SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 as amended
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
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( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
The Warnaco Group, Inc.
(Name of Registrant as Specified In Its Charter)
The Warnaco Group, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
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( ) Check box if any part of the fee is offset as provided by Exchange Act
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statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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THE WARNACO GROUP, INC.
90 Park Avenue
New York, New York 10016
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1994 Annual Meeting of the stockholders of The Warnaco Group, Inc.
will be held at the Helmsley Park Lane Hotel, 36 Central Park South, New York,
NY on May 12, at 10:00 a.m. for the following purposes:
1. To elect two directors for a term to expire at the 1997 Annual
Meeting of the stockholders and one director for a term to expire at the
1996 Annual Meeting of the stockholders.
2. To consider and vote upon a proposal to ratify the appointment of
Ernst & Young as the Company's independent auditors for fiscal 1994.
3. To consider and vote upon a proposal to adopt the 1993
Non-Employee Director Stock Plan (as described in the attached Proxy
Statement).
4. To consider and vote upon a proposal to adopt the Supplemental
Incentive Compensation Plan (as described in the attached Proxy
Statement).
5. To consider and vote upon a proposed amendment to the Company's
1993 Stock Plan (as described in the attached Proxy Statement) which would
change the manner in which the limit on the number of shares of the
Company's Common Stock available for awards thereunder would be
calculated.
6. To transact such other business as may properly come before the
meeting and any and all adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 31, 1994,
as the record date for the determination of the stockholders entitled to
notice of and to vote at the meeting and at any adjournment or postponement
thereof.
Stockholders are invited to attend the meeting. Whether or not you
expect to attend, WE URGE YOU TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the
meeting, you may vote your shares in person, which will revoke any previously
executed proxy.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the meeting, you must obtain a letter from the broker, bank
or other nominee confirming your beneficial ownership of the shares and bring
it to the meeting. In order to vote your shares at the meeting, you must
obtain from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important.
Please SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By order of the Board of Directors,
STANLEY P. SILVERSTEIN,
Secretary
New York, New York
April 13, 1994
THE WARNACO GROUP, INC.
90 Park Avenue
New York, New York 10016
PROXY STATEMENT
Introduction
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of The Warnaco Group, Inc., a
Delaware corporation (the "Company"), for the 1994 Annual Meeting of the
stockholders of the Company on May 12, 1994. The Notice of Annual Meeting,
this proxy statement and the accompanying proxy are first being mailed on or
about April 13, 1994 to stockholders of record as of the close of business
on March 31, 1994. You can ensure that your shares are voted at the meeting by
signing, dating and promptly returning the enclosed proxy in the envelope
provided. Sending in a signed proxy will not affect your right to attend the
meeting and vote in person. You may revoke your proxy at any time before it
is voted by notifying the Company's Transfer Agent, Chemical Bank, 450 W. 33rd
St., 15th Floor, New York, NY 10001 in writing, or by executing a subsequent
proxy, which revokes your previously executed proxy.
The Company's principal executive offices are located at 90 Park Avenue,
New York, New York 10016.
Voting of Proxies
Proxies will be voted as specified by the stockholders. Where specific
choices are not indicated, proxies will be voted for proposals 1, 2, 3, 4 and
5. Abstentions, broker non-votes or, in the case of proposal 1 only,
instructions on the accompanying proxy card to withhold authority to vote for
the nominated directors will result in such proposal or proposals receiving
fewer votes. Under the Delaware General Corporation Law, the Company's Amended
and Restated Certificate of Incorporation (the "Charter") and the Company's
Bylaws, (i) a plurality of the votes of the outstanding shares of Common Stock
entitled to vote and present, in person or by properly executed proxy, will be
required to elect a nominated director, (ii) the affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock
entitled to vote and present, in person or by properly executed proxy, will be
required in order to ratify the appointment of Ernst & Young as the Company's
independent auditors for fiscal 1994, (iii) the affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock
entitled to vote and present, in person or by properly executed proxy, will be
required in order to adopt the Company's 1993 Non-Employee Director Stock
Plan, (iv) the affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock entitled to vote and present, in person or
by properly executed proxy, will be required in order to adopt the
Supplemental Incentive Compensation Plan and (v) the affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock
entitled to vote and present, in person or by properly executed proxy, will be
required to approve the proposed amendment to the Company's 1993 Stock Plan.
Broker non-votes will not be considered entitled to vote and present for
purposes of proposals 3, 4 and 5.
Stockholders will not be entitled to appraisal rights in connection with
any of the matters to be voted on at the Annual Meeting.
1. Election of Directors
At the meeting, two directors are to be elected to serve for a term to
expire at the 1997 Annual Meeting of the stockholders. The nominees for these
positions are Linda J. Wachner and Andrew G. Galef. One director is to be
elected to serve for a term to expire at the 1996 Annual Meeting of the
stockholders. The nominee for this position is Joseph A. Califano, Jr.
Information regarding the Board's nominees for director is set forth on page
2. Information regarding the three directors whose terms expire in 1995 and
1996 is set forth on pages 2 and 3.
The accompanying proxy will be voted for the election of the Board's
nominees unless contrary instructions are given. If one or more of the
Board's nominees is unable to serve, which is not anticipated, the persons
named as proxies intend to vote, unless the number of nominees is reduced by
the Board of Directors, for such other person or persons as the Board of
Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS, WHICH
IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY CARD.
Nominees for Election to the Board of Directors for a Three-Year Term
to Expire at the 1997 Annual Meeting of the Stockholders
Mrs. Linda J. Wachner, 48, has been a Director, President and Chief
Executive Officer of the Company since August 1987, and the Chairman of the
Board since August 1991. Mrs. Wachner was a Director and President of the
Company from March 1986 to August 1987. Mrs. Wachner has been Chairman and
Chief Executive Officer of Authentic Fitness Corporation since May 1990. Mrs.
Wachner held various positions, including President and Chief Executive
Officer, with Max Factor and Company from December 1978 to October 1984. Mrs.
Wachner also serves as a Director of The Travelers Inc., Castle & Cooke Homes,
Inc. and Authentic Fitness Corporation.
Mr. Andrew G. Galef, 61, has been a Director of the Company since March
1986, and served as Chairman of the Board of Directors of the Company until
August 1991. Mr. Galef has been President of The Spectrum Group, Inc., a
private investment and management firm, since its incorporation in California
in 1978. Mr. Galef has been the Chairman of the Board of MagneTek, Inc., an
electrical products manufacturer, since July 1984 and has been Chief Executive
Officer of MagneTek, Inc. since September 1993. Mr. Galef has served as the
Chairman of the Board of Exide Corporation, a maker of industrial, commercial
and automotive batteries, from July 1982 until June 1989. Mr. Galef has
served as a director of Petco Animal Supplies, a retail animal food and
supplies company, since 1988. Mr. Galef served as Chairman of the Board of
Grantree Corporation, a furniture rental company, from 1987 to April 1992. In
March 1991, Grantree Corporation filed for bankruptcy under Chapter 11 of the
United States Bankruptcy Code and emerged from bankruptcy in March 1992. Mr.
Galef served as the Chairman of the Board of Aviall, Inc., an aviation support
and aircraft parts distribution company, and its predecessor company, from
1979 to 1985.
Nominee for Election to the Board of Directors for a Two-Year Term
to Expire at the 1996 Annual Meeting of the Stockholders
Mr. Joseph A. Califano, Jr., 62, has been a Director of the Company since
March 1992. Mr. Califano is Chairman and President of the Center on Addiction
and Substance Abuse at Columbia University. He is a director of Authentic
Fitness Corporation, Automatic Data Processing, Inc., Chrysler Corporation,
Kmart Corporation, New York Telephone Company, The Travelers Inc. and
Georgetown University, a trustee of New York University and the Twentieth
Century Fund, and a Governor of New York Hospital. He serves as Chairman of
the Institute for Social and Economic Policy in the Middle East at the Kennedy
School of Government at Harvard University and a member of the governing
council of the Institute of Medicine of the National Academy of Sciences. Mr.
Califano served as Secretary of the United States Department of Health,
Education and Welfare from 1977 to 1979. He was Special Assistant for
Domestic Affairs to the President of the United States for the period from
1965 to 1969. He is the author of eight books.
Members of the Board of Directors Continuing in Office;
Terms Expire at the 1995 Annual Meeting of the Stockholders
Mr. Dariush Ashrafi, 47, has been Senior Vice President and Chief
Financial Officer of the Company since July 1990. Prior to joining the
Company, Mr. Ashrafi was a partner with the international accounting and
auditing firm of Ernst & Young beginning in 1983, where he was a member of the
Financial Services Group specializing in mergers and acquisitions and was
responsible for audits of major clients, including those in the apparel
industry.
Mr. Stewart A. Resnick, 57, has served as the Chief Executive Officer and
Chairman of Franklin Mint Corporation since 1985. Mr. Resnick is also
Chairman of the Board of Roll International Corporation, a company which
through various divisions and affiliates has interests in the flowers-by-wire,
agriculture, transportation and real estate businesses. Mr. Resnick is a
member of the Board of Trustees of Bard College in New York, the Acquisitions
Committee of the National Gallery in Washington, D.C. and Co-Chairman of the
Marketing Department Advisory Board and member of the Management Education
Council of The Wharton School at the University of Pennsylvania.
Member of the Board of Directors Continuing in Office;
Terms Expire at the 1996 Annual Meeting of the Stockholders
Mr. Robert D. Walter, 64, has been a Director of the Company since
January 1987. Mr. Walter was a Vice President and Chief Financial Officer of
the Company from June 1986 to February 1988 pursuant to a consulting contract.
Mr. Walter served successively as Treasurer, Vice President and Chief
Accounting Officer, and Senior Vice President and Chief Financial Officer and
Member of the Office of the Chairman of Norton Simon Inc., a diversified
consumer products company, from 1971 to 1983. Since 1983, Mr. Walter has
served as a consultant to several companies and non-profit organizations,
including TLC Group, the New York Mission Society and the National Health
Foundation. Mr. Walter also serves as a Director of Authentic Fitness
Corporation.
Committees of the Board -- Board Meetings
The Board of Directors held 5 meetings in 1993. All of the Directors
attended at least 75% of the meetings of the Board and the respective
Committees of the Board of which they were a member during 1993.
The Board of Directors has the following standing committees:
Audit Committee
The Audit Committee, which met four times in 1993, recommends the
appointment of the Company's external auditors and meets with both internal
and external auditors to review the scope of their audits and the results
thereof. In addition, the Audit Committee reviews and comments on the
proposed plans of the internal and external auditors, audit fee proposals,
financial statements and other documents submitted to shareholders and
regulators and reviews the internal control policies and procedures of the
Company.
The members of the Audit Committee are Mr. Califano, Mr. Resnick and Mr.
Walter.
Pension Committee
The Pension Committee, which met four times in 1993, reviews and makes
recommendations concerning the Company's pension, profit sharing and other
employee benefit plans, recommends the appointment of the Plan Accountant and
Plan Actuary for the Company's pension and profit sharing plans and consults
with the persons so appointed.
The members of the Pension Committee are Mr. Resnick, Mrs. Wachner and
Mr. Walter.
Compensation Committee
The Compensation Committee, which met three times in 1993, reviews and
approves the remuneration arrangements for the officers and directors of the
Company and reviews and recommends new executive compensation or stock plans
in which the officers and/or directors are eligible to participate, including
the granting of stock options.
The members of the Compensation Committee are Mr. Califano, Mr. Galef and
Mr. Walter.
Compensation Committee Interlocks and Insider Participation
As noted above, the members of the Compensation Committee are Mr.
Califano, Mr. Galef and Mr. Walter. Mr. Walter was an officer of the Company
from June 1986 to February 1988 pursuant to a consulting contract.
Mr. Galef, a stockholder of the Company, is the sole stockholder of and
serves as President and a Director of The Spectrum Group, Inc. ("Spectrum").
Spectrum and the Company are parties to an agreement pursuant to which
Spectrum has agreed to render consulting and advisory services to the Company
through May 1996. The agreement provides for annual fees of $350,000 (plus
cost of living increases), with total payments not to exceed $500,000
including expenses, payable in equal monthly installments. Payments to
Spectrum during fiscal 1993 aggregated $500,000. During 1993, the Company
consulted with Spectrum from time to time on various strategic planning
matters.
In addition, pursuant to the Company's Amended and Restated 1988 Employee
Stock Purchase Plan, through 1991 Mr. Galef acquired 510,000 shares of the
Company's Common Stock in exchange for a non-recourse, non-interest bearing
note. Such shares were acquired at their then fair market value. The largest
aggregate amount of such indebtedness outstanding during 1993 was $2,378,000
and the amount of such indebtedness outstanding as of March 18, 1994 was
$1,725,000.
Mr. Califano and Mr. Walter are directors of Authentic Fitness
Corporation. Throughout the fiscal year, the Company provided certain
services to Authentic Fitness Corporation. Such services included contract
labor for production, occupancy services related to leased facilities,
computer service and laboratory, testing and other services, all of which
were charged at the Company's cost. In addition, the Company purchased
certain inventory from Authentic Fitness Corporation, which totaled
approximately $0.7 million in 1993. The total amount paid by Authentic
Fitness Corporation to the Company for such services during 1993 was $1.418
million.
In 1993, Authentic Fitness Corporation acquired from the Company its
Checotah, Oklahoma manufacturing facility for approximately $3.3 million, a
purchase price determined at arms-length on the basis of an independent
third-party appraisal.
Also, in 1993, the Company entered into a License Agreement with
Authentic Fitness Corporation to produce men's and women's sportswear and
men's dress shirts and furnishings bearing the CATALINA (Registered Trademark)
trademark owned by Authentic Fitness Corporation on terms and conditions
determined at arms-length on the basis of an independent third-party
appraisal. No payments pursuant to this agreement were made in 1993.
