-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KeB4Wyjb7yBWZg66Ic0WhbJNzZkS4wNQT3SwLzFqw2XcEPLK8ddiDzAOPFH8BZDv /CPgT5Q2peQhbIbXIaNu/g== 0000899140-03-000658.txt : 20030821 0000899140-03-000658.hdr.sgml : 20030821 20030821140725 ACCESSION NUMBER: 0000899140-03-000658 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20030821 GROUP MEMBERS: DANIEL S. LOEB SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WARNACO GROUP INC /DE/ CENTRAL INDEX KEY: 0000801351 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', CHILDREN'S & INFANTS' UNDERGARMENTS [2340] IRS NUMBER: 954032739 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-41889 FILM NUMBER: 03859806 BUSINESS ADDRESS: STREET 1: 90 PARK AVE STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126611300 MAIL ADDRESS: STREET 1: 90 PARK AVENUE STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 FORMER COMPANY: FORMER CONFORMED NAME: W ACQUISITION CORP /DE/ DATE OF NAME CHANGE: 19861117 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: THIRD POINT MANAGEMENT CO LLC CENTRAL INDEX KEY: 0001040273 IRS NUMBER: 133922602 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 12 EAST 49TH ST STREET 2: 28TH FL CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2122247400 MAIL ADDRESS: STREET 1: 12 EAST 49TH ST STREET 2: 28TH FL CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D 1 t1249316b.txt INITIAL FILING ON SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934* The Warnaco Group, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.01 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 934390402 - -------------------------------------------------------------------------------- (CUSIP Number of Class of Securities) Daniel S. Loeb Third Point Management Company L.L.C. 360 Madison Avenue, 24th Floor New York, NY 10017 (212) 224-7400 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copies to: Jack H. Nusbaum, Esq. Willkie Farr & Gallagher 787 Seventh Avenue New York, NY 10019-6099 (212) 728-8000 August 11, 2003 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Schedule) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ------------------- ------------------ CUSIP No. 934390402 Page 2 of 11 Pages - ------------------- ------------------ - ----------- -------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Daniel S. Loeb - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY - ----------- -------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ----------- -------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - --------------------- --------- ------------------------------------------------ 7 SOLE VOTING POWER 0 --------- ------------------------------------------------ NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,252,000 OWNED BY --------- ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 0 --------- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 2,252,000 - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 2,252,000 - ----------- -------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.0% - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - ----------- -------------------------------------------------------------------- SCHEDULE 13D - ------------------- ------------------ CUSIP No. 934390402 Page 3 of 11 Pages - ------------------- ------------------ - ----------- -------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Third Point Management Company L.L.C. I.D. #13-3922602 - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY - ----------- -------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ----------- -------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------- --------- ------------------------------------------------ 7 SOLE VOTING POWER 0 --------- ------------------------------------------------ NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,252,000 OWNED BY --------- ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 0 --------- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 2,252,000 - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 2,252,000 - ----------- -------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.0% - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - ----------- -------------------------------------------------------------------- This Schedule 13D is being filed on behalf of Third Point Management Company L.L.C., a Delaware limited liability company (the "Management Company"), and Daniel S. Loeb, an individual ("Mr. Loeb" and, together with the Management Company, the "Reporting Persons"). This Schedule 13D relates to the common stock, par value $0.01 per share, of The Warnaco Group, Inc., a Delaware corporation (the "Company"). Unless the context otherwise requires, references herein to the "Common Stock" are to such common stock of the Company. The Management Company is the investment manager or adviser to a variety of hedge funds and managed accounts (such funds and accounts, collectively, the "Funds"). The Funds directly own the Common Stock to which this Schedule 13D relates, and the Reporting Persons may be deemed to have beneficial ownership over such Common Stock by virtue of the authority granted to them by the Funds to vote and to dispose of the securities held by the Funds, including the Common Stock. Item 1. Security and Issuer. This statement on Schedule 13D relates to the Common Stock of the Company, and is being filed pursuant to Rules 13d-1 and 13d-5 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The address of the principal executive offices of the Company is 90 Park Avenue, New York, New York 10016. Item 2. Identity and Background. (a) This statement is filed by the Reporting Persons. Daniel S. Loeb is the managing member of the Management Company and controls the Management Company's business activities. The Management Company is organized as a limited liability company under the laws of the State of Delaware. (b) The address of the principal business and principal office of the Management Company and Mr. Loeb is 360 Madison Avenue, 24th Floor, New York, NY 10017. 