Document:

EX-10.27

Ex. 10.27

September 11, 2003

As amended on August 11, 2005

As amended and restated as of December 31, 2008

Mr. Lawrence Rutkowski

69 Heather Drive

New Canaan, CT. 06840

Dear Larry,

     This amended and restated letter agreement is made and entered into between The Warnaco Group,
Inc. (together with its subsidiaries, divisions and affiliates, the “Company”) and you to be
effective as of the close of business on December 31, 2008 and reflects our 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”). As such, as of
the close of business on December 31, 2008, this letter agreement amends and restates the letter
agreement between us dated as of September 11, 2003, as amended on August 11, 2005. Except as
otherwise provided in this agreement, the terms of your employment with the Company shall be
governed by the Warnaco Job Application and current Employee Handbook.

	 	1.	 	The Company agrees to employ you and you agree to serve as Senior Vice
President and Chief Financial Officer of the Company, and you shall have such
authorities, duties and responsibilities commensurate with the position of Chief
Financial Officer. In carrying out your duties, you shall report to the Chief Executive
Officer of the Company. You agree to devote your full time and best efforts to the
satisfactory performance of such services and duties as the position requires, and you
shall be entitled to (i) serve on the boards of directors of trade associations and
charitable organizations, subject to the good faith approval of the Chief Executive
Officer of the Company and the Company’s Board of Directors which approval shall not be
unreasonably withheld, (ii) engage in charitable activities and community affairs and
(iii) manage your personal investments and affairs, provided that such activities do
not interfere with the proper performance of your duties and responsibilities for the
Company. The Company acknowledges that as of the Effective Date, the Executive is
employed by the Company as Executive Vice President and Chief Financial Officer.
	 
	 	2.	 	The term (the “Term”) of your employment under this letter agreement began as
of September 11, 2003 (the “Commencement Date”) and shall end at the close of business
on the second anniversary of the Commencement Date; provided, however, that the Term
shall thereafter be automatically extended for additional one-year periods unless
either you or the Company 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. Notwithstanding the foregoing, the Term shall end on the date on which your
employment is terminated by either party in accordance with the provisions herein.

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 2

	 	3.	 	Your compensation shall be as follows:

	 	a.	 	During the Term, you shall be paid an annual base salary of
$550,000 (“Base Salary”), payable in semi-monthly payments of $22,916.66. Your
Base Salary may be reviewed annually by the Chief Executive Officer and may be
increased based on such performance review within the Company’s discretion. You
shall not be entitled to any additional compensation for service as an officer
or member of any board of directors of any affiliate of the Company. The
Company acknowledges that as of the Effective Date, Base Salary is $600,000,
payable in semi-monthly payments of $25,000.
	 
	 	b.	 	During the Term, you shall be eligible to receive an annual
cash incentive award with a target of 70% of Base Salary (“Target Bonus”),
based on your achievement of annual performance and other targets established
by the Chief Executive Officer of the Company and the Company’s Board of
Directors in consultation with you. The amount and payment of any such award
shall be determined in accordance with the Company’s annual incentive program
for senior executives. The Company acknowledges that as of the Effective Date,
Target Bonus is 85% of Base Salary.

	 	i.	 	For fiscal year 2003, you shall receive a
guaranteed pro-rata annual incentive award, which shall be calculated
by multiplying the annual incentive award you would have been entitled
to receive if you had been employed for a full fiscal year based on the
Target Bonus and the Company’s achievement of the applicable
performance targets by a fraction, the numerator of which is the number
of days you were employed during fiscal year 2003 and the denominator
of which is 365. Any annual incentive award, including any annual
incentive award for fiscal year 2003, shall be payable to you when
bonuses for the applicable performance period are paid to other senior
executives of the Company, but in all events no later than the
60th day following the end of the fiscal year for which the
annual incentive award has been earned.

	 	c.	 	Pursuant to the Warnaco 2003 Stock Incentive Plan (the “Plan”),
on your start date, you were granted 50,000 shares of restricted stock
(“restricted stock”) and an option to purchase 200,000 shares of the Company’s
outstanding common stock (the “option”), subject to the terms and conditions of
such awards as set out in the Plan. You may also be eligible to receive future
grants of restricted stock and/or options or other forms of equity compensation
at the sole discretion of the Compensation Committee of the Board of Directors.

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 3

	 	i.	 	Except as otherwise provided herein, the
restricted stock as described herein and the option as described herein
shall vest 25% on February 29, 2004 and shall vest 25% on each of
February 28, 2005, February 28, 2006 and February 28, 2007, provided
that you are employed by the Company on such vesting date and have not
given notice to the Company that you are voluntarily resigning, without
Good Reason (as defined in Exhibit A) prior to such vesting
date. The form of the Restricted Stock Award Agreement for the
restricted stock was attached as Exhibit B to the form of this
letter agreement dated as of September 11, 2003. The form of the
Non-Qualified Stock Option Agreement for the option was attached as
Exhibit C to the form of this letter agreement dated as of
September 11, 2003.
	 
	 	ii.	 	You shall be subject to the equity ownership,
retention and other requirements applicable to senior executives of the
Company. Except as otherwise expressly provided herein, all equity
grants shall be governed by the applicable plan and award agreement, as
in effect on the date hereof and as may be hereafter changed in
accordance with such plan and agreement.

	 	d.	 	During the Term beginning with fiscal year 2005, provided you
are employed by the Company, you 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 paragraph 3(d) if you will be less than age 50 by the
end of the applicable fiscal year, 10% of such amount if you 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 you will be age 60 or older by the end of the applicable fiscal
year (“Supplemental Award”), with the first such award being made no later than
60 days after the Effective Date. For this purpose, Base Salary shall be the
Base Salary paid to you for the fiscal year prior to the award year and Annual
Bonus shall be the annual bonus awarded to you by the Board for such fiscal
year. The Supplemental Award shall not be awarded to you until after the
determination by the Board of your 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 your 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 paragraph 3(d), each Career Share

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 4

	 	 	 	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 you 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 you (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 paragraph 3(d), shall be an unfunded obligation to be satisfied from
the general funds of the Company. Except as otherwise provided in
paragraphs 6 or 8 below or the applicable Stock Incentive Plan and provided
that you are 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 your 62nd birthday or
upon your obtaining 15 years of “Vesting Service” and 100% of the Career
Shares will vest on the earliest of (i) your 65th birthday, (ii)
upon your obtaining 20 years of “Vesting Service” or (iii) 10th
anniversary of the date of grant. Except as otherwise provided in
paragraphs 6 or 8 below, and provided that you are 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 your
62nd birthday or upon your obtaining 5 years of “Vesting Service”
and 100% on the earlier of the your 65th birthday and upon your
obtaining 10 years of “Vesting Service”. For purposes of this paragraph
3(d), “Vesting Service” shall mean the period of time that you are employed
by the Company as an executive officer. Subject to paragraph 27 hereof,
upon vesting the Career Shares will be delivered to you in the form of
Shares. In addition, any unvested Adjusted Notional Account shall vest upon
a Change in Control as defined in clauses (i) or (ii) of the definition of
“Change in Control” on Exhibit A attached hereto if such event qualifies as
a “change in control event” under Section 409A (“409A CIC Event”). The
vested balance in the Adjusted Notional Account, if any, shall not be
distributed to you until there has been a Separation From Service (as
defined in Exhibit A attached hereto) or, if earlier, there has been a 409A
CIC Event and, at such time, shall only be distributed at the earliest time
that satisfies the requirements of this paragraph 3(d). Upon a 409A CIC
Event, the vested Adjusted Notional Account shall be paid to you in a
lump-sum cash payment. In addition, if

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 5

	 	 	 	your employment is terminated for any reason, after taking into account
paragraph 6 or paragraph 8 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 paragraph 27 hereof, shall be paid to you in a cash lump-sum payment
immediately following your Separation From Service; provided, however, that
if you are a “specified employee” as determined pursuant to Section 409A as
of the date of your Separation From Service, such distribution shall not be
made until the earlier of your death or the first business day of the
seventh calendar month following the month in which your Separation From
Service occurs; provided, further, that if your 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 your Separation From
Service without regard to whether you were a “specified employee” at such
time. You can elect to delay the time and/or form of payment of the
Adjusted Notional Account under this paragraph 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) your death, (ii) your “disability” which
satisfies the requirements of Section 409A(a)(2)(C) 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 paragraph 3(d) (without regard to paragraphs 6 or 8,
except as otherwise expressly provided in paragraph 8 of this Agreement) and
the election right in this paragraph 3(d) shall continue to apply to any
outstanding Supplemental Award.

	 	4.	 	While you are employed by the Company, and subject, of course, to the Company’s
right to amend, modify or terminate any benefit plan or program, you shall be entitled
to participate in all Company employee benefit plans applicable to senior executives,
including the following benefits/perquisites:

	 	a.	 	Reimbursement of reasonable business expenses incurred in
carrying out your duties and responsibilities under this agreement, subject to
documentation in accordance with Company policy.
	 
	 	b.	 	Perquisites provided to other senior executives, including a
monthly car allowance of up to $700.
	 
	 	c.	 	Vacation — four weeks paid vacation per calendar year.

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 6

	 	 	 	Notwithstanding anything elsewhere to the contrary, except to the extent any
reimbursement, payment or entitlement pursuant to this paragraph 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 you during any calendar year will not affect
the amount of expenses eligible for reimbursement or provided as in-kind benefits to
you in any other calendar year, (ii) the reimbursements for expenses for which you
are 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.	 	In the event your employment is terminated without Cause (as defined in
Exhibit A) by the Company (other than upon death or due to Disability (as
defined in Exhibit A)) or you resign for Good Reason (as defined in Exhibit
A) (other than due to Disability) during the Term, you shall be entitled to:

	 	a.	 	Base Salary through the Date of Termination (as defined in
Exhibit A), payable on the first regularly scheduled payroll date
following the Date of Termination.
	 
	 	b.	 	Payment of an amount equal to the Base Salary that would have
been payable to you from the Date of Termination through the expiration date
for the original Term, but in no event less than one times Base Salary, payable
in a cash lump sum to you as soon as practicable following the Date of
Termination (but in no event later than 60 days following such date).
	 
	 	c.	 	A pro-rata bonus for the fiscal year in which the Date of
Termination occurs, based on the Company’s performance for such year
(determined by multiplying the amount you would have received had your
employment continued through the end of such fiscal year by a fraction, the
numerator of which is the number of days during such fiscal year that you are
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 1st and no later than
March 15th of the year following the year in which the Date of
Termination occurs).
	 
	 	d.	 	Immediate vesting of that portion of the restricted stock
described in paragraph 3(c) above that would have vested if you had been
employed on the vesting date immediately following the Date of Termination.