Payments will be made in the future as sales are made under the agreement.
The Company believes that the terms of the relationships and transactions
described above are at least as favorable to the Company as could have been
obtained from an unaffiliated third party.
Compensation of Directors
The Company does not pay any additional remuneration to employees for
serving as directors. For purposes of directors' compensation, Mr. Galef is
deemed an employee of the Company. Directors of the Company who are not
employees currently receive an annual retainer fee of $20,000 plus fees of
$1,500 per day for attendance at meetings of the Board of Directors and $1,000
per day for attendance at meetings of its committees. Directors of the
Company are also reimbursed for out-of-pocket expenses.
The Board of Directors has adopted, subject to stockholder approval, The
Warnaco Group, Inc. 1993 Stock Plan for Non-Employee Directors (the "Director
Stock Plan"). See proposal 3 on page 16. Each of the non-employee directors
(Messrs. Califano, Resnick and Walter) has been granted an option under the
Director Stock Plan to purchase 15,000 shares of Common Stock at an exercise
price of $31.625 per share. These options will be cancelled if stockholders
do not approve the Director Stock Plan at the 1994 Annual Meeting.
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 26, 1994, by
each of the Company's directors and nominees, all directors and officers as a
group and each person who is known by the Company to beneficially own five
percent or more of any class of the Company's voting securities.
<TABLE>
<CAPTION>
Shares Beneficially Owned
------------------------------------
Number Percent
Name of Shares of Shares
---- ---------- ---------
<S> <C> <C>
Directors, nominees and officers(a)
Linda J. Wachner(b)............................................... 3,023,000 13.8%
Dariush Ashrafi................................................... 101,250 *
William S. Finkelstein............................................ 97,250 *
Stanley P. Silverstein............................................ 22,950 *
Joseph A. Califano, Jr............................................ 1,000 *
Andrew G. Galef................................................... 858,000 4.1
Stewart A. Resnick................................................ 20,000 *
Robert D. Walter.................................................. 30,000 *
All directors and officers as a group (8 persons)................. 4,153,450 18.9
Other 5% stockholders
Fayez Sarofim & Co.(c)............................................ 1,311,455 6.2
2907 Two Houston Center
Houston, TX 77010
Metropolitan Life Insurance Company(d)............................ 1,659,050 7.9
One Madison Avenue
New York, NY 10010
Oppenheimer Group, Inc.(e)........................................ 4,083,685 19.4
Oppenheimer Tower
World Financial Tower
New York, NY 10281
<FN>
- -------------
* Less than 1%
(a) The business address of each of the directors, nominees and officers
is c/o The Warnaco Group, Inc., 90 Park Avenue, New York, New York
10016. The number of shares beneficially owned by the following
officers includes vested but unexercised options in the following
amounts: Mrs. Wachner, 950,000; Mr. Ashrafi, 18,250; Mr.
Finkelstein, 18,250 and Mr. Silverstein, 7,750.
(b) Includes 25,000 shares of Common Stock held by the Linda J. Wachner
Charitable Trust of which Mrs. Wachner is the Trustee. Mrs. Wachner
has the sole power to vote and no power to dispose of such 25,000
shares.
(c) Information based on a Schedule 13G dated February 11, 1994, which
reflects the collective beneficial ownership of shares of Common Stock
by Fayez Sarofim & Co. and its wholly-owned subsidiary, Sarofim Trust
Co., each of which is an investment advisor, as well as by Fayez S.
Sarofim individually. According to the Schedule 13G, Fayez S. Sarofim
has the sole power to vote and dispose of 250,000 of such shares, Fayez
Sarofim & Co. has neither the sole power to vote nor the sole power to
dispose of any of such shares and Fayez Sarofim & Co. and Fayez S.
Sarofim each have the shared power to vote 806,400 of such shares and
the shared power to dispose of all of such shares.
(d) Information based on a Schedule 13G dated February 11, 1994 filed by
Metropolitan Life Insurance Company ("Met Life") as parent holding
company of State Street Research and Management Company, Inc.
According to the Schedule 13G, Met Life has the sole voting power with
respect to 1,547,950 of such shares, no voting power with respect to
the remaining 111,100 shares and the sole power to dispose of 1,659,050
of such shares.
(e) Information based on a Schedule 13G dated February 1, 1994 filed by
Oppenheimer Group, Inc. ("Group") with the Securities and Exchange
Commission on behalf of Oppenheimer & Co., L.P., the parent company of
Group, and certain of Group's subsidiary companies, including
Oppenheimer Capital, a registered investment adviser, and/or certain
investment advisory clients or discretionary accounts of such
subsidiary companies, reporting their collective beneficial ownership
of the shares of Common Stock set forth in the table. According to the
Schedule 13G, neither Group nor Oppenheimer Capital has the sole power
to vote or dispose of any of such shares, Group has the shared power to
vote and dispose of all of such shares and Oppenheimer Capital has the
shared power to vote and dispose of 4,083,685 of such shares.
</TABLE>
Certain Relationships and Certain Transactions
Pursuant to the Company's Amended and Restated 1988 Employee Stock
Purchase Plan, through 1991 the individuals discussed below acquired shares of
the Company's Common Stock in exchange for notes payable to the Company. In
the case of Messrs. Ashrafi, Brooks, Finkelstein and Silverstein, such notes
were full recourse and, in the case of Mr. Galef and Mrs. Wachner, such notes
were non-recourse and non-interest-bearing. The largest aggregate amount of
indebtedness outstanding during fiscal 1993 was $487,000 for Mr. Ashrafi,
$16,000 for Mr. Brooks, $487,000 for Mr. Finkelstein, $106,000 for Mr.
Silverstein, $2,378,000 for Mr. Galef and $6,016,000 for Mrs. Wachner. The
aggregate amount of indebtedness outstanding and the rate of interest thereon,
if applicable, as of March 18, 1994, were $444,000 and 8.6% for Mr.
Finkelstein, $29,000 and 8% for Mr. Silverstein, $1,725,000 for Mr. Galef and
$6,016,000 for Mrs. Wachner.
In 1990, the Company sold substantially all of the assets of its
Activewear Division to Authentic Fitness Corporation. Pursuant to such
transaction, the Company acquired and continues to own common stock
representing approximately 3% of Authentic Fitness Corporation's fully
diluted equity. Mrs. Wachner is the Chairman of the Board, Chief
Executive Officer and a significant stockholder, and Messrs. Califano,
Finkelstein and Walter are directors, of Authentic Fitness Corporation.
Throughout the fiscal year, the Company provided certain services to
Authentic Fitness Corporation. Such services included contract labor for
production, occupancy services related to leased facilities, computer
service and laboratory, testing and other services, all of which were
charged at the Company's cost. In addition, the Company purchased certain
inventory from Authentic Fitness Corporation, which totaled approximately
$0.7 million in 1993. The total amount paid by Authentic Fitness
Corporation to the Company for such services during 1993 was $1.418
million.
In 1993, Authentic Fitness Corporation acquired from the Company its
Checotah, Oklahoma manufacturing facility for approximately $3.3 million, a
purchase price determined at arms-length on the basis of an independent
third-party appraisal.
Also, in 1993, the Company entered into a License Agreement with
Authentic Fitness Corporation to produce men's and women's sportswear and
men's dress shirts and furnishings bearing the CATALINA (Registered
Trademark) trademark owned by Authentic Fitness Corporation on terms and
conditions determined at arms-length on the basis of an independent
third- party appraisal. No payments pursuant to this agreement were made in
1993. Payments will be made in the future as sales are made under the
agreement.
The Company believes that the terms of the relationships and transactions
described above are at least as favorable to the Company as could have been
obtained from an unaffiliated third party.
Compensation of Executive Officers
Set forth below are tables prescribed by the proxy rules of the
Securities and Exchange Commission which present compensation information for
the Company's chief executive officer and the four other most highly
compensated executive officers (including one former executive officer) whose
aggregate salary and bonus exceeded $100,000 in 1993 (the "Named Executives").
The Company has no executive officers other than the Named Executives.
SUMMARY COMPENSATION TABLE
The following table discloses compensation paid or to be paid to the
Named Executives with respect to each of the three fiscal years ended January
4, 1992, January 2, 1993 and January 8, 1994.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------- -----------------------------
Awards Payouts
------------------ -------
Other Securities
Annual Restricted Underlying All other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus sation Award SARs Payouts sation
------------------ ---- ------ -------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Linda J. Wachner............ 1993 $2,360,028 $ 0 (a) -- 700,000 -- --
Chairman, President and 1992 1,860,028 1,300,000 (a) -- 250,000 -- --
Chief Executive Officer 1991 1,700,000 1,300,000 $80,000(b) -- -- -- --
Dariush Ashrafi............. 1993 282,812 226,000 (a) -- 75,000 -- --
Senior Vice President 1992 250,000 226,875 (a) -- 24,000 -- --
Chief Financial Officer 1991 243,750 80,000 (a) -- -- -- --
William S. Finkelstein...... 1993 245,431 175,000 (a) -- 75,000 -- --
Senior Vice President 1992 225,000 175,812 (a) -- 24,000 -- --
Controller 1991 215,000 100,000 (a) -- -- -- --
Stanley P. Silverstein...... 1993 203,750 129,000 (a) -- 45,000 -- --
Vice President, 1992 194,167 129,500 (a) -- 8,000 -- --
General Counsel 1991 185,000 45,500 (a) -- -- -- --
and Secretary
Wallis H. Brooks(c)......... 1993 112,500 30,000 (a) -- -- -- --
Treasurer 1992 114,231 53,250 (a) -- -- -- --
<FN>
- -------------
(a) Other Annual Compensation was less than the lesser of $50,000 and 10% of
such officer's annual salary and bonus for such year.
(b) Such amount included perquisites of which $68,732 was for use of company
transportation.
(c) Mr. Brooks's employment by Warnaco terminated on September 30, 1993.
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1993
to the Named Executives.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term(e)
----------------------------------------------------- -----------------------------------------
Percent of
Total Options/
Number of SARs
Securities Granted to Exercise
Underlying Employees or Base
Options/SARs in Fiscal Price Expiration
Name Granted(#) Year ($/share) Date 0%(f) 5% 10%
---- ----------- ---------- --------- ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Linda J. Wachner.............. 200,000(a) 16.6% $36.625 Feb. 11, 2003 $0 $ 4,606,800 $ 11,674,600
500,000(a) 41.5 31.625 Aug. 12, 2003 0 9,943,500 25,201,500
Dariush Ashrafi............... 25,000(b) 2.1 36.625 Feb. 11, 2003 0 575,850 1,459,325
50,000(c) 4.1 31.625 Aug. 12, 2003 0 994,350 2,520,150
William S. Finkelstein........ 25,000(b) 2.1 36.625 Feb. 11, 2003 0 575,850 1,459,325
50,000(c) 4.1 31.625 Aug. 12, 2003 0 994,350 2,520,150
Stanley P. Silverstein........ 15,000(b) 1.2 36.625 Feb. 11, 2003 0 345,510 875,595
30,000(c) 2.5 31.625 Aug. 12, 2003 0 596,610 1,512,090
Wallis H. Brooks(d)........... 3,000(b) 0.2 36.625 Feb. 11, 2003 N/A N/A N/A
All Shareholders.............. N/A N/A N/A N/A 0 433,488,871 1,098,664,433
All Optionees................. 325,000 27.0 36.625 Feb. 11, 2003 0 7,486,050 18,971,225
880,000 73.0 31.625 Aug. 12, 2003 0 17,500,560 44,354,640
<FN>
- -------------
(a) All of such options are currently vested. Such options have
stock-for-stock exercise and tax withholding features, which allow the
holder, in lieu of paying cash for the exercise price and any tax
withholding upon exercise, to have the Company commensurately reduce the
number of shares of Common Stock to which they would otherwise be entitled
upon exercise of such options.
(b) Twenty-five percent of such options vested on February 11, 1994. The
remaining 75% of such options vest 25% per year until fully vested on
February 11, 1997. Such options have stock-for-stock exercise and tax
withholding features, which allow the holders, in lieu of paying cash for
the exercise price and any tax withholding upon exercise, to have the
Company commensurately reduce the number of shares of Common Stock to
which they would otherwise be entitled upon exercise of such options.
(c) Such options will vest 25% per year beginning August 12, 1994 until fully
vested on August 12, 1997. Such options have stock-for-stock exercise and
tax withholding features, which allow the holders, in lieu of paying cash
for the exercise price and any tax withholding upon exercise, to have the
Company commensurately reduce the number of shares of Common Stock to
which they would otherwise be entitled upon exercise of such options.
(d) These options were cancelled as of the date of Mr. Brooks's termination of
employment with the Company.
(e) The dollar amounts under these columns are the result of calculations at
0% and at the 5% and 10% rates set by the SEC and therefore are not
intended to forecast possible future appreciation, if any, of the
Company's stock price.
(f) No gain to the optionees is possible without an increase in stock price
appreciation, which will benefit all shareholders commensurately. A zero
percent gain in a stock price appreciation will result in zero dollars for
the optionee.
