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]
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Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
PHILLIPS-VAN HEUSEN CORPORATION
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(Name of Registrant as Specified in Its Charter)
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previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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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 Graduate Center - City
University of New York, 365 Fifth Avenue, Elebash Recital Hall, First Floor, New
York, New York, on Tuesday, June 10, 2003, at 10:00 a.m., for the following
purposes:
(1) to elect 10 directors of the Company to serve for a term of one
year;
(2) to consider and act upon a proposal to approve the Company's 2003
Stock Option Plan;
(3) to ratify the appointment of auditors for the Company to serve for
the current fiscal year; and
(4) 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 14, 2003 are
entitled to vote at the meeting.
Attendance at the meeting will be limited to holders of record of the
Company's Common Stock and its Series B Convertible Preferred 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. Attendees also must present a picture ID to be admitted
to the meeting.
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,
MARK D. FISCHER
Secretary
New York, New York
May 5, 2003
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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.
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PHILLIPS-VAN HEUSEN CORPORATION
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 10, 2003
---------------
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 Graduate Center - City University of New York, 365 Fifth
Avenue, First Floor, New York, New York, on Thursday, June 10, 2003, at 10:00
a.m., and at any adjournments thereof.
The principal executive offices of the Company are located at 200 Madison
Avenue, New York, New York 10016-3903. The approximate date on which this Proxy
Statement and the enclosed proxy card were first sent or given to stockholders
was May 5, 2003.
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 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 elections 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. Abstentions will have the same effect as negative votes, except that
abstentions will have no effect on the election of directors because directors
are elected by a plurality of the votes cast. 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. Under existing New York Stock Exchange rules, brokers do not have
discretionary voting power with respect to the proposal to approve the Company's
2003 Stock Option Plan.
Common stockholders of record at the close of business on April 14, 2003
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 30,324,716 shares
of Common Stock. Holders of record of the Company's Series B Convertible
Preferred Stock (the "Series B Stock") at the close of business on April 14,
2003 will be entitled to one vote for each share of Common Stock into which
their shares of Series B Stock are convertible as of the record date. As of such
date, there were 10,000 shares of Series B Stock outstanding that were
convertible into 17,857,136 shares of Common Stock. The Common Stock and the
Series B Stock are the only outstanding classes of voting stock of the Company.
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 14, 2003. 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
---------------- ------------ ----------
Apax affiliates(1)............................ 17,857,136 37.1
Vaneton International, Inc.(2)................ 4,481,101 12.9
P.O. Box 3340
Road Town
Tortola, British Virgin Islands
Dimensional Fund Advisors Inc.(3)............. 1,934,100 6.0
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Putnam, LLC(4) ............................... 1,637,715 5.1
One Post Office Square
Boston, Massachusetts 02109
----------
(1) Apax Managers, Inc., 445 Park Avenue, New York, New York 10022, Apax
Partners Europe Managers Limited, 15 Portland Place, London, England, W1B
1PT and Apax Europe V GP Co. Limited, 13-15 Victoria Road, St. Peter Port,
Guernsey, Channel Islands, may be deemed to own beneficially an aggregate
of 17,857,136 shares (37.1%) of the outstanding Common Stock (the "Apax
shares"). The Apax shares consist solely of the shares of Common Stock
issuable upon the conversion of shares of Series B Stock. Of the Apax
shares, Apax Partners Europe Managers Limited and its affiliate Apax
Europe V GP Co. Limited, may be deemed to own beneficially an aggregate of
13,809,519 shares (31.3%) of the outstanding Common Stock, issuable upon
conversion of 7,733.3 shares of Series B Stock acquired by certain private
equity funds. Apax Partners Europe Managers Limited is the discretionary
investment manager and Apax Europe V GP Co. Limited is the general partner
of the general partner of those funds. Apax Partners Europe Managers
Limited and Apax Europe V GP Co. Limited have shared voting and
dispositive power over such shares. Of the Apax shares, Apax Managers,
Inc. may be deemed to own beneficially an aggregate of 4,047,617 shares
(11.8%) of the outstanding Common Stock, issuable upon conversion of
2,266.7 shares of Series B Stock acquired by certain private equity funds.
Apax Managers, Inc. is the general partner of the general partner of those
funds. Information as to the shares of Common Stock beneficially owned by
Apax Partners Europe Managers Limited, Apax Europe V GP Co. Limited and
Apax Managers, Inc. (other than percentage ownership) is as of February
12, 2003, as set forth in a Schedule 13D dated February 21, 2003 and filed
with the Securities and Exchange Commission.
(2) Dr. Richard Lee, 6/F TAL Building, 49 Austin Road, Kowloon, Hong Kong, may
be deemed to beneficially own the 4,481,101 shares of Common Stock owned of
record by Vaneton International, Inc. Dr. Richard 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 Dr. Richard Lee (other than percentage
ownership) is as of December 31, 2002, as set forth in a Schedule 13G dated
February 28, 2003 and filed with the Securities and Exchange Commission.
(3) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
adviser, furnishes investment advice to four registered investment
companies and serves as investment manager to certain other commingled
group trusts and separate accounts (such investment companies, trusts and
accounts are referred to as the "Funds"). In its role as investment advisor
or manager, Dimensional possesses voting and/or investment power over the
Common Stock owned by the Funds. Dimensional disclaims beneficial ownership
of such securities. Information as to the shares of Common Stock that may
be deemed to be owned beneficially by Dimensional (other than percentage
ownership) is as of December 31, 2002, as set forth in a Schedule 13G dated
February 11, 2003 and filed with the Securities and Exchange Commission.
(Footnotes continue on following page)
2
(Footnotes continued from previous page)
(4) Putnam, LLC, d/b/a Putnam Investments, and its affiliates Marsh & McLennan
Companies, Inc. ("MMC"), Putnam Investments' parent holding company, and
Putnam Investment Management, LLC ("PIM") and the Putnam Advisory Company,
LLC ("PAC"), subsidiaries of Putnam Investments and registered investment
advisers, may be deemed to beneficially own an aggregate of 1,637,715
shares of Common Stock. Securities beneficially owned by MMC and Putnam
Investments consist of securities beneficially owned by PIM and PAC. PIM is
the investment adviser to the Putnam family of mutual funds. PAC is the
investment adviser to Putnam Investments' institutional clients. PIM and
PAC may be deemed to own beneficially the shares of Common Stock owned by
their clients. Each of PIM and PAC has dispository power over the shares of
Common Stock which it may be deemed to own beneficially as investment
manager and PAC has shared voting power over the shares of Common Stock
held by its institutional clients. MMC and Putnam Investments do not have
the power to vote or dispose of, or direct the voting or disposition of,
any of the shares of Common Stock. Information as to the beneficial
ownership of Putnam Investments and its affiliates (other than percentage
ownership) is as of December 31, 2002, as set forth in a Schedule 13G dated
February 14, 2003 and 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 14, 2003. Except as otherwise
indicated below, each of the directors, nominees for director and executive
officers has sole voting and investment power with respect to the shares listed
as owned by him.
AMOUNT
BENEFICIALLY PERCENT OF
NAME OWNED(1) CLASS
----- ------------ ----------
Emanuel Chirico(2)......................................... 168,604 *
Edward H. Cohen............................................ 31,255 *
Francis K. Duane........................................... 63,333 *
Joseph B. Fuller........................................... 27,641 *
Joel H. Goldberg........................................... 36,999 *
Marc Grosman............................................... 17,999 *
Dennis F. Hightower........................................ 6,000 *
Bruce J. Klatsky........................................... 538,315 1.7
David A. Landau(3)......................................... - -
Harry N.S. Lee(4).......................................... 25,197 *
Bruce Maggin............................................... 54,141 *
Henry Nasella(3)........................................... - -
Christian Nather(3)........................................ - -
Allen E. Sirkin............................................ 160,314 *
Peter J. Solomon........................................... 42,507 *
Mark Weber................................................. 303,402 1.0
All directors, nominees for director and executive
officers as a group (18 persons)........................... 1,552,373 4.9
----------
* Less than 1% of class.
(1) The figures in the table are based upon information furnished to the
Company by the directors, nominees for director and executive officers.
The figures do not include the shares held for the executive officers in
the Master Trust for the PVH Stock Fund. The PVH Stock Fund is one of the
investment options under the Company's Associates Investment Plans (the
"AIPs"), which are employee benefit plans under Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended. Participants
in the AIPs who make investments in the PVH Stock Fund may direct the vote
of shares of Common Stock held in the Master Trust for the PVH Stock Fund
only with respect to tender or exchange offers subject to Section 13(e) or
Section 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and matters which, if approved or disapproved, would
result in a change in control of the Company (as defined in the AIPs). The
committee that administers the AIP (the "AIP Committee") has the right to
vote such shares for all other matters. These participants also have the
right, subject to certain limitations, to receive a distribution of shares
of Common Stock held for their benefit in the Master Trust, but the AIP
Committee makes all other decisions regarding the disposition of Common
Stock held in the Master Trust.
(Footnotes continue on following page)
3
(Footnotes continued from previous page)
(2) Mr. Chirico's figure does not include the 1,155,544 shares of Common Stock
(3.7%) held in the Master Trust for the PVH Stock Fund as of December 31,
2002 for all participants in the AIPs who invest in the PVH Stock Fund.
Mr. Chirico is a member of the AIP Committee, which has the power, under
most circumstances, to vote and dispose of the shares held in the Master
Trust.
(3) David A. Landau is a partner, Henry Nasella is a venture partner and
Christian Nather is a partner of Apax Partners. Apax Managers, Inc., Apax
Partners Europe Managers Limited and Apax Europe V GP Co. Limited,
affiliates of Apax Partners, together beneficially own shares of the
Series B Stock that are currently convertible into 17,857,136 shares of
Common Stock (37.1%). See Note 1 to the prior table.
(4) Harry N.S. Lee is an indirect minority shareholder of Vaneton
International, Inc., which beneficially owns 4,481,101 shares of Common
Stock (12.1%). See Note 2 to the prior table.
The figures in the foregoing table include 1,000 shares owned by a family
foundation of which Mr. Hightower is trustee, 190 shares held by Mr. Klatsky's
child, as to which Mr. Klatsky has disclaimed beneficial ownership, 12,000
shares held by Mr. Maggin as custodian for his children, as to which Mr. Maggin
has disclaimed beneficial ownership, and 100 shares held by Mr. Sirkin's wife as
custodian for one of Mr. Sirkin's children, as to which Mr. Sirkin has
disclaimed beneficial ownership.
The foregoing table also includes shares which the following directors and
executive officers have the right to acquire within 60 days of April 14, 2003
upon the exercise of options granted under the Company's stock option plans:
Emanuel Chirico, 165,104 shares; Edward H. Cohen, 25,255 shares; Francis K.
Duane, 63,333 shares; Joseph B. Fuller, 25,255 shares; Joel Goldberg, 16,999
shares; Marc Grosman, 16,999 shares; Dennis Hightower, 5,000 shares; Bruce J.
Klatsky, 481,790 shares; Harry N.S. Lee, 24,197 shares; Bruce Maggin, 25,255
shares; Allen E. Sirkin, 160,214 shares; Peter J. Solomon, 25,255 shares; Mark
Weber, 270,924 shares; and all directors, nominees for director and executive
officers as a group, including the foregoing, 1,377,246 shares.
4
ELECTION OF DIRECTORS
The Board of Directors currently consists of 13 members, 10 of whom are
elected by the holders of the Common Stock and Series B Stock voting together
and three of whom are elected solely by the holders of the Series B Stock (the
"Series B Directors"). The Board of Directors has established 14 as the number
of directors constituting the entire Board. One of the directors elected at last
year's Annual Meeting of Stockholders resigned in February 2003 because her
business obligations did not permit her to dedicate the appropriate time to her
duties as director. The Company intends to seek qualified candidates to fill
such vacancy. Proxies cannot be voted at the meeting for more than 10 people.
