AGREEMENT, made
and entered into as of August 11, 2008 (the “Effective
Date”) by and between THE WARNACO GROUP, INC., a Delaware
corporation (together with its successors and assigns, the
“Company”), and JAY DUBINER (the
“Executive”).
WHEREAS, the
Company desires to employ the Executive and to enter into an
agreement embodying the terms of such employment and the Executive
desires to enter into this Agreement and to accept such employment,
subject to the terms and provisions of this Agreement;
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 Company and the Executive
(individually a “Party” and together 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 interests of the Company or any
of its Affiliates;
(ii) willful and material breach of duty by
the Executive in the course of the Executive’s employment,
which, if curable, is not cured within 10 days after
Executive’s receipt of written notice from the Company
specifically describing such willful and material
breach;
(iii) willful failure by the Executive,
after having been given written notice from the Company, to perform
the Executive’s duties other than a failure resulting from
the Executive’s incapacity due to physical or mental
illness;
(iv) indictment of the Executive for a
felony, a crime involving moral turpitude or any other crime
involving the business of the Company or any of its Affiliates
which, in the case of such crime involving the business of the
Company or any of its Affiliates, is injurious to such business;
or
(v) failure of the Executive to give
90 days prior written notice of a voluntary resignation (other
than for Good Reason or Disability), unless such failure is waived
in writing by an authorized officer of the Company or the Company
shortens the notice period in accordance with Section 5(c)
hereof.
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 him in bad faith and without reasonable
belief that his action was in the best interests of the Company.
The determination to terminate the Executive’s employment for
Cause shall be made by the full Board by no less than majority vote
and prior to such determination the Executive and his legal
representatives 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, as amended) 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 Effective Date, 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) “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 the
Executive’s employment is so terminated; provided that for a
termination for Cause such notice is delivered after the Board
determination as set forth in Section 1(c) hereof;
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(ii) if
the Executive voluntarily resigns the Executive’s employment,
90 days after receipt by the Company of written notice that the
Executive is terminating the Executive’s employment or if the
Company shortens the required notice period in accordance with
Section 5(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(f) below; or
(v) if the
Executive resigns the Executive’s employment for Good Reason,
30 days after receipt by the Company of timely written notice from
the Executive in accordance with Section 1(g) below unless the
Company cures the event or events giving rise to Good Reason within
30 days after receipt of such written notice.
(f) “Disability”
shall mean the Executive’s inability, due to physical or
mental incapacity, to substantially perform the Executive’s
duties and responsibilities for a period of 120 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 the Executive’s employment
gives written notice to the other Party in accordance with
Section 14 below.
(g) “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,
General Counsel and Corporate Secretary or the assignment to the
Executive by the Company of any duties materially inconsistent with
such positions;
(ii) reduction in (A) Base Salary or
(B) Target Bonus opportunity as a percentage of Base
Salary;
(iii) 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,
General Counsel or as Corporate Secretary of the Company or the
failure by the Board to 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
his current place of employment; or
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(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 in writing or as a matter of law 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 proper 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.
(h) “Separation
From Service” shall mean a termination of the
Executive’s employment in a manner consistent with Treasury
Regulation Section 1.409A-1(h).
During the Term,
the Executive shall be employed by the Company as Senior Vice
President, General Counsel and Corporate Secretary, reporting
directly to the Company’s Chief Executive Officer, and shall
perform such duties and responsibilities as determined by the
Company’s Chief Executive Officer consistent with such
positions. The Executive shall devote the Executive’s full
business time and attention to the satisfactory performance of such
duties. Anything herein to the contrary notwithstanding, nothing
shall preclude the Executive from (i) subject to 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
7(a)(i) below), (ii) engaging in charitable activities and
community affairs and (iii) managing his personal investments
and affairs, provided that the activities described in the
preceding clauses (i) through (iii) do not materially
interfere with the proper performance of his duties and
responsibilities hereunder. The Executive agrees to commence
employment with the Company no later than September 2, 2008
(the “Commencement Date”). The term of the
Executive’s employment hereunder shall begin on the
Commencement Date and end at the close of business on the second
anniversary of such date; 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.
