AGREEMENT, dated as of April 28, 1993, among BRUCE J. KLATSKY
("Klatsky"), LAWRENCE S. PHILLIPS ("Phillips") and PHILLIPS-VAN
HEUSEN CORPORATION (the "Company"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the parties hereto desire to provide for an orderly
succession of the management of the Company;
NOW, THEREFORE, the parties hereto agree as follows:
1. Transition of Management. (a) Effective as of the Board
of Directors meeting scheduled for June 1, 1993, but no later than
June 2, 1993, Phillips shall resign as, and Phillips and the
Company shall cause Klatsky to be appointed as, the Chief Executive
Officer of the Company with all the duties, powers, rights,
privileges, responsibilities, perquisites, emoluments and
obligations customarily associated with and incident to such office
(the "CEO Powers").
(b) Effective as of June 7, 1994, (i) Phillips shall resign
as, and Phillips and the Company shall cause Klatsky to be
appointed as, the Chairman of the Board of Directors of the
Company, with all the duties, powers, rights, privileges,
responsibilities, perquisites, emoluments and obligations
customarily associated with and incident to such office (the
"Chairman Powers," and together with the CEO Powers, the "Powers"),
and (ii) Klatsky and the Company shall cause Phillips to be
appointed as Honorary Chairman or, at Phillips' election, Chairman
Emeritus of the Company.
(c) On or prior to January 28, 1995, Phillips shall relocate
his office and his assistant to facilities arranged and paid for by
the Company other than in the principal offices maintained by the
Company, and his office shall thereafter remain outside of such
principal office. Such office and assistant shall be paid for by
the Company.
2. Special Severance Benefit. The Company hereby agrees
that, among other things, any breach of the obligations to Klatsky
under Section 1 of this Agreement shall, with respect to Klatsky,
be a "Severance Event" under its Special Severance Benefit Plan
(the "Plan"), thereby entitling Klatsky to the full benefits
provided for in Section 5 thereof. The Plan is hereby amended by
adding the following to the end of the definition of "Severance
Event" appearing in Section 2 of the Plan:
"In addition to the foregoing and not in limitation
thereof, a Severance Event with respect to Bruce
Klatsky shall mean (a) the failure of the directors
of the Company duly to elect Mr. Klatsky as Chief
Executive Officer or Chairman of the Board of the
Company effective not later than June 2, 1993 and
June 7, 1994, respectively, and to continue him in
each of such positions so long as he is employed by
the Company, (b) subsequent to any election or re-
election as provided in the foregoing clause (a),
the directors appoint an officer or hire an
employee with authority equal or superior to the
authority of Mr. Klatsky, (c) the failure of
Lawrence S. Phillips to relocate his office on or
prior to January 28, 1995 to facilities other than
in the principal office maintained by the Company
or the failure of Mr. Phillips thereafter to
maintain his office outside of such principal
office or (d) the failure of the Company to
compensate Mr. Klatsky at a rate of at least
$750,000 per year and maintain the other terms and
conditions of his employment by the Company on no
less than substantially the same basis as currently
enjoyed by Mr. Klatsky in connection with his
employment by the Company."
3. Outstanding Options. The Company hereby amends all of
the options heretofore granted to Klatsky to provide that the
exercisability of all such options shall be accelerated, and all
such options shall be exercisable in full, in the event of the
occurrence of a "Severance Event" as defined in the Plan as the
same is amended pursuant to Section 2 hereof.
4. Contingent Bonus. To induce Klatsky to enter into this
Agreement, the Company hereby agrees to pay Klatsky a bonus (the
"Contingent Bonus") of $3,000,000, on the date, and subject to the
terms and conditions, provided for in this Section 4.
(a) Subject to the provisions of Section 4(c), the Contingent
Bonus shall be paid to Klatsky, without interest, on April 27, 1996
if Klatsky is employed by the Company on said date.
(b) Subject to the provisions of Section 4(c), the Contingent
Bonus shall be forfeited by Klatsky and shall not be paid in the
event that the employment of Klatsky with the Company terminates
prior to April 27, 1996.