All members of the Board of Directors, other than the Series B Directors,
are elected by the stockholders at the Annual Meeting of Stockholders of the
Company for a term of one year or until their successors are elected and
qualified. All of the nominees for director have previously been elected
directors of the Company by the stockholders.
The election of directors requires the affirmative vote of a plurality of
the votes cast in person or by proxy at the meeting. At this time, the Board of
Directors knows of no reason why any nominee might be unable to serve. There is
no arrangement or understanding between any director or nominee and any other
person pursuant to which such person was selected as a director or nominee,
except as described below with respect to the Series B Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE 10
NOMINEES NAMED BELOW. PROXIES RECEIVED IN RESPONSE TO THIS SOLICITATION WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES UNLESS OTHERWISE SPECIFIED IN A PROXY.
YEAR
BECAME A
NAME PRINCIPAL OCCUPATION AGE DIRECTOR
---- -------------------- --- --------
Edward H. Cohen........... Counsel to Katten Muchin Zavis 64 1987
Rosenman, a law firm
Joseph B. Fuller.......... President and Chief Executive 46 1991
Officer of Monitor Company, a
management consulting firm
Joel H. Goldberg.......... President of Career Consultants, 59 1997
Inc., a management consulting firm
Marc Grosman.............. Founder and Chief Executive Officer 48 1997
of Marc Laurent SA, the owner of a
chain of European apparel stores
which trade under the name CELIO
Dennis F. Hightower....... Retired business executive 61 1997
Bruce J. Klatsky.......... Chairman and Chief Executive 54 1985
Officer of the Company
Harry N.S. Lee............ Managing Director of TAL Apparel 60 1995
Limited, an apparel manufacturer
and exporter based in Hong Kong
Bruce Maggin.............. Principal of The H.A.M. Media 60 1987
Group, LLC, a media investment
company
Peter J. Solomon.......... Chairman of Peter J. Solomon L.P., an 64 1987
investment banking firm
Mark Weber................ President and Chief Operating 54 1998
Officer of the Company
5
Affiliates of Apax Partners purchased all of the Series B Stock for $250.0
million in February 2003, the net proceeds of which the Company used to pay a
portion of the purchase price for its acquisition of Calvin Klein, Inc. and
certain related companies. Pursuant to the Certificate of Designations,
Preferences and Rights of the Series B Stock, the holders of such stock have the
right to elect separately as a class up to three directors to the Company's
Board of Directors. The following individuals are the Series B Directors:
YEAR
BECAME A
NAME PRINCIPAL OCCUPATION AGE DIRECTOR
---- -------------------- --- --------
David A. Landau.............. Partner of Apax Partners, an 37 2003
international private equity
investment group, and head of its
U.S. Consumer/Retail Group
Henry Nasella................ Venture Partner of Apax Partners, 56 2003
an international private equity
investment group
Christian Nather............. Partner of Apax Partners, an 37 2003
international private equity
investment group
Mr. Cohen is also a director of Franklin Electronic Publishers, Inc.,
Gilman & Ciocia, Inc., Levcor International, Inc. and Merrimac Industries, Inc.
Mr. Fuller is also a director of Merrimac Industries, Inc. Mr. Goldberg is also
a director of Hampshire Group, Limited and Merrimac Industries, Inc. Mr. Grosman
is also a director of Aigle SA. Mr. Hightower is also a director of The Gillette
Company, Northwest Airlines Corporation, PanAmSat Corporation and The TJX
Companies, Inc. Mr. Maggin is also a director of Avalon Digital Marketing
Systems, Inc. and Central European Media Enterprises, Ltd. Mr. Solomon is also a
director of BKF Capital Group, Inc., Monro Muffler Brake, Inc. and Office Depot,
Inc.
Each of the directors has been engaged in the principal occupation
indicated in the foregoing table for more than the past five years, except Mr.
Cohen, who was a partner in the law firm of Rosenman & Colin LLP until its
February 1, 2002 merger with Katten Muchin Zavis, at which time he became
counsel to the merged firm, Katten Muchin Zavis Rosenman; Mr. Hightower, who was
a Professor of Management at Harvard University School of Business
Administration from July 1996 until May 2000 and Chief Executive Officer, Europe
Online Networks S.A. from June 2000 until February 2001; Mr. Maggin, who from
1999 until 2002 was also the Chief Executive Officer of TDN, Inc. (d/b/a at TV
Media, Inc.), a marketer of interactive television advertising; Mr. Nasella, who
was Chairman of Online Retail Partners, Inc., a venture capital and information
technology services company, from 1999 until 2001 and Chairman and Chief
Executive Officer of Star Markets Co., Inc., a food retailer, from 1994 until
1999; and Mr. Nather, who was a partner of McKinsey & Company, a management
consulting firm, from 1993 to 2001.
No family relationship exists between any director or executive officer of
the Company.
The Nominating Committee of the Company's Board of Directors 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 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.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended February 2, 2003, there were five 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 served held during the fiscal year.
The Board of Directors of the Company has a standing Audit Committee, a
standing Compensation Committee and a standing Nominating Committee. Pursuant to
an Investors Rights Agreement between the Company and the holders of the Series
B Stock, the Series B Stockholders have the right to designate a Series B
Director for each such committee, subject to applicable law, rule and
regulation.
6
AUDIT COMMITTEE
The Audit Committee is currently composed of Messrs. Cohen, Hightower,
Nasella and Maggin. Mr. Nasella joined the Committee in the current fiscal year,
at the time the Series B Directors were elected to the Board of Directors. The
Board has determined that all of the members of the Committee are "independent,"
as defined in the current rules of the New York Stock Exchange. The Company's
Common Stock is listed for trading on the New York Stock Exchange.
The Board of Directors has adopted a written charter for the Audit
Committee. A copy of the charter is attached to this Proxy Statement as Exhibit
A. Pursuant to its charter, the Committee is charged with providing assistance
to the Board of Directors in fulfilling the Board's statutory responsibilities
relating to the quality and integrity of the Company's financial reports,
monitoring the Company's financial reporting process and internal control system
and performing such other activities consistent with its charter and the
Company's By-laws as the Committee or the Board deems appropriate. The Committee
is directly responsible for the appointment, compensation and oversight of the
work of the outside auditors.
The Audit Committee held seven meetings during the fiscal year ended
February 2, 2003.
COMPENSATION COMMITTEE
The Compensation Committee is currently composed of Messrs. Grosman,
Hightower, Landau and Solomon. Mr. Solomon joined the Committee in the current
fiscal year to replace Maria Elena Lagomasino at the time she resigned as a
director. Mr. Landau joined the Committee in the current fiscal year, at the
time the Series B Directors were elected to the Board of Directors. The
Committee is charged with setting the compensation of all executive officers,
administering the Company's existing stock option plans and its cash-based
incentive compensation plans for the executive officers, adopting new cash-based
incentive compensation plans and implementing changes and improvements to
existing cash-based incentive compensation plans for the executive officers and,
subject to approval by the full Board, recommending new stock option plans and
other equity-based compensation plans and implementing changes and improvements
to the existing stock option plans. The Compensation Committee also provides
guidance to the executive officers regarding the compensation of the Company's
corporate and divisional officers. The Compensation Committee held two meetings
during the fiscal year ended February 2, 2003.
NOMINATING COMMITTEE
The Nominating Committee determines, and recommends to the Board of
Directors, a slate of nominees for election as directors. In connection
therewith, the Nominating Committee considers the nomination for reelection of
incumbent directors and will consider the qualifications of candidates suggested
by Board members, management, stockholders and consultants that may be retained
for the purpose of identifying candidates. The members of the Nominating
Committee currently are Messrs. Goldberg, Grosman, Hightower, Landau and
Solomon. Mr. Solomon joined the Committee in the current fiscal year to replace
Maria Elena Lagomasino at the time she resigned as a director. Mr. Landau joined
the Committee in the current fiscal year, at the time the Series B Directors
were elected to the Board of Directors. The Nominating Committee held one
meeting during the fiscal year ended February 2, 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of the filings furnished to the Company pursuant to
Rule 16a-3(e) promulgated under the Exchange Act 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 February 2, 2003.
7
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
(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 February 2, 2003, February 3, 2002 and February 4,
2001 (fiscal 2002, 2001 and 2000, respectively).
LONG-TERM COMPENSATION
----------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ------ -------
------------------- LTIP ALL OTHER
NAME AND FISCAL SALARY BONUS OPTIONS PAYOUTS(1) COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) (#) ($) ($)
------------------------------------ -------- ------ ----- ------- --------- ---------------
Emanuel Chirico...................... 2002 600,000 844,740 40,000 - 42,236
Executive Vice President and CFO, 2001 500,000 - 40,000 419,375 61,242
Phillips-Van Heusen Corporation 2000 500,000 485,000 40,000 700,000 36,750
Francis K. Duane..................... 2002 600,000 600,000 30,000 - 43,144
Vice Chairman, Sportswear, 2001 600,000 449,640 30,000 - 50,001
Phillips-Van Heusen Corporation 2000 475,000 375,000 30,000 - 15,283
Bruce J. Klatsky..................... 2002 1,000,000 2,152,600 150,000 - 132,932
Chairman and CEO, 2001 1,000,000 - 150,000 1,357,550 203,406
Phillips-Van Heusen Corporation 2000 1,000,000 1,370,000 150,000 2,313,000 122,523
Allen E. Sirkin...................... 2002 750,000 750,000 30,000 - 34,155
Vice Chairman, Dress Shirts, 2001 750,000 - 30,000 - 62,540
Phillips-Van Heusen Corporation 2000 716,667 541,500 30,000 - 31,245
Mark Weber........................... 2002 800,000 1,126,320 75,000 - 131,446
President and COO, 2001 800,000 - 75,000 671,000 123,874
Phillips-Van Heusen Corporation 2000 750,000 728,000 75,000 1,050,000 79,889
----------
(1) Payouts were made pursuant to long-term incentive plans for the 33-month
period ending February 3, 2002 and February 4, 2001, respectively, adopted
in June 1999 by the Compensation Committee.
(2) All Other Compensation includes payments or contributions required by the
AIPs and Supplemental Savings Plan, Executive Medical Reimbursement
Insurance Plan and Educational Benefits Plan.
Under the AIPs, each employee, including the Named Executive Officers,
eligible to participate may authorize his or her employer to withhold a
specified percentage of his or her compensation, up to 6% in the case of
certain management and highly compensated employees, including the Named
Executive Officers, and otherwise up to 15% (subject to certain
limitations). Under 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 of his or her
compensation, up to 15% after deductions for contributions to the AIPs. The
Company or its subsidiaries currently contribute an amount equal to 100% of
the first 2% of total compensation contributed by an employee and an amount
equal to 25% of the next 4% of total compensation contributed by such
employee. A participant's interest in the amounts arising out of employer
contributions currently vest ratably over the first five years of
employment (regardless of when participation commences), or, if earlier, at
age 65 or upon disability or death. In fiscal 2002, 2001 and 2000,
respectively, the Company made contributions which are reflected under this
column in the amounts of $30,581, $50,558 and $27,005 for Mr. Chirico;
$31,489, $39,317 and $5,537 for Mr. Duane; $70,727, $140,622 and $66,228
for Mr. Klatsky; $22,500, $51,856 and $21,500 for Mr. Sirkin; and $44,130,
$77,336 and $40,444 for Mr. Weber.
The Company's Executive Medical Reimbursement Insurance Plan covers
eligible employees for most medical charges not covered by the basic
medical plan up to a specified annual maximum. The Company incurred
$11,655, $10,684 and $9,745 during fiscal 2002, 2001 and 2000,
respectively, as annual premiums for coverage for each of the Named
Executive Officers, which amounts are reflected under this column.
