Exhibit 10.7
HANESBRANDS INC.
PERFORMANCE-BASED ANNUAL INCENTIVE PLAN
CERTIFICATE
I hereby certify that the attached document is the official version of the Hanesbrands Inc. Performance-Based Annual Incentive Plan adopted by the Board of Directors of the Company by resolution dated June 26, 2006 and subsequently finalized by the duly authorized officers of the Company effective as of July 2, 2006.
Dated this1stday of September, 2006.
HANESBRANDS INC. | ||
By | /s/ Kevin Oliver | |
Its | Senior Vice President, Human Resources | |
HANESBRANDS INC.
PERFORMANCE-BASED ANNUAL INCENTIVE PLAN
1.Purpose.The purpose of the Hanesbrands Inc. Performance-Based Annual Incentive Plan (the “Plan”) is to advance the interests of Hanesbrands Inc. and its stockholders by providing certain of its key executives with annual incentive compensation which is tied to the achievement of pre-established and objective performance goals. ThePlan is intended to provideParticipants with annual incentive compensation which is not subject to the deduction limitation rules prescribed under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and should be construed to the extent possible as providing for remuneration which is “performance-based compensation” within the meaning of Section 162(m) of theCode and the regulations promulgated thereunder.
2.Definitions. Where the context of thePlan permits, words in the masculine gender shall include the feminine gender, the plural form of a word shall include the singular form, and the singular form of a word shall include the plural form. Unless the context clearly indicates otherwise, the following terms shall have the following meanings:
| (a) | Board means the Board of Directors of Hanesbrands Inc. |
| (b) | Committee means the Compensation and Benefits Committee of theBoard, a subcommittee thereof, or such other committee as may be appointed by theBoard. TheCommittee shall be comprised of two or more non-employee members of theBoard who shall qualify to administer thePlan as “outside directors” under Section 162(m) of theCode and who shall qualify as “independent” under the New York Stock Exchange listing requirements. |
| (c) | Corporation means Hanesbrands Inc., a Maryland corporation, and any successor thereto. |
| (d) | Incentive Pool Fund means an amount equal to3.0% ofOperating Income. |
| (e) | Operating Income means theCorporation’s operating income for the applicablePerformance Period as reported in theCorporation’s income statement and as |
adjusted to eliminate the effects of charges for restructurings, discontinued operations, extraordinary items, other unusual or non-recurring items, and the cumulative effect of tax or accounting changes, each as determined in accordance with Generally Accepted Accounting Principles and identified in the financial statements, in the notes to the financial statements or in the Management’s Discussion and Analysis section of the financial statements.
| (f) | Participant means (i) a “covered employee,” as defined in Section 162(m) of theCode and the regulations promulgated thereunder, of theCorporation or itsSubsidiaries who has been selected by theCommittee to participate in thePlan during aPerformance Period and (ii) each other employee of theCorporation or itsSubsidiaries who has been selected by theCommittee to participate in thePlan during aPerformance Period. |
| (g) | Performance Award means an award granted pursuant to the terms of section 4 of thisPlan. AParticipant shall have no right to anyPerformance Award until that award is paid. |
| (h) | Performance Period means theCorporation’s fiscal year, or such other period as designated by theCommittee. |
| (i) | Plan means the Hanesbrands Inc. Performance-Based Annual Incentive Plan, as amended from time to time. |
| (j) | Pool Fund Allocation means the percentage of theIncentive Pool Fund that is allocated to eachParticipant with respect to anyPerformance Period. A maximum of40% may be allocated to any singleParticipant. The total allocation may not exceed 100%. |
| (k) | Subsidiary orSubsidiaries means any corporation or entity of which theCorporationowns directly or indirectly, at least 50% of the total voting power or in which it has at least a 50% economic interest, and which is authorized to participate in thePlan. |
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3.Plan Administration. TheCommittee shall have full discretion, power and authority to administer and interpret thePlan and to establish rules and procedures for its administration as theCommittee deems necessary and appropriate. TheCommittee may delegate to officers and employees of theCorporation the authority to manage the day-to-day administration of thePlan including without limitation the discretionary authority to (i) administer and interpret the terms of thePlan, and (ii) amend thePlan only as necessary to reflect any ministerial, administrative or managerial functions; provided that any such amendment does not increase theIncentive Pool Fund or thePool Fund Allocation.Pool Fund Allocations shall be established by theCommittee for aParticipant (or group ofParticipants) no later than ninety (90) days after the commencement of eachPerformance Period (or the date on which 25% of thePerformance Period has elapsed, if earlier).
Any interpretation of thePlan or other act of theCommittee (or its delegate) in administering thePlan shall be final and binding upon allParticipants.
4.Performance Awards. For eachPerformance Period, theCommittee shall determine the amount of aParticipant’s Performance Award as follows:
| (a) | General. The maximum amount of aParticipant’s Performance Award shall be equal to theParticipant’s Pool Fund Allocation of theIncentive Pool Fund for thePerformance Period. The actual amount of aParticipant’s Performance Award may be reduced or eliminated by theCommittee as set forth in subsection (c) below. |
| (b) | Allocation of Incentive Pool Fund. TheIncentive Pool Fund for eachPerformance Period shall be allocated amongParticipants. The maximum award for aParticipant is equal to theParticipant’s Pool Fund Allocation. |
| (c) | Reduction or Elimination of Pool Fund. ThePool Fund Allocation for eachParticipant may be reduced or eliminated by theCommittee in its sole discretion; provided, however, that under no circumstances may the amount of theIncentive Pool Fund, or thePool Fund Allocation to anyParticipant, be increased. Once |
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theCommittee has determined the amount of aParticipant’s Performance Award pursuant to subsections (a), (b), and (c) in this section 4, and upon the certification required under section 5 hereto, theCommittee shall pay theParticipant’s Performance Award pursuant to such terms and procedures as theCommittee shall adopt under section 3 hereto.