4 (c) The principal business of the Management Company is to serve as investment manager or adviser to the Funds, and to control the investing and trading in securities of the Funds. The principal business of Mr. Loeb is to act as the managing member of the Management Company. (d) None of the Reporting Persons, nor, to the best of their knowledge, any of their directors, executive officers, general partners or members has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons, nor, to the best of their knowledge, any of their directors, executive officers, general partners or members has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Mr. Loeb is a United States citizen. Item 3. Source and Amount of Funds or Other Consideration. The Funds expended an aggregate of approximately $20,515,936.06 of their own investment capital to acquire the 2,252,000 shares of Common Stock held by them (the "Shares"). The Shares were acquired in open market purchases. The Funds effect purchases of securities primarily through margin accounts maintained for them with Bear, Stearns Securities Corp. (the "Primary Broker") which may extend margin credit to the Funds as and when required to open or carry positions in the margin accounts, subject to applicable Federal margin regulations, stock exchange rules and the firm's credit policies. In such instances, the positions held in the margin accounts are pledged as collateral security for the repayment of debit balances in the accounts. 5 Item 4. Purpose of Transaction. The purpose of the acquisition of the Shares by the Funds is for investment. The Reporting Persons may cause the Funds to make further acquisitions of Common Stock from time to time or to dispose of any or all of the shares of Common Stock held by the Funds at any time. As further detailed in a letter, dated August 21, 2003, from Mr. Loeb as managing member of the Management Company, to the Board of Directors of the Company (the "Board"), a copy of which is attached hereto as Exhibit 2, the Reporting Persons are seeking changes in the membership of the Board as well as other changes in Company policy. Certain specific changes sought by the Reporting Persons are as follows: (1) A seat on the Board should be made available to the Reporting Persons. An additional two seats should be made available to other shareholders. (2) The Company should retain financial advisors to explore alternatives to maximize shareholder value. (3) Mr. Stuart Buchalter should resign from the Board. The fact that Mr. Buchalter rejected a $310 million bid for Standard Brands Paint in 1981 when he was Chief Executive Officer of that company, which subsequently filed for bankruptcy, makes him unfit to serve as a director of a public company in the opinion of the Reporting Persons. (4) Mr. Joseph Gromek should resign from his position as Chief Executive Officer of the Company, as well as from the Board, and assume the role of Executive Vice President of Communications and Director of Investor Relations for the remainder of his contracted term with the Company. (5) Mr. Tony Alvarez should cease providing transitional services to the Company at a rate of $750.00 per hour and, if unwilling to cease, resign from the Board. (6) A permanent Chief Financial Officer should be hired and Mr. James Fogarty should resign from his position as Chief Financial Officer of the Company where he is providing accounting services at the rate of $495 per hour. (7) Ms. Sheila Hopkins did not know the number of outstanding Company shares when questioned and should resign from the Board for that and various other reasons. (8) Certain design changes should be implemented in connection with the Company's retail stores and the Company website. If the Company does not pursue the above courses of action, the Reporting Persons may communicate, and coordinate their actions, 6 with other stockholders of the Company to convene a special meeting to replace the members of the Board. It is the understanding of the Reporting Persons that holders of at least 15% of the total outstanding shares of Common Stock may call such a meeting. The Reporting Persons are engaged in the investment business. In pursuing this business, the Reporting Persons analyze the operations, capital structure and markets of companies, including the Company, on a continuous basis through analysis of documentation and discussions with knowledgeable industry and market observers and with representatives of such companies (often at the invitation of management). From time to time, one or more of the Reporting Persons may hold discussions with third parties or with management of such companies in which the Reporting Person may suggest or take a position with respect to potential changes in the operations, management or capital structure of such companies as a means of enhancing shareholder value. Such suggestions or positions may relate to one or more of the transactions specified in clauses (a) through (j) of Item 4 of Schedule 13D of the Exchange Act, including, without limitation, such matters as disposing of or selling all or a portion of the company or acquiring another company or business, changing operating or marketing strategies, adopting or not adopting certain types of anti-takeover measures and restructuring the company's capitalization or dividend policy. Except as set forth above, and in the letter attached hereto as Exhibit 2, the Reporting Persons do not have any present plans or proposals that relate to or would result in any of the actions required to be described in Item 4 of Schedule 13D. Each of the Reporting Persons may, at any time, review or reconsider its position with respect to the Company and formulate plans or proposals with respect to any of such matters, but has no present intention of doing so. Item 5. Interest in Securities of the Issuer. (a) As of the date of this Schedule 13D, the Management Company beneficially owns 2,252,000 shares of Common Stock. The Management Company shares voting and dispositive power over such holdings with Mr. Loeb and with the Funds. As of August 8, 2003, the Shares represented 5.0% of the total 45,025,183 shares of Common Stock outstanding as reported in the Company's quarterly report on Form 10-Q for the quarterly period ended July 5, 2003. None of the individual Funds owns a number of shares of Common 7 Stock equal to or greater than 5% of such total Common Stock outstanding. (b) The Management