Document:

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Exhibit 4.4

 

 

WARRANT AGREEMENT

            THIS WARRANT AGREEMENT (this “Agreement”), dated as of [●], 2011, is by and between Chart Acquisition Corp., a Delaware corporation (the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the “Warrant Agent”).

     

WHEREAS, the Company has entered into that certain Unit Subscription Agreement, dated October 11 2011, with Chart Acquisition Group LLC, a Delaware limited liability company (the “Sponsor”) pursuant to which the Sponsor will purchase an aggregate of 300,000 Units (as defined below) for an aggregate purchase price of $3,000,000 (“Placement Units”), each Unit consisting of one share of Common Stock (as defined below) (“Placement Shares”) and one warrant to purchase one Placement Share (the “Placement Warrants”) of the Company, bearing the legend set forth in Exhibit B hereto, to be sold to the Sponsor simultaneously with the closing of the Offering (as defined below);

WHEREAS, the Company has entered into that certain Unit Subscription Agreement, dated October 11, 2011, with Cowen Overseas Investment LP, a Cayman Islands limited partnership (“Cowen”) pursuant to which Cowen will purchase an aggregate of 175,000 Placement Units of the Company for an aggregate purchase price of $1,725,000, bearing the legend set forth in Exhibit B hereto, to be sold to Cowen simultaneously with the closing of the Offering;

     

WHEREAS, the Company is engaged in an initial public offering (the “Offering”) of units of the Company’s equity securities, each such unit comprised of one share of Common Stock and one Public Warrant (as defined below) (the “Public Units”, and together with the Placement Units, the “Units”) and, in connection therewith, has determined to issue and deliver up to 11,500,000 Warrants (including up to 1,500,000 warrants subject to a forty-five (45) day over-allotment option granted to the underwriters (the “Over allotment Option”)) to investors in the Offering (the “Public Warrants” and, together with the Placement Warrants, the “Warrants”), each such Warrant evidencing the right of the holder thereof to purchase one share of common stock of the Company, $0.0001 par value per share (the “Common Stock”), for $11.50 per share, subject to adjustment as described herein;

WHEREAS, the Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1, No. 333-177280 (the “Registration Statement”) and prospectus (the “Prospectus”), for the registration, under the Securities Act of 1933, as amended (the “Securities Act”), of the Public Units, the Public Warrants and Common Stock included in the Public Units;

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange, redemption and exercise of the Warrants;

     

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

     

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Agreement.

                NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

 

  

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1.           Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.

2.           Warrants.

2.1           Form of Warrant. Each Warrant shall be issued in registered form only and shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein and shall be signed by, or bear the facsimile signature of, the Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer, Secretary or other principal officer of the Company. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance.

2.2           Effect of Countersignature. Unless and until countersigned by the Warrant Agent pursuant to this Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.

     

2.3           Registration.

          

2.3.1           Warrant Register. The Warrant Agent shall maintain books (the “Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.

          

2.3.2           Registered Holder. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant is registered in the Warrant Register (the “Registered Holder”) as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificate (as defined below) made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

     

2.4           Detachability of Warrants. The Common Stock and Public Warrants comprising the Public Units shall begin separate trading on the 52nd day following the date of the Prospectus, or, if such 52nd day is not on a Business Day (a “Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City), then on the immediately succeeding Business Day following such date (the “Detachment Date”) unless Cowen and Company, LLC, informs the Company of its decision to allow earlier separate trading, but in no event shall the Common Stock and the Public Warrants comprising the Units be separately traded until (A) the Company has filed a Current Report on Form 8-K with the SEC containing an audited balance sheet reflecting its receipt of the gross proceeds of the Offering and (B) the Company issues a press release and files with the Commission a current report on Form 8-K announcing when such separate trading shall begin; provided, that, if the Over-allotment Option is exercised following the filing of the initial Current Report on Form 8-K, a second or amended Current Report on Form 8-K shall be filed by the Company to provide updated financial information to reflect the exercise of the Over-allotment Option.

 

  

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2.5           Warrant Attributes.

 

2.5.1           Placement Warrants. The Placement Warrants shall be identical to the Public Warrants, except that so long as they are held by the Sponsor or Cowen, members of the Sponsor, partners of Cowen or any of their Permitted Transferees (as defined below), the Placement Warrants: (i) may be exercised for cash or on a cashless basis, pursuant to subsection 3.3.1(c) hereof, (ii) may not be transferred, assigned or sold until thirty (30) days after the completion by the Company of an initial Business Combination (as defined below) provided that Cowen will not in any event be permitted to sell any of its Placement Warrants prior to the date 180 days immediately following the completion of the Offering, and (iii) shall not be redeemable by the Company; provided, however, that in the case of the Placement Warrants and any shares of Common Stock held by the Sponsor, members of the Sponsor or partners of Cowen and issued upon exercise of the Placement Warrants may be transferred by the Sponsor, members of the Sponsor or partners of Cowen:

     

(a) as gift to a member of Sponsor or a partner of Cowen, their immediate family or to a trust, the beneficiary of which is a member of Sponsor or partner of Cowen and their immediate family or to a charitable organization,

(b) to the Company’s officers or directors, any affiliates or family members of any of the Company’s officers or directors, any member of Sponsor or partners of Cowen or any of their respective affiliates,

     

(c) by virtue of the laws of descent and distribution upon death of one of the members of the Sponsor or partners of Cowen,

     

(d) pursuant to a qualified domestic relations order,

     

(e) by virtue of the laws of the jurisdiction of incorporation or formation, as applicable, of the Sponsor or Cowen, the Sponsor’s limited liability company agreement upon dissolution of the Sponsor or, in the case of Cowen, by virtue of the laws of the Cayman Islands or its controlling limited partnership agreement or by any member of Sponsor or partner of Cowen upon dissolution of such entity,

(f) in the event of the Company’s liquidation prior to the completion of the initial Business Combination, or

   

(g) in the event that, subsequent to the consummation of the initial Business Combination, the Company consummates a merger, stock exchange or other similar transaction that results in all of the holders of the Company’s equity securities issued in the Offering having the right to exchange their shares of Common Stock for cash, securities or other property;

 

  

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provided, however, that, in the case of clauses (a) through (e), these transferees (the “Permitted Transferees”) enter into a written agreement with the Company agreeing to be bound by the transfer restrictions in this Agreement.

 

3.            Terms and Exercise of Warrants.

                3.1           Warrant Price. Each Warrant shall, when countersigned by the Warrant Agent, entitle the Registered Holder thereof, subject to the provisions of such Warrant and of this Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $11.50 per share, subject to the adjustments provided in Section 4 hereof and in the last sentence of this Section 3.1. The term “Warrant Price” as used in this Agreement shall mean the price per share at which a share of Common Stock may be purchased at the time a Warrant is exercised. The Company in its sole discretion may lower the Warrant Price at any time prior to the Expiration Date (as defined below) for a period of not less than twenty (20) Business Days, provided, that the Company shall provide at least twenty (20) days prior written notice of such reduction to Registered Holders of the Warrants and, provided further that any such reduction shall be identical among all of the Warrants.

     

3.2           Duration of Warrants. A Warrant may be exercised only during the period (the “Exercise Period”) commencing on the later of: (i) the date that is thirty (30) days after the first date on which the Company completes an acquisition, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”), or (ii) the date that is twelve (12) months from the date of the closing of the Offering, and terminating at 5:00 p.m., New York City time on the earlier to occur of: (x) the date that is five (5) years after the date on which the Company completes its initial Business Combination, (y) the liquidation of the Company, or if the Company fails to consummate a Business Combination twenty-one (21) months from the closing of the Offering, or (z) other than with respect to the Placement Warrants, the Redemption Date (as defined below) as provided in Section 6.2 hereof (the “Expiration Date”); provided, however, that the exercise of any Warrant shall be subject to the satisfaction of any applicable conditions, as set forth in subsection 3.3.2 below with respect to an effective registration statement. Except with respect to the right to receive the Redemption Price (other than with respect to a Placement Warrant) in the event of a redemption (as set forth in Section 6 hereof), each Warrant (other than a Placement Warrant in the event of a redemption) not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Agreement shall cease at 5:00 p.m. New York City time on the Expiration Date. The Company in its sole discretion may extend the duration of the Warrants by delaying the Expiration Date; provided, that the Company shall provide at least twenty (20) days prior written notice of any such extension to Registered Holders of the Warrants and, provided further that any such extension shall be identical in duration among all the Warrants.

                3.3           Exercise of Warrants.

                     

3.3.1           Payment. Subject to the provisions of the Warrant and this Agreement, a Warrant, when countersigned by the Warrant Agent, may be exercised by the Registered Holder thereof by surrendering it, at the office of the Warrant Agent, or at the office of its successor as Warrant Agent, in the Borough of Manhattan, City and State of New York, with the subscription form, as set forth in the Warrant, duly executed, and by paying in full the Warrant Price for each full share of Common Stock as to which the Warrant is exercised and any and all applicable taxes due in connection with the exercise of the Warrant, the exchange of the Warrant for the shares of Common Stock and the issuance of such shares of Common Stock, as follows:

               

  

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(a) by wire transfer of immediately available funds in good certified check or good bank draft payable to the order of the Company;

(b) in the event of a redemption pursuant to Section 6 hereof in which the Company’s board of directors (the “Board”) has elected to require all holders of the Warrants to exercise such Warrants on a “cashless basis,” by surrendering the Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value” (as defined in this subsection 3.3.1(b)) by (y) the Fair Market Value. Solely for purposes of this subsection 3.3.1(b) and Section 6.3, the “Fair Market Value” shall mean the average last sale price of the shares of Common Stock for the ten (10) trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of the Warrants, pursuant to Section 6 hereof;

               

(c) with respect to any Placement Warrant exercised on a “cashless basis”, so long as such Placement Warrant are held by the Sponsor, a member of the Sponsor, Cowen or partners of Cowen or their Permitted Transferees, by surrendering the Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value”, as defined in this subsection 3.3.1(c), by (y) the Fair Market Value. Solely for purposes of this subsection 3.3.1(c), the “Fair Market Value” shall mean the average last sale price of the Common Stock for the ten (10) trading days ending on the third trading day prior to the date on which notice of exercise of the Warrant is sent to the Warrant Agent; or

          

(d) as provided in Section 7.4 hereof.

