AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND
RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made
and entered into by and between THE WARNACO GROUP, INC., a Delaware
corporation (together with its successors and assigns, the
“Company”), and Elizabeth Wood (the
“Executive”) to be effective as of the close of
business on December 31, 2008 (the “Effective
Date”).
WHEREAS, the
Company and the Executive (individually a “Party” and
together the “Parties”) previously entered into this
Agreement as of September 12, 2005 on the terms and conditions
set forth herein; and
WHEREAS, the
Parties wish to amend and restate this Agreement as of the close of
business on December 31, 2008 in a manner which reflects the
Parties best efforts to comply with the provisions of
Section 409A of the Internal Revenue Code of 1986, as amended
from time to time (the “Code”), and its implementing
regulations and guidance (“Section 409A”), and to
make certain other changes;
NOW, THEREFORE, in
consideration of the premises and mutual covenants contained herein
and for other good and valuable consideration, the receipt of which
is mutually acknowledged, the Parties agree as follows:
(a) “Affiliate”
of a specified person or entity shall mean a person or entity that
directly or indirectly controls, is controlled by, or is under
common control with, the person or entity specified.
(b) “Board”
shall mean the Board of Directors of the Company.
(i) willful misconduct by the Executive
which causes material harm to the Company’s
interests;
(ii) willful and material breach of duty by
the Executive in the course of her employment, which, if curable,
is not cured within 10 days after Executive’s receipt of
written notice from the Company;
(iii) willful failure by the Executive,
after having been given written notice from the Company, to perform
her duties other than a failure resulting from Executive’s
incapacity due to physical or mental illness; or
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(iv) indictment of the Executive for a
felony, a crime involving moral turpitude or any other crime
involving the business of the Company which, in the case of such
crime involving the business of the Company, is injurious to the
business of the Company.
For purposes of
this Cause definition, no act or failure to act, on the part of the
Executive, shall be considered willful unless it is done, or
omitted to be done, by her in bad faith and without reasonable
belief that her action was in the best interests of the Company.
The determination to terminate the Executive’s employment for
Cause shall be made by the Board and prior to such determination
the Executive shall have the right to appear before the Board or a
Committee designated by the Board.
(d) “Change
in Control” shall mean any of the following:
(i) any
“person” (as such term is used in Sections 3(a)(9)
and 13(d) of the Securities Exchange Act of 1934) or group of
persons acting jointly or in concert, but excluding a person who
owns more than 5% of the outstanding shares of the Company as of
the date of this Agreement, becomes a “beneficial
owner” (as such term is used in Rule 13d-3 promulgated
under that Act), of 50% or more of the Voting Stock of the
Company;
(ii) all
or substantially all of the assets of the Company are disposed of
pursuant to a merger, consolidation or other transaction (unless
the shareholders of the Company immediately prior to such merger,
consolidation or other transaction beneficially own, directly or
indirectly, in substantially the same proportion as they owned the
Voting Stock of the Company, all of the Voting Stock or other
ownership interests of the entity or entities, if any, that succeed
to the business of the Company); or
(iii) approval by the shareholders of the
Company of a complete liquidation or dissolution of all or
substantially all of the assets of the Company.
For purposes of
this Change in Control definition, “Voting Stock” shall
mean the capital stock of any class or classes having general
voting power, in the absence of specified contingencies, to elect
the directors of the Company.
(e) “Commencement
Date” shall mean September 12, 2005.
(f) “Date
of Termination” shall mean:
(i) if the
Executive’s employment is terminated by the Company, the date
specified in the notice by the Company to the Executive that her
employment is so terminated; provided that for a termination for
Cause
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such notice is
delivered after the Board determination as set forth in Section
1(c) hereof;
(ii) if
the Executive voluntarily resigns her employment, 90 days
after receipt by the Company of written notice that the Executive
is terminating her employment or if the Company shortens the
required notice period in accordance with Section 6(c), the
date of termination specified in such notice;
(iii) if
the Executive’s employment is terminated by reason of death,
the date of death;
(iv) if
the Executive’s employment is terminated for Disability,
30 days after written notice is given as specified in Section
1(g) below; or
(v) if the
Executive resigns her employment for Good Reason, 30 days
after receipt by the Company of timely written notice from the
Executive in accordance with Section 1(h) below unless the Company
cures the event or events giving rise to Good Reason within
30 days after receipt of such written notice.
