UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

            (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended January 2, 1999

                                       OR

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                          Commission file number 1-6666

                               SALANT CORPORATION
             (Exact name of registrant as specified in its charter)

              1114 Avenue of the Americas, New York, New York 10036
                            Telephone: (212) 221-7500

  Incorporated in the State of Delaware Employer Identification No. 13-3402444

           Securities registered pursuant to Section 12(b) of the Act:
                      Common Stock, par value $1 per share,
                   registered on the New York Stock Exchange.

        Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes X  No __

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.

         Indicate by check mark whether the  registrant  has filed all documents
and reports  required  to be filed by Section 12, 13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes X No __

         As of April 7, 1999,  there were outstanding  14,984,608  shares of the
Common Stock of the  registrant.  Based on the closing price of the Common Stock
on the New York Stock Exchange on such date,  the aggregate  market value of the
voting  stock  held  by  non-affiliates  of the  registrant  on  such  date  was
$1,067,704.  For purposes of this computation,  shares held by affiliates and by
directors and executive  officers of the  registrant  have been  excluded.  Such
exclusion of shares held by directors  and  executive  officers is not intended,
nor shall it be deemed,  to be an admission  that such persons are affiliates of
the registrant.



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                                                 TABLE OF CONTENTS



PART I                                                                                                                     Page
     <S>          <C>             
     Item 1.      Business
     Item 2.      Properties
     Item 3.      Legal Proceedings
     Item 4.      Submission of Matters to a Vote of Security Holders

PART II

     Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters
     Item 6.      Selected Consolidated Financial Data
     Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations
     Item 8.      Financial Statements and Supplementary Data
     Item 9.      Disagreements on Accounting and Financial Disclosure

PART III

     Item 10.     Directors and Executive Officers of the Registrant
     Item 11.     Executive Compensation
     Item 12.     Security Ownership of Certain Beneficial Owners and Management
     Item 13.     Certain Relationships and Related Transactions

PART IV

     Item 14.     Exhibits, Financial Statement Schedule and Reports on Form 8-K

SIGNATURES
</TABLE>


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                                                      PART I

ITEM 1.  BUSINESS

Introduction.   Salant  Corporation  ("Salant"  or  the  "Company"),  which  was
incorporated in Delaware in 1987, is the successor to a business founded in 1893
and incorporated in New York in 1919. Salant designs, manufactures,  imports and
markets to retailers  throughout  the United States brand name and private label
menswear apparel products. Salant sells its products to department and specialty
stores,  national chains, major discounters and mass volume retailers throughout
the United States. In June 1997, the Company  discontinued the operations of the
Made  in  the  Shade  division,  which  produced  and  marketed  women's  junior
sportswear. In December 1998, the Company determined to discontinue and sell its
Salant Children's Apparel Group (the "Children's Group"), which manufactures and
markets blanket sleepers,  pajamas and underwear. (As used herein, the "Company"
includes Salant and its subsidiaries,  but excludes the Children's Group and the
Made in the Shade divisions.)

Bankruptcy Court Cases.

On June 27,  1990,  Salant  and Denton  Mills each filed with the United  States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy  Court")
a separate  voluntary  petition for relief  under  chapter 11 of title 11 of the
United States Code (the  "Bankruptcy  Code").  On July 30, 1993,  the Bankruptcy
Court issued an order confirming the Company's reorganization plan.

On December 29, 1998 (the "Filing Date"),  Salant filed a petition under chapter
11 of the  Bankruptcy  Code in the  Bankruptcy  Court (the "Chapter 11 Case") in
order to implement a restructuring of its 10-1/2 % Senior Notes due December 31,
1998 (the "Senior  Notes").  Salant also filed its plan of  reorganization  (the
"Plan") with the Bankruptcy Court in order to implement its restructuring.

Pursuant to the Plan, Salant intends to focus primarily on its Perry Ellis men's
apparel  business  and,  as a  result,  intends  to exit its  other  businesses,
including its Children's Group and non-Perry Ellis menswear  divisions.  To that
end, Salant has sold its John Henry and Manhattan  businesses.  These businesses
include the John Henry, Manhattan and Lady Manhattan trade names, the John Henry
and Manhattan  dress shirt  inventory,  the leasehold  interest in a dress shirt
facility  located in Valle  Hermosa,  Mexico,  and the equipment  located at the
Valle Hermosa facility and at Salant's  facility located in Andalusia,  Alabama.
Salant has also sold its Children's Group business.  This sale was primarily for
inventory related to the Children's Group business and the Dr. Denton Trademark.

The Plan provides  that (i) all of the  outstanding  principal  amount of Senior
Notes, plus all accrued and unpaid interest thereon,  will be converted into 95%
of Salant's  new common  stock,  subject to  dilution,  and (ii) all of Salant's
existing  common stock will be converted  into 5% of Salant's new common  stock,
subject to dilution.  Salant's  general  unsecured  creditors  (including  trade
creditors)  are  unimpaired  and upon  consummation  of the Plan will be paid in
full.  The Plan has been  approved  by all of the  holders of Senior  Notes that
voted and over 96% of the holders of Salant common stock that voted.

On March 25, 1999, the Bankruptcy  Court held a hearing on the  confirmation  of
the Plan. At that hearing,  the Bankruptcy  Court advised that it would take the
objection to confirmation  under  advisement and that it expected to rule on the
objection.  Prior to the Bankruptcy  Court's  announcement  of its ruling on the
objection,  Salant  and  Supreme  International,  Inc.  ("Supreme")  (in its own
capacity and on behalf of Perry Ellis  International,  Inc. ("PEI", and together
with Supreme  "Supreme-PEI")),  which had filed an  objection  to  confirmation,
settled  and  resolved  their  differences,  and the  economic  terms  of  their
settlement  were set forth in a term sheet (the "Term Sheet") which was attached
to  and  incorporated  into  the  confirmation  order  (the  "PEI  Settlement").
Thereafter, at the April 16, 1999 hearing, the Bankruptcy Court entered an order
confirming the Plan (the "Confirmation Order").

     The PEI Settlement.  The following is a summary of the material  provisions
     of the Term  Sheet  setting  forth  the  terms of the PEI  Settlement.  The
     following description is qualified in its entirety by the provisions of the
     Term Sheet,  which is attached as Exhibit A to the Comfirmation  Order. The
     PEI  Settlement  provides that (i) Salant will return to PEI the license to
     sell Perry Ellis products in Puerto Rico, the U.S. Virgin Islands, Guam and
     Canada  (Salant  will retain the right to sell its  existing  inventory  in
     Canada  through  January 31,  2000);  (ii) the  royalty  rate due PEI under
     Salant's Perry Ellis  Portfolio pants license with respect to regular price
     sales in excess of $15.0  million  annually  will be increased to 5%; (iii)
     Salant  will  provide  Supreme-PEI  with the  option  to take over any real
     estate lease for a retail store that Salant  intends to close;  (iv) Salant
     will assign to Supreme-PEI  its sublicense with Aris  Industries,  Inc. for
     the  manufacture,  sale and  distribution  of the Perry Ellis America brand
     sportswear and, depending on certain circumstances, receive certain royalty
     payments from  Supreme-PEI  through the year 2005;  (v) Salant will pay PEI
     its prepetition invoices of $616,844 and post-petition  invoices of $56,954
     on the later of (a) the Effective Date (as defined in the Plan) of the Plan
     and (b) the due date with respect to such  amounts;  (vi)  Supreme-PEI  (a)
     agrees and acknowledges  that the sales of businesses made by Salant during
     its Chapter 11 case do not violate the terms of Salant's license agreements
     with  PEI  (the  "Perry  Ellis  Licenses")  and do  not  give  rise  to the
     termination  of the Perry Ellis  Licenses and (b) consents to the change of
     control  arising from the conversion of debt into equity under the Plan and
     acknowledges that such change of control does not give rise to any right to
     terminate the Perry Ellis Licenses;  and (vii)  Supreme-PEI  withdraws with
     prejudice  its  objection  to   confirmation  of  the  Plan,  and  supports
     confirmation of the Plan.

Men's Apparel.  In fiscal 1998, the men's apparel  business was comprised of the
Perry Ellis division and Salant Menswear Group. The Perry Ellis division markets
dress shirts,  slacks and sportswear  under the PERRY ELLIS,  PORTFOLIO BY PERRY
ELLIS and PERRY ELLIS AMERICA trademarks. Salant Menswear Group was comprised of
the Accessories  division,  the Bottoms  division and all dress shirt businesses
other than those  selling  products  bearing  the PERRY  ELLIS  trademarks.  The
Accessories  division markets  neckwear,  belts and suspenders under a number of
different  trademarks,  including PORTFOLIO BY PERRY ELLIS, JOHN HENRY, SAVE THE
CHILDREN and PEANUTS.  The Bottoms  division  primarily  manufactures  men's and
boys' jeans,  principally under the Sears,  Roebuck & Co. ("Sears") CANYON RIVER
BLUES trademark,  and men's casual slacks under Sears' CANYON RIVER BLUES KHAKIS
trademark (collectively "Canyon River Blues Product").  Pursuant to an Agreement
dated March 10, 1999,  between the Company and Sears,  the Company has agreed to
continue to deliver, in the ordinary course, Canyon River Blues Product to Sears
until the middle of May 1999.  During  the end of May and early  June 1999,  the
Company will  deliver to Sears the  remaining  Canyon  River Blues  Product at a
discount to Sears.  The  Agreement by its terms is subject to  Bankruptcy  Court
approval. A motion seeking approval of the Agreement is currently pending before
the Bankruptcy Court. If no objections to the motion are filed, the Company will
present an order for signature to the Bankruptcy  Court  approving the motion on
April 26, 1999. To date, no objections to the motion have been filed.

The Salant  Menswear Group also marketed dress shirts,  primarily under the JOHN
HENRY and MANHATTAN trademarks. Pursuant to the Plan, the Company has sold or is
in the processes of selling or otherwise  disposing of substantially  all of its
businesses other than the businesses conducted under the Perry Ellis Trademarks.
In that  connection,  the  Company  sold its dress shirt  business  and its John
Henry,  Manhattan and related  trademarks to Supreme  pursuant to a Purchase and
Sale Agreement, dated December 28, 1998 (subject to and subsequently approved by
the Bankruptcy Court on February 26, 1999).

Children's  Sleepwear  and  Underwear.  In 1998,  the  children's  sleepwear and
underwear  business was conducted by the Children's Group . The Children's Group
marketed  blanket  sleepers  primarily  using a number  of  well-known  licensed
cartoon  characters  created  by,  among  others,  DISNEY and WARNER  BROS.  The
Children's Group also marketed pajamas under the OSHKOSH B'GOSH  trademark,  and
sleepwear and underwear under the JOE BOXER  trademark.  At the end of the first
quarter of 1998,  the  Company  determined  not to  continue  with its Joe Boxer
sportswear  line for Fall 1998.  Instead,  consistent with the approach that the
Joe Boxer Corporation  (Salant's licensor of the Joe Boxer trademark) had taken,
the  Company  focused  on its core  business  of  underwear  and  sleepwear.  In
connection  with the Plan, the Company  adopted a formal plan to discontinue the
Children's  Group.  Pursuant to a Purchase and Sale Agreement  dated January 14,
1999, the Company sold to the Wormser Company ("Wormser"), all of Salant's right
to, title and interest in, certain assets of the Children's Group. All assets of
the Children's Group not sold to Wormser have been or will be disposed.

Retail Outlet Stores.  The retail outlet stores business of the Company consists
of a chain of factory  outlet stores (the "Stores  division"),  through which it
sells products manufactured by the Company and other apparel  manufacturers.  In
December 1997, the Company  announced the  restructuring of the Stores division,
pursuant  to which the  Company  closed  all stores  other than its Perry  Ellis
outlet stores.  This resulted in the closing of 42 outlet stores.  At the end of
1998, Salant operated 19 Perry Ellis outlet stores and 1 close-out store.

Significant  Customers.  In 1998,  approximately 20% of the Company's sales were
made  to  Sears  and  approximately  14% of the  Company's  sales  were  made to
Federated Department Stores, Inc. ("Federated"). Also in 1998, approximately 11%
of the  Company's  sales were made to Dillard's  Corporation  ("Dillard's")  and
approximately  10% of the  Company's  sales  were  made to  Marmaxx  Corporation
("Marmaxx").  In 1997  approximately  10% of the  Company's  sales  were made to
Dillards.  In 1997 and 1996,  approximately  11% and 10% of the Company's  sales
were  made  to  Marmaxx,  respectively  and  approximately  19%  and  15% of the
Company's sales were made to Sears for 1997 and 1996, respectively. In both 1997
and 1996, approximately 12% of the Company's sales were made to Federated.

No other customer accounted for more than 10% of the sales during 1996, 1997 or
1998.

Trademarks.  The markets in which the Company  operates are highly  competitive.
The  Company  competes  primarily  on the basis of brand  recognition,  quality,
fashion, price, customer service and merchandising expertise.

Approximately  76% of the  Company's  net  sales  for 1998 was  attributable  to
products  sold under  Company owned or licensed  designer  trademarks  and other
internationally  recognized  brand  names and the balance  was  attributable  to
products sold under  retailers'  private labels,  including  Sears' CANYON RIVER
BLUES.

Pursuant  to the  Plan,  substantially  all of the  Company's  business  will be
conducted  under the Perry Ellis  Trademarks.  During 1998, 55% of the Company's
sales was  attributable  to products  sold under the PERRY  ELLIS,  PORTFOLIO BY
PERRY ELLIS and PERRY ELLIS AMERICA trademarks;  these products are sold through
leading  department  and specialty  stores.  Approximately  11% of the Company's
sales were attributable to products sold under the MANHATTAN trademark. Products
sold to Sears under its exclusive  brand CANYON RIVER BLUES accounted for 15% of
the Company's  sales during 1998.  No other line of products  accounted for more
than 10% of the Company's sales during 1998.

Trademarks  Licensed to the Company.  The Perry Ellis Trademarks are licensed to
the Company  under the Perry Ellis  Licenses  with PEI.  The license  agreements
contain renewal options,  which,  subject to compliance with certain  conditions
contained  therein,  permit  the  Company  to extend  the terms of such  license
agreements.  Assuming  the  exercise  by the  Company of all  available  renewal
options,  the license  agreements  covering men's apparel and  accessories  will
expire on  December  31,  2015.  The  Company  also has rights of first  refusal
worldwide  for  certain  new  licenses  granted  by PEI for  men's  apparel  and
accessories.  On January  28,  1999,  PEI and  Supreme  announced  that they had
entered into a definitive  agreement  under which  Supreme will acquire for cash
all of the stock of PEI for $75 million. On April 7, 1999, Supreme completed the
acquisition of PEI and became Salant's licensor under the Perry Ellis Licenses.

Design and  Manufacturing.  Products sold by the Company's various divisions are
manufactured to the designs and specifications  (including fabric selections) of
designers employed by those divisions. In limited cases, the Company's designers
may receive input from one or more of the Company's  licensors on general themes
or color palettes.

During 1998, approximately 10% of the products produced by the Company (measured
in units) were manufactured in the United States, with the balance  manufactured
in  foreign  countries.   Facilities  operated  by  the  Company  accounted  for
approximately  90% of its  domestic-made  products  and 30% of its  foreign-made
products;  the balance in each case was  attributable to  unaffiliated  contract
manufacturers.  In 1998,  approximately 37% of the Company's foreign  production
was manufactured in Mexico, and approximately 23% was manufactured in Guatemala.

The Company's foreign sourcing  operations are subject to various risks of doing
business  abroad,  including  currency  fluctuations  (although the  predominant
currency  used is the U.S.  dollar),  quotas and, in certain parts of the world,
political   instability.   Although  the  Company's  operations  have  not  been
materially  adversely  affected by any of such factors to date, any  substantial
disruption  of its  relationships  with its foreign  suppliers  could  adversely
affect its operations.  Some of the Company's imported merchandise is subject to
United States Customs  duties.  In addition,  bilateral  agreements  between the
major exporting  countries and the United States impose quotas,  which limit the
amounts of certain  categories  of  merchandise  that may be  imported  into the
United States. Any material increase in duty levels,  material decrease in quota
levels or material  decrease in  available  quota  allocations  could  adversely
affect the Company's operations.

Raw Materials.  The raw materials used in the Company's manufacturing operations
consist principally of finished fabrics made from natural, synthetic and blended
fibers.  These  fabrics  and  other  materials,  such  as  leathers  used in the
manufacture of various accessories, are purchased from a variety of sources both
within and outside the United States. The Company believes that adequate sources
of supply at  acceptable  price  levels are  available  for all such  materials.
Substantially  all of the Company's  foreign  purchases are  denominated in U.S.
currency.  No  single  supplier  accounted  for more  than 10% of  Salant's  raw
material purchases during 1998.

Employees.  As of the end of 1998,  the  Company  employed  approximately  3,200
persons, of whom 2,700 were engaged in manufacturing and distribution operations
and the  remainder  were employed in  executive,  marketing  and sales,  product
design,  engineering  and  purchasing  activities  and in the  operation  of the
Company's retail outlet stores. Substantially all of the manufacturing employees
are covered by collective bargaining agreements with various unions. The Company
believes that its relations with its employees are satisfactory. Pursuant to the
business plan being implemented by means of the Plan, the Company will no longer
engage  in  manufacturing  and will  close all of its  distribution  facilities,
except for its Winnsboro,  South  Carolina  facility.  Accordingly,  the Company
anticipates  employing  approximately  500 persons  following the disposition of
those facilities used in the non-Perry Ellis business.

Competition. The apparel industry in the United States is highly competitive and
characterized by a relatively small number of multi-line  manufacturers (such as
the Company) and a larger number of specialty  manufacturers.  The Company faces
substantial  competition in its markets from companies in both categories.  Many
of the Company's  competitors have greater financial resources than the Company.
The Company  seeks to maintain its  competitive  position in the markets for its
branded  products on the basis of the strong brand  recognition  associated with
those  products  and,  with  respect  to all of its  products,  on the  basis of
styling, quality, fashion, price and customer service.

Environmental  Regulations.  Current environmental regulations have not had, and
in the opinion of the Company,  assuming the continuation of present conditions,
are  not  expected  to  have  a  material   effect  on  the  business,   capital
expenditures, earnings or competitive position of the Company.

Seasonality of Business and Backlog of Orders. This information is included 
under Item 7. Management's Discussion and Analysis of Financial Condition and 
Results of Operations.

Salant Children's Group - Discontinued  Operation. In December 1998, the Company
determined to restructure and sell its Children's Group,  which manufactured and
marketed  blanket  sleepers  primarily  using a  number  of  well-known  cartoon
characters created by, among others, DISNEY and WARNER BROTHERS.  The Children's
Group also marketed pajamas under the OSHGOSH B'GOSH trademark and sleepwear and
underwear under the JOE BOXER trademark. The financial statements of the Company
included  in this  report  treat  Salant's  Children's  Group as a  discontinued
operation.


Made  in  the  Shade  -  Discontinued  Operation.  In  June  1997,  the  Company
discontinued  the operations of the Made in the Shade  division,  which produced
and marketed  women's junior  sportswear under the Company owned trademarks MADE
IN THE SHADE and PRIME TIME. The financial statements of the Company included in
this report treat the Made in the Shade division as a discontinued operation.

Events Leading to the Chapter 11 Filing

Since emerging from bankruptcy in September  1993,  Salant had from time to time
explored various  strategies  regarding its overall business  operations and, in
particular,  various possible transactions that would result in a refinancing of
its long-term debt obligations.  In this connection,  during the period from the
beginning of the fiscal year ending January 3, 1998 ("Fiscal  1997") through the
Filing Date,  Salant from time to time  received  indications  of interest  from
various third parties to purchase all or a portion of its  businesses or assets.
During this period,  Salant's refinancing efforts were significantly hampered by
its  inconsistent   operating  results  and  the  fact  that  investors  in  the
marketplace  generally did not look favorably upon investing in highly-leveraged
apparel companies.

In the latter half of Fiscal 1997,  Salant,  working with its various investment
banking firms, its Board of Directors (the "Board") and management, analyzed and
assessed its  financial  situation and explored the  availability  of capital in
both the  private  and  public  debt  and  equity  markets  for the  purpose  of
recapitalizing.  The  investment  banking firms advised Salant that they did not
believe that it could  recapitalize by use of the capital  markets,  in light of
Salant's past inconsistent operating  performance,  together with the reluctance
of investors to invest in apparel companies  suffering from high  debt-to-equity
ratios.

Salant's  unfavorable  operating results continued throughout the fourth quarter
of Fiscal 1997.  Net sales (prior to  discontinued  operations  adjustments  for
Salant  Children's  Group) for the fourth  quarter  of Fiscal  1997 were  $116.4
million,  a 1.1%  increase from the  comparable  quarter in 1996.  However,  net
losses  amounted to $5.6 million (as compared to a net income of $6.1 million in
1996), and the loss from continuing operations before interest, income taxes and
extraordinary gain was $2.4 million (as compared to $10.6 million of income from
continuing  operations  before interest and income taxes for the same quarter of
1996). These results heightened  Salant's concern that absent a restructuring or
other  extraordinary  transaction,  it would be difficult for Salant to make the
principal  payment  under its Senior  Notes due on  December  31, 1998 of $104.9
million.

Moreover,  during the fourth  quarter of Fiscal  1997,  Salant  closed 42 of its
retail  outlets  (representing  all retail  outlets  other than the Perry  Ellis
outlet stores), determined to close one of its distribution centers, and changed
the sourcing of a portion of its Perry Ellis product  line.  While these changes
were  essential to streamline  Salant by  eliminating  non-core  businesses  and
correcting  operational  issues,  these  actions  had a  detrimental  effect  on
Salant's earnings in Fiscal 1997.

As a result,  heading into fiscal year 1998, Salant was concerned that, in light
of its  inconsistent  operating  performance and inability to access the capital
markets to refinance or retire its indebtedness under the Senior Notes, Salant's
ability to maintain the support and confidence of its trade vendors was at risk.
In that connection, Salant, in consultation with its financial advisors, decided
that it needed to immediately address its high level of indebtedness in order to
avoid  any  permanent  adverse  effects  on  its  business  operations,   future
productivity and growth potential.

In addition,  as a result of Salant's  performance  during  Fiscal  1997,  as of
January 3, 1998,  Salant failed to meet certain of the financial  covenants (the
"CIT  Financial  Covenants")  contained in the Revolving  Credit,  Factoring and
Security  Agreement,  dated as of September  20,  1993,  as amended (the "Credit
Agreement") between Salant and The CIT Group/Commercial  Services, Inc. ("CIT"),
its working capital lender. In this connection, Salant reviewed the advisability
of making the $5.5 million  interest payment on the Senior Notes due and payable
on  March  2,  1998  with  a view  towards  maximizing  liquidity  in  order  to
appropriately   fund  operations   during  the  pendency  of  the  restructuring
transactions.  Commencing in December 1997,  Salant began  discussions with CIT,
regarding a possible  restructuring  of Salant's  indebtedness  under the Senior
Notes  (including  various issues relating to its future ability to meet the CIT
Financial  Covenants and the March 1998 interest  payment on the Senior  Notes).
Salant believed that,  given the potential  instability  that is associated with
any  restructuring  process,  it would be most productive to adopt a strategy to
maximize  liquidity and thereby  protect the total  enterprise  value of Salant.
Salant also concluded that holders of Senior Notes (the  "Noteholders")  and its
equity security holders (the "Shareholders")  would best be served by converting
the Senior Notes into equity,  thus  allowing  Salant to eliminate a significant
portion of its debt and substantially improve its balance sheet.

The March 2 Letter Agreement

In furtherance of its continuing efforts to deleverage, Salant approached Magten
Asset  Management  Corp.  ("Magten"),  the beneficial  owner,  or the investment
manager on behalf of the  beneficial  owners of,  approximately  $74  million in
aggregate principal face amount of the Senior Notes, representing  approximately
71% of the  aggregate  principal  amount of all Senior  Notes,  to  discuss  the
possible terms and conditions of a restructuring of the  indebtedness  under the
Senior Notes,  including the Senior Notes held by Magten.  In connection  with a
possible restructuring, Salant agreed to finance the retention of Hebb & Gitlin,
a Professional  Corporation ("H&G"), as special counsel to Magten, and Allen and
Company Incorporated,  as financial advisor to H&G. During the months of January
and February 1998,  Salant  continued to actively  discuss a restructuring  with
Magten and Apollo Apparel  Partners,  L.P.  ("Apollo"),  the beneficial owner of
5,924,352 shares of Salant common stock, representing approximately 39.5% of the
issued  and  outstanding  shares.  During  this  period,  Salant  continued  its
negotiations  with CIT to ensure its support of a  restructuring.  These efforts
culminated  in the  execution  of a letter  agreement  dated  March 2, 1998,  as
amended by and among Salant, Magten and Apollo (the "March 2 Letter Agreement").

Pursuant  to the March 2 Letter  Agreement,  the  parties  agreed,  among  other
things, to support a restructuring on the following terms: (i) the entire $104.9
million  outstanding  aggregate  principal amount of, and all accrued and unpaid
interest on, the Senior Notes would be converted  into 92.5% of Salant's  issued
and outstanding new common stock,  subject to dilution,  and (ii) the Old Common
Stock would be converted into 7.5% of Salant's issued and outstanding new common
stock, subject to dilution; additionally,  Stockholders would receive seven year
warrants to purchase up to 10% of  Salant's  issued and  outstanding  new common
stock, on a fully diluted basis.  CIT agreed to support  Salant's  restructuring
efforts  under  the  March  2  Letter  Agreement.  In  furtherance  of  Salant's
restructuring  effort,  in order to facilitate the  consummation of the terms of
the March 2 Letter  Agreement,  on April 22, 1998, Salant filed its Registration
Statement on Form S-4 (the  "Registration  Statement")  with the  Securities and
Exchange  Commission (the  "Commission") to register the securities to be issued
in  accordance  with the  March 2 Letter  Agreement.  Thereafter,  Salant  filed
amendments  to the  Registration  Statement  on May 18,  1998,  May 26, 1998 and
August 31, 1998.

In furtherance of the March 2 Letter Agreement,  during the period of March 1998
through the Filing Date,  Salant  obtained  various  extensions and  forbearance
agreements  from Magten and CIT related to Salant's  failure to pay interest due
on the  Senior  Notes  that was due and  payable on March 2, 1998 and August 31,
1998.

After Salant entered into the March 2 Letter Agreement and while it continued to
pursue implementation of such agreement,  Salant received various proposals from
third  parties to purchase all or a part of Salant's  businesses or assets which
if consummated would have provided  significantly  more value to Noteholders and
Stockholders  than would  otherwise  have been achieved under the March 2 Letter
Agreement.

For several  months  following  the  execution of the March 2 Letter  Agreement,
Salant engaged in intense  negotiations with certain of such parties regarding a
combination  transaction.  However,  by reason of certain  market changes which,
among  other  things,  caused a  reduction  in the value of certain of  Salant's
business  units,  no such  transaction  was  able to be  consummated.  Moreover,
Salant,  together with Magten and Apollo,  determined to review their  continued
pursuit of the  transactions  contemplated  by the March 2 Letter  Agreement  in
light of,  among other  things,  the  significant  additional  time  required to
consummate such  transactions  and the occurrence of certain events  (including,
but not  limited to, a  reduction  in the value of certain of Salant's  business
units) that caused various  assumptions  upon which the March 2 Letter Agreement
was premised to no longer be true.

The Plan Negotiations

Thereafter,  in contemplation of filing the Chapter 11 Case, Salant,  Magten and
Apollo agreed to pursue a  restructuring  of Salant pursuant to which all of the
Senior Notes would be  converted  to new equity of Salant and that  provided for
Salant to continue to operate after the  restructuring  as a  stand-alone  Perry
Ellis  business  ("Reorganized  Salant").  The terms for Salant's  restructuring
agreed  to among the  parties  prior to the  Filing  Date form the basis for the
Plan.  Under the Plan,  as proposed to be  confirmed at the hearing on March 25,
1999, (i) the entire $104.9 million  outstanding  aggregate principal amount of,
and all accrued and unpaid interest on, the Senior Notes would be converted into
95% of Salant's issued and outstanding new common stock, subject to dilution for
shares issued under the Stock Award and Incentive Plan and the Restricted  Stock
Plan, and (ii) the existing common stock ("Old Common Stock") would be converted
into 5% of Salant's issued and outstanding new common stock, subject to dilution
for shares  issued under the Stock Award and Incentive  Plan and the  Restricted
Stock Plan.

In connection with the  negotiations  leading up to the formulation of the Plan,
Salant,  Magten and Apollo agreed that the  enterprise  value of the Company was
less than the amount of Salant's  outstanding  indebtedness and,  therefore,  no
value remained for the Stockholders.  However,  to reach a consensual  agreement
and avoid the costs associated with a protracted litigation,  the parties agreed
to the terms of the Plan described above.



ITEM 2.  PROPERTIES

The  Company's  principal  executive  offices  are located at 1114 Avenue of the
Americas,  New York, New York 10036. The Company's principal  properties consist
of three  domestic  manufacturing  facilities  located in Alabama,  New York and
Tennessee,   four   manufacturing   facilities   located  in  Mexico,  and  four
distribution  centers;  one in New York, one in South Carolina and two in Texas.
At the end of 1998,  the Company is planning to sell or close all  manufacturing
and  distribution  facilities,  except for the  distribution  facility  in South
Carolina. The Company owns approximately  1,067,000 square feet of space devoted
to manufacturing and distribution and leases  approximately  328,000 square feet
of such space. The Company owns approximately 69,000 square feet of office space
and leases  approximately  211,000  square feet of combined  office,  design and
showroom  space.  The  Children's  Group  has  exclusive  use of  the  Tennessee
manufacturing facility,  shares one of the Mexican manufacturing facilities with
the Salant Menswear Group Bottoms division and has its distribution  center in a
building in Texas. As of the end of 1998, the Company's Stores division operated
20 factory outlet stores, comprising approximately 44,000 square feet of selling
space, all of which are leased. Except as noted above,  substantially all of the
owned and leased  property of the Company is used in  connection  with its men's
apparel business or general corporate administrative functions.

The Company believes that its plant and equipment are adequately maintained,  in
good operating condition, and are adequate for the Company's present needs.

ITEM 3.  LEGAL PROCEEDINGS

The  Company is a  defendant  in several  legal  actions.  In the opinion of the
Company's management, based upon the advice of the respective attorneys handling
such cases,  such actions are not expected to have a material  adverse effect on
the Company's  consolidated  financial  position,  results of operations or cash
flow. In addition, the Company notes the following legal proceedings.

1.   Bankruptcy  Case.  On December  29,  1998,  Salant  filed a petition  under
     chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for
     the Southern  District of New York (Case No.  98-10107  (CB)).  The Company
     filed its Plan on the Filing Date. The Plan has been approved by all of the
     holders of Senior  Notes  that voted and over 96% of the  holders of Salant
     common stock that voted.  On March 25, 1999,  the  Bankruptcy  Court held a
     hearing on the  confirmation  of the Plan. At the hearing,  the  Bankruptcy
     Court  advised  that it would  take the  objection  to  confirmation  under
     advisement.  Prior to the Bankruptcy Court's  announcement of its ruling on
     the  objection,  Salant and Supreme (in its own  capacity  and on behalf of
     PEI),  which had filed an objection to  confirmation,  settled and resolved
     their  differences,  and the economic  terms of their  settlement  were set
     forth on the Term Sheet attached to and incorporated  into the Confirmation
     Order.  Thereafter,  at the April 16, 1999 hearing,  the  Bankruptcy  Court
     entered the Confirmation Order.

