Vice President, Human Resources Employment Agreement

Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of September 12, 2005 (the " Effective Date" ) by and between THE WARNACO GROUP, INC., a Delaware corporation (together with its successors and assigns, the " Company" ), and Elizabeth Wood (the " Executive" ).
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Executive and to enter into an agreement embodying the terms of such employment and the Executive desires to enter into this Agreement and to accept such employment, subject to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Executive (individually a " Party" and together the " Parties" ) agree as follows:
1. Certain Definitions .
(a) " Affiliate" of a specified person or entity shall mean a person or entity that directly or indirectly controls, is controlled by, or is under common control with, the person or entity specified.
(b) " Board" shall mean the Board of Directors of the Company.
(c) " Cause" shall mean:
(i) willful misconduct by the Executive which causes material harm to the Company' s interests;
(ii) willful and material breach of duty by the Executive in the course of her employment, which, if curable, is not cured within 10 days after Executive' s receipt of written notice from the Company;
(iii) willful failure by the Executive, after having been given written notice from the Company, to perform her duties other than a failure resulting from Executive' s incapacity due to physical or mental illness; or
(iv) indictment of the Executive for a felony, a crime involving moral turpitude or any other crime involving the business of the Company which, in the case of such crime involving the business of the Company, is injurious to the business of the Company.
For purposes of this Cause definition, no act or failure to act, on the part of the Executive, shall be considered willful unless it is done, or omitted to be done, by her in bad faith and without reasonable belief that her action was in the best interests of the Company. The determination to terminate the Executive' s employment for Cause shall be made by the Board and prior to such determination the Executive shall have the right to appear before the Board or a Committee designated by the Board.
(d) " Change in Control" shall mean any of the following:
(i) any " person" (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934) or group of persons acting jointly or in concert, but excluding a person who owns more than 5% of the outstanding shares of the Company as of the date of this Agreement, becomes a " beneficial owner" (as such term is used in Rule 13d-3 promulgated under that Act), of 50% or more of the Voting Stock of the Company;
(ii) all or substantially all of the assets of the Company are disposed of pursuant to a merger, consolidation or other transaction (unless the shareholders of the Company immediately prior to such merger, consolidation or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they owned the Voting Stock of the Company, all of the Voting Stock or other ownership interests of the entity or entities, if any, that succeed to the business of the Company); or
(iii) approval by the shareholders of the Company of a complete liquidation or dissolution of all or substantially all of the assets of the Company.
For purposes of this Change in Control definition, " Voting Stock" shall mean the capital stock of any class or classes having general voting power, in the absence of specified contingencies, to elect the directors of the Company.
(e) " Commencement Date" shall mean September 12, 2005.
(f) " Date of Termination" shall mean:
(i) if the Executive' s employment is terminated by the Company, the date specified in the notice by the Company to the Executive that her employment is so terminated; provided that for a termination for Cause such notice is delivered after the Board determination as set forth in Section 1(c) hereof;
(ii) if the Executive voluntarily resigns her employment, 90 days after receipt by the Company of written notice that the Executive is terminating her employment or if the Company shortens the required notice period in accordance with Section 6(c), the date of termination specified in such notice;
(iii) if the Executive' s employment is terminated by reason of death, the date of death;
(iv) if the Executive' s employment is terminated for Disability, 30 days after written notice is given as specified in Section 1(g) below; or
(v) if the Executive resigns her employment for Good Reason, 30 days after receipt by the Company of timely written notice from the Executive in accordance with Section 1(h) below unless the Company cures the event or events giving rise to Good Reason within 30 days after receipt of such written notice.
(g) " Disability" shall mean the Executive' s inability, due to physical or mental incapacity, to substantially perform her duties and responsibilities for a period of 180 consecutive days as determined by a medical doctor selected by the Company and reasonably acceptable to the Executive. In no event shall any termination of the Executive' s employment for Disability occur until the Party terminating her employment gives written notice to the other Party in accordance with Section 15 below.
