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                                                                   EXHIBIT 10.26

                                LETTER AGREEMENT

                                 BY AND BETWEEN

                             ALVAREZ & MARSAL, INC.

                                       AND

                             THE WARNACO GROUP, INC.

                                JANUARY 29, 2003



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                             ALVAREZ & MARSAL, INC.
--------------------------------------------------------------------------------
 101 East 52nd Street - 6th Floor o New York, NY 10022 o Phone: 212.759.4433
                                 o 212.759.5532

January 29, 2003

The Warnaco Group, Inc.
90 Park Avenue - 26th Floor
New York, New York 10016
Att: Mr. Stanley P. Silverstein, Esq.

Dear Stanley,

This letter confirms and sets forth the terms and conditions of the engagement
between Alvarez & Marsal, Inc. ("A&M") and The Warnaco Group, Inc. (together
with its divisions, subsidiaries and affiliates, the "Company"), including the
scope of the services to be performed and the basis of compensation for those
services. Upon execution of this letter by each of the parties below this letter
will constitute an agreement between the Company and A&M (the "Agreement").

1.   Description of Services.

     (a)  Personnel. In connection with this engagement, A&M shall make
          available the following personnel to the Company:

          (i)  Antonio C. Alvarez II to continue to serve as President and Chief
               Executive Officer (the "CEO") reporting to the Board of Directors
               of the Company.

          (ii) James Fogarty to continue to serve as Senior Vice President
               Finance and Chief Financial Officer (the "CFO") reporting to the
               CEO and

          (iii) Douglas Rosefsky and William Gordon each of whom will be
                available to serve the Company as required (the "Additional
                Personnel").

     (b)  Duties.

          (i)  The CEO and CFO shall continue to perform those duties and
               responsibilities typically assigned to the CEO and CFO.

          (ii) Upon the commencement of employment of a new Chief Executive
               Officer or Chief Financial Officer, the compensation related to
               such services set forth in Paragraph 2 below shall terminate. In
               each such event the CEO or CFO as appropriate shall provide such
               transition assistance as reasonably required by the Company.


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          (iii) The Additional Personnel shall perform such services as
                requested or directed by the Company and agreed to by such
                individual.

     (c)  Employment by A&M. It is understood that the CEO, CFO and the
          Additional Personnel will continue to be employed by A&M. It is
          further understood that while rendering services to the Company, such
          individuals may continue to work with other personnel at A&M in
          connection with matters unrelated to the Company, provided such work
          will not unduly interfere with the provision of services pursuant to
          this Agreement.

          Projections; Reliance; Limitation of Duties. The Company understands
          that the services to be rendered by the CEO, CFO and the Additional
          Personnel may include the preparation of projections and other
          forward-looking statements, and that numerous factors can affect the
          actual results of the Company's operations, which may materially and
          adversely differ from those projections and other forward-looking
          statements. In addition, the CEO, CFO and the Additional Personnel may
          be relying on information provided by other members of the Company's
          management in the preparation of those projections and other
          forward-looking statements. Neither the CEO, CFO, the Additional
          Personnel nor A&M assumes responsibility for the selection of any.
          transaction or strategic alternative that any such individual assists
          in formulating and presenting to the Board, and the CEO, CFO and
          Additional Personnel shall be responsible for implementation only of a
          transaction or alternative approved by the Board and only to the
          extent and in the manner authorized and directed by the Board.

     (d)  Additional Responsibilities. Upon the mutual agreement of the Company
          and A&M, A&M may provide such additional personnel as the Company may
          request to assist in performing the services described above and such
          other services as may be agreed to, on such terms and conditions and
          for such compensation as the Company and A&M shall agree.

2.   Compensation

     (a)  A&M will be paid by the Company for the services of the CEO, CFO and
          the Additional Personnel at the following rates.

<TABLE>
<S>                                         <C>
          i.   Antonio C.Alvarez II (CEO)   $125,000 per month while engaged as
                                            CEO and for fifteen (15) days after
                                            the commencement of employment of a
                                            new CEO; thereafter $750 per hour
                                            for transition services.

          ii.  James Fogarty (CFO)          $475 per hour

          iii. Douglas Rosefsky             $425 per hour

          iv.  William Gordon               $375 per hour

          v.   Other A&M Staff
              (as mutually agreed)          A&M standard rates
</TABLE>


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          Such rates shall be subject to adjustment annually at such time as A&M
          adjusts its rates generally.

