EMPLOYMENT AGREEMENT

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EXHIBIT 10.45

EMPLOYMENT AGREEMENT

        EMPLOYMENT AGREEMENT ("Agreement"), dated as of March 4, 2003, between PHILLIPS-VAN HEUSEN CORPORATION, a Delaware corporation ("PVH" and, together with its subsidiaries, the "Company"), and MICHAEL SHAFFER (the "Executive").

W I T N E S S E T H:

        WHEREAS, the Company desires to retain Executive on a full-time basis in accordance with the terms set forth herein; and

        WHEREAS, the Executive desires to be so employed by the Company.

        NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, the parties hereto hereby agree as follows:

        1.     Employment.     

        (a)     Employment.     The Company agrees to employ the Executive, and the Executive agrees to be employed by the Company, in accordance with the terms and conditions hereof. The Executive shall be an employee at will and this Agreement shall not constitute a guarantee of employment. Each of the parties acknowledges and agrees that either party may terminate the Executive's employment at any time, for any reason, with or without cause, and with or without notice. The period commencing on the date hereof and ending on the effective date of the termination of the Executive's employment is hereinafter referred to as the "Employment Period."

        (b)     Position.     The Executive shall serve as Senior Vice President, Retail Operations or in such other position or positions as the Company's Chief Executive Officer or Board of Directors (which, for purposes of this Agreement, includes any committee thereof, unless the context requires otherwise) may designate from time to time. The Executive shall (i) perform such duties and services as shall from time to time be assigned to him, (ii) devote all of his business time to the services required of him hereunder and (iii) use his best efforts, judgment, skill and energy to perform such duties and services. As used in this Section 1, "business time" shall be determined in accordance with the usual and customary standards of the Company.

        2.     Compensation.     

        (a)     Base Salary.     The Company shall pay the Executive a salary at the annual rate of $275,000 ("Base Salary"), payable in accordance with the normal payroll procedures of the Company in effect from time to time. The Company or the Board of Directors may from time to time, in its sole and absolute discretion, increase or decrease the Base Salary by any amount it determines to be appropriate.

        (b)     Incentive and Bonus Compensation.     The Executive shall be eligible to participate in the Company's existing and future bonus and stock option plans and other incentive compensation programs (collectively, "Plans"), to the extent that the Executive is qualified to participate in any such Plan under the generally applicable provisions thereof in effect from time to time. Such eligibility is not a guarantee of participation in or of the receipt of any award, payment or other compensation under any Plan. To the extent the Executive does participate in a Plan and the Plan does not expressly provide otherwise, the Chief Executive Officer and/or the Board of Directors, as appropriate, may determine all terms of participation (including, without limitation, the type and size of any award, payment or other compensation and the timing and conditions of receipt thereof by the Executive) in the Chief Executive Officer's or Board's sole and absolute discretion. Nothing herein shall be deemed to prohibit the Company or the Board of Directors from amending or terminating any and all Plans in its sole and absolute discretion. The terms of each Plan shall govern the Executive's rights and obligations thereunder during the Executive's employment and upon the termination thereof. Without limiting the generality of the foregoing, the definition of "Cause" hereunder shall not supersede the

definition of "cause" in any Plan and any rights of the Executive hereunder upon and subsequent to the termination of the Executive's employment shall be in addition to, and not in lieu of, any right of the Executive under any Plan then in effect upon or subsequent to a termination of employment.

        (c)     Benefits.     The Executive shall be eligible to participate in all employee benefit and insurance plans sponsored or maintained by the Company for similarly situated executives (including any savings, retirement, life, health and disability plans), to the extent that the Executive is qualified to participate in any such plan under the generally applicable provisions thereof in effect from time to time. Nothing herein shall be deemed to prohibit the Company or the Board of Directors from amending or terminating any such plan in its sole and absolute discretion. The terms of each such plan shall govern the Executive's rights and obligations thereunder during the Executive's employment and upon the termination thereof.

        (d)     Expenses.     The Company shall pay or reimburse the Executive for reasonable expenses incurred or paid by the Executive in the performance of the Executive's duties hereunder in accordance with the generally applicable policies and procedures of the Company, as in effect from time to time and subject to the terms and conditions thereof.