          

3.3.2           Issuance of Common Stock on Exercise. As soon as practicable after the exercise of any Warrant and the clearance of the funds in payment of the Warrant Price (if payment is pursuant to subsection 3.3.1(a)), the Company shall issue to the Registered Holder of such Warrant a certificate or certificates for the number of full shares of Common Stock to which he, she or it is entitled, registered in such name or names as may be directed by him, her or it, and if such Warrant shall not have been exercised in full, a new countersigned Warrant for the number of shares as to which such Warrant shall not have been exercised. Notwithstanding the foregoing, the Company shall not be obligated to deliver any Common Stock pursuant to the exercise of a Warrant and shall have no obligation to settle such Warrant exercise unless a registration statement under the Securities Act with respect to the Common Stock underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations under Section 7.4. No Warrant shall be exercisable and the Company shall not be obligated to issue Common Stock upon exercise of a Warrant unless the Common Stock issuable upon such Warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the Registered Holder of the Warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Warrant, the holder of such Warrant shall not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless, in which case the purchaser of a Unit containing such Public Warrants shall have paid the full purchase price for the Unit solely for the Common Stock underlying such Unit.  In no event will the Company be required to net cash settle the Warrant exercise.

          

  

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3.3.3           Valid Issuance. All Common Stock issued upon the proper exercise of a Warrant in conformity with this Agreement shall be validly issued, fully paid and nonassessable.

          

3.3.4           Date of Issuance. Each person in whose name any certificate for Common Stock is issued shall for all purposes be deemed to have become the holder of record of such Common Stock on the date on which the Warrant was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the share transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the share transfer books are open.

          

3.3.5           Maximum Percentage. A holder of a Warrant may notify the Company in writing in the event it elects to be subject to the provisions contained in this subsection 3.3.5; provided, however, that no holder of a Warrant shall be subject to this subsection 3.3.5 unless he, she or it makes such election. If the election is made by a holder, the Warrant Agent shall not effect the exercise of the holder’s Warrant, and such holder shall not have the right to exercise such Warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the Warrant Agent’s actual knowledge, would beneficially own in excess of 9.8% (the “Maximum Percentage”) of the Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with respect to which the determination of such sentence is being made, but shall exclude Common Stock that would be issuable upon (x) exercise of the remaining, unexercised portion of the Warrant beneficially owned by such person and its affiliates and (y) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For purposes of the Warrant, in determining the number of outstanding shares of Common Stock, the holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, current report on Form 8-K or other public filing with the Commission as the case may be, (2) a more recent public announcement by the Company, or (3) any other notice by the Company or Continental Stock Transfer & Trust Company (the “Transfer Agent”) setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written request of the holder of the Warrant, the Company shall, within two (2) Business Days, confirm orally and in writing to such holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of equity securities of the Company by the holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the holder of a Warrant may from time to time increase or decrease the Maximum Percentage applicable to such holder to any other percentage specified in such notice; provided, however, that any such increase shall not be effective until the sixty-first (61st) day after such notice is delivered to the Company.

 

  

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4.             Adjustments.

     

4.1           Stock Dividends.

          

4.1.1           Split-Ups. If after the date hereof, and subject to the provisions of Section 4.6 below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in Common Stock, or by a split-up of the Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in the outstanding shares of Common Stock. A rights offering to holders of the Common Stock entitling holders to purchase Common Stock at a price less than the “Fair Market Value” (as defined below) shall be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for the Common Stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of Common Stock paid in such rights offering divided by (y) the Fair Market Value. For purposes of this subsection 4.1.1, (i) if the rights offering is for securities convertible into or exercisable for Common Stock, in determining the price payable for Common Stock, there shall be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) “Fair Market Value” means, for purposes of this subsection 4.1.1 only, the volume weighted average price of the Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the Common Stock trades on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.

          

4.1.2           Extraordinary Dividends. If the Company, at any time while the Warrants are outstanding and unexpired, shall pay a dividend or make a distribution in cash, securities or other assets to the holders of the Common Stock on account of such Common Stock (or other shares of the Company’s capital stock into which the Warrants are convertible), other than (a) as described in subsection 4.1.1 above, (b) Ordinary Cash Dividends (as defined below), (c) to satisfy the redemption rights of the holders of the Common Stock in connection with a proposed initial Business Combination, (d) as a result of the repurchase of Common Stock by the Company if a proposed initial Business Combination is presented to the stockholders of the Company for approval or (e) in connection with the Company’s liquidation and the distribution of its assets upon its failure to consummate a Business Combination (any such non-excluded event being referred to herein as an “Extraordinary Dividend”), then the Warrant Price shall be decreased, effective immediately after the effective date of such Extraordinary Dividend, by the amount of cash and/or the fair market value (as determined by the Board, in good faith) of any securities or other assets paid on each share of Common Stock in respect of such Extraordinary Dividend. For purposes of this subsection 4.1.2, “Ordinary Cash Dividends” means any cash dividend or cash distribution which, when combined on a per share basis, with the per share amounts of all other cash dividends and cash distributions paid on the Common Stock during the 365-day period ending on the date of declaration of such dividend or distribution (as adjusted to appropriately reflect any of the events referred to in other subsections of this Section 4 and excluding cash dividends or cash distributions that resulted in an adjustment to the Warrant Price or to the number of shares of Common Stock issuable on exercise of each Warrant) does not exceed $0.50 (being 5% of the offering price of the Units in the Offering).

     

4.2           Aggregation of Shares. If after the date hereof, and subject to the provisions of Section 4.6 hereof, the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock.

     

  

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4.3           Adjustments in Exercise Price. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, as provided in subsection 4.1.1 or 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.

     

4.4           Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Common Stock (other than a change under subsections 4.1.1 or 4.1.2 or Section 4.2 hereof or that solely affects the par value of such Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the Warrants shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Warrants would have received if such holder had exercised his, her or its Warrant(s) immediately prior to such event (the “Alternative Issuance”); provided, however, that (i) if the holders of the Common Stock were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets constituting the Alternative Issuance for which each Warrant shall become exercisable shall be deemed to be the weighted average of the kind and amount received per share by the holders of the Common Stock in such consolidation or merger that affirmatively make such election, and (ii) if a tender, exchange or redemption offer shall have been made to and accepted by the holders of the Common Stock (other than a tender, exchange or redemption offer made by the Company in connection with redemption rights held by stockholders of the Company as provided for in the Company’s certificate of incorporation or as a result of the repurchase of Common Stock by the Company if a proposed initial Business Combination is presented to the stockholders of the Company for approval) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the outstanding Common Stock, the holder of a Warrant shall be entitled to receive as the Alternative Issuance, the highest amount of cash, securities or other property to which such holder would actually have been entitled as a stockholder if such Warrant holder had exercised the Warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the Common Stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in this Section 4; provided further, however, that if more than 30% of the consideration receivable by the holders of the Common Stock in the applicable event is payable in the form of common stock in the successor entity that is not listed for trading on a national securities exchange or on the OTC Bulletin Board, or is not to be so listed for trading immediately following such event, then the Warrant Price shall be reduced by an amount (in dollars) equal to the quotient of (x) $17.50 (subject to adjustment in accordance with Section 6.1 hereof) minus the Per Share Consideration (as defined below) (but in no event, less than zero), and (y) (A) if the applicable event is announced on or prior to the third anniversary of the closing date of the initial Business Combination, 2); (B) if the applicable event is announced after the third anniversary of the closing date of the initial Business Combination and on or prior to the fourth anniversary of the closing date of the initial Business Combination, 2.5); or (C) if the applicable event is announced after the fourth anniversary of the closing date of the initial Business Combination and on or prior to the Expiration Date, 3. “Per Share Consideration” means (1) if the consideration paid to holders of the Common Stock consists exclusively of cash, the amount of such cash per share of Common Stock, and (2) in all other cases, the volume weighted average price of the Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the effective date of the applicable event. If any reclassification or reorganization also results in a change in the Common Stock covered by subsection 4.1.1, then such adjustment shall be made pursuant to subsection 4.1.1 or Sections 4.2, 4.3 and this Section 4.4. The provisions of this Section 4.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.

     

  

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4.5           Notices of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Sections 4.1, 4.2, 4.3 or 4.4, the Company shall give written notice of the occurrence of such event to each holder of a Warrant, at the last address set forth for such holder in the Warrant Register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

     

4.6           No Fractional Shares. Notwithstanding any provision contained in this Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round up to the nearest whole number, the number of the shares of Common Stock to be issued to such holder.

     

4.7           Form of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Agreement; provided, however, that the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

     

4.8           Other Events. In case any event shall occur affecting the Company as to which none of the provisions of preceding subsections of this Section 4 are strictly applicable, but which would require an adjustment to the terms of the Warrants in order to (i) avoid an adverse impact on the Warrants and (ii) effectuate the intent and purpose of this Section 4, then, in each such case, the Company shall appoint a firm of independent public accountants, investment banking or other appraisal firm of recognized national standing, which shall give its opinion as to whether or not any adjustment to the rights represented by the Warrants is necessary to effectuate the intent and purpose of this Section 4 and, if they determine that an adjustment is necessary, the terms of such adjustment. The Company shall adjust the terms of the Warrants in a manner that is consistent with any adjustment recommended in such opinion.

 

  

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5.             Transfer and Exchange of Warrants.

     

5.1           Registration of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.

     

5.2           Procedure for Surrender of Warrants. Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the Registered Holder of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend (as in the case of the Placement Warrants), the Warrant Agent shall not cancel such Warrant and issue new Warrants in exchange thereof until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the new Warrants must also bear a restrictive legend.

     

5.3           Fractional Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which shall result in the issuance of a warrant certificate for a fraction of a warrant.

     

5.4           Service Charges. No service charge shall be made for any exchange or registration of transfer of Warrants.

     

5.5           Warrant Execution and Countersignature. The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by the Warrant Agent, shall supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.

     

5.6           Transfer of Warrants. Prior to the Detachment Date, the Public Warrants may be transferred or exchanged only together with the Unit in which such Warrant is included, and only for the purpose of effecting, or in conjunction with, a transfer or exchange of such Unit. Furthermore, each transfer of a Unit on the register relating to such Units shall operate also to transfer the Warrants included in such Unit. Notwithstanding the foregoing, the provisions of this Section 5.6 shall have no effect on any transfer of Warrants on and after the Detachment Date.

