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                                                                    EXHIBIT 10.5

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT by and between MicroFinancial Incorporated, a
Massachusetts corporation, and its subsidiaries (the "Company"), and Steven
LaCreta (the "Executive"), dated as of May 4, 2005 (this "Agreement").

      WHEREAS, Executive and the Company entered into an Employment Agreement
dated as of September 26, 1997 which was amended as of November 21, 2002 (as
amended from time to time, the "Original Agreement") to assure that the Company
would have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control of the Company;

      WHEREAS, in order to encourage the Executive's continued attention and
dedication to the Company, the Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company and its
shareholders to provide the Executive with additional severance arrangements
whether or not a Change of Control of the Company occurs and to make other
amendments to the Original Agreement, subject to the terms set forth herein; and

      WHEREAS, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement which shall amend and supersede in its
entirety the Original Agreement (and any and all prior oral and written
agreements and understandings with respect to the Original Agreement) as
follows:

      NOW, THEREFORE, IT IS HEREBY, AGREED AS FOLLOWS:

      1. Certain Definitions.

            (a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if a Change
of Control occurs and if the Executive's employment with the Company is
terminated prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment (i)
was at the request of a third party who has taken steps reasonably calculated to
effect the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.

            (b) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on third anniversary of the date of such date;
provided, however, that commencing on the first anniversary of the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"), the
Change of Control Period shall be automatically extended so as to terminate
three (3) years from such Renewal Date, unless at least sixty (60) days prior to
the Renewal Date the Company shall give notice to the Executive that the Change
of Control Period shall not be so extended.

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      2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:

            (a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person"), including an acquisition pursuant
to 11 U.S.C. Section 1129 et passim, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i)
the then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities") or;

            (b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board or are divested of possession by appointment of a trustee pursuant
to Chapter 7 or 11 of the United States Bankruptcy Code; provided, however, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board; or

            (c) Approval by the shareholders of the Company, or, in the instance
of proceedings for the Company pursuant to Chapter 7 or Chapter 11 of the United
States Bankruptcy Code, approval by the bankruptcy judge, of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation, more than 60% of, respectively, the then outstanding
shares of common stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be; or

            (d) Approval by the shareholders, or, in the instance of proceedings
for the Company pursuant to Chapter 7 or Chapter 11 of the United States
Bankruptcy Code, approval by the bankruptcy judge, of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company.

      3. Change of Control Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, in accordance with the terms and provisions of
this Agreement, for the period commencing on the Effective Date and ending
(subject to the terms hereof) on the day following the first anniversary of such
date (the "Change of Control Employment Period"); provided, however, that the
Change of Control Employment Period shall be automatically extended upon

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its expiration for successive periods of one (1) month each, in full accordance
with the terms and provisions of this Agreement.

      4. Terms of Employment during Change of Control Employment Period.

            (a) Position and Duties.

                  (i) During the Change of Control Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office which is the headquarters of the Company and is
less than 35 miles from such location.

                  (ii) During the Change of Control Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Change of Control Employment
Period it shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.

            (b) Compensation during Change of Control Employment Period.

                  (i) Base Salary. During the Change of Control Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid in equal installments on a monthly basis, at least
equal to twelve times the highest monthly base salary paid or payable to the
Executive by the Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. During the Change of Control Employment Period, the Annual Base Salary
shall be reviewed at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases in base salary
generally awarded in the ordinary course of business to other peer executives of
the Company and its affiliated companies. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so

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increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.

                  (ii) Annual Bonus. In addition to Annual Base Salary, the
Executive may be awarded, for each fiscal year ending during the Change of
Control Employment Period, an annual bonus (the "Annual Bonus") in cash as
determined in the discretion of the Company's President and Chief Executive
Officer consistent with the practices and procedures of the Company. Any such
Annual Bonus shall be paid no later than the end of the fourth month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.

                  (iii) Incentive, Savings and Retirement Plans. During the
Change of Control Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.

                  (iv) Welfare Benefit Plans. During the Change of Control
Employment Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer executives
of the Company and its affiliated companies.

                  (v) Expenses. During the Change of Control Employment Period,
the Executive shall be entitled to receive prompt reimbursement for all
reasonable employment expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.

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                  (vi) Fringe Benefits. During the Change of Control Employment
Period, the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect for the Executive at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.

                  (vii) Office and Support Staff. During the Change of Control
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.

                  (viii) Vacation. During the Change of Control Employment
Period, the Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.

      5. Termination of Employment (During the Change of Control Employment
Period)

            (a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death if during the Change of Control
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Change of Control Employment Period
(pursuant to the definition of Disability set forth below), it may give to the
Executive written notice in accordance with Section 13(b) of this Agreement of
its intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).

            (b) Cause. The Company may terminate the Executive's employment
during the Change of Control Employment Period for Cause. For purposes of this
Agreement (other than Section 7) "Cause" shall mean (i) a material breach by the
Executive of the Executive's obligations under Section 4(a) of this Agreement
(other than as a result of incapacity due to physical or mental illness) which
is demonstrably willful and deliberate on the Executive's part, which is
committed in bad faith or without reasonable belief that such breach is in the
best

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interests of the Company and which is not remedied in a reasonable period of
time after receipt of written notice from the Company specifying such breach or
(ii) the conviction of the Executive of a felony involving moral turpitude.

            (c) Good Reason. The Executive's employment may be terminated during
the Change of Control Employment Period by the Executive for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

                  (i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities or any other
action by which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;

                  (ii) any failure by the Company to comply with the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;

                  (iii) the Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B) of this
Agreement;

                  (iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or

                  (v) any failure by the Company to comply with and satisfy
Section 12(c) of this Agreement, provided that such successor has received at
least ten days prior written notice from the Company or the Executive of the
requirements of Section 12(c) of this Agreement.

For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.

            (d) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 15
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the

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Executive or the Company hereunder or preclude the Executive or the Company from
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

            (e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.

      6. Obligation of the Company upon Termination (During the Change of
Control Employment Period).

            (a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Change of Control Employment Period, the Company shall terminate the
Executive's employment other than for Cause, death or Disability or the
Executive shall terminate employment for Good Reason:

                  (i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts: the sum of (1) the Executive's Annual Base Salary and (2) any
compensation or bonus previously deferred (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses (1) and (2) of
this Section 6(a)(i) shall be hereinafter referred to as the "Change of Control
Severance Amount"); and

                  (ii) for a minimum period that is the greater of the period
commencing on the Date of Termination through (x) the next applicable Renewal
Date following the Date of Termination or (y) the six month period following the
Date of Termination, or such longer period as any plan, program, practice or
policy may provide, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(v) of this Agreement if the Executive's employment had not been
terminated in accordance with the most favorable plans, practices, programs or
policies of the Company and its affiliated companies as in effect and applicable
generally to other peer executives and their families during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes re-employed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility (such continuation of such benefits for the
applicable period herein set forth shall be hereinafter referred to as "Welfare
Benefit Continuation"). For purposes of determining eligibility of the Executive
for retiree benefits pursuant to such plans, practices, programs and

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policies, the Executive shall be considered to have remained employed until the
end of the Change of Control Employment Period and to have retired on the last
day of such period; and

                  (iii) for a minimum period that is the greater of the period
commencing on the Date of Termination through (x) the next applicable Renewal
Date following the Date of Termination or (y) the six month period following the
Date of Termination, to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive and/or the Executive's family any
other amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
and under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies as in effect and applicable generally to
other peer executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally thereafter with respect to other peer executives of the Company
and its affiliated companies and their families (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").

            (b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Change of Control Employment Period, this
Agreement shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for (i) payment of the Change
of Control Severance Amount (which shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination) and the timely payment or provision of the Welfare Benefit
Continuation and Other Benefits (excluding, in each case, Death Benefits (as
defined below)) and (ii) payment to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination of
an amount equal to the present value (determined as provided in Section
280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code") of any
cash amount to be received by the Executive or the Executive's family as a death
benefit pursuant to the terms of any plan, policy or arrangement of the Company
and its affiliated companies, but not including any proceeds of life insurance
covering the Executive to the extent paid for directly or on a contributory
basis by the Executive (which shall be paid in any event as an Other Benefit)
(the benefits included in this clause (ii) shall be hereinafter referred to as
the "Death Benefits").

