10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

OR

		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 1-10857

THE WARNACO GROUP, INC.
(Exact name of registrant as specified in its charter)

Delaware				95-4032739
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

501 Seventh Avenue
New York, New York 10018
(Address of principal executive offices)

Registrant's telephone number, including area code: (212) 287-8000

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Title of each class				Name of each exchange on which registered
Common Stock, par value $0.01 per share				The NASDAQ National Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Act.    Yes       No   

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes      No   

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer        Accelerated filer     Non-accelerated filer   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes      No   

As of July 1, 2005 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the registrant’s common equity held by non-affiliates was $1,060,778,056, based upon the last sale price reported for such date on the NASDAQ National Market.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes       No   

The number of shares outstanding of the registrant’s Common Stock, par value $.01 per share, as of February 17, 2006: 46,680,876.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Part III of this report is incorporated by reference from the Proxy Statement of the registrant relating to the 2006 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days of the Fiscal 2005 year-end.

THE WARNACO GROUP, INC.
2005 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

								PAGE
					PART I
Item 1.				Business					1
Item 1A.				Risk Factors					23
Item 1B.				Unresolved Staff Comments					30
Item 2.				Properties					30
Item 3.				Legal Proceedings					30
Item 4.				Submission of Matters to a Vote of Security Holders					30
				PART II
Item 5.				Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities					31
Item 6.				Selected Financial Data					31
Item 7.				Management's Discussion and Analysis of Financial Condition and Results of Operations					35
Item 7A.				Quantitative and Qualitative Disclosures About Market Risk					67
Item 8.				Financial Statements and Supplementary Data					68
Item 9.				Changes in and Disagreements With Accountants on Accounting and Financial Disclosure					68
Item 9A.				Controls and Procedures					69
Item 9B.				Other Information					69
				PART III
Item 10.				Directors and Executive Officers of the Registrant					70
Item 11.				Executive Compensation					70
Item 12.				Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters					70
Item 13.				Certain Relationships and Related Transactions					70
Item 14.				Principal Accounting Fees and Services					70
				PART IV
Item 15.				Exhibits and Financial Statement Schedules					71

PART I

Item 1. Business.

Introduction

The Warnaco Group, Inc. (‘‘Warnaco’’), a Delaware corporation organized in 1986 (collectively with its subsidiaries, the ‘‘Company’’), designs, sources, manufactures, markets, licenses and distributes a broad line of intimate apparel, sportswear and swimwear worldwide. The Company's products are sold under several highly recognized brand names, including Warner's^®, Olga^®, Calvin Klein^®, Speedo^®, Ocean Pacific^®, Chaps^®, Nautica^®, Catalina^®, Anne Cole^® and Lejaby^®.

The Company's products are distributed domestically and internationally, primarily to wholesale customers through various distribution channels, including major department stores, independent retailers, chain stores, membership clubs, specialty and other stores, mass merchandisers and the internet, including such leading retailers as Macy's and other units of Federated Department Stores, J.C. Penney, Kohl's, Sears, Target, Costco and Wal-Mart Stores, Inc. As of December 31, 2005, the Company operated 121 Calvin Klein retail stores worldwide (consisting of 59 stores directly operated by the Company, including one on-line store, and 62 stores operated under retail licenses or distributor agreements). The Company’s Swimwear Group also operates two Speedo outlet stores, which opened in July 2005, and one on-line store. For the fiscal year ended December 31, 2005 (‘‘Fiscal 2005’’), approximately 71.6% of the Company's net revenues were generated from domestic sales and approximately 28.4% were generated from international sales.

The Company owns and licenses a portfolio of highly recognized brand names. As described below, the majority of trademarks used by the Company are either owned or licensed in perpetuity and generated approximately 61% of its revenues during Fiscal 2005. Brand names the Company licenses for a term generated approximately 39% of its revenues during Fiscal 2005. The Company's highly recognized brand names have been established in their respective markets for extended periods and have attained a high level of consumer awareness.

The following table sets forth the Company's trademarks and licenses as of February 17, 2006:

Owned Trademarks

Warner's				Catalina (a)
Olga				Cole of California®
Body Nancy Ganz®/Bodyslimmers®				Ocean Pacific and related brands (b)
Lejaby/ Lejaby Rose®				Calvin Klein and formatives (including Choice
Rasurel®				Calvin Klein) (beneficially owned for men's,
				women's and children's underwear,
				loungewear and sleepwear. See ‘‘Trademarks
				and Licensing Agreements’’)

Trademarks Licensed in Perpetuity

Trademark				Territory
Speedo(c)				United States, Canada, Mexico, Caribbean Islands
Axcelerate™				United States, Canada, Mexico, Caribbean Islands
Axcelerate Engineered by Speedo™				United States, Canada, Mexico, Caribbean Islands
Fastskin® (secondary Speedo® mark)				United States, Canada, Mexico, Caribbean Islands
Anne Cole (for women's swimwear)(d)				Worldwide

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Trademarks Licensed for a Term

Trademark				Territory				Expires (n)
Calvin Klein (for men's/women's/juniors' jeans and certain jeans-related products)(e)				North, South and Central America				12/31/2044
CK/Calvin Klein Jeans (for retail stores selling men’s, women’s and juniors’ jeans and certain jeans-related products and ancillary products bearing the Calvin Klein marks)(e)				Canada, Mexico and Central and South America				12/31/2044
CK/Calvin Klein (for bridge apparel, bridge accessories and retail stores selling bridge apparel and accessories)(f)				All countries constituting European Union, Norway, Switzerland, Monte Carlo, Vatican City, Liechtenstein, Iceland and parts of Eastern Europe, Russia, Middle East and Africa				12/31/2046
Calvin Klein and CK/Calvin Klein (for men’s/women’s/children’s jeans, khakis and other related apparel as well as retail stores selling such items and ancillary products)(f)				Western Europe including Ireland, Great Britain, France, Monte Carlo, Germany, Spain, Portugal, Andorra, Italy, San Marino, Vatican City, Benelux, Denmark, Sweden, Norway, Finland, Austria, Switzerland, Lichtenstein, Greece, Cyprus, Turkey and Malta; parts of Eastern Europe, Russia, the Middle East and Africa; Japan, China, South Korea and ‘‘Rest of Asia’’ (Hong Kong, Thailand, Australia, New Zealand, Philippines, Taiwan, Singapore, Malaysia, Indonesia, New Guinea, Vietnam, Cambodia, Laos, Myanmar, Macau and the Federated State of Micronesia)				12/31/2046
Calvin Klein (for jeans accessories)(f)				All countries constituting European Union, Norway, Switzerland, Monte Carlo, Vatican City, Liechtenstein, Iceland and parts of Eastern Europe, Russia, Middle East, Africa and Asia				12/31/2046
Chaps (for men's sportswear, jeanswear, activewear, sport shirts and men’s swimwear)(g)				United States, Canada, Mexico, Puerto Rico and Caribbean Islands				12/31/2018
Nautica (for women's swimwear, beachwear and accessories)(h)				United States, United States Virgin Islands, Canada, Mexico and Caribbean Islands				6/30/2009
Nautica (for women's swimwear and coordinating cover-ups)(h)				Australia, Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russia, Slovakia, Spain, Sweden, Switzerland, Turkey, Ukraine and United Kingdom				6/30/2009

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Trademark				Territory				Expires (n)
Lifeguard®(for wearing apparel excluding underwear and loungewear)(i)				Worldwide (United States, Canada, Mexico, Caribbean Islands and all other countries where trademark filings are or will be made)				6/30/2030
Calvin Klein, CK Calvin Klein and Choice Calvin Klein (for women's and juniors' swimwear)(j)				Worldwide with respect to Calvin Klein; Worldwide in approved forms with respect to CK Calvin Klein and Choice Calvin Klein				12/31/2014
Calvin Klein (for men's swimwear)(k)				Europe (countries constituting European Union at May 1, 2004), Switzerland, Norway, United Arab Emirates, Saudi Arabia, Kuwait, Lebanon, Jordan, the West Bank, Egypt, Israel and Russia				12/31/2014
J. Lo by Jennifer Lopez® (for women's intimate apparel)(l)				Worldwide				12/31/2013
Michael Kors® and MICHAEL Michael Kors® (for women's swimwear)(m)				Worldwide (excluding Japan)				6/30/2014

(a)	The Company sells swimwear to Wal-Mart Stores, Inc. under the Catalina trademark.

(b)	In August 2004, the Company acquired 100% of the outstanding common stock of Ocean Pacific Apparel Corp. Ocean Pacific operates directly and through a network of third-party licensees worldwide and offers a broad array of apparel and accessories catering to men, women, young men, juniors and kids under various trademarks, the most recognizable being its Op® and Ocean Pacific labels.

(c)	Licensed in perpetuity from Speedo International, Ltd. (‘‘SIL’’).

(d)	Licensed in perpetuity from Anne Cole and Anne Cole Design Studio.

(e)	Expiration date reflects a renewal option, which permits the Company to extend for an additional ten-year term through 12/31/2044 (subject to compliance with certain terms and conditions).

(f)

In January 2006, the Company acquired the companies that operate the license and related wholesale and retail businesses of Calvin Klein jeans and accessories in Europe and Asia and the CK Calvin Klein ‘‘bridge’’ line of sportswear and accessories in Europe. See "—Acquisitions—CKJEA Acquisition." In connection with the acquisition, the Company acquired various exclusive license agreements. In addition, the Company entered into amendments to certain of its existing license agreements with Calvin Klein, Inc. (in its capacity as licensor). See "—Trademarks and Licensing Agreements."

(g)	Expiration date reflects two renewal options, each of which permits the Company to extend for an additional five-year term (subject to compliance with certain terms and conditions) for the trademark Chaps and the Chaps mark and logo.

(h)	Expiration date reflects a renewal option which permits the Company to extend for an additional two years (subject to compliance with certain terms and conditions).

(i)	Expiration date reflects four renewal options, each of which permits the Company to extend for an additional five-year term (subject to compliance with certain terms and conditions).

(j)	Expiration date reflects a renewal option which permits the Company to extend for an additional five-year term (subject to compliance with certain terms and conditions). In January 2006, the Company announced its plans to discontinue the Choice Calvin Klein line.

(k)	Expiration date reflects a renewal option, which permits the Company to extend for an additional five-year term (subject to compliance with certain terms and conditions).

(l)	Expiration date reflects two renewal options, each of which permits the Company to extend for an additional three-year term (subject to compliance with certain terms and conditions).

(m)	Expiration date reflects two renewal options, each of which permits the Company to extend for an additional three-year term (subject to compliance with certain terms and conditions).

(n)	Assumes exercise of renewal option(s), as applicable.

The Company relies on its highly recognized brand names to appeal to a broad range of consumers. The Company designs products across a wide range of price points to meet the needs and shopping preferences of male and female consumers across a broad age spectrum. The Company

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believes that its ability to serve multiple domestic and international distribution channels with a diversified portfolio of products under widely recognized brand names at varying price points distinguishes it from many of its competitors and reduces its reliance on any single distribution channel, product, brand or price point.

The Company operates on a fiscal year basis ending on the Saturday closest to December 31. References in this Annual Report on Form 10-K to the ‘‘Predecessor’’ refer to the Company prior to February 4, 2003 (the date the Company emerged from bankruptcy). References to the ‘‘Successor’’ refer to the Company on and after February 4, 2003 after giving effect to the implementation of fresh start accounting. References in this Form 10-K to ‘‘Fiscal 2005’’ refer to operations for the twelve months ended December 31, 2005. References in this Form 10-K to ‘‘Fiscal 2004’’ refer to operations for the twelve months ended January 1, 2005. References in this Form 10-K to ‘‘Fiscal 2003’’ refer to the operations for the twelve months ended January 3, 2004, comprising operations of the Predecessor for the period January 5, 2003 to February 4, 2003 combined with the operations of the Successor for the period February 5, 2003 to January 3, 2004. The Company’s two fiscal years prior to Fiscal 2003 and Fiscal 2004 ended on January 4, 2003 (‘‘Fiscal 2002’’) and January 5, 2002 (‘‘Fiscal 2001’’).

Acquisitions

CKJEA Acquisition

On January 31, 2006, the Company acquired (the "CKJEA Acquisition") 100% of the shares 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 from Fingen Apparel N.V., Fingen S.p.A. Euro Cormar S.p.A., and Calvin Klein, Inc. (collectively, the "Sellers") for total consideration of approximately €240 million (approximately $292 million), consisting of cash consideration of approximately €179 million (approximately $218 million) and assumption of indebtedness of approximately €61 million (approximately $74 million), net of cash acquired of approximately €13 million (total assumed debt aggregating approximately €74 million (approximately $90 million)). In addition, as of December 31, 2005, the Company had incurred professional fees and other related costs of approximately $5.5 million in connection with the acquisition. The purchase price is subject to certain post-closing adjustments, including adjustments related to the amount of working capital acquired. Approximately €37 million (approximately $45 million) of the assumed debt was repaid simultaneously with the closing, leaving approximately €37 million (approximately $45 million) of assumed debt outstanding. The CKJEA Acquisition was consummated pursuant to the terms and conditions of a Stock Purchase Agreement, dated as of December 20, 2005 (as amended as of January 30, 2006). The Company is in the process of determining the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed on acquisition.

The Company funded the acquisition using a combination of cash on hand and borrowings under a new $180 million term loan facility under the Amended and Restated Credit Agreement (as defined below). See "Management's Discussion and Analysis of Financial Condition and Results of Operations —Capital Resources and Liquidity—Financing Arrangements."

In connection with the consummation of the CKJEA Acquisition, the Company will, subject to certain conditions, acquire 100% of the shares of the company that operates the license for Calvin Klein men's and women's Collection apparel and accessories worldwide on or about January 2, 2008. The Calvin Klein Collection license terminates on December 2013, subject to certain conditions.

In addition, in connection with the consummation of the CKJEA Acquisition, on January 31, 2006, the Company acquired various exclusive license agreements and entered into amendments to certain of its existing license agreements with Calvin Klein, Inc. (in its capacity as licensor). See "—Trademarks and Licensing Agreements."

Ocean Pacific

On August 19, 2004, the Company acquired 100% of the outstanding common stock of Ocean Pacific Apparel Corp. (collectively with its subsidiaries, ‘‘OP’’) for $40.0 million in cash and the

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assumption and retirement of $1.0 million in debt owed to a selling shareholder of OP. The assumed debt was repaid simultaneously with the closing. The terms of the acquisition agreement require the Company to make certain contingent payments to the sellers if (i) wholesale net revenues (both directly earned by the Company and directly earned by the Company's licensees) exceed a defined threshold for fiscal 2007 and (ii) operating profits of certain defined direct operations of the Company exceed 5% of wholesale net revenues for fiscal 2007 and fiscal 2008. The contingent payments are based on the amount earned by the Company in excess of the applicable thresholds. The defined thresholds represent significant growth in OP's business compared to Fiscal 2004 and 2005. No contingent payments are required if the defined thresholds are not exceeded by the Company. Any contingent payments ultimately made by the Company will be recorded as an increase in the purchase price of OP and an increase in goodwill.

OP is based in Irvine, California and is a surf and beach lifestyle brand which operates both directly and through a network of third party licensees worldwide. OP offers a broad array of apparel and accessories catering to men, women, young men, juniors and kids under its Op and Ocean Pacific labels. During Fiscal 2005, the Company exited certain key third party licenses and added certain OP product categories to its wholesale business model.

The results of operations of OP have been included in the Company's consolidated statement of operations (as part of the Company's Swimwear Group) since August 19, 2004.

Business Groups

The Company operates in three business segments: (i) Intimate Apparel Group; (ii) Sportswear Group; and (iii) Swimwear Group.

The following table sets forth, for each of the last three fiscal years, net revenues and operating income for each of the Company's business groups and for the Company on a consolidated basis. The Company does not allocate interest expense (including the amortization of deferred financing charges), income taxes, corporate overhead (including depreciation of corporate assets and the cost of certain shared services), restructuring items or reorganization items to its business groups.

				Fiscal 2005								Fiscal 2004								Fiscal 2003
				(in thousands of dollars)
								% of Total								% of Total								% of Total
Net revenues:
Intimate Apparel Group				$	595,702				39.6	%		$	588,256				41.3	%		$	572,813				41.7	%
Sportswear Group					517,567				34.4	%			455,601				32.0	%			440,516				32.0	%
Swimwear Group					391,146				26.0	%			380,324				26.7	%			361,092				26.3	%
Net revenues				$	1,504,415				100.0	%		$	1,424,181				100.0	%		$	1,374,421				100.0	%

								% of Net Revenues								% of Net Revenues								% of Net Revenues
Operating income:
Intimate Apparel Group				$	66,679							$	55,361							$	55,858
Sportswear Group					71,845								53,757								31,764
Swimwear Group					44,186								58,147								52,901
Group operating income					182,710				12.1	%			167,265				11.8	%			140,523				10.2	%
Unallocated corporate expenses					(81,321	)			-5.3	%			(66,000	)			-4.6	%			(62,603	)			-4.5	%
Restructuring (expense) income					503				0.0	%			(5,130	)			-0.4	%			(19,101	)			-1.4	%
Reorganization items					—				0.0	%			—				0.0	%			(29,805	)			-2.2	%
Operating income				$	101,892				6.8	%		$	96,135				6.8	%		$	29,014				2.1	%

The following table sets forth, as of December 31, 2005 and January 1, 2005, total assets for each of the Company's business groups and for the Company on a consolidated basis:

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				December 31, 2005				% of Total				January 1, 2005				% of Total
Total assets:
Intimate Apparel Group				$	282,352				23.1	%		$	303,484				26.3	%
Sportswear Group					233,877				19.1	%			254,728				22.1	%
Swimwear Group					359,343				29.4	%			356,288				30.9	%
Corporate/Other					346,644				28.4	%			239,404				20.7	%
Total assets				$	1,222,216				100.0	%		$	1,153,904				100.0	%

Intimate Apparel Group

The Intimate Apparel Group designs, manufactures, sources and markets moderate to premium priced intimate apparel and other products for women and better to premium priced men's underwear and loungewear. Net revenues of the Intimate Apparel Group accounted for approximately 39.6% of the Company's net revenues in Fiscal 2005.

The Intimate Apparel Group targets a broad range of consumers and provides products across a wide range of price points. The Company's design team strives to design products of a price, quality, fashion and style that meet its customers' demands.

The following table sets forth the Intimate Apparel Group's brand names and the apparel price ranges and types:

Brand Name				Price Range				Type of Apparel
Calvin Klein				Better to premium				Women's intimate apparel and sleepwear and men's underwear and loungewear
Choice Calvin Klein (a)				Better to premium				Juniors' intimate apparel
Warner's				Upper moderate to better				Women's intimate apparel
Olga				Upper moderate to better				Women's intimate apparel
Body Nancy Ganz/Bodyslimmers				Better to premium				Women's intimate apparel
Lejaby/Rasurel/Lejaby Rose				Better to premium				Women's intimate apparel and swimwear
J. Lo by Jennifer Lopez				Better to premium				Women's intimate apparel
Axcelerate/Axcelerate Engineered by Speedo (b)				Better to premium				Women's intimate apparel and men's underwear

(a)	In January 2006, the Company announced its plans to discontinue the Choice Calvin Klein line.

(b)	Axcelerate/Axcelerate Engineered by Speedo began shipping in the second quarter of Fiscal 2005.

The Calvin Klein women's lines consist primarily of women's underwear, bras, panties, daywear, loungewear and sleepwear. The Calvin Klein men's lines consist primarily of men's underwear, briefs, boxers, T-shirts, loungewear and sleepwear. According to The NPD Group (‘‘NPD’’), a market research firm, Calvin Klein men's underwear was the number two selling brand of men's underwear in 2005 and 2004 in U.S. department stores participating in the surveys.

The Warner's, Olga, Lejaby/Lejaby Rose and J. Lo by Jennifer Lopez (‘‘JLO’’) lines consist primarily of bras, panties, daywear and sleepwear. The Body Nancy Ganz/Bodyslimmers line is primarily a shapewear line. The Rasurel line consists primarily of swimwear sold in Europe. The Company's Axcelerate/Axcelerate Engineered by Speedo (‘‘Axcelerate’’) line of intimate apparel consists primarily of women's performance bras and, to a lesser extent, men’s performance underwear.

The Company's Intimate Apparel brands are distributed primarily through department stores, independent retailers, chain stores, membership clubs, Company operated retail stores/stores operated

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under retail licenses or distributor agreements, the Company’s CKU.com internet website and, to a lesser extent, specialty stores. In addition, the Company uses its design, manufacturing and sourcing expertise to produce private label intimate apparel for customers that may not carry the Company's branded products.

The following table sets forth the Intimate Apparel Group's principal distribution channels and customers:

Channels of Distribution				Customers				Brands
United States
Department Stores				Federated Department Stores, Carson’s/Bon Ton and Saks Fifth Avenue				Warner's, Olga, Body Nancy Ganz, JLO, Lejaby Rose, Lejaby, Calvin Klein underwear and Axcelerate
Independent Retailers				Nordstrom, Dillard's, Neiman Marcus and Belk				Warner's, Olga, Body Nancy Ganz, Lejaby Rose and Calvin Klein underwear
Chain Stores				Kohl's and Sears				Warner's, Olga, Body Nancy Ganz and private label
Membership Clubs				Costco and Sam's Club				Warner's, Olga and Bodyslimmers
Canada				Hudson Bay Company, Zellers, Sears and Wal-Mart				Warner's, Olga, Body Nancy Ganz/Bodyslimmers, JLO, Calvin Klein underwear and Lejaby/Lejaby Rose
Mexico				Liverpool, Palacio de Hierro, Suburbia, Sears and Sam's Club				Warner's, Olga, Body Nancy Ganz/Bodyslimmers and Calvin Klein underwear
Europe				Harrods, House of Fraser, Galeries Lafayette, Selfridges, Debenhams, Au Printemps, Karstadt, Kaufhof and El Corte Ingles				JLO, Lejaby, Rasurel and Calvin Klein underwear
				Company operated retail stores/ stores operated under retail licenses or distributor agreements				Calvin Klein underwear and Lejaby
Asia				Company operated retail stores/ stores operated under retail licenses or distributor agreements				Calvin Klein underwear and Lejaby

The Intimate Apparel Group generally markets its product lines for three retail-selling seasons (Spring, Fall and holiday). Its revenues are generally consistent throughout the year, with 49.5%, 45.8%, and 48.6% of the Intimate Apparel Group's net revenues recorded in the first halves of Fiscal 2005, 2004 and 2003, respectively.

The Intimate Apparel Group has operations in North America (United States, Canada and Mexico), Europe (Austria, Belgium, France, Germany, Italy, the Netherlands, Spain, Switzerland and the United Kingdom) and Asia (Hong Kong, Singapore, China and Macau). In the first quarter of Fiscal 2004, the Company sold its intimate apparel production facilities located in Villanueva, Honduras and San Luis, Mexico.

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The following table sets forth the domestic and international net revenues of the Intimate Apparel Group:

				Fiscal 2005								Fiscal 2004								Fiscal 2003
				Net Revenues				% of Total				Net Revenues				% of Total				Net Revenues				% of Total
				(in thousands of dollars)
Net revenues:
United States				$	271,681				45.6	%		$	282,866				48.1	%		$	295,656				51.6	%
International					324,021				54.4	%			305,390				51.9	%			277,157				48.4	%
				$	595,702				100.0	%		$	588,256				100.0	%		$	572,813				100.0	%

The Company's Calvin Klein underwear, Warner's, Olga, Body Nancy Ganz/Bodyslimmers, JLO and Axcelerate underwear products (generating approximately 83.5% of the Intimate Apparel Group's net revenues) are sourced from third parties. Lejaby's products are produced in the Company's facilities located in France, with a portion of the manufacturing process subcontracted to third parties located in Tunisia and China. Sourcing allows the Company to maximize production flexibility while avoiding significant capital expenditures, work-in-process inventory buildups and the costs of managing a large production work force. The Company inspects products manufactured by suppliers to ensure that they meet its quality and production standards.

Sportswear Group

The Sportswear Group designs, sources and markets moderate to premium priced men's, women's and juniors' sportswear. Net revenues of the Sportswear Group accounted for 34.4% of the Company's net revenues in Fiscal 2005. The following table sets forth the Sportswear Group's brand names and their apparel price ranges and types:

Brand Name (a)				Price Range				Type of Apparel
Calvin Klein (b)				Better to premium				Men's, women's, juniors' and children's (c) designer jeanswear (bottoms and tops)
Chaps				Moderate				Men's sportswear, jeanswear, activewear, knit and woven sports shirts and swimwear

(a)	In December 2003, the Company sold its White Stag® trademark to Wal-Mart Stores, Inc. Pursuant to the sale agreement, the Company provides certain sourcing and design services related to the White Stag women's sportswear line. The design services agreement extends through January 2007.

(b)	Choice Calvin Klein (a formative brand of Calvin Klein) will be discontinued in 2006.

(c)	The Sportswear Group sub-licenses the rights to produce children's designer jeanswear to a third party.

The Calvin Klein line includes men's and women's jeans and jeans-related products, including outerwear, knit and woven tops and shirts. The Company renegotiated the term of its Calvin Klein jeans license in the second quarter of Fiscal 2003, providing the Company with greater control over the design and product development calendar and setting forth the terms of the Company’s license to use the Calvin Klein name in connection with swimwear. The Company believes that this increased flexibility has allowed it to provide better service to retailers, which has resulted in improved sell-through of merchandise at retail. In January 2006, the Company acquired 100% of the shares of the companies that operate the licenses and related wholesale and retail businesses of Calvin Klein jeans and accessories in Europe and Asia and the CK Calvin Klein ‘‘bridge’’ line of sportswear and accessories in Europe. See ‘‘Acquisitions—CKJEA Acquisition’’ described above.

Chaps is a moderately priced men's sportswear line providing a more casual product offering to the consumer. During Fiscal 2003, the Company negotiated an amendment and extension of the Chaps license through 2018, assuming the exercise of renewal options and satisfaction of certain conditions. The renegotiated license gives the Company an opportunity to extend the brand in terms of both

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product and distribution channels, which allowed the Company to launch Chaps sportswear in Fiscal 2004 in the mid-tier distribution channel.

The Sportswear Group's apparel products are distributed primarily through department stores, independent retailers, chain stores, membership clubs, mass merchandisers and, to a lesser extent, specialty stores.

The following table sets forth, as of December 31, 2005, the Sportswear Group's principal distribution channels and customers:

Channels of Distribution				Customers				Brands
United States
Department Stores				Federated Department Stores Carson’s/Bon Ton				Calvin Klein jeans Calvin Klein jeans and Chaps
Independent Retailers				Nordstrom Dillard’s and Belk				Calvin Klein jeans Calvin Klein jeans and Chaps
Chain Stores				Kohl's/Mervyn’s				Chaps
Membership Clubs				Costco and Sam's Club BJ’s				Calvin Klein jeans Calvin Klein jeans and Chaps
Mass Merchandisers				Wal-Mart				Design and sourcing services related to the White Stag trademark
Other				Military				Calvin Klein jeans and Chaps
Canada				Hudson Bay Company and Sears				Calvin Klein jeans and Chaps
Mexico				Liverpool, Sears and membership clubs				Calvin Klein jeans and Chaps
South America				Stores operated under distributor agreements				Calvin Klein jeans

As noted above, in January 2006, the Company consummated the CKJEA Acquisition. The channels of distribution and customers of the businesses acquired in the CKJEA Acquisition are not reflected in the table above.

The Sportswear Group generally markets its products for four retail selling seasons (Spring, Summer, Fall and holiday). New styles, fabrics and colors are introduced based upon consumer preferences and market trends, and coincide with the appropriate selling season. The Sportswear Group recorded 48.4%, 41.3%, and 47.9% of its net revenues in the first halves of Fiscal 2005, Fiscal 2004 and Fiscal 2003, respectively.

During Fiscal 2005, the Sportswear Group had operations in the United States, Canada and Mexico. The Sportswear Group's products are entirely sourced from third party suppliers worldwide. As discussed previously, the Company acquired certain licensed Calvin Klein businesses in Europe and Asia in January 2006. See ‘‘Acquisitions—CKJEA Acquisition’’.

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The following table sets forth the domestic and international net revenues of the Sportswear Group:

				Fiscal 2005								Fiscal 2004								Fiscal 2003
				Net Revenues				% of Total				Net Revenues				% of Total				Net Revenues				% of Total
				(in thousands of dollars)
Net revenues:
United States				$	442,553				85.5	%		$	388,907				85.4	%		$	388,529				88.2	%
International					75,014				14.5	%			66,694				14.6	%			51,987				11.8	%
				$	517,567				100.0	%		$	455,601				100.0	%		$	440,516				100.0	%

Swimwear Group

The Swimwear Group designs, manufactures, sources and markets mass market to premium priced swimwear, fitness apparel, swim accessories and related products and licenses its owned brand names to suppliers of apparel and other products in widely diversified channels of distribution. Net revenues of the Swimwear Group accounted for 26.0% of the Company's net revenues in Fiscal 2005.

The following table sets forth the Swimwear Group's significant brand names and their apparel price ranges and types:

Brand Name				Price Range				Type of Apparel
Speedo				Better				Men's and women's competitive swimwear, competitive and non- competitive swim accessories, men's swimwear and coordinating T-shirts, women's fitness swimwear, fashion swimwear and activewear and children's swimwear
Anne Cole				Better to premium				Women's swimwear
Cole of California				Upper moderate to better				Women's swimwear
Catalina				Mass market				Women's and juniors' swimwear
Lifeguard				Upper moderate to better				Men's and women's swimwear and related products
Nautica				Upper moderate to better				Women's swimwear, beachwear and accessories
Calvin Klein				Better to premium				Men's and women's swimwear
Choice Calvin Klein (a)				Better to premium				Juniors' swimwear
Ocean Pacific (b)				Better to premium				Men's, women's, young men's, juniors' and kid's swimwear, sportswear and related products
Michael Kors (c)				Better to premium				Women's swimwear
Axcelerate Engineered by Speedo (d)				Better				Men's and women's swimwear, Better activewear and accessories
Private Label				Moderate				Women's and juniors' swimwear

(a)	In January 2006, the Company announced its plans to discontinue the Choice Calvin Klein line.

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(b)	In Fiscal 2004, OP products were sold by third-party licensees. During Fiscal 2005, the Company exited certain key third-party licenses and added certain OP product categories to its wholesale business model.

(c)	Company shipments of Michael Kors commenced in the fourth quarter of Fiscal 2005.

(d)	Shipments of Axcelerate activewear, swimwear and accessories commenced in the first quarter of Fiscal 2005.