2.   Rodriguez-Olvera  Action. The Company is a defendant in a lawsuit captioned
     Maria Delores  Rodriguez-Olvera,  et al. Vs. Salant Corp., et al., Case No.
     97-07-14605-CV,  in the 365th Judicial  District Court of Maverick  County,
     Texas   (the   "Rodriguez-Olvera    Action").   The   plaintiffs   in   the
     Rodriguez-Olvera   Action  assert  personal  injury,  wrongful  death,  and
     survival  claims  arising out of a bus accident  that  occurred on June 23,
     1997.  A bus  registered  in  Mexico,  owned  by the  Company's  subsidiary
     Maquiladora Sur, S.A. de C.V.  ("Maquiladora"),  a Mexican corporation (and
     driven by a Mexican citizen and resident employed by Maquiladora,  carrying
     Mexican  workers from their homes in Mexico to their jobs at  Maquiladora),
     overturned and caught fire in Mexico.  Fourteen  persons were killed in the
     accident, and twelve others claim injuries as a result of the accident; the
     Rodriguez-Olvera  plaintiffs seek  compensation  from the Company for those
     deaths and injuries.
     The Company has vigorously  defended  against the  allegations  made in the
     lawsuit. Its defenses include, among other things, that the claims, if any,
     asserted by the Rodriguez-Olvera plaintiffs exist against Maquiladora,  and
     not the Company,  and that the  Rodriguez-Olvera  Action should be tried in
     the courts of Mexico,  and not the United  States,  under the  doctrine  of
     forum non  conveniens.  The Company also  contends  that the law of Mexico,
     rather  than  that  of the  United  States,  governs  the  Rodriguez-Olvera
     plaintiffs'  claims.  The  Rodriguez-Olvera  plaintiffs  disagree  with the
     Company's positions.

     A motion on behalf of the  company to dismiss the  Rodriguez-Olvera  Action
     under the doctrine of forum non  conveniens  was denied by the trial court.
     The  propriety  of those  rulings is the subject of an action for a writ of
     mandamus,   captioned  In  Re  Salant   Corporation,   et  al.,   Case  No.
     4-98-00929-CV  (the  "Mandamus  Action"),  in the Court of Appeals  for the
     Fourth  District of Texas,  at San Antonio (the "Texas Court of  Appeals").
     The Texas Court of Appeals has stayed further proceedings in the underlying
     Rodriguez-Olvera  action (for reasons apart from any that might result in a
     stay under  federal  bankruptcy  law)  pending the outcome of the  Mandamus
     Action.

     The Company is also a defendant in a related  declaratory  judgment action,
     captioned Hartford Fire Insurance Company v. Salant Corporation,  Index No.
     60233/98, in the Supreme Court of the State of New York, County of New York
     (the "Hartford  Action"),  relating to the Company's insurance coverage for
     the claims  that are the  subject of the  Rodriguez-Olvera  Action.  In the
     Hartford Action,  the Company's  insurers seek a declaratory  judgment that
     the claims  asserted in the  Rodriguez-Olvera  Action are not covered under
     the policies  that the insurers had issued.  The  Company's  insurers  have
     nevertheless  provided  a defense to the  Company  in the  Rodriguez-Olvera
     Action, without prejudice to their positions in the Hartford Action.

     If, as the Company  contends in the Hartford Action,  the  Rodriguez-Olvera
     claims are covered by insurance, the damages sought by the Rodriguez-Olvera
     plaintiffs  nevertheless  exceed the face amount of the Company's liability
     insurance coverage. Accordingly, it is possible that the damages that would
     be awarded in the  Rodriguez-Olvera  Action could exceed available coverage
     limits.  Counsel  for the  plaintiffs  in the  Rodriguez-Olvera  action has
     stated that they have offered to settle that lawsuit  within the  Company's
     insured limits, and that the Company's insurance carriers have rejected the
     Rodriguez-Olvera   plaintiffs'   settlement   offers.   Counsel   for   the
     Rodriguez-Olvera  plaintiffs has further stated that in such event,  in his
     view,  Texas law should hold the Company's  insurers  liable for failing to
     settle  the  claims  within  policy  limits.   The  Company   considers  it
     inappropriate  to endorse or dispute that view and expresses no position on
     that view herein.





ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of 1998, no matter was submitted to a vote of security
holders of Salant by means of the solicitation of proxies or otherwise.


<PAGE>


                                                      PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Salant's  Common Stock is  currently  trading on the  Over-The-Counter  Bulletin
Board under the trading  symbol SLNT.  On December 17, 1998,  the New York Stock
Exchange  ("NYSE")  advised the Company that trading of its Common Stock will be
suspended  prior to the opening of the NYSE on December 30,  1998.  The NYSE had
advised  Salant  that this  action was taken in view of the fact that Salant has
fallen below the NYSE's continued listing criteria.

The high and low sale  prices  per share of Common  Stock  (based  upon the NYSE
composite  tape)  for each  quarter  of 1997 and 1998 are set forth  below.  The
Company did not declare or pay any  dividends  during such years.  The indenture
governing the Senior Notes and the Credit Agreement requires the satisfaction of
certain net worth tests prior to the payment of any cash dividends by Salant. As
of January 2, 1999,  Salant was prohibited  from paying cash dividends by reason
of, among other things, these provisions.
<TABLE>
<CAPTION>

                              High and Low Sale Prices Per Share of the Common Stock
   
                                       Quarter                       High                      Low
<S>                                    <C>                           <C>                       <C> 
                                       1998
                                       Fourth                        0.500                     0.031
                                       Third                         0.875                     0.406
                                       Second                        0.813                     0.500
                                       First                         1.813                     0.375

                                       1997
                                       Fourth                        3.375                     1.563
                                       Third                         3.000                     1.938
                                       Second                        4.250                     2.875
                                       First                         5.375                     3.000

</TABLE>

On April 7, 1999,  there were 1,025 holders of record of shares of Common Stock,
and the closing market price was $0.13.

All of the outstanding voting securities of the Company's subsidiaries are owned
beneficially  and  (except  for shares of certain  foreign  subsidiaries  of the
Company  owned of  record  by others  to  satisfy  local  laws) of record by the
Company.


<PAGE>


ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA
(Amounts in thousands except share, per share and ratio data)

     The following selected consolidated  financial data presented as of January
     3, 1998 and January 2, 1999 and for each of the fiscal  years for the three
     year period ended  January 2, 1991 have been derived from the  Consolidated
     Financial  Statements of the Company,  which has been audited by Deloitte &
     Touche  LLP,  whose  report  thereon   appears  under  Item  8,  "Financial
     Statements and  Supplementary  Data". The selected  consolidated  financial
     data for fiscal  years 1994  through  1996 have been  derived  from audited
     consolidated   financial  data,  which  are  not  included   herein.   Such
     consolidated  financial  data  should be read in  conjunction  with Item 7,
     "Management's Discussion and Analysis of Financial Condition and Results of
     Operations" and with the Consolidated  Financial Statements,  including the
     related notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>

                                                        Jan. 02      Jan. 03,     Dec. 28,     Dec. 30,     Dec. 31,
                                                           1999         1998         1996         1995         1994

                                                     (52 Weeks)    (53 Weeks)   (52 Weeks)   (52 Weeks)   (52 Weeks)

For The Year Ended:
  Continuing Operations:
<S>                                                   <C>          <C>           <C>          <C>          <C>      
    Net sales                                         $300,586     $ 347,667     $ 371,958    $ 445,889    $ 363,477

    Restructuring costs (a)                            (24,825)       (2,066)     (11,730)     (3,550)             -
    Income/(loss) from continuing operations           (56,775)       (8,394)     (12,652)       (3943)        1,476
    Discontinued Operations:
      Loss from operations, net of income taxes        (10,163)    (10,464)        3,329          3,445      (7,608)
      Loss on disposal, net of income taxes             (5,724)       (1,330)            -            -      (1,796)

    Extraordinary gain (b)                                    -         2,100            -        1,000           63

    Net income/(loss)(a)                               (72,662)      (18,088)      (9,323)          502      (7,865)

    Basic and diluted earnings/(loss) per share:
    Earnings/(loss) per share from continuing
     operations before extraordinary gain (a)           $(3.74) $      (0.55)    $  (0.84)  $    (0.26)      $  0.10
    Earnings/(loss) per share from discontinued
     operations                                          (1.05)        (0.78)        0.22          0.23       (0.63)
    Earnings per share from extraordinary gain                -          0.14            -         0.06            -
    Basic earnings/(loss) per share (a)                  (4.79)        (1.19)       (0.62)         0.03       (0.53)



    Cash dividends per share                                  -             -            -            -            -

At Year End:
  Current assets                                       $149,697    $ 147,631     $ 149,476    $ 163,031     $169,586
  Total assets                                          176,129       228,583      231,717      251,340      261,800

  Current liabilities (c)                               203,029       180,898       56,032       59,074       66,747

  Long-term debt  (c)                                        --            --      106,231      110,040      109,908

  Deferred liabilities                                    4,010         5,382        8,863       11,373       13,479
  Working capital/(deficiency)                         (53,333)      (33,267)       93,440      103,957      102,839
  Current ratio                                           0.7:1         0.8:1        2.7:1        2.8:1        2.5:1

  Shareholders' equity / (deficiency)                 $(30,910)      $ 42,303     $ 60,591     $ 70,853     $ 71,666
  Book value per share                                  $(2.04)        $ 2.79       $ 4.01       $ 4.71       $ 4.78
  Number of shares outstanding                           15,171        15,171       15,094       15,041       15,008
</TABLE>


     (a)  Includes,  for the year ended  January 2, 1999, a provision of $24,825
     ($1.64 per share;  tax  benefit  not  available)  for  restructuring  costs
     primarily  related to the Company's  intention to focus solely on its Perry
     Ellis  men's  apparel  business  and,  as a  result,  intends  to exit  its
     non-Perry Ellis menswear  divisions.  To that end, Salant has sold its John
     Henry and Manhattan  businesses.  These businesses  include the John Henry,
     Manhattan  and Lady  Manhattan  trade names and the related  goodwill,  the
     leasehold  interest in a dress  shirt  facility  located in Valle  Hermosa,
     Mexico,  and the  equipment  located at the Valle  Hermosa  facility and at
     Salant's  facility  located in Andalusia,  Alabama.  These assets had a net
     book value of $43,184  and were sold in 1999 for  $27,000,  resulting  in a
     loss of $16,184.  In addition to the $16,184,  the restructuring  provision
     consisted  of (i)  $6,305  of  additional  property,  plant  and  equipment
     write-downs,  (ii) $2,936 for the  write-off  of other  assets,  severance,
     leases and other restructuring costs and (iii) offset by a reversal of $600
     from the reversal of previously recorded  restructuring  reserves primarily
     resulting  from the  settlement of  liabilities  for less than the carrying
     amount and the gain on sale from the sale of the Thomson building;  for the
     year ended January 3, 1998, a provision of $2,066 (14 cents per share;  tax
     benefit not available) for restructuring  costs principally  related to (i)
     $3,530  related to the  decision in the fourth  quarter to close all retail
     outlet stores other than Perry Ellis outlet stores and (ii) the reversal of
     previously recorded restructuring provisions of $1,464, primarily resulting
     from the  settlement  of  liabilities  for less than the  carrying  amount,
     resulting in the reversal of the excess portion of the  provision;  for the
     year ended  December  28, 1996, a provision of $11,730 (78 cents per share;
     tax benefit not available) for restructuring  costs principally  related to
     (i) the  write-off  of goodwill  and the  write-down  of other assets for a
     product line which has been put up for sale,  (ii) the write-off of certain
     assets and accrual for future  royalties  for a licensed  product  line and
     (iii) employee costs related to closing  certain  facilities;  for the year
     ended  December 30,  1995,  a provision of $3,550 (24 cents per share;  tax
     benefit not available) for restructuring  costs principally  related to (i)
     fixed  asset  write-downs  at  locations  to be closed  and (ii)  inventory
     markdowns for discontinued product lines.

(b)  Includes,  for the year ended  January 3, 1998,  a gain of $2,100 (14 cents
     per  share)  related  to the  reversal  of  excess  liabilities  previously
     provided for the anticipated  settlement of claims arising from the Chapter
     11  proceeding;  for the year ended  December 30, 1995, a gain of $1,000 (6
     cents per share) related to the reversal of excess  liabilities  previously
     provided for the anticipated  settlement of claims arising from the Chapter
     11 proceeding;  for the year ended December 31, 1994, a gain of $63 (no per
     share  effect)  related to the purchase and  retirement of a portion of the
     Senior Notes at a price below the principal amount thereof.

(c)  At January 2, 1999 and January 3, 1998, long term debt of $104,879 has been
     classified as liabilities  subject to compromise  and a current  liability,
     respectively.  See  Note 1.  Financial  Restructuring  to the  Consolidated
     Financial Statements.



<PAGE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Overview

On the  filing  date,  the  Company  filed a  petition  under  Chapter 11 of the
Bankruptcy Code in the United States  Bankruptcy Court for the Southern District
of New York in order to implement a  restructuring  of its Senior Notes. On that
date,  Salant filed the Plan with the Bankruptcy Court in order to implement its
restructuring.  The  restructuring  consists  of two  key  components;  (i)  the
conversion of all principal and accrued  interest  under the Senior Notes to 95%
of new Common Stock of Salant and (ii) the sale and or disposal of substantially
all of the Company's  business  other than the  businesses  conducted  under the
Perry Ellis Trademarks.

Results of Operations

Fiscal 1998 Compared with Fiscal 1997

  Net Sales

In Fiscal 1998 net sales of $300.6 million were $47.1 million or 13.5% less than
the  $347.7  million  of net sales in Fiscal  1997.  Sales of men's  apparel  at
wholesale  decreased  by $39.1  million or 12.0% in Fiscal 1998.  This  decrease
resulted  primarily from (i) a $19.4 million reduction in sales of men's bottoms
primarily  due to reduced  demand for basic denim  products and the phase-out of
the Company's  discontinued  Thomson  brand;  (ii) an $8.5 million  reduction in
non-Perry  Ellis product sales,  principally as a result of lower sales of Gant,
John  Henry  and  Manhattan  dress  shirts  and   discontinuance   of  Manhattan
sportswear;  and (iii) a $7.1 million decrease in Perry Ellis dress shirt sales,
primarily as a result of the planned reduction of sales to off price channels of
distribution.

Sales by the retail  outlet stores  division  decreased by $8.0 million or 37.0%
from last year.  This reduction was primarily  caused by the  elimination of all
non-Perry Ellis stores at the end of Fiscal 1997.

  Gross Profit

In Fiscal 1998 gross  profit of $62.4  million was $14.9  million  less than the
$77.3 million of gross profit in Fiscal 1997. The gross profit margin  decreased
from 22.2% in Fiscal 1997 to 20.8% in Fiscal  1998.  The decline in gross profit
and gross profit margin was primarily  attributable to (i)  approximately  $10.5
million of the decline,  to lower sales and (ii)  approximately  $4.4 million of
loss of gross profit,  relating to the markdown  taken from the  disposition  of
non-Perry Ellis inventory in connection with the Company's restructuring.


  Selling General and Administrative Expenses

Selling, General, and Administration (S,G&A) expenses for Fiscal 1998 were $72.0
million  (23.9% of net sales)  compared to $73.2 million (21.0% of net sales for
Fiscal  1997).  Through  the  first  nine  months of Fiscal  1998,  the  Company
decreased its SG&A expenses by approximately $6.3 million. This decrease in SG&A
expenses,  however,  was  substantially  offset  in the  fourth  quarter  by (i)
approximately $2.8 million of additional bonus needs required for the management
retention  program in connection  with the Company's  restructuring  activities,
(ii) the write-off of approximately  $2.2 million of  miscellaneous  receivables
from  a  company  that  ceased   doing   business  in  January  1999  and  (iii)
approximately  $1.5 million in additional  cost  relating to the Company's  Year
2000 Compliance Program.

  Provision for Restructuring

In 1998, the Company  recorded a provision for  restructuring of $24,825 related
to the  decision  of the  Company to focus  primarily  on its Perry  Ellis men's
apparel business. As a result, the Company intends to exit its other businesses.
Subsequent  to  January  2,  1999,  Salant  sold its John  Henry  and  Manhattan
businesses  pursuant to a Purchase and Sale  Agreement  dated  December 28, 1998
(subject to and  subsequently  approved by the Bankruptcy  Court on February 25,
1999).  These  businesses  include the John Henry,  Manhattan and Lady Manhattan
trade names and the related  goodwill,  the leasehold  interest in a dress shirt
facility  located in Valle  Hermosa,  Mexico,  and the equipment  located at the
Valle Hermosa facility and at Salant's  facility located in Andalusia,  Alabama.
These  assets had a net book value of $43,184  (consisting  of the  $29,979  for
goodwill,  $9,680 for  licenses  and $3,525 for fixed  assets) and were sold for
$27,000,  resulting  in a loss of  $16,184.  At the end of  fiscal  1998 the net
realizable  value of $27,000 for these assets was  included in the  consolidated
balance sheet as assets held for sale.  The assets not sold in this  transaction
are also  included as assets held for sale and are  recorded at their  estimated
net realizable value of $1,400.

In addition to the $16,184 above, the restructuring  provision  consisted of (i)
$6,305 of additional property, plant and equipment write-downs,  (ii) $2,936 for
the write off of other  assets,  severance  costs,  lease  exit  costs and other
restructuring  costs and (iii)  offset by $600 from the  reversal of  previously
recorded  restructuring  reserves  primarily  resulting  from the  settlement of
liabilities  for less than the  carrying  amount and the gain on the sale of the
Thomson  manufacturing and distribution  facility. As of January 2, 1999, $3,551
remained in the restructuring reserve relating to future lease payments of $845,
royalties of $592, severance of $840 and other miscellaneous restructuring costs
of $1,274, of which $527 related to the 1996 restructuring  provision for future
minimum royalties.

In Fiscal  1997,  the Company  recorded a provision  for  restructuring  of $2.1
million,  consisting of (i) a $3.5 million  provision related to the decision in
the fourth  quarter to close all retail  outlet  stores  other than Perry  Ellis
outlet  stores  and (ii)  the  reversal  of  previously  recorded  restructuring
provisions  of $1.4  million,  including  $300  thousand in the fourth  quarter,
primarily  resulting  from the  settlement  of  liabilities  for  less  than the
carrying amount, as a result of a settlement  agreement and license  arrangement
with the former owners of the JJ. Farmer trademark, resulting in the reversal of
the excess portion of the provision.

  Interest Expense, Net

Net  interest  expense was $13.9  million for Fiscal  1998  compared  with $14.6
million for Fiscal 1997. The decrease in interest expense related primarily to a
lower average borrowing rate.

  Loss from Continuing Operations

In Fiscal 1998, the Company  reported a loss from continuing  operations  before
extraordinary gain of $56.8 million or $3.74 per share,  compared to a loss from
continuing operations of $8.4 million, or $0.55 per share in Fiscal 1997.

     Earnings before  Interest,  Taxes,  Depreciation,  Amortization,  
     Reorganization Costs,  Debt  Restructuring  Costs,  Restructuring  Charges,
     Discontinued Operations, and Extraordinary Gain

Earnings before  interest,  taxes,  depreciation,  amortization,  reorganization
costs, debt restructuring costs, restructuring charges, discontinued operations,
and  extraordinary  gain was $3.3  million  (1.1% of net sales) in Fiscal  1998,
compared to $17.2  million (5% of net sales) in Fiscal 1997, a decrease of $13.9
million,   or  81%.  The  Company   believes  this  information  is  helpful  in
understanding  cash flow  operations  that is  available  for debt  service  and
capital  expenditures.  This  measure is not  contained  in  generally  accepted
accounting  principles and is not a substitute for operating income,  net income
or net cash flows from operating activities.

  Loss from Discontinued Operations

For Fiscal 1998, the Company recognized a charge of $15.9 million reflecting the
discontinuance of the Company's  Children's Group. Of the $15.9 million,  $10.2
million  related to operating  losses prior to the date the decision was made to
discontinue the business and $5.7 million represented estimated future operating
losses and losses  from the sale of the  business.  The $5.7  million  estimated
future loss is comprised of (i) a write-off of assets of $2.9  million,  (ii) an
estimated loss from operations of $1.6 million,  (iii) severance of $1.5 million
and (iv) royalty and lease payments of $1.5 million,  offset by $1.8 million for
the sale of the Dr.  Denton  trademark.  The  Children's  Group had net sales of
$42.8 million in 1998, $49.3 million in 1997 and $45.8 million in 1996.

In June 1997, the Company  discontinued  the operations of the Made in the Shade
division,  which produced and marketed women's junior sportswear.  The loss from
operations of the division in 1997 was $8,136, which included a charge of $4,459
for the write-off of goodwill.  Additionally,  in 1997,  the Company  recorded a
charge of $1,330 to accrue for expected  operating  losses  during the phase-out
period. In addition,  the Company  discontinued the Children's Group in 1998 and
the loss  from  operations  of $2,328  was added to the loss of $8,136  from the
discontinued operations of the Made in the Shade division.

  Net Loss

As a result of the above,  the net loss for Fiscal  1998 was $72.7  million,  or
$4.79 per share,  compared with a net loss of $18.1 million,  or $1.19 per share
for Fiscal 1997.

Fiscal 1997 Compared with Fiscal 1996

   Net Sales

Fiscal  1997 sales of $347.7  million  were $24.3  million  less than the $372.0
million  of net  sales in  Fiscal  1996.  Sales of men's  apparel  at  wholesale
decreased by $18.9 million, or 5.5%, in Fiscal 1997. This decrease resulted from
(i) a $12.4 million  reduction in sales of men's slacks, of which $8.4 reflected
the  elimination of  unprofitable  programs and the balance was primarily due to
operational difficulties experienced in the first quarter of 1997 related to the
move of  manufacturing  and  distribution  out of the  Company's  facilities  in
Thomson,  Georgia,  (ii) a $5.7 million  reduction in sales of men's sportswear,
which includes the  elimination of $16.7 million of the Company's JJ. Farmer and
Manhattan  sportswear  lines net sales,  offset by an $11.0 million  increase in
sales of Perry Ellis sportswear products, (iii) a $5.1 million decrease in sales
of men's  accessories,  primarily due to the  slow-down of the novelty  neckwear
business  and (iv) a $4.7  million  reduction  in sales of certain  dress  shirt
lines, which reflected the elimination of unprofitable  businesses.  These sales
decreases  were  partially  offset by a $9.5 million  increase in sales of Perry
Ellis dress shirts due to the  addition of new  distribution  and the  continued
strong  acceptance  of these  products by consumers.  The total sales  reduction
attributable to the elimination of unprofitable programs was $29.8 million.

Sales of the retail outlet stores division decreased by $5.4 million,  or 19.8%,
in Fiscal 1997.  This decrease was due to (i) a decrease in the number of stores
in the first 10 months of 1997 and (ii) the  decision in November  1997 to close
all non-Perry  Ellis outlet stores.  The Company ceased to operate the non-Perry
Ellis outlet stores in November 1997.

   Gross Profit

The gross profit margin  decreased  from 22.4% in Fiscal 1996 to 22.2% in Fiscal
1997.  The gross profit of the retail  outlet  stores  decreased  primarily as a
result of inventory markdowns of $1.6 million (7.3% of net sales) related to the
closing of the non-Perry Ellis stores.  Excluding these inventory markdowns, the
gross profit margin  increased as a result of a decrease in the transfer  prices
(from a negotiated  rate to standard  cost)  charged to the retail outlet stores
for products made by other divisions of the Company.

    Selling, General and Administrative Expenses

Selling,  general and  administrative  ("S,G&A")  expenses  for Fiscal 1997 were
$73.2 million  (21.0% of net sales)  compared  with $77.1 million  (20.7% of net
sales) for Fiscal 1996.  While  implementation  of the Company's  strategic plan
resulted in the  elimination  of certain  S,G&A  expenses in Fiscal  1997,  such
eliminations were partially offset by higher  amortization costs attributable to
the  installation  of new store  fixtures  for Perry Ellis  sportswear  shops in
department  stores which  commenced  in 1995.  The  amortization  of these store
fixtures accounted for approximately $2.5 million of the total S,G&A expenses in
Fiscal 1997, compared with $1.6 million in Fiscal 1996.

    Other Income

Other income for Fiscal 1996 included a gain of $2.7 million related to the sale
of a leasehold interest in a facility located in Glen Rock, New Jersey.

    Provision for Restructuring

In Fiscal  1997,  the Company  recorded a provision  for  restructuring  of $2.1
million,  consisting  of (i) $3.5 million  related to the decision in the fourth
quarter to close all retail  outlet  stores other than Perry Ellis outlet stores
and (ii) the reversal of previously  recorded  restructuring  provisions of $1.4
million, including $300 thousand in the fourth quarter, primarily resulting from
the settlement of liabilities for less than the carrying amount,  as a result of
a settlement agreement and license arrangement with the former owners of the JJ.
Farmer  trademark,  resulting  in the  reversal  of the  excess  portion  of the
provision.

The Company recorded a restructuring  charge of $11.7 million in Fiscal 1996. Of
this amount, (i) $5.7 million was primarily related to the write-off of goodwill
and the  write-down  of other assets of the JJ. Farmer  product line,  (ii) $2.9
million was  attributable  to the  write-off  of certain  assets  related to the
licensing  of the Gant brand name for certain of the  Company's  dress shirt and
accessories  product  lines and the  accrual  of a portion  of future  royalties
payable  under the Gant  licenses  that are not expected to be covered by future
sales,  (iii) $1.8 million was primarily  related to employee  costs  associated
with the  closing of a  manufacturing  and  distribution  facility  in  Thomson,
Georgia,  (iv) $0.7 million was primarily  related to employee costs  associated
with the closing of a manufacturing  facility in Americus,  Georgia and (v) $0.6
million related to other severance costs.

   Interest Expense, Net

Net  interest  expense was $14.6  million for Fiscal  1997  compared  with $13.7
million for Fiscal 1996. The $0.9 million increase is a result of higher average
borrowings  during  Fiscal 1997  primarily due to the loss from  operations  and
spending on capital expenditures and store fixtures.

   Loss from Continuing Operations

In Fiscal 1997, the Company  reported a loss from continuing  operations  before
extraordinary  gain of $8.4  million,  or $0.55 per share,  compared with a loss
from continuing operations of $12.7 million, or $0.84 per share, in Fiscal 1996.

     Earnings before  Interest,  Taxes,  Depreciation,  Amortization,  
     Reorganization Costs,  Debt  Restructuring  Costs,  Restructuring  Charges,
     Discontinued Operations, and Extraordinary Gain

Earnings before  interest,  taxes,  depreciation,  amortization,  reorganization
costs, debt restructuring costs, restructuring charges, discontinued operations,
and  extraordinary  gain was $17.2  million  (5% of net  sales) in Fiscal  1997,
compared to $20.7 million (5.6% of net sales) in Fiscal 1996, a decrease of $3.5
million,   or  17%.  The  Company   believes  this  information  is  helpful  in
understanding  cash flow  operations  that is  available  for debt  service  and
capital  expenditures.  This  measure is not  contained  in  Generally  Accepted
Accounting  Principles and is not a substitute for operating income,  net income
or net cash flows from operating activities.

   Extraordinary Gain

The extraordinary  gain of $2.1 million recorded in Fiscal 1997,  including $1.5
million in the fourth  quarter,  related to the  reversal of excess  liabilities
previously  provided for the  anticipated  settlement of claims arising from the
Company's prior chapter 11 cases.

  Gain/(Loss) from Discontinued Operations

In June 1997, the Company  discontinued  the operations of the Made in the Shade
division,  which produced and marketed women's junior sportswear.  The loss from
operations of the division in 1997 was $8,136, which included a charge of $4,459
for the write-off of goodwill.  Additionally,  in 1997,  the Company  recorded a
charge of $1,330 to accrue for expected  operating  losses  during the phase-out
period. In addition,  the Company  discontinued the Children's Group in 1998 and
the loss  from  operations  of $2,328  was added to the loss of $8,136  from the
discontinued operations of the Made in the Shade division.

The income from  discontinued  operations  for 1996 was comprised of the loss of
$365 for the Made in the Shade division and income from discontinued  operations
of $3,694 for the Children's Group.

  Net Loss

As a result of the above, the net loss for  Fiscal  1997 was $18.1  million,  or
$1.19 per share, compared with a net loss of $9.3 million, or $0.62 per share in
Fiscal 1996.

Liquidity and Capital Resources

Upon  commencement  of the Chapter 11 Case,  Salant  filed a motion  seeking the
authority of the Bankruptcy Court to enter into a revolving credit facility with
CIT  pursuant  to and in  accordance  with  the  terms of the  Ratification  and
Amendment  Agreement,  dated as of December  29, 1998 (the  "Amendment")  which,
together  with  related  documents  are  referred  to  herein  as the  "CIT  DIP
Facility",  effective as of the Filing Date,  which would  replace the Company's
existing  working capital facility under the Credit  Agreement.  On December 29,
1998, the Bankruptcy Court approved the CIT DIP Facility on an interim basis and
on January 19, 1999 approved the CIT DIP Facility on a final basis.

The CIT DIP Facility  provides for a general  working capital  facility,  in the
form of direct borrowings and letters of credit, up to $85 million subject to an
asset-based  borrowing formula.  The CIT DIP Facility consists of an $85 million
revolving credit facility,  with a $30 million letter of credit subfacility.  As
collateral for borrowings under the CIT DIP Facility, the Company granted to CIT
a first  priority  lien on and  security  interest in  substantially  all of the
Company's   assets   and   those  of  its   subsidiaries,   with   superpriority
administrative  claim  status  over any and all  administrative  expenses in the
Company's  Chapter 11 Case,  subject to a $2 million  carve-out for professional
fees and the fees of the United  States  Trustee.  The CIT DIP  Facility  has an
initial  term of 150 days,  subject  to  renewal,  at CIT's  discretion,  for an
additional 90 day period and, thereafter, for an additional 120 day period.

The CIT DIP Facility also provides, among other things, that the Company will be
charged an interest rate on direct borrowings of 1.0% in excess of the Reference
Rate (as defined in the Credit  Agreement).  If the Company does not  consummate
the Plan by the end of the initial 150 day term, and CIT elects to renew the CIT
DIP Facility for an additional 90 day period,  as described  above,  pursuant to
the CIT DIP  Facility,  the  Company is  required  to pay CIT the amount of $250
thousand and the interest  rate under the CIT DIP Facility  will be increased to
1.25% in excess of the Reference  Rate. If the Company does not  consummate  the
Plan by the end of the first 90 day renewal under the CIT DIP Facility,  and CIT
elects  to renew the CIT DIP  Facility  for an  additional  120 day  period,  as
described  above,  pursuant to the CIT DIP Facility,  the Company is required to
pay CIT the  amount of $250  thousand  and the  interest  rate under the CIT DIP
Facility will be increased to 1.75% in excess of the Reference Rate. CIT may, in
its sole  discretion,  make  loans to the  Company  in excess  of the  borrowing
formula but within the $85 million limit of the revolving  credit  facility.  In
addition,  the CIT DIP  Facility  provides  that the  accounts of the  Company's
non-Perry Ellis business units will be factored by CIT beginning January 1, 1999
on a  non-notification  basis for the first 150 days and on a notification basis
thereafter.

