SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PHILLIPS-VAN HEUSEN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
PHILLIPS-VAN HEUSEN CORPORATION
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(Name of Person Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
COMMON STOCK, PAR VALUE $1.00
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
PHILLIPS-VAN HEUSEN CORPORATION
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------------
The Annual Meeting of Stockholders of PHILLIPS-VAN HEUSEN CORPORATION (the
"Company"), a Delaware corporation, will be held at the offices of Chemical
Bank, 270 Park Avenue, Third Floor Auditorium, New York, New York, on Tuesday,
June 13, 1995, at 10:00 A.M., for the following purposes:
(1) To elect four directors of the Company to serve for a term of three
years;
(2) To consider and act upon a proposal to increase the number of shares
of Common Stock with respect to which options may be granted under
the Company's 1987 Stock Option Plan;
(3) To consider and act upon a proposal to approve the Company's
Performance Restricted Stock Plan;
(4) To ratify the appointment of auditors for the Company to serve until
the next annual meeting of stockholders;
(5) To consider and act upon a proposal of two stockholders to request
the Board of Directors to take the steps necessary to provide that
all directors of the Company be elected annually; and
(6) To consider and act upon such other matters as may properly come
before the meeting.
Only stockholders of record at the close of business on April 17, 1995 are
entitled to vote at the meeting.
Attendance at the meeting will be limited to holders of record of the
Company's Common Stock or their proxies, beneficial owners having evidence of
ownership, and guests of the Company. If you hold stock through a bank or
broker, a copy of an account statement from your bank or broker as of the record
date will suffice as evidence of ownership. You are requested to fill in, date
and sign the enclosed proxy, which is solicited by the Board of Directors of the
Company, and to mail it promptly in the enclosed envelope.
By order of the Board of Directors,
PAMELA N. HOOTKIN
Secretary
New York, New York
May 1, 1995
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
PHILLIPS-VAN HEUSEN CORPORATION
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 13, 1995
-------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PHILLIPS-VAN HEUSEN CORPORATION (the
"Company") to be used at the Annual Meeting of Stockholders of the Company which
will be held at the offices of Chemical Bank, 270 Park Avenue, Third Floor
Auditorium, New York, New York, on Tuesday, June 13, 1995, at 10:00 A.M., and at
any adjournments thereof.
The principal executive offices of the Company are at 1290 Avenue of the
Americas, New York, New York 10104. The approximate date on which this Proxy
Statement and the enclosed form of proxy were first sent or given to
stockholders was May 1, 1995.
Stockholders who execute proxies retain the right to revoke them at any time
by notice in writing to the Secretary of the Company, by revocation in person at
the meeting or by presenting a later dated proxy. Unless so revoked, the shares
represented by proxies will be voted at the meeting. The shares represented by
the proxies solicited by the Board of Directors of the Company will be voted in
accordance with the directions given therein. Stockholders vote at the annual
meeting by casting ballots (in person or by proxy) which are tabulated by a
person who is appointed by the Board of Directors before the meeting to serve as
inspector of election at the meeting and who has executed and verified an oath
of office. Abstentions and broker "non-votes" are included in the determination
of the number of shares present at the meeting for quorum purposes. An
abstention will have the same effect as a negative vote, but broker "non-votes"
are not counted in the tabulations of the votes cast on proposals presented to
stockholders because shares held by a broker are not considered to be entitled
to vote on matters as to which broker authority is withheld. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner.
Stockholders of record at the close of business on April 17, 1995 will be
entitled to one vote for each share of the Company's common stock (the "Common
Stock") then held. There were outstanding on such date 26,656,716 shares of
Common Stock. The Common Stock is the only outstanding class of voting stock of
the Company.
The rights to purchase shares of the Company's Series A Cumulative
Participating Preferred Stock, which automatically trade with the Common Stock,
do not vote. Such rights become exercisable, unless they theretofore have been
redeemed or have expired, 10 days after a person or affiliated or associated
group acquires 20% or more of the Common Stock in a transaction not previously
approved by the Company's Board of Directors or commences a tender offer for 30%
or more of the Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information with respect to the persons
who are known to the Company to be the beneficial owners of more than five
percent of the Common Stock as of April 17, 1995. Except as otherwise indicated,
the persons listed below have advised the Company that they have sole voting and
investment power with respect to the shares listed as owned by them.
AMOUNT
NAME AND ADDRESS OF BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS
- -------------------------------------------------------------- ------------ ----------
Vaneton International, Inc.1 2,835,794 10.7%
P.O. Box 3340
Road Town
Tortola, British Virgin Islands
Dietche & Field Advisers, Inc.2 1,679,400 6.3
437 Madison Avenue
New York, New York 10022
The Phillips-Van Heusen Corporation3 1,675,456 6.3
Associates Investment Plan
1290 Avenue of the Americas
New York, New York 10104
Merrill Lynch & Co., Inc.4 1,651,240 6.2
World Financial Center
250 Vesey Street
New York, New York 10281
The Capital Group Companies, Inc.5 1,410,000 5.3
333 South Hope Street
Los Angeles, California 90071
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1 Dr. Richard Lee, 6/F TAL Building, 49 Austin Road, Kowloon, Hong Kong, may
be deemed to beneficially own the 2,835,794 shares of Common Stock owned of
record by Vaneton International, Inc. Mr. Lee and Vaneton International,
Inc. have shared voting and dispositive power over such shares. Information
as to the shares of Common Stock beneficially owned by Vaneton
International, Inc. and Mr. Lee is as of March 22, 1995 and as set forth in
a Schedule 13D filed with the Securities and Exchange Commission.
2 Dietche & Field Advisers, Inc. does not have dispositive power as to the
shares of Common Stock beneficially owned by it. Information as to the
shares of Common Stock beneficially owned by Dietche & Field Advisers, Inc.
is as of December 31, 1994 and as set forth in a Schedule 13G filed with
the Securities and Exchange Commission.
3 Includes all shares held by the Master Trust relating to both the Company's
Associates Investment Plan and its Associates Investment Plan for
Associates in Puerto Rico.
4 Merrill Lynch & Co., Inc. ("MLC") is the parent company of (i) Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281, and (ii)
Merrill Lynch Group, Inc. ("MLG"), World Financial Center, North Tower, 250
Vesey Street, New York, New York 10281. As such, MLC may be deemed to be
the beneficial owner of an aggregate 1,651,240 shares (6.2%) of Common
Stock which may be deemed to be beneficially owned by MLPF&S and MLG.
MLPF&S is a registered broker-dealer and may be deemed to be the beneficial
owner of shares of Common Stock as a result of acting as a sponsor of
certain unit investment trusts, none of which individually owns more than
5% of the Common Stock. In addition, MLC may be deemed to be the beneficial
owner of certain securities held by MLPF&S in its proprietary trading
accounts.
MLG may be deemed to be the beneficial owner of 1,594,940 shares (6.0%) of
the Common Stock by virtue of its control of its wholly-owned subsidiary,
Princeton Services, Inc. ("PSI"), 800
(Footnotes continued on following page)
2
(Footnotes continued from preceding page)
Scudders Mill Road, Plainsboro, New Jersey 08536, and of Merrill Lynch Bank
(Suisse) S.A. and various trust company subsidiaries. PSI is the general
partner of Merrill Lynch Asset Management, L.P. ("MLAM"). MLAM, 800
Scudders Mill Road, Plainsboro, New Jersey 08536, is a registered
investment advisor which may be deemed to be the beneficial owner of
1,397,300 shares (5.3%) of the Common Stock.
Each of MLC, MLPF&S, MLG, PSI and MLAM has disclaimed beneficial ownership
of such shares, other than in the case of MLC and MLPF&S, the shares of
Common Stock held by MLPF&S in its proprietary trading accounts. Each of
MLC, MLG and PSI have shared voting and dispositive power over the shares
of Common Stock which each of them are deemed to own beneficially.
Information as to the shares of Common Stock beneficially owned by MLC,
MLG, PSI and MLAM is as of December 31, 1994 and as set forth in a Schedule
13G filed with the Securities and Exchange Commission.
5 The Capital Group Companies, Inc. ("CGC") is the parent company of Capital
Research and Management Company ("CRMC"), 333 South Hope Street, Los
Angeles, California 90071. CRMC is a registered investment adviser which,
as of December 31, 1994, exercised investment discretion with respect to
1,410,000 shares (5.3%) of the Common Stock, which were owned by various
institutional investors. CRMC and, therefore, CGC has no power to direct
the vote of such shares. CGC has disclaimed beneficial ownership of such
shares. Information as to the shares of Common Stock beneficially owned by
CGC and CRMC is as of December 31, 1994 and as set forth in a Schedule 13G
filed with the Securities and Exchange Commission.
The following table presents certain information with respect to the number
of shares of Common Stock beneficially owned by each of the directors and
nominees for director of the Company, the Chief Executive Officer, the four most
highly compensated executive officers of the Company other than the Chief
Executive Officer, and all of the directors, nominees for director and executive
officers of the Company as a group as of April 17, 1995.
AMOUNT
BENEFICIALLY PERCENT OF
NAME OWNED1 CLASS
- --------------------------------------------------------------- ------------ ----------
Edward H. Cohen 8,490 *
Estelle Ellis 13,490 *
Joseph B. Fuller 1,990 *
Bruce J. Klatsky 76,318 *
Maria Elena Lagomasino 200 *
Harry N.S. Lee2 1,000 *
Bruce Maggin 25,990 *
Ellis E. Meredith 11,500 *
Steven L. Osterweis 16,490 *
Walter T. Rossi 8,833 *
William S. Scolnick 6,990 *
Allen E. Sirkin 32,023 *
Peter J. Solomon 30,490 *
Mark Weber 42,539 *
Irwin W. Winter 58,432 *
All directors, nominees for director and executive officers as
a group (15 persons) 334,775 1.3%
- ------------
* Less than 1% of class.
1 The figures in the table are based on information furnished to the Company
by the directors, nominees for director and executive officers. Except as
otherwise indicated, each of the directors,
(Footnotes continued on following page)
3
(Footnotes continued from preceding page)
nominees and executive officers has sole voting and investment power with
respect to the shares listed as owned by them.
2 Harry N.S. Lee is a director of Vaneton International, Inc. which
beneficially owns 2,835,794 shares (10.7%) of the Common Stock. See the
prior table for certain information regarding Vaneton International, Inc.
The figures in the foregoing table include 190 shares held by Bruce J.
Klatsky's child and by Mr. Klatsky's wife as custodian for his child, as to
which Mr. Klatsky has disclaimed beneficial ownership, 8,000 shares held by
Bruce Maggin as custodian for his minor children, 300 shares held by Allen E.
Sirkin with his wife as joint tenants, 200 shares held by Mr. Sirkin's wife's
Keogh Plan, as to which he has disclaimed beneficial ownership, 100 shares held
by Mr. Sirkin's wife as custodian for one of his children, as to which Mr.
Sirkin has disclaimed beneficial ownership, and 12,000 shares held in certain
trusts for the benefit of the children of Peter J. Solomon, as to which Mr.
Solomon has disclaimed beneficial ownership.
The foregoing table also includes shares which the following directors and
executive officers have the right to acquire within sixty days upon the exercise
of options granted under the Company's stock option plans: Edward H. Cohen,
6,490 shares; Estelle Ellis, 6,490 shares; Joseph B. Fuller, 1,490 shares; Bruce
J. Klatsky, 27,460 shares; Bruce Maggin, 6,490 shares; Ellis E. Meredith, 6,490
shares; Steven L. Osterweis, 6,490 shares; Walter T. Rossi, 8,333 shares;
William S. Scolnick, 6,490 shares; Allen E. Sirkin, 28,373 shares; Peter J.
Solomon, 6,490 shares; Mark Weber, 35,039 shares; Irwin W. Winter, 32,557
shares; and all directors, nominees for director and executive officers as a
group, including the foregoing, 178,682 shares.
ELECTION OF DIRECTORS
Four directors will be elected at the meeting for a term of three years and
until their respective successors shall have been elected and shall qualify. The
election of directors requires the affirmative vote of a plurality of the shares
of Common Stock present in person or by proxy at the meeting. At this time, the
Board of Directors of the Company knows of no reason why any nominee might be
unable to serve. There are no arrangements or understandings between any
director or nominee and any other person pursuant to which such person was
selected as a director or nominee. With the exception of Marie Elena Lagomasino,
who was elected by the directors on February 4, 1993, all of these individuals
have previously been elected directors of the Company by the stockholders.
YEAR
BECAME A
NAME OF NOMINEE PRINCIPAL OCCUPATION AGE DIRECTOR
- ---------------------------- ------------------------------------------------- --- --------
CLASS B (TERM EXPIRES 1998)
Edward H. Cohen Senior Partner of Rosenman & Colin 56 1987
Estelle Ellis President of Business Image, Inc. 75 1982
Maria Elena Lagomasino Senior Vice President of The Chase Manhattan 46 1993
Bank, N.A.
William S. Scolnick Retired Executive Vice President of a division of 77 1962
the Company
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOUR
NOMINEES TO THE COMPANY'S BOARD OF DIRECTORS. PROXIES RECEIVED IN RESPONSE TO
THIS SOLICITATION WILL BE VOTED FOR THE ELECTION OF THE FOUR NOMINEES UNLESS
OTHERWISE SPECIFIED IN THE PROXY.
