for Cause.
(i) Condition to Receipt of Severance Payments. The Employee hereby
acknowledges that the "Severance Payment" (as hereinafter defined) is greater
than the amount provided by the Corporation's normal severance policy and is
being offered to the Employee in reliance upon the Employee's agreement to
release the Corporation from any liability and to waive any claims the Employee
may have against the Corporation, including, without limitation, any claims
relating to the Employment or separation from employment. Notwithstanding
anything to the contrary contained herein, nothing shall impair the Employee's
(i) right to enforce the obligations of the Corporation as set forth in this
Agreement, or (ii) right to seek indemnification or contribution from the
Corporation in the event the Employee is the subject of any third-party claim
arising out of or relating to any act or omission by the Employee during the
course of his employment by the Corporation, to the extent such right would have
otherwise existed. For purposes of this Agreement, Severance Payment shall mean
any amount paid to the Employee during a Severance Period or a Non-renewal
Severance Period, as the case may be.
Section 7. Covenant Not to Compete. The Employee covenants and agrees
that he will not, at any time during the Restriction Period (as defined below),
whether as owner, principal, agent, partner, director, officer, employee,
independent contractor, consultant, shareholder, licensor or otherwise, alone or
in association with any other person, either directly or indirectly , carry on,
be engaged or take part in, render services to own, or share in the earnings of,
or invest in the stocks, bonds or other securities of, or be interested in any
way in any business competing with, or similar to, the business in which the
Corporation, or any of its subsidiaries are primarily engaged, including,
without limitation, any retail customer of the Corporation that accounts for 5%
or more of the Company's net sales on an annualized basis, without the written
consent of the Board of Directors, provided that the Employee may hold a passive
investment in a business which is competitive with or similar to any of the
businesses of the Corporation if the investment is in securities which are
listed on a national securities exchange and the investment in any class of
securities does not exceed 1% of the outstanding shares of such class or 1% of
the aggregate outstanding principal amount of such class, as the case may be. In
addition, for one year after the end of the Restriction Period, the Employee
covenants and agrees that he will not, directly or indirectly, hire any person
who is employed by the Corporation on the Termination Date whose annual salary
on such date is equal to or greater than $100,000, or solicit, induce, entice or
hire any such person to leave the employment of the Corporation. For purposes of
this Section 7, the "Restriction Period" shall mean the period beginning on the
Commencement Date and ending on the last day of either (i) the Employment Period
(determined without giving effect to any termination of employment), (ii) the
Severance Period or (iii) the Non-renewal Severance Period, whichever is longer.
Section 8. Non-Disclosure Covenant. The Employee further agrees that
during the Employment Period and thereafter without limit, he will not, either
directly or indirectly, communicate or divulge to any person, firm or
corporation other than the Corporation and its subsidiaries, any information
(except that which is generally known to the public) relating to the business,
customers and suppliers, or other affairs of the Corporation or its subsidiaries
("Confidential Information") except (a) for the purpose of, or in connection
with, the advancement of the business of the Corporation, or (b) in the event
that the Employee is required (by oral questions, interrogatories requests for
information or documents, subpoena, civil investigative demand or similar legal
process) to disclose Confidential Information, and the Employee is compelled to
disclose such Confidential Information or else stand liable for contempt or
suffer other censure, penalty or violation in a court proceeding. In the event
that the Employee is required to disclose such Confidential Information in the
circumstances described in clause (b) above, the Employee will, to the extent
legally permissible either (i) give the Corporation at least ten days' written
notice (or shorter, but prompt, notice to the extent the Employee is required to
respond to legal process in fewer than ten days ) so that the Corporation may
seek an appropriate protective order, or (ii) make such disclosure to a court
under seal.
The provisions of this Section 8, shall not be applicable to
information which
(i) was at the time of the disclosure by the Corporation to
the Employee, in the public domain; (ii) has subsequent, to
the disclosure by the Corporation, become part of the public
domain,
through no fault, act or omission of the Employee, directly or
indirectly, in violation of such obligation; (iii) was, at the
time of the disclosure by the Corporation to the Employee, in
the Employee's
possession and was not otherwise, directly or indirectly acquired from the
Corporation;
(iv) was received by the Employee from any third party,
provided that such information was not obtained by said third party from the
Corporation improperly, directly or indirectly, and was not improperly disclosed
by the third party.
Section 9. Indemnification. On the same terms and conditions applicable
to other directors and officers of the Corporation, the Corporation shall
continue to indemnify the Employee against all liability and loss with respect
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation or any of its
subsidiaries or Affiliates (as hereinafter defined), against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that he did not act in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful. Notwithstanding any other provision of this Agreement, the
Corporation's obligation to indemnify the Employee shall survive the expiration
of this Agreement, provided that in the event that the Employee is terminated
pursuant to Section 6(c) of this Agreement, the Corporation shall have no
obligation to indemnify the Employee under this Section 9 against any liability,
loss or expense arising from conduct that constitutes grounds for the
Corporation to terminate the Employment Period pursuant to Section 6(c) of this
Agreement. At all times during the Employment Period, the Corporation shall pay
for and maintain professional liability insurance for the benefit of the
Employee to the extent provided on the Commencement Date.