(g) “Disability”
shall mean the Executive’s inability, due to physical or
mental incapacity, to substantially perform her duties and
responsibilities for a period of 180 consecutive days as determined
by a medical doctor selected by the Company and reasonably
acceptable to the Executive. In no event shall any termination of
the Executive’s employment for Disability occur until the
Party terminating her employment gives written notice to the other
Party in accordance with Section 15 below.
(h) “Good
Reason” shall mean the occurrence of any of the following
without the Executive’s prior written consent:
(i) a
material diminution by the Company in the Executive’s
authority, duties or responsibilities as Senior Vice President
Human Resources or the assignment to the Executive by the Company
of any duties materially inconsistent with such
position;
(ii) a
reduction in (A) Base Salary or (B) Target Bonus
opportunity as a percentage of Base Salary;
(iii) in
connection with or following a Change in Control, a change in
reporting structure so that the Executive reports to someone other
than the Chief Executive Officer of the Company;
(iv) the
removal by the Company of the Executive as Senior Vice President
Human Resources of the Company or the failure by the Board
to
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elect or
reelect the Executive as an executive officer of the
Company;
(v) requiring the Executive to be
principally based at any office or location more than 50 miles from
midtown Manhattan; or
(vi) the
failure of a successor to all or substantially all of the assets of
the Company to assume the Company’s obligations under this
Agreement either as a matter of law or in writing within
15 days after a merger, consolidation, sale or similar
transaction.
Anything herein to
the contrary notwithstanding, the Executive shall not be entitled
to resign for Good Reason (i) if the occurrence of the event
otherwise constituting Good Reason is the result of Disability, a
termination by the Company for which notification has been given or
a voluntary resignation by the Executive other than for Good Reason
and (ii) unless the Executive gives the Company written notice
of the event constituting “Good Reason” within
90 days of the occurrence of such event and the Company fails
to cure such event within 30 days after receipt of such
notice.
(i) “Separation
From Service” shall mean a termination of the
Executive’s employment in a manner consistent with Treasury
Regulation Section 1.409A-1(h).
The term of the
Executive’s employment under this Agreement commenced on the
Commencement Date and shall end at the close of business on the
second anniversary of such date (the “Term”);
provided , however, that the Term shall thereafter be
automatically extended for additional one-year periods, unless
either the Company or the Executive gives the other written notice
at least 120 days prior to the then-scheduled expiration of
the Term that such Party is electing not to so extend the Term (the
initial term plus any extension thereof in accordance herewith
being referred to herein as the “Term”).
Notwithstanding the foregoing, the Term shall end on the date on
which the Executive’s employment is terminated by either
Party in accordance with the provisions herein.
3.
Position; Duties and Responsibilities .
During the Term,
the Executive shall be employed as Senior Vice President, Human
Resources of the Company and shall perform such duties and
responsibilities as determined by the Chief Executive Officer. The
Executive shall devote substantially all of her business time and
attention to the satisfactory performance of her duties. Anything
herein to the contrary notwithstanding, nothing shall preclude the
Executive from (i) subject to the reasonable approval of the
Board, serving on the boards of directors of trade associations
and/or charitable organizations or other business corporations
(provided such service is not prohibited under Section 8(a)(i)
below), (ii) engaging in charitable activities and community
affairs and (iii) managing her personal investments and
affairs, provided that the activities described in the
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preceding
clauses (i) through (iii) do not materially interfere
with the proper performance of her duties and responsibilities
hereunder.
(a)
Base Salary . During the Term, the Executive shall be paid
an annualized Base Salary of $300,000 (“Base Salary”),
payable in accordance with the regular payroll practices of the
Company, subject to annual review by the Board (or its designee,
including the Compensation Committee of the Board) in its sole
discretion. During the Term the Base Salary may not be decreased
without the Executive’s prior written consent. The Executive
shall not be entitled to any compensation for service as an officer
or member of any board of directors of any Affiliate. After any
increase in base salary approved by the Board or its designee, the
term “Base Salary” as used in this Agreement shall
thereafter refer to the increased amount. The Company acknowledges
that as of the Effective Date, Base Salary is $325,000.