Company and Mr. Loeb share voting and dispositive power over the 2,252,000 shares of Common Stock held directly by the Funds. (c) Schedule A hereto sets forth certain information with respect to transactions by the Funds, at the direction of the Reporting Persons, in the Common Stock during the past sixty days. All of the transactions set forth on Schedule A, except as may be otherwise noted therein, were effected in open market purchases on the New York Stock Exchange through the Primary Broker. Except as set forth above, during the last sixty days there were no transactions in the Common Stock effected by the Reporting Persons, nor, to the best of their knowledge, any of their directors, executive officers, general partners or members. (d) Other than the Funds which directly hold the Shares, and except as set forth in this Item 5, no person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. Pursuant to Rule 13d-1(k) promulgated under the Exchange Act, the Reporting Persons have entered into an agreement with respect to the joint filing of this statement, and any amendment or amendments hereto. By virtue of the relationships among the Reporting Persons and the Funds, as described in Item 2, the Reporting Persons and the Funds may be deemed to be a "group" under the Federal securities laws. Except as otherwise set forth in this Schedule 13D, each Reporting Person expressly disclaims beneficialownership of any of the shares of Common Stock beneficially owned by any other Reporting Person or the Funds and the filing of this Statement shall not be construed as an admission, for the purposes of Sections 13(d) and 13(g) or under any provision of the Exchange Act or the rules promulgated thereunder or for 8 any other purpose, that any Reporting Person is a beneficial owner of any such shares. Except as set forth herein, there are no contracts, arrangements, understandings or relationships among the persons named in Item 2 or between such persons and any other person with respect to any securities of the Company. Item 7. Material to be Filed as Exhibits. 1. Joint Filing Agreement, dated as of August 21, 2003, by and between the Reporting Persons. 2. Letter from the Management Company to the Board of Directors of the Company, dated August 21, 2003. 9 Schedule A ---------- (Transactions by the Funds in Common Stock during the past sixty days) Date Shares Purchased Shares Sold Price Per Share ---- ---------------- ----------- --------------- 06/30/2003 24,241 $13.43000 06/30/2003 24,241 $13.43000 07/07/2003 76,700 $13.71670 07/31/2003 32,868 $15.60000 07/31/2003 32,868 $15.60000 08/11/2003 51,000 $14.30000 08/20/2003 1,000 $15.70000 SIGNATURES After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: August 21, 2003 THIRD POINT MANAGEMENT COMPANY L.L.C. By: /s/ Daniel S. Loeb ------------------------------ Name: Daniel S. Loeb Title: Managing Member /s/ Daniel S. Loeb ------------------------------ Daniel S. Loeb [SIGNATURE PAGE TO SCHEDULE 13D WITH RESPECT TO THE WARNACO GROUP, INC.] EX-1 4 t1249316c.txt JOINT FILING AGREEMENT Exhibit 1 --------- JOINT FILING AGREEMENT PURSUANT TO RULE 13d-1(k)(1) ---------------------------- The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the others, except to the extent that it knows or has reason to believe that such information is inaccurate. This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall constitute one and the same instrument. Dated: August 21, 2003 THIRD POINT MANAGEMENT COMPANY L.L.C. By: /s/ Daniel S. Loeb ------------------------------ Name: Daniel S. Loeb Title: Managing Member /s/ Daniel S. Loeb ------------------------------ Daniel S. Loeb [JOINT FILING AGREEMENT FOR SCHEDULE 13D WITH RESPECT TO THE WARNACO GROUP, INC.] EX-2 5 t1249316d.txt LETTER Exhibit 2 --------- [THIRD POINT MANAGEMENT COMPANY L.L.C. LETTERHEAD] VIA FACSIMILE & U.S. MAIL August 21, 2003 Warnaco Board of Directors The Warnaco Group, Inc. 90 Park Avenue New York, New York 10016 Dear Ladies and Gentlemen: Third Point Management Company L.L.C. ("Third Point"), is investment advisor to Third Point Partners L.P. and certain affiliates that have acquired 2,252,000 shares of Warnaco Corporation Inc. ("Warnaco" or the "Company"), representing 5.0% of the issued and outstanding stock, carrying a market value of $35.8 million at yesterday's closing price of $15.90. Do not confuse our significant equity stake with a vote of confidence in the Company's Chairman, C.E.O. or certain members of the Board of Directors. In fact, we have grave concerns about the competency, judgment and motivation of these individuals for reasons that shall be set forth in this letter. Nor are we bitter shareholders, significantly under water, like the commercial banks that inherited a stock position because they exercised poor judgment in lending money to a Linda Wachner-led Warnaco at par. We came about our initial holdings via opportunistic purchases of bank debt in the secondary market at prices as low as 27% of face value. These timely initial purchases allowed us to create equity in Warnaco at the equivalent of approximately $6.50 per share, a 59% discount to yesterday's closing price. We purchased additional shares after the Company emerged from Chapter 11 bankruptcy and made our most recent purchase of 52,000 shares over the past ten days. As a result of that purchase, we are required by Regulation 13D of the Securities Exchange Act of 1934 to file with the SEC a statement reflecting the views set forth in this letter. This letter is the outcome of an ongoing investigation by Third Point and certain parties (the "Investigation") into current Board Members' qualifications and their histories that we have been conducting as part of our due diligence process. Our decision to set forth our findings and recommendations in a written communication is due to a series of actions by various members of the Board and management reflecting a refusal to discuss our concerns with us in good faith, culminating in management's failure to take our call during the question and answer period on the Company's August 11, 2003 quarterly conference call. It saddens me to have to communicate with the Board in this way; however, the fact that we were shut out of the question and answer