(c) Notwithstanding any other provisions of this Section 4,
the Contingent Bonus will not be subject to forfeiture pursuant to
Section 4(b) and shall be paid promptly upon the termination of the
employment of Klatsky with the Company, (i) in the event of the
termination of his employment as a result of his death or his
"disability" (as hereinafter defined) or Klatsky's employment with
the Company is terminated by the Company without "cause" (as
hereinafter defined), (ii) in the event that Klatsky terminates his
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employment with the Company following the occurrence of a
"Severance Event" as defined in the Plan as the same is amended
pursuant to Section 2 hereof, or (iii) Klatsky terminates his
employment with the Company by written notice to the Company (the
"Termination Notice") as a result of his reasonable determination
that Phillips and/or the Company have acted or failed to act in
such a manner as to deny, limit or restrict to any significant
extent Klatsky's CEO Powers, at any time commencing on June 2,
1993, or his Chairman Powers, at any time commencing on June 7,
1994, provided that prior to giving the Termination Notice, Klatsky
has provided the Company with written notice of such determination
(the "Determination Notice") and the Company shall have within ten
days from receipt of such Determination Notice failed to cure the
condition which Klatsky is claiming is the cause of his
determination under this clause (iii).
(d) For purposes of this Agreement, (i) "disability" shall
mean the inability of Klatsky to perform the duties of the offices
to which he has been appointed, as determined by an independent
physician, due to any physical or psychological injury, illness or
disease and (ii) the Company shall have "cause" to terminate
Klatsky's employment only if (A) Klatsky shall engage in fraudulent
activities materially injurious to the Company or (B) Klatsky shall
be convicted of a felony under state or federal law.
(e) In the event that Klatsky shall have given the Company a
Determination Notice pursuant to clause (iii) of Section 4(c),
Klatsky shall be entitled, prior to giving a Termination Notice, to
submit the matter by written notice to the Company to an arbitrator
appointed pursuant to Section 10 hereof to determine (i) whether
Klatsky has the right, pursuant to said clause (iii), to terminate
his employment and (ii) whether the Company has cured the condition
of which Klatsky has complained. Klatsky shall not be under any
obligation to give a Termination Notice or to terminate his
employment notwithstanding the determination of the arbitrator or
his giving of a Determination Notice.
5. Special Bonus. To further induce Klatsky to enter into
this Agreement, the Company hereby agrees to pay Klatsky a special
bonus of $85,000 on or prior to June 2, 1993.
6. Special Option. To further induce Klatsky to enter into
this Agreement, the Company hereby grants to Klatsky an option
under the Company's 1987 Stock Option Plan to purchase 100,000
shares of the Company's common stock, $1.00 par value.
7. Continued Service by Phillips. Phillips shall continue
to be employed by the Company in the following capacities during
the dates indicated upon terms from time to time negotiated by
Phillips and the Company which, for the five year period commencing
June 7, 1994, shall not be less than the compensation (including in
compensation all payments made to Phillips under any of the
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Company's pension plans) and, subject to Section 1(c), perquisites
currently enjoyed by Phillips:
Date Office
April 27, 1993 to and including Chairman and Chief
June 1, 1993 Executive Officer
June 2, 1993 to and including Chairman
June 6, 1994
June 7, 1994 and thereafter Honorary Chairman or, at
Phillips' election,
Chairman Emeritus
and consultant
to the Chairman
8. Representation and Warranty. Klatsky hereby represents
and warrants to the Company and Phillips that he has not entered
into any agreement or understanding with Crystal Brands, Inc. to
become employed by or provide any services to such company.
9. Indemnification. The Company hereby agrees to indemnify
and hold Klatsky harmless from any loss, cost, expense, damage or
liability suffered or incurred by reason of Klatsky's breach of any
alleged agreement to become employed by or provide services to
Crystal Brands, Inc. or his refusal to sign any such written
agreement. If any event shall occur which may result in indemni-
fication hereunder, Klatsky shall give the Company prompt written
notice thereof. The Company shall, upon written notice to Klatsky
within 10 days of the Company's receipt of written notice from
Klatsky as herein provided, have the right at its expense to
control and assume the defense of the matter giving rise to
indemnification hereunder and to compromise or settle any such
matter. In the event that the Company shall fail to control and
assume the defense of any such matter, the Company shall pay all
costs and expenses (including reasonable attorneys' fees and costs)
incurred by Klatsky in connection with the defense of such matter.