The following individuals are the Company's other directors whose terms of
office continue after the meeting and until the Annual Meeting of Stockholders
in the year in which the directorships of their
4
class terminate. With the exception of Harry N.S. Lee, who was elected by the
directors on April 18, 1995, all of these individuals have previously been
elected directors of the Company by the stockholders.
YEAR
BECAME A
NAME OF DIRECTOR PRINCIPAL OCCUPATION AGE DIRECTOR
- ---------------------------- ------------------------------------------------ --- --------
CLASS A (TERM EXPIRES 1997)
Harry N.S. Lee Director of TAL Apparel Limited, an apparel 52 1995
manufacturer and exporter based in Hong Kong
Ellis E. Meredith Formerly President of American Apparel 67 1984
Manufacturers Association, Inc.; Chairman of
Newsletters, Inc.
Peter J. Solomon Chairman of Peter J. Solomon Company, Ltd. 56 1987
Irwin W. Winter Vice President, Finance, of the Company 61 1987
CLASS C (TERM EXPIRES 1996)
Joseph B. Fuller Director of Monitor Company 38 1991
Bruce J. Klatsky Chairman, President and Chief Executive Officer 46 1985
of the Company
Bruce Maggin Executive Vice President, Multimedia Group, 52 1987
Capital Cities/ABC, Inc.
Steven L. Osterweis Business consultant; formerly Chairman of 82 1976
Associated Merchandising Corporation
Mr. Cohen is also a director of Franklin Electronic Publishers, Inc. Mr.
Osterweis is also a trustee of the Neuberger & Berman Equity Funds. Mr. Solomon
is also a director of Bradlees, Inc., Centennial Cellular Corp., Century
Communications Corporation, Culbro Corporation, Monro Muffler Brake, Inc. and
Office Depot, Inc.
Each of the directors or nominees for director has been engaged in the
principal occupation indicated in the foregoing table for more than the past
five years.
No family relationship exists between any director or executive officer of
the Company.
The Board of Directors of the Company has standing Audit and Compensation
Committees; it does not have a standing Nominating Committee. The Audit
Committee, composed of Messrs. Maggin, Osterweis and Scolnick, is charged with
recommending annually to the Board of Directors the independent auditors to be
retained by the Company, reviewing the audit plan with the auditors, reviewing
the results of the audit with the officers of the Company and its auditors and
reviewing with the officers and internal auditors of the Company the scope and
nature of the Company's internal audit function. The Audit Committee held three
meetings during the fiscal year ended January 29, 1995. The Compensation
Committee, composed of Messrs. Cohen, Maggin, Meredith and Osterweis, is charged
with setting the compensation of all executive officers, recommending new
incentive compensation plans and implementing changes and improvements to
existing incentive compensation plans, all subject to approval by the Board of
Directors. The Compensation Committee held three meetings during the fiscal year
ended January 29, 1995.
During the fiscal year ended January 29, 1995, there were six meetings of
the Board of Directors. All of the directors attended at least 75% of the
aggregate number of meetings of the Board of Directors and the Committees of the
Board of Directors on which they serve.
The Company will consider for election to the Board of Directors a nominee
recommended by a stockholder if the recommendation is made in writing and
includes (i) the qualifications of the proposed nominee to serve on the Board of
Directors, (ii) the principal occupations and employment of the proposed nominee
during the past five years, (iii) each directorship currently held by the
proposed
5
nominee and (iv) a statement that the proposed nominee has consented to the
nomination. The recommendation should be addressed to the Secretary of the
Company.
Based upon a review of the filings furnished to the Company pursuant to Rule
16a-3(e) promulgated under the Securities Exchange Act of 1934 and on
representations from its executive officers and directors, all filing
requirements of Section 16(a) of said Act were complied with during the fiscal
year ended January 29, 1995.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes all plan and non-plan compensation awarded
to, earned by, or paid to the Company's Chief Executive Officer and its four
most highly compensated executive officers, other than the Chief Executive
Officer, who were serving as executive officers at the end of the Company's last
fiscal year (together, the "Named Executive Officers"), for services rendered in
all capacities to the Company and its subsidiaries for each of the Company's
last three fiscal years, ended January 29, 1995, January 30, 1994 and January
31, 1993.
LONG-TERM
COMPENSATION
------------
ANNUAL
COMPENSATION AWARDS ALL OTHER
------------------ ------------ COMPENSATION1
NAME AND SALARY BONUS OPTIONS2 -------------------------
PRINCIPAL POSITION YEAR $ $ # $
- ---------------------------------------- ---- ------- ------- ------------ ------------
Bruce J. Klatsky 1994 750,000 -- 7,890 93,977
Chairman, 1993 750,000 835,000 215,520 2,281,983
Phillips-Van Heusen Corporation 1992 600,000 -- 8,840 27,490
Walter T. Rossi3 1994 575,000 -- 5,260 21,095
Chairman, 1993 500,000 -- 8,620 10,733
The PVH Retail Group 1992 114,104 -- 25,000 2,245
Allen E. Sirkin 1994 575,000 -- 5,260 25,627
Chairman, 1993 500,000 -- 8,620 45,572
The PVH Wholesale Group 1992 425,000 -- 4,910 41,032
Mark Weber 1994 462,500 -- 4,170 22,252
Vice President, 1993 425,000 -- 7,340 22,233
Phillips-Van Heusen 1992 362,500 -- 3,440 20,366
Corporation and Group
President, The Sportswear Group
Irwin W. Winter 1994 456,250 -- 5,000 17,533
Vice President, Finance, 1993 395,833 -- 8,280 16,467
Phillips-Van Heusen Corporation 1992 350,000 -- 5,160 19,666
No other annual compensation, restricted stock awards, stock appreciation
rights ("SARs") or long-term incentive plan ("LTIP") payouts (all as defined
in the proxy regulations of the Securities and Exchange Commission) were
awarded to, earned by, or paid to the Named Executive Officers during any of
the Company's last three fiscal years.
- ------------
1 All Other Compensation includes payments or contributions required by the
Company's Associates Investment Plan and Supplemental Savings Plan,
Corporate Medical Reimbursement Insurance Plan and Educational Benefit
Trust and payments made pursuant to an agreement, dated April 28, 1993 and
amended December 6, 1993, between the Company and Mr. Klatsky.
(Footnotes continued on following page)
6
(Footnotes continued from preceding page)
Under the combination of the Company's Associates Investment Plan, its
Associates Investment Plan for Associates in Puerto Rico and the
Supplemental Savings Plan applicable to certain management and highly
compensated employees, each employee, including the Named Executive
Officers, eligible to participate may currently authorize his or her
employer to withhold a specified percentage (up to 6%) of his or her
compensation. The Company or its subsidiaries will contribute an amount
equal to 50% of an employee's contribution. Of the total amount contributed
by the employee and the Company or its subsidiaries, 50% will be invested
in Common Stock, with the balance invested in a money market fund and/or a
general stock fund and/or additional Common Stock at the direction of the
employee, except that all contributions under the Supplemental Savings Plan
are in the form of phantom shares of Common Stock. A participant's interest
in the amounts arising out of employer contributions vests after the
earlier of five years, at age 65 or upon disability or death.
Effective July 1, 1995, (i) the Associates Investment Plan and the
Associates Investment Plan for Associates in Puerto Rico will be amended to
provide that (a) other than certain management and highly compensated
employees including, without limitation, the Named Executive Officers, each
employee eligible to participate may authorize his or her employer to
withhold up to 15% of his or her compensation (subject to certain
limitations), (b) 100% of the amount contributed by the Company will be
invested in Common Stock and (c) the amount contributed by the employee
will be invested in the employee's sole direction in up to six investment
funds (including up to 25% in additional Common Stock) and (ii) The
Supplemental Savings Plan will be amended (x) to conform to the changes in
the Associates Investment Plan and the Associates Investment Plan for
Associates in Puerto Rico and (y) the contributions will be in the form of
phantom shares of each of the investment funds, and in the same
percentages, as the employee's investment choices under the Associates
Investment Plan or the Associates Investment Plan for Associates in Puerto
Rico, as applicable. The Company has made contributions which are reflected
under this column in the amount of $22,500, $22,500 and $18,000 for Bruce
J. Klatsky, $17,250, $1,250 and $0 for Walter T. Rossi, $17,250, $15,000
and $12,750 for Allen E. Sirkin, $13,875, $12,750 and $10,876 for Mark
Weber, and $13,688, $10,875, and $10,500, for Irwin W. Winter, in the
fiscal years ended January 29, 1995, January 30, 1994 and January 31, 1993,
respectively.
The Company's Corporate Medical Reimbursement Plan covers eligible
employees for most medical charges up to a specified annual maximum. During
the fiscal years ended January 29, 1995, January 30, 1994 and January 31,
1993, respectively, the Company incurred the following annual premiums for
single or family coverage for the Named Executive Officers which are
reflected under this column: Bruce J. Klatsky--$8,377, $9,483 and $9,490;
Walter T. Rossi-- $3,845, $9,483 and $2,245; Allen E. Sirkin--$8,377,
$9,483 and $9,490; Mark Weber--$8,377, $9,483 and $9,490; and Irwin W.
Winter--$3,845, $5,592 and $9,166.
Under the Company's Educational Benefit Trust, children of eligible
employees received reimbursement of tuition and room and board charges
while attending an accredited college or vocational school. The plan was
terminated in 1986 except with respect to children who were then covered by
the plan. The education benefits received by children who continue to be
eligible to receive benefits under the plan and which are reflected under
this column totalled $26,100, $21,089 and $18,792, for the fiscal years
ended January 29, 1995, January 30, 1994 and January 31, 1993 respectively.
Such benefits were paid to the child of Bruce J. Klatsky for the fiscal
year ended January 29, 1995 and to the children of Allen E. Sirkin for the
prior two fiscal years.
Pursuant to an agreement, dated April 28, 1993 and amended December 6,
1993, the Company transferred (subject to certain restrictions) $2,250,000
of government securities to Mr. Klatsky and reimbursed Mr. Klatsky for
$37,000 in legal expenses relating to the negotiation of said agreement.
See "Employment Contracts, Termination of Employment and Change-In-Control
Arrangements."
2 In response to changes in the tax laws as a result of the Omnibus Budget
Reconciliation Act of 1993 (the "1993 Tax Act"), on September 9, 1993, the
Named Executive Officers agreed to cancel
(Footnotes continued on following page)
7
(Footnotes continued from preceding page)
the options which had been issued to them on June 1, 1993, in consideration
of the grant of new options for the same number of shares at a price equal
to the option price of the original options, which price was higher than
the market price on such date. Also in response to the 1993 Tax Act
changes, at the Company's urging and for its benefit, on December 1, 2 and
3, 1993, Mr. Klatsky exercised the option granted to him on April 28, 1993
to purchase 100,000 shares, in consideration of the grant to him of a new
option on December 3, 1993 for 100,000 shares at the then fair market value
of the Common Stock for the balance of the term of his original option.
Both the original grants which were cancelled and the new grants are
reflected in the 1993 option grants under this column.
3 Mr. Rossi commenced employment with the Company on November 9, 1992.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of stock
options to purchase Common Stock pursuant to the Company's 1987 Stock Option
Plan (the "Option Plan") granted to the Named Executive Officers during the
fiscal year ended January 29, 1995. No stock appreciation rights have been
granted by the Company.
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO OPTION TERM
OPTIONS EMPLOYEES EXERCISE EXPIRA- ---------------------------
GRANTED1 IN FISCAL PRICE TION 5% 10%
NAME # YEAR $/SH DATE $ $
- ---------------------------- ------- ---------- -------- ------- ----------- -------------
Bruce J. Klatsky 7,890 4.0 27.875 6/14/04 138,312 350,521
Walter T. Rossi 5,260 2.7 27.875 6/14/04 92,208 233,681
Allen E. Sirkin 5,260 2.7 27.875 6/14/04 92,208 233,681
Mark Weber 4,170 2.1 27.875 6/14/04 73,100 185,256
Irwin W. Winter 5,000 2.5 27.875 6/14/04 87,650 222,130
All Stockholders2 N/A N/A N/A N/A 465,501,226 1,179,712,349
- ------------
1 All options granted to the Named Executive Officers in the fiscal year
ended January 29, 1995 were granted on June 14, 1994. One third of the
outstanding options become exercisable on each of the third, fourth and
fifth anniversaries of the grant date.
2 These figures were calculated assuming that the price of the 26,554,548
shares of Common Stock outstanding on June 14, 1994 increased from $27.875
per share at a compound rate of 5% and 10% per year for ten years. The
purpose of including this information is to indicate the potential
realizable value at the assumed annual rates of stock price appreciation
for the option term for all of the Company's stockholders.
