Document:

ex10-1.htm

Exhibit 10.1

 

RETIREMENT AGREEMENT

 

This Retirement Agreement (this “Agreement”) by and between The Warnaco Group, Inc., a Delaware corporation (together with its successors and assigns, the “Company”), and Frank Tworecke (the “Executive”), is dated as of April 25, 2012.

 

WHEREAS, the Company and the Executive are party to an employment agreement dated as of April 16, 2004, as amended (the “Employment Agreement”) (all capitalized terms not defined herein shall have the meanings ascribed to them in the Employment Agreement);

 

WHEREAS, the Executive and the Company have agreed that the Executive will retire in accordance with the terms of this Agreement;

 

NOW, THEREFORE, the Company and the Executive hereby agree as follows:

 

1.           Responsibilities Through July 1, 2012.  As of the date of this Agreement and through July 1, 2012, the Executive shall serve as the Company’s Group President, Sportswear and the Executive agrees to devote his full business time and attention to the satisfactory performance of such position.

 

2.           Resignation as Executive Officer on July 1, 2012.  Effective as of July 1, 2012 (the “Resignation Date”), the Executive shall resign from serving as the Group President, Sportswear and, except as provided in Section 3 of this Agreement, from all other positions the Executive then holds as an officer and employee of the Company or as an officer, employee or member of the board of directors of any of the Company’s affiliates.  The Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Company, but he shall be treated for all purposes as having so resigned from such positions on the Resignation Date, regardless of when or whether he executes any such documentation.

 

3.           Transition Period.  During the period commencing on the Resignation Date and continuing through December 31, 2012  (or such earlier date if the Executive terminates his employment, his employment is terminated for Cause or he dies, in each case prior to December 31, 2012) (the “Separation Date” and, such continuation period, the “Transition Period”), the Executive shall serve as a non-officer employee of the Company, providing strategic advice and working on special projects pursuant to the direction of the Company’s Chief Executive Officer.  In this capacity, the Executive shall provide no less than 20 percent of the average level of services performed by him during the last three years of his employment with the Company.  The Executive’s employment shall terminate without any further action of either party on the Separation Date.

 

4.           Base Salary and Benefits.  Up through the Resignation Date and during the Transition Period, the Executive shall continue to be paid his current Base Salary in accordance with the Company’s normal payroll practices (with each such payroll payment deemed to be a separate payment for purposes of Section 409A) and receive the payments and entitlements set forth in paragraph 4 of the Employment Agreement.   Except as otherwise provided in Section 5 of this Agreement, the Executive shall not be entitled to receive any other payments, benefits or entitlements from the Company or any affiliate, including, without limitation, any annual bonus

 

  

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or any additional long-term incentive and/or equity awards or Supplemental Awards.  Through the Separation Date, the Executive shall remain subject to all the Company’s policies and procedures. 

 

5.           Additional Payments.  Provided that (x) the Executive’s employment is not terminated for Cause or he does not resign his employment, in each case prior to December 31, 2012, and (y) he does not die prior to the Resignation Date, and subject to, and in consideration of, the Executive’s execution and non-revocation of the release of claims against the Company attached hereto as Exhibit A (the “Release”) within 21 days following the Separation Date and his compliance with this Agreement, the Executive (or his estate, as applicable) shall be entitled to the following:

 

(a)           a fully vested Supplemental Award equal to 13% of the sum of (i) the actual base salary paid to the Executive for fiscal year 2012 and (ii) notwithstanding anything to the contrary in paragraph 3(d) in the Employment Agreement, the amount paid to the Executive pursuant to Section 5(d) below, with such amount to be granted and paid in accordance with paragraph 3(d) of the Employment Agreement, provided that (x) the grant date shall be April 1, 2013 and (y) if the payment date pursuant to paragraph 3(d) of the Employment Agreement would result in a payment prior to April 1, 2013, the payment date for this award shall be April 1, 2013;

 

(b)           a severance payment in the amount of $825,000, payable on March 1, 2013;

 

(c)           an additional severance payment in the amount of $870,000, payable in 2013, but in all events no later than March 1, 2013;

 

(d)           an additional severance payment in the amount of $400,000, payable in 2013, but in all events no later than March 1, 2013;

 