 

  

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6.             Redemption.

                6.1           Redemption. Subject to Section 6.4 hereof, not less than all of the outstanding Warrants may be redeemed at the option of the Company, at any time while they are exercisable and prior to their expiration, at the office of the Warrant Agent, upon notice to the Registered Holders of the Warrants, as described in Section 6.2 below, at the price of $0.01 per Warrant (the “Redemption Price”); provided, that the last sales price of the Common Stock reported has been at least $17.50 per share (subject to adjustment in compliance with Section 4 hereof), on each of twenty (20) trading days within the thirty (30) trading-day period ending on the third Business Day prior to the date on which notice of the redemption is given; and, provided further that there is an effective registration statement covering the Common Stock issuable upon exercise of the Warrants, and a current prospectus relating thereto, available throughout the 30-day Redemption Period (as defined in Section 6.2 below).

     

6.2           Date Fixed for, and Notice of, Redemption. In the event that the Company elects to redeem all of the Warrants, the Company shall fix a date for the redemption (the “Redemption Date”). Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days prior to the Redemption Date (such 30-day period, the “Redemption Period”) to the Registered Holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Registered Holder received such notice.

     

6.3           Exercise After Notice of Redemption. The Warrants may be exercised, for cash (or on a “cashless basis” in accordance with subsection 3.3.1(b) hereof) at any time after notice of redemption shall have been given by the Company pursuant to Section 6.2 hereof and prior to the Redemption Date. In the event that the Company determines to require all holders of Warrants to exercise their Warrants on a “cashless basis” pursuant to subsection 3.3.1, the notice of redemption shall contain the information necessary to calculate the number of shares of Common Stock to be received upon exercise of the Warrants, including the “Fair Market Value” (as such term is defined in subsection 3.3.1(b) hereof) in such case. On and after the Redemption Date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.

     

6.4           Exclusion of Placement Warrants. The Company agrees that the redemption rights provided in this Section 6 shall not apply to the Placement Warrants if at the time of the redemption such Placement Warrants continue to be held by the Sponsor, members of the Sponsor, Cowen, partners of Cowen or their Permitted Transferees; provided, however, that once such Placement Warrants are transferred (other than to Permitted Transferees under subsection 2.5), the Company may redeem the Placement Warrants, provided that the criteria for redemption are met, including the opportunity of the holder of such Placement Warrants to exercise the Placement Warrants prior to redemption pursuant to Section 6.3. Placement Warrants that are transferred to persons other than Permitted Transferees shall upon such transfer cease to be Placement Warrants and shall become Public Warrants under this Agreement.

7.             Other Provisions Relating to Rights of Holders of Warrants.

     

7.1           No Rights as Stockholder. A Warrant does not entitle the Registered Holder thereof to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter.

     

7.2           Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.

     

  

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7.3           Reservation of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued Common Stock that shall be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.

     

7.4           Registration of Common Stock. The Company agrees that as soon as practicable, but in no event later than fifteen (15) Business Days after the closing of its initial Business Combination, it shall use its best efforts to file with the Commission a post-effective amendment to the Registration Statement, or a new registration statement, for the registration, under the Securities Act, of the Common Stock issuable upon exercise of the Warrants, and it shall use its best efforts to take such action as is necessary to register or qualify for sale, in those states in which the Warrants were initially offered by the Company, the Common Stock issuable upon exercise of the Warrants, to the extent an exemption is not available. The Company shall use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of this Agreement. If any such post-effective amendment or registration statement has not been declared effective by the sixtieth (60th) Business Day following the closing of the Business Combination, holders of the Warrants shall have the right, during the period beginning on the sixty-first (61st) Business Day after the closing of the Business Combination and ending upon such post-effective amendment or registration statement being declared effective by the Commission, and during any other period when the Company shall fail to have maintained an effective registration statement covering the Common Stock issuable upon exercise of the Warrants, to exercise such Warrants on a “cashless basis,” by exchanging the Warrants (in accordance with Section 3(a)(9) of the Securities Act or another exemption) for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value” (as defined below) by (y) the Fair Market Value. Solely for purposes of this Section 7.4, “Fair Market Value” shall mean the volume weighted average price of the Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the date that notice of exercise is received by the Warrant Agent from the holder of such Warrants or its securities broker or intermediary. The date that notice of cashless exercise is received by the Warrant Agent shall be conclusively determined by the Warrant Agent. The Company shall provide the Warrant Agent with an opinion of counsel for the Company (which shall be an outside law firm with securities law experience) stating that (i) the exercise of the Warrants on a cashless basis in accordance with this Section 7.4 is not required to be registered under the Securities Act and (ii) the Common Stock issued upon such exercise shall be freely tradable under United States federal securities laws by anyone who is not an affiliate (as such term is defined in Rule 144 under the Securities Act) of the Company and, accordingly, shall not be required to bear a restrictive legend. For the avoidance of any doubt, unless and until all of the Warrants have been exercised on a cashless basis, the Company shall continue to be obligated to comply with its registration obligations under the first three sentences of this Section 7.4. In addition, the Company agrees to use its best efforts to register the Common Stock issuable upon exercise of a Warrant under the blue sky laws of the states of residence of the exercising Warrant holder to the extent an exemption is not available.

 

 

  

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8.              Concerning the Warrant Agent and Other Matters.

     

8.1           Payment of Taxes. The Company shall from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of Common Stock upon the exercise of the Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares.

                8.2           Resignation, Consolidation, or Merger of Warrant Agent.

          

8.2.1           Appointment of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of a Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

 

8.2.2           Notice of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the Transfer Agent for the Common Stock not later than the effective date of any such appointment.

          

8.2.3           Merger or Consolidation of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Agreement without any further act.

     

8.3           Fees and Expenses of Warrant Agent.

                                8.3.1 Remuneration. The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and shall, pursuant to its obligations under this Agreement, reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.

          

  

13

  

 

 

8.3.2           Further Assurances. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Agreement.

     

8.4           Liability of Warrant Agent.

          

8.4.1           Reliance on Company Statement. Whenever in the performance of its duties under this Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the President, Chief Executive Officer or Chairman of the Board of the Company and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement.

          

8.4.2           Indemnity. The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement, except as a result of the Warrant Agent’s gross negligence, willful misconduct or bad faith.

          

8.4.3           Exclusions. The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof). The Warrant Agent shall not be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant. The Warrant Agent shall not be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any Common Stock shall, when issued, be valid and fully paid and nonassessable.

     

8.5           Acceptance of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all monies received by the Warrant Agent for the purchase of the Common Stock through the exercise of the Warrants.

8.6           Waiver. The Warrant Agent has no right of set-off or any other right, title, interest or claim of any kind (“Claim”) in, or to any distribution of, the Trust Account (as defined in that certain Investment Management Trust Agreement, dated as of the date hereof, by and between the Company and the Warrant Agent as trustee thereunder) and hereby agrees not to seek recourse, reimbursement, payment or satisfaction for any Claim against the Trust Account for any reason whatsoever. The Warrant Agent hereby waives any and all Claims against the Trust Account and any and all rights to seek access to the Trust Account.

 

  

14

  

 

9.             Miscellaneous Provisions.

     

9.1           Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

     

9.2           Notices. Any notice, statement or demand authorized by this Agreement shall be sufficiently given (i) when so delivered if by hand or overnight delivery, (ii) upon receipt of by the intended recipient if by facsimile, or (ii) if sent by certified mail or private courier service within five (5) days after deposit of such notice, postage prepaid. Such notice, statement or demand shall be addressed as follows:

If to the Company:

Chart Acquisition Corp.

75 Rockefeller Plaza, 14th Floor,

New York, NY 10019

Fax: (212) 350-8299

Attention: Michael LaBarbera, Chief Financial Officer

If to the Warrant Agent:

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Fax: 212-616-7615

Attention: Compliance Department

If to Cowen:

Cowen Overseas Investment LP

c/o Ramius Advisors, LLC

599 Lexington Avenue, 27th Floor

New York, NY 10022

Fax:  (212) 845-7990

Attention:  Stephen Lasota, Chief Financial Officer

with a copy in each case (which shall not constitute service) to:

Ellenoff Grossman & Schole LLP

150 East 42nd Street

New York, NY 10017

Fax: 212-370-1300

Attention:  Douglas S. Ellenoff, Esq.

DLA Piper LLP (US)

1251 Avenue of Americas

New York, New York 10020

Fax:  (212) 884-8645

Attention: Jack Kantrowitz, Esq.

 

  

15

  

 

9.3           Applicable Law. The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

     

9.4           Persons Having Rights under this Agreement. Nothing in this Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the Registered Holders of the Warrants any right, remedy, or claim under or by reason of this Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors and assigns and of the Registered Holders of the Warrants.

     

9.5           Examination of the Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in the Borough of Manhattan, City and State of New York, for inspection by the Registered Holder of any Warrant. The Warrant Agent may require any such holder to submit his Warrant for inspection by it.

                9.6           Counterparts. This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

     

9.7           Effect of Headings. The section headings herein are for convenience only and are not part of this Agreement and shall not affect the interpretation thereof.

     

9.8           Amendments. This Agreement may be amended by the parties hereto without the consent of any Registered Holder for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the Registered Holders. All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period and any amendment to the terms of only the Placement Warrants, shall require the written consent of the Registered Holders of 65% of the then outstanding Public Warrants. Further, the Sponsor, the members of the Sponsor, Cowen, partners of Cowen shall not vote any Placement Warrants owned or controlled by them in favor of such amendment unless the Registered Holders of 65% of the Public Warrants vote in favor of such amendment. Notwithstanding the foregoing, the Company may lower the Warrant Price or extend the duration of the Exercise Period pursuant to Sections 3.1 and 3.2, respectively, without the consent of the Registered Holders.

                9.9           Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

[Remainder of page intentionally left blank. Signature page to follow.]

 

  

16

  

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

	  	
CHART ACQUISITION CORP.