The Company believes that Speedo is the pre-eminent competitive swimwear brand in the world. Innovations by the Swimwear Group and its licensor, SIL, have led and continue to lead the competitive swimwear industry. For example, in March 2004, Speedo introduced the next generation of its Fastskin suit (the ‘‘FS II’’), developed by the Swimwear Group and SIL. Based on data compiled by the Company's Swimwear Group, the Company believes that over 67% of the total U.S. swimming medal winners at the 2004 Summer Olympic Games in Athens raced in Speedo suits. Speedo competitive swimwear is primarily distributed through chain stores, sporting goods stores, team dealers, swim specialty shops and the Company's Speedo internet website. Speedo competitive swimwear accounted for approximately 13.5% of the Swimwear Group's net revenues in Fiscal 2005. During the fourth quarter of Fiscal 2005, Speedo introduced the FS II Ice speed suit worn by U.S. sledding hopefuls at the 2006 Winter Olympic Games in Torino, Italy. This is the first time athletes have competed in Speedo at the Winter Olympic Games and reflects the Company’s strategy of bringing Speedo ‘‘out of the water.’’

The Company capitalizes on the competitive Speedo image in marketing its Speedo brand fitness and fashion swimwear by incorporating performance elements in its more fashion-oriented products. Speedo fitness and fashion swimwear, Speedo swimwear for children and Speedo active apparel are distributed in the United States, Mexico, Canada and the Caribbean through department and specialty stores, independent retailers, chain stores, sporting goods stores, team dealers, catalog retailers, membership clubs, the Company's Speedo internet website and two outlet stores. Speedo fashion swimwear, active apparel and related products accounted for approximately 26.4% of the Swimwear Group's net revenues in Fiscal 2005.

Speedo accessories, including swim goggles, footwear, water-based fitness products, water toys, electronics and other swim and fitness-related products for adults and children, are primarily distributed through sporting goods stores, chain stores, swim specialty shops, membership clubs and mass merchandisers. Speedo accessories accounted for approximately $58.4 million of net revenues in Fiscal 2005, or approximately 14.9% of the Swimwear Group's net revenues, which included $31.3 million of net revenues from the sale of Speedo footwear products.

The Swimwear Group's Designer Swimwear business unit designs, sources, manufactures and sells a broad range of fashion swimwear and beachwear for girls, juniors and women. Designer Swimwear products are distributed through many channels of distribution in the United States, Mexico and Canada, including department stores, independent retailers, chain stores, membership clubs, mass merchandisers and swim specialty shops. In addition, the Company uses its design, manufacturing and sourcing expertise to produce private label swimwear at lower price points to customers that generally do not carry the Company's branded products. Designer Swimwear accounted for approximately 32.7% of the Swimwear Group's net revenues in Fiscal 2005.

The Swimwear Group's OP business unit was acquired by the Company on August 19, 2004. OP is a surf and beach lifestyle brand which operates both directly and through a network of licensees worldwide. OP offers a broad array of apparel and accessories catering to men, women, young men, juniors and kids under its Op and Ocean Pacific labels. During Fiscal 2005, the Company exited certain key third party licenses and added certain OP product categories to its wholesale business model.

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The following table sets forth the Swimwear Group's principal distribution channels and customers:

Channels of Distribution (a)				Customers				Brands (a)
United States
Department Stores				Federated Department Stores and Saks Inc.				Speedo swimwear and accessories, Anne Cole, Cole of California, Nautica, Choice Calvin Klein swimwear, Axcelerate, Michael Kors and OP
Independent Retailers				Nordstrom, Dillard's, Neiman Marcus and Belk				Anne Cole, Speedo swimwear, Nautica swimwear and Choice Calvin Klein swimwear
Chain Stores				J. C. Penney, Kohl's and Sears				Speedo swimwear and accessories Designer, Private Label and Axcelerate
Membership Clubs				Costco and Sam's Club				Speedo swimwear, active apparel and accessories
Mass Merchandisers				Wal-Mart and Target				Catalina (wholesale basis), private label and Speedo accessories
Other				Military, Victoria's Secret Catalog and The Sports Authority				Speedo swimwear and accessories, Lifeguard, Anne Cole, Nautica and private label
Canada				Hudson Bay Company, Sears and membership clubs				Speedo swimwear and accessories, Nautica and Anne Cole
Mexico				Liverpool, Palacio De Hierro, Marti, Suburbia, Wal-Mart and membership Clubs				Speedo swimwear and accessories, Nautica, Anne Cole and Catalina
Europe				EL Corte Ingles, House of Fraiser, La Rinascente and Company-owned Stores/stores operated under distributor agreements				Calvin Klein swimwear

(a)

In Fiscal 2004, the Company's OP business was operated through a network of third party licensees which distributed a broad range of apparel and accessories through multiple channels of distribution including department stores, swim specialty stores and chain stores. During Fiscal 2005, the Company exited certain key third-party licenses and added certain OP product categories to its wholesale business model.

The Swimwear Group generally markets its products for three retail selling seasons (cruise, Spring and Summer). New styles, fabrics and colors are introduced based upon consumer preferences and market trends and coincide with the appropriate selling season. The swimwear business is seasonal. Approximately 70% of the Swimwear Group's net revenues were recorded in the first halves of Fiscal 2005, Fiscal 2004 and Fiscal 2003, respectively.

The Swimwear Group has operations in the United States, Mexico, Canada and Europe and its licensees operate worldwide. The Swimwear Group's products are manufactured both in the Company's facilities in Mexico and Canada and sourced from third party contractors primarily in the United States, Mexico, Europe and Asia.

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The following table sets forth the domestic and international net revenues of the Swimwear Group:

				Fiscal 2005								Fiscal 2004								Fiscal 2003
				Net Revenues				% of Total				Net Revenues				% of Total				Net Revenues				% of Total
				(in thousands of dollars)
Net revenues:
United States				$	362,639				92.7	%		$	361,770				95.1	%		$	344,980				95.5	%
International					28,507				7.3	%			18,554				4.9	%			16,112				4.5	%
				$	391,146				100.0	%		$	380,324				100.0	%		$	361,092				100.0	%

Customers

As of December 31, 2005, the Company's products are widely distributed to department and specialty stores, independent retailers, chain stores, membership clubs and mass merchandise stores in North America, Asia and Europe. One customer, Federated Department Stores, accounted for approximately 11.4% of the Company’s net revenues in Fiscal 2005. No other customer accounted for more than 10% of the Company’s net revenues in Fiscal 2005. No one customer accounted for more than 10% of the Company's net revenues in Fiscal 2004. One customer, Wal-Mart Stores, Inc., accounted for approximately 10.5% of the Company's net revenues in Fiscal 2003. No other customer accounted for more than 10% of the Company’s net revenues in Fiscal 2003.

The Company offers a diversified portfolio of brands across virtually all distribution channels to a wide range of customers. The Company utilizes focus groups, market research and in-house and licensor design staffs to align its brands with the preferences of consumers. The Company believes that this strategy reduces its reliance on any single distribution channel and allows it to market products with designs and features that appeal to a wide range of consumers at varying price points. As of December 31, 2005, the Company operated 121 Calvin Klein retail stores worldwide (consisting of 59 stores directly operated by the Company, including one on-line store, and 62 stores operated under retail licenses or distributor agreements). The Company’s Swimwear Group also operates two Speedo outlet stores, which opened in July 2005, and one on-line store.

Advertising, Marketing, and Promotion

The Company devotes significant resources to advertising and promoting its various brands to increase awareness of its products with retail consumers and, consequently, to increase consumer demand.

Total advertising, marketing and promotion expense (including cooperative advertising programs) was $85.3 million, or 5.7% of net revenues, in Fiscal 2005 compared with $86.0 million, or 6.0% of net revenues, in Fiscal 2004 and $73.8 million, or 5.4% of net revenues, in Fiscal 2003. The Company focuses its advertising and promotional spending on brand and/or product-specific advertising, primarily through point of sale product displays, visuals and individual in-store promotions. Certain of the Company's brands also advertise in national print publications. In addition, the Swimwear Group sponsors a number of world-class swimmers, divers, volleyball players, surfers, winter-sports athletes, skateboarders and tri-athletes who wear its products in competition and participate in various promotional activities on behalf of the Speedo and OP brands.

The Company participates in cooperative advertising programs with many of its customers, reimbursing customers for a portion of the cost incurred by the customer in placing advertisements featuring its products. Cooperative advertising expenses included in advertising, marketing and promotion expenses were $15.9 million, $18.4 million and $18.9 million for Fiscal 2005, 2004 and 2003, respectively.

The Company's licenses for the Calvin Klein, Nautica and Michael Kors trademarks include provisions requiring the Company to spend a specified percentage (ranging from 1% to 3%) of

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revenues on advertising and promotion related to the licensed products. The Company also benefits from general advertising campaigns conducted by its licensors. Though some of these advertising campaigns do not focus specifically on the Company's licensed products and often include the products of other licensees in addition to its own, the Company believes it benefits from the general brand recognition that these campaigns generate.

Sales

The Company's wholesale customers are served by sales representatives who are generally assigned to specific brands and products. The Company also employs sales coordinators who assist its customers in presenting its products effectively and in educating consumers about its various products. In addition, the Company has customer service departments for each business unit that assist its sales representatives and customers in tracking goods available for sale, determining order and shipping lead times and tracking the status of open orders.

The Company utilizes Electronic Data Interchange programs (‘‘EDI’’) wherever possible, which permit it to receive purchase orders electronically from customers and, in some cases, to transmit invoices electronically to customers. EDI helps the Company ensure that its customers receive its products in a timely and efficient manner.

Distribution

As of December 31, 2005, the Company distributed its products to its wholesale customers and retail stores from its various distribution facilities located in the United States (four primary facilities), Mexico (two facilities), Canada (one facility), France (one facility), Hong Kong (one facility), China (one facility) and the Netherlands (one facility). The Company acquired 100% control of the management of the Netherlands facility on December 31, 2004, which facility had previously been managed through a joint venture. Several of the Company's facilities are shared by more than one of its business units and/or operating segments. During Fiscal 2003, the Company consolidated the distribution and logistics of its Calvin Klein jeans operation into its primary distribution facilities in Pennsylvania. These services were previously provided by a third party. During Fiscal 2004, the Company completed the process of consolidating its two Canadian distribution operations into one facility. The Company owns one of its distribution facilities and leases all of its other distribution facilities. In connection with the CKJEA Acquisition, as discussed previously, the Company acquired distribution facilities in Italy (one facility), Korea (one facility) and China (one facility), all of which are leased.

Raw Materials and Sourcing

The Company's products are comprised of raw materials which consist principally of cotton, wool, silk, synthetic and cotton-synthetic blends of fabrics and yarns. Raw materials are generally available from multiple sources. Neither the Company, nor, to the Company's knowledge, any of its third party contractors, have experienced any significant shortage of raw materials.

Substantially all of the Company's products sold in the United States are imported and are subject to federal customs laws. See "—Government Regulations." The Company seeks to maintain a balanced portfolio of sourcing countries and factories worldwide to ensure continuity in supply of product. Quotas are monitored closely and contingencies activated when necessary.

Pursuant to its strategy of shifting from a manufacturing to a sourcing based production model, the Company hired a President-Global Sourcing in April 2005. In addition, during the first half of Fiscal 2005, the Company acquired a portion of a business located in Asia that had provided sourcing and buying services to the Company. The consideration for the acquisition is based on the cost of inventory sourced by the acquired entity from the date of acquisition through February 25, 2006. The Company expects the total purchase price for the acquisition to be approximately $2.0 million.

Trademarks and Licensing Agreements

The Company owns and licenses a portfolio of highly recognized brand names. Most of the trademarks used by the Company are either owned, licensed in perpetuity or, in the case of Calvin

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Klein jeans, licensed for terms through 2044 and 2046. The Company's core brands have been established in their respective markets for extended periods and have attained a high level of consumer awareness. The Speedo brand has been in existence for 78 years and the Company believes Speedo is the dominant competitive swimwear brand in the United States. The Warner's and Olga brands have been in existence for 133 and 66 years, respectively; Lejaby has been in existence for more than 50 years; and Calvin Klein, OP and Chaps have each been in existence for more than 25 years. According to NPD, Warner's, Olga and Calvin Klein were three of the top ten selling intimate apparel brands in U.S. department stores participating in the survey in Fiscal 2005.

The Company regards its intellectual property in general and, in particular, its owned trademarks and licenses, as its most valuable asset. The Company believes the trademarks and licenses have substantial value in the marketing of its products. The Company has protected its trademarks by registering them with the U.S. Patent and Trademark Office and with governmental agencies in other countries where its products are manufactured and sold. The Company works vigorously to enforce and protect its trademark rights by engaging in regular market reviews, helping local law enforcement authorities detect and prosecute counterfeiters, issuing cease-and-desist letters against third parties infringing or denigrating its trademarks and initiating litigation as necessary. The Company also works with trade groups and industry participants seeking to strengthen laws relating to the protection of intellectual property rights in markets around the world.

Although the specific terms of each of the Company's license agreements vary, generally the agreements provide for minimum royalty payments and/or royalty payments based on a percentage of net sales. The license agreements generally also grant the licensor the right to approve any designs marketed by the Company.

The Company has license agreements in perpetuity with SIL which permit the Company to design, manufacture and market certain men's, women's and children's apparel, including swimwear, sportswear and a wide variety of other products, using the Speedo trademark and certain other trademarks, including Axcelerate. The Company's license to use Speedo and other trademarks was granted in perpetuity subject to certain conditions and is exclusive in the United States and its territories and possessions, Canada, Mexico and the Caribbean. The license agreements provide for minimum royalty payments to be credited against future royalty payments based on a percentage of net sales. The license agreements may be terminated with respect to a particular territory in the event the Company does not pay royalties or abandons the trademark in such territory. Moreover, the license agreements may be terminated in the event the Company manufactures, or is controlled by a company that manufactures, racing/competitive swimwear, swimwear caps or swimwear accessories under a different trademark, as specifically defined in the license agreements. The Company generally may sublicense the Speedo trademark within the geographic regions covered by the licenses. SIL retains the right to use or license the Speedo trademark in other jurisdictions and actively uses or licenses the Speedo trademark throughout the world outside of the Company's licensed territory.

In 1992, the Company entered into an agreement with Speedo Holdings B.V. and its successor, SIL, granting certain additional irrevocable rights to the Company relating to the use of the Authentic Fitness^® name and service mark, which rights are in addition to the rights under the license agreements with SIL.

The Company has an exclusive worldwide license agreement with Anne Cole and Anne Cole Design Studio Ltd. Under the license agreement, the Company has the right to use, in perpetuity, the Anne Cole trademark for women's swimwear, activewear and beachwear and children's swimwear, subject to certain terms and conditions. Under the license agreement, the Company is required to pay certain minimum guaranteed annual royalties, to be credited against earned royalties, based on a percentage of net sales. Anne Cole and Anne Cole Design Studio Ltd. have the right to approve products bearing the licensed trademark, as set forth in the license.

The Company has a license to develop, manufacture and market designer jeanswear products under the Calvin Klein trademark in North, South and Central America. In July 2004, the Company acquired the license to open retail stores to sell jeanswear and ancillary products bearing the Calvin Klein marks in Central and South America. In addition, in connection with the CKJEA Acquisition,

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the Company expanded the territory covered by the retail stores license to include Mexico and Canada. The initial term of these licenses expire on December 31, 2034 and are extendable by the Company for a further ten-year term expiring on December 31, 2044 if the Company achieves certain sales targets in the United States, Mexico and Canada. The Company had an exclusive worldwide license agreement with Calvin Klein, Inc. to distribute Calvin Klein men's accessories, which expired on June 30, 2004. The Company had extended this license agreement through December 31, 2005 for Western Europe only. In January 2006, the Company acquired certain Calvin Klein accessories licenses as part of the CKJEA Acquisition (as discussed below).

The Company also has a license to develop, manufacture and market women’s and juniors’ swimwear under the Calvin Klein, CK Calvin Klein and Choice Calvin Klein trademarks in the approved forms as designated by the licensor worldwide and men’s swimwear under the Calvin Klein mark in the form designated by the licensor in Europe (countries constituting European Union at May 1, 2004), Norway, Switzerland, United Arab Emirates, Saudi Arabia, Kuwait, Lebanon, Jordan, the West Bank, Egypt, Israel and Russia. The initial terms of these licenses expire on December 31, 2009 and are extendable by the Company for a further 5-year term expiring on December 31, 2014 if the Company achieves certain sales targets. In May 2005, the Company acquired from the former licensee (with the consent of the licensor) the right to develop, manufacture and market women’s and juniors’ swimwear under the Calvin Klein and CK Calvin Klein trademarks in the approved forms as designated by the licensor in the United States, Mexico and Canada.

In January 2006, the Company acquired the companies that operate the license and related wholesale and retail businesses of Calvin Klein jeans and accessories in Europe and Asia and the CK Calvin Klein ‘‘bridge’’ line of sportswear and accessories in Europe. See ‘‘Acquisitions—CKJEAAcquisition.’’ In connection with the acquisition, the Company acquired various exclusive license agreements and entered into amendments to certain of its existing license agreements with Calvin Klein, Inc. (in its capacity as licensor). Under these agreements the Company has licenses to develop, manufacture, distribute and market, and to open retail stores to sell, ‘‘bridge’’ apparel and accessories under the CK/Calvin Klein trademark and service mark in Europe (countries constituting European Union at May 1, 2004), Norway, Switzerland, Monte Carlo, Vatican City, Liechtenstein, Iceland and parts of Eastern Europe, Russia, the Middle East and Africa. These licenses extend through December 31, 2046.

In connection with the CKJEA Acquisition, the Company acquired the licenses to develop, manufacture, distribute and market, and to open retail stores to sell, jeans apparel and accessories under the Calvin Klein and/or CK/Calvin Klein trademark and service mark in the forms of the logos Calvin Klein jeans and/or CK/Calvin Klein jeans in Japan, China, South Korea and ‘‘Rest of Asia’’ (Hong Kong, Thailand, Australia, New Zealand, Philippines, Taiwan, Singapore, Malaysia, Indonesia, New Guinea, Vietnam, Cambodia, Laos, Myanmar, Macau and the Federated State of Micronesia) and parts of Western Europe, the Middle East, Egypt, Eastern Europe and Southern Africa. These licenses also extend through December 31, 2046.

All of the Calvin Klein trademarks (including all variations and formatives thereof) for all products and services are owned by the Calvin Klein Trademark Trust. The trust is co-owned by Calvin Klein, Inc. and the Company. The Class B and C Series Estates of the trust correspond to the Calvin Klein trademarks for men's, women's and children's underwear, intimate apparel and sleepwear and are owned by the Company. Accordingly, as owner of the Class B and C Estate Shares of the trust corresponding to these product categories, the Company is the beneficial owner of the Calvin Klein trademarks for men's, women's and children's underwear, intimate apparel, loungewear and sleepwear throughout the entire world.

In November 2003, the Company entered into an exclusive worldwide license agreement with Sweetface Fashion Company, LLC for the design, sourcing, distribution, advertising, marketing and sale of women's panties, bras, shapewear, sleepwear, loungewear and daywear bearing the J. Lo by Jennifer Lopez brand name. Assuming compliance with certain terms and conditions for the exercise of two renewal options, this license can be extended through 2013.

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The Company has the exclusive right to use the Chaps trademark for men's sportswear, jeanswear, activewear, sports shirts and swimwear in the United States and its territories and possessions, including Puerto Rico, Mexico and Canada and has rights of first refusal with respect to Europe. The license extends through December 31, 2008, subject to the Company's right to renew for two additional five-year terms beyond the expiration date up to and including December 31, 2018, provided that the Company has achieved certain levels of minimum earned royalties.

In March 2003, the Company entered into an exclusive license agreement to manufacture, distribute and sell Nautica women's swimwear and related products in the United States, Canada, Mexico and the Caribbean Islands for an initial term of four years. The license agreement may be renewed at the Company's option for two additional years to June 30, 2009 if it achieves certain sales targets. In February 2006, the Nautica license agreement was amended to expand the licensed territories with respect to certain product lines.

In July 1995, the Company entered into a license agreement with Lifeguard Licensing Corp. Under the license agreement, the Company has the exclusive right to manufacture, source, sublicense, distribute, promote and advertise Lifeguard apparel worldwide. In September 2003, the Lifeguard license was amended and extended to add other product categories, namely accessories and sporting equipment. The current term of the license agreement expires on June 30, 2010. The agreement includes four renewal options, each of which permits the Company to extend for an additional five-year term (through June 30, 2030) subject to compliance with certain conditions.

In June 2004, the Company entered into a license agreement with Michael Kors, L.L.C. The Company has the worldwide (excluding Japan) right to manufacture and distribute Michael Kors and MICHAEL Michael Kors swimwear products in the designer collection market segment and in the better market segment. The current term of the license agreement expires on June 30, 2008. The agreement includes two renewal options, each of which permits the Company to extend for an additional three-year term (through June 30, 2014) subject to compliance with certain conditions.

In August 2004, the Company acquired 100% of the outstanding common stock of OP. OP is based in Irvine, California and is a surf and beach lifestyle brand offering a broad array of apparel and accessories catering to men, women, young men, juniors and kids under various trademarks, the most recognizable being its Op, Ocean Pacific and Op Classics labels. Assets acquired included, among other things, license agreements pursuant to which a worldwide network of third-party licensees were granted the right to design, market and distribute licensed products in specific geographic areas. The terms for OP licenses range from one to 26 years. Licenses that are set to expire by 2008 accounted for approximately 36% of OP's royalty income for Fiscal 2005. During Fiscal 2005, the Company exited certain key third-party licenses and added certain OP product categories to its wholesale business model.

On an ongoing basis, the Company evaluates entering into distribution or license agreements with other companies that would permit those companies to market products under the Company's trademarks. In evaluating a potential distributor or licensee, the Company generally considers the experience, financial stability, manufacturing performance and marketing ability of the proposed licensee.

Certain of the Company's license agreements with third parties will expire by their terms over the next several years. There can be no assurance that the Company will be able to negotiate and conclude extensions of such agreements on similar economic terms or at all.

International Operations

In addition to its operations in the United States, as of December 31, 2005, the Company had operations in Canada, Brazil (pursuant to a joint venture), Mexico, Europe (Austria, Belgium, Denmark, France, Germany, Italy, the Netherlands, Portugal, Spain, Switzerland and the United Kingdom) and Asia (Hong Kong, Singapore, China, Taiwan, Korea, Japan and Macau), which engage in sales, manufacturing and/or marketing activities. International operations generated $427.5 million, or 28.4% of net revenues, in Fiscal 2005 compared with $390.6 million, or 27.4% of net revenues, in

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Fiscal 2004 and $345.3 million, or 25.1% of net revenues, in Fiscal 2003. International operations generated operating income of $72.6 million, $60.2 million and $50.0 million (representing 39.8%, 36.0% and 35.6%, respectively, of group operating income) in Fiscal 2005, Fiscal 2004 and Fiscal 2003, respectively. Pursuant to the CKJEA Acquisition, in January 2006, the Company acquired additional operations in Europe and Asia.

The Company has manufacturing facilities in Canada, Mexico and France. As of December 31, 2005, the Company had distribution facilities in Canada, Mexico, France, China, Hong Kong and the Netherlands. Pursuant to the CKJEA Acquisition, in January 2006, the Company acquired leased distribution facilities in Italy, Korea and China. The Swimwear Group operates manufacturing facilities in Mexico pursuant to duty-advantaged (commonly referred to as ‘‘Item 807’’) programs. During Fiscal 2005, the Company acquired a portion of a business located in Asia that had provided sourcing and buying services to the Company.

A portion of the Company's Warner's, Olga and Body Nancy Ganz/Bodyslimmers products are currently manufactured by a third party supplier in Honduras. A loss of production from this supplier could have a short-term adverse effect on the Company's ability to deliver these products to its customers. The Company has many potential sources of supply and believes a disruption at any one facility would not have a material adverse effect on the Company. The Company maintains insurance policies designed to substantially mitigate the financial effects of disruptions in its sources of supply.

The movement of foreign currency exchange rates affects the Company's results of operations. For further discussion of certain of the risks involved in the Company's foreign operations, including foreign currency exposure, see "Risk Factors."

Competition

The apparel industry is highly competitive. The Company competes with many domestic and foreign apparel manufacturers and suppliers, some of which are larger and more diversified and have greater financial and other resources than the Company. In addition to competition from other branded apparel manufacturers, the Company competes in certain product lines with department stores, mass merchandisers and specialty store private label programs.

The Company offers a diversified portfolio of brands across a wide range of price points in many channels of distribution in an effort to appeal to all consumers. The Company competes on the basis of product design, quality, brand recognition, price, product differentiation, marketing and advertising, customer service and other factors. Although some of its competitors have greater sales, the Company does not believe that any single competitor dominates any channel in which it operates. The Company believes that its ability to serve multiple distribution channels with a diversified portfolio of products under widely recognized brand names distinguishes it from many of its competitors.

Government Regulations

The Company is subject to federal, state and local laws and regulations affecting its business, including those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission and various environmental laws and regulations. The Company's international businesses are subject to similar regulations in the countries where they operate. The Company believes that it is in compliance in all material respects with all applicable governmental regulations.

The Company's operations are also subject to various international trade agreements and regulations such as the North American Free Trade Agreement, the Central American Free Trade Agreement and the Caribbean Basin Initiative, and the activities and regulations of the World Trade Organization. The Company believes that these trade agreements generally benefit the Company's business by reducing or eliminating the duties and/or quotas assessed on products manufactured in a particular country; however, the elimination of quotas with respect to certain countries could adversely affect the Company as a result of increased competition from such countries. See "Risk Factors." In

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addition, trade agreements can also impose requirements that negatively affect the Company's business, such as limiting the countries from which it can purchase raw materials and setting quotas on products that may be imported from a particular country. On January 1, 2005, in accordance with its commitments under the World Trade Organization (‘‘WTO’’), the United States discontinued imposing quotas on the import of apparel from WTO members. In response to import surges in key categories and to develop a stable and predictable trading environment, the United States and China entered into a three year memorandum of understanding (‘‘MOU’’) in November 2005. The MOU essentially imposes quotas on key apparel categories manufactured in China and exported on or after January 2006 through December 2008. The Company monitors trade-related matters pending with the United States government for potential positive or negative effects on its operations.

Employees

As of December 31, 2005, the Company employed 10,156 employees. As of December 31, 2005, approximately 49% of the Company's employees, all of whom are engaged in the manufacture and distribution of its products, were represented by labor unions. The Company considers labor relations with its employees to be satisfactory and has not experienced any significant interruption of its operations due to labor disagreements.

The Company monitors all of its owned and contracted factories to ensure their continued human rights and labor compliance and adherence to all applicable laws and the Company's own business partner manufacturing guidelines.

All of the Company's contractors are required, by the terms of such contractor's agreement with the Company, to execute the Company's business partner manufacturing guidelines. All purchase orders and letters of credit contain similar contractual requirements. Company personnel regularly conduct on-site visits to monitor a contractor's working environment, compliance with local labor laws and compliance with the Company's business partner manufacturing guidelines.

In addition, the Company has engaged third-party labor compliance auditing companies to monitor its facilities and those of its contractors. These auditing companies periodically audit all the Company's foreign and domestic contractors' payroll records, age certificates, and compliance with local labor laws and compliance with the Company's business partner manufacturing guidelines. These auditing companies also conduct unannounced visits, surveillance and random interviews with contractors, employees and supervisors. In addition, these companies regularly conduct labor compliance training sessions for personnel at the Company's factories and sourcing operations around the world.

Backlog

The Company's Swimwear Group had unfilled customer orders (consisting of both confirmed and unconfirmed orders) of approximately $207.7 million as of December 31, 2005 and $219.1 million as of January 1, 2005. A substantial portion of net revenues of the Company's other businesses is based on orders for immediate delivery and, therefore, backlog is not necessarily indicative of future net revenues.

Asset Sales

During the course of the Chapter 11 Cases (as defined below), the Company obtained the Bankruptcy Court's authorization to sell assets and settle liabilities for amounts other than those reflected in the consolidated financial statements. The Company sold certain personal property, certain owned buildings and land and other assets, generating net proceeds of approximately $36.3 million. These proceeds included approximately $23.2 million from the sale of inventory related to certain closed outlet stores. The sale of assets in Fiscal 2002 and Fiscal 2003 did not result in a material gain or loss since the Company had previously written-down assets identified for potential disposition to their estimated net realizable value. Substantially all of the net proceeds from the sale of assets were used to reduce outstanding borrowings under the Amended Debtor-in-Possession Financing Facility entered into in connection with the Chapter 11 Cases, or to provide collateral for outstanding trade and standby letters of credit.

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In November 2003, the Company entered into an agreement to sell its A.B.S. by Allen Schwartz^® (‘‘ABS’’) business unit. The sale was finalized on January 30, 2004. The sale price was $15.4 million in cash plus the assumption of up to $2.0 million in liabilities. The Company recorded, as part of the loss from discontinued operations in the statement of operations, a loss pursuant to the sale of the ABS business unit of $3.1 million. The loss included an impairment charge of $3.0 million related to the write-down of the ABS trademark to net realizable value at January 3, 2004. Cash proceeds from the sale, net of related expenses, were $15.2 million.

During the fourth quarter of Fiscal 2003, the Company entered into an agreement to sell its manufacturing operations located in Villanueva, Honduras. The manufacturing operations sold consisted of one cutting center and four sewing facilities. The sale was finalized in January 2004 and, pursuant to the sale agreement, the Company sold certain items of property and machinery for $0.5 million. Included in restructuring charges in Fiscal 2003 is an impairment charge of approximately $1.5 million related to the write-down of these assets to net realizable value based on the selling price as stated in the agreement.

During the fourth quarter of Fiscal 2003, the Company sold its White Stag trademark to Wal-Mart Stores, Inc. for $28.7 million. Pursuant to the sale agreement, the Company received $10.0 million in cash in December 2003 and a note receivable for an aggregate of $18.7 million (plus interest). The note, including interest, is payable on or before March 2, 2007. The Company recorded a loss on the sale of the White Stag trademark of $3.8 million, which is included in other income (expense) in the consolidated statement of operations for the period February 5, 2003 to January 3, 2004.

During the first quarter of Fiscal 2004, the Company entered into an agreement to sell its manufacturing operation located in San Luis, Mexico. The manufacturing operation sold consisted of a combined cutting and sewing facility. The sale was finalized in March 2004 and, pursuant to the sale agreement, the Company sold certain items of property and machinery for $0.1 million.