period and that Mr. Gromek, the C.E.O., has declined to meet with us despite numerous invitations has left us with no other choice but to produce our concerns in writing and to share those concerns with our fellow shareholders in order to protect our investment. Our poor opinion of Company management does not extend into the ranks of those working to build the Warnaco brands at the operating level. On the contrary, we believe the achievements of the Company's operating divisions have been obscured by its corporate management and its Board. We fear the spirit of Warnaco's former management has not yet been completely exorcised from the Company. ACCORDINGLY, WE DEMAND THAT THIRD POINT BE PERMITTED TO DESIGNATE EITHER ITS MANAGING MEMBER, DANIEL S. LOEB, OR AN APPOINTEE TO THE COMPANY BOARD. ALTHOUGH WE HAVE NOT DISCUSSED THIS MATTER WITH OTHER SHAREHOLDERS, WE DEMAND THAT THE OTHER TWO LARGEST POST-BANKRUPTCY SHAREHOLDERS BE ALLOWED TO APPOINT ONE REPRESENTATIVE EACH FOR A TOTAL OF THREE REPRESENTATIVES. We have spoken to financial advisors and industry participants who believe that there would be significant interest in the Company's operations if broken up and sold in an auction process and that a value significantly in excess of the Company's current market price could be realized. In fact, during the bankruptcy process, it was reported that the Company was in discussions to sell the Calvin Klein brands to a strategic competitor. WE DEMAND THAT AN INVESTMENT BANKER BE RETAINED TO EVALUATE OPTIONS TO MAXIMIZE SHAREHOLDER VALUE AND TO DETERMINE WHETHER IT IS IN SHAREHOLDERS' INTERESTS FOR THE COMPANY TO CONTINUE AS AN INDEPENDENT CONCERN. INVESTIGATION SUMMARY AND CONCLUSIONS - ------------------------------------- STUART BUCHALTER, Chairman of the Board of Directors, extracted $500,000 as a non-executive Chairman in 2002 and currently receives the indefensible salary of $250,000 -- an outrageously high sum for a non-executive Chairman who has already been gifted 12,975 free shares. Appallingly, Mr. Buchalter also received a one-time cash bonus of $210,004 upon the Company's emergence from bankruptcy in February, 2003. It is surprising to us that Mr. Buchalter has managed to insinuate himself as Chairman of the Company given his past experience and prior role in the destruction of Standard Brands Paint ("Standard Brands"). (Details of this woeful tale of apparent mismanagement, self-dealing, abuse of corporate defenses, and ultimate financial failure, are chronicled in Appendix I to this letter). As Chief Executive Officer of Standard Brands Paint ("Standard Brands"), Buchalter rejected a $310 million offer for that company and erected takeover defenses to entrench himself. Standard Brands subsequently filed for bankruptcy resulting in the elimination of equity value and impairment to Standard Brands' creditors. Mr. Buchalter is also director of bankrupt E4L, Inc. (OTCBB: ETVL). This affiliation is omitted from his biography contained in the Company's Proxy Statement. We were interested to learn that Mr. Buchalter's law firm, Buchalter, Nemer and Fields was named for his late father, Irwin and that Mr. Buchalter served on the Board of Earl Scheib (ASE: ESH Market cap $12 million), a company chaired by his father. With regard to Warnaco, it appears to us that Mr. Buchalter seems to be most interested in receiving as much cash and free shares from the Company as possible. Note that Mr. Buchalter has never purchased a single share in the Company. Notwithstanding Mr. Buchalter's evident disregard for shareholders, he is Chairman of the Company's "Nominating and Corporate Governance Committee" and a member of both the Company's "Compensation Committee" and "Audit Committee." As shall be discussed below, the directors hired by the Buchalter-led Nominating Committee, have little economic interest in the Company and were, in our view, put in place to entrench Mr. Buchalter. MR. BUCHALTER'S INTERESTS ARE NOT ALIGNED WITH SHAREHOLDERS' AND WE INSIST THAT HE RESIGN FROM THE BOARD OF DIRECTORS EFFECTIVE IMMEDIATELY. JOSEPH GROMEK, Chief Executive Officer, has been generally unresponsive to us and other shareholders. He had not been formally employed, to the best of our knowledge, for over 15 months when offered the position at the Company. His background running Brooks Brothers, a staid retailer of out-dated men's fashions catering to the country club set (http://www.brooksbrothers.com/ countryclub/landing_countryclub.tem) was marked by a series of disappointments, according to press reports. We were surprised by the Board's choice to hire Mr. Gromek, particularly considering the better-qualified internal candidates. His initial efforts at Warnaco do not suggest the necessary abilities required to effectively run the Company. We were particularly chagrined by Gromek's handling of the Company's recent high yield offering where we believe that the Company paid an unduly high interest rate in a deal that was substantially oversubscribed. WE URGE MR. GROMEK TO RESIGN AS CHIEF EXECUTIVE OFFICER AND BOARD MEMBER AND TO ASSUME THE ROLE OF EXECUTIVE VICE PRESIDENT OF COMMUNICATIONS AND DIRECTOR OF INVESTOR RELATIONS FOR THE REMAINDER OF HIS CONTRACTED TERM AS AN OFFICER OF THIS COMPANY. TONY ALVAREZ, in his capacity as Chief Restructuring Officer, did a commendable job as Interim Chief Executive Officer of the Company, for which he was paid immensely well. According to the Company's Proxy Statement dated April 29, 2003, Mr. Alvarez was paid over $6 million in base salary and cash incentive bonuses during his tenure. In addition, Mr. Alvarez received 266,400 shares currently valued in excess of $4 million upon reorganization. It appears that Mr. Alvarez continues to be paid $750 per hour for ongoing "transitional services," a sum that we find difficult to condone. Mr. Fogarty, the interim CFO, has been billing his time at a rate of $475 per hour, an annualized salary in excess of $950,000. Such a high rate of compensation brings to question the incentives to find a permanent CFO. In fact, when triangulating the information contained in the June 30, 2003 10Q, the April 2003 proxy and the May 27, 2003 Debt Prospectus it was revealed that Alvarez & Marsal, Inc., a firm where Mr. Alvarez and Mr. Fogarty