 

	  	
By:  

	  
	  	  	
 Name: Michael LaBarbera

	  	  	
 Title:  Chief Financial Officer

	  

	  	
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,

as Warrant Agent

 

	  	
By:  

	  
	  	  	
Name:  

	  	  	
Title:  

	  

 

 

Signature Page to the Warrant Agreement

  

  

  

 

 

EXHIBIT A

 

[Form of Warrant Certificate]

 

[FACE]

 

Number

 

                    

 

Warrants

 

                    

 

THIS WARRANT SHALL BE VOID IF NOT EXERCISED PRIOR TO

 THE EXPIRATION OF THE EXERCISE PERIOD PROVIDED FOR

 IN THE WARRANT AGREEMENT DESCRIBED BELOW

CHART ACQUISITION CORP.

 A Delaware corporation

 

CUSIP 161151 113

 

Warrant Certificate

 

     This Warrant Certificate certifies that                                        , or registered assigns, is the registered holder of                      warrants (the “Warrants”) to purchase shares of common stock, $0.0001 par value (the “Common Stock”), of Chart Acquisition Corp. (the “Company”). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement referred to below, to receive from the Company that number of fully paid and nonassessable shares of Common Stock (each, a “Warrant” ) as set forth below, at the exercise price (the “Exercise Price”) as determined pursuant to the Warrant Agreement, payable in lawful money (or through “cashless exercise” if permitted by the Warrant Agreement) of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent referred to below, subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement (as defined on the reverse hereof).

 

     Each Warrant is initially exercisable for one fully paid and non-assessable share of Common Stock. The number of shares of Common Stock issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.

 

     The initial Exercise Price per share of Common Stock for any Warrant is equal to $11.50 per share. The Exercise Price is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.

 

     Subject to the conditions set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and to the extent not exercised by the end of such Exercise Period, such Warrants shall become void.

 

     Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.

 

  

  

  

 

 

     This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.

 

     This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of New York, without regard to conflicts of laws principles thereof.

 

	  	
CHART ACQUISITION CORP.

 

	  	
By:  

	  
	  	  	
 Name: Michael LaBarbera

	  	  	
 Title:  Chief Financial Officer

	  

	  	
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,

as Warrant Agent

 

	  	
By:  

	  
	  	  	
Name:  

	  	  	
Title:  

	  

 

 

  

  

  

[Form of Warrant Certificate]

 

[Reverse]

 

     The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive shares of Common Stock and are issued or to be issued pursuant to a Warrant Agreement dated as of [●], 2012 (the “Warrant Agreement”), duly executed and delivered by the Company to Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the “Warrant Agent”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words “holders”  or “holder”  meaning the Registered Holders or Registered Holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.

 

     Warrants may be exercised at any time during the Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price as specified in the Warrant Agreement (or through “cashless exercise” if permitted by the Warrant Agreement) at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his, her or its assignee, a new Warrant Certificate evidencing the number of Warrants not exercised.

 

     Notwithstanding anything else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a registration statement covering the shares of Common Stock to be issued upon exercise is effective under the Securities Act and (ii) a prospectus thereunder relating to the shares of Common Stock is current, except through “cashless exercise” if permitted by the Warrant Agreement.  Additionally, if the Corporation fails to enter into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving the Corporation and one or more businesses by [           ], 2013, the Warrants evidenced by this Warrant Certificate shall expire worthless.

 

     The Warrant Agreement provides that upon the occurrence of certain events the number of the Warrants set forth on the face hereof may, subject to certain conditions, be adjusted. If, upon exercise of a Warrant, the holder thereof would be entitled to receive a fractional interest in a share of Common Stock, the Company shall, upon exercise, round up to the nearest whole number of shares of Common Stock to be issued to the holder of the Warrant.

 

     Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the Registered Holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.

 

     Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.

 

     The Company and the Warrant Agent may deem and treat the Registered Holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.

 

  

  

  

Election to Purchase

 

(To Be Executed Upon Exercise of Warrant)

 

     The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive                      shares of Common Stock and herewith tenders payment for such shares to the order of Chart Acquisition Corp. (the “Company”) in the amount of $                       in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of                     , whose address is                      and that such shares be delivered to                      whose address is                     . If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of                     , whose address is                     , and that such Warrant Certificate be delivered to                     , whose address is                     .

 

     In the event that the Warrant (as such term is defined in the Warrant Agreement) has been called for redemption by the Company pursuant to Section 6 of the Warrant Agreement and the Company has required cashless exercise pursuant to Section 6.3 of the Warrant Agreement, the number of shares that this Warrant is exercisable for shall be determined in accordance with subsection 3.3.1(b) and Section 6.3 of the Warrant Agreement.

 

     In the event that the Warrant is a Placement Warrant that is to be exercised on a “cashless basis” pursuant to subsections 3.3.1(c) of the Warrant Agreement, the number of shares that this Warrant is exercisable for shall be determined in accordance with subsection 3.3.1(c) of the Warrant Agreement.

 

     In the event that the Warrant is to be exercised on a “cashless basis” pursuant to Section 7.4 of the Warrant Agreement, the number of shares that this Warrant is exercisable for shall be determined in accordance with Section 7.4 of the Warrant Agreement.

 

     In the event that the Warrant may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise (i) the number of shares that this Warrant is exercisable for would be determined in accordance with the relevant section of the Warrant Agreement which allows for such cashless exercise and (ii) the holder hereof shall complete the following: The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, through the cashless exercise provisions of the Warrant Agreement, to receive shares of Common Stock. If said number of shares is less than all of the shares of Common Stock purchasable hereunder (after giving effect to the cashless exercise), the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of, whose address is, and that such Warrant Certificate be delivered to , whose address is ________.

 

Date:                    , 20

 

	  	  	  
	  	  	
  (Signature)

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	
  (Address)

	  	  	  
	  	  	
  (Tax Identification Number)

 

  

  

  

 

 

Signature Guaranteed:                                        

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).

  

  

  

 

EXHIBIT B

 

LEGEND

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP AGREEMENT BETWEEN CHART ACQUISITION CORP., CHART ACQUISITION GROUP LLC AND COWEN OVERSEAS INVESTMENT LP AND MAY ONLY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED DURING THE TERM OF THAT LOCKUP AGREEMENT PURSUANT TO THE TERMS SET FORTH THEREIN.

 

	  	  	  
	  	  	  
	
No.                   

	  	
                    Warrantsex10_1.htm

Exhibit 10.1

	  	
December 13, 2011

Ms. Helen McCluskey

2211 Redding Road

Fairfield, CT 06430

Dear Helen,

This letter agreement (this “Agreement”) is made and entered into between The Warnaco Group, Inc. (the “Company”) and you as of the date hereof to be effective on February 1, 2012 (the “Effective Date”).   As of the Effective Date, this Agreement shall supercede in its entirety the current employment agreement between us dated as of December 31, 2008 (the “Original Employment Agreement”).  Capitalized terms not defined herein shall have the meaning set forth in Exhibit A attached hereto.

 

	  	
1.

	
As of the Effective Date, the Company agrees to employ you and you agree to serve as President and Chief Executive Officer of the Company.  During the Term, in such positions, you will be responsible for the general management of the affairs of the Company and shall perform such other duties and responsibilities as determined by the board of directors of the Company (the “Board”).  It is also the intention of the Company to appoint you as a member of the Board as of the Effective Date.  In carrying out your duties, you shall report to the Board, or the Chairman of the Board as the Board’s designee.  You agree to devote your full time and best efforts to the satisfactory performance of such services and duties as the position requires, and you shall be entitled to (i) serve on the boards of directors of trade associations, charitable organizations and for-profit businesses, subject to the reasonable approval of the Board, (ii) engage in charitable activities and community affairs and (iii) manage your personal investments and affairs, provided that such activities do not interfere with the proper performance of your duties and responsibilities for the Company and are otherwise consistent with the provisions of paragraphs 11 through 14 of this Agreement.

	 	 	 
	  	
2.

	
The term (the “Term”) of your employment under this Agreement shall begin on the Effective Date and shall end on the Date of Termination.

	 	 	 
	  	
3.

	
Your compensation shall be as follows:

	 	 	 
	  	  	
a.     During the Term, you shall be paid an annual base salary of $1,000,000 (“Base Salary”), payable in accordance with the regular payroll practices of the Company.  Your Base Salary may be reviewed annually by the Compensation Committee of the Board and may be increased (but not

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 2

 

 

	  	  	
decreased) in the Board’s sole discretion, with any such increase administered in compliance with Section 409A of the Code and the Treasury regulations implementing such section (“Section 409A”). 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 such increased amount. You shall not be entitled to any additional compensation for service as a member of the Board or for service as an officer or member of any board of directors of any subsidiary or affiliate of the Company.

	 	 	 
	  	  	
b.      During the Term, you shall be eligible to receive an annual cash incentive award (“Annual Incentive Award”) under the Company’s Incentive Compensation Plan (or such other incentive plan as may be approved the Company’s shareholders from time to time and is in effect for the applicable fiscal year) (“Bonus Plan”) with a target for fiscal year 2012 and each fiscal year thereafter of 110% of Base Salary (“Target Bonus”). The terms and conditions applicable to any such Annual Incentive Award, including, but not limited to the determination of performance targets, the ultimate amount of such award, and the timing of payment of such award, shall be determined in accordance with the terms of the Bonus Plan.  For the avoidance of doubt, any such Annual Incentive Award shall be payable to you when bonuses under the Bonus Plan for the applicable performance period are paid to other senior executives of the Company, but in all events shall be paid to you between January 15th and March 15th of the fiscal year immediately following the fiscal year for which the Annual Incentive Award has been earned.

	 	 	 
	  	  	
c.      During the Term, you shall be eligible to receive future grants of restricted stock and/or options or other forms of equity compensation at the sole discretion of the Compensation Committee of the Board.  You shall be subject to the equity ownership, retention and other requirements applicable to senior executives of the Company.  Except as otherwise expressly provided herein, all equity grants shall be governed by the applicable plan and award agreement; provided that the equity awarded to you pursuant to paragraph 3(c) of the Original Agreement shall continue to be treated in accordance with the provisions of paragraphs 5 through 8 of the Original Agreement, as applicable.