During Fiscal 2004, the Company sold certain real property in the United Kingdom and Costa Rica for total proceeds of $2.3 million. The Company recorded a net gain of $0.5 million, as part of restructuring items, related to these properties.

Executive Officers of the Registrant

The executive officers of the Company, their age and their position as of February 17, 2006 are set forth below:

Name				Age				Position
Joseph R. Gromek					59			Director, President and Chief Executive Officer
Lawrence R. Rutkowski					47			Executive Vice President and Chief Financial Officer
Roger A. Williams					58			President—Swimwear Group
Helen McCluskey					50			President—Intimate Apparel Group
Frank Tworecke					59			President—Sportswear Group
Dwight Meyer					53			President—Global Sourcing
Stanley P. Silverstein					53			Executive Vice President—International Strategy and
								Business Development
Jay A. Galluzzo					31			Senior Vice President, General Counsel and Secretary
Elizabeth Wood					44			Senior Vice President—Human Resources

Mr. Gromek has served as the Company's President and Chief Executive Officer since April 2003, at which time he was also elected to the Board of Directors. From 1996 to January 2002, Mr. Gromek served as President and Chief Executive Officer of Brooks Brothers, Inc. From January 2002 until he joined the Company 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.

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Mr. Rutkowski currently serves as the Company's Executive Vice President and Chief Financial Officer. From September 2003 until March 2, 2005, Mr. Rutkowski served as the Company's Senior Vice President and Chief Financial Officer. Over the last 20 years, Mr. Rutkowski has held senior management positions at National Broadcasting Company/General Electric and Walt Disney Studios. From December 1999 to June 2003, he served as Executive Vice President and Chief Financial Officer at Primedia, Inc. 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.

Mr. Williams has served as the Company's President—Swimwear Group since May 2002. Mr. Williams owned his own private consulting firm from 1998 to 2002. Between 1994 and 1997, Mr. Williams served as Executive Vice President of Guess?. He also served as Executive Vice President of Donna Karan from 1992 to 1994. Mr. Williams served as Chief Operating Officer of Authentic Fitness Corporation from 1990 to 1992. From 1982 to 1990, Mr. Williams served as Chief Operating Officer of Olga Intimate Apparel and Group President, Warnaco Retail, and as Executive Vice President and Chief Financial Officer for Warnaco Inc.

Ms. McCluskey joined the Company as President—Intimate Apparel Group in July 2004 and is responsible for all aspects of the Company's intimate apparel business, including Calvin Klein underwear, Warner's, Olga and Body Nancy Ganz, as well as Lejaby, Lejaby Rose and JLO lingerie. Prior to joining the Company, Ms. McCluskey served as Group President of the Moderate Women's Sportswear division of Liz Claiborne Corporation from August 2001 to June 2004. Previously, she spent 18 years at Sara Lee Corporation where she held executive positions in marketing, operations and general management, including President of Playtex Apparel from 1999 to 2001.

Mr. Tworecke joined the Company as President—Sportswear Group in May 2004 and currently oversees the Calvin Klein jeans and Chaps brands. Mr. Tworecke has over 30 years experience in leading retail and apparel companies. Mr. Tworecke served as President and Chief Operating Officer of Bon-Ton Stores from 1999 to April 2004. Previously, he was President and Chief Operating Officer of Jos. A. Bank. Mr. Tworecke has also held senior management positions with other apparel wholesalers, as well as specialty and department store retailers including MGR, Inc., Rich's Lazarus Goldsmith (a division of Federated Department Stores) and John Wanamaker.

Mr. Meyer joined the Company as President—Global Sourcing in April 2005. 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 the 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.

Mr. Silverstein currently serves as the Company's Executive Vice President—International Strategy and Business Development. From March 3, 2005 to January 26, 2006, Mr. Silverstein served as the Company’s Executive Vice President—Corporate Development. From March 2003 to March 2, 2005, Mr. Silverstein served as the Company's Senior Vice President—Corporate Development. Mr. Silverstein served as the Company's Vice President and General Counsel from December 1990 until February 2003. Mr. Silverstein served as the Company's Secretary from January 1987 until May 2003 and as its Assistant Secretary from June 1986 to January 1987. Mr. Silverstein has also served as the Company's Chief Administrative Officer from December 2001 to January 26, 2006.

Mr. Galluzzo currently serves as the Company's Senior Vice President, General Counsel and Secretary. From March 2003 to March 2, 2005, Mr. Galluzzo served as the Company's Vice President and General Counsel and has served as the Company's 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. From September 1999 to September 2000, Mr. Galluzzo served as a law clerk to the Hon. Charles L. Brieant, United States District Judge for the Southern District of New York.

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Ms. Wood joined the Company 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.

Proceedings Under Chapter 11 of the Bankruptcy Code

On June 11, 2001 (the ‘‘Petition Date’’), the Company and certain of its subsidiaries (each a ‘‘Debtor’’ and, collectively, the ‘‘Debtors’’) each filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, 11 U.S.C. §§101-1330, as amended (the ‘‘Bankruptcy Code’’), in the United States Bankruptcy Court for the Southern District of New York (the ‘‘Bankruptcy Court’’) (collectively, the ‘‘Chapter 11 Cases’’). Warnaco, 36 of its 37 U.S. subsidiaries and one of the Company's Canadian subsidiaries, Warnaco of Canada Company, were Debtors in the Chapter 11 Cases. The remainder of the Company's foreign subsidiaries were not debtors in the Chapter 11 Cases, nor were they subject to foreign bankruptcy or insolvency proceedings.

On November 9, 2002, the Debtors filed the First Amended Joint Plan of Reorganization of The Warnaco Group, Inc. and Its Affiliated Debtors and Debtors-In-Possession Under Chapter 11 of the Bankruptcy Code (the ‘‘Reorganization Plan’’). On January 16, 2003, the Bankruptcy Court entered (i) its Findings of Fact to and Conclusions of Law Re: Order and Judgment Confirming The First Amended Joint Plan of Reorganization of The Warnaco Group, Inc. and Its Affiliated Debtors and Debtors-In-Possession Under Chapter 11 of Title 11 of the United States Code, dated November 8, 2002, and (ii) an Order and Judgment Confirming The First Amended Joint Plan of Reorganization of The Warnaco Group, Inc. and Its Affiliated Debtors and Debtors-In-Possession Under Chapter 11 of Title 11 of the United States Code, dated November 8, 2002, and Granting Related Relief (the ‘‘Confirmation Order’’).

In accordance with the provisions of the Reorganization Plan and the Confirmation Order, the Reorganization Plan became effective on February 4, 2003 (the ‘‘Effective Date’’) and the Company entered into a $275 million Senior Secured Revolving Credit Facility (as amended on November 12, 2003, August 1, 2004 and September 15, 2005, the ‘‘Revolving Credit Facility’’). The Revolving Credit Facility entered into on the Effective Date provided for a four-year, non-amortizing revolving credit facility. In accordance with the Reorganization Plan, on the Effective Date, the Company issued $200.9 million of New Warnaco Second Lien Notes due 2008 (the ‘‘Second Lien Notes’’) to certain pre-petition creditors and others in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (‘‘Securities Act’’), pursuant to Section 1145(a) of the Bankruptcy Code. On June 12, 2003, the Company repaid the Second Lien Notes and the accrued interest thereon, in full, with the proceeds of the offering of Warnaco Inc.'s 8 7/8% Senior Notes due 2013 (the ‘‘Senior Notes’’). See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Financing Arrangements" and Note 15 of Notes to Consolidated Financial Statements for a discussion of the Company's outstanding debt arrangements.

Set forth below is a summary of certain material provisions of the Reorganization Plan. Among other things, as described below, the Reorganization Plan resulted in the cancellation of the Predecessor's Class A Common Stock, issued prior to the Effective Date (the ‘‘Old Common Stock’’). The holders of Old Common Stock did not receive any distribution on account of the Old Common Stock under the Reorganization Plan. The Company, as reorganized under the Reorganization Plan, issued 44,999,973 shares of common stock, par value $0.01 per share (the ‘‘Common Stock’’), in reliance on the exemption from registration afforded by Section 1145 of the Bankruptcy Code, which shares were distributed to pre-petition creditors as specified below. In addition, 5,000,000 shares of Common Stock of the Company were reserved for issuance pursuant to management incentive stock grants. On March 12, 2003, subject to approval by the stockholders of the Company's proposed The Warnaco Group, Inc. 2003 Stock Incentive Plan (the ‘‘Stock Incentive Plan’’), the Company authorized the grant of 750,000 shares of restricted stock and options to purchase 3,000,000 shares of Common

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Stock at the fair market value of the Common Stock on the date of grant. On May 28, 2003, the stockholders of the Company approved the Stock Incentive Plan. The Reorganization Plan also provided for the issuance by the Company of the Second Lien Notes in the principal amount of $200.9 million to pre-petition creditors and others as specified below, secured by a second priority security interest in substantially all of the Debtors' domestic assets and guaranteed by the Company and its domestic subsidiaries.

The following is a summary of distributions pursuant to the Reorganization Plan:

	a)	the Old Common Stock, including all stock options and restricted shares, was extinguished, and holders of the Old Common Stock received no distribution on account of the Old Common Stock;

	b)	general unsecured claimants received approximately 2.55% (1,147,050 shares) of the Common Stock, which the Company distributed in April 2003;

	c)	the Company's pre-petition secured lenders received their pro rata share of approximately $106.1 million in cash, Second Lien Notes in the principal amount of $200 million and approximately 96.26% of the Common Stock (43,318,350 shares);

	d)	holders of claims arising from or related to certain of the Predecessor's preferred securities received approximately 0.60% of the Common Stock (268,200 shares);

	e)	pursuant to the terms of his employment agreement, as modified by the Reorganization Plan, Antonio C. Alvarez II, then President and Chief Executive Officer of the Company, received an incentive bonus consisting of approximately $2.0 million in cash, Second Lien Notes in the principal amount of approximately $0.9 million and approximately 0.59% of the Common Stock (266,400 shares valued at $11.19 per share); and

	f)	in addition to the foregoing, allowed administrative and certain priority claims were paid in full in cash.

Website Access to Reports

The Company's internet website is http://www.warnaco.com. The Company makes available free of charge on its website (under the heading ‘‘SEC Filings’’) its SEC filings, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission (‘‘SEC’’).

Additional information required by Item 1 of Part I is incorporated by reference to Note 8 of Notes to Consolidated Financial Statements.

Item 1A.    Risk Factors

In this Item 1A, the terms "we," "us," and "our" refer to The Warnaco Group, Inc. and its consolidated subsidiaries.

Our business, operations and financial condition are subject to various risks and uncertainties. The most significant of these risks include those described below; however, there may be additional risks and uncertainties not presently known to us or that we currently consider immaterial. If any of the events or circumstances described in the following risk factors occur, our business, financial condition or results of operations may suffer, and, among other things, the trading price of our Common Stock could decline. These risk factors should be read in conjunction with the other information in this Annual Report on Form 10-K and in the other documents that we file from time to time with the SEC.

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The worldwide apparel industry is heavily influenced by general economic conditions.

The apparel industry is highly cyclical and heavily dependent upon the overall level of consumer spending. Purchases of apparel and related goods tend to be highly correlated with cycles in the disposable income of consumers. Our wholesale customers may anticipate and respond to adverse changes in economic conditions and uncertainty by reducing inventories and canceling orders. Accordingly, a reduction in consumer spending in any of the regions in which we compete as a result of any substantial deterioration in general economic conditions (including as a result of the war against terrorism, the turmoil in Iraq or additional terrorist attacks) or increases in interest rates could adversely affect the sales of our products.

The apparel industry is subject to constantly changing fashion trends and if we misjudge consumer preferences, the image of one or more of our brands may suffer and the demand for our products may decrease.

The apparel industry is subject to shifting consumer demands and evolving fashion trends both in domestic and overseas markets and our success is dependent upon our ability to anticipate and promptly respond to these changes. Failure to anticipate, identify or promptly react to changing trends, styles or brand preferences may result in decreased demand for our products, as well as excess inventories and markdowns, which could have an adverse effect on our results of operations. In addition, if we misjudge consumer preferences, the brand image of our products may be impaired, which would adversely affect our business.

The apparel industry is subject to pricing pressures that may require us to lower the prices we charge for our products.

Prices in the apparel industry have been declining over the past several years, primarily as a result of the trend to move manufacturing operations offshore, the elimination of certain trade quotas, the introduction of new manufacturing technologies, growth of the mass retail channel of distribution, increased competition and consolidation in the retail industry. Products manufactured offshore generally cost less to manufacture than those made domestically, primarily because labor costs are lower offshore. We and our competitors source a significant portion of products from developing countries to achieve lower costs. Certain of our competitors may be able to source their products at lower costs than ours, and use these cost savings to reduce their prices. In addition, the elimination of certain quotas on the import of goods could result in increased competition from other countries (which may have lower labor costs) which may place additional pressure on apparel prices. Prices may also decline as a result of new manufacturing technologies (which enable manufacturers to produce goods on a more cost effective basis), increases in sales through the mass retail channel of distribution (which retailers seek to sell their products at discounted prices) or consolidation in the retail industry (which could result in larger customers with greater negotiating leverage).

To remain competitive, we must adjust our prices from time to time in response to these industry-wide pricing pressures. In addition, our customers are increasingly seeking allowances, incentives and other forms of economic support. Our profitability may be negatively affected by these pricing pressures if we are forced to reduce our prices but are unable to reduce our production or other operating costs. Similarly, our margins may also suffer if our production costs increase and we are unable to increase the prices we charge for our products.

The markets in which we operate are highly competitive and we may not be able to compete effectively.

The apparel industry is extremely competitive. We compete with many domestic and foreign apparel manufacturers and distributors, some of which are larger, more diversified and have greater financial and other resources than us. This competition could cause reduced unit sales or prices, or both, which could adversely affect us. We compete on the basis of a variety of factors, including:

	•	product quality;

	•	brand recognition;

	•	price;

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	•	product differentiation (including product innovation);

	•	manufacturing and distribution expertise and efficiency;

	•	marketing and advertising; and

	•	customer service.

Our ability to remain competitive in these areas will, in large part, determine our future success. Our failure to compete successfully could adversely affect our business.

Increases in the prices of raw materials used to manufacture our products could materially increase our costs and decrease our profitability.

The principal fabrics used in our business are made from cotton, wool, silk, synthetic and cotton-synthetic blends. The prices we pay for these fabrics are dependent on the market prices for the raw materials used to produce them, primarily cotton and chemical components of synthetic fabrics. These raw materials are subject to price volatility caused by weather, supply conditions, government regulations, energy costs, economic climate and other unpredictable factors. Fluctuations in petroleum prices may also influence the prices of related items such as chemicals, dyestuffs and polyester yarn. Any raw material price increase could increase our cost of sales and decrease our profitability unless we are able to pass higher prices on to our customers. In addition, if one or more of our competitors is able to reduce its production costs by taking greater advantage of any reductions in raw material prices or favorable sourcing agreements, we may face pricing pressures from those competitors and may be forced to reduce our prices or face a decline in net sales, either of which could have an adverse effect on our business, results of operations or financial condition.

Shortages in the supply of sourced goods, difficulties encountered by the third parties that source certain of our products or interruptions in our manufacturing or distribution operations could result in difficulty in procuring, producing and distributing our products.

We seek to secure and maintain favorable relationships with the companies that source our products and to ensure the proper operation of our manufacturing facilities. We generally utilize multiple sources of supply. An unexpected interruption in the supply of our sourced or manufactured products, including as a result of a disruption in operations at any of our manufacturing or distribution facilities or at the facilities which source our products, our failure to secure or maintain favorable sourcing relationships, shortages of sourced goods or disruptions in shipping, could adversely affect our results of operations until alternate sources or facilities can be secured. Such events could result in difficulty in procuring or producing our products on a cost-effective basis or at all, which could have an adverse effect on our results of operations.

In addition, although we monitor the third party facilities that source certain of our products to ensure their continued human rights and labor compliance and adherence to all applicable laws and our own business partner manufacturing guidelines, we do not control these independent manufacturers. Accordingly, vendors may violate labor or other laws, or fail to adhere to our business partner manufacturing guidelines, including by engaging in business or labor practices that would generally be regarded as unethical in the U.S. In such case, our reputation may be damaged, our supply of sourced goods may be interrupted and we may terminate our relationship with such vendors, any of which could have an adverse effect on our business.

We depend on a limited number of customers for a significant portion of our sales, and our financial success is linked to the success of our customers, our customers' commitment to our products and our ability to satisfy and maintain our customers.

Net revenues from our ten largest customers represented approximately 50.0% and 49.9% of our worldwide net revenues during Fiscal 2005 and 2004, respectively. One customer, Federated Department Stores, Inc., accounted for 11.4% of our Fiscal 2005 net revenues.

We do not have long-term contracts with any of our customers. Sales to customers are generally on an order-by-order basis. If we cannot fill customers' orders on time, orders may be cancelled and relationships with customers may suffer, which could have an adverse effect on us, especially if the

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relationship is with a major customer. Furthermore, if any of our customers experiences a significant downturn in its business, or fails to remain committed to our programs or brands, the customer may reduce or discontinue purchases from us. The loss of a major customer or a reduction in the amount of our products purchased by our major customers could have an adverse effect on our results of operations.

During the past several years, various retailers, including some of our customers, have experienced significant changes and difficulties, including consolidation of ownership, restructurings, bankruptcies and liquidations. Consolidation of retailers or other events that eliminate our customers could result in fewer stores selling our products and could increase our reliance on a smaller group of customers. In addition, if our retailer customers experience significant problems in the future, including as a result of general weakness in the retail environment, our sales may be reduced and the risk of extending credit to these retailers may increase. A significant adverse change in a customer relationship or in a customer's financial position could cause us to limit or discontinue business with that customer, require us to assume greater credit risk relating to that customer's receivables or limit our ability to collect amounts related to previous purchases by that customer. These or other events related to our significant customers could have an adverse effect on our business, results of operations or financial condition.

Our success depends upon the continued protection of our trademarks and other intellectual property rights and we may be forced to incur substantial costs to maintain, defend, protect and enforce our intellectual property rights.

Our registered and common law trademarks, as well as certain of our licensed trademarks, have significant value and are instrumental to our ability to market our products. Third parties may assert claims against any such intellectual property and we may not be able to successfully resolve such claims. In addition, we may be required to assert legal claims or take other enforcement actions against third parties who infringe on our intellectual property rights. We may be required to incur substantial costs in defending such claims or in taking such actions. In addition, the laws of some foreign countries may not allow us to protect, defend or enforce our intellectual property rights to the same extent as the laws of the U.S. Our failure to successfully protect our intellectual property rights, or the substantial costs that we may incur in doing so, may have an adverse effect on our operations.

A significant portion of our operations is dependent on license agreements with third parties that allow us to design, produce, source and market our products.

As of December 31, 2005, approximately 57.5% of our revenues were derived from sales of products which we design, manufacture, source and/or market pursuant to license agreements with third parties. The success of this portion of our business requires us to maintain favorable relationships with our licensors; deterioration in these relationships could impair our ability to market our brands and distribute our products.

Certain of our license agreements, including the license agreements with Speedo International, Ltd., Calvin Klein, Inc., Nautica Apparel, Inc. and Anne Cole and Anne Cole Design Studio Ltd., require us to make minimum royalty payments, subject us to restrictive covenants, require us to provide certain services (such as design services) and may be terminated if certain conditions are not met. We may not be able to continue to meet our obligations or fulfill the conditions under these agreements in the future. The termination of certain of these license agreements could have an adverse effect on our business, results of operations or financial condition.

Our success depends on the reputation of our owned and licensed brand names, including, in particular, Calvin Klein.

The success of our business depends on the reputation and value of our owned and licensed brand names. The value of our brands could be diminished by actions taken by licensors or others who have interests in the brands for other products and/or territories. Because we cannot control the quality of other products produced and sold under such licensed brand names, if such products are of poor quality, the value of the brand name could be damaged, which could have an adverse effect on our sales. In addition, some of the brand names licensed to us reflect the names of living individuals,

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whose actions are outside our control. If the reputation of one of these individuals is significantly harmed, our products bearing such individual's name may fall into disfavor, which could adversely affect our business. In addition, we may from time to time license our owned and licensed brand names to third parties. The actions of these licensees may diminish the reputation of the licensed brand, which could adversely affect our business.

The Calvin Klein brand name is significant to our business, in particular as a result of the CKJEA Acquisition (See "Business — Acquisitions — CKJEA Acquisition"). Sales of a substantial portion of our products are in large part tied to the success of the Calvin Klein brand name. In the event that consumer demand in the U.S. or overseas for the Calvin Klein brand declines, including as a result of changing fashion trends or an adverse change in the perception of the Calvin Klein brand image, our businesses which rely on the Calvin Klein brand name, including the businesses acquired in the CKJEA Acquisition, would be significantly harmed.

We are subject to local laws and regulations in the U.S. and abroad.

We are subject to U.S. federal, state and local laws and regulations affecting our business, including those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission and various labor, workplace and related laws, as well as environmental laws and regulations. Our international businesses and the companies which source our products are subject to similar regulations in the countries where they operate. Our efforts to maintain compliance with local laws and regulations may require us to incur significant expenses, and our failure to comply with such laws may expose us to potential liability, which could have an adverse effect on our results of operations. Similarly, local laws could have an adverse effect on our sourcing vendors, which could affect our ability to procure our products.

Changing international trade regulation may increase our costs and limit the amount of products or raw materials that we may import from or export to a given country.

Substantially all of our operations are subject to quotas imposed by bilateral textile agreements between the countries from which we procure raw materials, such as yarn, and the countries where our manufacturing facilities or the facilities of the companies which source our products are located. Such agreements and regulations include the North American Free Trade Agreement and the Caribbean Basin Initiative, and the activities and regulations of the World Trade Organization ("WTO"). These quotas may limit the amount of products that may be imported from a particular country, which could impair our ability to produce or procure our products on a cost-effective basis.

In addition, the countries in which our products are manufactured or sourced, or into which they are imported, may from time to time impose additional new quotas, duties, tariffs and requirements as to where raw materials must be purchased or additional workplace regulations or other restrictions, or may adversely modify existing restrictions. Changes in international trade regulation, including future trade agreements, could provide our competitors an advantage over us, or increase our costs, either of which could have an adverse effect on our business, results of operations or financial condition.

Our business outside of the U.S. exposes us to uncertain conditions in overseas markets.

Our foreign operations subject us to risks customarily associated with foreign operations. As of December 31, 2005, we sold our products throughout the world and had warehousing and distribution facilities in seven countries. In addition, in January 2006, we acquired additional operations in Europe and Asia pursuant to the CKJEA Acquisition. See "Business — Acquisitions — CKJEA Acquisition". We also source many of our products from third-party vendors based in foreign countries. For Fiscal 2005, we had net revenues outside of the U.S. of $427.5 million, representing 28.4% of our total net revenues, with the majority of these sales in Canada and Europe, and we expect that as a result of the CKJEA Acquisition, the percentage of our total revenues derived from foreign operations will increase to over 35%. We are exposed to the risk of changes in social, political and economic conditions inherent in operating in foreign countries, including:

	•	currency fluctuations;

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	•	import and export license requirements;

	•	trade restrictions;

	•	changes in quotas, tariffs, taxes and duties;

	•	restrictions on repatriating foreign profits back to the U.S.;

	•	foreign laws and regulations;

	•	international trade agreements;

	•	difficulties in staffing and managing international operations;

	•	economic conditions overseas;

	•	political or social unrest; and

	•	disruptions or delays in shipments.

In addition, transactions between our foreign subsidiaries and us may be subject to U.S. and foreign withholding taxes. Applicable tax rates in foreign jurisdictions differ from those of the U.S., and change periodically.

We have foreign currency exposures relating to buying, selling and financing in currencies other than the U.S. dollar, our functional currency.

We have foreign currency exposure related to foreign denominated revenues and costs which must be translated into U.S. dollars. Fluctuations in foreign currency exchange rates may adversely affect our reported earnings and the comparability of period-to-period results of operations. In addition, certain of our foreign operations purchase products from suppliers denominated in U.S. dollars, which exposes such operations to increases in cost of goods sold (thereby lowering profit margins) as a result of foreign currency fluctuations. Our exposures are primarily concentrated in the Canadian dollar, euro, British pound sterling and Mexican peso. Changes in currency exchange rates may also affect the relative prices at which we and our foreign competitors sell products in the same market and the cost of certain items required in our operations. We are currently party to foreign currency exchange contracts, which were designed to fix the number of euros required to satisfy the first one-third of dollar denominated purchases of inventory by certain of our pre-CKJEA Acquisition European subsidiaries. See Item 7A- Quantitative and Qualitative Disclosures About Market Risk-Foreign Exchange Risk. Management of our foreign currency exposure may not sufficiently protect us from fluctuations in foreign currency exchange rates, which could have an adverse effect on our business, results of operations and financial condition.

We are subject to certain risks as a result of our indebtedness.

As of December 31, 2005, we had total debt of approximately $210.0 million. In connection with the CKJEA Acquisition (See "Business — Acquisitions — CKJEA Acquisition"), we borrowed $180.0 million under a term loan under the Amended and Restated Credit Agreement and assumed approximately $45 million of indebtedness of the acquired companies. As of February 17, 2006, we had total debt of approximately $435 million. Our ability to service our indebtedness using cash flows from operations is dependent on our financial and operating performance, which is subject to prevailing economic and competitive industry conditions and to certain other factors beyond our control, including the factors described in this Item 1A. In the event that we are unable to satisfy our debt obligations as they come due, we may be forced to refinance our indebtedness, and there can be no assurance that we will be able to refinance our indebtedness on terms favorable to us, or at all. Our debt service obligations may also limit cash flow available for our operations and adversely affect our ability to obtain additional financing, if necessary. In addition, certain of the indebtedness under our Amended and Restated Credit Agreement, our Foreign Credit Facility and the indebtedness we assumed in the CKJEA Acquisition is subject to floating interest rates; accordingly, our results of operations may be adversely affected if market interest rates increase.

The terms of the agreements governing our indebtedness may also limit our operating and financial flexibility. The indenture governing our Senior Notes and the Amended and Restated Credit

28

Agreement each contain a number of significant restrictions and other covenants, including financial covenants, with which we must comply. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity — Financing Arrangements." In addition, in the event that we are unable to comply with these restrictions and other covenants and are not able to obtain waivers from our lenders, we would be in default under these agreements and, among other things, our debt may be accelerated by our lenders. In such case, we may not be able to repay our debt or borrow sufficient funds to refinance it on commercially reasonable terms, or terms that are acceptable to us, which could have an adverse effect on our financial condition.

Our business depends on our senior management team and other key personnel.

Our success is, to a significant extent, dependent on our ability to attract, retain and motivate senior management and other key employees, including managerial, operational, design and sales personnel. Demand and competition for qualified personnel in our industry is intense, and we compete for personnel with companies which may have greater financial resources than we do. The unexpected loss of our current senior management or other key employees, or our inability to attract and retain such persons in the future, could harm our ability to operate our business, including our ability to effectively service our customers, generate new business or formulate and execute on our strategic initiatives.

We may experience difficulties in connection with SAP's Apparel and Footwear Solution, which could increase our costs and impair the operation of our business.

We are in the process of implementing SAP's Apparel and Footwear Solution (an enterprise-wide software platform encompassing finance, sales and distribution and materials management). We have implemented SAP at our Swimwear Group and certain of our corporate shared services departments, and plan to implement SAP Company-wide over the next three years.

As previously disclosed, we experienced difficulties under our SAP system which negatively affected our January 2006 shipments. Although we believe that these difficulties had been addressed as of February 2006, the continuing implementation and maintenance of the SAP system could in the future result in unanticipated costs or expenditures, which could adversely affect our results of operations. Moreover, failure to smoothly and successfully implement SAP in our business operations, or difficulties that we may experience in operating our business under SAP's systems, could disrupt our operations, including our ability to timely ship and track product orders to customers, project inventory requirements, manage our supply chain, and otherwise adequately service our customers, which could have an adverse effect on our business.

Businesses that we may acquire, including the businesses acquired in the CKJEA Acquisition, may fail to perform to expectations. In addition, we may be unable to successfully integrate acquired businesses with our existing business.

From time to time, we evaluate potential acquisition opportunities to support and strengthen our business. On January 31, 2006, we acquired the licenses and related wholesale and retail business of Calvin Klein jeans and accessories in Europe and Asia and the CK Calvin Klein "bridge" line of sportswear and accessories in Europe. In August 2004, we acquired Ocean Pacific Apparel Corp. See "Business — Acquisitions".

We may not be able to realize all or a substantial portion of the anticipated benefits of these or the other acquisitions that we may consummate. Newly acquired businesses may not achieve expected results of operations, including expected levels of revenues, and may require unanticipated costs and expenditures. Acquired businesses may also subject us to liabilities that we were unable to discover in the course of our due diligence, and our rights to indemnification from the sellers of such businesses, even if obtained, may not be sufficient to offset the relevant liabilities. In addition, acquired businesses may be adversely affected by the risks described in this Item 1A, or other risks, including as a result of factors that we are not currently aware of.

In addition, the integration of newly acquired businesses and products may be expensive and time-consuming and may not be entirely successful. The success of integrating acquired businesses is

29

dependent on our ability to, among other things, merge operational and financial systems, retain customers of acquired businesses, realize cost reduction synergies and retain key management and other personnel of the acquired companies. Integration of the recently acquired international Calvin Klein businesses may also place additional pressures on our systems of internal control over financial reporting. If we are unable to successfully integrate newly acquired businesses, including the business acquired in the CKJEA Acquisition (which represents our most significant acquisition since our emergence from bankruptcy), or if acquired businesses fail to produce targeted results, it could have an adverse effect on our results of operations or financial condition.

Item 1B.    Unresolved Staff Comments.

None.

Item 2.    Properties.

The Company's principal executive offices are located at 501 Seventh Avenue, New York, New York, which the Company leases pursuant to a 13-year lease that commenced in May 2003 (expiring August 2016). In addition to the Company's executive offices, the Company leases offices in California and Connecticut pursuant to leases that expire between 2010 and 2013.

As of December 31, 2005, the Company had four primary domestic distribution and warehousing facilities located in California and Pennsylvania and fourteen international manufacturing and warehouse facilities in Canada (two), France (five), Mexico (four), China (one), Hong Kong (one) and the Netherlands (one). Some of the Company's manufacturing and warehouse facilities are also used for administrative functions. The Company owns one of its domestic facilities and two of its international facilities. The owned domestic facility is subject to liens in favor of the lenders under the Amended and Restated Credit Agreement. The rest of the Company's facilities are leased with terms expiring between 2006 and 2020, except for certain leases which operate on a month-to-month basis. In connection with the CKJEA Acquisition, as discussed above, the Company acquired distribution and warehousing facilities in Italy (two), Korea (one) and China (one), all of which are leased.