(Footnotes continue on following page)
8
(Footnotes continued from previous page)
Under the Company's Educational Benefits Plan, 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. For fiscal 2002, 2001 and 2000, respectively, the benefits
received by the Named Executive Officers, which are reflected under this
column, were in the amounts of $50,550, $52,100 and $46,550 for Mr.
Klatsky; and $75,661, $35,854 and $29,699 for Mr. Weber.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of stock
options to purchase Common Stock awarded to the Named Executive Officers during
the fiscal year ended February 2, 2003. All such grants were made pursuant to
the Company's 2000 Stock Option Plan (the "2000 Option Plan").
INDIVIDUAL GRANTS
------------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES EXERCISE --------------------------
GRANTED(1) IN FISCAL PRICE EXPIRATION 5% 10%
NAME (#) YEAR ($/SH) DATE ($) ($)
---- ---------- --------- ------- ---------- ----------- ----------
Emanuel Chirico............ 40,000 4.5 14.92 4/21/12 375,200 951,200
Francis K. Duane........... 30,000 3.4 14.92 4/21/12 281,400 713,400
Bruce J. Klatsky........... 150,000 16.8 14.92 4/21/12 1,407,000 3,567,000
Allen E. Sirkin............ 30,000 3.4 14.92 4/21/12 281,400 713,400
Mark Weber................. 75,000 8.4 14.92 4/21/12 703,500 1,783,500
----------
(1) One-quarter of the options granted to each of the Named Executive Officers
in fiscal 2002 become exercisable on each of the first through fourth
anniversaries of the grant date.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table sets forth information with respect to option
exercises by the Named Executive Officers during the fiscal year ended February
2, 2003 and the value at February 2, 2003 of unexercised stock options held by
the Named Executive Officers.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR-END OPTIONS IN-THE-MONEY AT
SHARES ACQUIRED VALUE -------------------------- FISCAL YEAR-END(1)
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCIABLE
NAME (#) ($) (#) ($)
---- ------------------ -------------- ---------------------------- ----------------------------
Emanuel Chirico.............. 125,104 / 128,335 153,828 / 132,235
Francis K. Duane............. 3,333 16,581 39,166 / 82,501 12,979 / 25,959
Bruce J. Klatsky............. 5,481 12,592 335,956 / 437,502 253,539 / 321,461
Allen E. Sirkin.............. 3,044 8,128 127,714 / 97,501 57,497 / 77,877
Mark Weber................... 2,133 5,375 189,673 / 227,085 126,770 / 160,731
----------
(1) Fair market value at fiscal year end of securities underlying the options
minus the exercise price of the options.
9
LONG-TERM INCENTIVE PLANS -
AWARDS IN LAST FISCAL YEAR
The following table sets forth information with respect to the awards made
to the Named Executive Officers under the Company's Long-Term Incentive Plan
during fiscal 2002.
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS(1)
-------------------------------------
PERFORMANCE OR OTHER PERIOD THRESHOLD PLAN MAXIMUM
NAME UNTIL MATURATION OF PAYOUT ($) ($) ($)
---- --------------------------- --------- --------- -----------
Bruce J. Klatsky................... 2/4/02 - 1/30/05 550,000 1,500,000 3,500,000
Mark Weber......................... 2/4/02 - 1/30/05 320,000 800,000 1,800,000
Emanuel Chirico.................... 2/4/02 - 1/30/05 200,000 500,000 1,125,000
----------
(1) Based on base salaries as of February 2, 2003. Actual payouts are based on
the base salary in effect on the last day of the performance cycle.
The Company has a Long-Term Incentive Plan in which the Company's Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer are the
only participants. The payment of cash awards under the Plan requires the
Company to achieve both earnings growth and improvement in return on equity over
the applicable performance cycle. Threshold, plan and maximum targets are
established within the first 90 days of the relevant performance cycle by the
Compensation Committee. Awards are based on a percentage of a participant's base
salary in effect on the last day of the performance cycle. The percentage is
lowest for the achievement of the threshold targets and is highest if the
maximum targets are achieved or exceeded. If the level of achievement falls
between two of the targets, the award will be based on a percentage of the
participant's base salary that is on a straight-line interpolation between the
percentages for the two targets. The percentage of base salary that a
participant can earn as an award differs among the participants and can change
from performance cycle to performance cycle. The range for the award made in
fiscal 2002 for the Chief Executive Officer is 55%-350% of base salary and the
range for the Chief Operating Officer and the Chief Financial Officer is
40%-225% of base salary. No payouts are made if the threshold targets are not
satisfied. In the event of the death or disability of a participant during a
performance cycle, the participant or his estate will receive the payout, if
any, which would otherwise have been payable to the participant for such
performance cycle, pro rated to reflect the portion of the performance cycle
worked by the participant. In all other events, a participant must be employed
by the Company on the payment date with respect to an award or must have died,
become disabled, retired under the Company's retirement plan or have been
discharged without cause subsequent to the end of the performance cycle but
prior to the date the award is paid in order to remain eligible to receive the
payout.
10
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 $87,000.
CAREER ANNUAL BENEFITS FOR YEARS OF SERVICE INDICATED
AVERAGE SALARY PAYABLE AS A LIFE ANNUITY AT AGE 65
-------------- ------------------------------------------------------------
15 20 25 30 35
-- -- -- -- --
$200,000 38,454 50,622 62,568 74,376 86,136
$400,000 83,454 110,622 137,568 164,376 191,136
$600,000 128,454 170,622 212,568 254,376 296,136
$800,000 173,454 230,622 287,568 344,376 401,136
$1,000,000 218,454 290,622 362,568 434,376 506,136
$1,200,000 263,454 350,622 437,568 524,376 611,136
$1,400,000 308,454 410,622 512,568 614,376 716,136
$1,600,000 353,454 470,622 587,568 704,376 821,136
$1,800,000 398,454 530,622 662,568 794,376 926,136
$2,000,000 443,454 590,622 737,568 884,376 1,031,136
$2,200,000 488,454 650,622 812,568 974,376 1,136,136
$2,400,000 533,454 710,622 887,568 1,064,376 1,241,136
$2,600,000 578,454 770,622 962,568 1,154,376 1,346,136
$2,800,000 623,454 830,622 1,037,568 1,244,376 1,451,136
$3,000,000 668,454 890,622 1,112,568 1,334,376 1,556,136
The benefits under the Company's pension plans are generally based on a
participant's career average compensation (except that pre-2000 benefits for
current salaried employees are based on pre-2000 last five-years average
compensation, unless the participant's career average compensation is greater
than the last five-years average). Absent any election by a participant of an
optional form of benefit, benefits under the pension plans become payable at the
time of retirement, normally at age 65. Such benefits under the pension plans
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 pension plans, the
amounts shown in the above table are shown in the actuarial equivalent amount of
a life annuity. The benefits listed above are not subject to any deduction for
Social Security or other offset amounts.
The credited years of service under the pension plans, as of February 2,
2003, for each of the Named Executive Officers is set forth in the following
table.
CREDITED YEARS
NAME OF SERVICE
---- ----------
Emanuel Chirico........................................... 9
Francis K. Duane.......................................... 4
Bruce J. Klatsky.......................................... 30
Allen E. Sirkin........................................... 16
Mark Weber................................................ 30
COMPENSATION OF DIRECTORS
Each director of the Company who is not an employee of the Company or any
of its subsidiaries, other than the Series B Directors, receives a fee of
$25,000 for his or her services as a director of the Company and $2,000 for each
Board of Directors' meeting attended. Each director who is a member of the Audit
Committee or the Compensation Committee receives an additional fee of $2,000 for
each committee meeting attended. Pursuant to the Company's stock option plans,
each outside director is entitled to receive, on an annual basis, in the
aggregate, non-qualified options to
11
purchase 8,000 shares of Common Stock at the fair market value on the date of
grant for his or her services as a director. The Series B Directors do not
receive option grants.
The law firm of Katten Muchin Zavis Rosenman, of which Mr. Cohen is
counsel, was engaged as the Company's general outside counsel for fiscal 2002.
The Company expects to continue to engage such firm during the current fiscal
year. Mr. Cohen does not share in the fees that the Company pays to such law
firm and his compensation is not based on such fees.
Dr. Goldberg, Career Consultants Inc. and S&K Associates, Inc. were paid
an aggregate of approximately $1,083,262 for management consulting and
recruiting services they provided to the Company in fiscal 2002. Dr. Goldberg
owns the two companies. The Company is continuing to utilize such services
during the current fiscal year.
The Company purchased approximately $14,390,000 of products and services
from TAL Apparel Limited and certain related companies during fiscal 2002. Mr.
Lee is a director of TAL Apparel Limited. The Company expects to continue to
purchase goods from such companies during the current fiscal year.
In connection with the Company's acquisition of Calvin Klein, Inc. and
certain related companies, the Apax affiliates invested $250.0 million in the
Company through the purchase of the Series B Stock. See "Security Ownership of
Certain Beneficial Owners and Management." The Apax affiliates are entitled to
elect up to three directors to the Company's Board of Directors and to have
appointed to each of the Audit Committee, Compensation Committee, Executive
Committee and Nominating Committee, one of their directors. See "Election of
Directors." Also in connection with the acquisition, the Apax affiliates
provided the Company with a $125 million secured term loan, which accrued
interest at the rate of 10% per annum. The term loan, the full amount of which
had been borrowed, was scheduled to be repaid on May 5, 2003.
In connection with their investments in the Series B Stock, the Apax
affiliates engaged Monitor Company to conduct a consumer study with respect to
the Calvin Klein and cK brands. The fee and costs for this engagement was
approximately $536,700. Under the Company's agreement with the Apax affiliates,
the Company reimbursed the Apax affiliates for the fee and costs of the study.
Mr. Fuller, one of the Company's directors, is the President and Chief Executive
Officer of Monitor Company.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has had in effect since 1987 a Special Severance Benefit Plan.
Upon the termination of the employment of any participant in the plan within two
years after a change in control of the Company (as defined in the Special
Severance Plan), 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. The Company has agreed to indemnify each participant in the Special
Severance Benefit Plan against any and all liabilities he or she may incur under
Section 4999(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
which relates to excise taxes on excess parachute payments, including any income
taxes and/or additional excise taxes applicable to such indemnification payment.
In addition, the participant receives comparable medical, dental and life
insurance coverage for himself or herself and his or her family for a three-year
period after termination. Mr. Klatsky is the only current participant in the
Special Severance Benefit Plan.
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 change in control of the Company (as defined
in such plan), the full undiscounted value of the future payments to be made to
the participant under the Capital Accumulation Plan becomes immediately payable
in a lump sum. Further, each participant's rights are subject to non-competition
and non-disclosure restrictions that automatically terminate upon a change in
control of the Company. Messrs. Klatsky, Weber, Chirico and Sirkin are
participants in the Capital Accumulation Plan.
Mr. Klatsky is also entitled to the payments provided for under the
Special Severance Benefit Plan and the Capital Accumulation Plan (i) if he is
not continued as the Company's Chief Executive Officer and Chairman of the Board
of Directors prior to his retirement as an employee of the Company, (ii) in the
event of the appointment by the Board of Directors of an officer or the hiring
by the Board of Directors of an employee with authority equal or superior to the
authority of Mr. Klatsky at any time prior to his retirement as an employee of
the Company or (iii) if the Company fails to maintain the terms and conditions
of Mr. Klatsky's employment, including, without limitation, a minimum level of
compensation, as such existed on April 28, 1993, or a termination of the Special
Severance Benefit Plan.
12
All options that were previously granted under any of the Company's option
plans and which have not expired or been otherwise cancelled become immediately
exercisable in full upon a change in control of the Company, regardless of
whether such options have previously vested.
The Company is in the process of entering into employment agreements with
24 of its senior executives, including Messrs. Chirico, Duane, Sirkin and Weber.
