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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment
of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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On
December 19, 2007 (the "Effective Date"), The Warnaco Group, Inc. ("Registrant")
and Joseph R. Gromek, the Registrant’s President and Chief Executive Officer,
entered into an amendment and restatement of Mr. Gromek’s employment agreement
dated as of December 22, 2004. The amended and restated employment
agreement (the "Agreement") is effective December 19, 2007. The Agreement
remains substantially unchanged from the prior employment agreement except
that:
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The
Agreement’s term is extended for 3 years until March 1, 2011, subject to
automatic one-year renewals thereafter unless notice of termination
is
given at least 180 days prior to the date on which the term would
otherwise expire.
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Mr.
Gromek’s cash severance upon a termination without Cause or for Good
Reason (as each term is defined in the Agreement) or upon the
Registrant
providing notice of non-renewal of the Agreement and terminating
Mr.
Gromek's employment under circumstances that during the term
would
constitute a termination of employment without Cause, in all
cases not in
connection with a Change in Control (as defined in the Agreement)
of the
Registrant, will be a lump-sum payment equal to 1.5 times his
base salary
and target bonus opportunity and his welfare benefits will continue
until
the earlier of 18 months after termination or such earlier date
he obtains
equivalent coverage. Under his prior employment agreement, Mr.
Gromek was entitled to severance of base salary and target bonus
and
welfare benefit continuation for the remainder of the Term (but
in no
event more than 36 months or less than 12 months).
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If
Mr. Gromek’s employment terminates upon Retirement (defined as any
voluntary termination on or after he reaches age 63 (other than
for Good
Reason or upon death or Disability (as each term is defined in
the
Agreement)), he will be entitled to:
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Continued
vesting of any stock options granted on or after the Effective
Date as if
he had remained an employee, with any such stock options which
are
exercisable as of his retirement date remaining exercisable until
the
first anniversary of such date (or the expiration of the option’s term, if
shorter) and any such stock options vesting after his retirement
date
remaining exercisable until the first anniversary of the vesting
date (or
the expiration of the option’s term, if shorter); and
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If
on his retirement date less than a majority of the members of
the
Registrant’s Board of Directors (“Board”) are members who were members on
the Effective Date, any Supplemental Award (as defined below)
granted as a
credit to a bookkeeping account on the Registrant’s books (“Notional
Account”) shall immediately vest upon the retirement date and be paid
out
in January of the following year and any outstanding restricted
stock or
restricted stock units granted to Mr. Gromek after the Effective
Date will
immediately vest as of the retirement date, provided that Mr.
Gromek will
be restricted from selling such shares (other than to pay taxes
associated
therewith) until the date such stock or units would have normally
vested.
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Mr.
Gromek must provide 90 days prior notice of a Retirement. Upon
Retirement
Mr. Gromek's non-compete obligation is extended from a period
of 12 months
to 24 months and the prohibition on his soliciting or hiring
employees or
soliciting customers of the Registrant is extended from a period
of 18
months to 24 months.
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Technical amendments
were made to comply with Section 409A of the Internal Revenue
Code of
1986, as amended, and the regulations promulgated thereunder
(“Section
409A”).
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In
light of the impact of Section 409A, a substantive change was
made in the
vesting and payment of the Supplemental Award such that upon
a Change in
Control (as defined in the Agreement) of the Company (provided
such event
satisfies the definition of a change in control event under Section
409A),
any Supplemental Award granted in the form of restricted stock
units will
vest if restricted stock granted under the Registrant’s Stock Incentive
Plan also vests upon such event and any balance in the Notional
Account
will vest and be paid out upon such Change in Control.
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Under the Agreement, except as provided above, the basic terms of Mr. Gromek’s
compensation remain the same as was in effect for 2007. Therefore, his
base salary remains at $1 million per year, with a target bonus opportunity
equal to 125% of his base salary. For each fiscal year during the term,
Mr. Gromek continues to have an annual target equity opportunity with a target
value on the grant date equal to no less than 100% of his total cash
compensation (base salary and target bonus opportunity) and is awarded annually
a supplemental award equal to 30% of his prior year’s total cash compensation
(base salary and earned annual bonus) (the “Supplemental Award”). The
Supplemental Award is granted in the form of restricted stock units; provided
that Mr. Gromek may elect to receive up to 50% of the value of such award as
a
credit to the Notional Account. Amounts credited to the Notional Account
will be credited (or debited) with the deemed positive (or negative) return
based on the investment alternatives under the Registrant’s 401(k) plan selected
by Mr. Gromek in advance to apply to such account. Any Supplemental Award
granted prior to April 14, 2008 will vest 50% on April 14, 2008 and 50% on
Mr.
Gromek’s 65
th
birthday, while any Supplemental Award granted on or after April 14, 2008 will
cliff vest 100% on Mr. Gromek’s 65
th
birthday. In
addition, as noted above, the Supplemental Award granted in the form of
restricted stock units will vest upon a Change in Control (as
defined in the Agreement) of the Company (provided such event satisfies the
definition of a change in control event under Section 409A) if restricted stock
granted under the Registrant’s Stock Incentive Plan also vests upon such event
and any balance in the Notional Account will vest and be paid out upon such
Change in Control. In all other cases, the vested portion of the
Supplemental Awards is generally payable in January of the year following the
year in which Mr. Gromek’s employment terminates.
