EMPLOYMENT AGREEMENT


     EMPLOYMENT  AGREEMENT  (this  "Agreement"),  dated as of May 17, 1999,
between Salant Corporation,  a Delaware corporation (the "Corporation") and
Michael J. Setola (the "Employee").

     WHEREAS, the Corporation and the Employee are parties to an Employment
Agreement (the "Prior Agreement") dated as of March 11, 1994, as amended as
of December  21,  1995 and June 16,  1997,  pursuant to which the  Employee
currently serves as the Corporation's Chief Executive Officer;

     WHEREAS,  in  connection  with the First  Amended  Chapter  11 Plan of
Reorganization for Salant Corporation, dated February 3, 1999, as such plan
may be amended or  supplemented  (the "Plan"),  the  Corporation  wishes to
enter into this  Agreement,  effective as of the Effective Date (as defined
in the Plan),  and pursuant to which the Employee will continue to serve as
the Corporation's Chief Executive Officer; and

     WHEREAS,  the  Corporation  and the Employee desire to enter into this
Agreement and terminate the Prior Agreement.

     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.  EFFECTIVENESS.  This Agreement shall become effective only
upon the  occurrence  of the  Effective  Date  (as  defined  in the  Plan);
provided  that the  Effective  Date shall have occurred on or prior to June
30, 1999. If the  Effective  Date shall not have occurred by June 30, 1999,
this  Agreement  shall be of no force and  effect  and shall be  treated as
having  had no force  and  effect  from and  after  the  date  hereof.  The
Corporation  shall  include  the  material  terms  of this  Agreement  as a
provision of the Plan.

     SECTION  2.  EMPLOYEE'S  SERVICES.  During the  Employment  Period (as
hereinafter  defined),  the Corporation agrees to employ the Employee,  and
the  Employee  agrees to serve the  Corporation,  as the  senior  executive
officer of the Corporation, having the title Chief Executive Officer of the
Corporation.  During the Employment Period, the Employee shall perform such
services  and duties as shall be assigned to him or  delegated  to him from
time to time by the Board of  Directors of the  Corporation  (the "Board of
Directors")  or the  Executive  Committee  of the Board of  Directors  (the
"Executive Committee").

     At all times during the Employment Period, the Employee's duties shall
be consistent with those customarily performed by senior executive officers
of other entities doing  business in the apparel  industry.  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 interest of the  Corporation and its  subsidiaries.  The Employee will
perform his duties hereunder principally in the New York metropolitan area.

     On the Effective  Date,  the Employee  shall be elected as Chairman of
the Board of Directors for a three-year  term.  Upon the termination of his
employment  under this  Agreement,  the Employee  agrees to resign from the
Board of Directors.

     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 3. TERM OF EMPLOYMENT. The term of Employee's employment under
this Agreement shall commence on the Effective Date and end on December 31,
2000 (the "Initial Term").

     The  Employment  Period  (as  defined  below)  shall be  automatically
renewed for successive  one-year terms after the Initial Term (the "Renewal
Terms") on the same terms set forth herein (except  Salary,  as hereinafter
defined,  which shall be at the annual rate in effect  immediately prior to
the  Renewal  Term plus  $75,000),  unless  at least 180 days  prior to the
expiration  of the Initial Term or Renewal Term, as the case may be, either
the Employee or the Corporation notifies the other in writing that he or it
is electing to terminate  the  Employment  Period at the  expiration of the
Initial Term or Renewal Term, as the case may be. "Employment Period" shall
mean the Initial Term and all Renewal Terms, subject to earlier termination
on the Termination Date (as hereinafter defined).

     SECTION 4. 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  compensation set forth
below.

     (a) Salary.  In  consideration  of the  services to be rendered by the
Employee hereunder,  the Corporation shall pay him salary at an annual rate
of $650,000 for the period commencing on the Effective Date and terminating
on December 31, 1999 and $700,000 for the period  commencing  on January 1,
2000 and  terminating  on December  31, 2000 (each such period  hereinafter
referred  to  as  an  "Employment   Year"),   payable  in  equal  bi-weekly
installments during the Employment Period (the "Salary").