Section 10. Stock Options. The Corporation shall grant on the
Commencement Date to the Employee non-qualified Stock Options (the "Stock
Options") representing the right to purchase 75,000 shares of the Corporation's
common stock, par value $1.00 per share (the "Common Stock"), pursuant to the
Corporation's 1996 Stock Plan. The exercise price for the Stock Options will be
the market price of the Common Stock on the Commencement Date. The Stock Options
shall be subject to the terms and conditions set forth in the Corporation's 1996
Stock Plan and an agreement or agreements to be entered into, pursuant to such
plan (the "Stock Option Agreements"), between the Corporation and the Employee,
provided however, there shall be no restrictions on any Common Stock acquired by
Employee by exercise of any options granted by the Corporation, except for those
restrictions pursuant to applicable law.
Notwithstanding anything contained herein or in the Stock Option
Agreements to the contrary, all Stock Options outstanding shall immediately vest
upon a "Change of Control" (as hereinafter defined).
During the Employment Period, Employee shall also receive such
additional options as the Board deems appropriate in its sole discretion.
Section 11. Vacations. The Employee shall be entitled to paid vacations
in accordance with the policies of the Corporation in effect from time to time,
but not less than four weeks in any of the fiscal years during which the
Employee is employed. To the extent the Employee does not use the full vacation
period during a fiscal year the unused balance shall accrue and be carried over
into subsequent fiscal years; provided, however, that no more than an aggregate
of two weeks of unused vacation time may be carried forward from one fiscal year
to the next fiscal year.
Section 12. Legal Expenses. The Corporation shall pay all legal fees
and related expenses incurred by the Employee as a result of (i) the Employee's
termination of employment (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination to employment) if the
Corporation has been found to be in breach of its obligations hereunder or (ii)
the Employee's seeking to obtain or enforce any right or benefit provided by
this Agreement, if the Employee prevails against the Corporation in any
proceeding in which rights hereunder are contested.
Section 13. Successors and Assigns. In the event that the Corporation
shall at any time be merged or consolidated with any other corporation or shall
sell or otherwise transfer substantially all of its assets or business to
another corporation or entity, the provisions of this Agreement shall be binding
upon and inure to the benefit of such corporation or entity surviving or
resulting from such merger or consolidation or to which such assets or business
shall be so sold or transferred; provided, however, that nothing contained in
this Section 13 shall in any way limit, or be construed to limit, the
obligations to the Employee under this Agreement or the obligations of the
Corporation or the Corporation's successors or assigns. This Agreement shall not
be assignable by the Employee.
Section 14. Notice. Any notice or other communication which is required
or permitted by this Agreement shall be in writing and shall be deemed to have
been duly given when delivered in person, transmitted by telecopy or five (5)
days after being mailed by registered or certified mail, postage prepaid, return
receipt requested, to such party at the address shown below:
If to the Corporation, care of the following:
Salant Corporation
1114 Avenue of the Americas
New York New York 10036
Attention: Todd Kahn
Executive Vice President
General Council
If to the Employee, then to the following:
Philip A. Franzel
c/o Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
Each party may, by notice or other party, change the above address.
Section 15. Entire Agreement; Amendments. This Agreement embodies the
entire agreement and understanding between the parties and supersedes all prior
agreements and understandings as to the employment of the Employee. No
amendment, waiver, modification or discharge of any of the terms of this
Agreement shall be valid unless in writing and signed by the party against which
enforcement is sought.
Section 16. Waiver. The waiver by either party of a breach of
any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach thereof.
Section 17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be
deemed to be an original.
Section 18. Governing Law; Resolution of Disputes. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York. The Employee hereby acknowledges that irreparable damage will occur in the
event that Sections 7 and 8 of this Agreement are not performed in accordance
with their specific terms or are otherwise breached by the Employee. It is
accordingly agreed that the Corporation shall be entitled to an injunction or
injunctions to prevent breaches or such provisions in any Court of the United
States or any states having jurisdiction, this being in addition to any other
remedy to which the Corporation may be entitled to at law or in equity. Except
in the event the Corporation is attempting to seek injunctive or other equitable
relief for a breach by the Employee of Sections 7 and 8 of this Agreement, the
parties agree that as a condition precedent to the filing of any claim as set
forth below, the parties and their attorneys must attempt to confer at least
twice, in person, in an effort to resolve any dispute. Should such efforts not
be successful, such dispute shall be resolved by binding arbitration, to be held
in New York City in accordance with the rules and procedures of the American
Arbitration Association. Judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. Each party shall bear
his or its own costs of the arbitration or litigation, including, without
limitation, attorneys' fees. Pending the resolution of any arbitration or court
proceeding, the Corporation shall continue payment of all amounts and benefits
due the Employee under this Agreement.