Pursuant  to the  terms  of the CIT  DIP  Facility,  the  Company  will  pay the
following  fees:  (i) a  documentary  letter  of  credit  fee of 1/8 of  1.0% on
issuance and 1/8 of 1/0% on negotiation;  (ii) a standby letter of credit fee of
1% per annum plus bank charges;  (iii) a factoring  commission  of .75%;  (iv) a
collateral  management fee of $4,167 per month; and (v) a field exam fee of $750
per day, plus out-of-pocket  expenses.  In addition,  the Company will be liable
for all of CIT's  costs and  expenses  incurred in  connection  with the CIT DIP
Facility, including attorneys' fees and expenses.

Upon  confirmation  and  consummation  of the Plan, the Company intends to enter
into a syndicated  revolving  credit facility (the "CIT Exit Facility") with CIT
pursuant  to and in  accordance  with the  terms of a  commitment  letter  dated
December 7, 1998 (the "CIT Commitment Letter"),  effective as of consummation of
the Plan, which will replace the CIT DIP Facility described above.

The CIT Exit Facility will provide for a general  working capital  facility,  in
the form of direct  borrowings and letters of credit,  up to $85 million subject
to an asset-based borrowing formula. The CIT Exit Facility will consist of a $85
million revolving credit facility,  with at least a $30 million letter of credit
subfacility.  As collateral for borrowings  under the CIT Exit Facility,  Salant
will  grant  to CIT and a  syndicate  of  lenders  to be  arranged  by CIT  (the
"Lenders") a first priority lien on and security  interest in substantially  all
of the  assets of Salant.  The CIT Exit  Facility  will have an initial  term of
three years.

The CIT Exit  Facility will also  provide,  among other things,  that (i) Salant
will be charged an interest  rate on direct  borrowings of .50% in excess of the
Reference Rate; provided,  however, that if Salant meets certain mutually agreed
upon financial tests based upon opening financial statements,  then the interest
rate shall be .25% in excess of the  Reference  Rate or 2.25% in excess of LIBOR
(as defined in the Credit  Agreement),  and (ii) the Lenders  may, in their sole
discretion,  make loans to Salant in excess of the borrowing  formula but within
the $85 million limit of the revolving credit facility.

Pursuant to the CIT Exit  Facility,  Salant will pay the following  fees:  (i) a
documentary  letter of credit fee of 1/8 of 1.0% on issuance  and 1/8 of 1.0% on
negotiation;  (ii) a standby  letter of credit  fee of 1.0% per annum  plus bank
charges;  (iii) a commitment  fee of $325  thousand;  (iv) an unused line fee of
 .25%; (v) an agency fee of $100 thousand (only for the second and third years of
the term of the CIT Exit Facility);  (vi) a collateral  management fee of $8,333
per  month;  and  (vii) a field  exam  fee of $750  per day  plus  out-of-pocket
expenses.  In addition,  Salant will be liable for all of the Lenders' costs and
expenses incurred in connection with the CIT Exit Facility, including attorneys'
fees and expenses, whether or not the Lenders and Salant close upon the CIT Exit
Facility.

The  execution  of the CIT Exit  Facility  is  subject  to  various  conditions,
including,  but not  limited  to,  satisfaction  of the  Plan  requirements  and
approval of the financing facility by CIT's Executive Credit Facility. Moreover,
Salant is required to  consummate  the CIT Exit  Facility no later than June 30,
1999.  There is no assurance that such  conditions will be satisfied or that the
CIT Exit Facility will be executed.

At the end of Fiscal 1998 direct  borrowings  and letters of credit  outstanding
under the DIP CIT Facility were $38.5 million and $24.3  million,  respectively,
and the Company had unused  availability of $13.0 million.  At the end of Fiscal
1997,  direct  borrowings  and  letters of credit  outstanding  under the Credit
Agreement  were $33.8 million and $23.2 million,  respectively,  and the Company
had unused  availability  of $17.5  million.  During  Fiscal  1998,  the maximum
aggregate amount of direct  borrowings and letters of credit  outstanding at any
one time  under the  Credit  Agreement  was  $100.9  million,  at which time the
Company had unused availability of $8.4 million. During fiscal 1997, the maximum
aggregate amount of direct  borrowings and letters of credit  outstanding at any
one time  under the  Credit  Agreement  was  $112.9  million,  at which time the
Company had unused availability of $10.5 million.

The  Company's  cash  provided by operating  activities  for fiscal 1998 was $.9
million,  which  primarily  reflects the operating loss of $56.8 million,  an
increase  in assets  held for sale of $28.4  million  and a decrease in accounts
payable of $21.0 million offset by (i) a decrease in inventory of $15.2 million,
(ii) an increase in liabilities subject to compromise of $38.9 million and (iii)
non-cash charges,  such as depreciation,  amortization and other assets of $60.2
million.

Cash used in fiscal 1998 for investing  activities  was $6.0  million,  of which
$4.9  million  was  related  to  capital  expenditures,  $1.1  million  for  the
installation  of store  fixtures in department  stores.  During fiscal 1999, the
Company plans to make capital  expenditures of approximately $5.0 million and to
spend an  additional  $2.5  million for the  installation  of store  fixtures in
department stores.

Cash provided by financing activities in fiscal 1998 was $4.1 million, primarily
attributable to short-term borrowings under the Credit Agreement.

New Accounting Standards

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standard  ("SFAS") No. 133,  "Accounting  for  Derivative
Instruments and Hedging Activities".  The statement  establishes  accounting and
reporting  standards  requiring that derivative  instruments  (including certain
derivative  instruments  embedded in other contracts) be recorded in the balance
sheet as either an asset or  liability  measured  at fair value.  The  statement
requires that changes in a  derivative's  fair value be recognized  currently in
earnings unless specific hedge accounting  criteria are met. Special  accounting
for qualifying  hedges allows a derivative's  gains and losses to offset related
results on the hedged item in the income  statement  and requires that a company
formally document,  designate, and assess the effectiveness of transactions that
receive hedge  accounting.  SFAS No. 133 is effective for fiscal years beginning
after June 15, 1999;  however,  it may be adopted earlier.  It cannot be applied
retroactively to financial  statements of prior periods. The Company has not yet
quantified  the impact of adopting SFAS No. 133 on its financial  statements and
has not determined the timing of or method of adoption.

Year 2000 Compliance

The Company has  completed an  assessment  of its  information  systems  ("IS"),
including its computer software and hardware,  and the impact that the year 2000
will have on such  systems  and  Salant's  overall  operations.  The Company has
completed its assessment of date critical  non-IS and has  determined  that they
are year 2000 compliant.  As of November 17, 1998, the Company has completed the
implementation of new financial systems that are year 2000 compliant ("Y2K"). In
addition,  the Company has  completed all testing of software  modifications  to
correct the Y2K problems on certain existing  software  programs,  including its
primary  enterprise  systems (the "AMS System") at a total cost of $3.5 million.
The Company  anticipates that any business units that are using software that is
not Y2K compliant  will be converted to the modified  software by the end of the
second quarter of 1999, at an estimated  cost of $500 thousand.  The Company has
also  identified  certain  third party  software  and  hardware  that is not Y2K
compliant.  The Company  expects that these systems will be converted by the end
of the  third  quarter  of 1999 to  systems  that  will be Y2K  compliant  at an
estimated  cost of $2.0 million.  The funding for these  activities  has or will
come from internally  generated cash flow and/or  borrowings under the Company's
working  capital  facility.   As  a  result  of  the  Company's  (i)  successful
implementation  of its new  financial  systems,  (ii)  completed  testing of the
modifications to the AMS System,  and (iii) expectation that all non Y2K systems
will be converted by the end of the second  quarter of 1999, the Company has not
developed a contingency  plan to address Y2K issues.  If,  however,  the Company
fails to complete such  conversion in a timely manner,  such failure will have a
material  adverse  effect on the  business,  financial  condition and results of
operations  of the Company.  To ensure  business  continuity,  the Company began
surveying  its  suppliers of key goods and services in 1998 for Y2K  compliance.
The Company  continues to follow-up  with its key business  partners on a global
basis to obtain responses to its inquiries. Based on responses received to date,
management  will perform a risk  assessment by the end of the second  quarter of
1999 and develop necessary contingency plans in the third quarter of 1999.

Seasonality

Although the Company  typically  introduces  and  withdraws  various  individual
products  throughout  the year,  its principal  products are organized  into the
customary retail Spring, Fall and Holiday seasonal lines. The Company's products
are designed as much as one year in advance and manufactured  approximately  one
season in advance of the related retail selling season.

Backlog

The  Company  does not  consider  the  amount  of its  backlog  of  orders to be
significant  to an  understanding  of its  business  primarily  due to increased
utilization of EDI technology, which provides for the electronic transmission of
orders from customers' computers to the Company's computers. As a result, orders
are placed closer to the required  delivery date than had been the case prior to
EDI  technology.  At  April  5,  1999,  the  Company's  backlog  of  orders  was
approximately  $45.5 million,  which reflect 52% less than the backlog of orders
of  approximately  $94.9 million that existed at March 7, 1998.  The decrease is
due to the Company's decision to focus primarily on its Perry Ellis business and
exit its non-Perry Ellis Menswear Apparel  businesses and its Children's Apparel
Group.

Factors that May Affect Future Results and Financial Condition

This report  contains or incorporates  by reference  forward-looking  statements
within the  meaning of the  Private  Securities  Litigation  Reform Act of 1995.
Where any such forward-looking statement includes a statement of the assumptions
or bases underlying such  forward-looking  statement,  the Company cautions that
assumed  facts or bases  almost  always  vary from the actual  results,  and the
differences  between  assumed facts or bases and actual results can be material,
depending on the circumstances.  Where, in any  forward-looking  statement,  the
Company  or its  management  expresses  an  expectation  or  belief as to future
results,  there can be no assurance  that the  statement of the  expectation  or
belief  will  result  or be  achieved  or  accomplished.  The  words  "believe",
"expect",  "estimate",  "project",  "seek", "anticipate" and similar expressions
may identify forward-looking  statements. The Company's future operating results
and financial condition are dependent upon the Company's ability to successfully
design,  manufacture,  import  and  market  apparel.  Taking  into  account  the
foregoing,  the following are  identified as important  factors that could cause
results  to  differ  materially  from  those  expressed  in any  forward-looking
statement made by, or on behalf of, the Company:

Disruption of Operations  Relating to the Chapter 11 Case. The  commencement  of
the Chapter 11 Case could adversely  affect the Company's and its  subsidiaries'
relationships with their customers, suppliers or employees. If the Company's and
its  subsidiaries'  relationships  with  customers,  suppliers or employees  are
adversely affected,  the Company's operations could be materially affected.  The
Company anticipates,  however,  that it will have sufficient cash to service the
obligations  that it intends to pay during the period  prior to and  through the
consummation of the Plan.

Even though the Plan was  confirmed by the  Bankruptcy  Court on April 16, 1999,
there  can be no  assurance  that the  Company  would  not  thereafter  suffer a
disruption in its business operations as a result of filing the Chapter 11 Case,
particularly  in light  of the  fact  that  the  Company  has  been a debtor  in
bankruptcy on two prior occasions.

Competition. The apparel industry in the United States is highly competitive and
characterized by a relatively small number of multi-line  manufacturers (such as
the Company) and a large number of specialty  manufacturers.  The Company  faces
substantial  competition in its markets from  manufacturers  in both categories.
Many of the Company's  competitors  have greater  financial  resources  than the
Company.  The Company also competes for private label programs with the internal
sourcing organizations of many of its own customers.

Apparel  Industry  Cycles  and other  Economic  Factors.  The  apparel  industry
historically has been subject to substantial  cyclical variation,  with consumer
spending on apparel tending to decline during recessionary periods. A decline in
the general economy or  uncertainties  regarding  future economic  prospects may
affect consumer  spending habits,  which, in turn, could have a material adverse
effect on the Company's results of operations and financial condition.

Retail  Environment.   Various  retailers,   including  some  of  the  Company's
customers,  have  experienced  declines in revenue and profits in recent periods
and some have been forced to file for bankruptcy protection.  To the extent that
these  financial  difficulties  continue,  there  can be no  assurance  that the
Company's  financial  condition and results of operations would not be adversely
affected.

Seasonality of Business and Fashion Risk. The Company's  principal  products are
organized  into seasonal lines for resale at the retail level during the Spring,
Fall and Holiday Seasons. Typically, the Company's products are designed as much
as one year in advance and manufactured  approximately  one season in advance of
the related retail  selling  season.  Accordingly,  the success of the Company's
products  is often  dependent  on the  ability of the  Company  to  successfully
anticipate  the needs of the  Company's  retail  customers and the tastes of the
ultimate consumer up to a year prior to the relevant selling season.

Foreign  Operations.  The Company's  foreign sourcing  operations are subject to
various  risks  of  doing  business  abroad,   including  currency  fluctuations
(although  the  predominant  currency used is the U.S.  dollar),  quotas and, in
certain parts of the world, political instability. Any substantial disruption of
its relationship with its foreign suppliers could adversely affect the Company's
operations.  Some of the  Company's  imported  merchandise  is subject to United
States  Customs  duties.  In addition,  bilateral  agreements  between the major
exporting countries and the United States impose quotas,  which limit the amount
of  certain  categories  of  merchandise  that may be  imported  into the United
States. Any material increase in duty levels,  material decrease in quota levels
or material  decrease in available quota  allocation  could adversely affect the
Company's  operations.  The Company's operations in Asia, including those of its
licensees,  are subject to certain  political and economic risks including,  but
not limited to, political  instability,  changing tax and trade  regulations and
currency  devaluations  and controls.  The Company's  risks  associated with the
Company's Asian operations may be higher in 1999 than has historically  been the
case,  due to the fact that  financial  markets in East and Southeast  Asia have
recently experienced and continue to experience difficult conditions,  including
a currency crisis. As a result of recent economic volatility,  the currencies of
many  countries  in this  region have lost value  relative  to the U.S.  dollar.
Although the Company has experienced no material  foreign  currency  transaction
losses  since the  beginning of this crisis,  its  operations  in the region are
subject  to an  increased  level of  economic  instability.  The impact of these
events on the Company's  business,  and in particular  its sources of supply and
royalty income cannot be determined at this time.

Dependence  on  Contract  Manufacturing.  As of  January 2,  1999,  the  Company
produced  65% of all  of its  products  (in  units)  through  arrangements  with
independent contract manufacturers. Upon consummation of the Plan, substantially
all of the Company's inventory will be manufactured by independent  contractors.
The use of such  contractors  and the  resulting  lack of direct  control  could
subject the Company to  difficulty in obtaining  timely  delivery of products of
acceptable  quality. In addition,  as is customary in the industry,  the Company
does not have any  long-term  contracts  with its  fabric  suppliers  or product
manufacturers.  While the Company is not  dependent  on one  particular  product
manufacturer  or raw  material  supplier,  the  loss  of  several  such  product
manufacturers  and/or raw  material  suppliers  in a given  season  could have a
material adverse effect on the Company's performance.

Because  of the  foregoing  factors,  as well as  other  factors  affecting  the
Company's operating results and financial condition,  past financial performance
should not be considered to be a reliable indicator of future  performance,  and
investors are cautioned not to use  historical  trends to anticipate  results or
trends in the future.  In addition,  the Company's  participation  in the highly
competitive  apparel  industry  often results in  significant  volatility in the
Company's common stock price.


<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Independent Auditors' Report

To the Board of Directors and Stockholders of Salant Corporation:

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Salant
Corporation and  subsidiaries  (the "Company") as of January 2, 1999 and January
3, 1998, and the related  consolidated  statements of operations,  comprehensive
income,  shareholders'  equity/deficiency  and  cashflows  for the  years  ended
January 2, 1999, January 3, 1998 and December 28, 1996. Our audits also included
the financial statement schedule listed in the index at Item 14. These financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and financial statement schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the financial  position of Salant  Corporation and subsidiaries as of
January 2, 1999 and January 3, 1998,  the results of their  operations and their
cash flows for the years ended January 2, 1999, January 3, 1998 and December 28,
1996 in conformity with generally accepted accounting  principles.  Also, in our
opinion,  the financial statement  schedule,  when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

As discussed in Note 1, the Company has filed for  reorganization  under Chapter
11 of the Federal Bankruptcy Code. The accompanying  financial statements do not
purport  to  reflect  or  provide  for  the   consequences   of  the  bankruptcy
proceedings. In particular, such financial statements do not purport to show (a)
as  to  assets,   their  realizable  value  on  a  liquidation  basis  or  their
availability  to satisfy  liabilities;  (b) as to prepetition  liabilities,  the
amounts  that may be  allowed  for  claims or  contingencies,  or the status and
priority thereof; (c) as to stockholder accounts, the effect of any changes that
may be made in the capitalization of the Company;  or (d) as to operations,  the
effect of any changes that may be made in its business.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 9 to the
consolidated  financial statements,  the Company has received a commitment from,
but has not yet executed a new credit exit facility with, its lenders.
This matter raises a substantial  doubt about the Company's  ability to continue
as a going concern.  The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.


/s/ Deloitte & Touche LLP


April 2, 1999
(April 16, 1999 as to Note 1 paragraphs 4 and 5)
New York, New York

<PAGE>
<TABLE>
<CAPTION>
                                        Salant Corporation and Subsidiaries
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Amounts in thousands, except per share data)

                                                                                              Year Ended                        
                                                             January 2,            January 3,          December 28,
                                                                   1999                  1998                  1996


<S>                                                          <C>                  <C>                   <C>        
Net sales                                                    $  300,586           $   347,667           $   371,958
Cost of goods sold                                              238,192               270,328               288,508
                                                            -----------           -----------          ------------


Gross profit                                                     62,394                77,339                83,450

Selling, general and administrative expenses                    (71,999)              (73,169)              (77,075)
Royalty income                                                    5,254                 5,596                 6,148
Goodwill amortization                                            (1,881)               (1,881)               (2,227)
Other income, net                                                   199                   564                 2,634
Restructuring costs (Note 3)                                    (24,825)               (2,066)              (11,730)
Reorganization costs (Note 1)                                    (3,200)                   --                    --
Debt restructuring costs (Note 10)                               (8,633)                   --                    --
                                                             -----------     ----------------     -----------------
(Loss)/Income from continuing operations before interest,
  income taxes and extraordinary gain                           (42,691)                6,383                 1,200
Interest expense, net (Notes 9 and 10)                           13,944                14,610                13,748
                                                             ----------          ------------         -------------


Loss from continuing operations
  before income taxes and extraordinary gain                    (56,635)              ( 8,227)              (12,548)

Income taxes (Note 12)                                              140                   167                   104
                                                            ------------       --------------       ---------------


Loss from continuing operations
  before extraordinary gain                                     (56,775)              ( 8,394)              (12,652)
Discontinued operations (Note 17):
  (Loss)/Income from discontinued operations                    (10,163)              (10,464)                3,329

  Loss on disposal                                               (5,724)               (1,330)                   --
Extraordinary gain (Note 4)                                          --                 2,100                    --
                                                       ----------------        --------------     -----------------


Net loss                                                        (72,662)         $    (18,088)      $        (9,323)
                                                             ===========         =============      ===============

Basic and diluted loss per share:
  Loss per share from continuing
    operations before extraordinary gain                   $     (3.74)      $         (0.55)     $          (0.84)
  (Loss)/earnings per share from discontinued operations         (1.05)                (0.78)                 0.22
  Extraordinary gain                                                 --                 0.14                    -- 
                                                      -----------------     ----------------     ------------------


Basic and diluted loss per share                          $      (4.79)      $         (1.19)      $         (0.62)
                                                          =============      ===============       ===============

Weighted average common stock outstanding                        15,171                15,139                15,078
                                                           ============       ===============       ===============


</TABLE>


                                  See Notes to Consolidated Financial Statements


<PAGE>
<TABLE>
<CAPTION>


                                        Salant Corporation and Subsidiaries
                                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                              (Amounts in thousands)


                                                             January 2,            January 3,          December 28,
                                                                   1999                  1998                  1997    


<S>                                                            <C>                   <C>                    <C>     
Net loss                                                       $(72,662)             $(18,088)              $(9,323)

Other comprehensive income, net of tax:

 Foreign currency translation adjustments                          (203)                  (70)                  (54)
 Minimum pension liability adjustments                               (348)               (326)                 (997)
                                                             -------------        ------------          ------------

Comprehensive income                                           $(73,213)             $(18,484)             $(10,374) 
                                                               =========             =========             ==========



</TABLE>


































                                  See Notes to Consolidated Financial Statements







<PAGE>
<TABLE>
<CAPTION>


                                        Salant Corporation and Subsidiaries
                                            CONSOLIDATED BALANCE SHEETS
                                   (Amounts in thousands, except per share data)

                                                                              January 2,                 January 3,
                                                                                    1999                       1998
ASSETS
Current assets:
<S>                                                                      <C>                        <C>            
  Cash and cash equivalents                                              $         1,222            $         2,193
  Accounts receivable - net of allowance for doubtful accounts
  of $2,661 in 1998  and $2,094 in 1997 (Notes 9 and 10)                          38,359                     39,635
  Inventories (Notes 5 and 9)                                                     69,590                     84,777

  Prepaid expenses and other current assets                                        5,266                      3,536
  Assets held for sale (Note 3)                                                   28,400                         --
  Net assets of discontinued operations (Note 17)                                  6,860                     17,490           
                                                                        ----------------            --------------------------

    Total current assets                                                         149,697                    147,631

Property, plant and equipment, net (Notes 6 and 9)                                12,371                     22,913
Other assets (Notes 7, 10 and 12)                                                 14,061                     58,039        
                                                                         ---------------           ------------------------

                                                                           $     176,129             $      228,583
                                                                           =============             ==============

LIABILITIES AND SHAREHOLDERS' EQUITY / DEFICIENCY
Current liabilities:
  Loans payable (Note 9)                                                          38,496           $         33,800
  Accounts payable                                                                 2,831                     23,889

  Reserve for business restructuring (Note 3)                                      3,551                      2,764
  Liabilities subject to compromise (Note 1)                                     143,807                         --
  Accrued salaries, wages and other liabilities (Note 8)                          14,344                     15,566
  Current portion of long term debt (Note 10)                                         --                    104,879            
                                                                     -------------------             --------------------------

    Total current liabilities                                                    203,029                    180,898

Deferred liabilities (Note 15)                                                     4,010                      5,382

Commitments and contingencies (Notes 9, 10, 13, 14, 16 and 20)

Shareholders'  equity / deficiency (Note 14):  Preferred stock, par value $2 per
  share:
    Authorized 5,000 shares; none issued                                              --                       --
  Common stock, par value $1 per share
     Authorized 30,000 shares;                                                    15,405                     15,405
     issued and issuable - 15,405 shares in 1998 and 1997
  Additional paid-in capital                                                     107,249                    107,249
  Deficit                                                                       (147,897)                   (75,235)
  Accumulated other comprehensive income (Note 18)                                (4,053)                    (3,502)
  Less - treasury stock, at cost - 234 shares                                     (1,614)                    (1,614)
                                                                       -----------------           ----------------


Total shareholders' (deficiency) / equity                                        (30,910)                    42,303         
                                                                        ----------------           -------------------------

                                                                         $       176,129             $      228,583
                                                                         ===============             ==============
</TABLE>


                                  See Notes to Consolidated Financial Statements


<PAGE>
<TABLE>
<CAPTION>


                                        Salant Corporation and Subsidiaries
                           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY / DEFICIENCY
                                              (Amounts in thousands)

                                                                       Accum-
                                                                      ulated                       Total
                                                                     Other                          Share-
                                    Common Stock    Add'l             Compre-              Treasury Stock      holders'
                                Number            Paid-In            hensive      Number           Equity/
                              of Shares  Amount   Capital     Deficit       Income   of SharesAmount (Deficiency)


<S>                              <C>      <C>       <C>     <C>        <C>          <C>    <C>       <C>   
Balance at December 30, 1995     15,275   15,275    107,071 (47,824)   (2,055)      234    (1,614)   70,853

Stock options exercised              53       53         59                                             112
Net loss                                                     (9,323)                                 (9,323)
Other Comprehensive Income                                                    (1,051)                               (1,051)
                            --------------------------------------------------------------------------------   -----------

Balance at December 28, 1996     15,328   15,328    107,130 (57,147)   (3,106)      234    (1,614)   60,591

Stock options exercised              77       77        119                                             196
Net loss                                                    (18,088)                                (18,088)
Other Comprehensive Income                                                         (396)                               (396)
                            -----------------------------------------------------------------------------------------------

Balance at January 3, 1998       15,405   15,405    107,249 (75,235)   (3,502)      234    (1,614)   42,303     
                                                                                                           =====

Net loss                                                    (72,662)                                (72,662)
Other Comprehensive Income                                                            (551)                              (551)
                           ---------------------------------------------------------------------------------------------------

Balance at January 2, 1999              15,405$15,405$107,249$(147,897)$(4,053)     234   $(1,614) $(30,910)
                                        ============================== ======= ========   =======  ========

</TABLE>



                                  See Notes to Consolidated Financial Statements



<PAGE>
<TABLE>
<CAPTION>


                                        Salant Corporation and Subsidiaries
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (Amounts in thousands)

                                                                                                    Year Ended     

                                                             January 2,            January 3,          December 28,
                                                                   1999                  1998                  1996

Cash Flows from Operating Activities
<S>                                                          <C>                  <C>               <C>             
Income/(loss) from continuing operations                     $  (56,775)          $    (8,394)      $       (12,652)
Adjustments to reconcile income from continuing operations to
  net cash (used in)/provided by operating activities:
    Depreciation                                                  7,474                 6,578                 5,576
    Amortization of intangibles                                   1,881                 1,881                 2,228
    Write-down of fixed assets                                   10,931                 1,274                   263
    Write-down of other assets                                   39,952                     -                 6,264
    Loss on sale of fixed assets                                                            -                    17
    Changes in operating assets and liabilities:
      Accounts receivable                                         1,276                (7,717)               (2,622)
      Inventories                                                15,187                 3,863                18,219
      Prepaid expenses and other current assets                  (1,730)                  629                 1,251
      Assets held for sale                                      (28,400)
      Other assets                                                  301                  (242)                 (760)
      Accounts payable                                          (21,058)               (1,690)                1,393
      Accrued salaries, wages and other liabilities              (1,222)               (2,589)               (2,460)
      Liabilities subject to compromise                          38,928
      Reserve for business restructuring                            787                  (205)                1,400
      Deferred liabilities                                       (1,372)               (2,203)               (2,148)
                                                           -------------         ------------          -------------

    Net cash (used in)/provided by continuing operating activities  6,160              (8,815)               15,969
    Cash used in discontinued operations                         (5,257)               (5,120)                   58
                                                           -------------         ------------        --------------

Net cash (used in)/provided by operations                           903               (13,935)               16,027
                                                          -------------           -----------           -----------


Cash Flows from Investing Activities
Capital expenditures, net of disposals                           (4,871)               (5,104)               (6,542)
Store fixture expenditures                                       (1,148)               (3,122)               (3,855)
Acquisition                                                           -                     -                  (694)
Proceeds from sale of assets                                          -                     -                 1,854
                                                       ----------------      ----------------           -----------

Net cash used in investing activities                            (6,019)               (8,226)               (9,237)
                                                          --------------         ------------           -----------


Cash Flows from Financing Activities
Net short-term borrowings/(repayments)                            4,696                26,123                (6,745)
Retirement of long-term debt                                          -                (3,372)                    -
Exercise of stock options                                             -                   196                   112
Other, net                                                         (551)                  (70)                  (54)
                                                          --------------      ---------------         -------------

Net cash provided by/(used in) financing activities               4,145                22,877                (6,687)
                                                           ------------          ------------           -----------


Net increase/(decrease) in cash and cash equivalents               (971)                  716                   103

Cash and cash equivalents - beginning of year                     2,193                 1,477                 1,374
                                                           ------------         -------------            ----------

Cash and cash equivalents - end of year                     $     1,222          $      2,193             $   1,477
                                                            ===========          ============             =========

Supplemental  disclosures  of cash flow  information:  Cash paid during the year
for:
   Interest                                                   $   5,441            $   16,479             $  16,307
                                                              =========            ==========             =========

   Income taxes                                              $      321          $        201           $       189
                                                             ==========          ============           ===========
</TABLE>




                                  See Notes to Consolidated Financial Statements


<PAGE>


                       SALANT CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
       (Amounts in Thousands of Dollars, Except Share and Per Share Data)


Note 1.  Financial Restructuring

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.

On December 29, 1998 (the "Filing  Date")  Salant  Corporation  filed a petition
under chapter 11 of title 11 of the United States Code (the  "Bankruptcy  Code")
in the United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") in order to implement a restructuring of its 10-1/2 % Senior
Notes due December 31, 1998 (the "Senior Notes").  Salant also filed its Plan of
Reorganization  (the "Plan") with the Bankruptcy Court in order to implement its
restructuring.  Salant's  major note and equity  holders  support  the Plan.  In
addition, Salant has obtained a $85 million  debtor-in-possession  facility (the
"DIP   Facility")   from  its  existing   working   capital   lender,   The  CIT
Group/Commercial Services, Inc. ("CIT"), during the chapter 11 case. The Company
also has  received a  commitment  letter  from CIT,  which is subject to certain
conditions,  for an exit  facility  (the "Exit  Facility")  to  replace  the DIP
Facility following the emergence from Chapter 11.

The Plan provides  that (i) all of the  outstanding  principal  amount of Senior
Notes, plus all accrued and unpaid interest thereon,  will be converted into 95%
of Salant's  new common  stock,  subject to  dilution,  and (ii) all of Salant's
existing  common stock will be converted  into 5% of Salant's new common  stock,
subject to dilution.  Salant's  general  unsecured  creditors  (including  trade
creditors)  are  unimpaired  and upon  consummation  of the Plan will be paid in
full.  The Plan has been  approved  by all of the  holders of Senior  Notes that
voted and over 96% of the holders of Salant  common  stock that voted.  On March
25, 1999, the Bankruptcy  Court held a hearing on the  confirmation of the Plan.
At the hearing, the Bankruptcy Court advised that it would take the objection to
confirmation under advisement.

Prior to the  Bankruptcy  Court's  announcement  of its ruling on the objection,
Salant and Supreme  International,  Inc.  (in its own  capacity and on behalf of
Perry Ellis International,  Inc.), which had filed an objection to confirmation,
settled  and  resolved  their  differences,  and the  economic  terms  of  their
settlement were set forth in a term sheet which was attached to and incorporated
into the  confirmation  order.  Thereafter,  at the April 16, 1999 hearing,  the
Bankruptcy Court entered an order confirming the Plan.