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 7

	 	e.	 	That portion of the option described in paragraph 3(c) above
that has vested as of the Date of Termination remaining exercisable for two
years following the Date of Termination.
	 
	 	f.	 	Continued participation on the same terms as immediately prior
to the Date of Termination (including costs of premiums) for you and your
eligible dependents in the Company’s medical and dental plans in which you and
your 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, or (b) the date, or dates, you receive equivalent coverage under the
plans and programs of a subsequent employer.
	 
	 	g.	 	Outplacement counseling and use of an office during the period
Base Salary is paid as salary continuation under paragraph 5(b) above.
	 
	 	h.	 	Any amounts earned, accrued or owing to you but not yet paid.
	 
	 	i.	 	As a condition to receiving severance compensation pursuant to
this paragraph 5, you hereby agree to execute and deliver to the Company a
general release of claims in a form acceptable to the Company no later than 45
days following the Date of Termination and not revoke such release within the
applicable revocation period.

	 	6.	 	In the event your employment is terminated upon death or due to Disability
during the Term, you (or your estate or legal representative, as the case may be) shall
be entitled to:

	 	a.	 	Base Salary through the Date of Termination, payable on the
first regularly scheduled payroll date following the Date of Termination.
	 
	 	b.	 	A pro-rata bonus for the fiscal year in which the Date of
Termination occurs, based on the Company’s performance for such year
(determined by multiplying the amount you would have received had your
employment continued through the end of such fiscal year by a fraction, the
numerator of which is the number of days during such fiscal year that you are
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 1st and no later than
March 15th of the year following the year in which the Date of
Termination occurs).
	 
	 	c.	 	Immediate vesting of 50% of the restricted stock described in
paragraph 3(c) above that remains unvested as of the Date of Termination and
100%

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 8

	 		 	of that portion of the option described in paragraph 3(c) above that remains
unvested as of the Date of Termination, with any vested portion of such
option remaining exercisable for 12 months following the Date of
Termination.
	 
	 	d.	 	Any amounts earned, accrued or owing to you but not yet paid.
	 
	 	e.	 	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 paragraph 3(d) above.

	 	7.	 	In the event the Company terminates your employment for Cause or you
voluntarily resign, you shall be entitled to Base Salary through the Date of
Termination. In the event of your termination for Cause, the unvested restricted stock
described in paragraph 3(c) above and that portion of the option described in paragraph
3(c) above that remains unvested as of the Date of Termination shall be forfeited. In
the event of your voluntary resignation, the unvested restricted stock described in
paragraph 3(c) above and that portion of the option described in paragraph 3(c) above
that remains unvested as of the date on which you provide written notice to the Company
that you are voluntarily resigning shall be forfeited. A voluntary resignation shall be
effective on 60 days prior written notice, subject to early termination by the Company,
and, provided that such notice is given, shall not be deemed to be a breach of this
agreement.
	 
	 	8.	 	In the event your employment is terminated without Cause by the Company (other
than upon death or due to Disability) or you resign for Good Reason (other than due to
Disability), in both cases within one year following a Change in Control (as defined on
Exhibit A) (provided the Term is still in effect or has expired during the
one-year period), you shall be entitled to:

	 	a.	 	Base Salary through the Date of Termination, payable on the
first regularly scheduled payroll date following the Date of Termination.
	 
	 	b.	 	Payment of an amount equal to 2 times the sum of (a) Base
Salary plus (b) Target Bonus, payable in a lump sum as soon as practicable
following the Date of Termination (but in no event later than 60 days following
such date).
	 
	 	c.	 	A pro-rata Target Bonus for the year of termination, determined
by multiplying the Target Bonus by a fraction, the numerator of which is the
number of days that you were employed by the Company during the year in which
the Date of Termination occurs and the denominator of which is 365, payable in
a lump sum as soon as practicable following the Date of Termination (but in no
event later than 60 days following such date).

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 9

	 	d.	 	Immediate vesting of 100% of any of the restricted stock
described in paragraph 3(c) above that remains unvested as of the Date of
Termination and 100% of that portion of the option described in paragraph 3(c)
above that remains unvested as of the Date of Termination, with any vested
portion of such option remaining exercisable for six months following the Date
of Termination and immediate vesting as of the Date of Termination of all other
outstanding equity awards (other than Career Shares), with any stock options
granted on or after August 11, 2005 remaining exercisable for 24 months
following the Date of Termination or the remainder of the option term, if
shorter.
	 
	 	e.	 	Immediate vesting as of the Date of Termination of any
previously granted Supplemental Award, payable in accordance with paragraph
3(d) above.
	 
	 	f.	 	Continued participation on the same terms as immediately prior
to the Date of Termination (including costs of premiums) for you and your
eligible dependents in the Company’s medical and dental plans in which you and
your 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 24
months, or (b) the date, or dates, you receive equivalent coverage under the
plans and programs of a subsequent employer.
	 
	 	g.	 	Any amounts earned, accrued or owing to you but not yet paid.
	 
	 	h.	 	As a condition to receiving severance compensation pursuant to
this paragraph 8, you hereby agree to execute and deliver to the Company a
general release of claims in a form acceptable to the Company no later than 45
days following the Date of Termination and not revoke such release within the
applicable revocation period.

	 	9.	 	In the event the Company provides written notice to you in accordance with
paragraph 2 above that the Term shall not renew and upon or at any time after such
expiration of the Term the Company terminates your employment under circumstances that
during the Term would constitute a termination of employment without Cause, you shall
be entitled to:

	 	a.	 	Base Salary through the Date of Termination, payable on the
first regularly scheduled payroll date following the Date of Termination.
	 
	 	b.	 	Payment of an amount equal to 6 months of Base Salary, payable
in a cash lump sum as soon as practicable following the Date of Termination
(but in no event later than 60 days following such date).

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 10

	 	c.	 	That portion of the option described in paragraph 3(c) above
that has vested as of the Date of Termination remaining exercisable for nine
months following the Date of Termination.
	 
	 	d.	 	Continued participation on the same terms as immediately prior
to the Date of Termination (including costs of premiums) for you and your
eligible dependents in the Company’s medical and dental plans in which you and
your eligible dependents were participating immediately prior to the Date of
Termination for six months following the Date of Termination.
	 
	 	e.	 	Any amounts earned, accrued or owing to you but not yet paid.
	 
	 	f.	 	Notwithstanding the foregoing, in the event that (i) the
Company provides written notice to you in accordance with paragraph 2 above
that the Term shall not renew, (ii) upon or after such expiration of the Term
the Company terminates your employment under circumstances that during the Term
would constitute a termination of employment without Cause, and (iii) such
notice of non-renewal of the Term and such termination both occur on or within
one year following a Change in Control, then you shall be entitled to the
payments, benefits and entitlements under paragraph 8 hereof instead of this
paragraph 9.
	 
	 	g.	 	As a condition to receiving severance compensation pursuant to
this paragraph 9, you hereby agree to execute and deliver to the Company a
general release of claims in a form acceptable to the Company no later than 45
days following the Date of Termination and not revoke such release within the
applicable revocation period.

	 	10.	 	Any amounts due to you under paragraphs 5, 6, 8 or 9 are in the nature of
severance payments considered to be reasonable by the Company and are not in the nature
of a penalty. Any payments provided pursuant to paragraph 5, paragraph 8 or paragraph 9
shall be in lieu of any salary continuation arrangements under any other severance
program of the Company.
	 
	 	11.	 	a. Notwithstanding any other provision of this Agreement, upon the termination
of your employment for any reason, unless otherwise requested by the Board, you shall
immediately resign from all boards of directors of any affiliate of the Company, if
any, of which you may be a member, and as a trustee of, or fiduciary to, any employee
benefit plans of the Company or any affiliate of the Company. You agree to execute any
and all documentation of such resignations upon request by the Company, but you shall
be treated for all purposes as having so resigned upon termination of your employment,
regardless of when or whether you execute any such documentation.

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 11

	 	 	 	 b. Section 409A. Notwithstanding anything to the contrary in this Agreement
or elsewhere (except for paragraph 3(d) of this Agreement), if you are a “specified
employee” as determined pursuant to Section 409A as of the date of your Separation
From Service and if any payment, benefit or entitlement provided for in this
Agreement or otherwise both (x) constitutes a “deferral of compensation” within the
meaning of Section 409A and (y) cannot be paid or provided in a manner otherwise
provided herein or otherwise without subjecting you to additional tax, interest or
penalties under Section 409A, then any such payment, benefit or entitlement that is
payable during the first six months following your Separation From Service shall be
paid or provided to you in a cash lump-sum on the earlier of your death or the first
business day of the seventh calendar month following the month in which your
Separation From Service occurs. In addition, any payment, benefit or entitlement
due upon a termination of your employment that represents a “deferral of
compensation” within the meaning of Section 409A (other than any payments due
pursuant to paragraph 3(d) of this Agreement) shall only be paid or provided to you
upon a Separation From Service, in which case any reference to “Date of Termination”
in connection with such payment, benefit or entitlement shall be deemed to be a
reference to “Separation From Service” and the actual payment date within the time
specified in the applicable provision of paragraphs 5, 6, 7, 8 or 9 shall be within
the Company’s sole discretion. Notwithstanding anything to the contrary in this
Agreement or otherwise, any payment or benefit under this Agreement or otherwise
which is exempt from Section 409A pursuant to Treasury Regulation Section
1.409A-1(b)(9)(v)(A) or (C) shall be paid or provided to you only to the extent the
expenses are not incurred or the benefits are not provided beyond the last day of
your second taxable year following your taxable year in which your Separation From
Service occurs; and provided further that the Company reimburses such expenses no
later than the last day of your third taxable year following your taxable year in
which your Separation From Service occurs. Finally, to the extent that the
provision of any benefit pursuant to paragraph 5(f), paragraph 8(f) or paragraph
9(d) hereof is taxable to you, any such reimbursement shall be paid to you on or
before the last day of your taxable year following your taxable year in which the
expense is incurred and such reimbursement shall not be subject to liquidation or
exchange for any other benefit.
	 