Except
as noted above, Mr. Gromek’s entitlements upon termination of employment remain
the same. Thus, if Mr. Gromek’s employment is terminated by the Registrant
without Cause or by Mr. Gromek for Good Reason (each term as defined in the
Agreement) or if the Registrant provides notice of non-renewal of the Agreement
and terminates Mr. Gromek’s employment at the end of the term in circumstances
that would constitute a termination without Cause, in all cases not in
connection with a Change in Control (as defined in the agreement), Mr. Gromek
will be entitled to (i) payment of 1.5 times base salary and target bonus
opportunity, within 60 days of the termination date, (ii) a pro-rata bonus
for
the year of termination based on the Registrant’s performance for such year,
(iii) immediate vesting of 50% of any unvested restricted stock award, (iv)
two
years (or the remainder of the option’s term, if shorter) to exercise vested
options, (v) immediate vesting of 25% of any previously granted Supplemental
Award if termination is prior to April 14, 2008 and immediate vesting of 50%
of
any unvested Supplemental Award if termination is on or after such date;
provided that any balance in the Notional Account shall vest pro-rata based
on
employment during the period from April 14, 2008 through Mr. Gromek’s 65
th
birthday
and (vi)
continued participation in welfare benefit plans until the earlier of 18 months
from the date of his termination and the date he obtains equivalent coverage
from subsequent employment.
If
Mr. Gromek’s employment terminates upon his death or Disability (as defined in
the Agreement), he (or his legal representatives or estate, as the case may
be)
will be entitled to (i) a pro-rata bonus for the year of termination based
on
the Registrant’s performance for such year, (ii) a pro-rata Supplemental Award
for the year of termination and (iii) immediate vesting of all outstanding
equity awards and any previously granted Supplemental Award, with any vested
stock options remaining exercisable for two years following the termination
or
the remainder of the option term, if shorter.
If
Mr. Gromek’s employment is terminated by the Registrant without Cause or by Mr.
Gromek for Good Reason upon or within one year following a Change in Control
(as
defined in the Agreement), his employment is terminated by the Registrant
without Cause within 90 days prior to a Change in Control (and such termination
is in connection with, or in anticipation of, such Change in Control) or if
the
Registrant provides notice of non-renewal of the Agreement and terminates Mr.
Gromek’s employment at the end of the term in circumstances that would
constitute a termination without Cause and the term expires within the one
year
period following a Change in Control, Mr. Gromek will be entitled to (i) three
times base salary and target bonus, payable within 60 days of the termination
date, (ii) a pro-rata bonus for the year of termination based on the
Registrant’s performance for such year, (iii) an amount equal to 90% of the
total cash compensation used to determine the value of the Supplemental Award
granted immediately prior to the date of termination, payable within 60 days
of
the termination date, (iv) immediate vesting of all outstanding equity awards
and any previously granted Supplemental Award, with vested stock options
remaining exercisable for the remainder of their original terms and (v)
continued participation in welfare benefit plans until the earlier of 36 months
from the date of his termination and the date he obtains equivalent coverage
from subsequent employment. If any payments, benefits or entitlements
provided to Mr. Gromek under the Agreement or otherwise are subject to federal
excise tax as excess parachute payments and Mr. Gromek would be in a better
position on an after-tax basis, such payments, benefits or entitlements will
be
reduced such that no federal excise tax will apply.
If
Mr. Gromek’s employment terminates upon Retirement (defined as any voluntary
termination on or after he reaches age 63 (other than for Good Reason or upon
death or Disability)), he will be entitled to (i) continued vesting of any
stock
options granted on or after the Effective Date as if he had remained an
employee, with any such stock options which are exercisable as of his retirement
date remaining exercisable until the first anniversary of such date (or the
expiration of the option’s term, if shorter) and any such stock options vesting
after his retirement date remaining exercisable until the first anniversary
of
the vesting date (or the expiration of the option’s term, if shorter) and (ii)
if on his retirement date less than a majority of the members of the Board
are
members who were members on the Effective Date, the balance in the Notional
Account shall immediately vest upon the retirement date and be paid out in
January of the following year and any restricted stock or any Supplemental
Award
in the form of restricted stock units granted to Mr. Gromek after the Effective
Date will immediately vest as of the retirement date, provided that Mr. Gromek
will be restricted from selling such shares (other than to pay taxes associated
therewith) until the date such stock or units would have normally
vested.
Under
the
Agreement, Mr. Gromek is bound by a perpetual confidentiality covenant and
is
prohibited from competing with the Registrant both during employment and for
12
months following termination of employment (24 months in the case of
Retirement). Additionally, for 18 months following termination of
employment (24 months in the case of Retirement) he is prohibited from
soliciting or hiring employees of the Registrant and its affiliates and from
soliciting its clients.
A
copy of the Agreement is attached to this report as Exhibit 10.1 and is
incorporated herein by reference. The description of the Agreement is
qualified in its entirety by reference to the Agreement.