8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FISCAL
YEAR-END OPTION VALUES
The following table sets forth information with respect to each exercise of
stock options during the fiscal year ended January 29, 1995 by the Named
Executive Officers and the value at January 29, 1995 of unexercised stock
options held by the Named Executive Officers. No stock appreciation rights have
been granted by the Company.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END1
SHARES ACQUIRED VALUE ----------------------------- -----------------------------
ON EXERCISE REALIZED1 EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME # $ # $
- ------------------ --------------- --------- ----------------------------- -----------------------------
Bruce J. Klatsky -- -- 24,514 121,544 161,760 0
Walter T. Rossi -- -- 8,333 26,237 0 0
Allen E. Sirkin -- -- 26,737 12,844 209,927 0
Mark Weber -- -- 33,892 10,134 308,720 0
Irwin W. Winter 12,000 376,250 30,837 12,581 234,635 0
- ------------
1 Fair market value of securities underlying the options minus the exercise
price of the options at exercise or fiscal year-end.
PENSION PLAN TABLE
The following table sets forth the aggregate estimated annual benefits
payable, upon retirement at age 65, to employees under the combination of the
pension plan for salaried employees and a supplemental defined benefit plan,
applicable to certain management and highly compensated employees (including the
Named Executive Officers), in various compensation and years-of-service
classifications, assuming that the Social Security maximum limit does not change
from its present level of $61,200.
YEARS OF SERVICE
REMUNERATION -------------------------------------------------------
$ 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------
175,000 35,253 46,464 57,489 68,394 79,245
275,000 57,753 76,464 94.989 113,394 131,745
375,000 80,253 106,464 132,489 158,394 184,245
475,000 102,753 136,464 169,989 203,394 236,475
575,000 125,253 166,464 207,489 248,394 289,245
675,000 147,753 196,464 244,989 293,394 341,745
775,000 170,253 226,464 282,489 338,394 394,245
The benefits under the Company's pension plans are generally based on a
participant's career average compensation (except that pre-1994 benefits are
based on pre-1994 high five-year average compensation and exclude bonuses).
Absent any election by a participant of an optional form of benefit, benefits
under the plans become payable at the time of retirement, normally at age 65;
such benefits under the pension plan for salaried employees are payable monthly
for the life of the participant and, in most cases, for the life of such
participant's surviving spouse and benefits under the supplemental defined
benefit plan are payable in a lump sum. Notwithstanding the method of payment of
benefits under the plans, the amounts shown in the above table are shown in the
actuarial equivalent amount of a life annuity.
9
The credited years of service and covered compensation under the pension
plans, as of January 29, 1995, for each of the Named Executive Officers is set
forth in the following table.
COVERED
CREDITED YEARS COMPENSATION
NAME OF SERVICE $
- ------------------------------------------------- -------------- ------------
Bruce J. Klatsky 22 602,458
Walter T. Rossi 1 580,333
Allen E. Sirkin 8 373,296
Mark Weber 23 355,553
Irwin W. Winter 7 351,385
COMPENSATION OF DIRECTORS
Each director of the Company who is not an employee of the Company or any of
its subsidiaries receives a fee of $10,000 for his or her services as a director
of the Company and $750 for each Board meeting attended. Each director who is a
member of the Audit Committee receives an additional fee of $2,500; each
director who is a member of the Compensation Committee receives an additional
fee of $2,000. Pursuant to the Option Plan, each outside director is entitled to
receive, on an annual basis, a non-incentive option to purchase the number of
shares of Common Stock derived by dividing $50,000 by the fair market value of a
share of Common Stock on the date of grant. Pursuant to the Option Plan, on June
14, 1994, each outside director was granted an option to purchase 1,793 shares
of Common Stock.
The law firm of Rosenman & Colin, of which Mr. Cohen is a senior partner,
was engaged as the Company's general outside counsel for the fiscal year ended
January 29, 1995 and will continue to be so engaged for the fiscal year ending
January 28, 1996.
Peter J. Solomon Company, Ltd., of which Mr. Solomon is Chairman, provides
investment banking services to the Company.
Business Image, Inc., of which Ms. Ellis is President, provides marketing
and communications services to the Company, including the publication of a
corporate newsletter. During the fiscal year ended January 29, 1995, Business
Image, Inc. was paid $263,742 for its services to the Company.
Monitor Company, of which Mr. Fuller is a director, provided business
consulting services to the Company during the fiscal year ended January 29,
1995.
TAL Apparel Limited, of which Mr. Lee is a director, has been, and continues
to be, one of the Company's principal manufacturers of its apparel products.
During the fiscal year ended January 29, 1995, the Company purchased
approximately $43,000,000 of products from TAL Apparel Limited and certain
related companies.
EMPLOYMENT CONTRACTS, TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Pursuant to an agreement, dated April 28, 1993 and amended December 6, 1993,
the Company transferred (subject to certain restrictions) $2,250,000 of
government securities to Bruce J. Klatsky, the Company's Chairman and Chief
Executive Officer. Under the agreement, $83,333 of such securities are released
to Mr. Klatsky at the end of each month commencing February 1994 and ending
March 1996, with the balance, if any, released to Mr. Klatsky on April 27, 1996.
The agreement provides for the immediate release of the government securities to
Mr. Klatsky upon certain events, including his disability, termination of his
employment by the Company (other than for cause), as a result of the
10
Company's breach of its obligations under said agreement, pursuant to a
Severance Event (as hereinafter defined) or if his powers as Chief Executive
Officer and Chairman of the Company are limited or restricted to any significant
extent. If Mr. Klatsky's employment is terminated other than as set forth above,
he forfeits all rights to any government securities not previously released to
him. Pursuant to said agreement, the Company loaned Mr. Klatsky $278,351 at 7
1/2% per annum to pay a portion of the tax incurred by Mr. Klatsky upon his
receipt of the government securities. At the request of, and for the benefit of,
the Company, Mr. Klatsky elected to incur income tax on the government
securities in 1993; thus allowing the Company to receive a deduction for the
full amount of such securities. Had Mr. Klatsky deferred the income tax on his
receipt of the securities, the Company would have been subject to the
limitations imposed by the 1993 Tax Act. The largest amount of such loan
outstanding during the fiscal year ended January 29, 1995 was $278,351. The loan
was repaid in full by Mr. Klatsky on August 1, 1994.
The Company has had in effect since 1987 a Special Severance Benefit Plan
providing benefits for 10 key employees of the Company and its subsidiaries,
including the Named Executive Officers. Upon the termination of employment by
any participant within two years after a change in control of the Company
accompanied or followed by a change in the chief executive officer of the
Company (a "Severance Event"), the participant receives a lump sum payment in an
amount generally equal to three times the average annual total cash compensation
paid to or accrued for him or her during the two-year period preceding the date
of termination. In addition, the Company has agreed to indemnify each
participant in the Plan against any and all liabilities he or she may incur
under Section 4999(a) of the Internal Revenue Code (relating to excise taxes on
excess parachute payments), including any income taxes and/or additional excise
taxes applicable to such indemnification payment.
Certain other plans of the Company in which certain of the Named Executive
Officers participate provide for benefits upon the occurrence of a change in
control of the Company. The Company's Capital Accumulation Plan, under which
participants remaining in the employ of the Company until established target
dates earn specified dollar amounts, provides that if a participant's employment
with the Company is terminated following a Severance Event, the full
undiscounted value of the future payments to be made to the participant under
the Plan becomes immediately payable in a lump sum. Further, each participant's
rights are subject to non-competition and non-disclosure restrictions which
automatically terminate upon the occurrence of a Severance Event. The Option
Plan provides that upon a Severance Event all options which were previously
granted under the Option Plan and which have not expired or been otherwise
cancelled become immediately exercisable in full (regardless of whether such
options have fully vested).
On February 14, 1995, the Company entered into a consulting and
non-competition agreement with Lawrence S. Phillips, the former Chairman of the
Company, in connection with Mr. Phillips' resignation as a director of the
Company. The consulting and non-competition agreement superseded Mr. Phillips'
rights under a prior agreement, dated April 28, 1993, relating to his
resignation as the Company's Chief Executive Officer and Chairman and the
election of Mr. Klatsky to such positions in June 1993 and June 1994,
respectively. Pursuant to the consulting and non-competition agreement, which
terminates on June 14, 2004, Mr. Phillips is to receive compensation for his
commitment to consult with the Company at the rate of $250,000 per annum. The
consulting and non-competition agreement provides, among other things, for the
Company to provide Mr. Phillips with an office, administrative assistance,
supplementary medical coverage and a car, to reimburse Mr. Phillips for certain
out-of-pocket expenses and to make contributions to certain charities selected
by Mr. Phillips. The consulting and non-competition agreement also provides for
an annual payment to Mr. Phillips of $500,000 in exchange for his covenant not
to compete against the Company and includes a confidentiality provision. In
addition, the Company entered into two split-dollar life insurance agreements on
Mr. Phillips' life and an indemnity agreement in favor of Mr. Phillips and
granted Mr. Phillips an option to acquire 100,000 shares of Common Stock at an
exercise price of $16.50 per share. The split-dollar life insurance agreements
relate to separate life insurance policies, each of which provides for an
initial
11
death benefit of $3,375,000. Mr. Phillips' children are the beneficiaries of
both such policies and are generally entitled to a portion of the death
benefits, with the remainder being payable to the Company. The Company is
obligated to pay the premiums on both policies. Both agreements provide for the
Company's recovery of all premiums paid by it if Mr. Phillips should die while
the policies are in effect.
The Company has an additional split dollar life insurance arrangement with
the Lawrence S. Phillips 1992 Trust (created by Mr. Phillips) which it entered
into on August 1, 1992 with respect to a life insurance policy having an initial
death benefit of $4,220,000. Under the arrangement, the Trust is entitled to
name the beneficiary with respect to various portions of the death benefit; the
remaining death benefit under the policy is payable to the Company. The Trust is
required to pay the portion of the annual premium equal to the value of the
insurance protection furnished to the Trust and the Company is required to pay
the balance of the premium. The arrangement is structured so that, upon the
death of Mr. Phillips at any time, the Company will recover all premiums paid by
it, plus interest.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee for the fiscal year ended January
29, 1995 were Edward H. Cohen, Bruce Maggin, Ellis E. Meredith and Steven L.
Osterweis. From February 1987 until February 1988, Mr. Cohen was Vice President
and General Counsel of the Company. In addition, the law firm of Rosenman &
Colin, of which Mr. Cohen is a senior partner, was engaged as the Company's
general outside counsel in the fiscal year ended January 29, 1995 and will
continue to be so engaged for the fiscal year ending January 28, 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's responsibility is to set the compensation of
all executive officers, recommend new incentive compensation plans and implement
changes and improvements to existing incentive compensation plans, all subject
to approval by the Board.
OVERALL POLICY. The Compensation Committee believes that the Company's
executive officers constitute a highly qualified management team who have
largely been responsible for the Company's success, especially over the past
seven years. Despite an extremely difficult fiscal 1994, the Company's sales and
net income per share, during that seven year period, increased at compound
annual rates of 14% and 11% per annum, respectively, while many of the Company's
competitors have experienced decreased sales and declines in net income and, in
some cases, have incurred losses or gone out of business. Based upon its belief,
the Compensation Committee has structured the Company's compensation program (1)
primarily to compensate its executive officers on an annual basis with a stable,
secure cash salary at a sufficiently high level to retain and motivate these
officers, (2) in part to link a portion of its executive officers' compensation
to long term increases in value created for the Company's stockholders by the
efforts of these officers and (3) to be consistent with the Company's high
ethical standards. The Compensation Committee believes that the Company's
preference for cash compensation over fringe benefits and perquisites results in
a more efficient and effective compensation package which benefits the Company,
its stockholders and its executives. Such belief is based on the subjective
judgment of the Compensation Committee's members, particularly taking into
account the long term performance of the Company's Common Stock compared to the
S&P 500 Composite Index and Line of Business Index in the Performance Graph on
page 16 hereof and the Compensation Committee's sense that the Company has a low
rate of executive turnover.
The key elements of the Company's executive compensation package have been
base salaries and stock options. The Company eliminated the annual bonus portion
of executive compensation several years ago for two reasons: (1) annual bonuses,
which are generally dependent upon a variety of factors
12
often beyond the control of Company executives, were not, in the Board's view,
the most effective motivational tool and (2) the business inter-relationships of
the Company's wholesale and retail operations made it more logical, in the
Board's view, to grant stock options to key management, so that a benefit would
accrue to them only if the entire Company did well, as reflected in the
appreciation of the price of the Common Stock. In lieu of using annual bonuses,
the Company adopted a policy of offering competitive base salaries, together
with annual stock option grants. In addition, the Company believes its fringe
benefit plans are generally competitive and that it has a reputation for
providing a reasonably high level of job security in an industry known for high
levels of executive turnover.
Although the Board stands by its decision to eliminate annual bonuses, the
absence of a performance based compensation plan is making it increasingly
difficult to attract and retain effective, highly qualified and motivated
executive officers, capable of achieving corporate objectives and increasing
stockholder value, while keeping executive compensation expenses at levels that
are comparable to the levels of its competitors. The companies that the
Compensation Committee examines in ascertaining comparable compensation levels
include certain of those appearing in the S&P 500 Retail Store Composite Index,
the S&P 500 Textile (Apparel Manufacturers) Index and the S&P 500 Shoes Index,
as well as other public and private companies in those industries. In addition,
the Compensation Committee retained Towers Perrin, whose database is a broad
selection of Fortune 1000 companies in and out of the apparel industry, to
provide it with information regarding competitive executive compensation levels.