            (c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Change of Control Employment
Period, this Agreement shall terminate without further obligation to the
Executive, other than for (i) payment of Change of Control Severance Amount
(which shall be paid to the Executive in a lump sum in cash within 30 days of
the Date of Termination) and the timely payment or provision of the Welfare
Benefit Continuation and Other Benefits (excluding, in each case, Disability
Benefits (as defined below)) and (ii) payment to the Executive in a lump sum in
cash within 30 days of the Date of Termination of an amount equal to the present
value (determined as provided in Section 280G(d)(4) of the Code) of any cash
amount to be received by the Executive as a disability benefit pursuant to the
terms of any plan, policy or arrangement of the Company and its affiliated
companies, but not including any proceeds of disability insurance covering the
Executive to the extent paid for directly or on a contributory basis by the
Executive (which shall be paid in any

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event as an Other Benefit) (the benefits included in this clause (ii) shall be
hereinafter referred to as the "Disability Benefits").

            (d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Change of Control Employment Period,
this Agreement shall terminate without further obligations to the Executive
other than the obligation to pay to the Executive Annual Base Salary through the
Date of Termination plus the amount of any compensation previously deferred by
the Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Change of Control Employment Period, excluding
a termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than the payment of the Executive's Annual
Base Salary through the Date of Termination and any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay (in each case to be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination).

      7. Terms of Employment; Obligation of the Company upon Termination of
Employment (Prior to the Effective Date).

            (a) Terms of Employment; Obligation of the Company upon Termination
of Employment. The Executive and the Company acknowledge that the employment of
the Executive by the Company is "at will" and, prior to the Effective Date, may
be terminated by either the Executive or the Company at any time. Except as
specifically provided in Sections 7(b) and (c) of this Agreement, the terms of
Executive's employment and the continuing participation of Executive in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies prior to the Effective Date or upon Executive's termination
of employment prior to the Effective Date (either by Executive or the Company)
shall be governed by the then existing plan, program, policy or practice of the
Company or any of its affiliated companies.

            (b) Other Than for Cause, Death or Disability. If, at any time prior
to the Effective Date, the Company shall terminate the Executive's employment
other than for Cause (defined below), death or Disability, the Company shall (1)
pay to the Executive the Executive's Annual Base Salary payable over 12 months
at the same time that the Company pays other peer executives of the Company
generally, and (2) pay to the Executive any compensation or bonus previously
deferred (together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (1) and (2) of this Section 7(b) shall be
hereinafter referred to as the "Severance Amount"); and (3) for a period equal
to that period over which the Executive's Annual Base Salary shall be paid
pursuant to Section 7(b) (1) hereof, the Company shall continue health and
dental benefits to the Executive and/or the Executive's family equal to those
health and dental benefits in effect on the Date of Termination; provided,
however, that if Executive becomes re-employed with another employer which
provides medical or dental benefits of any kind (whether equivalent to, or
lesser than, those provided by the Company on the Date of Termination), then
Executive's health or dental coverage with the Company shall, respectively,
cease upon the date

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Executive shall become eligible for either of such benefits from Executive's new
employer. Executive covenants and agrees to promptly notify the Company upon
becoming so eligible.

            For purposes of Section 7, "Cause" shall mean shall mean (i) a
material breach by the Executive of the Executive's duties, responsibilities
held, exercised and assigned by the Company to the Executive (other than as a
result of incapacity due to physical or mental illness) which is demonstrably
willful and deliberate on the Executive's part, which is committed in bad faith
or without reasonable belief that such breach is in the best interests of the
Company and which is not remedied in a reasonable period of time after receipt
of written notice from the Company specifying such breach or (ii) the conviction
of the Executive of a felony involving moral turpitude.

            (c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability prior to the Effective Date, this Agreement
shall terminate without further obligation to the Executive, other than the
payment by the Company to Executive of an amount equal to (i) the Severance
Amount minus (ii) the amount Executive would be entitled to receive as a
disability benefit under the then existing plan, program, policy or practice of
the Company or any of its affiliated companies (which shall be paid to the
Executive in accordance with the then existing, plan, program, policy or
practice of the Company or any of its affiliated companies).

      8. Non-Exclusivity of Rights. Except as provided in Sections 6(a)(ii),
6(b), 6(c), 7(b) or 7(c) of this Agreement, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.

      9. Full Settlement; Resolution of Disputes.

            (a) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(a)(ii) of this Agreement, such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to pay promptly as
incurred, to the full extent permitted by law, all legal fees and expenses which
the Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the

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amount of any payment pursuant to this Agreement), plus in each case interest on
any delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.

            (b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment by
the Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
6(a) of this Agreement as though such termination were by the Company without
Cause or by the Executive with Good Reason; provided, however, that the Company
shall not be required to pay any disputed amounts pursuant to this paragraph
except upon receipt of an undertaking by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.

      10. Certain Additional Payments by the Company.

            (a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

            (b) Subject to the provisions of Section 10(c) of this Agreement,
all determinations required to be made under this Section 10, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Deloitte & Touche, LLP (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 10, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's

                                     - 11 -
<PAGE>

determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 10(c) of this Agreement and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

            (c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:

                  (i) give the Company any information reasonably requested by
the Company relating to such claim,

                  (ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

                  (iii) cooperate with the Company in good faith in order
effectively to contest such claim, and

                  (iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 10(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and

                                     - 12 -
<PAGE>

may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

            (d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 10(c) of this Agreement, the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 10(c) of
this Agreement) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 10(c) of this Agreement, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.

      11. Confidential Information; Non-Compete. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 11 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement. For a
period of twelve months from and after the Date of Termination, the Executive
shall not, directly or indirectly, be or become employed or associated with any
microticket leasing business in the United States which is in competition with
the Company.

      12. Successors.

                                     - 13 -
<PAGE>

            (a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.

            (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

            (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

      13. Bankruptcy Proceedings. The Company agrees that within three (3) days
of the entry of an order for relief with respect to the Company pursuant to the
provisions of Chapter 7 or Chapter 11 of the United States Bankruptcy Code, it
will seek approval of the bankruptcy court having jurisdiction over its affairs
for the assumption of this Agreement pursuant to the provisions of Section 365
of the United States Bankruptcy Code.

      14. Miscellaneous.

            (a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.

            (b) This Agreement amends and supersedes in its entirety all prior
agreements and understandings, whether oral or written, with respect to the
provisions of the Original Agreement.

            (c) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

      If to the Executive:

            Steven LaCreta
            c/o MicroFinancial Incorporated
            10 M Commerce Way
            Woburn, MA 01801

                                     - 14 -
<PAGE>

      If to the Company:

            MicroFinancial Incorporated
            10 M Commerce Way
            Woburn, MA  01801
            Attention: Richard F. Latour, President and Chief Executive Officer

      With a copy to:

            Gerald P. Hendrick, Esq.
            Edwards & Angell, LLP
            101 Federal Street
            Boston, MA 02110

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

            (d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

            (e) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

            (f) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.

            (g) This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together constitute one
instrument. Counterparts of this Agreement (or applicable signature pages
hereof) that are manually signed and delivered by facsimile transmission shall
be deemed to constitute signed original counterparts hereof and shall bind the
parties signing and delivering in such manner.

                                     - 15 -
<PAGE>

      IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.

                                              __________________________________
                                              Steven LaCreta

                                              MicroFinancial Incorporated

                                              By: ______________________________
                                                  Its: _________________________EMPLOYMENT AGREEMENT

     AGREEMENT, made and entered into as of August 11, 2005 (the "Effective
Date") by and between THE WARNACO GROUP, INC., a Delaware corporation (together
with its successors and assigns, the "Company"), and ROGER A. WILLIAMS (the
"Executive").