(e)           if the Executive renews the lease on his current New York City apartment and provides the Company with such executed lease no later than August 1, 2012, an additional payment equal to the monthly rent due for such apartment for January 2013 through the earliest of (i) June 2013, (ii) the date such lease ends and (iii) the date the Executive no longer occupies such apartment, payable in 2013, but in no event later than June 1, 2013; and

 

(f)            provided the Executive makes a timely election under COBRA, continued participation for the Executive and his eligible dependents in the Company’s medical and dental plans in which the Executive and his eligible dependents were participating immediately prior to the Separation Date until the earlier of (a) the 18th month anniversary of the Separation Date, or (b) the date, or dates, the Executive receives equivalent coverage under the plans and programs of a subsequent employer; provided that, at the Company’s election, the Executive shall pay the full cost of such COBRA premiums and the Company shall promptly reimburse the Executive for its portion of the premiums (as if the Executive had continued in employment); and provided, further, that

 

  

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in no event shall there be any gross up provided by the Company for any tax liabilities or otherwise.

 

For purposes of Section 409A, each payment under each clause of this Section 5 shall be deemed to be a “separate payment”.

 

6.           Outstanding Equity Awards.  The Executive’s outstanding equity awards are  set forth on the schedule attached hereto as Schedule I and shall be treated in accordance with the applicable plans and award agreements.

 

7.           Supplemental Awards.  The Executive’s outstanding Supplemental Awards are fully vested and all Supplemental Awards, except for the award payable pursuant to Section 5 above, shall be delivered or paid to the Executive (or his estate) in accordance with paragraph 3(d) of the Employment Agreement.

 

8.           Non-Disparagement.  On and after the date hereof, the Executive and the Company each agree that the mutual non-disparagement covenants contained in paragraph 13 of the Employment Agreement shall be incorporated by reference in this Agreement and shall remain in full force and effect.

 

9.           Confidentiality; Assignment of Rights; Return of Property.  On and after the date hereof, the Executive shall continue to be subject to the confidentiality provisions, the assignment of rights (for Rights made or conceived during the Executive’s employment), and return of property provisions set forth in paragraphs 14, 15 and 16 of the Employment Agreement, which provisions are incorporated by reference in this Agreement and shall remain in full force and effect.

 

10.         Non-Competition and Non-Solicitation.  The Executive acknowledges that in the Executive’s capacity in management the Executive has had a great deal of exposure and access to the trade secrets of the Company or its affiliates and other confidential information of the Company and its affiliates.  Therefore, to protect such trade secrets and such other confidential information, in addition to the Executive’s obligations not to engage in a “Competitive Activity” pursuant to the applicable award agreements for any equity awards, the Executive agrees as follows:

 

(a)           During the Executive’s employment with the Company or any affiliate and for 12 months following the Separation Date, the Executive shall not, other than in the ordinary course of performing the Executive’s duties for the Company prior to the Separation Date or as agreed by the Company in writing, engage in a “Competitive Business,” directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any relationship or capacity, in any geographic location in which the Company or any of its affiliates is engaged in business.  The Executive shall not be deemed to be in violation of this Section 10(a) by reason of the fact that the Executive 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 primarily engaged in apparel design or apparel wholesaling in competition with the Company or any of its affiliates.  The Company agrees to consider in

 

  

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    good faith any written request by the Executive concerning whether an entity or person qualifies as a “Competitive Business”.

 

(b)           During the Executive’s employment with the Company or any Affiliate and for 18 months following the Separation Date, the Executive shall not, other than in the ordinary course of the Company’s business prior to the Resignation Date or with the Company’s prior written consent, directly or indirectly, solicit or encourage any customer of 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)           During the Executive’s employment with the Company or any affiliate and for 18 months following the Separation Date, the Executive shall not, other than in the ordinary course of the Company’s business prior to the Resignation Date or with the Company’s prior written consent, directly or indirectly, solicit any employee of the Company or any affiliate of the Company to terminate his/her employment (excluding, only, his personal assistant) on his behalf or on behalf of any other person or entity or hiring any key employee (e.g., any management-level employee or any designer) of the Company or any affiliate.

 

11.         Cooperation.  On and after the date hereof, the Executive and the Company each agree that the provisions of the cooperation covenant contained in paragraph 20 of the Employment Agreement shall be incorporated by reference in this Agreement and shall remain in full force and effect.