Although it is particularly difficult to ascertain precise comparable
compensation levels because of differences in the components of compensation and
required disclosures, the Compensation Committee has attempted to target its
compensation levels in the 50th to 75th percentile of compensation which it
believes are effectively being paid by the companies that the Compensation
Committee examined. Based upon its own research and the information provided by
Towers Perrin, the Compensation Committee recommended to the Board that the
Board adopt the Company's Performance Restricted Stock Plan (the "Performance
Restricted Stock Plan") in order to provide the Company with an additional means
of attracting, retaining and incentivizing its top executives by placing the
Company in an appropriate competitive position in its industry and broader peer
group. See "Approval of Performance Restricted Stock Plan" for a description of
the Performance Restricted Stock Plan. On April 18, 1995, based upon the
Compensation Committee's recommendation, the Board adopted the Performance
Restricted Stock Plan, subject to the approval of such Plan by the Company's
stockholders.
In view of the Company's rapid expansion and the resulting necessity of
hiring additional, highly qualified executives, the Compensation Committee
intends annually to review the Company's executive compensation package, taking
into account corporate performance, stock price results and total return to
stockholders, as well as industry conditions, recommendations of the Company's
chief executive officer and compensation awarded to executives in other
companies, especially those involved in the apparel, footwear and specialty
retail industries. In establishing future executive compensation packages, the
Compensation Committee may adopt additional long-term incentive and/or annual
bonus plans to meet the needs of changing employment markets and economic,
accounting and tax conditions. In determining the compensation of an individual
executive, the Compensation Committee intends to take into account the
performance of the executive and the full compensation package afforded by the
Company to him or her, including pension benefits, insurance and other benefits.
The views of the Chief Executive Officer will be considered by the Compensation
Committee in their review of the performance and compensation of individual
executives.
BASE SALARIES. Annual salaries are determined by evaluating the performance
of the Company and of each executive. In the case of executives with
responsibility for particular operations of the Company, the financial results
of those operations are also considered. In evaluating overall performance and
results of particular operations of the Company, the Compensation Committee
reviews the extent to which the Company or the particular operations achieved
budgeted estimates for sales, gross and after-tax margins and earnings per share
presented to and reviewed by the Board for the fiscal year, and the
13
Company's sales and earnings results compared to those of many public peer
companies (including companies that are part of the Line of Business Index).
Where appropriate, the Compensation Committee considers non-financial
performance measures, including market share increases, manufacturing and
distribution efficiency gains, improvements in product quality, improvements in
relations with customers and suppliers and a demonstrated commitment to the
welfare and dignity of the Company's associates. Also considered are years of
service to the Company. In addition, in determining the annual salaries for
fiscal 1994 of certain executive officers the Compensation Committee considered,
and in determining the annual salaries for fiscal 1995 of all executive officers
the Compensation Committee will consider, information provided by Towers Perrin
regarding competitive executive compensation. Finally, the Compensation
Committee takes into account the relative salaries of the executive officers and
determines what it believes are appropriate compensation level distinctions
among the executive officers and between the executive officers, on the one
hand, and the Company's chief executive officer, on the other hand. There is no
specific relationship between achieving or failing to achieve the budgeted
estimates or the Company's relative results, and the annual salaries determined
by the Compensation Committee for any of the Named Executive Officers. No
specific weight is attributed to any of the factors considered by the
Compensation Committee; the Compensation Committee considers all factors and
makes a subjective determination, based upon the experience of its members and
the recommendations of the Company's chief executive officer, of appropriate
compensation levels.
In determining the base salary of Bruce J. Klatsky, as Chief Executive
Officer, the Compensation Committee took into account the salaries of chief
executive officers of many public peer companies (including companies that are
part of the Line of Business Index) and private peer companies known to the
members of the Committee, the Company's success in meeting its financial goals
in 1994 and over the prior several years, the performance of the Common Stock
over the same period and the assessment by the Compensation Committee of Mr.
Klatsky's individual performance. In evaluating whether the Company achieved its
current and past financial goals the Compensation Committee reviewed the extent
to which the Company achieved budgeted estimates for sales, gross and after-tax
margins and earnings per share presented to and reviewed by the Board for
current and prior fiscal periods and the Company's sales and earnings results
compared to those of many public peer companies (including companies that are
part of the Line of Business Index). The Compensation Committee did not utilize
compensation surveys in determining Mr. Klatsky's compensation package. Mr.
Klatsky's base salary was set at its present level in 1993 and has not been
increased for the past two fiscal years.
LONG-TERM INCENTIVES. Under the Company's Option Plan, stock options are
granted to executives of the Company. Stock options are designed to align the
interests of executives with those of the stockholders. Stock options are
customarily granted at prices equal to fair market value at the date of grant.
Generally stock options may not be exercised until the third anniversary of the
date on which they are granted and grants of stock options do not become fully
exercisable until the fifth anniversary of the date on which they are granted.
The options generally remain exercisable during employment until the tenth
anniversary of the date of grant. This approach provides an incentive to the
executive to increase stockholder value over the long term, since the full
benefit of the options granted cannot be realized unless stock price
appreciation occurs over a number of years.
In view of changing tax laws and economic and employment conditions, the
Compensation Committee regularly examines other methods of incentive based
compensation and intends to implement, when appropriate, such methods in lieu of
or in addition to stock options.
Grants under the Option Plan were awarded in June 1994 to approximately 150
of the top executives of the Company based on a fixed percentage of their
respective salaries. Of the options granted in June, Bruce J. Klatsky and Irwin
W. Winter received options in an amount (based on the fair market value of the
shares underlying the options) equal to 30% of their respective base salaries;
the Company's two group chairmen and the group president of its sportswear group
(Messrs. Rossi, Sirkin and Weber) received options based on 25% of their
respective base salaries; the Company's 20 divisional
14
presidents and corporate officers received options based on 20% of their
respective base salaries; and the remaining participants received options based
on 15% of their respective base salaries. These grants were generally similar to
grants made to the same group of executives in June 1992 and June 1993. Although
the number of options granted was determined by this pre-established formula,
the Compensation Committee retains the discretion to withhold the grant of stock
options based upon non-objective criteria and recommendations of the executive
officers of the Company and in the event of poor Company or executive
performance and may amend the methodology for granting stock options under the
Plan or abandon the use of a pre-established formula. The Compensation
Committee, based in part upon the advice provided by Towers Perrin, now believes
that the foregoing formula and the use of stock options as the sole means of
incentive compensation to be inadequate and, therefore, recommended to the Board
that the Board adopt the Performance Restricted Stock Plan and intends,
commencing in June 1995, to increase the number of options granted to employees.
To ensure that management's interests remain aligned with stockholders'
interests, the Company encourages key executives to retain shares acquired
pursuant to the exercise of stock options. In addition, employees of the Company
acquire stock of the Company through the Associates Investment Plan. The fact
that the majority of the Company's executive officers have chosen to invest most
of the discretionary portion of their Plan funds in Common Stock of the Company
evidences their deep commitment to and belief in the future success of the
Company.
Compensation Committee
Edward H. Cohen Ellis E. Meredith
Bruce Maggin Steven L. Osterweis
15
PERFORMANCE GRAPH
The following performance graph is a line graph comparing the yearly change
in the cumulative total stockholder return on the Company's Common Stock against
the cumulative return of the S&P 500 Composite Index, and a line of business
index comprised of the S&P 500 Retail Store Composite Index, the S&P 500 Textile
(Apparel Manufacturers) Index and the S&P 500 Shoes Index for the five fiscal
years ended January 29, 1995. The figures represented in the performance graph
assume the reinvestment of dividends.
Phillips-Van S&P 500 Line of
Heusen Composite Index Business Index
------------ --------------- --------------
Jan-90 $100.00 $100.00 $100.00
Jan-91 $136.76 $108.37 $118.39
Jan-92 $311.88 $132.91 $172.26
Jan-93 $435.97 $146.95 $193.59
Jan-94 $534.31 $165.79 $164.28
Jan-95 $239.43 $166.70 $164.34
- ------------
Note: Line of Business Index is composed of a blended weighting of the S&P 500
Retail Store Composite Index (50%), the S&P 500 Textile (Apparel
Manufacturers) Index (33%) and the S&P 500 Shoes Index (17%) to
correspond generally to the Company's relative sales attributable to its
retail, wholesale apparel and wholesale footwear operations.
VALUE OF $100.00 INVESTED AFTER FIVE YEARS:
Phillips-Van Heusen Corporation Common Stock $239.43
S&P 500 Composite Index 166.70
Line of Business Index 164.34
16
INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK
WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED
UNDER THE COMPANY'S STOCK OPTION PLAN
Under the Option Plan, the Company may grant to eligible individuals
incentive stock options, as defined in Section 422(b) of the Internal Revenue
Code (the "Code"), and non-incentive stock options. Key employees of the Company
and its subsidiary operations are eligible to receive stock options under the
Option Plan. Directors who are not employees of the Company receive a
non-discretionary annual grant of options to purchase the number of shares of
Common Stock derived by dividing $50,000 by the fair market value of a share of
Common Stock on the date of grant.
The Option Plan was adopted in 1987 and, as previously amended, provided
that 2,500,000 shares of authorized but unissued Common Stock be reserved for
issuance upon exercise of stock options. The Option Plan has only 283,600 shares
remaining available for grant. The Compensation Committee believes this amount
is inadequate for future requirements. The Compensation Committee recommended to
the Board of Directors, which has approved, subject to approval by the holders
of a majority of the shares of Common Stock present in person or by proxy at the
meeting, an increase in the number of shares of Common Stock with respect to
which options may be granted under the Option Plan from 2,500,000 to 3,150,000
shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE INCREASE IN THE NUMBER OF
SHARES OF COMMON STOCK WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED UNDER THE
OPTION PLAN.
NATURE AND PURPOSE OF THE OPTION PLAN
The purpose of the Option Plan is to induce certain individuals to remain in
the employ or service of the Company and its subsidiaries, to attract new
employees and directors and to encourage such individuals to secure or increase
on reasonable terms their stock ownership in the Company. The Board continues to
believe that the Option Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those who are
or may become primarily responsible for shaping and carrying out the long range
plans of the Company and securing its continued growth and financial success.
The approximate number of persons eligible to participate in the Option Plan is
200.
DURATION AND MODIFICATION
The Option Plan will terminate not later than April 1, 1997. The Board may
at any time terminate the Option Plan or make such modifications of the Option
Plan as it may deem advisable. However, except in certain limited circumstances,
the Board may not, without further approval by the stockholders, increase the
number of shares of Common Stock as to which options may be granted under the
Option Plan, or change the manner of determining the option prices, or extend
the period during which an option may be granted or exercised or withdraw the
authority to administer the Option Plan from the committee designated by the
Board of Directors to administer the Option Plan.
ADMINISTRATION OF THE OPTION PLAN
The Option Plan is administered by the Compensation Committee. The
Compensation Committee consists of from three to five members of the Board of
Directors who are "outside directors" within the contemplation of Section 162(m)
of the Code. The members of the Compensation Committee are appointed annually
by, and serve at the pleasure of, the Board. The present members of the
Compensation Committee are Messrs. Cohen, Maggin, Meredith and Osterweis. The
Compensation Committee has discretion to determine the participants under the
Option Plan, the time and price at which options will be granted, the period
during which options will be exercisable, the number of shares subject to each
option and whether an option shall be an incentive stock option, a non-incentive
stock option or a
17
combination thereof, but will not have the discretion to determine any of the
foregoing with respect to options granted to non-employee directors, which are
non-discretionary in nature. In addition to the fees payable to the Compensation
Committee members as directors of the Company, they receive a $2,000 annual fee
for their services as Compensation Committee members. The members of the
Compensation Committee do not receive additional compensation for service in
connection with the administration of the Option Plan.
DESCRIPTION OF OPTIONS
Under the Option Plan, the per share exercise price of any option which is
an incentive stock option may not be less than the fair market value of a share
of Common Stock on the business day preceding the date of grant, and the per
share exercise price of any option which is a non-incentive stock option may not
be less than 85% of such fair market value (except for a non-incentive stock
option granted to a person who is or may reasonably be expected to become a
"covered employee" under Section 162(m) of the Code, in which case the per share
exercise price of such option may not be less than 100% of such fair market
value on the date of grant). Options granted to non-employee directors are
granted at a per share exercise price equal to the fair market value of a share
of Common Stock on the day preceding the date of grant. The aggregate fair
market value of the shares of Common Stock for which a participant may be
granted incentive stock options which are exercisable for the first time in any
calendar year may not exceed $100,000. No participant may, during any fiscal
year, be granted options to purchase more than 100,000 shares of the Common
Stock.
Options granted under the Option Plan prior to March 1993, are exercisable
33 1/3% after the second anniversary of the date of grant, 66 2/3% after the
third anniversary of the date of grant and in full after the fourth anniversary
of the date of grant. Options granted subsequent to March 1993, are exercisable
33 1/3% after the third anniversary of the date of grant, 66 2/3% after the
fourth anniversary of the date of grant, and in full after the fifth anniversary
of the date of grant. The Board may permit any option to be exercised in whole
or in part prior to the time that it would otherwise be exercisable. Upon the
exercise of an option, the option price must be paid in cash or, if the
Committee so determined at the time of the grant of the option, in shares of
Common Stock. An option may not be granted for a period in excess of ten years
from the date of grant.