                                   WITNESSETH:

     WHEREAS, the Company desires to continue to employ the Executive and to
enter into an agreement embodying the terms of such continued employment and the
Executive desires to enter into this Agreement and to accept such continued
employment, subject to the terms and provisions of this Agreement;

     NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:

     1. Certain Definitions.

          (a) "Affiliate" of a specified person or entity shall mean a person or
entity that directly or indirectly controls, is controlled by, or is under
common control with, the person or entity specified.

          (b) "Board" shall mean the Board of Directors of the Company.

          (c) "Cause" shall mean:

               (i) willful misconduct by the Executive which causes material
               harm to the Company's interests;

               (ii) willful and material breach of duty by the Executive in the
               course of his employment, which, if curable, is not cured within
               10 days after Executive's receipt of written notice from the
               Company;

               (iii) willful failure by the Executive, after having been given
               written notice from the Company, to perform his duties other than
               a failure resulting from Executive's incapacity due to physical
               or mental illness;

               (iv) indictment of the Executive for a felony, a crime involving
               moral turpitude or any other crime involving the business of the
               Company which, in the case of such crime involving the business
               of the Company, is injurious to the business of the Company; or

                                       1

               (v) failure of the Executive to give 180 days prior written
               notice of a voluntary resignation (other than for Good Reason or
               Disability).

     For purposes of this Cause definition, no act or failure to act, on the
part of the Executive, shall be considered willful unless it is done, or omitted
to be done, by him in bad faith and without reasonable belief that his action
was in the best interests of the Company. The determination to terminate the
Executive's employment for Cause shall be made by the Board and prior to such
determination the Executive shall have the right to appear before the Board or a
committee designated by the Board.

          (d)  "Change in Control" shall mean any of the following:

               (i) any "person" (as such term is used in Sections 3(a)(9) and
               13(d) of the Securities Exchange Act of 1934) 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 this Agreement, becomes a "beneficial owner" (as such
               term is used in Rule 13d-3 promulgated under that Act), of 50% or
               more of the Voting Stock of the Company;

               (ii) all or substantially all of the assets of the Company are
               disposed of pursuant to a merger, consolidation or other
               transaction (unless the shareholders of the Company immediately
               prior to such merger, consolidation or other transaction
               beneficially own, directly or indirectly, in substantially the
               same proportion as they owned the Voting Stock of the Company,
               all of the Voting Stock or other ownership interests of the
               entity or entities, if any, that succeed to the business of the
               Company); or

               (iii) approval by the shareholders of the Company of a complete
               liquidation or dissolution of all or substantially all of the
               assets of the Company.

     For purposes of this Change in Control definition, "Voting Stock" shall
mean the capital stock of any class or classes having general voting power, in
the absence of specified contingencies, to elect the directors of the Company.

          (e) "Date of Termination" shall mean:

               (i) if the Executive's employment is terminated by the Company
               for Cause, the date specified in the notice by the Company to the
               Executive that his employment is so terminated; provided such
               notice is delivered after the Board determination as set forth in
               Section 1(c) hereof;

               (ii) if the Executive's employment is terminated by the Company
               without Cause, 180 days after the Company provides written notice
               to the

                                       2

               Executive that his employment is so terminated or, if the
               Executive shortens the required notice period in accordance with
               Section 6(i), the date of termination specified in such notice;

               (iii) if the Executive voluntarily resigns his employment, 180
               days after the Executive provides written notice to the Company
               that the Executive is terminating his employment or, if the
               Company shortens the required notice period in accordance with
               Section 6(i), the date of termination specified in such notice;

               (iv) if the Executive's employment is terminated by reason of
               death, the date of death;

               (v) if the Executive's employment is terminated for Disability,
               30 days after written notice is given as specified in Section
               1(f) below; or

               (vi) if the Executive resigns his employment for Good Reason, 30
               days after receipt by the Company of timely written notice from
               the Executive in accordance with Section 1(g) below unless the
               Company cures the event or events giving rise to Good Reason
               within 30 days after receipt of such written notice.

          (f) "Disability" shall mean the Executive's inability, due to physical
or mental incapacity, to substantially perform his essential duties and
responsibilities for a period of 180 consecutive days as determined by a medical
doctor selected by the Company and reasonably acceptable to the Executive. In no
event shall any termination of the Executive's employment for Disability occur
until the Party terminating his employment gives written notice to the other
Party in accordance with Section 14 below.

          (g) "Good Reason" shall mean the occurrence of any of the following
without the Executive's prior written consent:

               (i) a material diminution by the Company in the Executive's
               authority, duties or responsibilities as President, Swimwear
               Group or the assignment to the Executive by the Company of any
               duties materially inconsistent with such position;

               (ii) a reduction in (A) Base Salary or (B) Target Bonus
               opportunity as a percentage of Base Salary;

               (iii) in connection with or following a Change in Control, a
               change in reporting structure so that the Executive reports to
               someone other than the Chief Executive Officer of the Company;

                                       3

               (iv) the removal by the Company of the Executive as President,
               Swimwear Group or the failure by the Board to elect or reelect
               the Executive as an executive officer of the Company;

               (v) requiring the Executive to be principally based at any office
               or location more than 50 miles from his current office; or

               (vi) the failure of a successor to all or substantially all of
               the assets of the Company to assume the Company's obligations
               under this Agreement either as a matter of law or in writing
               within 15 days after a merger, consolidation, sale or similar
               transaction.

     Anything herein to the contrary notwithstanding, the Executive shall not be
entitled to resign for Good Reason (i) if the occurrence of the event otherwise
constituting Good Reason is the result of Disability, a termination by the
Company for which notification has been given or a voluntary resignation by the
Executive other than for Good Reason and (ii) unless the Executive gives the
Company written notice of the event constituting "Good Reason" within 90 days of
the occurrence of such event and the Company fails to cure such event within 30
days after receipt of such notice.

          (h) "Notice Period" means the period from the date of a notice of
termination as set forth in Section 1(e)(ii) (for a termination without Cause by
the Company) or Section 1(e)(iii) (for a voluntary resignation by the Executive)
through the Date of Termination.

     2. Term of Employment.

     The term of the Executive's employment hereunder shall begin on the
Effective Date and end at the close of business on the third anniversary of such
date; provided, however, that the Term shall thereafter be automatically
extended for additional one-year periods (subject to a maximum of four such
automatic one-year extensions), unless either the Company or the Executive gives
the other written notice at least 180 days prior to the then-scheduled
expiration of the Term that such Party is electing not to so extend the Term
(the initial term plus any extension thereof in accordance herewith being
referred to herein as the "Term"). Notwithstanding the foregoing, the Term shall
end on the date on which the Executive's employment is terminated by either
Party in accordance with the provisions herein.

     3. Position; Duties and Responsibilities.

     During the Term, the Executive shall be employed by the Company as
President, Swimwear Group and shall perform such duties and responsibilities as
determined by the Chief Executive Officer. The Executive shall devote
substantially all of his business time and attention to the satisfactory
performance of his duties. Anything herein to the contrary notwithstanding,
nothing shall preclude the Executive from (i) subject to the reasonable approval
of the Board, serving on the boards of directors of trade associations and/or
charitable organizations or other business corporations (provided such service
is not prohibited under Section 8(a) below),

                                       4

(ii) engaging in charitable activities and community affairs and (iii) managing
his personal investments and affairs, provided that the activities described in
the preceding clauses (i) through (iii) do not materially interfere with the
proper performance of his duties and responsibilities hereunder.

     4. Compensation.

          (a) Base Salary. During the Term, the Executive shall be paid an
annualized Base Salary of $680,000 ("Base Salary"), payable in accordance with
the regular payroll practices of the Company, subject to annual review by the
Board (or its designee, including the Compensation Committee of the Board) in
its sole discretion. During the Term the Base Salary may not be decreased
without the Executive's prior written consent. The Executive shall not be
entitled to any compensation for service as an officer or member of any board of
directors of any Affiliate. After any increase in base salary approved by the
Board or its designee, the term "Base Salary" as used in this Agreement shall
thereafter refer to the increased amount.

