DEF 14A 1 file1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant
Filed by a party other than the Registrant
Check the appropriate box:

    Preliminary Proxy Statement
    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
    Definitive Proxy Statement
    Definitive Additional Materials
    Soliciting Material Pursuant to Section 240.14a-12

THE WARNACO GROUP, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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THE WARNACO GROUP, INC.
501 Seventh Avenue
New York, New York 10018

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 2007

To the Stockholders of
THE WARNACO GROUP, INC.:

NOTICE IS HEREBY GIVEN that the 2007 Annual Meeting of Stockholders of The Warnaco Group, Inc., a Delaware corporation, will be held at Warnaco’s offices, 501 Seventh Avenue, New York, New York 10018, on Tuesday, May 15, 2007, at 10:00 a.m., local time, or at any adjournments or postponements thereof (the ‘‘Annual Meeting’’), for the following purposes:


	1.	To elect nine Directors to serve until the next annual meeting and until their successors have been elected and qualified;


	2.	To ratify the appointment of Deloitte & Touche LLP as Warnaco’s independent registered public accounting firm for the fiscal year ending December 29, 2007; and


	3.	To transact such other business as may properly come before the Annual Meeting.

The attached proxy statement describes the matters to be considered at the Annual Meeting. The Board of Directors has fixed the close of business on Tuesday, March 27, 2007 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. A list of stockholders entitled to vote at the Annual Meeting will be available at Warnaco’s principal executive offices located at 501 Seventh Avenue, New York, New York, 10018 for at least ten days prior to the Annual Meeting and will also be available for inspection at the Annual Meeting.

Whether or not you expect to attend, WE URGE YOU TO COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE OR VOTE BY TELEPHONE OR INTERNET IN ACCORDANCE WITH THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD. If you attend the Annual Meeting, you may vote your shares in person which will revoke any previously provided proxy.

If your shares are held of record by a broker, bank or other nominee and you wish to attend the Annual 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 Annual Meeting. In order to vote such shares at the Annual 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 COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD OR VOTE BY TELEPHONE OR INTERNET TODAY.

By Order of the Board of Directors

JAY A. GALLUZZO
Senior Vice President — Corporate Development,
General Counsel & Secretary

New York, New York
April 17, 2007

THE WARNACO GROUP, INC.
501 Seventh Avenue
New York, New York 10018

P R O X Y S T A T E M E N T

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 2007

INTRODUCTION

This proxy statement (the ‘‘Proxy Statement’’) and the accompanying proxy are being furnished in connection with the solicitation of proxies on behalf of the Board of Directors of The Warnaco Group, Inc., a Delaware corporation, for use at the 2007 Annual Meeting of Stockholders to be held at Warnaco’s offices, 501 Seventh Avenue, New York, New York 10018, on Tuesday, May 15, 2007, at 10:00 a.m., local time, or at any adjournments or postponements thereof (the ‘‘Annual Meeting’’), for the purposes set forth in the accompanying Notice of Annual Meeting. The Notice of Annual Meeting, Proxy Statement and accompanying proxy are first being mailed on or about April 17, 2007 to stockholders of record as of the close of business on March 27, 2007.

If your shares are held of record by a broker, bank or other nominee, please refer to the information provided by that entity for instructions on how to vote your shares. In addition, if your shares are held by a broker, bank or other nominee, and you wish to attend, and vote at, the Annual Meeting, you must (a) obtain a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares, (b) obtain a proxy issued in your name from such record holder and (c) bring both the letter and the proxy to the Annual Meeting.

If you are a registered stockholder holding shares in Warnaco directly under your own name, you can ensure that your shares are voted at the Annual Meeting by (1) completing, signing, dating and promptly returning the enclosed proxy in the envelope provided; (2) voting by telephone as instructed on the enclosed proxy; or (3) voting by Internet as instructed on the enclosed proxy. Sending in a signed written proxy or voting by telephone or Internet will not affect your right to attend the Annual Meeting and vote in person.

You may revoke your proxy at any time before it is voted at the Annual Meeting by (1) notifying our Transfer Agent, Wells Fargo Corporate Trust, Sixth & Marquette, Minneapolis, Minnesota 55479, in writing; (2) providing us with a subsequent properly executed written proxy; (3) subsequently voting by telephone or Internet; or (4) attending the Annual Meeting and voting in person.

Our principal executive offices are located at 501 Seventh Avenue, New York, New York 10018.

Voting Of Proxies

All properly executed written proxies, and all properly completed proxies submitted by telephone or Internet, received prior to the Annual Meeting will be voted in accordance with the instructions specified therein. As to any matter for which no choice has been specified in a properly executed written proxy or properly completed proxy submitted by telephone or Internet, the shares represented thereby will be voted ‘‘FOR’’ the election of all nine nominees for the Board of Directors and ‘‘FOR’’ the ratification of the appointment of Deloitte & Touche LLP (‘‘Deloitte & Touche’’) as our independent registered public accounting firm for the fiscal year ending December 29, 2007 and in the discretion of the persons named in the proxy in connection with any other business that may properly come before the Annual Meeting. The Board of Directors knows of no other business to come before the Annual Meeting; however, if other matters properly come before the Annual Meeting, it is intended that the persons named in the proxy will vote thereon in accordance with their best judgment.

Quorum; Vote Required

The presence, in person or by properly executed written proxy or properly completed proxy submitted by telephone or Internet, of the holders of a majority of the total number of votes of the issued and outstanding shares of our common stock, par value $0.01 per share (the ‘‘Common Stock’’), entitled to vote at the Annual Meeting is necessary to constitute a quorum in order to transact business. Abstentions and broker non-votes, if any, will be included in the calculation of the number of shares present at the Annual Meeting for purposes of determining a quorum.

Directors shall be elected by a plurality of votes of the shares of Common Stock present at the Annual Meeting, in person or by properly executed written proxy or properly completed proxy submitted by telephone or Internet, and entitled to vote. In determining whether such nominees have received the requisite number of affirmative votes, abstentions and broker non-votes, if any, will have no effect on the outcome of the vote.

Approval of the ratification of the appointment of Deloitte & Touche as our independent registered public accounting firm requires the affirmative vote of a majority of the shares of Common Stock present at the Annual Meeting, in person or by properly executed written proxy or properly completed proxy submitted by telephone or Internet, and entitled to vote. In determining whether such proposal has received the requisite number of affirmative votes, abstentions and broker non-votes, if any, will be counted and will have the same effect as a vote against the proposal.

Outstanding Voting Securities

As of the close of business on March 27, 2007, the record date for determining stockholders entitled to vote at the Annual Meeting, there were outstanding and entitled to vote 46,294,935 shares of Common Stock. Each share of Common Stock is entitled to one vote per share. Only stockholders of record as of the close of business on March 27, 2007 will be entitled to notice of and to vote at the Annual Meeting.

Solicitation Of Proxies

The cost of soliciting proxies for the Annual Meeting will be borne by us. In addition to solicitation by mail, solicitations may also be made by personal interview, facsimile transmission, telegram, telephone and other methods of communication. We are using the services of Morrow & Co., Inc. to assist in soliciting proxies. We expect that the fees and expenses to be paid by us for such services will not exceed $10,000. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to forward proxy materials to their beneficial owners, and we will reimburse them for their reasonable expenses incurred in connection therewith. Directors, officers and other regular employees of Warnaco, as yet undesignated, may also request the return of proxies by telephone, telegram, personal visit or otherwise.