(h) " Good Reason" shall mean the occurrence of any of the following without the Executive' s prior written consent:
(i) a material diminution by the Company in the Executive' s authority, duties or responsibilities as Senior Vice President Human Resources or the assignment to the Executive by the Company of any duties materially inconsistent with such position;
(ii) a reduction in (A) Base Salary or (B) Target Bonus opportunity as a percentage of Base Salary;
(iii) in connection with or following a Change in Control, a change in reporting structure so that the Executive reports to someone other than the Chief Executive Officer of the Company;
(iv) the removal by the Company of the Executive as Senior Vice President Human Resources of the Company or the failure by the Board to elect or reelect the Executive as an executive officer of the Company;
(v) requiring the Executive to be principally based at any office or location more than 50 miles from midtown Manhattan; or
(vi) the failure of a successor to all or substantially all of the assets of the Company to assume the Company' s obligations under this Agreement either as a matter of law or in writing within 15 days after a merger, consolidation, sale or similar transaction.
Anything herein to the contrary notwithstanding, the Executive shall not be entitled to resign for Good Reason (i) if the occurrence of the event otherwise constituting Good Reason is the result of Disability, a termination by the Company for which notification has been given or a voluntary resignation by the Executive other than for Good Reason and (ii) unless the Executive gives the Company written notice of the event constituting " Good Reason" within 90 days of the occurrence of such event and the Company fails to cure such event within 30 days after receipt of such notice.
2. Term of Employment .
The term of the Executive' s employment hereunder shall begin on the Commencement Date and end at the close of business on the second anniversary of such date; provided , however, that the Term shall thereafter be automatically extended for additional one-year periods, unless either the Company or the Executive gives the other written notice at least 120 days prior to the then-scheduled expiration of the Term that such Party is electing not to so extend the Term (the initial term plus any extension thereof in accordance herewith being referred to herein as the " Term" ). Notwithstanding the foregoing, the Term shall end on the date on which the Executive' s employment is terminated by either Party in accordance with the provisions herein.
3. Position; Duties and Responsibilities .
During the Term, the Executive shall be employed as Senior Vice President, Human Resources of the Company and shall perform such duties and responsibilities as determined by the Chief Executive Officer. The Executive shall devote substantially all of her business time and attention to the satisfactory performance of her duties. Anything herein to the contrary notwithstanding, nothing shall preclude the Executive from (i) subject to the reasonable approval of the Board, serving on the boards of directors of trade associations and/or charitable organizations or other business corporations (provided such service is not prohibited under Section 8(a)(i) below), (ii) engaging in charitable activities and community affairs and (iii) managing her personal investments and affairs, provided that the activities described in the preceding clauses (i) through (iii) do not materially interfere with the proper performance of her duties and responsibilities hereunder.
4. Compensation .
(a) Base Salary . During the Term, the Executive shall be paid an annualized Base Salary of $300,000 (" Base Salary" ), payable in accordance with the regular payroll practices of the Company, subject to annual review by the Board (or its designee, including the Compensation Committee of the Board) in its sole discretion. During the Term the Base Salary may not be decreased without the Executive' s prior written consent. The Executive shall not be entitled to any compensation for service as an officer or member of any board of directors of any Affiliate. After any increase in base salary approved by the Board or its designee, the term " Base Salary" as used in this Agreement shall thereafter refer to the increased amount.
(b) Annual Incentive Awards . During the Term, the Executive shall be eligible to receive an annual incentive award (provided the Executive was employed continuously during the applicable fiscal year) pursuant to the Company' s Incentive Compensation Plan, as amended (or such other annual incentive plan as may be approved by the Company' s shareholders), in effect for the applicable fiscal year (" Bonus Plan" ). The Executive' s annual incentive award shall have a target of 50% of Base Salary (" Target Bonus" ), with a potential maximum award as set forth in the Bonus Plan, in all events based on the Executive' s achievement of annual performance and other targets approved by the committee administering the Bonus Plan. The amount and payment of any annual incentive award shall be determined in accordance with the Bonus Plan and shall be payable when bonuses for the applicable performance period are paid to other senior executives of the Company. After any increase in the Executive' s target annual bonus opportunity as a percentage of Base Salary as approved by the Board (or its designee), the term " Target Bonus" as used in this Agreement shall thereafter refer to the increased target opportunity.