          Prior to the engagement of a permanent CEO or CFO, Messrs. Alvarez or
          Fogarty shall not receive compensation on account of their service as
          a director. Upon the engagement of a permanent CEO or CFO, Messrs.
          Alvarez or Fogarty (as appropriate) will receive directors'
          compensation.

     (b)  In addition, A&M will be reimbursed by the Company for the reasonable
          out-of pocket expenses of the CEO, CFO and the Additional Personnel
          and, if applicable, other A&M personnel, incurred in connection with
          this engagement, such as travel, lodging, duplication, computer
          research, messenger and telephone charges. In addition, A&M shall be
          reimbursed by the Company for the reasonable fees and expenses of its
          counsel incurred in connection with the preparation and negotiation of
          this Agreement. All fees and expenses due to A&M will be billed on a
          monthly basis or, at A&M's discretion, more frequently.

     (c)  The Company shall provide A&M with a retainer in the amount of
          $100,000, which shall be credited against any amounts due at the
          termination of this engagement and returned upon the satisfaction of
          all obligations hereunder. For the avoidance of doubt, the $100,000
          retainer Mr. Alvarez currently holds pursuant to his Amended
          Employment Agreement with the Company will be deemed to satisfy the
          Company's obligation in accordance with this Paragraph 2(c).

     (d)  The Company and A&M agree that in addition to the compensation, set
          forth above, A&M shall be eligible to receive incentive compensation
          in connection with the provision of certain services hereunder (the
          "Incentive Compensation"). A&M and the Company agree to promptly
          discuss in good faith and to endeavor to reach agreement within 30
          days from the date hereof on the services which are intended to
          qualify for Incentive Compensation, the amount of any Incentive
          Compensation and the terms upon which it shall be payable (including
          A&M's right to receive any such agreed upon Incentive Compensation in
          connection with events or transactions which may occur after the
          termination of this Agreement).

3.   Term

     The engagement and this Agreement will commence as of the effective date of
     the Company's Plan of Reorganization and may be terminated in whole or in
     part (relative to the provision of services of any of the personnel
     identified in Paragraph 2(a)) by either party without cause by giving 30
     days' written notice to the other party. In the event of any such
     termination, any compensation pursuant to Paragraph 2 and expenses due to
     A&M shall be remitted promptly (including compensation and expenses that
     accrued prior to but were invoiced subsequent to such termination). The
     Company may immediately terminate A&M's services hereunder at any time for
     Cause by giving written


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     notice to A&M. Upon any such termination, the Company shall be relieved of
     all of its payment obligations under this Agreement, except for the payment
     of fees and expenses through the effective date of termination (including
     compensation and expenses that accrued prior to but were invoiced
     subsequent to such termination) and its obligations under Paragraph 8. For
     purposes of this Agreement, "Cause" shall mean if (i) A&M, the CEO or CFO
     is convicted of, admits guilt in a written document filed with a court of
     competent jurisdiction to, or enters a plea of nolo contendere to, an
     allegation of fraud, embezzlement, misappropriation or any felony; (ii)
     A&M, the CEO or CFO willfully disobeys a lawful direction of the Board; or
     (iii) a material breach of any of A&M's or the CEO's, CFO's or the
     Additional Personnel's material obligations under this Agreement which is
     not cured within 30 days of the Company's written notice thereof to A&M
     describing in reasonable detail the nature of the alleged breach. A&M may
     terminate this Agreement at any time for Good Reason. For purposes of this
     Agreement, termination for "Good Reason" shall mean either its resignation
     caused by a breach by the Company of any of its material obligations under
     this Agreement that is not cured within 30 days of A&M having given written
     notice of such breach to the Company describing in reasonable detail the
     nature of the alleged breach.