PROPOSAL NO. 1 — ELECTION OF DIRECTORS

At the Annual Meeting, nine Directors are to be elected to serve until the next annual meeting and until their successors have been elected and qualified. The nine nominees for Director (each of whom is currently a member of the Board of Directors) are David A. Bell, Robert A. Bowman, Richard Karl Goeltz, Joseph R. Gromek, Sheila A. Hopkins, Charles R. Perrin, Nancy A. Reardon, Donald L. Seeley and Cheryl Nido Turpin. Certain biographical information regarding the nine nominees is set forth below.

All properly executed written proxies received by us and properly completed proxies submitted by telephone or Internet will be voted ‘‘FOR’’ the election of the Board of Directors’ nominees unless contrary instructions are given. If one or more of the Board of Directors’ nominees is unable to serve, which is not anticipated, the persons named as proxies intend to vote, unless the number of Directors 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 ITS NOMINEES, WHICH IS DESIGNATED AS ITEM NO. 1 ON THE ENCLOSED PROXY CARD.

BIOGRAPHICAL INFORMATION

Set forth below are the name, age (as of March 27, 2007), positions and offices with Warnaco, if applicable, and other selected biographical information of each (1) Director nominee and (2) non-Director Executive Officer of Warnaco.

Biographical Information of the Director Nominees

Charles R. Perrin, 61, has been a Director of Warnaco since April 2003 and has served as our Non-Executive Chairman since March 2004. Mr. Perrin served as Acting Non-Executive Chairman from January 2004 until March 2004. Mr. Perrin served as Chairman of Avon Products, Inc. (‘‘Avon’’) from May 1999 to November 1999 and Chief Executive Officer of Avon from July 1998 to November 1999. He served as Avon’s Vice Chairman from January 1998 to May 1999 and Avon’s Chief Operating Officer from January 1998 to July 1998. Mr. Perrin served as Chairman and Chief Executive Officer of Duracell International, Inc. from 1994 to 1996. He is a trustee of Trinity College, Save the Children and Ability Beyond Disability, Chairman of Clearpool, Inc. and a Director of Campbell Soup Company and Eastern Mountain Sports.

David A. Bell, 63, has been a Director of Warnaco since April 2003. Since March 16, 2006, Mr. Bell has served as Chairman Emeritus of The Interpublic Group of Companies (‘‘Interpublic’’), a provider of advertising, specialized marketing and communication services. Previously, he served as Interpublic’s Co-Chairman from January 2005 until March 15, 2006, Chairman and Chief Executive Officer from February 2003 to January 2005 and Vice Chairman from June 2001 to February 2003. From March 1999 to 2001, Mr. Bell served as Chairman and Chief Executive Officer of True North Communications, Inc., a provider of advertising and marketing communication services. From 1992 to March 1999, he served as Chairman and Chief Executive Officer of Bozell Worldwide. Mr. Bell serves on the Board of Directors of Primedia, Inc. and DHB Industries Inc. Mr. Bell is currently an operating advisor of Pegasus Capital Advisors, L.P., Chairman of PRO-AD PAC (the advertising industry’s political action committee), and is the Chairman of the Board of Directors of The National Forest Foundation and Co-Chairman of the Advertising Council Advisory Group.

Robert A. Bowman, 52, has been a Director of Warnaco since January 2004. He currently serves as President and Chief Executive Officer of Major League Baseball Advanced Media (‘‘MLB.com’’), the Internet and interactive media unit of Major League Baseball. Prior to joining MLB.com in November 2000, Mr. Bowman was President and Chief Executive Officer of Cyberian Outpost, Inc., an online retailer of computers and electronics. Before he joined Cyberian Outpost in September 1999, Mr. Bowman held several senior management positions at ITT Corporation, including President, Chief Operating Officer and Chief Financial Officer. Earlier in his career, Mr. Bowman served for eight years as Treasurer of the State of Michigan. Mr. Bowman is currently a Director of World Wrestling Entertainment, Inc. and Blockbuster, Inc.

Richard Karl Goeltz, 64, has been a Director of Warnaco since July 2002. From 1996 to 2000, Mr. Goeltz served as Vice Chairman and Chief Financial Officer of the American Express Company, a provider of travel, payment, financial advisory and international banking services. Previously, Mr. Goeltz was Group Chief Financial Officer and a member of the Board of Directors of NatWest Group (‘‘NatWest’’), the parent company of National Westminister Bank PLC. Prior to joining NatWest, Mr. Goeltz served The Seagram Company for over 20 years in a variety of management positions. Mr. Goeltz is a Director of Federal Home Loan Mortgage Corporation (‘‘Freddie Mac’’), the New Germany Fund and Aviva plc, a member of the Board of Overseers of Columbia Business School, a Director of Opera Orchestra of New York, a member of the Council on Foreign Relations and a member of the Court of Governors and the Council of the London School of Economics and Political Science.

Joseph R. Gromek, 60, has served as President and Chief Executive Officer of Warnaco since April 2003, at which time he was also elected to the Board of Directors. From 1996 to 2002, Mr. Gromek served as President and Chief Executive Officer of Brooks Brothers, Inc., a clothing retailer. From January 2002 until he joined Warnaco in April 2003, Mr. Gromek worked as an independent consultant. Over the last 25 years, Mr. Gromek has held senior management positions with Saks Fifth Avenue, Limited Brands, Inc. and AnnTaylor Stores Corporation. Mr. Gromek is the Chairman of the Board of Directors of Volunteers of America and a member of the Board of Governors of the Parsons School of Design.

Sheila A. Hopkins, 51, has been a Director of Warnaco since July 2003. Ms. Hopkins currently serves as Vice President and General Manager, Professional Oral Care, N.A. at Colgate-Palmolive Company, a consumer products company. From January 2004 to January 2007, she served as Vice President — Palmolive Equity Global Business Development and from September 1997 to January 2004, she served as Vice President, General Manager of Personal Care. Previously she served as Vice President of U.S. Marketing at Tambrands and in various marketing positions at Procter & Gamble Company. Ms. Hopkins currently is a member of the Board of Directors of Volunteers of America.

Nancy A. Reardon, 54, has been a Director of Warnaco since July 2006. Ms. Reardon currently serves as Senior Vice President and Chief Human Resources and Communications Officer at Campbell Soup Company, a global manufacturer of soup, beverage, confectionery and prepared food products. Prior to joining Campbell Soup Company, from 2002 to 2004, Ms. Reardon served as Executive Vice President of Human Resources for Comcast Cable Communications, Inc., a provider of cable television and communication services. Previously, from 1996 to 2002, she served as Partner and Executive Vice President, Human Resources and Corporate Affairs, Borden Capital Management Partners, a provider of private equity investments, corporate governance, mergers and acquisitions and strategic partnering expertise. Ms. Reardon is currently a member of the Board of Directors of The Mann Center for the Performing Arts in Philadelphia. Ms. Reardon was elected as a Director of Warnaco on July 11, 2006 by the Board of Directors. Ms. Reardon was recommended to the Nominating and Corporate Governance Committee by a non-management Director of Warnaco and was approved and recommended to the Board of Directors by that committee in accordance with the procedures described below under ‘‘Nominating and Corporate Governance Committee’’.

Donald L. Seeley, 63, has been a Director of Warnaco since July 2005. Since April 2000 Mr. Seeley has been an adjunct lecturer and the Director of the Applied Investment Management Program at the University of Arizona. From July 1997 to March 2000, Mr. Seeley was Vice Chairman and Chief Financial Officer of True North Communications. Earlier, he was President and Chief Executive Officer of the Alexander Consulting Group. He currently is a member of the Board of Trustees of William Blair Mutual Funds.

Cheryl Nido Turpin, 59, has been a Director of Warnaco since April 2004. From June 1994 to August 1997, Ms. Turpin served as President and Chief Executive Officer of The Limited Stores. She was President and Chief Executive Officer of Lane Bryant, a subsidiary of The Limited Stores, Inc., from January 1990 to June 1994. Ms. Turpin is a Director of Footlocker, Inc.