	 	12.	 	You acknowledge that in your capacity in management you have had or will have a
great deal of exposure and access of the Company’s trade secrets and confidential and
proprietary information. Therefore, during the Term and thereafter (provided you are
employed by the Company) and for 12 months following the termination of your employment
with the Company, to protect the Company’s trade secrets and other confidential and
proprietary information, you agree that you will not, other than in the ordinary course
of performing your duties hereunder or as agreed by the Company in writing, engage in a

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 12

	 	 	 	“Competitive Business,” directly or indirectly, as an individual, partner,
shareholder, director, officer, principal, agent, employee, trustee, consultant, or
in any relationship or capacity, in any geographic location in which the Company or
any of its affiliates is engaged in business. You shall not be deemed to be in
violation of this paragraph 12 by reason of the fact that you own or acquire, solely
as an investment, up to two percent (2%) of the outstanding equity securities
(measured by value) of any entity. “Competitive Business” shall mean a business
primarily engaged in apparel design, apparel wholesaling or apparel retailing.
	 
	 	13.	 	Upon any termination of employment, you agree to refrain from directly or
indirectly soliciting any employee of the Company or an affiliate of the Company to
terminate his/her employment (excluding, only, your personal assistant) on your own
behalf or on behalf of any other person or entity or from directly or indirectly hiring
any key employee (e.g., any management-level employee or any designer) of the Company
for a period of eighteen (18) months thereafter. In addition, you agree that for a
period of eighteen (18) months following the termination of your employment with the
Company, you will not, without the prior written consent of the Company, directly or
indirectly, solicit or encourage any customer of the Company or any affiliate of the
Company to reduce or cease its business with the Company or any such affiliate of the
Company or otherwise interfere with the relationship of the Company or any affiliate of
the Company with its customers. You and the Company each agree to refrain from making
any statements or comments of a defamatory or disparaging nature to third parties
regarding each other (including, in the case of the Company, an affiliate of the
Company or the Company’s officers, directors, personnel or products). You and the
Company each understand that either party should be entitled to respond truthfully and
accurately to statements about such party made publicly by you or the Company, as the
case may be, provided that such response is consistent with your or the Company’s
obligations not to make any statements or comments of a defamatory or disparaging
nature as set forth herein above.
	 
	 	14.	 	During the Term and thereafter, other than in the ordinary course of performing
your duties for the Company or as required in connection with providing any cooperation
to the Company pursuant to paragraph 20 below, you agree that you will not disclose to
anyone or make use of any trade secret or proprietary or confidential information of
the Company or any affiliate of the Company, including such trade secret or proprietary
or confidential information of any customer or other entity to which the Company owes
an obligation not to disclose such information, which you acquire during the course of
your employment, including, but not limited to, records kept in the ordinary course of
business, except when required to do so by a court of law, by any governmental agency
having supervisory authority over the business of the Company or by any administrative
or legislative body (including a committee thereof) with apparent

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 13

	 		 	or actual jurisdiction to order you to divulge, disclose or make accessible such
information. The foregoing shall not apply to information that (i) was known to the
public prior to its disclosure by you or (ii) becomes known to the public through no
wrongful disclosure by or act of you or any of your representatives. In the event
you are requested by subpoena, court order, investigative demand, search warrant or
other legal process to disclose any information regarding the Company, you agree,
unless prohibited by law or Securities and Exchange Commission regulation, to give
the Company’s General Counsel prompt written notice of any request for disclosure in
advance of your making such disclosure and you shall not disclose such information
regarding the Company unless and until the Company has expressly authorized you to
do so in writing or the Company has had a reasonable opportunity to object to such a
request or to litigate the matter (of which the Company agrees to keep you
reasonably informed) and has failed to do so.
	 
	 	15.	 	You hereby sell, assign and transfer to the Company all of your right, title
and interest in and to all inventions, discoveries, improvements and copyrightable
subject matter (the “Rights”) which during the period of your employment are made or
conceived by you, alone or with others, and which are within or arise out of any
general field of the Company’s business or arise out of any work you perform, or
information you receive regarding the business of the Company, while employed by the
Company. You shall fully disclose to the Company as promptly as available all
information known or possessed by you concerning any Rights, and upon request by the
Company and without any further remuneration in any form to you by the Company, execute
all applications for patents and for copyright registration, assignments thereof and
other instruments and do all things which the Company may deem necessary to vest and
maintain in it the entire right, title and interest in and to all such Rights.
	 
	 	16.	 	You agree that at the time of the termination of employment, whether at your
instance or the Company, and regardless of the reasons therefore, you will promptly
deliver to the Company’s General Counsel, and not keep or deliver to anyone else, any
and all of the following which is in your possession or control: (i) Company property
(including, without limitation, credit cards, computers, communication devices, home
office equipment and other Company tangible property) and (ii) notes, files, memoranda,
papers and, in general, any and all physical matter and computer files containing
confidential or proprietary information of the Company or any of the Company’s
affiliates, including any and all documents relating to the conduct of the business of
the Company or any of the Company’s affiliates and any and all documents containing
confidential or proprietary information of the customers of the Company or any of the
Company’s affiliates, except for (x) any documents for which the Company’s General
Counsel has given written consent to removal at the time of termination,

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 14

	 	 	 	(y) any documents on your personal computer if you destroy such documents and give
a notarized written affidavit of such destruction and (z) any information necessary
for you to retain for tax purposes (provided you maintain the confidentiality of
such information in accordance with paragraph 14 above).
	 
	 	17.	 	Any failure by you to comply with the provisions of paragraphs 12, 13, 14, 15
or 16 shall relieve the Company of any of its obligations pursuant to this agreement,
including pursuant to paragraphs 5, 6, 8 and 9.
	 
	 	18.	 	From and after the date hereof, should any disagreement, claim or controversy
arise between you and the Company with respect to this agreement, the same may be
enforced at the option of either party by confidential, binding and final arbitration
in New York, New York before a single arbitrator in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The award of the arbitrator
with respect to such disagreement, claim or controversy shall be enforceable in any
court of competent jurisdiction and shall be binding upon the parties hereto. You
consent to the personal jurisdiction of the Courts of the State of New York (including
the United States District Court for the Southern District of New York) in any
proceedings for equitable relief. You further agree not to interpose any objection or
improper venue in any such proceeding or interpose any defense that the Company has an
adequate remedy at law or that the injury suffered by the Company is not irreparable.
You and the Company agree that each party shall be responsible for its own costs and
expenses, including attorneys’ fees, provided, however, that if you substantially
prevail with respect to all claims that are the subject matter of the dispute, your
costs, including reasonable attorneys’ fees, shall be borne by the Company; provided
that if such costs are not reimbursed in connection with a dispute exempt from Section
409A pursuant to Treasury Regulation Section 1.409A-1(b)(11) then such payment shall be
made by the Company to you in the year following the year in which the dispute is
resolved.
	 
	 	19.	 	You expressly agree and acknowledge that any breach or threatened breach of any
obligation set forth in paragraphs 12, 13, 14, 15 or 16 above will cause the Company
irreparable harm for which there is no adequate remedy at law, and as a result of this
the Company shall be entitled to seek the issuance by a court of competent jurisdiction
of an injunction, restraining order or other equitable relief in favor of itself,
without the necessity of posting a bond and without proving actual damages, restraining
you from committing or continuing to commit any such violation.
	 
	 	20.	 	Following the Date of Termination, upon reasonable request by the Company, you
shall cooperate with the Company or any of its affiliates with respect to any legal or
investigatory proceeding, including any government or regulatory investigation, or any
litigation or other dispute relating to any matter in which you

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 15

	 	 	 	were involved or had knowledge during your employment with the Company, subject to
your reasonable personal and business schedules. The Company shall reimburse you for
all reasonable out-of-pocket costs, such as travel, hotel and meal expenses and
reasonable attorneys’ fees, incurred by you in providing any cooperation pursuant to
this paragraph 20; provided such expenses shall be paid to you as soon as
practicable but in no event later than the end of the calendar year following the
calendar year in which the expenses are incurred, subject in all cases to your
providing appropriate documentation to the Company. The Company shall also pay you
a reasonable per diem amount for your time (other than for time spent preparing for
or providing testimony) which shall be based upon your Base Salary at the Date of
Termination, with such per diem paid to you in the calendar month following the
month in which you provide such assistance. Any reimbursement or payment under this
paragraph 20 shall not affect the amount of the reimbursement or payment to you in
any other taxable year. The right to payment or reimbursement pursuant to this
paragraph 20 shall not be liquidated or exchanged for any other benefit.
	 
	 	21.	 	You represent and warrant that you have the free and unfettered right to enter
into this agreement and to perform your obligations under it and that you know of no
agreement between you and any other person, firm or organization, or any law or
regulation, that would be violated by the performance of your obligations under this
agreement. You agree that you will not use or disclose any confidential or proprietary
information of any prior employer in the course of performing your duties for the
Company or any of its affiliates.
	 
	 	22.	 	The invalidity or unenforceability of any particular provision or provisions of
this agreement (as determined by an arbitrator or a court of competent jurisdiction)
shall not affect the other provisions hereof and this agreement shall be construed in
all respects as if such invalid or unenforceable provisions had been omitted.
	 
	 	23.	 	This agreement (including its Exhibits) and the documents referred to herein
constitute the full and complete understanding and agreement of the parties concerning
the subject matter hereof and, as of the close of business on December 31, 2008, shall
supersede all prior representations, understandings and agreements with respect thereto
(other than any agreements governing any equity awards outstanding as of December 31,
2008), and cannot be amended, changed, modified in any respect, without the written
consent of the parties, except that the Company reserves the right in its sole
discretion to make changes at any time to the other documents referenced in this letter
agreement. For the avoidance of doubt, for any termination of employment prior to
January 1, 2009, paragraphs 5 through 9, as applicable, of this letter agreement as in
effect prior to this amendment and restatement shall govern and control. No waiver by
either party of any breach by the other party of any condition or provision contained
in this

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 16

	 	 	 	agreement shall be deemed to be a waiver of a similar or dissimilar condition or
provision.
	 