 

12.         Injunctive and Other Relief.  The Executive expressly agrees and acknowledges any breach or threatened breach of any of his obligations under Section 8, Section 9 or Section 10 above will cause the Company immeasurable and irreparable harm for which there is no adequate remedy at law, and as a result of this, the Company shall be entitled to seek the issuance by a court of competent jurisdiction of an injunction, restraining order or other equitable relief in favor of itself, without the necessity of posting a bond, restraining the Executive from committing or continuing to commit any such violation.

 

13.         No Mitigation; Offset.  The Executive is under no obligation to mitigate damages or the amount of any payment provided for hereunder by seeking other employment or otherwise and, except as otherwise provided in Section 5 of this Agreement, such amounts shall not be reduced whether or not the Executive obtains other employment (provided such employment is after the Separation Date and consistent with Section 10 hereof).  Notwithstanding anything herein to the contrary or otherwise, the Executive’s equity awards shall be subject to cancellation and recoupment by the Company, and shall be repaid by the Executive to the Company, to the extent required by law or regulation or pursuant to any listing requirement for the Company’s stock, or by any Company policy or agreement.

 

14.         Indemnification; Tax Matters; Resolution of Disputes.  Notwithstanding the other provisions of this Agreement, the indemnification and other provisions set forth in paragraphs 18, 19, 28 and 29 of the Employment Agreement are incorporated by reference in this Agreement and shall remain in full force and effect; provided, however, where applicable any

 

  

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reference to “you” or “this Agreement” in such sections shall mean the Executive and this Retirement Agreement, respectively.

 

15.         Compliance with Section 409A of the Code.  Notwithstanding other provisions of this Agreement, the provisions relating to Section 409A of the Code set forth in the Employment Agreement (including, without limitations, those provisions set forth in paragraphs 3(d), 4 and 11(b)  of the Employment Agreement) are incorporated by reference in this Agreement and shall remain in full force and effect.

 

16.         Entire Agreement. As of the date hereof, this Agreement sets forth the entire agreement of the Company and the Executive with respect to the subject matter hereof, and, as of the date hereof, supercedes in its entirety the Employment Agreement and any compensation and/or severance plan, policy or arrangement of the Company or any other agreement, plan, policy or arrangement with respect to the subject matter hereof; provided that (x) if the Executive dies prior to the Resignation Date, his estate shall be entitled to the payments and entitlements set forth in paragraph 6 of the Employment Agreement and shall not be entitled to any payment, benefit or entitlement pursuant to this Agreement, (y)  if the Executive’s employment is terminated for Cause or he terminates his employment, in each case prior to December 31, 2012, he shall only be entitled to the provisions of Sections 4 and 7 above (with the Separation Date being the date the Executive’s employment so terminates) and his equity awards shall be treated in accordance with the applicable plan and award agreements, and (z) if there is a Change in Control prior to December 31, 2012 and the Executive receives written notice from the Company that his employment is being terminated without Cause on or after the date of the Change in Control but prior to December 31, 2012, he shall be entitled to the payments and benefits under paragraph 8 of the Employment Agreement and this Agreement shall be null and void and of no further effect as of the date of such notice.  For the avoidance of doubt, in no event shall paragraphs 5 or 9 of the Employment Agreement apply for any termination of the Executive’s employment on or after the date of this Agreement, and if the Executive remains employed through December 31, 2012 then he shall only be entitled to the payments under Section 5 of this Agreement and not any payment, benefit or entitlement under the Employment Agreement, including, without limitation, pursuant to paragraph 8 of the Employment Agreement.  In addition, if the Company terminates the Executive’s employment for any reason prior to December 31, 2012 other than for Cause or because the Executive breached the terms of this Agreement and provided a Change in Control has not occurred prior to such termination date, the Executive shall be entitled to the payments and benefits of this Agreement as if he remained employed through December 31, 2012.  Without limiting the generality of the foregoing, the Executive expressly acknowledges and agrees that except as specifically set forth in Section 4, 5, 6, and 7 of this Agreement, he is not entitled to receive any severance pay, severance benefits, compensation or employee benefits of any kind whatsoever from the Company on and after the date hereof.  As of the date hereof, the Executive expressly waives his right to terminate his employment for Good Reason under the Employment Agreement.