     (b) Annual Cash  Bonuses.  The  Employee  shall be entitled to receive
cash  bonuses  (each,  a "Bonus")  for each fiscal year of the  Corporation
which  shall  occur  during  the  Employment  Period,  which  (i)  for  the
Corporation's  1999  fiscal  year  (the  "1999  Fiscal  Year"),   shall  be
determined in accordance  with the terms of the schedule  annexed hereto as
Exhibit 1 (or if the  Employment  Period  shall  terminate  during the 1999
Fiscal  Year as a result of a Change of  Control  (as  defined  below),  in
accordance  with the terms of the  schedule  attached  hereto as Exhibit 2)
(each of which is hereby  incorporated by reference  herein)  comparing the
performance of the Corporation's  Perry Ellis Menswear Division (the "Perry
Ellis Division") for the 1999 Fiscal Year to the budget for the Perry Ellis
Division for the 1999 Fiscal Year, which budget shall have been set for the
Perry  Ellis  Division  by  the  Compensation  Committee  of the  Board  of
Directors;  provided,  however, that in no event shall the Bonus in respect
of the 1999 Fiscal  Year be less than three  hundred  twenty-five  thousand
dollars   ($325,000)   (the   "Guaranteed   Portion")   and  (ii)  for  the
Corporation's  fiscal  years  2000  and  beyond,  shall  be  determined  in
accordance  with the terms of the  schedule  annexed  hereto  as  Exhibit 3
(which  is  hereby   incorporated  by  reference   herein)   comparing  the
Corporation's  performance  for each such fiscal year to the  Corporation's
budget for each such fiscal year,  which  budget  shall have been  mutually
agreed to by the  Corporation  and the Employee,  which agreement shall not
unreasonably  be withheld.  Each Bonus shall be paid by the  Corporation to
the Employee  within 90 days after the end of the fiscal year to which such
Bonus relates.  If the Employment Period terminates on a day other than the
last day of a fiscal year,  the amount of the Bonus 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,
pro-rated  by the  proportion  that the  number  of  months  of  employment
completed  by the Employee  during that fiscal year bears to 12;  provided,
however,  that if the  Employment  Period shall  terminate as a result of a
Change of Control (i) during the 1999 Fiscal Year,  the amount of the Bonus
payable in respect of the 1999 Fiscal Year shall be equal to the sum of (A)
the  Guaranteed  Portion  and (B) an amount  equal to the  product of (1) a
fraction,  the  numerator  of which is the  number of months of  employment
completed by the Employee  during that fiscal year and the  denominator  of
which is 12 and (2) the excess, if any, of (I) the Monthly-Based 1999 Bonus
(as  defined  below) over (II) the  Guaranteed  Portion and (ii) during any
fiscal year of the Company  other than the 1999 Fiscal Year,  the pro-rated
bonus payable with respect  thereto  shall be pro-rated (by the  proportion
that the number of months of  employment  completed by the Employee  during
that fiscal year bears to 12) based on the  Employee's  achievement  of the
performance   goals  set  in  the  budget  for  that   fiscal   year  on  a
month-by-month  (rather  than an  annual)  basis  for all  complete  months
through the date of termination.  If the Employment  Period shall terminate
during any  fiscal  year as a result of a Change of  Control,  the Bonus in
respect of that year shall be paid by the  Corporation to the Employee in a
lump  sum on the day of  termination.  Notwithstanding  anything  contained
herein to the  contrary,  no Bonus shall be payable if (i) the  Corporation
terminates the Employment  Period for Cause (as  hereinafter  defined),  or
(ii) the  Employee  terminates  the  Employment  Period other than for Good
Reason (as hereinafter defined).

     For  purposes  of this  Section  4(b),  "termination  as a result of a
Change of Control"  shall mean either (i) a termination by the Employee for
Good  Reason (as  defined  below)  that is based upon the  occurrence  of a
Change of Control,  or (ii) a termination by the Corporation for any reason
other  than Cause (as  defined  below),  death or  Disability  (as  defined
below), at any time after the occurrence of a Change of Control.

     For purposes of this Agreement,  the term  "Monthly-Based  1999 Bonus"
shall  mean a Bonus  in  respect  of the 1999  Fiscal  Year  calculated  in
accordance  with the  terms set forth on  Exhibit  2 hereto  comparing  the
aggregate monthly  performance of the Perry Ellis Division for all complete
months  during the period  commencing  on the first day of the 1999  Fiscal
Year and terminating on the date on which the Employment  Period terminates
(the "Calculation  Period") to the aggregate of the monthly budgets for all
complete months during the Calculation Period.

     SECTION 5. 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 6. EXPENSES AND OTHER PERQUISITES.  (a) Expense Reimbursement.
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
connection with 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)  Legal  Fees.  The  Corporation  shall  pay all  reasonable  legal
expenses  incurred by the Employee in connection  with the  preparation and
negotiation of this Agreement.