In the event of the death or retirement of an optionee, all options
theretofore granted shall become immediately exercisable and, if not exercised,
shall terminate, generally within three months of such optionee's death or
retirement. In the event an optionee leaves the employ of the Company or one of
its subsidiaries or ceases to serve as a director of the Company prior to his or
her 65th birthday, any options previously granted to but not exercised by such
optionee shall terminate, generally within 30 days of such optionee's
termination of employment or service as a director. Options are not transferable
except upon death.
If the fair market value of the Common Stock declines below the option price
of any option (other than options granted to non-employee directors), the
Committee (with the prior approval of the Board) may adjust, reduce, or cancel
and regrant such option or take any similar action it deems to be for the
benefit of the participant in light of such declining value.
The number of shares reserved for issuance under the Option Plan and the
number of shares covered by each option granted under the Option Plan will be
adjusted in the event of a stock dividend, reorganization, recapitalization,
stock split-up, combination of shares, sale of assets, merger or consolidation
in which the Company is the surviving corporation. In the event of the
dissolution or liquidation of the Company, or a merger, reorganization or
consolidation in which the Company is not the surviving corporation, each option
will terminate.
18
SECURITIES SUBJECT TO THE OPTION PLAN
There are 1,535,800 authorized but unissued shares of Common Stock reserved
for issuance upon the exercise of options granted under the Option Plan. The
number of authorized but unissued shares so reserved under the Option Plan will
be reduced from time to time to the extent that a corresponding amount of
outstanding shares are purchased by the Company and set aside for issuance upon
the exercise of options granted under the Option Plan. If any such options were
to expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto would again become available for the purposes
of the Option Plan.
The market value of the Common Stock, as of April 17, 1995 was $15.625 per
share.
FEDERAL INCOME TAX CONSEQUENCES OF GRANTING AND EXERCISE OF OPTIONS
The following discussion of the Federal income tax consequences of the
granting and exercise of options under the Option Plan, and the sale of Common
Stock acquired as a result thereof, is based on an analysis of the Code, as
currently in effect, existing laws, judicial decisions and administrative
rulings and regulations, all of which are subject to change. In addition to
being subject to the Federal income tax consequences described below, an
optionee may also be subject to state and/or local income tax consequences in
the jurisdiction in which he or she works and/or resides.
Non-Incentive Stock Options
No income will be recognized by an optionee at the time a non-incentive
stock option is granted. Ordinary income will be recognized by an optionee at
the time a non-incentive stock option is exercised, and the amount of such
income will be equal to the excess of the fair market value on the exercise date
of the shares issued to the optionee over the option price. This ordinary
(compensation) income will also constitute wages subject to withholding and the
Company will be required to make whatever arrangements are necessary to ensure
that the amount of the tax required to be withheld is available for payment in
money.
The Company generally will be entitled to a deduction for Federal income tax
purposes in the same amount that the optionee is required to include in income.
If an optionee makes payment of the option price by delivering shares of
Common Stock, the optionee generally will not recognize any gain as a result of
such delivery, but the amount of gain, if any, which is not so recognized will
be excluded from his or her basis in the new shares received.
Capital gain or loss on a subsequent sale or other disposition of the shares
acquired upon the exercise of a non-incentive stock option will be measured by
the difference between the amount realized on the disposition and the tax basis
of such shares. The tax basis of the shares acquired upon the exercise of any
non-incentive stock option will be equal to the sum of the exercise price of
such non-incentive stock option and the amount included in income with respect
to such option.
Incentive Stock Options
In general, neither the grant nor the exercise of an incentive stock option
will result in taxable income to an optionee or a deduction to the Company.
The sale of Common Stock received pursuant to the exercise of an incentive
stock option which satisfies the holding period rules will result in capital
gain to an optionee and will not result in a tax deduction to the Company. To
receive incentive stock option treatment as to the shares acquired upon exercise
of an incentive stock option, an optionee must neither dispose of such shares
within two years after such incentive stock option is granted nor within one
year after the exercise of such incentive stock option. In addition, an optionee
generally must be an employee of the Company (or of a subsidiary of the Company)
at all times between the date of grant and the date three months before exercise
of such incentive stock option.
19
If the holding period rules are not satisfied, the portion of any gain
recognized on the disposition of the shares acquired upon the exercise of an
incentive stock option that is equal to the lesser of (a) the fair market value
of the shares on the date of exercise minus the option price or (b) the amount
realized on the disposition minus the option price, will be treated as ordinary
(compensation) income, with any remaining gain being treated as capital gain.
The Company will be entitled to a deduction equal to the amount of such ordinary
income.
If an optionee makes payment of the option price by delivering shares of
Common Stock, the optionee generally will not recognize any gain as a result of
such delivery, but the amount of gain, if any, which is not so recognized will
be excluded from his or her basis in the new shares received. However, the use
by an optionee of shares previously acquired pursuant to the exercise of an
incentive stock option to exercise an option will be treated as a taxable
disposition if the transferred shares are not held by the optionee for the
requisite holding period. For the purposes of the alternative minimum tax, an
incentive stock option is treated as if it were a non-incentive stock option.
CERTAIN INFORMATION WITH RESPECT TO OPTIONS GRANTED
The following table sets forth, for the three-year period ended January 29,
1995, with respect to the Named Executive Officers, each nominee for director,
all executive officers as a group, all directors who are not executive officers
as a group, and all employees as a group, the number of shares of Common Stock
subject to options granted.
NAME OF INDIVIDUAL
OR IDENTITY OF GROUP CAPACITIES OPTIONS GRANTED1
- ------------------------ -------------------------------------------------- ------------------------
Bruce J. Klatsky Chairman, Phillips-Van Heusen Corporation 232,250
Walter T. Rossi Chairman, The PVH Retail Group 38,880
Allen E. Sirkin Chairman, The PVH Wholesale Group 18,790
Mark Weber Vice President, Phillips-Van Heusen Corporation 14,950
and Group President, The Sportswear Group
Irwin W. Winter Vice President, Finance, Phillips-Van Heusen 18,440
Corporation
Edward H. Cohen Nominee for Director 7,190
Estelle Ellis Nominee for Director 7,190
Maria Elena Lagomasino Nominee for Director 4,955
William S. Scolnick Nominee for Director 7,190
All executive officers 323,310
as a group
All directors who are 61,052
not executive officers
as a group2
All employees as a 587,996
group3
- ------------
1 See Note 2 to Summary Compensation Table.
2 Includes options granted to the nominees for director.
3 Excluding executive officers.
Approval of the increase in the number of shares of Common Stock with
respect to which options may be granted under the Option Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy at the meeting.
PROXIES RECEIVED IN RESPONSE TO THIS SOLICITATION WILL BE VOTED FOR SUCH
INCREASE UNLESS OTHERWISE SPECIFIED IN THE PROXY.
20
APPROVAL OF
PERFORMANCE RESTRICTED STOCK PLAN
On April 18, 1995, the Board of Directors adopted, subject to stockholder
approval, the Performance Restricted Stock Plan effective with respect to the
fiscal year of the Company beginning on January 30, 1995.
The following summary of certain features of the Performance Restricted
Stock Plan is qualified in its entirety by reference to the full text of the
Performance Restricted Stock Plan which has been filed with the Securities and
Exchange Commission as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended January 29, 1995.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE PERFORMANCE
RESTRICTED STOCK PLAN.
NATURE AND PURPOSE OF THE PERFORMANCE RESTRICTED STOCK PLAN
The purpose of the Performance Restricted Stock Plan is to induce certain
senior executive employees to remain in the employ of the Company and its
subsidiaries, to attract new senior executive employees, to provide inducement
for such senior executive employees to promote the success of the business of
the Company and its subsidiaries and to encourage ownership of shares in the
Company by such senior executive employees. The approximate number of persons
currently eligible to participate in the Performance Restricted Stock Plan is
21.
DURATION AND MODIFICATION
The Plan will terminate after provision has been made for the settlement of
all awards earned thereunder with respect to the Company's fiscal year ending on
January 30, 2000, unless the stockholders approve the continuation of the
Performance Restricted Stock Plan at the 1999 annual meeting of stockholders.
The Board may at any time terminate the Performance Restricted Stock Plan or
make such modifications thereof as it determines. However, except in certain
limited circumstances, the Board may not, without further approval of the
stockholders, increase the number of shares of Common Stock which may be issued
under the Performance Restricted Stock Plan or change the manner of calculating
awards to be earned thereunder or change the class of persons eligible to
participate thereunder or withdraw the authority to administer the Performance
Restricted Stock Plan from the committee designated by the Board to administer
the Plan.
ADMINISTRATION OF THE PERFORMANCE RESTRICTED STOCK PLAN
The Performance Restricted Stock Plan is administered by the Compensation
Committee of the Board. The members of the Compensation Committee will not
receive additional compensation for service in connection with the
administration of the Performance Restricted Stock Plan.
DETERMINATION OF ANNUAL AWARDS
Within 90 days after the commencement of each fiscal year, the Compensation
Committee is required to determine the senior executive employees of the Company
and its subsidiaries who will be participants in the Performance Restricted
Stock Plan with respect to such fiscal year, the Corporate EBIT Goal with
respect to such fiscal year, the Corporate Executive Goal with respect to such
fiscal year for the members of the Corporate Executive Group (which presently
consists of the Chief Executive Officer, the Chief Financial Officer, the
Treasurer, the Controller, the Vice President of Human Resources and the Vice
President, Chief Information Officer, of the Company), and, for each other
participant, the Divisional Goal to which such participant will be subject with
respect to such fiscal year. The Corporate EBIT Goal is based on the
consolidated earnings of the Company and its
21
subsidiaries and each Divisional Goal is based on the earnings of the applicable
division, in each case (i) before interest and taxes, (ii) after charges with
respect to the Performance Restricted Stock Plan, (iii) before non-operating
expenses and/or reserves, (iv) before extraordinary expenses within the
contemplation of generally accepted accounting principles and (v) with such
additional modifications as the Compensation Committee may determine within 90
days after the commencement of such fiscal year. Such net income is determined
in accordance with generally accepted accounting principles consistently
applied. The Corporate Executive Goal is the aggregate of the Divisional Goals,
adjusted to avoid duplication, with respect to such fiscal year less the
corporate expenses which have been taken into account in determining the
Corporate EBIT Goal with respect to such fiscal year.
If the Corporate EBIT Goal is attained with respect to a fiscal year, each
participant who is employed by the Company or a subsidiary on the last day of
such fiscal year will be entitled to an award (an "Award") equal to 25% of his
or her "base compensation" with respect to such fiscal year. If the Corporate
EBIT Goal is attained with respect to such fiscal year, then each participant
who is a member of the Corporate Executive Group is entitled to receive an
additional Award with respect to such fiscal year which ranges from 12 1/2% of
his or her base compensation if at least 90% of the Corporate Executive Goal is
achieved to 37 1/2% of his or her base compensation if at least 110% of the
Corporate Executive Goal is achieved. If the Corporate EBIT Goal is attained
with respect to such fiscal year, then each participant who is not a member of
the Corporate Executive Group is entitled to earn an additional Award with
respect to such fiscal year which ranges from 12 1/2% of his or her base
compensation if at least 90% of his or her Divisional Goal is achieved to 37
1/2% of his or her base compensation if at least 110% of his or her Divisional
Goal is achieved.
A participant's base compensation with respect to a fiscal year is his or
her annual rate of base salary in effect on the first day of that fiscal year,
or, if such participant shall initially have become an employee of the Company
or its subsidiaries after the first day of a fiscal year but prior to the
determination of the participants for that fiscal year, a proportionate part of
his or her annual rate of base compensation in effect on the first day on which
he or she shall have become an employee of the Company or a subsidiary.
PAYMENT OF AWARDS
If a participant earns an Award with respect to a fiscal year, he or she
will be issued the number of shares of Common Stock determined by dividing the
amount of his or her Award by the greater of the average value of a share of the
Common Stock during the 90 day period ending on the last day of such fiscal year
or 85% of the value of a share of the Common Stock at the close of trading on
the last business day of such fiscal year. Thus, the maximum Award which any
participant may receive with respect to a fiscal year has a value of 73.529% of
his or her base compensation with respect to such fiscal year.
Each participant who receives shares of Common Stock under the Performance
Restricted Stock Plan will have such shares issued pursuant to a Restricted
Stock Agreement. Each Restricted Stock Agreement will provide that, except as
provided below, if such participant leaves the employ of the Company and its
subsidiaries prior to the last day of the third fiscal year following the fiscal
year with respect to which the shares subject thereto ("Restricted Shares") were
issued, he or she will forfeit such Restricted Shares, and will be required to
retransfer such Restricted Shares to the Company without any consideration. The
foregoing requirement to retransfer Restricted Shares to the Company will not
apply, and forfeiture thereof will not occur, if the participant's employment by
the Company and its subsidiaries terminates by reason of his or her death or
permanent disability, or on or after his or her 65th birthday, or on or after a
change in control. In addition, if a participant's employment terminates during
the three-year period by reason of his or her termination without cause or after
the later to occur of his or her 55th birthday and his or her completion of 10
years of employment with the Company and its subsidiaries, then, if and to the
extent that the Compensation Committee, upon the recommendation
22
of the Chief Executive Officer of the Company, so determines, the restrictions
on the transferability of his or her Restricted Shares will terminate and the
forfeiture will not occur.
