December 6, 1993
Mr. Bruce J. Klatsky
45 Kerry Lane
Chappaqua, NY 10514
Dear Bruce:
We refer to that certain agreement (the "April
Agreement"), dated as of April 28, 1993, by and among yourself,
Lawrence S. Phillips and us. This letter, when accepted by you,
will constitute an amendment of the April Agreement.
1. Section 4 of the April agreement is hereby amended in
its entirety so that it shall read as follows:
4. Contingent Payment. (a) To induce Klatsky to
enter into this Agreement, the Company hereby agrees to
do the following: (i) pay to Klatsky, on or prior to
December 24, 1993, a bonus (the "December Bonus") in
the amount of $750,000, (ii) convey to Klatsky, on or
prior to December 24, 1993, without additional
consideration of any type, kind or nature, the
securities (the "Restricted Securities") at a cost of
$2,250,000 listed, or described, in Exhibit A annexed
hereto, and (iii) lend to Klatsky on the date of such
conveyance, the sum of Two Hundred Seventy Eight
Thousand Three Hundred Fifty-One and 00/100
($278,351.00) Dollars (the "December Loan"). The
December Loan shall bear interest at the rate of 7 1/2%
per annum and shall be evidenced by a promissory note
in the form annexed hereto as Exhibit B.
(b) Klatsky shall hold the Restricted Securities
(when this term is hereafter used, it shall be deemed to
also include proceeds from the sale or redemption of such
Restricted Securities) separate and apart from his other
assets in a brokerage or custody account chosen by him
(the "Account"). Except as otherwise specifically
provided in this Agreement, Klatsky shall not sell,
assign, transfer or otherwise dispose of, and shall not
pledge or hypothecate, any or all of the Restricted
Securities. The proceeds from the sale or redemption of
any Restricted Securities held in the Account shall, as
Klatsky shall determine, either be used to purchase other
securities or shall remain in the account and not be
reinvested. Any such securities so purchased shall
remain in the Account and otherwise be distributed as
provided herein and shall be considered Restricted
Securities for all purposes of this Agreement. All
interest or dividend income or distributions other than
stock dividends ("Earned Income") collected on any of the
Restricted Securities may, at Klatsky's option, be
removed from the Account and retained by him. Whether or
not such Earned Income is removed from the Account, the
same shall be free from all claims of the Company.
(c) The restriction against removing the Restricted
Securities from the Account set forth in subparagraph (b)
above shall terminate (i) with respect to Restricted
Securities having a fair market value of $83,333, on the
last day of each calendar month commencing February, 1994
and ending March, 1996, and (ii) with respect to the
remainder of the Restricted Securities, if any, on April
27, 1996. Klatsky shall be entitled to remove the
Restricted Securities held in the Account at any time, if
restrictions with respect thereto have terminated.
Whether or not the Restricted Securities against which
the restriction has terminated
2
have been removed from the Account or not, such
securities shall, nevertheless, be free and clear of all
claims of the Company.
(d) Notwithstanding any other provisions of this
Section 4, the Restricted Securities shall no longer be
subject to forfeiture or the restrictions set forth in
section 4(b) hereof upon the occurrence of any of the
following: (i) termination of Klatsky's employment
resulting from death or "disability" (as hereinafter
defined), (ii) termination of Klatsky's employment by the
Company without "cause" (as hereinafter defined), (iii)
termination of Klatsky's employment by Klatsky following
the occurrence of a "Severance Event" as defined in the
Plan as the same is amended pursuant to Section 2 hereof,
or (iv) termination of Klatsky's employment if by written
notice to the Company (the "Termination Notice") as a
result of Klatsky's 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 14, 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 has 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 (iv).
Failure by Klatsky to give the Determination Notice
herein provided after the occurrence of a condition which
would have given him the right to do so shall not be
deemed a waiver by him of his right thereafter to give
such Determination Notice.
(e) If Klatsky's employment with the Company shall
3
terminate prior to April 27, 1996, then, except as
otherwise provided in Section 4(d) hereof, the Restricted
Securities which shall not have theretofore been released
from the restriction set forth in Section 4(b) hereof
shall be forfeited by Klatsky and shall be returned to
the Company, free and clear of all claims of Klatsky with
respect thereto.