are partners, extracted over $12 million in cash and shares from the Company. During the second quarter of 2003, a period that began well after the completion of the restructuring and about the time of Mr. Gromek's hire, Alvarez & Marsal, Inc. received $514,000 in payments for executive services. When factoring in a full quarter of compensation for Mr. Fogarty and a month of compensation for Mr. Alvarez at the rates of $475 per hour and $125,000 per month respectively, this leaves approximately $140,000 of cash compensation unaccounted for. We can only guess that this $140,000 represented an additional 180 hours-plus of "transitional" billing time from Mr. Alvarez. Our call to Mr. Fogarty on this matter, among others that became apparent in the recent 10Q filing, went unanswered. The high sums Mr. Alvarez and Mr. Fogarty have received suggest to us and others that they view this Company as a "honey pot" from which to extract as much "nectar" (shareholders' cash) as possible. It is high time that Mr. Alvarez move onto his next bankruptcy assignment where the courts are generous in permitting exorbitant fees for professional services. WE INSIST THAT MR. ALVAREZ CEASE AND DESIST FROM PROVIDING SUCH HIGH-PRICED "TRANSITIONAL SERVICES" TO THE COMPANY EFFECTIVE IMMEDIATELY AND, IF UNWILLING TO TERMINATE SUCH FEES, RESIGN EFFECTIVE IMMEDIATELY FROM THE BOARD OF DIRECTORS. WE FURTHER DEMAND THAT MR. FOGARTY RESIGN AS A $475 PER HOUR CFO AND THAT A NEW CFO BE APPOINTED IMMEDIATELY. SHEILA HOPKINS, recently elected to the Company Board, is currently Vice President and General Manager of U.S. Personal Care at Colgate Palmolive Corp. (NYSE: CL) and was previously a Vice President at Tambrands Inc. As part of the Investigation, we conducted a series of interviews with her and fellow employees. We inquired about the relevance of her experience as a mid-level executive marketing consumer brands such as Lady Speed Stick and Tampons to a diversified apparel concern such as the Company. She stated that her 20 years of experience in marketing would be useful to the Company. When we probed further, she responded by saying that it was not appropriate for her to discuss her views with shareholders. We explained that as a significant shareholder we believed it was appropriate for her to share her marketing insights as they applied to the Company. We then asked her how many shares she had purchased with her own money. She replied that it was none of our business. I explained to her that, on the contrary, as one of the Company's largest shareholders holding 2,252,000 shares, it was my business to ensure that we were represented by like-minded individuals who shared a stake in the Company, or as Warren Buffett of Berkshire Hathaway (NYSE: BRK/A) says, have "skin in the game." As the interview proceeded, it became clear to me how important it is for directors to own a stake in the companies they serve. When I asked her how many Company shares were outstanding, her reply was: "I don't have that information in front of me." Wrong answer. She was also unable to tell us the Company's revenues generated in the most recent quarter. We shareholders demand that the Directors have a rudimentary knowledge of the Company's financial position, including an approximate idea of the market capitalization and sales. This is not an unreasonable request, even for directors new to the job, who should have done their own due diligence and read recent financial statements. ACCORDINGLY WE DEMAND THAT SHEILA HOPKINS RESIGN IMMEDIATELY FROM THE COMPANY'S BOARD OF DIRECTORS DUE TO OUR IMPRESSION OF HER INABILITY TO CARRY OUT HER FIDUCIARY DUTIES. CHARLES PERRIN was abruptly relieved of his duties as Chief Executive Officer of Avon Products (NYSE: AVP) in November 1999 when the stock plummeted from $36 to about $26 in one day (already down from the mid-50s during the summer of 1999) as a result of significant disappointment in Avon's results under his management. Evidently, Mr. Perrin has not been formally employed since his departure from Avon except as a director of Warnaco. We are curious what specific insights Mr. Perrin offers to Warnaco. We are also concerned that, with no other apparent source of income, Mr. Perrin might become reliant upon the $65,000 in annual salary and free stock grant to sustain himself, thus clouding his judgment on such matters that might bring an end to this source of income (aside from severance from Avon). Mitigating our concerns, however, is the fact that Mr. Perrin did purchase 10,000 Warnaco shares. WE DO NOT INSIST UPON MR. PERRIN'S RESIGNATION AS WE APPLAUD HIM FOR BEING THE ONLY NON-EXECUTIVE DIRECTOR TO PURCHASE COMPANY SHARES. ADDITIONAL DEMANDS AND RECOMMENDATIONS - -------------------------------------- o The Investor Relations function, currently being handled by Alison Malkin at Integrated Corporate Relations ("ICR"), is wholly inadequate for a company of Warnaco's size. Many shareholders and potential shareholders have complained that ICR lacks the depth of knowledge required to satisfy the investor relations function. As mentioned above, we believe that Joseph Gromek should handle that function until such time that his employment agreement expires. Otherwise, we urge the Company to assign the task to a full-time employee and terminate the ICR relationship immediately. o The Warnaco website is a debacle. It is shocking that the website is in such disarray given that the Company Board boasts several supposed experts in marketing. It is poorly designed and provides scant information for investors or others interested in the Company. The image projected of the Company is cheap and tawdry. When you click on to the Warnaco site (www.Warnaco.com) the first image that you are welcomed with is a collage of mostly semi-nude models, the centerpiece of which is that of a buff hairless boy bulging out of his Calvin Klein underwear. The site then shifts to a page of poorly reproduced black and white logos before bringing the user to the Home Page, which contains several links. Under "Presentations," there are none. Under "Analyst Coverage," there is no reference. Most insulting, under "Management", there is a list of the Company's directors, three senior officers (including Jay Galuzzo, the 