Biographical Information of the Non-Director Executive Officers

Lawrence R. Rutkowski, 49, currently serves as Warnaco’s Executive Vice President and Chief Financial Officer. From September 2003 until March 2005, Mr. Rutkowski served as our Senior Vice President and Chief Financial Officer. From December 1999 to June 2003, he served as Executive Vice President and Chief Financial Officer at Primedia, Inc., a targeted media company. From November 1993 to December 1999, he served at National Broadcasting Company/General Electric as Senior Vice President and Chief Financial Officer Strategic Business Development and Controller of Corporate Finance. Previously, Mr. Rutkowski held a senior management position at Walt Disney Studios.

Helen McCluskey, 51, joined Warnaco as Group President — Intimate Apparel in July 2004. Prior to joining Warnaco, Ms. McCluskey served as Group President of the Moderate Women’s Sportswear

division of Liz Claiborne Corporation, a designer and marketer of branded apparel, accessories and fragrance products, from August 2001 to June 2004. Previously, she spent 18 years at Sara Lee Corporation, a manufacturer and marketer of brand-name products, where she held executive positions in marketing, operations and general management, including President of Playtex Apparel from 1999 to 2001.

Frank Tworecke, 60, joined Warnaco as Group President — Sportswear in May 2004. From 1999 to April 2004, Mr. Tworecke served as President and Chief Operating Officer of Bon-Ton Stores, a department store operator. Previously, he was President and Chief Operating Officer of Jos. A. Bank. Mr. Tworecke has also held senior management positions with other specialty and department store retailers including MGR, Inc., Rich’s Lazarus Goldsmith’s (now part of the Macy’s Central division of Federated Department Stores), and John Wanamaker.

Dwight Meyer, 54, currently serves as Warnaco’s President — Global Sourcing, Distribution and Logistics. Mr. Meyer is responsible for all aspects of our worldwide sourcing, distribution and logistics operations. From April 2005 until March 2007, Mr. Meyer served as our President — Global Sourcing. Prior to joining Warnaco, Mr. Meyer served as Executive Vice President of Global Sourcing of AnnTaylor Stores Corporation, a specialty clothing retailer of women’s apparel, shoes and accessories, from 1996 until April 2005. Previously, he served as President and Chief Operating Officer of C.A.T. (a joint venture between AnnTaylor Stores Corporation and Cygne Design) and Vice President, Sourcing for the Abercrombie & Fitch division of M.A.S.T. Industries.

Stanley P. Silverstein, 54, currently serves as Warnaco’s Executive Vice President — International Strategy and Business Development. From March 2005 until January 2006, Mr. Silverstein served as our Executive Vice President — Corporate Development. From March 2003 to March 2005, Mr. Silverstein served as Warnaco’s Senior Vice President — Corporate Development and served as our Chief Administrative Officer from December 2001 until January 2006. Mr. Silverstein served as Warnaco’s Vice President and General Counsel from December 1990 until February 2003 and as its Secretary from January 1987 until May 2003. In May 2004, Mr. Silverstein, without admitting or denying the findings, entered into a settlement with the Securities and Exchange Commission (‘‘SEC’’) pursuant to which the SEC found that Mr. Silverstein had willfully aided and abetted and caused certain violations by Warnaco of the federal securities laws and issued an administrative order requiring that Mr. Silverstein cease and desist from causing any violations and any future violations of such laws. The order, which did not impose any fines or monetary penalties on Mr. Silverstein, censured him pursuant to the SEC’s Rules of Practice and required that he disgorge certain incentive compensation for 1998, with interest. In addition, the order provided that until May 11, 2006, Mr. Silverstein not sign documents to be filed with the SEC by or on behalf of Warnaco nor participate in or be responsible for the preparation or review of such filings, except under limited circumstances.

Jay A. Galluzzo, 32, currently serves as Warnaco’s Senior Vice President — Corporate Development, General Counsel and Secretary. From March 2005 until March 2007, Mr. Galluzzo served as our Senior Vice President, General Counsel and Secretary. From March 2003 to March 2005, Mr. Galluzzo served as Warnaco’s Vice President and General Counsel and has served as our Secretary since May 2003. Mr. Galluzzo was associated with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from October 2000 to March 2003.

Elizabeth Wood, 45, joined Warnaco as Senior Vice President — Human Resources in September 2005. From May 2002 to August 2005, Ms. Wood served as a consultant for Breakthrough Group, a consulting company that focuses on executive and employee training and development. From May 1996 to February 2002, Ms. Wood served as the Executive Vice President of Human Resources of Brooks Brothers, Inc. Previously, Ms. Wood served as Corporate Human Resources Director of Marks and Spencer Group, plc.

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Board of Directors

The Board of Directors has determined that Messrs. Bell, Bowman, Goeltz, Perrin and Seeley and Mmes. Hopkins, Reardon and Turpin (comprising a majority of Warnaco’s Board of Directors) are independent directors as defined in the NASDAQ listing standards.

The Board of Directors has adopted Corporate Governance Guidelines, a Code of Ethics for Principal Executive and Senior Financial Officers and an Employee Code of Business Conduct and Corporate Ethics Policy (‘‘Code of Conduct’’), all of which are posted, along with our Charter, By-Laws and Committee Charters, on the corporate governance page of our Internet website located at www.warnaco.com. Any amendment to, or waiver of, the Code of Ethics for Principal Executive and Senior Financial Officers will be disclosed on our website. We do not currently expect to make any such waivers.

The Board of Directors held ten meetings in the fiscal year ended December 30, 2006 (‘‘Fiscal 2006’’). During Fiscal 2006, all of the Directors attended at least 75% of the meetings of the Board of Directors and the respective committees of the Board of Directors of which they were a member. Warnaco strongly encourages, but does not require, members of the Board of Directors to attend annual stockholder meetings. All of our then-sitting Directors attended last year’s annual meeting. Our Corporate Governance Guidelines provide that independent Directors will meet without management at regularly scheduled executive sessions at least quarterly, in conjunction with regularly scheduled Board meetings, and at such other times as they deem appropriate.

The Board of Directors has adopted certain processes for receiving communications from stockholders. Our stockholders may contact any member (or all members) of the Board of Directors (including, without limitation, any committee of the Board or any chair of any such committee) by mail or electronically. To communicate with the Board of Directors, any individual Director or any group or committee of Directors, stockholders may address correspondence to the Board of Directors or any such individual Directors or group or committee of Directors by either name or title. All such correspondence shall be sent to us ‘‘c/o Corporate Secretary’’ at The Warnaco Group, Inc., 501 Seventh Avenue, New York, New York 10018. This contact information is also available on the corporate governance page of our Internet website at www.warnaco.com. On the corporate governance page, stockholders will find an on-line form that may be used for writing an electronic message to the Board of Directors, any individual Director, or any group or committee of Directors. The website includes instructions for sending any such message. Stockholders may also communicate with such persons by sending an e-mail to board@warnaco.com. All communications received from stockholders will be opened by our Corporate Secretary for the sole purpose of determining whether the contents represent a message to our Directors. Any contents that are not in the nature of advertising or promotions of a product or service will be forwarded promptly to the addressees. Communications which consist of stockholder proposals must instead follow the procedures set forth under ‘‘Stockholder Proposals’’ below and, in the case of recommendations for Director candidates, the procedures set forth under ‘‘Nominating and Corporate Governance Committee’’ below.

In Fiscal 2006, the Board of Directors had the following standing committees: Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee.