These agreements outline the compensation and benefits to be paid to these
executives during their employment and specifically state the current base
salary of each such executive: $800,000 for Mr. Chirico, $700,000, for Mr.
Duane, $750,000 for Mr. Sirkin and $1,000,000 for Mr. Weber. The agreements
permit the Company to both raise and lower salaries. In addition, the agreements
outline the executives' rights to severance upon termination of employment.
Generally, the executives are entitled to severance only if employment is
terminated without cause (as defined in the agreements), in which case the
severed officer is entitled to the greater of two weeks pay for each year of
employment with the Company and one year's base salary (18 months' base salary
for Mr. Chirico and two years' base salary for Mr. Weber). Mr. Weber is also
entitled to two times his average salary and bonus for the prior two years if he
terminates his employment because he does not succeed Mr. Klatsky as Chairman
and Chief Executive Officer of the Company or if he is required to report to
another executive other than Mr. Klatsky. The executives are also only required
to pay the active employee rate for medical and dental insurance during the
period severance is paid. Additionally, the executives are entitled to severance
upon the termination of their employment without cause within two years after a
change of control of the Company (as defined in the agreements). Termination
without cause includes voluntary termination by the executive if certain
material changes are made to the terms of the executive's employment after a
change of control. In either such case, the officer receives a lump sum payment
in an amount equal to two times (three times in the case of Mr. Weber) the
average annual total cash compensation paid to or accrued for him or her during
the two-year period preceding the date of termination. The Company has agreed to
indemnify each such executive against any and all liabilities he or she may
incur under Section 4999(a) of the Code, which relates to excise taxes on excess
parachute payments, including any income taxes and/or additional excise taxes
applicable to such indemnification payment. In addition, the executive receives
comparable medical, dental and life insurance coverage for himself or herself
and his or her family for a two-year period (three years for Mr. Weber) after
termination. The agreements also include certain restrictive covenants in favor
of the Company, including agreements regarding the use of confidential
information, non-interference with business relationships, non-solicitation of
employees and post-termination employment restrictions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended February 2, 2003, the members of the
Compensation Committee included Marc Grosman, Dennis F. Hightower and Maria
Elena Lagomasino. Ms. Lagomasino resigned from the Board of Directors in
February 2003 after the end of fiscal 2002 and was replaced on the Committee by
Peter J. Solomon. David A. Landau was subsequently added to the Committee as
well. There were no interlocks or insider participations as defined in the proxy
regulations of the Securities and Exchange Commission.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for setting the compensation of
all executive officers, administering the Company's existing stock option plans
and cash-based incentive compensation plans for the executive officers, adopting
new cash-based incentive compensation plans and implementing changes and
improvements to existing cash-based incentive compensation plans for the
executive officers, and, subject to approval by the Board of Directors,
recommending new stock option plans and other equity-based compensation plans
and implementing changes and improvements to the existing stock option plans.
The Compensation Committee also provides guidance to the executive officers
regarding the compensation of the Company's corporate and divisional officers.
OVERALL POLICY
The Compensation Committee believes that the Company's executive officers
constitute a highly qualified management team that has been largely responsible
for the Company's success. The Compensation Committee has structured the
Company's executive officer compensation program primarily (i) 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, (ii) to provide
short-term incentives to executive officers to attain certain financial targets
and to reward certain accomplishments or activities, (iii) 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 (iv) to be
consistent with the Company's high ethical standards. The Compensation Committee
targets the compensation levels of its top three executives to approximate the
competitive median if the Company achieves its budget plan, to exceed the median
and approach the 75th percentile of competitive compensation levels if the plan
is exceeded and to be below the competitive median if the budget plan is not
attained. Information regarding competitive compensation generally is compiled
by compensation
13
consultants retained by the Committee. Although the Company's compensation
program does not rely to any significant extent on fringe benefits or
perquisites, its fringe benefit plans are believed to be generally competitive.
The Company believes that it has a reputation for providing a reasonably high
level of job security in an industry known for high levels of executive
turnover.
The Compensation Committee reviews annually the Company's executive
officer compensation package, taking into account corporate performance, stock
price performance 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 officer 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 each individual executive officer, 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
Company's Chief Executive Officer are considered by the Compensation Committee
in their review of the performance and compensation of each individual executive
officer.
BASE SALARIES
Annual salaries are determined by evaluating the performance of the
Company and of each individual executive officer. In the case of executive
officers 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 and may also consider 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) and private peer companies known to
the members of the Committee or the results of which can be disclosed by
compensation consultants retained by the Committee. 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.
Finally, the Compensation Committee takes into account the relative salaries of
the executive officers and determines what it believes are appropriate
compensation level distinctions between and among the executive officers,
including between the Company's Chief Executive Officer and the other executive
officers. 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 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 the Company's Chief Executive Officer
for the fiscal year ended February 2, 2003, 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), compensation
information provided by an outside consultant, the performance of the Common
Stock over the prior several years and the assessment by the Compensation
Committee of Mr. Klatsky's individual performance. The Committee also took into
account the incentive components of Mr. Klatsky's compensation package under the
Company's stock option, bonus and long-term incentive plans and the potential
payouts and other value under those plans.
SHORT-TERM INCENTIVES
PERFORMANCE INCENTIVE BONUS PLAN. Stockholders approved the Company's
Performance Incentive Bonus Plan (the "Bonus Plan") at the 2000 Annual Meeting
of Stockholders. Under the Bonus Plan, the Company's senior executives,
including the Named Executive Officers, can receive a bonus based on earnings
targets for the Company as a whole or, in the case of the Vice Chairmen,
earnings targets for their respective divisions. Threshold, plan and maximum
earnings targets are set during the first 90 days of each fiscal year. If an
executive dies during a fiscal year for which he or she was selected as a
participant in the Plan, his or her estate would receive the bonus, if any,
payable to the participant for that fiscal year, pro rated to reflect the
portion of the year worked by the participant. The amount of a participant's
bonus payment, if any, for a fiscal year is determined by the end of the first
quarter of the succeeding fiscal year. Messrs. Klatsky, Weber, Chirico, Duane
and Sirkin all earned bonuses under the Bonus Plan for the fiscal year ended
February 2, 2003 and received their bonus payments in the first quarter of the
current fiscal year.
DISCRETIONARY BONUSES. The Compensation Committee has the authority to
award annual bonuses to executive officers on a discretionary basis. In
determining whether to award discretionary bonuses, the Compensation Committee
14
reviews each executive's overall compensation package and takes into account
factors including, but not limited to, the assessment by the Compensation
Committee of each executive's individual performance and the compensation
awarded to executives in other companies, especially companies involved in the
apparel, footwear and specialty retail industries. The Compensation Committee
may also award bonuses for undertaking additional duties or accomplishing
specific projects or achieving specific benefits for the Company, such as
special efforts in connection with a transaction or the disposition on favorable
terms of corporate assets. The Compensation Committee has the authority to place
restrictions, such as a vesting period, on any discretionary bonus it awards to
an executive officer. No executive officer was awarded a discretionary bonus for
fiscal 2002.
LONG-TERM INCENTIVES
STOCK OPTIONS. The Company currently has in effect two stock option plans,
the 1997 Stock Option Plan (the "1997 Option Plan") and the 2000 Option Plan,
under which options to purchase Common Stock are granted. In addition, options
to purchase Common Stock under the Company's 1987 Stock Option Plan (the "1987
Option Plan") are still outstanding. The Company's option plans are administered
by the Compensation Committee in its capacity as the Stock Option Committee
under each of the plans. Stock options may be granted to employees of the
Company, including the Named Executive Officers, under the 1997 and 2000 Option
Plans, subject to certain limitations. The 1997 and 2000 Option Plans also
provide for an annual grant of options to the Company's non-employee directors
and permit additional grants to be made to non-employee directors who provide
services to the Company or its subsidiaries outside of their duties as
directors. The 2000 Option Plan also permits option grants to be made to
consultants and advisors of the Company. Stock options are designed to align the
interests of grantees with those of the stockholders. Stock options granted
under the Company's stock option plans are granted at an exercise price equal to
the closing price of the Common Stock on the New York Stock Exchange on the date
prior to grant. Stock options granted under the 1987 and 1997 Option Plans
generally 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, unless the
Compensation Committee provides for different vesting at the time of the grant.
Stock options granted under the 2000 Option Plan generally may not be exercised
until the first anniversary of the date of grant and do not become fully
exercisable until the fourth anniversary of the date of the grant, unless the
Compensation Committee provides for different vesting at the time of the grant.
The stock options granted to executive officers (and other grantees) under each
of the Company's option plans 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. The Company will continue to
use stock options as a material component of its compensation structure if the
Company's 2003 Stock Option Plan is approved by stockholders, as has been
recommended by the Board of Directors. See "Approval of 2003 Stock Option Plan"
for a description of that plan.
Grants under the 2000 Option Plan were awarded in April 2002 to
approximately 230 of the key employees of the Company, including the Named
Executive Officers. Each such individual received a fixed number of shares
relative to his or her salary range and position within the Company. Options
were granted to the executive officers in an amount such that the value of the
award, when combined with base compensation, potential bonuses under the Bonus
Plan and, in the case of the top three executive officers, potential payouts
under the Company's Long-Term Incentive Plan, would provide competitive total
compensation relative to comparable positions at other companies.
LONG-TERM INCENTIVE PLAN. Stockholders approved the Company's Long-Term
Incentive Plan at the 2000 Annual Meeting of Stockholders. The participants in
the Long-Term Incentive Plan are the Company's Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer. The payment of cash awards under
the Long-Term Incentive Plan requires the Company to achieve both earnings
growth and improvement in return on equity over the applicable performance
cycle. The Compensation Committee can also establish other performance criteria.
Threshold, plan and maximum targets are established within the first 90 days of
each performance cycle, and awards are established for achievement of each of
the targets at the time the targets are determined. Awards are based on a
percentage of a participant's base salary. The percentage is lowest for
achievement of the threshold targets and is highest if the maximum targets are
achieved or exceeded. If the level of achievement falls between two of the
targets, the payout will be based on a percentage of the participant's base
salary that is on a straight-line interpolation between the percentages for the
two targets. The percentage of base salary that a participant can earn differs
among the participants and can differ from performance cycle to performance
cycle. No payouts are made if the threshold targets are not satisfied. The
amount of a participant's payout, if any, will be determined by the Compensation
Committee, by the end of the first quarter of the fiscal year immediately
following the end of the applicable performance cycle. Payments will be made as
soon as practicable thereafter. In the event of the death or disability of a
participant during a performance cycle, the participant or his or her estate
will receive the payout, if any, which would otherwise have been payable to the
participant for such performance cycle, pro rated to reflect the portion of the
performance cycle worked by the participant. In all other events, a participant
must be employed by the Company on the payment date therefor or must have died,
become disabled, retired
15
under the Company's retirement plan or have been discharged without cause
subsequent to the end of the performance cycle but prior to the date the payout
is made in order to remain eligible to receive a payout. No payouts were made
with respect to the performance cycle ended February 2, 2003.
In view of changing tax laws and economic and employment conditions, the
Compensation Committee regularly examines other methods of long-term and
short-term incentive-based compensation for executive officers and intends to
implement, when appropriate, such methods in lieu of or in addition to the
existing plans. In addition, the Compensation Committee may create special bonus
pools or modify existing arrangements when special conditions or events warrant.
STOCK OWNERSHIP
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, including the executive officers, acquire Common Stock of the Company
through the AIPs, subject to certain limitations on the amount an employee can
contribute to or hold in the PVH Stock Fund. Most of the Company's executive
officers have a significant portion of their AIP accounts invested in the PVH
Stock Fund.