(f) For purposes of this Agreement, (i)
"disability" shall mean the inability of Klatsky to
perform the duty of the offices to which he has been duly
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.
(g) In the event that Klatsky shall have given the
Company a Determination Notice pursuant to clause (iv) of
Section 4(d) hereof, 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 of the April Agreement to
determine whether (A) Klatsky has the right, pursuant to
said clause (iv) to terminate his employment, and (B) the
Company has duly 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.
(h) On or before December 24, 1993, Klatsky shall
execute, deliver and file with the Internal Revenue
Service and the Company an election under Section 83(b)
4
of the Internal Revenue Code of 1986 (the "83(b)
Election"), in substantially the form annexed hereto as
Exhibit C, whereby he elects to include in his income for
calendar year 1993, for federal, state and local income
tax purposes, an amount equal to the fair market value of
the Restricted Securities on the date of the conveyance
thereof to Klatsky.
(i) The Company shall apply the December Bonus and
the proceeds from the December Loan to the payment of tax
withholding on the December Bonus and the amount which
Klatsky is required to include in income as a result to
the 83(b) Election. Of such amount, $236,250 shall be
applied to New York State withholding, $13,500 shall be
applied to New York City withholding and the balance
shall be applied to Federal withholding.
2. If Klatsky shall not be employed by the Company on
the date of conveyance of the Restricted Securities, the provisions
of this Agreement shall be of no force and effect and the rights of
the parties shall be determined under the provisions of the April
Agreement as originally executed and delivered.
3. All references in the April Agreement to June 7,
1994 shall be deemed to be references to June 14, 1994.
4. Except as hereby expressly modified and amended,
the terms and conditions of the April Agreement shall remain in
full force and effect.
If the foregoing is acceptable to you, please sign and
return to us the enclosed copy of this letter.
PHILLIPS-VAN HEUSEN CORPORATION
By: Irwin W. Winter
Vice President
AGREED TO AND ACCEPTED
Bruce J. Klatksy
Bruce J. Klatsky
5
SCHEDULE A
RESTRICTED SECURITIES
The Restricted Securities are to be United States Treasury
bills. Bruce J. Klatsky shall have the right to sell and invest
the proceeds in municipal bonds chosen by him.
6
EXHIBIT B
NON-NEGOTIABLE
PROMISSORY NOTE
$278,351.00 New York, New York
December , 1993
FOR VALUE RECEIVED, the undersigned, Bruce Klatsky (the
"Maker") of 45 Kerry Lane, Chappaqua, New York 10514, hereby
promises to pay to PHILLIPS-VAN HEUSEN CORPORATION (the "Payee"),
at 1290 Avenue of the Americas, New York, New York 10104, as herein
provided, the principal sum of TWO HUNDRED SEVENTY EIGHT THOUSAND
THREE HUNDRED FIFTY-ONE AND 00/100 ($278,351.00) DOLLARS and to pay
interest (computed on the basis of a 365-day year, based on the
actual number of days elapsed) at a rate of 7 1/2% per annum, such
payments to be made as follows:
(i) monthly payments of interest accrued and unpaid on
the unpaid principal amount of this Note from the date hereof shall
be due and payable in arrears on the last day of each calendar
month commencing with March 1994 and ending with July 1994; and
(ii) monthly payments of principal on this Note, each in
the amount of EIGHTY-THREE THOUSAND THREE HUNDRED THIRTY-THREE AND
00/100 ($83,333.00) DOLLARS, shall be due and payable on the last
day of each of April, 1994, May 1994 and June 1994, and a final
payment of principal on this Note in the amount of TWENTY-EIGHT
THOUSAND THREE HUNDRED FORTY-TWO AND 00/100 ($28,342.00) DOLLARS
shall be due and payable on July 31, 1994.
Payments of principal and interest hereunder shall be
made in such coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and
private debts in immediately available funds by wire transfer or by
check to the address of Payee specified above or at such other
place as Payee may from time to time designate.