Audit Committee

The Audit Committee, which met 15 times in Fiscal 2006, is primarily responsible for: (1) monitoring the quality and integrity of Warnaco’s financial statements and related disclosure and systems of internal controls regarding risk management, finance and accounting; (2) monitoring all material matters relating to Warnaco’s capital structure, financial policies, capital investments, and related matters; (3) appointing and overseeing the independent auditors and approving in advance the independent auditors’ fee arrangements, other terms of service and scope of audit; (4) monitoring the independent auditors’ qualifications and independence; (5) approving in advance any non-audit services to be provided by the independent auditors; (6) in consultation with management, overseeing the appointment, compensation,

performance, replacement, reassignment or dismissal of the principal internal auditor; (7) reviewing the scope, planning and staffing of the proposed annual internal audit plan; (8) providing an avenue of communication among the independent auditors, management, the internal auditing department and the Board of Directors; (9) monitoring Warnaco’s compliance with legal and regulatory requirements; (10) reviewing and approving related party transactions pursuant to Warnaco’s policy governing such transactions (which policy, adopted by the Committee on March 6, 2007, codified Warnaco’s existing practices); (11) administering and monitoring the performance of Warnaco’s Employee Retirement Plan; and (12) issuing the report required by the SEC to be included in Warnaco’s annual proxy statement.

In Fiscal 2006, the members of the Audit Committee were Mr. Bowman, Mr. Goeltz, Chairman, Ms. Hopkins, Mr. Perrin and Mr. Seeley (each of whom continues to serve on the Audit Committee as of the date of this Proxy Statement). In addition, in January 2007, Ms. Reardon joined the Audit Committee. Each member of the Audit Committee during Fiscal 2006 was, and each current member is, an independent director under the NASDAQ listing standards and qualified pursuant to the additional NASDAQ requirements for audit committee members, in each case, as determined by the Board of Directors. The Board of Directors has determined that Mr. Goeltz is an ‘‘audit committee financial expert’’ as that term is defined in the applicable SEC rules and in satisfaction of the applicable audit committee requirements of the NASDAQ listing standards; however, he is not an auditor or accountant for Warnaco, he does not perform field work and is not an employee of Warnaco. In accordance with the SEC’s safe harbor relating to audit committee financial experts, a person designated or identified as an audit committee financial expert will not be deemed an ‘‘expert’’ for any purpose, including without limitation for purposes of Section 11 of the Securities Act of 1933, as amended. In addition, such designation or identification does not impose on such person any duties, obligations or liability that are greater than that imposed on such person as a member of the Audit Committee and Board of Directors in the absence of such designation or identification and does not affect the duties, obligations or liabilities of any other member of the Audit Committee or Board of Directors.

The Audit Committee has established procedures for: (a) the receipt, retention and treatment of complaints received by Warnaco regarding accounting, internal accounting controls, misuse or inappropriate use of corporate assets or auditing matters or potential violations of law; and (b) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters or potential violations of law. Such procedures are described in the Audit Committee’s written charter referred to below.

The Audit Committee operates under a written charter which is available on the corporate governance page of our Internet website located at www.warnaco.com. The Audit Committee reviews its charter annually and amends it as necessary. In addition, the Audit Committee undertakes an annual self-evaluation of its practices and operations to ensure that all members of the Committee are satisfied with the manner in which the Committee is executing its duties. The self-evaluation results are reviewed by our Nominating and Corporate Governance Committee and our Board of Directors.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee, which met six times in Fiscal 2006, has as its primary purposes: (1) assisting the Board of Directors by actively identifying individuals qualified to become Directors; (2) recommending to the Board of Directors the Director nominees for election at annual meetings of stockholders; (3) recommending to the Board of Directors nominees to serve on committees of the Board of Directors and members of each committee to serve as Chair of that committee; (4) recommending to the Board of Directors compensation amounts (including cash and equity compensation) for Directors; (5) monitoring significant developments in the law and practice of corporate governance and of the duties and responsibilities of directors of public companies; (6) leading the Board of Directors, each committee of the Board of Directors and management in its annual performance self-evaluation, including establishing criteria to be used in connection with such evaluation; (7) overseeing compliance with our Code of Conduct; and (8) developing, recommending to the Board of Directors and administering our Corporate Governance Guidelines.

In Fiscal 2006, the members of the Nominating and Corporate Governance Committee were Mr. Bell, Mr. Goeltz, Mr. Perrin, Chairman, Mr. Seeley and Ms. Turpin (each of whom continues to serve on the Nominating and Corporate Governance Committee as of the date of this Proxy Statement). Each member of the Nominating and Corporate Governance Committee during Fiscal 2006 was, and each current member is, an independent director under the NASDAQ listing standards as determined by the Board of Directors.

The Nominating and Corporate Governance Committee has adopted a policy to generally ensure that the minimum qualifications for serving as a Director of Warnaco are that a nominee: (1) demonstrate, by significant accomplishment in his or her field, an ability to make a meaningful contribution to the Board of Directors’ oversight of the business and affairs of Warnaco; and (2) be a person of the highest integrity and have an impeccable record and reputation for honest and ethical conduct in both his or her professional and personal activities. In addition, the Nominating and Corporate Governance Committee examines candidates’ specific experiences and skills in light of: (1) the needs of Warnaco and the Board of Directors; (2) time availability in light of other commitments; (3) potential conflicts of interest; and (4) independence from management and Warnaco. The Nominating and Corporate Governance Committee identifies potential nominees by asking current Directors and Executive Officers to notify the Committee if they become aware of persons meeting the criteria described above, who might be available to serve on the Board of Directors. From time to time, the Nominating and Corporate Governance Committee engages firms that specialize in identifying Director candidates. During Fiscal 2006, we engaged Spencer Stuart, a global executive search firm, to perform these services.

The Nominating and Corporate Governance Committee will also consider Director candidates recommended by stockholders. In order to have a candidate considered by the Nominating and Corporate Governance Committee, stockholders must submit the following information: (1) the name of the stockholder and evidence of the stockholder’s ownership of Common Stock, including the number of shares owned and the length of time of ownership and (2) the name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a Director of Warnaco and the candidate’s consent to be named as a Director if selected by the Nominating and Corporate Governance Committee and nominated by the Board of Directors. The stockholder recommendation and information described above must be sent to the Nominating and Corporate Governance Committee ‘‘c/o Corporate Secretary’’ at The Warnaco Group, Inc., 501 Seventh Avenue, New York, New York 10018. The Nominating and Corporate Governance Committee will accept recommendations of Director candidates throughout the year; however, in order for a recommended Director candidate to be considered for nomination to stand for election at an upcoming annual meeting of stockholders, the recommendation must be received by our Corporate Secretary not less than 120 days prior to the anniversary date of our most recent annual meeting of stockholders. This information regarding the procedure for submitting stockholder nominations to the Board of Directors also can be found on the corporate governance page of our Internet website located at www.warnaco.com.

In considering Board of Director candidates, the Nominating and Corporate Governance Committee will take into consideration the needs of Warnaco and the Board of Directors as well as the qualifications of the candidate. The Nominating and Corporate Governance Committee may also take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held.

Once a person has been identified by the Nominating and Corporate Governance Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Nominating and Corporate Governance Committee determines that the candidate warrants further consideration, the Chairman or another member of the Committee will contact the candidate directly. Generally, if the candidate expresses a willingness to be considered and to serve on the Board of Directors, the Nominating and Corporate Governance Committee will request further information from the candidate, review the person’s accomplishments and qualifications, including in light of any other candidates that the Committee might be considering, and conduct one or more interviews with the candidate. In certain

instances, Nominating and Corporate Governance Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments to assist in the evaluation process. The Committee’s evaluation process shall not vary based on whether or not a candidate is recommended by a stockholder, although, as stated above, the Committee may take into consideration the number of shares held by a recommending stockholder and the length of time such shares have been held.