4.   No Audit, Duty to Update.

     It is understood that except for those duties and responsibilities
     undertaken or assumed in connection with the performance of their functions
     as CEO and CFO, the CEO, CFO, the Additional Personnel and A&M are not
     being requested to perform an audit, review or compilation, or any other
     type of financial statement reporting engagement that is subject to the
     rules of the AICPA, SEC or other state or national professional or
     regulatory body. They are entitled to rely on the accuracy and validity of
     the data disclosed to them or supplied to them by employees and
     representatives of the Company.

5.   No Third Party Beneficiary.

     The Company acknowledges that all advice (written or oral) given, by A&M to
     the Company in connection with this engagement is intended solely for the
     benefit and use of the Company (limited to its Board and management) in
     considering the matters to which this engagement relates. The Company
     agrees that no such advice shall be used for any other purpose or
     reproduced, disseminated, quoted or referred to at any time in any manner
     or for any purpose other than accomplishing the tasks referred to herein
     without A&M's prior approval (which shall not be unreasonably withheld),
     except as required by law.

6.   Conflicts.

     A&M is not currently aware of any relationship that would create a conflict
     of interest with the Company. Because A&M is a consulting firm that serves
     clients on an international basis in numerous cases, both in and out of
     court, it is possible that A&M may have rendered services to or have
     business associations with other entities or people which had or have or
     may have relationships with the Company, including creditors of


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     the Company. In the event you accept the terms of this engagement, A&M will
     not represent, and A&M has not represented, the interests of any such
     entities or people in connection with this matter.

7.   Confidentiality / Non-Solicitation.

     The CEO, CFO, the Additional Personnel and A&M shall keep as confidential
     all non-public information received from the Company in conjunction with
     this engagement, except (i) as requested by the Company or its legal
     counsel; (ii) as required by legal proceedings or (iii) as reasonably
     required in the performance of this engagement. This Agreement shall
     constitute a "Confidentiality Agreement" for purposes of Regulation FD
     promulgated pursuant to the Securities Exchange Act of 1934. All
     obligations as to non-disclosure shall cease as to any part of such
     information to the extent that such information is or becomes public other
     than as a result of a breach of this provision. Except as specifically
     provided for in this letter, the Company agrees not to solicit, recruit or
     hire any employees of A&M effective from the date of this Agreement and
     continuing for a period of two years subsequent to the termination of this
     engagement. Should the Company extend offers of employment to any A&M
     employee (other than as specifically provided for in this Agreement) and
     should such an offer be accepted, A&M will be entitled to a fee based upon
     such individual's hourly rates multiplied by an assumed annual billing of
     2,000 hours. This fee would be payable at the time of the individual's
     acceptance of employment from the Company. The election of Messrs. Alvarez
     and Fogarty as directors shall not constitute an offer of employment for
     purposes of this Paragraph 7 or entitle A&M to any fee other than the
     compensation set forth in Paragraph 2 above. The non-solicitation and other
     obligations of A&M and Antonio C. Alvarez II set forth in Paragraph 6 of
     that certain engagement letter between the Company and A&M dated April 30,
     2001 and Paragraph 9 of the Amended Employment Agreement between the
     Company and Antonio C. Alvarez II shall continue in accordance with their
     respective terms.

8.   Indemnification.

     The Company shall indemnify the CEO and CFO to the same extent as the most
     favorable indemnification it extends to its officers or directors, whether
     under the Company's bylaws, its certificate of incorporation, by contract
     or otherwise, and no reduction or termination in any of the benefits
     provided under any such indemnities shall affect the benefits provided to
     the CEO and CFO. The CEO and CFO shall be covered as officers under the
     Company's existing director and officer liability insurance policy. The
     Company shall also use commercially reasonable efforts to maintain any such
     insurance coverage for the CEO and CFO for a period of not less than two
     years following the date of the termination of such officer's services
     hereunder. The provisions of this Paragraph 8 are in the nature of
     contractual obligations and no change in applicable law or the Company's
     charter, bylaws or other organizational documents or policies shall affect
     the CEO's and CFO's rights hereunder. The attached indemnity provisions are
     incorporated herein and the termination of this agreement or the engagement
     shall not affect those provisions, which shall survive termination.


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9.   Miscellaneous.