          (b) Annual Incentive Awards. During the Term, the Executive shall be
eligible to receive an annual incentive award (provided the Executive was
employed continuously during the applicable fiscal year) pursuant to the
Company's Incentive Compensation Plan, as amended (or such other annual
incentive plan as may be approved by the Company's shareholders), in effect for
the applicable fiscal year ("Bonus Plan"). The Executive's annual incentive
award for fiscal year 2005 and thereafter shall have a target of 70% of Base
Salary ("Target Bonus"), with a potential maximum award as set forth in the
Bonus Plan, in all events based on the Executive's achievement of annual
performance and other targets approved by the committee administering the Bonus
Plan. The amount and payment of any annual incentive award shall be determined
in accordance with the Bonus Plan and shall be payable when bonuses for the
applicable performance period are paid to other senior executives of the
Company. After any increase in the Executive's target annual bonus opportunity
as a percentage of Base Salary as approved by the Board (or its designee), the
term "Target Bonus" as used in this Agreement shall thereafter refer to the
increased target opportunity.

          (c) Long-Term Incentive Awards. During the Term, the Executive shall
be eligible to participate in the Company's equity incentive plans, including,
without limitation, the 2003 and 2005 Stock Incentive Plans, as amended from
time to time, and such other long-term incentive plan(s) as may be approved by
the Company's shareholders from time to time ("Stock Incentive Plan"). Except as
otherwise provided herein, all equity grants shall be governed by the applicable
equity plan and/or award agreement. The Executive shall be subject to the equity
ownership, retention and other requirements applicable to senior executives of
the Company.

          (d) Supplemental Award. During the Term beginning with fiscal year
2005, provided the Executive is employed by the Company, the Executive 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 Section 4(d) if the
Executive will be less than age 60 by the end of the applicable fiscal year and
13% of such amount if the Executive will be age 60 or older by the end of the
applicable fiscal year ("Supplemental Award"), with the first such award being
made no

                                       5

later than 60 days after the Effective Date. For this purpose, Base Salary shall
be the Base Salary paid to the Executive for the fiscal year prior to the award
year and Annual Bonus shall be the annual bonus awarded to the Executive by the
Board for such prior fiscal year. The Supplemental Award shall not be awarded to
the Executive until after the determination by the Board of the Executive's
annual bonus for the prior fiscal year (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 the Executive's account (the "Notional Account"). Any Career Shares
awarded hereunder shall be governed by the applicable Stock Incentive Plan and,
if applicable, any award agreement. For purposes of this Section 4(d), each
Career Share shall be valued at the closing price of a share of the Company's
common stock ("Share") on the date that the Supplemental Award is made. For the
Notional Account, the Company shall select the investment alternatives available
to the Executive under the Company's 401(k) plan. The balance in the Notional
Account shall periodically be credited (or debited) with the deemed positive (or
negative) return based on returns of the permissible investment alternative or
alternatives under the Company's 401(k) plan as selected in advance by the
Executive (and in accordance with the applicable rules of such plan or
investment alternative) to apply to such Notional Account, with such deemed
returns calculated in the same manner and at the same times as the return on
such investment alternative(s). The Company's obligation to pay the amount
credited to the Notional Account, including any return thereon provided for in
this Section 4(d), shall be an unfunded obligation to be satisfied from the
general funds of the Company. Except as otherwise provided in Section 6 below or
the applicable Stock Incentive Plan and provided that the Executive is employed
by the Company on such vesting date, any Supplemental Award granted in the form
of Career Shares will vest as follows: 50% of the Career Shares will vest on the
earlier of the Executive's 62nd birthday or upon the Executive's obtaining 15
years of "Vesting Service" and 100% of the Career Shares will vest on the
earliest of (i) the Executive's 65th birthday, (ii) upon the Executive's
obtaining 20 years of "Vesting Service" or (iii) the 10th anniversary of the
date of grant. Except as otherwise provided in Section 6 below, and provided
that the Executive is employed by the Company on such vesting date, any
Supplemental Award granted as a credit to the Notional Account (as adjusted for
any returns thereon) ("Adjusted Notional Account")) shall vest as follows: 50%
on the earlier of the Executive's 62nd birthday or upon the Executive's
obtaining 5 years of "Vesting Service" and 100% on the earlier of the
Executive's 65th birthday and upon the Executive's obtaining 10 years of
"Vesting Service". For purposes of this Section 4(d), "Vesting Service" shall
mean the period of time that the Executive is employed by the Company as an
executive officer, provided that for these purposes only the Executive's service
from February 4, 2003 on will be counted. Subject to Section 16(b) hereof, upon
vesting the Career Shares will be delivered in the form of Shares to the
Executive. The vested balance in the Adjusted Notional Account shall not be
distributed to the Executive until he ceases to be an employee of the Company
and, at such time, shall only be distributed at the earliest time that satisfies
the requirements of this Section 4(d). Except as otherwise provided in Section 6
hereof, if the Executive's employment is terminated for any reason, any unvested
Supplemental Awards (whether in the form of Career Shares or the Adjusted
Notional Account) shall be forfeited and any vested balance in the Adjusted
Notional Account, subject to Section 16(b) hereof, shall be paid to the
Executive in a cash lump-sum

                                       6

payment immediately following the Executive's "separation from service," as
defined by Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as
amended (the "Code"), with the Company; provided, however, that, except in the
case of the Executive's death, if at the time of such separation from service
the Executive is a "specified employee," as defined in Section 409A(a)(2)(B)(i)
of the Code, such distribution shall not be made until at least six months after
the date of such separation from service; provided, further, that if the
Executive's employment is terminated due to Disability and such Disability
satisfies the requirements of Section 409A(a)(2)(C) of the Code, then such
distribution may be made upon termination without regard as to whether Executive
was a "specified employee" at such time. The provisions of this Section 4(d)
shall survive expiration or termination of the Term.

     5. Employee Benefits.

          (a) Employee Benefit Programs. During the Term, subject to the
Company's right to amend, modify or terminate any benefit plan or program, the
Executive shall be entitled to participate in all employee savings and welfare
benefit plans and programs made available to the Company's senior-level
executives on a basis no less favorable than provided to other
similarly-situated executives, as such plans or programs may be in effect from
time to time, including, without limitation, savings and other retirement plans
or programs, medical, dental, hospitalization, short-term and long-term
disability and life insurance plans, accidental death and dismemberment
protection and travel accident insurance. During the Term, the Executive shall
also be entitled to a paid annual physical medical exam as approved by the
Company and Company-paid term life insurance with a benefit equal to $1 million,
provided the Company can obtain such insurance at commercially reasonable
premium levels. The Executive shall be entitled to four weeks paid vacation per
calendar year.

          (b) Business Expenses. During the Term, the Executive is authorized to
incur reasonable expenses in carrying out his duties and responsibilities under
this Agreement and the Company shall promptly reimburse him for all business and
entertainment expenses incurred in connection with carrying out the business of
the Company, subject to documentation in accordance with the Company's policy.
The Executive shall be entitled to first class air travel when traveling on
Company business.

          (c) Perquisites. The Executive shall be entitled to perquisites
provided to other senior-level executives, including a monthly car allowance of
up to a maximum of $1,000.

     6. Termination of Employment. The Term of this Agreement and the
Executive's employment hereunder shall terminate as of the Date of Termination
in the following circumstances:

          (a) Termination Without Cause by the Company. In the event that during
the Term the Executive's employment is terminated without Cause by the Company
(other than due to Disability) and Section 6(e) below does not apply, the
Executive shall be entitled to:

               (i) payment of Base Salary as salary continuation for the
               remainder of the applicable Term (without regard to its earlier
               termination hereunder),

                                       7

               but in no event more than 18 months or less than 6 months
               following the Date of Termination;

               (ii) immediate vesting as of the Date of Termination of 50% of
               any restricted stock (other than Career Shares) that remains
               unvested as of the Date of Termination;

               (iii) with respect to any stock options granted on or after the
               Effective Date which are vested and outstanding as of the Date of
               Termination, continued exercisability for 6 months following the
               Date of Termination or the remainder of the option term, if
               shorter; and

               (iv) continued participation for the Executive and his eligible
               dependents in the Company's welfare benefit plans in which he and
               his eligible dependents were participating immediately prior to
               the Date of Termination until the earlier of (a) the end of the
               applicable Term (without regard to its earlier termination
               hereunder), but in no event more than 18 months or less than 6
               months following the Date of Termination, or (b) the date, or
               dates, the Executive receives equivalent coverage under the plans
               and programs of a subsequent employer.