 

17.         Assignability; Binding Nature; Severability.  Notwithstanding the other provisions of this Agreement, the provisions of paragraphs 22 and 24 of the Employment Agreement are incorporated by reference in this Agreement and shall remain in full force and effect; provided, however, that any reference to “this Agreement” in such sections shall mean this Retirement Agreement.

 

  

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18.         Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of New York without reference to principles of conflicts of law.

 

19.         Notices.  Any notice given to a party to this Agreement (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 acknowledgment 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 19:

 

	 	
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.

	 	  	 	  

 

20.         Withholding of Taxes.  The tax withholding and other provisions set forth in paragraph 27 of the Employment Agreement are incorporated by reference in this Agreement and shall remain in full force and effect.

 

21.         Miscellaneous.  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.  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 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 captions used in this Agreement are designed for convenient reference only and are not to be used for the purpose of interpreting any provision of this Agreement.

 

22.         Counterparts.  This Agreement may be executed in one or more counterparts, including by facsimile signature, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

 

 

[Remainder of page is left intentionally blank]

 

  

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

	  	
THE WARNACO GROUP, INC.

	  	  	  
	  	  	  
	  	
By:  

	
/s/ Jay L. Dubiner

	  	
Name:  Jay L. Dubiner

	  	
Title:     Executive Vice President, General Counsel

	  	
THE EXECUTIVE

	  	  
	  	  
	  	
/s/ Frank Tworecke   

	  	
Frank Tworecke

  

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EXHIBIT A

AGREEMENT AND RELEASE OF CLAIMS

 

THIS AGREEMENT AND RELEASE is executed by the undersigned (the “Executive”) as of the date hereof.

WHEREAS, the Executive and The Warnaco Group, Inc. (the “Company”) entered into a retirement agreement dated as of April 25, 2012 (the “Retirement Agreement”);

WHEREAS, the Executive has certain entitlements pursuant to the Retirement 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 5 of the Retirement 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, and the Age Discrimination in Employment Act, as amended by the Older Workers’ Benefit Protection Act (“ADEA”)), 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.  Anything to the contrary notwithstanding in this Agreement and Release or the Retirement 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 4, 5, 6, 7 or 14 of the Retirement Agreement, (iii) any right or claim the Executive may

  

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have to benefits 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 understands that nothing in this Agreement and Release shall be construed to prohibit him from filing a charge with, or participating in any investigation or proceeding conducted by, the Equal Employment Opportunity Commission, National Labor Relations Board, and/or any federal, state or local agency.  Notwithstanding the foregoing, the Executive hereby waives any and all rights to recover monetary damages in any charge, complaint, or lawsuit filed by him or by anyone else on his behalf based on events occurring prior to the date of this Agreement and Release.

The Executive agrees that he shall continue to be bound by, and will comply with, the provisions of Sections 8, 9, 10 and 11 of the Retirement Agreement and the provisions of such sections, along with Section 12 and 13 of the Retirement 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 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 in accordance with Section 19 of the Retirement Agreement.  This Agreement and Release becomes effective when signed unless revoked in writing and in accordance with this seven-day provision.  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.  Capitalized terms, unless defined herein, shall have the meaning ascribed to such terms in the Retirement Agreement.

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

	  	
 

	  	
Frank Tworecke

	  	
Date:  

	  
	  	  

  

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Frank Tworecke Equity Summary

	
Schedule I

23-Feb-12

Assumes December 31, 2012 retirement date

	
Grant Type

	
Plan ID

	
Grant Date

	
Grant Price

	
Options/RES Granted

	
Options Exercised/RES lapsed

	
Options/RES Outstanding

	
Options Exercisable

	
Options/RES Vested

	
Vesting Date

	
Options/RES Vesting

	
Vesting Date

	
Options/RES Vesting

	
Vesting Date

	
Options/RES Vesting

	
Last date to Exercise

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Stock Option Summary1, 2

	  	  	  	  	  	  	  	  	  	  	  	  	  
	