     This Agreement shall (together with the attached indemnity provisions) be:
     (a) governed and construed in accordance with the laws of the State of New
     York, regardless of the laws that might otherwise govern under applicable
     principles of conflict of laws thereof; (b) incorporates the entire
     understanding of the parties with respect to the subject matter thereof;
     and (c) may not be amended or modified except in writing executed by each
     of the signatories hereto. The Company and A&M agree to waive trial by jury
     in any action, proceeding or counterclaim brought by or on behalf of the
     parties hereto with respect to any matter relating to or arising out of the
     performance or non-performance of the Company or A&M hereunder.

     If the foregoing is acceptable to you, kindly sign the enclosed copy to
     acknowledge your agreement with its terms.

                                              Very truly yours,

                                              Alvarez & Marsal, Inc.


                                              By: /s/ James P. Fogarty
                                                  ------------------------------
                                                  James P. Fogarty
                                                  Managing Director


Accepted and Agreed:

The Warnaco Group, Inc.
For itself and by and on behalf of all its subsidiaries,


By: /s/ Stanley P. Silverstein
    -------------------------------------
    Stanley P. Silverstein
    Vice President
    Chief Administrative Officer

cc: Mr. Stuart Buchalter


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                             ALVAREZ & MARSAL, INC.
--------------------------------------------------------------------------------
 101 East 52nd Street - 6th Floor o New York, NY 10022 o Phone: 212.759.4433
                                 o 212.759.5532

                            INDEMNIFICATION AGREEMENT

This indemnity is made part of an agreement, dated January 29, 2003 (which
together with any renewals, modifications or extensions thereof, is herein
referred to as the "Agreement") by and between Alvarez & Marsal, Inc. ("A&M")
and the Warnaco Group, Inc. (together with its divisions, subsidiaries and
affiliates the "Company"), for services to be rendered to the Company by A&M.

A. The Company agrees to indemnify and hold harmless each of A&M, its
shareholders, employees, agents, representatives and subcontractors (each, an
"Indemnified Party" and collectively, the "Indemnified Parties") against any and
all losses, claims, damages, liabilities, penalties, obligations and expenses,
including the costs for counsel or others (including employees of A&M, based on
their then current hourly billing rates) in investigating, preparing or
defending any action or claim, whether or not in connection with litigation in
which any Indemnified Party is a party, or enforcing the Agreement (including
these indemnity provisions), as and when incurred, caused by, relating to, based
upon or arising out of (directly or indirectly) the Indemnified Parties'
acceptance of or the performance or nonperformance of their obligations under
the Agreement; provided, however, such indemnity shall not apply to any such
loss, claim, damage, liability or expense to the extent it is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal) to
have resulted primarily and directly from such Indemnified Party's gross
negligence or willful misconduct. The Company also agrees that no Indemnified
Party shall have any liability (whether direct or indirect, in contract or tort
or otherwise) to the Company for or in connection with the engagement of A&M,
except to the extent for any such liability for losses, claims, damages,
liabilities or expenses that are found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from such Indemnified Party's gross negligence or willful
misconduct. The Company further agrees that it will not, without the prior
consent of an Indemnified Party, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which such Indemnified Party seeks indemnification hereunder (whether
or not such Indemnified Party is an actual party to such claim, action, suit or
proceedings) unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Party from all liabilities arising out
of such claim, action, suit or proceeding. A&M will not settle, compromise or
consent to the entry of any judgment in any proceeding or threatened claim,
suit, action or proceeding in respect of which indemnification may be sought
hereunder without the prior written consent of the Company, which shall not be
unreasonably withheld.

B. These indemnification provisions shall be in addition to any liability which
the Company may otherwise have to the Indemnified Parties.