          (b) Resignation for Good Reason by the Executive. In the event that
during the Term, the Executive resigns for Good Reason and Section 6(f) below
does not apply, the Executive shall be entitled to:

               (i) payment of Base Salary as salary continuation for the
               remainder of the applicable Term (without regard to its earlier
               termination hereunder), but in no event more than 24 months or
               less than 12 months following the Date of Termination;

               (ii) immediate vesting as of the Date of Termination of 50% of
               any restricted stock (other than Career Shares) that remains
               unvested as of the Date of Termination;

               (iii) with respect to any stock options granted on or after the
               Effective Date which are vested and outstanding as of the Date of
               Termination, continued exercisability for 12 months following the
               Date of Termination or the remainder of the option term, if
               shorter; and

               (iv) continued participation for the Executive and his eligible
               dependents in the Company's welfare benefit plans in which he and
               his eligible dependents were participating immediately prior to
               the Date of Termination until the earlier of (a) the end of the
               applicable Term (without regard to its earlier termination
               hereunder), but in no event more than 24 months or less than 12
               months following the Date of Termination, or (b)

                                       8

               the date, or dates, the Executive receives equivalent coverage
               under the plans and programs of a subsequent employer.

          (c) Termination upon Death or due to Disability. In the event that
during the Term the Executive's employment is terminated upon death or due to
Disability, the Executive (or his estate or legal representative, as the case
may be) shall be entitled to:

               (i) a pro-rata annual bonus determined by multiplying the amount
               of the annual bonus the Executive would have received had his
               employment continued through the end of the fiscal year in which
               the Date of Termination occurs by a fraction, the numerator of
               which is the number of days during such fiscal year that the
               Executive was employed by the Company and the denominator of
               which is 365, payable when bonuses for such fiscal year are paid
               to other Company executives;

               (ii) immediate vesting as of the Date of Termination of 50% of
               any restricted stock (other than Career Shares) that remains
               unvested as of the Date of Termination; and

               (iii) 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 Section
               4(d) above.

          (d) Termination by the Company for Cause or a Voluntary Resignation by
the Executive. In the event that during the Term the Company terminates the
Executive's employment for Cause, or the Executive voluntarily resigns in
accordance with Section 1(e)(iii), the Executive shall be entitled to his Base
Salary and employee benefits through the Date of Termination. A voluntary
resignation by the Executive of his employment shall be effective upon 180 days
prior written notice by the Executive to the Company and failure by the
Executive to provide such notice shall be deemed to be a breach of this
Agreement.

          (e) Termination without Cause by the Company Upon or Following a
Change in Control. In the event the Executive's employment is terminated without
Cause by the Company (other than due to Disability) upon or within one year
following a Change in Control (provided the Term is still in effect or has
expired during this one-year period), the Executive shall be entitled to:

               (i) an amount equal to (A) the greater of (x) the sum of Base
               Salary plus Target Bonus divided by 12, with such amount then
               multiplied by the number of months (including any partial months)
               remaining in the Term (without regard to the earlier termination
               thereof) or (y) 2 times the sum of (a) Base Salary plus (b)
               Target Bonus, minus (B) the Base Salary and the bonus earned by
               the Executive during the Notice Period, with such amount 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);

                                       9

               (ii) a pro-rata Target Bonus for the year in which the notice of
               termination is given, determined by multiplying the Target Bonus
               by a fraction, the numerator of which is the number of days that
               have elapsed from the first day of the performance period for
               such year through the date the Company gives the Executive a
               notice of termination of his employment without Cause 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);

               (iii) immediate vesting as of the Date of Termination of all
               outstanding equity awards (other than Career Shares), with any
               stock options granted on or after the Effective Date remaining
               exercisable for 18 months following the Date of Termination or
               the remainder of the option term, if shorter;

               (iv) immediate vesting as of the Date of Termination of any
               previously granted Supplemental Award, payable in accordance with
               Section 4(d) above; and

               (v) continued participation for the Executive and his eligible
               dependents in the Company's welfare benefit plans in which he and
               his eligible dependents were participating immediately prior to
               the Date of Termination until the earlier of (a) 18 months
               following the Date of Termination, or (b) the date, or dates, the
               Executive receives substantially equivalent coverage under the
               plans and programs of a subsequent employer.

          (f) Resignation for Good Reason by the Executive Upon or Following a
Change in Control. In the event that the Executive resigns for Good Reason
within one year following a Change in Control (provided the Term is still in
effect or has expired during this one-year period), the Executive shall be
entitled to:

               (i) an amount equal to the greater of (x) the sum of Base Salary
               plus Target Bonus divided by 12, with such amount then multiplied
               by the number of months (including any partial months) remaining
               in the Term (without regard to the earlier termination thereof)
               or (y) 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);

               (ii) 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 the Executive was
               employed by the Company during the year in which the Date of
               Termination occurs and the denominator of

                                       10

               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);

               (iii) immediate vesting as of the Date of Termination of all
               outstanding equity awards (other than Career Shares), with any
               stock options granted on or after the Effective Date remaining
               exercisable for 24 months following the Date of Termination or
               the remainder of the option term, if shorter;

               (iv) immediate vesting as of the Date of Termination of any
               previously granted Supplemental Award, payable in accordance with
               Section 4(d) above; and

               (v) continued participation for the Executive and his eligible
               dependents in the Company's welfare benefit plans in which he and
               his eligible dependents were participating immediately prior to
               the Date of Termination until the earlier of (a) 24 months
               following the Date of Termination, or (b) the date, or dates, the
               Executive receives substantially equivalent coverage under the
               plans and programs of a subsequent employer.

          (g) Termination of the Executive's Employment by the Company Upon the
Expiration of the Term. If the Company provides written notice to the Executive
in accordance with Section 2 above that the Term shall not renew and upon such
expiration of the Term the Company terminates the Executive's employment under
circumstances that during the Term would constitute a termination of employment
without Cause, the Executive shall be entitled to the same payments, benefits
and entitlements as a resignation for Good Reason by the Executive under Section
6(b) hereof.

          (h) Other Entitlements Upon Termination of Employment. In the event of
any termination of the Executive's employment, the Executive (or his estate or
legal representative, as the case may be) shall be entitled to:

               (i) Base Salary through the Date of Termination;

               (ii) except for a termination for Cause, payment of any annual
               bonus awarded to the Executive that remains unpaid for the fiscal
               year preceding the fiscal year in which the Date of Termination
               occurs, payable when bonuses for such performance period are paid
               to other Company executives;

               (iii) any Supplemental Award that is vested as of the Date of
               Termination, payable in accordance with Section 4(d) above;

                                       11

               (iv) any amounts owing to the Executive but not yet paid under
               Section 5(b) and 5(c) above; and

               (v) except as otherwise provided in Section 6(j) below,
               additional entitlements or treatment, if any, in accordance with
               applicable plans and programs of the Company (provided that in no
               event shall the Executive be entitled to duplication of any
               payments or benefits).