(b)
Annual Incentive Awards . During the Term, the Executive
shall be eligible to receive an annual incentive award (provided
the Executive was employed continuously during the applicable
fiscal year) pursuant to the Company’s Incentive Compensation
Plan, as amended (or such other annual incentive plan as may be
approved by the Company’s shareholders), in effect for the
applicable fiscal year (“Bonus Plan”). The
Executive’s annual incentive award shall have a target of 50%
of Base Salary (“Target Bonus”), with a potential
maximum award as set forth in the Bonus Plan, in all events based
on the Executive’s achievement of annual performance and
other targets approved by the committee administering the Bonus
Plan. The amount and payment of any annual incentive award shall be
determined in accordance with the Bonus Plan and shall be payable
to the Executive when bonuses for the applicable performance period
are paid to other senior executives of the Company, but in all
events no later than the 60 th day following the end of the applicable fiscal
year for which the Annual Bonus has been earned. After any increase
in the Executive’s target annual bonus opportunity as a
percentage of Base Salary as approved by the Board (or its
designee), the term “Target Bonus” as used in this
Agreement shall thereafter refer to the increased target
opportunity. The Company acknowledges that as of the Effective
Date, Target Bonus is 60% of Base Salary.
(c)
Long Term Incentive Awards . On the Commencement Date, the
Executive was granted shares of restricted stock and an option to
purchase shares of the Company’s common stock with an
aggregate value of 2 times Base Salary ($600,000). Except as
otherwise provided herein, the restricted stock as described herein
and the option as described herein shall vest 33% on each of
September 12, 2006 and September 12, 2007 and 34% on
September 12, 2008, provided that the Executive is employed by
the Company on such vesting date and has not given notice to the
Company that she is voluntarily resigning, without Good Reason,
prior to such vesting date. Thereafter, commencing in fiscal year
2007, the Executive shall be eligible to participate in the
Company’s equity incentive plans, including, without
limitation, the 2003 and 2005 Stock Incentive Plans, as amended
from time to time, and such other long-term incentive plan(s) as
may be approved by the Company’s shareholders from time to
time (“Stock Incentive Plan”). Except as otherwise
provided herein, all equity grants shall be governed by the
applicable equity plan and/or award agreement. The Executive shall
be subject
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to the equity
ownership, retention and other requirements applicable to senior
executives of the Company.
(d)
Supplemental Award . During the Term beginning with fiscal
year 2006, provided the Executive is employed by the Company, the
Executive shall be entitled to an annual award with an aggregate
grant date value equal to 8% of the sum of Base Salary plus Annual
Bonus as defined in this Section 4(d) if the Executive will be less
than age 50 by the end of the applicable fiscal year, 10% of such
amount if the Executive will be age 50 and over and less than age
60 at the end of the applicable fiscal year and 13% of such amount
if the Executive will be age 60 or older by the end of the
applicable fiscal year (“Supplemental Award”), with the
first such award pro-rated to reflect four months of service in
fiscal 2005. For this purpose, Base Salary shall be the Base Salary
paid to the Executive for the fiscal year prior to the award year
and Annual Bonus shall be the annual bonus awarded to the Executive
by the Board for such fiscal year. The Supplemental Award shall not
be awarded to the Executive until after the determination by the
Board of the Executive’s annual bonus for the prior fiscal
year (but in no event later than 60 days thereafter for any
award made after fiscal year 2005) and 50% of the value of the
Supplemental Award shall be awarded in the form of restricted
shares pursuant to the applicable Stock Incentive Plan
(“Career Shares”) and 50% shall be awarded in the form
of a credit to a bookkeeping account maintained by the Company for
the Executive’s account (the “Notional Account”).