     The  following  is a summary of the material  provisions  of the Term Sheet
     setting forth the terms of the PEI Settlement. The following description is
     qualified in its  entirety by the  provisions  of the Term Sheet,  which is
     attached  as  Exhibit  A to the  Confirmation  Order.  The  PEI  Settlement
     provides that (i) Salant will return to PEI the license to sell Perry Ellis
     products in Puerto Rico, the U.S. Virgin  Islands,  Guam and Canada (Salant
     will  retain the right to sell its  existing  inventory  in Canada  through
     January 31, 2000); (ii) the royalty rate due PEI under Salant's Perry Ellis
     Portfolio  pants  license with respect to regular  price sales in excess of
     $15,000  annually  will be  increased  to 5%;  (iii)  Salant  will  provide
     Supreme-PEI with the option to take over any real estate lease for a retail
     store that Salant intends to close;  (iv) Salant will assign to Supreme-PEI
     its sublicense with Aris  Industries,  Inc. for the  manufacture,  sale and
     distribution of the Perry Ellis America brand sportswear and,  depending on
     certain  circumstances,  receive certain royalty  payments from Supreme-PEI
     through the year 2005; (v) Salant will pay PEI prepetition invoices of $617
     and post petition  invoices of $57 on the later of (i) the  Effective  Date
     (as defined in the Plan) of the Plan and (ii) the due date with  respect to
     such amounts;  (vi) Supreme-PEI (a) agrees and acknowledges  that the sales
     of businesses  made by Salant during its chapter 11 case do not violate the
     terms of Salant's license  agreements with PEI (the "Perry Ellis Licenses")
     and do not give rise to the termination of the Perry Ellis Licenses and (b)
     consents to the change of control  arising from the conversion of debt into
     equity under the Plan and acknowledges that such change of control does not
     give rise to any right to  terminate  the Perry Ellis  Licenses;  and (vii)
     Supreme-PEI  withdraws with prejudice its objection to  confirmation of the
     Plan, and supports confirmation of the Plan.

     As of the Filing Date Salant had $143,807  (consisting of $14,703 in Senior
     Note   interest,   $104,879  of  Senior  Notes  and  $24,225  of  unsecured
     pre-bankruptcy claims) of liabilities subject to compromise, in addition to
     the loans payable to CIT. In addition  Salant accrued the estimated fees in
     the 1998  fourth  quarter of $3.2  million  for the  administration  of the
     chapter 11 proceedings.

Post-restructuring,  Salant intends to focus  primarily on its Perry Ellis men's
apparel  business  and,  as a  result,  intends  to exit its  other  businesses,
including  its  Children's   Group  and  non-Perry  Ellis  menswear   divisions.
Subsequent  to January 2, 1999,  the Company  sold its John Henry and  Manhattan
businesses.  These  businesses  include  the  John  Henry,  Manhattan  and  Lady
Manhattan trade names, the John Henry and Manhattan dress shirt  inventory,  the
leasehold interest in the dress shirt facility located in Valle Hermosa, Mexico,
and the equipment located at the Valle Hermosa facility and at Salant's facility
located in Andalusia,  Alabama.  Salant has also sold,  subsequent to January 2,
1999,  its  Children's  Group.  This  agreement  is  primarily  for the  sale of
inventory related to the Children's Group. As a result of the above, Salant will
now report its business operations as a single segment.

The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going concern.

Note 2.  Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Consolidated Financial Statements include the accounts of Salant Corporation
("Salant") and subsidiaries.  (As used herein, the "Company" includes Salant and
its  subsidiaries  but excludes  Salant  Children's  Group and Made in the Shade
divisions.) In December 1998, the Company  decided to discontinue the operations
of the Children's Group, which produced and marketed children's blanket sleepers
primarily  using a number of well-known  licensed  characters  created by, among
others,  DISNEY and WARNER BROTHERS.  The Children's Group also marketed pajamas
under OSHKOSH B'GOSH trademark,  and sleepwear and underwear under the JOE BOXER
trademark.  In June 1997, the Company discontinued the operations of the Made in
the Shade division,  which produced and marketed women's junior  sportswear.  As
further  described in Note 17, the  consolidated  financial  statements  and the
notes thereto  reflect the Children's  Group and Made in the Shade  divisions as
discontinued operations.  Significant intercompany balances and transactions are
eliminated in consolidation.

The Company's principal business is the designing, manufacturing,  importing and
marketing of apparel.  The Company  sells its products to  retailers,  including
department and specialty  stores,  national chains,  major  discounters and mass
volume retailers, throughout the United States.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  (such as  accounts
receivable,  inventories,  restructuring  reserves and valuation  allowances for
income taxes),  disclosure of contingent  assets and  liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Fiscal Year

The Company's  fiscal year ends on the Saturday closest to December 31. The 1998
and 1996  fiscal  year was  comprised  of 52  weeks.  The 1997  fiscal  year was
comprised of 53 weeks.

Reclassifications

Certain  reclassifications were made to the 1996 and 1997 consolidated financial
statements to conform to the 1998 presentation.

Cash and Cash Equivalents

The Company treats cash on hand,  deposits in banks and  certificates of deposit
with original  maturities of less than 3 months as cash and cash equivalents for
the purposes of the statements of cash flows.

Inventories

Inventories  are  stated  at the  lower  of cost  (principally  determined  on a
first-in, first-out basis for apparel operations and the retail inventory method
on a first-in, first-out basis for outlet store operations) or market.

Property, Plant and Equipment

Property,  plant  and  equipment  are  stated  at cost  and are  depreciated  or
amortized over their estimated useful lives, or for leasehold improvements,  the
lease term, if shorter.  Depreciation and amortization are computed  principally
by the straight-line  method for financial reporting purposes and by accelerated
methods for income tax purposes.

The annual depreciation rates used are as follows:

Buildings and improvements                     2.5%      -    10.0%
Machinery, equipment and autos                 6.7%      -    33.3%
Furniture and fixtures                        10.0%      -    50.0%
Leasehold improvements             Shorter of the life of the asset or the lease
                                   term

Other Assets

Intangible assets are being amortized on a straight-line basis over their useful
lives, of 25 years.  Costs in excess of fair value of net assets  acquired,  are
assessed for  recoverability  on a periodic  basis.  In evaluating the value and
future  benefits  of these  intangible  assets,  their  carrying  value would be
reduced  by the  excess,  if any,  of the  intangibles  over  management's  best
estimate of  undiscounted  future  operating  income of the acquired  businesses
before  amortization  of  the  related  intangible  assets  over  the  remaining
amortization period.

Income Taxes

Deferred  income  taxes are  provided  to reflect  the tax  effect of  temporary
differences  between financial statement income and taxable income in accordance
with the provisions of Statement of Financial Accounting Standard No.
109, "Accounting for Income Taxes".

Fair Value of Financial Instruments

     For financial  instruments,  including cash and cash equivalents,  accounts
     receivable  and  payable,  and  accrued  expenses,   the  carrying  amounts
     approximated  fair value because of their short  maturity.  Long-term debt,
     which was issued at a market rate of interest,  currently is not traded and
     in  accordance  with the Plan will be  converted  to equity.  In  addition,
     deferred liabilities have carrying amounts approximating fair value.

Earnings/(Loss) Per Share 

Earnings/(loss)  per  share is based on the  weighted  average  number of common
shares  (including,  as of January 2, 1999 and  January  3,  1998,  185,854  and
205,854  shares,  respectively,   anticipated  to  be  issued  pursuant  to  the
Reorganization  Plan) and common stock equivalents  outstanding,  if applicable.
Loss per  share  for 1998 and 1997 did not  include  common  stock  equivalents,
inasmuch as their effect would have been anti-dilutive.  In 1998, 1997 and 1996,
earnings  per share did not  include  1,266,367,  1,343,393  and  837,240  stock
options, respectively, which would not have had a dilutive effect.

Foreign Currency

In fiscal 1998, the Company  entered into forward  foreign  exchange  contracts,
relating to its projected 1999 Mexican peso needs,  to fix its cost of acquiring
pesos and  diminish  the risk of  currency  fluctuations.  Gains  and  losses on
foreign  currency  contracts  are  included  in income  and offset the gains and
losses on the  underlying  transactions.  On January 2,  1999,  the  outstanding
foreign  currency  contracts had a cost of  approximately  $4,886 and a year end
market value of approximately  $4,851.  Subsequent to year-end and in connection
with the  restructuring,  the outstanding  foreign currency  contracts were sold
without a material gain or loss.

In fiscal 1997, the Company  entered into forward  foreign  exchange  contracts,
relating to 80% of its  projected  1998 Mexican  peso needs,  to fix its cost of
acquiring pesos and diminish the risk of currency fluctuations. Gains and losses
on foreign  currency  contracts  are included in income and offset the gains and
losses on the  underlying  transactions.  On January 3,  1998,  the  outstanding
foreign  currency  contracts had a cost of  approximately  $8,900 and a year end
market value of approximately $10,000.

Revenue Recognition

Revenue is  recognized  at the time the  merchandise  is shipped.  Retail outlet
store revenues are recognized at the time of sale.

New Accounting Standards

The Company has adopted Statement of Financial  Accounting Standard ("SFAS") No.
130, "Reporting  Comprehensive  Income",  during the year ended January 2, 1999.
SFAS No. 130 establishes  standards for reporting  comprehensive  income and its
components in a full set of general-purpose financial statements. This Statement
requires that an enterprise (a) classify items of other comprehensive  income by
their nature in a financial statements,  and (b) display the accumulated balance
of other  comprehensive  income separately from retained earnings and additional
paid-in  capital in the equity  section of a statement  of  financial  position.
Adoption of this statement  required the Company to report changes in the excess
of additional pension liability over unrecognized prior service cost and foreign
currency translation  adjustment accounts,  currently shown in the stockholder's
equity section of the balance sheet,  as an increase or decrease to reported net
income in arriving at comprehensive income.

The Company has adopted SFAS No. 132, "Employers' Disclosures about Pensions and
Other  Postretirement  Benefits",  for the period  ended  January 2, 1999.  This
statement revises employers'  disclosures about pension and other postretirement
benefit plans for all periods  presented.  It does not change the measurement or
recognition of those plans.  It  standardizes  the disclosure  requirements  for
pensions and other postretirement  benefits to the extent practicable,  requires
additional  information on changes in the benefit obligations and fair values of
plan assets that will  facilitate  financial  analysis,  and eliminates  certain
disclosures that are no longer as useful.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities".  The statement
establishes   accounting  and  reporting  standards  requiring  that  derivative
instruments   (including  certain  derivative   instruments  embedded  in  other
contracts)  be  recorded in the  balance  sheet as either an asset or  liability
measured at fair value.  The statement  requires that changes in a  derivative's
fair value be recognized  currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset  related  results  on the  hedged  item in the income
statement and requires that a company formally document,  designate,  and assess
the effectiveness of transactions that receive hedge accounting. SFAS No. 133 is
effective for fiscal years  beginning  after June 15, 1999;  however,  it may be
adopted earlier. It cannot be applied  retroactively to financial  statements of
prior  periods.  The Company has not yet  quantified the impact of adopting SFAS
No. 133 on their  financial  statements  and has not determined the timing of or
method of adoption.

Note 3.  Restructuring Costs

In 1998, the Company  recorded a provision for  restructuring of $24,825 related
to the  decision  of the  Company to focus  primarily  on its Perry  Ellis men's
apparel business. As a result, the Company intends to exit its other businesses.
Subsequent  to  January  2,  1999,  Salant  sold its John  Henry  and  Manhattan
businesses  pursuant to a Purchase and Sale  Agreement  dated  December 28, 1998
(subject to and  subsequently  approved by the Bankruptcy  Court on February 26,
1999).  These  businesses  include the John Henry,  Manhattan and Lady Manhattan
trade names and the related  goodwill,  the leasehold  interest in a dress shirt
facility  located in Valle  Hermosa,  Mexico,  and the equipment  located at the
Valle Hermosa facility and at Salant's  facility located in Andalusia,  Alabama.
These  assets had a net book value of $43,184  (consisting  of the  $29,979  for
goodwill,  $9,680 for  licenses  and $3,525 for fixed  assets) and were sold for
$27,000,  resulting  in a loss of  $16,184.  At the end of  fiscal  1998 the net
realizable  value of $27,000 for these assets was  included in the  consolidated
balance sheet as assets held for sale.  The assets not sold in this  transaction
are also  included as assets held for sale and are  recorded at their  estimated
net realizable value of $1,400.

In addition to the $16,184 above, the restructuring  provision  consisted of (i)
$6,305 of additional property, plant and equipment write-downs,  (ii) $2,936 for
the write off of other  assets,  severance  costs,  lease  exit costs and other
restructuring  costs and (iii)  offset by $600 from the  reversal of  previously
recorded  restructuring  reserves  primarily  resulting  from the  settlement of
liabilities  for less than the  carrying  amount and the gain on the sale of the
Thomson  manufacturing and distribution  facility. As of January 2, 1999, $3,551
remained in the restructuring reserve relating to future lease payments of $845,
royalties of $592, severance of $840 and other miscellaneous restructuring costs
of $1,274, of which $527 related to the 1996 restructuring  provision for future
minimum royalties.

Assets held for sale include (i)  buildings  in Eagle Pass and Carrizo  Springs,
Texas and  Andalusia,  Alabama  and (ii)  machinery,  equipment,  furniture  and
fixtures  in  several  locations  in  Mexico,  Long  Island  City and the  Texas
facilities. The Company is investigating, through various channels, an efficient
and timely disposal/sale of these assets.

In  1997,  the  Company  recorded  a  provision  for  restructuring  of  $2,066,
consisting of (i) $3,530  related to the decision in the fourth quarter to close
all retail  outlet  stores  other  than Perry  Ellis  outlet  stores  consisting
primarily of asset  write-offs  and future  payments  related to  non-cancelable
operating   leases,   offset  by  a  $1,464  reversal  of  previously   recorded
restructuring  reserves,   including  $300  in  the  fourth  quarter,  primarily
resulting from the settlement of liabilities for less than the carrying  amount.
As of  January  3, 1998,  $1,579  remained  in the  restructuring  reserve,  all
relating to the retail outlet store closings.

In 1996,  the  Company  recorded  a  provision  for  restructuring  of  $11,730,
consisting of (i) $5,718 in connection  with the decision to sell or license the
JJ. Farmer  sportswear  product line,  which charge is primarily  related to the
write-off of goodwill and write-down of other assets, (ii) $2,858 related to the
write-off of certain assets related to the licensing of the Gant dress shirt and
accessories  product  lines,  and the accrual of a portion of the future minimum
royalties  under the Gant  licenses,  which are not  expected  to be  covered by
future sales,  (iii) $1,837  primarily  related to employee  costs in connection
with the  closing of a  manufacturing  and  distribution  facility  in  Thomson,
Georgia,  (iv) $714 primarily  related to employee costs in connection  with the
closing of a  manufacturing  facility in Americus,  Georgia and (v) $603 related
primarily to other severance  costs. As of January 3, 1998,  $1,185 of the above
amounts  remained  in the  restructuring  reserves  related  to  future  minimum
royalties and future carrying costs for a closed facility.


Note 4.  Extraordinary Gain

In 1997, the Company recorded an extraordinary gain of $2,100,  including $1,500
in the fourth quarter for the early extinguishment of debt.

Note 5.  Inventories
<TABLE>
<CAPTION>
                                                                          January 2,            January 3,
                                                                                1999                  1998

<S>                                                                        <C>                   <C>      
Finished goods                                                             $  42,022             $  45,108
Work-in-process                                                               17,225                19,714
Raw materials and supplies                                                    10,343                19,955
                                                                          ----------            ----------
                                                                           $  69,590             $  84,777
                                                                           =========             =========
</TABLE>

Finished goods inventory includes in transit merchandise of $1,858 and $4,428 at
January 2, 1999 and January 3, 1998, respectively.

Note 6.  Property, Plant and Equipment
<TABLE>
<CAPTION>
                                                                          January 2,            January 3,
                                                                                1999                  1998

<S>                                                                        <C>                   <C>      
Land and buildings                                                         $   6,404             $  13,673
Machinery, equipment, furniture
  and fixtures                                                                15,088                28,708
Leasehold improvements                                                         4,172                 6,271
Property held under capital leases                                                --                   583
                                                                      --------------          ------------
                                                                              25,664                49,235
Less accumulated depreciation and amortization                                13,293                26,322
                                                                           ---------            ----------
                                                                           $  12,371             $  22,913
                                                                           =========             =========
</TABLE>



Note 7.  Other Assets
<TABLE>
<CAPTION>

                                                                           January 2            January 3,
                                                                                1999                  1998
Excess of cost over net assets acquired,
 net of accumulated amortization of
<S>                                                                        <C>                   <C>      
 $3,828 in 1998 and $13,240 in 1997                                        $   7,333             $  39,042
Trademarks and license agreements,
 net of accumulated amortization of
 $1,227 in 1998 and $4,064 in 1997                                             3,373                13,498
Other                                                                          3,355                 5,499
                                                                         ------------          -----------
                                                                           $  14,061             $  58,039
                                                                           =========             =========
</TABLE>

The  unamortized  portion of intangible  assets  related to the non-Perry  Ellis
menswear  operations  amounting to $39,952  ($29,979  representing the excess of
cost  over  net  assets  acquired  and  $9,680  representing  licenses  and $293
representing  trademarks)  were  included in the  computation  of  restructuring
charges as discussed in Note 3.

In June 1996,  the company  wrote-off  other assets of $4,325 that  consisted of
$4,075  for the  unamortized  portion  of the  excess  of cost  over net  assets
acquired  related to the JJ.  Farmer  division  and $250  related to the license
agreements for the Gant product lines.

In November 1996, the Company sold its leasehold  interest in a closed  facility
in Glen Rock,  New Jersey,  resulting in a gain of $2,712,  which is included in
other income.

Note 8.  Accrued Salaries, Wages and Other Liabilities
<TABLE>
<CAPTION>

                                                                          January 2,            January 3,
                                                                                1999                  1998

<S>                                                                        <C>                   <C>      
Accrued salaries and wages                                                 $   5,491             $   3,803
Accrued pension and retirement benefits                                        1,972                 2,792
Accrued royalties                                                                 --                   207
Accrued interest                                                                 151                 3,897
Other accrued liabilities                                                      6,730                 4,867
                                                                          ----------            ----------
                                                                            $ 14,344              $ 15,566
                                                                            ========              ========
</TABLE>

Note 9.  Financing and Factoring Agreements

Upon  commencement  of the Chapter 11 Case,  Salant  filed a motion  seeking the
authority of the Bankruptcy Court to enter into a revolving credit facility with
CIT  pursuant  to and in  accordance  with  the  terms of the  Ratification  and
Amendment  Agreement,  dated as of December  29, 1998 (the  "Amendment")  which,
together  with  related  documents  are  referred  to  herein  as the  ("CIT DIP
Facility"),  effective as of the Filing Date,  which would replace the Company's
existing  working capital facility under the Credit  Agreement.  On December 29,
1998,  the  Bankruptcy  Court approved the CIT DIP Facility on an interim basis.
After a hearing before the Bankruptcy Court held on January 19, 1999 to consider
the final approval of the CIT DIP Facility,  the  Bankruptcy  Court approved the
CIT DIP Facility on a final basis.

The CIT DIP Facility  provides for a general  working capital  facility,  in the
form of direct borrowings and letters of credit, up to $85 million subject to an
asset-based  borrowing formula.  The CIT DIP Facility consists of an $85 million
revolving credit facility,  with a $30 million letter of credit subfacility.  As
collateral for borrowings under the CIT DIP Facility, the Company granted to CIT
a first  priority  lien on and  security  interest in  substantially  all of the
Company's   assets   and   those  of  its   subsidiaries,   with   superpriority
administrative  claim  status  over any and all  administrative  expenses in the
Company's  Chapter 11 Case,  subject to a $2 million  carve-out for professional
fees and the fees of the United  States  Trustee.  The CIT DIP  Facility  has an
initial  term of 150 days,  subject  to  renewal,  in CIT's  discretion,  for an
additional 90 day period and, thereafter, for an additional 120 day period.

The CIT DIP Facility also provides, among other things, that the Company will be
charged an interest rate on direct borrowings of 1.0% in excess of the Reference
Rate (as defined in the Credit  Agreement).  If the Company does not  consummate
the Plan by the end of the initial 150 day term, and CIT elects to renew the CIT
DIP Facility for an additional 90 day period,  as described  above,  pursuant to
the CIT DIP  Facility,  the  Company is  required  to pay CIT the amount of $250
thousand and the interest  rate under the CIT DIP Facility  will be increased to
1.25% in excess of the Reference  Rate. If the Company does not  consummate  the
Plan by the end of the first 90 day renewal under the CIT DIP Facility,  and CIT
elects  to renew the CIT DIP  Facility  for an  additional  120 day  period,  as
described  above,  pursuant to the CIT DIP Facility,  the Company is required to
pay CIT the  amount of $250  thousand  and the  interest  rate under the CIT DIP
Facility will be increased to 1.75% in excess of the Reference Rate. CIT may, in
its sole  discretion,  make  loans to the  Company  in excess  of the  borrowing
formula but within the $85 million limit of the revolving  credit  facility.  In
addition,  the CIT DIP  Facility  provides  that the  accounts of the  Company's
non-Perry Ellis business units will be factored by CIT beginning January 1, 1999
on a  non-notification  basis for the first 150 days and on a notification basis
thereafter.

Pursuant  to the  terms  of the CIT  DIP  Facility,  the  Company  will  pay the
following  fees:  (i) a  documentary  letter  of  credit  fee of 1/8 of  1.0% on
issuance and 1/8 of 1.0% on negotiation;  (ii) a standby letter of credit fee of
1% per annum plus bank charges;  (iii) a factoring  commission  of .75%;  (iv) a
collateral  management fee of $4,167 per month; and (v) a field exam fee of $750
per day, plus out-of-pocket  expenses.  In addition,  the Company will be liable
for all of  CIT's  costs  and  expenses  incurred  in  connection  with  the DIP
Facility, including attorneys' fees and expenses.

Upon  consummation  of the Plan, the Company  intends to enter into a syndicated
revolving  credit facility (the "CIT Exit Facility") with CIT pursuant to and in
accordance  with the terms of a commitment  letter  dated  December 7, 1998 (the
"CIT Commitment  Letter"),  effective as of consummation of the Plan, which will
replace the CIT DIP Facility described above.

The CIT Exit Facility will provide for a general  working capital  facility,  in
the form of direct  borrowings and letters of credit,  up to $85 million subject
to an asset-based borrowing formula. The CIT Exit Facility will consist of a $85
million revolving credit facility,  with at least a $30 million letter of credit
subfacility.  As collateral for borrowings  under the CIT Exit Facility,  Salant
will  grant  to CIT and a  syndicate  of  lenders  to be  arranged  by CIT  (the
"Lenders") a first priority lien on and security  interest in substantially  all
of the  assets of Salant.  The CIT Exit  Facility  will have an initial  term of
three years.

The CIT Exit  Facility will also  provide,  among other things,  that (i) Salant
will be charged an interest  rate on direct  borrowings of .50% in excess of the
Reference Rate; provided,  however, that if Salant meets certain mutually agreed
upon financial tests based upon opening financial statements,  then the interest
rate shall be .25% in excess of the  Reference  Rate or 2.25% in excess of LIBOR
(as defined in the Credit  Agreement),  and (ii) the Lenders  may, in their sole
discretion,  make loans to Salant in excess of the borrowing  formula but within
the $85 million limit of the revolving credit facility.

Pursuant to the CIT Exit  Facility,  Salant will pay the following  fees:  (i) a
documentary  letter of credit fee of 1/8 of 1.0% on issuance  and 1/8 of 1.0% on
negotiation;  (ii) a standby  letter of credit  fee of 1.0% per annum  plus bank
charges;  (iii) a commitment  fee of $325  thousand;  (iv) an unused line fee of
 .25%; (v) an agency fee of $100 thousand (only for the second and third years of
the term of the CIT Exit Facility);  (vi) a collateral  management fee of $8,333
per  month;  and  (vii) a field  exam  fee of $750  per day  plus  out-of-pocket
expenses.  In addition,  Salant will be liable for all of the Lenders' costs and
expenses incurred in connection with the Facility, including attorneys' fees and
expenses,  whether  or not the  Lenders  and  Salant  close  upon  the CIT  Exit
Facility.

The  execution  of the CIT Exit  Facility  is  subject  to  various  conditions,
including,  but not  limited  to,  satisfaction  of the  Plan  requirements  and
approval of the financing facility by CIT's Executive Credit Facility. Moreover,
Salant is required to  consummate  the CIT Exit  Facility no later than June 30,
1999.  There is no assurance that such  conditions will be satisfied or that the
CIT Exit Facility will be executed.

On January 2, 1999,  direct  borrowings and letters of credit  outstanding under
the Credit Agreement were $38,496 and $24,325, respectively, and the Company had
unused  availability  of  $13,022.  On January 2, 1998,  direct  borrowings  and
letters  of credit  outstanding  under the Credit  Agreement  were  $33,800  and
$23,239,  respectively,  and the Company had unused availability of $17,486. The
weighted  average interest rate on borrowings under the Credit Agreement for the
years ended January 2, 1999 and January 3, 1998 was 8.4% and 9.3%, respectively.

In addition to the financial  covenants  discussed  above,  the Credit Agreement
contains  a number  of other  covenants,  including  restrictions  on  incurring
indebtedness and liens, making investments in or purchasing the stock, or all or
a substantial part of the assets of another person,  selling property and paying
cash dividends.

Note 10.  Long-Term Debt

On September 20, 1993, Salant issued $111,851  principal amount of Senior Notes.
The Senior Notes may be redeemed at any time prior to  maturity,  in whole or in
part, at the option of the Company, at a premium to the principal amount thereof
plus  accrued   interest.   The  Senior  Notes  are  secured  by  a  first  lien
(subordinated to the lien securing  borrowings under the Credit Agreement to the
extent of $15,000) on certain accounts  receivable,  certain  intangible assets,
the capital  stock of Salant's  subsidiaries  and certain  real  property of the
Company,  and by a second lien on  substantially  all of the other assets of the
Company.  The Senior  Notes were due on  December  31, 1998 and as of January 2,
1999, $104,879 was outstanding and included in liabilities subject to compromise
and as of January 3, 1998 included in current liabilities.

On April 22, 1998,  the Company  filed a  registration  statement on Form S-4 in
order to facilitate the debt  restructuring of the Senior Notes due December 31,
1998.  Thereafter,  Salant filed amendments to the registration statement on May
10, 1998,  May 26, 1998 and August 31, 1998.  In  consideration  of, among other
things, the significant additional time required to consummate such transactions
and the occurrence of certain events (including, but not limited to, a reduction
in the value of certain of Salant's  business units) that caused the corporation
its  bondholders  and  shareholders  to seek an alternative  debt  restructuring
process  through  chapter  11  proceedings.  In  connection  with the filing the
Company  incurred $8,633 relating to the efforts to restructure the debt through
the registration  statement process, which were charged to expense in the fourth
quarter of 1998.

In contemplation of the debt  restructuring,  the Company elected not to pay the
interest  payments due during 1998. As a result,  at the Filing Date Salant owed
approximately  $14.7 million for interest on the Senior Notes. The $14.7 million
is  included on the  balance  sheet in  liabilities  subject to  compromise  (as
discussed in Note 1).

On October 28, 1996, the Company completed the sale of a leasehold interest in a
facility  located in Glen Rock, New Jersey.  The cash  proceeds,  net of certain
expenses,  of such sale  were  $3,372.  Such  amount  was  included  in  current
liabilities  at December 28, 1996.  Pursuant to the  Indenture,  on December 30,
1996, the Company  repurchased  Senior Notes in a principal  amount equal to the
net cash proceeds at 100% of the principal amount thereof.

Note 11 Significant Customers

The Company's principal business is the designing, manufacturing,  importing and
marketing of apparel.  The Company  sells its products to  retailers,  including
department and specialty  stores,  national chains,  major  discounters and mass
volume  retailers,  throughout the United  States.  As an adjunct to its apparel
manufacturing  operations,  the  Company  operates 20 factory  outlet  stores in
various parts of the United States. Foreign operations, other than sourcing, are
not significant.

In 1998,  approximately 20% of the Company's sales were made to Sears, Roebuck &
Company  ("Sears") and  approximately  14% of the  Company's  sales were made to
Federated Department Stores, Inc. ("Federated"). Also in 1998, approximately 11%
of the  Company's  sales were made to Dillard's  Corporation  ("Dillard's")  and
approximately  10% of the  Company's  sales  were  made to  Marmaxx  Corporation
("Marmaxx").  In 1997  approximately  10% of the  Company's  sales  were made to
Dillards.  In 1997 and 1996,  approximately  11% and 10% of the Company's  sales
were  made  to  Marmaxx,  respectively  and  approximately  19%  and  15% of the
Company's sales were made to Sears for 1997 and 1996, respectively. In both 1997
and 1996, approximately 12% of the Company's sales were made to Federated.

No other  customer  accounted  for more than 10% of sales during  1998,  1997 or
1996.

Note 12.  Income Taxes

The provision for income taxes consists of the following:
<TABLE>
<CAPTION>

                                                    January 2,             January 3,         December 28,
1999                                                      1998                   1996
Current:
<S>                                                     <C>                    <C>                  <C>    
 Federal                                                $ (109)                $  (34)              $ (106)
 State                                                                             --                   --
 Foreign                                                   249                    201                  209
                                                       -------                 ------               ------
                                                        $  140                  $ 167                $ 103
                                                        ======                  =====                =====
</TABLE>

The  following  is a  reconciliation  of  the  tax  provision/(benefit)  at  the
statutory Federal income tax rate to the actual income tax provision:
<TABLE>
<CAPTION>

                                                          1998                   1997                 1996  
                                                        --------               --------             --------

<S>                                                   <C>                     <C>                  <C>     
Income tax benefit, at 34%                            $(19,256)               $(3,589)             $(3,135)

Loss producing no current tax benefit                  (19,256)                 3,589                3,135
Alternative minimum tax
Tax refunds from prior years                              (109)                   (34)                (106)
Foreign taxes                                              249                    201                  209
                                                    ----------             ----------            ---------

Income tax provision                                 $     140              $     167             $    103
                                                     =========              =========             ========

</TABLE>

The following are the tax effects of significant  items comprising the Company's
net deferred tax asset:
<TABLE>
<CAPTION>
                                                                          January 2,            January 3,
                                                                                1999                  1998

Deferred tax liabilities:
<S>                                                                        <C>                   <C>       
 Differences between book and tax basis of property                        $  (3,575)            $  (3,575)
                                                                           ----------            ---------

Deferred tax assets:
 Reserves not currently deductible                                            24,419                12,700
 Operating loss carryforwards                                                 58,886                51,844
 Tax credit carryforwards                                                      1,764                 2,958
 Expenses capitalized into inventory                                           3,800                 4,925
                                                                         -----------            ----------
                                                                              88,869                72,427
                                                                          ----------             ---------
Net deferred asset                                                            85,294                68,852
Valuation allowance                                                          (85,294)              (68,852)
                                                                           ---------             ---------
Net deferred tax asset                                                 $          --         $          --
                                                                       =============         =============
</TABLE>

At January 2, 1999,  the Company had net operating loss  carryforwards  ("NOLs")
for income tax purposes of  approximately  $151,000,  expiring  from 1999 to the
year 2018,  which can be used to offset  future  taxable  income.  Approximately
$51,000 of these NOLs arose from the  acquisition  of  Manhattan  Industries  in
April 1988 and expire in 2003. To the extent any of these NOLs are utilized they
will offset any unamortized goodwill related to the Manhattan  acquisition.  The
Manhattan  acquisition and the 1990 bankruptcy and subsequent  consummation have
caused an "ownership  change" for federal  income tax  purposes.  As a result of
such  ownership  change,  the use of the NOLs to offset future taxable income is
limited by the requirements of section 382 of the Internal Revenue Code of 1986,
as amended  ("Section 382"). The $151,000 of NOLs reflected above is the maximum
the Company may use to offset future  taxable  income.  Of the $151,000 of NOLs,
$109,000  is  subject  to  annual  usage   limitations   under  Section  382  of
approximately $7,200.