(a)
Base Salary . During the Term, the Executive shall be paid
an annualized Base Salary of $450,000 (“Base Salary”),
payable in accordance with the regular payroll practices of the
Company, subject to annual review by the Board (or the Compensation
Committee of the Board) in its sole discretion. During the Term,
the Base Salary may not be
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decreased
without the Executive’s prior written consent. After any
increase in base salary approved by the Board (or the Compensation
Committee of the Board), the term “Base Salary” as used
in this Agreement shall thereafter refer to the increased amount.
The Executive shall not be entitled to any compensation for service
as an officer or member of the board of directors of any Affiliate
of the Company.
(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 its shareholders), in effect for the applicable fiscal
year (“Bonus Plan”). The Executive’s annual
incentive award for fiscal year 2008 and thereafter shall have a
target of 70% of Base Salary (“Target Bonus”), with a
potential maximum award as set forth in the Bonus Plan; provided
that the actual bonus for fiscal year 2008 shall be pro-rated from
the Commencement Date, but in all events, subject to the
Executive’s continued employment with the Company through the
payment date, shall be no less than an amount equal to $315,000
multiplied by a fraction, the numerator of which shall be the
number of days the Executive worked for the Company in fiscal year
2008 and the denominator is 365. Except for the guaranteed bonus
for fiscal year 2008, any Bonus shall in all events be 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 70 th day following the end of the fiscal year for
which the annual incentive award 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 the
Compensation Committee of the Board), the term “Target
Bonus” as used in this Agreement shall thereafter refer to
the increased target opportunity.
(c)
Long-Term Incentive Awards . On the Commencement Date, the
Executive will be granted the following equity awards: (i) an
award of restricted stock (“Restricted Stock”), the
number of shares of which shall be equal to 218,025 divided by the
closing price of a share of the Company’s common stock on the
Commencement Date and rounded up to the nearest 100 shares, and
(ii) an option to purchase shares of the Company’s common
stock (the “Option”) in accordance with the applicable
equity plan, the number of shares of which shall be equal to
218,025 divided by 0.4038 and then divided by the closing price of
a share of the Company’s common stock on the Commencement
Date and rounded up to the nearest 100 shares. Except as otherwise
provided in this Section 3(c) or Section 5 hereof, the
Restricted Stock will cliff vest on the third anniversary of the
Commencement Date and the Option shall vest (and become
exercisable) in three equal annual installments on the first,
second and third anniversaries of the Commencement Date, provided
in both cases that the Executive is employed by the Company through
such applicable vesting date and has not given notice to the
Company that the Executive is voluntarily resigning without Good
Reason prior to such applicable vesting date. Thereafter,
commencing in fiscal year 2009 and provided the Term is in effect
and the Executive continues to be employed by the Company, 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
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incentive
plan(s) as may be approved by its shareholders from time to time
(“Stock Incentive Plans”). 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
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 2008, provided the Executive is employed by the Company on the
applicable grant date, the Executive shall be entitled to an annual
award with an aggregate grant date value equal to 6% of the sum of
Base Salary plus Annual Bonus as defined in this paragraph 3(d) if
the Executive will be less than age 40 by the end of the applicable
fiscal year, 8% of such amount if the Executive will be age 40 and
over and less than 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 the number of full months
of service by the Executive in fiscal year 2008. 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 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 3(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 3(d), shall be an unfunded obligation to be satisfied
from the general funds of the Company. Except as otherwise provided
in Section 5 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 5
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
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100% on the
earlier of the Executive’s 65th birthday and upon the
Executive obtaining 10 years of “Vesting Service”.
In addition, any unvested Adjusted Notional Account shall vest upon
a Change in Control as defined in Section 1(d)(i) or
(ii) hereof. For purposes of this Section 3(d),
“Vesting Service” shall mean the period of time that
the Executive is employed by the Company as an executive officer.