NQ

	
2005

	
03/07/2007

	
$27.07

	
20,400

	
7,400

	
13,000

	
13,000

	
13,000

	  	  	  	  	  	  	
03/31/2013

	
NQ

	
2005

	
05/14/2008

	
$50.13

	
20,200

	
0

	
20,200

	
20,200

	
20,200

	  	  	  	  	  	  	
03/31/2013

	
NQ

	
2005

	
05/13/2009

	
$27.02

	
30,400

	
0

	
30,400

	
20,267

	
20,267

	
03/04/2012

	
10,133

	  	  	  	  	
03/31/2013

	
NQ

	
2005R

	
03/03/2010

	
$43.28

	
16,100

	
0

	
16,100

	
5,367

	
5,367

	
03/03/2012

	
5,366

	
03/03/2013

	
5,367

	  	  	
12/31/2014

	
NQ

	
2005R

	
03/01/2011

	
$55.57

	
11,300

	
0

	
11,300

	
0

	
0

	
03/01/2012

	
3,767

	
03/01/2013

	
3,766

	
03/01/2014

	
3,767

	
12/31/2014

	  	  	  	  	
98,400

	  	
91,000

	
58,834

	
58,834

	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Restricted Stock/Unit Summary 2

	  	  	  	  	  	  	  	  	  	  	  	  	  
	
RES

	
2005

	
03/04/2009

	
$0.00

	
11,049

	
7,366

	
3,683

	
0

	
0

	
03/04/2012

	
3,683

	  	  	  	  	  
	
RES

	
2005

	
05/13/2009

	
$0.00

	
12,100

	
0

	
12,100

	
0

	
0

	
03/04/2012

	
12,100

	  	  	  	  	  
	
RSU

	
2005R

	
03/03/2010

	  	
7,250

	
0

	
7,250

	
0

	
0

	
03/03/2013

	
7,250

	  	  	  	  	  
	
RSU

	
2005R

	
03/01/2011

	  	
5,200

	
0

	
5,200

	
0

	
0

	
03/01/2014

	
5,200

	  	  	  	  	  
	  	  	  	  	
35,599

	  	
28,233

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Performance Share/Unit Summary 2,3

	  	  	  	  	  	  	  	  	  	  	  	  
	
PU

	
2005R

	
03/03/2010

	
$0.00

	
7,250

	
0

	
7,250

	
0

	
0

	
03/03/2013

	
7,250

	  	  	  	  	  
	
PU

	
2005R

	
03/01/2011

	
$0.00

	
5,200

	
0

	
5,200

	
0

	
0

	
03/01/2014

	
5,200

	  	  	  	  	  
	  	  	  	  	
12,450

	  	
12,450

	  	  	  	  	  	  	  	  	  

Notes:

	  	
1

	 	
Options granted in 2009 or earlier that vest prior to retirement or thereafter must be exercised within 3 months of retirement

	  	
2

	 	
Equity granted in 2010 and later is retirement eligible and therefore continues to vest after retirement, and remains exercisable for 2 years from retirement, subject to the terms of the applicable award agreements.

	  	
3

	 	
Actual number of Performance Shares/Units vesting is contingent on performance and applicable award agreement. Shares shown are at target.

This schedule is subject to the applicable plan and award agreement, including, if applicable, any requirement not to engage in "Competitive Activity" in order to be eligible for continued vesting of equity awards or to exercise any vested options.WU - 3.31.2012 - Ex 10.1

Exhibit 10.1

THE WESTERN UNION COMPANY
SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN
(As Amended and Restated Effective February 23, 2012)

1.  PURPOSE OF THE PLAN.  The Western Union Company Senior Executive Annual Incentive Plan (the “Plan”), originally established effective January 1, 2007, is hereby amended and restated effective February 23, 2012 by the Compensation and Benefits Committee of the Board of Directors of The Western Union Company (the “Company”).  The Plan is designed to encourage teamwork and individual performance by providing annual incentive compensation based on the Company's Operating Income, to advance the interests of the Company by attracting and retaining key executives, and to reward contributions made by the Company's Chief Executive Officer and other senior executive officers in optimizing long-term value to the Company's shareholders by connecting a portion of each such executive's total potential cash compensation to the attainment of objective Company financial goals.  The Incentive Awards payable under the Plan are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and shall be interpreted in a manner consistent with such intent.

2.  DEFINITIONS.  For purposes of this Plan, the following terms shall have the meanings set forth below:

2.1  “Committee” means the Compensation and Benefits Committee of the Company's Board of Directors, or any successor thereto or delegate thereof with the authority to act on behalf of the Committee with respect to this Plan.

