DEFERRED COMPENSATION
PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
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1.1
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Establishment.
The Warnaco Group, Inc.
(the “Company”) adopted this deferred compensation
plan, known as “The Warnaco Group, Inc. Deferred Compensation
Plan” (the “Plan”), effective as of May 1,
2005. The Plan is amended and restated effective as of
January 1, 2009.
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1.2
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Purpose. The Plan is intended to provide
certain key Company employees the opportunity to build wealth by
deferring compensation on a pre-tax basis and to help the Company
reward and retain these employees. The Plan is intended to be a
“top-hat” plan (i.e., an unfunded deferred compensation
plan maintained for a select group of management or
highly-compensated employees) under Sections 201(2), 301(a)(3)
and 401(a)(1) of the Employee Retirement Income Security Act of
1974 (“ERISA”).
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As used in the
Plan, the following words and phrases have the meanings given them
in this Article 2, unless a different meaning is plainly required
by the context. Some of the words and phrases used in the Plan are
not defined in this Article 2, but, for convenience, are
defined as they are introduced into the text.
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2.1
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“Administrative
Committee” means the committee designated to oversee the
operation and administration of the Plan pursuant to Article 9
hereof.
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2.2
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“Base Pay” means a
Participant’s annual base salary in effect at any given
time.
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2.3
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“Beneficiary” means a
person or entity designated by a Participant in accordance with
Section 12.6 hereof, who upon the Participant’s death, shall
be entitled to any balance remaining in the Participant’s
Participant Contribution Account.
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2.4
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“Change in Control”
means any transaction or series of transactions (whether related or
not) involving the transfer of the beneficial ownership (as defined
below) of shares of any class of the Company’s capital stock
by any stockholders that results in any Person (as defined below)
together with its Affiliates (as defined below) as a group, or any
other group (as the term “group” is used in Section
12(d) of the Securities Exchange Act of 1934, as amended, and the
rules thereunder (the 1934 Act)) beneficially owning (as defined
below) capital stock of the Company possessing the voting power to
elect one-half or more of the Company’s Board of Directors,
or upon the occurrence of a “change in control event”
within the meaning of Final Treasury Regulation
§ 1.409A-3(i)(5). For
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purposes of this Section 2.4,
(a) “Affiliate” means (1) in the case of a natural
Person, such person’s spouse, descendants (whether natural or
adopted), parents, brothers, sisters and other relatives, and
(2) in other cases, any Person controlling, controlled by or
under common control with another Person; (b) “Beneficial
ownership” and beneficially owning” shall have the
meaning determined under Rule 13D-3 under the 1934 Act; and
(c) “Person” means an individual, a partnership, a
corporation, an association a joint stock company, a trust, an
entity or any department, agency or political subdivision
thereof.
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2.5
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“Code” means the
Internal Revenue Code of 1986, as amended from time to
time.
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2.6
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“Compensation Committee”
means the Compensation Committee of the Company’s Board of
Directors.
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2.7
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“Disability” means any
medically determinable physical or mental impairment that can be
expected to result in death or last for a continuous period of not
less than twelve months and that (1) renders the Participant
unable to engage in any substantial gainful activity or (2) is the
reason the Participant is receiving income and replacement benefits
for a period of not less than three months under an accident and
health plan covering employees of the Company.
“Disability” also means any determination by the Social
Security Administration that a Participant is totally
disabled.
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2.8
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“Incentive Pay” means
any cash payment to a Participant pursuant to an annual bonus or
long-term incentive plan designated by the Administrative
Committee. Incentive Pay shall not include any payment that relates
to commissions or a grant of equity compensation, including (but
not limited to) stock options, stock appreciation rights, and
restricted stock.
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2.9
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“Participant Contribution
Account” means the account established for each Participant
to which contributions described in Section 4.1 hereof are
credited.
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2.10
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“Participant” means any
employee who contributes to the Plan pursuant to Article 4
hereof and any former employee who is eligible to receive a benefit
under the Plan.
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2.11
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“Plan Year” means the
twelve-month period (or such shorter period, if applicable) ending
on December 31 of each year during which the Plan is in
effect.
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2.12
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“Rabbi Trust” means the
Grantor Trust between First American Trust FSB and The Warnaco
Group, Inc. dated July 2, 2007, as amended from time to time,
and any successor trust thereto.
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2.13
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“Retirement Date” means
the date a Participant attains age fifty (50) and completes
ten (10) years of service with the Company.
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2
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3.1
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Eligibility to
Participate. Each U.S. employee of the Company
and each of its wholly owned subsidiaries whose Base Pay equals or
exceeds $180,000 and who is eligible to participate in The Warnaco
Group, Inc. Incentive Compensation Plan, as in effect from time to
time, or any successor plan, as a member of a select group of
management or highly compensated employees, shall be eligible to
participate in the Plan on the first day of the month following the
date in which they would otherwise meet this eligibility criteria.
The Compensation Committee may change eligibility requirements from
time to time.
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3.2
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Participation.
A Participant shall
remain a Participant so long as he or she is entitled to receive
benefits under the Plan.
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3.3
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Select Group of
Employees. The Plan is intended to qualify as a
plan maintained by the Company primarily to provide deferred
compensation for a select group of management and highly
compensated employees. If the Company determines, based on
subsequent authority, or if an agency or court of competent
jurisdiction determines that the Plan benefits any person other
than a member of the select group of management and highly
compensated employees, the participation of each employee who is
determined not to be included in the group shall be terminated
immediately and the employee shall cease to participate in the
Plan. In the case of a determination by an agency or court, the
employee’s participation shall terminate only after the
period for appeal of the determination has elapsed.