	 	24.	 	This agreement shall be binding upon and shall inure to the benefit of
successors and assigns of the Company.
	 
	 	25.	 	This agreement shall be governed by and construed in accordance with the laws
of the State of New York, without regard to its provisions as to choice of laws. The
respective rights and obligations of the parties hereunder, including without
limitation paragraphs 12 through 16, shall survive any expiration of the Term,
including expiration thereof upon your termination of employment for whatever reason,
to the extent necessary to the intended preservation of such rights and obligations.
	 
	 	26.	 	Any notice given to either you or the Company under this agreement shall be in
writing and shall be deemed to have been given upon actual receipt or refusal to accept
receipt, with any such notice duly addressed to you or the Company, as the case may be,
at the address indicated below or to such other address as such Party may subsequently
designate by written notice in accordance with this paragraph 26: If to the Company:
The Warnaco Group, Inc., 501 Seventh Avenue, New York, New York 10018, Attention:
General Counsel; If to you: at your home address as indicated on the Company’s records.
	 
	 	27.	 	The Company may withhold from any amounts payable under this agreement such
Federal, state, local or other taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
	 
	 	28.	 	The Company hereby agrees during, and after termination of, your employment to
indemnify you and hold you harmless, both during the Term and thereafter, to the
fullest extent permitted by law and under the certificate of incorporation and by-laws
of the Company against and in respect of any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including reasonable attorneys’ fees),
losses, amounts paid in settlement to the extent approved by the Company, and damages
resulting from your good faith performance of your duties as an officer or director of
the Company or any affiliate of the Company. The Company shall reimburse you for
expenses incurred by you in connection with any proceeding hereunder upon your written
request for such reimbursement and your submission of the appropriate documentation
associated with these expenses. Such request shall include an undertaking by you to
repay the amount of such advance or reimbursement if it shall ultimately be determined
that you are not entitled to be indemnified hereunder against such costs and expenses.
The Company shall use commercially reasonable efforts to obtain and maintain directors’
and officers’ liability insurance covering you to the same extent as the Company covers
its other officers and directors.

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 17

		29.	a. 	 If any amount, entitlement, or benefit paid or payable to you or provided
for your benefit under this agreement and under any other agreement, plan or program of
the Company (such payments, entitlements and benefits referred to as a “Payment”) is
subject to the excise tax imposed under Section 4999 of the Code or any similar federal
or state law (an “Excise Tax”), then notwithstanding anything contained in this
agreement to the contrary, to the extent that any or all Payments would be subject to
the imposition of an Excise Tax, the Payments shall be reduced (but not below zero) if
and to the extent that such reduction would result in your retaining a larger amount,
on an after-tax basis (taking into account federal, state and local income taxes and
the imposition of the Excise Tax), than if you received all of the Payments (such
reduced amount is hereinafter referred to as the “Limited Payment Amount”). The
Company shall reduce or eliminate the Payments, by first reducing or eliminating those
payments or benefits which are payable in cash and then by reducing or eliminating
non-cash payments, in each case in reverse order beginning with payments or benefits
which are to be paid the farthest in time from the Determination (as defined below).
	 
	 	 	 	b. All calculations under this paragraph 29 shall be made by a nationally
recognized accounting firm designated by the Company and reasonably
acceptable to you (other than the accounting firm that is regularly engaged
by any party who has effectuated a Change in Control) (the “Accounting
Firm”). The Company shall pay all fees and expenses of such Accounting
Firm. The Accounting Firm shall provide its calculations, together with
detailed supporting documentation, both to the Company and you within 45
days after the Change in Control or the Date of Termination, whichever is
later (or such earlier time as is requested by the Company) and, with
respect to the Limited Payment Amount, shall deliver its opinion to you that
you are not required to report any Excise Tax on your federal income tax
return with respect to the Limited Payment Amount (collectively, the
“Determination”). Within 5 days of your receipt of the Determination, you
shall have the right to dispute the Determination (the “Dispute”). The
existence of the Dispute shall not in any way affect your right to receive
the Payments in accordance with the Determination. If there is no Dispute,
the Determination by the Accounting Firm shall be final binding and
conclusive upon the Company and you (except as provided in clause (c)
below).
	 
	 	 	 	c. If, after the Payments have been made to you, it is established that the
Payments made to you, or provided for your benefit, exceed the limitations
provided in clause (a) above (an “Excess Payment”) or are less than such
limitations (an “Underpayment”), as the case may be, then the

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 18

	 	 	 	provisions of this clause (c) shall apply. If it is established pursuant to
a final determination of a court or an Internal Revenue Service (the “IRS”)
proceeding which has been finally and conclusively resolved, that an Excess
Payment has been made, you shall repay the Excess Payment to the Company
within 20 days following the determination of such Excess Payment. In the
event that it is determined by (i) the Accounting Firm, the Company (which
shall include the position taken by the Company, or together with its
consolidated group, on its federal income tax return) or the IRS, (ii)
pursuant to a determination by a court, or (iii) upon the resolution to your
satisfaction of the Dispute, that an Underpayment has occurred, the Company
shall pay an amount equal to the Underpayment to you within 10 days of such
determination or resolution together with interest on such amount at the
applicable federal short-term rate, as defined under Section 1274(d) of the
Code and as in effect on the first date that such amount should have been
paid to you under this agreement, from such date until the date that such
Underpayment is made to you.

 

 

Mr. Lawrence Rutkowski

December 31, 2008

Page 19

     IN WITNESS WHEREOF, the Company and you have voluntarily executed this letter agreement to be
effective as of the close of business on December 31, 2008.

	 	 	 	 	 
	 	Very truly yours,

THE WARNACO GROUP, INC.

 	 
	 	/s/ Joseph R. Gromek
 	 
	 	Name:  	Joseph R. Gromek 	 
	 	Title:  	President and Chief Executive Officer 	 
	 

Agreed to and accepted

	 	 	 
	/s/ Lawrence Rutkowski

	 	 
	 

Lawrence Rutkowski

	 	 

 

 

Exhibit A

Definitions

“Cause” shall mean:

	(i)	 	willful misconduct by you which is injurious to the Company’s interests;
	 
	(ii)	 	willful breach of duty by you in the course of your employment, which, if curable, is not
cured within 10 days after your receipt of written notice from the Company;
	 
	(iii)	 	willful failure by you after having been given written notice from the Company to perform
your duties other than a failure resulting from your incapacity due to physical or mental
illness; or
	 
	(iv)	 	indictment of you for the commission of a felony, or your engagement in other willful
misconduct which is injurious to the business or reputation of the Company.

“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 the Commencement 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.

“Date of Termination” shall mean:

	(i)	 	if your employment is terminated by the Company, the date specified in the notice by the
Company to you that your employment is so terminated;

 

 

	(ii)	 	if you voluntarily resign your employment, 60 days after receipt by the Company of written
notice that you are terminating your employment (provided, that the Company may
accelerate the Date of Termination to an earlier date by providing you with written notice of
such action, or, alternatively, the Company may place you on paid leave (covering only Base
Salary) during such period);

(iii) if your employment is terminated by reason of death, the date of death; or

	(iv)	 	if you resign your employment for Good Reason, 30 days after receipt by the Company of timely
written notice from you in accordance with paragraph 26 of the letter agreement effective as
of December 31, 2008 between you and the Company, unless the Company cures the event or events
giving rise to Good Reason within 30 days after receipt of such written notice.

“Disability” shall mean your inability, due to physical or mental incapacity, to substantially
perform your duties and responsibilities for a period of 120 consecutive days as determined by
a medical doctor selected by the Company and reasonably acceptable to you.

“Good Reason” shall mean the occurrence of any of the following without your consent:

	(i)	 	a material diminution in your authority, duties or responsibilities as Chief Financial
Officer of the Company;

(ii) a reduction in your Base Salary or Target Bonus;

	(iii)	 	a change in reporting structure so that you report to someone other than the Chief Executive
Officer of the Company;

(iv) the removal by the Company of you as Chief Financial Officer of the Company;

	(v)	 	the failure of a successor to all or substantially all of the assets of the Company to assume
the Company’s obligations under the letter agreement either in writing or as a matter of law;
or

	(vi)	 	requiring you to be principally based at any office or location other than Manhattan or
Westchester County, New York, provided that you will be required to spend time at the
Company’s Milford, Connecticut office where the Company’s finance and accounting departments
are located.

     Anything herein to the contrary notwithstanding, you shall not be entitled to resign for Good
Reason unless you give the Company written notice of the event constituting “Good Reason” within 60
days of the occurrence of such event and the Company fails to cure such event within 30 days after
receipt of such notice.

 

 

“Separation From Service” shall mean a termination of your employment in a manner consistent with
Treasury Regulation Section 1.409A-1(h).EX-10.28

Ex. 10.28

April 16, 2004

As amended on August 11, 2005

As amended and restated as of December 31, 2008

Mr. Frank Tworecke

11102 Hidden Trail Drive

Owings Mills, MD 21117

Dear Frank,

     This amended and restated letter agreement is made and entered into between The Warnaco Group,
Inc. (together with its subsidiaries, divisions and affiliates, the “Company”) and you to be
effective as of the close of business on December 31, 2008 and reflects our 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”). As such, as of
the close of business on December 31, 2008, this letter agreement amends and restates the letter
agreement between us dated as of April 16, 2004, as amended on August 11, 2005. Except as otherwise
provided in this agreement, the terms of your employment with the Company shall be governed by the
Warnaco Job Application and current Employee Handbook.

	 	1.	 	The Company agrees to employ you and you agree to serve as Group President,
Sportswear of the Company, and you shall have such authorities, duties and
responsibilities commensurate with that position, including but not limited to
operational responsibility for the Company’s Calvin Klein Men’s and Women’s Underwear,
Chaps and Calvin Klein Jeans units. In carrying out your duties, you shall report to
the Chief Executive Officer of the Company. You agree to devote your full time and best
efforts to the satisfactory performance of such services and duties as the position
requires, and you shall be entitled to (i) serve on the boards of directors of trade
associations, charitable organizations and for-profit businesses, subject to the
reasonable approval of the Chief Executive Officer and the Company’s Board of
Directors, (ii) engage in charitable activities and community affairs and (iii) manage
your personal investments and affairs, provided that such activities do not interfere
with the proper performance of your duties and responsibilities for the Company. The
Company acknowledges that as of the Effective Date, the Executive is employed by the
Company as President, Warnaco Sportswear Group.
	 