Any Career Shares awarded hereunder shall be governed by the
applicable Stock Incentive Plan and, if applicable, any award
agreement. For purposes of this Section 4(d), each Career
Share shall be valued at the closing price of a share of the
Company’s common stock (“Share”) on the date that
the Supplemental Award is made. For the Notional Account, the
Company shall select the investment alternatives available to the
Executive under the Company’s 401(k) plan. The balance in the
Notional Account shall periodically be credited (or debited) with
the deemed positive (or negative) return based on returns of the
permissible investment alternative or alternatives under the
Company’s 401(k) plan as selected in advance by the Executive
(and in accordance with the applicable rules of such plan or
investment alternative) to apply to such Notional Account, with
such deemed returns calculated in the same manner and at the same
times as the return on such investment alternative(s). The
Company’s obligation to pay the amount credited to the
Notional Account, including any return thereon provided for in this
Section 4(d), shall be an unfunded obligation to be satisfied
from the general funds of the Company. Except as otherwise provided
in Section 6 below or the applicable Stock Incentive Plan and
provided that the Executive is employed by the Company on such
vesting date, any Supplemental Award granted in the form of Career
Shares will vest as follows: 50% of the Career Shares will vest on
the earlier of the Executive’s 62nd birthday or upon the
Executive’s obtaining 15 years of “Vesting
Service” and 100% of the Career Shares will vest on the
earliest of (i) the Executive’s 65th birthday,
(ii) upon the Executive obtaining 20 years of
“Vesting Service” or (iii) 10th anniversary of the
date of grant. Except as otherwise provided in Section 6
below, and provided that the Executive is employed by the Company
on such vesting date, any Supplemental Award granted as a credit to
the Notional Account (as adjusted for any returns thereon)
(“Adjusted Notional Account”)) shall vest as follows:
50% on the earlier of the Executive’s 62nd birthday or upon
the Executive obtaining 5 years of “Vesting
Service” and 100% on the earlier of the Executive’s
65th birthday and upon the Executive obtaining 10 years of
“Vesting Service”. For purposes of this
Section 4(d), “Vesting Service” shall mean the
period of time that the Executive is employed by the Company as an
executive officer. Subject to
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Section 17(b)
hereof, upon vesting the Career Shares will be delivered to the
Executive in the form of Shares. In addition, any unvested Adjusted
Notional Account shall vest upon a Change in Control as defined in
Section 1(d)(i) or (ii) hereof which also qualifies as a
“change in control event” under Section 409A
(“409A Change in Control Event”). The vested balance in
the Adjusted Notional Account, if any, shall not be distributed to
the Executive until there has been a Separation From Service or, if
earlier, there has been a 409A Change in Control Event and, at such
time, shall only be distributed at the earliest time that satisfies
the requirements of this Section 4(d). Upon a 409A Change in
Control Event, the vested Adjusted Notional Account shall be paid
to the Executive in a lump-sum cash payment. In addition, if the
Executive’s employment is terminated for any reason, after
taking into account Section 6 hereof, any unvested
Supplemental Awards (whether in the form of Career Shares or the
Adjusted Notional Account) shall be forfeited and any vested
balance in the Adjusted Notional Account, subject to Section 17(b)
hereof, shall be paid to the Executive in a cash lump-sum payment
immediately following the Executive’s Separation From
Service; provided, however, that if the Executive is a
“specified employee” as determined pursuant to
Section 409A as of the date of the Executive’s
Separation From Service, such distribution shall not be made until
the earlier of the Executive’s death or the first business
day of the seventh calendar month following the month in which the
Executive’s Separation From Service occurs; provided,
further, that if the Executive’s employment is terminated due
to Disability and such Disability satisfies the requirements of
Section 409A(a)(2)(C) of the Code or the Treasury Regulations
implementing such section, then such distribution may be made upon
Separation From Service without regard to whether the Executive was
a “specified employee” at such time. The Executive can
elect to delay the time and/or form of payment of the Adjusted
Notional Account under this Section 4(d), provided such
election is delivered to the Company in writing at least
12 months before the scheduled payment date for such payment
and the new payment date for such payment is not earlier than
(i) the Executive’s death, (ii) the
Executive’s “disability” which satisfies the
requirements of Section 409A(a)(2)(C) of the Code and its
implementing regulations, or (iii) five (5) years from
the originally scheduled payment date. Upon the expiration or
termination of the Term, the vesting and payment dates in this
Section 4(d) (without regard to Section 6, except as otherwise
expressly provided in Section 6(d) of this Agreement) and the
election right in this Section 4(d) shall continue to apply to any
outstanding Supplemental Award.
(a)
Employee Benefit Programs . During the Term, subject to the
Company’s right to amend, modify or terminate any benefit
plan or program, the Executive shall be entitled to participate in
all employee savings and welfare benefit plans and programs made
available to the Company’s senior-level executives on a basis
no less favorable than provided to other similarly-situated
executives, as such plans or programs may be in effect from time to
time, including, without limitation, savings and other retirement
plans or programs, medical, dental, hospitalization, short-term and
long-term disability and life insurance plans, accidental death and
dismemberment protection and travel accident insurance. During the
Term, the Executive shall also be entitled to a paid annual
physical medical exam as approved by the Company and Company-paid
term life insurance with a benefit equal to $1 million,
provided the Company can obtain such insurance at commercially
reasonable premium levels. The Executive shall be entitled to four
weeks paid vacation per calendar year.
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(b)
Business Expenses . During the Term, the Executive is
authorized to incur reasonable expenses in carrying out her duties
and responsibilities under this Agreement and the Company shall
promptly reimburse her for all business and entertainment expenses
incurred in connection with carrying out the business of the
Company, subject to documentation in accordance with the
Company’s policy. The Executive shall be entitled to first
class air travel when traveling on Company business.