The Company leases sales offices in a number of major cities, including Atlanta, Dallas, Los Angeles and New York in the United States; Brussels, Belgium; Toronto, Canada; Paris, France; Cologne, Germany; Shanghai, China; Hong Kong; Milan, Italy; Mexico City, Mexico; and Lausanne, Switzerland. The sales office leases expire between 2006 and 2008 and are generally renewable at the Company's option. The Company leases 59 retail store sites in the United States, Canada, Europe and Asia. Retail leases expire between 2006 and 2025 and are generally renewable at the Company's option. Prior to Fiscal 2004, the Company also operated Speedo Authentic Fitness retail stores. During Fiscal 2004, the Company finalized the closure of all its leased Speedo Authentic Fitness retail stores and recorded, as part of loss from discontinued operations, charges of $2.6 million related to future operating lease commitments and landlord settlements, net of possible sublease rental income.

All of the Company's production and warehouse facilities are located in appropriately designed buildings, which are kept in good repair. All such facilities have well-maintained equipment and sufficient capacity to handle present and expected future volumes. The Company owns one vacant domestic manufacturing facility that it has listed for sale with local real estate agents. The carrying value of this facility has been reduced to its expected net realizable value.

Item 3.    Legal Proceedings.

From time to time, the Company is involved in arbitrations or legal proceedings that arise in the ordinary course of its business. The Company cannot predict the timing or outcome of these claims and proceedings. Currently, the Company is not involved in any arbitration and/or legal proceeding that it expects to have a material effect on its financial condition, results of operations or business.

Item 4.    Submission of Matters to a Vote of Security Holders.

None.

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PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Common Stock began trading on the NASDAQ National Stock Market under the ticker symbol ‘‘WRNC’’ on February 5, 2003, following the Company's emergence from bankruptcy. The table below sets forth the high and low sales prices of the Common Stock as reported on the NASDAQ Composite Tape from January 4, 2004 through February 17, 2006:

				High				Low
2004
First Quarter				$	20.62			$	15.66
Second Quarter				$	21.98			$	17.63
Third Quarter				$	22.76			$	17.57
Fourth Quarter				$	22.55			$	19.21
2005
First Quarter				$	25.84			$	20.05
Second Quarter				$	25.58			$	19.70
Third Quarter				$	25.88			$	21.49
Fourth Quarter				$	27.53			$	19.70
2006
First Quarter (through February 17, 2006)				$	28.22			$	23.14

As of February 17, 2006, there were 2,041 holders of the Common Stock, based upon the number of holders of record and the number of individual participants in certain security position listings.

The last reported sale price of the Common Stock as reported on the NASDAQ Composite Tape on February 17, 2006 was $23.59 per share. The Amended and Restated Credit Agreement and the indenture governing the Senior Notes place restrictions on the Company's ability to pay dividends on the Common Stock, and the Company has not paid any dividends on the Common Stock.

Share Repurchase Program

In July 2005, the Company’s Board of Directors authorized the Company to enter into a share repurchase program of up to 3,000,000 shares of common stock. During the third quarter of Fiscal 2005, the Company repurchased 9,151 shares of common stock in the open market at a total cost of $0.2 million (an average cost of $24.25 per share) under the share repurchase program. The Company did not repurchase any shares of its common stock during the fourth quarter of Fiscal 2005. The share repurchase program may be modified or terminated by the Company’s Board of Directors at any time.

Item 6.    Selected Financial Data

The following table sets forth the Company's selected historical consolidated financial and operating data for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004, the period January 5, 2003 to February 4, 2003, Fiscal 2002 and Fiscal 2001. All fiscal years for which financial information is set forth below had 52 weeks, except Fiscal 2001 which had 53 weeks. The period February 5, 2003 to January 3, 2004 and the period January 5, 2003 to February 4, 2003 had 48 weeks and four weeks, respectively.

Income from continuing operations excludes the results of the Company's ABS business unit, the Company's Warner's Europe operations and the Company's Speedo Authentic Fitness retail stores which the Company closed in Fiscal 2004. The ABS business unit, the Company's Warner's Europe operations and the Speedo Authentic Fitness retail stores have been accounted for as discontinued

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operations in accordance with Statement of Financial Accounting Standards (‘‘SFAS’’) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Accordingly, the results of operations of these business units are presented separately in the following table.

The Company emerged from bankruptcy on February 4, 2003 and, pursuant to American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (‘‘SOP 90-7’’), the Company adopted fresh start accounting. Fresh start accounting principles provide, among other things, that the Company determines the reorganization value of its company and allocates such reorganization value to the fair value of its assets in accordance with the provisions of SFAS No. 141, Business Combinations (‘‘SFAS 141’’). The Company engaged an independent third party appraisal firm to assist it in determining its reorganization value. The reorganization value of the Company as approved by the bankruptcy court was $750.0 million. Using the work of valuation specialists, the Company allocated the reorganization value to the fair value of its tangible assets, finite lived intangible assets and indefinite lived intangible assets in accordance with the provisions of SFAS 141. The Company's audited consolidated balance sheet as of February 4, 2003, reflecting the implementation of the Reorganization Plan and the Company's emergence from bankruptcy, is included in the notes to the Company's financial statements included elsewhere in this Annual Report on Form 10-K. See Note 3 of Notes to Consolidated Financial Statements. The Company's consolidated balance sheet as of February 4, 2003 and consolidated balance sheets presented for periods thereafter will not be comparable in certain material respects to historical balance sheets presented elsewhere in this Annual Report on Form 10-K. The Company's consolidated statements of operations for periods beginning after February 4, 2003 will not be comparable in certain material respects to the historical consolidated financial statements for prior periods included elsewhere in this Annual Report on Form 10-K.

References to ‘‘Predecessor’’ refer to the Company prior to February 4, 2003. References to ‘‘Successor’’ refer to the Company on and after February 4, 2003 after giving effect to the implementation of fresh start accounting.

The information set forth in the following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K.

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				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003				Fiscal 2002 (a)				Fiscal 2001 (a)
				(Dollars in millions, except per share data)
Statement of operations data:
Net revenues				$	1,504.4			$	1,424.2			$	1,264.3			$	110.1			$	1,408.2			$	1,582.9
Gross profit					509.6				473.0				392.1				42.8				405.4				268.3
Selling, general and administrative expenses (b)					406.7				378.5				319.9				32.2				370.0				545.2
Amortization of sales order backlog					—				—				11.8				—				—				—
Impairment charge					—				—				—				—				—				65.0
Restructuring expense (income)					(0.5	)			5.1				19.1				—				—				—
Reorganization expense					—				—				—				29.8				114.5				171.9
Operating income (loss)					101.9				96.1				48.1				(19.1	)			(84.4	)			(513.8	)
Gain on cancellation of pre-petition indebtedness					—				—				—				(1,692.7	)			—				—
Fresh start adjustments					—				—				—				(765.7	)			—				—
Other (income) loss					1.0				(2.2	)			(2.8	)			0.4				(0.1	)			6.6
Interest expense, net					18.1				19.8				20.6				1.8				20.0				122.2
Income (loss) from continuing operations before cumulative effect of change in accounting principle					52.2				46.9				18.2				2,359.0				(154.0	)			(793.5	)
Loss from discontinued operations, net of taxes					(0.2	)			(4.4	)			(18.4	)			(0.5	)			(9.3	)			(67.7	)
Cumulative effect of change in accounting principle, net of taxes					—				—				—				—				(801.6	)			—
Net income (loss)					52.1				42.5				(0.2	)			2,358.5				(964.9	)			(861.2	)
Net income (loss) applicable to Common Stock					52.1				42.5				(0.2	)			2,358.5				(964.9	)			(861.2	)
Dividends on Common Stock					—				—				—				—				—				—
Per share data:
Income (loss) from continuing operations before cumulative effect of change in accounting principle
Basic				$	1.14			$	1.03			$	0.40			$	44.52			$	(2.91	)		$	(15.00	)
Diluted					1.12				1.02				0.40				44.52				(2.91	)			(15.00	)
Income (loss) from discontinued operations, net of taxes
Basic					(0.01	)			(0.10	)			(0.41	)			(0.01	)			(0.17	)			(1.28	)
Diluted					(0.01	)			(0.09	)			(0.40	)			(0.01	)			(0.17	)			(1.28	)
Cumulative effect of change in accounting principle, net of taxes
Basic					—				—				—				—				(15.13	)			—
Diluted					—				—				—				—				(15.13	)			—
Net income (loss)
Basic					1.13				0.93				(0.01	)			44.51				(18.21	)			(16.28	)
Diluted					1.11				0.93				—				44.51				(18.21	)			(16.28	)
Dividends declared					—				—				—				—				—				—
Shares used in computing earnings per share (c)
Basic					45,872,308				45,418,069				45,060,724				52,989,965				52,989,965				52,911,005
Diluted					46,804,053				46,178,535				45,462,560				52,989,965				52,989,965				52,911,005

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				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003				Fiscal 2002 (a)				Fiscal 2001 (a)
				(Dollars in millions, except per share data)
Other data:
Cash flows from operating activities					138.1				50.3				83.6				(24.9	)			226.2				(422.8	)
Cash flows from investing activities					(36.7	)			(45.2	)			(18.5	)			(0.7	)			16.2				(21.4	)
Cash flows from financing activities					(0.1	)			0.6				(44.9	)			(67.6	)			(176.8	)			474.6
Depreciation and amortization					33.7				32.5				43.5				4.3				53.2				89.3
Capital expenditures					39.1				31.9				30.1				0.6				20.0				22.8
Ratio of earnings to fixed charges (d)					3.2				3.3				1.8				787.2				n/a				n/a
Deficit of earnings to fixed charges (d)					n/a				n/a				n/a				n/a				104.3				642.5

				Successor																Predecessor
				December 31, 2005				January 1, 2005				January 3, 2004				February 4, 2003				January 4, 2003				January 5, 2002
				(Dollars in millions, except per share data)
Balance sheet data:
Working capital					498.6				434.2				394.3				327.7				461.2	(e)			446.3	(e)
Total assets					1,222.2				1,153.9				1,091.0				1,126.6				947.9				1,985.5
Liabilities subject to compromise					—				—				—								2,486.1				2,435.0
Debtor-in-possession financing					—				—				—				—				—				155.9
Senior Secured Credit Facility					—				—				—				39.2				—				—
Second Lien Notes due 2008					—				—				—				200.9				—				—
8 7/8% Senior Notes due 2013					210.0				210.0				210.0				—				—				—
Long-term debt (excluding current maturities)					210.0				210.8				211.1				202.2				1.3				2.2
Stockholders' equity (deficit)					632.0				576.9				520.6				503.5				(1,856.1	)			(851.3	)

(a)

Includes reorganization items related to the Chapter 11 Cases of $177.8 million and $116.7 million in Fiscal 2001 and Fiscal 2002, respectively, impairment charges of $101.8 million in Fiscal 2001, and a tax provision of $151.0 million in Fiscal 2001 primarily related to the increase in the valuation allowance related to future income tax benefits. Also includes the cumulative effect of a change in accounting of $801.6 million, net of income tax benefit of $53.5 million, related to the adoption of SFAS No. 142, Goodwill and Other Intangible Assets (‘‘SFAS 142’’) in Fiscal 2002.

(b)

Selling general & administrative (‘‘SG&A’’) expenses exclude pension expense (income) of $1.6 million, $(6.8) million, $(6.8) million, $0, $5.4 million, and $2.9 million for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004, the period January 5, 2003 to February 4, 2003, Fiscal 2002 and Fiscal 2001, respectively. Pension income of $634 and $323 related to the Company's foreign defined benefit plans have been reclassified for Fiscal 2004 and the period February 5, 2003 to January 3, 2004, respectively, from SG&A expense to pension expense (income). See Note 10 of Notes to Consolidated Financial Statements.

(c)

On February 4, 2003, pursuant to the terms of the Reorganization Plan, the outstanding Old Common Stock was cancelled, and the Company issued 44,999,973 shares of Common Stock. Due to the cancellation of the Predecessor's Old Common Stock and the issuance of approximately 45 million shares of Common Stock by the Successor in connection with the Company's emergence from bankruptcy on February 4, 2003, income (loss) per common share for periods beginning after February 4, 2003 will not be comparable to income (loss) per common share for periods before February 4, 2003.

(d)

For the purposes of computing the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes, plus fixed charges and less capitalized interest. Fixed charges are defined as the sum of interest expense, including the amortization of deferred financing costs, capitalized interest and that portion of rental expense which the Company believes to be representative of an interest factor. The deficit of earnings to fixed charges represents the amount of earnings that would be required to increase the ratio of earnings to fixed charges to 1.00 in those cases where earnings are less than the total fixed charges.

(e)	Does not include liabilities subject to compromise.

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Company is subject to certain risks and uncertainties that could cause its future results of operations to differ materially from its historical results of operations and those expected in the future and that could affect the market value of the Company's common stock, par value $0.01 per share (the ‘‘Common Stock’’). Except for the historical information contained herein, this Annual Report on Form 10-K, including the following discussion, contains forward-looking statements that involve risks and uncertainties. See ‘‘Statement Regarding Forward-Looking Disclosure’’ and ‘‘Risk Factors.’’

The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes thereto which are included in this Annual Report on Form 10-K. References to ‘‘Core Brands’’ refer to the Intimate Apparel Group's Warner's, Olga and Body Nancy Ganz /Bodyslimmers brand names. References to ‘‘Fashion Brands’’ refer to the Intimate Apparel Group's Lejaby, JLO and Axcelerate brand names. References to ‘‘Designer’’ refer to the Swimwear Group's fashion brands, including Cole of California, Catalina, Anne Cole, Lifeguard, Nautica, Calvin Klein and Michael Kors.

Overview

The Company designs, sources, manufactures, markets, licenses and distributes intimate apparel, sportswear and swimwear worldwide through a broad line of highly recognized brand names. The Company's products are distributed primarily to wholesale customers through multiple distribution channels, including major department stores, independent retailers, membership clubs, chain stores, specialty and other stores and mass merchandisers. As of December 31, 2005, the Company also operated 121 Calvin Klein retail stores worldwide (consisting of 59 stores directly operated by the Company, including one on-line store, and 62 stores operated under retail licenses or distributor agreements). The Company’s Swimwear Group also operates two Speedo outlet stores, which opened in July 2005, and one on-line store.

During Fiscal 2005, the Company had net revenues of $1.5 billion and net income of $52.1 million. During Fiscal 2005, the Company capitalized on the launch (in Fiscal 2004) of Chaps into an expanded channel of distribution and improved the profitability of its Core Brands division. In addition, the Company experienced growth in net revenues and operating income in its Calvin Klein jeans business and launched two new brand extensions from Calvin Klein underwear. The Company also invested in the development of OP, Calvin Klein and Michael Kors swimwear brands. During Fiscal 2005, the Company added key executives in its global sourcing and human resources departments. In addition, on July 12, 2005, the Company announced the election of Donald L. Seeley to the Board of Directors. With the addition of Mr. Seeley, seven of the Company's eight directors are independent.

On January 31, 2006, the Company consummated the acquisition of 100% of the shares of the companies that operate the licenses and related wholesale and retail businesses of Calvin Klein jeans and accessories in Europe and Asia and the CK Calvin Klein ‘‘bridge’’ line of sportswear and accessories in Europe. For a description of the CKJEA Acquisition, see ‘‘Business—Acquisitions—CKJEA Acquisition.’’ The Company funded the acquisition using a combination of cash on hand and borrowings under the Amended and Restated Credit Agreement. See "—Capital Resources and Liquidity—Financing Arrangements."

The Company continues to plan for its long-term growth and profitability by investing in its operating platform and infrastructure. During the first quarter of 2006, the Company implemented SAP’s Apparel and Footwear Solution (an enterprise-wide computer software platform encompassing finance, sales and distribution and materials management) (‘‘SAP’’) in both its Swimwear Group and certain corporate shared services departments. The Company will continue the SAP implementation process in its remaining domestic operations and certain foreign operations during 2006 and expects that SAP will be fully implemented across its entire platform before 2009. See "Risk Factors—We may experience difficulties in connection with SAP's Apparel and Footwear Solution, which could increase our costs and impair the operation of our business." The Company believes that this enterprise software solution will enable management to better and more efficiently gather, analyze and assess information worldwide.

35

In fiscal 2006, the Company intends to continue the global development of its portfolio of brands and maximize on the expansion potential of the recently acquired Calvin Klein businesses in Europe and Asia. In addition, the Company will seek to further improve its intimate apparel business and capitalize on its leadership position in swimwear.

The Company has identified many near-term opportunities for growth and operational improvement, as well as challenges and uncertainties relating to certain of its businesses. In particular, management believes that there are many factors influencing the manufacturing and procurement business cycle of the apparel industry, including but not limited to uncertainty surrounding ongoing import restrictions (including recently established limits on imports of certain intimate apparel products from Asia), overall deflation in the selling prices of apparel products and consolidation of the Company's retail customers. See ‘‘Risk Factors’’ and ‘‘Statement Regarding Forward-Looking Disclosure.’’ The Company will continue to address these and other challenges by, among other things, seeking to: (i) improve its procurement process and identify and utilize lower cost, high quality reliable sourcing partners; (ii) focus on operational controls and efficiency by continuing its investment in its infrastructure; (iii) continue to develop and invest in its portfolio of desirable brands while maintaining a diverse product offering at competitive price points across multiple channels of distribution; (iv) expand its product offerings with existing customers; (v) introduce new products in new channels of distribution; and (vi) identify strategic acquisition opportunities.

Financial and Operating Highlights

Net revenues increased $80.2 million, or 5.6%, to $1.50 billion for Fiscal 2005 compared to $1.42 billion for Fiscal 2004, reflecting increases across all operating groups. The majority of the increase was attributable to expanded distribution of the Sportswear Group’s Chaps brand and the continued strength of the Calvin Klein jeans brand. The increase in net revenues was also due to increases in the Intimate Apparel Group reflecting increases in the Company’s Calvin Klein underwear brand net revenues, partially offset by decreases in net revenues of the Core Brands and Fashion labels. In addition, net revenues increased in the Swimwear Group, reflecting increases in net revenues for OP (reflecting a full year in Fiscal 2005 compared to a partial year in Fiscal 2004), Designer and retail, partially offset by a decrease in Speedo. In translating foreign currencies into the United States dollar, the weakness of the United States dollar relative to the functional currencies where the Company conducts certain of its operations (primarily the euro in Europe and Canadian dollar in Canada) resulted in a $6.5 million increase in net revenues for Fiscal 2005 compared to Fiscal 2004.

Gross profit increased $36.6 million, or 7.7%, to $509.6 million for Fiscal 2005 compared to $473.0 million for Fiscal 2004, attributable to increases in the Sportswear and Intimate Apparel Groups, partially offset by a decrease in the Swimwear Group. Gross profit as a percentage of net revenues (‘‘gross margin’’) increased from 33.2% for Fiscal 2004 to 33.9% for Fiscal 2005, primarily reflecting the realization of initial benefits from the sourcing initiatives implemented during the year, partially offset by less favorable markdown and allowance experience. Gross profit also includes the effect of design and merchandising expenses related to the introduction of new products, primarily OP, Calvin Klein swimwear, Michael Kors and Axcelerate. In translating foreign currencies into the United States dollar, the weakness of the United States dollar relative to the functional currencies where the Company conducts certain of its operations (primarily the euro in Europe and Canadian dollar in Canada) resulted in a $2.2 million increase in gross profit for Fiscal 2005 compared to Fiscal 2004.

SG&A expenses increased $28.2 million, or 7.4%, to $406.7 million (27.0% of net revenues) for Fiscal 2005 from $378.5 million (26.6% of net revenues) for Fiscal 2004. Selling expenses (including distribution expenses) increased $19.9 million, primarily as a result of the associated increase in net revenues, a full period of operations in the Company’s OP business (acquired in August 2004) and expenses associated with the launches of Michael Kors and Calvin Klein swimwear. Marketing expenses decreased $0.7 million, due primarily to reduced marketing related to Calvin Klein accessories. Administrative expenses increased $9.0 million, reflecting an increase in expenses related to operating groups of $0.1 million combined with an increase in unallocated corporate expenses of $8.9 million. The increase in administrative expenses related to the operating groups primarily reflects

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the full period effect and vertical integration of a portion of the OP business, increases related to the Company’s expansion of its retail business, additional amortization expense related to the Calvin Klein swimwear and OP licenses and the provision for an uncollectible non-trade receivable balance (totaling $1.5 million, $0.3 million of which is included in restructuring items) in the Intimate Apparel Group, partially offset by net cost savings realized in the Sportswear Group. The increase in unallocated corporate expenses includes an increase in employee benefits and incentive based compensation ($4.4 million), an increase in charges related to the Company’s SAP implementation (which commenced in the fourth quarter of Fiscal 2004) ($2.3 million), an increase in insurance costs of $2.3 million and other net increases ($3.3 million), partially offset by a reduction in professional fees of $3.3 million associated with Sarbanes-Oxley ("SOX") compliance and an internal control review conducted in connection with the Company’s previously disclosed settlement with the SEC. In translating foreign currencies into the United States dollar, the weakness of the United States dollar relative to the functional currencies where the Company conducts certain of its operations (primarily the euro in Europe and Canadian dollar in Canada) resulted in a $0.6 million increase in SG&A expenses for Fiscal 2005 compared to Fiscal 2004.

Pension expense was $1.6 million in Fiscal 2005 compared to pension income of $6.8 million in Fiscal 2004. This $8.4 million increase in expense was due primarily to the net effect of a lower return on plan assets, loss related to plan amendments for prior service costs and a loss related to a change in mortality tables, partially offset by a gain related to the change in the discount rate. See Note 10 of Notes to Consolidated Financial Statements.

Operating income was $101.9 million (6.8% of net revenues) for Fiscal 2005 compared to $96.1 million (6.8% of net revenues) for Fiscal 2004, primarily reflecting an increase in gross profit combined with a decrease in restructuring expenses, partially offset by an increase in pension and SG&A expenses. Operating margin for Fiscal 2005 was flat compared to Fiscal 2004. In translating foreign currencies into the United States dollar, the weakness of the United States dollar relative to the functional currencies where the Company conducts certain of its operations (primarily the euro in Europe and Canadian dollar in Canada) resulted in a $1.5 million increase in operating income for Fiscal 2005 compared to Fiscal 2004.

Net income increased to $52.1 million, or $1.11 per diluted share, for Fiscal 2005 compared to $42.5 million, or $0.93 per diluted share, for Fiscal 2004. The improvement in net income resulted primarily from the increase in gross profit, the increase in restructuring income, lower interest expense and lower tax expense.

Accounts receivable decreased $6.4 million from $219.8 million at January 1, 2005 to $213.4 million at December 31, 2005. The decrease primarily reflects initial shipments of Chaps into the mid-tier channel of distribution at the end of December 2004, which resulted in a high level of accounts receivable for the Chaps division at the end of Fiscal 2004.

Inventories decreased $9.4 million from $335.7 million at January 1, 2005 to $326.3 million at December 31, 2005. Intimate Apparel inventory decreased $22.0 million, due primarily to a decrease in the level of excess and obsolete inventory. Sportswear Group inventory decreased $11.5 million, due primarily to a high level of inventory for the Chaps division at the end of Fiscal 2004 as a result of the introduction of the Chaps brand into the mid-tier channel of distribution. Swimwear inventory increased $24.1 million, primarily related to the increase in the level of excess and/or obsolete inventory coupled with an increase in levels necessary to service anticipated sales in the first quarter of 2006. The Company had identified inventory having a carrying value of $58.6 million as potentially excess and/or obsolete at December 31, 2005, compared to $53.5 million at January 1, 2005. Adjustments to reduce the carrying value of excess and/or obsolete inventory to estimated net realizable value totaled $19.3 million at December 31, 2005 compared to $22.4 million at January 1, 2005. Adjustments to reduce the carrying value of excess and obsolete inventory to net realizable value reflect the mix of inventory and historical realization rates for the sales of goods by type and location.

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Cash and cash equivalents increased by $98.6 million, or 150.3%, to $164.2 million at December 31, 2005 compared to $65.6 million at January 1, 2005. See ‘‘—Capital Resources and Liquidity—Liquidity" for a discussion of cash used for the CKJEA Acquisition in January 2006.

Bankruptcy Reorganization and Turnaround

On the Petition Date, the Debtors each filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court. A number of factors contributed to the Company's decision to file for reorganization, including the Company's highly leveraged capital structure, the impact of litigation with certain licensors and general operating problems. The Company incurred substantial debt in part to finance and support its acquisition strategy and share repurchase program during the period from 1994 to 2001, and the Company was unable to refinance its debt. In addition, Calvin Klein, Inc. and the Calvin Klein Trademark Trust filed a lawsuit against the Company alleging breach of a license agreement by selling to retailers other than those permitted by the agreement and by the Company's use of the license. Although this lawsuit ultimately was settled favorably and dismissed in January 2001, it generated adverse publicity that the Company believes had a negative effect on its business. Additional factors contributing to the Company's deteriorating financial performance in Fiscal 2001 included: (i) increased competition in the apparel industry; (ii) the closings and/or bankruptcies of a number of the stores that carried the Company's product lines; (iii) escalating interest rates under the Company's then outstanding credit agreements; and (iv) a softening retail environment and overall economy.

As part of the Company's reorganization, it implemented a comprehensive turnaround plan intended to stabilize and improve operations of the Company's core business units and sell or liquidate certain of the Company's non-core businesses. The Company also explored the potential sale of its core businesses.

Discussion of Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in its consolidated financial statements and accompanying notes. The following critical accounting policies are based on, among other things, judgments and assumptions made by the Company that involve inherent risks and uncertainties.

Use of Estimates

The Company uses estimates and assumptions in the preparation of its financial statements which affect (i) the reported amounts of assets and liabilities at the date of the consolidated financial statements and (ii) the reported amounts of revenues and expenses. Actual results could materially differ from these estimates. The estimates the Company makes are based upon historical factors, current circumstances and the experience and judgment of the Company’s management. The Company evaluates its assumptions and estimates on an ongoing basis and may employ outside experts to assist in its evaluations. The Company believes that the use of estimates affects the application of all of the Company’s significant accounting policies and procedures.

Revenue Recognition

The Company recognizes revenue when goods are shipped to customers and title and risk of loss have passed, net of estimated customer returns, allowances and other discounts. The Company recognizes revenue from its consignment accounts and retail stores when goods are sold to consumers, net of allowances for future returns. The determination of allowances and returns involves the use of significant judgment and estimates by the Company. The Company bases its estimates of allowance rates on past experience by product line and account, the financial stability of its customers, the

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expected rate of retail sales and general economic and retail forecasts. The Company reviews and adjusts its accrual rates each month based on its current experience. During the Company's monthly review, the Company also considers its accounts receivable collection rate and the nature and amount of customer deductions and requests for promotion assistance. The Company believes it is likely that its accrual rates will vary over time and could change materially if the Company's mix of customers, channels of distribution or product mix changes. Current rates of accrual for sales allowances, returns and discounts vary by customer. Revenues from the licensing or sub-licensing of certain trademarks are recognized when the underlying royalties are earned.

Cost of Goods Sold

Cost of goods sold for the Successor consists of the cost of products produced or purchased and certain period costs related to the product procurement and manufacturing process. Product costs include: (i) material, direct labor and overhead (including the costs incurred by external contractors); (ii) duty, quota and related tariffs; (iii) in-bound freight and traffic costs, including inter-plant freight; (iv) procurement and material handling costs; (v) indirect production overhead including inspection, quality control, sample making, production control and planning, cost accounting and preproduction; and (vi) in-stocking costs in the Company's warehouse (in-stocking costs may include but are not limited to costs to receive, unpack and stock product available for sale in its distribution centers). Period costs included in cost of goods sold include: (a) royalty; (b) design and merchandising; (c) prototype costs; (d) manufacturing variances (net of amounts capitalized); (e) loss on seconds; (f) provisions for inventory losses (including provisions for shrinkage and losses on the disposition of excess and obsolete inventory); and (g) direct freight charges incurred to ship finished goods to customers. Costs incurred to store, pick, pack and ship (excluding direct freight charges) inventory to customers are included in shipping and handling costs and are classified in SG&A expenses. The Company's gross profit and gross margin may not be directly comparable to those of its competitors, as income statement classifications of certain expenses may vary by company.

Accounts Receivable

The Company maintains reserves for estimated amounts that the Company does not expect to collect from its trade customers. Accounts receivable reserves include amounts the Company expects its customers to deduct for returns, allowances, trade discounts, markdowns, amounts for accounts that go out of business or seek the protection of the Bankruptcy Code and amounts related to charges in dispute with customers. The Company's estimate of the allowance amounts that are necessary includes amounts for specific deductions the Company has authorized and an amount for other estimated losses. Adjustments for specific account allowances and negotiated settlements of customer deductions are recorded as deductions to revenue in the period the specific adjustment is identified. The provision for accounts receivable allowances is affected by general economic conditions, the financial condition of the Company's customers, the inventory position of the Company's customers and many other factors. The determination of accounts receivable reserves is subject to significant levels of judgment and estimation by the Company's management. If circumstances change or economic conditions deteriorate, the Company may need to increase the reserve significantly. As of December 31, 2005 and January 1, 2005, the Company recorded $48.3 million and $54.9 million, respectively, of accounts receivable reserves.

Inventories

The Company records purchases of inventory when it assumes title and the risk of loss. The Company values its inventories at the lower of cost, determined on a first-in, first-out basis, or market. The Company evaluates its inventories to determine excess units or slow-moving styles based upon quantities on hand, orders in house and expected future orders. For those items for which the Company believes it has an excess supply or for styles or colors that are obsolete, the Company estimates the net amount that it expects to realize from the sale of such items. The Company's objective is to recognize projected inventory losses at the time the loss is evident rather than when the goods are ultimately sold. The Company's calculation of the reduction in carrying value necessary for

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the disposition of excess inventory is highly dependent on its projections of future sales of those products and the prices it is able to obtain for such products. The Company reviews its inventory position monthly and adjusts its carrying value for excess or obsolete goods based on revised projections and current market conditions for the disposition of excess and obsolete inventory. If economic conditions worsen, the Company may have to decrease its carrying value of excess or obsolete goods substantially.