	 	2.	 	The term (the “Term”) of your employment under this letter agreement began on
May 7, 2004 (the “Commencement Date”) and shall end at the close of business on the
third anniversary of the Commencement Date; provided, however, that the Term shall
thereafter be automatically extended for additional one-year periods unless either you
or the Company 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. Notwithstanding the foregoing, the Term shall end on the

 

 

Mr. Frank Tworecke

December 31, 2008

Page 2

	 	 	 	date on which your employment is terminated by either party in accordance with the
provisions herein.
	 
	 	3.	 	Your compensation shall be as follows:

	 	a.	 	During the Term, you shall be paid an annual base salary of
$700,000 (“Base Salary”), payable in semi-monthly payments of $29,166.66. Your
Base Salary may be reviewed annually by the Compensation Committee of the Board
of Directors in consultation with the Chief Executive Officer and may be
increased based on such performance review within the Company’s discretion. You
shall not be entitled to any additional compensation for service as an officer
or member of any board of directors of any affiliate of the Company. The
Company acknowledges that as of the Effective Date, Base Salary is $775,000,
payable in semi-monthly payments of $32,291.67.
	 
	 	b.	 	During the Term, commencing with the Company’s fiscal year
2004, you shall be eligible to receive an annual cash incentive award under The
Warnaco Group, Inc. Incentive Compensation Plan (“Bonus Plan”) with a target of
70% of Base Salary (“Target Bonus”). The terms and conditions applicable to
such annual cash incentive award, including but not limited to the
determination of performance targets (following consultation with you), the
ultimate amount of such award, and the timing of payment of any such award,
shall be determined in accordance with the terms of the Bonus Plan. The
Company acknowledges that as of the Effective Date, Target Bonus is 85% of Base
Salary.

	 	i.	 	For fiscal year 2004, you shall receive a
minimum guaranteed annual incentive award of $250,000. Any annual
incentive award, including any annual incentive award for fiscal year
2004, shall be payable to you when bonuses for the applicable
performance period are paid to other senior executives of the Company,
but in all events no later than the 60th day following the
end of the fiscal year for which the annual incentive award has been
earned.

	 	c.	 	Pursuant to the Warnaco 2003 Stock Incentive Plan (the “Plan”),
on the Commencement Date you were granted 35,000 shares of restricted stock
(“restricted stock”) and an option to purchase 210,000 shares of the Company’s
outstanding common stock (the “option”), subject to the terms and conditions of
such awards as set out in the Plan. You may also be eligible to receive future
grants of restricted stock and/or options or other forms of equity compensation
at the sole discretion of the Compensation Committee of the Board of Directors.

 

 

Mr. Frank Tworecke

December 31, 2008

Page 3

	 	i.	 	Except as otherwise provided herein, the
restricted stock as described herein and the option as described herein
shall vest 33% on May 1, 2005 and shall vest 33% on each of May 1, 2006
and May 1, 2007, provided that you are employed by the Company on such
vesting date and have not given notice to the Company that you are
voluntarily resigning, without Good Reason (as defined in Exhibit
A), prior to such vesting date. The form of the Restricted Stock
Award Agreement for the restricted stock was attached as Exhibit
B to the form of this letter agreement dated as of April 16, 2004.
The form of the Non-Qualified Stock Option Agreement for the option was
attached as Exhibit C to the form of this letter agreement
dated as of April 16, 2004.
	 
	 	ii.	 	You shall be subject to the equity ownership,
retention and other requirements applicable to senior executives of the
Company. Except as otherwise expressly provided herein, all equity
grants shall be governed by the applicable plan and award agreement, as
in effect on the date hereof and as may be hereafter changed in
accordance with such plan and agreement.

	 	d.	 	During the Term beginning with fiscal year 2005, provided you
are employed by the Company, you shall be entitled to an annual award with an
aggregate grant date value equal to 10% of the sum of Base Salary plus Annual
Bonus as defined in this paragraph 3(d) if you will be less than age 60 by the
end of the applicable fiscal year and 13% of such amount if you will be age 60
or older by the end of the applicable fiscal year (“Supplemental Award”), with
the first such award being made no later than 60 days after the Effective Date.
For this purpose, Base Salary shall be the Base Salary paid to you for the
fiscal year prior to the award year and Annual Bonus shall be the annual bonus
awarded to you by the Board for such fiscal year. The Supplemental Award shall
not be awarded to you until after the determination by the Board of your 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 your 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 paragraph 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

 

 

Mr. Frank Tworecke

December 31, 2008

Page 4

	 	 	 	Company shall select the investment alternatives available to you 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 you
(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 paragraph 3(d), shall be an unfunded obligation to be satisfied from
the general funds of the Company. Except as otherwise provided in
paragraphs 6 or 8 below or the applicable Stock Incentive Plan and provided
that you are 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 your 62nd birthday or
upon your obtaining 15 years of “Vesting Service” and 100% of the Career
Shares will vest on the earliest of (i) your 65th birthday, (ii)
upon your obtaining 20 years of “Vesting Service” or (iii) 10th
anniversary of the date of grant. Except as otherwise provided in
paragraphs 6 or 8 below, and provided that you are 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 your
62nd birthday or upon your obtaining 5 years of “Vesting Service”
and 100% on the earlier of the your 65th birthday and upon your
obtaining 10 years of “Vesting Service”. For purposes of this paragraph
3(d), “Vesting Service” shall mean the period of time that you are employed
by the Company as an executive officer. Subject to paragraph 27 hereof,
upon vesting the Career Shares will be delivered to you in the form of
Shares. In addition, any unvested Adjusted Notional Account shall vest upon
a Change in Control as defined in clauses (i) or (ii) of the definition of
“Change in Control” on Exhibit A attached hereto if such event qualified as
a “change in control event” under Section 409A (“409A CIC Event”). The
vested balance in the Adjusted Notional Account, if any, shall not be
distributed to you until there has been a Separation From Service (as
defined in Exhibit A attached hereto) or, if earlier, there has been a 409A
CIC Event and, at such time, shall only be distributed at the earliest time
that satisfies the requirements of this paragraph 3(d). Upon a 409A CIC
Event, the vested Adjusted Notional Account shall be paid to you in a
lump-sum cash payment. In addition, if your employment is terminated for
any reason, after taking into account paragraph 6 or paragraph 8 hereof, any
unvested Supplemental Awards (whether in the

 

 

Mr. Frank Tworecke

December 31, 2008

Page 5

	 	 	 	form of Career Shares or the Adjusted Notional Account) shall be forfeited
and any vested balance in the Adjusted Notional Account, subject to
paragraph 27 hereof, shall be paid to you in a cash lump-sum payment
immediately following your Separation From Service; provided, however, that
if you are a “specified employee” as determined pursuant to Section 409A as
of the date of your Separation From Service, such distribution shall not be
made until the earlier of your death or the first business day of the
seventh calendar month following the month in which your Separation From
Service occurs; provided, further, that if your 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 your Separation From
Service without regard to whether you were a “specified employee” at such
time. You can elect to delay the time and/or form of payment of the
Adjusted Notional Account under this paragraph 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) your death, (ii) your “disability” which
satisfies the requirements of Section 409A(a)(2)(C) 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 paragraph 3(d) (without regard to paragraphs 6 or 8,
except as otherwise expressly provided in paragraph 8 of this Agreement) and
the election right in this paragraph 3(d) shall continue to apply to any
outstanding Supplemental Award.
	 
	 	e.	 	If you remain actively employed with the Company until the
fifth anniversary of the date you commenced employment with the Company then
following your Separation From Service (other than for Cause), the Company will
pay you an amount annually, in equal monthly installments, equal to $75,000
minus the “Value of the Supplemental Awards,” with the first installment being
paid on the first business day of the calendar month following the calendar
month within which your Separation From Service occurs and monthly payments
being paid on the first business day of each calendar month thereafter until
the earlier to occur of (i) your death or (ii) the fifteenth anniversary of
your Separation From Service; provided that if you are a “specified employee”
as of your Separation From Service, then the first such monthly payment shall
not be made until the first business day of the seventh calendar month
following the month in which your Separation From Service occurs and, at such
time, you shall receive a lump-sum amount equal to the amount of the
installments that would otherwise have been made to you if you had not been a
“specified

 

 

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	 	 	 	employee”. Notwithstanding the foregoing, the amount payable hereunder
shall be pro-rated for the year of termination and the year in which you die
based on the number of days that elapsed in such year after your date of
termination or prior to your date of death, as the case may be. The “Value
of the Supplemental Awards” shall equal (x) the number of vested Career
Shares as of your date of termination multiplied by the applicable “Share
Price” plus (y) the Adjusted Notional Account balance as of your date of
termination, (z) divided by 9.75. For purposes of this paragraph 3(e),
“Share Price” shall mean (a) for any vested Career Shares for which the
Share was sold prior to the date you terminate employment, the sale price
for such Share, with such price increased by 7/12ths of 1% per month from
the date of sale to your date of termination and (b) for any vested Career
Share for which the Share has not been sold prior to your date of
termination, the closing price of the Share on the date you terminate
employment. The provisions of this paragraph 3(e) shall survive expiration
or termination of the Term.

	 	4.	 	While you are employed by the Company, and subject, of course, to the Company’s
right to amend, modify or terminate any benefit plan or program, you shall be entitled
to participate in all Company employee benefit plans applicable to senior executives,
including the following benefits/perquisites:

	 	a.	 	Reimbursement of reasonable business expenses incurred in
carrying out your duties and responsibilities under this agreement, subject to
documentation in accordance with Company policy.
	 
	 	b.	 	Perquisites provided to other senior executives, including a
monthly car allowance of up to $1,500.
	 
	 	c.	 	Vacation — four weeks paid vacation per calendar year.