In  addition,  at  January  2,  1999,  the  Company  had  available  tax  credit
carryforwards  of  approximately  $1,764  which  expire  between  1999 and 2010.
Utilization  of these  credits may be limited in the same manner as the NOLs, as
described above.

Additionally,   if  the  Debt  Restructuring,   as  outlined  in  the  Plan,  is
consummated,  a second  ownership  change  under  Section 382 will  occur.  As a
result, the utilization of the NOLs and tax credit carryforwards would likely be
subject to additional limitations, which could significantly reduce their use.

Note 13.  Employee Benefit Plans

Pension and Retirement Plans

The  Company has several  defined  benefit  plans for  virtually  all  full-time
salaried employees and certain nonunion hourly employees.  The Company's funding
policy for its plans is to fund the  minimum  annual  contribution  required  by
applicable regulations.


The Company also has a  nonqualified  supplemental  retirement and death benefit
plan covering certain employees that was terminated during 1998. The funding for
this plan was based on premium costs of related insurance contracts.

The  reconciliation  of the  funded  status of the plans at  January 2, 1999 and
January 3, 1998 is as follows:
<TABLE>
<CAPTION>

                                                                                1998                  1997
                                                                                ----                  ----

Change in Projected Benefit Obligation (PBO)
During Measurement Period
<S>           <C>                                                        <C>                    <C>       
PBO, November 30 of previous year                                        $    49,862            $   46,811
Service Cost                                                                   1,000                 1,050
Interest Cost                                                                  3,307                 3,272
Actuarial (Gain)/Loss                                                             24                 1,760
Plan Curtailment                                                                 (70)                    -
Plan Settlement                                                                 (332)                    -
Benefits Paid                                                                 (2,640)               (3,031)
                                                                        ------------          ------------
PBO, November 30                                                          $   51,151            $   49,862


Change in Plan Assets During the Measurement Period
Plan Assets at Fair Value, November 30
 of previous year                                                        $    42,295            $   35,979
Actual Return on Plan Assets                                                   2,299                 4,435
Employer Contribution                                                          3,586                 4,912
Benefits Paid                                                                 (2,898)               (3,031)
                                                                         -----------           -----------
Plan Assets at Fair Value, November 30                                    $   45,282            $   42,295
</TABLE>


The reconciliation of the Prepaid/(Accrued) plans at January 2, 1999 and January
3, 1998 is as follows:
<TABLE>
<CAPTION>

                                                                                1998                  1997
                                                                                ----                  ----

Reconciliation of Prepaid/(Accrued)
<S>                                                                       <C>                  <C>         
Funded Status of the Plan                                                 $   (5,868)          $    (7,567)
Unrecognized Net (Gain)/Loss                                                   8,141                 7,307
Unrecognized Prior Service Cost                                               (1,031)               (1,111)
Unrecognized Net Transition (Asset)/Obligation                                   411                   552
                                                                        ------------         -------------
Net Amount Recognized                                                     $    1,653          $       (819)

Prepaid Benefit Cost                                                      $    1,683          $       (164)
Accrued Benefit Liability                                                     (3,887)               (4,288)
Intangible Asset                                                                   -                   125
Accumulated Other Comprehensive Income                                         3,857                 3,508
                                                                         -----------           -----------
Net Amount Recognized                                                     $    1,653           $      (819)
</TABLE>


Components of Net Periodic Benefit Cost for Fiscal Year
<TABLE>
<CAPTION>

                                                          1998                  1997                  1996
                                                          ----                  ----                  ----

<S>                                                 <C>                    <C>                   <C>      
Service Cost                                        $    1,000             $   1,050             $   1,270
Interest Cost                                            3,307                 3,272                 2,912
Expected Return of Plan Assets                          (3,427)               (3,027)               (2,660)
Amortization of Unrecognized:
   Net (Gain)/Loss                                         266                   233                   125
   Prior Service Cost                                     (111)                 (111)                 (107)
   Net Transition (Asset)/Obligation                        71                    71                    80
Settlement Gain                                            (92)                    -                     -
Curtailment Loss                                           101                     -                     -
                                                   -----------        --------------        --------------
Net Periodic Pension Cost                            $   1,115            $    1,488            $    1,620

Other Comprehensive Income                          $      348

Accrued Benefit Obligation, November 30               $ 46,878             $  46,042             $  42,239
</TABLE>

Assumptions used in accounting for defined benefit pension plans are as follows:
<TABLE>

                                                   1998        1998       1997       1997       1996       1996
                                                   Non-      Qualified    Non-     Qualified    Non-     Qualified
                                                 Qualified     Plans    Qualified    Plans    Qualified    Plans
                                                   Plan                   Plan                  Plan

<S>                                                <C>         <C>        <C>        <C>        <C>        <C>  
Discount rate                                      6.75%       6.75%      7.0%       7.0%       7.25%      7.25%
Rate of increase in compensation levels             N/A        5.0%        N/A       5.0%        N/A       5.0%
Expected long-term rate of return on assets        8.5%        8.5%       8.0%       8.5%       8.0%       8.5%
</TABLE>

Assets of the Company's qualified plans are invested in directed trusts.  Assets
in the directed  trusts are invested in common and preferred  stocks,  corporate
bonds,  money market funds and U.S.  government  obligations.  The  nonqualified
supplemental  plan  assets  consist  of the  cash  surrender  value  of  certain
insurance contracts.

The Company also  contributes to certain union  retirement  and insurance  funds
established to provide  retirement  benefits and group life, health and accident
insurance for eligible  employees.  The total cost of these  contributions was $
3,184,  $3,839 and $4,095 in 1998,  1997 and 1996,  respectively.  The actuarial
present value of accumulated plan benefits and net assets available for benefits
for  employees  in the  union  administered  plans  are  not  determinable  from
information available to the Company.

Long Term Savings and Investment Plan

Salant sponsors the Long Term Savings and Investment  Plan, under which eligible
salaried  employees  may  contribute  up to 15% of  their  annual  compensation,
subject to certain  limitations,  to a money market  mutual fund, a fixed income
fund and/or three equity mutual  funds.  Salant  contributes a minimum  matching
amount of 20% of the first 6% of a  participant's  annual  compensation  and may
contribute an additional discretionary amount in cash or in the Company's common
stock. In 1998, 1997 and 1996 Salant's aggregate  contributions to the Long Term
Savings and Investment Plan amounted to $198, $218 and $229, respectively.

Note 14.  Stock Options and Shareholder Rights

The  Company's   stock  plans   authorized   such  grants  (subject  to  certain
restrictions  applicable to certain stock options  granted to directors) at such
prices  and  pursuant  to such  other  terms and  conditions  as the Stock  Plan
Committee may determine.  Options may be nonqualified stock options or incentive
stock  options and may include stock  appreciation  rights.  Exercise  prices of
options are equal to 100% of the fair market  value of the  Company's  shares on
the date of grant of the  options.  Options  expire no later than ten years from
the date of grant and become exercisable in varying amounts over periods ranging
from the date of grant to five years from the date of grant.

The Plan provides that Salant will reserve 10% of the outstanding  common stock,
on a fully diluted basis,  as of the  consummation  of the Plan, (the "Effective
Date"),  in order to create new  employee  stock and stock  option plans for the
benefit of the  members of  management  and the other  employees  of Salant.  In
addition,  the Plan provides  that, on the  Effective  Date, a management  stock
option plan will be  authorized  pursuant to which  options to acquire a certain
percentage  of such 10% reserve  will be granted to (i) the  directors of Salant
and (ii) those  members of  management  of Salant  selected  by  management  and
approved by the non-management  members of the board of directors of Salant. The
Plan also provides that the decision to grant any additional  stock options from
the balance of the 10% reserve referred to above, and the  administration of the
stock plans,  will be at the  discretion  of the  non-management  members of the
board of directors of Salant. Pursuant to the Plan, upon the effective date, all
existing stock options will be cancelled.

The following table summarizes stock option  transactions  during 1996, 1997 and
1998:
<TABLE>
<CAPTION>

                                                                                                 Weighted
                                                                                                  Average
                                                                                                  Exercise
                                                          Shares             Price Range             Price

<S>                                                      <C>                <C>                  <C>  
Options outstanding at December 30, 1995                 1,263,573          $1.00-15.125         $6.50
Options granted during 1996                                 51,600            $3.32-3.94         $3.42
Options exercised during 1996                              (53,000)           $1.00-2.00         $1.94
Options surrendered or canceled during 1996               (228,433)          $2.75-12.00         $6.63
                                                        ----------
Options outstanding at December 28, 1996                 1,033,740         $1.625-15.125         $6.56
Options granted during 1997                              1,316,900         $2.0625-4.125         $3.65
Options exercised during 1997                              (76,500)         $1.625-2.625         $2.56
Options surrendered or cancelled during 1997              (930,747)        $2.625-15.125         $6.54
                                                         ---------
Options outstanding at January 3, 1998                   1,343,393        $2.0625-12.875         $3.95
Options granted during 1998                                 10,000               $1.7188         $1.72
Options exercised during 1998                                    0
Options surrendered or canceled during 1998                (87,026)         $2.25-12.875         $5.15
                                                       -----------
Options outstanding at January 2, 1999                   1,266,367          $1.7188-9.82         $3.85
                                                         =========

Options exercisable at January 2, 1999                     513,526        $2.0625-12.875         $4.21
                                                        ==========

Options exercisable at January 3, 1998                     191,392         $2.41 -12.875         $6.02
                                                        ==========

</TABLE>



The following tables summarize information about outstanding stock options as of
January 2, 1999 and January 3, 1998:
<TABLE>
<CAPTION>

                                                 Options Outstanding                        Options Exercisable

                                                       Weighted Average
                                          Number           Remaining        Weighted          Number           Weighted
                                     Outstanding at    Contractual Life      Average      Exercisable at       Average
      Range of Exercise Price             1/2/99                            Exercise          1/2/99        Exercise Price
                                      Price

<S>       <C>                                 <C>                   <C>          <C>               <C>              <C>   
          $1.7188 -$2.75                      300,300               8.56         $2.495            100,299          $2.529
          $2.813 - $4.00                      453,900               8.11          3.849            201,060           3.809
              $4.125                          400,000               8.22          4.125            100,000           4.125
           $4.25 - $5.88                       45,167               3.86          5.459             45,167           5.459
          $6.69 - $ 9.82                       67,000               4.82          7.245             67,000           7.245

         $1.7188 - $ 9.82                   1,266,367               7.93           3.85            513,526            4.21



                                                       Weighted Average
                                          Number           Remaining        Weighted          Number           Weighted
                                      Outstanding at   Contractual Life      Average      Exercisable at       Average
      Range of Exercise Price             1/3/98                            Exercise          1/3/98        Exercise Price
                                      Price

          $2.0625 -$2.75                      305,300               9.55         $2.508              5,300          $2.731
          $2.813 - $4.00                      492,900               9.13          3.861             40,899           3.588
              $4.125                          400,000               9.22          4.125                  0               0
           $4.25 - $8.19                      131,567               5.43          6.346            131,567           6.346
          $9.82 - $12.875                      13,626               2.33         11.393             13,626          11.393

         $2.0625 - $12.875                  1,343,393               8.82          3.952            191,392           6.016

</TABLE>


The Company has a shareholder  rights plan (the "Rights  Plan"),  which provides
for a dividend  distribution  of one right for each share of Salant common stock
to holders of record of the  Company's  common stock at the close of business on
December  23, 1987.  The rights will expire on December  23, 2002.  With certain
exceptions,  the  rights  will  become  exercisable  only in the  event  that an
acquiring party accumulates 20 percent or more of the Company's voting stock, or
if a party  announces  an offer to acquire  30  percent  or more of such  voting
stock.  Each  right,  when  exercisable,  will  entitle  the  holder  to buy one
one-hundredth  of a share of a new  series of  cumulative  preferred  stock at a
price of $30 per right or, upon the  occurrence of certain  events,  to purchase
either Salant common stock or shares in an "acquiring entity" at half the market
value  thereof.  The Company will  generally be entitled to redeem the rights at
three cents per right at any time until the 10th day following  the  acquisition
of a 20 percent  position in its voting stock. In July 1993, the Rights Plan was
amended  to  provide  that an  acquisition  or  offer by  Apollo,  or any of its
subsidiaries  will not cause the rights to become  exercisable.  Pursuant to the
Plan, upon the effective date, the Rights Plan will be cancelled.

In summary,  as of January 2, 1999,  there were 1,266,367 shares of Common Stock
reserved  for the exercise of stock  options and 644,048  shares of Common Stock
reserved for future grants of stock options or awards.

All stock  options are granted at fair market  value of the Common  Stock at the
grant date. The weighted  average fair value of the stock options granted during
1998 and 1997 was $1.45 and  $3.65,  respectively.  The fair value of each stock
option grant is estimated  on the date of grant using the  Black-Scholes  option
pricing model with the following weighted average assumptions used for grants in
1998, 1997 and 1996,  respectively:  risk-free interest rate of 5.16%, 5.75% and
6.34%;  expected  dividend  yield of 0%,  for all years;  expected  life of 4.46
years, 4.62 years and 4.62 years; and expected  volatility of 106%, 49% and 53%.
The  outstanding  stock  options  at  January  2, 1999 have a  weighted  average
contractual life of 7.93 years.

The  Company  accounts  for  the  stock  plans  in  accordance  with  Accounting
Principles Board Opinion No. 25, under which no compensation  cost is recognized
for stock option awards.  Had compensation cost been determined  consistent with
Statement of Financial  Accounting Standard No. 123, "Accounting for Stock-Based
Compensation"  (SFAS 123), the Company's pro forma net  income/(loss)  for 1998,
1997 and 1996 would have been ($74,069),  ($19,070) and ($9,900),  respectively.
The  Company's  pro forma net  income/(loss)  per share for 1998,  1997 and 1996
would have been ($4.88), ($1.25) and ($0.66), respectively. Because the SFAS 123
method of accounting has not been applied to options  granted prior to 1995, the
resulting pro forma  compensation  cost may not be  representative of that to be
expected in future years.

Note 15.  Deferred Liabilities
<TABLE>
<CAPTION>
                                                                          January 2,            January 3,
                                                                                1999                  1998

<S>                                                                          <C>                   <C>    
Deferred pension obligations                                                 $ 3,856               $ 3,634
Other deferred liabilities                                                       154                   196
Liability for settlement of 1990 chapter 11 claims                                --                 1,552
                                                                         -----------              --------
                                                                             $ 4,010               $ 5,382
                                                                             =======               =======
</TABLE>

Note 16.  Commitments and Contingencies

(a)      Lease Commitments

The Company  conducts a portion of its  operations  in premises  occupied  under
leases  expiring at various dates through  2012.  Certain of the leases  contain
renewal  options.  Rental  payments  under  certain  leases may be adjusted  for
increases in taxes and operating expenses above specified amounts.  In addition,
certain of the leases for outlet stores contain  provisions for additional  rent
based upon sales.

In  1998,  1997  and  1996,  rental  expense  was  $7,008,  $7,689  and  $7,563,
respectively.  As of January 2,  1999,  future  minimum  rental  payments  under
noncancelable  operating  leases  (exclusive  of  renewal  options,   percentage
rentals,  and  adjustments  for property  taxes and operating  expenses) were as
follows:



                           Fiscal Year

              
                           1999               $    4,459
                           2000                    3,793
                           2001                    3,413
                           2002                    3,101
                           2003                    2,863
                           Thereafter           _ 25,260
                                                --------
                              Total            $  42,890
                                                =========

(b)      Employment Agreements

The Company has employment agreements with certain executives, which provide for
the payment of compensation aggregating  approximately $3,438 in 1999 and $1,200
in  2000  . In  addition,  such  employment  agreements  provide  for  incentive
compensation based on various performance criteria.

Note 17.  Discontinued Operations

In December  1998,  the Company  discontinued  the  operations of the Children's
Group, which produced and marketed children's blanket sleepers primarily using a
number of well-known  licensed  characters created by, among others,  DISNEY and
WARNER BROTHERS. The Children's Group also marketed pajamas under OSHKOSH B'GOSH
trademark, and sleepwear and underwear under the JOE BOXER trademark. For Fiscal
1998,  the  Company   recognized  a  charge  of  $15.9  million  reflecting  the
discontinuance of the Company's  Children's  Group. Of the $15.9 million,  $10.2
million  related to the  operations  prior to the date the  decision was made to
discontinue the business and $5.7 million  represented  estimated  future losses
during the  phase-out  period.  The $5.7  million  estimated  phase-out  loss is
comprised of (i) write-off of assets of $2.9 million,  (ii)  estimated loss from
operations of $1.6 million, (iii) severance of $1.5 million and (iv) royalty and
lease  payments of $1.5 million,  offset by $1.8 million for the sale of the Dr.
Denton trademark. No income tax benefits have been allocated to the division.

Pursuant to a purchase and sale  agreement  dated January 14, 1999,  the Company
sold,  all of Salant's  right to,  title and interest  in,  certain  assets (Dr.
Denton  trademark,  selected  inventory  and  machinery  and  equipment)  of the
Children's Group.  Inventory not sold in the above mentioned  purchase agreement
has been or will be sold  during  the  phase-out  period.  Accounts  receivable,
prepaids,  accounts  payable and accrued  liabilities  will be collected or paid
through the normal  course of business.  Property,  plant and equipment has been
written down to its estimated net  realizable  value and the Company is actively
pursuing the disposal of these assets.

 In June 1997, the Company  discontinued the operations of the Made in the Shade
division,  which produced and marketed women's junior sportswear.  The loss from
operations of the division in 1997 was $8,136, which included a charge of $4,459
for the write-off of goodwill.  Additionally,  in 1997,  the Company  recorded a
charge of $1,330 to accrue for expected  operating  losses  during the phase-out
period.  Substantially,  all assets and liabilities  were settled in fiscal year
1997 with the balance resolved in early fiscal year 1998.

The Made in the  Shade  division's  results  for 1997 and  1996,  as well as the
Salant Children's  division's  results for 1998, 1997 and 1996 are summarized as
follows (no income tax benefits have been allocated to the divisions):
<TABLE>
<CAPTION>

                                                               1998               1997             1996
                                                             ------               ----             ----

Net Sales
<S>                                                            <C>              <C>                <C>    
   Children's                                                  $ 42,766         $ 49,265           $45,753
   Made in the Shade                                                 --            2,822            20,408
                                                          -------------       ----------          --------
Total                                                          $ 42,766         $ 52,087           $66,161
                                                               ========         ========           =======

Net Income/(Loss) from operations
   Children's                                                  $(10,163)       $  (2,328)          $ 3,694
   Made in the Shade                                                 --           (8,136)             (365)
                                                          -------------       -----------        ----------
Total                                                          $(10,163)        $(10,464)          $ 3,329
                                                               ========         ========           =======
</TABLE>

Net assets of discontinued  operations in the 1998 and 1997 consolidated balance
sheets include:

<TABLE>
<CAPTION>
                                                                 1998              1997
                                                                 ----              ----

<S>                                                            <C>              <C>     
         Net accounts receivable                               $  3,833         $  6,193
         Net inventory                                            5,698           11,861
         Prepaids and other                                         999              704
         Net property plant & equipment                               0            3,526
         Assets held for Sale                                     2,826                0
                                                              ---------      -----------

         Assets                                                 $13,356          $22,284
                                                                -------          -------

         Accounts payable                                      $  1,374         $  3,858
         Accrued liabilities                                        394              675
         Reserve for phase-out losses                             4,728              261
                                                               --------       ----------

         Liabilities                                            $ 6,446         $  4,794
                                                                -------         --------

         Net Assets                                             $ 6,860          $17,490
                                                                =======          =======
</TABLE>

Note 18.  Accumulated Other Comprehensive Income
<TABLE>
<CAPTION>

                                                                                                   Accum-
                                                                   Foreign         Minimum        ulated
                                                                   Currency       Pension          other
                                                                  Translation    Liability        Compre-
                                                                   Adjust-        Adjust-         hensive
                                                                    ments          ments           Income 

1998

<S>                                                              <C>             <C>               <C>     
  Beginning of the year balance                                  $    6          $(3,508)          $(3,502)
  12 month change                                                  (203)            (348)             (551)
                                                                  ------       ----------        ----------
  End of the year balance                                         $  97)         $(3,856)          $(4,053)
                                                                  ======         ========          ========

1997

  Beginning of the year balance                                  $   76          $(3,182)          $(3,106)
  12 month change                                                   (70)            (326)             (396)
                                                                 -------       ----------        ----------
  End of the year balance                                       $     6          $(3,508)          $(3,502)
                                                                ========         ========          ========

1996

  Beginning of the year balance                                   $ 130          $(2,185)          $(2,055)
  12 month change                                                   (54)            (997)           (1,051)
                                                                 -------       ----------         ---------
  End of the year balance                                        $   76          $(3,182)          $(3,106)
                                                                 =======         ========          ========

</TABLE>



Note 19.  Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>

                                         Fiscal year ended January 2, 1999

                                                Total      4th Qtr.     3rd Qtr.      2nd Qtr.     1st Qtr.
<S>                                          <C>           <C>           <C>          <C>          <C>    
Net sales                                    $300,586      $73,935       $80,344      $69,362      $76,945
Gross profit                                   62,394        8,899        20,862       16,665       15,968
Net income/(loss)                             (72,662)     (67,887)        2,090       (3,568)      (3,297)
Basic earnings/(loss) per share (a)            $(4.79)      $(4.47)       $0.14       $(0.24)       $(0.22)


                                         Fiscal year ended January 3, 1998

                                                Total      4th Qtr.     3rd Qtr.      2nd Qtr.     1st Qtr.

Net sales                                    $347,667      $99,126       $88,834      $75,940      $83,767
Gross profit                                   77,339       20,282        21,820       16,264       18,973
Net income/(loss)                             (18,088)      (5,646)        5,212      (14,144)      (3,510)
Basic earnings/(loss) per share (a)            $(1.19)      $(0.37)       $0.34       $(0.94)       $(0.23)

</TABLE>

Reference  is made to Notes 3, 4 and 5  concerning  fourth  quarter  adjustments
during the years ended January 2, 1999 and January 3, 1998.

(a)     Income/(loss) per share of common stock is computed  separately for each
        period.  The sum of the amounts of  income/(loss)  per share reported in
        each period  differs  from the total for the year due to the issuance of
        shares and, when appropriate, the inclusion of common stock equivalents.


Note 20. Legal Proceeding

The  Company is a  defendant  in several  legal  actions.  In the opinion of the
Company's management, based upon the advice of the respective attorneys handling
such cases,  such actions are not expected to have a material  adverse effect on
the Company's  consolidated  financial  position,  results of operations or cash
flow.  In  addition,   the  Company  notes  the  following  legal   proceeding.

Rodriguez-Olvera Action. The Company is a defendant in a lawsuit captioned Maria
Delores   Rodriguez-Olvera,   et  al.  Vs.  Salant  Corp.,   et  al.,  Case  No.
97-07-14605-CV,  in the 365th Judicial District Court of Maverick County,  Texas
(the "Rodriguez-Olvera  Action"). The plaintiffs in the Rodriguez-Olvera  Action
assert personal injury, wrongful death, and survival claims arising out of a bus
accident  that occurred on June 23, 1997. A bus  registered in Mexico,  owned by
the  Company's  subsidiary  Maquiladora  Sur,  S.A. de C.V.  ("Maquiladora"),  a
Mexican  corporation  (and driven by a Mexican citizen and resident  employed by
Maquiladora,  carrying  Mexican workers from their homes in Mexico to their jobs
at  Maquiladora),  overturned and caught fire in Mexico.  Fourteen  persons were
killed in the  accident,  and twelve  others  claim  injuries as a result of the
accident; the Rodriguez-Olvera plaintiffs seek compensation from the Company for
those deaths and injuries.

The Company has vigorously defended against the allegations made in the lawsuit.
Its defenses include,  among other things,  that the claims, if any, asserted by
the Rodriguez-Olvera plaintiffs exist against Maquiladora,  and not the Company,
and that the  Rodriguez-Olvera  Action  should be tried in the courts of Mexico,
and not the United  States,  under the  doctrine  of forum non  conveniens.  The
Company  also  contends  that the law of Mexico,  rather than that of the United
States,  governs the  Rodriguez-Olvera  plaintiffs' claims. The Rodriguez-Olvera
plaintiffs disagree with the Company's positions.

A motion on behalf of the company to dismiss the  Rodriguez-Olvera  Action under
the  doctrine  of forum  non  conveniens  was  denied by the  trial  court.  The
propriety  of those  rulings is the subject of an action for a writ of mandamus,
captioned  In Re  Salant  Corporation,  et  al.,  Case  No.  4-98-00929-CV  (the
"Mandamus Action"), in the Court of Appeals for the Fourth District of Texas, at
San  Antonio  (the  "Texas  Court of  Appeals").  The Texas Court of Appeals has
stayed  further  proceedings  in the  underlying  Rodriguez-Olvera  action  (for
reasons apart from any that might result in a stay under federal bankruptcy law)
pending the outcome of the Mandamus Action.

The  Company  is also a  defendant  in a related  declaratory  judgment  action,
captioned  Hartford  Fire  Insurance  Company v. Salant  Corporation,  Index No.
60233/98, in the Supreme Court of the State of New York, County of New York (the
"Hartford Action"),  relating to the Company's insurance coverage for the claims
that are the subject of the Rodriguez-Olvera Action. In the Hartford Action, the
Company's  insurers seek a declaratory  judgment that the claims asserted in the
Rodriguez-Olvera Action are not covered under the policies that the insurers had
issued.  The  Company's  insurers  have  nevertheless  provided a defense to the
Company in the Rodriguez-Olvera  Action, without prejudice to their positions in
the Hartford Action.

If, as the Company contends in the Hartford Action, the Rodriguez-Olvera  claims
are covered by insurance, the damages sought by the Rodriguez-Olvera  plaintiffs
nevertheless  exceed  the  face  amount  of the  Company's  liability  insurance
coverage.  Accordingly, it is possible that the damages that would be awarded in
the Rodriguez-Olvera  Action could exceed available coverage limits. Counsel for
the plaintiffs in the Rodriguez-Olvera  action has stated that they have offered
to settle  that  lawsuit  within  the  Company's  insured  limits,  and that the
Company's  insurance  carriers  have rejected the  Rodriguez-Olvera  plaintiffs'
settlement  offers.  Counsel  for the  Rodriguez-Olvera  plaintiffs  has further
stated that in such  event,  in his view,  Texas law should  hold the  Company's
insurers  liable for  failing to settle the claims  within  policy  limits.  The
Company considers it inappropriate to endorse or dispute that view and expresses
no position on that view herein.

ITEM 9.           DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

                                                     PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Board of Directors (the "Board") currently consists of seven members.  Prior
to December 29, 1998 (the "Filing  Date"),  the Board consisted of nine members,
however,  three of the then  current  directors  Messrs.  York,  Falk and  Katz,
tendered their  resignations  effective  that date. On the Filing Date,  Michael
Setola joined the Board and became Chairman. Upon consummation of the Plan , the
following  individuals shall be elected or appointed as the case may be to serve
as the initial  members of the Board:  Michael  Setola,  Talton R.  Embry,  Rose
Peabody Lynch, G.
Raymond Epson and Ben Evans.

The following table sets forth certain  information  with respect to the persons
who are members of the Board or executive officers of Salant.

<TABLE>
<CAPTION>

                                                                                            Director/Officer
          Name                Age     Positions and Offices                                  of Salant Since

<S>                           <C>     <C>                                                                  <C> 
Mike Setola.............      40      Director, Chairman of the Board and                      December 1998
                                      Chief Executive Officer
Ann Dibble Jordan.....        64      Director                                                September 1993
Harold Leppo.............     62      Director                                                September 1993
Jerald S. Politzer.......     53      Director                                                    April 1997
Bruce F. Roberts.........     75      Director                                                September 1993
John S. Rodgers........       69      Director                                                    March 1973
Marvin Schiller..........     65      Director                                                      May 1983
Awadhesh Sinha...........     52      Executive Vice President                                 February 1999
                                      and Chief Financial Officer
Todd Kahn................     34      Chief Operating Officer, General Counsel                     June 1993
                                      and Secretary
</TABLE>

The business  experience of each of the directors and executive  officers during
the past five years is as follows:

Michael Setola was elected Chief Executive  Officer and Chairman of the Board of
the Company on December 29, 1998.  Prior to that time,  Mr. Setola was President
of the Perry  Ellis  Division  since  January  1994 and  President  of  Salant's
Children's Division since October 1991.

Ann Dibble Jordan has been an  independent  consultant  for the last five years.
Ms. Dibble Jordan is a director of Johnson & Johnson Corporation, a manufacturer
and marketer of consumer  healthcare  products;  and Automatic Data  Processing,
Inc., a computer services company.

Harold Leppo has been an  independent  retail  consultant for more than the past
five years. Mr. Leppo is a director of Filene's Basement,  an operator of retail
clothing stores; J. Baker,  Inc., an operator of retail clothing stores;  Napier
Co.,  a  jewelry  manufacturer;   and  Royce  Hosiery  Mills,  Inc.,  a  hosiery
manufacturer.

Jerald S. Politzer resigned from his position as Chairman of the Board and Chief
Executive  Officer on December 29, 1998.  Mr.  Politzer  joined the Company as a
director  on March  24,  1997,  Chief  Executive  Officer  on April 1,  1997 and
Chairman of the Board on May 13,  1997.  From July 1989 to November  1996 he had
been Executive Vice President of Melville Corporation, a diversified retailer.

Bruce F. Roberts is Executive Director of the Textile Distributors  Association,
a trade  association,  from September 1990.  Prior to that time, Mr. Roberts was
most recently Senior Vice President - Corporate  Relations at Spring Industries,
a textile manufacturer.

John S. Rodgers is an  independent  consultant.  From  September 1993 until July
1995, Mr. Rodgers was Executive Vice President,  Secretary and Senior Counsel of
Salant.  Prior to that time,  Mr. Rodgers was Chairman of the Board of Directors
of the  Company  since  March  1991.  Prior to June 1993,  Mr.  Rodgers had been
General  Counsel for more than the previous  five years and prior to August 1995
he had been Secretary for more than the previous five years.

Marvin  Schiller  was  Managing  Director of A. T.  Kearney,  Inc., a management
consulting  firm,  from May 1983 until his  retirement as of January  1995.  Dr.
Schiller is a director of  LePercq-Istel  Fund,  Inc., a mutual fund;  and Tutor
Time Learning Systems Inc., a childcare and educational company.

Awadhesh Sinha was elected  Executive Vice President and Chief Financial Officer
of Salant on February  1, 1999.  Prior to this,  Mr.  Sinha was  Executive  Vice
President of Operations and Chief  Financial  Officer of Perry Ellis since 1998,
Executive Vice President and Chief Financial Officer of the Perry Ellis division
since 1992,  Vice  President  of Finance  since 1983 and joined the Company as a
Division Controller in 1981.