          (i) Obligations During Notice Period. In the event the Executive's
employment is terminated without Cause by the Company or the Executive
voluntarily resigns his employment (other than for Good Reason), the Executive
shall continue to be an employee of the Company during the Notice Period. As
such, his fiduciary duties and other obligations as an employee of the Company
shall continue during the Notice Period and the Executive agrees to cooperate in
the transition of his responsibilities during such period. The Company shall
have the right to direct the Executive to no longer come to work, or not to
perform any work for the Company, during the Notice Period and, if the Company
so directs, in addition to his fiduciary duties and other obligations as an
employee and his commitments pursuant to Section 7 and 8 hereof, the Executive
agrees to refrain during the Notice Period from contacting any customers,
clients, advertisers, suppliers, agents, professional advisors or employees of
the Company or any of its Affiliates. In the case of a voluntary resignation by
the Executive, the Company may shorten the Notice Period by providing written
notice to the Executive, in which event the Executive's employment shall
terminate on the date stated in such notice; provided that the Company shall
continue to pay the Executive his Base Salary through the end of the original
Notice Period. In the case of a termination without Cause by the Company, the
Executive may shorten the Notice Period by providing written notice to the
Company, in which event the Executive's employment shall terminate on the date
stated in such notice.

          (j) Exclusivity of Benefits; Releases of Claims. Any payments provided
pursuant to Section 6(a), Section 6(b), Section 6(e), Section 6(f) or Section
6(g) above shall be in lieu of any salary continuation arrangements under any
other severance program of the Company and in all events, the Executive shall
not be entitled to duplication of any benefit or entitlement. In order to be
entitled to any payments, rights and other entitlements pursuant to this
Agreement or otherwise, the Executive must comply with the covenants and/or
acknowledgements contained in Sections 7, 8, 9 and 10 of this Agreement. In
addition, in order to be entitled to any payments, rights or other entitlements
in connection with a termination covered by Section 6(a), Section 6(b), Section
6(e), Section 6(f) or Section 6(g) above (except for those payments or benefits
required to be paid or provided by applicable law), the Executive shall be
required to execute and deliver to the Company the Agreement and Release of
Claims attached hereto as Exhibit A (and not revoke such agreement within the
applicable revocation period).

          (k) Nature of Payments; No Mitigation. Any amounts due under this
Section 6 are in the nature of severance payments considered to be reasonable by
the Company and are not in the nature of a penalty. In the event of termination
of his employment for any reason in compliance with this Agreement, the
Executive shall be under no obligation to seek other employment and, except as
specifically provided for in this Section 6 with respect to continuation

                                       12

of welfare benefits, there shall be no offset against amounts or entitlements
due to him on account of any remuneration or benefits provided by any subsequent
employment he may obtain.

          (l) Resignation. Notwithstanding any other provision of this
Agreement, upon the termination of the Executive's employment for any reason or,
if earlier, upon commencement of the Notice Period, unless otherwise requested
by the Board, he shall immediately resign from the Board, if applicable, and all
boards of directors of any Affiliate of the Company of which he may be a member,
and as a trustee of, or fiduciary to, any employee benefit plans of the Company
or any Affiliate. The Executive hereby agrees to execute any and all
documentation of such resignations upon request by the Company, but he shall be
treated for all purposes as having so resigned upon termination of his
employment or upon commencement of the Notice Period, as the case may be,
regardless of when or whether he executes any such documentation.

     7. Protection of Confidential Information and Company Property.

          (a) During the Term and thereafter, other than in the ordinary course
of performing his duties for the Company or as required in connection with
providing any cooperation to the Company pursuant to Section 10 below, the
Executive agrees that he shall 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 he acquires during
the course of his employment ("Confidential Information"), 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 him to divulge, disclose or make accessible such
information. "Confidential Information" shall not include information that (i)
was known to the public prior to its disclosure by the Executive; or (ii)
becomes known to the public through no wrongful disclosure by or act of the
Executive or any representative of the Executive. In the event the Executive is
requested by subpoena, court order, investigative demand, search warrant or
other legal process to disclose any Confidential Information, the Executive
agrees, 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 the Executive's making such disclosure and
the Executive agrees not to disclose such information unless and until the
Company has expressly authorized the Executive to do so in writing or the
Company has had a reasonable opportunity to object to such request or to
litigate the matter (of which the Company agrees to keep the Executive
reasonably informed) and has failed to do so.

          (b) The Executive hereby sells, assigns and transfers to the Company
all of his right, title and interest in and to all inventions, discoveries,
improvements and copyrightable subject matter (the "Rights") which during the
period of his employment are made or conceived by him, 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 he performs, or information he receives regarding

                                       13

the business of the Company, while employed by the Company. The Executive shall
fully disclose to the Company as promptly as available all information known or
possessed by him concerning any Rights, and upon request by the Company and
without any further remuneration in any form to him by the Company, but at the
expense of 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. The Executive hereby acknowledges
receipt of a separate written notice provided by the Company pursuant to Section
2872 of the California Labor Code, attached hereto as Exhibit B.

          (c) The Executive agrees upon termination of employment (whether
during or after the expiration of the Term and whether such termination is at
the instance of the Executive or the Company), and regardless of the reasons
therefor, or at any time as the Company may request, he 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 his 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 its Affiliates, including any and all documents relating to the
conduct of the business of the Company or any of its Affiliates and any and all
documents containing confidential or proprietary information of the customers of
the Company or any of its Affiliates, except for (x) any documents for which the
Company's General Counsel has given written consent to removal at the time of
termination of the Executive's employment and (y) any information necessary for
the Executive to retain for his tax purposes (provided the Executive maintains
the confidentiality of such information in accordance with Section 7(a) above).

     8. Additional Covenants.

          (a) The Executive agrees that during his employment with the Company
or any Affiliate (whether during the Term or thereafter), including, without
limitation, during any Notice Period, he shall not, except as otherwise 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 Affiliate is
engaged in business. The Executive shall not be deemed to be in violation of
this Section 8(a) by reason of the fact that he owns or acquires, 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
engaged in (x) apparel design and/or apparel wholesaling or (y) retailing in
competition with any business that the Company or any Affiliate is conducting at
the time of the alleged violation.

          (b) The Executive agrees that during his employment with the Company
or any Affiliate (whether during the Term or thereafter), including, without
limitation, during any Notice Period, he shall not, other than in the ordinary
course of the Company's business or with the Company's prior written consent,
directly or indirectly, solicit or encourage any customer of

                                       14

the Company or any of its Affiliates to reduce or cease its business with the
Company or any such Affiliate or otherwise interfere with the relationship of
the Company or any Affiliate with its customers.

          (c) The Executive agrees that during his employment with the Company
or any Affiliate and for 18 months following termination of such employment for
any reason (whether during the Term or thereafter), he shall not, other than in
the ordinary course of the Company's business or with the Company's prior
written consent, directly or indirectly, hire any employee of the Company or any
of its Affiliates, or solicit or encourage any such employee to leave the employ
of the Company or its Affiliates, as the case may be.

          (d) Upon commencement of the Notice Period and following the
termination of the Executive's employment for any reason (whether during the
Term or thereafter), the Executive and the Company each agree to refrain from
making any statements or comments, whether oral or written, of a defamatory or
disparaging nature to third parties regarding each other (and, in the case of
the Executive's commitment hereunder, the "Company" shall include an Affiliate
of the Company and the Company's officers, directors, personnel and products).
The Executive and the Company each understand that either party should be
entitled to respond truthfully and accurately to statements about such party
made publicly by the Executive or the Company, as the case may be, provided that
such response is consistent with the responding party's obligations not to make
any statements or comments of a defamatory or disparaging nature as set forth
herein.

     9. Injunctive and Other Relief.

          (a) The Executive acknowledges that the restrictions and commitments
set forth in Sections 7, 8 and 10 of this Agreement are necessary to prevent the
improper use and disclosure of Confidential Information and to otherwise protect
the legitimate business interests of the Company and any of its Affiliates. The
Executive further acknowledges that the restrictions set forth in Sections 7, 8
and 10 of this Agreement are reasonable in all respects, including, without
limitation, duration, territory and scope of activity. The Executive expressly
agrees and acknowledges that any breach or threatened breach by the Executive or
any third party of any obligation by the Executive under this Agreement,
including, without limitation, any breach or threatened breach of Section 7, 8
or 10 of this Agreement will cause the Company immediate, immeasurable and
irreparable harm for which there is no adequate remedy at law, and as a result
of this, in addition to its other remedies, the Company shall be entitled to the
issuance by a court of competent jurisdiction of an injunction, restraining
order, specific performance or other equitable relief in favor of itself,
without the necessity of posting a bond, restraining the Executive or any third
party from committing or continuing to commit any such violation. If the Company
defers or withholds any payment, benefit or entitlement due to the Executive
pursuant to this Agreement or otherwise based on the Executive's violation of
this Agreement and it is subsequently finally determined that the Executive did
not commit such breach, the Company shall promptly pay all such unpaid amounts,
and shall extend such rights or other entitlements, to the Executive as of the
date that it is so determined that the Executive did not commit such

                                       15

breach.