     (c)  Automobile   Allowance.   During  the  Employment   Period,   the
Corporation  will provide the Employee with an automobile  allowance in the
amount of $680 per month, payable in the first pay period of each month.

     (d)  Housing  Allowance.  In order to enable  the  Employee  to devote
additional time to his duties  hereunder,  the  Corporation  also agrees to
reimburse the Employee  during the  Employment  Period,  up to a maximum of
$3,000 per month (the "NYC Amount") for the  reasonable  expenses  actually
incurred  by the  Employee  in  either  (i)  renting  in his own  name  and
occupying  an  apartment in New York City or (ii) staying in a hotel in New
York City.

     SECTION 7. TERMINATION.  (a) Termination Date. The "Termination  Date"
shall be the date which is the  earlier of (i) the last day of the  Initial
Term or, if  applicable,  a Renewal  Term  which is not  renewed,  (ii) the
effective date of a termination  of the Employee's  employment as set forth
in a notice  delivered by the  Corporation to the Employee  indicating that
the Employee's employment hereunder is terminated,  (iii) the date on which
the  Employee  delivers  written  notice  to  the  Corporation  that  he is
terminating  his  employment  hereunder;  provided,  however,  that  if the
Employee is terminating  his employment for Good Reason in accordance  with
the provisions of Section 7(e) hereof, in no event shall the effective date
of such a termination be prior to the applicable  cure period,  or (iv) the
Employee's death or Disability (as hereinafter defined).

     (b)  Termination  Due  to  Death  or  Disability.  In  the  event  the
Employee's employment is terminated due to his death or Disability,  he, or
his estate or his beneficiaries, as the case may be, shall be entitled to:

          (i) Salary through the Termination  Date and any Bonus earned but
     not in fact paid for any fiscal year completed  before the Termination
     Date;

          (ii) pro-rated  Bonus through the  Termination  Date,  payable in
     accordance with Section 4(b) hereof;

          (iii) in the case of death  only,  a  lump-sum  payment  equal to
     three  months'  Salary  at the  annual  rate in  effect on the date of
     death, payable promptly after his death;

          (iv) the right to  exercise  all  stock  options  granted  to the
     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 of the applicable option, if shorter;

          (v) any amounts earned,  accrued or owing to the Employee through
     the Termination Date but not yet paid under Section 5 or 6 hereof;

          (vi) in the case of  Disability  only,  the right to receive  all
     applicable  benefits pursuant to the Corporation's  Employee Long Term
     Disability  Insurance Plan (the "Disability Plan") as if he were fully
     covered  thereunder;  provided,  however, if the Employee is precluded
     from receiving such benefits  (e.g.,  because he is no longer employed
     by the  Corporation),  the Corporation  shall pay cash to the Employee
     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
     Disability Plan; and

          (vii)  other  or  additional  benefits  then  due  or  earned  in
     accordance with applicable plans and programs of the Corporation.

     "Disability"  shall mean any physical or mental illness as a result of
which the Employee is unable to discharge his duties hereunder for a period
of  six  consecutive  months  or  for  a  total  of  180  days  during  any
twelve-month period hereunder.

     (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
          Corporation's  Code  of  Conduct,  resulting,  in each  case,  in
          material  harm to the  financial  condition or  reputation of the
          Corporation.

          (ii) 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
          through the Termination  Date but not yet paid under Section 5 or
          6 hereof; and

               (C)  other or  additional  benefits  then due or  earned  in
          accordance with applicable plans and programs of the Corporation.

               Notwithstanding  anything contained in this Agreement to the
          contrary, in the event the Corporation  terminates the Employee's
          employment  for Cause,  all options  (other  than the  Guaranteed
          Options   (as  defined   below))  to   purchase   shares  of  the
          Corporation's  stock then held by the Employee shall  immediately
          be forfeited.