SECURITIES SUBJECT TO THE PERFORMANCE RESTRICTED STOCK PLAN
There are 600,000 authorized but unissued shares of the Common Stock
reserved for issuance upon the settlement of the Awards earned under the
Performance Restricted Stock Plan. The number of authorized but unissued shares
so reserved will be reduced from time to time to the extent that a corresponding
amount of outstanding shares are repurchased by the Company and set aside for
issuance in settlement of such Awards. If any shares of the Common Stock issued
under the Performance Restricted Stock Plan are forfeited, such shares will
again be available for the purposes of the Performance Restricted Stock Plan.
The number of shares reserved for issuance under the Performance Restricted
Stock Plan will be adjusted in the event of a stock dividend, reorganization,
recapitalization, stock split-up, combination of shares, sale of assets, merger
or consolidation.
FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE, VESTING, SALE AND FORFEITURE OF
RESTRICTED SHARES
The following discussion of the Federal income tax consequences of the
issuance, vesting, sale and forfeiture of Restricted Shares is based on an
analysis of the Code, as currently in effect, existing laws, judicial decisions
and administrative rulings and regulations, all of which are subject to change.
In addition to being subject to the Federal income tax consequences described
below, a participant may also be subject to state and local tax consequences in
the jurisdiction in which he or she works and/or resides.
No income will be recognized by a participant at the time Restricted Shares
are issued to him or her. Ordinary income will be recognized by a participant at
the time he or she is no longer obligated to retransfer such Restricted Shares
to the Company. The amount of such ordinary income will be equal to the fair
market value of the Common Stock on the date on which the risk of forfeiture
terminates. This ordinary (compensation) income will also constitute wages
subject to withholding and the Company will be required to make whatever
arrangements are necessary to ensure that the amount of tax required to be
withheld is available for payment. Any subsequent gain or loss will be a capital
gain or loss with the participant's holding period being measured from the date
on which the risk of forfeiture terminates and with the participant's basis
being equal to the fair market value of the shares on such date.
Notwithstanding the foregoing, a participant may, within 30 days after
Restricted Shares are issued to him or her under the Performance Restricted
Stock Plan, elect (a "Section 83(b) Election") under Section 83(b) of the Code
to include in income as of the date of their issuance the fair market value of
such Restricted Shares, notwithstanding that such shares are subject to a
"substantial risk of forfeiture" within the contemplation of Section 83 of the
Code. Such income will be ordinary (compensation) income which will also
constitute wages subject to withholding and the Company will be required to make
whatever arrangements are necessary to ensure that the amount required to be
withheld is available for payment. If a participant subsequently is no longer
required to retransfer such Restricted Shares to the Company, such event will
not be a taxable event to such participant. Upon the eventual sale of such
shares, any gain or loss will be a capital gain or loss with his or her holding
period being determined by reference to the date of issuance and his or her
basis being the fair market value thereof on the date of issuance. If a
participant makes a Section 83(b) Election, and subsequently retransfers the
Restricted Shares to the Company, he or she will not be entitled to a deduction
with respect thereto and will not have a capital loss as a result thereof.
The Company generally will be entitled to a deduction for Federal income tax
purposes in an amount equal to the amount included in income by the participant.
23
A participant may satisfy his or her withholding obligations by delivering
to the Company shares of the Common Stock (other than Restricted Shares as to
which the risk of forfeiture has not terminated) having a fair market value
equal to the amount required to be withheld. Such delivery will be deemed to be
a sale for Federal income tax purposes.
BENEFITS TO BE RECEIVED UPON APPROVAL
The benefits which a participant will receive in the event that the
Performance Restricted Stock Plan is approved by the stockholders or which would
have been received had the Plan been in effect during fiscal 1994 cannot be
determined because the goals to be achieved are set annually, receipt of Awards
is dependent on achievement of such goals, the number of shares of Common Stock
to be issued in the event an Award is made is dependent on future market prices
of the Common Stock and the Restricted Shares are subject to a three year
vesting period.
Approval of the Performance Restricted Stock Plan requires the affirmative
vote of the holders of a majority of the shares of Common Stock present in
person or by proxy at the meeting.
PROXIES RECEIVED IN RESPONSE TO THIS SOLICITATION WILL BE VOTED FOR SUCH
PLAN UNLESS OTHERWISE SPECIFIED IN THE PROXY.
SELECTION OF AUDITORS
The Board of Directors, with the concurrence of the Audit Committee, has
selected Ernst & Young LLP, independent auditors, as auditors for the fiscal
year ending January 28, 1996. Although stockholder ratification of the Board of
Directors' action in this respect is not required, the Board of Directors
considers it desirable for stockholders to pass upon the selection of auditors
and, if the stockholders disapprove of the selection, intends to reconsider the
selection of auditors for the fiscal year ending February 2, 1997, since it
would be impracticable to replace the Company's auditors so late into the
Company's current fiscal year. The auditing and tax fee paid to Ernst & Young
LLP for the fiscal year ended January 30, 1994 was $1,094,100. The audit and tax
work for the fiscal year ended January 29, 1995 is not yet completed, but it is
estimated that the fee will be higher in light of additional tax services
provided.
It is expected that representatives of Ernst & Young LLP will be present at
the meeting, will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF THE AUDITORS. PROXIES RECEIVED IN RESPONSE TO THIS SOLICITATION WILL BE VOTED
FOR THE APPOINTMENT OF THE AUDITORS UNLESS OTHERWISE SPECIFIED IN THE PROXY.
RESOLUTION PROPOSED BY CERTAIN STOCKHOLDERS
John J. Gilbert of 29 E. 64th Street, New York, New York 10121-7043, the
owner of 500 shares of Common Stock and the estate of Lewis D. Gilbert of the
same address, the owner of 200 shares of Common Stock, have given notice that
they intend to present the following resolution for action at the meeting.
RESOLVED: That the stockholders of Phillips-Van Heusen Corporation,
assembled in annual meeting in person and by proxy, hereby request that the
Board of Directors take the steps necessary to provide that at future
elections of directors new directors be elected annually and not by classes,
as is now provided, and that on expiration of present terms of directors,
their subsequent election shall also be on an annual basis.
24
They have submitted the following statement in support of this
resolution:
"Continued very strong support along the lines we suggest was shown at
the last annual meeting when 38%, 205 owners of 8,882,386 shares, were cast
in favor of this proposal. The vote against included 173 unmarked proxies.
The recent decline in our stock, due to poor earnings, also shows the need
to end the stagger system of electing directors.
"Last year ARCO, to its credit, voluntarily ended theirs, stating that
when a very high percentage, 34.6%, desired it to be changed to an annual
election it was reason enough for them to change it. Several other companies
have also followed suit such as: Pacific Enterprises, Katy Industry, Hanover
Direct, Campbell Soup and others.
"Because of the normal need to find new directors and because of the
environmental problems and the recent avalanche of derivative losses and
many groups desiring to have directors who are qualified on the subjects, we
think that ending the stagger system of electing directors is the answer.
"In addition, some recommendations have been made to carry out the
Valdez 10 points. The 11th, our opinion, should be to end the stagger system
of electing directors and to have cumulative voting.
"Recently Equitable Life Insurance Company, which is now called
Equitable Companies, converted from a policy owned company to a public
stockholder company. Thanks to AXA, the controlling French insurance company
not wanting it, they now do not have a staggered board.
"The Orange and Rockland Utility Company had a terrible time with the
stagger system and its 80% clause to recall a director. The chairman was
involved in a scandal effecting the company. Not having enough votes the
meeting to get rid of the chairman had to be adjourned. Finally, at the
adjourned meeting enough votes were counted to recall him."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS RESOLUTION.
In 1975, the stockholders of the Company voted overwhelmingly (holders of
almost 94% of the shares voting) to amend the Certificate of Incorporation so as
to provide for the classification of the Board of Directors. At present, the
Board is divided into three classes, each class having a term of three years
with the terms staggered so that one class of directors is elected each year.
The Board believes that division of the directors into classes benefits the
Company by insuring that experienced personnel familiar with the Company will be
represented on the Board at all times. Continuity of Board membership
facilitates stability of leadership and policy, permitting management to plan
for a reasonable period of time into the future. An overwhelming majority of the
stockholders voted against this proposal at the 1979, 1980, 1985, 1987, 1989,
1990, 1991, 1992, 1993 and 1994 Annual Meetings and the Board of Directors urges
that you do so again.
The affirmative vote of a majority of the shares represented in person or by
proxy at the meeting would be required to approve this resolution. Subsequent to
such approval, approval by the Board of Directors and then 80% of the
stockholders would be required to amend the Certificate of Incorporation to
effect the proposed action.
PROXIES RECEIVED IN RESPONSE TO THIS SOLICITATION WILL BE VOTED AGAINST THE
ADOPTION OF THIS RESOLUTION UNLESS OTHERWISE SPECIFIED IN THE PROXY.
MISCELLANEOUS
Any proposal of an eligible stockholder intended to be presented at the next
Annual Meeting of Stockholders must be received by the Company for inclusion in
its proxy statement and form of proxy relating to that meeting no later than
January 2, 1996.
25
The Board of Directors of the Company does not intend to present, and does
not have any reason to believe that others intend to present, any matter of
business at the meeting other than that set forth in the accompanying Notice of
Annual Meeting of Stockholders. However, if other matters properly come before
the meeting, it is the intention of the persons named in the enclosed form of
proxy to vote any proxies in accordance with their judgment.
The Company will bear the cost of preparing, assembling and mailing the
enclosed form of proxy, this Proxy Statement and other material which may be
sent to stockholders in connection with this solicitation. Solicitation may be
made by mail, telephone, telegraph and personal interview. The Company may
reimburse persons holding shares in their names or in the names of nominees for
their expense in sending proxies and proxy material to their principals. In
addition, Georgeson & Company, which is retained by the Company on a continuing
basis at an annual fee not to exceed $6,000, will aid in the solicitation of
proxies for the meeting.
Copies of the 1994 Annual Report to Stockholders are being mailed to the
stockholders simultaneously with this Proxy Statement. If you want to save the
Company the cost of mailing more than one Annual Report to the same address, at
your request to the Secretary of the Company, mailing of the duplicate copy to
the account or accounts you select will be discontinued.
THE COMPANY WILL PROVIDE TO ANY STOCKHOLDER A COPY OF ITS ANNUAL REPORT ON
FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR
ENDED JANUARY 29, 1995 UPON WRITTEN REQUEST TO:
The Secretary
Phillips-Van Heusen Corporation
1290 Avenue of the Americas
New York, New York 10104
By order of the Board of Directors,
PAMELA N. HOOTKIN
Secretary
New York, New York
May 1, 1995
26
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
PHILLIPS-VAN HEUSEN CORPORATION
1290 Avenue of the Americas
New York, New York 10104-0101
BRUCE J. KLATSKY and IRWIN W. WINTER, or either of them, with
power of substitution, are hereby authorized to represent the
undersigned and to vote all shares of the Common Stock of
PHILLIPS-VAN HEUSEN CORPORATION held by the undersigned at the
Annual Meeting of Stockholders to be held in New York, New York,
on June 13, 1995, and any adjournments thereof, on the matters
printed on the reverse side.
This Proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If this Proxy is
executed but no directions are given, this Proxy will be voted:
- FOR the election of all of the nominees for directors;
- FOR the increase in the number of shares of Common
Stock with respect to which options may be granted under the
Company's Stock Option Plan;
- FOR the adoption of a performance based restricted
stock plan;
- FOR the appointment of auditors; and
- AGAINST the stockholder proposal.
(Continued, and to be dated and signed on the other side.)
PHILLIPS-VAN HEUSEN CORPORATION
P.O. BOX 11980
NEW YORK, N.Y. 10203-0980
The Board recommends a vote FOR proposals 1, 2, 3 and 4 below:
1. Election of Directors:
FOR all nominees
listed below /X/
WITHHOLD AUTHORITY to vote
for all nominees listed below /X/
*EXCEPTIONS /X/
Nominees: Edward H. Cohen, Estelie Ellis, Maria Elena Lagomasino,
William S. Scolnick
(Instruction: To withhold authority to vote for any individual
nominee, mark the "Exceptions" box and write that nominee's name
in the space provided below:)
*Exceptions
FOR AGAINST ABSTAIN
2. Increase in the number of shares of Common Stock with respect
to which options may be granted under the Company's Stock Option / / / / / /
Plan.
3. Adoption of a performance based restricted stock plan. / / / / / /
4. Appointment of Auditors. / / / / / /
The Board recommends a vote AGAINST proposal 5 below:
5. Stockholder proposal to request the Board to provide that all
directors be elected annually. / / / / / /
6. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
Address Change
and/or Comments / /
NOTE: The signature should agree with the name on your stock
certificate. If acting as executor, administrator, trustee,
guardian, etc., you should so indicate when signing. If the
signer is a corporation, please sign the full corporate name, by
duly authorized officer. If shares are held jointly, each
stockholder named should sign.
