Exhibit 10.6

[CARTER’S LETTERHEAD]

January 19, 2009

Mr. Richard F. Westenberger

224 East Sheridan Road
Lake Bluff, Illinois  60044

Re:  Severance Terms

Dear Richard,

This letter agreement (this “Agreement”) confirms the understanding between The
William Carter Company (the “Company”) and you with respect to your severance
compensation from the Company, notably that:

1.
Position.
       
(a)
You will continue to be an At Will employee, serving as the Executive Vice
President and Chief Financial Officer for Carter's, and have the normal duties,
responsibilities, and authority of such position, subject to the Company’s
ability to expand, limit, or otherwise change these duties, responsibilities,
and authorities.
       
(b)
Your base salary will be a minimum of $400,000 per year and your current target
annual cash incentive award (“Target Bonus”) under the Company’s Amended and
Restated Annual Incentive Plan (“Plan”) will be a minimum of seventy-five
percent (75%) of your base salary as in effect during the calendar year for
which the award is made, each subject to upward adjustments based on your
performance.
   
2.
Severance Compensation.
       
(a)
If the Company terminates your employment for any reason other than because of
your conviction of a felony, your commission of fraud (or other act involving
dishonesty) or misconduct that is injurious to the Company, or your willful
refusal to perform your job responsibilities, then you shall be entitled to
receive (i) your base salary as in effect during the calendar year during which
such termination occurs (“Termination Year”) for a period of twelve (12) months
following your termination (“Severance Period”); and (ii) the Target Bonus you
would have earned under the Plan for the Termination Year, provided that the
calculation of any such Target Bonus shall take into account whether the
Company’s performance goals established pursuant to the Plan were achieved, and
provided, further, that any such Target Bonus payment shall be pro-rated for the
amount of time you were employed by the Company during the Termination Year (the
compensation referenced in subclauses (i) and (ii) above are collectively
referred to as the (“Severance Compensation”).  Except to the extent
modification is required to comply with the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended (“Section 409A”), as described in
Section 4 below, the portion of your Severance Compensation described in
subclause (i) shall be paid in accordance with the Company’s normal pay cycles
and the portion described in subclause (ii) shall be paid in accordance with the
terms of the Plan.
       
(b)
In addition to the Severance Compensation described above, during the Severance
Period, you can continue to receive coverage under the Company-sponsored
medical, dental, vision, or group life insurance plans for you (and any eligible
dependents who are enrolled in those plans at the time of your termination of
employment) at the same cost for such coverage as is paid by active
employees.  In order to receive the Company’s subsidy for these benefits, you
(and any dependents) must qualify for continued coverage under the terms and
conditions of the plans or by law; must elect to continue the coverage in
accordance with the terms of each plan; and must pay the cost of your coverage
through deduction from the salary continuation payments under subclause (i) of
Section 2(a) above.  The Company’s subsidy for these benefits will expire with
the end of the Severance Period.
       
(c)
The amount of your Severance Compensation will be reduced by the amount of any
severance compensation you are otherwise entitled to pursuant to any Company
Severance Plan.
     
3.
Other Benefits.  Your eligibility for all Company-subsidized benefits will cease
on the last day of the Severance Period or, if later, on the date provided by
the plan documents for such benefits.  Coverage for medical, dental and vision
insurance may be continued under COBRA.  Group life insurance may be continued
pursuant to the terms and conditions of that plan.
     