</TABLE>
Option Exercises and Year-End Value Table
The following table provides information on option/SAR exercises in
fiscal 1993 by the Named Executives and values of such officers' unexercised
options at January 8, 1994.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of
Unexercised Unexercised
Options/SARs at In-the-Money
Fiscal Year-End Options/SARs at
(#) Fiscal Year-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
---- --------------- ----------- --------------- ------------------
<S> <C> <C> <C> <C>
Linda J. Wachner.................... 0 $0.00 950,000/0 $0/$0
Dariush Ashrafi..................... 0 $0.00 6,000/93,000 $0/$0
William S. Finkelstein.............. 0 $0.00 6,000/93,000 $0/$0
Stanley P. Silverstein.............. 0 $0.00 2,000/51,000 $0/$0
Wallis H. Brooks.................... 0 $0.00 0/0 $0/$0
</TABLE>
Pension Plan
The following table sets forth the annual pension benefits payable at
age 65 pursuant to the Company's Employee Retirement Plan which provides such
pension benefits to all qualified personnel based on the average of the
highest five (increasing to ten years by the year 1999 and fifteen years by
the year 2004) consecutive calendar years' compensation multiplied by the
years of credited service. Such benefits payable are expressed as
straight-life annuity amounts and are not subject to reduction for social
security or other offset. The credited years of service as of January 8, 1994
for the Named Executives are: Mrs. Wachner, seven years, eight months; Mr.
Ashrafi, three years, six months; Mr. Finkelstein, five years, ten months; Mr.
Silverstein, nine years, nine months; and Mr. Brooks five years, two months.
The current remuneration covered by the Company's Retirement Plan for each
such individual other than Mr. Brooks is $235,840 and for Mr. Brooks is
$146,387, which amounts are included in the Summary Compensation Table under
"Salary" and "Bonus."
ANNUAL BENEFITS PAYABLE AT AGE 65
<TABLE>
<CAPTION>
Years of Credited Service
Average Compensation ---------------------------------------------------------------
(Best 5 Years) 5 10 15 20 25 30
-------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000..................................... $ 7,271 $14,541 $21,812 $29,083 $ 38,353 $ 43,624
$150,000..................................... 11,271 22,541 33,812 45,083 56,353 67,624
$200,000..................................... 15,271 30,541 45,812 61,083 76,353 91,624
$250,000..................................... 19,271 38,541 57,812 77,083 96,353 115,624
$300,000..................................... 23,271 46,541 69,812 93,083 116,353 139,624
</TABLE>
Employment Agreement
In 1991, the Company entered into an employment agreement with Mrs.
Wachner (the "Employment Agreement"), which sets forth the terms and
conditions of Mrs. Wachner's employment. The Employment Agreement, which
will terminate on January 6, 1999, unless extended, provides for Mrs.
Wachner's employment as Chairman, President and Chief Executive Officer at
an annual base salary, which was initially established at $1.76 million per
year (subject to adjustment for changes in the cost of living) as well as
certain other benefits and reimbursement of expenses. The contract
provides for increases in the rate of base salary from time to time, as
determined by the Company. In accordance with this provision, Mrs.
Wachner's base salary for 1993 was $2.3 million. Her base salary in prior
years was as set forth in the table on page 8. The contract also provides
that Mrs. Wachner will receive an annual bonus based upon the Company's
achievement of an annually increasing minimum EBITDA (earnings before
interest, taxes, depreciation and amortization). Under this bonus
arrangement, Mrs. Wachner is entitled to receive a bonus in the amount by
which EBITDA exceeds the threshold EBITDA for such year, subject to a
maximum bonus amount of $1.3 million. Threshold EBITDAs were established
at the time the contract was entered into and increase annually from the
initial date of the arrangement: for 1993 the threshold was $110 million
and for 1994 the threshold is $115 million. The Employment Agreement also
provides for supplemental bonuses in the Company's discretion. The
Employment Agreement specifically permits Mrs. Wachner to spend reasonable
time managing her own affairs as well as the business of Authentic Fitness
Corporation, a public company, which purchased substantially all of the
Company's Activewear Division in 1990 and of which Mrs. Wachner is the
Chairman of the Board and Chief Executive Officer.
Under the Employment Agreement, Mrs. Wachner will be entitled to certain
severance benefits if the Company terminates her employment other than for
"cause" or if Mrs. Wachner terminates her employment for "good reason." The
definition of good reason may include a change of control of the Company. If
the Company terminates Mrs. Wachner's employment without cause or if Mrs.
Wachner terminates her employment for good reason, she would be entitled to
receive a lump sum payment equal to five times the sum of her highest annual
base salary and the highest annual bonus paid to her. In the event that any
amount of benefit paid to Mrs. Wachner becomes subject to the excise tax
imposed under Section 4999 of the Internal Revenue Code, the Company will pay
to Mrs. Wachner an additional amount such that after the payment of all income
and excise taxes, she will be in the same after-tax position as if no excise
tax had been imposed.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
administering the executive compensation plans and programs of the Company and
for making recommendations to the Board of Directors regarding the
compensation of and benefits provided to the Chief Executive Officer and the
other executive officers. The names of the Committee members are set forth
below this report.
General Policies Regarding Compensation of Executive Officers
In establishing compensation and benefit levels for executive officers,
the Committee seeks to (1) attract and retain individuals of superior ability
and managerial talent (2) motivate executive officers to increase Company
performance primarily for the benefit of its shareholders but also for the
benefit of its customers and other constituencies, and (3) reward executives
for exceptional individual contributions to the achievement of the Company's
business objectives. To these ends, the Company's executive compensation
package consists of salary, variable annual cash compensation (bonus) and
stock-based long-term incentive awards.
Base Salary. Salary levels generally are determined based on the
Committee's subjective assessment of prevailing levels among the Company's
competitors. The Company's competitors, for this purpose, include certain of
the companies included in the industry peer group index used for comparison
with the Company's performance in the performance graph following this report,
as well as other companies with which, in the Committee's view, the Company
competes for executive talent. These companies may include nonpublic
companies and companies in related industries such as retailing or general
apparel manufacturing.
In general, the Committee attempts to set base salaries at levels that
will attract and retain highly qualified individuals. In selected cases, the
Committee may feel that excellent executive talent may only be attracted and
retained by compensation in excess of prevailing levels among the Company's
competitors. As the Company has only four executive officers, and in view of
the considerations enumerated below under "1993 Compensation" and
"Compensation of the Chief Executive Officer," the Committee believes that
base salaries at the high end of the range for the competitor group for all
executive officers, and Mrs. Wachner in particular, are appropriate.
In making such judgments regarding the appropriate level for any
particular officer, as well as in determining which companies should form the
comparison group for this purpose, the Committee from time to time may consult
with independent compensation consultants. However, the Committee ultimately
reviews the case of each executive officer individually, relying heavily on
the recommendations of the Chief Executive Officer as well as on their own
subjective judgment. The Committee did not engage outside consultants during
1993, except in connection with the design of the proposed Supplemental
Incentive Compensation Plan described in proposal 4.
Annual Bonus. The Committee generally believes that, at higher executive
levels, a greater percentage of an individual's total annual cash compensation
opportunity should consist of variable compensation tied to the Company's
performance. Mrs. Wachner has a bonus opportunity under her Employment
Agreement that is approximately 56% of base salary and is based on earnings
before interest, taxes, depreciation and amortization ("EBITDA"), as described
below. See also "Employment Agreement" on page 10. Annual bonus
opportunities for other executive officers range from 88% to 125% of base
salary.
The Committee's practice with regard to awarding annual bonuses to
executive officers has been to review the Company's performance after the
close of the fiscal year, taking into account various measures of
performance the Committee has determined in its sole discretion to be
appropriate under the circumstances, and assigning such weight to any such
factors as it determines to be appropriate. The Committee focuses
particularly on such factors as growth in earnings (measured by earnings
before interest and taxes ("EBIT") or EBITDA), cash flow, distribution of
product and the development of innovative ideas in determining whether or
not bonuses are paid. The Committee also pays bonuses to selected
individuals on an ad hoc basis in connection with or in recognition of
special events or projects such as major acquisitions, financings and
licensing arrangements. In making all of such determinations, the
Committee takes into consideration and gives significant weight to the
recommendations of the Chief Executive Officer with respect to bonuses of
executive officers other than herself.
For 1994, the Committee intends to maintain its customary approach to
determining annual bonuses as described above. However, the Committee has
recommended and is seeking shareholder approval for a supplemental incentive
compensation plan for all executive officers and other senior management. See
proposal 4. The new supplemental plan will provide a formula-based
arrangement that is prospective in operation and will reward executive
officers and selected senior managers for the achievement of a return to
Company investors that exceeds the industry median. The new supplemental plan
is designed to ensure that amounts payable thereunder are fully deductible
under Section 162(m) of the Internal Revenue Code, as discussed below.
Long-Term Incentive Compensation. Stock-based incentives, at the present
time consisting solely of stock options granted at 100% of the stock's fair
market value on the grant date, constitute the long-term portion of the
Company's executive compensation package. Stock options provide an incentive
for executives to increase the Company's stock price and therefore, the return
to the Company's shareholders. The Committee has not heretofore granted stock
appreciation rights ("SARs") or other stock- based awards, although it has the
authority to do so under the Company's stock option plans.
Limitations on Deductibility of Executive Compensation. Section 162(m)
of the Internal Revenue Code, enacted as part of the Revenue Reconciliation
Act of 1993, limits the deductibility of compensation paid to certain
executive officers of the Company beginning with the Company's taxable year
1994. To qualify for deductibility under Section 162(m), compensation in
excess of $1,000,000 per year paid to the Chief Executive Officer and the four
other most highly compensated executive officers at the end of such fiscal
year generally must be either (1) paid pursuant to a written binding contract
in effect on February 17, 1993 or (2) "performance-based" compensation as
determined under Section 162(m). In order to be considered
"performance-based," for this purpose, compensation must be paid solely on
account of the attainment of one or more preestablished performance goals
established by a committee of two or more "outside directors," pursuant to an
arrangement that has been disclosed to and approved by shareholders. Also, in
order for an arrangement to give rise to fully deductible "performance-based"
compensation, the terms of the arrangement must preclude the exercise of any
discretion in the administration of the plan that would have the effect of
increasing compensation paid thereunder.
The Committee generally intends to comply with the requirements for full
deductibility of executive compensation under Section 162(m). However, the
Committee will balance the costs and burdens involved in such compliance
against the value of the tax benefits to be obtained by the Company thereby,
and may in certain instances pay compensation that is not fully deductible if
in its determination such costs and burdens outweigh such benefits.
1993 Compensation
The Committee increased base salaries for the executive officers named
in the Summary Compensation Table, other than Mrs. Wachner, by
approximately 5-15% in 1993. In exercising its subjective discretion to
authorize such increases, the Committee considered salary levels of its
competitors, as described above, as well as the Company's strong financial
performance, as evidenced by continuing improvement in revenues, which
increased by 12.6% in 1993, and earnings per share from continuing
operations before nonrecurring expenses and income tax benefits, which
increased by $.67 in 1993, a 33% increase over the previous year. Because
of a nonrecurring charge in 1993 relating to the reconfiguration of the
Company's Menswear manufacturing operations, the Committee did not pay 1993
bonuses based on the achievement of specific business objectives. Thus,
the amounts shown as 1993 bonus in the Summary Compensation Table for the
three executive officers other than Mrs. Wachner reflect discretionary ad
hoc bonus amounts awarded in 1993 based solely on special achievement in
connection with the successful restructuring of the Company's long-term
debt.
In awarding the options granted to the named executive officers as shown
in the table labelled Option/SAR Grants in Last Fiscal Year, the Committee
considered the number of option shares available for grant under the Company's
stock option plan and the shareholder dilution represented by the total number
of options authorized and outstanding under all such plans. The Committee
then determined in its discretion the number of options it wished to grant
during 1993 and allocated the options available for grant among executive
officers based on its subjective assessment of individual performance,
seniority and relative position level. In making such assessments, the
Committee reviewed the number of outstanding options held by each executive
officer. In making these determinations and allocations, the Committee also
relied on the recommendations of the Chief Executive Officer.
The Committee determined to make larger option grants in 1993 than in
previous years both to enhance the retention effect of the options and in
anticipation of the adverse effect of proposed changes in the accounting
requirements affecting options.
Compensation of the Chief Executive Officer
Mrs. Wachner's annual base salary and annual bonus are governed by
her 1991 Employment Agreement with the Company, described on page 10. This
agreement provides for increases in base salary in the Committee's
discretion. The last such increase occurred in 1992.
In 1993, the Committee recommended and the Board approved two option
grants to Mrs. Wachner: a grant of 200,000 options in February 1993 and a
grant of 500,000 options in August 1993. These options were granted at the
then market prices, $36.625 and $31.625, respectively. These grants were based
on the factors described above.
Joseph A. Califano, Jr.
Andrew G. Galef
Robert D. Walter
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below compares cumulative total return
of the Company, the NYSE Composite Index and a comparable industry index
selected by the Company as described below. The stock price performance shown
on the graph below is not necessarily indicative of future price performance.
(GRAPHIC A)
(SEE APPENDIX A FOR DESCRIPTION OF GRAPHIC MATERIAL)
<TABLE>
<CAPTION>
10/11/91 12/31/91 3/31/92 6/30/92 9/30/92 12/31/92 3/31/92 6/30/93 9/30/93 12/31/93
-------- -------- ------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Warnaco 100 112 158 137 164 180 142 153 141 127
NYSE Composite Index 100 109 106 107 109 114 119 119 122 123
Industry Index 100 115 132 123 147 160 140 126 122 115
Revised Industry Index 100 115 118 111 121 125 94 84 80 75
</TABLE>
The industry index for 1993 is a peer group index selected by the
Company and is comprised of the following apparel companies, as adjusted for
relative market capitalization: Crystal Brands, Inc., Fruit of the Loom, Inc.,
Liz Claiborne, Inc., Oxford Industries, Inc., Russell Corporation,
State-O'-Maine, Inc. and VF Corporation.
The industry index used by the Company in 1992 includes Phillips-Van
Heusen Corporation in addition to the companies set forth above. This company
will be omitted from the peer group in 1993 and subsequent years because the
Company believes Phillips-Van Heusen Corporation's increasing focus on
retailing makes it no longer appropriate for comparison with apparel
manufacturers.