Todd Kahn was elected Chief  Operating  Officer on December 29, 1998,  Executive
Vice  President  on May 13,  1997,  Secretary  on  August  15,  1995,  Assistant
Secretary on September 22, 1993 and Vice  President and General  Counsel on June
1, 1993. Prior to this Mr. Kahn had been an attorney with the law firm of Fried,
Frank,  Harris,  Shriver &  Jacobson,  outside  counsel  to the  Company,  since
September 1988.

Each of the  executive  officers of Salant was elected at a meeting of the Board
and will serve until the  completion of the Plan or until his successor has been
duly elected and qualified. Section 16(a) of the Securities Exchange Act of 1934
(the "Securities  Exchange Act") requires the Company's  directors and executive
officers  and  holders  of more  than 10% of the  Common  Stock to file with the
Securities  and  Exchange   Commission  reports  of  ownership  and  changes  in
beneficial  ownership of Common Stock and other equity securities of the Company
on Forms 3, 4 and 5. Based on written  representations of the reporting persons,
the Company  believes  that during the fiscal year ended  January 2, 1999,  such
persons complied with all applicable Section 16(a) filing  requirements with the
following  exceptions:  A Form 3 was not filed within ten days after Mr. Franzel
(the former Chief Financial  Officer) sold Common Stock of the Company; a Form 3
was not filed within 10 days of Mr.  Setola's  election as Chairman and a Form 3
was not filed within 10 days of Mr.  Sinha's  February 1, 1999 election as Chief
Financial Officer.

Post Chapter 11 Board

The Plan provides that, if the Plan is consummated,  the existing members of the
Board will resign. As provided for in the Plan as of the consummation  date, the
directors  listed  below  will  serve as the  initial  members  of the  Board of
Reorganized  Salant.  Such directors shall be elected or appointed,  as the case
may be,  pursuant to the Plan, but shall not take office and shall not be deemed
to be elected or appointed  until the  occurrence of the Effective  Date.  Those
directors  and officers of the Company not  continuing in office shall be deemed
removed  therefrom as of the Effective  Date pursuant to the Plan.  The Board of
Directors of  Reorganized  Salant as of the Effective  Date shall consist of the
following members: Michael Setola, Talton R. Embry, Rose Peabody Lynch, G.
Raymond Epson and Ben Evans.

Set forth below (with the exception of Michael  Setola) are summary  biographies
for each of the proposed  directors to constitute  the Board upon  completion of
the Debt Restructuring:

Talton R. Embry  established  Magten Asset  Management  Corp.  in 1978 to manage
distressed  securities and special  situation high yield debt for  institutional
and taxable  clients.  Mr. Embry is currently the Chairman and Chief  Investment
Officer  of Magten  and  directs  Magten's  research  and  portfolio  management
functions.  Prior  to  this  association,  Mr.  Embry  was a vice  president  at
Fiduciary  Trust Company in New York from 1968 to 1978. Mr. Embry graduated from
Rutgers University in 1968. He is currently a director of Anacomp,  BDK Holdings
and Combined  Broadcasting  (in  dissolution).  In addition,  he has  previously
served as a director of Capure  Holdings,  Thermadyne,  TSX  Corporation,  Varco
International,  West Point  Stevens and was vice  chairman and director of Revco
Drug Stores.

G. Raymond Empson is currently the President of Keep America Beautiful,  Inc., a
non-profit,  public  education  organization  dedicated  to the  enhancement  of
American communities through  beautification,  litter prevention,  recycling and
neighborhood  improvement programs.  Prior to that, from 1994 to early 1997, Mr.
Empson was an independent business consultant to institutional investors, Boards
of Directors and corporate  management with respect to strategic and operational
issues.  From 1991 to 1994,  he was  President  and Chief  Executive  Officer of
Collection  Clothing Corp.  Prior to that,  until 1990, Mr. Empson was President
and Chief Executive Officer of Gerber Products Company and Gerber Childrenswear,
Inc. From 1976 to 1986, he was Executive President of Buster Brown Apparel, Inc.

Ben Evans joined S.D.  Leidesdorf  & Company,  the  predecessor  firm to Ernst &
Whinney,  in 1954 as a junior  accountant.  He became a partner  at that firm in
1968.  From 1978  through  1989,  Mr.  Evans  was a member of Ernst &  Whinney's
corporate  financial  service  group  concentrating  on  bankruptcy  assignments
generally on behalf of unsecured creditors' committees, with special emphasis in
the apparel,  retailing, food, drug, and pharmaceutical industries.  Since 1989,
Mr. Evans has been a consultant for the firm of Ernst & Young (formerly known as
Ernst & Whinney) in their corporate financial services group continuing his work
in the bankruptcy area.

Rose Peabody  Lynch was the Vice  President and General  Merchandise  Manager of
Victoria's Secret Bath and Fragrance from 1993 to 1996. Prior to that, Ms. Lynch
was President to Trowbridge  Gallery,  from 1989 to 1993.  From 1987 to 1989 Ms.
Lynch  was  President  of  Danskin,  Inc.  From  1985 to 1987 Ms.  Lynch was the
Director of Marketing  (Cosmetics) for Charles of the Ritz Group, Inc. From 1982
to 1985 Ms.  Lynch was the  Director of Marketing  Development  (Treatment)  for
Elizabeth Arden, Inc.

ITEM 11.          EXECUTIVE COMPENSATION

The following  table sets forth all  compensation  paid or accrued by Salant for
fiscal years 1996 through 1998 for services in all  capacities to the Company by
all individuals serving as the Chief Executive Officer during the last completed
fiscal  year  and each of the  four  most  highly  compensated  other  executive
officers of Salant who were either (i) serving as executive  officers at the end
of the last  completed  fiscal year or (ii) served as  executive  officers for a
portion of the last completed  fiscal year but were not serving at year end (the
"Named Executive Officers").




<PAGE>

<TABLE>
<CAPTION>

SUMMARY COMPENSATION TABLE
                                               Annual Compensation (a)                                   Long-Term Compensation
                                                                                                    Number of                
                                                                                                    Securities
                                                                                Other       Res-      Under-
                         Principal                                              Annual    tricked     lying   Long-Term    All Other
Name                     Positions          Year    Salary($)     Bonus($)      Compen-    Stock     Options  Incentive     Compen-
                                                                                sation     Awards    Granted   Payouts     sation($)
----                     ---------          ----    ---------     --------      -------    ------    -------   -------     -------
<S>                      <C>                <C>       <C>          <C>            <C>        <C>         <C>     <C>          <C>
Michael Setola           Chief
                         Executive
                         Officer (b)        1998      450,468      270,000        0         0            0       0            2,000

                         President of
                         Perry Ellis        1997      407,391      280,000        0         0      100,000       0            1,900
                         Division

                         President of
                         Perry              1996      308,160            0        0         0            0       0            1,800
                         Ellis Division

Jerald S. Politzer       Chief
                         Executive
                         Officer            1998      695,275      700,000        0         0            0       0           38,000

                         Chief
                         Executive                                             
                         Officer (c)        1997      487,500   650,000(d)        0         0      400,000       0           29,644
                                                                                                                                (e)
Philip A. Franzel        Executive
                         Vice President
                         and Chief
                         Financial          1998      308,160      150,000        0         0            0       0               0
                         Officer
                         Executive
                         Vice President
                         and Chief
                         Financial          1997      109,615   150,000(c)        0         0       75,000       0               0
                         Officer (f)

Todd Kahn                Chief Operating
                         Officer, General
                         Counsel and
                         Secretary(g)       1998      304,314      150,000        0         0           0       0            2,000

                         Executive Vice
                         President,
                         General Counsel                                                                                     1,900
                         and Secretary      1997      258,077       75,000        0         0      65,000       0              (h)

                         Vice President,
                         General Counsel
                         and Secretary      1996      201,923            0        0         0           0       0              792


</TABLE>

<PAGE>


(a) Includes amounts earned in fiscal year, whether or not deferred.
(b) Mr. Setola was elected Chief Executive Officer on December 29, 1998.
(c) Mr. Politzer joined the Company and was elected Chief Executive Officer on 
    April 1, 1997.
(d) Reflects a one-time minimum cash bonus for 1997 agreed to in lieu of a sign-
    up bonus.
(e) Housing allowance of $21,000 and pre-employment expense reimbursement of 
    $8,644.
(f) Mr. Franzel joined the Company and was elected Executive Vice President
    and Chief Financial Officer on August 18, 1997.
(g) Mr. Kahn was elected Chief Operating Officer on December 29, 1998.
(h) Matching  contributions under the Company's Long Term Savings and Investment
    Plans (the "Savings Plan").

Option Grants for Fiscal Year 1998

There  were no  options  granted  to, or  exercises  of  options  by,  the Named
Executive Officers, of Common Stock in the last fiscal year.

Performance Graph

The following table compares the cumulative total  shareholder  return on Salant
Common Stock with the cumulative  total  shareholder  returns of (x) the S&P 500
Textile-Apparel  Manufacturers  index  and  (y) the  Wilshire  5000  index  from
December 1993 to December 1998. The return on the indices is calculated assuming
the investment of $100 on December 31, 1993 and the reinvestment of dividends.

       Cumulative Total Shareholder Return December 1993 to December 1998
<TABLE>
<CAPTION>

                           Comparison of Five Year Cumulative Total Shareholder Return*
                         Salant Corporation, Wilshire 5000, and S&P Textile Industry Index

            Date                                          Salant           Wilshire 5000          S&P Textile
            ----                                          ------           -------------          -----------

<S>             <C>                                      <C>                     <C>                  <C>    
                December 1993                            $100.00                 $100.00              $100.00
                December 1994                              77.97                   99.94                97.98
                December 1995                              52.54                  136.37               109.97
                December 1996                              42.37                  165.30               151.08
                December 1997                              23.73                  217.03               162.92
                December 1998                               0.64                  267.88               141.01
</TABLE>

*Total return assumes reinvestment of dividends on a quarterly basis.


Employment Agreements

Mr. Setola is a party to an employment  agreement dated March 11, 1994,  amended
by letter  agreements  dated  December 21, 1995 and June 16, 1997,  respectively
(the "Setola Agreement"),  which provides for his employment as President of the
Company's  Perry Ellis  Division  (The  "Division")  through  December 31, 1999,
unless terminated (the "Setola Employment  Period"),  earlier in accordance with
the Setola Agreement. The Setola Agreement provides for an annual base salary of
$300,000 per annum from  January 1, 1996 to December 31, 1996,  and $400,000 per
annum from January 1, 1997 until  December 31,  1999.  Commencing  with the 1997
fiscal year, the terms of the Setola Agreement  provide that Mr. Setola shall be
guaranteed an annual bonus equal to $100,000 based on criteria determined by the
CEO of the Company from time to time.  Under the terms of the Setola  Agreement,
Mr.  Setola is entitled to receive an annual  cash  bonus:  (i) if the  Division
attains  or  exceeds  its  Pre-tax  Income  Budget  (as  defined  in the  Setola
Agreement) for the applicable fiscal year,  commencing with the 1996 fiscal year
(a copy of each fiscal year's budget will be furnished to Mr. Setola in December
of the prior year),  the Company shall pay a bonus to Mr. Setola for such fiscal
year in which  such  Pre-tax  Income  Budget was  attained  or  exceeded  by the
Division  equal to 60% of his then current base salary plus an additional  bonus
equal to 10% of such then  current  base  salary  for each full 10% by which the
actual  Pre-tax  Income (as defined in the Setola  Agreement)  for the  Division
exceeds the Pre-tax  Income  Budget;.  (ii) if the actual  Pre-tax Income of the
Division is less than 100% of its Pre-tax  Income Budget and equal to or greater
than 95% of its Pre-tax Income Budget for the applicable fiscal year, commencing
with the 1996 fiscal year, then Mr. Setola shall receive a bonus equal to 40% of
his then current base salary;  and (iii) if the actual  Pre-tax Income Budget of
the  Division  is less than 95% of its  Pre-tax  Income  Budget  and equal to or
greater than 90% of its Pre-tax  Income Budget for the  applicable  fiscal year,
commencing  with the 1996 fiscal year,  then Mr.  Setola  shall  receive a bonus
equal to 25% of his then current base salary. Notwithstanding anything contained
herein to the  contrary,  commencing  with the 1997 fiscal year,  Mr.  Setola is
guaranteed an annual bonus equal to $100,000  based upon criteria  determined by
the Chief Executive Officer of the Company from time to time.

The Setola Agreement  provides that if the Perry Ellis men's bottoms business of
the Company's Thomson Division (the "Bottoms Division") is incorporated into the
Division,  Mr. Setola will be eligible for a bonus based on the  performance  of
the  Bottoms  Division  for each  fiscal  year as  follows:  (i) if the  Bottoms
Division  attains or  exceeds  its  Pre-tax  Income  Budget  for a fiscal  year,
commencing  with the 1996  fiscal  year,  the  Company  shall pay a bonus to Mr.
Setola for such fiscal year equal to 25% of his then current base salary plus an
additional  bonus equal to 4% of such then current base salary for each full 10%
by which the actual Pre-tax Income of the Bottoms  Division  exceeds its Pre-tax
Income  Budget;  (ii) if the  actual  Pre-tax  Income  is less  than 100% of its
Pre-tax  Income  Budget and equal to or greater  than 95% of its Pre-tax  Income
Budget in a fiscal year,  commencing  with the 1996 fiscal year, then Mr. Setola
shall receive a bonus equal to 17% of his current base salary;  and (iii) if the
actual  Pre-tax  Income of the Bottoms  Division is less than 95% of its Pre-tax
Income Budget and equal to or greater than 90% of its Pre-tax Income Budget in a
fiscal year, commencing with the 1996 fiscal year, then Mr.
Setola shall receive a bonus equal to 10% of his then current base salary.

The amount of any such bonus  payable to Mr.  Setola shall be  calculated  on or
before 90 days following the close of each fiscal year of the Company commencing
with the 1995 fiscal year. A written statement of the calculation and the amount
of the bonus,  if any,  shall be  delivered  to Mr.  Setola  within  such 90-day
period. In the event of the termination of the Setola Employment Period prior to
the close of a complete  fiscal year of the  Company,  the bonus amount shall be
computed on the basis of the  results of the full  fiscal year within  which the
termination of the Setola  Employment  Period occurs and shall be prorated based
on the proportion that (x) the number of days from January 1 of such year to the
date of the  termination  of the  Setola  Employment  Period  bears  to (y) 365.
Notwithstanding  anything to the contrary  contained in this  Agreement,  if Mr.
Setola  leaves the employ of the Company  prior to the  completion of the Setola
Employment  Period or the Setola  Employment Period is terminated by the Company
for "cause", Mr. Setola shall not be entitled to any bonus or pro rata bonus for
the year in which such termination takes place or any subsequent year.

If the  actual  Pre-tax  Income of the  dress  shirt  and  sportswear  divisions
(exclusive  of the Bottoms  Division) of the Division for the three fiscal years
1996,  1997 and 1998 in the  aggregate  equals or exceeds $45 million,  then Mr.
Setola shall receive a one time special bonus (the "Special Bonus") of $300,000.
If the  actual  Pre-tax  Income of the  dress  shirt  and  sportswear  divisions
(exclusive  of the Bottoms  Division) of the Division for the three fiscal years
1996,  1997 and 1998 in the  aggregate  equals or exceeds $40 million,  then the
amount of the Special Bonus shall be $150,000.  The Special Bonus, if any, shall
be payable on or about April 15, 1999 (the "Payment  Date");  provided that, Mr.
Setola is employed by the Company on the Payment Date.

The Setola  Agreement  provides that during the Setola  Employment  Period,  Mr.
Setola shall be entitled to an automobile allowance of $680 per month.

The Setola Agreement  provides that if Mr. Setola's  employment is terminated by
the Company  without  "cause" or other than as a result of death or  disability,
Mr. Setola shall be entitled to (i) base salary through the date of termination;
(ii) base salary at the annualized rate then in effect for the remainder of what
would  otherwise  have been the then current  Setola  Employment  Period;  (iii)
pro-rated  bonus;  and (iv) the right to exercise each stock option then held by
Mr. Setola,  each of which shall remain  exercisable  until the earlier of (A) 6
months  following the date of termination  and (B) the remainder of the exercise
period of each such option.

In connection  with the Plan, it is the Company's  intention to amend the Setola
Agreement (as amended, the "Amended Setola Agreement"),  effective as of January
1, 1999,  to provide (i) for Mr.  Setola's  new  position as Chairman  and Chief
Executive  Officer of the Company;  (ii) for Mr. Setola's new base salary in the
amount of  $650,000  per annum;  and (iii) that if the  Effective  Date does not
occur on or prior to June 30, 1999, Mr.  Setola's  employment  will terminate on
December 31, 1999, unless earlier terminated in accordance with the terms of the
Amended Setola Agreement.

As presently  contemplated,  the Amended Setola  Agreement will provide that Mr.
Setola is entitled to receive a cash bonus for the  Company's  1999 fiscal year:
(i) if the Company's Perry Ellis Division  attains 100% of its EBITDA budget set
for the Company's 1999 fiscal year, in an amount equal to $650,000;  (ii) if the
Division exceeds 100% of its EBITDA budget, in an amount equal to the sum of (A)
$650,000 and (B) 1% of $650,000  for each full 1% by which the Division  exceeds
its EBITDA  budget;  (iii) if the  Division  exceeds  90% but does not attain at
least 100% of its EBITDA budget, in an amount equal to (A) $650,000 minus (B) 2%
of $650,000 for each full 1% by which the  Division's  EBITDA budget exceeds the
Division's performance for that fiscal year; (iv) if the Division attains 90% of
its EBITDA budget, in an amount equal to $520,000;  and (v) if the Division does
not attain at least 90% of its EBITDA budget, in an amount equal to $325,000. If
Mr. Setola's  employment is terminated prior to December 31, 1999, the amount of
Mr.  Setola's  bonus will be  calculated on the basis of the results of the full
fiscal year and prorated based upon the  proportion  that (x) the number of days
from January 1, 1999 through the date of  termination  of the Setola  Employment
Period bears to (y) 365.  Notwithstanding  the  foregoing,  in no event will the
amount of the bonus in respect of the 1999 fiscal year be less than  $325,000 if
the Setola  Employment  Period is  terminated  (A) by the Company other than for
"cause" or (B) by Mr.  Setola for "good  reason;"  provided,  however,  that Mr.
Setola  will not be  entitled to any bonus in respect of the 1999 fiscal year if
the Employment Period is terminated (C) by the Company for "cause" or (D) by Mr.
Setola other than for "good  reason." The bonus in respect of the Company's 1999
fiscal year will be paid to Mr. Setola within 90 days following the close of the
Company's 1999 fiscal year.

In  connection  with the Plan,  it is the  Company's  intention to enter into an
agreement  (the "New  Setola  Agreement"),  which  will  govern the terms of Mr.
Setola's continuing  employment with the Company. The New Setola Agreement is to
be implemented as part of the Plan and shall become effective upon the Effective
Date of the Plan; provided,  however,  that the Effective Date of the Plan shall
have occurred by June 30, 1999.  In the event that the Effective  Date shall not
have occurred by June 30, 1999, Mr. Setola's employment shall be governed by the
terms of the Amended Setola Agreement.  Upon becoming effective,  the New Setola
Agreement  will  supercede  all  prior  agreements  pertaining  to Mr.  Setola's
employment with the Company, including the Amended Setola Agreement. Pursuant to
the terms of the New Setola Agreement,  Mr. Setola will serve as the Chairman of
the Board and Chief Executive  Officer of the Company  effective January 1, 1999
through  December  31,  2000.  Thereafter,  the  term  of  employment  shall  be
automatically  renewed for  successive  one year terms,  unless  prior notice by
either party shall have been given  within one hundred  eighty (180) days of the
expiration of the then existing term. The New Setola  Agreement will provide for
the payment of a base salary in the amount of $650,000 for 1999 and $700,000 for
2000.  For each year  following  2000 that the term of Mr.  Setola's  employment
under the New Setola Agreement is renewed, the annual base salary shall be equal
to the base salary in effect for the  immediately  preceding  year plus $75,000.
Under the terms of the Setola  Agreement,  for the fiscal year 1999,  Mr. Setola
shall be eligible  for an annual  bonus (the "1999  Annual  Bonus") as described
below.

Three hundred twenty-five  thousand ($325,000) of the 1999 Annual Bonus shall be
guaranteed (the  "Guaranteed  Portion") if Mr. Setola is employed by the Company
through  December  31,1999 (or his employment has been terminated  either by the
Company without "cause" or by Mr. Setola for "good reason" prior to such date).

In the event that the  Company's  Perry Ellis  Menswear  division's  actual 1999
performance  shall equal 100% of its fiscal year 1999 budget (which  performance
and budget shall be based upon EBITDA), the aggregate amount of Mr.
Setola's 1999 Annual Bonus shall be $650,000.

In the event that the  Company's  Perry Ellis  Menswear  division's  actual 1999
performance  shall  exceed 100% of its fiscal year 1999  budget,  the  aggregate
amount  of Mr.  Setola's  1999  Annual  Bonus  shall  be equal to the sum of (i)
$650,000, plus (ii) an amount equal to 1% of $650,000 for each full 1% increment
by which the Company's Perry Ellis Menswear  division's  actual 1999 performance
shall exceed its fiscal year 1999 budget.

In the event that the  Company's  Perry Ellis  Menswear  division's  actual 1999
performance shall be greater than 90% and less than 100% of its fiscal year 1999
budget,  the  aggregate  amount of Mr.  Setola's  1999 Annual  Bonus shall be an
amount  equal to (i)  $650,000  minus (ii) an amount equal to 2% of $650,000 for
each full 1% increment by which the Company's  Perry Ellis  Menswear  division's
actual 1999 performance is less than 100% of its fiscal year 1999 budget.

In the event that the  Company's  Perry Ellis  Menswear  division's  actual 1999
performance shall be equal to 90% of its fiscal year 1999 budget,  the aggregate
amount of Mr.  Setola's  1999 Annual Bonus shall be $520,000.  In the event that
the Company's Perry Ellis Menswear  division's  actual 1999 performance shall be
less  than 90% of its  fiscal  year 1999  budget,  the  aggregate  amount of Mr.
Setola's 1999 Annual Bonus shall be $325,000 (the Guaranteed Portion).

For fiscal  years 2000 and beyond,  Mr.  Setola  shall be eligible for an annual
bonus in respect of each such year in  accordance  with the  formula  for fiscal
year 1999 described above;  provided,  however, that (i) the amount of each such
bonus shall be based upon the Company's performance (as opposed to the Company's
Perry Ellis Menswear division's performance) in respect of each year as compared
to its budget for each such year (which performance and budget need not be based
upon EBITDA) and (ii) no portion of any such bonus shall be guaranteed.

Each bonus will be paid to Mr. Setola within 90 days after the end of the fiscal
year to which the bonus relates. If Mr. Setola's employment  terminates on a day
other than the last day of a year,  the amount of the bonus payable with respect
to that year will be  calculated  on the basis of the results of the full fiscal
year and  prorated  based upon the  proportion  that (x) the number of days from
January  1 of the year in  which  the  termination  occurs  through  the date of
termination bears to (y) 365; provided, however, that if Mr. Setola's employment
terminates  during the 1999 fiscal year as a result of a "change in control" (i)
only that portion of the 1999 bonus in excess of the Guaranteed  Portion will be
prorated and (ii) the 1999 bonus will be paid to Mr.
Setola in a lump sum on the date of termination.

If Mr.  Setola's  employment  is  terminated  prior to the end of any year,  the
amount of Mr.  Setola's  bonus will be calculated on the basis of the results of
the full fiscal year and prorated based upon the proportion  that (x) the number
of days from  January  1, 1999  through  the date of  termination  of the Setola
Employment Period bears to (y) 365.

The New Setola  Employment  Agreement  will  provide that during the term of Mr.
Setola's  employment  with the Company:  (i) the Company will provide Mr. Setola
with an  automobile  allowance of $680 per month;  (ii) the Company will provide
Mr.  Setola with a housing  allowance  of up to $3,000 per month;  and (iii) Mr.
Setola will be eligible to  participate  in the pension and welfare plans of the
Company. In addition, the New Setola Agreement will provide that Mr. Setola will
be reimbursed  for the  reasonable  legal  expenses that he incurs in connection
with the preparation and negotiation of the New Setola Agreement.

Pursuant to the New Setola  Agreement,  on the Effective  Date,  Mr. Setola will
receive a grant of options to purchase 2.5% of the issued and outstanding shares
of the Company's  common stock,  on a fully diluted  basis,  as of the Effective
Date.  The options shall (i) have an exercise  price per share equal to the fair
market value on the  Effective  Date of a share of the  Company's  common stock;
(ii) vest and become  exercisable  with  respect  to 1/3 of the total  number of
shares subject thereto on each of (A) the Effective Date; (B) December 31, 1999;
and (C)  December  31,  2000;  and (iii) have a duration  of 10 years.  Upon the
"change in control" (as defined in the New Setola  Agreement)  during the period
that Mr. Setola shall be actively employed by the Company:  (i) the options,  to
the extent not thereto vested and exercisable,  shall  immediately  become fully
vested and  exercisable  and (ii) to the extent that the aggregate value derived
by Mr.  Setola from the  options is less than an amount  equal to the greater of
(A) 0.8% of the aggregate value of the consideration  received by the Company or
its  shareholders  in connection  with the "change in control" and (B) $675,000,
the Company  shall  immediately  after the "change in control",  make a lump sum
cash payment to Mr. Setola equal to such difference.

The New  Setola  Agreement  will  provide  that if Mr.  Setola's  employment  is
terminated (i) by the Company without "cause" or other than as a result of death
or  "disability"  or (ii) by Mr.  Setola for "good  reason," Mr. Setola shall be
entitled to (A) base salary through the date of termination;  (B) base salary at
the annualized rate then in effect from the date of termination (1) in the event
that termination  shall occur prior to a "change in control," until the 12-month
anniversary  of the date of termination  or (2) in the event  termination  shall
occur  after a "change  in  control,"  until  the  earlier  of (I) the  12-month
anniversary of the date of  termination  and (II) December 31, 2000 (the "Setola
Severance Period"); (C) pro-rated bonus; (D) continued  participation in Company
benefit plans during the Setola  Severance Period (or until the date or dates on
which Mr. Politzer receives equivalent coverage and benefits under the plans and
programs of a subsequent  employer,  if earlier);  and (E) the right to exercise
each  stock  option  then  held  by Mr.  Setola,  each  of  which  shall  remain
exercisable  until the earlier of (1) 6 months following the date of termination
and (2) the remainder of the exercise period of each such option.

Mr. Politzer is a party to an agreement (the "Politzer Agreement"),  dated March
20, 1997,  that provided for his  employment as Chief  Executive  Officer of the
Company  effective April 1, 1997 through the termination of his employment as of
the Filing  Date.  The  Politzer  Agreement  provided  for the payment of a base
salary  in the  amount  of  $650,000  per  annum  for the first 12 months of his
employment,  $700,000 per annum for the second 12 months of his  employment  and
$750,000  for the  third 12  months  of his  employment.  Under the terms of the
Politzer Agreement, Mr. Politzer was eligible to receive a cash bonus in respect
of each fiscal year during the term of his  employment  equal to; (i) 50% of his
then current base salary if the Company  generated  actual  pre-tax income for a
year equal to at least 90% but less than 100% of the pre-tax income  provided in
the Company's  annual business plan for such year; (ii) 100% of his then current
base salary if the Company's  actual  pre-tax  income for a year was to equal to
100% of its annual business plan. If the Company's  actual pre-tax income was in
excess of the annual  business plan for a year. Mr.  Politzer's  incentive bonus
was  increased  by 1% of his then  current  base salary for each 1% increment of
increased  actual  pre-tax  income  for  the  year.  Pursuant  to  the  Politzer
Agreement,  Mr.  Politzer was to receive a minimum cash bonus for the  Company's
1997  fiscal  year,  and no other  fiscal  year  thereafter,  in the  amount  of
$650,000.

The Politzer  Agreement  provided that each bonus was to be paid to Mr. Politzer
within 90 days after the end of the fiscal year to which the bonus relates.  The
Politzer Agreement provided that if Mr. Politzer's  employment was terminated on
a day other than the last day of a year,  the amount of the bonus  payable  with
respect to that year would be calculated on the basis of the results of the full
fiscal  year and  prorated  based  upon the  proportion  that (x) the  number of
completed  months  during  the  period  from  January 1 of the year in which the
termination occurred through the date of termination bore to (y) 12.

The  Politzer  Agreement  provided  that  during  the  term  of  Mr.  Politzer's
employment with the Company:  (i) the Company would provide Mr. Politzer with an
automobile  allowance  of $680 per month;  (ii) the  Company  would  provide Mr.
Politzer  with a housing  allowance  of up to $3,000  per  month;  and (iii) Mr.
Politzer  would be eligible to  participate  in the pension and welfare plans of
the Company.

The Politzer Agreement provided that if Mr. Politzer's employment was terminated
(i) by the  Company  without  "cause"  or  other  than as a  result  of death or
"disability"  or (ii) by Mr.  Politzer for "good reason," Mr.  Politzer would be
entitled to (A) base salary through the date of termination;  (B) base salary at
the  annualized  rate  then in  effect  from the date of  termination  until the
12-month  anniversary  of the  date  of  termination  (the  "Politzer  Severance
Period");  (C) pro-rated bonus;  (D) continued  participation in Company benefit
plans during the Politzer  Severance Period (or until the date or dates on which
Mr.  Politzer  receives  equivalent  coverage and  benefits  under the plans and
programs of a subsequent  employer,  if earlier);  and (E) the right to exercise
each  stock  option  then  held by Mr.  Politzer,  each of  which  shall  remain
exercisable  until the earlier of (1) 6 months following the date of termination
and  (2)  the   remainder   of  the   exercise   period  of  each  such  option.
Notwithstanding  the foregoing,  the terms and conditions of the  termination of
Mr. Politzer's  employment will be governed by the Politzer Consulting Agreement
(as defined below), which the Company intends to enter into with Mr. Politzer.

In July 1998, the Company implemented a Management  Retention Incentive Program.
Pursuant to the  Management  Retention  Incentive  Program,  Mr.  Politzer  will
receive a payment  of  $700,000  if he remains  employed  by the  Company  until
February 15, 1999 or if terminated by the Company  without cause (the "Retention
Amount," and, together with the Severance Payments,  the "Termination  Amount").
Mr. Politzer received this amount in February 1999.

As of the Filing Date, Mr. Politzer ceased to be the Chief Executive Officer and
Chairman of the Board of the Company. The Company intends to retain Mr. Politzer
as a  consultant  to the  Company  pursuant  to the  terms of a  transition  and
consulting agreement (the "Politzer Consulting Agreement") to be entered into by
and between Mr. Politzer and the Company. The Politzer Consulting Agreement will
have retroactive  effect to the Filing Date. The Politzer  Consulting  Agreement
will provide that during the period (the  "Consulting  Period")  from the Filing
Date to the Effective Date, Mr. Politzer will provide services to the Company as
a consultant on an as-needed  basis, and will provide advice and guidance to Mr.
Setola,  as the  newly-appointed  Chief  Executive  Officer,  and the Board,  as
requested by the Board or Mr.  Setola,  including,  (i) assisting the Company in
connection with the transition of its management,  (ii) assisting the Company in
effectuating a corporate  restructuring of its three current business units into
a Perry Ellis only business unit; and (iii) providing guidance and advice to the
Company in connection with transition and strategic decision making.