     (d)  Termination by the  Corporation  Without Cause.  In the event the
Employee's employment is terminated by the Corporation for any reason other
than Cause, 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  annual  rate in effect on the  Termination
     Date,  for a period (the  "Severance  Period") which shall commence on
     the date of such  termination and shall terminate on either (A) in the
     event that such  termination  shall have occurred prior to a Change of
     Control,  the 12-month  anniversary of the date of such termination or
     (B) in the event that such termination shall have occurred following a
     Change of Control,  the earlier of (1) the 12-month anniversary of the
     date of such termination and (2) December 31, 2000;

          (iii)  pro-rated  Bonus with  respect to the fiscal year in which
     termination  occurs,  payable in accordance  with Section 4(b) hereof,
     and any Bonus for any fiscal  year  earned but not in fact paid before
     the Termination Date, payable in a lump sum as promptly as practicable
     following  the  Termination  Date,  but in no event later than fifteen
     (15) days after the Termination Date;

          (iv) the right to exercise  any stock option held by the Employee
     at the Termination  Date (whether or not then vested),  such option to
     remain  exercisable for six months after the Termination  Date, or for
     the  remainder of the exercise  period of the  applicable  option,  if
     shorter;

          (v) any amounts earned, accrued, or owing to the Employee through
     the Termination Date but not yet paid under Section 5 or 6 hereof;

          (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
          Section  7(d)(vi)  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,
     payable in a lump sum on the Termination Date.

     (e)  Termination  by the Employee for Good Reason.  The Employee shall
have the right to  terminate  the  Employment  Period  for Good  Reason (as
hereinafter  defined),  provided,  that,  not later  than  sixty  (60) days
following  the  occurrence  of the event  giving rise to the alleged  "Good
Reason," 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.  Notwithstanding the foregoing,  if
the event  giving rise to "Good  Reason" is the  occurrence  of a Change of
Control,  the Employee  shall,  at any time following the occurrence of the
Change of Control,  be entitled to terminate his employment for Good Reason
upon not less than sixty (60) days written  notice to the  Corporation.  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 7(d) hereof.  "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 from those set forth in Section 2 hereof,  or a
change  without good cause in the  Employee's  reporting  responsibilities,
(ii) a reduction in the Employee's Salary or the Guaranteed  Portion of the
1999  Bonus,  (iii) a material  reduction  in the  Employee's  benefits  or
perquisites  (other  than a  reduction  pursuant  to the last  sentence  of
Section 5 hereof);  (iv) a requirement  that  Employee  change his place of
principal  employment to a location  other than the  metropolitan  New York
area; or (v) the occurrence of a Change of Control.

     (f) Termination  following  Non-Renewal.  In the event the Corporation
notifies the Employee in writing at least 180 days prior to the  expiration
of the Initial  Term or any Renewal  Term that it is electing to  terminate
the  Employment  Period 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 annual rate in effect on the Termination Date
     for  a  period  of  one  year  following  the  Termination  Date  (the
     "Non-Renewal Severance Period");

          (iii)  pro-rated  Bonus with  respect to the fiscal year in which
     termination  occurs,  payable in accordance  with Section 4(b) hereof,
     and any Bonus for any fiscal  year  earned but not in fact paid before
     the Termination Date, payable in a lump sum as promptly as practicable
     following  the  Termination  Date,  but in no event later than fifteen
     (15) days after the Termination Date;

          (iv) the right to exercise  any stock option held by the Employee
     at the  Termination  Date,  to the extent  vested at such  date,  such
     option to remain exercisable for the Non-Renewal  Severance Period and
     for sixty (60) days  thereafter,  or for the remainder of the exercise
     period of the applicable option, if shorter;

          (v) any amounts earned, accrued, or owing to the Employee through
     the Termination Date but not yet paid under Section 5 or 6 hereof;

          (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
          Section  7(f)(vi)  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  by  the  Employee.  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 7(c) hereof.

     (h) 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 his  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  otherwise  exist.
"Severance  Payment"  shall  mean any  amount  paid or  payable  or benefit
provided  or to be  provided to the  Employee  with  respect to a Severance
Period or a Non-Renewal Severance Period, as the case may be.

     SECTION 8. COVENANT NOT TO COMPETE.  The Employee covenants and agrees
that he will not, at any time during the Restriction Period (as hereinafter
defined), 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  engaged in the
design,  manufacture  and/or  wholesale  or retail  sale of  designer  mens
apparel (and/or such other  additional  businesses in which the Corporation
or  any  of its  subsidiaries  may  hereafter  become  primarily  engaged),
including,  without limitation, any retail customer of the Corporation that
accounts  for 5% or more of the  Corporation'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 such  business 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  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 or entice any such person to leave
the employment of the Corporation;  provided,  however,  that this covenant
shall be inapplicable to any employee of the Corporation  whose  employment
is  involuntarily  terminated  by the  Corporation  following  a Change  of
Control.  "Restriction  Period"  shall mean the period  beginning  with the
Effective  Date and  ending  on the last day of either  (i) the  Employment
Period (determined  without giving effect to any termination of employment,
unless such  termination  was initiated by the  Corporation  for any reason
other  than  Cause),  (ii) the  Severance  Period or (iii) the  Non-Renewal
Severance Period, whichever is longer; provided, however, that the Employee
shall, at any time during the Severance Period or the Non-Renewal Severance
Period,  as the case may be, have the right to  immediately  terminate  the
Restriction  Period by waiving  any and all of his rights to all  Severance
Payments due the Employee from and after the date on which the  Restriction
Period terminates (i.e., the Severance Period or the Non-Renewal  Severance
Period,  as the case may be, and the Restriction  Period shall terminate as
of the date of the Employee's waiver).