5.Payment of Performance Awards. Subject to any stockholder approval required by law, payment of anyPerformance Award to aParticipant for anyPerformance Period shall be made in cash (or in stock or stock-based awards under the Hanesbrands Inc. Omnibus Incentive Plan of 2006 as restated and/or amended from time to time) after written certification by theCommittee that the performance goal for thePerformance Period was achieved, and any other material terms of thePerformance Award were satisfied. AnyPerformance Award may be deferred pursuant to the terms and conditions of theCorporation’s deferred compensation plan or plans then in effect.
A Participant is not entitled to any award hereunder for thePerformance Period during whichParticipant breaches any confidentiality, proprietary information, or non-compete provisions of any agreement or plan then in effect betweenCorporation andParticipant, and shall immediately forfeit his right to any accrued but unpaid amounts attributable to anyPerformance Period.Further,if aParticipant breaches any confidentiality, proprietary information, or non-compete provisions of any agreement or plan betweenCorporation and theParticipant in effect after theParticipant’s termination of employment, theParticipant shall repay toCorporation any award paid to theParticipant under thePlan within one year of such breach (plus the cost of collection and a reasonable rate of interest) and shall immediately forfeit his right to any accrued unpaid amounts attributable to anyPerformance Period.
TheCommittee may make retroactive adjustments to and theParticipant shall reimburse to theCorporation any cash or equity based incentive compensation paid to theParticipant where such compensation was predicated upon achieving certain financial results that were
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substantially the subject of a restatement, and as a result of the restatement it is determined that theParticipant otherwise would not have been paid such compensation, regardless of whether or not the restatement resulted from theParticipant’s misconduct. In each such instance, theCorporation will, to the extent practicable, seek to recover the amount by which theParticipant’s cash or equity based incentive compensation for the relevant period exceeded the lower payment that would have been made based on the restated financial results. TheCorporation will, to the extent permitted by governing law, require reimbursement of any cash or equity based incentive compensation paid to any named executive officer (for purposes of this policy “named executive officers” has the meaning given that term in Item 402(a)(3) of Regulation S-K under the Securities Exchange Act of 1934) where: (i) the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a substantial restatement, and (ii) in theCommittee’s view the officer engaged in fraud or misconduct that caused or partially caused the need for the substantial restatement. In each instance described above, theCorporation will, to the extent practicable, seek to recover the described cash or equity based incentive compensation for the relevant period, plus a reasonable rate of interest.
6.Plan Amendment and Termination. Except as explicitly provided by law, thisPlan is provided at theCorporation’s sole discretion and theBoard or theCommittee may modify or terminate it at any time, prospectively or retroactively, without notice or obligation for any reason, subject to obtaining any necessary stockholder approval as required by law, regulation, or listing exchange requirement. In addition, there is no obligation to extend thePlan or establish a replacement plan in subsequent years.
7.Miscellaneous Provisions.
| (a) | Employment Rights. ThePlan does not constitute a contract of employment and participation in thePlan will not give aParticipant the right to continue in the employ of theCorporation, or any of its subsidiaries or affiliates, on a full-time, part-time, or any other basis. Participation in thePlan will not give anyParticipant any right or claim to any benefit under thePlan, unless such right or claim has specifically been granted by theCommittee under the terms of thePlan. |
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| (b) | Committee’s Decision Final. Any interpretation of thePlan and any decision on any matter pertaining to thePlan which is made by theCommittee in its discretion in good faith shall be binding on all persons. |
| (c) | Governing Law. Except to the extent superseded by the laws of the United States, the laws of the State of North Carolina, without regard to any state’s conflict of laws principles, shall govern in all matters relating to thePlan. Any legal action related to thisPlan shall be brought only in a federal or state court located in North Carolina. |
| (d) | Interests Not Transferable. Any interests ofParticipants under thePlan may not be voluntarily sold, transferred, alienated, assigned or encumbered, other than by will or pursuant to the laws of descent and distribution. |
| (e) | Severability. In the event any provision of thePlan shall be held to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of thePlan, and thePlan shall be construed and enforced as if such illegal or invalid provision(s) had never been contained in thePlan. |
| (f) | Withholding. TheCorporation will withhold from any amounts payable under thisPlan all federal, state, foreign, city and local taxes as shall be legally required. |
| (g) | Effect on Other Plans or Agreements. Payments or benefits provided to aParticipant under any stock, deferred compensation, savings, retirement or other employee benefit plan are governed solely by the terms of such plan. |
8.Effective Date. ThisPlan shall be effective as of July 2, 2006, as approved by Sara Lee Corporation as the sole shareholder of theCorporation. ThePlan shall automatically terminate as of the first meeting of shareholders on and after the first anniversary of the date on which theCorporation first issues equity securities of theCorporation that are required to be registered under Article II of the Securities Exchange Act of 1934, as amended, unless resubmitted to and approved by shareholders prior to that date.
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