	 	 	 	During the Term, you shall also be entitled to Company-paid term life insurance with
a benefit equal to $2 million, provided the Company can obtain such insurance at
commercially reasonable premium levels. In addition, during the Term, the Company
shall provide for your use a 2-bedroom apartment (together with a furnishing
allowance for such apartment not to exceed $10,000) and shall reimburse you your
costs for one weekly round-trip travel between New York and Baltimore.
Notwithstanding anything elsewhere to the contrary, except to the extent any
reimbursement, payment or entitlement pursuant to this paragraph 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 you during any calendar year will not affect
the amount of expenses eligible for reimbursement or provided as in-kind benefits to
you in any other calendar year, (ii) the reimbursements for

 

 

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	 	 	 	expenses for which you are 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.	 	In the event your employment is terminated without Cause (as defined in
Exhibit A) by the Company (other than upon death or due to Disability (as
defined in Exhibit A)) or you resign for Good Reason (as defined in Exhibit
A), in each case during the Term, you shall be entitled to:

	 	a.	 	Base Salary through the Date of Termination (as defined in
Exhibit A), payable on the first regularly scheduled payroll date
following the Date of Termination.
	 
	 	b.	 	Payment of an amount equal to the Base Salary that would have
been payable to you from the Date of Termination through the expiration of the
original Term, but in no event less one times Base Salary, payable in a cash
lump sum to you as soon as practicable following the Date of Termination (but
in no event later than 60 days following such date).
	 
	 	c.	 	A pro-rata bonus for the fiscal year in which the Date of
Termination occurs, based on the Company’s performance for such year
(determined by multiplying the amount you would have received had your
employment continued through the end of such fiscal year by a fraction, the
numerator of which is the number of days during such fiscal year that you are
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 1st and no later than
March 15th of the year following the year in which the Date of
Termination occurs).
	 
	 	d.	 	Immediate vesting of that portion of the restricted stock
described in paragraph 3(c) above that would have vested if you had been
employed on the vesting date immediately following the Date of Termination.
	 
	 	e.	 	That portion of the option described in paragraph 3(c) above
that has vested as of the Date of Termination remaining exercisable for two
years following the Date of Termination.
	 
	 	f.	 	Provided you make a timely election under COBRA, continued
participation on the same terms as immediately prior to the Date of Termination
(including costs of premiums) for you and your eligible dependents in the
Company’s medical and dental plans in which you and your eligible dependents
were participating immediately prior to the Date

 

 

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	 	 	 	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 18 months, or (b) the date, or dates, you receive equivalent coverage
under the plans and programs of a subsequent employer.
	 
	 	g.	 	Any amounts earned, accrued or owing to you but not yet paid.
	 
	 	h.	 	As a condition to receiving severance compensation pursuant to
this paragraph 5, you hereby agree to execute and deliver to the Company a
general release of claims in a form acceptable to the Company no later than 45
days following the Date of Termination and not revoke such release within the
applicable revocation period.

	 	6.	 	In the event your employment is terminated upon death or due to Disability
during the Term, you (or your estate or legal representative, as the case may be) shall
be entitled to:

	 	a.	 	Base Salary through the Date of Termination, payable on the
first regularly scheduled payroll date following the Date of Termination.
	 
	 	b.	 	A pro-rata bonus for the fiscal year in which the Date of
Termination occurs, based on the Company’s performance for such year
(determined by multiplying the amount you would have received had your
employment continued through the end of such fiscal year by a fraction, the
numerator of which is the number of days during such fiscal year that you are
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 1st and no later than
March 15th of the year following the year in which the Date of
Termination occurs).
	 
	 	c.	 	Immediate vesting of 50% of the restricted stock described in
paragraph 3(c) above that remains unvested as of the Date of Termination and
100% of that portion of the option described in paragraph 3(c) above that
remains unvested as of the Date of Termination, with any vested portion of such
option remaining exercisable for 12 months following the Date of Termination.
	 
	 	d.	 	Any amounts earned, accrued or owing to you but not yet paid.
	 
	 	e.	 	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 paragraph 3(d) above.

 

 

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	 	7.	 	In the event the Company terminates your employment for Cause or you
voluntarily resign, you shall be entitled to Base Salary through the Date of
Termination. In the event of your termination for Cause, the unvested restricted stock
described in paragraph 3(c) above and that portion of the option described in paragraph
3(c) above that remains unvested as of the Date of Termination shall be forfeited. In
the event of your voluntary resignation, the unvested restricted stock described in
paragraph 3(c) above and that portion of the option described in paragraph 3(c) above
that remains unvested as of the date on which you provide written notice to the Company
that you are voluntarily resigning shall be forfeited. A voluntary resignation shall be
effective on 60 days prior written notice by you to the Company, subject to early
termination by the Company, and, provided that such notice is given, shall not be
deemed to be a breach of this agreement.
	 
	 	8.	 	In the event your employment is terminated without Cause by the Company (other
than upon death or due to Disability) or you resign for Good Reason, in both cases
within one year following a Change in Control (as defined on Exhibit A)
(provided the Term is still in effect or has expired during the one-year period), you
shall be entitled to:

	 	a.	 	Base Salary through the Date of Termination, payable on the
first regularly scheduled payroll date following the Date of Termination.
	 
	 	b.	 	Payment of an amount equal to 2 times the sum of (a) Base
Salary plus (b) Target Bonus, payable in a lump sum as soon as practicable
following the Date of Termination (but in no event later than 60 days following
such date).
	 
	 	c.	 	A pro-rata Target Bonus for the year of termination, determined
by multiplying the Target Bonus by a fraction, the numerator of which is the
number of days that you were employed by the Company during the year in which
the Date of Termination occurs and the denominator of which is 365, payable in
a lump sum as soon as practicable following the Date of Termination (but in no
event later than 60 days following such date).
	 
	 	d.	 	Immediate vesting of 100% of any of the restricted stock
described in paragraph 3(c) above that remains unvested as of the Date of
Termination and 100% of that portion of the option described in paragraph 3(c)
above that remains unvested as of the Date of Termination, with any vested
portion of such option remaining exercisable for six months following the Date
of Termination and immediate vesting as of the Date of Termination of all other
outstanding equity awards (other than Career Shares), with any stock options
granted on or after August 11, 2005 remaining exercisable

 

 

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	 	 	 	for 24 months following the Date of Termination or the remainder of the
option term, if shorter.
	 
	 	e.	 	Immediate vesting as of the Date of Termination of any
previously granted Supplemental Award, payable in accordance with paragraph
3(d) above.
	 
	 	f.	 	Provided you make a timely election under COBRA, continued
participation on the same terms as immediately prior to the Date of Termination
(including costs of premiums) for you and your eligible dependents in the
Company’s medical and dental plans in which you and your 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 24 months, or (b) the date,
or dates, you receive equivalent coverage under the plans and programs of a
subsequent employer.
	 
	 	g.	 	Any amounts earned, accrued or owing to you but not yet paid.
	 
	 	h.	 	As a condition to receiving severance compensation pursuant to
this paragraph 8, you hereby agree to execute and deliver to the Company a
general release of claims in a form acceptable to the Company no later than 45
days following the Date of Termination and not revoke such release within the
applicable revocation period.

	 	9.	 	In the event the Company provides written notice to you in accordance with
paragraph 2 above that the Term shall not renew and upon or at any time after such
expiration of the Term the Company terminates your employment under circumstances that
during the Term would constitute a termination of employment without Cause, you shall
be entitled to:

	 	a.	 	Base Salary through the Date of Termination, payable on the
first regularly scheduled payroll date following the Date of Termination.
	 
	 	b.	 	Payment of an amount equal to one times Base Salary, payable in
a cash lump sum as soon as practicable following the Date of Termination (but
in no event later than 60 days following such date).
	 
	 	c.	 	That portion of the option described in paragraph 3(c) above
that has vested as of the Date of Termination remaining exercisable for nine
months following the Date of Termination.
	 
	 	d.	 	Provided you make a timely election under COBRA, continued
participation on the same terms as immediately prior to the Date of Termination
(including costs of premiums) for you and your eligible

 

 

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	 	 	 	dependents in the Company’s medical and dental plans in which you and your
eligible dependents were participating immediately prior to the Date of
Termination for 18 months following the Date of Termination.
	 
	 	e.	 	Any amounts earned, accrued or owing to you but not yet paid.
	 
	 	f.	 	Notwithstanding the foregoing, in the event that (i) the
Company provides written notice to you in accordance with paragraph 2 above
that the Term shall not renew, (ii) upon or after such expiration of the Term
the Company terminates your employment under circumstances that during the Term
would constitute a termination of employment without Cause, and (iii) such
notice of non-renewal of the Term and such termination both occur on or within
one year following a Change in Control, then you shall be entitled to the
payments, benefits and entitlements under paragraph 8 hereof instead of this
paragraph 9.
	 
	 	g.	 	As a condition to receiving severance compensation pursuant to
this paragraph 9, you hereby agree to execute and deliver to the Company a
general release of claims in a form acceptable to the Company no later than 45
days following the Date of Termination and not revoke such release within the
applicable revocation period.

	 	10.	 	Any amounts due to you under paragraphs 5, 6, 8 or 9 are in the nature of
severance payments considered to be reasonable by the Company and are not in the nature
of a penalty. Any payments provided pursuant to paragraph 5, paragraph 8 or paragraph 9
shall be in lieu of any salary continuation arrangements under any other severance
program or plan of the Company.
	 
	 	11.	 	a. Notwithstanding any other provision of this Agreement, upon the termination
of your employment for any reason, unless otherwise requested by the Board, you shall
immediately resign from all boards of directors of any affiliate of the Company, if
any, of which you may be a member, and as a trustee of, or fiduciary to, any employee
benefit plans of the Company or any affiliate of the Company. You agree to execute any
and all documentation of such resignations upon request by the Company, but you shall
be treated for all purposes as having so resigned upon termination of your employment,
regardless of when or whether you execute any such documentation.
	 
	 	 	 	 b. Section 409A. Notwithstanding anything to the contrary in this Agreement
or elsewhere (except for paragraphs 3(d) and 3(e) of this Agreement), if you are a
“specified employee” as determined pursuant to Section 409A as of the date of your
Separation From Service and if any payment, benefit or entitlement provided for in
this Agreement or otherwise both (x) constitutes a “deferral of compensation” within
the meaning of Section 409A and (y) cannot be

 

 

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	 	 	 	paid or provided in a manner otherwise provided herein or otherwise without
subjecting you to additional tax, interest or penalties under Section 409A, then any
such payment, benefit or entitlement that is payable during the first six months
following your Separation From Service shall be paid or provided to you in a cash
lump-sum on the earlier of your death or the first business day of the seventh
calendar month following the month in which your Separation From Service occurs. In
addition, any payment, benefit or entitlement due upon a termination of your
employment that represents a “deferral of compensation” within the meaning of
Section 409A (other than any payments due pursuant to paragraphs 3(d) and 3(e) of
this Agreement) shall only be paid or provided to you upon a Separation From
Service, in which case any reference to “Date of Termination” in connection with
such payment, benefit or entitlement shall be deemed to be a reference to
“Separation From Service” and the actual payment date within the time specified in
the applicable provision of paragraphs 5, 6, 7, 8 or 9 shall be within the Company’s
sole discretion. Notwithstanding anything to the contrary in this Agreement or
otherwise, any payment or benefit under this Agreement or otherwise which is exempt
from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(v)(A) or
(C) shall be paid or provided to you only to the extent the expenses are not
incurred or the benefits are not provided beyond the last day of your second taxable
year following your taxable year in which your Separation From Service occurs; and
provided further that the Company reimburses such expenses no later than the last
day of your third taxable year following your taxable year in which your Separation
From Service occurs. Finally, to the extent that the provision of any benefit
pursuant to paragraph 5(f), paragraph 8(f) or paragraph 9(d) hereof is taxable to
you, any such reimbursement shall be paid to you on or before the last day of your
taxable year following your taxable year in which the expense is incurred and such
reimbursement shall not be subject to liquidation or exchange for any other benefit.
	 
