By and  on June 30, 1994

NEW YORK -- The Leslie Fay Cos. will continue the bankruptcy court fight for its incentive compensation plan today, after running into unexpectedly tough opposition Wednesday.

The company, which has been in Chapter 11 since April 1993, asked Bankruptcy Court Judge Tina L. Brozman to continue the hearing so it could call Michael J. Babcock, its president and chief operating officer, to testify.

Babcock will try and convince the court that the compensation plan, which could double the pay of four of Leslie Fay's top officers, is essential to the firm's well-being. The fact that Babcock was not originally scheduled to speak seemed to some observers an indication that Leslie Fay was not prepared for the level of opposition to its plan.

Leslie Fay has the backing of the creditors' and equity committees, but has run into a stiff battle with the ILGWU. The union, which is on strike against the company, is fighting the incentive plan, which includes two-year contract extensions for the four officers, and conducted a demonstration in front of the court Wednesday in protest. The extensions can be stretched to a third year if the company achieves certain operating goals.

During a contentious hearing, Alan Miller, of Weil, Gotshal & Manges, attorneys for Leslie Fay, called three witnesses who testified that without the proposed incentive plan senior officers could be pirated by other firms.

Kathryn D. Connors, Leslie Fay's senior vice president of corporate affairs, who helps determine the compensation for the company's employees, told the court the current compensation package "tends to be on the low side," compared to other apparel companies. She noted that Leslie Fay proposed the plan because it "needed a uniform system tying their goals to that of the company."

"We believe these executives are essential to the turnaround of Leslie Fay," said Connors.

Marc E. Richards, of Marcus, Montgomery, Wolfson & Burton, counsel to the ILGWU, attacked Leslie Fay's argument that it needs the plan to block other companies from recruiting the firm's executives, saying, "There's really been no evidence of that."

Brozman seemed to agree with Richards, and said, "One could legitimately question that management is likely to flee."

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