Subject to Section 15(b) hereof, upon vesting the Career Shares
will be delivered to the Executive in the form of Shares. 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 Change in Control as
defined in Section 1(d)(i) or (ii) hereof and, at such
time, shall only be distributed at the earliest time that satisfies
the requirements of this Section 3(d). Upon a Change in
Control as defined in Section 1(d)(i) or (ii), the vested
Adjusted Notional Account, subject to Section 15(b) hereof, 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 5 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 15(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 of the Internal Revenue Code of 1986, as amended
from time to time (the “Code”), and the regulations
promulgated thereunder (“Section 409A”) as of the
date of the Executive’s Separation From Service, such
distribution shall not be made until the first business day of the
seventh calendar month following the month in which the
Executive’s Separation From Service occurs. The Executive can
elect to delay the time and/or form of payment of the Adjusted
Notional Account under this Section 3(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 3(d) (without
regard to Section 5, except as otherwise expressly provided in
Section 5(d) of this Agreement) and the election right in this
Section 3(d) shall continue to apply to any outstanding
Supplemental Award.
(e)
Review of Arrangements . If during the Term the employment
agreements or compensation arrangements of the Company’s
executive officers are reviewed generally for material
improvements, this Agreement and the Executive’s compensation
arrangements, as applicable, will be subject to the same
review.
(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
generally made available to the Company’s senior-level
executives as such plans or programs may be in effect from time to
time. 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
7
reasonable
premium levels. During the Term, the Executive shall be entitled to
four weeks paid vacation per calendar year.
(b)
Business Expenses . During the Term, the Company shall
reimburse the Executive for all reasonable business expenses
incurred by him in performance of his duties hereunder in
accordance with Company policy, including, but not limited to, the
proper documentation of such expenses. The Company’s business
travel policy shall apply to the Executive.
(c)
Perquisites . During the Term, 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.
(d)
General Limitation . Notwithstanding anything elsewhere to
the contrary, except to the extent any reimbursement, payment or
entitlement pursuant to this Section 4 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 payments or 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.
5.
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 5(d) below does not apply, subject to
Section 15(b) hereof, the Executive shall be entitled
to:
(i) payment of an amount equal to the Base
Salary that would have been payable to the Executive for the
remainder of the Term (without regard to its earlier termination
hereunder), but in no event less than 12 months, 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 the Restricted Stock as follows: 50% if the Date of
Termination occurs prior to the first anniversary of the
Commencement Date; 66% if the Date of Termination occurs on or
after the first anniversary of the Commencement Date but before the
second anniversary of the
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Commencement
Date; and 83% if the Date of Termination occurs on or after the
second anniversary of the Commencement Date but prior to the third
anniversary of the Commencement Date;
(iii) immediate vesting as of the Date of
Termination of 50% of any restricted stock (other than the Career
Shares and the Restricted Stock) that remains unvested as of the
Date of Termination and, with respect to any stock options 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;
(iv) if
the Date of Termination occurs after Joseph Gromek is no longer
Chief Executive Officer of the Company, a pro-rata annual bonus
determined by multiplying the amount of the annual bonus the
Executive would have received had his 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);
(v) outplacement counseling for up to
6 months following the Date of Termination; and
(vi) continued participation on the same
terms as immediately prior to the Date of Termination for the
Executive and his eligible dependents in the Company’s
medical and dental plans in which the Executive and his 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, and (b) the date, or dates, the Executive
receives coverage under the plans or programs of a subsequent
employer; provided that in no event shall there be any gross up
provided by the Company for any income tax liabilities or
otherwise.
If the Company
provides written notice to the Executive in accordance with
Section 2 above that the Term shall not renew and upon or at
any time after such expiration of the Term the Company terminates
the Executive’s employment under circumstances that during
the Term would constitute a termination of the Executive’s
employment without Cause, the Executive shall, subject to Section
15(b) hereof, be entitled to the same payments, benefits and
entitlements as a termination without Cause pursuant to this
Section 5(a); provided if such notice of non-renewal of the
Term and termination occurs within one year following a Change in
Control, the Executive shall be entitled to the same payments,
benefits and entitlements as a termination without Cause pursuant
to Section 5(d) hereof.
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(b)
Termination upon Death or due to Disability . In the event
that during the Term the Executive’s employment is terminated
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