2. Appointment of Auditors
On the recommendation of the Audit Committee of the Board of Directors,
the Board has appointed Ernst & Young as auditors for the year 1994, subject
to ratification by the stockholders. Ernst & Young has audited the financial
statements of the Company since 1986.
Representatives of Ernst & Young are expected to attend the 1994 Annual
Meeting, where they will have the opportunity to make a statement if they wish
to do so and will be available to answer appropriate questions from the
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF AUDITORS, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE ENCLOSED
PROXY CARD.
3. Approval of the 1993 Stock Plan for Non-Employee Directors
The Company's Board of Directors has recommended, and at the meeting the
stockholders will be asked to approve, the adoption of The Warnaco Group, Inc.
1993 Stock Plan for Non-Employee Directors (the "Director Stock Plan"). The
following summary of the Director Stock Plan is qualified in its entirety by
reference to the text of the Director Stock Plan, which is attached hereto as
Annex I.
The purpose of the Director Stock Plan is to promote the interests of the
Company and its stockholders by increasing the proprietary and vested interest
of non-employee directors in the growth and performance of the Company.
The Director Stock Plan provides for awards of nonqualified options to
directors of the Company who are not employees of the Company or its
affiliates and who have not, within one year immediately preceding the
determination of such director's eligibility, received any stock-based award
under any other plan of the Company or its affiliates ("Eligible Directors").
There are currently three Eligible Directors, although this number is expected
to vary from time to time depending on the composition of the Board. The
options shall be exercisable in whole or in part at all times during the
period beginning on the date of grant until the earlier of (i) ten years from
the date of grant and (ii) one year from the date on which an optionee ceases
to be an Eligible Director. The exercise price per share of Common Stock
shall be 100% of the fair market value per share on the date the option is
granted.
Pursuant to the Director Stock Plan, subject to stockholder approval,
each Eligible Director has been granted an option to purchase 15,000 shares of
Common Stock. In addition, (i) upon first election or appointment to the
Board, each newly elected Eligible Director will be granted an option to
purchase 15,000 shares of Common Stock and (ii) immediately following each
Annual Shareholders Meeting, commencing with the meeting in 1994, each
Eligible Director will be granted an option to purchase 5,000 shares of Common
Stock as of the date of such meeting.
The maximum number of shares of Common Stock in respect of which awards
may be granted under the Director Stock Plan is 200,000. Shares of Common
Stock subject to awards that are forfeited, terminated, canceled or settled
without the delivery of Common Stock will again be available for awards.
Also, shares tendered to the Company in satisfaction or partial satisfaction
of the exercise price of any award will increase the number of shares
available for awards to the extent permitted by Rule 16b-3 under the
Securities Exchange Act of 1934. The shares of Common Stock to be delivered
under the Director Stock Plan will be made available from the authorized but
unissued shares of Common Stock or from treasury shares.
The Director Stock Plan will be administered by the Board of Directors,
who are authorized to interpret the Director Stock Plan, to establish, amend,
and rescind any rules and regulations relating to it and to make all other
determinations necessary or advisable for its administration; provided,
however, that the Board shall have no discretion with respect to the selection
of directors to receive options, the number of shares of Common Stock subject
to any such options, the purchase price thereunder or the timing of grants of
options. The determinations of the Board in the administration of the
Director Stock Plan, as described herein, shall be final and conclusive. In
addition, the Secretary of the Company is authorized to take such actions of a
ministerial nature as shall be necessary to administer the Director Stock
Plan.
The exercise price of options may be satisfied in cash or, unless
otherwise determined by the Board, by exchanging shares of Common Stock owned
by the optionee, or by a combination of cash and shares of Common Stock. The
ability to pay the option exercise price in shares of Common Stock would
enable an optionee to engage in a series of successive stock-for-stock
exercises of an option (sometimes referred to as "pyramiding") and thereby
fully exercise an option with little or no cash investment. However, the
Board's current policy is to require any shares tendered in satisfaction of
the option exercise price to have been owned by the exercising optionee for at
least six months.
In the event of a stock split, stock dividend, subdivision or combination
of the shares of Common Stock or other change in corporate structure affecting
the shares of Common Stock, the number of shares of Common Stock authorized by
the Director Stock Plan and the number of shares subject to options granted
thereunder shall be increased or decreased proportionately, as the case may
be, with appropriate corresponding adjustment in the purchase price per share
thereunder.
The options granted under the Director Stock Plan may not be assigned or
transferred, except by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order.
No award may be granted under the Director Stock Plan after the Company's
Annual Stockholders Meeting in 2001.
The Director Stock Plan may be amended by the Board, as it shall deem
advisable or to conform to any change in any law or regulation applicable
thereto; provided, that the Board may not, except in the limited circumstances
described above, without the authorization and approval of shareholders: (i)
increase the number of shares of Common Stock which may be purchased pursuant
to options, either individually or in the aggregate, (ii) change the
requirement that option grants be priced at fair market value, (iii) modify in
any respect the class of individuals who constitute Eligible Directors or (iv)
materially increase benefits. The provisions governing eligibility and the
grant, terms and conditions of the options may not be amended more often than
once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended (the "Code"), the Employee Retirement Income
Security Act ("ERISA"), or the rules under either such statute.
Set forth below is a summary of the awards made during 1993 pursuant to
the Director Stock Plan:
NEW PLAN BENEFITS
Director Stock Plan
Name and Position Dollar Value ($) Number of Units
- ----------------- ---------------- ---------------
Non-Employee Director Group n/a 45,000
The market value of the Common Stock as of April 7, 1994 was $32.875 per
share. The Director Stock Plan is not subject to any provision of ERISA and is
not qualified under Section 401(a) of the Code.
Certain Federal Income Tax Consequences of the Director Stock Plan Under
Current Law
When an optionee exercises an option, the difference between the option
price and any higher fair market value of the shares of Common Stock,
generally on the date of exercise, will be ordinary income to the optionee and
generally will be allowed as a deduction for federal income tax purposes to
the Company.
Any gain or loss realized by an optionee on disposition of the Common
Stock acquired upon exercise of an option generally will be capital gain or
loss to such optionee, long-term or short-term depending on the holding
period, and will not result in any additional tax consequences to the Company.
The optionee's basis in the shares for determining gain or loss on the
disposition will generally be the fair market value of such shares determined
generally at the time of exercise. Certain additional special rules apply if
the exercise price for an option is paid in shares of Common Stock previously
owned by the optionee rather than in cash.
The foregoing discussion summarizes the federal income tax consequences
of the Director Stock Plan based on current provisions of the Code which are
subject to change. This summary does not cover any state or local tax
consequences of participation in the Director Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1993
NON-EMPLOYEE DIRECTOR STOCK PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 3 ON THE
ENCLOSED PROXY CARD.
4. Approval of The Warnaco Group, Inc. Supplemental Incentive Compensation
Plan
The Company's Board of Directors has recommended, and at the meeting the
stockholders will be asked to approve, the adoption of The Warnaco Group, Inc.
Supplemental Incentive Compensation Plan (the "Supplemental Plan"). The
following summary of the Supplemental Plan is qualified in its entirety by
reference to the text thereof which is attached hereto as Annex II.
The purpose of the Supplemental Plan is to establish an incentive
arrangement for senior management of the Company that will induce and reward
extraordinary and superior performance of the Company as compared with other
companies in the industries in which the Company competes.
The Supplemental Plan is intended to result in "performance-based
compensation" for purposes of Section 162(m) of the Code. It is designed to
provide for supplemental bonus payments to senior executives of the Company
when the Company has significantly outperformed its competitors. Maximum
supplemental bonus awards will be payable under the Supplemental Plan only
when the Company has equalled or exceeded the performance of each of its
material competitors for the fiscal year. Based on current performance of the
Company and its competitors, the Company would have to achieve significant
improvements in earnings to achieve this result.
Maximum supplemental bonus awards for named executive officers under the
Supplemental Plan are expressed as a percentage of the officer's base salary
at the beginning of the year and are established under the plan as follows:
Officer, Title or Position Percentage
- -------------------------- ----------
Chief Executive Officer ........................................... 300%
Executive and Senior Vice Presidents (each) ....................... 200%
Vice Presidents and other officers (each) ......................... 140%
Division Presidents and other key employees (each)not to exceed ... 200%
The Committee may reduce maximum supplemental bonus opportunities for
any of the above positions or for any executive in such category in any year
at its discretion and may also provide and establish bonus percentages for
additional participants. Currently, there are two Executive or Senior Vice
Presidents, one Vice President and seven Division Presidents or key employees
who are expected to participate in the Supplemental Plan.
Under the Supplemental Plan, the Compensation Committee of the Board will
establish a peer group at the beginning of each fiscal year consisting of the
companies it believes to be the Company's principal material competitors.
After the close of each fiscal year, the Committee will determine the
company's return on equity and compare it to the return on equity of the other
companies in the peer group.
If for any year the Company's return on equity is in the 100th percentile
of companies in the peer group, participants in the Supplemental Plan will be
eligible to receive their maximum supplemental bonus awards. For any year for
which the Company's return on equity is in the 75th percentile or higher,
participants will be eligible to receive 75% of their maximum supplemental
bonus awards. For any year for which the Company's return on equity is in the
50th percentile but below the 75th percentile, participants will be eligible
to receive 50% of their maximum supplemental bonus awards. If the Company's
performance is not at least in the 50th percentile as compared to the return
on equity of companies in the peer group for a bonus year, no supplemental
bonus awards will be paid under the Supplemental Plan for such year.
For any year, the Committee may, but is not required to, use return on
capital employed, earnings per share, market share or other appropriate
criteria rather than return on equity for purposes of the peer group
comparison. In determining return on equity or return on capital employed,
the Supplemental Plan provides that net income shall be reduced by preferred
stock dividends, if any, and shall be further adjusted by disregarding gains
and losses from discontinued operations and by reversing or disregarding the
cumulative effect of changes in accounting principles and changes in tax law
as well as extraordinary and nonrecurring items, as defined under generally
accepted accounting principles.
A supplemental bonus award to any participant shall be reduced, but
not below, to the extent that such supplement award, together with other
cash bonuses paid to such participant in respect of such year (other than
bonuses paid at the Committee's discretion) would exceed such participant's
maximum supplemental bonus award under the Supplemental Plan. In addition,
the Committee may in its sole discretion determine to reduce the amount of
any award otherwise payable under the terms of the Supplemental Plan.
The Committee may determine to pay awards in cash or in securities of the
Company, including securities and awards under the Company's stock option
plans. The Committee may pay awards in installments, except that at least 50%
of an award must be paid in cash or vested securities at the time of award.
If the Committee determines to defer a portion of the award, it may attach
such conditions and restrictions to the receipt of any deferred amounts as it
determines to be in the best interests of the Company. All deferred amounts
will be paid immediately in the event of a change in control of the Company.
The following table shows the amounts that would have been payable to the
executive officers named in the Summary Compensation Table if the Supplemental
Plan had been in effect for fiscal year 1993, assuming that the Company's
return on equity for 1993 was above the 75th percentile for the peer group:
NEW PLAN BENEFITS
Number
of
Name and Position Dollar Value($) Units
----------------- --------------- -----
Linda J. Wachner, Chairman, President
and Chief Executive Officer ..................... $5,310,000 N/A
Dariush Ashrafi, Senior Vice President
and Chief Financial Officer ..................... 375,000 N/A
William S. Finkelstein, Senior Vice
President and Controller ........................ 337,500 N/A
Stanley P. Silverstein, Vice President,
General Counsel and Secretary ................... 204,750 N/A
Wallis H. Brooks .................................. 0
Executive Group ................................... 6,091,375 N/A
Non-Executive Director Group ...................... N/A N/A
Non-Executive Officer Employee Group .............. * N/A
- ---------
* Amount not determinable as participation of non-executive officer employees
is subject to the discretion of the Compensation Committee.
The Supplemental Plan will be administered by the Compensation Committee
of the Board of Directors, which shall have complete authority to interpret
and administer the plan and to establish, amend and rescind any rules and
regulations relating to it; provided, however, that the Committee shall not
have any authority to increase the amount of any supplemental bonus award
earned in accordance with the terms of the Supplemental Plan by an employee
subject to Section 162(m) of the Code or to take any other action in
administering the plan that would have such effect.
The Supplemental Plan may be amended, modified or terminated by the
Committee at any time. Any such amendment or modification will be subject to
shareholder approval if in the Committee's discretion such approval is
necessary or desirable to ensure continued compliance with Section 162(m) or
for any other reason.
Neither the adoption of the Supplemental Plan nor the payment of
supplemental bonus awards thereunder shall preclude the Company from adopting
or establishing other incentive plans or arrangements, and such plans or
arrangements may be generally applicable or applicable only in specific cases.
The Supplemental Plan is not subject to any provision of ERISA and is not
qualified under Section 401(a) of the Code.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE WARNACO
GROUP, INC. SUPPLEMENTAL INCENTIVE COMPENSATION PLAN, WHICH IS DESIGNATED AS
PROPOSAL NO. 4 ON THE ENCLOSED PROXY CARD.
5. Amendment of 1993 Stock Plan
At the meeting, the stockholders will be asked to approve an amendment to
The Warnaco Group, Inc. 1993 Stock Plan (as amended, the "1993 Stock Plan") to
change the method for determining the maximum number of shares of the
Company's Common Stock that are available for awards thereunder. At the
present time, 45,000 shares remain available for award under the 1993 Stock
Plan. As explained in the Compensation Committee's Report on Executive
Compensation, the Company made larger option grants in 1993, in part to avoid
the then expected adverse effects on the Company of pending accounting and tax
rule changes. As a result, the Company now believes that it will require more
authorized shares under the 1993 Stock Plan to serve the purposes of the 1993
Stock Plan in the coming years.