28 year old General Counsel), but no mention of the corporate officers who are so integral to the success of the Company, namely John Kourakos Head of Sportswear, Roger Williams, Head of Swimwear and Tom Wyatt, Head of Intimate Apparel. Compare this to the Phillips Van Heusen website (www.pvh.com) where the links to the "Management" section provides a detailed list of corporate executives. I only wish that the marketing geniuses on the Company Board were too busy reading the Company's financial statements to check out the Company website. Such a wish has about as much probability of fulfillment as one duly lodged with the tooth fairy. o While Speedo's wholesale business appears to be healthy, Speedo Retail stores need a face-lift, both in store design and merchandising. If the Company plans to fill its admirable mission described by Mr. Gromek as taking the Speedo Brand "out of the pool, onto the beach and onto the street" there must be something done to fix the stale designs and poor merchandising. I only hope that Mr. Gromek does not attempt to reinvigorate the collection with designers from his days at Brooks Brothers. THE SPEEDO STORES NEED AN IMMEDIATE DESIGN AND MERCHANDISING PLAN TO FIX THE DATED IMAGE THAT SPEEDO HAS IN ITS RETAIL OUTLETS NOW. BACKGROUND TO THE INVESTIGATION - ------------------------------- Third Point was attracted to Warnaco for its world-class brands and ability to generate significant cash flow. We believed Linda Wachner, the utterly disgraced and notoriously incompetent former CEO who presided over the demise of the Company, had left behind a taint that affected the valuation of the Company even after her involuntary removal from the Company. The odor left behind by Ms. Wachner's malfeasance was so pronounced that even vulture investors turned away from investing in the Company at the equivalent of $6.50 a share. Since we base our investment decisions on facts and financial results as opposed to sentiment, in early 2002, we leapt at the opportunity to enter the business at approximately 3.7x EBITDA and to relieve the banks of approximately $85 million face amount of bank loans, while the Company was still in bankruptcy, making Third Point one of the Company's largest creditors. In 2002, we caught wind of a disturbing development in the restructuring process reported in a November issue of Women's Wear Daily ("WWD"), namely that the Board and the Steering Committee of Creditors were attempting to sell the Company's crown jewel, its Calvin Klein brands, at a bargain basement price. We believed that transaction served neither the long-term interests of the Company nor those of its future shareholders. The transaction, recommended by a financial advisor, in our opinion, did not make financial sense. It appeared to us that such a transaction only served the fee-generating interests of the restructuring professionals -- who had already extracted millions in fees. We concluded that we needed a "seat at the table" and offered to serve on the Company's Steering Committee with other creditors. I explained to Mr. Buchalter that since we were creditors that planned to be long-term shareholders, we would like a voice in the restructuring process. Our offer to serve on the Steering Committee was rebuffed, notwithstanding our large debt holdings. Frustrated by the Steering Committee and Board's unwillingness to represent our interests in the restructuring process, we and two other disenfranchised creditors sent a detailed letter dated December 5, 2002 addressed to James Fogarty, C.F.O of the Company and a partner at Alvarez & Marsal, Inc. Although the sale was not completed, its failure was due to technicalities in the transaction and not a withdrawal of the process as we recommended. It became clear to us that the Company needed a strong voice on the Board representing shareholders who had actually purchased shares voluntarily as opposed to receiving them via free stock options or inheriting them as a result of a failed loan. I offered to serve as a Company Director to Mr. Buchalter, Chairman of the Nominating Committee and was assured by him that I would be contacted by a representative of Heidrich & Struggles (OTC: HSII), the firm retained to conduct the search for new directors. I submitted my qualifications to serve on the Board: o I am a graduate of Columbia University with a degree in economics, 41 years of age and have approximately twenty years of investment experience, including a career that started in the venture capital firm of E. M. Warburg Pincus and Co. I worked at Jefferies and Co. as a high yield and distressed debt analyst and trader and then Citicorp Securities in the high yield department. I am President of the Daniel S. Loeb/Third Point Foundation, a charitable entity dedicated to providing financial support to organizations involved in education, healthcare and women's rights. o I founded Third Point, a firm dedicated to event-driven value-oriented investing, in June 1995. Our firm has one of the top track records and in 1997 we were voted "Best Event-Driven Manager" by a body of investment professionals and won the Alternative Investment Award. Third Point's assets under management have grown from $3.0 million at inception to over $500 million today. A dollar invested in Third Point Partners, LP at its inception would be worth over seven dollars today. o I was a Director of Radia Communications, an 802.11(a/b/g) wireless LAN semiconductor company, where I made a significant impact on its success. David Fisher, its C.E.O, has said that without my personal efforts Radia would not have succeeded. At Radia, Third Point was the initial and founding shareholder as well as lead investor. We led several rounds of subsequent venture financing during the most difficult periods in memory for such financing. Radia has since been sold to Texas Instruments (NYSE: TXN) for an undisclosed sum. While we cannot reveal the terms of the transaction, Third Point, Radia's management, and our advisors, Thomas Weisel Partners were pleased with the outcome. To read more about the transaction, please see the press release: http://www.ti.com/corp/docs/press/company/2003/c03041.shtml o As Managing Member of Third Point, advisor to funds controlling over 