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3.4
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Change of Employment
Category. During any period in which a
Participant remains in the employ of the Company, but ceases to
meet the eligibility criteria set forth in Section 3.1 hereof, the
Participant will not be permitted to change or cease any current
election under Section 4.1 hereof, however, the Participant
shall not be eligible to make contributions hereunder with respect
to any future Plan Year during such period of ineligibility. Any
existing Participant Contribution Account will continue to be
administered in accordance with the Participant’s existing
elections and the terms of the Plan.
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4.1
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Deferral of Base Pay.
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(a) Annual
Elections. Prior to January 1 st of
each calendar year, each eligible employee may make a written
election to reduce his or her Base Pay for that calendar year by up
to fifty percent (50%) and to have the amounts contributed to his
or her Participant Contribution Account.
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(b) Initial
Eligibility Elections. If an employee first becomes eligible to
participate in the Plan during the middle of a calendar year, the
Administrative Committee may in its sole discretion permit the
Participant, within thirty (30) days after he or she first
becomes eligible to participate in the Plan, to make an election to
reduce his or her Base Pay for the months remaining in the calendar
year by up to fifty percent (50%) and to have the amounts
contributed to his or her Participant Contribution
Account.
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4.2
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Deferral of Incentive
Pay.
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(a) Performance
Period Elections. Prior to January 1 st of
the first year in which an Incentive Pay performance period begins
(whether based on an annual or multi-year performance period), each
eligible employee may make a written election to reduce his or her
Incentive Pay for such performance period by up to one hundred
percent (100%) (but no less than one percent (1%) or such other
minimum as established by the Administrative Committee) and to have
the amounts contributed to his or her Participant Contribution
Account. Notwithstanding the foregoing, in the event the Incentive
Pay is considered to be “performance-based
compensation” within the meaning of Final Treasury Regulation
Section 1.409A-1(e), including (without limitation) the
requirement that performance criteria be pre-established in writing
no later than ninety (90) days after the commencement of the
performance period, the Administrative Committee may in its sole
discretion permit Participants to make an election on or before the
date that is six (6) months before the end of the Incentive
Pay performance period; provided that, in accordance with
Final Treasury Regulation Section 1.409A-2(a)(8), the
Participant performs services continuously to the Company from the
later of the beginning of the performance period or the date the
performance criteria are established through the election date and
that the election to defer be made before such compensation has
become readily ascertainable.
(b) Initial
Eligibility Elections. If an employee first becomes eligible to
participate in the Plan during the middle of a performance period,
the Administrative Committee may in its sole discretion permit the
Participant, within thirty (30) days after he or she first
becomes eligible to participate in the Plan, to make an election to
reduce his or her Incentive Pay provided that any such election
applies to no more than an amount equal to the total amount of
Incentive Pay for the performance period, multiplied by a ratio:
(i) the numerator of which is the number of days remaining in
the performance period, and (ii) the denominator of which is
the total number of days in the performance period. Any such
amounts will be contributed to the Participant’s Participant
Contribution Account.
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4.3
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Deferral Elections.
The elections shall be
made on paper forms or otherwise as provided by the Administrative
Committee on or before the specified deadline. The election forms
shall state the percentage in whole numbers by which the
Participant desires to reduce his or her Base Pay and/or Incentive
Pay. Amounts shall be withheld form the Participant’s
Incentive Pay and/or ratably from the Participant’s Base Pay
throughout the calendar year and credited to his or her Participant
Contribution Account as of the last day of the
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4
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payroll period
in which withheld. A Participant’s election shall remain in
force for subsequent calendar years and/or measurement periods
unless and until the Participant makes a new election in accordance
with this Article 4.
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4.4
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Additional Rules for Amounts
Deferred. Anything to the contrary
notwithstanding, if the amounts deferred would reduce a
Participant’s Base Pay and/or Incentive Pay below amounts
necessary to pay applicable employment, state, local or foreign
taxes on his or her deferrals and/or to make any elective
contributions under the Company’s tax-qualified 401(k) plan,
the Administrative Committee may reduce the amounts deferred
accordingly in order to satisfy such obligations. In addition,
deferrals may only be cancelled in the Administrative
Committee’s discretion and in compliance with Final Treasury
Regulation Section 1.409A-3(j)(4), including (without
limitation) following an “unforeseeable emergency”
defined in Section 7.5 hereof, a hardship distribution under
the Company’s tax-qualified 401(k) plan pursuant to Final
Treasury Regulation Section 1.401(k)-1(d)(3) if required
under such 401(k) plan, certain types of disability and/or to
comply with ethics rules and applicable law.
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5.1
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Establishment of
Accounts. The
Administrative Committee shall establish a Participant Contribution
Account for each Participant to which the contributions described
in Sections 4.1 and 4.2 hereof will be credited. The
Administrative Committee may establish sub-accounts for
Participants, as it deems appropriate. The accounts and/or
sub-accounts shall be adjusted to reflect distributions and any
notional income, gains, and losses.
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5.2
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Investment Credits.
The Administrative
Committee shall offer Participants a choice of two or more
hypothetical or notional investment options, in which their
contributions will be deemed to be invested, and the Administrative
Committee may add, eliminate, or modify the options from time to
time. The Administrative Committee shall select such options from
among those then available under the Company’s tax-qualified
401(k) plan. Participants’ accounts will be
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