10. Arbitration. Any determination requested by Klatsky
pursuant to Section 4(e) hereof and any dispute with respect to
Klatsky's exercise of his rights pursuant to Section 4(c)(iii)
hereof shall be determined by arbitration pursuant to the rules of
the American Arbitration Association (the "AAA"). Such arbitration
shall be conducted on an expedited basis in the City of New York by
one arbitrator appointed pursuant to the rules of the AAA. Any
award or decision made by such arbitrator shall be final and
binding on the parties hereto and may be entered in any court
having jurisdiction thereof. The Company shall pay or promptly
reimburse Klatsky for all fees and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred by
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Klatsky in connection with such arbitration unless it is determined
that Klatsky acted in bad faith in seeking or contesting such
arbitration. The Company shall be responsible for all of its own
fees and expenses incurred in connection with any such arbitration.
11. Expenses of Enforcement. The Company shall pay, or
reimburse Klatsky for, the expenses of his counsel in connection
with the enforcement of any of the provisions of this Agreement,
unless it is determined that Klatsky brought such action in bad
faith.
12. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
New York without reference to the conflicts of law provisions
thereof.
13. Understanding of Parties; No Waiver. This Agreement
contains the entire understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior
agreements and understandings with respect to the subject matter
hereof. No waiver shall be deemed to be made by any of the parties
to any of its rights hereunder unless that waiver shall be in a
writing signed by the waiving party and any such waiver shall only
be effective to the extent set forth therein.
14. Captions. The captions contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
15. Notices. All notices and communications hereunder shall
be in writing and shall be sent by registered or certified mail,
return receipt requested, addressed to the party for whom or for
which intended, in the case of the Company, to its then principal
office, or at such other address of which the Company shall have
given notice to the other parties hereto in the manner herein pro-
vided, and in the case of each of Klatsky and Phillips, at his
respective residence address as set forth in the records of the
Company or at such other address of which he shall have given
notice to the other parties hereto in the manner herein provided,
with a copy of all such notices and communications to be given
concurrently to Rosenman & Colin, 575 Madison Avenue, New York, New
York 10022, Attention: Edward H. Cohen, Esq. and Ruskin, Moscou,
Evans & Faltischek, P.C., 170 Old Country Road, Mineola, New York
11501, Attention: Raymond S. Evans, Esq.
16. Further Assurances. Each of the parties hereto shall
execute and deliver to the others such additional documents and
shall take such further actions as may be reasonably requested to
carry out the transactions contemplated by this Agreement,
including, without limitation, the giving of notice by the Company
to the participants in the Plan of the amendment to such Plan
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effected by Section 2 hereof. If the Plan is terminated or is
amended so as to adversely affect the rights of Klatsky thereunder
by reason of the amendments effected by Section 2 hereof, the
Company agrees to enter into an agreement reasonably satisfactory
to Klatsky which shall provide Klatsky with the rights to which he
is entitled under the Plan by reason of the amendments effected by
Section 2 hereof, but the Company shall not be required to enter
into an agreement which would provide Klatsky with any rights to
which he was entitled under the Plan without regard to the
amendments effected by Section 2 hereof.
17. Severability. In the event that any provision of this
Agreement shall be declared invalid or unenforceable, such
invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions of this Agreement, it being
hereby agreed that such provisions are severable and that this
Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
18. Successors and Assigns. The terms and provisions of this
Agreement shall inure to the benefit of and be binding upon the
company and its successors and assigns and each of Klatsky and
Phillips and their respective heirs, legal representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
______________________________
Bruce J. Klatsky
______________________________
Lawrence S. Phillips
PHILLIPS-VAN HEUSEN CORPORATION
By___________________________
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