	 	 	 
	  	  	
d.      During the Term, you shall be entitled to an annual award with an aggregate grant date value equal to 10% of the sum of Base Salary plus Annual Bonus (as defined in this paragraph 3(d)) if you will be less than age 60 by the end of the fiscal year immediately preceding the year in which the award is made and 13% of such amount if you will be age 60 or

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 3

	  	  	
older by the end of the applicable fiscal year immediately preceding the year in which the award is made (“Supplemental Award”).  For this purpose, Base Salary shall be the Base Salary paid to you for the fiscal year immediately prior to the award year and Annual Bonus shall be the Annual Incentive Award awarded to you by the Board under the Bonus Plan for the fiscal year immediately preceding the fiscal year in which the Supplemental Award is made.  The Supplemental Award shall not be awarded to you until after the determination by the Board of your Annual Incentive Award for such prior fiscal year (but in no event later than 70 days thereafter), with 50% of the value of the Supplemental Award awarded in the form of restricted shares pursuant to the applicable Stock Incentive Plan (“Career Shares”) and 50% awarded in the form of a credit to a bookkeeping account maintained by the Company for your account (the “Notional Account”).  Any Career Shares awarded hereunder shall be governed by the applicable Stock Incentive Plan and, if applicable, the related award agreement.  For purposes of this paragraph 3(d), each Career Share shall be valued based on the definition of Fair Market Value in the applicable Stock Incentive Plan ("Share").  For the Notional Account, the Company shall select the investment alternatives available to you for deemed (not actual) investment, which investment alternatives shall be those available under the Company’s 401(k) plan.  The balance in the Notional Account shall periodically be credited (or debited) with the deemed positive (or negative) return based on returns of the permissible investment alternative or alternatives under the Company’s 401(k) plan as selected in advance by you for deemed (not actual) investment (and in accordance with the applicable rules of such plan or investment alternative) to apply to such Notional Account, with such deemed returns calculated in the same manner and at the same times as the return on such investment alternative(s).  The Company’s obligation to pay the amount credited to the Notional Account, including any return thereon provided for in this paragraph 3(d), shall be an unfunded obligation to be satisfied from the general funds of the Company.  Except as otherwise provided in paragraphs 6 or 8 below, or in the applicable Stock Incentive Plan or award agreement, and provided that you are employed by the Company on such vesting date, any Supplemental Award granted in the form of Career Shares will vest as follows:  50% of  your Career Shares will vest on the earlier of your 62nd birthday or upon your obtaining 15 years of Vesting Service (as defined in this paragraph 3(d)) and 100% of  your Career Shares will vest on the earliest of (i) your 65th birthday, (ii) upon your obtaining 20 years of Vesting Service or (iii) the 10th anniversary of the date of grant.  Except as otherwise provided in paragraphs 6 or 8 below, and provided that you are employed by the Company on such vesting date, any Supplemental Award granted as a credit to the Notional Account (as

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 4

	  	  	
adjusted for any returns thereon) (“Adjusted Notional Account”)) shall vest as follows:  50% on the earlier of your 62nd birthday or upon your obtaining 5 years of Vesting Service and 100% on the earlier of your 65th birthday or upon your obtaining 10 years of Vesting Service.  For purposes of this paragraph 3(d), Vesting Service shall mean the period of time that you are employed by the Company as an executive officer.  Subject to paragraph 27 hereof, upon vesting the Career Shares will be delivered to you in the form of Shares.  In addition, provided you are employed with the Company on the relevant vesting date, any unvested Adjusted Notional Account shall vest upon the occurrence of a Qualifying Change in Control. The vested balance in the Adjusted Notional Account, if any, shall not be distributed to you until there has been a Separation From Service or, if earlier, there has been a Qualifying Change in Control and, at such time, shall only be distributed at the earliest time that satisfies the requirements of this paragraph 3(d).  Upon a Qualifying Change in Control, the vested Adjusted Notional Account shall be paid to you in a lump-sum cash payment on the date of such Qualifying Change in Control.  In addition, if your employment is terminated for any reason, after taking into account paragraphs 6 or 8 hereof, any unvested Supplemental Awards (whether in the form of Career Shares or the Adjusted Notional Account) shall be forfeited and any vested balance in the Adjusted Notional Account, subject to paragraph 27 hereof, shall be paid to you in a cash lump-sum payment within 30 days following the occurrence of your Separation From Service; provided, however, that if you are a “specified employee” as determined pursuant to Section 409A as of the date of your Separation From Service, such distribution of the vested balance in the Adjusted Notional Account shall not be made until the earlier of your death or the first business day of the seventh calendar month following the month in which your Separation From Service occurs.  You can elect to delay the time and/or form of payment of the Adjusted Notional Account under this paragraph 3(d), provided such election is delivered to the Company in writing at least 12 months before the scheduled payment date for such payment and the new payment date for such payment shall be consistent with the applicable deferral rules under Section 409A.  Upon the expiration or termination of the Term, the vesting and payment dates in this paragraph 3(d) (without regard to paragraphs 6 or 8, as applicable) and the election right in this paragraph 3(d) shall continue to apply to any outstanding Supplemental Award awarded under the Original Employment Agreement as well as this Agreement.

	 	 	 
	  	
4.

	
During the Term, and subject, of course, to the Company’s right to amend, modify or terminate any benefit plan or program, you shall be entitled to

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 5

 

	  	  	
participate in all Company employee benefit plans applicable to senior executives, including the following benefits/perquisites:

	 	 	 
	  	  	
a.      Reimbursement of reasonable business expenses incurred in carrying out your duties and responsibilities under this Agreement, subject to documentation in accordance with Company policy.

	 	 	 
	  	  	
b.      Perquisites provided to other senior executive, including a monthly car allowance of up to $1,500.

	 	 	 
	  	  	
c.      Vacation — four weeks paid vacation per calendar year.

	 	 	 
	  	  	
d.      Company-paid term life insurance payable to your designated beneficiary in the amount of $2 million; provided that the Company is able to obtain such insurance for a commercially reasonable premium.

	 	 	 
	  	  	
e.      Company-paid annual executive physical exam.

	 	 	 
	  	  	
Notwithstanding anything elsewhere to the contrary, except to the extent any reimbursement, payment or entitlement pursuant to this paragraph 4 does not constitute a “deferral of compensation” within the meaning of Section 409A, (i) the amount of expenses eligible for reimbursement or the provision of any in-kind benefit (as defined in Section 409A) to you during any calendar year will not affect the amount of expenses eligible for reimbursement or provided as in-kind benefits to you in any other calendar year, (ii) the reimbursements for expenses for which you are entitled shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred, and (iii) the right to payment or reimbursement or in-kind benefits may not be liquidated or exchanged for any other benefit.

	 	 	 
	  	
5.

	
In the event your employment is terminated without Cause by the Company (other than upon Retirement or death or due to Disability) or you resign for Good Reason (and provided paragraph 8 below does not apply), you shall be entitled to:

	 	 	 
	  	  	
a.      Base Salary through the Date of Termination, to be paid to you in a cash lump sum on the first regularly scheduled payroll date following the Date of Termination or such earlier date as may be required by applicable law.

	 	 	 
	  	  	
b.      Payment of an amount equal to one and a half (1.5) times the sum of (a) Base Salary plus (b) Target Bonus, both in effect as of Date of Termination (without taking into account any reduction under clause (ii) of the definition of Good Reason if you have terminated your employment for Good Reason based on such clause), to be paid to you in a cash lump sum on the 60th day following the Date of Termination.

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 6

	  	  	
c.      A pro-rata bonus for the fiscal year in which the Date of Termination occurs, based on the Company’s performance for such year (determined by multiplying the amount of the Annual Incentive Award you would have received under the Bonus Plan had your employment continued through the end of such fiscal year by a fraction, the numerator of which is the number of days during such fiscal year that you are employed by the Company and the denominator of which is 365), payable in accordance with paragraph 3(b) above.

	 	 	 
	  	  	
d.      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, for any options granted on or after the Effective Date, continued exercisability of any outstanding stock options that have vested as of the Date of Termination for 12 months following the Date of Termination, or the remainder of the option term, if shorter.

	 	 	 
	  	  	
e.      Provided you make a timely election under COBRA, continued participation on the same terms as immediately prior to the Date of Termination (including costs of premiums) for you and your eligible dependents in the Company’s medical and dental plans in which you and your eligible dependents were participating immediately prior to the Date of Termination until the earlier of (a) the 18th month anniversary of the Date of Termination, or (b) the date, or dates, you receive equivalent coverage under the plans and programs of a subsequent employer; provided, that, at the Company’s election, you shall pay the full cost of such COBRA premiums and the Company shall promptly reimburse you for its portion of the premiums (as if you had continued in employment); provided, further, that in no event shall there be any gross up provided by the Company for any tax liabilities or otherwise.

	 	 	 
	  	  	
f.      Any amounts earned, accrued or owing to you but not yet paid, which shall be paid to you in accordance with the terms and conditions of the applicable plan or arrangement.

	 	 	 
	  	  	
g.      As a condition to receiving the payments and entitlements pursuant to this paragraph 5 (other than clauses (a) and (f) hereof), you hereby agree to execute and deliver to the Company a release of claims in the form of Exhibit B attached hereto no later than 45 days following the Date of Termination and not revoke such release within the applicable revocation period.

	 	 	 
	  	
6.

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

 

 

 

  

  

  

N Ms. Helen McCluskey

December 13, 2011

Page 7

 

	  	  	
a.      Base Salary through the Date of Termination, to be paid to you in a cash lump sum on the first regularly scheduled payroll date following the Date of Termination or such earlier date as may be required by applicable law.

	 	 	 
	  	  	
b.      A pro-rata bonus for the fiscal year in which the Date of Termination occurs, based on the Company’s performance for such year (determined by multiplying the amount of the Annual Incentive Award you would have received under the Bonus Plan had your employment continued through the end of such fiscal year by a fraction, the numerator of which is the number of days during such fiscal year that you are employed by the Company and the denominator of which is 365), payable in accordance with paragraph 3(b) above.

	 	 	 
	  	  	
c.      Any amounts earned, accrued or owing to you but not yet paid, which shall be paid to you in accordance with the terms and conditions of the applicable plan or arrangement.

	 	 	 
	  	  	
d.      Immediate vesting as of the Date of Termination of 50% of any previously granted Supplemental Award that remains unvested as of the Date of Termination, payable in accordance with paragraph 3(d) above.

	 	 	 
	  	
7.