The Company proposes to change the limit on authorized shares under the
1993 Stock Plan from a fixed number of shares to a percentage (3%) of the
total number of shares of the Company's Common Stock outstanding at the
beginning of each fiscal year, as described below. As of January 9, 1994, the
Company had 20,166,575 outstanding shares; thus, the total number of shares
available for grant in 1994 under the proposed amendments would be 604,997.
The 3% amount is expected to cover the grant of Restoration Options, if any,
as well as the grant of general awards under the plan. In addition, the 1993
Stock Plan, as amended, will provide that no executive officer of the Company
may receive awards under the 1993 Stock Plan in any fiscal year that relate to
more than 1,000,000 shares.
The description of the 1993 Stock Plan, which incorporates the amendment
described above, appears below. The following description is qualified in its
entirety by reference to the text of the 1993 Stock Plan, as amended, which is
attached hereto as Annex III.
1993 Stock Plan
The purpose of the 1993 Stock Plan is to attract and retain key
personnel, including consultants and advisors to the Company, and to enhance
their interest in the Company's continued success.
The maximum number of shares of Common Stock in respect to which awards
may be granted under the 1993 Stock Plan in each fiscal year of the Company
shall be 3% of the total number of shares of such class outstanding as of the
beginning of such fiscal year. Any shares available for award in a fiscal year
that are not awarded may be awarded in a subsequent year in addition to the
shares otherwise available for grant in such subsequent year, until the
expiration of the 1993 Stock Plan. Shares of Common Stock subject to awards
that are forfeited, terminated, cancelled or settled without the delivery of
Common Stock will again be available for awards. Also, shares tendered to the
Company in satisfaction or partial satisfaction of the exercise price of any
award will increase the number of shares available for awards under the 1993
Stock Plan to the extent permitted by Rule 16b-3 under the Securities Exchange
Act of 1934 (the "1934 Act"). No executive officer of the Company may receive
awards under the 1993 Stock Plan in any fiscal year that relate to more than
1,000,000 shares. The shares of Common Stock to be delivered under the plan
will be made available from the authorized but unissued shares of Common Stock
or from treasury shares.
The 1993 Stock Plan will be administered by the Compensation Committee of
the Board of Directors (the "Committee"), upon which no director who is an
officer of the Company may serve. The Committee shall have the sole and
complete authority to interpret the provisions of the 1993 Stock Plan and to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the operation of the 1993 Stock Plan as it shall deem advisable.
Key employees of, and consultants and advisors to, the Company and its
existing or future subsidiaries who can make substantial contributions to the
successful performance of the Company are eligible to be granted awards under
the 1993 Stock Plan. It is anticipated that the Committee's determinations of
which eligible individuals will be granted awards and the terms thereof will
be based on each individual's present and potential contribution to the
success of the Company and its subsidiaries. The approximate number of
persons initially eligible to participate in the Plan has not yet been
determined by the Company.
The 1993 Stock Plan provides for awards of stock options, stock
appreciation rights, performance awards, restricted stock, restricted stock
units and stock unit awards. Options granted under the 1993 Stock Plan may be
either nonqualified options or incentive stock options. Stock appreciation
rights may be granted in conjunction with or unrelated to options and, if in
conjunction with an outstanding option, may be granted at the time of such
option granted or thereafter, at the exercise price of the option. The
Committee has discretion to fix the exercise price of such options and stock
appreciation rights, but such exercise price may not be less than the fair
market value of the Common Stock at the date of grant. The Committee also has
broad discretion as to the terms and conditions upon which options and stock
appreciation rights shall be exercisable.
The exercise price of options may be satisfied in cash or, in the
discretion of the Committee, by exchanging shares of Common Stock owned by the
optionee, or by a combination of cash and shares of Common Stock. The ability
to pay the option exercise price in shares of Common Stock would, if permitted
by the Committee, enable an optionee to engage in a series of successive
stock-for-stock exercises of an option (sometimes referred to as "pyramiding")
and thereby fully exercise an option with little or no cash investment.
However, the Committee's current policy is to require any shares tendered in
satisfaction of the option exercise price to have been owned by the exercising
optionee for at least six months.
In the event that a participant is permitted to and does exercise an
option granted under the 1993 Stock Plan by delivering shares of Common Stock,
the Committee is authorized to grant or provide for the automatic grant of a
Restoration Option to such optionee, subject to the satisfaction of such
conditions or criteria as the Committee shall establish from time to time. A
Restoration Option shall entitle the participant to purchase a number of
shares of Common Stock equal to the number of shares surrendered in payment of
the exercise price of the original option, at a per share exercise price equal
to not less than 100% of the per share fair market value of the Common Stock
on the date of grant of such Restoration Option. Restoration Options shall
have a term not longer than the term remaining on the original option and
shall contain such other terms and conditions as the Committee shall
determine.
Upon the exercise of a stock appreciation right with respect to a share
of Common Stock, a participant would be entitled to receive the excess of the
fair market value of such share over the exercise price of such right. No
stock appreciation right shall be exercisable for six months after grant. The
Committee has the authority to determine whether the value of a stock
appreciation right is paid in cash or shares of Common Stock or a combination
of both. For administrative convenience, the 1993 Stock Plan allows the
Committee to provide that any exercise of a stock appreciation right (other
than such a right which is related to an incentive stock option) for cash by a
person subject to Section 16 of the 1934 Act during the third through the
twelfth day after the release of the Company's quarterly financial results
will be deemed to occur on the day during such 10-day period on which the
price of the shares of Common Stock was the highest.
Performance awards will be earned to the extent performance goals
established by the Committee are achieved over a period of time specified by
the Committee. The Committee will have discretion to determine the value of
each performance award, to adjust the performance goals as it deems equitable
to reflect events affecting the Company or changes in law or accounting
principles or other factors, and to determine the extent to which performance
awards that are earned may be paid in the form of cash, shares of Common
Stock, or a combination of both.
Awards of restricted stock or restricted stock units under the 1993 Stock
Plan will consist of shares of Common Stock or units, the value of which is
equal to a share of Common Stock. Restricted stock and restricted stock units
will be granted to a participant subject to forfeiture and restrictions on
transfer. In general, a participant who has been granted restricted stock
will from the date of grant have the benefits of ownership in respect of such
shares, including the right to vote such shares and to receive dividends and
other distributions thereon, subject to the restrictions set forth in the 1993
Stock Plan and in the instrument evidencing such award. The shares of
restricted stock will be held by the Company, or by an escrow agent designated
by the Company, during the restricted period and may not be sold, assigned,
transferred, pledged, or otherwise encumbered until the restrictions have
lapsed. The Committee has authority to determine the duration of the
restricted period and the conditions under which restricted stock and
restricted stock units may be forfeited, as well as the other terms and
conditions of such awards. Restricted stock units may be paid, in the
discretion of the Committee, in cash or shares of Common Stock or a
combination of both upon the termination of the applicable restriction period.
The 1993 Stock Plan also authorizes the Committee to grant to
participants awards of shares of Common Stock and other awards that are valued
in whole or in part by reference to, or are otherwise based on, the value of
shares of Common Stock ("Stock Unit Awards"). The Committee has discretion to
determine the participants to whom Stock Unit Awards are to be made, the times
at which such awards are to be made, the size of such awards, and all other
conditions of such awards, including any restrictions, deferral periods, or
performance requirements.
Any award under the 1993 Stock Plan may provide that the participant has
the right to receive currently or on a deferred basis dividends or dividend
equivalents and/or other cash payments in addition to or in lieu of such
award, all as the Committee shall determine.
If the Committee determines that any stock split, stock dividend or other
distribution (whether in the form of cash, securities, or other property),
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of shares, issuance of warrants or other
rights to purchase shares at a price below fair market value, or other similar
corporate event affects the Common Stock such that an adjustment is required
in order to preserve the benefits intended under the 1993 Stock Plan, then the
Committee has discretion (i) to make equitable adjustments in (a) the number
and kind of shares that may be the subject of future awards (in aggregate or
to any individual) under the 1993 Stock Plan or (b) the number and kind of
shares (or other securities or property) subject to outstanding awards and the
respective grant or exercise prices thereof and/or, (ii) if appropriate, to
provide for the payment of cash to a participant.
The Committee has broad discretion as to the specific terms and condition
of each award and any rules applicable thereto, including but not limited to
the effect thereon of the death, retirement or other termination of employment
of the participant or termination of the provision of services pursuant to an
advisory or consultant arrangement and the effect, if any, of a change in
control of the Company. The terms of each award are to be evidenced by a
written instrument delivered to the participant. The awards authorized under
the 1993 Stock Plan are subject to applicable tax withholding by the Company
which may be satisfied by the withholding of shares issuable under the 1993
Stock Plan, and may not be assigned or transferred, except by will or the laws
of descent and distribution or pursuant to a qualified domestic relations
order.
No award may be granted under the 1993 Stock Plan after April 13, 2003,
except for Restoration Options which shall continue to be granted as long as
options under the 1993 Stock Plan providing therefor are outstanding.
The 1993 Stock Plan may be amended or terminated at any time by the Board
of Directors, except that no amendment may be made without stockholder
approval if the Committee determines that such approval is necessary to comply
with any tax or regulatory requirement, including any approval requirement
which is a prerequisite for exemptive relief from Section 16 of the 1934 Act,
for which or with which the Committee determines that it is desirable to
qualify or comply.
The 1993 Stock Plan is not subject to any provision of ERISA and is not
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
The following table shows options granted under the 1993 Stock Plan in
1993. The market value of the Common Stock as of a recent date was $32.875.
NEW PLAN BENEFITS
Number
of
Name and Position Dollar Value($) Units
----------------- --------------- -----
Linda J. Wachner, Chairman, President
and Chief Executive Officer ..................... N/A 700,000
Dariush Ashrafi, Senior Vice President
and Chief Financial Officer ..................... N/A 75,000
William S. Finkelstein, Senior Vice
President and Controller ........................ N/A 75,000
Stanley P. Silverstein, Vice President,
General Counsel and Secretary ................... N/A 45,000
Wallis H. Brooks N/A 3,000*
Executive Group N/A 898,000
Non-Executive Director Group N/A N/A
Non-Executive Officer Employee Group N/A 1,205,000
- ----------
* These options were cancelled as of the date of Mr. Brooks's termination of
employment with the Company.
Certain Federal Income Tax Consequences of the 1993 Stock Plan Under Current
Law
Options
When an optionee exercises an option other than an incentive stock option
(a "nonqualified option"), the difference between the option price and any
higher fair market value of the shares of Common Stock, generally on the date
of exercise, will be ordinary income to the optionee and generally will be
allowed as a deduction for federal income tax purposes to the Company.
Any gain or loss realized by an optionee on disposition of the Common
Stock acquired upon exercise of a nonqualified option generally will be
capital gain or loss to such optionee, long-term or short-term depending on
the holding period, and will not result in any additional tax consequences to
the Company. The optionee's basis in the shares for determining gain or loss
on the disposition will be the fair market value of such shares determined
generally at the time of exercise.
When an optionee exercises an incentive stock option while employed by
the Company or a subsidiary or within three months (one year for disability)
after termination of employment, no ordinary income will be recognized by the
optionee at that time, but the excess (if any) of the fair market value of the
shares of Common Stock acquired upon such exercise over the option exercise
price will be an adjustment to taxable income for purposes of the federal
alternative minimum tax applicable to individuals. If the shares of Common
Stock acquired upon exercise of the incentive stock option are not disposed of
prior to the expiration of one year after the date of acquisition and two
years after the date of grant of the option, the excess (if any) of the sales
proceeds over the aggregate option exercise price of such shares will be
long-term capital gain, and the employer will not be entitled to any tax
deduction with respect to such gain. Generally, if the shares of Common Stock
are disposed of prior to the expiration of such periods (a "disqualifying
disposition"), the excess of the fair market value of such shares at the time
of exercise over the aggregate option exercise price (but not more than the
gain on the disposition if the disposition is a transaction on which a loss,
if realized, would be recognized) will be ordinary income at the time of such
disqualifying disposition (and the employer will generally be entitled to a
federal income tax deduction in a like amount). Any gain realized by the
optionee as a result of a disqualifying disposition that exceeds the amount
treated as ordinary income will be capital in nature, long-term or short-term
depending on the holding period. If an incentive stock option is exercised
more than three months (one year for disability) after termination of
employment, the tax consequences are the same as described above for
"nonqualified options."
Restricted Stock
In the absence of an election by a participant, as explained below, the
grant of restricted stock will not result in taxable income to the participant
or a deduction for the Company or its subsidiary in the year of grant. The
value of such restricted stock will be taxable to a participant in the year in
which the restrictions lapse. Alternatively, a participant may elect to treat
as income in the year of grant the fair market value of the restricted stock
on the date of grant, by making the election within 30 days after the date of
such grant. If such an election were made, a participant would not be allowed
to deduct at a later date the amount included as taxable income if he should
forfeit the shares of restricted stock to the Company. The Company will
generally be entitled to a federal income tax deduction equal to the amount of
ordinary income recognized by a participant in the year such income is
recognized. Prior to the lapse of restrictions, dividends paid on the shares
subject to such restrictions will be taxable to the participant as additional
compensation in the year received free of restrictions, and the employer will
be allowed a corresponding federal income tax deduction.
Other Awards
Except as noted below, when a participant receives payment with respect
to a stock appreciation right, restricted stock unit or other award granted to
him under the 1993 Stock Plan other than as described in the preceding
paragraphs, the amount of cash and the fair market value of the shares
received, net of any amount paid by the participant, will be ordinary income
to such participant and will generally be allowed as a deduction for federal
income tax purposes to the Company.
Special Rules
Special rules may apply to a participant who is subject to Section 16 of
the 1934 Act. Certain additional special rules apply if the exercise price
for an option is paid in shares of Common Stock previously owned by the
optionee rather than in cash and if the award is held, following the death of
a participant, by the executors of the participant's estate.