(c) Long Term Incentive Awards . On the Commencement Date, the Executive will be granted shares of restricted stock and an option to purchase shares of the Company' s common stock with an aggregate value of 2 times Base Salary ($600,000). Except as otherwise provided herein, the restricted stock as described herein and the option as described herein shall vest 33% on each of September 12, 2006 and September 12, 2007 and 34% on September 12, 2008, provided that the Executive is employed by the Company on such vesting date and has not given notice to the Company that she is voluntarily resigning, without Good Reason, prior to such vesting date. Thereafter, commencing in fiscal year 2007, the Executive shall be eligible to participate in the Company' s equity incentive plans, including, without limitation, the 2003 and 2005 Stock Incentive Plans, as amended from time to time, and such other long-term incentive plan(s) as may be approved by the Company' s shareholders from time to time (" Stock Incentive Plan" ). Except as otherwise provided herein, all equity grants shall be governed by the applicable equity plan and/or award agreement. The Executive shall be subject to the equity ownership, retention and other requirements applicable to senior executives of the Company.
(d) Supplemental Award . During the Term beginning with fiscal year 2006, provided the Executive is employed by the Company, the Executive shall be entitled to an annual award with an aggregate grant date value equal to 8% of the sum of Base Salary plus Annual Bonus as defined in this paragraph 3(d) if the Executive will be less than age 50 by the end of the applicable fiscal year, 10% of such amount if the Executive will be age 50 and over and less than age 60 at the end of the applicable fiscal year and 13% of such amount if the Executive will be age 60 or older by the end of the applicable fiscal year (" Supplemental Award" ), with the first such award pro-rated to reflect four months of service in fiscal 2005. For this purpose, Base Salary shall be the Base Salary paid to the Executive for the fiscal year prior to the award year and Annual Bonus shall be the annual bonus awarded to the Executive by the Board for such fiscal year. The Supplemental Award shall not be awarded to the Executive until after the determination by the Board of the Executive' s annual bonus for the prior fiscal year (but in no event later than 60 days thereafter for any award made after fiscal year 2005) and 50% of the value of the Supplemental Award shall be awarded in the form of restricted shares pursuant to the applicable Stock Incentive Plan (" Career Shares" ) and 50% shall be awarded in the form of a credit to a bookkeeping account maintained by the Company for your account (the " Notional Account" ). Any Career Shares awarded hereunder shall be governed by the applicable Stock Incentive Plan and, if applicable, any award agreement. For purposes of this Section 4(d), each Career Share shall be valued at the closing price of a share of the Company' s common stock (" Share" ) on the date that the Supplemental Award is made. For the Notional Account, the Company shall select the investment alternatives available to the Executive under the Company' s 401(k) plan. The balance in the Notional Account shall periodically be credited (or debited) with the deemed positive (or negative) return based on returns of the permissible investment alternative or alternatives under the Company' s 401(k) plan as selected in advance by the Executive (and in accordance with the applicable rules of such plan or investment alternative) to apply to such Notional Account, with such deemed returns calculated in the same manner and at the same times as the return on such investment alternative(s). The Company' s obligation to pay the amount credited to the Notional Account, including any return thereon provided for in this Section 4(d), shall be an unfunded obligation to be satisfied from the general funds of the Company. Except as otherwise provided in Section 6 below or the applicable Stock Incentive Plan and provided that the Executive is employed by the Company on such vesting date, any Supplemental Award granted in the form of Career Shares will vest as follows: 50% of the Career Shares will vest on the earlier of the Executive' s 62nd birthday or upon the Executive' s obtaining 15 years of " Vesting Service" and 100% of the Career Shares will vest on the earliest of (i) the Executive' s 65th birthday, (ii) upon the Executive obtaining 20 years of " Vesting Service" or (iii) 10th anniversary of the date of grant. Except as otherwise provided in paragraph 6 below, and provided that the Executive is employed by