Under the  Politzer  Consulting  Agreement,  from and after the Filing  Date and
terminating on March 31, 2000 (the  "Continuation  Period"),  Mr.  Politzer will
continue to receive bi-weekly payments equal to the bi-weekly salary payments to
which Mr.  Politzer  was  entitled as of the Filing  Date (the "Fee  Payments"),
subject to the  limitation  described in the following  paragraph.  In addition,
during the period commencing on the Filing Date and terminating on the date (the
"Target  Date") that is the earlier of (i) the Effective Date and (ii) April 30,
1999,  Mr.  Politzer will be entitled to the  continuation  of certain  benefits
including  the  maintenance  of an office and a secretary and  reimbursement  of
expenses  associated  with  maintaining  an  automobile  ($680 per month) and an
apartment   ($3,000  per  month)  in  New  York  City  (the   "Housing  and  Car
Reimbursements").  The  Politzer  Consulting  Agreement  will  provide  that Mr.
Politzer  will,  at the same benefit  level at which he  participated  as of the
Filing Date,  continue to be eligible to  participate  in all  medical,  dental,
health and life insurance plans and in other employee  benefit plans or programs
of the  Company  until the  earlier  of (i) March 31,  2000 and (ii) the date or
dates on which he receives  equivalent coverage and benefits under the plans and
programs of a subsequent employer; provided, however, that Mr. Politzer will not
be entitled to participate in any employee benefit plan or program to the extent
that his  participation  therein is precluded as a matter of law or by the terms
or conditions of such employee benefit plan or program.

Following the Target Date, the aggregate amount of any and all Fee Payments that
Mr.  Politzer  would  otherwise have been entitled to receive under the Politzer
Consulting  Agreement  from the Target Date through the end of the  Continuation
Period will be reduced by an amount equal to (i)  $250,000  minus (ii) an amount
equal to the cost that would have been incurred by  Reorganized  Salant in order
to provide the Housing and Car  Reimbursements to Mr. Politzer during the period
from the Target Date  through the  Continuation  Period.  The payments and other
benefits to be  provided to Mr.  Politzer  pursuant to the  Politzer  Consulting
Agreement will be in full satisfaction and release of all claims (including, but
not  limited  to,  any  claims  for  severance)  arising  out of Mr.  Politzer's
employment with the Company or the termination  thereof. The Politzer Consulting
Agreement  will (i) provide  that the  non-compete  provision  contained  in the
existing agreement will terminate on the later to occur of the Effective Date or
April  30,  1999 and (ii)  include  a  non-disparagement  provision  which  will
terminate on March 31, 2001.

Mr. Franzel is a party to an agreement (the "Franzel  Agreement"),  dated August
18, 1997,  that provided for his  employment as the Executive Vice President and
Chief  Financial  Officer of the Company  effective  August 18, 1997 through the
time of his resignation on January 25, 1999. The Franzel Agreement  provided for
the payment of a base salary in an amount not less than  $300,000 per year.  The
Franzel  Agreement  provided  that Mr.  Franzel  would  be paid a cash  bonus in
respect of each fiscal year during the term of his  employment  with the Company
equal to (i) 40% of his then current base salary if the Company generated actual
pre-tax  income  for a year  equal to at least  90% but  less  than  100% of the
pre-tax income provided in the Company's annual business plan for such year; and
(ii) 50% of his then current base salary if the Company generated actual pre-tax
income  for  such  year  equal to 100% of the  pre-tax  income  provided  in the
Company's  annual business plan. If the Company's actual pre-tax income for such
year was in excess of the  annual  business  plan for such year,  Mr.  Franzel's
incentive  bonus was  increased  by 5% of his then  current base salary for each
full 5% increment of increased actual pre-tax income for such year.

The Franzel  Agreement  provided  that each bonus was to be paid to Mr.  Franzel
within 90 days after the end of the fiscal year to which the bonus relates.  The
Franzel Agreement provided that if Mr. Franzel's  employment was terminated on a
day other  than the last day of a year,  the  amount of the bonus  payable  with
respect to that year would be calculated on the basis of the results of the full
fiscal  year and  prorated  based  upon the  proportion  that (x) the  number of
completed  months  during  the  period  from  January 1 of the year in which the
termination occurred through the date of termination bore to (y) 12.

The Franzel Agreement provided that during the term of Mr. Franzel's  employment
with the Company:  (i) the Company would provide Mr.  Franzel with an automobile
allowance  ($680  per  month);  and  (ii)  Mr.  Franzel  would  be  eligible  to
participate in the pension and welfare plans of the Company.

The Franzel Agreement  provided that if Mr. Franzel's  employment was terminated
(i) by the  Company  without  "cause"  or  other  than as a  result  of death or
"disability"  or (ii) by Mr.  Franzel for "good  reason," Mr.  Franzel  would be
entitled to (A) base salary through the date of termination;  (B) base salary at
the  annualized  rate  then in  effect  from the date of  termination  until the
12-month  anniversary  of  the  date  of  termination  (the  "Franzel  Severance
Period");  (C) pro-rated bonus;  (D) continued  participation in Company benefit
plans during the Franzel  Severance  Period (or until the date or dates on which
Mr.  Franzel  receives  equivalent  coverage  and  benefits  under the plans and
programs of a subsequent  employer,  if earlier);  and (E) the right to exercise
each  stock  option  then  held by Mr.  Franzel,  each  of  which  shall  remain
exercisable  until the earlier of (1) 6 months following the date of termination
and  (2)  the   remainder   of  the   exercise   period  of  each  such  option.
Notwithstanding  the foregoing,  the terms and conditions of the  termination of
Mr.  Franzel's  employment  will be governed  by the  Separation  Agreement  (as
defined below).

On January 25, 1999, Mr. Philip Franzel  resigned as Chief Financial  Officer of
the  Company.  The Company  intends to enter into a  separation  agreement  (the
"Separation  Agreement")  with Mr. Franzel during the pendency of the Chapter 11
Case. Pursuant to the terms of the Separation Agreement, Mr. Franzel,  beginning
on January 25, 1999 and terminating on February 15, 1999,  rendered advisory and
consulting  services to the Company in connection with the business,  management
and  finances  of the  Company  as are  reasonably  requested  by the  Board  of
Directors, Mr. Setola or Mr. Sinha. From February 15, 1999 through and including
June 30,  1999,  Mr.  Franzel will be  available,  subject to  reasonable  prior
notice, to the Company to provide guidance and advice on financial matters.

Under the Separation Agreement, beginning on January 25, 1999 and terminating on
June 30, 1999, Mr.  Franzel will receive  $25,680 per month payable in bi-weekly
installments in arrears. On February 15, 1999, Mr. Franzel received, pursuant to
the  terms  of the  Management  Retention  Program,  a bonus  in the  amount  of
$150,000.  The Separation Agreement provides that during the period beginning on
January 25, 1999 and  terminating on June 30, 1999, the Company shall provide to
Mr.  Franzel those medical,  dental and other similar  health  benefits that Mr.
Franzel had  immediately  prior to his  resignation  by paying his premium under
COBRA;  provided,  however,  that all of the Company's obligations therefor will
terminate upon the commencement of benefit coverage by any subsequent  full-time
employer of Mr. Franzel.

The Separation  Agreement will be in full satisfaction and release of all claims
(including,  but not  limited to, any claims for  severance)  arising out of Mr.
Franzel's employment with the Company or the termination thereof. The Separation
Agreement (i) will provide that a non-compete  provision  will be in place until
June 30, 1999 and (ii) will  include a  non-disparagement  provision  which will
terminate on June 30, 2000.  The  Separation  Agreement  will have a retroactive
effect.

Mr. Kahn is a party to an agreement (the "Kahn  Agreement"),  dated May 1, 1997,
that  provided for his  employment  as the  Executive  Vice  President,  General
Counsel and Secretary of the Company  effective May 1, 1997 through December 31,
1999, which shall automatically be renewed for successive one-year terms, unless
at least 180 days prior to any such renewal,  either party notifies the other of
its election to terminate Mr. Kahn's employment with the Company by not renewing
the then current employment term. The Kahn Agreement provides for the payment of
a base salary in an amount not less than  $275,000 per year,  which amount shall
be reviewed annually  commencing March of 1998 for increase.  The Kahn Agreement
provides  that Mr. Kahn will be paid a cash bonus in respect of each fiscal year
during the term of his employment  with the Company equal to (i) 40% of his then
current base salary if the Company  generated  actual  pre-tax income for a year
equal to at least 90% but less than 100% of the pre-tax  income  provided in the
Company's  annual  business plan for such year; and (ii) 50% of his then current
base salary if the Company  generated  actual pre-tax income for such year equal
to 100% of the pre-tax income provided in the Company's annual business plan. If
the Company's  actual  pre-tax  income for such year was in excess of the annual
business plan for such year, Mr. Kahn's  incentive  bonus was increased by 5% of
his then current  base salary for each full 5%  increment  of  increased  actual
pre-tax income for such year.

The Kahn Agreement  provides that each bonus is to be paid to Mr. Kahn within 90
days  after the end of the  fiscal  year to which the  bonus  relates.  The Kahn
Agreement  provides that if Mr.  Kahn's  employment is terminated on a day other
than the last day of a year,  the amount of the bonus  payable  with  respect to
that year would be  calculated  on the basis of the  results of the full  fiscal
year and  prorated  based upon the  proportion  that (x) the number of completed
months  during the period  from  January 1 of the year in which the  termination
occurs through the date of termination bears to (y) 12.

The Kahn Agreement  provides that during the term of Mr. Kahn's  employment with
the Company:  (i) the Company will provide Mr. Kahn with an automobile allowance
of $680 per month;  and (ii) Mr.  Kahn will be eligible  to  participate  in the
pension and welfare plans of the Company.

The Kahn Agreement  provides that if Mr. Kahn's  employment is terminated (i) by
the Company  without  "cause" or other than as a result of death or "disability"
or (ii) by Mr.  Kahn for "good  reason,"  Mr.  Kahn will be entitled to (A) base
salary through the date of  termination;  (B) base salary at the annualized rate
then in effect from the date of  termination  until the 12-month  anniversary of
the date of termination (the "Kahn Severance Period");  (C) pro-rated bonus; (D)
continued  participation  in Company  benefit  plans  during the Kahn  Severance
Period  (or  until  the  date or dates on which  Mr.  Kahn  receives  equivalent
coverage and benefits under the plans and programs of a subsequent employer,  if
earlier); and (E) the right to exercise each stock option then held by Mr. Kahn,
each of  which  shall  remain  exercisable  until  the  earlier  of (1) 6 months
following the date of termination  and (2) the remainder of the exercise  period
of each such option.

In connection  with the Plan, the Company  intends to enter into a new agreement
(the "New Kahn  Agreement"),  which shall be effective upon the Effective  Date.
Pursuant  to the terms of the Kahn  Agreement,  Mr. Kahn will serve as the Chief
Operating  Officer and General  Counsel of the Company for a period of one year,
commencing  on January 1,  1999,  and will  supercede  any  existing  employment
agreement between Mr. Kahn and the Company.  Given that the term of the New Kahn
Agreement will,  under the terms thereof,  begin prior to the Effective Date but
the New Kahn Agreement will not become  effective  until the Effective Date, the
New Kahn Agreement will have retroactive  effect to January 1, 1999. Base salary
for Mr. Kahn will be $25,000 per month. The New Kahn Agreement will also provide
for a bonus in the amount of $25,000 per month from  February  15, 1999  through
December 31, 1999, payable in two installments as follows: the aggregate bonuses
for the period from  February 15, 1999 through  March 31, 1999,  will be paid to
Mr. Kahn in a single  payment on February  15, 1999 in advance;  and bonuses for
the period from April 1, 1999 through  December  31,  1999,  will be paid to Mr.
Kahn in quarterly installments in advance.  Notwithstanding the foregoing,  upon
the later to occur of (i) the Company's  emergence from Chapter 11, and (ii) the
wind-down and/or sale of all of the Company's  non-Perry Ellis  businesses,  Mr.
Kahn will  receive a lump sum  payment  of  $262,500  less any  aggregate  bonus
payments  actually  made to him  prior  to that  event.  In  addition,  the Kahn
Agreement will provide for the payment of a $150,000 retention bonus to Mr. Kahn
in accordance  with, and subject to, the Company's  Management  Retention  Bonus
Plan on February  15, 1999.  If Mr. Kahn is  terminated  without  cause prior to
December  31,  1999,  under the Kahn  Agreement,  Mr.  Kahn will be  entitled to
receive the aggregate  amount of $565,500,  less any  aggregate  base salary and
bonus payments made prior to his termination.

Compensation Committee Interlocks and Insider Participation

The members of the  Company's  Compensation  and Stock Plan  Committees up until
December 29, 1998 were Messrs.  Leppo, Schiller and Yorke, none of whom were (i)
during  the  1998  fiscal  year,  an  officer  of  the  Company  or  any  of its
subsidiaries  or  (ii)  formerly  an  officer  of  the  Company  or  any  of its
subsidiaries.

Joint  Report  of the  Compensation  and  Stock  Plan  Committees  on  Executive
Compensation

This report sets forth the  compensation  policies  that guide  decisions of the
Compensation  and Stock Plan Committees with respect to the  compensation of the
Company's  executive  officers.  This report also reviews the  rationale for pay
decisions that affected Mr.  Politzer  during the 1998 fiscal year, and, in that
regard,   offers  additional  insight  into  the  figures  that  appear  in  the
compensation  tables  which are an integral  part of the overall  disclosure  of
executive compensation. Any consideration of pay-related actions that may become
effective in future fiscal years are not reported in this statement.

Committee  Responsibility.   The  central  responsibility  of  the  Compensation
Committee  is to oversee  compensation  practices  for the  Company's  executive
officers.   In  this  capacity,  it  reviews  salaries,   benefits,   and  other
compensation paid to the Company's  executive officers and recommends actions to
the full  Board of  Directors  with  respect  to these  matters.  The Stock Plan
Committees  administer the Company's 1987,  1988, 1993 and 1996 Stock Plans and,
in this role, are responsible for granting stock options to all of the Company's
eligible employees, including its officers.

Statement of Compensation  Policy.  In the context of their oversight roles, the
Compensation  and Stock Plan  Committees  are  dedicated  to  ensuring  that the
Company's financial resources are used effectively to support the achievement of
its short-term and long-term business  objectives.  In general, it is the policy
of the Company that executive compensation (a) reflect relevant market standards
for individuals  with superior  capabilities so as to ensure that the Company is
effectively positioned to recruit and retain high-performing  management talent;
(b) be driven  substantially  by the  Company's  performance  as measured by the
achievement of internally  generated  earnings  targets;  and (c) correlate with
share price appreciation,  thereby  coordinating the interests of management and
shareholders.  Percentile  objectives  are not  specified  in setting  executive
compensation.

The  members of the  Compensation  and Stock Plan  Committees  believe  that the
Company's  executive  compensation  program is well  structured  to achieve  its
objectives.  These  objectives  are  satisfied  within the context of an overall
executive pay system that is comprised of a market driven base salary,  variable
incentive compensation and options to purchase the Company's Common Stock.

Description of  Compensation  Practices.  It is the Company's  practice to enter
into employment agreements with its executive officers. These agreements specify
the various components of compensation, including, among others, base salary and
incentive compensation.

Base Salary.  Base salaries for the Company's  executive officers are defined in
their  respective  employment  agreements,  and, in the view of the Compensation
Committee,  reflect  base pay  levels  that  generally  are being  commanded  by
high-quality management in the marketplace.  The Compensation Committee's normal
practice is to review each  executive  officer's  salary at the time of contract
renewal,  at which point adjustments are recommended to ensure  consistency with
pay  expectations  in the  apparel  industry  and to  reflect  the extent of the
executive's contribution to corporate performance over time. Mr. Politzer's base
salary for 1998 was established pursuant to an agreement,  dated as of March 24,
1997. Mr.  Politzer's  compensation  represents a negotiated  rate that reflects
market prices for executives of his caliber and experience.

Incentive  Compensation.  Incentive  compensation payments to executive officers
are  based  on the  Company's  performance  and are  intended  to  motivate  the
Company's  executive  officers to maximize  their efforts to meet and exceed key
earnings   goals.   The  specific  terms  of  each  incentive   arrangement  are
individually   negotiated,   but,  in  general,   executive  officers  can  earn
incremental cash compensation  based on the extent to which the Company achieves
and exceeds annual earnings targets.  Ordinarily,  executive officers are paid a
fixed cash award in years when actual  pre-tax income  (before  amortization  of
intangibles and after any reserve for  contingencies)  equals 100% of the annual
business plan. Smaller awards are paid when earnings fall below plan levels, and
greater  payments  are made when results  exceed plan.  There is no limit on the
overall  incentive  opportunity;  however,  in a year in which operating  income
falls below 90% of the annual business plan, no incentive  compensation payments
are made.

Management  Retention  Program.  In July  of  1998,  the  Board  instituted  the
Management Retention Program (the "MRP") in an effort and with such a purpose as
to retain key  employees  during the period of time the Company was  involved in
its restructuring efforts. Pursuant to the MRP, such key employees would receive
a bonus based on their previously  existing  incentive bonus arrangement if they
remained  employed  by the  Company  until  February  15,  1999 or if they  were
terminated by the Company without cause.  The aggregate  amount allocated to the
MRP for payments to such key employees was approximately  $3.7 million.  Messrs.
Politzer and Setola were beneficiaries of the MRP.

Stock Plans.  The Company  reinforces  the  importance  of producing  attractive
returns to  shareholders  over the long term through the  operation of its 1987,
1988,  1993 and 1996 Stock Plans.  Stock options  granted  pursuant to the Stock
Plans provide  recipients  with the opportunity to acquire an equity interest in
the Company and to participate in the increase in shareholder value reflected in
an  increase  in the price of Company  shares.  Exercise  prices of options  are
ordinarily equal to 100% of the fair market value of the Company's shares on the
date of grant of the option.  This ensures that  executives will derive benefits
as  shareholders   realize   corresponding   gains.  To  encourage  a  long-term
perspective,  options  are  assigned a 10-year  term,  and most  options  become
exercisable in equal installments on the first,  second and third  anniversaries
of the date of grant.  Stock options granted to executive officers typically are
considered when employment agreements are initiated or renewed. In recent years,
the Stock Plan  Committees  have based their decisions to grant stock options on
competitive  factors,  their  understanding  of  current  industry  compensation
practices  and their  assessment of individual  potential  and  performance.  By
granting stock options,  the Committees are not only  addressing  market demands
with  respect  to total  compensation  opportunities,  but are also  effectively
reinforcing  the Company's  policy of encouraging  executive  stock ownership in
support of building shareholder value.

Deductibility of Executive Compensation.  Section 162(m) of the Internal Revenue
Code ("Section  162(m)")  generally  disallows a federal income tax deduction to
any  publicly-held  corporation for compensation paid in excess of $1 million in
any taxable  year to the chief  executive  officer or any of the four other most
highly  compensated  executive  officers  who are employed by the Company on the
last day of the taxable year. In 1998,  Section  162(m) will only affect the tax
deductibility of a portion of the compensation paid to Mr. Politzer.

Summary.  The  Compensation  and Stock Plan  Committees  are  responsible  for a
variety of compensation  recommendations  and decisions  affecting the Company's
executive officers. By conducting their decision-making  within the context of a
highly  integrated,  multicomponent  framework,  the Committees  ensure that the
overall  compensation  offered to  executive  officers  is  consistent  with the
Company's interest in providing  competitive pay opportunities which reflect its
pay-for-performance   orientation  and  support  its  short-term  and  long-term
business  mission.  The  Compensation and Stock Plan Committees will continue to
actively monitor the effectiveness of the Company's executive compensation plans
and  assess  the  appropriateness  of  executive  pay  levels to assure  prudent
application of the Company's resources.

Other Information Regarding the Directors

During the 1998  fiscal  year,  there were  twenty-two  meetings of the Board of
Directors. Directors who are not employees of Salant are paid an annual retainer
of $13,000 and an additional  fee of $600 for  attendance at each meeting of the
Board or of a committee of the Board  (other than the  Executive  Committee)  as
well as $5,000 per year for service on the Executive Committee,  $3,000 per year
for  service  on the  Audit  Committee,  $2,000  per  year  for  service  on the
Compensation  Committee,  $2,000  per year for  service  on the  Qualified  Plan
Committee  and  $1,000  per year for  service on the  Nominating  Committee.  In
addition, the Chairman of each Committee is paid an annual fee of $1,000. During
the 1998 fiscal year,  none of the directors  attended  fewer than 75 percent of
the aggregate number of meetings held by (i) the Board during the period that he
or she served as a director,  with the  exception  of Messrs.  Falk and Katz and
(ii) the Committees of which he or she was a member during the period that he or
she served on these Committees.

The Board has established five standing committees to assist it in the discharge
of its responsibilities.

The Executive Committee met three times during the 1998 fiscal year. The members
of the Committee until December 29, 1998 were Messrs.  Politzer,  Schiller,  and
Yorke. The Committee, to the extent permitted by law, may exercise all the power
of the Board during intervals between meetings of the Board.

               The Audit Committee met one time during the 1998 fiscal year. The
               members of the  Committee  until  December  29, 1998 were Messrs.
               Katz, Leppo and Roberts.  The Committee meets  independently with
               representatives   of  Salant's   independent   auditors  and  the
               Company's Chief  Financial  Officer and reviews the general scope
               of the audit, the annual financial  statements of the Company and
               the related  audit  report,  the fees charged by the  independent
               auditors and matters relating to internal  control  systems.  The
               Committee  is  responsible   for  reviewing  and  monitoring  the
               performance  of  non-audit   services  by  Salant's   independent
               auditors  and for  recommending  to the  Board the  selection  of
               Salant's independent auditors.

The  Compensation  and Stock Plan Committees did not meet during the 1998 fiscal
year. The members of the Committees until December 29, 1998 were Messrs.  Leppo,
Schiller  and  Yorke.   The  Committees  are   responsible   for  reviewing  and
recommending to the Board compensation for officers and certain other management
employees and for administering and granting awards under the stock plans.

The  Nominating  Committee did not meet in the 1998 fiscal year.  The members of
the Committee  until  December 29, 1998 were Ms. Dibble Jordan and Mr.  Roberts.
The Committee is responsible for proposing nominees for director for election by
the  stockholders  at each Annual  Meeting and proposing  candidates to fill any
vacancies on the Board.
 The Qualified Plan Committee met twice during the 1998 fiscal year. The members
of the  Committee  until  December 29, 1998 were Ms.  Dibble  Jordan and Messrs.
Roberts,  Rodgers and Kahn.  The Committee is  responsible  for  overseeing  the
administration of the Company's pension and savings plans.

Salant Corporation Retirement Plan

Salant sponsors the Salant Corporation  Retirement Plan (the "Retirement Plan"),
a  noncontributory,  final  average pay,  defined  benefit  plan. A  participant
becomes  vested upon  completion  of 5 years of  service.  The  Retirement  Plan
provides pension benefits and benefits to surviving  spouses of participants who
die prior to  retirement.  At normal  retirement,  a member  receives  an annual
pension benefit for life equal to the greater of (a) the sum of 0.65% of his/her
average final annual  compensation  for the highest 5  consecutive  years of the
last 15 years preceding retirement ("final average  compensation") not in excess
of 140% of the average  Social  Security wage base for the 35-year period ending
with   retirement   ("covered   compensation")   plus  1.25%  of  final  average
compensation in excess of covered compensation multiplied by the number of years
of his/her  credited  service not in excess of 35, or (b) $96  multiplied by the
number  of years of  his/her  credited  service,  but not to  exceed  $2,880.  A
participant   may  elect  an  actuarially   reduced  benefit  at  his/her  early
retirement.  The benefit  formula of the Retirement  Plan was amended in October
1991  effective  as of  December  1, 1989.  A  participant's  benefit  under the
Retirement  Plan will never be less than the greater of his/her  accrued benefit
under the terms of such plan prior to (a) the effective date of the amendment or
(b) January 1, 1994.  The benefit  formula  prior to amendment  was 1 1/4 % of a
participant's  average final annual  compensation  for the highest 5 consecutive
years of the last 15 years  preceding  retirement  multiplied  by the  number of
years of  his/her  credited  service  not in  excess  of 30,  minus up to 50% of
primary  social  security,  prorated  for fewer  than 30 years of  service.  The
following  table  shows the annual  pension  benefits  which would be payable to
members of the Retirement Plan at normal  retirement  after specific  periods of
service at selected  salary levels,  assuming the  continuance of the Retirement
Plan.


<PAGE>
<TABLE>
<CAPTION>

                       Estimated Annual Pension Payable to Member Upon Retirement at Age 65

                                                              Number of Years of Service (b)

          Average Annual Compensation in                                                                         
       Highest Five Consecutive Years of the            10          20           25          30          35
                                                        --          --           --          --          --
       Last 15 Years Preceding Retirement(a)





<S>     <C>                                              <C>         <C>         <C>         <C>         <C>    
        $ 60,000...................................      $4,885      $9,770      $12,213     $14,656     $17,098


          80,000..................................        7,385      14,770       18,463      22,156      25,848


         100,000...................................       9,885      19,770       24,713      29,656      34,598


         120,000...................................      12,385      24,770       30,963      37,156      43,348


         150,000...................................      16,135      32,270       40,338      48,406      56,473


         180,000...................................      17,385      34,770       43,463      52,156      60,848


         200,000...................................      17,385      34,770       43,463      52,156      60,848


</TABLE>


(a)      Effective from 1989 through 1993, no more than $200,000 of compensation
         (adjusted for inflation) may be recognized for the purpose of computing
         average annual compensation.  Subsequent to 1993, no more than $150,000
         of  compensation  (adjusted for  inflation)  may be recognized for such
         purpose.
(b)      Messrs. Setola, Politzer, Kahn and Sinha have, respectively, 7 years, 1
         year, 5 years and 17 years of credited service under the Retirement 
         Plan.


<PAGE>



ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain  information  with respect to each person
who is known to Salant to be the  "beneficial  owner" (as defined in regulations
of the  Securities and Exchange  Commission) of more than 5% of the  outstanding
shares of Common Stock..
<TABLE>
<CAPTION>

                                     Beneficial Owners of More than 5% of the
                                     Outstanding Shares of Salant Common Stock


                   Name and Address                              Amount and Nature of               Percent of
                  of Beneficial Owner                            Beneficial Ownership                Class(a)





<S>                                                                   <C>                             <C>  
Apollo Apparel Partners, L.P...........................               5,924,352                       39.5%


  c/o Apollo Advisors, L.P.                                                                                         
  Two Manhattanville Road                                                                                           
  Purchase, New York 10577

</TABLE>



(a)      This  percentage  is  calculated  on the  basis  of  14,984,608  shares
         outstanding as of April 7, 1999,  excluding those shares held by or for
         the account of Salant.


<PAGE>



                        SECURITY OWNERSHIP OF MANAGEMENT

  The Following  table sets forth certain  information  as of April 7, 1999 with
 respect to the beneficial ownership of Common Stock by each of the directors of
 Salant, the Named Executive Officers and all directors and executive
                       officers of Salant as a group.
<TABLE>
<CAPTION>

                 BENEFICIAL OWNERSHIP OF SALANT COMMON STOCK BY
                   DIRECTORS AND EXECUTIVE OFFICERS OF SALANT

Amount and Nature of                                                                                                   Percent of
Name of Beneficial Owner                    Beneficial Ownership1                            Class2

<S>                                                            <C>                             <C>  
Ann Dibble Jordan                                              2,5003                           *

Todd Kahn                                                     71,5004                           *

Harold Leppo                                                   2,5005                           *

Jerald S. Politzer                                           145,0006                          1.0%

Bruce F. Roberts                                               6,5007                           *

John S. Rodgers                                              434,0878                          3.0%

Marvin Schiller                                               16,7349                           *

Michael J. Setola                                            75,43310                           *
Awadhesh Sinha                                               41,80011                           *
All directors and executive
officers as a group (8 persons)                             796,05412                          5.0%

</TABLE>
--------
*  Represents less than one percent.
1 For  Purposes  of this  table,  a person or group of persons is deemed to have
"beneficial  ownership"  of any shares of Common Stock which such person has the
right to acquire within 60 days following  April 7,1999.  2 As of April 7, 1999,
there were 14,984,608 shares outstanding,  excluding those shares held by or for
the account of Salant.  For purposes of computing the  percentage of outstanding
shares of Common Stock held by each person or group of persons named above,  any
security  which such person or persons  has the right to acquire  within 60 days
following  April  7,1999 is deemed to be  outstanding,  but is not  deemed to be
outstanding  for the purpose of  computing  the  percentage  of ownership of any
other person. 3 This amount represents 2,500 issuable upon the exercise of stock
options.  4 This amount  includes  4,000 shares held  directly and 67,500 shares
issuable  upon the exercise of stock  options.  5 This amount  represents  2,500
issuable  upon the  exercise of stock  options.  6 This amount  includes  45,000
shares held  directly  and 100,000  shares  issuable  upon the exercise of stock
options.  7 This amount  includes  4,000  shares held  directly and 2,500 shares
issuable  upon the exercise of stock  options.  8 This amount  includes  424,280
shares held directly by Mr. Rodgers,  1,600 shares issuable upon the exercise of
stock  options,  2,284 shares held through the  Company's  Long Term Savings and
Investment  Plan (the  "Savings  Plan) and 5,923  shares held by the Margaret S.
Vickery Trust,  of which Mr. Rodgers is a co-trustee.  As the shares held by the
Margaret S. Vickery Trust, Mr. Rodgers shares voting and investment power with a
co-trustee. He disclaims beneficial ownership with respect to the shares held by
the Trust. 9 This amount  includes  11,234 shares held directly and 5,500 shares
issuable upon the exercise of stock options. 10This amount includes 2,100 shares
held  directly and 73,333 shares  issuable  upon the exercise of stock  options.
11This amount  includes  19,800 shares held directly and 22,000 shares  issuable
upon the exercise of stock options.  12 The 796,054 shares held by all directors
and  executive  officers of Salant as a group  includes (i) 516,337  shares held
directly by, or attributable  to, directors and executive  officers,  (ii) 2,284
shares held through the Savings Plan by an executive officer,  and (iii) 277,433
shares  issuable  upon the exercise of stock  options held by all  directors and
executive  officers that are  exercisable on, or may become  exercisable  within
sixty days of, April 7, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

No transactions have occurred since January 3, 1998 to which Salant was or is to
be a party and in which  directors,  executive  officers  or control  persons of
Salant,  or their  associates,  had or are to have a direct or indirect material
interest.

                                                      PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

Financial Statements

The following financial statements are included in Item 8 of this Annual Report:

Independent Auditors' Report

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Shareholders' Equity/Deficiency

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Financial Statement Schedule

The following  Financial Statement Schedule for the years ended January 2, 1999,
January 3, 1998 and December 28, 1996 is filed as part of this Annual Report:

Schedule II - Valuation and Qualifying Accounts and Reserves

All other  schedules  have been  omitted  because they are  inapplicable  or not
required,  or the information is included elsewhere in the financial  statements
or notes thereto.