FEDERAL INCOME TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code, limits the amount of compensation a publicly
held corporation may deduct as a business expense for Federal income tax
purposes. The deductibility limit, which applies to a company's chief executive
officer and the four other most highly compensated executive officers, is $1
million, subject to certain exceptions. The exceptions include the general
exclusion of performance-based compensation from the calculation of an executive
officer's compensation for purposes of determining whether his or her
compensation exceeds the deductibility limit. The Company generally has not in
the past paid its executive officers compensation which is not fully deductible,
but the Compensation Committee also recognizes that in certain instances it may
be in the best interest of the Company to provide compensation that is not fully
deductible.
Mr. Solomon was not a member of the Compensation Committee in fiscal 2002
and Mr. Landau joined the Board of Directors and Compensation Committee after
the end of fiscal 2002, and, therefore, neither of them participated in the
Committee's activities during fiscal 2002. However, they did participate in the
determination of whether the executive officers qualified for bonuses under the
Bonus Plan and payouts under the Long-Term Incentive Plan for the fiscal year
and performance cycle ended February 2, 2003, respectively.
Compensation Committee
Peter J. Solomon, Chairman
Marc Grosman
Dennis F. Hightower
David A. Landau
16
PERFORMANCE GRAPH
The following performance graph is a line graph comparing the yearly
change in the cumulative total stockholder return on the Common Stock against
the cumulative return of the Russell 2000 Index and a line of business index
comprised of the S&P Retail Composite Index, the S&P Textile (Apparel) Index and
the S&P Footwear Index for the five fiscal years ended February 2, 2003.
COMPARISON OF 5 YEAR CUMULATIVE
TOTAL RETURN
[GRAPH OMITTED]
Phillips-Van Heusen Russell Line of
Corporation 2000 Index Business Index
02/01/98 100.00 100.00 100.00
01/31/99 53.72 100.33 129.36
01/30/00 60.64 120.12 123.11
02/04/01 120.14 120.75 145.94
02/03/02 99.90 117.35 162.38
02/02/03 104.44 92.26 132.70
----------
Note: Line of Business Index is composed of a blended weighting of the S&P
Retail Composite Index (50%), the S&P Textile (Apparel) Index (33%) and
the S&P Footwear Index (17%) to correspond generally to the Company's
historical sales attributable to its retail, wholesale apparel and
wholesale footwear operations at the time the requirement to include a
performance graph was first implemented.
VALUE OF $100.00 INVESTED AFTER FIVE YEARS:
Phillips-Van Heusen Corporation Common Stock......... $104.44
Russell 2000 Index................................... $92.26
Line of Business Index............................... $132.70
17
AUDIT COMMITTEE REPORT
The Company's management has the primary responsibility for the financial
statements and the reporting process, including the system of internal controls.
The independent auditors audit the Company's financial statements and express an
opinion on the financial statements based on their audit. The Audit Committee
reviews the Company's financial reporting process on behalf of the Board of
Directors. Last year, the Audit Committee revised its written charter, which was
then approved by the Executive Committee of the Board of Directors. The revised
charter is attached as Exhibit A to this Proxy Statement.
As part of its oversight of the Company's financial statements and
reporting process, the Audit Committee has met and held discussions with Company
management, the Company's internal auditing staff and Ernst & Young LLP, the
Company's independent auditors. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States, and the Committee
has reviewed and discussed the consolidated financial statements with management
and the independent auditors. The Committee discussed with the independent
auditors matters required to be discussed by Statement on Auditing Standards No.
61 (Communication With Audit Committees).
In addition, the Audit Committee has discussed with the independent
auditors the auditors' independence from the Company and its management,
including the matters in the written disclosures required by Independence
Standards Board Standard No. 1 (Independence Discussions With Audit Committees).
The Committee has also considered whether the independent auditors' provision of
other non-audit services to the Company is compatible with the auditors'
independence.
The Audit Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
meets with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, the evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board approved, the
inclusion of the audited consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended February 2, 2003, as filed with
the Securities and Exchange Commission. The Committee also has recommended,
subject to stockholder approval, the selection of the Company's independent
auditors.
The members of the Audit Committee reviewed on a quarterly basis the
Company's earnings releases and, as applicable, its quarterly reports on Form
10-Q and annual report on Form 10-K. In addition, the Committee met quarterly
with Company management and the Company's independent auditors to discuss the
earnings releases.
Mr. Nasella joined the Board of Directors and the Committee after the end
of fiscal 2002 and, therefore, he did not participate in the Committee's
activities during such year. He did, however, participate in matters relating to
the Company's earnings release for the fourth quarter of fiscal 2002 and full
year's results, as well as the Company's annual report on Form 10-K.
Audit Committee
Bruce Maggin, Chairperson
Edward H. Cohen
Dennis F. Hightower
Henry Nasella
18
APPROVAL OF THE COMPANY'S 2003 STOCK OPTION PLAN
On May 1, 2003, the Board of Directors adopted, upon the recommendation of
the Compensation Committee and subject to stockholder approval, a new 2003 Stock
Option Plan. Approval of the Plan requires the affirmative vote of a majority of
the votes cast on the proposal at the Annual Meeting of Stockholders. The 2003
Stock Option Plan is intended to replace the 1997 and 2000 Option Plans as the
principal source of the Company's option grants, although outstanding options
granted under those plans will continue to be governed by the applicable plans
and grants of available shares may still be made under such plans. As of the
date of this Proxy Statement, there are only an aggregate of approximately
60,000 shares available for the grant of options under the 1997 and 2000 Stock
Option Plans.
The following summary of certain features of the 2003 Stock Option Plan is
qualified in its entirety by reference to the full text of the Plan, which is
Exhibit B to this Proxy Statement.
The 2003 Stock Option Plan authorizes the grant of options to purchase
shares of Common Stock to key employees of the Company and its subsidiaries, to
the non-employee directors of the Company and to certain other persons. Under
the Plan, the Company may grant to eligible individuals incentive stock options,
as defined in Section 422(b) of the Code, and/or non-qualified stock options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE 2003
STOCK OPTION PLAN.
NATURE AND PURPOSES OF THE 2003 STOCK OPTION PLAN
The purposes of the 2003 Stock Option Plan are to induce certain
individuals to remain in the employ or service of the Company and its
subsidiaries, to attract new individuals to enter into such employment or
service and to encourage such individuals to secure or increase on reasonable
terms their stock ownership in the Company. The Board of Directors believes that
the 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 2003 Stock Option Plan is 290.
The number of eligible participants in the Company's option plans has increased
by more than 20% since the 2000 Option Plan's adoption, principally due to the
addition of participants as a result of the Company's acquisition of Calvin
Klein, Inc. and certain related companies.
DURATION AND MODIFICATION
The 2003 Stock Option Plan will terminate not later than April 30, 2013.
The Board of Directors may at any time terminate the Plan or make such
modifications of the 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 Plan, change the class of persons eligible to
participate in the Plan, change the manner of determining the option prices,
amend any option to reduce the option price, or cancel any outstanding option
and contemporaneously award a new option to the same participant for
substantially the same number of shares at a lower option price.
ADMINISTRATION
The 2003 Stock Option Plan is administered by the Compensation Committee
or such other committee of the Board of Directors that the Board may designate
from time to time (the "Option Committee"). The Option Committee must consist of
two or more members of the Board of Directors who are intended to be
"non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act
and "outside directors" within the meaning of Section 162(m) of the Code. The
members of the Option Committee are appointed annually by the Board. The Option
Committee, among other things, has complete authority, in its discretion, to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it and to determine the participants in the 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
will be an incentive stock option, a non-qualified stock option or a combination
thereof. The Option Committee will not have the discretion to determine any of
the foregoing with respect to the non-discretionary options granted to
non-employee directors. All options granted to non-employee directors are
non-qualified stock options. Authority is delegated to a director who is an
employee of the Company to make grants to employees of the Company or its
subsidiaries of not more than 5,000 per person per year and not more than
100,000 in the aggregate in any year. Such grants may not be made to any officer
of the Company who is subject to the reporting requirements under Section 16 of
the Exchange Act or whose compensation is, or is likely to become, subject to
the provisions of Section 162(m) of the Code. The members of the
19
Option Committee do not receive additional compensation for service in
connection with the administration of the Plan. Compensation Committee members
receive a $2,000 fee for each Compensation Committee meeting attended.
DESCRIPTION OF OPTIONS
Under the 2003 Stock Option Plan, the per share exercise price of any
option may not be less than the fair market value of a share of Common Stock on
the date of grant, which generally is the closing sale price of the Common Stock
on the New York Stock Exchange on the business 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 1,200,000
shares of the Common Stock.
Directors who are not employees of the Company or its subsidiaries, other
than the Series B Directors, receive a non-discretionary annual grant of options
to purchase 8,000 shares of Common Stock at 100% of the fair market value on the
date of grant.
Options granted under the 2003 Stock Option Plan generally become
exercisable with respect to 25% of the underlying shares on the first
anniversary of the date of grant, 50% of the underlying shares on the second
anniversary of the date of grant, 75% of the underlying shares on the third
anniversary of the date of grant and 100% of the underlying shares on the fourth
anniversary of the date of grant, unless otherwise determined by the Option
Committee at the time of the grant of the option. In the event of a change in
control (as defined in the Plan), all options that have been previously granted
and have not expired or otherwise been cancelled or become unexercisable become
immediately exercisable. 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 10 years
from the date of grant.
In the event of the death or retirement of an optionee, all options that
have been previously granted and have not expired or otherwise been cancelled
become immediately exercisable. If such options are not thereafter exercised,
they will terminate, generally within three months after the qualification of
the representative of such optionee's estate in the event of such optionee's
death or three years of such optionee's retirement. If 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 death or retirement, any then
exercisable options previously granted to but not exercised by such optionee
will terminate within 90 days of such optionee's termination of employment or
service as a director.
Non-qualified stock options may be transferred for no consideration to or
for the benefit of the optionee's immediate family (as defined in the 2003 Stock
Option Plan), a trust for the exclusive benefit of the optionee and his or her
immediate family or to a partnership or limited liability company for one or
more members of the optionee and his or her immediate family. Any transfer of a
non-qualified stock option must be approved in advance by the Compensation
Committee and may be approved subject to such conditions as the Option Committee
may impose.
The number of shares reserved for issuance under the 2003 Stock Option
Plan and the number of shares covered by each option granted under the 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.
Provisions have been included in the 2003 Stock Option Plan to meet the
requirements for deductibility of executive compensation under Section 162(m) of
the Code by qualifying option grants under the Plan as performance-based
compensation.
SECURITIES SUBJECT TO THE 2003 STOCK OPTION PLAN
5,400,000 authorized but unissued shares of the Common Stock have been
reserved for issuance upon the exercise of options granted under the 2003 Stock
Option Plan. The number of authorized but unissued shares so reserved will
continue to 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 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 Plan.
The market value of the Common Stock, as of April 23, 2003 was $13.35 per
share.
20
FEDERAL INCOME TAX CONSEQUENCES OF ISSUANCE AND EXERCISE OF OPTIONS
The following discussion of the Federal income tax consequences of the
granting and exercise of options under the 2003 Stock 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-Qualified Stock Options
No income will be recognized by an optionee at the time a non-qualified
stock option is granted. Ordinary income will be recognized by an optionee at
the time a non-qualified 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 will generally be entitled to a deduction for Federal income
tax purposes at such time and in the same amount that the optionee is required
to include in his or her income upon the exercise of a non-qualified stock
option.
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-qualified 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-qualified stock option will be equal to the sum of the
exercise price of such non-qualified stock option and the amount included in
income with respect to such option.
If an optionee transfers an option by gift, the optionee will recognize
ordinary income at the time that the transferee exercises the option. The
Company will be required to report the ordinary income recognized by the
optionee, and to withhold income and employment taxes, and pay the Company's
share of employment taxes, with respect to such ordinary income. The optionee
may also be subject to federal gift tax on the value of the transferred option
at the time that the transfer of the option is considered completed for gift
purposes. The Internal Revenue Service takes the position that the transfer is
not complete until the option is fully vested.