The Nominating and Corporate Governance Committee operates under a written charter which is available on the corporate governance page of our Internet website located at www.warnaco.com. The Nominating and Corporate Governance Committee reviews its charter annually and amends it as necessary. In addition, the Nominating and Corporate Governance Committee undertakes an annual self-evaluation of its practices and operations to ensure that all members of the Committee are satisfied with the manner in which the Committee is executing its duties. The self-evaluation results are reviewed by our Board of Directors.

As noted below, the Nominating and Corporate Governance Committee is also advised by Towers Perrin with respect to Director compensation.

Compensation Committee

The primary purpose of Warnaco’s Compensation Committee, which met seven times in Fiscal 2006, is to discharge the responsibilities of the Board of Directors relating to all compensation, including equity compensation, of Warnaco’s Executive Officers. The Compensation Committee also oversees Warnaco’s broad-based benefit programs. The Compensation Committee has overall responsibility for evaluating and making recommendations to the Board of Directors regarding (1) the performance and compensation of Warnaco’s Executive Officers and (2) Warnaco’s equity-based and incentive compensation plans, policies and programs. In addition, the Compensation Committee undertakes regular review of Warnaco’s executive compensation philosophy. Through this review process, combined with evaluation of the practices of our industry peers and consultation with outside consultants, the Compensation Committee manages our executive compensation practices. The Compensation Committee retains discretion over compensation decisions in order that it may regularly monitor pay against performance and determine how to compensate appropriately for performance. The Compensation Committee meets regularly in private executive session with Towers Perrin (see ‘‘Compensation Consultant’’ below for additional information) to discuss our performance as it relates to executive compensation.

In addition, the Compensation Committee undertakes an annual self-evaluation of its practices and operations to ensure that all members of the Committee are satisfied with the manner in which the Committee is executing its duties. The self-evaluation results are reviewed by our Nominating and Corporate Governance Committee and our Board of Directors.

In Fiscal 2006, the members of the Compensation Committee were Mr. Bell, Chairman, Mr. Bowman, Ms. Hopkins, Mr. Perrin, Ms. Reardon (as of July 11, 2006) and Ms. Turpin (each of whom continues to serve on the Compensation Committee as of the date of this Proxy Statement). Each member of the Compensation Committee during Fiscal 2006 was, and each current member is, an independent director under the NASDAQ listing standards as determined by the Board of Directors.

The Compensation Committee operates under a written charter which is available on the corporate governance page of our Internet website located at www.warnaco.com and which was recently amended to address the Committee’s review and approval of the discussion of its compensation policies and objectives. The Compensation Committee reviews its charter annually and amends it as necessary.

Compensation Consultant

In 2004, the Compensation Committee retained Towers Perrin as its independent compensation consultant to advise the Compensation Committee on all matters related to executive compensation, general compensation programs and other compensation and benefits-related matters. Other than the

services described below (all of which have been reviewed and approved by the Compensation Committee), Towers Perrin provides no other services to, and is not otherwise affiliated with, Warnaco.

Representatives of Towers Perrin assist the Compensation Committee in reviewing proxy compensation data in order to select an appropriate peer group and in analyzing the peer group’s practices. Our Compensation Committee uses this information to determine the compensation of our Executive Officers and set individual performance goals for each Executive Officer. As part of its engagement, Towers Perrin regularly provides guidance relating to our overall compensation practices, in addition to advice regarding best practices in the industry and broader marketplace.

Towers Perrin also advises our Nominating and Corporate Governance Committee with respect to Director compensation, including annual compensation, meeting fees and equity awards. Additionally, management may from time to time utilize Towers Perrin’s proxy data and other information services. This use is limited in nature and is subject to review and approval by the Compensation Committee, in its sole discretion.

Our relationship with Towers Perrin continues in 2007.

Compensation Committee Interlocks and Insider Participation

None.

Certain Relationships and Related Person Transactions

We have adopted a written Policy and Procedures with respect to Related Person Transactions (available on the corporate governance page of our Internet website located at www.warnaco.com) relating to the review, approval and ratification of related person transactions, including transactions that are disclosable under SEC Regulation S-K, Item 404(a). Generally, our policy requires that our Audit Committee review and approve transactions involving more than $120,000 in which Warnaco is a participant and in which any of the following persons has a direct or indirect material interest: any of our Directors (or nominees) or Executive Officers or any person known to be the beneficial owner of more than 5% of our voting securities, any immediate family member of, or any person sharing a household with, any of the foregoing persons, or any entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest. Prior to the consummation of any transaction with a related person (regardless of the dollar amount involved), full disclosure of all facts and circumstances of such transaction must be made to our legal department. The legal department then determines whether such transaction or arrangement requires the approval of the Audit Committee. If appropriate, the transaction is submitted to the Audit Committee for consideration at the next Committee meeting or, in those instances where the legal department, in consultation with the Chief Executive Officer or Chief Financial Officer, determines it is not practicable or desirable to wait until the next meeting, to the Chair of the Committee (who possesses delegated authority to act between Committee meetings).

The Audit Committee (or Chair, as applicable) will approve only those related person transactions that are in, or not inconsistent with, the best interests of the Warnaco and its stockholders. Our written policies also include similar procedures relating to the review and ratification of any related person transaction not previously approved pursuant to the policy, and procedures for identifying related persons.

There were no transactions since the beginning of our last fiscal year, and there are no currently proposed transactions, required to be disclosed under SEC Regulation S-K, Item 404(a).

DIRECTOR COMPENSATION

Compensation of our independent Directors is structured to provide pay commensurate with the work required of them and to align independent Directors’ goals with those of stockholders. In addition, independent Director compensation is regularly evaluated to ensure consistency with peer company practices, as well as the broader marketplace.

Fiscal 2006 Director Compensation

Upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors approved the following Fiscal 2006 compensation arrangement for our independent Directors (other than our Non-Executive Chairman, whose compensation arrangement is described separately below): (i) $35,000 in cash and (ii) Common Stock issued under The Warnaco Group, Inc. 2005 Stock Incentive Plan with a value of $60,000, as well as fees of $1,500 per day for attendance at meetings of the Board of Directors and $1,200 per day for attendance at meetings of its Committees.

Upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors approved the following Fiscal 2006 compensation arrangement for our Non-Executive Chairman — Charles R. Perrin: (i) $200,000 in cash and (ii) Common Stock issued under the 2005 Stock Incentive Plan with a value of $110,000. The Non-Executive Chairman did not receive fees for attendance at meetings of the Board of Directors or its Committees or Committee Chairman fees (as described separately below).

In addition, in Fiscal 2006, the Chairmen of the Audit and Compensation Committees were paid additional fees of $10,000 and $5,000, respectively. In Fiscal 2006, Mr. Goeltz served as Chairman of the Audit Committee, Mr. Bell served as Chairman of the Compensation Committee and Mr. Perrin served as Chairman of the Nominating and Corporate Governance Committee. As noted above, Mr. Perrin does not receive a Committee Chairman fee.

Directors were also reimbursed for reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors and its Committees.

We do not pay any additional remuneration to employees who serve as Directors of Warnaco.