Dated: ______________, 1995
__________________________
Signature
__________________________
Signature, if held jointly
To vote, fill in (X) with black or blue ink only. /X/
PHILLIPS-VAN HEUSEN CORPORATION
PERFORMANCE RESTRICTED STOCK PLAN
(As Adopted Effective as of April 18, 1995)
1. Purpose. The purpose of the Phillips-Van Heusen Performance
-------
Restricted Stock Plan (the "Plan") is to induce certain senior executive
employees to remain in the employ of the Company and its present and future
Subsidiaries, to attract new individuals to enter into such employ, to
encourage ownership of shares in the Company by such employees and to
provide additional incentive for such employees to promote the success of
the Company's business.
2. Definitions
-----------
(a) "Affiliate" shall mean any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, any other Person.
(b) "Award" shall mean an amount calculated with respect to a
Participant and with respect to a Fiscal Year in accordance with the
provisions of Section 8(c).
(c) "Base Compensation", as used with respect to a Participant and
with respect to a Fiscal Year, shall mean such Participant's annual rate of
salary from the Company and its Subsidiaries on the first business day of
such Fiscal Year; provided, however, that if a Participant shall not be an
-------- -------
employee
of the Company or any of its Subsidiaries on the first day of a Fiscal
Year, then his Base Compensation with respect to such Fiscal Year shall be
equal to the product of (i) such Participant's annual rate of salary from
the Company and its Subsidiaries on the first business day on which he or
she shall become such an employee and (ii) the fraction the numerator of
which shall be the number of days remaining in such Fiscal Year from and
after the date on which he or she shall have first become an employee of
the Company and/or one or more of its Subsidiaries and the denominator of
which shall be the number of days in such Fiscal Year.
(d) "Board" shall mean the Board of Directors of the Company.
(e) A "Change in Control" shall be deemed to occur upon (i) the
election of one or more individuals to the Board which election results in
one-third of the directors of the Company consisting of individuals who
have not been directors of the Company for at least two years, unless such
individuals have been elected as directors by three-fourths of the
directors of the Company who have been directors of the Company for at
least two years, (ii) the sale by the Company of all or substantially all
of its assets to any Person, the consolidation of the Company with any
person, the merger of the Company with any Person as a result of which
merger the Company is not the surviving entity as a publicly held
corporation, (iii) the sale or transfer of shares of the Company by the
Company and/or any one or more of its
2
stockholders, in one or more transactions, related or unrelated, to one or
more Persons under circumstances whereby any Person and its Affiliates
shall own, after such sales and transfers, at least one-fourth, but less
than one-half, of the shares of the Company having voting power for the
election of directors, unless such sale or transfer has been approved in
advance by three-fourths of the directors of the Company who have been
directors of the Company for at least two years, or (iv) the sale or
transfer of shares of the Company by the Company and/or any one or more of
its stockholders, in one or more transactions, related or unrelated, to one
or more Persons under circumstances whereby any Person and its Affiliates
shall own, after such sales and transfers, at least one-half of the shares
of the Company having voting power for the election of directors.
(f) "Code" shall mean the Internal Revenue Code of 1986 as in effect
at the time with respect to which such term is used.
(g) "Common Stock" shall mean the shares of the common stock, $1.00
par value, of the Company authorized and outstanding on the date of the
adoption of the Plan.
(h) "Company" shall mean Phillips-Van Heusen Corporation, a Delaware
corporation.
(i) "Corporate EBIT Goal" shall mean a dollar amount established by
the Committee with respect to a Fiscal Year as provided in Section 8(a) of
the consolidated net income of the Company and its Subsidiaries before
interest and taxes, after
3
charges with respect to the Plan required by generally accepted accounting
principles, before non-operating expenses and/or reserves, including but
not limited to expenses and/or reserves for plant closings and/or
restructurings, before any extra-ordinary items within the contemplation of
generally accepted accounting principles, and with such additional
modifications as the Committee shall determine at or prior to its
determination referred to in Section 8(a). Such net income shall be
determined in accordance with generally accepted accounting principles
consistently applied.
(j) "Corporate Executive Goal" shall mean a dollar amount established
by the Committee with respect to a Fiscal Year which shall be equal to the
aggregate of the Divisional Goals with respect to such Fiscal Year (as
adjusted to eliminate duplication) minus the corporate and other expenses
with respect to such Fiscal Year taken into account in determining the
Corporate EBIT Goal with respect to such Fiscal Year.
(k) "Corporate Executive Group" shall mean all of the following
officers of the Company: Chief Executive Officer, Chief Financial Officer,
Treasurer, Controller, Vice President of Human Resources and Vice
President, Chief Information Officer and such other senior executive
officers, if any, as the Committee shall determine at or prior to its
determination referred to in Section 8(a).
(l) "Discharge for Cause" shall mean the termination of a
4
Participant's employment by the Company and its Subsidiaries by reason of
(i) the commission by such Participant of any act or omission that would
constitute a crime under federal, state or equivalent foreign law, (ii) the
commission by such Participant of any act of moral turpitude, (iii) fraud,
dishonesty or other acts or omissions that result in a breach of any
fiduciary or other material duty of such Participant to the Company and/or
any one or more of its Subsidiaries, or (iv) continued alcohol or other
substance abuse that renders such Participant incapable of performing his
or her material duties to the satisfaction of the Company and/or its
Subsidiaries.
(m) "Divisional Goal" shall mean a dollar amount established by the
Committee with respect to a Fiscal Year as provided in Section 8(a) of the
net income of the operating division with respect to which such
determination is made before interest and taxes, after charges with respect
to the Plan required by generally accepted accounting principles and
allocated to such operating division, before non-operating expenses and/or
reserves, including but not limited to expenses and/or reserves for plant
closings and/or restructurings, before any extraordinary items within the
contemplation of generally accepted accounting principles, and with such
additional modifications as the Committee shall determine at or prior to
its determination referred to in Section 8(a). Such net income shall be
determined in accordance with generally accepted accounting principles
consistently applied.
5
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934 as
in effect at the time with respect to which such term is used.
(o) The "Fair Market Value" of a share of the Common Stock on any
date shall be equal to (i) the closing sale price of the Common Stock on
the New York Stock Exchange on such date or (ii) if there is no sale of the
Common Stock on such Exchange on such date, the average of the bid and
asked prices on such Exchange at the close of the market on such date.
(p) "Fiscal Year" shall mean the 52 or 53 week period ending on the
Sunday on or closest to January 31 of each calendar year on the basis of
which the Company maintains its books and records.
(q) "Grant Value", as used with respect to a share of the Common
Stock and with respect to a Fiscal Year, shall mean the greater of (i) the
average of the Fair Market Values of a share of the Common Stock at the
close of trading on each business day included in the 90 day period ending
on the last day of such Fiscal Year and (ii) 85% of the Fair Market Value
thereof on the last business day of such Fiscal Year.
(r) "Participant" shall mean a senior executive employee of the
Company and/or one or more of its Subsidiaries who shall have become a
Participant hereunder as provided in Section 8(a).
6
(s) "Permanent Disability" shall mean a physical and/or mental
condition of a Participant caused by a non-self-inflicted injury, illness
or disease which, in the opinion of the Committee, based upon such medical
evidence as the Committee shall reasonably determine, renders such
Participant unable to perform the duties and responsibilities of his or her
position with the Company and its Subsidiaries and which will be permanent
and continuous for the remainder of his or her life.
(t) "Person" shall mean any individual, partnership, firm, trust,
corporation or other similar entity, and when two or more Persons act as a
partnership, limited partnership, syndicate or other group for the purpose
of acquiring, holding or disposing of securities of the Company, such
partnership, limited partnership, syndicate or group shall be deemed a
"Person".
(u) "Restricted Stock Agreement" shall mean an agreement between the
Company and a Participant embodying the restrictions on the transfer of
Restricted Shares referred to in Section 10.
(v) "Stock Restrictions" shall mean the restrictions on the ability
of a Participant to transfer Restricted Shares issued to such Participant
hereunder referred to in Sections 10(a) and 10(b) and embodied in a
Restricted Stock Agreement between the Company and such Participant.
(w) "Subsidiary" shall have the meaning ascribed thereto by the
provisions of section 424(f) of the Code.
7
(x) "Termination Without Cause" shall mean the termination of a
Participant's employment by the Company and all of its Subsidiaries at the
request of the Company under circumstances which do not constitute
Discharge for Cause.
3. Effective Date of the Plan. The Plan became effective on April
--------------------------
18, 1995, by action of the Board, subject to ratification of the Plan at
the 1995 Annual Meeting of the Stockholders of the Company.
4. Stock Subject to Plan. 600,000 of the authorized but unissued
---------------------
shares of the Common Stock are hereby reserved for issuance under the Plan;
provided, however, that the number of shares so reserved may from time to
- -------- -------
time be reduced to the extent that a corresponding number of issued and
outstanding shares of the Common Stock are purchased by the Company and set
aside for issuance under the Plan. If any shares of the Common Stock
issued under the Plan are reacquired by the Company as provided in Section
10(b), such shares shall again be available for the purposes of the Plan.
5. Committee. The Plan shall be administered by a Committee which
---------
shall consist of two or more members of the Board both or all of whom shall
be "disinterested persons" within the meaning of Rule 16b-3(c)(i)
promulgated under the Exchange Act and "outside directors" within the
contemplation of section 162(m)(4)(C) of the Code. The Committee shall be
appointed annually by the Board, which may at any time and from time to
8
time remove any members of the Committee, with or without cause, appoint
additional members of the Committee and fill vacancies, however caused, in
the Committee. A majority of the members of the Committee shall constitute
a quorum. All determinations of the Committee shall be made by a majority
of its members present at a meeting duly called and held. Any decision or
determination of the Committee reduced to writing and signed by all of the
members of the Committee shall be fully as effective as if it had been made
at a meeting duly called and held.
6. Administration. Subject to the express provisions of the Plan,
--------------
the Committee shall have complete authority, in its discretion, to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the Corporate EBIT Goal, the Corporate
Executive Goal and the various Divisional Goals with respect to each Fiscal
Year, to determine the terms and provisions of the Restricted Stock
Agreements, to determine the Participants with respect to each Fiscal Year
and to make all other determinations necessary or advisable for the
administration of the Plan. In making such determinations, the Committee
may take into account the nature of the services rendered by the respective
Participants, their present and potential contributions to the success of
the Company and its Subsidiaries and such other factors as the Committee in
its discretion shall deem relevant. The Committee's determination on the
matters referred to in this Section 6 shall be conclusive. Any dispute or
disagreement which may arise hereunder or under
9
any Restricted Stock Agreement or as a result of or with respect to any
Award shall be determined by the Committee, in its sole discretion, and any
interpretations by the Committee of the terms thereof shall be final,
binding and conclusive.
7. Eligibility. Participation in the Plan with respect to any
-----------
Fiscal Year shall only be available to persons who are senior executive
employees of the Company and/or one or more of its Subsidiaries on the date
of the Committee's determination with respect to such Fiscal Year provided
for in Section 8(a).
8. Calculation of Fiscal Year Awards. (a) The Committee shall, no
---------------------------------
later than 90 days after the commencement of each Fiscal Year, determine
the senior executive employees of the Company and its Subsidiaries who will
participate in the Plan with respect to such Fiscal Year, the Corporate
EBIT Goal and the Corporate Executive Goal which will be applicable with
respect to such Fiscal Year and, in the case of each Participant who is not
a member of the Corporate Executive Group, the Divisional Goal with respect
to the operating division for which such Participant has responsibility.
The Committee shall promptly thereafter send written notice of such
determination to the Board and the Chief Financial Officer of the Company
and, to the extent applicable to any Participant, to such Participant.
(b) The Committee shall, within 30 days after the receipt of the
Company's audited financial statements with respect to any Fiscal Year,
calculate the percentage of the Corporate EBIT Goal
10
which has been achieved with respect to such Fiscal Year and, if such
percentage is at least 100%, the percentage of the Corporate Executive Goal
and of each Divisional Goal which has been achieved with respect to such
Fiscal Year and the amount of the Award which has been earned by each
Participant with respect to such Fiscal Year. Each Participant's Award
with respect to any Fiscal Year shall be determined in accordance with the
provisions of Section 8(c) and, except as otherwise provided in Section
8(d), shall be the sum of the amount calculated with respect to him or her
in accordance with the provisions of Section 8(c)(i) and whichever shall be
applicable of Sections 8(c)(ii) and 8(c)(iii). The Committee shall,
promptly after it has made such calculations, send written notice thereof
to the Board and the Chief Financial Officer of the Company and, to the
extent applicable to any Participant, to such Participant.
(c) The amount of each Participant's Award with respect to each
Fiscal Year shall be the sum of the amounts calculated as follows:
(i) In the case of each Participant, if the Corporate EBIT Goal
is achieved with respect to such Fiscal Year, an amount equal to 25%
of his or her Base Compensation with respect to such Fiscal Year.