	
In the event the Company terminates your employment for Cause, you voluntarily resign or upon your Retirement, you shall be entitled to Base Salary through the Date of Termination, to be paid to you in a cash lump sum on the first regularly scheduled payroll date following the Date of Termination or such earlier date as may be required by applicable law.  A voluntary resignation (other than a Retirement) shall be effective on 60 days prior written notice; subject to earlier termination by the Company in accordance with clause (ii) of the definition of Date of Termination, and, provided that such notice is given, shall not be deemed to be a breach of this Agreement.  A Retirement shall be effective on 90 days prior written notice from either the Company or you; and provided that such notice is given, shall not be deemed to be a breach of this Agreement.  Upon Retirement, you shall also be entitled to any amounts or entitlements earned, accrued or owing to you but not yet paid, including, without limitation, treatment of your outstanding equity awards in accordance with the applicable retirement provisions of the Company’s equity plans and programs.  Amounts described in the immediately preceding sentence shall be paid to you in accordance with the terms and conditions of the applicable plan or arrangement.

	 	 	 
	  	
8.

	
In the event your employment is (i) terminated without Cause by the Company (other than upon Retirement or death or due to Disability) or you resign for Good Reason, in both cases upon or within one year following a Change in Control or (ii) terminated without Cause by the Company (other than upon Retirement or death or due to Disability) within 60 days prior to a Change in Control and such

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 8

 

	  	  	
termination is in connection with, or in anticipation, the Change in Control, you shall be entitled to:

	 	 	 
	  	  	
a.      Base Salary through the Date of Termination, to be paid to you in a cash lump sum on the first regularly scheduled payroll date following the Date of Termination or such earlier date as may be required by applicable law.

	 	 	 
	  	  	
b.      Subject to clause (h) below, payment of an amount equal to 3 times the sum of (a) Base Salary plus (b) Target Bonus, both in effect as of the Date of Termination (without taking into account any reduction under clause (ii) of the definition of Good Reason if you have terminated your employment for Good Reason based on such clause), to be paid to you in a cash lump sum on the 60th day following the Date of Termination.

	 	 	 
	  	  	
c.      A pro-rata Target Bonus for the year of termination, determined by multiplying such Target Bonus by a fraction, the numerator of which is the number of days that you were employed by the Company during the year in which the Date of Termination occurs and the denominator of which is 365, to be paid to you in a cash lump sum on the 60th day following the Date of Termination.

	 	 	 
	  	  	
d.      Immediate vesting as of the Date of Termination of all outstanding equity awards (other than Career Shares or any performance unit awards) and treatment of any performance unit awards in accordance with the applicable plan and award agreement, with any stock options granted on or after August 11, 2005 which remain in effect or are granted after the Change in Control remaining exercisable for 24 months following the Date of Termination or the remainder of the option term, if shorter.

	 	 	 
	  	  	
e.      Immediate vesting as of the Date of Termination of any previously granted Supplemental Award, payable in accordance with paragraph 3(d) above.

	 	 	 
	  	  	
f.      Provided you make a timely election under COBRA, continued participation on the same terms as immediately prior to the Date of Termination (including costs of premiums) for you and your eligible dependents in the Company’s medical and dental plans in which you and your eligible dependents were participating immediately prior to the Date of Termination until the earlier of (a) the 36th month anniversary of the Date of Termination, or (b) the date, or dates, you receive equivalent coverage under the plans and programs of a subsequent employer; provided, that, at the Company’s election, you shall pay the full cost of such medical and/or dental premiums and the Company shall promptly reimburse you for its portion of the premiums (as if you had continued in employment);  provided, further, that in no event shall there be any gross

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 9

	  	  	
up provided by the Company for any tax liabilities or otherwise.  It is intended by the parties that the Company’s provision of medical and dental benefits hereunder for the first 18 months of the 36-month period be exempt from Section 409A by virtue of the applicability thereto of Treasury Regulation 1.409A-1(b)(9)(B) (the "Separation Pay Exemption").  The Company's provision of medical and dental benefits hereunder for such 18-month period or the remainder of the 36-month period, to the extent not exempt from Section 409A under the Separation Pay Exemption, shall satisfy the following requirements: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during one taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; (ii) any reimbursement shall be made on or before the last day of the taxable year following the taxable year in which the expense was incurred (it being understood by the Company that any such reimbursement shall be made within 30 days following the date on which you remit the applicable premium payments); and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

	 	 	 
	  	  	
g.      Any amounts earned, accrued or owing to you but not yet paid, which shall be paid to you in accordance with the terms and conditions of the applicable plan or arrangement.

	 	 	 
	  	  	
h.      If your employment is terminated without Cause (other than upon Retirement, or death or Disability) within the 60 days prior to a Change in Control, such termination is in connection with, or in anticipation of, the Change in Control and the Date of Termination is prior to the date the Change in Control occurs, then, subject to clause (i) below: (1) the payments under clause (b) of this paragraph 8 shall be paid to you as follows:  an amount equal to one and a half (1.5) times the sum of (a) Base Salary plus (b) Target Bonus, both in effect on the Date of Termination (without taking into account any reduction under clause (ii) of the definition of Good Reason if you have terminated your employment for Good Reason based on such clause), to be paid to you in a cash lump sum on the 60th day following the Date of Termination and an amount equal to one and a half (1.5) times the sum of (a) Base Salary plus (b) Target Bonus, both in effect on the Date of Termination (without taking into account any reduction under clause (ii) of the definition of Good Reason if you have terminated your employment for Good Reason based on such clause), to be paid to you in a cash lump sum on the later of the date the Change in Control occurs or the 60th day following the Date of Termination (which, for the avoidance of doubt, shall in no event be later than the last day of the applicable two and one-half (2 1⁄2) month short-

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 10

 

	  	  	
term deferral period with respect to such payment, within the meaning of Treasury Regulation Section 1.409A-1(b)(4)).

	 	 	 
	  	  	
i.      As a condition to receiving the payments and entitlements pursuant to this paragraph 8 (other than clauses (a) and (h) hereof), you hereby agree to execute and deliver to the Company a release of claims in the form of Exhibit B attached hereto no later than 45 days following the Date of Termination and not revoke such release within the applicable revocation period.

	 	 	 
	  	
9.

	
Any amounts due to you under paragraphs 5, 6, or 8 are considered to be reasonable by the Company and are not in the nature of a penalty. Any payments provided pursuant to paragraph 5 or paragraph 8 shall be in lieu of any salary continuation arrangements under any other severance program or plan of the Company.

	 	 	 
	  	
10.

	
a.      Notwithstanding any other provision of this Agreement, upon the termination of your employment for any reason, unless otherwise requested by the Board, you shall immediately resign from all boards of directors of any affiliate of the Company, if any, of which you may be a member, and as a trustee of, or fiduciary to, any employee benefit plans of the Company or any affiliate of the Company. You agree to execute any and all documentation of such resignations upon request by the Company, but you shall be treated for all purposes as having so resigned upon termination of your employment, regardless of when or whether you execute any such documentation.

	 	 	 
	  	
 

	
b.      Section 409A.  The Company and you agree that this Agreement and the payments and benefits hereunder are intended to comply with, or qualify for exemption from, the requirements of Section 409A (including the Treasury Regulations and other administrative guidance promulgated thereunder), and this Agreement shall be interpreted in a manner consistent with such intent.  Without limiting the foregoing, you expressly agree and acknowledge that neither the Company, any of its affiliates, nor any of their respective employees, directors or representatives shall have any liability to you with respect to the imposition of any early or additional taxes, interest or penalties under Section 409A except in such circumstances where the imposition of such taxes, interest or penalties results from the failure of the Company to pay amounts in accordance with this Agreement and any plan or arrangement applicable to you or results from actions taken by the Company inconsistent with this Agreement.  Notwithstanding anything to the contrary in this Agreement or elsewhere (except for paragraph 3(d) of this Agreement), if you are a “specified employee” as determined pursuant to Section 409A as of the date of your Separation From Service and if any payment, benefit or entitlement provided for in this Agreement or otherwise both (x) constitutes a “deferral of compensation” within the meaning of Section 409A

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 11

 

	  	  	
and (y) cannot be paid or provided in a manner otherwise provided herein or otherwise without subjecting you to additional tax, interest or penalties under Section 409A, then any such payment, benefit or entitlement that is payable during the first six months following your Separation From Service shall be paid or provided to you in a cash lump-sum on the earlier of your death or the first business day of the seventh calendar month following the month in which your Separation From Service occurs.  In addition, any payment, benefit or entitlement due upon a termination of your employment that represents a “deferral of compensation” within the meaning of Section 409A (other than any payments due pursuant to paragraph 3(d) of this Agreement) shall only be paid or provided to you upon a Separation From Service, in which case any reference to “Date of Termination” in connection with such payment, benefit or entitlement shall be deemed to be a reference to “Separation From Service” and the actual payment date within any applicable time period specified in the applicable provision of paragraphs 5, 6, 7 or 8 shall be within the Company’s sole discretion.    Notwithstanding anything to the contrary in this Agreement or otherwise, any payment or benefit under this Agreement or otherwise which is exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(v)(A) or (C) shall be paid or provided to you only to the extent the expenses are not incurred or the benefits are not provided beyond the last day of your second taxable year following your taxable year in which your Separation From Service occurs; and provided further that the Company reimburses such expenses no later than the last day of your third taxable year following your taxable year in which your Separation From Service occurs.  Finally, to the extent that the provision of any benefit pursuant to paragraph 5(e) or paragraph 8(f) hereof is taxable to you, any such reimbursement or in-kind benefit shall be paid to you on or before the last day of your taxable year following your taxable year in which the expense is incurred, shall not be subject to liquidation or exchange for any other benefit and shall not, with respect to one taxable year, affect the expenses eligible for reimbursement or the in-kind benefits to be provided in any other taxable year.

	  	  	  
	  	
11.

	
During your employment and for 12 months (24 months in the event of your Retirement) following the Date of Termination, you agree that you will not, other than in the ordinary course of performing your duties hereunder or as agreed by the Company in writing, engage in a “Competitive Business,” directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any relationship or capacity, in any geographic location in which the Company or any of its affiliates is engaged in business.  You shall not be deemed to be in violation of this paragraph 11 by reason of the fact that you own or acquire, solely as an investment, up to two percent (2%) of the outstanding equity securities (measured by value) of any entity. “Competitive Business” shall mean a business engaged in (x) apparel design and/or apparel wholesaling or (y) retailing in competition with any

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 12

 

	  	  	
business the Company or any of its affiliates is conducting at the time of such alleged violation.