The foregoing discussion summarizes the federal income tax consequences
of the 1993 Stock Plan based on current provisions of the Code which are
subject to change. This summary does not cover any state or local tax
consequences of participation in the 1993 Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE 1993 STOCK
PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 5 ON THE ENCLOSED PROXY CARD.
Outstanding Voting Securities
On March 31, 1994, the record date for the 1994 Annual Meeting, there
were outstanding and entitled to vote 21,016,321 shares of Common Stock of the
Company, entitled to one vote per share.
Solicitation of Proxies
The cost of soliciting proxies for the 1994 Annual Meeting will be borne
by the Company. In addition to solicitation by mail, solicitations may also
be made by personal interview, telegram and telephone. The Company will use
the services of Chemical Bank to assist in soliciting proxies and expects to
pay approximately $5,000 for such services. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send
proxies and proxy material to their principals, and the Company will reimburse
them for expenses in so doing. Consistent with the Company's confidential
voting procedure, directors, officers and other regular employees of the
Company, as yet undesignated, may also request the return of proxies by
telephone or telegram, or in person.
Annual Report
The Annual Report of the Company for the fiscal year ended January 8,
1994, is being mailed to all stockholders with this proxy statement.
Stockholder Proposals
In general, stockholder proposals intended to be presented at an Annual
Meeting, including proposals for the nomination of directors, must be received
by the Company 60 days in advance of the anniversary date of the immediately
preceding annual meeting, or by March 13, 1995, to be considered for the 1995
Annual Meeting. The requirements for submitting such proposals are set forth
in the Company's Bylaws.
Stockholder proposals intended to be considered for inclusion in the
proxy statement for presentation at the 1995 Annual Meeting must be received
by the Company by December 14, 1994.
Other Matters
The Board of Directors does not know of any matter other than those
described in this proxy statement that will be presented for action at the
meeting. If other matters properly come before the meeting, the persons named
as proxies intend to vote the shares they represent in accordance with their
judgment.
ANNEX I
THE WARNACO GROUP, INC.
1993 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purpose.
The purpose of The Warnaco Group, Inc. 1993 Stock Plan for Non-Employee
Directors (the "Plan") is to promote the interests of The Warnaco Group, Inc.
(the "Company") and its stockholders by increasing the proprietary and vested
interest of non-employee directors in the growth and performance of the
Company by granting such directors options to purchase shares of Class A
Common Stock, par value $.01 per share (the "Shares"), of the Company.
2. Administration.
The Plan shall be administered by the Company's Board of Directors (the
"Board"). Subject to the provisions of the Plan, the Board shall be
authorized to interpret the Plan, to establish, amend, and rescind any rules
and regulations relating to the Plan and to make all other determinations
necessary or advisable for the administration of the Plan; provided, however,
that the Board shall have no discretion with respect to the selection of
directors to receive options, the number of Shares subject to any such
options, the purchase price thereunder or the timing of grants of options
under the Plan. The determinations of the Board in the administration of the
Plan, as described herein, shall be final and conclusive. The Secretary of
the Company shall be authorized to implement the Plan in accordance with its
terms and to take such actions of a ministerial nature as shall be necessary
to effectuate the intent and purposes thereof. The validity, construction and
effect of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Delaware.
3. Eligibility.
The class of individuals eligible to receive grants of options under the
Plan shall be directors of the Company who are not employees of the Company or
its affiliates and who have not, within one year immediately preceding the
determination of such director's eligibility, received any award under any
other plan of the Company or its affiliates that entitles the participants
therein to acquire stock, stock options or stock appreciation rights of the
Company or its affiliates (other than any other plan under which participants'
entitlements are governed by provisions meeting the requirements of Rule
16b-3(c)(2)(ii) promulgated under the Securities Exchange Act of 1934)
("Eligible Directors"). Any holder of an option granted hereunder shall
hereinafter be referred to as a "Participant."
4. Shares Subject to the Plan.
Subject to adjustment as provided in Section 6, an aggregate of 200,000
Shares shall be available for issuance upon the exercise of options granted
under the Plan. The Shares deliverable upon the exercise of options may be
made available from authorized but unissued Shares or treasury Shares. If any
option granted under the Plan shall terminate for any reason without having
been exercised, the Shares subject to, but not delivered under, such option
shall be available for other options. If any option granted under the Plan is
exercised through the delivery of Shares, the number of Shares available for
issuance upon the exercise of options shall be increased by the number of
Shares surrendered, to the extent permissible under Rule 16b-3.
5. Grant, Terms and Conditions of Options.
(a) Effective August 12, 1993, subject to approval of the Plan by the
shareholders of the Company, each person who was on such date an Eligible
Director has been granted an option hereunder to purchase 15,000 Shares.
(b) With respect to Eligible Directors who do not receive an option
under paragraph 5(a), upon the first election or appointment of any such
individual to the Board, each newly elected Eligible Director will be granted
an option to purchase 15,000 Shares.
(c) Immediately following each Annual Shareholders Meeting, commencing
with the Annual Shareholders Meeting in 1994, each Eligible Director will be
granted an option to purchase 5,000 Shares as of the date of such meeting.
(d) The options granted will be nonstatutory stock options not intended
to qualify under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and shall have the following terms and conditions:
(i) Price. The purchase price per Share deliverable upon the
exercise of each option shall be 100% of the Fair Market Value per Share
on the date the option is granted. For purposes of this Plan, Fair Market
Value shall be the closing per Share sales price as reported for
consolidated trading of issues listed on the New York Stock Exchange on
the date in question, or, if the Shares shall not have traded on such
date, the closing per Share sales price on the first date prior thereto on
which the Shares were so traded.
(ii) Payment. Options may be exercised only upon payment of the
purchase price thereof in full. Such payment shall be made in cash or,
unless otherwise determined by the Board, in Shares, which shall have a
Fair Market Value (determined in accordance with the rules of paragraph
(i) above) at least equal to the aggregate exercise price of the Shares
being purchased, or a combination of cash and Shares.
(iii) Exercisability and Term of Options. Options shall be
exercisable in whole or in part at all times during the period beginning
on the date of grant until the earlier of ten years from the date of grant
and the expiration of the one year period provided in paragraph (iv)
below.
(iv) Termination of Service as Eligible Director. Upon termination of
a Participant's service as a Director for any reason, all outstanding
options shall be exercisable in whole or in part for a period of one year
from the date upon which the Participant ceases to be a Director, provided
that in no event shall the options be exercisable after the tenth
anniversary of the date of grant.
(v) Nontransferability of Options. No option may be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered
by a Participant otherwise than by will or the laws of descent and
distribution, and during the lifetime of the Participant to whom an option
is granted it may be exercised only by the Participant or by the
Participant's guardian or legal representative. Notwithstanding the
foregoing, options may be transferred pursuant to a qualified domestic
relations order.
(vi) Listing and Registration. Each option shall be subject to the
requirement that if at any time the Board shall determine, in its
discretion, that the listing, registration or qualification of the Shares
subject to such option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with,
the granting of such option or the issue or purchase of Shares thereunder,
no such option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained free of any condition not acceptable to the Board.
(vii) Option Agreement. Each option granted hereunder shall be
evidenced by an agreement with the Company which shall contain the terms
and provisions set forth herein and shall otherwise be consistent with the
provisions of the Plan.
6. Adjustment of and Changes in Shares.
In the event of a stock split, stock dividend, subdivision or
combination of the Shares or other change in corporate structure affecting
the Shares, the number of Shares authorized by the Plan and the number of
Shares subject to options to be granted pursuant to Sections 5(a), 5(b)
and 5(c) shall be increased or decreased proportionately, as the case may
be, and the number of Shares subject to any outstanding option shall be
increased or decreased proportionately, as the case may be, with
appropriate corresponding adjustment in the purchase price per Share
thereunder.
7. No Rights of Shareholders.
Neither a Participant nor a Participant's legal representative shall
be, or have any of the rights and privileges of, a shareholder of the
Company in respect of any Shares purchasable upon the exercise of any
option, in whole or in part, unless and until certificates for such Shares
shall have been issued.
8. Plan Amendments.
The Plan may be amended by the Board, as it shall deem advisable or
to conform to any change in any law or regulation applicable thereto;
provided, that the Board may not, without the authorization and approval
of shareholders of the Company: (i) increase the number of Shares which
may be purchased pursuant to options hereunder, either individually or in
the aggregate, except as permitted by Section 6, (ii) change the
requirement of Section 5(d) that option grants be priced at Fair Market
Value, except as permitted by Section 6, (iii) modify in any respect the
class of individuals who constitute Eligible Directors or (iv) materially
increase the benefits accruing to Participants hereunder. The provisions
of Sections 3 and/or 5 may not be amended more often than once every six
months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules under either such statute.
9. Effective Date and Duration of Plan.
The Plan shall become effective on the day of the Company's Annual
Shareholders Meeting at which the Plan is approved by Shareholders. The
Plan shall terminate the day following the seventh Annual Shareholders
Meeting at which Directors are elected succeeding the Annual Shareholders
Meeting at which the Plan was approved by Shareholders, unless the Plan is
extended or terminated at an earlier date by Shareholders or is terminated
by exhaustion of the Shares available for issuance hereunder.
ANNEX II
THE WARNACO GROUP, INC.
SUPPLEMENTAL INCENTIVE COMPENSATION PLAN
1. Purpose.
The purpose of the Warnaco Group, Inc. Supplemental Incentive
Compensation Plan (the "Plan") is to establish an incentive arrangement for
senior management of the Company that will induce and reward extraordinary and
superior performance of the Company as compared with the other companies in
the industries in which the Company competes.
2. Definitions.
(a) "Adjusted Net Income" shall mean Net Income (i) reduced by the
aggregate amount of dividends on the Company's preferred stock (if any), and
(ii) increased or reduced by the after-tax earnings impact of each of the
following items if they occur during a Bonus Year:
(i) the cumulative effect of changes in accounting principles for
the Bonus Year required by the Financial Accounting Standards Board, the
Securities and Exchange Commission or any other governing body that sets
accounting standards, as set forth in the audited Consolidated Statements
of Operations or the Notes thereto;
(ii) the cumulative effect of changes in the tax law occurring during
the Bonus Year as set forth in the Company's audited Consolidated
Statements of Operations or the Notes thereto;
(iii) extraordinary items, as defined under generally accepted
accounting principles, during the Bonus Year as set forth in the Company's
audited Consolidated Statements of Operations;
(iv) gain or loss from discontinued operations; and
(v) Nonrecurring items, as defined under generally accepted
accounting principles, during the Bonus Year as set forth in the Company's
audited Consolidated Statements of Operations.
(b) "Board" shall mean the Board of Directors of The Warnaco Group, Inc.
(c) "Bonus Year" shall mean the fiscal year for which the calculation of
a bonus award is to be made, or such other period as is established by the
Committee.
(d) "Change in Control" shall mean a Change in Control, as defined in
the Company's 1991 Stock Option Plan.
(e) "Chief Executive Officer" shall mean the Chief Executive Officer of
the Company or the individual acting in such capacity.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Compensation Committee of the Board, or
any subcommittee thereof, except as otherwise provided in paragraph 3(a).
(h) "Common Equity" shall mean the average of common stockholders'
equity appearing on the Company's audited Consolidated Balance Sheets as of
each of the beginning and the end of the Bonus Year in question.
(i) "Company" shall mean The Warnaco Group, Inc. and its successors.
Where the context requires, the "Company" shall mean The Warnaco Group, Inc.
and its consolidated subsidiaries.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Long Term Debt" shall mean the sum of total preferred stock plus
total long-term debt of the Company, as disclosed in the Company's audited
Consolidated Balance Sheets for the Bonus Year in question.
(l) "Named Employee" shall mean those individuals who, in the opinion of
the Committee at any time, will be the Chief Executive Officer of the Company
and the four other most highly compensated executive officers of the Company
as determined on the last day of the taxable year or years within which the
Supplemental Bonus Award for the applicable Bonus Year is paid and in
accordance with Section 162(m).
(m) "Net Income" shall mean the consolidated net income of the Company
as disclosed in the Company's audited Consolidated Statements of Operations
for the Bonus Year.
(n) "Outside Director" shall mean a member of the Board who falls within
the definition of an "outside director" under Section 162(m), including any
transition or interim rules for such definition.
(o) "Peer Group" shall mean a group of companies selected by the
Committee consisting of the principal companies that are expected to be the
Company's material competitors during the Bonus Year. The Peer Group shall be
established prior to the beginning of a Bonus Year, or, if permitted by
Section 162(m), during the first quarter of such year. The Peer Group shall
not include any company with negative stockholders' equity at the end of the
most recent fiscal year ended prior to the Bonus Year unless, in accordance
with paragraph 4(d), the Committee irrevocably determines at the time of the
establishment of the Peer Group to employ a benchmark or benchmarks other than
Return on Equity for such Bonus Year.
(p) "Return on Capital Employed" shall mean the percentage equivalent to
a fraction resulting from dividing (i) Adjusted Net Income by (ii) the sum of
Common Equity plus Long Term Debt.
(q) "Return on Equity" shall mean the percentage equivalent to the
fraction resulting from dividing (i) Adjusted Net Income by (ii) Common
Equity.
(r) "Section 162(m)" shall mean Section 162(m) of the Code and any and
all regulations and other authorities issued thereunder or pertaining thereto.