Long-lived Assets

As of February 4, 2003, the Company adopted fresh start reporting and, as a result, its long-lived assets, including property, plant and equipment were recorded at their fair values based upon the preliminary appraised values of such assets. Adjustments to the preliminary appraised values were recorded as adjustments to goodwill in the period February 5, 2003 to January 3, 2004. The Company used the work of an independent third party appraisal firm to assist it in determining the fair values of its property, plant and equipment. The Company and the independent third party appraiser determined the fair value of the Company's property, plant and equipment using the planned future use of each asset or group of assets, quoted market prices for assets where a market existed for such assets, the expected future revenue and profitability of the business unit utilizing such assets and the expected future life of such assets. In its determination of fair value, the Company also considered whether an asset would be sold either individually or with other assets and the proceeds the Company expected to receive from such a sale. Long-lived assets in existence at February 4, 2003 are recorded at their fair values net of accumulated depreciation since February 4, 2003. Long-lived assets acquired after February 4, 2003 are recorded at historical costs, net of accumulated depreciation. Assumptions relating to the expected future use of individual assets could affect the fair value of such assets and the depreciation expense recorded related to such assets in the future. The Company reviews its long-lived assets for possible impairment when events or circumstances indicate that the carrying value of the assets may not be recoverable. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived and intangible assets, which could result in impairment charges in future periods. In addition, depreciation and amortization expense is affected by the Company's determination of the estimated useful lives of the related assets. The estimated useful lives of fixed assets and finite lived intangible assets are based on their classification and expected usage, as determined by the Company.

Goodwill and Other Intangible Assets

Goodwill represents (i) the amount by which the Company's reorganization value exceeded the fair value of its tangible assets and identified intangible assets less its liabilities allocated in accordance with the provisions of SFAS 141 as of February 4, 2003 and (ii), for transactions subsequent to February 4, 2003, the excess of purchase price over fair value of net assets acquired in business combinations under the purchase method of accounting. Pursuant to the provisions of SFAS 142, goodwill is not amortized and is subject to an annual impairment test which the Company performs in the fourth quarter of each fiscal year. Goodwill was allocated to various reporting units, which are either the operating segment or one reporting level below the operating segment. As of December 31, 2005, the Company's reporting units for purposes of applying the provisions of SFAS 142 are: Warner's/Olga/Body Nancy Ganz/Bodyslimmers, Calvin Klein underwear, Lejaby, Calvin Klein jeans, Chaps, Swimwear (excluding OP) and OP. SFAS 142 requires the Company to compare the fair value of the reporting unit to its carrying amount on an annual basis to determine if there is potential impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its carrying value. If the carrying amount of goodwill exceeds its fair value, an impairment loss is recognized. Fair values for goodwill are determined based on discounted cash flows, market multiples or appraised values, as appropriate.

Intangible assets primarily consist of licenses and trademarks. The fair value of such licenses and trademarks owned by the Company at February 4, 2003 was based upon the preliminary appraised values of such assets as determined by the Company and an independent third party appraiser.

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Adjustments to the preliminary appraised amounts were recorded as adjustments to goodwill in the period February 5, 2003 to January 3, 2004. Licenses and trademarks in existence at February 4, 2003 are recorded at their fair values net of accumulated amortization since February 4, 2003. Licenses and trademarks acquired after February 4, 2003 are recorded at cost net of accumulated amortization. The majority of the Company's license and trademark agreements cover periods of time in excess of forty years. The estimates and assumptions used in the determination of the value of indefinite-lived intangible assets will not have an effect on the Company's future earnings unless a future evaluation of trademark or license value indicates that such asset is impaired. Pursuant to the provisions of SFAS 142, intangible assets with indefinite lives are not amortized. The Company reviews its indefinite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an indefinite-lived intangible asset exceeds its fair value. If the carrying value of an indefinite-lived intangible asset exceeds its fair value (determined based on discounted cash flows), an impairment loss is recognized. Identifiable intangible assets with finite lives are amortized on a straight-line basis over the estimated useful lives of the assets. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of a finite-lived intangible asset may not be recoverable. Recoverability of a finite-lived intangible asset is measured by a comparison of its carrying amount to the undiscounted future cash flows expected to be generated by the asset. If the asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined based on discounted cash flows. See Note 13 of Notes to Consolidated Financial Statements.

The Company did not identify any impairments of goodwill or intangible assets for Fiscal 2005, Fiscal 2004 or the period February 5, 2003 to January 3, 2004.

Income Taxes

Deferred income taxes are determined using the liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. A valuation allowance is established to reduce the amount of deferred tax assets to an amount that the Company believes, based upon objectively verifiable evidence, is realizable.

Pension Plans

The Company has a defined benefit pension plan covering certain full-time non-union domestic employees and certain domestic employees covered by a collective bargaining agreement (the ‘‘Pension Plan’’). The Company also has unfunded defined benefit plans in foreign countries. The determination of the total liability attributable to benefits owed to participants covered by the defined benefit plans is determined by third party actuaries using assumptions provided by the Company. The assumptions used can have a significant effect on the amount of pension liability recorded by the Company. The actuaries also determine the annual cash contribution to the defined benefit plans. The Pension Plan was under-funded as of December 31, 2005 and January 1, 2005. The Pension Plan and the Company’s Reorganization Plan contemplate that the Company will continue to fund its minimum required contributions and any other premiums due under the Employee Retirement Income Security Act of 1974, as amended and the United States Internal Revenue Code of 1986, as amended. Effective January 1, 2003, the Pension Plan was amended and, as a result, no future benefits accrue to participants in the Pension Plan. As a result of the amendment, the Company has not recorded pension expense related to current service for all periods presented and will not record pension expense for current service for any future period. As of December 31, 2005 and January 1, 2005, the Company recorded a Pension Plan liability equal to the amount that the present value of projected benefit obligations exceeded the fair value of Pension Plan assets as determined by the Pension Plan trustee. The Company's cash contribution to the Pension Plan for 2005 was $5.0 million and is expected to be approximately $28.9 million in the aggregate from fiscal 2006 through fiscal 2010. The amount of estimated cash contributions that the Company will be required to make to the Pension

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Plan could increase or decrease depending on the actual return earned by the assets of the Pension Plan and changes in the amount of projected benefit obligation as determined by the Pension Plan actuary. The accrued long-term defined benefit plans liability and accruals for other post-retirement benefits are classified as long-term liabilities in the consolidated balance sheet at December 31, 2005. The portion of the total unfunded liability that will be contributed by the Company to the Pension Plan in fiscal 2006 of approximately $12.9 million is classified as accrued pension obligations at December 31, 2005.

On October 5, 2003, the Company changed its method of accounting for its defined benefit plans (including the Pension Plan) to a method that accelerates the recognition of gains or losses on Pension Plan assets and the projected benefit obligations (‘‘Accelerated Method’’). The Company previously deferred gains and losses on assets and liabilities in excess of the expected rate of return and amortized the deferred amount into operations over the remaining estimated service life to the extent such gains and losses exceeded 10% of the projected benefit obligation. The Company also deferred the recognition of certain changes in the projected benefit obligations (‘‘Deferred Method’’). The Company believes that the Accelerated Method is preferable to the Deferred Method because the recorded pension liability, using the Accelerated Method, will approximate fair value. Pursuant to SFAS No. 87, Employers' Accounting for Pensions, each quarter the Company recognizes interest cost on projected benefit obligations, offset by the expected return on Pension Plan assets. In addition, the Company obtains reports from the Pension Plan actuary and Pension Plan trustee to measure Pension Plan assets and liabilities at year-end. The Company records the effect of actual gains and losses exceeding the expected return on Pension Plan assets and any other changes in the projected benefit obligations determined by the actuary in the fourth quarter of each fiscal year. This change results in additional volatility in pension expense/income in future periods. Therefore, the Company reports pension expense/income on a separate line of its statement of operations in each period. To conform to the current year presentation, pension expense (income) was reclassified from SG&A expenses to pension expense (income) for all defined benefit plans in foreign countries. See Note 10 of Notes to Consolidated Financial Statements.

Stock-Based Compensation

Effective February 5, 2003, the Company adopted the fair value method of accounting for stock options for all options granted by the Company after February 4, 2003 pursuant to the prospective method provisions of SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure. The Company uses the Black-Scholes-Merton model to calculate the fair value of stock option awards. The Black-Scholes-Merton model requires the Company to make significant judgments regarding the assumptions used within the Black-Scholes-Merton model, the most significant of which are the stock price volatility assumption, the expected life of the option award and the risk-free rate of return. In determining the stock price volatility assumption used, the Company considered the volatility of the stock prices of selected companies in the apparel industry, the nature of those companies, the Company's stock price volatility since its emergence from bankruptcy and other factors. The Company based its Fiscal 2005 estimate of the expected life of a stock option of six years upon the vesting period of 36-42 months and the option term of ten years for issued and outstanding options. The Company's risk-free rate of return assumption for options granted in Fiscal 2005, Fiscal 2004 and the period February 5, 2003 to January 3, 2004 was equal to the quoted yield for five-year U.S. treasury bonds as of the date of grant. Compensation expense related to stock option grants is determined based on the fair value of the stock option on the grant date and is recognized over the vesting period of the grants on a straight-line basis. Compensation expense related to restricted stock grants is determined based on the fair value of the underlying stock on the grant date and recognized over the vesting period of the grants on a straight-line basis.

Prior to February 5, 2003, the Company followed the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation (‘‘SFAS 123’’). The Company accounted for stock-based compensation for employees using the intrinsic value method as prescribed by Accounting Principles Board (‘‘APB’’) Opinion No. 25, Accounting for Stock Issued to Employees (‘‘APB 25’’), and related interpretations. Under APB 25, no compensation expense was recognized for employee share option

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grants because the exercise price of the options granted equaled the market price of the underlying shares on the date of grant (the ‘‘intrinsic value method’’). Compensation expense related to restricted stock grants, prior to February 4, 2003, was recognized over the vesting period of the grants.

Advertising Costs

Advertising costs are included in SG&A expenses and are expensed when the advertising or promotion is published or presented to consumers. Cooperative advertising expenses are charged to operations as incurred and are also included in SG&A expenses. The amounts charged to operations for advertising, marketing and promotion expenses (including cooperative advertising, marketing and promotion expenses) for Fiscal 2005, Fiscal 2004, and the periods February 5, 2003 to January 3, 2004 and January 5, 2003 to February 4, 2003 were $85.3 million, $86.0 million, $66.4 million, and $7.4 million, respectively. Cooperative advertising expenses for Fiscal 2005, Fiscal 2004, the periods February 5, 2003 to January 3, 2004 and January 5, 2003 to February 4, 2003 were $15.9 million, $18.4 million, $17.5 million, and $1.4 million, respectively.

Reorganization Items

Reorganization items included in the consolidated statement of operations for the period January 5, 2003 to February 4, 2003 were $29.8 million. Included in reorganization items are certain non-cash asset impairment provisions and accruals for items that were paid in cash or settled in connection with the Reorganization Plan. Certain accruals at January 4, 2003 were subject to compromise under the provisions of the Bankruptcy Code. The Company recorded these accruals at the estimated amount the creditor was entitled to claim under the provisions of the Bankruptcy Code. The ultimate amount of and settlement terms for such liabilities are detailed in the Reorganization Plan. See Note 5 of Notes to Consolidated Financial Statements. Subsequent to February 4, 2003, to the extent that the Company has incurred reorganization items in respect of the Chapter 11 Cases, such items have been recorded in SG&A expenses. Included in SG&A expenses for Fiscal 2004 and the period February 5, 2003 to January 3, 2004 are legal and professional fees and certain compensation related costs relating to the Chapter 11 Cases of $0.7 million and $5.0 million, respectively.

Restructuring Expense (Income)

During Fiscal 2005 the Company recorded restructuring income of $0.5 million. During Fiscal 2004 and the period February 5, 2003 to January 3, 2004, the Company incurred restructuring expense of $5.1 million and $19.1 million, respectively. See Note 6 of Notes to Consolidated Financial Statements.

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Results of Operations

Statement of Operations (Selected Data)

The following tables summarize the historical results of operations of the Company for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004 and the period January 5, 2003 to February 4, 2003. The period January 5, 2003 to February 4, 2003 combined with the period February 5, 2003 to January 3, 2004 constitutes a combined presentation of Fiscal 2003.

The results of the Company's discontinued operations are included in ‘‘Loss from discontinued operations, net of taxes’’ for all periods presented.

				Successor																				Predecessor				Combined
				Fiscal 2005				% of Net Revenues				Fiscal 2004				% of Net Revenues				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003				Fiscal 2003				% of Net Revenues
				(in thousands of dollars)
Net revenues				$	1,504,415				100.0	%		$	1,424,181				100.0	%		$	1,264,301			$	110,120			$	1,374,421				100.0	%
Cost of goods sold					994,799				66.1	%			951,198				66.8	%			872,170				67,283				939,453				68.4	%
Gross profit					509,616				33.9	%			472,983				33.2	%			392,131				42,837				434,968				31.6	%
Selling, general and administrative expenses (a)					406,664				27.0	%			378,502				26.6	%			319,903				32,156				352,059				25.6	%
Pension expense (income) (a)					1,563				0.1	%			(6,784	)			-0.5	%			(6,811	)			—				(6,811	)			-0.5	%
Amortization of sales order backlog					—				0.0	%			—				—				11,800				—				11,800				0.8	%
Restructuring expense (income)					(503	)			0.0	%			5,130				0.3	%			19,101				—				19,101				1.4	%
Reorganization expense					—				0.0	%			—				—				—				29,805				29,805				2.2	%
Operating income (loss)					101,892				6.8	%			96,135				6.8	%			48,138				(19,124	)			29,014				2.1	%
Gain on cancellation of pre-petition indebtedness					—								—								—				(1,692,696	)			(1,692,696	)
Fresh start adjustments					—								—								—				(765,726	)			(765,726	)
Other (income) loss					1,019								(2,197	)							(2,817	)			359				(2,458	)
Interest expense, net					18,080								19,821								20,641				1,751				22,392
Income from continuing operations before provision for income taxes					82,793								78,511								30,314				2,437,188				2,467,502
Provision for income taxes					30,556								31,636								12,084				78,150				90,234
Income from continuing operations					52,237								46,875								18,230				2,359,038				2,377,268
Loss from discontinued operations, net of taxes					(185	)							(4,358	)							(18,393	)			(501	)			(18,894	)
Net income (loss)				$	52,052							$	42,517							$	(163	)		$	2,358,537			$	2,358,374

(a)	Pension income of $634 and $323 related to the Company’s foreign defined benefit plans have been reclassified for Fiscal 2004 and the period February 5, 2003 to January 3, 2004, respectively, from SG&A expenses to pension expense (income). See Note 10 of Notes to Consolidated Financial Statements.

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Comparison of Fiscal 2005 to Fiscal 2004

Net Revenues

Net revenues by segment were as follows:

				Fiscal 2005				Fiscal 2004				Increase (Decrease)				% Change
				(in thousands of dollars)
Intimate Apparel Group				$	595,702			$	588,256			$	7,446				1.3	%
Sportswear Group					517,567				455,601				61,966				13.6	%
Swimwear Group					391,146				380,324				10,822				2.8	%
Net revenues				$	1,504,415			$	1,424,181			$	80,234				5.6	%

The Company's products are widely distributed through virtually all channels of distribution. The following table summarizes the Company's net revenues by channel of distribution for Fiscal 2005 and Fiscal 2004:

				Fiscal 2005				Fiscal 2004
United States – wholesale
Department stores and independent retailers					21	%			23	%
Specialty stores					10	%			10	%
Chain stores					9	%			7	%
Mass merchandisers					7	%			8	%
Membership clubs and other					24	%			24	%
Total United States – wholesale					71	%			72	%
International – wholesale					27	%			26	%
Retail / other					2	%			2	%
Net revenues – consolidated					100	%			100	%

Intimate Apparel Group

Intimate Apparel Group net revenues were as follows:

				Fiscal 2005				Fiscal 2004				Increase (Decrease)				% Change
				(in thousands of dollars)
Calvin Klein underwear (a)				$	338,069			$	323,130			$	14,939				4.6	%
Core Brands					144,070				148,176				(4,106	)			-2.8	%
Fashion Brands					113,563				116,950				(3,387	)			-2.9	%
Intimate Apparel Group				$	595,702			$	588,256			$	7,446				1.3	%

(a)	Includes net revenues from Company operated retail and on-line stores of approximately $29.4 million and $21.8 million for Fiscal 2005 and Fiscal 2004, respectively.

The increase in Calvin Klein underwear net revenues reflects increases of $7.1 million in Europe, $8.0 million in Asia and $1.7 million in Mexico, partially offset by a combined decrease of $1.9 million in the United States and Canada. The increase in Europe primarily reflects volume increases in the men’s and women’s businesses and increased sales in the Company’s retail stores. The Company experienced an increase in both its retail and wholesale operations in Asia, primarily reflecting the Company’s expansion initiatives in China, Korea, Taiwan, Japan and Singapore. The increase in Asia is also attributable to an increase in net revenues from same store sales of approximately 20%. The increase in Mexico primarily reflects volume increases related to improved customer service levels.

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The decreases in the United States from $151.0 million in Fiscal 2004 to $149.1 million for Fiscal 2005 reflects continued strength in the men’s business ($5.0 million increase) combined with increases in all other lines, net, of $2.9 million, more than offset by continued declines in the women’s business ($9.8 million decrease). The increase in the men’s business primarily reflects increases in sales to retail stores operated by Calvin Klein, Inc. and increases in sales to customers in the off-price channel, partially offset by a decrease in department store sales. Management continues to address the weakness in its women’s business. Measures taken thus far by management include the decision to discontinue the underperforming Choice Calvin Klein line in 2006 and the decision to extend the Company’s Perfectly Fit line which was launched in 2005. Management believes, based on early indications, that the Perfectly Fit line is being favorably received at retail.

The decrease in Core Brands net revenues reflects a decrease of $5.6 million the United States, partially offset by a $1.5 million increase in foreign operations. The decrease in the United States primarily reflects an $8.3 million decrease in the Olga and Body Nancy Ganz/Bodyslimmers brands, partially offset by an increase of $2.7 million in Warner’s. The declines in the Olga and Body Nancy Ganz/Bodyslimmers brands were due to the limited success of new product introductions in Fiscal 2004 and fewer new product launches and reduced distribution in Fiscal 2005. The increase in Warner’s reflects an increase in sales to membership clubs as a result of the Company’s expansion into that distribution channel. Management believes the improved performance of the Warner’s brand is the result of its ongoing efforts to reinvigorate this brand.

The decrease in Fashion Brands net revenues primarily reflects a $5.4 million decrease in Lejaby/Lejaby Rose, partially offset by a $1.3 million increase in JLO and a $0.7 million increase related to the launch of Axcelerate in 2005. The decrease in Lejaby reflects a $3.8 million decrease in Europe and a $2.6 million decrease in the United States, partially offset by a $1.0 million increase in other foreign operations. The decline in Lejaby Europe primarily reflects volume decreases across certain basic lines, partially offset by an increase in average selling prices. Management is in the process of making design improvements to certain basic lines in Europe in an effort to address the declining sales volumes. The decline in Lejaby in the United States primarily relates to declines in the Company’s underperforming Lejaby Rose brand. The Company plans to exit the Lejaby Rose business in the United States in the Spring of 2006. The increase in JLO reflects a $1.8 million decrease in the United States, more than offset by a $3.1 million net increase in the Company’s foreign operations. The net increase in JLO’s foreign operations primarily reflects a full year of revenues in Europe for Fiscal 2005 compared to a partial year in Fiscal 2004.

Sportswear Group

Sportswear Group net revenues were as follows:

				Fiscal 2005				Fiscal 2004				Increase (Decrease)				% Change
				(in thousands of dollars)
Calvin Klein jeans				$	284,387			$	265,754			$	18,633				7.0	%
Chaps					211,107				168,114				42,993				25.6	%
Calvin Klein accessories (a)					16,430				13,857				2,573				18.6	%
Mass sportswear licensing (b)					5,643				7,876				(2,233	)			-28.4	%
Sportswear Group				$	517,567			$	455,601			$	61,966				13.6	%

(a)	The Calvin Klein accessories license expired on December 31, 2005. On January 31, 2006, the Company acquired certain accessories licenses as part of the CKJEA Acquisition. See ‘‘Business—Acquisitions—CKJEA Acquisition’’ discussed above.

(b)	Mass sportswear licensing revenues include design services fees earned in connection with the White Stag women’s sportswear line.

Calvin Klein jeans net revenues increased $18.6 million, reflecting increases of $16.6 million and $4.2 million in the United States and Mexico, respectively, partially offset by a $2.2 million decrease in

46

Canada. The increase in net revenues in the United States reflects an increase in sales to membership clubs ($3.7 million), increases in sales to department stores ($6.9 million), increases in sales to stores operated by the Calvin Klein jeans licensor ($5.6 million), increases in sales to customers in the off-price channel ($2.6 million) and decreases across all other channels of distribution ($2.2 million). The Company believes the increases reflect the successful execution of its product and distribution strategies.

Chaps net revenues increased $43.0 million reflecting an increase of $39.3 million in the United States combined with a $3.7 million increase in foreign countries. The increase in Chaps net revenues in the United States primarily reflects the Company’s expansion into the mid-tier channel of distribution (first shipped in December 2004), resulting in an increase of $52.6 million. This, along with an increase in net revenues to customers in the off-price channel of $4.7 million, was partially offset by declines in the department store and specialty channels of $14.1 million and all other channels of distribution of $3.9 million. The decrease in department store sales reflects Chaps’ planned exit from certain department store accounts in Fiscal 2005. Sales to all of the above channels included sales of Chaps denim products which were introduced in June 2004 and which generated incremental net revenues of $15.9 million for Fiscal 2005 compared to Fiscal 2004.

Swimwear Group

Swimwear Group net revenues were as follows:

				Fiscal 2005				Fiscal 2004				Increase (Decrease)				% Change
				(in thousands of dollars)
Speedo				$	246,989			$	248,619			$	(1,630	)			-0.7	%
Designer					127,837				123,890				3,947				3.2	%
OP (a)					9,730				2,747				6,983				254.2	%
Online retail store					6,590				5,068				1,522				30.0	%
Swimwear Group				$	391,146			$	380,324			$	10,822				2.8	%

(a)	For Fiscal 2005, consists of wholesale and licensing revenue. For Fiscal 2004, consists of licensing revenue.

Approximately 66% of Speedo’s net revenues were earned during the first half of Fiscal 2005 due to the seasonal nature of the swimwear business. The decrease in Speedo net revenues reflects a $7.4 million decrease in net revenues for the first half of Fiscal 2005, which the Company believes is attributable to the poor weather in the first half of Fiscal 2005, offset by an increase in net revenues of $5.8 million in the second half of Fiscal 2005. The increase in net revenues for the second half of Fiscal 2005 is primarily related to $1.4 million in sales of Speedo activewear (which sales commenced in Fiscal 2005) coupled with favorable returns experience and volume increases across other sport related Speedo lines.

The increase in Designer swimwear net revenues reflects approximately $9.8 million related to the introduction of Calvin Klein swimwear in Europe and the United States, $3.1 million of additional revenues related to other branded businesses and $2.1 million related to net revenues generated following the launch of Michael Kors swimwear in 2005, partially offset by reductions of $4.7 million primarily related to private label and mass merchandisers and a $6.4 million planned reduction in close-out sales. The reduction in sales to mass merchandisers primarily reflects a decline in net revenues associated with sales of Catalina brand products to Wal-Mart Stores Inc. due primarily to the discontinuance of the Company’s Catalina Ocean Gear line.

Net revenues for OP, which was acquired in August 2004, increased $7.0 million, reflecting an increase of $6.5 million in licensing revenues (as a result of a full year of activity in Fiscal 2005 compared to Fiscal 2004) coupled with net revenues of $0.5 million related to OP’s wholesale business which launched in Fiscal 2005.

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Gross Profit

Gross profit was as follows:

				Fiscal 2005				% of Segment Net Revenues				Fiscal 2004				% of Segment Net Revenues
				(in thousands of dollars)
Intimate Apparel Group				$	229,176				38.5	%		$	210,455				35.8	%
Sportswear Group					146,874				28.4	%			126,571				27.8	%
Swimwear Group					133,566				34.1	%			135,957				35.7	%
Total gross profit				$	509,616				33.9	%		$	472,983				33.2	%

Intimate Apparel Group gross profit increased $18.7 million, or 8.9%, and gross margin increased 270 basis points. The increase in gross profit and gross margin reflects strength in the Company’s Calvin Klein underwear business (increased gross profit and gross margin of $12.4 million and 180 basis points, respectively) and strength in the Core Brands (increased gross profit and gross margin of $9.2 million and 700 basis points, respectively), partially offset by a decrease in Fashion Brands (decreased gross profit and gross margin of $2.9 million and 140 basis points, respectively). The increase in gross margin in the Core Brands primarily reflects an improved sales mix and a more favorable markdowns and allowances experience coupled with the execution of initiatives to improve sourcing and inventory management. The Company believes that the improved sales mix reflects a more favorable reception of the Intimate Apparel Group’s products at retail, primarily Warner’s. The decrease in Fashion Brands gross profit and gross margin primarily reflects the decrease in net revenues described previously coupled with certain inventory markdowns related to the underperforming JLO and Lejaby Rose brands in the United States. As discussed above, the Company plans to exit the Lejaby Rose business in the Spring of 2006. In addition, the Company anticipates a higher portion of its JLO business will be derived from its foreign operations in fiscal 2006 (which typically yield higher gross margins than the domestic JLO business).

Sportswear Group gross profit increased $20.3 million, or 16.0%, for Fiscal 2005 compared to Fiscal 2004. The increase in gross profit primarily reflects strength in Calvin Klein jeans ($7.7 million increase in gross profit) and Chaps ($13.7 million increase in gross profit). Sportswear Group gross margin increased 60 basis points, primarily reflecting an improvement in the ratio of off-price sales to total sales.

Swimwear Group gross profit declined $2.4 million, or 1.8%, for Fiscal 2005 compared to Fiscal 2004. The decrease primarily reflects increases in manufacturing costs, increases in inventory markdowns (primarily in the Designer business) and increases in design and development costs related to the development of new lines such as OP, Michael Kors, Calvin Klein and Choice Calvin Klein, partially offset by increased gross profit on higher net revenues earned in the Company’s OP business.

Selling, General and Administrative Expenses

SG&A expenses increased $28.2 million, or 7.4%, to $406.7 million (27.0% of net revenues) for Fiscal 2005 from $378.5 million (26.6% of net revenues) for Fiscal 2004. Selling expenses (including distribution expenses) increased $19.9 million, primarily as a result of the associated increase in net revenues, a full period of operations in the Company’s OP business (acquired in August 2004) and expenses associated with the launches of Michael Kors and Calvin Klein swimwear. Marketing expenses decreased $0.7 million, due primarily to reduced marketing related to Calvin Klein accessories. Administrative expenses increased $9.0 million, reflecting an increase in expenses related to operating groups of $0.1 million combined with an increase in unallocated corporate expenses of $8.9 million. The increase in administrative expenses related to the operating groups primarily reflects the full period effect and vertical integration of a portion of the OP business, increases related to the Company’s expansion of its retail business, additional amortization expense related to the Calvin Klein swimwear and OP licenses and the provision for an uncollectible non-trade receivable balance (totaling $1.5 million, $0.3 million of which is included in restructuring items) in the Intimate Apparel

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Group, partially offset by net cost savings realized in the Sportswear Group. The increase in unallocated corporate expenses includes an increase in employee benefits and incentive based compensation ($4.4 million), an increase in charges related to the Company’s SAP implementation (which commenced in the fourth quarter of Fiscal 2004) ($2.3 million), an increase in insurance costs of $2.3 million and other net increases ($3.3 million), partially offset by a reduction in professional fees of $3.3 million associated with SOX compliance and an internal control review conducted in connection with the Company’s previously disclosed settlement with the SEC.

Pension Income / Expense

Pension expense was $1.6 million in Fiscal 2005 compared to pension income of $6.8 million in Fiscal 2004. This $8.4 million increase in expense was due primarily to the net effect of a lower return on plan assets, a loss related to plan amendments for prior service costs and a loss related to a change in mortality tables, partially offset by a gain related to a change in the discount rate. See Note 10 of Notes to Consolidated Financial Statements.

Restructuring Expense (Income)

During Fiscal 2005, the Company recorded restructuring income of $0.5 million related primarily to a $1.5 million reversal of accruals due to a reduction in the estimated amounts required for employee terminations, partially offset by expenses incurred in connection with the continuation of activities commenced in prior periods associated with the closure, consolidation or sale of certain facilities of $1.0 million. During Fiscal 2004, the Company incurred restructuring expenses of $5.1 million. See Note 6 of Notes to Consolidated Financial Statements.

Operating Income

The following table presents operating income by group:

				Fiscal 2005				% of Net Revenues				Fiscal 2004				% of Net Revenues
				(in thousands of dollars)
Intimate Apparel Group				$	66,679							$	55,361
Sportswear Group					71,845								53,757
Swimwear Group					44,186								58,147
Group operating income					182,710				12.1	%			167,265				11.8	%
Unallocated corporate expenses					(81,321	)			–5.3	%			(66,000	)			-4.6	%
Restructuring items					503				0.0	%			(5,130	)			-0.4	%
Operating income				$	101,892				6.8	%		$	96,135				6.8	%

Intimate Apparel Group

Intimate Apparel Group operating income was as follows:

				Fiscal 2005				% of Brand Net Revenues				Fiscal 2004				% of Brand Net Revenues
				(in thousands of dollars)
Calvin Klein underwear				$	57,274				16.9	%		$	50,262				15.6	%
Core Brands					13,230				9.2	%			3,251				2.2	%
Fashion Brands					(3,825	)			–3.4	%			1,848				1.6	%
Intimate Apparel Group				$	66,679				11.2	%		$	55,361				9.4	%

Intimate Apparel Group operating income increased $11.3 million, or 20.4%, over the prior year reflecting increases in Calvin Klein underwear and Core Brands, partially offset by decreases in Fashion Brands. The $7.0 million increase in Calvin Klein underwear operating income reflects a

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$12.4 million increase in gross profit (as described above), partially offset by a $5.4 million increase in SG&A expenses (primarily reflecting an increase in variable selling expenses commensurate with the increase in net revenues described previously). The $10.0 million and 700 basis point increase in Core Brands operating income and operating margin, respectively, primarily reflects the increase in gross profit and gross margin described previously. Management believes the improved performance of the Core Brands in the United States primarily reflects its ongoing efforts to reinvigorate these brands coupled with the favorable reception of the Warner’s brand at retail. The $5.7 million decrease in Fashion Brands operating income reflects the decrease in gross profit of $2.9 million described previously, combined with a $2.8 million increase in SG&A expenses. The increase in SG&A expenses primarily reflects initial costs related to the expansion of the Lejaby brand into Asia (Taiwan) combined with costs to support the Axcelerate line (which began shipping in 2005).