(ii) If at least 100% of the Corporate EBIT Goal is achieved
with respect to such Fiscal Year, then, in the case of each
Participant who shall be a member of the Corporate
11
Executive Group on the date of the Committee's determination referred
to in Section 8(a), (A) if at least 90% but less 95% of the Corporate
Executive Goal is achieved with respect to such Fiscal Year, an amount
equal to 12-1/2% of his or her Base Compensation with respect to such
Fiscal Year, (B) if at least 95% but less than 100% of the Corporate
Executive Goal is achieved with respect to such Fiscal Year, an amount
equal to 18-3/4% of his or her Base Compensation with respect to such
Fiscal Year, (C) if at least 100% but less than 105% of the Corporate
Executive Goal is achieved with respect to such Fiscal Year, an amount
equal to 25% of his or her Base Compensation with respect to such
Fiscal Year, (D) if at least 105% but less than 110% of the Corporate
Executive Goal is achieved with respect to such Fiscal Year, an amount
equal to 31-1/4% of his or her Base Compensation with respect to such
Fiscal Year, and (E) if at least 110% of the Corporate Executive Goal
is achieved with respect to such Fiscal Year, an amount equal to 37-
1/2% of his or her Base Compensation with respect to such Fiscal Year.
(iii) If at least 100% of the Corporate EBIT Goal is achieved
with respect to such Fiscal Year, then, in the case of each
Participant who shall not be a member of the Corporate Executive Group
on the date of the Committee's determination referred to in Section
8(a), (A) if at least 90% but less 95% of his or her Divisional Goal
is achieved
12
with respect to such Fiscal Year, an amount equal to 12-1/2% of his or
her Base Compensation with respect to such Fiscal Year, (B) if at
least 95% but less than 100% of his or her Divisional Goal is achieved
with respect to such Fiscal Year, an amount equal to 18-3/4% of his or
her Base Compensation with respect to such Fiscal Year, (C) if at
least 100% but less than 105% of his or her Divisional Goal is
achieved with respect to such Fiscal Year, an amount equal to 25% of
his or her Base Compensation with respect to such Fiscal Year, (D) if
at least 105% but less than 110% of his or her Divisional Goal is
achieved with respect to such Fiscal Year, an amount equal to 31-1/4%
of his or her Base Compensation with respect to such Fiscal Year, and
(E) if at least 110% of his or her Divisional Goal is achieved with
respect to such Fiscal Year, an amount equal to 37-1/2% of his or her
Base Compensation with respect to such Fiscal Year.
(d) (i) Notwithstanding the provisions of Section 8(c), if a
Participant shall not be entitled to an Award under the provisions of
Section 8(c)(i) with respect to any Fiscal Year (due to the fact that at
least 100% of the Corporate EBIT Goal has not been achieved with respect to
such Fiscal Year), then such Participant shall not be entitled to any Award
with respect to such Fiscal Year under whichever shall be applicable to him
or her of Sections 8(c)(ii) or 8(c)(iii).
13
(ii) If any Participant shall cease to be employed by the Company and
all of its Subsidiaries prior to the end of any Fiscal Year, he or she
shall not be entitled to receive an Award with respect to such Fiscal Year.
9. Settlement of Fiscal Year Awards. The Company shall, no later
--------------------------------
than 30 days after the date of the delivery to its Chief Financial Officer
of the certification by the Committee referred to in Section 8(b) with
respect to any Fiscal Year, deliver to each Participant who shall have
received an Award hereunder with respect to such Fiscal Year and
(a) who shall be employed by the Company and/or one or more of
its Subsidiaries on the date of such delivery or
(b) whose employment by the Company and all of its Subsidiaries
shall have terminated after the end of such Fiscal Year by reason of
any of the events referred to in Section 10(c),
a stock certificate, registered in the name of such Participant, with
respect to the largest whole number of shares of the Common Stock which
shall be equal to or less than the number derived by dividing the amount of
such Participant's Award with respect to such Fiscal Year by the Grant
Value of a share of the Common Stock with respect to such Fiscal Year.
Each share of the Common Stock issued to a Participant referred to in
clause (a) above shall be subject to an agreement between the Company and
the Participant which will embody the terms and conditions of Section
14
10. Stock Restrictions. (a) Except as otherwise provided in this
------------------
Section 10 and in Section 12(b), each share of the Common Stock issued in
accordance with the provisions of Section 9 (a "Restricted Share") to a
Participant referred to in clause (a) thereof may not be sold, assigned,
transferred or otherwise disposed of, and may not be pledged or
hypothecated, prior to the last business day of the third Fiscal Year
following the Fiscal Year during which the Award with respect to which it
was issued was earned.
(b) Except as otherwise provided in Section 10(c), if the employment
by the Company and all of its Subsidiaries of the Participant to whom
Restricted Shares have been issued shall terminate prior to the last
business day of the third Fiscal Year following the Fiscal Year during
which the Award with respect to which it was issued was earned, such
Restricted Shares shall be forfeited and he or she shall be obligated to
redeliver such Restricted Shares to the Company immediately without the
receipt of any consideration therefore.
(c) Anything herein to the contrary notwithstanding, the restrictions
set forth in Sections 10(a) and 10(b) shall terminate as to all of the
Restricted Shares owned by a Participant which shall not have theretofore
have been required to be redelivered to the Company upon the occurrence of
any of the following events:
15
(i) Such Participant's employment by the Company and all of its
Subsidiaries shall have terminated by reason of his or her death or
Permanent Disability or on or after his or her 65th birthday or after
the occurrence of a Change in Control.
(ii) Such Participant's employment by the Company and all of its
Subsidiaries shall have terminated on or after his or her 55th
birthday and prior to his or her 65th birthday and after he or she
shall have completed at least ten years of employment with the Company
and the Committee, on the recommendation of the Company's Chief
Executive Officer, shall so determine.
(iii) Such Participant's employment by the Company and all of
its Subsidiaries shall have terminated by reason of his or her
Termination Without Cause and the Committee, on the recommendation of
the Company's Chief Executive Officer, shall so determine.
(d) Upon issuance of the certificate or certificates for Restricted
Shares in the name of a Participant, such Participant shall thereupon be a
stockholder of the Company with respect to all the Restricted Shares
represented by such certificate or certificates and shall have the rights
of a stockholder with respect to such Restricted Shares, including the
right to vote such Restricted Shares and to receive all dividends and other
distributions paid with respect to such Restricted Shares.
16
(e) Each Participant who is entitled to receive shares of the Common
Stock in accordance with the provisions of Section 9 shall
(i) represent and warrant to the Company that he or she is
acquiring such shares for investment for his or her own account
(unless there is then current a prospectus relating to such shares
under Section 10(a) of the Securities Act of 1933, as amended) and, in
any event, that he or she will not sell or otherwise dispose of such
shares except in compliance with the provisions of said Act, and
(ii) agree that the Company may place on the certificates
representing the shares or new or additional or different shares or
securities distributed with respect to such shares such legend or
legends as the Company may deem appropriate and that the Company may
place a stop transfer order with respect to such shares with the
Transfer Agent(s) for the Common Stock.
In addition, if such shares shall be Restricted Shares, such Participant
shall
(iii) agree that such Restricted Shares shall be subject to, and
shall be held by him or her in accordance with, all of the applicable
terms and considerations of the Plan, and
(iv) at his or her option, (A) be entitled to make the
17
election permitted under section 83(b) of the Code to include in gross
income in the taxable year in which the Restricted Shares are
transferred to him or her an amount equal to the Fair Market Value of
such shares at the time of transfer, notwithstanding that such shares
are subject to a substantial risk of forfeiture within the meaning of
section 83(c)(1) of the Code, or (B) include in gross income the Fair
Market Value of the Restricted Shares as of the date on which such
restrictions lapse.
The foregoing agreement, representation and warranty shall be contained in
an agreement in writing which shall be delivered by such Participant to the
Company.
11. Adjustment of Number of Shares. In the event that a dividend
------------------------------
shall be declared upon the Common Stock payable in shares of the Common
Stock, the number of shares of the Common Stock then subject to any
Restricted Stock Agreement and the number of shares of the Common Stock
reserved for issuance in accordance with the provisions of the Plan but not
yet issued (and if the record date with respect thereto shall occur during
the period commencing at the end of a Fiscal Year and ending on the date of
issuance referred to in Section 9, the number of shares required to be
issued) shall be adjusted by adding to each such share the number of shares
which would be distributable thereon if such shares had been outstanding on
the date fixed for determining the stockholders entitled to receive such
stock dividend. In the event that the outstanding shares of the Common
18
Stock shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-
up, combination of shares, sale of assets, merger or consolidation in which
the Company is the surviving corporation, then, there shall be substituted
for each share of the Common Stock then subject to a Restricted Stock
Agreement and for each share of the Common Stock reserved for issuance in
accordance with the provisions of the Plan but not yet issued (and if the
record date with respect thereto shall occur during the period commencing
at the end of a Fiscal Year and the date of issuance referred to in Section
9, for each such share so required to be so issued), the number and kind of
shares of stock or other securities into which each outstanding share of
the Common Stock shall be so changed or for which each such share shall be
exchanged. In the event that there shall be any change, other than as
specified in this Section 11, in the number or kind of outstanding shares
of the Common Stock, or of any stock or other securities into which the
Common Stock shall have been changed, or for which it shall have been
exchanged, then, if the Committee shall, in its sole discretion, determine
that such change equitably requires an adjustment in the number or kind of
shares then subject to a Restricted Stock Agreement and the number or kind
of shares reserved for issuance in accordance with the provisions of the
Plan but not yet issued (and if the record date with respect thereto shall
occur during the period commencing at the end of a Fiscal Year and the date
of issuance
19
referred to in Section 9, for each such share so required to be so issued,
the number or kind of shares required to be so issued), such adjustment
shall be made by the Committee and shall be effective and binding for all
purposes of the Plan and of each Restricted Stock Agreement entered into in
accordance with the provisions of the Plan. No adjustment or substitution
provided for in this Section 11 shall require the Company to deliver a
fractional share under the Plan or any Restricted Stock Agreement.
12. Withholding and Waivers. (a) Each Participant shall make such
-----------------------
arrangements with the Company with respect to income tax withholding as the
Company shall determine in its sole discretion is appropriate to ensure
payment of federal, state or local income taxes due with respect to the
issuance and/or ownership of shares of the Common Stock issued hereunder
and the release of the Stock Restrictions on Restricted Shares issued
hereunder. In the event of the death of a Participant, an additional
condition to the Company's obligation to issue shares of the Common Stock
to the executors or administrators of such Participant's estate in
accordance with the provisions of Section 9 and to release the Stock
Restrictions provided hereunder on any Restricted Shares owned by such
Participant as provided in Section 10(b) shall be the delivery to the
Company of such tax waivers, letters testamentary and other documents as
the Committee may reasonably determine.
(b) A Participant may, in the discretion of the Committee
20
and subject to such rules as the Committee may adopt, elect to satisfy his
or her withholding obligation arising as a result of the release of the
Stock Restrictions with respect to any Restricted Shares, in whole or in
part, by electing (an "Election") to deliver to the Company shares of the
Common Stock (other than shares of the Common Stock as to which the Stock
Restrictions (under this or any other agreement entered into in accordance
with the Plan) shall not have theretofore terminated) having a Fair Market
Value, determined as of the date that the amount to be withheld is
determined (the "Tax Date"), equal to the amount required to be so
withheld. Such Participant shall pay the Company in cash for any
fractional share that would otherwise be required to be delivered.
(c) Each Election shall be subject to the following restrictions:
(i) The Election must be made on or prior to the Tax Date;
(ii) The Election shall be irrevocable;
(iii) The Election is subject to the approval of the Committee;
(iv) If the Participant's transactions in shares of the Common
Stock are subject to the provisions of section 16(b) of the Exchange
Act, an Election may not be made within six months of the date of the
execution and delivery
21
of the Restricted Stock Agreement governing such Restricted Shares.
(v) If the Participant's transactions in shares of the Common
Stock are subject to the provisions of section 16(b) of the Exchange
Act, the Election must be made (A) six months or more prior to the Tax
Date or (B) during the period beginning on the third business date
following the date of the release of the Company's quarterly or annual
statement of sales and earnings and ending on the twelfth business day
following such date.
13. No Employment Right. Neither the existence of the Plan nor the
-------------------
grant of any Awards hereunder shall require the Company or any Subsidiary
to continue any Participant in the employ of the Company or such
Subsidiary.
14. Termination and Amendment of the Plan. The Board may at any time
-------------------------------------
terminate the Plan or make such modifications of the Plan as it shall deem
advisable; provided, however, that the Board may not without further
-------- -------
approval of the holders of a majority of the shares of the Common Stock
present in person or by proxy at any special or annual meeting of the
stockholders, increase the number of shares which may be issued under the
Plan (as adjusted in accordance with the provisions of Section 11), or
change the manner of calculating Awards or change the class of persons
eligible to become Participants hereunder or withdraw the authority to
administer the Plan from the Committee. Except as
22
otherwise provided in Section 11, no termination or amendment of the Plan
may, without the consent of the Participant to whom any Restricted Shares
shall theretofore have been granted, adversely affect the rights of such
Participant with respect to such Restricted Shares.
15. Expiration and Termination of the Plan. Unless the holders of a
--------------------------------------
majority of the shares of the Common Stock present in person or by proxy at
any special or annual meeting of the Stockholders occurring on or prior to
the date of the 1999 Annual Meeting of the Stockholders shall approve the
continuation of the Plan after the 1999 Annual Meeting of the Stockholders
(for a term which shall not exceed five years from the date of such special
or annual meeting at which such approval is obtained), no Awards shall be
granted hereunder with respect to any Fiscal Year ending after January 30,
2000.
23