4.
Section 409A Compliance.
       
(a)  It is intended that the payment of benefits described in this Agreement
will comply with Section 409A and all guidance and regulations thereunder.  This
Agreement will at all times be construed in a manner to comply with Section 409A
and should any provision be found not in compliance with Section 409A, you
hereby agree to any changes to the terms of this Agreement reasonably deemed
necessary and required by the Company to achieve compliance with Section 409A,
including any applicable exemptions.  In no event will any payment pursuant to
this Agreement that is considered “deferred compensation” within the meaning of
Section 409A, and that does not satisfy any of the applicable exemptions under
Section 409A, be accelerated or delayed in violation of Section 409A.  If you
are a “specified employee,” as defined in Section 409A and Section 4(c) below,
at the time that payments to you under this Agreement are to commence, no
payment under this Agreement that is considered to be “deferred compensation”
within the meaning of Section 409A that does not satisfy any of the applicable
exemptions under Section 409A may be made before the date that is six (6) months
after your separation from service (or death, if earlier).  To the extent that
payments to you under this Agreement are subject to the six-month delay rule,
all payments that would have been made to you during the six (6) months
following your separation from service will be accumulated and paid to you
during the seventh (7th) month following your separation from service, and any
remaining payments due will be made in their ordinary course according to the
terms of this Agreement.  The Company will notify you if you are subject to the
six (6) month delay rule.  In no event shall amounts be paid to you pursuant to
Section 2(a) unless you incur a separation from service within the meaning of
Section 409A(a)(2)(A)(i) and the Treasury Regulations promulgated thereunder.
       
(b)  Notwithstanding the provisions of Section 4(a), so much of the Severance
Compensation payable pursuant to Section 2(a) as does not exceed the "exempt
amount" as hereinafter defined shall be paid in accordance with the Company’s
normal pay cycles or the terms of the Plan, which is applicable; provided,
that in no event shall such amounts be paid later than by December 31 of the
second calendar year following the calendar year in which your involuntary
separation from service occurs.  For purposes of the immediately preceding
sentence, the "exempt amount" means the lesser of (i) your total Severance
Compensation, if any, or (ii) the lesser of (A) two times the applicable limit
under Section 401(a)(17) of the Internal Revenue Code for the year in which your
involuntary separation from service occurs, or (B) two times the annualized
compensation determined under applicable Treasury Regulations by reference to
the annual rate of pay for the calendar year preceding the calendar year in
which your involuntary separation from service occurs.  For purposes of the
Treasury Regulations under Section 409A, each payment described in this Section
shall be treated as a separate payment.
       
(c)  For purposes of this Section, the term "specified employee" means an
individual who is determined by the Company to be a specified employee as
defined in subsection (a)(2)(B)(i) of Section 409A.  The Company may, but need
not, elect in writing, subject to the applicable limitations under Section 409A,
any of the special elective rules prescribed in Section 1.409A-1(i) of the
Treasury Regulations for purposes of determining "specified employee"
status.  Any such written election shall be deemed part of this Agreement.
     
5.
Release and Compliance.  Your right to receive Severance Compensation is
expressly conditional upon (a) your execution (and non-revocation) of a general
release of liability of the Company and its Affiliates in form and substance
satisfactory to the Company, and (b) your compliance with each of the terms of
this Agreement.
     
6.
Non-Competition/Non-Solicitation.  During the Severance Period, you will not:
work or provide services in a similar capacity for any company a material
component of whose business is competitive with the Company; solicit, induce, or
hire (or attempt to do any of the same) any Company employee for employment with
another company; induce or attempt to induce any customer of the Company to, in
any way, diminish their relationship with the Company; or otherwise interfere
with any relationship between the Company and any employee or customer.
     
7.
Confidential Information.  The information you obtain while working for the
Company (whether written, oral, or any other form) relating to the business or
operations of the Company that is not generally known by the public is
proprietary to the Company.  You agree not to use any of such confidential
information outside of your performance of your job responsibilities for the
Company, and you agree to return or destroy any physical copies that may contain
such confidential information.  You agree not to discuss or disclose the terms
or existence of this letter agreement.  The obligations of this paragraph
survive the termination of your employment with the Company.
     
8.
Miscellaneous.  This letter sets forth the entire understanding between the
Company and you with respect to your severance compensation.  The interpretation
of any of these provisions will be governed by the laws of the State of New
York.  Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.

 
 

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Please acknowledge your acceptance of these terms by counter-signing below.

Sincerely,

   
/s/ BRENDAN M. GIBBONS
Brendan M. Gibbons
Vice President, General Counsel, and
Corporate Secretary

AGREED AND ACCEPTED

   
/s/ RICHARD F. WESTENBERGER
Richard F. Westenberger

 
 

 

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