Sportswear Group

Sportswear Group operating income was as follows:

				Fiscal 2005				% of Brand Net Revenues				Fiscal 2004				% of Brand Net Revenues
				(in thousands of dollars)
Calvin Klein jeans				$	40,932				14.4	%		$	30,266				11.4	%
Chaps					26,211				12.4	%			17,479				10.4	%
Calvin Klein accessories					3,531				21.5	%			2,564				18.5	%
Mass sportswear licensing					1,171				20.8	%			3,448				43.8	%
Sportswear Group				$	71,845				13.9	%		$	53,757				11.8	%

Sportswear Group operating income increased $18.1 million, or 33.6%, over the prior year primarily due to increases in operating income in Calvin Klein and Chaps. The $10.7 million increase in Calvin Klein jeans operating income reflects the $7.7 million increase in gross profit described previously, combined with a $3.0 million reduction in SG&A expenses primarily related to the reduction in administration and distribution costs reflecting operating efficiency improvements. The $8.7 million increase in Chaps operating income is attributable to the $13.7 million increase in gross profit described above, partially offset by a $5.0 million increase in SG&A expenses. The increase in Chaps SG&A expenses primarily reflects an increase in marketing expenses to support the Company’s expanded distribution platform combined with an increase in variable selling expenses as a result of the increase in net revenues.

Swimwear Group

Swimwear Group operating income was as follows:

				Fiscal 2005				% of Brand Net Revenues				Fiscal 2004				% of Brand Net Revenues
				(in thousands of dollars)
Speedo				$	40,102				16.2	%		$	38,999				15.7	%
Designer					6,797				5.3	%			17,344				14.0	%
OP					(4,773	)			-49.1	%			(423	)			-15.4	%
Online retail store					2,060				31.3	%			2,227				43.9	%
Swimwear Group				$	44,186				11.3	%		$	58,147				15.3	%

Swimwear Group operating income decreased $14.0 million, or 24.0%. The $1.1 million increase in Speedo operating income reflects a $2.8 million decrease in gross profit, more than offset by a $3.9 million decrease in SG&A expenses primarily as a result of lower marketing expenditure (expenses in Fiscal 2004 were higher primarily due to the 2004 Olympic Games in Athens) coupled with a reduction in amounts incurred for employee termination costs.

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Designer operating income decreased $10.5 million, reflecting a $4.2 million decrease in gross profit combined with a $6.3 million increase in SG&A expenses. As described previously, the decrease in gross profit primarily reflects an increase in design costs associated with new brands combined with increases in manufacturing costs and inventory markdowns. The increase in SG&A expenses primarily reflects an increase in spending associated with the launches of Michael Kors and Calvin Klein swimwear coupled with an increase in amortization costs associated with the Calvin Klein swimwear license in the United States that was acquired during Fiscal 2005.

The decrease in OP operating income primarily reflects increased spending related to the development of the OP wholesale business.

Other (Income) Loss

Other (income) loss primarily reflects foreign exchange losses for Fiscal 2005 of $1.1 million and foreign exchange gains for Fiscal 2004 of $1.9 million, in each case, on the current portion of inter-company loans to foreign subsidiaries that are denominated in United States dollars.

Interest Expense, Net

Interest expense decreased $1.7 million to $18.1 million for Fiscal 2005 from $19.8 million for Fiscal 2004. Interest expense in Fiscal 2005 included interest on the Company’s 8 7/8% Senior Notes due 2013 (‘‘Senior Notes’’) of $17.6 million (net of the benefit related to the 2003 and 2004 Swap Agreements (as defined below) of approximately $1.0 million), unused commitment fees and letter of credit charges of $1.7 million related to the Revolving Credit Facility, amortization of deferred financing fees of $2.1 million and other items of $1.2 million, partially offset by interest income of $3.4 million related to interest earned on the note receivable associated with the sale of the White Stag trademark, income related to cash investments and cash collateral accounts and other miscellaneous interest income. In addition, during Fiscal 2005, $1.1 million of interest expense was capitalized to fixed assets in connection with the implementation of SAP. Interest expense for Fiscal 2004 included interest on the Senior Notes of $16.9 million (net of the benefit related to the 2003 and 2004 Swap Agreements of approximately $1.6 million), unused commitment fees and letters of credit charges of $2.4 million and amortization of deferred financing fees and other items of $2.4 million, partially offset by interest income of $1.9 million. Interest income primarily reflects income earned on the note receivable relating to the sales of White Stag and interest earned on invested cash balances.

Income Taxes

The effective tax rate in Fiscal 2005 was 36.9% compared to 40.3% in Fiscal 2004. The effective tax rate was higher in Fiscal 2004 due to an increase in the Company’s valuation allowance maintained against certain deferred tax assets. Realization of the Company's deferred tax assets is dependent upon future earnings in specific tax jurisdictions, the timing and amount of which are uncertain. Accordingly, the Company evaluates all significant available positive and negative evidence, including the existence of losses in recent years and its forecast of future taxable income, in assessing the need for a valuation allowance. The underlying assumptions used in forecasting future taxable income require significant judgment and take into account the Company's recent performance. A valuation allowance is established to reduce the deferred tax assets to the amount that is more likely than not to be realized. As of the end of Fiscal 2005 and 2004, based upon its evaluation of historical and projected results of operation and the current business environment, the Company recorded a valuation allowance on all of its domestic deferred tax assets and certain of its foreign deferred tax assets. The Company anticipates that it will be able to utilize net operating loss carryforwards related to Fiscal 2005, which should result in approximately $6 million of cash tax benefit.

Discontinued Operations

Loss from discontinued operations was $0.2 million and $4.4 million for Fiscal 2005 and Fiscal 2004, respectively. See Note 4 of Notes to Consolidated Financial Statements.

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Comparison of Fiscal 2004 to Fiscal 2003

Net Revenues

Net revenues by segment were as follows:

				Fiscal 2004				Fiscal 2003				Increase (Decrease)				% Change
				(in thousands of dollars)
Intimate Apparel Group				$	588,256			$	572,813			$	15,443				2.7	%
Sportswear Group					455,601				440,516				15,085				3.4	%
Swimwear Group					380,324				361,092				19,232				5.3	%
Net revenues				$	1,424,181			$	1,374,421			$	49,760				3.6	%

The Company's products are widely distributed through many major channels of distribution. The following table summarizes the Company's net revenues by channel of distribution for Fiscal 2004 and Fiscal 2003:

				Fiscal 2004				Fiscal 2003
United States – wholesale
Department stores and independent retailers					23	%			25	%
Specialty stores					10	%			9	%
Chain stores					7	%			7	%
Mass merchandisers					8	%			9	%
Membership clubs and other					24	%			25	%
Total United States – wholesale					72	%			75	%
International – wholesale					26	%			24	%
Retail / other					2	%			1	%
Net revenues – consolidated					100	%			100	%

Intimate Apparel Group

Intimate Apparel Group net revenues were as follows:

				Fiscal 2004				Fiscal 2003				Increase (Decrease)				% Change
				(in thousands of dollars)
Calvin Klein underwear				$	310,192			$	279,106				31,086				11.1	%
Core Brands					148,176				180,945				(32,769	)			-18.1	%
Fashion Brands					116,950				100,240				16,710				16.7	%
Retail/other					12,938				12,522				416				3.3	%
Intimate Apparel Group				$	588,256			$	572,813			$	15,443				2.7	%

The increase in Calvin Klein underwear net revenues reflects an increase of $11.2 million, $15.6 million and $4.3 million in the United States, Europe and all other foreign operations, respectively. The increased sales in the United States and Europe were primarily driven by strength in the men's regular price business combined with the launch of the Company's new Choice Calvin Klein label (which accounted for approximately $7.9 million of the increase in net revenues in the United States and Europe). The Company believes the increase in net revenues is a result of improvements and innovations in product design and an increase in marketing expenditures combined with the positive impact of a stronger euro relative to the United States dollar.

The decrease in Core Brands net revenues reflects a $35.9 million decline in the United States, partially offset by a combined increase of $3.1 million in Canada, Asia and Mexico. The decline in net

52

revenues in the United States primarily reflects continued difficulty for the Company's Core Brands at retail. In addition, the Company experienced a reduction in the level of service to customers, primarily as a result of transitioning from an owned manufacturing to an outsourced production model, which negatively affected order fulfillment rates.

The increase in Fashion Brands net revenues reflects $11.6 million in net revenues from the launch of JLO in July 2004 and an increase of $5.1 million in Lejaby net revenues. The increase in Lejaby reflects an increase of $3.1 million in the United States primarily related to the launch of Lejaby Rose in March 2004 combined with an increase of $2.0 million in Europe. The increase in Lejaby net revenues in Europe primarily reflects the positive effect of a stronger euro of $9.5 million, partially offset by a decrease, primarily related to lower unit volumes, of $7.9 million. The decrease in sales volumes was attributable to a less favorable reception of certain product lines at retail and a declining specialty store distribution base.

Sportswear Group

Sportswear Group net revenues were as follows:

				Fiscal 2004				Fiscal 2003				Increase (Decrease)				% Change
				(in thousands of dollars)
Calvin Klein jeans				$	265,754			$	282,718			$	(16,964	)			-6.0	%
Chaps					168,114				129,634				38,480				29.7	%
Calvin Klein accessories (a)					13,857				13,335				522				3.9	%
Mass sportswear licensing (b)					7,876				14,829				(6,953	)			-46.9	%
Sportswear Group				$	455,601			$	440,516			$	15,085				3.4	%

(a)	The Calvin Klein accessories license expired on December 31, 2005.

(b)	Mass sportswear licensing revenues for Fiscal 2003 consist of royalty revenues related to the White Stag trademark. With respect to Fiscal 2004, mass sportswear licensing revenues include design services fees earned in connection with the White Stag women's sportswear line.

Chaps net revenues increased $37.4 million and $2.3 million in the United States and Mexico, respectively, partially offset by a $1.2 million decrease in Canada. The increase in Chaps domestic net revenues includes $18.1 million related to the launch of the new denim line in June 2004 combined with a $19.3 million net increase across all other Chaps sportswear lines reflecting the Company's planned expansion into the mid-tier channel of distribution and a favorable reception of the Company's products at retail, which increased certain reorder sales. These increases were partially offset by a reduction in sales to military base stores.

Calvin Klein jeans net revenues decreased $17.0 million reflecting a decrease of $29.6 million in the United States, partially offset by an increase of $8.9 million and $3.7 million in Mexico and Canada, respectively. The decrease in the United States reflects a planned reduction of unit sales to low margin off-price channels (accounting for a decrease of approximately $30.0 million) and declines in department store unit sales and sales to military base stores. The decreases in off-price and department store sales were partially offset by an increase in unit sales to membership clubs and to stores operated by the Calvin Klein jeans licensor. Net unit selling prices increased due to more favorable returns and allowances experience, which management believes is the result of reinvigorated designs and extended product offerings. The increase in Mexico net revenues relates to volume increases in sales of certain men's basic lines to department stores combined with increased sales to membership clubs.

The decrease in mass sportswear licensing net revenues reflects the sale of the White Stag trademark to Wal-Mart in December 2003. Pursuant to the sales agreement, the Company no longer receives royalties from Wal-Mart; however, the Company receives fees for design services provided to Wal-Mart related to the White Stag women's sportswear line.

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Swimwear Group

Swimwear Group net revenues were as follows:

				Fiscal 2004				Fiscal 2003				Increase (Decrease)				% Change
				(in thousands of dollars)
Speedo				$	248,619			$	240,405			$	8,214				3.4	%
Designer swimwear					123,890				116,575				7,315				6.3	%
OP (a)					2,747				—				2,747				0.0	%
Online retail store					5,068				4,112				956				23.2	%
Swimwear Group				$	380,324			$	361,092			$	19,232				5.3	%

(a)	Consists of licensing revenue.

The increase in Speedo net revenues reflects a $3.9 million increase in regular-price sales combined with a $4.3 million increase in off-price sales. The increase in regular price sales reflects higher net selling price due to a $3.0 million reduction in sales allowances and returns, primarily as a result of better product performance at retail in Fiscal 2004 compared to Fiscal 2003, combined with increased net sales of $1.0 million primarily related to increased unit shipments of shoes, accessories and racing gear.

The increase in Designer swimwear net revenues reflects increases primarily related to the Company's private label business with Target ($7.3 million), increased net sales of Catalina ($2.3 million) and increased net sales of Nautica and Anne Cole swimwear ($17.3 million), offset by declines in Polo^® (license terminated in June 2003) and other brands ($19.6 million). The increase in net revenues from private label and Catalina sales reflects volume increases. The increase in Nautica and Anne Cole primarily reflects a full year of selling of the Nautica brand which was launched during Fiscal 2003.

Net revenues of OP relate to the acquisition of OP in August 2004 and represent royalty income earned from licensing partners.

Gross Profit

Gross profit was as follows:

				Fiscal 2004				% of Segment Net Revenues				Fiscal 2003				% of Segment Net Revenues
				(in thousands of dollars)
Intimate Apparel Group				$	210,455				35.8	%		$	199,598				34.8	%
Sportswear Group					126,571				27.8	%			103,946				23.6	%
Swimwear Group					135,957				35.7	%			131,424				36.4	%
Total gross profit				$	472,983				33.2	%		$	434,968				31.6	%

The increase in gross profit of $38.0 million reflects an increase of $22.6 million, $10.9 million and $4.5 million in the Sportswear Group, Intimate Apparel Group and Swimwear Group, respectively. Gross profit as a percentage of net revenues (‘‘gross margin’’) increased 160 basis points primarily due to a more favorable sales mix in the Company's Calvin Klein jeans business. Gross profit for Fiscal 2004 includes the effect of approximately $16.7 million related to the favorable impact of foreign currency exchange rate fluctuations, primarily as a result of a stronger euro and Canadian dollar.

Intimate Apparel Group gross profit increased $10.9 million primarily reflecting strength in the Company's Calvin Klein underwear business (increased gross profit of $22.3 million) and the launch of JLO lingerie in July 2004 (gross profit of $2.1 million) combined with increases of $2.3 million and $1.8 million in the Company's Lejaby and Intimate Apparel retail operations, respectively. The

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increases were partially offset by a $17.6 million decrease in Core Brands gross profit. The increase in Calvin Klein underwear gross profit and gross margin reflects the increase in net revenues described above, combined with a favorable sales mix and lower sourcing costs. The decline in Core Brands gross profit reflects sales allowances granted to customers and unfavorable absorption of fixed overhead costs due to decreased sales volumes.

Sportswear Group gross profit increased $22.6 million, or 21.8%, in Fiscal 2004 as compared to Fiscal 2003 and gross margin increased 420 basis points. The increase in gross profit and gross margin primarily reflects strength in the Calvin Klein jeans ($17.6 million increase in gross profit), Calvin Klein accessories ($1.8 million increase in gross profit) and Chaps ($10.5 million increase in gross profit) businesses, partially offset by a $7.3 million decline in mass sportswear licensing as a result of the sale of the White Stag trademark to Wal-Mart in December 2003. The increase in Calvin Klein jeans gross profit and gross margin reflects an improved sales mix, primarily as a result of the Company's planned reduction of sales to low margin off-price channels. The increase in Chaps gross profit reflects the increase in net revenues described above and improved allowance experience to customers reflecting higher net selling prices.

Swimwear Group gross profit increased $4.5 million, reflecting the increase in net revenues described above and efficiencies realized in the Company's manufacturing plants as a result of production volume increases. The decrease in gross margin of 70 basis points reflects the less favorable sales mix, start-up activities related to a new activewear line and the unfavorable impact of foreign currency exchange rate fluctuations on cost of sales, primarily as a result of the effect of a stronger Canadian dollar related to Canadian manufacturing operations, partially offset by margins earned on royalty income (related to the August 2004 acquisition of OP) and favorable manufacturing variances.

Selling, General and Administrative Expenses

SG&A expenses increased $26.4 million, or 7.5%, to $378.5 million (26.6% of net revenues) for Fiscal 2004 from $352.1 million (25.6% of net revenues) for Fiscal 2003. Marketing expenses increased $12.0 million, reflecting the Company's investment in the marketing of new and existing brands of $10.0 million (including the launches of JLO lingerie and Chaps denim) and expenses related to the 2004 Summer Olympic Games in Athens of $2.0 million. Selling expenses increased $9.5 million reflecting higher sales volumes, partially offset by the positive impact of terminating a third party distribution agreement and consolidating the Company's Calvin Klein jeans distribution facility into the Company's primary distribution facility in Pennsylvania. Unallocated corporate administrative expenses include $5.6 million related to professional costs associated with SOX compliance and an internal control review conducted in connection with the Company's previously announced settlement with the SEC. In addition, SG&A expenses for Fiscal 2004 include $6.1 million related to the unfavorable impact of foreign currency exchange rate fluctuations, primarily as a result of a stronger euro and Canadian dollar.

Pension Income / Expense

Pension Plan income of $6.8 million for Fiscal 2004 reflects the income earned by Pension Plan assets, offset by interest costs associated with Pension Plan projected benefit obligations. Pension Plan income was $6.8 million for Fiscal 2003.

Amortization of Sales Order Backlog

Results of operations for Fiscal 2003 included $11.8 million of expenses related to the amortization of sales order backlog recorded in connection with the adoption of fresh start accounting on February 4, 2003. The sales order backlog was amortized over six months using the straight-line method and was fully amortized as of January 3, 2004.

Restructuring Expense

During Fiscal 2004 and the period February 5, 2003 to January 3, 2004, the Company incurred restructuring charges of $5.1 million and $19.1 million, respectively.

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Reorganization Items

Reorganization items were $29.8 million for the period January 5, 2003 to February 4, 2003.

Operating Income

The following table presents operating income by group:

				Fiscal 2004				% of Net Revenues				Fiscal 2003				% of Net Revenues
				(in thousands of dollars)
Intimate Apparel Group				$	55,361							$	55,858
Sportswear Group					53,757								31,764
Swimwear Group					58,147								52,901
Group operating income					167,265				11.8	%			140,523				10.2	%
Unallocated corporate expenses					(66,000	)			–4.6	%			(62,603	)			-4.5	%
Restructuring expense					(5,130	)			–0.4	%			(19,101	)			-1.4	%
Reorganization expense					—				0.0	%			(29,805	)			-2.2	%
Operating income				$	96,135				6.8	%		$	29,014				2.1	%

Operating income increased $67.1 million, reflecting an increase in group operating income of $26.7 million and a decrease in restructuring and reorganization items of $43.8 million, partially offset by an increase in unallocated corporate expenses of $3.4 million. The increase in group operating income includes the effect of an $11.8 million decrease in amortization expense related to sales order backlog which was incurred in the 2003 period in connection with the adoption of fresh start accounting. Operating income for Fiscal 2004 was positively affected by the favorable impact of foreign currency exchange rate fluctuations of approximately $10.6 million, primarily as a result of a stronger euro and Canadian dollar. The increase in unallocated corporate expenses of $3.4 million in Fiscal 2004 compared to Fiscal 2003 was due primarily to consulting fees of $5.6 million related to professional costs associated with SOX compliance and an internal control review conducted in connection with the Company's previously announced settlement with the SEC.

Intimate Apparel Group

Intimate Apparel Group operating income was as follows:

				Fiscal 2004				% of Net Revenues				Fiscal 2003				% of Net Revenues
				(in thousands of dollars)
Calvin Klein underwear				$	49,871				16.1	%		$	39,837				14.3	%
Core Brands					2,520				1.7	%			7,524				4.2	%
Fashion Brands					2,579				2.2	%			9,256				9.2	%
Retail/other					391				3.0	%			(759	)			-6.1	%
Intimate Apparel Group				$	55,361				9.4	%		$	55,858				9.8	%

Intimate Apparel Group operating income decreased $0.5 million, primarily reflecting an increase in Calvin Klein underwear, more than offset by a decrease in Core Brands and Fashion Brands. The $10.0 million increase in Calvin Klein underwear operating income reflects a $22.3 million increase in gross profit (as described above), the positive effect of a stronger euro and a $2.2 million decrease in amortization of sales order backlog. Partially offsetting this net increase was an increase of $14.5 million in SG&A expenses (primarily due to a planned increase in marketing expenditures to support the launch of Choice Calvin Klein), the increase in volume-related selling costs and the effect of a stronger euro. The $5.0 million decrease in Core Brands operating income reflects a decline in Core Brands gross profit of $17.6 million as described above, partially offset by a decrease of $12.6 million in SG&A expenses due to cost cutting initiatives undertaken by management in Fiscal 2004 and a decrease in volume-related selling expenses due to reduced net revenues. The $6.7 million

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decrease in Fashion Brands operating income reflects a $3.0 million operating loss from the launch of JLO in July 2004 and a $3.7 million decrease in Lejaby. The decrease in Lejaby operating income reflects a $6.0 million increase in SG&A expenses, partially offset by a $2.3 million increase in Lejaby gross profit. The increase in SG&A expenses includes a $2.8 million increase in marketing costs associated with a new European advertising campaign and the launch of Lejaby Rose in the United States combined with the unfavorable impact of a stronger euro.

Sportswear Group

Sportswear Group operating income was as follows:

				Fiscal 2004				% of Brand Net Revenues				Fiscal 2003				% of Brand Net Revenues
				(in thousands of dollars)
Calvin Klein jeans				$	30,266				11.4	%		$	9,447				3.3	%
Chaps					17,479				10.4	%			9,718				7.5	%
Calvin Klein accessories					2,564				18.5	%			1,795				13.5	%
Mass sportswear licensing					3,448				43.8	%			10,804				72.9	%
Sportswear Group				$	53,757				11.8	%		$	31,764				7.2	%

Sportswear Group operating income increased $22.0 million reflecting increases in Calvin Klein jeans, Chaps and Calvin Klein accessories, partially offset by decreases in mass sportswear licensing. The increase of $7.8 million in Chaps operating income reflects an increase in gross profit of $10.5 million (as discussed above) combined with a $0.8 million reduction in amortization of sales order backlog, partially offset by an increase of $3.5 million in SG&A expenses. The increase in SG&A expenses included a $2.7 million increase in marketing expenses primarily related to the launch of Chaps denim in June 2004 and the increased variable selling expenses associated with higher sales volume. The increase of $20.8 million in Calvin Klein jeans operating income reflects an increase in gross profit of $17.6 million (as discussed above) combined with a $3.2 million reduction in SG&A expenses, primarily related to a decrease in warehouse and distribution expenses as a result of the Company relocating its distribution center in the fourth quarter of Fiscal 2003 from a third-party operated facility to the Company's facility in Huntingdon, Pennsylvania. The decrease in operating income of mass sportswear licensing reflects the sale of the White Stag trademark in December 2003.

Swimwear Group

Swimwear Group operating income was as follows:

				Fiscal 2004				% of Brand Net Revenues				Fiscal 2003				% of Brand Net Revenues
				(in thousands of dollars)
Speedo				$	38,999				15.7	%		$	34,729				14.4	%
Designer					17,344				14.0	%			16,574				14.2	%
OP					(423	)			–15.4	%			—				—
Ubertech					—				—				34				—
Online retail store					2,227				43.9	%			1,564				38.0	%
Swimwear Group				$	58,147				15.3	%		$	52,901				14.7	%

Swimwear Group operating income increased $5.2 million, reflecting an increase of $4.5 million in gross profit as a result of increased net revenues combined with a decrease of $8.5 million in amortization of sales order backlog, partially offset by a $7.8 million increase in SG&A expenses. The increase in SG&A expenses reflects a $2.3 million increase in marketing expenses, primarily related to the 2004 Summer Olympic Games in Athens, a $2.1 million increase in volume related selling expenses and a $3.4 million increase in administrative expenses primarily related to the acquisition of OP.

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Gain on Cancellation of Debt and Fresh Start Adjustments

Fiscal 2003 includes a gain of $1,692.7 million related to the cancellation of the Company's pre-petition debt and other liabilities subject to compromise net of the fair value of cash and cash equivalents and securities distributed to the pre-petition creditors. Fresh start adjustments of $765.7 million represent adjustments to the carrying amount of the Company's assets and liabilities to fair value in accordance with the provisions of SOP 90-7.

Other (Income) Loss

Other (income) loss primarily reflects gains on the current portion of inter-company loans to foreign subsidiaries that are denominated in United States dollars of $1.9 million and $6.7 million for Fiscal 2004 and Fiscal 2003, respectively. The foreign exchange gain for Fiscal 2003 was partially offset by a $3.8 million loss on the sale of the White Stag trademark.

Interest Expense, Net

Interest expense decreased $2.6 million, or 11.5%, to $19.8 million in Fiscal 2004 compared to $22.4 million in Fiscal 2003. Interest expense in Fiscal 2004 included interest on the Senior Notes of $16.9 million (net of the benefit of approximately $1.6 million from the Swap Agreements (as defined below)), unused commitment fees and letters of credit charges of $2.4 million related to the Revolving Credit Facility and amortization of deferred financing fees and other items of $2.4 million, partially offset by interest income of $1.9 million. Interest income primarily reflects income earned on the note receivable relating to the sale of White Stag and interest earned on invested cash balances. Interest expense for Fiscal 2003 includes interest on foreign debt for one month of $1.0 million, interest on the Second Lien Notes of $6.7 million, interest on the Senior Notes of approximately $10.0 million, amortization of deferred financing fees of $2.1 and other interest and fees of approximately $2.6 million.

Income Taxes

The provision for income taxes of $31.6 million for Fiscal 2004 consists of an income tax expense of $13.3 million on domestic earnings and an $18.3 million income tax expense on foreign earnings. The provision for income taxes for Fiscal 2003 of $90.2 million includes income taxes related to the income of foreign operations of $11.6 million, state and local income taxes of $1.0 million and deferred income taxes of $77.6 million related to the recording of the Company's assets at fair value in accordance with fresh start accounting.

Under U.S. tax law, a company that realized cancellation of debt income (‘‘COD’’) while in bankruptcy is entitled to exclude such income from taxable income for U.S. tax reporting purposes. A company that excludes COD will be required to reduce certain tax attributes in an amount equal to the COD excluded from taxable income. If the attribute reduction is applied on a consolidated basis, all of the Company's U.S. consolidated net operating loss carryovers would be eliminated and certain of its other U.S. tax attributes will be substantially reduced or eliminated. However, by applying the attribute reduction rules on a separate company basis, the Company retained U.S. net operating loss carryforwards of approximately $246.2 million, which can be used to reduce U.S. taxable income, if any, by approximately $23.4 million per year. There can be no assurance that the Company's position with respect to separate company attribute reduction will be sustained upon review by the Internal Revenue Service. Any tax benefit from the utilization of consolidated U.S. net operating losses that existed as of February 4, 2003 will reduce goodwill when realized and will not affect the Company's future results of operations.

Additionally, as a result of the Company's acquisition of OP on August 19, 2004, non-current deferred tax liabilities were increased by $12.4 million, primarily related to acquired trademarks and licenses. Deferred taxes also included a U.S. net operating loss carryforward of $2.6 million, of which the majority is subject to an annual limitation of $0.4 million.

Discontinued Operations

Loss from discontinued operations was $4.4 million and $18.9 million for Fiscal 2004 and Fiscal 2003, respectively. See Note 4 of Notes to Consolidated Financial Statements.

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Capital Resources and Liquidity

Financing Arrangements

Senior Notes

On June 12, 2003, Warnaco Inc., the principal operating subsidiary of Warnaco, completed the sale of $210.0 million aggregate principal amount of Senior Notes at par value, which notes mature on June 15, 2013 and bear interest at 8 7/8% payable semi-annually on December 15 and June 15 of each year. No principal payments prior to the maturity date are required. The Senior Notes are unconditionally guaranteed, jointly and severally, by Warnaco and substantially all of Warnaco Inc.'s domestic subsidiaries (all of which are 100% owned, either directly or indirectly, by Warnaco). The Senior Notes are effectively subordinate in right of payment to existing and future secured debt (including the Company's Amended and Restated Credit Agreement) and to the obligations (including trade accounts payable) of the subsidiaries that are not guarantors of the Senior Notes. The guarantees of each guarantor are effectively subordinate to that guarantor's existing and future secured debt (including guarantees of the Amended and Restated Credit Agreement) to the extent of the value of the assets securing that debt. There are no restrictions that prevent the guarantor subsidiaries from transferring funds or paying dividends to the Company. The indenture pursuant to which the Senior Notes were issued contains covenants which, among other things, restrict the Company's ability to incur additional debt, pay dividends and make restricted payments, create or permit certain liens, use the proceeds of sales of assets and subsidiaries' stock, create or permit restrictions on the ability of certain of Warnaco Inc.'s subsidiaries to pay dividends or make other distributions to Warnaco or to Warnaco Inc., enter into transactions with affiliates, engage in certain business activities, engage in sale and leaseback transactions and consolidate or merge or sell all or substantially all of its assets. The Company was in compliance with the covenants of the Senior Notes at December 31, 2005. Redemption of the Senior Notes prior to their maturity is subject to premiums as set forth in the indenture. Proceeds from the sale of the Senior Notes were used to repay the outstanding principal balance on the Second Lien Notes of $200.9 million and accrued interest thereon of $2.0 million. The proceeds were also used to pay underwriting fees, legal and professional fees and other expenses associated with the offering in an aggregate amount of approximately $7.1 million. In connection with the offering of the Senior Notes, the Company entered into a registration rights agreement with the initial purchasers of the Senior Notes, which, among other things, required Warnaco Inc. and the guarantors to complete a registration and exchange of the Senior Notes. In accordance with the registration rights agreement, the Company completed the registration and exchange of the Senior Notes in the first quarter of Fiscal 2004.

Interest Rate Swap Agreements

On September 18, 2003, the Company entered into an Interest Rate Swap Agreement (the ‘‘2003 Swap Agreement’’) with respect to the Senior Notes for a total notional amount of $50 million. The 2003 Swap Agreement provides that the Company will receive interest at 8 7/8% and pay a variable rate of interest based upon six month London Interbank Offered Rate (‘‘LIBOR’’) plus 4.11% (8.78% at December 31, 2005). The 2003 Swap Agreement expires on June 15, 2013 (the date on which the Senior Notes mature).