Director Compensation Table

The following table discloses compensation paid to our non-management Directors with respect to Fiscal 2006:


Name	Fees Earned or Paid in Cash ($)			Stock Awards ($) (a)			Option Awards ($)			Non-Equity Incentive Plan Compensation ($)			Change in Pension Value and Nonqualified Deferred Compensation Earnings			All Other Compensation ($)			Total ($)
Charles R. Perrin		$	183,333		$	109,984		$	0		$	0		$	0		$	0		$	293,317
Robert A. Bowman		$	71,300		$	59,998		$	0		$	0		$	0		$	0		$	131,298
David A. Bell		$	62,200		$	59,998		$	0		$	0		$	0		$	0		$	122,198
Richard Karl Goeltz		$	82,500		$	59,998		$	0		$	0		$	0		$	0		$	142,498
Sheila A. Hopkins		$	69,800		$	59,998		$	0		$	0		$	0		$	0		$	129,798
Nancy A. Reardon		$	27,531		$	51,115		$	0		$	0		$	0		$	0		$	78,646
Donald L. Seeley		$	71,000		$	59,998		$	0		$	0		$	0		$	0		$	130,998
Cheryl Nido Turpin		$	62,900		$	59,998		$	0		$	0		$	0		$	0		$	122,898

(a)	Amounts shown represent the market value of awards of Common Stock on the grant date. This amount is equal to the number of shares granted multiplied by the closing price of our Common Stock on the grant date.

2007 Director Compensation

In January 2007, upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors approved the following fiscal 2007 compensation arrangement for our independent Directors (other than Mr. Perrin, whose fiscal 2007 compensation arrangement is described separately below): (i) $50,000 in cash and (ii) Common Stock issued under the 2005 Stock Incentive Plan with a value of $75,000, as well as fees of $1,200 per day for attendance at meetings of the Board’s Committees. Beginning in fiscal 2007, we no longer pay fees for attendance at meetings of the Board of Directors.

Upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors approved the following fiscal 2007 compensation arrangement for Mr. Perrin: (i) $210,000 in cash and (ii) Common Stock issued under the 2005 Stock Incentive Plan with a value of $125,000. As was the case in Fiscal 2006, the Non-Executive Chairman will not receive fees for attendance at meetings of the Board of Directors or its Committees or Committee Chairman fees.

In addition, in fiscal 2007, the Chairmen of the Audit and Compensation Committees will be paid additional fees of $12,500 and $7,500, respectively. As noted above, the Non-Executive Chairman does not receive a Committee Chairman fee.

In fiscal 2007, we will continue to reimburse Directors for reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors and its Committees.

We do not pay any additional remuneration to employees who serve as Directors of Warnaco.

In December 2006, the Nominating and Corporate Governance Committee approved a deferred compensation plan for our independent Directors (the ‘‘Directors’ Deferred Compensation Plan’’), effective beginning in 2007. The Directors’ Deferred Compensation Plan provides for an annual elective deferral of cash compensation and/or meeting fees into an unfunded individual account, the performance of which is linked to investment options selected by each participant.

COMPENSATION DISCUSSION AND ANALYSIS

Overview and Business Goals

Warnaco designs, sources, manufactures, markets, licenses and distributes a broad line of intimate apparel, sportswear and swimwear worldwide. Our products are sold under several highly recognized brand names, including but not limited to Warner’s^®, Olga^®, Lejaby^®, Calvin Klein^®, Speedo^®, Chaps^®, Nautica^®, Catalina^®, Anne Cole^® and Michael Kors^®. We distribute our diversified portfolio of products both domestically and internationally through a variety of distribution channels including major department stores, independent retailers, chain stores, membership clubs, specialty and other stores, mass merchandisers, Warnaco-owned retail stores and the Internet. In addition, we use our design, manufacturing and sourcing expertise to produce private label intimate apparel and swimwear products for customers that generally do not carry our branded products. We manufacture our products through a combination of third-party manufacturing contractors and, to a lesser extent, Warnaco-owned offshore facilities.

Our mission is to be the premier global, branded apparel company by building on our portfolio of leading brands to attract new customers and continue to provide world class services to existing ones. To this end, we have identified the following primary strategic objectives:


	•	Brand growth through product line extension


	•	International expansion


	•	Diversification of distribution channels


	•	Direct-to-consumer platform development

In addition, we are committed to exploring new opportunities to meet the needs of consumers and customers and to driving improvement in stockholder returns. To this end, we are working to enhance operational efficiencies throughout our business. By working across one corporate platform, we believe

we can better support an increasingly global business with diversified product offerings. In addition, we are continuing to transition to an internally-managed sourcing model. In working toward our overall corporate mission and specific strategic initiatives, we rely on the contributions of all Warnaco employees worldwide. We regard our employees as key drivers of our success and we are focused on building a corporate culture that recognizes the contributions of all employees, appreciates personal contributions to superior product and performance, and promotes the values of diversity and cultural and personal respect in the workplace.

Compensation Program Objectives and Supporting Principles

Our compensation philosophy is designed to support our business mission, strategic objectives and corporate culture. The compensation program’s core objectives are to:


	•	Reward employees for superior performance


	•	Attract and retain world-class talent


	•	Ensure consistency of compensation with Warnaco’s operating objectives


	•	Encourage alignment of Warnaco’s and employees’ performance goals with stockholder interests


	•	Provide competitive compensation, as measured against our predetermined peer group and other comparable companies in the broader marketplace

The following guiding principles support the program’s core objectives:


	•	Consideration of competitive compensation practices, job scope and responsibility, as well as our need to retain, attract, and reward executive talent


	•	Emphasis on the importance of team accountability by structuring certain incentive awards primarily based on the results of Warnaco and each of our business units, with adjustments for individual performance in cases of significant under- or over-performance


	•	Determination of incentive payment awards based on a predetermined quantitative framework as well as rigorous discretionary review of qualitative results


	•	Application of our compensation philosophy globally, with allowances for adjustments to individual compensation packages based on local standards of practice


	•	Motivation to achieve business goals through executive compensation that is tied, in part, to our overall financial results

The Compensation Committee annually evaluates the compensation philosophy and adjusts it as necessary, from time to time, in an effort to ensure that the philosophy continues to be aligned with our corporate objectives and stockholder interests.

Executive Officer Compensation

In compensating Executive Officers, the Compensation Committee considers factors relating to each Executive Officer’s individual position and performance, including experience, relevant skill sets, achievement of financial goals and achievement of strategic and/or tactical objectives. In addition, the Compensation Committee considers factors relating to each Executive Officer’s contribution to his or her business unit (where appropriate) and Warnaco generally, including performance relative to competitive peer companies and the overall marketplace. From time to time, the Compensation Committee considers other quantitative or qualitative measures of performance, as appropriate. Lastly, the Compensation Committee considers the effect of certain external factors including, but not limited to, the overall economic environment and retention risk. In addition, the Chief Executive Officer evaluates the performance of each other Executive Officer and makes compensation-related recommendations to the Compensation Committee. Total compensation packages as well as each element of compensation (i.e., base salary, incentive compensation, long-term incentives and benefits and perquisites) are targeted at the median of the peer group companies, with certain actual awards varying up or down based on individual performance and certain other factors.

Throughout our fiscal year, the Compensation Committee follows a pre-established process for evaluating compensation levels for Executive Officers. During the course of the year, the Compensation Committee regularly reviews:


	•	Our compensation philosophy


	•	The composition of the peer group of companies used for benchmarking executive compensation


	•	Our annual budget and operating plan


	•	Our Chief Executive Officer’s and other Executive Officers’ ongoing performance against pre-established financial, strategic and operational goals


	•	Our Executive Officers’ competitive compensation positioning compared to peer companies and the marketplace


	•	Our Chief Executive Officer’s and other Executive Officers’ full compensation packages, including all conditional amounts, such as payments upon termination or change in control

The process described above forms the basis for the Compensation Committee’s decisions regarding executive compensation, which are made annually before the end of our first fiscal quarter. Once the executive compensation decisions are made for a given fiscal year, the Compensation Committee begins anew the process of reviewing and evaluating the factors noted above in preparation for determining the following year’s executive compensation.