     SECTION 9. 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 then 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  9  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 to the
     Employee,  become part of the public domain,  through no fault, act or
     omission of the Employee,  directly or indirectly, in violation of his
     obligations hereunder;

          (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; or

          (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 to the Employee.

     SECTION 10.  INDEMNIFICATION.  On the same terms and conditions as are
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 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  interest 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 the Employee 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,  that he had  reasonable  cause to believe that his conduct was
unlawful.  Notwithstanding  any other  provisions  of this  Agreement,  the
Corporation's  obligation  to  indemnify  the  Employee  shall  survive the
termination of the Employment  Period,  provided that in the event that the
Employee is terminated for Cause, the Corporation  shall have no obligation
to indemnify the Employee under this Section 10 against any liability, loss
or  expense  arising  from  conduct  that   constitutes   grounds  for  the
Corporation  to  terminate  the  Employment  Period for Cause  pursuant  to
Section 7(c) hereof.

     SECTION 11.  STOCK AND STOCK OPTION  PLAN.  Pursuant to the Plan,  the
Corporation shall reserve (the "Stock Option Reserve") ten percent (10%) of
the issued and outstanding  common stock,  par value $1.00 per share of the
Corporation  ("Common  Stock") on a fully  diluted basis (after taking into
account all shares of Common Stock subject to the Stock Option  Reserve) as
of the Effective  Date (the  "Outstanding  Stock") in order to create a new
employee stock option plan of the  Corporation  (the "Equity Plan") for the
benefit of non-management directors, executives and other employees. On the
Effective Date, the Equity Plan shall be authorized by the Plan pursuant to
which options to acquire a specified percentage of the Stock Option Reserve
shall be granted to (i) the Employee;  provided,  however, that in no event
shall the  Employee  be  granted  options  (the  "Guaranteed  Options")  to
purchase less than  twenty-five  percent (25%) of the Stock Option  Reserve
(i.e., two and one-half percent  (2-1/2%) of the Outstanding  Stock),  (ii)
the non-management  directors of the Corporation and (iii) those members of
management of the Corporation  selected by the Employee and approved by the
non-management members of the Board of Directors. The decision to grant any
additional  stock options from the balance of the Stock Option  Reserve and
the  administration  of the Equity Plan shall be in the sole  discretion of
the non-management members of the Board of Directors.

     SECTION 12. GUARANTEED OPTIONS.  (a) Grant of Guaranteed Options.  The
Guaranteed  Options shall be granted to the Employee on the Effective  Date
pursuant  to the terms and  conditions  set forth in the Equity Plan and an
agreement  (the "Option  Agreement") to be entered into by the Employee and
the Corporation,  which shall provide that (i) the Guaranteed Options shall
have an exercise  price per share equal to the Fair Market Value of a share
of Common Stock on the Effective  Date,  (ii) the Guaranteed  Options shall
have a duration of ten (10) years and (iii) the Employee  shall vest and be
entitled to exercise the Guaranteed Options with respect to one-third (1/3)
of  the  total  number  of  shares  of  Outstanding  Stock  subject  to the
Guaranteed  Options  from and  after  the  Effective  Date,  an  additional
one-third (1/3) of the total number of shares of Outstanding  Stock subject
to the  Guaranteed  Options  from  and  after  December  31,  1999  and the
remaining  one-third  (1/3) of the total  number  of shares of  Outstanding
Stock subject to the Guaranteed Options from and after December 31, 2000.

     This  Section  12  constitutes   "written   clearance  from  the  Code
Administrator"  (within the meaning of Section 17 of the Company's  Code of
Conduct,  dated January 1998 (the "Code of  Conduct"))  with respect to the
Employee's acquisition of the Guaranteed Options, his acquisition of Common
Stock  upon  exercise  thereof  and his sale or other  disposition  of such
Common Stock thereafter; provided, however, that, except as contemplated in
Section 12(b)  following a Change of Control,  in no event may the Employee
engage in any "securities transaction" (within the meaning of Section 17 of
the Code of Conduct) (i) that is based upon, or otherwise entered into as a
result of, the Employee's knowledge of Temporary  Confidential  Information
(as  defined in the Code of  Conduct)  or (ii)  during any period  that the
Company has instituted a "freeze"  (within the meaning of Section 17 of the
Code of Conduct) on trading by salaried employees generally.