the Company on such vesting date, any Supplemental Award granted as a credit to the Notional Account (as adjusted for any returns thereon) (" Adjusted Notional Account" )) shall vest as follows: 50% on the earlier of the Executive' s 62nd birthday or upon the Executive obtaining 5 years of " Vesting Service" and 100% on the earlier of the Executive' s 65th birthday and upon the Executive obtaining 10 years of " Vesting Service" . For purposes of this Section 4(d), " Vesting Service" shall mean the period of time that the Executive is employed by the Company as an executive officer. Subject to Section 17(b) hereof, upon vesting the Career Shares will be delivered to the Executive in the form of Shares. The vested balance in the Adjusted Notional Account shall not be distributed to the Executive until she ceases to be an employee of the Company and, at such time, shall only be distributed at the earliest time that satisfies the requirements of this Section 4(d). Except as otherwise provided in paragraph 6 hereof, if the Executive' s employment is terminated for any reason, any unvested Supplemental Awards (whether in the form of Career Shares or the Adjusted Notional Account) shall be forfeited and any vested balance in the Adjusted Notional Account, subject to Section 17(b) hereof, shall be paid to the Executive in a cash lump-sum payment immediately following her " separation from service," as defined by Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the " Code" ), with the Company; provided, however, that, except in the case of the Executive' s death, if at the time of such separation from service she is a " specified employee," as defined in Section 409A(a)(2)(B)(i) of the Code, such distribution shall not be made until at least six months after the date of such separation from service; provided, further, that if the Executive' s employment is terminated due to Disability and such Disability satisfies the requirements of Section 409A(a)(2)(C) of the Code, then such distribution may be made upon termination without regard as to whether the Executive was a " specified employee" at such time. The provisions of this Section 4(d) shall survive expiration or termination of the Term.
5. Employee Benefits .
(a) Employee Benefit Programs . During the Term, subject to the Company' s right to amend, modify or terminate any benefit plan or program, the Executive shall be entitled to participate in all employee savings and welfare benefit plans and programs made available to the Company' s senior-level executives on a basis no less favorable than provided to other similarly-situated executives, as such plans or programs may be in effect from time to time, including, without limitation, savings and other retirement plans or programs, medical, dental, hospitalization, short-term and long-term disability and life insurance plans, accidental death and dismemberment protection and travel accident insurance. During the Term, the Executive shall also be entitled to a paid annual physical medical exam as approved by the Company and Company-paid term life insurance with a benefit equal to $1 million, provided the Company can obtain such insurance at commercially reasonable premium levels. The Executive shall be entitled to four weeks paid vacation per calendar year.
(b) Business Expenses . During the Term, the Executive is authorized to incur reasonable expenses in carrying out her duties and responsibilities under this Agreement and the Company shall promptly reimburse her for all business and entertainment expenses incurred in connection with carrying out the business of the Company, subject to documentation in accordance with the Company' s policy. The Executive shall be entitled to first class air travel when traveling on Company business.
(c) Perquisites . The Executive shall be entitled to perquisites provided to other senior-level executives, including a monthly car allowance of up to a maximum of $1,000.
6. Termination of Employment . The Term of this Agreement and the Executive' s employment hereunder shall terminate as of the Date of Termination in the following circumstances:
(a) Termination Without Cause by the Company or Resignation for Good Reason by the Executive . In the event that during the Term the Executive' s employment is terminated without Cause by the Company (other than due to Disability) or the Executive resigns for Good Reason and Section 6(d) below does not apply, the Executive shall be entitled to:
(i) payment of Base Salary as salary continuation for the remainder of the applicable Term (without regard to its earlier termination hereunder), but in no event less than 12 months following the Date of Termination;
(ii) ...