Competitive Market for Talent

As previously noted, we operate in the wholesale/retail apparel industry and manufacture, source, market and sell a diversified group of products to a broad array of customers. In order to ensure that we meet both our short- and long-term business goals in each of our operating areas, it is critical that we attract a highly-motivated and experienced team of Executive Officers and employees. The apparel industry is extremely competitive in this regard, and it is common for companies to use compensation as the basis to initially attract talent. Our current executive compensation packages reflect, in part, our goal of attracting and retaining superior performers to meet diverse business needs.

Moreover, we have experienced a number of significant structural and corporate changes in recent years including (i) our emergence in 2003 from reorganization proceedings under Chapter 11 of the United States Bankruptcy Code; (ii) our transition from a third-party based sourcing model to an internal sourcing model beginning in 2005; and (iii) the acquisition of the companies that operate the wholesale and retail businesses of Calvin Klein jeanswear and accessories in Europe and Asia and the CK Calvin Klein ‘‘bridge’’ line of sportswear and accessories in Europe in 2006 (the ‘‘CKJEA Acquisition’’). These corporate and strategic changes, among others, have necessitated the recruitment and employment of a new management team to provide us with the leadership and talent to support a global business model. For example, in connection with our 2003 reorganization, we undertook an executive search and recruited both Mr. Gromek and Mr. Rutkowski to serve as Chief Executive Officer and Chief Financial Officer, respectively. Additionally, in 2005 we recruited Mr. Meyer to serve as President — Global Sourcing to manage the transition to an internal sourcing model. In certain limited cases, elements of individual compensation packages were set at the higher end of the competitive range in order to attract the most talented candidates with the specific skills and background needed to manage Warnaco and execute our strategic goals.

When measuring the level of compensation for Executive Officers against the competitive market, the Compensation Committee uses proxy data from a predetermined set of peer companies, comprised of wholesale and/or vertically integrated retail apparel companies, with a size ranging from approximately one-half to two times our revenues. With assistance in the data review process from Towers Perrin, we have determined that our current peer group of companies is as follows:


Abercrombie & Fitch			Kellwood
Aeropostale			New York & Company
American Eagle Outfitters			Oxford Industries
AnnTaylor Stores			Perry Ellis International
Charming Shoppes			Phillips-Van Heusen
Chico’s FAS			Polo Ralph Lauren
Columbia Sportswear			Quicksilver
Guess?			Tommy Hilfiger^*

Going forward, we will exclude Tommy Hilfiger from our peer group, as current proxy compensation data will no longer be available due to Tommy Hilfiger’s December 2005 acquisition by Apax Partners.

The Compensation Committee also considers compensation practices at VF Corporation, Jones Apparel Group and Liz Claiborne, Inc., as these entities also compete for the overall apparel industry talent pool. However, data from these companies is not included in competitive benchmarks because each of these entities has significantly greater annual revenues than ours. In certain instances, proxy-level data from peer companies may be supplemented by compensation consultant survey data of companies in the apparel industry and other industries.

The Compensation Committee also relies in part on additional pay practice and competitive data provided by Towers Perrin, its independent compensation consultant as disclosed above under ‘‘Compensation Consultant’’.

Compensation Elements

We believe that the combination of base salary, short-term incentives, long-term incentives and benefits and perquisites should be increasingly leveraged towards variable compensation as the amount of total compensation increases. While a competitive level of fixed compensation in the form of base salary serves an important competitive purpose and also provides Executive Officers with a level of certainty that allows for planning of personal financial expenses, it does not provide sufficient incentive to executive officers to drive the outcomes that we desire. Therefore, increasing short-term and long-term incentives as a percentage of the overall package is desirable for higher compensated Executive Officers.

Similarly, with respect to incentive compensation, the percentage of total compensation targeted toward long term incentives increases with level and scope of responsibility to reflect an increased level of job focus on strategic long-term goals.

Our executive compensation program consists of the following components:

Base Salary

We provide base salary to retain and attract Executive Officers by providing a form of ‘‘fixed’’ competitive compensation which is consistent with an individual’s role and experience. However, we do not intend that base salary be the primary method of rewarding performance for Executive Officers. Instead, incentive compensation and equity, each as described in detail below, are the primary methods for rewarding Executive Officers’ achievement of short- and long-term goals. In some cases, base salaries of our Executive Officers may be higher than the competitive median, such as when an Executive Officer is recruited to join Warnaco or when a particular skill set is required in connection with the scope and complexity of a given position. Executives may receive base salary above or below the median of the peer group depending on experience, proficiency, scope of responsibilities, and/or potential future value to Warnaco. We regularly review Executive Officers’ base salaries against the peer group and internally to ensure that all Executive Officers receive comparable pay for positions requiring comparable skills and responsibilities.

Incentive Compensation

We provide incentive compensation in order to reward Executive Officers for meeting annual financial and strategic goals that contribute to the achievement of our short- and long-term business objectives.

The foundation of the Compensation Committee’s process to determine annual incentive compensation awards under the Warnaco Incentive Compensation Plan (the ‘‘WICP’’) for Executive Officers and other participating employees is its review of our annual operating plan, which outlines annual financial, operational and strategic goals both at the corporate and business unit level. Following review of the operating plan, the Compensation Committee approves financial, operational and strategic goals and a target incentive compensation award amount which is (i) reflected as a percentage of base salary for Executive Officers and other participating employees and (ii) attributable to the performance of Warnaco as a whole or one or more of our operating divisions, on a percentage basis, depending upon the individual’s duties and responsibilities. During the course of the year, the Compensation Committee regularly reviews these goals to monitor our progress against them. In determining incentive compensation awards for the prior fiscal year, the Compensation Committee considers our overall performance and our achievement of pre-determined financial goals along with a discretionary assessment of performance against other aspects of our operating plan and our performance relative to our peer companies. In addition, the Compensation Committee considers additional quantitative and qualitative factors to approve final incentive compensation awards. Based on the Compensation Committee’s assessment and measurement of our performance as compared to predetermined financial, operational and strategic goals, the Compensation Committee approves a final ‘‘pool’’ or total amount for incentive compensation awards at a percentage of the original target incentive compensation amount. This final pool amount is applicable to all employees (including Executive Officers) who participate in the WICP (currently there are approximately 200 employees participating in the WICP).

Incentive compensation may be granted in the form of (1) awards under the WICP, which are based on pre-determined financial goals and are not subject to discretionary increase, and (2) discretionary bonus awards granted outside the WICP. Awards granted under the WICP are eligible for deductibility under Section 162(m) of the Internal Revenue Code (the ‘‘Code’’) as discussed below under ‘‘Limitations on Deductibility of Executive Compensation’’.

Equity Awards

We provide annual equity awards in order to:


	•	Align Executive Officers’ and stockholders’ interests


	•	Focus Executive Officers on attainment of long-term business goals to drive stockholder value


	•	Reward Executive Officers for superior performance


	•	Provide a retention incentive

Annual equity award values are targeted at the median of our peer group, but actual annual grants may be higher or lower based on performance, scope of responsibilities, experience, retention risk, and/or potential future value to Warnaco. The ultimate value of the grant delivered (and our associated competitive positioning) will be determined over time by our stock price.

As part of our 2003 reorganization, the creditors’ committee representing Warnaco and its affiliates approved substantial equity grants to Executive Officers and other employees, reflecting the absence of any outstanding grants from prior years. These grants were approved in order to attract and retain executives during an unstable period, to motivate employees to achieve long-term business goals and to align employees’ and stockholders’ interests. We have provided equity grants in subsequent years at substantially lower levels.