          (b) If any restriction set forth in Section 7, 8 or 10 of this
Agreement is found by any court of competent jurisdiction to be unenforceable
because it extends for too long a period of time or over too great a range of
activities or in too broad a geographic area, it will be interpreted to extend
over the maximum period of time, range of activities or geographic area as to
which it may be enforceable. If any provision of Section 7, 8 or 10 of this
Agreement is declared to be invalid or unenforceable, in whole or in part, for
any reason, such invalidity will not affect the remaining provisions of such
Section which will remain in full force and effect.

     10. Cooperation.

     Following the Executive's termination of employment for any reason (whether
during or after the expiration of the Term), upon reasonable request by the
Company, the Executive 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 he was involved or had knowledge during his employment with the
Company, subject to his reasonable personal and business schedules. The Company
shall reimburse the Executive for all reasonable out-of-pocket costs, such as
travel, hotel and meal expenses and reasonable attorneys' fees, incurred by the
Executive in providing any cooperation pursuant to this Section 10, as well as a
reasonable per diem amount for the Executive's time (other than for time spent
preparing for or providing testimony) which shall be based upon the Executive's
Base Salary at the Date of Termination.

     11. Tax Matters.

          (a) If any amount, entitlement, or benefit paid or payable to the
Executive or provided for his 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 the Executive 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 the Executive
received all of the Payments (such reduced amount is hereinafter referred to as
the "Limited Payment Amount"). Unless the Executive shall have given prior
written notice specifying a different order to the Company to effectuate the
limitations described in the preceding sentence, the Company shall reduce or
eliminate the Payments, by first reducing or eliminating those payments or
benefits which are not payable in cash and then by reducing or eliminating 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). Any notice given by the Executive pursuant to the preceding sentence
shall take precedence over the provisions of any other plan, arrangement or
agreement, including, but not limited to, the other provisions of this
Agreement, governing the Executive's rights and entitlements to any
compensation, entitlement

                                       16

or benefit.

          (b) All calculations under this Section 11 shall be made by a
nationally recognized accounting firm designated by the Company and reasonably
acceptable to the Executive (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 the Executive 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 the Executive that he is
not required to report any Excise Tax on his federal income tax return with
respect to the Limited Payment Amount (collectively, the "Determination").
Within 5 days of the Executive's receipt of the Determination, the Executive
shall have the right to dispute the Determination (the "Dispute"). The existence
of the Dispute shall not in any way affect the right of the Executive 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 the Executive (except as provided in subsection (c) below).

          (c) If, after the Payments have been made to the Executive, it is
established that the Payments made to, or provided for the benefit of, the
Executive exceed the limitations provided in subsection (a) above (an "Excess
Payment") or are less than such limitations (an "Underpayment"), as the case may
be, then the provisions of this subsection (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, the Executive shall repay the Excess Payment to
the Company on demand. 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 the satisfaction of the Executive of the Dispute, that an Underpayment has
occurred, the Company shall pay an amount equal to the Underpayment to the
Executive 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 the Executive under this Agreement, from such
date until the date that such Underpayment is made to the Executive.

     12. Representations.

          (a) The Executive represents and warrants that he has the free and
unfettered right to enter into this Agreement and to perform his obligations
under it and that he knows of no agreement between him and any other person,
firm or organization, or any law or regulation, that would be violated by the
performance of his obligations under this Agreement. The Executive agrees that
he will not use or disclose any confidential or proprietary information of any
prior employer in the course of performing his duties for the Company or any of
its Affiliates.

                                       17

          (b) The Company represents that (i) the execution of this Agreement
and the granting of the benefits and awards hereunder have been authorized by
the Company, including, where necessary, by the Board, (ii) the execution,
delivery and performance of this Agreement does not violate any law, regulation,
order, decree, agreement, plan or corporate governance document of the Company
and (iii) upon the execution and delivery of this Agreement by the Parties, it
shall be the valid and binding obligation of the Company enforceable against it
in accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.

     13. Indemnification and Liability Insurance.

     The Company hereby agrees during, and after termination of, his employment
to indemnify the Executive and hold him 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 the Executive's
good faith performance of his duties as an officer or director of the Company or
any Affiliate of the Company. The Company shall reimburse the Executive for
expenses incurred by him in connection with any proceeding hereunder upon
written request from the Executive for such reimbursement and the submission by
the Executive of the appropriate documentation associated with these expenses.
Such request shall include an undertaking by the Executive to repay the amount
of such advance or reimbursement if it shall ultimately be determined that he is
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 the Executive to the same
extent as the Company covers its other officers and directors.

     14. Notices.

     Any notice given to a Party shall be in writing and shall be deemed to have
been given (i) when delivered personally (provided that a written
acknowledgement of receipt is obtained), (ii) three days after being sent by
certified or registered mail, postage prepaid, return receipt requested or (iii)
two days after being sent by overnight courier (provided that a written
acknowledgement of receipt is obtained by the overnight courier), with any such
notice duly addressed to the Party concerned at the address indicated below or
to such other address as such Party may subsequently designate by written notice
in accordance with this Section 14:

     If to the Company:   The Warnaco Group, Inc.
                          501 Seventh Avenue
                          New York, New York 10018
                          Attention: General Counsel

     If to the Executive: The most recent address in the Company's records.

     15. Governing Law; Exclusive Jurisdiction.

                                       18

     This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York without reference to principles of
conflicts of law. The Parties each consent to the personal and exclusive
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 proceeding arising
out of, or relating to, this Agreement. Each Party further agrees not to
interpose any objection for improper venue in any such proceeding. Each Party
shall be responsible for its own costs and expenses, including attorneys' fees,
in connection with any dispute arising out of, or relating to, this Agreement.

     16. Miscellaneous Provisions.

          (a) This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and, as of the
Effective Date, shall supersede all prior agreements, understandings,
discussions, negotiations and undertakings, whether written or oral, between the
Parties with respect thereto (but not including any indemnification agreements
and/or equity agreements which remain outstanding as of the Effective Date). No
provision of this Agreement may be amended unless such amendment is agreed to in
writing and signed by the Executive and an authorized officer of the Company.
Notwithstanding the foregoing, in 2005, the Company shall have the right to
modify any provision of this Agreement (or, if requested by the Executive, shall
make such modification), including, without limitation, Section 4(d) and/or
Section 6 hereof, if, and only to the extent that, such modification shall be
required, in the reasonable opinion of the Company's and/or the Executive's
counsel, to comply with Section 409A of the Code or any regulations or similar
guidance issued by the Treasury or the Internal Revenue Service with respect to
Code Section 409A. No waiver by either Party of any breach by the other Party of
any condition or provision contained in this Agreement to be performed by such
other Party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by the Party against whom it is being enforced (either the
Executive or an authorized officer of the Company, as the case may be). The
respective rights and obligations of the Parties hereunder, including, without
limitation, Section 4(d) (Supplemental Award), Section 7 (protection of
confidential information and company property), Section 8 (additional
covenants), Section 9 (injunctive and other relief), Section 10 (cooperation)
and Section 13 (indemnification and liability insurance), shall survive any
expiration of the Term, including expiration thereof upon the Executive's
termination of employment for whatever reason, to the extent necessary to the
intended preservation of such rights and obligations.