        3.     Termination of Employment.     The Executive's employment hereunder shall terminate, or shall be subject to termination at any time, as follows:

        (a)     Termination for Cause by the Company.     The Company may terminate the Executive's employment under this Agreement at any time for Cause (as defined below). Upon such termination, the Company shall have no further obligation to the Executive hereunder except for the payment of (i) the portion of the Base Salary for periods prior to the effective date of termination accrued but unpaid (if any), and (ii) all unreimbursed expenses, subject to Section 2(d). For the avoidance of doubt, the Executive shall have no right to receive any amounts under the Company's severance policy upon his termination for Cause. For purposes of this Agreement, "Cause" shall be defined as (1) gross negligence in the performance of the material responsibilities of the Executive's office or position; (2) gross misconduct in the performance of the material responsibilities of the Executive's office or position, including, without limitation, malfeasance relating to the Company and/or vendor and customer accounts and insubordination; (3) material failure or refusal by the Executive to perform his core job duties, as such may be reasonably assigned to him from time to time, other than by reason of his death or disability or other acts or omissions constituting material neglect or dereliction of his such duties; (4) the conviction of the Executive by a court of competent jurisdiction (and after all appeal procedures have been exhausted or have expired) of, or the entry of a plea of guilty or nolo contendere by the Executive to a charge of, the commission of a crime that constitutes a felony under federal or state law or the equivalent under foreign law; (5) the Executive's embezzlement or intentional misappropriation of any property of the Company; (6) the Executive having divulged, furnished or made accessible to anyone other than the Company, its directors, officers, employees, auditors and legal advisors, otherwise than in the ordinary course of business, any Confidential Information (as hereinafter defined); (7) fraud, dishonesty or other acts or omissions by the Executive that constitute a willful breach of his fiduciary duty to the Company; or (8) the happening of any other event which, under the provisions of applicable law, disqualifies the Executive from acting in any or all capacities in which he is then acting. The Executive shall be given notice of the termination of his employment for Cause under this Section 3(a). If the Executive shall be terminated pursuant to clause (1), (2) or (3) of this Section 3(a), the Executive shall be given a reasonable period of time, not to exceed 30 days, to correct the underlying act or omission. In all other cases, termination shall be effective as of the date notice is given.

        (b)     Termination without Cause by the Company.     The Company may also terminate the Executive's employment under this Agreement at any time without Cause. The voluntary resignation of the Executive shall not for any reason be treated as a termination of employment by the Company

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without Cause, even if the Executive's stated reason for resignation is a material change in the terms or conditions of his employment as in effect at that time, except as otherwise provided in Section 3(f)(ii). If the Company terminates the Executive's services without Cause, other than during the two-year period following a Change in Control (as hereinafter defined), the Executive shall be entitled to receive from the Company (i) the portion of the Base Salary for periods prior to the effective date of termination accrued but unpaid (if any), (ii) all unreimbursed expenses (if any), subject to Section 2(d), and (iii) an aggregate amount (the "Severance Amount") equal to the greater of (x) two weeks' salary for each consecutive year of employment with the Company immediately prior to such a termination and (y) the severance payable under the Company's Severance Policy, as then in effect; provided , however , that in no event shall the Severance Amount be less than the Base Salary then in effect. In addition, if the Company terminates the Executive's employment hereunder without Cause, then the Company shall also provide to the Executive during the period over which the Severance Amount is paid, medical and dental insurance coverage for the Executive and the members of his family which is not less favorable to the Executive than the group medical and dental insurance coverage carried by the Company for the Executive and the members of his family immediately prior to such termination of employment; provided , however , that the obligations set forth in this sentence shall terminate to the extent the Executive obtains comparable medical and dental insurance coverage from any other employer during such period, but the Executive shall not have any obligation to seek or accept employment during such period, whether or not any such employment would provide comparable medical and dental insurance coverage; and provided further , however , that the Executive shall be obligated to pay an amount equal to the active employee contribution, if any, for each such coverage. The Severance Amount shall be based upon the Base Salary then in effect. The Severance Amount shall be payable in substantially equal payments on the same schedule as Base Salary was paid immediately prior to termination. For purposes of this Section 3(b), the Executive shall be deemed to accrue a year of employment with the Company on each anniversary of his date of hire and, with respect to his last year of employment, if at least six months have passed since the last such anniversary date. For the avoidance of doubt the payment of the Severance Amount shall be in lieu of any amounts payable under the Company's severance policy (as then in effect) and the Executive hereby waives any and all rights thereunder.

        (c)     Termination by Voluntary Resignation by the Executive.     The Executive may terminate his employment with the Company at any time by voluntary resignation. Upon such termination, except as otherwise provided in Section 3(f)(ii), the Company shall have no further obligation to the Executive hereunder except for the payment of (i) the portion of the Base Salary for periods prior to the effective date of termination accrued but unpaid (if any), and (ii) all unreimbursed expenses (if any), subject to Section 2(d). Notwithstanding the foregoing, the Executive shall provide no less than 90 days' prior written notice of the effective date of his resignation. The Company shall continue to pay the Executive his Base Salary during such 90-day period. The Executive acknowledges and agrees that the Company may elect to place the Executive on paid leave for all or any part of such 90-day period. Notwithstanding the foregoing, the Company, in its sole and absolute discretion, may waive the requirement for prior notice of the Executive's resignation or decrease the notice period, in which event the Company shall have no continuing obligation to pay the Executive's Base Salary or shall only have such obligation with respect to the shortened period, as the case may be.