<PAGE>

<TABLE>
<CAPTION>


                                        SALANT CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

COLUMN A                             COLUMN B                 COLUMN C                  COLUMN D               COLUMN E

                                                        (1)             (2)
                                     Balance at     Charged to         Charged to                               Balance
                                      Beginning     Costs and      Other Accounts      Deductions               at End
Description                          of Period       Expenses     -- Describe         -- Describe              of Period
                                    ----------      ---------  ------------------     -----------              ---------

YEAR ENDED JANUARY 2, 1999:

Accounts receivable - allowance
<S>                                    <C>              <C>               <C>          <C>                        <C>   
  for doubtful accounts                $2,094           $2,769            $  --        $2,202 (A)                 $2,661

Reserve for business restructuring     $2,764          $24,825            $  --       $24,038 (B)                 $3,551

YEAR ENDED JANUARY 3, 1998:

Accounts receivable allowance
  for doubtful accounts                  $2,806           $195             $ --          $907 (A)                 $2,094

Reserve for business restructuring       $2,969         $2,066             $ --        $2,271 (B)                 $2,764

YEAR ENDED DECEMBER 28, 1996:

Accounts receivable allowance
  for doubtful accounts                  $3,007         $(112)             $ --           $89 (A)                 $2,806

Reserve for business restructuring       $1,569        $11,730             $ --       $10,330 (B)                 $2,969

</TABLE>

NOTES:

(A) Uncollectible  accounts written off, less recoveries.  (B) Costs incurred in
plant closings and business restructuring.


<PAGE>


Reports on Form 8-K

During the fourth quarter of 1998, the Company filed one Form 8-K dated November
30,  1998  reporting  that  (i) it had  received  and  accepted  an $85  million
financing  commitment  from its working  capital  priority  lender that would be
available to Salant upon the completion of its  restructuring and (ii) that such
lender had also extending its then current  financing to Salant through December
31, 1998. No financial statements were included in the Form 8-K filed.


<PAGE>

<TABLE>
<CAPTION>

Exhibits

                                                                 Incorporation
Number         Description                                       By Reference To

<S>            <C>                                               <C>     

2.1            Third Amended Disclosure                          Exhibit 1 to
               Statement of Salant                               Form 8-A dated
               Corporation, and Denton                           July 28, 1993.
               Mills, Inc., dated
               May 12,1993.

2.2            Third Amended Joint                               Included as
               Chapter 11 Plan of                                Exhibit D-1
               Reorganization of                                 to Exhibit 1
               Salant Corporation                                to Form 8-A
               and Denton Mills, Inc.                            dated July 28, 1993.

2.3            Chapter 11 Plan of  Reorganization                Exhibit 2.3 to Form 8-K dated
               for Salant Corporation,                           dated December 29, 1998.
                                                                 December 29, 1998.

2.4            Disclosure Statement for Chapter 11               Exhibit 2.4 to Form 8-K dated
               Plan of Reorganization, dated                     December 29, 1998.
               December 29, 1998.

3.1            Form of Amended and                               Included as Exhibit
               Restated Certificate of                           D-1 to Exhibit 2
               Incorporation of Salant                           to Form 8-A dated
               Corporation.                                      July 28, 1993.

3.2            Form of Bylaws, as amended, of
               Salant Corporation, effective
               September 21, 1994.

4.1            Rights Agreement dated as of                      Exhibit 1 to Current Report
               December 8, 1987 between Salant                   on Form 8-K dated December 8, 1987.
               Corporation and The Chase
               Manhattan Bank, N.A.,
               as Rights Agent.  The Rights
               Agreement includes as Exhibit B the
               form of Right Certificate.

4.2            Form of First Amendment                           Exhibit 3 to
               to the Rights Agreement                           Amendment No. 1 to
               between Salant Corporation                        Form 8-A dated
               and Mellon Securities.                            July 29, 1993.

4.3            Indenture, dated as of                            Exhibit 10.34 to
               September 20, 1993, between Salant                Quarterly Report
               Corporation and Bankers                           on Form 10-Q for
               Trust Company, as trustee,                        the quarter ended
               for the 10-1/2% Senior                            October 2, 1993.
               Secured Notes due
               December 31, 1998.

10.1           Revolving Credit,                                 Exhibit 10.33 to
               Factoring and Security                            Quarterly Report
               Agreement dated September 29, 1993,               on Form 10-Q for
               between Salant Corporation                        the quarter ended
               and The CIT Group/Commercial                      October 2, 1993.
               Services, Inc.

10.2     Salant Corporation 1987 Stock Plan.*                    Exhibit 19.2 to Annual Report on
                                                                 Form 10-K for fiscal year 1987.

10.3           Salant Corporation 1988 Stock Plan.*              Exhibit 19.3 to Annual Report on
                                                                 Form 10-K for fiscal year 1988.

10.4           First Amendment, effective                        Exhibit 19.1 to Quarterly Report
               as of July 25, 1989, to the Salant                on Form 10-Q for the quarter
               Corporation 1988 Stock Plan. *                    ended September 30, 1989.

10.5           Form of Salant Corporation 1988                   Exhibit 19.7 to Annual Report on
               Stock Plan Employee Agreement. *                  Form 10-K for fiscal year 1988.

10.6           Form of Salant Corporation                        Exhibit 19.8 to
               1988 Stock Plan Director                          Annual Report on
               Agreement. *                                      Form 10-K for fiscal
                                                                 year 1988.

10.7           License Agreement, dated                          Exhibit 19.1 to Annual Report
               January 1, 1991, by and between                   on Form 10-K for fiscal year 1992.
               Perry Ellis International Inc.
               and Salant Corporation regarding
               men's sportswear.

10.8           License Agreement, dated                          Exhibit 19.2 to Annual Report
               January 1, 1991, by and between                   on Form 10-K for
               Perry Ellis International Inc.                    fiscal year 1992.
               and Salant Corporation regarding
               men's dress shirts.

10.9           Forms of Salant Corporation 1993                  Exhibit 10.34 to Annual
               Stock Plan Directors' Option                      Report on Form
               Agreement. *                                      10-K for Fiscal Year 1993.

10.10          Letter Agreement, dated as of                     Exhibit 10.45 to
               August 24, 1994, amending the                     Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated                         quarter ended October 1, 1994.
               September 20, 1993,
               between The CIT Group/Commercial
               Services, Inc. and Salant Corporation.

10.11          Third Amendment to Credit Agreement,              Exhibit 10.48 to Current Report on
               dated February 28, 1995, to the                   Form 8-K, dated March 2, 1995.
               Revolving Credit, Factoring and
               Security Agreement, dated
               September 20, 1993, as amended,
               between The CIT Group/Commercial
               Services, Inc. and Salant Corporation.

10.12          Salant Corporation Retirement Plan,               Exhibit 10.23 to Annual Report on
               as amended and restated. *                        Form 10-K for Fiscal Year 1994.

10.13          Salant Corporation Pension Plan,                  Exhibit 10.24 to Annual Report on
               as amended and restated. *                        Form 10-K for Fiscal Year 1994.

10.14          Salant Corporation Long Term Savings              Exhibit 10.25 to Annual Report on
               and Investment Plan as amended                    Form 10-K for Fiscal Year 1994.
               and restated. *

10.15          Fourth Amendment to Credit                        Exhibit 10.27 to
               Agreement, dated as of March 1,                   Quarterly Report
               1995, to the Revolving Credit,                    on Form 10-Q for
               Factoring and Security Agreement,                 the quarter
               dated as of September 20, 1993,                   ended April 1,
               as amended, between Salant                        1995.
               Corporation and The CIT Group/
               Commercial Services, Inc.

10.16          Fifth Amendment to Credit                         Exhibit 10.29
               Agreement, dated as of                            to Quarterly
               June 28, 1995, to the                             Report on
               Revolving Credit, Factoring                       Form l0-Q for
               and Security Agreement,                           the quarter
               dated as of September 20,                         ended July 1,
               1993, as amended, between                         1995.
               Salant Corporation and The
               CIT Group/Commercial Services, Inc.

10.17          Sixth Amendment to Credit                         Exhibit 10.30
               Agreement, dated as of                            to Quarterly
               August 15, 1995, to the                           Report on
               Revolving Credit, Factoring                       Form l0-Q for
               and Security Agreement,                           the quarter
               dated as of September 20,                         ended July 1,
               1993, as amended, between                         1995.
               Salant Corporation and The
               CIT Group/Commercial Services, Inc.

10.18          Letter from The CIT Group/                        Exhibit 10.31
               Commercial Services, Inc.,                        to Quarterly
               dated as of July 11, 1995,                        Report on
               regarding the waiver of a                         Form l0-Q for
               default.                                          the quarter
                                                                 ended July 1,
                                                                 1995.

10.19          Letter Agreement between                          Exhibit 10.31
               Salant Corporation and The                        to Quarterly
               CIT Group/Commercial Services,                    Report on
               Inc. dated as of July 11, 1995,                   Form l0-Q for
               regarding the Seasonal Overadvance                the quarter
               Subfacility.                                      ended July 1,
                                                                 1995.

10.20          Seventh Amendment to Credit                       Exhibit 10.34 to
               Agreement, dated as of                            Annual Report on
               March 27, 1996, to the                            Form 10-K for
               Revolving Credit, Factoring                       fiscal year 1995.
               and Security Agreement,
               dated as of September 20,
               1993, as amended, between
               Salant Corporation and The
               CIT Group/Commercial Services,
               Inc.

10.21          First Amendment to the Salant                     Exhibit 10.35 to
               Corporation Retirement Plan, dated                Quarterly Report on
               as of January 31, 1996. *                         Form 10-Q for the
                                                                 quarter ended
                                                                 March 30, 1996.

10.22          First Amendment to the Salant                     Exhibit 10.36 to
               Corporation Long Term Savings and                 Quarterly Report on
               Investment Plan, effective as of                  Form 10-Q for the
               January 1, 1994. *                                quarter ended
                                                                 March 30, 1996.

10.23          Eighth Amendment to Credit Agreement,             Exhibit 10.37 to
               dated as of June 1, 1996, to the                  Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated as of                   quarter ended
               September 20, 1993, as amended,                   June 29, 1996.
               between Salant Corporation and
               The CIT Group/Commercial Services,
               Inc.

10.24          Ninth Amendment to Credit Agreement,              Exhibit 10.38 to
               dated as of August 16,1996, to the                Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated as of                   quarter ended
               September 20, 1993, as amended,                   June 29, 1996.
               between Salant Corporation and
               The CIT Group/Commercial Services,
               Inc.

10.25          Salant Corporation 1996 Stock Plan.*              Exhibit 10.40 to Annual Report on
                                                                 Form 10-K for Fiscal Year 1996.

10.26          Tenth Amendment to Credit Agreement,              Exhibit 10.41 to Annual Report on
               dated as of February 20, 1997, to                 Form 10-K for Fiscal Year 1996.
               the Revolving Credit, Factoring and 
               Security Agreement,  dated as
               of September 20, 1993, as amended, 
               between Salant Corporation and
               The CIT Group/Commercial Services, Inc.

10.27          Employment Agreement, dated as                    Exhibit 10.43 to Annual Report on
               of March 24, 1997, between                        Form 10-K for Fiscal Year 1996.
               Jerald S. Politzer and
               Salant Corporation. *

10.28          Employment Agreement, dated as of                 Exhibit 10.44 to Quarterly Report on
               May 1, 1997, between Todd Kahn and                Form 10-Q for the quarter ended
               Salant Corporation. *                             June 28, 1997.

10.29          Employment Agreement, dated as of                 Exhibit 10.45 to Quarterly Report on
               August 18, 1997 between Philip A.                 Form 10-Q for the quarter ended
               Franzel and Salant Corporation. *                 June 28, 1997.

10.30          Eleventh Amendment to Credit                      Exhibit 10.46 to Quarterly Report on
               Agreement, dated as of                            Form 10-Q for the quarter ended
               August 8, 1997, to the Revolving                  June 28, 1997.
               Credit, Factoring and Security
               Agreement, dated as of
               September 20, 1993, as amended,
               between Salant Corporation and
               The CIT Group/Commercial Services, Inc.

10.31          Letter Agreement, dated                           Exhibit 10.48 to Current Report on
               March 2, 1998, by and among Salant                Form 8-K dated March 4, 1998.
               Corporation, Magten Asset Management
               Corp., as agent on behalf of
               certain of its accounts, and Apollo
               Apparel Partners, L.P.

10.32          Twelfth Amendment and Forbearance                 Exhibit 10.49 to Current Report on
               Agreement to Credit Agreement, dated              Form 8-K dated March 4, 1998.
               as of March 2, 1998, by and between
               Salant Corporation and The CIT
               Group/Commercial Services, Inc.

10.33          Thirteenth Amendment and Forbearance              Exhibit 10.53 to Current Report on
               Agreement, dated as of June 1, 1998,              Form 8-K dated June 1, 1998.
               By and between Salant Corporation
               And The CIT Group/Commercial
               Services, Inc.

10.34          Commitment Letter,  dated June 1,                Exhibit 10.54 to Current Report
               on 1998, by and between Salant                   Form 8-K dated June 1, 1998.
               Corporation and The CIT
               Group/Commercial Services, Inc.

10.35          Letter Agreement, dated June 1,                   Exhibit 10.55 to Current Report on
               1998, by and among Salant                         Form 8-K dated June 1, 1998.
               Corporation, Magten Asset Management
               Corp., as agent on behalf of
               certain of its accounts, and Apollo
               Apparel Partners, L.P.

10.36          Letter Agreement, dated July 8,                   Exhibit 10.44 to Quarterly Report on
               1998, amending the Letter Agreement,              Form 10-Q for the quarter ended
               dated March 2, 1998, as amended,                  July 4, 1998.
               By and among Salant  Corporation,  
               Magten Asset Management Corp.,
               as agent on behalf of certain of 
               its accounts, and Apollo Apparel
               Partners, L.P.


10.37          Letter Agreement, dated July 20,                  Exhibit 10.45 to Quarterly Report on
               1998, amending the Employment                     Form 10-Q for the quarter ended
               Agreement, dated August 18, 1997,                 October 3, 1998.
               between Philip A. Franzel and
               Salant Corporation. *

10.38          Letter Agreement, dated July 20,                  Exhibit 10.46 to Quarterly Report on
               1998, amending the Employment                     Form 10-Q for the quarter ended
               Agreement, dated May 1, 1997,                     October 3, 1998.
               between Todd Kahn and Salant
               Corporation. *

10.39          Letter Agreement, dated July 20,                  Exhibit 10.47 to Quarterly Report on
               1998, amending the Employment                     Form 10-Q for the quarter ended
               Agreement, dated March 20, 1997,                  October 3, 1998.
               between Jerald s. Politzer and
               Salant Corporation. *

10.40          Letter  Agreement,  dated                         Exhibit  10.48 to  Current  Report  on
               November  30, 1998,  by and between               Form 8-K dated  November 30, 1998.
               Salant Corporation and The CIT
               Group/Commercial Services, Inc.

10.41          Letter  Agreement,  dated                         Exhibit  10.49 to  Current  Report  on
               December 4, 1998,  by and  between                Form 8-K dated  November  30, 1998.
               Salant Corporation and The CIT
               Group/Commercial Services, Inc.

10.42          Ratification and Amendment                        Exhibit 10.50 to Current Report on
               Agreement, dated as of December 29,               Form 8-K dated December 29, 1998.
               1998, by and between Salant
               Corporation and The CIT Group/Commercial
               Services, Inc.

21             List of Subsidiaries of the Company

27             Financial Data Schedule
</TABLE>

* constitutes a management contract or compensatory plan or arrangement.


<PAGE>


SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                    SALANT CORPORATION

Date:  April 19, 1999                               By: /s/ Awadhesh Sinha     
                                                    ------------------------
                                                    Awadhesh Sinha
                                                    Executive Vice President and
                                                    Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated and on April 19, 1999.

         Signature                                Title

         /s/  Michael Setola                      Chairman of the Board,
         Michael Setola                           and Chief Executive Officer
                                                  (Principal Executive Officer);
                                                  Director

         /s/  Awadhesh Sinha                      Executive Vice President
         Awadhesh Sinha                           and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)




         /s/   Ann Dibble Jordan          /s/  Harold Leppo 
         Ann Dibble Jordan     Director        Harold Leppo             Director


         /s/  Bruce Roberts               /s/  John S. Rodgers         
         Bruce F. Roberts      Director        John S. Rodgers          Director


         /s/  Marvin Schiller             /s/  Jerry Politzer
         Marvin Schiller       Director        Jerald Politzer          Director



<PAGE>




                                        SECURITIES AND EXCHANGE COMMISSION
                                              WASHINGTON, D.C. 20549






                                                     EXHIBITS


                                                        to


                                                     FORM 10-K


                                     FOR THE FISCAL YEAR ENDED JANUARY 2, 1999


<PAGE>

<TABLE>
<CAPTION>

                                                SALANT CORPORATION
                                                   EXHIBIT INDEX

                                                                 Incorporation
Number         Description                                       By Reference To

<S>            <C>                                               <C>
2.1            Third Amended Disclosure                          Exhibit 1 to
               Statement of Salant                               Form 8-A dated
               Corporation, and Denton                           July 28, 1993.
               Mills, Inc., dated
               May 12,1993.

2.2            Third Amended Joint                               Included as
               Chapter 11 Plan of                                Exhibit D-1
               Reorganization of                                 to Exhibit 1
               Salant Corporation                                to Form 8-A
               and Denton Mills, Inc.                            dated July 28, 1993.


2.3            Chapter 11 Plan of Reorganization                 Exhibit 2.3 to Form 8-K dated
               for Salant Corporation, dated                     December 29, 1998.
                                                                 December 29, 1998.

2.4            Disclosure Statement for Chapter 11               Exhibit 2.4 to Form 8-K dated
               Plan of Reorganization, dated                     December 29, 1998.
               December 29, 1998.


3.1            Form of Amended and                               Included as Exhibit
               Restated Certificate of                           D-1 to Exhibit 2
               Incorporation of Salant                           to Form 8-A dated
               Corporation.                                      July 28, 1993.

3.2            Form of Bylaws, as amended, of
               Salant Corporation, effective
               September 21, 1994.

4.1            Rights Agreement dated as of                      Exhibit 1 to Current Report
               December 8, 1987 between Salant                   on Form 8-K dated December 8, 1987.
               Corporation and The Chase
               Manhattan Bank, N.A.,
               as Rights Agent.  The Rights
               Agreement includes as Exhibit B the
               form of Right Certificate.

4.2            Form of First Amendment                           Exhibit 3 to
               to the Rights Agreement                           Amendment No. 1 to
               between Salant Corporation                        Form 8-A dated
               and Mellon Securities.                            July 29, 1993.

4.3            Indenture, dated as of                            Exhibit 10.34 to
               September 20, 1993, between Salant                Quarterly Report
               Corporation and Bankers                           on Form 10-Q for
               Trust Company, as trustee,                        the quarter ended
               for the 10-1/2% Senior                            October 2, 1993.
               Secured Notes due
               December 31, 1998.

10.1           Revolving Credit,                                 Exhibit 10.33 to
               Factoring and Security                            Quarterly Report
               Agreement dated September 29, 1993,               on Form 10-Q for
               between Salant Corporation                        the quarter ended
               and The CIT Group/Commercial                      October 2, 1993.
               Services, Inc.

10.2           Salant Corporation 1987 Stock Plan.*              Exhibit 19.2 to Annual Report on
                                                                 Form 10-K for fiscal year 1987.

10.3           Salant Corporation 1988 Stock Plan.*              Exhibit 19.3 to Annual Report on
                                                                 Form 10-K for fiscal year 1988.


10.4           First Amendment, effective                        Exhibit 19.1 to Quarterly Report
               as of July 25, 1989, to the Salant                on Form 10-Q for the quarter
               Corporation 1988 Stock Plan. *                    ended September 30, 1989.

10.5           Form of Salant Corporation 1988                   Exhibit 19.7 to Annual Report on
               Stock Plan Employee Agreement. *                  Form 10-K for fiscal year 1988.

10.6           Form of Salant Corporation                        Exhibit 19.8 to
               1988 Stock Plan Director                          Annual Report on
               Agreement. *                                      Form 10-K for fiscal
                                                                 year 1988.

10.7           License Agreement, dated                          Exhibit 19.1 to Annual Report
               January 1, 1991, by and between                   on Form 10-K for fiscal year 1992.
               Perry Ellis International Inc.
               and Salant Corporation regarding
               men's sportswear.

10.8           License Agreement, dated                          Exhibit 19.2 to Annual Report
               January 1, 1991, by and between                   on Form 10-K for
               Perry Ellis International Inc.                    fiscal year 1992.
               and Salant Corporation regarding
               men's dress shirts.

10.9           Forms of Salant Corporation 1993                  Exhibit 10.34 to Annual
               Stock Plan Directors' Option                      Report on Form
               Agreement. *                                      10-K for Fiscal Year 1993.

10.10          Letter Agreement, dated as of                     Exhibit 10.45 to
               August 24, 1994, amending the                     Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated                         quarter ended October 1, 1994.
               September 20, 1993,
               between The CIT Group/Commercial
               Services, Inc. and Salant Corporation.

10.11          Third Amendment to Credit Agreement,              Exhibit 10.48 to Current Report on
               dated February 28, 1995, to the                   Form 8-K, dated March 2, 1995.
               Revolving Credit, Factoring and
               Security Agreement, dated
               September 20, 1993, as amended,
               between The CIT Group/Commercial
               Services, Inc. and Salant Corporation.

10.12          Salant Corporation Retirement Plan,               Exhibit 10.23 to Annual Report on
               as amended and restated. *                        Form 10-K for Fiscal Year 1994.

10.13          Salant Corporation Pension Plan,                  Exhibit 10.24 to Annual Report on
               as amended and restated. *                        Form 10-K for Fiscal Year 1994.

10.14          Salant Corporation Long Term Savings              Exhibit 10.25 to Annual Report on
               and Investment Plan as amended                    Form 10-K for Fiscal Year 1994.
               and restated. *

10.15          Fourth Amendment to Credit                        Exhibit 10.27 to
               Agreement, dated as of March 1,                   Quarterly Report
               1995, to the Revolving Credit,                    on Form 10-Q for
               Factoring and Security Agreement,                 the quarter
               dated as of September 20, 1993,                   ended April 1,
               as amended, between Salant                        1995.
               Corporation and The CIT Group/
               Commercial Services, Inc.

10.16          Fifth Amendment to Credit                         Exhibit 10.29
               Agreement, dated as of                            to Quarterly
               June 28, 1995, to the                             Report on
               Revolving Credit, Factoring                       Form l0-Q for
               and Security Agreement,                           the quarter
               dated as of September 20,                         ended July 1,
               1993, as amended, between                         1995.
               Salant Corporation and The
               CIT Group/Commercial Services, Inc.

10.17          Sixth Amendment to Credit                         Exhibit 10.30
               Agreement, dated as of                            to Quarterly
               August 15, 1995, to the                           Report on
               Revolving Credit, Factoring                       Form l0-Q for
               and Security Agreement,                           the quarter
               dated as of September 20,                         ended July 1,
               1993, as amended, between                         1995.
               Salant Corporation and The
               CIT Group/Commercial Services, Inc.

10.18          Letter from The CIT Group/                        Exhibit 10.31
               Commercial Services, Inc.,                        to Quarterly
               dated as of July 11, 1995,                        Report on
               regarding the waiver of a                         Form l0-Q for
               default.                                          the quarter
                                                                 ended July 1,
                                                                 1995.

10.19          Letter Agreement between                          Exhibit 10.31
               Salant Corporation and The                        to Quarterly
               CIT Group/Commercial Services,                    Report on
               Inc. dated as of July 11, 1995,                   Form l0-Q for
               regarding the Seasonal Overadvance                the quarter
               Subfacility.                                      ended July 1,
                                                                 1995.

10.20          Seventh Amendment to Credit                       Exhibit 10.34 to
               Agreement, dated as of                            Annual Report on
               March 27, 1996, to the                            Form 10-K for
               Revolving Credit, Factoring                       fiscal year 1995.
               and Security Agreement,
               dated as of September 20,
               1993, as amended, between
               Salant Corporation and The
               CIT Group/Commercial Services,
               Inc.

10.21          First Amendment to the Salant                     Exhibit 10.35 to
               Corporation Retirement Plan, dated                Quarterly Report on
               as of January 31, 1996. *                         Form 10-Q for the
                                                                 quarter ended
                                                                 March 30, 1996.

10.22          First Amendment to the Salant                     Exhibit 10.36 to
               Corporation Long Term Savings and                 Quarterly Report on
               Investment Plan, effective as of                  Form 10-Q for the
               January 1, 1994. *                                quarter ended
                                                                 March 30, 1996.

10.23          Eighth Amendment to Credit Agreement,             Exhibit 10.37 to
               dated as of June 1, 1996, to the                  Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated as of                   quarter ended
               September 20, 1993, as amended,                   June 29, 1996.
               between Salant Corporation and
               The CIT Group/Commercial Services,
               Inc.

10.24          Ninth Amendment to Credit Agreement,              Exhibit 10.38 to
               dated as of August 16,1996, to the                Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated as of                   quarter ended
               September 20, 1993, as amended,                   June 29, 1996.
               between Salant Corporation and
               The CIT Group/Commercial Services,
               Inc.

10.25          Salant Corporation 1996 Stock Plan.*              Exhibit 10.40 to Annual Report on
                                                                 Form 10-K for Fiscal Year 1996.

10.26          Tenth Amendment to Credit Agreement,              Exhibit 10.41 to Annual Report on
               dated as of February 20, 1997, to                 Form 10-K for Fiscal Year 1996.
               the Revolving Credit, Factoring and 
               Security Agreement,  dated as
               of September 20, 1993, as amended, between 
               Salant Corporation and 
               The CIT Group/Commercial Services, Inc.

10.27          Employment Agreement, dated as                    Exhibit 10.43 to Annual Report on
               of March 24, 1997, between                        Form 10-K for Fiscal Year 1996.
               Jerald S. Politzer and
               Salant Corporation. *

10.28          Employment Agreement, dated as of                 Exhibit 10.44 to Quarterly Report on
               May 1, 1997, between Todd Kahn and                Form 10-Q for the quarter ended
               Salant Corporation. *                             June 28, 1997.

10.29          Employment Agreement, dated as of                 Exhibit 10.45 to Quarterly Report on
               August 18, 1997 between Philip A.                 Form 10-Q for the quarter ended
               Franzel and Salant Corporation. *                 June 28, 1997.

10.30          Eleventh Amendment to Credit                      Exhibit 10.46 to Quarterly Report on
               Agreement, dated as of                            Form 10-Q for the quarter ended
               August 8, 1997, to the Revolving                  June 28, 1997.
               Credit, Factoring and Security
               Agreement, dated as of
               September 20, 1993, as amended,
               between Salant Corporation and
               The CIT Group/Commercial Services, Inc.

10.31          Letter Agreement, dated                           Exhibit 10.48 to Current Report on
               March 2, 1998, by and among Salant                Form 8-K dated March 4, 1998.
               Corporation, Magten Asset Management
               Corp., as agent on behalf of
               certain of its accounts, and Apollo
               Apparel Partners, L.P.

10.32          Twelfth Amendment and Forbearance                 Exhibit 10.49 to Current Report on
               Agreement to Credit Agreement, dated              Form 8-K dated March 4, 1998.
               as of March 2, 1998, by and between
               Salant Corporation and The CIT
               Group/Commercial Services, Inc.

10.33          Thirteenth Amendment and Forbearance              Exhibit 10.53 to Current Report on
               Agreement, dated as of June 1, 1998,              Form 8-K dated June 1, 1998.
               By and between Salant Corporation
               And The CIT Group/Commercial
               Services, Inc.

10.34          Commitment Letter,  dated June 1,                 Exhibit 10.54 to Current Report
               on 1998, by and between Salant                    Form 8-K dated June 1, 1998.
               Corporation and The CIT
               Group/Commercial Services, Inc.

10.35          Letter Agreement, dated June 1,                   Exhibit 10.55 to Current Report on
               1998, by and among Salant                         Form 8-K dated June 1, 1998.
               Corporation, Magten Asset Management
               Corp., as agent on behalf of
               certain of its accounts, and Apollo
               Apparel Partners, L.P.

10.36          Letter Agreement, dated July 8,                   Exhibit 10.44 to Quarterly Report on
               1998, amending the Letter Agreement,              Form 10-Q for the quarter ended
               dated March 2, 1998, as amended,                  July 4, 1998.
               By and among Salant  Corporation,  
               Magten Asset Management Corp.,
               as agent on behalf of certain of its 
               accounts, and Apollo Apparel
               Partners, L.P.


10.37          Letter Agreement, dated July 20,                  Exhibit 10.47 to Quarterly Report on
               1998, amending the Employment                     Form 10-Q for the quarter ended
               Agreement, dated August 18, 1997,                 October 3, 1998.
               between Philip A. Franzel and
               Salant Corporation. *

10.38          Letter Agreement, dated July 20,                  Exhibit 10.47 to Quarterly Report on
               1998, amending the Employment                     Form 10-Q for the quarter ended
               Agreement, dated May 1, 1997,                     October 3, 1998.
               between Todd Kahn and Salant
               Corporation. *

10.39          Letter Agreement, dated July 20,                  Exhibit 10.47 to Quarterly Report on
               1998, amending the Employment                     Form 10-Q for the quarter ended
               Agreement, dated March 20, 1997,                  October 3, 1998.
               between Jerald s. Politzer and
               Salant Corporation. *

10.40          Letter  Agreement,  dated                         Exhibit  10.48 to  Current  Report  on
               November  30, 1998,  by and between               Form 8-K dated  November 30, 1998.
               Salant Corporation and The CIT
               Group/Commercial Services, Inc.

10.41          Letter  Agreement,  dated                         Exhibit  10.49 to  Current  Report  on
               December 4, 1998,  by and  between                Form 8-K dated  November  30, 1998.
               Salant Corporation and The CIT
               Group/Commercial Services, Inc.

10.42          Ratification and Amendment                        Exhibit 10.50 to Current Report on
               Agreement, dated as of December 29,               Form 8-K dated December 29, 1998.
               1998, by and between Salant
               Corporation and The CIT Group/Commercial
               Services, Inc.

21             List of Subsidiaries of the Company

27             Financial Data Schedule
</TABLE>

* constitutes a management contract or compensatory plan or arrangement.


<PAGE>


EXHIBIT 21


                                          SUBSIDIARIES OF THE REGISTRANT


Birdhill, Limited, a Hong Kong corporation

Carrizo Manufacturing Co., S.A. de C.V., a Mexican corporation

Clantexport, Inc., a New York corporation

Denton Mills, Inc., a Delaware corporation

JJ. Farmer Clothing, Inc., a Canadian corporation

Frost Bros. Enterprises, Inc., a Texas corporation

Manhattan Industries, Inc., a Delaware corporation

Manhattan Industries, Inc., a New York corporation

Manhattan Industries (Far East) Limited, a Hong Kong corporation

Maquiladora Sur S.A. de C.V., a Mexican corporation

Salant Canada, Inc., a Canadian corporation

SLT Sourcing, Inc., a New York corporation

Vera Licensing, Inc., a Nevada corporation

Vera Linen Manufacturing, Inc., a Delaware corporation

Salant Caribbean, S.A., a Guatemalan Corporation