5% of the Company shares valued at over $35 million, I have a significant economic stake in the Company. Several months after my initial approach, I was finally contacted by the executive search firm. What ensued was the equivalent of a Kangaroo Court to determine my qualifications to join the Board. Given my stake in the Company, my success as an investor and my track record as a corporate director, I fully expected my candidacy to be approved or at least taken seriously. However, how seriously could it have been taken since nobody from Heidrich & Struggles bothered to contact anyone with whom I served on the Radia Board? I DEMAND TO SEE THE MINUTES FROM THE BOARD MEETING WHERE MY CANDIDACY WAS DISCUSSED AND WHAT THE RATIONALE WAS FOR BLACKBALLING ME. I was surprised that, as one of the Company's largest owners, I was treated so shabbily by Mr. Buchalter, the Chairman of the Nominating Committee. I was not even informed that I had been passed over for the Board position but had to surmise it from the announcement of the appointment of others. Nevertheless, I swallowed my pride and trusted that the Committee must be considering another large shareholder or at least individuals who are considered giants in the field of marketing and brand management and who could make a substantial contribution to the Company. On April 28, 2003 the Company announced the appointment of David A, Bell, Chairman and CEO of Interpublic Group Inc. (NYSE: IPG) and Charles R. Perrin, former CEO of Avon Products (NYSE: AVP) and Duracell. Most recently, Sheila Hopkins, a Vice President of Colgate Palmolive was appointed to the Board. CONCLUSION - ---------- The dipping into of Warnaco's coffers by greedy advisors and directors must stop now. We demand a seat on the Company's Board of Directors. We have reviewed the Company's bylaws and understand that shares representing 15% of the outstanding stock can call a special meeting to replace the Board of Directors. Should you not accept our demands, we may organize with other disgruntled shareholders to convene such a special meeting. We look forward to your response to this letter and hope that your response reflects an understanding and appreciation of your fiduciary duties, including the duties of good faith, due care and candor, to the shareholders of the Company. Sincerely, /s/ Daniel S. Loeb Daniel S. Loeb APPENDIX A: STUART BUCHALTER BACKGROUND INFORMATION - --------------------------------------------------- After our initial investigation of the above Directors, I began to grow uneasy and it appeared as if the Nominating Committee, now named the Nominating and Corporate Governance Committee, was intentionally hiring light-weight directors with no economic stake so as to insulate Mr. Buchalter and Mr. Alvarez and to allow them to make their numerous trips to the Warnaco "honey pot" where they so readily helped themselves to generous fees and free stock grants. I knew little of Mr. Buchalter other than what he told me about himself. He informed me that he had known my father, a former partner at Irell and Manella in Los Angeles and had known my late, great-aunt, Ruth Handler, the legendary founder of Mattel, Inc. (NYSE: MAT). I met Mr. Buchalter in person at a Warnaco Annual Meeting, a handsome middle-aged gentleman, his shock of gray hair and beard and his bold red striped shirt and polka dot red tie made him look oddly like Burt Reynolds character, the pornographic producer, in the film, "Boogie Nights". His wife, who came to the Annual Meeting, informed me that we were somehow distant cousins and told me that she would send me an invitation to a family reunion in Denver (an invitation that never arrived). At the meeting, I stood up and expressed my views on corporate governance reading a section from Mr. Warren Buffett's annual letter to shareholders in which he discusses the importance of directors' true ownership in a company. (The full text of the letter is on the Berkshire Hathaway website http://www.berkshirehathaway.com/letters/2002.html) and should be mandatory reading for all corporate directors. Mr. Buchalter proclaimed his dedication to shareholder rights and claimed that the Warnaco Board would be a model in corporate governance. But alas, it was not to be so. Hence, one can imagine my shock and dismay as we conducted our investigation into Mr. Buchalter's compensation on the Warnaco Board as well as his prior employment history. Mr. Buchalter mentions his membership on the City National Corp.'s (NYSE: CYN) Board of Directors, a Beverly Hills-based bank known for lending to the entertainment industry. What he does not mention is his membership on the Board of Directors of E4L, the former National Marketing, whose shares trade on the Pink Sheets at one one hundredth of a cent and is currently operating under bankruptcy protection. Evidently, Stuart Buchalter attracts bankruptcies the way Pigpen (of Charlie Brown fame) attracts a cloud of filth hovering overhead. Nor does he mention his prior membership to the Board of Earl Scheib ("I'll paint any car for $99.99"), a company on which his father served as Chairman. Unfortunately, as the Investigation revealed, Mr. Buchalter's career is like an Earl Scheib paint job, attractive on the surface but soon to peel off and reveal the rust that lays beneath the surface. The cornerstone of Mr. Buchalter's career was his role in the management of Standard Brands, a company where he rose from the ranks of General Counsel to Chairman and Chief Executive Officer. The search for ways to cut costs is intense. "We all got a little bit lazy, and now we're forced to look at each expense and figure out what's it doing for me," said STUART BUCHALTER, chairman of the Standard Brand Paint Company of Torrance, Calif. His company has not been able to raise prices for 18 months due to competition from off- price warehouse stores. "We've learned that inventories don't have to grow by 10 percent a year." (New York Times August 11, 1985) A Forbes article dated June 29, 1987 chronicled the sorry performance of Standard Brands under Mr. Buchalter's management in an article entitled "Painted into a corner." "RUMORS, ONLY RUMORS," Chairman STUART BUCHALTER told his shareholders at Standard Brands Paint Co.'s May 29 annual meeting. The story was that someone had been buying blocks of shares of the Torrance, Calif.