	 	12.	 	You acknowledge that in your capacity in management you have had or will have a
great deal of exposure and access of the Company’s trade secrets and confidential and
proprietary information. Therefore, during the Term and thereafter (provided you are
employed by the Company) and for 12 months following the termination of your employment
with the Company, to protect the Company’s trade secrets and other confidential and
proprietary information, you agree that you will not, other than in the ordinary course
of performing your duties hereunder or as agreed by the Company in writing, engage in a
“Competitive Business,” directly or indirectly, as an individual, partner, shareholder,
director, officer, principal, agent, employee, trustee, consultant, or in any
relationship or capacity, in any geographic location in which the Company or any of its
affiliates is engaged in business. You shall not be deemed to be in violation of this
paragraph 12 by reason of the fact that you own or acquire, solely as an investment, up
to two percent (2%) of the outstanding equity securities

 

 

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	 	 	 	(measured by value) of any entity. “Competitive Business” shall mean a business
primarily engaged in apparel design or apparel wholesaling.
	 
	 	13.	 	Upon any termination of employment (whether during or after the expiration of
the Term), you agree to refrain from directly or indirectly soliciting any employee of
the Company or an affiliate of the Company to terminate his/her employment (excluding,
only, your personal assistant) on your own behalf or on behalf of any other person or
entity or from directly or indirectly hiring any key employee (e.g., any
management-level employee or any designer) of the Company for a period of eighteen (18)
months thereafter. In addition, you agree that for a period of eighteen (18) months
following the termination of your employment with the Company (whether during or after
the expiration of the Term), you will not, without the prior written consent of the
Company, directly or indirectly, solicit or encourage any customer of the Company or
any affiliate of the Company to reduce or cease its business with the Company or any
such affiliate of the Company or otherwise interfere with the relationship of the
Company or any affiliate of the Company with its customers. You and the Company each
agree to refrain from making any statements or comments of a defamatory or disparaging
nature to third parties regarding each other (including, in the case of the Company, an
affiliate of the Company or the Company’s officers, directors, personnel or products).
You and the Company each understand that either party should be entitled to respond
truthfully and accurately to statements about such party made publicly by you or the
Company, as the case may be, provided that such response is consistent with your or the
Company’s obligations not to make any statements or comments of a defamatory or
disparaging nature as set forth herein above.
	 
	 	14.	 	During the Term and thereafter, other than in the ordinary course of performing
your duties for the Company or as required in connection with providing any cooperation
to the Company pursuant to paragraph 20 below, you agree that you will not disclose to
anyone or make use of any trade secret or proprietary or confidential information of
the Company or any affiliate of the Company, including such trade secret or proprietary
or confidential information of any customer or other entity to which the Company owes
an obligation not to disclose such information, which you acquire during the course of
your employment, including, but not limited to, records kept in the ordinary course of
business, except when required to do so by a court of law, by any governmental agency
having supervisory authority over the business of the Company or by any administrative
or legislative body (including a committee thereof) with apparent or actual
jurisdiction to order you to divulge, disclose or make accessible such information. The
foregoing shall not apply to information that (i) was known to the public prior to its
disclosure by you or (ii) becomes known to the public through no wrongful disclosure by
or act of you or any of your representatives. In

 

 

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	 	 	 	the event you are requested by subpoena, court order, investigative demand, search
warrant or other legal process to disclose any information regarding the Company,
you agree, unless prohibited by law or Securities and Exchange Commission
regulation, to give the Company’s General Counsel prompt written notice of any
request for disclosure in advance of your making such disclosure and you shall not
disclose such information regarding the Company unless and until the Company has
expressly authorized you to do so in writing or the Company has had a reasonable
opportunity to object to such a request or to litigate the matter (of which the
Company agrees to keep you reasonably informed) and has failed to do so.
	 
	 	15.	 	You hereby sell, assign and transfer to the Company all of your right, title
and interest in and to all inventions, discoveries, improvements and copyrightable
subject matter (the “Rights”) which during the period of your employment are made or
conceived by you, alone or with others, and which are within or arise out of any
general field of the Company’s business or arise out of any work you perform, or
information you receive regarding the business of the Company, while employed by the
Company. You shall fully disclose to the Company as promptly as available all
information known or possessed by you concerning any Rights, and upon request by the
Company and without any further remuneration in any form to you by the Company, execute
all applications for patents and for copyright registration, assignments thereof and
other instruments and do all things which the Company may deem necessary to vest and
maintain in it the entire right, title and interest in and to all such Rights.
	 
	 	16.	 	You agree that at the time of the termination of employment (whether during or
after the expiration of the Term), whether at your instance or the Company, and
regardless of the reasons therefore, you will promptly deliver to the Company’s General
Counsel, and not keep or deliver to anyone else, any and all of the following which is
in your possession or control: (i) Company property (including, without limitation,
credit cards, computers, communication devices, home office equipment and other Company
tangible property) and (ii) notes, files, memoranda, papers and, in general, any and
all physical matter and computer files containing confidential or proprietary
information of the Company or any of the Company’s affiliates, including any and all
documents relating to the conduct of the business of the Company or any of the
Company’s affiliates and any and all documents containing confidential or proprietary
information of the customers of the Company or any of the Company’s affiliates, except
for (x) any documents for which the Company’s General Counsel has given written consent
to removal at the time of termination, (y) any documents on your personal computer if
you destroy such documents and give a notarized written affidavit of such destruction
and (z) any information necessary for you to retain for tax purposes (provided you

 

 

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	 	 	 	maintain the confidentiality of such information in accordance with paragraph 14
above).
	 
	 	17.	 	Any failure by you to comply with the provisions of paragraphs 12, 13, 14, 15
or 16 shall relieve the Company of any of its obligations pursuant to this agreement,
including pursuant to paragraphs 5, 6, 8 and 9.
	 
	 	18.	 	From and after the date hereof, should any disagreement, claim or controversy
arise between you and the Company with respect to this agreement or your employment by
the Company, the same may be enforced at the option of either party by confidential,
binding and final arbitration in New York, New York before a single arbitrator in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. With respect to any dispute regarding whether Cause (as defined in
Exhibit A) or Good Reason (as defined in Exhibit A) exists as a basis
for forfeiting your outstanding stock options or restricted stock, the parties agree
that any determination by the committee administering the applicable plan that Cause or
Good Reason did or did not exist shall not be binding in the arbitrator(s). The award
of the arbitrator with respect to such disagreement, claim or controversy shall be
enforceable in any court of competent jurisdiction and shall be binding upon the
parties hereto. You consent to the personal jurisdiction of the Courts of the State of
New York (including the United States District Court for the Southern District of New
York) in any proceedings for equitable relief. You further agree not to interpose any
objection or improper venue in any such proceeding or interpose any defense that the
Company has an adequate remedy at law or that the injury suffered by the Company is not
irreparable. You and the Company agree that each party shall be responsible for its own
costs and expenses, including attorneys’ fees, provided, however, that if you
substantially prevail with respect to all claims that are the subject matter of the
dispute, your costs, including reasonable attorneys’ fees, shall be borne by the
Company; provided that if such costs are not reimbursed in connection with a dispute
exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(11) then
such payment shall be made by the Company to you in the year following the year in
which the dispute is resolved.
	 
	 	19.	 	You expressly agree and acknowledge that any breach or threatened breach of any
obligation set forth in paragraphs 12, 13, 14, 15 or 16 above will cause the Company
irreparable harm for which there is no adequate remedy at law, and as a result of this
the Company shall be entitled to seek the issuance by a court of competent jurisdiction
of an injunction, restraining order or other equitable relief in favor of itself,
without the necessity of posting a bond and without proving actual damages, restraining
you from committing or continuing to commit any such violation.

 

 

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	 	20.	 	Following the Date of Termination, upon reasonable request by the Company, you
shall cooperate with the Company or any of its affiliates with respect to any legal or
investigatory proceeding, including any government or regulatory investigation, or any
litigation or other dispute relating to any matter in which you were involved or had
knowledge during your employment with the Company, subject to your reasonable personal
and business schedules. The Company shall reimburse you for all reasonable
out-of-pocket costs, such as travel, hotel and meal expenses and reasonable attorneys’
fees, incurred by you in providing any cooperation pursuant to this paragraph 20;
provided such expenses shall be paid to you as soon as practicable but in no event
later than the end of the calendar year following the calendar year in which the
expenses are incurred, subject in all cases to your providing appropriate documentation
to the Company. The Company shall also pay you a reasonable per diem amount for your
time (other than for time spent preparing for or providing testimony) which shall be
based upon your Base Salary at the Date of Termination, with such per diem paid to you
in the calendar month following the month in which you provide such assistance. Any
reimbursement or payment under this paragraph 20 shall not affect the amount of the
reimbursement or payment to you in any other taxable year. The right to payment or
reimbursement pursuant to this paragraph 20 shall not be liquidated or exchanged for
any other benefit.
	 
	 	21.	 	You represent and warrant that you have the free and unfettered right to enter
into this agreement and to perform your obligations under it and that you know of no
agreement between you and any other person, firm or organization, or any law or
regulation, that would be violated by the performance of your obligations under this
agreement. You agree that you will not use or disclose any confidential or proprietary
information of any current or prior employer in the course of performing your duties
for the Company or any of its affiliates.
	 
	 	22.	 	The invalidity or unenforceability of any particular provision or provisions of
this agreement (as determined by an arbitrator or a court of competent jurisdiction)
shall not affect the other provisions hereof and this agreement shall be construed in
all respects as if such invalid or unenforceable provisions had been omitted.
	 