(s) "Supplemental Bonus Award" shall mean an amount calculated as a
percentage of an individual's base salary (as such base salary is in effect at
the beginning of the Bonus Year or, in the case of any individual not employed
by the Company at the beginning of the Bonus Year, such individual's base
salary in effect on the first day of employment by the Company) which
percentage for the senior executives of the Company shall be as follows:
Title or Effective Position Percentage
- --------------------------- ----------
Chief Executive Officer. . . . . . . . . . . . . . . . . . . . 300%
Executive and Senior Vice Presidents (each). . . . . . . . . . 200%
Vice Presidents and other officers (each). . . . . . . . . . . 140%
Division Presidents and other key employees (each). . not to exceed 200%
The Committee may establish, for any Bonus Year, a lower percentage for any of
the above positions or for any executive in any such category and may provide
for the participation and establish a bonus percentage of employees or
positions not listed above. Any such determinations shall be made in
compliance with Section 162(m), to the extent determined to be necessary by
the Committee.
3. Administration.
(a) The Plan shall be administered by the Committee. If, however, the
Committee shall fail to be composed solely of Outside Directors, then those
members of the Committee who are Outside Directors shall act as the Committee.
(b) The Plan shall be interpreted and construed in accordance with
Section 162(m), to the extent necessary, as determined by the Committee, to
minimize the after-tax cost to the Company of awards under the Plan. The
Committee shall have full and exclusive authority, power and discretion to
construe and interpret the Plan and generally to determine any and all
questions arising under the Plan; provided, however, that the Committee shall
not have any authority hereunder to increase the amount of any Supplemental
Bonus Award earned by a Named Employee in accordance with the terms of this
Plan or to take any action in administering the Plan that would have such
effect.
(c) The Committee shall be responsible for certifying in writing to the
Board the comparative performance of the Company in relation to the Peer Group
for purposes of paragraph 4(b) before any bonus payments are made under this
Plan. If permitted under Section 162(m), such certification may be based upon
reasonably estimated financial information available prior to year-end.
4. Awards.
(a) As soon as practicable after the end of any Bonus Year, the Committee
shall determine the Return on Equity of the Company for such Bonus Year and
the return on equity of each company in the Peer Group for the most recently
ended fiscal year of each such company, using the same methodology for the
Peer Group companies as is specified herein for the determination of the
Company's Return on Equity.
(b) Subject to the other subparagraphs of this paragraph 4, (i) if the
Company's Return on Equity is higher than every Peer Group company's return on
equity, or if no Peer Group company's return on equity is higher than the
Company's Return on Equity, each participant in the Plan will be eligible to
receive an award of 100% of his or her Supplemental Bonus Award for such Bonus
Year; (ii) if the Company's Return on Equity is in the 75th percentile of the
Peer Group companies' returns on equity or higher (but below the 100th
percentile), participants will be eligible to receive 75% of their respective
Supplemental Bonus Awards; (iii) if the Company's Return on Equity is in the
50th percentile of Peer Group companies' returns on equity or higher, but
below the 75th percentile, participants will be eligible to receive 50% of
their respective Supplemental Bonus Awards; and (iv) if Return on Equity is
below the 50th percentile of Peer Group companies' returns on equity, no award
will be made hereunder.
(c) Any award earned under paragraph 4(b) will be reduced, but not
below zero, by the portion thereof that, when such award is combined with
all other bonuses paid to such participant in respect of such year (other
than any such bonus paid at the discretion of the Committee, including any
bonus paid pursuant to the terms of any employment contract between the
Company and such participant permitting discretionary awards), exceeds such
participant's maximum Supplemental Bonus Award hereunder.
(d) The Committee may, but shall not be required to, determine to compare
the Company's Return on Capital Employed with the Peer Group companies' return
on capital employed for purposes of paragraph 4(b). In addition, the
Committee may determine to employ earnings per share or market share or any
combination of any of the foregoing benchmarks, or any other criterion
determined by the Committee to be appropriate, as the comparison benchmark for
any Bonus Year, in which event the Committee shall specify and define the
benchmark at the time it establishes the Peer Group for such Bonus Year.
(e) If at the time of the Committee's determination under paragraph
4(b) (or 4(d)), any of the companies originally selected for inclusion in the
Peer Group have been combined with or acquired by a company not in the Peer
Group or have reorganized or taken any other corporate action having the
result that its audited financial statements for its most recently completed
fiscal year are not and will not be publicly available, such company shall be
excluded from the Peer Group for purposes of the determination set forth in
paragraph 4(b) (or 4(d)).
(f) Notwithstanding the foregoing, the Committee shall have the
discretion to cancel, withhold, defer (subject to paragraph 5(a)) or reduce
any award earned under paragraph 4(b), and no participant shall have any
contractual right under the Plan to the award of any amount hereunder.
5. Payment of Awards.
(a) Awards shall be paid at such times and in such forms as is determined
by the Committee. The Committee may determine to pay bonus awards in
increments or installments, and may attach such conditions to the payment of
any such increment or installment as it determines to be in the best interests
of the Company; provided, however, that not more than 50% of any award made by
the Committee hereunder may be paid on a deferred basis or paid in a form that
will result in deferral of a vested entitlement thereto.
(b) Subject to the foregoing paragraph 5(a), awards may be paid in cash
or in securities of the Company, including without limitation awards or
securities under any stock option plan or stock incentive plan of the Company,
or in any combination thereof, as determined by the Committee. The Committee
may attach to such securities or awards such restrictions as it determines to
be in the best interests of the Company.
(c) Any amounts or securities deferred or subject to vesting or earnout
in accordance with this paragraph 5 shall immediately become vested and
payable in the event of a Change in Control.
(d) Any participant in the Plan who is not employed by the Company for
the entire Bonus Year (or the entirety of such portion thereof as occurs after
such participant's date of original hire by the Company) shall not be eligible
to receive any award hereunder for such Bonus Year. The award to any
particpant who was not employed by the Company at the beginning of such Bonus
Year shall be prorated based on the number of days during such Bonus Year that
such participant was employed by the Company.
6. Effectiveness and Amendments.
(a) This Plan shall become effective as of January 1, 1994, if approved
by the Company's stockholders at their 1994 Annual Meeting. If not approved
by stockholders at the 1994 Annual Meeting, this Plan shall not take effect
and no payments will be made hereunder.
(b) This Plan may be amended, modified or terminated at any time by the
Committee. Any such amendments or modifications shall be subject to the
approval of stockholders if in the Committee's discretion such approval is
desirable either in order to minimize the after-tax cost to the Company of
bonus awards hereunder or for any other reason.
7. Nonexclusivity.
Neither the adoption of this Plan nor the payment of awards hereunder
shall preclude the Company from adopting any other bonus or incentive
arrangement, and any such other arrangement may be generally applicable or
applicable only to selected individuals.
ANNEX III
THE WARNACO GROUP, INC.
AMENDED AND RESTATED 1993 STOCK PLAN
SECTION 1. Purpose. The purposes of The Warnaco Group, Inc. Amended and
Restated 1993 Stock Plan are to promote the interests of The Warnaco Group,
Inc. and its stockholders by (i) attracting and retaining exceptional
executive personnel and other key employees of, and advisors and consultants
to, the Company and its Affiliates, as defined below; (ii) motivating such
employees, advisors and consultants by means of performance-related incentives
to achieve longer-range performance goals; and (iii) enabling such employees,
advisors and consultants to participate in the long-term growth and financial
success of the Company.
SECTION 2. Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted Stock
Award, Performance Award or Other Stock-Based Award.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean a committee of the Board designated by the Board
to administer the Plan and composed of not less than the minimum number of
persons from time to time required by Rule 16b-3, each of whom, to the extent
necessary to comply with Rule 16b-3 only, is a "disinterested person" within
the meaning of Rule 16b-3.
"Company" shall mean The Warnaco Group, Inc., together with any successor
thereto.
"Employee" shall mean (i) an employee of the Company or of any Affiliate
and (ii) an advisor or consultant to the Company or to any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean the fair market value of the property or
other item being valued, as determined by the Committee in its sole
discretion.
"Incentive Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to
meet the requirements of Section 422 of the Code or any successor provision
thereto.
"Non-Qualified Stock Option" shall mean a right to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is not
intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option and shall include a Restoration Option.
"Other Stock-Based Award" shall mean any right granted under Section 10
of the Plan.
"Participant" shall mean any Employee selected by the Committee to
receive an Award under the Plan.
"Performance Award" shall mean any right granted under Section 9 of the
Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
"Plan" shall mean Amended and Restated The Warnaco Group, Inc. 1993 Stock
Plan.
"Restoration Option" shall mean an Option granted pursuant to Section
6(e) of the Plan.
"Restricted Stock" shall mean any Share granted under Section 8 of the
Plan.
"Restricted Stock Unit" shall mean any unit granted under Section 8 of
the Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the Staff thereof.
"Shares" shall mean shares of the Class A Common Stock, par value $.01
per share, of the Company, or such other securities of the Company as may be
designated by the Committee from time to time.
"Stock Appreciation Right" shall mean any right granted under Section 7
of the Plan.
"Substitute Awards" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired
by the Company or with which the Company combines.
SECTION 3. Administration. (a) The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be
granted to an eligible Employee; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other matters are to
be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or cancelled, forfeited, or
suspended and the method or methods by which Awards may be settled, exercised,
cancelled, forfeited, or suspended; (vi) determine whether, to what extent,
and under what circumstances cash, Shares, other securities, other Awards,
other property, and other amounts payable with respect to an Award shall be
deferred either automatically or at the election of the holder thereof or of
the Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (ix)
make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee,
may be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Award, any shareholder and any Employee.
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section
4(b), the number of Shares with respect to which Awards may be granted under
the Plan in any fiscal year of the Company shall be 3% of the total number of
shares of such class outstanding as of the beginning of such fiscal year. Any
Shares available for award in a fiscal year that are not awarded may be
awarded in a subsequent year in addition to the Shares otherwise available for
award in such year, until the expiration of the Plan. If, after the effective
date of the Plan, any Shares covered by an Award granted under the Plan, or to
which such an Award relates, are forfeited, or if an Award is settled for cash
or otherwise terminates or is cancelled without the delivery of Shares, then
the Shares covered by such Award, or to which such Award relates, or the
number of Shares otherwise counted against the aggregate number of Shares with
respect to which Awards may be granted, to the extent of any such settlement,
forfeiture, termination or cancellation, shall again be, or shall become,
Shares with respect to which Awards may be granted. In the event that any
Option or other Award granted hereunder is exercised through the delivery of
Shares, the number of Shares available for Awards under the Plan shall be
increased by the number of Shares surrendered, to the extent permissible under
Rule 16b-3. Notwithstanding the foregoing and subject to adjustment as
provided in Section 4(b), no executive officer of the Company may receive
awards under the Plan in any fiscal year that relate to more than 1,000,000
shares. Notwithstanding the foregoing, the number of Shares with respect to
which Incentive Stock Options may be granted under the Plan shall be 3% of the
number of Shares outstanding as of January 9, 1994, which number shall be
included in, and not in addition to, the number of Shares otherwise authorized
under this Section 4(a).
(b) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall, in
such manner as it may deem equitable, adjust any or all of (i) the number of
Shares or other securities of the Company (or number and kind of other
securities or property) with respect to which Awards may be granted, in
aggregate or to any individual, (ii) the number of Shares or other securities
of the Company (or number and kind of other securities or property) subject
to outstanding Awards, and (iii) the grant or exercise price with respect to
any Award or, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Award; provided, in each case, that with respect to
Awards of Incentive Stock Options no such adjustment shall be authorized to
the extent that such authority would cause the Plan to violate Section
422(b)(1) or to be inconsistent with Section 162(m) of the Code, as from time
to time amended.
(c) Substitute Awards. Any Shares underlying Substitute Awards shall
not, except in the case of Shares with respect to which Substitute Awards are
granted to Employees who are officers or directors of the Company for purposes
of Section 16 of the Exchange Act or any successor section thereto, be counted
against the Shares available for Awards under the Plan.
(d) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
SECTION 5. Eligibility. Any Employee, including any officer or
employee-director of the Company or any Affiliate, who is not a member of the
Committee, shall be eligible to be designated a Participant, except that only
Employees who are employees of the Company or an Affiliate shall be eligible
for the grant of Incentive Stock Options.
SECTION 6. Stock Options.
(a) Grant. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Employees to whom Options
shall be granted, the number of Shares to be covered by each Option, the
option price therefor and the conditions and limitations applicable to the
exercise of the Option. The Committee shall have the authority to grant
Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant
both types of options. In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to and comply with such rules as
may be prescribed by Section 422 of the Code, as from time to time amended,
and any regulations implementing such statute.
(b) Exercise Price. The Committee shall establish the exercise price at
the time each Option is granted, which price, except in the case of Options
that are Substitute Awards, shall not be less than 100% of the per Share Fair
Market Value on the date of grant.
(c) Exercise. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement or thereafter. The
Committee may impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of federal or
state securities laws, as it may deem necessary or advisable.
(d) Payment. No Shares shall be delivered pursuant to any exercise of
an Option until payment in full of the option price therefor is received by
the Company. Such payment may be made in cash, or its equivalent, or, if and
to the extent permitted by the Committee, by exchanging Shares owned by the
optionee (which are not the subject of any pledge or other security interest),
or by a combination of the foregoing, provided that the combined value of all
cash and cash equivalents and the Fair Market Value of any such Shares so
tendered to the Company as of the date of such tender is at least equal to
such option price.
(e) Restoration Options. In the event that any Participant delivers
Shares in payment of the exercise price of any Option granted hereunder in
accordance with Section 6(d), the Committee shall have the authority to grant
or provide for the automatic grant of a Restoration Option to such
Participant, subject to Section 4(a). The grant of a Restoration Option shall
be subject to the satisfaction of such conditions or criteria as the Committee
in its sole discretion shall establish from time to time. A Restoration
Option shall entitle the holder thereof to purchase a number of Shares equal
to the number of such Shares so delivered upon exercise of the original Option
and, in the discretion of the Committee, the number of Shares, if any,
tendered to the Company to satisfy any withholding tax liability arising in
connection with the exercise of the original Option. A Restoration Option
shall have a per share exercise price of not less than 100% of the per Share
Fair Market Value on the date of grant of such Restoration Option, a term not
longer than the remaining term of the original Option at the time of exercise
thereof, and such other terms and conditions as the Committee in its sole
discretion shall determine.