2.2  “Corporate Performance Measures” means specified levels of earnings per share, the attainment of a specified price of the Company's common stock, specified levels of earnings before interest expense and taxes, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), growth in EBITDA, operating income, return to stockholders (including dividends), total shareholder return, return on equity, earnings, revenues, growth in revenues, pretax return on total capital, cash flow, cost reduction goals, economic value added, or any combination of the foregoing, or any other financial or strategic measure of company performance as selected by the Committee for a specified performance or measurement period for purposes of this Plan, and as such measures may be adjusted for major nonrecurring and non-operating expense and income items, as determined by the Company and as acceptable to the Committee in its sole discretion, based on the facts and circumstances involved, as determined pursuant to generally accepted accounting principles, and as consistently applied by the Committee. 

2.3  “Division or Business Unit Performance Measures” mean specified levels of revenue, operating income, pretax return on total capital, cost reduction goals, economic value added, or any combination of the foregoing, or any other financial or strategic measure of business unit and/or division performance as selected by the Committee for a specified performance or measurement period for purposes of this Plan, and as such measures may be adjusted for major nonrecurring and non-operating expense and income items, as determined by the Company and as acceptable to the Committee in its sole discretion, based on the facts and circumstances involved, as determined pursuant to generally accepted accounting principles, and as consistently applied by the Committee.  

2.4  “Incentive Award” means an incentive compensation award paid to a Participant pursuant to the Plan.

2.5  “Incentive Pool” means the aggregate dollar value of the maximum Incentive Awards payable under the Plan in any Plan Year, as specified in Section 3.1.

2.6  “Operating Income” for purposes of Section 3.1 means the Company's consolidated operating income as determined by the Committee from the Company's annual audited financial statements.

2.7  “Participant” means the Company's Chief Executive Officer and any executive officer of the Company who is identified as eligible to participate in this Plan for a given Plan Year by the Committee.  

2.8  “Plan Year” means a period of one year, commencing each January 1 and ending on the following December 31, or such other twelve consecutive month period as may be established from time to time by the Company.  

3.  ESTABLISHMENT OF INCENTIVE POOL, PERFORMANCE MEASURES AND DETERMINATION OF INCENTIVE AWARDS.  

3.1  The Incentive Pool for each Plan Year shall equal 3% of Operating Income for such year.

3.2  No later than 90 days after the beginning of each Plan Year, the Committee shall establish for each Participant the maximum Incentive Award that may be payable to such Participant for such Plan Year, expressed as a percentage of the Incentive Pool for the Plan Year (a “Maximum Percentage”), provided that the Maximum Percentage for any Participant under this Plan for any Plan Year shall not be greater than 33 1/3% of such Incentive Pool.

3.3  As soon as practicable following the end of each Plan Year, the Committee shall determine the amount of the Incentive Pool for such Plan Year and shall certify such amount in a written statement and shall authorize the payment of Incentive Awards in accordance with the terms of the Plan.  

3.4  The Committee shall have the sole and absolute discretion to reduce (but not increase) the amount of any Incentive Award otherwise payable under the Plan for each Plan Year or to determine that no Incentive Award shall be payable to a Participant under the Plan (so long as the exercise of such negative discretion does not result in an increase in the Incentive Award payable to any other Participant).  The exercise of such discretion may be determined by (i) the extent to which selected Corporate Performance Measures and, if appropriate in the Committee's discretion, selected Division or Business Unit Performance Measures established for each Participant for each Plan Year have been attained, and (ii) the Committee's evaluation of a Participant's individual performance.  Under no circumstances shall any Incentive Award be deemed earned by or payable to a Participant under this Plan with respect to any Plan Year unless and until the Committee both certifies the amount of the Incentive Pool for such Plan Year and exercises its discretion to determine whether an Incentive Award shall be paid to each such individual Participant with respect to such Plan Year.