	 	23.	 	This agreement (including its Exhibits) and the documents referred to herein
constitute the full and complete understanding and agreement of the parties concerning
the subject matter hereof and, as of the close of business on December 31, 2008, shall
supersede all prior representations, understandings and agreements with respect
thereto, including, without limitation, the letter agreement between the Company and
you dated as of April 16, 2004 relating to a certain retirement benefit (but shall not
supersede any agreements governing any equity awards outstanding as of December 31,
2008), and cannot be amended, changed, modified in any respect, without the written
consent of the parties, except that the

 

 

Mr. Frank Tworecke

December 31, 2008

Page 17

	 	 	 	Company reserves the right in its sole discretion to make changes at any time to the
other documents referenced in this letter agreement. For the avoidance of doubt, for
any termination of employment prior to January 1, 2009, paragraphs 5 through 9, as
applicable, of this letter agreement in effect prior to this amendment and
restatement shall govern and control. No waiver by either party of any breach by
the other party of any condition or provision contained in this agreement shall be
deemed to be a waiver of a similar or dissimilar condition or provision.
	 
	 	24.	 	This agreement shall be binding upon and shall inure to the benefit of
successors and assigns of the Company.
	 
	 	25.	 	This agreement shall be governed by and construed in accordance with the laws
of the State of New York, without regard to its provisions as to choice of laws. The
respective rights and obligations of the parties hereunder, including without
limitation paragraphs 12 through 16, shall survive any expiration of the Term,
including expiration thereof upon your termination of employment for whatever reason,
to the extent necessary to the intended preservation of such rights and obligations.
	 
	 	26.	 	Any notice given to either you or the Company under this agreement shall be in
writing and shall be deemed to have been given upon actual receipt or refusal to accept
receipt, with any such notice duly addressed to you or the Company, as the case may be,
at the address indicated below or to such other address as such Party may subsequently
designate by written notice in accordance with this paragraph 26: If to the Company:
The Warnaco Group, Inc., 501 Seventh Avenue, New York, New York 10018, Attention:
General Counsel; If to you: at your home address as indicated on the Company’s records.
	 
	 	27.	 	The Company may withhold from any amounts payable under this agreement such
Federal, state, local or other taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
	 
	 	28.	 	The Company hereby agrees during, and after termination of, your employment to
indemnify you and hold you harmless, both during the Term and thereafter, to the
fullest extent permitted by law and under the certificate of incorporation and by-laws
of the Company against and in respect of any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including reasonable attorneys’ fees),
losses, amounts paid in settlement to the extent approved by the Company, and damages
resulting from your good faith performance of your duties as an officer or director of
the Company or any affiliate of the Company. The Company shall reimburse you for
expenses incurred by you in connection with any proceeding hereunder upon your written
request for such reimbursement and your submission of the appropriate documentation
associated with these expenses. Such request shall include an undertaking by you to
repay the amount

 

 

Mr. Frank Tworecke

December 31, 2008

Page 18

	 	 	 	of such advance or reimbursement if it shall ultimately be determined that you are
not entitled to be indemnified hereunder against such costs and expenses. The
Company shall use commercially reasonable efforts to obtain and maintain directors’
and officers’ liability insurance covering you to the same extent as the Company
covers its other officers and directors.

	29.     	a.	 	 If any amount, entitlement, or benefit paid or payable to you or provided
for your benefit under this agreement and under any other agreement, plan or program of
the Company (such payments, entitlements and benefits referred to as a “Payment”) is
subject to the excise tax imposed under Section 4999 of the Code or any similar federal
or state law (an “Excise Tax”), then notwithstanding anything contained in this
agreement to the contrary, to the extent that any or all Payments would be subject to
the imposition of an Excise Tax, the Payments shall be reduced (but not below zero) if
and to the extent that such reduction would result in your retaining a larger amount,
on an after-tax basis (taking into account federal, state and local income taxes and
the imposition of the Excise Tax), than if you received all of the Payments (such
reduced amount is hereinafter referred to as the “Limited Payment Amount”). The
Company shall reduce or eliminate the Payments, by first reducing or eliminating those
payments or benefits which are payable in cash and then by reducing or eliminating
non-cash payments, in each case in reverse order beginning with payments or benefits
which are to be paid the farthest in time from the Determination (as defined below).

	 	b.	 	All calculations under this paragraph 29 shall be made by a
nationally recognized accounting firm designated by the Company and reasonably
acceptable to you (other than the accounting firm that is regularly engaged by
any party who has effectuated a Change in Control) (the “Accounting Firm”).
The Company shall pay all fees and expenses of such Accounting Firm. The
Accounting Firm shall provide its calculations, together with detailed
supporting documentation, both to the Company and you within 45 days after the
Change in Control or the Date of Termination, whichever is later (or such
earlier time as is requested by the Company) and, with respect to the Limited
Payment Amount, shall deliver its opinion to you that you are not required to
report any Excise Tax on your federal income tax return with respect to the
Limited Payment Amount (collectively, the “Determination”). Within 5 days of
your receipt of the Determination, you shall have the right to dispute the
Determination (the “Dispute”). The existence of the Dispute shall not in any
way affect your right to receive the Payments in accordance with the
Determination. If there is no Dispute, the Determination by the Accounting
Firm shall be final binding

 

 

Mr. Frank Tworecke

December 31, 2008

Page 19

	 	 	 	and conclusive upon the Company and you (except as provided in clause (c)
below).
	 
	 	c.	 	If, after the Payments have been made to you, it is established
that the Payments made to you, or provided for your benefit, exceed the
limitations provided in clause (a) above (an “Excess Payment”) or are less than
such limitations (an “Underpayment”), as the case may be, then the provisions
of this clause (c) shall apply. If it is established pursuant to a final
determination of a court or an Internal Revenue Service (the “IRS”) proceeding
which has been finally and conclusively resolved, that an Excess Payment has
been made, you shall repay the Excess Payment to the Company within 20 days
following the determination of such Excess Payment. In the event that it is
determined by (i) the Accounting Firm, the Company (which shall include the
position taken by the Company, or together with its consolidated group, on its
federal income tax return) or the IRS, (ii) pursuant to a determination by a
court, or (iii) upon the resolution to your satisfaction of the Dispute, that
an Underpayment has occurred, the Company shall pay an amount equal to the
Underpayment to you within 10 days of such determination or resolution together
with interest on such amount at the applicable federal short-term rate, as
defined under Section 1274(d) of the Code and as in effect on the first date
that such amount should have been paid to you under this agreement, from such
date until the date that such Underpayment is made to you.

 

 

Mr. Frank Tworecke

December 31, 2008

Page 20

     IN WITNESS WHEREOF, the Company and you have voluntarily executed this letter agreement to be
effective as of the close of business on December 31, 2008.

	 	 	 	 	 
	 	Very truly yours,

THE WARNACO GROUP, INC.

 	 
	 	/s/ Joseph R. Gromek
 	 
	 	Name:  	Joseph R. Gromek 	 
	 	Title:  	President and Chief Executive Officer 	 
	 

Agreed to and accepted

/s/ Frank Tworecke                                         

Frank Tworecke

 

 

Exhibit A

Definitions

“Cause” shall mean:

	(i)	 	willful misconduct by you which is injurious to the Company’s interests;
	 
	(ii)	 	willful breach of duty by you in the course of your employment, which, if curable, is not
cured within 10 days after your receipt of written notice from the Company;
	 
	(iii)	 	willful failure by you after having been given written notice from the Company to perform
your duties other than a failure resulting from your incapacity due to physical or mental
illness; or
	 
	(iv)	 	indictment of you for the commission of a felony, or your engagement in other willful
misconduct which is injurious to the business or reputation of the Company.

For purposes of this definition of “Cause,” no act or omission by you shall be deemed to be
“willful” if you had a reasonable good faith belief that such act or failure to act was in the best
interests of the Company. The determination to terminate your employment for Cause shall be made
by the Board of Directors of the Company and prior to such determination you shall have the right
to appear (represented by counsel) before a committee designated by the Board.

“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 the Commencement 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.

 

 

“Date of Termination” shall mean:

	(i)	 	if your employment is terminated by the Company, the date specified in the notice by the
Company to you that your employment is so terminated;
	 
	(ii)	 	if you voluntarily resign your employment, 60 days after receipt by the Company of written
notice that you are terminating your employment (provided, that the Company may
accelerate the Date of Termination to an earlier date by providing you with written notice of
such action, or, alternatively, the Company may place you on paid leave (covering only Base
Salary) during such period);
	 
	(iii)	 	if your employment is terminated by reason of death, the date of death; or
	 
	(iv)	 	if you resign your employment for Good Reason, 30 days after receipt by the Company of timely
written notice from you in accordance with paragraph 26 of the letter agreement effective as
of December 31, 2008 between you and the Company (the “letter agreement”), unless the Company
cures the event or events giving rise to Good Reason within 30 days after receipt of such
written notice.

“Disability” shall mean your inability, due to physical or mental incapacity, to substantially
perform your duties and responsibilities for a period of 120 consecutive days as determined by
a medical doctor selected by the Company and reasonably acceptable to you.

“Good Reason” shall mean the occurrence of any of the following without your consent:

	(i)	 	a material diminution in your authority, duties or responsibilities as Group President –
Sportswear of the Company;
	 
	(ii)	 	a reduction in your Base Salary or Target Bonus;
	 
	(iii)	 	a change in reporting structure so that you report to someone other than the Chief Executive
Officer of the Company;
	 
	(iv)	 	the removal by the Company of you as Group President – Sportswear of the Company;
	 
	(v)	 	the failure of a successor to all or substantially all of the assets of the Company to assume
the Company’s obligations under the letter agreement either in writing or as a matter of law;
or
	 
	(vi)	 	requiring you to be principally based at any office or location other than Manhattan, New
York or any location within a 45 mile radius of Manhattan, New York.

 

 

     Anything herein to the contrary notwithstanding, you shall not be entitled to resign for Good
Reason unless you give the Company written notice of the event constituting “Good Reason” within 60
days of the occurrence of such event and the Company fails to cure such event within 30 days after
receipt of such notice.

“Separation From Service” shall mean a termination of your employment in a manner consistent with
Treasury Regulation Section 1.409A-1(h).

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