        (d)     Disability.     The Executive's employment shall be terminable by the Company, subject to applicable law and the Company's short-term and long-term disability policies then in effect, if the Executive becomes physically or mentally disabled, whether totally or partially, such that he is prevented from performing his usual duties and services hereunder for a period of 120 consecutive days or for shorter periods aggregating 120 days in any 12-month period. If the Executive's employment is so terminated by the Company, the Company shall have no further obligation to the Executive hereunder, except for the payment to the Executive or his legal guardian or representative, as appropriate, of

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(i) the portion of the Base Salary for periods prior to the effective date of termination accrued but unpaid (if any), and (ii) all unreimbursed expenses (if any), subject to Section 2(d).

        (e)     Death.     If the Executive shall die during the Employment Period, this Agreement shall terminate on the date of the Executive's death and the Company shall have no further obligation to the Executive hereunder except for the payment to the Executive's estate of (i) the portion of the Base Salary for periods prior to the effective date of termination accrued but unpaid (if any), and (ii) all unreimbursed expenses (if any), subject to Section 2(d).

        (f)     Termination Subsequent to a Change in Control.     

        (i)    For purposes of this Agreement:

        (A)  A "Change in Control" shall be deemed to occur upon:

        (1)   the election of one or more individuals to the Board of Directors, which election results in one-third or more of the directors of PVH consisting of individuals who have not been directors of PVH for at least two years, unless such individuals have been elected as directors or nominated for election as directors by at least three-fourths of the directors of PVH who have been directors of PVH for at least two years;

        (2)   the sale by PVH of all or substantially all of its assets (or the assets of the PVH subsidiary employing the Executive) to any individual or unaffiliated partnership, limited liability company or other entity (each, a "Person"), the consolidation of PVH (or the PVH subsidiary employing the Executive) with any Person, the merger of PVH (or the PVH subsidiary employing the Executive) with any Person as a result of which merger PVH (or the PVH subsidiary employing the Executive) is not the surviving entity (in the case of PVH, as a publicly held corporation), unless such sale has been approved in advance by at least three-fourths of the directors of PVH on the date hereof or by a Successor Board, provided that at least three-fourths of the Continuing Directors on such Successor Board approve such transaction;

        (3)   the sale or transfer of shares of PVH by PVH 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 (as defined in the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended) shall own, after such sales and transfers, at least one-fourth, but less than one-half, of the shares of PVH 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 PVH on the date hereof or by a Successor Board, provided that at least three-fourths of the Continuing Directors on such Successor Board approve such transaction; or

        (4)   the sale or transfer of shares of PVH by PVH 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 (as defined in the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended) shall own, after such sales and transfers, at least one-half, of the shares of PVH having voting power for the election of directors.

        (B)  "Continuing Director" means any director of PVH on the date hereof and any director of PVH whose election to the Board of Directors of PVH was recommended or approved by at least three-fourths of the directors of PVH serving at the time of such recommendation or approval and in all events shall exclude any director who was elected as a result of the solicitation of proxies by any Person other than the Board of Directors of PVH.

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        (C)  "Successor Board" means a Board of Directors of PVH at least three-quarters of which is composed of Continuing Directors.

        (D)  "Good Reason" means

        (1)   a material reduction in the Executive's duties without his consent;

        (2)   a reduction of the Executive's Base Salary as in effect immediately before the Change in Control by more than 10% or the elimination of all Plans (without a commensurate increase in Base Salary or replacement by new Plans) or the reduction of the compensation under the Plans (including any new or replacement Plans) such that the Executive's potential total compensation ( i.e. , Base Salary, cash bonuses, stock awards, stock options and other compensation) is reduced by more than 10% of his potential total compensation (assuming all performance criteria are satisfied and awards are paid at their maximum level) before the Change in Control;

        (3)   a material reduction relative to all other senior executives in the medical, life, disability and other benefits made available to the Executive pursuant to Section 2(c); and

        (4)   a material diminution relative to all other senior executives in the Executive's status or working conditions or any other action that impairs substantially the Executive's status relative to all other senior executives.

        (E)  "Parachute Indemnity Amount" shall mean the amount determined with respect to the Executive as follows:

        (1)   There shall first be determined, after giving effect to the payment of the Executive's Primary Benefit (as hereinafter defined) and all other compensation and benefits paid to the Executi