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C. If any action, proceeding or investigation is commenced to which any
Indemnified Party proposes to demand indemnification hereunder, such Indemnified
Party will notify the Company with reasonable promptness; provided, however,
that any failure by such Indemnified Party to notify the Company will not
relieve the Company from its obligations hereunder, except to the extent that
such failure shall have actually prejudiced the defense of such action. The
Company shall promptly pay expenses reasonably incurred by any Indemnified Party
in defending, participating in, or settling any action, proceeding or
investigation in which such Indemnified Party is a party or is threatened to be
made a party or otherwise is participating in by reason of the engagement under
the Agreement, upon submission of invoices therefor, whether in advance of the
final disposition of such action, proceeding, or investigation or otherwise.
Each Indemnified Party hereby undertakes, and the Company hereby accepts its
undertaking, to repay any and all such amounts so advanced if it shall
ultimately be determined that such Indemnified Party is not entitled to be
indemnified therefor. If any such action, proceeding or investigation in which
an Indemnified Party is a party is also against the Company, the Company may, in
lieu of advancing the expenses of separate counsel for such Indemnified Party,
provide such Indemnified Party with legal representation by the same counsel who
represents the Company, provided such counsel is reasonably satisfactory to such
Indemnified Party, at no cost to such Indemnified Party; provided, however, that
if such counsel or counsel to the Indemnified Party shall determine that due to
the existence of actual or potential conflicts of interest between such
Indemnified Party and the Company such counsel is unable to represent both the
Indemnified Party and the Company, then the Indemnified Party shall be entitled
to use separate counsel of its own choice, and the Company shall promptly
advance its reasonable expenses of such separate counsel upon submission of
invoices therefor. Nothing herein shall prevent an Indemnified Party from using
separate counsel of its own choice at its own expense. The Company will be
liable for any settlement of any claim against an Indemnified Party made with
the Company's written consent, which consent shall not be unreasonably withheld.

D. In order to provide for just and equitable contribution if a claim for
indemnification pursuant to these indemnification provisions is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification, then the
relative fault of the Company, on the one hand, and the Indemnified Parties, on
the other hand, in connection with the statements, acts or omissions which
resulted in the losses, claims, damages, liabilities and costs giving rise to
the indemnification claim and other relevant equitable considerations shall be
considered; and further provided that in no event will the Indemnified Parties'
aggregate contribution for all losses, claims, damages, liabilities and expenses
with respect to which contribution is available hereunder exceed the amount of
fees actually received by the Indemnified Parties pursuant to the Agreement. No
person found liable for a fraudulent misrepresentation shall be entitled to
contribution hereunder from any person who is not also fond liable for such
fraudulent misrepresentation.

E. In the event the Company and A&M seek judicial approval for the assumption of
the Agreement or authorization to enter into a new engagement agreement pursuant
to either of which A&M would continue to be engaged by the Company, the Company
shall promptly pay expenses reasonably incurred by the Indemnified Parties,
including attorneys' fees and expenses,


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in connection with any motion, action or claim made either in support of or in
opposition to any such retention or authorization, whether in advance of or
following any judicial disposition of such motion, action or claim, promptly
upon submission of invoices therefor and regardless of whether such retention or
authorization is approved by any court. The Company will also promptly pay the
Indemnified Parties for any expenses reasonable incurred by them, including
attorneys' fees and expenses, in seeking payment of all amounts owed it under
the Agreement (or any new engagement agreement) whether through submission of a
fee application or in any other manner, without offset, recoupment or
counterclaim, whether as a secured claim, an administrative expense claim, an
unsecured claim a prepetition claim or a postpetition claim.

F. Neither termination of the Agreement nor termination of A&M's engagement nor
the filing of a petition under Chapter 7 or 11 of the United States Bankruptcy
Code (nor the conversion of an existing case to one under a different chapter)
shall affect these indemnification provisions, which shall hereafter remain
operative and in full force and effect.

G. The rights provided herein shall not be deemed exclusive of any other rights
to which the Indemnified Parties nay be entitled under the certificate of
incorporation or bylaws of the Debtors, any other agreements, any vote of
stockholders or disinterested directors of the Debtors, any applicable law or
otherwise.

The Warnaco Group, Inc.                       ALVAREZ & MARSAL, INC.


By: /s/ Stanley P. Silverstein                By: /s/ James P. Fogarty
    ------------------------------------          ------------------------------
    Stanley P. Silverstein, Esq.                  James P. Fogarty
    Vice President, General Counsel &             Managing Director
    Chief Administrative Officer


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