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. However, for purposes of the alternative minimum tax, the spread on the
exercise of an incentive stock option will be considered as part of the
optionee's income.
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 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. If an incentive stock option is exercised more than
three months after the termination of an optionee's employment with the Company,
the option will be treated as a non-qualified stock option.
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 generally 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
21
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.
BENEFITS TO BE RECEIVED UPON APPROVAL
The following table sets forth, for the current fiscal year, with respect
to each of the Named Executive Officers, all executive officers as a group, all
non-employee directors as a group, and all non-executive officer employees as a
group, the number of shares of Common Stock subject to options granted under the
2000 Stock Option Plan. The Company would expect comparable grants to be made in
future years to the individuals and groups identified if the 2003 Stock Option
Plan is approved.
NAME AND POSITION OPTIONS GRANTED
----------------- ---------------
Emanuel Chirico...................................... 40,000
Executive Vice President and Chief Financial Officer
Francis K. Duane..................................... 30,000
Vice Chairman, Sportswear
Bruce J. Klatsky..................................... 150,000
Chairman and Chief Executive Officer
Allen E. Sirkin...................................... 30,000
Vice Chairman, Dress Shirts
Mark Weber........................................... 75,000
President and Chief Operating Officer
All executive officers as a
group (7 persons).................................. 385,000
All directors who are not
executive officers as a
group (9 persons)(1)............................... 72,000
All employees as a group(2).......................... 508,850
----------
(1) The Series B Directors do not receive option grants.
(2) Excluding executive officers.
The Compensation Committee, in its capacity as the Option Committee, is
considering making a special grant of options to the Chief Executive Officer,
Chief Operating Officer and Chief Financial Officer that would reward them for
success following the Calvin Klein acquisition. The grant would be
performance-oriented and linked to long-term stock price appreciation, with
vesting of the entire grant at one-time after an extended period (e.g., six
years after the grant, as opposed to the usual incremental vesting over the
first through fourth anniversaries) and the opportunity to accelerate vesting
tied to achieving stock price goals (e.g., the Common Stock trading above a
target price for at least a set number of consecutive trading days).
Approval of the 2003 Stock Option Plan requires the affirmative vote of a
majority of the votes cast in person or by proxy at the meeting.
PROXIES RECEIVED IN RESPONSE TO THIS SOLICITATION WILL BE VOTED FOR THE
2003 STOCK OPTION PLAN UNLESS OTHERWISE SPECIFIED IN A PROXY.
22
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of February 2, 2003 with
respect to shares of Common Stock that may be issued under the Company's
existing equity compensation plans - the 1997 Stock Option Plan and the 2000
Stock Option Plan - as well as under the 1987 Stock Option Plan. The 1987 Stock
Option Plan has expired, but valid options to purchase Common Stock granted
thereunder are still outstanding. All of the foregoing plans were approved by
the Company's stockholders and the Company has no equity compensation plans that
were not approved by the stockholders. The table does not include information
about the shares of Common Stock with respect to which options may be granted
under the proposed 2003 Stock Option Plan.
Number of securities
remaining available for
Number of securities to be future issuance under
issued upon exercise of Weighted average exercise equity compensation plans
outstanding options, price of outstanding (excluding securities
warrants and options, warrants and reflected in Column
Plan category rights (a) rights (b) (a)) (c)
------------- ---------- ---------- --------
Equity compensation plans approved
by security holders 4,865,625 $12.62 1,007,257
Equity compensation plans not
approved by security holders -- -- --
--------- ------ ---------
Total 4,865,625 $12.62 1,007,257
========= ====== =========
SELECTION OF AUDITORS
The Audit Committee has selected Ernst & Young LLP, independent auditors,
as the Company's auditors for the fiscal year ending February 1, 2004. Although
stockholder ratification of the Audit Committee's selection 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 request the Audit Committee to reconsider the selection of auditors
for the fiscal year ending January 30, 2005, since it would be impracticable to
replace the Company's auditors so late into the Company's current fiscal year.
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
A PROXY.
FEES PAID TO AUDITORS
The following table sets forth the aggregate fees billed by Ernst & Young
LLP, the member firms of Ernst & Young LLP, and their respective affiliates for
professional services rendered to the Company for the audit of the Company's
annual financial statements for the fiscal years ended February 2, 2003 and
February 3, 2002, for the reviews of the financial statements included in the
Company's Quarterly Reports on Form 10-Q for those fiscal years, and for other
services rendered on behalf of the Company during those fiscal years. All of
such fees were approved by the Audit Committee.
23
Fiscal 2002 Fiscal 2001
----------- -----------
Audit Fees $664,500 $608,250
======== ========
Audit-Related Fees(1) $528,300 $72,500
======== =======
Tax Fees(2) $186,400 $321,500
======== ========
----------
(1) Fiscal 2002 include fees for due diligence services related to the
Company's acquisition of Calvin Klein and audits of employee benefit
plans. Fiscal 2001 includes fees for audits of employee benefit plans.
(2) Fiscal 2002 and 2001 include fees for services to assist the Company in
its preparation of tax returns and for the provision of tax advice.
The Audit Committee's revised charter requires the Audit Committee to
preapprove at its meetings all auditing and non-audit services provided by the
Company's outside auditors. The charter permits the Committee to delegate to any
one or more of its members the authority to grant such preapprovals. Any such
delegation of authority may be subject to any rules or limitations that the
members deem appropriate. The decision to preapprove any services made by any
member to whom authority has been so delegated must be presented to the full
Committee at its next meeting.
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 on
or before January 6, 2004. The proxy or proxies designated by the Board of
Directors will have discretionary authority to vote on any matter properly
presented by a stockholder for consideration at the next Annual Meeting of
Stockholders but not submitted for inclusion in the proxy materials for such
Meeting unless notice of the matter is received by the Company on or before
March 21, 2004 and certain other conditions of the applicable rules of the
Securities and Exchange Commission are satisfied. Stockholder proposals should
be directed to the Secretary of the Company at the address set forth below.
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 that may be sent
to stockholders in connection with this solicitation. Solicitation may be made
by mail, telephone, telegraph and/or 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 Shareholder, which is retained by the Company on an annual
basis, will aid in the solicitation of proxies for the meeting for a fee of
$6,500 plus expenses.
Copies of the 2002 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,
please send your written request to the Secretary of the Company at the address
indicated below to discontinue mailing a duplicate copy to the account or
accounts selected by you.
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 FEBRUARY 2, 2003 UPON RECEIPT OF A WRITTEN REQUEST ADDRESSED TO:
Treasurer
Phillips-Van Heusen Corporation
200 Madison Avenue
New York, New York 10016-3903
By order of the Board of Directors,
MARK D. FISCHER
Secretary
New York, New York
May 5, 2003
24
EXHIBIT A
PHILLIPS-VAN HEUSEN CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The Audit Committee is a committee of the Board of Directors. It shall provide
assistance to the Board in fulfilling the Board's oversight functions relating
to the quality and integrity of the Company's financial reports, monitor the
Company's financial reporting process and internal control system, and perform
such other activities consistent with this Charter and the Company's By-laws as
the Committee or the Board deems appropriate. It shall have such additional
functions as are required by the New York Stock Exchange, the Securities and
Exchange Commission and the federal securities laws.
II. COMPOSITION
The Audit Committee shall be composed of three or more directors, none of whom
shall be an employee of the Company and each of whom shall meet the independence
requirements of the New York Stock Exchange and the Securities Exchange Act of
1934, including the rules thereunder (the "Exchange Act"). All members of the
Committee shall be financially literate, and at least one member shall have
accounting or related financial management expertise.
The members of the Audit Committee shall be elected by the Board of Directors at
the annual organizational meeting of the Board and shall serve until the next
annual organizational meeting or until their respective successors shall be duly
elected and qualified.
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III. MEETINGS
The Audit Committee shall meet at least four times annually. In addition to
other matters considered at such meetings, one meeting shall review the audit
plan of the internal auditing staff, one meeting shall review the audit plan of
the outside auditing firm, one meeting shall review the Company's annual audited
financial statements prior to their issuance, and one meeting shall review the
post-audit findings of the outside auditing firm. At least annually, the
Committee shall meet with the outside auditing firm and the internal auditing
staff in separate executive sessions to discuss any matters that the Committee
or these groups believe should be discussed privately with the Committee. A
quorum for the meetings referred to in this paragraph shall be a majority of the
members.
The Audit Committee shall also meet at least three times annually to confer with
the outside auditing firm and management to review the Company's interim
financial results prior to their public announcement. A quorum for the meetings
referred to in this paragraph shall be one of the members.
The Audit Committee may also hold any special meetings as may be called by the
Chairman of the Committee, a majority of the members of the Committee or at the
request of the outside auditing firm or the internal auditing staff or
management. Members of senior management, the outside auditing firm, the
internal auditing staff and others may attend meetings of the Committee at the
invitation of the Committee and shall provide pertinent information as
necessary.
The Chairman of the Audit Committee shall set the agenda of each meeting and
arrange for the distribution of the agenda, together with supporting material,
to the Committee members prior to
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each meeting. The Chairman will also cause minutes of each meeting to be
prepared and circulated to the Committee members. The Committee may meet via
telephone conference calls.
The Audit Committee shall report regularly to the Board of Directors as to its
activities.
IV. RELATIONSHIP WITH OUTSIDE AUDITING FIRM
The outside auditing firm is ultimately accountable to the Board of Directors
and the Audit Committee, as representatives of the Company's stockholders, but
shall report directly to the Committee. The Committee shall be directly
responsible for the appointment, compensation and oversight of the work of the
outside auditing firm (including resolution of disagreements between management
of the Company and the outside auditing firm regarding financial reporting) for
the purpose of preparing or issuing an audit report or related work. All
auditing services and non-audit services provided to the Company by the outside
auditing firm shall be preapproved by the Committee. The Committee may delegate,
subject to any rules or limitations it may deem appropriate, to one or more
designated members of the Committee the authority to grant such preapprovals;
provided, however, that the decisions of any member to whom authority is so
delegated to preapprove an activity shall be presented to the Committee at its
next meeting.
V. FUNCTIONS
The Audit Committee's primary functions are to:
Documents/Reports Review
1. Review and assess the adequacy of this Charter at least annually.
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2. Review all public announcements of financial results prior to any
release to the public or investors.
3. Review all quarterly and annual financial statements and reports
(including disclosures under Management's Discussion and Analysis of
Financial Condition and Results of Operations) prior to any filing
of Forms 10-Q or 10-K with the Securities and Exchange Commission.
4. Recommend to the Board of Directors that the audited financial
statements be included in the Company's annual report on Form 10-K
for filing with the Securities and Exchange Commission.
5. Prepare the report of the Audit Committee required to be included in
the Company's proxy statement in connection with the annual
stockholders meeting.
Outside Auditing Firm
6. Approve the appointment and compensation of the outside auditing
firm prior to any engagement.
7. Review all relationships the outside auditing firm has with the
Company to determine their independence and obtain and review a
report from the outside auditing firm concerning the auditors'
internal quality control procedures; any material issues raised by
the most recent internal quality-control review, or peer review, of
the firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years,
respecting one or
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more independent audits carried out by the firm, and any steps taken
to deal with any such issues. The outside auditing firm shall
annually provide to the Audit Committee a written statement
delineating all such matters.
8. Review the annual audit plan of the outside auditing firm and
evaluate their performance.
9. Review the experience and qualifications of the senior members of
the outside auditing firm team.