-based do-it-yourself paint discounter. Given the company's stock performance in recent years, shareholders could be forgiven for wishing that the takeover talk was more than rumor. At a recent $ 23 a share, Standard Brands fetches less than it did in 1983, when the bull market was still a calf. Last year Standard Brands earned $ 15 million on sales of $ 327 million, less than it earned in 1980 on sales of $ 210 million. Profits are off nearly 28% since the 1984 peak. These mediocre results are all the more surprising since Standard Brands caters to the do-it-yourself home repair crowd, one of the fastest-growing retail segments around. It sells home decorating products such as paint, carpet, wallpaper, window coverings and art supplies at discount prices through 140 company-owned stores in 95 cities in nine western states. Standard Brands makes 80% of the paint it sells... Standard Brands' policy of promoting from within, another article of faith, seems to have produced an overwhelming case of management myopia. President Marvin Wager, 62, has been around since 1952. When Sidney Greenberg, son of Dan (one of the cofounders), retired as chairman in 1981, the board of directors looked to an outsider for new ideas. It got no further than STUART BUCHALTER, corporate counsel. Buchalter, 49, is personable and quick, but a merchandising star on the Samuel Walton or Leslie Wexner model he is not. (Forbes, June 29, 1987) Evidently, not only was Mr. Buchalter no merchandising star but he was not much of a financial star either for on July 28 1987, the United Press reported that Stuart Buchalter and the Standard Brands Board had "rejected a $300 million takeover bid from New Zealand's Chase Corp." in an article entitled "Standard Brands rebuffs $300 million offer." "The board's decision was based on many factors," said STUART BUCHALTER, Standard Brands chairman and chief executive officer. Buchalter said the offer was based on what he termed a "wholly unrealistic" business plan "which reflects no understanding of Standard Brands business and assets and is inconsistent with the maximization of shareholder value." The price of company's shares have increased in recent weeks on rumors of a possible takeover, despite actions taken by Standard Brands to thwart an unwanted suitor. In May, the company reincorporated in Delaware and adopted anti-takeover measures. Standard Brands said its directors determined the unsolicited $28-a-share offer was not in the "best interests" of shareholders. (United Press International, July 28, 1987) After having reached a high of $31.88 in the wake of the hostile bid, Standard Brands shares plummeted over 30% to $21.50 per share when Mr. Buchalter and his Board made the ill-fated decision to leverage up Standard Brands' balance sheet with $185 million in debt to repurchase shares in a 1987 tender offer. So great was shareholder disgust in Mr. Buchalter and his "management" of Standard Brands, that in 1991, John Latshaw, a private investor attempted to wrestle control of the Company via a proxy contest. Yet another article chronicled the steady decline in earnings per share under the Buchalter regime. SIX YEARS OF PAIN Earnings of Torrance-based Standard Brands Paint Co. have fallen for six straight years -- and now, several big shareholders have decided that enough is enough. Earnings per share '84: 1.87 '85: 1.40 '86: 1.33 '87: 0.79 '88: 0.57 '89: 0.36 '90: -0.80 '91*: -0.95 *Estimate Earnings exclude gains and losses from discontinued operations Source: Value Line Investment Survey By August 1991, not only had Mr. Buchalter lost the confidence of his shareholders but his employees were publicly venting their disgust with his reign. In an August 19, 1991 article in the Los Angeles Business Journal entitled "Standard Brands paints a brighter scene:" Meanwhile, half of the company's employees have been without a labor contract since December, with no progress reported. Adding fuel to an already kindled fire, a group of employee shareholders -- who control about 20 percent of the company's stock -- sued to force the company to hold an annual meeting. Standard Brands officials said last week the suit has been dismissed, but the plaintiff says it hasn't. The group has also waged a proxy fight, which the employee shareholders say is still going on but the company says is null and void. (Los Angeles Business Journal, August 19, 1991) Particularly disturbing, in the course of the Investigation was Mr. Buchalter's apparent lining of his own pockets while he was in the process of ruining the company. In a Los Angeles Times article dated February 7, 1992 titled "Investors Seeking Voice On Execs' Pay May Get It," Stuart Buchalter is held out as a poster-child of self-dealing: Take the case of Standard Brands Paint Co., a Torrance-based paint retailer whose profits have been falling for six years. The company, with $300 million in annual sales, now teeters on the verge of Chapter 11 bankruptcy. Its stock, $31 in 1987, now trades for $1.88. STUART BUCHALTER, the CEO who has presided over Standard's long decline, earned $429,874 in fiscal 1990. In addition, he was paid $23,750 under a "target bonus plan" -- even as the company's earnings plunged further. Why would Standard's board of directors pay a bonus to Buchalter in a disastrous year? A company spokesman says the bonus was based on Buchalter's ability to reach certain cash-flow targets "to keep the company going. In other words, though Standard was collapsing, it hadn't yet collapsed completely -- so the directors decided Buchalter deserved a bonus. (Los Angeles Times, February 7, 1992) Just 7 months after this scathing article and 5 years after Stuart Buchalter rejected a $310 million offer for the company, Mr. Buchalter's term as CEO ended ignominiously when Standard Brands filed its Plan of Reorganization with the U.S. Bankruptcy Court in Los Angeles. One can only wonder how, with this blight on his record, Stuart Buchalter would be allowed a position as an officer or director of a public company. We at Third Point believe that Warnaco shareholders and employees deserve better. -----END PRIVACY-ENHANCED MESSAGE-----