(c)
Perquisites . The Executive shall be entitled to perquisites
provided to other senior-level executives, including a monthly car
allowance of up to a maximum of $1,000.
Notwithstanding
anything elsewhere to the contrary, except to the extent any
reimbursement, payment or entitlement pursuant to this
Section 5 does not constitute a “deferral of
compensation” within the meaning of Section 409A,
(i) the amount of expenses eligible for reimbursement or the
provision of any in-kind benefit (as defined in Section 409A)
to the Executive during any calendar year will not affect the
amount of expenses eligible for reimbursement or provided as
in-kind benefits to the Executive in any other calendar year,
(ii) the reimbursements for expenses for which the Executive
is entitled shall be made on or before the last day of the calendar
year following the calendar year in which the applicable expense is
incurred and (iii) the right to payment or reimbursement or
in-kind benefits may not be liquidated or exchanged for any other
benefit.
6.
Termination of Employment . The Term of this Agreement and
the Executive’s employment hereunder shall terminate as of
the Date of Termination in the following circumstances:
(a)
Termination Without Cause by the Company or Resignation for Good
Reason by the Executive . In the event that during the Term the
Executive’s employment is terminated without Cause by the
Company (other than due to Disability) or the Executive resigns for
Good Reason and Section 6(d) below does not apply, the Executive
shall be entitled to:
(i) an
amount equal to the Base Salary which would have been paid the
Executive from the Date of Termination through the expiration of
the Term (without regard to its earlier termination hereunder) if
she had remained employed, but in no event less than one times Base
Salary, payable in a cash lump sum to the Executive as soon as
practicable following the Date of Termination (but in no event
later than 60 days following such date);
(ii) immediate vesting as of the Date of
Termination of 50% of any restricted stock (other than Career
Shares) that remains unvested as of the Date of
Termination;
(iii) with
respect to any stock options granted on or after September 12,
2005 which are vested and outstanding as of the Date of
Termination, continued exercisability for 12 months following
the Date of Termination or the remainder of the option term, if
shorter; and
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(iv) continued participation for the
Executive and her eligible dependents in the Company’s
welfare benefit plans in which she and her eligible dependents were
participating immediately prior to the Date of Termination until
the earlier of (a) the end of the applicable Term (without
regard to its earlier termination hereunder), but in no event less
than 12 months following the Date of Termination, or
(b) the date, or dates, the Executive receives equivalent
coverage under the plans and programs of a subsequent
employer.
(b)
Termination upon Death or due to Disability . In the event
that during the Term the Executive’s employment is terminated
upon death or due to Disability, the Executive (or her estate or
legal representative, as the case may be) shall be entitled
to:
(i) a
pro-rata annual bonus determined by multiplying the amount of the
annual bonus the Executive would have received had her employment
continued through the end of the fiscal year in which the Date of
Termination occurs by a fraction, the numerator of which is the
number of days during such fiscal year that the Executive was
employed by the Company and the denominator of which is 365,
payable when bonuses for such fiscal year are paid to other Company
executives (which payment date shall be no earlier than January
1 st
and no later than
March 15 th of
the year following the year in which the Date of Termination
occurs);
(ii) immediate vesting as of the Date of
Termination of 50% of any restricted stock (other than Career
Shares) that remains unvested as of the Date of Termination;
and
(iii) immediate vesting as of the Date of
Termination of 50% of any previously granted Supplemental Award
that remains unvested as of the Date of Termination, payable in
accordance with Section 4(d) above.
(c)
Termination by the Company for Cause or a Voluntary Resignation
by the Executive . In the event that during the Term the
Company terminates the Executive’s employment for Cause or
the Executive voluntarily resigns, the Executive shall be entitled
to her Base Salary and benefits through the Date of Termination. A
voluntary resignation by the Executive of her employment shall be
effective upon 90 days prior written notice by the Executive
to the Company (“Notice Period”), subject to earlier
termination by the Company in accordance herewith. Failure by the
Executive to provide the required notice shall be deemed to be a
breach of this Agreement. During the Notice Period, the Executive
shall continue to be an employee of the Company and her fiduciary
duties and other obligations as an employee of the Company shall
continue. The Executive shall cooperate in the transition of her
responsibilities; provided that the Company shall have the right to
direct the Executive to no longer come to work or not to perform
any work for the Company during the Notice Period. If the Company
so directs, in addition to her fiduciary duties and other
obligations as an employee and her
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commitments
pursuant to Section 7 and 8 her
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