10. Obtain and review a report from the outside auditing firm at least
annually as to (a) all critical accounting policies to be used, (b)
all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management of the Company, the ramifications of the use of such
alternative disclosures and treatments and the treatment preferred
by the outside auditing firm, and (c) other material written
communications between the outside auditing firm and management of
the Company, including management letters and schedules of
unadjusted differences.
11. Require the rotation of the "audit partners" (as defined in the
Exchange Act) on a regular basis in accordance with the requirements
of the Exchange Act.
12. Review the Company's hiring of employees or former employees of the
outside auditing firm who participated in any capacity in the audits
of the Company.
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Financial Reporting Processes
13. Consult with the outside auditing firm concerning the completeness
and accuracy of the Company's financial statements.
14. Consult with the outside auditing firm concerning the quality of the
Company's accounting principles as applied in its financial
statements and reporting.
15. Review any significant judgments made in management's preparation of
the financial statements and the view of the outside auditing firm
as to the appropriateness of such judgments.
16. Review any significant difficulties encountered during the course of
the audit or review, including any restrictions on the scope of the
outside auditing firm' work or access to reviewed information.
17. Review any disagreements between management and the outside auditing
firm in connection with any public announcements of financial
results and quarterly and annual financial statements and reports.
18. Review changes to the Company's accounting principles as recommended
by the outside auditing firm or management.
19. Review with the outside auditing firm and internal auditing staff
the adequacy of the Company's system of internal controls and
disclosure controls and procedures, including computerized
information system controls and security,
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and any related significant findings and recommendations of the
outside auditing firm, together with management's responses thereto.
20. Review the internal audit department's annual audit plan,
organization structure and staff qualifications.
21. Review periodically with the Company's general counsel, legal and
regulatory matters that could have a significant effect on the
Company's financial statements.
22. Discuss with management and the outside auditing firm the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
Other
23. Review periodically the Company's compliance with its Conflict of
Interest policy.
24. Establish procedures for (a) the receipt, retention, and treatment
of complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters, and (b) the confidential,
anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters.
25. Discuss the Company's policies with respect to risk assessment and
risk management.
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26. Perform an annual evaluation of the Audit Committee.
27. Investigate any other matter brought to its attention within the
scope of its duties which it deems appropriate for investigation.
The Audit Committee shall have such other functions as are provided by the New
York Stock Exchange, the Securities and Exchange Commission and the federal
securities laws.
The Audit Committee shall have the authority to engage outside legal, accounting
or other advisors as it determines necessary to carry out its functions, and the
Company shall provide adequate funding for the same.
Limitation of Audit Committee's Role
The Company's management has the primary responsibility for the financial
statements and the reporting process, including the Company's system of internal
controls and disclosure controls and procedures. The outside auditing firm
audits the Company's financial statements and expresses an opinion on the
financial statements based on the audit. The Audit Committee oversees (i) the
accounting and financial reporting processes of the Company and (ii) the audits
of the financial statements of the Company on behalf of the Board of Directors.
While the Audit Committee has the functions set forth in this Charter, it is not
the duty of the Audit Committee to plan or conduct audits or to determine that
the Company's financial statements and disclosures are complete and accurate and
are in accordance with generally accepted accounting principles and applicable
rules and regulations. The responsibility to plan and conduct audits is that of
the outside auditing firm. The Company's management has the responsibility to
determine that the Company's disclosures and financial statements are complete
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and accurate and in accordance with generally accepted accounting principles. It
is also not the duty of the Audit Committee to assure the Company's compliance
with laws and regulations or compliance with the Company's code of ethical
conduct. The primary responsibility for these matters rests with the Company's
management.
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EXHIBIT B
PHILLIPS-VAN HEUSEN CORPORATION
2003 STOCK OPTION PLAN
1. Purpose. The purposes of the 2003 Stock Option Plan (the "Plan") are
to induce certain individuals to remain in the employ, or to continue to serve
as directors of, or consultants or advisors to, Phillips-Van Heusen Corporation
(the "Company") and its present and future subsidiary corporations (each a
"Subsidiary"), as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code"), to attract new individuals to enter into such
employment or service and to encourage such individuals to secure or increase on
reasonable terms their stock ownership in the Company. The Board of Directors of
the Company (the "Board") believes that the granting of stock options (the
"Options") under the 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.
Options granted hereunder are intended to be either (i) "incentive stock
options" (which term, when used herein, shall have the meaning ascribed thereto
by the provisions of Section 422(b) of the Code) or (ii) options which are not
incentive stock options ("non-qualified stock options") or (iii) a combination
thereof, as determined by the Committee (the "Committee") referred to in Section
5 at the time of the grant thereof.
2. Effective Date of the Plan. The Plan became effective on May 1,
2003.
3. Stock Subject to Plan. 5,400,000 of the authorized but unissued
shares of the common stock, $1.00 par value, of the Company (the "Common Stock")
are hereby reserved for issue upon the exercise of Options granted 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 issue upon the exercise of Options. If any Options expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for the purposes of the Plan.
4. Administration.
(a) Except as otherwise provided in Section 4(b), the Plan shall be
administered by the Committee. 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 terms and provisions of the respective option agreements or
certificates (which need not be identical), to determine the individuals (each a
"Participant") to whom and the times and the prices at which Options shall be
granted, the periods during which each Option shall be exercisable, the number
of shares of the Common Stock to be subject to each Option and whether such
Option shall be an incentive stock option or a non-qualified stock option 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 individuals, their present and
potential contributions to the success of the Company and the 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 4 shall be
conclusive. Any dispute or disagreement which may arise under or as a result of
or with respect to any Option shall be
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determined by the Committee, in its sole discretion, and any interpretations by
the Committee of the terms of any Option shall be final, binding and conclusive.
(b) The Chairman of the Board or, if the Chairman is not an
executive officer of the Company, the Chief Executive Officer of the Company or
other executive officer of the Company designated by the Committee who is also a
director (the Chairman, Chief Executive Officer or other designated executive
officer being referred to as the "Designated Director") may administer the Plan
with respect to employees of the Company or a Subsidiary (i) who are not
officers of the Company subject to the provisions of Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and (ii) whose
compensation is not, and in the judgment of the Designated Director may not be
reasonably expected to become, subject to the provisions of Section 162(m) of
the Code. The authority of the Designated Director and Options granted by the
Designated Director shall be subject to such terms, conditions, restrictions and
limitations as may be imposed by the Board, including, but not limited to, a
limit on the aggregate number of shares of Common Stock subject to Options that
may be granted in any one calendar year by the Designated Director to all such
employees of the Company and its Subsidiaries and a maximum number of shares
that may be subject to Options granted under the Plan in any one calendar year
to any single employee by the Designated Director. Unless and until the Board
shall take further action, the maximum number of shares of Common Stock that may
be subject to Options granted under the Plan, the Company's 1997 Stock Option
Plan, 2000 Stock Option Plan and any other stock option plan then in effect in
any one calendar year by the Designated Director shall be 100,000 in the
aggregate and the maximum number of shares of Common Stock that may be subject
to Options granted under the Plan, the Company's 1997 Stock Option Plan, 2000
Stock Option Plan and any other stock option plan then in effect in any one
calendar year by the Designated Director to any single employee shall be 5,000
in the aggregate. Any actions duly taken by the Designated Director with respect
to the grant of Options to such employees shall be deemed to have been taken by
the Committee for purposes of the Plan.
5. Committee. The Committee shall consist of two or more members of the
Board. It is intended that all of the members of the Committee shall be
"non-employee directors" within the meaning of Rule 16b-3(b)(3) promulgated
under the Exchange Act, and "outside directors" within the contemplation of
Section 162(m)(4)(C)(i) of the Code. The Committee shall be appointed annually
by the Board, which may at any time and from time to time remove any members of
the Committee, with or without cause, appoint additional members to 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, except that the Committee may delegate to any one of its
members the authority of the Committee with respect to the grant of Options to
any person who shall not be an officer and/or director of the Company and who is
not, and in the judgment of the Committee may not be reasonably expected to
become, a "covered employee" within the meaning of Section 162(m)(3) of the
Code. Any decision or determination of the Committee reduced to writing and
signed by all of the members of the Committee (or by the member(s) of the
Committee to whom authority has been delegated) shall be fully as effective as
if it had been made at a meeting duly called and held.
6. Eligibility. An Option may be granted only to a key employee of the
Company or a Subsidiary or to a director of the Company or a Subsidiary who is
not an employee of the Company or a Subsidiary or to an independent consultant
or advisor who renders services to the Company or a Subsidiary.
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7. Option Prices.
(a) The initial per share option price of any Option shall be the
price determined by the Committee, but not less than the fair market value of a
share of the Common Stock on the date of grant; provided, however, that, in the
case of a Participant who owns more than 10% of the total combined voting power
of the Common Stock at the time an Option which is an incentive stock option is
granted to him or her, the initial per share option price shall not be less than
110% of the fair market value of a share of the Common Stock on the date of
grant.
(b) For all purposes of the Plan, 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 the business day preceding
such date or (ii) if there is no sale of the Common Stock on such Exchange on
such business day, the average of the bid and asked prices on such Exchange at
the close of the market on such business day.
8. Option Term. Participants shall be granted Options for such term as
the Committee shall determine, not in excess of 10 years from the date of the
granting thereof; provided, however, that, in the case of a Participant who owns
more than 10% of the total combined voting power of the Common Stock at the time
an Option which is an incentive stock option is granted to him or her, the term
with respect to such Option shall not be in excess of five years from the date
of the granting thereof.
9. Limitations on Amount of Options Granted.
(a) The aggregate fair market value of the shares of the Common
Stock for which any Participant may be granted incentive stock options which are
exercisable for the first time in any calendar year (whether under the terms of
the Plan or any other stock option plan of the Company) shall not exceed
$100,000.
(b) No Participant shall, during any fiscal year of the Company, be
granted Options under the Plan to purchase more than 1,200,000 shares of the
Common Stock.
10. Exercise of Options.
(a) Except as otherwise determined by the Committee at the time of
grant, a Participant may not exercise an Option during the period commencing on
the date of the grant of such Option to him or her and ending on the day
immediately preceding the first anniversary of such date. Except as otherwise
determined by the Committee at the time of grant, a Participant may (i) during
the period commencing on the first anniversary of the date of the grant of an
Option to him or her and ending on the day immediately preceding the second
anniversary of such date, exercise such Option with respect to one-quarter of
the shares granted thereby, (ii) during the period commencing on the second
anniversary of the date of such grant and ending on the day immediately
preceding the third anniversary of the date of such grant, exercise such Option
with respect to one-half of the shares granted thereby, (iii) during the period
commencing on the third anniversary of the date of such grant and ending on the
day immediately preceding the fourth anniversary of such date, exercise such
Option with respect to three-quarters of the shares granted thereby and (iv)
during the period commencing on the fourth anniversary of the date of such grant
and ending at the time the Option expires pursuant to the terms hereof, exercise
such Option with respect to all of the shares granted thereby.
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(b) Except as hereinbefore otherwise set forth, an Option may be
exercised either in whole at any time or in part from time to time.
(c) An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of the Common
Stock and payment to the Company of the amount of the option price for the
number of shares of the Common Stock so specified; provided, however, that, if
the Committee shall in its sole discretion so determine at the time of the grant
of any Option, all or any portion of such payment may be made in kind by the
delivery of shares of the Common Stock having a fair market value equal to the
portion of the option price so paid; provided further, however, that no portion
of such payment may be made by delivering shares of the Common Stock acquired
upon the exercise of an Option if such shares shall not have been held by the
Participant for at least six months; and provided further, however, that,
subject to the requirements of Regulation T (as in effect from time to time)
promulgated under the Exchange Act, the Committee may implement procedures to
allow a broker chosen by a Participant to make payment of all or any portion of
the option price payable upon the exercise of an Option and receive, on behalf
of such Participant, all or any portion of the shares of the Common Stock
issuable upon such exercise.