Should any indebtedness represented by this Note be
collected at law or in equity, or in bankruptcy or other
proceeding, or should this Note be placed in the hands of attorneys
7
for collection after default, the Maker agrees to pay, in addition
to the principal, and interest due and payable hereon, all costs of
collecting or attempting to collect this Note, including all
reasonable attorney's fees and expenses (including those incurred
in connection with any appeal).
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY OF THE CONFLICT OF LAW RULES THEREOF.
IN WITNESS WHEREOF, the undersigned has executed this
Note as of the date hereof.
Bruce J. Klatsky
8
EXHIBIT C
Election to Include in Gross Income in
Year of Transfer of Property Pursuant to
Section 83(b) of the Internal Revenue Code
The undersigned (hereinafter referred to as the
("Taxpayer") hereby makes an election pursuant to Section 83(b) of
the Internal Revenue Code with respect to the property described
below and supplies the following information in accordance with the
regulations promulgated thereunder:
1. The name, address and taxpayer identification
number of the Taxpayer are as follows:
Name: Bruce J. Klatsky
Address: 45 Kerry Lane
Chappaqua, NY 10514
Tax Identification No.: ###-##-####
2. Description of property with respect to which the
election is being made:
The securities listed on Schedule A annexed
hereto, any proceeds from the sale or redemption
thereof, and any securities purchased with all or
any portion of such proceeds (collectively the
"Restricted Securities").
3. The date on which the property was transferred was
December , 1993. The taxable year to which this
election relates is calendar year 1993.
4. The nature of the restrictions to which the
property is subject is as follows:
9
Pursuant to the provisions of a certain
agreement dated as of April 28, 1993, by and among
the Corporation, the Taxpayer and another
individual, as amended by letter dated December ,
1993, by and between the Corporation and the
Taxpayer (such agreement, as so amended, being
referred to herein as the "Agreement"), the
Taxpayer generally may not sell, assign, pledge or
otherwise dispose of the Restricted Securities and
must hold the Restricted Securities separate and
apart from his other assets in a brokerage or
custody account chosen by him (the "Account"). If,
while any Restricted Securities are held in the
Account, the same are sold or redeemed, the
proceeds thereof will continue to be held in the
Account and any securities purchased with all or
any portion of such proceeds will thereafter be
considered as Restricted Securities under the
Agreement.
The restrictions described above will
terminate (i) with respect to Restricted Securities
having a fair market value of $83,333 on the last
day of each calendar month commencing with
February, 1994 and ending with March 1996; and (ii)
with respect to the remainder of the Restricted
Securities, if any, on April 27, 1996, and the
Taxpayer will thereupon be entitled to remove the
same, or the proceeds from the sale or redemption
thereof, from the Account free and clear of all
claims of the Corporation with respect thereto. If
the Taxpayer's employment by the Corporation
terminates prior to April 27, 1996, then, except as
otherwise provided below, the Restricted Securities
(or the proceeds from the sale or redemption
thereof) which have not theretofore been released
10
from these restrictions will be forfeited by the
Taxpayer and will be returned to the Corporation,
free and clear of all claims of the Taxpayer with
respect thereto.
Notwithstanding the foregoing, the Restricted
Securities (or the proceeds from the sale or
redemption thereof) will no longer be subject to
forfeiture or the restrictions set forth above (i)
in the event of the termination of the Taxpayer's
employment with the Corporation as a result of his
death or his "disability;" (ii) in the event that
the Taxpayer's employment with the Corporation is
terminated by the Corporation without "cause" (as
defined in the Agreement), or (iii) in the event
that the Taxpayer terminates his employment with
the Corporation upon the occurrence of certain
other events referred to in the Agreement.
5. The aggregate fair market value of the Restricted
Securities (determined without regard to any
restrictions other than restrictions which by their
terms will never lapse) is approximately
$2,250,000.
6. The amount paid by the Taxpayer for the Restricted
Securities is zero.
7. A copy of this statement has been furnished to the
Corporation.
Dated: December 6, 1993
Bruce J. Klatsky
11