	 	 	 
	  	
12.

	
You agree that for a period of 18 months (24 months in the event of your Retirement) following the Date of Termination, you will not, without the prior written consent of the Company, directly or indirectly, hire any employee of the Company or any of its affiliates, or solicit or encourage any such employee to leave the employee of the Company or any of its affiliates, as the case may be.  In addition, you agree that for a period of 18 months (24 months in the event of your Retirement) following the Date of Termination, you will not, without the prior written consent of the Company, directly or indirectly, solicit or encourage any customer of the Company or any affiliate of the Company to reduce or cease its business with the Company or any such affiliate of the Company or otherwise interfere with the relationship of the Company or any affiliate of the Company with its customers.

	 	 	 
	  	
13.

	
You and the Company each agree to refrain from making any statements or comments of a defamatory or disparaging nature to third parties regarding each other (including, in the case of your obligation hereunder “Company” shall also include an affiliate of the Company and the Company’s officers, directors, personnel or products and, in the case of the Company’s obligation hereunder, “Company” shall include any subsidiary as well as any affiliate of the Company which the Company controls, directly or indirectly). You and the Company each understand that either party should be entitled to respond truthfully and accurately to statements about such party made publicly by you or the Company, as the case may be, provided that such response is consistent with your or the Company’s obligations not to make any statements or comments of a defamatory or disparaging nature as set forth herein above.

	 	 	 
	  	
14.

	
During the Term and thereafter, other than in the ordinary course of performing your duties for the Company or as required in connection with providing any cooperation to the Company pursuant to paragraph 20 below, you agree that you will not disclose to anyone or make use of any trade secret or proprietary or confidential information of the Company or any affiliate of the Company, including such trade secret or proprietary or confidential information of any customer or other entity to which the Company owes an obligation not to disclose such information, which you acquire during the course of your employment, including, but not limited to, records kept in the ordinary course of business, except when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent or actual jurisdiction to order you to divulge, disclose or make accessible such information. The foregoing shall not apply to information that (i) was known to

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 13

 

	  	  	
the public prior to its disclosure by you or (ii) becomes known to the public through no wrongful disclosure by or act of you or any of your representatives. In the event you are requested by subpoena, court order, investigative demand, search warrant or other legal process to disclose any information regarding the Company, you agree, unless prohibited by law or Securities and Exchange Commission regulation, to give the Company’s General Counsel prompt written notice of any request for disclosure in advance of your making such disclosure and you shall not disclose such information regarding the Company unless and until the Company has expressly authorized you to do so in writing or the Company has had a reasonable opportunity to object to such a request or to litigate the matter (of which the Company agrees to keep you reasonably informed) and has failed to do so.

	 	 	 
	  	
15.

	
You hereby sell, assign and transfer to the Company all of your right, title and interest in and to all inventions, discoveries, improvements and copyrightable subject matter (the “Rights”) which during the period of your employment are made or conceived by you, alone or with others, and which are within or arise out of any general field of the Company’s business or arise out of any work you perform, or information you receive regarding the business of the Company, while employed by the Company. You shall fully disclose to the Company as promptly as available all information known or possessed by you concerning any Rights, and upon request by the Company and without any further remuneration in any form to you by the Company, execute all applications for patents and for copyright registration, assignments thereof and other instruments and do all things which the Company may deem necessary to vest and maintain in it the entire right, title and interest in and to all such Rights.

	 	 	 
	  	
16.

	
You agree that at the time of termination of your employment, whether at your instance or the Company, and regardless of the reasons therefore, you will promptly deliver to the Company’s General Counsel, and not keep or deliver to anyone else, any and all of the following which is in your possession or control: (i) Company property (including, without limitation, credit cards, computers, communication devices, home office equipment and other Company tangible property) and (ii) notes, files, memoranda, papers and, in general, any and all physical matter and computer files containing confidential or proprietary information of the Company or any of the Company’s affiliates, including any and all documents relating to the conduct of the business of the Company or any of the Company’s affiliates and any and all documents containing confidential or proprietary information of the customers of the Company or any of the Company’s affiliates, except for (x) any documents for which the Company’s General Counsel has given written consent to removal at the time of termination, (y) any documents on your personal computer if you destroy such documents and give a notarized written affidavit of such destruction and (z) any information

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 14

 

	  	  	
necessary for you to retain for tax purposes (provided you maintain the confidentiality of such information described in the foregoing clauses in accordance with paragraph 14 above).  In addition, you may retain such records as relate to your compensation, benefits, expenses, job-description and job performance, as well as personal memorabilia.

	 	 	 
	  	
17.

	
Any failure by you to comply with the provisions of paragraphs 11, 12, 13, 14, 15 or 16 shall relieve the Company of any of its obligations pursuant to this Agreement, including pursuant to paragraphs 5, 6 and 8; provided, however, that if such failure is curable, the Company shall give you prompt notice and a 30-day period to cure such failure.  If so cured, subject to paragraph 29 hereof, all of the Company’s obligations hereunder shall remain in full force and effect.

	 	 	 
	  	
18.

	
From and after the date hereof, except as otherwise provided in paragraph 19, should any disagreement, claim or controversy arise between you and the Company with respect to this Agreement or your employment by the Company, the same may be enforced at the option of either party by confidential, binding and final arbitration in New York, New York before a single arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The award of the arbitrator with respect to such disagreement, claim or controversy shall be enforceable in any court of competent jurisdiction and shall be binding upon the parties hereto. You consent to the personal jurisdiction of the Courts of the State of New York (including the United States District Court for the Southern District of New York) in any proceedings for equitable relief. You further agree not to interpose any objection or improper venue in any such proceeding or interpose any defense that the Company has an adequate remedy at law or that the injury suffered by the Company is not irreparable. You and the Company agree that each party shall be responsible for its own costs and expenses, including attorneys’ fees, provided, however, that if you substantially prevail with respect to all claims that are the subject matter of the dispute, your costs, including reasonable attorneys’ fees, shall be borne by the Company; provided that if such costs are not reimbursed in connection with a dispute exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(11) then such payment shall be made by the Company to you in the year following the year in which the dispute is resolved, shall not be subject to liquidation or exchange for any other benefit and shall not, with respect to one taxable year, affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year.

	 	 	 
	  	
19.

	
You expressly agree and acknowledge that any breach or threatened breach of any obligation set forth in paragraphs 11, 12, 13, 14, 15 or 16 above will cause the Company (or, as applicable, any affiliate of the Company) irreparable harm for which there is no adequate remedy at law, and as a result of this the Company

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 15

 

	  	  	
shall be entitled to seek the issuance by a court of competent jurisdiction of an injunction, restraining order or other equitable relief in favor of itself, without the necessity of posting a bond and without proving actual damages, restraining you from committing or continuing to commit any such violation.

	 	 	 
	  	
20.

	
During any notice period and following the Date of Termination, upon reasonable request by the Company, you shall cooperate with the Company or any of its affiliates with respect to any legal or investigatory proceeding, including any government or regulatory investigation, or any litigation or other dispute relating to any matter in which you were involved or had knowledge during your employment with the Company, subject to your reasonable personal and business schedules. The Company shall reimburse you for all reasonable out-of-pocket costs, such as travel, hotel and meal expenses and reasonable attorneys’ fees, incurred by you in providing any cooperation pursuant to this paragraph 20; provided such expenses shall be paid to you as soon as practicable but in no event later than the end of the calendar year following the calendar year in which the expenses are incurred, subject in all cases to your providing appropriate documentation to the Company.  The Company shall also pay you a reasonable per diem amount for your time (other than for time spent preparing for or providing testimony) which shall be based upon your Base Salary at the Date of Termination, with such per diem paid to you in the calendar month following the month in which you provide such assistance.  Any reimbursement or payment under this paragraph 20 shall not affect the amount of the reimbursement or payment to you in any other taxable year.  The right to payment or reimbursement pursuant to this paragraph 20 shall not be liquidated or exchanged for any other benefit.

	 	 	 
	  	
21.

	
You represent and warrant that you have the free and unfettered right to enter into this Agreement and to perform your obligations under it and that you know of no agreement between you and any other person, firm or organization, or any law or regulation, that would be violated by the performance of your obligations under this Agreement. You agree that you will not use or disclose any confidential or proprietary information of any current or prior employer in the course of performing your duties for the Company or any of its affiliates.

	 	 	 
	  	
22.

	
The invalidity or unenforceability of any particular provision or provisions of this Agreement (as determined by an arbitrator or a court of competent jurisdiction) shall not affect the other provisions hereof and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions had been omitted.

	 	 	 
	  	
23.

	
This Agreement (including its Exhibits) and the documents referred to herein constitute the full and complete understanding and agreement of the parties concerning the subject matter hereof and shall be binding on the parties hereof as of the date first written above, but shall not become effective until the Effective

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 16

 

 

	  	  	
Date, at which time it shall supersede all prior representations, understandings and agreements with respect thereto (other than any agreements governing any equity awards outstanding as of February 1, 2012) and cannot be amended, changed, terminated, or modified in any respect without the written consent of the parties, except that the Company reserves the right in its sole discretion to make changes at any time to the other documents referenced in this Agreement.  For the avoidance of doubt, for any termination of employment prior to February 1, 2012, the Original Employment Agreement shall govern and control (provided that in no event shall entering into this Agreement (or the events occurring as contemplated hereunder) be deemed to constitute “Good Reason” pursuant to the Original Employment Agreement). No waiver by either party of any breach by the other party of any condition or provision contained in this Agreement shall be deemed to be a waiver of a similar or dissimilar condition or provision.

	 	 	 
	  	
24.

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

	 	 	 
	  	
25.

	
This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its provisions as to choice of laws. The respective rights and obligations of the parties hereunder, including without limitation paragraphs 5 through 8, 10 and 11 through 16, shall survive any termination of the Term to the extent necessary to the intended preservation of such rights and obligations.

	 	 	 
	  	
26.