On November 5, 2004, the Company entered into a second Interest Rate Swap Agreement (the ‘‘2004 Swap Agreement’’) with respect to the Company's Senior Notes for a total notional amount of $25 million. The 2004 Swap Agreement provides that the Company will receive interest of 8 7/8% and pay a variable rate of interest based upon six months LIBOR plus 4.34% (9.01% at December 31, 2005). The 2004 Swap Agreement expires on June 15, 2013 (the date on which the Senior Notes mature).

As a result of the 2003 and 2004 Swap Agreements, the weighted average effective interest rate of the Senior Notes was 8.87% and 8.16% as of December 31, 2005 and January 1, 2005, respectively.

The Company designated the 2003 and 2004 Swap Agreements as fair value hedges of the changes in fair value of $50 million and $25 million, respectively, aggregate principal amount of the

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$210 million aggregate principal amount of Senior Notes outstanding. As of December 31, 2005, the fair values of the 2003 and 2004 Swap Agreements were losses of $1.4 million and $1.0 million, respectively, recorded as part of long-term debt, which were offset by corresponding gains on the hedged debt. No hedge ineffectiveness is recognized in the consolidated statement of operations, as the provisions of the 2003 and 2004 Swap Agreements match the provisions of the hedged debt.

Revolving Credit Facility; Amended and Restated Credit Agreement

On the Effective Date, Warnaco Inc. entered into the Revolving Credit Facility, which was amended November 12, 2003, August 1, 2004 and September 15, 2005. In addition, as described below, the Revolving Credit Facility was amended and restated on January 31, 2006 in connection with the closing of the CKJEA Acquisition.

As of December 31, 2005, the Revolving Credit Facility provided for a $175 million revolving credit facility maturing on February 3, 2009. The Revolving Credit Facility includes a provision which allows Warnaco Inc. to increase maximum available borrowings under the revolving credit facility from $175.0 million to $325.0 million. Borrowings under the Revolving Credit Facility bear interest, at Warnaco Inc.’s option, at Citibank N.A.’s base rate plus 0.5% (7.75% at December 31, 2005) or at LIBOR plus 1.5% (approximately 6.04% at December 31, 2005), in each case, on a per annum basis. The rates of interest payable on outstanding borrowings under the Revolving Credit Facility may change based on the Company's financial ratios. Warnaco Inc. enters into contracts to elect the LIBOR option when it expects borrowings to be outstanding for more than 30 days. The remaining balances bear interest based upon Citibank N.A.’s base rate. The Revolving Credit Facility contains financial covenants that, among other things, require the Company to maintain a fixed charge coverage ratio above a minimum level and a leverage ratio below a maximum level and limit the amount of the Company's capital expenditures. In addition, the Revolving Credit Facility contains certain covenants that, among other things, limit investments and asset sales, prohibit the payment of dividends (subject to limited exceptions) and limit the incurrence of material additional indebtedness.

As of December 31, 2005, the Company was in compliance with the covenants of the Revolving Credit Facility. Warnaco Inc. did not borrow under the Revolving Credit Facility during Fiscal 2005 or Fiscal 2004, and had paid down all outstanding borrowings under the Revolving Credit Facility as of January 3, 2004. The Revolving Credit Facility is guaranteed by the Company and its domestic subsidiaries (other than Warnaco Inc.) and the obligations under such guaranty, together with Warnaco Inc.’s obligations under the Revolving Credit Facility, are secured by a lien for the benefit of the lenders on substantially all of the assets of the Company and its domestic subsidiaries.

On January 31, 2006, the Revolving Credit Facility was amended and restated (the ‘‘Amended and Restated Credit Agreement’’) to, among other things, add a $180 million term loan facility which was used to finance a portion of the CKJEA Acquisition. Generally, the loans under the term loan facility bear interest, at Warnaco Inc.’s option, at either Citibank N.A.'s base rate plus 0.50% or at LIBOR plus 1.50%, in each case, on a per annum basis. The term loan facility matures on January 31, 2013 and must be repaid at the rate of $450,000 per quarter from June 30, 2006 through March 31, 2012 and $42,300,000 on each of June 30, 2012, September 30, 2012, December 31, 2012 and January 31, 2013. Loans under the Amended and Restated Credit Agreement may be required to be repaid upon the occurrence of certain events, including certain types of asset sales, insurance recoveries, and issuances of debt. In addition, the term loan facility requires Warnaco Inc. to repay term loan principal in amounts equal to 25% of Excess Cash Flow (as defined in the Amended and Restated Credit Agreement), subject to certain conditions.

In addition to the amendments relating to the term loan facility, under the Amended and Restated Credit Agreement, certain covenants were modified, including financial covenants and the covenants relating to indebtedness, acquisitions, asset sales and investments. Further, certain terms and conditions under which an Event of Default (as defined in the Amended and Restated Credit Agreement) may be declared were amended. On January 31, 2006, Warnaco Inc. increased the revolving credit facility commitment under the Amended and Restated Credit Agreement from $175 million to $225 million.

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Warnaco Inc.’s obligations under the term loan facility are guaranteed by the same parties as had guaranteed the Revolving Credit Facility, and are secured by the same assets as had secured the Revolving Credit Facility, except that the lenders under the loan facilities have different lien priorities in the collateral.

    Foreign Revolving Credit Facility

During Fiscal 2005, certain of the Company's foreign subsidiaries (the "Foreign Subsidiaries") entered into a $25 million revolving credit facility with Bank of America, N.A. (the "Foreign Revolving Credit Facility"). The Foreign Revolving Credit Facility provides for a four year, non-amortizing revolving credit facility. Borrowings under the Foreign Revolving Credit Facility accrue interest at LIBOR or, if applicable, the lending bank's base rate, in each case, plus 2.25% or 2.00% (depending on the level of EBITDA (as defined in the Foreign Revolving Credit Facility) of the Foreign Subsidiaries). The Foreign Revolving Credit Facility is secured by first priority security interests on the assets of the Foreign Subsidiaries and the Foreign Subsidiaries guarantee each others' obligations under the Foreign Revolving Credit Facility. The Foreign Revolving Credit Facility contains covenants that require the Foreign Subsidiaries to maintain certain financial ratios and limit the amount of the Foreign Subsidiaries' capital expenditures. In addition, the Foreign Revolving Credit Facility contains certain restrictive covenants which, among other things, limit investments by the Foreign Subsidiaries and prohibit the Foreign Subsidiaries from incurring additional indebtedness. The Company's ability to borrow under the Foreign Revolving Credit Facility is subject to the satisfaction of certain conditions. As of December 31, 2005, the Company had no borrowing outstanding under the Foreign Revolving Credit Facility.

Liquidity

As of December 31, 2005, the Company had working capital of $498.6 million and had no borrowings outstanding under the Revolving Credit Facility. As of December 31, 2005, the Company had approximately $92.0 million of cash and cash equivalents available as collateral against outstanding letters of credit of $60.0 million and approximately $72.2 million of other cash and cash equivalents primarily held by foreign subsidiaries. As of December 31, 2005, the Company had $207.1 million of credit available under its Revolving Credit Facility which included available borrowings of $175.0 million and cash and cash equivalents, net of outstanding letters of credit of $32.1 million. Total cash and cash equivalents increased $98.6 million from $65.6 million as of January 1, 2005 to $164.2 million as of December 31, 2005.

The Company’s total debt as of December 31, 2005 was $210.0 million, consisting of the Senior Notes.

On January 31, 2006, the Company consummated the CKJEA Acquisition. See ‘‘Business— Acquisitions—CKJEA Acquisition.’’ The Company funded the acquisition using a combination of approximately $70.7 million of cash on hand (net of cash acquired) and borrowings of $180 million under a new term loan under the Amended and Restated Credit Agreement. In connection with the closing of the CKJEA Acquisition, on January 31, 2006, the Company also assumed an aggregate of approximately €74 million (approximately $90 million) of debt. Approximately €37 million (approximately $45 million) of the assumed debt was repaid simultaneously with the closing, leaving approximately €37 million (approximately $45 million) of debt outstanding.

The Company believes that cash available under its Amended and Restated Credit Agreement and cash to be generated from future operating activities will be sufficient to fund its operations, including capital expenditures, for the next three years. If the Company requires additional sources of capital to fund its operations, it will consider reducing capital expenditures, seeking additional financing or selling assets to meet such requirements.

Share Repurchase Program

In July 2005, the Company’s Board of Directors authorized the Company to enter into a share repurchase program of up to 3,000,000 shares of common stock. In order to comply with the terms of

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the applicable debt instruments (which contain certain limitations on share repurchases), the Company expects that purchases under the share repurchase program will be made over the course of the next three years. During Fiscal 2005, the Company repurchased 9,151 shares of its common stock in the open market at a total cost of $0.2 million (an average cost of $24.25 per share) under the share repurchase program. The share repurchase program may be modified or terminated by the Company’s Board of Directors at any time.

Cash Flows

The following table summarizes the cash flows from the Company's operating, investing and financing activities for Fiscal 2005, 2004, and 2003. The cash flows for Fiscal 2003 include cash flows for the period January 5, 2003 to February 4, 2003 combined with cash flows for the period February 5, 2003 to January 3, 2004.

				Fiscal 2005				Fiscal 2004				Fiscal 2003
				(in thousands of dollars)
Net cash provided by (used in) operating activities:
Continuing operations				$	137,042			$	54,816			$	64,263
Discontinued operations					1,024				(4,497	)			(5,601	)
Net cash provided by (used in) investing activities:
Continuing operations					(36,727	)			(46,383	)			(18,666	)
Discontinued operations					—				1,137				(586	)
Net cash provided by (used in) financing activities:
Continuing operations					(65	)			637				(112,482	)
Translation adjustments					(2,661	)			6,421				12,504
Increase (decrease) in cash and cash equivalents				$	98,613			$	12,131			$	(60,568	)

For Fiscal 2005, cash provided by operating activities from continuing operations was $137.0 million compared to $54.8 million in Fiscal 2004 and $64.3 million in Fiscal 2003. The $82.2 million increase in cash provided by operating activities from continuing operations for Fiscal 2005 compared to Fiscal 2004 was due primarily to a $77.4 million reduction in cash required to fund net working capital (primarily inventory, accounts receivable, accounts payable and accrued liabilities). Net working capital improvements resulted in $16.5 million of net operating cash inflows in Fiscal 2005 compared to $60.9 million of net operating cash outflows in Fiscal 2004. Net inventory decreased by $2.0 million in Fiscal 2005 compared to an increase of $55.7 million in Fiscal 2004. The improvement in inventory reflects the Company’s efforts to time inventory receipts to match shipping requirements more closely. Accounts receivable decreased $0.8 million in Fiscal 2005 compared to an increase of $7.2 million in Fiscal 2004, reflecting initial shipments of Chaps into the mid-tier channel of distribution at the end of December 2004 (which had resulted in an unusually high level of accounts receivable for the Chaps business unit at the end of Fiscal 2004).

The $9.4 million decrease in cash provided by operating activities from continuing operations for Fiscal 2004 compared to Fiscal 2003 was due primarily to a $44.9 million increase in net income (after adjusting for the effect of non-cash items) offset by a $54.4 million decrease in cash flows from operating assets and liabilities. The decrease in cash flows from operating assets and liabilities primarily reflects the $39.9 million increase in working capital primarily as a result of a $55.8 million increase in inventory related to the Chaps business (to support Chaps’ introduction to the mid-tier channel of distribution) and increases in Calvin Klein jeans inventories as a result of expected increased shipments for the first quarter of Fiscal 2005.

For Fiscal 2005, cash provided by operating activities from discontinued operations was $1.0 million as compared to cash used in operating activities from discontinued operations of $4.5 million in Fiscal 2004 and $5.6 million in Fiscal 2003. The $5.5 million increase in cash provided by operating activities from discontinued operations from Fiscal 2004 to Fiscal 2005 was due primarily to the winding down of discontinued operations including the collection of open accounts receivables of $1.7 million.

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For Fiscal 2005, cash used in investing activities from continuing operations was $36.7 million compared to $46.4 million in Fiscal 2004 and $18.7 million in Fiscal 2003. The $9.7 million decrease from Fiscal 2004 to Fiscal 2005 was due primarily to a decrease in cash used for business acquisitions. During Fiscal 2004, the Company used $40.0 million for the purchase of Ocean Pacific. During Fiscal 2005, the Company used $1.5 million for business acquisitions. The decrease in cash used in Fiscal 2004 was partially offset by the sale of the assets of the ABS business unit in January 2004 for $15.2 million. The Company did not sell any business units during Fiscal 2005. Cash used in investing activities for Fiscal 2005 included the $4.3 million purchase of the Calvin Klein swimwear license (see Note 13 of Notes to Consolidated Financial Statements). In addition, purchases of property, plant and equipment increased $5.7 million for Fiscal 2005 as compared to Fiscal 2004, due primarily to capitalized costs associated with the implementation of the SAP system.

The $27.7 million increase in cash used in investing activities in Fiscal 2004 compared to Fiscal 2003 was due primarily to the $40.0 million acquisition of the OP business in Fiscal 2004 (the Company did not have any business acquisitions in Fiscal 2003). Partially offsetting this increase in cash used was a $13.4 million increase in Fiscal 2004 in proceeds on disposal of assets and collection of notes receivable. In Fiscal 2004, the Company received $15.2 million for the sale of the ABS business unit, $6.4 million for the collection of notes receivable (primarily related to the sale of the White Stag trademark to Wal-Mart Stores, Inc.) and $2.5 million for the sale of other assets as compared to $9.5 million net proceeds received in Fiscal 2003 from the sale of the White Stag trademark to Wal-Mart Stores, Inc.

The Company had no cash provided by investing activities from discontinued operations in Fiscal 2005 compared to $1.1 million in Fiscal 2004 and cash used of $0.6 million in Fiscal 2003. Cash provided by investing activities from discontinued operations in Fiscal 2004 primarily reflects net proceeds of $1.2 million received from the sale of real property in the United Kingdom related to the Company’s Warner’s Europe operations.

For Fiscal 2005, cash used in financing activities was $0.1 million compared to cash provided by financing activities of $0.6 million in Fiscal 2004 and cash used in financing activities of $112.5 million in Fiscal 2003. The $0.7 million increase in cash used in financing activities from Fiscal 2004 to Fiscal 2005 was due primarily to an increase in payments of deferred financing costs related to the amendments to the Company’s Revolving Credit Facility.

The $113.1 million increase in cash provided by financing activities from Fiscal 2003 to Fiscal 2004 was due primarily to the $109.7 million net effect of proceeds received for the issuance of and payments made on debt in Fiscal 2003 in connection with the Company’s emergence from bankruptcy on February 4, 2003.

Cash in operating accounts primarily represents lockbox receipts not yet cleared or available to the Company, cash held by foreign subsidiaries and compensating balances required under various trade, credit and other arrangements.

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Contractual Obligations

The following table summarizes the Company's contractual commitments as of December 31, 2005:

				Payments Due by Year
Contractual Obligations				2006				2007				2008				2009				2010				Thereafter				Total
				(Dollars in thousands)
Revolving Credit Facility (a)				$	—			$	—			$	—			$	—			$	—			$	—			$	—
Senior Notes (b)					—				—				—				—				—				210,000				210,000
Operating leases (c)					27,801				23,825				20,144				16,232				14,409				68,876				171,287
Employment and severance contracts					5,749				3,943				1,347				63				62				75				11,239
Purchase obligations (d)					7,930				350				350				350				—				—				8,980
Trade letters of credit (e)					59,956				—				—				—				—				—				59,956
Purchase order guarantees					526				—				—				—				—				—				526
Capital leases					394				—				—				—				—				—				394
Other long-term obligations (f)					46,850				41,719				39,668				39,756				36,843				457,933				662,769
Total				$	149,206			$	69,837			$	61,509			$	56,401			$	51,314			$	736,884			$	1,125,151

(a)

The Revolving Credit Facility matures on February 4, 2009. There were no amounts outstanding under the Revolving Credit Facility as of December 31, 2005 and therefore, no maturity amount is included in the commitments table. On January 31, 2006, the Revolving Credit Facility was amended and restated to, among other things, add a $180 million term loan facility which was used to finance a portion of the CKJEA Acquisition. See "—Capital Resources and Liquidity— Financing Arrangements—Revolving Credit Facility; Amended and Restated Credit Agreement."

(b)	The Senior Notes mature on June 15, 2013. See "—Capital Resources and Liquidity—Financing Arrangements—Senior Notes" and Note 15 of Notes to Consolidated Financial Statements.

(c)	See Note 18 of Notes to Consolidated Financial Statements.

(d)	Represents contractual commitments for goods or services not received or recorded on the Company’s consolidated balance sheet. See Note 18 of Notes to Consolidated Financial Statements.

(e)	Trade letters of credit represent obligations, in the ordinary course of business, for inventory purchases.

(f)	Represents other commitments for the expenditure of funds including estimated funding contributions to the Company’s pension plan (see Note 10 of Notes to Consolidated Financial Statements) and minimum royalties (see Note 18 of Notes to Consolidated Financial Statements).

Seasonality

The operations of the Company are somewhat seasonal. In Fiscal 2005, approximately 54.1% of the Company's net revenues were generated in the first half of the fiscal year. The Company's Swimwear business is seasonal; approximately 68.7% of the Swimwear Group's net revenues were generated in the first half of Fiscal 2005. The working capital needs of the Swimwear Group are highest during the periods when the Company's other businesses have their lowest working capital requirements. Sales and earnings from the Company's other groups and business units are generally expected to be somewhat higher in the second half of the fiscal year.

The following sets forth the net revenues, operating income and net cash flow from operating activities generated for each quarter of Fiscal 2005 and Fiscal 2004.

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				For the Three Months Ended																For the Three Months Ended
				April 2, 2005				July 2, 2005				October 1, 2005				December 31, 2005				April 3, 2004				July 3, 2004				October 2, 2004				January 1, 2005
				(in millions of dollars)
Net revenues				$	439.5			$	374.7			$	327.7			$	362.5			$	393.3			$	332.1			$	324.4			$	374.4
Operating income					52.9				15.6				13.7				19.7				43.2				12.8				7.8				32.3
Cash flow provided by (used in) operating activities					(12.6	)			105.5				114.8				(69.6	)			4.1				97.9				56.4				(108.1	)

Inflation

The Company does not believe that the relatively moderate levels of inflation in the United States, Canada and Western Europe have had a significant effect on its net revenues or its profitability in any of the last three fiscal years. The Company believes that, in the past, it has been able to offset such effects by increasing prices on certain items or instituting improvements in productivity. Mexico historically has been subject to high rates of inflation; however, the effects of inflation on the operation of the Company's Mexican subsidiaries have not had a material effect on the results of the Company in any of the last three fiscal years.

Deflation of Apparel Selling Prices

Management believes the apparel industry is undergoing significant changes in its manufacturing and procurement business cycles through the lifting of import restrictions on certain products, overall deflation in the selling prices of its products and department store and retailer demands for increased profitability from the wholesale apparel industry. The Company expects to meet these challenges by improving its procurement process through aggressive sourcing of product from multiple vendors and locations, improving its efficiency through upgraded systems and improved procedures, maintaining a diverse mix of products that are offered at multiple price points across virtually all channels of distribution.

Off-Balance Sheet Arrangements

None.

Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 (‘‘SFAS 151’’). SFAS 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for costs incurred during fiscal years beginning after November 24, 2004. SFAS 151 is effective January 1, 2006 for the Company. The Company believes the provisions of SFAS 151 are consistent with its current accounting position and does not expect the adoption of SFAS 151 to have a material effect on the Company's consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (‘‘SFAS 123R’’). SFAS 123R requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized ratably over the period that an employee provides service in exchange for the award. SFAS 123R replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Among other matters, SFAS 123R requires companies to estimate the forfeiture rate of stock-based compensation awards. On April 14, 2005, the SEC announced the adoption of a rule that defers the required effective date of SFAS 123R. The SEC rule provides that SFAS 123R is now effective for registrants

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as of the beginning of the first fiscal year beginning after June 15, 2005. Effective February 5, 2003, the Company adopted the fair value method of accounting for stock options for all options granted by the Company after February 4, 2003 pursuant to the prospective method provisions of SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure. Since February 5, 2003, the Company has recorded stock-based compensation expense based on actual forfeitures of stock-based compensation awards. The Company has determined that the adoption of SFAS 123R at the commencement of its 2006 fiscal year will not have a material effect on its consolidated financial statements.

In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (‘‘FIN 47’’). FIN 47 clarifies that the term conditional asset retirement obligation as used in SFAS No. 143, Accounting for Asset Retirement Obligations (‘‘SFAS 143’’), refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. SFAS 143 requires an entity to recognize the fair value of a legal obligation to perform asset retirement activities when the obligation is incurred — generally upon acquisition, construction, or development and (or) through the normal operation of the asset. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005 (December 31, 2005 for the Company). Adoption of FIN 47 did not have a material effect on the Company’s consolidated financial statements.

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (‘‘SFAS 154’’). SFAS 154 replaces APB Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented reflecting the new accounting principle as if it had been adopted at the beginning of the earliest period presented. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for prospectively as a change in estimate and that the correction of errors in previously issued financial statements be termed a restatement. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005.

In June 2005, the FASB issued Emerging Issue Task Force Abstract No. 05-6, Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination ("EITF 05-6"). EITF 05-6 requires that leasehold improvements acquired in a business combination or purchased subsequent to the inception of a lease be amortized over the shorter of the useful life of the assets or a term that includes the remaining lease term and renewals that are deemed to be reasonably assured at the date of acquisition or purchase. EITF 05-6 is effective for leasehold improvements that are purchased or acquired in reporting periods beginning after June 29, 2005. Adoption of EITF 05-6 did not have an effect on the Company’s consolidated financial statements.

Statement Regarding Forward-Looking Disclosure

This Annual Report on Form 10-K, as well as certain other written, electronic and oral disclosures made by the Company from time to time, contains ‘‘forward-looking statements’’ within the meaning of Rule 3b-6 of the Securities Exchange Act of 1934, as amended, Rule 175 of the Securities Act and relevant legal decisions. The forward-looking statements involve risks and uncertainties and reflect, when made, the Company's estimates, objectives, projections, forecasts, plans, strategies, beliefs, intentions, opportunities and expectations. Actual results may differ materially from anticipated results or expectations and investors are cautioned not to place undue reliance on any forward-looking statements. Statements other than statements of historical fact are forward-looking statements. These forward-looking statements may be identified by, among other things, the use of forward-looking language, such as the words ‘‘believe,’’ ‘‘anticipate,’’ ‘‘expect,’’ ‘‘estimate,’’ ‘‘intend,’’ ‘‘may,’’ ‘‘project,’’ ‘‘scheduled to,’’ ‘‘seek,’’ ‘‘should,’’ ‘‘will be,’’ ‘‘will continue,’’ ‘‘will likely result,’’ or the negative of those terms, or other similar words and phrases or by discussions of intentions or strategies.

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The following factors, among others, including those described in this Annual Report on Form 10-K under the heading ‘‘Risk Factors’’ (as such disclosure may be modified or supplemented from time to time), could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by it: economic conditions that affect the apparel industry; the Company's failure to anticipate, identify or promptly react to changing trends, styles, or brand preferences; further declines in prices in the apparel industry; declining sales resulting from increased competition in the Company’s markets; increases in the prices of raw materials; events which result in difficulty in procuring or producing the Company's products on a cost-effective basis; the effect of laws and regulations, including those relating to labor, workplace and the environment; changing international trade regulation, including as it relates to the imposition or elimination of quotas on imports of textiles and apparel; the Company’s ability to protect its intellectual property or the costs incurred by the Company related thereto; the Company’s dependence on a limited number of customers; the Company's dependence on license agreements with third parties; the Company’s dependence on the reputation of its brand names, including, in particular, Calvin Klein; the Company’s exposure to conditions in overseas markets in connection with the Company’s foreign operations and the sourcing of products from foreign third-party vendors; the Company's foreign currency exposure; unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; the sufficiency of cash to fund operations, including capital expenditures; the Company's ability to service its indebtedness, the effect of changes in interest rates on the Company's indebtedness that is subject to floating interest rates and the limitations imposed on the Company's operating and financial flexibility by the agreements governing the Company's indebtedness; the Company's dependence on its senior management team and other key personnel; disruptions in the Company's operations caused by difficulties with the SAP Apparel and Footwear Solution; the limitations on purchases under the Company's share repurchase program contained in the Company's debt instruments, the number of shares that the Company purchases under such program and the prices paid for such shares; the failure of newly acquired businesses to generate expected levels of revenues; the failure of the Company to successfully integrate such businesses with its existing businesses (and as a result, not achieving all or a substantial portion of the anticipated benefits of the acquisition); and such newly acquired business being adversely affected, including by one or more of the factors described above, and thereby failing to achieve anticipated revenues and earnings growth.

The Company encourages investors to read the section entitled ‘‘Risk Factors’’ and the discussion of the Company's critical accounting policies under ‘‘—Discussion of Critical Accounting Policies’’ included in this Annual Report on Form 10-K, as such discussions may be modified or supplemented by subsequent reports that the Company files with the SEC. This discussion of forward-looking statements is not exhaustive but is designed to highlight important factors that may affect actual results. Forward-looking statements speak only as of the date on which they are made, and, except for the Company's ongoing obligation under the U.S. federal securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to market risk primarily related to changes in hypothetical investment values under certain of the Company’s employee benefit plans, interest rates and foreign currency exchange rates. The Company does not use derivative financial instruments for speculation or for trading purposes.

Market Risk

During Fiscal 2005, the Company adopted a non-qualified deferred compensation plan. Liabilities accrued for the plan’s participants are based on the participants’ contributions and the market values of hypothetical investments approved by the Company that are selected by the participants. Increases and decreases in liabilities attributable to changes in the market values of the participants’ hypothetical investments are reflected in the Company’s statement of operations. As of December 31, 2005, the total liability accrued attributable to participants’ accounts was $0.2 million. A

67

hypothetical increase of 10% in the value of participants’ hypothetical investment accounts (which would increase the accrued liability related to the deferred compensation plan) would not have had a material effect on the Company’s balance sheet or statement of operations for Fiscal 2005.

Interest Rate Risk

The Company’s market risk from exposure to changes in interest rates as of December 31, 2005 was limited because the Company did not have any borrowings outstanding under its Revolving Credit Facility as of December 31, 2005, and the interest rate on the Company’s Senior Notes is fixed at 8 7/8% per annum. However, as of December 31, 2005, the Company was exposed to interest rate risk on its 2003 and 2004 Swap Agreements with notional amounts totaling $75 million. The variable interest rate portion of the Company’s outstanding swap agreements is determined semi-annually on December 15 and June 15 for the ensuing six-month period. A hypothetical 10% increase in interest rates would have had an annual unfavorable impact of $0.4 million and $0.2 million in Fiscal 2005 and 2004, respectively, on the Company’s income from continuing operations before provision for income taxes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Financing Arrangements" and Note 15 of Notes to Consolidated Financial Statements.

Foreign Exchange Risk

The Company has foreign currency exposures primarily related to buying in currencies other than the functional currency in which it operates. These exposures are primarily concentrated in the Company's Canadian, Mexican and European operations, which accounted for approximately 28.4% of the Company's total net revenues for Fiscal 2005. These foreign operations of the Company purchase products from suppliers denominated in United States dollars. Total purchases of products made by foreign subsidiaries denominated in United States dollars amounted to approximately $102.9 million for Fiscal 2005. A hypothetical decrease of 10% in the value of these foreign currencies relative to the United States dollar would have increased cost of goods sold (which would decrease operating income) by $10.3 million for Fiscal 2005.

As of December 31, 2005, the Company had foreign currency exchange contracts outstanding to purchase, through April 2006, approximately $3.4 million for a total of approximately €2.8 million at a weighted-average exchange rate of 1.22 $/€. The foreign currency exchange contracts mature through April 2006 and were are designed to fix the number of euros required to satisfy the first one-third of dollar denominated purchases of inventory by certain of the Company’s pre-CKJEA Acquisition European subsidiaries. A hypothetical 10% adverse change in the foreign currency exchange rate between the euro and the United States dollar (i.e., an increase in the euro/dollar exchange rate from 1.22 $/€ to 1.34 $/€) would have decreased the unrealized gain on outstanding foreign exchange contracts by approximately $0.3 million at December 31, 2005. The hypothetical change would have reduced the Company’s income from continuing operations before provision for income taxes by a comparable amount when the related inventory is sold.

In January 2006, in connection with the CKJEA Acquisition, the Company entered into euro forward purchase contracts to purchase approximately €146.0 million for $180.0 million. The euro to dollar exchange rate at the close of business on the purchase date resulted in an exchange loss of approximately $2.5 million which the Company recorded in fiscal 2006.

Item 8.    Financial Statements and Supplementary Data.

The information required by Item 8 of Part II is incorporated by reference to the Consolidated Financial Statements filed with this Annual Report on Form 10-K. See Item 15 of Part IV.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

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Item 9A.    Controls and Procedures.

(a) Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal year covered by this Annual Report on Form 10-K. Based on management's evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, the Company has included Management's Annual Report on Internal Control Over Financial Reporting (the ‘‘Management Report’’) in this Form 10-K. Deloitte & Touche LLP, the independent registered public accounting firm of the Company, has audited management's assessment of, and the effectiveness of, the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Management Report appears on page F-1 and the report of Deloitte & Touche LLP appears at pages F-2 to F-3 of this Form 10-K under the captions ‘‘Management's Annual Report on Internal Control Over Financial Reporting’’ and ‘‘Report of Independent Registered Public Accounting Firm’’ and are incorporated herein by reference.

(c) Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting during the Company's fourth fiscal quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B.    Other Information.

None.

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PART III

Item 10. Directors and Executive Officers of the Registrant.

The information required by Item 10 of Part III is incorporated by reference from Executive Officers of the Registrant in Item 1 of Part I included herein and from the Proxy Statement of The Warnaco Group, Inc., relating to the 2006 Annual Meeting of Stockholders, to be filed with the SEC within 120 days of the Fiscal 2005 year-end.

Item 11. Executive Compensation.

The information required by Item 11 of Part III is incorporated by reference from the Proxy Statement of The Warnaco Group, Inc., relating to the 2006 Annual Meeting of Stockholders, to be filed with the SEC within 120 days of the Fiscal 2005 year-end.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 of Part III is incorporated by reference from the Proxy Statement of The Warnaco Group, Inc., relating to the 2006 Annual Meeting of Stockholders, to be filed with the SEC within 120 days of the Fiscal 2005 year-end.

Item 13. Certain Relationships and Related Transactions.

The information required by Item 13 of Part III is incorporated by reference from the Proxy Statement of The Warnaco Group, Inc., relating to the 2006 Annual Meeting of Stockholders, to be filed with the SEC within 120 days of the Fiscal 2005 year-end.