SECTION 7. Stock Appreciation Rights.
(a) Grant. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Employees to whom Stock
Appreciation Rights shall be granted, the number of Shares to be covered by
each Stock Appreciation Right Award, the grant price thereof and the
conditions and limitations applicable to the exercise thereof. Stock
Appreciation Rights may be granted in tandem with another Award, in addition
to another Award, or freestanding and unrelated to another Award. Stock
Appreciation Rights granted in tandem with or in addition to an Award may be
granted either at the same time as the Award or at a later time. Stock
Appreciation Rights shall not be exercisable earlier than six months after
grant, and except for Stock Appreciation Rights which are Substitute Awards,
shall have an exercise price of not less than 100% of the Fair Market Value of
the Shares on the date of grant or, in the case of a Stock Appreciation Right
granted in tandem with or in addition to another Award, at the time of grant
of such related Award.
(b) Exercise and Payment. A Stock Appreciation Right shall entitle the
Participant to receive an amount equal to the excess of the Fair Market Value
of a Share on the date of exercise of the Stock Appreciation Right over the
grant price thereof, provided that the Committee may for administrative
convenience determine that, with respect to any Stock Appreciation Right which
is not related to an Incentive Stock Option and which can only be exercised
for cash during limited periods of time in order to satisfy the conditions of
Rule 16b-3, the exercise of such Stock Appreciation Right for cash during such
limited period shall be deemed to occur for all purposes hereunder on the day
during such limited period on which the Fair Market Value of the Shares is the
highest. Any such determination by the Committee may be changed by the
Committee from time to time and may govern the exercise of Stock Appreciation
Rights granted prior to such determination as well as Stock Appreciation
Rights thereafter granted. The Committee shall determine whether a Stock
Appreciation Right shall be settled in cash, Shares or a combination of cash
and Shares.
(c) Other Terms and Conditions. Subject to the terms of the Plan and
any applicable Award Agreement, the Committee shall determine, at or after the
grant of a Stock Appreciation Right, the term, methods of exercise, methods
and form of settlement, and any other terms and conditions of any Stock
Appreciation Right. Any such determination by the Committee may be changed by
the Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted or exercised prior to such determination as well
as Stock Appreciation Rights granted or exercised thereafter. The Committee
may impose such conditions or restrictions on the exercise of any Stock
Appreciation Right as it shall deem appropriate.
SECTION 8. Restricted Stock and Restricted Stock Units.
(a) Grant. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Employees to whom Shares of
Restricted Stock and Restricted Stock Units shall be granted, the number of
Shares of Restricted Stock and/or the number of Restricted Stock Units to be
granted to each Participant, the duration of the period during which, and the
conditions under which, the Restricted Stock and Restricted Stock Units may be
forfeited to the Company, and the other terms and conditions of such Awards.
(b) Transfer Restrictions. Shares of Restricted Stock and Restricted
Stock Units may not be sold, assigned, transferred, pledged or otherwise
encumbered, except, in the case of Restricted Stock, as provided in the Plan
or the applicable Award Agreements. Certificates issued in respect of Shares
of Restricted Stock shall be registered in the name of the Participant and
deposited by such Participant, together with a stock power endorsed in blank,
with the Company. Upon the lapse of the restrictions applicable to such
Shares of Restricted Stock, the Company shall deliver such certificates to the
Participant or the Participant's legal representative.
(c) Payment. Each Restricted Stock Unit shall have a value equal to the
Fair Market Value of a Share. Restricted Stock Units shall be paid in cash,
Shares, other securities or other property, as determined in the sole
discretion of the Committee, upon the lapse of the restrictions applicable
thereto, or otherwise in accordance with the applicable Award Agreement.
Dividends paid on any Shares of Restricted Stock may be paid directly to the
Participant, or may be reinvested in additional Shares of Restricted Stock or
in additional Restricted Stock Units, as determined by the Committee in its
sole discretion.
SECTION 9. Performance Awards.
(a) Grant. The Committee shall have sole and complete authority to
determine the Employees who shall receive a "Performance Award," which shall
consist of a right which is (i) denominated in cash or Shares, (ii) valued,
as determined by the Committee, in accordance with the achievement of such
performance goals during such performance periods as the Committee shall
establish, and (iii) payable at such time and in such form as the Committee
shall determine.
(b) Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award and the amount and
kind of any payment or transfer to be made pursuant to any Performance Award.
(c) Payment of Performance Awards. Performance Awards may be paid in a
lump sum or in installments following the close of the performance period or,
in accordance with procedures established by the Committee, on a deferred
basis.
SECTION 10. Other Stock-Based Awards.
(a) General. The Committee shall have authority to grant to eligible
Employees an "Other Stock-Based Award," which shall consist of any right which
is (i) not an Award described in Sections 6 through 10 above and (ii) an Award
of Shares or an Award denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as deemed by the Committee to
be consistent with the purposes of the Plan; provided that any such rights
must comply, to the extent deemed desirable by the Committee, with Rule 16b-3
and applicable law. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of any such
Other Stock-Based Award. Except in the case of an Other Stock- Based Award
that is a Substitute Award, the price at which securities may be purchased
pursuant to any Other Stock-Based Award granted under this Plan, or the
provision, if any, of any such Award that is analogous to the purchase or
exercise price, shall not be less than 100% of the Fair Market Value of the
securities to which such Award relates on the date of grant.
(b) Dividend Equivalents. In the sole and complete discretion of the
Committee, an Award, whether made as an Other Stock-Based Award under this
Section 10 or as an Award granted pursuant to Sections 6 through 9 hereof, may
provide the Participant with dividends or dividend equivalents, payable in
cash, Shares, other securities or other property on a current or deferred
basis.
SECTION 11. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation or
termination shall be made without shareholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including for
these purposes any approval requirement which is a prerequisite for exemptive
relief from Section 16(b) of the Exchange Act for which or with which the
Board deems it necessary or desirable to qualify or comply. Notwithstanding
anything to the contrary herein, the Committee may amend the Plan in such
manner as may be necessary so as to have the Plan conform with local rules and
regulations in any jurisdiction outside the United States.
(b) Amendments to Awards. The Committee may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the rights of
any Participant or any holder or beneficiary of any Award theretofore granted
shall not to that extent be effective without the consent of the affected
Participant, holder or beneficiary.
(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided, however, that no such authority
shall exist with respect to any award intended to qualify as
"performance-based" compensation under Section 162(m) of the Code to the
extent that the exercise of such authority would cause such award to fail to
so qualify.
(d) Cancellation. Any provision of this Plan or any Award Agreement to
the contrary notwithstanding, the Committee may cause any Award granted
hereunder to be cancelled in consideration of a cash payment or alternative
Award made to the holder of such cancelled Award equal in value to the Fair
Market Value of such cancelled Award.
SECTION 12. General Provisions.
(a) Nontransferability.
(i) Each Award, and each right under any Award, shall be exercisable
only by the Participant during the Participant's lifetime, or, if
permissible under applicable law, by the Participant's guardian or legal
representative or by a transferee receiving such Award pursuant to a
qualified domestic relations order ("QDRO"), as determined by the
Committee.
(ii) No Award that constitutes a "derivative security," for purposes
of Section 16 of the Exchange Act, may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant
otherwise than by will or by the laws of descent and distribution or
pursuant to a QDRO, and any such purported assignment, alienation, pledge,
attachment, sale, transfer or encumbrance shall be void and unenforceable
against the Company or any Affiliate; provided that the designation of a
beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale, transfer or encumbrance.
(b) No Rights to Awards. No Employee, Participant or other Person shall
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or
beneficiaries of Awards. The terms and conditions of Awards need not be the
same with respect to each recipient.
(c) Share Certificates. All certificates for Shares or other securities
of the Company or any Affiliate delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities are
then listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(d) Delegation. Subject to the terms of the Plan and applicable law,
the Committee may delegate to one or more officers or managers of the Company
or any Affiliate, or to a committee of such officers or managers, the
authority, subject to such terms and limitations as the Committee shall
determine, to grant Awards to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend, or terminate Awards held by,
Employees who are not officers or directors of the Company for purposes of
Section 16 of the Exchange Act, or any successor section thereto, or who are
otherwise not subject to such Section.
(e) Withholding. A participant may be required to pay to the Company or
any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Award, from any payment due or transfer
made under any Award or under the Plan or from any compensation or other
amount owing to a Participant the amount (in cash, Shares, other securities,
other Awards or other property) of any applicable withholding taxes in respect
of an Award, its exercise, or any payment or transfer under an Award or under
the Plan and to take such other action as may be necessary in the opinion of
the Company to satisfy all obligations for the payment of such taxes. The
Committee may provide for additional cash payments to holders of Awards to
defray or offset any tax arising from the grant, vesting, exercise or payments
of any Award.
(f) Award Agreements. Each Award hereunder shall be evidenced by an
Award Agreement which shall be delivered to the Participant and shall specify
the terms and conditions of the Award and any rules applicable thereto,
including but not limited to the effect on such Award of the death, retirement
or other termination of employment of a Participant and the effect, if any, of
a change in control of the Company.
(g) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other compensation arrangements, which may, but need not,
provide for the grant of options, restricted stock, Shares and other types of
Awards provided for hereunder (subject to shareholder approval if such
approval is required), and such arrangements may be either generally
applicable or applicable only in specific cases.
(h) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of
the Company or any Affiliate. Further, the Company or an Affiliate may at any
time dismiss a Participant from employment, free from any liability or any
claim under the Plan, unless otherwise expressly provided in the Plan or in
any Award Agreement.
(i) No Rights as Stockholder. Subject to the provisions of the
applicable Award, no Participant or holder or beneficiary of any Award shall
have any rights as a stockholder with respect to any Shares to be distributed
under the Plan until he or she has become the holder of such Shares.
Notwithstanding the foregoing, in connection with each grant of Restricted
Stock hereunder, the applicable Award shall specify if and to what extent the
Participant shall not be entitled to the rights of a stockholder in respect of
such Restricted Stock.
(j) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan and any Award Agreement
shall be determined in accordance with the laws of the State of Delaware.
(k) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall
be stricken as to such jurisdiction, Person or Award and the remainder of the
Plan and any such Award shall remain in full force and effect.
(l) Other Laws. The Committee may refuse to issue or transfer any
Shares or other consideration under an Award if, acting in its sole
discretion, it determines that the issuance or transfer of such Shares or such
other consideration might violate any applicable law or regulation or entitle
the Company to recover the same under Section 16(b) of the Exchange Act, and
any payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded to the relevant Participant, holder or beneficiary. Without limiting
the generality of the foregoing, no Award granted hereunder shall be construed
as an offer to sell securities of the Company, and no such offer shall be
outstanding, unless and until the Committee in its sole discretion has
determined that any such offer, if made, would be in compliance with all
applicable requirements of the U.S. federal securities laws.
(m) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant
or any other Person. To the extent that any Person acquires a right to
receive payments from the Company or any Affiliate pursuant to an Award, such
right shall be no greater than the right of any unsecured general creditor of
the Company or any Affiliate.
(n) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any
rights thereto shall be cancelled, terminated, or otherwise eliminated.
(o) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 13. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of the date of its
approval by the shareholders of the Company.
(b) Expiration Date. No Award shall be granted under the Plan after May
14, 2003; provided that the authority for grant of Restoration Options
hereunder in accordance with Section 6(e) shall continue, subject to the
provisions of Section 4, as long as any Option granted hereunder remains
outstanding. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award granted hereunder may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue,
or terminate any such Award or to waive any conditions or rights under any
such Award shall, continue after May 14, 2003.
FORM OF PROXY
THE WARNACO GROUP, INC.
New York, New York
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Linda J. Wachner, William S. Finkelstein
and Stanley P. Silverstein, and each of them acting solely, proxies with full
power of substitution and with all powers the undersigned would possess if
personally present, to represent and to vote at the Annual Meeting of
stockholders to be held on May 12, 1994 and at any adjournments or
postponements thereof, as designated on the reverse side hereof and in their
discretion with respect to any other matters as may properly come before such
meeting, all of the shares of Class A Common Stock of The Warnaco Group, Inc.
held of record by the undersigned as of the close of business on March 31,
1994.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
_____________________________________________________________________________
(X) Please Mark
your votes
as this
---------------
COMMON
1. ELECTION OF DIRECTORS
Proposal to elect For Withhold
Linda J. Wachner and ( ) ( )
Andrew G. Galef as
directors for a term
of three years.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR EITHER INDIVIDUAL NOMINEE, STRIKE
OUT HIS OR HER NAME)
Proposal to elect For Withhold
Joseph A. Califano, Jr. ( ) ( )
as a director for a term
of two years.
2. Proposal to ratify the For Against Abstain
appointment of Ernst & ( ) ( ) ( )
Young as the independent
public accountants of the
corporation.
3. Proposed adoption of 1993 For Against Abstain
Non-Employee Director ( ) ( ) ( )
Stock Plan.
4. Proposed adoption of For Against Abstain
Supplemental Incentive ( ) ( ) ( )
Compensation Plan.
5. Proposed amendment For Against Abstain
to 1993 Stock Plan to ( ) ( ) ( )
increase the number of
shares of the Company's
Common Stock available
for awards thereunder.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5.
Signature(s)_____________________________________ Date ________________
Please sign exactly as name appears. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
APPENDIX A
Appendix A - Graphic Information Omitted from Electronic Filing
For the substantive information conveyed by the omitted graph, please
see the table under "Stock Price Performance Graph."