	
Any notice given to either you or the Company under this Agreement shall be in writing and shall be deemed to have been given upon actual receipt or refusal to accept receipt, with any such notice duly addressed to you or the Company, as the case may be, at the address indicated below or to such other address as such party may subsequently designate by written notice in accordance with this paragraph 26: If to the Company: The Warnaco Group, Inc., 501 Seventh Avenue, New York, New York 10018, Attention: General Counsel; If to you: at your home address as indicated on the Company’s records.

	 	 	 
	  	
27.

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

	 	 	 
	  	
28.

	
The Company hereby agrees during, and after termination of, your employment to indemnify you and hold you harmless, both during the Term and thereafter, to the fullest extent permitted by law and under the certificate of incorporation and by-laws of the Company against and in respect of any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorneys’ fees), losses, amounts paid in settlement to the extent approved by the Company, and damages resulting from your good faith performance of your

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 17

 

	  	  	
duties as an officer or director of the Company or any affiliate of the Company.  The Company shall reimburse you for expenses incurred by you in connection with any proceeding hereunder upon your written request for such reimbursement and your submission of the appropriate documentation associated with these expenses.  Such request shall include an undertaking by you to repay the amount of such advance or reimbursement if it shall ultimately be determined that you are not entitled to be indemnified hereunder against such costs and expenses.  The Company shall use commercially reasonable efforts to obtain and maintain directors’ and officers’ liability insurance covering you to the same extent as the Company covers its other officers and directors.

	 	 	 
	  	
29.

	
Notwithstanding anything herein to the contrary or otherwise, all payments and/or awards hereunder shall be subject to cancellation and recoupment by the Company, and shall be repaid by you 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 written Company forfeiture or recoupment policy applicable either to employees generally or all senior executives of the Company or any of its affiliates or any written agreement between you and the Company (or any of its affiliates).

	 	 	 
	  	
30.

	
a.      If any amount, entitlement, or benefit paid or payable to you or provided for your benefit under this Agreement and under any other agreement, plan or program of the Company (such payments, entitlements and benefits referred to as a “Payment”) is subject to the excise tax imposed under Section 4999 of the Code or any similar federal or state law (an “Excise Tax”), then notwithstanding anything contained in this Agreement to the contrary, to the extent that any or all Payments would be subject to the imposition of an Excise Tax, the Payments shall be reduced (but not below zero) if and to the extent that such reduction would result in your retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the imposition of the Excise Tax), than if you received all of the Payments (such reduced amount is hereinafter referred to as the “Limited Payment Amount”).  The Company shall reduce or eliminate the Payments, by first reducing or eliminating those payments or benefits which are payable in cash and then by reducing or eliminating non-cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined below).  For the avoidance of doubt, the parties agree that any Payment or portion thereof that constitutes deferred compensation under Section 409A shall be deemed to be forfeited upon application of any such reduction or elimination to such Payment or portion thereof.

 

 

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 18

 

	  	
b.      All calculations under this paragraph 30 shall be made by a nationally recognized accounting firm designated by the Company and reasonably acceptable to you (other than the accounting firm that is regularly engaged by any party who has effectuated a Change in Control) (the “Accounting Firm”).  The Company shall pay all fees and expenses of such Accounting Firm.  The Accounting Firm shall provide its calculations, together with detailed supporting documentation, both to the Company and you within 45 days after the Change in Control or the Date of Termination, whichever is later (or such earlier time as is requested by the Company) and, with respect to the Limited Payment Amount, shall deliver its opinion to you that you are not required to report any Excise Tax on your federal income tax return with respect to the Limited Payment Amount (collectively, the “Determination”).  Within 5 business days of your receipt of the Determination, you shall have the right to dispute the Determination (the “Dispute”).  The existence of the Dispute shall not in any way affect your right to receive the Payments in accordance with the Determination.  If there is no Dispute, the Determination by the Accounting Firm shall be final binding and conclusive upon the Company and you (except as provided in clause (c) below).

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

  

  

  

Ms. Helen McCluskey

December 13, 2011

Page 19

 

	  	
31.

	
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 left intentionally blank]

 

  

  

  

IN WITNESS WHEREOF, the Company and you have voluntarily executed this Agreement as of the date first written above.

 

	  	
Very truly yours,

	  	  
	  	
THE WARNACO GROUP, INC.

	  	  
	  	  
	  	 /s/ Elizabeth Wood
	  	
Name:  Elizabeth Wood

Title:    Senior Vice President, Human Resources

	
Agreed to and accepted

	  
	  	  
	  	  
	  	  
	
/s/ Helen McCluskey

	  
	
Helen McCluskey

	  

  

  

  

Exhibit A

Definitions

“Cause” shall mean:

 

	
(i)

	
willful misconduct by you which is materially injurious to the Company’s interests;

	 	 
	
(ii)

	
willful breach of duty by you in the course of your employment that is materially injurious to the Company’s interests and which, if curable, is not cured within 10 days after your receipt of written notice from the Company;

	  	  
	
(iii)

	
willful failure by you after having been given written notice from the Company to perform any and all duties commensurate with your position and a reasonable opportunity to perform such duties as are specified in the written notice, other than a failure resulting from your incapacity due to physical or mental illness; or

	  	  
	
(iv)

	
indictment of you for the commission of a felony, 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.

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

“Change in Control” shall mean any of the following:

	
(i)

	
any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934) or group of persons acting jointly or in concert, but excluding a person who owns more than 5% of the outstanding shares of the Company as of the Effective Date, becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under that Act), of more than 50% 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.  Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any award or amount which provides for the deferral of compensation and is subject to Section 409A, then, to the extent required to comply with Section 409A, the transaction or event described in clause (i), (ii) or (iii) above with respect to such award or amount must also constitute a “change of control event” as defined in the Treasury Regulation §1.409A-3(i)(5).

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

“Date of Termination” shall mean:

	
(i)

	
if your employment is terminated by the Company, the date specified in the notice by the Company to you that your employment is so terminated, which in the case of a Retirement shall be no less than 90 days’ after such notice is provided to you;

	  	  
	
(ii)

	
if you voluntarily resign your employment (other than a Retirement), 60 days after receipt by the Company of written notice that you are terminating your employment (provided, that if you commence other employment, the Company may (a) accelerate the Date of Termination to an earlier date so that there is no overlap with such other employment by providing you with written notice of such action, or, (b) alternatively, place you on paid leave (covering only Base Salary) during such period irrespective of whether you commence other employment);

	  	  
	
(iii)

	
if you terminate your employment and such termination qualifies as a Retirement, 90 days after receipt by the Company of written notice that you are terminating your employment;

	  	  
	
(iv)

	
if your employment is terminated for Disability by the Company, 30 days after written notice is given as specified below in the definition of “Disability”.

	  	  
	
(v)

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

	  	  
	
(vi)

	
if you resign your employment for Good Reason, 30 days after receipt by the Company of timely written notice from you in accordance with paragraph 26 of the letter agreement effective as of February 1, 2012 between you and the Company (the “Letter Agreement”), unless the Company cures the event or events giving rise to Good Reason within 30 days after receipt of such written notice.

“Disability” shall mean your inability, due to physical or mental incapacity, to substantially perform your duties and responsibilities for a period of 180 consecutive days as determined by a medical doctor selected by the Company and reasonably acceptable to you.  In no event shall any termination of your employment occur unless the Company gives you written notice of such termination in accordance with paragraph 26 of the Letter Agreement.

 

 

  

  

  

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

	
(i)

	
a material diminution in your authority, duties or responsibilities as Chief Executive Officer of the Company;

	  	  
	
(ii)

	
a reduction in your Base Salary or Target Bonus;

	  	  
	
(iii)

	
a change in reporting structure so that you report to someone other than the Board, or the Chairman of the Board as the Board’s designee;

	  	  
	
(iv)

	
the removal by the Company of you as Chief Executive Officer of the Company;

	  	  
	
(v)

	
the failure of the Company to nominate or renominate you, as the case may be, as a member of the Board, or the removal of you, after such appointment, from the Board;

	  	  
	
(vi)

	
the failure of a successor to all or substantially all of the assets of the Company to assume the Company’s obligations under the Letter Agreement either in writing or as a matter of law; or

	  	  
	
(vii)

	
requiring you to be principally based at any office or location other than Manhattan, New York or any location within a 45 mile radius of Manhattan, New York.

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

 

“Qualifying Change in Control” shall mean the occurrence of a Change in Control as defined in clauses (i) or (ii) of the definition of Change in Control; provided, that, such occurrence qualifies as a “change in control event” under Section 409A and Treasury Regulation Section 1.409A-3(i)(5) (applying the default rules contained therein).

“Retirement” shall mean any termination of your employment with the Company on or after you reach age 65 for any reason (whether by the Company or by you) other than a termination for Cause.

“Separation From Service” shall mean a termination of your employment with the Employer in a manner compliant and consistent with Treasury Regulation Section 1.409A-1(h).  For purposes of this definition, “Employer” shall mean the Company and any entity required to be aggregated with the Company under Treasury Regulation Section 1.409A-1(h)(3) (applying the default rules contained therein).

“Stock Incentive Plan”  shall mean, as applicable, the Company’s  2005 and 2008 Stock Incentive Plans, as amended from time to time, or such other long-term incentive plan(s) as may be approved the Company’s shareholders from time to time.

 

  

  

  

Exhibit B

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 an employment agreement dated December 13, 2011 (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 the Employment Agreement and other good and valuable consideration, the Executive agrees as follows:

The Executive, on behalf of herself and her 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 herself 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 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 paragraphs 5 or 8 (as applicable), paragraphs 18 and 28 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 understands that nothing in this Agreement and Release shall be construed to prohibit her 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 her or by anyone else on her behalf based on events occurring prior to the date of this Agreement and Release.

The Executive agrees that she shall continue to be bound by, and will comply with, the provisions of paragraphs 11, 12, 13, 14, 15, 16, 20 and 29 of the Employment Agreement and the provisions of such sections, along with paragraphs 18 and 19 of the Employment Agreement, shall be incorporated fully into this Agreement and Release.

The Executive acknowledges that she 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 she has seven calendar days from the date on which she executes this Agreement and Release to revoke her acceptance by delivering to the Company written notification of her intention to revoke this Agreement and Release in accordance with paragraph 26 of the Employment 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 Employment Agreement.

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

	  	
 

	  	
Helen McCluskey

	  	  
	  	  
	  	
Date:

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