          (b) The Company may withhold from any amounts or payments under this
Agreement such Federal, state, local or other taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

          (c) This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors, heirs (in the case of the
Executive) and assigns. For purposes of this Section 16(c), a successor to the
Company shall be limited to an entity which

                                       19

shall have acquired all or substantially all of the business and/or assets of
the Company and shall have assumed (whether by agreement or operation of law)
the Company's rights and obligations under this Agreement. No rights or
obligations of the Executive under this Agreement may be assigned or transferred
by the Executive other than his rights to compensation and benefits, which may
be transferred only by will, operation of law or in accordance with this clause
(c). The Executive shall be entitled, to the extent permitted under applicable
plans, agreements or law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the Executive's
death by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative.

          (d) In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable by a court of competent
jurisdiction for any reason, in whole or in part, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain in full force and
effect to the fullest extent permitted by law.

          (e) The headings and subheadings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.

          (f) This Agreement may be executed in two or more counterparts.

                           [Signatures on next page.]

                                       20

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.

                                   THE WARNACO GROUP, INC.

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

                                   THE EXECUTIVE
                                   /s/ Roger A. Williams
                                   -------------------------------------
                                   Roger A. Williams

                                       21

                                                                       EXHIBIT A

                         AGREEMENT AND RELEASE OF CLAIMS

          THIS AGREEMENT AND RELEASE is executed by ROGER A. WILLIAMS (the
"Executive") as of the date hereof.

          WHEREAS, the Executive and The Warnaco Group, Inc. (the "Company")
entered into an employment agreement dated August 11, 2005 (the "Employment
Agreement");

          WHEREAS, the Executive has certain entitlements pursuant to the
Employment Agreement subject to the Executive's executing this Agreement and
Release and complying with its terms.

          NOW, THEREFORE, in consideration of the payments set forth in Section
6 of the Employment Agreement and other good and valuable consideration, the
Executive agrees as follows:

          The Executive, on behalf of himself and his dependents, heirs,
administrators, agents, executors, successors and assigns (the "Executive
Releasors"), hereby releases and forever discharges the Company and its
affiliated companies and their past and present parents, subsidiaries,
successors and assigns and all of the aforesaid companies' past and present
officers, directors, employees, trustees, shareholders, representatives and
agents (the "Company Releasees"), from any and all claims, demands, obligations,
liabilities and causes of action of any kind or description whatsoever, in law,
equity or otherwise, whether known or unknown, that any Executive Releasor had,
may have had or now has against the Company or any other Company Releasee as of
the date of execution of this Agreement and Release arising out of or relating
to the Executive's employment relationship, or the termination of that
relationship, with the Company (or any affiliate), including, but not limited
to, any claim, demand, obligation, liability or cause of action arising under
any Federal, state, or local employment law or ordinance (including, but not
limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1991, the Equal Pay Act, the Americans With Disabilities Act of 1991, the
Workers Adjustment and Retraining Notification Act, the Employee Retirement
Income Security Act (other than any claim for vested benefits), the Family and
Medical Leave Act, the Age Discrimination in Employment Act, as amended by the
Older Workers' Benefit Protection Act ("ADEA"), the California Fair Employment
and Housing Act, California Business and Professions Code, the California
Constitution, the California Labor Code (including, without limitation, Section
132a), the California Civil Code and the California Family Rights Act), tort,
contract, or alleged violation of any other legal obligation (collectively
"Released Executive Claims"). In addition, in consideration of the promises and
covenants of the Company, the Executive, on behalf of himself and the other
Executive Releasors, further agrees to waive any and all rights under the laws
of any jurisdiction in the United States, or any other country, that limit a
general release to any of the foregoing actions, causes of action, claims or
charges that are known or suspected to exist in the Executive's favor as of the
date of this Agreement and Release. IN THIS CONNECTION, EXECUTIVE UNDERSTANDS
AND AGREES AS PART OF THE

                                       22

INDUCEMENT FOR THE CONSIDERATION GIVEN FOR THIS RELEASE THAT THE EXECUTIVE
SPECIFICALLY WAIVES AND RELINQUISHES ALL RIGHTS AND BENEFITS AFFORDED BY THE
PROVISIONS OF SECTION 1542 OF THE CALIFORNIA CIVIL CODE, WHICH READS AS FOLLOWS:

               A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
               DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
               EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
               AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

EXECUTIVE ACKNOWLEDGES THAT HE UNDERSTANDS THE SIGNIFICANCE OF THIS RELEASE OF
UNKNOWN CLAIMS HEREUNDER AND THIS WAIVER OF STATUTORY PROTECTION AGAINST THE
RELEASE OF SUCH UNKNOWN CLAIMS. Anything to the contrary notwithstanding in this
Agreement and Release or the Employment Agreement, nothing herein shall release
any Company Releasee from any claims or damages based on (i) any right or claim
that arises after the date of this Agreement and Release pertaining to a matter
that arises after such date, (ii) any right the Executive may have to enforce
Sections 6, 11 and 13 of the Employment Agreement, (iii) any right or claim the
Executive may have to benefits or equity awards that have accrued or vested as
of the Date of Termination or any right pursuant to any qualified retirement
plan or (iv) any right the Executive may have to be indemnified by the Company
to the extent such indemnification by the Company or any Affiliate is permitted
by applicable law or the Company's by-laws.

          The Executive agrees that he shall continue to be bound by, and will
comply with, the provisions of Sections 7, 8 and 10 of the Employment Agreement
and the provisions of such sections, along with Section 9 of the Employment
Agreement, shall be incorporated fully into this Agreement and Release.

          The Executive acknowledges that he has been provided a period of at
least 21 calendar days (45 calendar days in the case of any termination covered
by Section 7(f)(1)(F)(ii) of ADEA) in which to consider and execute this
Agreement and Release. The Executive further acknowledges and understands that
he has seven calendar days from the date on which he executes this Agreement and
Release to revoke his acceptance by delivering to the Company written
notification of his intention to revoke this Agreement and Release. This
Agreement and Release becomes effective when signed unless revoked in writing
and in accordance with this seven-day provision and Section 14 of the Employment
Agreement. To the extent that the Executive has not otherwise done so, the
Executive is advised to consult with an attorney prior to executing this
Agreement and Release.

          This Agreement and Release shall be governed by and construed and
interpreted in accordance with the laws of New York without reference to
principles of conflicts of law. The Executive consents and submits to the
exclusive jurisdiction of the Federal and state courts of New York with respect
to any legal proceeding brought, whether by the Executive or the Company,
concerning the subject matter contained in this Agreement and Release.
Capitalized

                                       23

terms, unless defined herein, shall have the meaning ascribed to such terms in
the Employment Agreement.

          IN WITNESS WHEREOF, the Executive has executed this Agreement and
Release as of the date hereof.

                                            ------------------------------------
                                            Roger A. Williams

                                            Date:
                                                  ------------------------------

                                       24

                                                                       Exhibit B

     In accordance with Section 2872 of the California Labor Code, you are
hereby notified that the Invention Assignment provisions of the Employment
Agreement you have signed in connection with your employment with THE WARNACO
GROUP, INC. do not apply to an invention that qualifies fully under the
provisions of Section 2870 of the California Labor Code, which provides in
pertinent part:

          ANY PROVISION IN AN EMPLOYMENT AGREEMENT WHICH PROVIDES THAT AN
          EMPLOYEE SHALL ASSIGN, OR OFFER TO ASSIGN, ANY OF HIS OR HER RIGHTS IN
          AN INVENTION TO HIS OR HER EMPLOYER SHALL NOT APPLY TO AN INVENTION
          THAT THE EMPLOYEE DEVELOPED ENTIRELY ON HIS OR HER OWN TIME WITHOUT
          USING THE EMPLOYER'S EQUIPMENT, SUPPLIES, FACILITIES, OR TRADE SECRET
          INFORMATION EXCEPT FOR THOSE INVENTIONS THAT EITHER:

               (1)  RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF
                    THE INVENTION TO THE EMPLOYER'S BUSINESS, OR ACTUAL OR
                    DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT OF THE
                    EMPLOYER; OR

               (2)  RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE
                    EMPLOYER.

                                            RECEIPT ACKNOWLEDGED:

Dated: August 11, 2005                       /s/ Roger A. Williams
      -----------------------------         ------------------------------------
                                            Roger A. Williams

                                       25

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