     (b) Effect of a Change of Control.  The Option Agreement shall provide
that  upon a  Change  of  Control  during  the  Employment  Period  (i) the
Guaranteed  Options,  to the extent not theretofore vested and exercisable,
shall  immediately  become  fully  vested and  exercisable  and (ii) to the
extent that the aggregate value derived by the Employee from the Guaranteed
Options upon exercise of the Guaranteed Options is less than an amount (the
"Guaranteed  Amount")  equal to the  greater  of (A) 0.8% of the  aggregate
value  of  the  consideration   received  by  the  Corporation  and/or  its
shareholders in connection with the Change of Control and (B) $675,000, the
Corporation shall, immediately after the Change of Control, make a lump sum
cash payment to the Employee equal to such difference;  provided,  however,
that the aggregate amount of such payment shall be  appropriately  adjusted
to take into account any shares of Common Stock  acquired  upon exercise of
the Guaranteed Options that the Employee shall have previously disposed of;
provided,  further,  however, that in no event shall the mechanism by which
the Company provides the Guaranteed Amount (or appropriate portion thereof)
to the Employee cause the Employee to engage in a transaction the result of
which would subject the Employee to a suit pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended,  and the rules and regulations
promulgated  thereunder  to recover the profit  realized by the Employee in
connection with all or such portion of the Guaranteed Options in respect of
which the Guaranteed Amount is being paid.

     SECTION  13.  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 14. LEGAL EXPENSES.  The Corporation  shall pay all legal fees
and  related  expenses  incurred  by the  Employee  as a result  of (i) the
Employee's termination of employment (including all such fees and expenses,
if any,  incurred  in  contesting  or  disputing  any such  termination  of
employment)  if the  Corporation  has  been  found to be in  breach  of its
obligations  hereunder or (ii) the Employee's  seeking to obtain or enforce
any right or benefit provided by this Agreement,  if the Employee  prevails
against the  Corporation  in any  proceeding in which rights  hereunder are
contested.

     SECTION 15. ASSIGNMENT.  This Agreement shall not be assignable by any
of the parties hereto.

     SECTION  16.  NOTICES.  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
facsimile  (with  receipt  confirmed)  or five 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, then to the following:

            Salant Corporation
            1114 Avenue of the Americas
            New York, New York  10036
            Attention:  Board of Directors

     If to the Employee, then to the following:

            Michael J. Setola
            44 Sneider Road
            Warren, New Jersey  07059

            With a copy to:

            Thomas A. Hickey, Esq.
            Eaton & Van Winkle
            3 Park Avenue
            New York, New York  10016

Each party may, by notice to the other  parties as provided in this Section
16, change his or its address set forth above.

     SECTION 17. ENTIRE AGREEMENT;  AMENDMENTS. This Agreement embodies the
entire agreement and understanding between the Employee and the Corporation
and supersedes all prior agreements and understandings as to the employment
of  the  Employee   (including  the  Prior   Agreement,   which  is  hereby
terminated). 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 whom or which enforcement is sought.

     SECTION  18.  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 19.  COUNTERPARTS.  This  Agreement may be executed in several
counterparts, each of which shall be deemed to be an original.

     SECTION 20.  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
may occur in the event that  Sections 8 and 9 hereof are not  performed  in
accordance  with their  specific  terms or are  otherwise  breached  by the
Employee.  It is accordingly  agreed that the Corporation shall be entitled
to an injunction or injunctions to prevent  breaches of such  provisions in
any Court of the United  States or any  states  having  jurisdiction,  this
being in  addition  to any other  remedy to which  the  Corporation  may be
entitled  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 8 and/or 9 hereof,  the  parties  agree  that,  as a
condition  precedent to the  commencement  of any  arbitration 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  hereunder.  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.  Except as provided in Section 14 hereof, each party
shall  bear his or its own costs of the  arbitration  or court  proceeding,
including,  without limitation,  attorneys' fees. Pending the resolution of
any such arbitration or court  proceeding,  the Corporation  shall continue
payment of all amounts and benefits due the Employee  under this  Agreement
during the pendency thereof.