Equity grants are generally approved by the Compensation Committee. In certain instances relating to hire or promotion awards to employees who are not Executive Officers, grants may be approved by the Chairman of the Compensation Committee and the Chief Executive Officer, or, in limited circumstances,

the Chief Executive Officer and the Senior Vice President, Human Resources (in each case, pursuant to a delegation of authority from, and within guidelines established by, the Compensation Committee). Beginning in fiscal 2007, all equity awards are granted pursuant to our Equity Grant Policy (as described below under ‘‘Equity Grant Practices and Equity Ownership and Retention Policy’’), as approved by the Compensation Committee, which codified our prior practice.

We provide annual equity awards in the form of time-vested restricted stock and time-vested stock options, which, in the case of stock options, are granted with an exercise price equal to the fair market value of the underlying Warnaco stock as of the date of grant. Grants are designed to balance the retention power of restricted stock with the leverage inherent in stock options. Vesting of restricted stock and stock options occurs over a three-year period and each option grant remains exercisable for 10 years after the date of grant. This approach results in a significant amount of restricted shares and options at risk of forfeiture at any time. To this end, restricted stock awards assist with our retention goals in challenging business times. The 10-year term of the options provides Executive Officers an incentive to work towards our long-term goals and to drive initiatives that will enhance stock price performance. By providing a portion of the overall compensation package in the form of equity and increasing executive ownership of our stock, we believe that we are aligning Executive Officers’ interests with those of stockholders.

As part of its mission, the Compensation Committee seeks to balance executive compensation awards with stockholder interests and ensure that the balance remains optimal and that we are well-positioned for future growth. To this end, with the assistance of its independent compensation consultant, the Compensation Committee regularly reviews equity grants to Executive Officers and other employees. Using proxy data, the Compensation Committee considers the value of equity grants to individual Executive Officers as compared to those of our peer companies.

Benefits and Perquisites

We provide certain benefits and perquisites to our Executive Officers to meet competitive norms. These benefits and perquisites typically focus on insurance coverage and automobile services and allowances. In one instance, we provide local housing to Mr. Tworecke, the only Executive Officer with a primary domicile outside of the immediate vicinity of our headquarters. In addition, as part of a legacy arrangement, we provide an electronic home security system to Mr. Silverstein. All benefit and perquisite amounts to Named Executives (as defined below) are disclosed below in the Summary Compensation Table. Additionally, Executive Officers are eligible to participate in (i) Warnaco-sponsored retirement plans available to all of our employees; (ii) contractual supplemental award arrangements as described below under ‘‘Post-Termination Compensation’’; and (iii) The Warnaco Group, Inc. Deferred Compensation Plan (the ‘‘Deferred Compensation Plan’’), which provides U.S.-based employees earning $150,000 per year or more with the option to defer all or a portion of base salary and bonus into an unfunded individual account, the performance of which is linked to investment options selected by each participant.

Tax Assistance or ‘‘Gross-Ups’’

As part of the overall compensation package for our Executive Officers, we provide tax assistance or ‘‘gross-ups’’ on the following items: (i) Warnaco-paid premiums for group term life insurance; (ii) automobile services; (iii) apartment rental and travel expenses; and (iv) home security systems. These gross-ups allow the executive to fully realize the intended benefit of a particular compensation element. In Fiscal 2006, the aggregate value of all tax assistance to the Named Executives was $87,759.

2006 Compensation

The Compensation Committee established base salary amounts and Fiscal 2006 incentive compensation targets consistent with the philosophy set forth above and its prior practices. For Mr. Gromek, our President and Chief Executive Officer, base salary was targeted at approximately 25% of total direct compensation opportunity. For Group Presidents and certain other Executive Officers, including the Named Executives other than Mr. Gromek, base salary was targeted at approximately 35% of total direct compensation opportunity.

In Fiscal 2006, the Compensation Committee set a target incentive compensation award for Mr. Gromek based on Warnaco’s operating income. For Fiscal 2006, Mr. Gromek’s incentive compensation award was targeted at 125% of base salary, with a maximum potential bonus award of 185% of target. With respect to our other Named Executives, (i) Messrs. Rutkowski and Silverstein’s incentive compensation award was based on Warnaco’s operating income and was targeted at 85% of base salary, with a maximum potential bonus award of 165% of target; (ii) Ms. McCluskey’s incentive compensation award was based 60% on the Intimate Apparel Group’s operating income and 40% on Warnaco’s operating income and was targeted at 85% of base salary, with a maximum potential bonus award of 165% of target and (iii) Mr. Tworecke’s incentive compensation award was based 60% on the Sportswear Group’s operating income and 40% on Warnaco’s operating income and was targeted at 85% of base salary, with a maximum potential bonus award of 165% of target.

In Fiscal 2006, the Compensation Committee set ambitious or ‘‘stretch’’ goals relating to operating income, adjusted for the impact of restructuring, foreign exchange, pension, incentive compensation and equity compensation, as a basis for determining annual incentive compensation. By using stretch goals, the Compensation Committee sought to motivate individual performance that would result in overall company growth. If achieved, these goals would allow Warnaco to make significant advancements in areas critical to long-term growth and to exceed expected industry performance.

In March 2007, the Compensation Committee approved incentive compensation awards for Fiscal 2006. Using its standard process of (1) reviewing Warnaco’s financial achievements against a pre-determined financial target as the foundation for decisions related to incentive compensation; (2) performing a discretionary assessment of Warnaco’s financial, operational and strategic goals against our plan and the peer group and (3) considering all relevant qualitative factors relating to our performance, the Compensation Committee awarded incentive compensation as described in this paragraph and in the Summary Compensation Table below. As the initial step in its review process described above, the Compensation Committee determined that, while the Intimate Apparel Group exceeded targeted financial performance and the Sportswear Group achieved above-threshold levels of performance, overall we did not achieve pre-determined financial targets for Fiscal 2006. The Compensation Committee also reviewed Warnaco’s performance against our strategic plan, year-over-year financial performance, financial performance relative to our peer group and other qualitative and quantitative factors.

After consideration of the factors described above, including Warnaco’s year-over-year growth in operating income and financial performance relative to peer companies, the Committee awarded an incentive compensation payment ‘‘pool’’ for all WICP participants (including Executive Officers) with a value equal to 80% of the aggregate target incentive compensation award. Individual incentive compensation awards were adjusted up or down based on individual and business unit performance. For Executive Officers, amounts included in the pool comprise amounts payable under the WICP to the extent that predetermined financial goals were achieved, together with amounts payable as discretionary bonuses (in each case, as shown in the Summary Compensation Table below).

As described below under ‘‘‘Clawback’ and certain other Compensation Recovery’’, Fiscal 2006 incentive compensation awards for certain Executive Officers were reduced to reflect actual fiscal 2005 financial results following the restatement of these results in September 2006. For a detailed analysis of all components of Fiscal 2006 compensation for the Named Executives, see the Summary Compensation Table below.

2007 Compensation

In March 2007, the Compensation Committee approved 2007 base salaries, target incentive compensation awards (which will be subject to the Compensation Committee’s ongoing review and final determination following the 2007 fiscal year) and equity grants for Executive Officers. These compensation award targets are consistent with the Compensation Committee’s philosophy set forth above and its prior practices. However, where in prior years the performance metric used to determine incentive compensation awards was based on operating income, in 2007 the performance metric is based on the high end of our earnings per diluted share guidance (disclosed in our February 26, 2007 earnings press release). This

approach allows for alignment of internal goals with our stated external earnings per share guidance and long-term strategic plan. Rather than using stretch goals, the Compensation Committee set targets that are more attainable, but which continue to provide management with significant challenge, motivation and possibility for major, positive change.

The 2007 base salaries, target incentive compensation awards and equity grants, which include time-vested restricted shares and stock options, for Named Executives are as follows:

Named Executive

2007 Base
Salary

Basis of Incentive
Compensation
Award

Target Incentive
Compensation
Award

Equity Grant

Joseph R.
Gromek

1,000,000