4.  PAYMENT OF INCENTIVE AWARDS.  Payment of Incentive Awards, less withholding taxes and other applicable withholdings, shall be made to Participants not later than March 15 (March 31, in the case of a Participant who is not a United States taxpayer) following the applicable Plan Year, provided the Committee has certified that the applicable Performance Measures have been satisfied and has determined the amount and approved the payment of the Incentive Award to the Participants.  Funding of Incentive Awards under this Plan shall be out of the general assets of the Company or of its wholly-owned subsidiaries.  Unless otherwise determined by the Committee in its discretion, Incentive Awards shall be paid in cash.  

5.  ADMINISTRATION.  The Plan shall be administered by the Committee, which shall have full power and authority to interpret, construe and administer the Plan in accordance with the provisions set forth herein.  The Committee's interpretation and construction of the Plan, and actions hereunder, or the amount or recipient of the payments to be made from the Plan, shall be binding and conclusive on all persons for all purposes.  In this connection, the Committee may delegate to any corporation, committee or individual, regardless of whether the individual is an employee of the Company, the duty to act for the Committee hereunder.  No officer or employee of the Company shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his or her own willful misconduct or lack of good faith.  The expenses of administering the Plan shall be paid by the Company or by a wholly-owned subsidiary of the Company and shall not be charged against the Plan. 

6.  PARTICIPATION IN THE PLAN.  Eligible executive officers of the Company may become Participants in accordance with the terms of the Plan at any time during the Plan Year.  If an executive officer becomes a Participant at any time other than as of the commencement of a Plan Year, the Corporate Performance Measures, the Division or Business Unit Performance Measures (if established by the Committee), and the Maximum Percentage for the Participant shall be established by the Committee no later than the time prescribed by the Treasury Regulations under Section 162(m) of the Internal Revenue Code of 1986, as amended.  

7.  TERMINATION OF EMPLOYMENT.  Unless otherwise determined by the Committee, a Participant whose employment in his current position with the Company terminates for any reason prior to the end of a Plan Year shall not be entitled to receive an Incentive Award for such Plan Year. 

8.  DEFERRAL OF INCENTIVE AWARDS.  A Participant may elect to defer receipt of all or any portion of any Incentive Award made under this Plan to a future date as provided in and subject to the terms and conditions of any deferred compensation plan of the Company.

9.  MISCELLANEOUS.

9.1  NONTRANSFERABILITY.  No Incentive Award payable hereunder, nor any right to receive any future Incentive Award hereunder, may be assigned, alienated, sold, transferred, anticipated, pledged, encumbered, or subjected to any charge or legal process, and if any such attempt is made, or a person eligible for any Incentive Award hereunder becomes bankrupt, the Incentive Award under the Plan which would otherwise be payable with respect to such person may be terminated by the Committee which, in its sole discretion, may cause the same to be held or applied for the benefit of one or more of the dependents of such person or make any other disposition of such award that it deems appropriate. 

9.2  CLAIM TO INCENTIVE AWARDS AND EMPLOYMENT RIGHTS.  Nothing in this Plan shall require the Company to segregate or set aside any funds or other property for purposes of paying all or any portion of an Incentive Award hereunder.  No Participant shall have any right, title or interest in or to any Incentive Award hereunder prior to the actual payment thereof, nor to any property of the Company.  Neither the adoption of the Plan nor the continued operation thereof shall confer upon any employee any right to continue in the employ of the Company or shall in any way affect the right and power of the Company to dismiss or otherwise terminate the employment of either Participant at any time for any reason, with or without cause.

9.3  INCOME TAX WITHHOLDING/RIGHTS OF OFFSET.  The Company shall have the right to deduct and withhold from all Incentive Awards all federal, state and local taxes as may be required by law.  In addition to the foregoing, the Company shall have the right to set off against the amount of any Incentive Award which would otherwise be payable hereunder, the amount of any debt, judgment, claim, expense or other obligation owed at such time by the Participant to the Company or any subsidiary.

9.4  GOVERNING LAW.  All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the State of Delaware.

10.  AMENDMENT AND TERMINATION.  The Plan may be amended or terminated at any time and for any reason by the Committee.  The Committee may, in its sole discretion, reduce or eliminate an Incentive Award to any Participant at any time and for any reason.  The Plan is specifically designed to guide the Company in granting Incentive Awards and shall not create any contractual right of any employee to any Incentive Award prior to the payment of such award.

11.  EFFECTIVE DATE.  The Plan shall be effective for the Plan Year beginning January 1, 2007 and each subsequent Plan Year.

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