(d) The Committee may, in its discretion, permit any Option to be
exercised, in whole or in part, prior to the time when it would otherwise be
exercisable.
(e) (1) Notwithstanding the provisions of Section 10(a) or the last
sentence of Section 13, in the event that a Change in Control shall occur, then,
each Option theretofore granted to any Participant which shall not have
theretofore expired or otherwise been cancelled or become unexercisable shall
become immediately exercisable in full. For the purposes of this Section 10(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 or nominated for election by the stockholders as directors by at
least 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 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 at least three-fourths of the directors of the Company who have been
directors of the Company for at least two years, (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 or (v) as defined in the Participant's
employment agreement, if any, with the Company or a Subsidiary. For the purposes
of this paragraph (1), (i) the term "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, (ii) the term
"Person" shall mean any individual, partnership, firm, trust, corporation or
other similar entity and (iii) 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."
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(2) In the event that a Change of Control shall occur, then,
from and after the time of such event, neither the provisions of this Section
10(e) nor any of the rights of any Participant hereunder shall be modified or
amended in any way.
11. Transferability. (a) Except as otherwise provided in Section 11(b),
no Option shall be assignable or transferable except by will and/or by the laws
of descent and distribution and, during the life of any Participant, each Option
granted to such Participant may be exercised only by him or her.
(b) A Participant may, with the prior approval of the Committee,
transfer for no consideration an Option which is a non-qualified stock option to
or for the benefit of the Participant's Immediate Family, a trust for the
exclusive benefit of the Participant's Immediate Family or to a partnership or
limited liability company for one or more members of the Participant's Immediate
Family, subject to such limits as the Committee may establish, and the
transferee shall remain subject to all the terms and conditions applicable to
the Option prior to such transfer. The term "Immediate Family" shall mean the
Participant's children, stepchildren, grandchildren, parents, stepparents,
grandparents, spouse, former spouse, siblings, nieces, nephews, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships or any person sharing the Participant's
household (other than a tenant or employee).
12. Termination of Employment or Service. Except as otherwise
determined by the Committee, in the event a Participant leaves the employ or
service, or ceases to serve as a director, of the Company and the Subsidiaries,
whether voluntarily or otherwise but other than by reason of his or her death
or, in the case of Participant who shall be an employee or director, retirement,
each Option theretofore granted to him or her which shall not have been
exercisable prior to the date of the termination of his or her employment or
service shall terminate immediately. Except as otherwise determined by the
Committee, each other Option theretofore granted to him or her which shall not
have theretofore expired or otherwise been cancelled shall, to the extent
exercisable on the date of such termination of employment or service and not
theretofore exercised, terminate upon the earlier to occur of (x) 90 days after
the date of such Participant's termination of employment or cessation of service
and (y) the date of termination specified in such Option. Notwithstanding the
foregoing, if a Participant is terminated for cause (as defined herein), each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent not theretofore
exercised, terminate forthwith. Except as otherwise determined by the Committee,
in the event a Participant leaves the employ, or ceases to serve as a director,
of the Company and the Subsidiaries by reason of his or her retirement, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall become immediately exercisable in full
and shall, to the extent not theretofore exercised, terminate upon the earlier
to occur of the expiration of three years after the date of such retirement and
the date of termination specified in such Option. Except as otherwise determined
by the Committee, in the event a Participant's employment or service with the
Company and the Subsidiaries terminates by reason of his or her death, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall become immediately exercisable in full
and shall, to the extent not theretofore exercised, terminate upon the earlier
to occur of the expiration of three months after the date of the qualification
of a representative of his or her estate and the date of termination specified
in such Option. For purposes of the foregoing, (a) the term "cause" shall mean:
(i) the commission by the Participant of any act or omission that would
constitute a crime under federal, state or equivalent foreign law, (ii) the
commission by the 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 to the Company and/or the Subsidiaries, (iv) continued
substance abuse that renders the Participant incapable of performing his or her
material duties to the satisfaction of the Company and/or the Subsidiaries, or
(v) as defined in the Participant's employment agreement, if any, with the
Company
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or a Subsidiary and (b) the term "retirement" shall mean (I) the termination of
a Participant's employment with the Company and all of the Subsidiaries (x)
other than for cause or by reason of his or her death and (y) on or after the
earlier to occur of (1) the first day of the calendar month in which his or her
65th birthday shall occur and (2) the date on which he or she shall have both
attained his or her 55th birthday and completed 10 years of employment with the
Company and/or the Subsidiaries or (II) the termination of a Participant's
service as a director with the Company and all of the Subsidiaries (x) other
than for cause or by reason of his or her death and (y) on or after the first
day of the calendar month in which his or her 65th birthday shall occur.
13. 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 Option and the number
of shares of the Common Stock reserved for issuance in accordance with the
provisions of the Plan but not yet covered by an Option and the number of shares
set forth in Section 9(b) shall be adjusted by adding to each 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 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 any Option and for each share of the Common Stock
reserved for issuance in accordance with the provisions of the Plan but not yet
covered by an Option and for each share of the Common Stock referred to in
Section 9(b), 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 13, 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 any Option and the number or kind of shares reserved for
issuance in accordance with the provisions of the Plan but not yet covered by an
Option and the number or kind of shares referred to in Section 9(b), such
adjustment shall be made by the Committee and shall be effective and binding for
all purposes of the Plan and of each stock option agreement or certificate
entered into in accordance with the provisions of the Plan. In the case of any
substitution or adjustment in accordance with the provisions of this Section 13,
the option price in each stock option agreement or certificate for each share
covered thereby prior to such substitution or adjustment shall be the option
price for all shares of stock or other securities which shall have been
substituted for such share or to which such share shall have been adjusted in
accordance with the provisions of this Section 13. No adjustment or substitution
provided for in this Section 13 shall require the Company to sell a fractional
share under any stock option agreement or certificate. 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, then,
except as otherwise provided in Section 10(e) and the second sentence of this
Section 13, each Option, to the extent not theretofore exercised, shall
terminate forthwith.
14. Purchase for Investment, Withholding and Waivers. Unless the shares
to be issued upon the exercise of an Option by a Participant shall be registered
prior to the issuance thereof under the Securities Act of 1933, as amended, such
Participant will, as a condition of the Company's obligation to issue such
shares, be required to give a representation in writing that he or she is
acquiring such shares for his or her own account as an investment and not with a
view to, or for sale in connection with, the distribution of any thereof. In the
event of the death of a Participant, a
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condition of exercising any Option shall be the delivery to the Company of such
tax waivers and other documents as the Committee shall determine. In the case of
each non-qualified stock option, a condition of exercising the same shall be the
entry by the person exercising the same into such arrangements with the Company
with respect to withholding as the Committee may determine.
15. No Stockholder Status. Neither any Participant nor his or her legal
representatives, legatees or distributees shall be or be deemed to be the holder
of any share of the Common Stock covered by an Option unless and until a
certificate for such share has been issued. Upon payment of the purchase price
thereof, a share issued upon exercise of an Option shall be fully paid and
non-assessable.
16. No Restrictions on Corporate Acts. Neither the existence of the
Plan nor any Option shall in any way affect the right or power of the Company or
its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding whether of a similar character or otherwise.
17. No Employment Right. Neither the existence of the Plan nor the
grant of any Option shall require the Company or any Subsidiary to continue any
Participant in the employ or service of the Company or such Subsidiary.
18. 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 as to which Options may be granted under the Plan (as adjusted
in accordance with the provisions of Section 13), or change the class of persons
eligible to participate in the Plan, or change the manner of determining the
option prices. Except as otherwise provided in Section 13, no termination or
amendment of the Plan may, without the consent of the Participant to whom any
Option shall theretofore have been granted, adversely affect the rights of such
Participant under such Option. The Committee 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, amend any
outstanding Option to reduce the option price, or cancel any outstanding Option
and contemporaneously award a new Option to the same optionee for substantially
the same number of shares at a lower option price.
19. Expiration and Termination of the Plan. The Plan shall terminate on
April 30, 2013 or at such earlier time as the Board may determine. Options may
be granted under the Plan at any time and from time to time prior to its
termination. Any Option outstanding under the Plan at the time of the
termination of the Plan shall remain in effect until such Option shall have been
exercised or shall have expired in accordance with its terms.
20. Options for Outside Directors.
(a) A director of the Company who is not an employee of the Company
or a Subsidiary and who is not a director elected solely by the holders of the
Company's Series B convertible preferred stock (an "Outside Director") shall be
eligible to receive, in addition to any other Option which he or she may receive
pursuant to Section 6, an annual Option. Except as
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otherwise provided in this Section 20, each such Option shall be subject to all
of the terms and conditions of the Plan.
(b) (i) At the first meeting of the Board immediately following each
Annual Meeting of the Stockholders of the Company, each Outside Director shall
be granted an Option, which shall be a non-qualified stock option, to purchase
8,000 shares of the Common Stock. Notwithstanding the foregoing, an Outside
Director may not receive a grant under this Section 20 for any year if and to
the extent such Outside Director receives a grant of options to purchase Common
Stock under any other Company stock option plan then in effect solely for his or
her services as a director of the Company for such year and the aggregate number
of shares of Common Stock issuable upon the exercise of all such options granted
for such year would exceed 8,000.
(ii) The initial per share option price of each Option granted
to an Outside Director shall under this Section 20 be equal to the fair market
value of a share of the Common Stock on the date of grant.
(iii) The term of each Option granted to an Outside Director
shall be ten years from the date of the granting thereof.
(iv) All or any portion of the payment required upon the
exercise of an Option granted to an Outside Director may be made in kind by the
delivery of shares of the Common Stock having a fair market value equal to the
portion of the option price so paid; provided, however, that no portion of such
payment may be made by delivering shares of the Common Stock acquired upon the
exercise of an Option if such shares shall not have been held by such Outside
Director for at least six months; and provided further, however, that, subject
to the requirements of Regulation T (as in effect from time to time) promulgated
under the Exchange Act, the Committee may implement procedures to allow a broker
chosen by such Outside Director to make payment of all or any portion of the
option price payable upon the exercise of an Option and receive, on behalf of
such Outside Director, all or any portion of the shares of the Common Stock
issuable upon such exercise.
(c) The provisions of this Section 20 may not be amended except by
the vote of a majority of the members of the Board and by the vote of a majority
of the members of the Board who are not Outside Directors.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PHILLIPS-VAN HEUSEN CORPORATION
200 Madison Avenue
New York, New York 10016-3903
BRUCE J. KLATSKY and MARK WEBER, or either of them, with the 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 10, 2003, 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:
o FOR THE ELECTION OF ALL OF THE NOMINEES FOR DIRECTOR
o FOR THE APPROVAL OF THE COMPANY'S 2003 STOCK OPTION PLAN; AND
o FOR THE APPOINTMENT OF AUDITORS.
(Continued, and to be dated and signed on the other side.)
PHILLIPS-VAN HEUSEN CORPORATION
P.O. BOX 11287
NEW YORK, NEW YORK 10203-0287
THE BOARD RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3 BELOW:
1. Election of the nominees for FOR all nominees [ ]
director listed below: listed below
WITHHOLD AUTHORITY to [ ] EXCEPTIONS* [ ]
vote for all nominees listed below
NOMINEES: EDWARD H. COHEN, JOSEPH B. FULLER, JOEL H. GOLDBERG, MARC GROSMAN,
DENNIS F. HIGHTOWER, BRUCE J. KLATSKY, HARRY N.S. LEE, BRUCE MAGGIN,
PETER J. SOLOMON AND MARK WEBER
(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
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2. Approval of the Company's FOR [ ] AGAINST [ ] ABSTAIN [ ]
2003 Stock Option Plan
3. Appointment of auditors. FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. 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: , 2003
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Signature
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Signature, if held jointly
To vote, fill in (x) with black or blue ink only. [X]