     SECTION 21. CERTAIN DEFINITIONS.

     "Affiliate"  shall  mean any  Person  that,  directly  or  indirectly,
Controls,  is  Controlled  by or is under common  Control  with,  any other
Person.

     "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;
(ii) the Corporation consolidates with or merges into another 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;
or (iii) the Corporation conveys,  transfers or leases all or substantially
all of its assets to any Person. Notwithstanding the foregoing, a Change of
Control shall not be deemed to occur if the Person described in clause (i),
(ii) or (iii) is Magten Asset Management Corp. or is an Affiliate of Magten
Asset Management Corp.

     "Fair Market  Value" on any date means the average of the high and low
sales  prices of the shares of Common  Stock 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 such shares on such date, the Fair Market
Value  shall be the value  established  by the Board of  Directors  in good
faith.

     "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, by
reason of ownership of Voting Stock, by contract or otherwise.


<PAGE>


     "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
date first-above written.


                                          SALANT CORPORATION


                                          By:
                                             ------------------------------


                                             ------------------------------
                                                   MICHAEL J. SETOLA


<PAGE>


                                                                  EXHIBIT 1
                                                                  ---------

                              FISCAL YEAR 1999
                         ANNUAL CASH BONUS SCHEDULE
                         --------------------------

     (a) With respect to the Corporation's 1999 Fiscal Year:

          (i) if the aggregate  Perry Ellis Division EBITDA (as hereinafter
     defined) for the entire 1999 Fiscal Year ("Actual Perry Ellis Division
     EBITDA") is equal to 100% of the  aggregate  amount of the Perry Ellis
     Division  EBITDA  projected in the annual business plan for the entire
     1999  Fiscal  Year  adopted  by  the  Compensation  Committee  of  the
     Corporation's  Board of  Directors on May 27, 1999  ("Projected  Perry
     Ellis Division  EBITDA"),  the Employee shall receive a Bonus equal to
     $650,000;

          (ii) if the Actual  Perry Ellis  Division  EBITDA is greater than
     100% of the Projected Perry Ellis Division EBITDA,  the Employee shall
     receive a Bonus in an amount equal to the sum of (A) $650,000 plus (B)
     an amount  equal to 1% of $650,000 for each full 1% increment by which
     the Actual Perry Ellis  Division  EBITDA  shall  exceed the  Projected
     Perry Ellis Division EBITDA;

          (iii) if the Actual Perry Ellis  Division  EBITDA is greater than
     90% and less than 100% of the Projected  Perry Ellis Division  EBITDA,
     the Employee  shall receive a Bonus in an amount equal to (A) $650,000
     minus (B) an amount equal to 2% of $650,000 for each full 1% increment
     by which  the  Actual  Perry  Ellis  Division  EBITDA is less than the
     Projected Perry Ellis Division EBITDA;

          (iv) if the Actual Perry Ellis Division EBITDA is equal to 90% of
     the Projected Perry Ellis Division EBITDA,  the Employee shall receive
     a Bonus equal to $520,000; and

          (v) if the Actual Perry Ellis Division EBITDA is less than 90% of
     the Projected Perry Ellis Division EBITDA,  the Employee shall receive
     a Bonus equal to $325,000.

     (b) "Perry Ellis  Division  EBITDA" shall mean the  aggregate  pre-tax
income of the Perry Ellis  Division for the 1999 fiscal  year,  as shown on
the  Corporation's   audited  financial  statements  (which  shall  include
deductions for the following  expenses:  (i) write-offs of inventory,  (ii)
1999 employee  salaries and bonuses,  (iii)  depreciation and amortization,
and (iv)  interest,  but no deduction or other  provision  for any federal,
state  or local  income  taxes),  provided,  that  the  following  shall be
excluded  from "Perry Ellis  Division  EBITDA":  all  extraordinary  items,
including  gains  and  losses  on the sale of fixed or  intangible  assets,
permanent (but not temporary)  sales of customs quotas,  gains or losses on
the termination of any employee  benefit plan and all insurance  recoveries
not  related to the 1999  operations  of the Perry  Ellis  Division  (i.e.,
business  interruption  insurance and inventory loss or casualty  insurance
recoveries  shall be included in the  calculation  of "Perry Ellis Division
EBITDA," but gains or losses on  recoveries  with respect to fixed or other
capital assets shall not be so included).