Section 19. Certain Definitions.
"Affiliate" shall mean any person, firm, corporation, partnership or
other legal entity that, directly or indirectly, controls, is controlled by or
is under common control with, the Corporation.
"Change of Control" shall mean an event or series of events by which
(i) any Person is or becomes the "beneficial owner" (as defined in rules 13d-3
and 13d-5 under the Securities and Exchange Act of 1934, as amended, except that
a person shall be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or after the passage of time), directly or indirectly, of a majority
of the aggregate Voting Stock of the Corporation; or (ii) the Corporation
consolidates with or merges into another Person or conveys, transfers or leases
all or substantially all of its assets to any Person, or any Person consolidates
with or merges into the Corporation, in either event pursuant to a transaction
in which the outstanding Voting Stock of the Corporation is changed into or
exchanged for cash, securities or other properties, other than any such
transaction where the holders of the Voting Stock of the Corporation immediately
prior to such transaction own, directly or indirectly, immediately after such
transaction Voting Stock of such surviving corporation entitling them to not
less than 50% of the aggregate voting power of all Voting Stock of such
surviving corporation. Notwithstanding the foregoing, a Change of Control shall
not be deemed to occur if the Person described in clause (i) or (ii) is Apollo
Apparel Partners, L.P. or is an Affiliate of Apollo Apparel Partners, L.P.
"Voting Stock" shall mean securities of any class or classes (or
equivalent interests) of any entity, if the holders of the securities of such
class or classes (or equivalent interests) are ordinarily, in the absence of
contingencies, entitled to vote for the election of the directors (or natural
persons or entities performing similar functions) of such entity, even though
the right to so vote has been suspended by the happening of such a contingency.
"Control" shall mean the power to direct the affairs of any person,
firm, corporation, partnership or other legal entity by reason of ownership of
voting stock, by contract or otherwise.
"Person" shall mean any natural person, corporation, partnership,
trust, association, governmental authority or unit, or any other entity, whether
acting in an individual, fiduciary or other capacity, or any group of Persons
acting in concert.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates set forth below.
SALANT CORPORATION
By:_______________________________
Jerald S. Politzer
Chairman of the Board
and Chief Executive Officer
----------------------------------
Philip A. Franzel
EXHIBIT 1
INCENTIVE COMPENSATION SCHEDULE
(a) If the Corporation's "Pre-tax Income", as shown on its audited
financial statements for any fiscal year during the Employment
Period ("Actual Annual Pre-tax Income"), is equal to or
greater than 100% of the amount of Pre-tax Income provided for
in the Corporation's annual business plan for that fiscal year
("Planned Annual Pre-tax Income"), the Employee shall receive
a cash bonus equal to 50% of his annual Salary at the end of
the applicable fiscal year ("Annual Salary").
(b) If Actual Annual Pre-tax Income is equal to or greater than
90% and less than 100% of Planned Annual Pre-tax Income, the
Employee shall receive a cash bonus equal to 40% of his Annual
Salary.
(c) If Actual Annual Pre-tax Income exceeds 100% of Planned Annual
Pre-tax Income, then in addition to the bonus specified in
paragraph (a) above, the Employee shall receive additional
cash bonuses, each equal to 5% of his Annual Salary, for each
full 5% increment (after rounding to the nearest 1/100th of a
percent) by which Actual Annual Pre-tax Income exceeds 100% of
Planned Annual Pre-tax Income.
(d) The following principles shall apply in calculating the
"Pre-tax Income" which term shall mean the aggregate income of
the Corporation before provisions for all Federal, State and
local income taxes thereon. In calculating such "Pre-tax
Income", all items of income and deductions shall be
determined in accordance with generally accepted accounting
principles applied on a consistent basis, subject, however, to
the provisions of the following subparagraphs:
(i) There shall be excluded from income: all
extraordinary items of income such as gains and losses on the
sale of fixed assets or intangible assets; all insurance
recoveries other than for business interruption; non-recurring
gains or losses including, without limitation, gains or losses
on the termination of any employee benefit plans or gains or
losses realized on the sale quota.
(ii) Deductions from income shall include all
interest expenses, fixed charges and reasonable provisions for
depreciation,amortization and obsolescence, inventory
write-offs and the salary and bonus payable to all of the
employees of the Corporation and the Employee hereunder.
(iii) The amount of "Planned Annual Pre-tax Income" for each fiscal year shall
be determined by the Corporation's Board of Directors.