<PAGE>


                                                                  EXHIBIT 2
                                                                  ---------

                             CALCULATION PERIOD
                            CASH BONUS SCHEDULE
                            -------------------

     With respect to the Calculation Period:

          (a) if the aggregate Perry Ellis Division EBITDA for all complete
     months  during the  Calculation  Period  ("Actual  Calculation  Period
     EBITDA") is equal to 100% of the  aggregate  amount of the Perry Ellis
     Division  EBITDA  projected in the annual business plan adopted by the
     Compensation Committee of the Corporation's Board of Directors for all
     complete months during the Calculation Period ("Projected  Calculation
     Period  EBITDA"),  the  Monthly-Based  1999  Bonus  shall  be equal to
     $650,000;

          (b) if the Actual  Calculation Period EBITDA is greater than 100%
     of the Projected  Calculation  Period EBITDA,  the Monthly-Based  1999
     Bonus  shall be equal to the sum of (A)  $650,000  plus (B) an  amount
     equal to 1% of $650,000 for each full 1% increment by which the Actual
     Calculation  Period  EBITDA  shall  exceed the  Projected  Calculation
     Period EBITDA;

          (c) if the Actual  Calculation  Period EBITDA is greater than 90%
     and less than 100% of the Projected  Calculation  Period  EBITDA,  the
     Monthly-Based  1999 Bonus shall be equal to (A) $650,000  minus (B) an
     amount equal to 2% of $650,000 for each full 1% increment by which the
     Actual   Calculation   Period   EBITDA  is  less  than  the  Projected
     Calculation Period EBITDA;

          (d) if the Actual  Calculation  Period  EBITDA is equal to 90% of
     the Projected  Calculation Period EBITDA, the Monthly-Based 1999 Bonus
     shall be equal to $520,000; and

          (e) if the Actual  Calculation  Period EBITDA is less than 90% of
     the Projected  Calculation Period EBITDA, the Monthly-Based 1999 Bonus
     shall be equal to $325,000.


<PAGE>


                                                                  EXHIBIT 3
                                                                  ---------

                        FISCAL YEARS 2000 AND BEYOND
                         ANNUAL CASH BONUS SCHEDULE
                         --------------------------

     (a) With  respect to each of the  Corporation's  fiscal years 2000 and
beyond:

          (i) if the  Corporation's  Earnings (as hereinafter  defined) for
     the entire relevant fiscal year ("Actual  Earnings") are equal to 100%
     of the amount of the  Corporation's  Earnings  projected in the annual
     business  plan for that fiscal  year,  as mutually  agreed upon by the
     Corporation  and the  Employee  ("Projected  Earnings"),  the Employee
     shall  receive a Bonus in respect of that fiscal year equal to 100% of
     the Employee's annual Salary at the end of the applicable fiscal year;

          (ii) if Actual  Earnings for the relevant fiscal year are greater
     than 100% of Projected  Earnings  for that fiscal  year,  the Employee
     shall  receive a Bonus in  respect  of that  fiscal  year in an amount
     equal  to the sum of (A) an  amount  equal  to 100% of the  Employee's
     annual  Salary at the end of the  applicable  fiscal  year plus (B) an
     amount equal to 1% of the  Employee's  annual Salary at the end of the
     applicable  fiscal  year for each full 1%  increment  by which  Actual
     Earnings shall exceed Projected Earnings;

          (iii) if Actual Earnings for the relevant fiscal year are greater
     than 90% and less  than 100% of  Projected  Earnings  for that  fiscal
     year,  the  Employee  shall  receive a Bonus in respect of that fiscal
     year in an amount equal to (A) 100% of the Employee's annual Salary at
     the end of the applicable  fiscal year minus (B) an amount equal to 2%
     of the Employee's  annual Salary at the end of the  applicable  fiscal
     year for each full 1% increment by which Actual Earnings are less than
     Projected Earnings;

          (iv) if Actual Earnings for the relevant fiscal year are equal to
     90% of Projected  Earnings for that fiscal  year,  the Employee  shall
     receive a Bonus in  respect  of that  fiscal  year equal to 80% of the
     Employee's annual Salary at the end of the applicable fiscal year; and

          (v) if Actual Earnings for the relevant fiscal year are less than
     90% of Projected Earnings for that fiscal year, the Employee shall not
     be entitled to any Bonus in respect of that fiscal year.

     (b) "Earnings"  shall mean the aggregate  earnings of the Corporation,
as shown on the Corporation's audited financial  statements,  calculated in
any manner  (whether  by  reference  to EBITDA or any other  measure of net
earnings)  utilized in the annual  projected  business plan relating to the
relevant fiscal year as a measure of the Employee's performance.