Item 14. Principal Accounting Fees and Services.

The information required by Item 14 of Part III is incorporated by reference from the Proxy Statement of The Warnaco Group, Inc., relating to the 2006 Annual Meeting of Stockholders, to be filed with the SEC within 120 days of the Fiscal 2005 year-end.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

				PAGE
(a)   1.   The Consolidated Financial Statements of The Warnaco Group, Inc.
Management's Annual Report on Internal Control Over Financial Reporting				F-1
Report of Independent Registered Public Accounting Firm				F-2
Report of Independent Registered Public Accounting Firm				F-4
Consolidated Balance Sheets as of December 31, 2005 and January 1, 2005				F-6
Consolidated Statements of Operations for the years ended December 31, 2005 and January 1, 2005 and the periods February 5, 2003 to January 3, 2004 and January 5, 2003 to February 4, 2003				F-7
Consolidated Statements of Stockholders' Equity (Deficiency) and Comprehensive Income (Loss) for the years ended December 31, 2005 and January 1, 2005 and the periods February 5, 2003 to January 3, 2004 and January 5, 2003 to February 4, 2003				F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2005 and January 1, 2005 and the periods February 5, 2003 to January 3, 2004 and January 5, 2003 to February 4, 2003				F-9-F-10
Notes to Consolidated Financial Statements				F-11-F-65
2.   Financial Statement Schedule
Schedule II. Valuation and Qualifying Accounts and Reserves				A-1

All other schedules for which provision is made in the applicable accounting regulations of the SEC which are not included with this additional financial data have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto.

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3. List of Exhibits.

Exhibit No.				Description of Exhibit
2.1				First Amended Joint Plan of Reorganization of The Warnaco Group, Inc. and its Affiliated Debtors in Possession Under Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 99.2 to The Warnaco Group, Inc.'s Form 10-Q filed on November 18, 2002).*
2.2				Disclosure Statement with respect to the First Amended Joint Plan of Reorganization of The Warnaco Group, Inc. and its Affiliated Debtors and Debtors in Possession Under Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 99.3 to The Warnaco Group, Inc.'s Form 10-Q filed November 18, 2002).*
2.3				Stock Purchase Agreement, dated as of August 3, 2004, by and among Warnaco Inc., Ocean Pacific Apparel Corp. and Doyle & Boissiere Fund I, LLC, Anders Brag, Leo Isotolo and Richard A. Baker (incorporated by reference to Exhibit 2.1 to The Warnaco Group, Inc.'s Form 10-Q filed November 10, 2004).*##**
2.4				Stock Purchase Agreement, dated as of December 20, 2005, by and among Warnaco Inc., Fingen Apparel N.V., Fingen S.p.A., Euro Cormar S.p.A., and Calvin Klein, Inc. (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 8-K filed December 23, 2005).* **
2.5				Amendment, dated as of January 30, 2006, to the Stock Purchase Agreement, dated as of December 20, 2005, by and among Warnaco Inc., Fingen Apparel N.V., Fingen S.p.A., Euro Cormar S.p.A., and Calvin Klein, Inc. (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 8-K filed February 3, 2006).*
3.1				Amended and Restated Certificate of Incorporation of The Warnaco Group, Inc. (incorporated by reference to Exhibit 1 to the Form 8-A/A filed by The Warnaco Group, Inc. on February 4, 2003).*
3.2				Bylaws of The Warnaco Group, Inc. (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed by The Warnaco Group, Inc. on April 4, 2003).*
4.1				Registration Rights Agreement, dated as of June 12, 2003, among Warnaco Inc., the Guarantors (as defined therein) and the Initial Purchasers (as defined therein) (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 (File No. 333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries on August 8, 2003).*
4.2				Indenture, dated as of June 12, 2003, among Warnaco Inc., the Guarantors (as defined therein) and the Trustee (as defined therein) (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-4 (File No. 333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries on August 8, 2003).*
4.3				Registration Rights Agreement, dated as of February 4, 2003, among The Warnaco Group, Inc. and certain creditors thereof (as described in the Registration Rights Agreement) (incorporated by reference to Exhibit 4.5 to The Warnaco Group, Inc.'s Form 8-K filed February 10, 2003).*
10.1				Senior Secured Revolving Credit Agreement, dated as of February 4, 2003, among Warnaco Inc., The Warnaco Group, Inc., the Administrative Agent, the Lenders, the Issuing Banks, the Syndication Agent and Salomon Smith Barney Inc. and J.P. Morgan Securities, Inc., as joint lead managers and joint lead book managers (incorporated by reference to Exhibit 99.2 to The Warnaco Group, Inc.'s Form 8-K filed February 10, 2003).*

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Exhibit No.				Description of Exhibit
10.2				Amendment No. 1, Consent and Waiver, dated as of November 12, 2003, to the Senior Secured Revolving Credit Agreement, dated as of February 4, 2003, among Warnaco Inc., The Warnaco Group, Inc., the financial institutions from time to time party thereto as lenders, the financial institutions from time to time party thereto as issuers, Citicorp North America, as administrative agent and collateral agent for the Lenders and the Issuers, JPMorgan Chase Bank, as syndication agent for the Lenders and the Issuers and Bank of America, NA, The CIT Group/Commercial Services Inc., and Congress Financial Corporation (Central), each as a co-documentation agent for the Lenders and Issuers (incorporated by reference to Exhibit 10.2 to Amendment No. 2 to the Registration Statement on Form S-4/A (File No. 333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries on December 18, 2003).*
10.3				Amendment No. 2, dated as of August 1, 2004, to the Credit Agreement, dated as of February 4, 2003 (as amended by Amendment No. 1, Consent and Waiver dated as of November 12, 2003), among Warnaco Inc., The Warnaco Group, Inc., the Lenders, the Issuers, Citicorp North America, as Administrative Agent, JPMorgan Chase Bank, as Syndication Agent and Bank of America, N.A., The CIT Group/Commercial Services, Inc., and Congress Financial Corporation (Central), as Co-Documentation Agents (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.'s Form 10-Q filed November 10, 2004).*
10.4				Amendment No. 3, dated as of September 15, 2005, to the Credit Agreement, dated as of February 4, 2003 (as amended by Amendment No. 1, Consent and Waiver dated as of November 12, 2003, as further amended by that certain Amendment No. 2 dated as of August 1, 2004), among Warnaco Inc., The Warnaco Group, Inc., the Lenders, the Issuers, Citicorp North America, as Administrative Agent, JPMorgan Chase Bank, as Syndication Agent and Bank of America, N.A., The CIT Group/Commercial Services, Inc., and Congress Financial Corporation (Central), as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 8-K filed September 20, 2005).*
10.5				Amended and Restated Credit Agreement, dated as of January 31, 2006, by and among Warnaco Inc., The Warnaco Group, Inc., the Lenders (as defined therein), the Issuers (as defined therein), Citicorp North America, Inc., as revolving facility agent, term facility agent and collateral agent, JPMorgan Chase Bank, N.A., as syndication agent, and Bank of America, NA, The CIT Group/Commercial Services, Inc. and Wachovia Capital Finance Corporation (Central) f/k/a Congress Financial Corporation (Central), in each case, as co-documentation agents (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 8-K/A filed February 15, 2006).*
10.6				Amended and Restated Guaranty, dated as of January 31, 2006, by and among The Warnaco Group, Inc., the Subsidiary Guarantors (as defined therein) and Citicorp North America, Inc., as collateral agent (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.'s Form 8-K/A filed February 15, 2006).*
10.7				Amended and Restated Pledge and Security Agreement, dated as of January 31, 2006, by and among Warnaco Inc., the other Grantors (as defined therein) and Citicorp North America, Inc., as collateral agent (incorporated by reference to Exhibit 10.3 to The Warnaco Group, Inc.'s Form 8-K/A filed February 15, 2006).*
10.8				Intercreditor and Collateral Agency Agreement, dated as of January 31, 2006, by and among Citicorp North America, Inc., as revolving facility agent, term facility agent and collateral agent, The Warnaco Group, Inc., Warnaco Inc. and each other Loan Party (as defined therein) (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.'s Form 8-K/A filed February 15, 2006).*
10.9				Warnaco Employee Retirement Plan (incorporated by reference to Exhibit 10.11 to The Warnaco Group, Inc.'s Registration Statement on Form S-1 (File No. 33-4587)).*

73

Exhibit No.				Description of Exhibit
10.10				The Warnaco Group, Inc. 2003 Stock Incentive Plan (incorporated by reference to Appendix D to The Warnaco Group, Inc.'s Proxy Statement filed April 29, 2003).*
10.11				The Warnaco Group, Inc. Incentive Compensation Plan (incorporated by reference to Appendix E to The Warnaco Group, Inc.'s Proxy Statement filed April 29, 2003).*
10.12				The Warnaco Group, Inc. 2005 Stock Incentive Plan (incorporated by reference to Annex A to The Warnaco Group, Inc.'s 2005 Proxy Statement on Schedule 14A filed on April 12, 2005).*
10.13				The Warnaco Group, Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 8-K filed April 28, 2005).*
10.14				2005 Directors' Compensation (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.'s Form 10-Q filed May 10, 2005).*
10.15				2005 Base Salaries of Named Executive Officers (incorporated by reference to Exhibit 10.5 to The Warnaco Group, Inc.'s Form 10-Q filed May 10, 2005).*
10.16				2005 Performance Bonus Targets for Named Executive Officers (incorporated by reference to Exhibit 10.6 to The Warnaco Group, Inc.'s Form 10-Q filed May 10, 2005).*
10.17				2004 Bonus Awards (incorporated by reference to Exhibit 10.7 to The Warnaco Group, Inc.'s Form 10-Q filed May 10, 2005).*
10.18				Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.'s Form 8-K filed May 25, 2005).*
10.19				Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3 to The Warnaco Group, Inc.'s Form 8-K filed May 25, 2005).*
10.20				Form of Restricted Stock Unit Award Agreement for Joseph R. Gromek (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.'s Form 8-K filed May 25, 2005).*
10.21				Form of The Warnaco Group, Inc. 2005 Stock Incentive Plan Notice of Grant of Restricted Stock (incorporated by reference to Exhibit 10.8 to The Warnaco Group, Inc.'s Form 8-K filed August 12, 2005).*
10.22				Offer Letter and Employee Waiver, Release and Discharge of Claims pursuant to the Key Domestic Employee Retention Plan for Stanley P. Silverstein, dated November 26, 2001 (incorporated by reference to Exhibit 10.41 to The Warnaco Group, Inc.'s Form 10-K filed July 31, 2002).*
10.23				Employment Agreement, dated as of December 22, 2004, by and between The Warnaco Group, Inc. and Joseph R. Gromek (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 8-K filed December 22, 2004).*
10.24				Letter Agreement, dated as of September 11, 2003, by and between The Warnaco Group, Inc. and Lawrence R. Rutkowski (incorporated by reference to Exhibit 10.36 to Amendment No. 1 to the Registration Statement on Form S-4/A (File No. 333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries on October 30, 2003).*
10.25				Amendment, dated as of August 11, 2005, to the Letter Agreement, dated as of September 11, 2003, by and between The Warnaco Group, Inc. and Lawrence R. Rutkowski (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.'s Form 8-K filed August 12, 2005).*
10.26				Letter Agreement, dated as of April 16, 2004, by and between The Warnaco Group, Inc. and Frank Tworecke (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 10-Q filed May 10, 2005).*
10.27				Letter Agreement, dated as of April 21, 2004, by and between The Warnaco Group, Inc. and Frank Tworecke (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 10-Q filed August 6, 2004).*
10.28				Amendment, dated as of August 11, 2005, to the Letter Agreement, dated as of April 21, 2004, by and between The Warnaco Group, Inc. and Frank Tworecke (incorporated by reference to Exhibit 10.5 to The Warnaco Group, Inc.'s Form 8-K filed August 12, 2005).*

74

Exhibit No.				Description of Exhibit
10.29				Letter Agreement, dated as of June 15, 2004, by and between The Warnaco Group, Inc. and Helen McCluskey (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.'s Form 10-Q filed August 6, 2004).*
10.30				Amendment, dated as of August 11, 2005, to the Letter Agreement, dated as of June 15, 2004, by and between The Warnaco Group, Inc. and Helen McCluskey (incorporated by reference to Exhibit 10.7 to The Warnaco Group, Inc.'s Form 8-K filed August 12, 2005).*
10.31				Employment Agreement, dated as of August 11, 2005, by and between The Warnaco Group, Inc. and Roger A. Williams (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 8-K filed August 12, 2005).*
10.32				Employment Agreement, dated as of August 11, 2005, by and between The Warnaco Group, Inc. and Stanley P. Silverstein (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.'s Form 8-K filed August 12, 2005).*
10.33				Employment Agreement, dated as of August 11, 2005, by and between The Warnaco Group, Inc. and Jay A. Galluzzo (incorporated by reference to Exhibit 10.3 to The Warnaco Group, Inc.'s Form 8-K filed August 12, 2005).*
10.34				Letter Agreement, dated as of April 6, 2005, by and between The Warnaco Group, Inc. and Dwight Meyer (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 8-K filed April 8, 2005).*
10.35				Amendment, dated as of August 11, 2005, to the Letter Agreement, dated as of April 6, 2005, by and between The Warnaco Group, Inc. and Dwight Meyer (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.'s Form 8-K filed August 12, 2005).*
10.36				Employment Agreement, dated as of September 12, 2005 by and between The Warnaco Group, Inc. and Elizabeth Wood (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 8-K filed September 14, 2005).*
10.37				Amended and Restated License Agreement, dated as of January 1, 1996, between Polo Ralph Lauren, L.P. and Warnaco Inc. (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.'s Form 10-Q filed November 14, 1997).*
10.38				Amended and Restated Design Services Agreement, dated as of January 1, 1996, between Polo Ralph Lauren Enterprises, L.P. and Warnaco Inc. (incorporated by reference to Exhibit 10.5 to The Warnaco Group, Inc.'s Form 10-Q filed November 14, 1997).*
10.39				License Agreement and Design Services Agreement Amendment and Extension, dated as of September 19, 2003, by and among PRL USA, Inc., as successor to Polo Ralph Lauren L.P., The Polo/Lauren Company, L.P., Polo Ralph Lauren Corporation, as successor to Polo Ralph Lauren L.P., and Warnaco Inc. and Warnaco of Canada Company (incorporated by reference to Exhibit 10.2 to the Warnaco Group, Inc.'s Form 10-Q filed November 18, 2003).*#
10.40				License Agreement, dated as of August 4, 1994, between Calvin Klein, Inc. and Calvin Klein Jeanswear Company (incorporated by reference to Exhibit 10.20 to Designer Holdings, Ltd.'s Registration Statement on Form S-1 (File No. 333-02236)).*
10.41				Amendment to the Calvin Klein License Agreement, dated as of December 7, 1994 (incorporated by reference to Exhibit 10.21 to Designer Holdings, Ltd.'s Registration Statement on Form S-1 (File No. 333-02236)).*
10.42				Amendment to the Calvin Klein License Agreement, dated as of January 10, 1995 (incorporated by reference to Exhibit 10.22 to Designer Holdings, Ltd.'s Registration Statement on Form S-1 (File No. 333-02236)).*
10.43				Amendment to the Calvin Klein License Agreement, dated as of February 28, 1995 (incorporated by reference to Exhibit 10.23 to Designer Holdings, Ltd.'s Registration Statement on Form S-1 (File No. 333-02236)).*
10.44				Amendment to the Calvin Klein License Agreement, dated as of April 22, 1996 (incorporated by reference to Exhibit 10.38 to Designer Holdings, Ltd.'s Registration Statement on Form S-1 (File No. 333-02236)).*

75

Exhibit No.				Description of Exhibit
10.45				Amendment and Agreement, dated June 5, 2003, by and among Calvin Klein, Inc., Phillips-Van Heusen Corporation, Warnaco Inc., Calvin Klein Jeanswear Company, and CKJ Holdings Inc. (incorporated by reference to Exhibit 10.25 to Amendment No. 2 to the Registration Statement on Form S-4/A (File No. 333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries on December 18, 2003).*##
10.46				Consent and Amendment No. 1 to the Facility Agreement, dated as of February 5, 2002 (incorporated by reference to Exhibit 10.49 to The Warnaco Group, Inc.'s Form 10-K filed July 31, 2002).*
10.47				Speedo Settlement Agreement, dated November 25, 2002, by and between Speedo International Limited and Authentic Fitness Corporation, Authentic Fitness Products, Inc., The Warnaco Group, Inc. and Warnaco Inc. (incorporated by reference to Exhibit 10.28 to The Warnaco Group, Inc.'s Form 10-K filed April 4, 2003).*
10.48				Amendment to the Speedo Licenses, dated as of November 25, 2002, by and among Speedo International Limited, Authentic Fitness Corporation and Authentic Fitness Products, Inc. (incorporated by reference to Exhibit 10.29 to The Warnaco Group, Inc.'s Form 10-K filed April 4, 2003).*##
10.49				Settlement Agreement, dated January 22, 2001, by and between Calvin Klein Trademark Trust, Calvin Klein, Inc. and Calvin Klein and Linda Wachner, The Warnaco Group, Inc., Warnaco Inc., Designer Holdings, Ltd, CKJ Holdings, Inc., Jeanswear Holdings Inc., Calvin Klein Jeanswear Company and Outlet Holdings, Inc. (incorporated by reference to Exhibit 10.57 to The Warnaco Group, Inc.'s Form 10-K filed July 31, 2002).*##
10.50				License Agreement, dated as of March 1, 2003, by and between Nautica Apparel, Inc. and Authentic Fitness Corporation (incorporated by reference to Exhibit 10.31 to The Warnaco Group, Inc.'s Form 10-K filed April 4, 2003).*##
10.51				Amended and Restated Master Agreement of Sale, dated as of September 30, 1998, among Warnaco Inc., as Originator, and Gregory Street, Inc., as Buyer and Servicer (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.'s Form 10-Q filed November 16, 1998).*
10.52				Master Agreement of Sale, dated as of September 30, 1998, among Calvin Klein Jeanswear Company, as Originator, and Gregory Street, Inc., as Buyer and Servicer (incorporated by reference to Exhibit 10.5 to The Warnaco Group, Inc.'s Form 10-Q filed November 16, 1998).*
10.53				Purchase and Sale Agreement, dated as of September 30, 1998, among Gregory Street, Inc., as Seller and initial Servicer and Warnaco Operations Corporation, as Buyer (incorporated by reference to Exhibit 10.6 to The Warnaco Group, Inc.'s Form 10-Q filed November 16, 1998).*
10.54				Parallel Purchase Commitment, dated as of September 30, 1998, among Warnaco Operations Corporation, as Seller and certain commercial lending institutions, as the Banks, and Gregory Street, Inc., as the initial Servicer and The Bank of Nova Scotia, as Agent (incorporated by reference to Exhibit 10.7 to The Warnaco Group, Inc.'s Form 10-Q filed November 16, 1998).*
10.55				Receivables Purchase Agreement, dated as of September 30, 1998, among Warnaco Operations Corporation, as Seller, Gregory Street, Inc., as Servicer, Liberty Street Funding Corp., and Corporate Asset Funding Company, Inc. as Investors and The Bank of Nova Scotia, as Agent, and Citicorp North America, Inc., as Co-Agent (incorporated by reference to Exhibit 10.8 to The Warnaco Group, Inc.'s Form 10-Q filed November 16, 1998).*

76

Exhibit No.				Description of Exhibit
10.56				Settlement Agreement, dated November 15, 2002, by and among Linda J. Wachner, the Debtors, the Bank of Nova Scotia and Citibank, N.A. in their capacity as Debt Coordinators for the Debtors' Prepetition Secured Lenders and the Official Committee of Unsecured Creditors of the Debtors (incorporated by reference to Exhibit 10.38 to The Warnaco Group, Inc.'s Form 10-K filed April 4, 2003).*
10.57				Acquisition Agreement, dated as of March 14, 1994, by and among Calvin Klein, Inc., The Warnaco Group, Inc. and Warnaco Inc. (incorporated by reference to Exhibit 10.6 to The Warnaco Group, Inc.'s Form 10-Q filed on May 24, 1994).*
10.58				Sublicense Agreement, dated as of November 2003, by and between Sweetface Fashion Company, LLC and Warnaco Inc. (incorporated by reference to Exhibit 10.39 to The Warnaco Group, Inc.'s Form 10-K filed March 18, 2004).*##
10.59				License Agreement, dated as of June 21, 2004, by and between The Warnaco Group, Inc. and Michael Kors (USA), Inc. (incorporated by reference to Exhibit 10.3 to The Warnaco Group, Inc.'s Form 10-Q filed August 6, 2004).*##
10.60				License Agreement, dated as of July 26, 2004, by and between Calvin Klein, Inc. and Warnaco Swimwear Inc. (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.'s Form 10-Q filed November 10, 2004).*##
10.61				License Agreement, dated as of December 1, 2004, by and between The Warnaco Group, Inc. and SAP America, Inc. (incorporated by reference to Exhibit 10.46 to The Warnaco Group, Inc.'s Form 10-K filed March 17, 2005) *#
10.62				Amended and Restated License Agreement, dated as of January 1, 1997, by and between Calvin Klein, Inc. and Calvin Klein Jeanswear Asia Ltd.†#
10.63				Amendment and Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., WF Overseas Fashion C.V. and the CKJ Entities (as defined therein), with respect to the Amended and Restated License Agreement, dated as of January 1, 1997, by and between Calvin Klein, Inc. and Calvin Klein Jeanswear Asia Ltd.†#
10.64				Amended and Restated Letter Agreement, dated as of March 6, 2002, by and among Calvin Klein, Inc., CK Jeanswear N.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.p.A.†#
10.65				Letter Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., WF Overseas Fashion C.V., CK Jeanswear N.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.p.A., with respect to the Amended and Restated Letter Agreement, dated as of March 6, 2002, by and among Calvin Klein, Inc., CK Jeanswear N.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.p.A.†#
10.66				Amended and Restated License Agreement, dated January 1, 1997, by and between Calvin Klein, Inc. and CK Jeanswear Europe, S.p.A.†#
10.67				Letter Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., WF Overseas Fashion C.V. and CK Jeanswear Europe, S.p.A., with respect to the Amended and Restated License Agreement, dated January 1, 1997, by and between Calvin Klein, Inc. and CK Jeanswear Europe, S.p.A.†#
10.68				License Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V. (re: Bridge Apparel).†#
10.69				License Agreement, dated as of January 31, 2006, by and among Calvin, Klein, Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V. (re: Bridge Accessories).†#
10.70				License Agreement, dated as of January 31, 2006, by and among Calvin, Klein, Inc., CK Jeanswear Europe S.p.A, CK Jeanswear Asia Limited and WF Overseas Fashion C.V. (re: Jean Accessories).†#
10.71				Letter Agreement, dated January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear N.V., CK Jeanswear Europe S.p.A., CK Jeanswear Asia Limited and WF Overseas Fashion C.V. (re: Bridge Store).†#
12.1				Computation of Ratio of Earnings to Fixed Charges.†

77

Exhibit No.				Description of Exhibit
21.1				Subsidiaries of The Warnaco Group, Inc.†
23.1				Consent of Independent Registered Public Accounting Firm.†
31.1				Certification of Chief Executive Officer of The Warnaco Group, Inc. pursuant to Rule 13a− 14(a)/15d-14(a) of the Securities Exchange Act of 1934.†
31.2				Certification of Chief Financial Officer of The Warnaco Group, Inc. pursuant to Rule 13a− 14(a)/15d-14(a) of the Securities Exchange Act of 1934.†
32.1				Certifications of Chief Executive Officer and Chief Financial Officer of The Warnaco Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)

*	Previously filed.

**	The schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish copies of any of the schedules to the Securities and Exchange Commission upon request.

†	Filed herewith.

#	Certain portions of this exhibit omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

##	Certain portions of this exhibit omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment, which request was granted.

78

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 2nd day of March, 2006.

				THE WARNACO GROUP, INC.
				By:				/s/ JOSEPH R. GROMEK                 Name: Joseph R. Gromek Title: President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

SIGNATURE		TITLE		DATE
/s/ JOSEPH R. GROMEK		Director, President and Chief Executive Officer (Principal Executive Officer)		March 2, 2006
(Joseph R. Gromek)
/s/ LAWRENCE R. RUTKOWSKI		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)		March 2, 2006
(Lawrence R. Rutkowski)
/s/ CHARLES R. PERRIN		Non-Executive Chairman of the Board of Directors		March 2, 2006
(Charles R. Perrin)
/s/ DAVID A. BELL		Director		March 2, 2006
(David A. Bell)
/s/ ROBERT A. BOWMAN		Director		March 2, 2006
(Robert A. Bowman)
/s/ RICHARD KARL GOELTZ		Director		March 2, 2006
(Richard Karl Goeltz)
/s/ SHEILA A. HOPKINS		Director		March 2, 2006
(Sheila A. Hopkins)
/s/ DONALD SEELEY		Director		March 2, 2006
(Donald Seeley)
/s/ CHERYL NIDO TURPIN		Director		March 2, 2006
(Cheryl Nido Turpin)

79

MANAGEMENT'S ANNUAL REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

	•	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

	•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

	•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2005. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on this assessment, management concluded that, as of December 31, 2005, the Company's internal control over financial reporting was effective.

The Company's independent registered public accounting firm has issued a report on our assessment of the Company's internal control over financial reporting. This report appears on pages F-2 and F-3.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of The Warnaco Group, Inc.
New York, New York

We have audited management's assessment, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting on Page F-1, that The Warnaco Group, Inc. and subsidiaries (the ‘‘Company’’) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

F-2

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the fiscal year ended December 31, 2005 of The Warnaco Group, Inc. and subsidiaries and our report dated March 2, 2006 expressed an unqualified opinion on those financial statements and financial statement schedule.

DELOITTE & TOUCHE LLP

New York, New York
March 2, 2006

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
The Warnaco Group, Inc.
New York, New York

We have audited the accompanying consolidated balance sheets of The Warnaco Group, Inc. and subsidiaries (the ‘‘Company’’) as of December 31, 2005 and January 1, 2005, and the related consolidated statements of operations, stockholders' equity (deficiency) and comprehensive income (loss), and cash flows for the fiscal years ended December 31, 2005 and January 1, 2005, the period February 5, 2003 to January 3, 2004 (‘‘Successor Company operations’’), and the period January 5, 2003 to February 4, 2003 (‘‘Predecessor Company operations’’). Our audits also included the financial statement schedule listed in the Index at Item 15(a)2. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Successor Company consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Warnaco Group, Inc. and subsidiaries as of December 31, 2005 and January 1, 2005, and the results of its operations and its cash flows for the fiscal years ended December 31, 2005 and January 1, 2005 and the period February 5, 2003 to January 3, 2004, in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the Predecessor Company consolidated financial statements referred to above present fairly, in all material respects, the results of its operations and its cash flows for the period January 5, 2003 to February 4, 2003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 3 to the consolidated financial statements, on January 16, 2003, the Bankruptcy Court entered an order confirming the Company's Reorganization Plan which became effective on February 4, 2003. Accordingly, the accompanying financial statements have been prepared in conformity with AICPA Statement of Position 90-7, ‘‘Financial Reporting for Entities in Reorganization Under the Bankruptcy Code,’’ for the Successor Company as a new entity with assets, liabilities, and a capital structure having carrying values not comparable with prior periods as described in Note 3.

As discussed in Note 10 to the consolidated financial statements, during the period February 5, 2003 to January 3, 2004, the Successor Company changed its method of accounting for defined benefit pension plans.

F-4

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2006 expressed an unqualified opinion on management's assessment of the effectiveness of the Company's internal control over financial reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

DELOITTE & TOUCHE LLP

New York, New York
March 2, 2006

F-5

THE WARNACO GROUP, INC.

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, excluding per share data)

				December 31, 2005				January 1, 2005
ASSETS
Current assets:
Cash and cash equivalents				$	164,201			$	65,588
Accounts receivable, less reserves of $48,258 and $54,943 as of December 31, 2005 and January 1, 2005, respectively					213,364				219,805
Inventories					326,274				335,651
Prepaid expenses and other current assets					43,797				43,137
Assets held for sale					1,112				1,547
Assets of discontinued operations					—				2,618
Deferred income taxes					2,666				727
Total current assets					751,414				669,073
Property, plant and equipment, net					116,995				106,937
Other assets:
Licenses, trademarks and other intangible assets, net					302,173				305,505
Deferred financing costs, net					10,928				11,566
Notes receivable					1,072				6,995
Deferred income taxes					3,736				5,568
Other assets					7,136				4,589
Goodwill					28,762				43,671
Total other assets					353,807				377,894
Total assets				$	1,222,216			$	1,153,904
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable				$	126,333			$	122,418
Accrued liabilities					89,807				83,244
Accrued pension obligations					12,919				5,400
Liabilities of discontinued operations					—				1,450
Accrued income taxes payable					22,162				20,590
Deferred income taxes					1,588				1,746
Total current liabilities					252,809				234,848
Long-term debt					210,000				210,799
Deferred income taxes					74,466				67,744
Retirement obligations					33,039				44,293
Other long-term liabilities					19,855				19,271
Commitments and contingencies: (See Notes 2, 4, 6, 9, 10, 15, 18, 19, 21 and 22)
Stockholders' equity
Preferred stock:
Preferred stock, $0.01 par value, 20,000,000 (112,500 designated as Series A) authorized and none issued or outstanding as of December 31, 2005 and January 1, 2005					—				—
Common stock: $0.01 par value, 112,500,000 shares authorized, 46,146,869 and 45,655,515 issued as of December 31, 2005 and January 1, 2005, respectively					461				456
Additional paid-in capital					533,565				518,591
Accumulated other comprehensive income					4,668				15,561
Retained earnings					94,406				42,354
Treasury stock, at cost, 42,498 and 638 shares as of December 31, 2005 and January 1, 2005, respectively					(1,053	)			(13	)
Total stockholders' equity					632,047				576,949
Total liabilities and stockholders' equity				$	1,222,216			$	1,153,904

See Notes to Consolidated Financial Statements.

F-6

THE WARNACO GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, excluding per share amounts)

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Net revenues				$	1,504,415			$	1,424,181			$	1,264,301			$	110,120
Cost of goods sold					994,799				951,198				872,170				67,283
Gross profit					509,616				472,983				392,131				42,837
Selling, general and administrative expenses					406,664				378,502				319,903				32,156
Pension expense (income)					1,563				(6,784	)			(6,811	)			—
Amortization of sales order backlog					—				—				11,800				—
Restructuring expense (income)					(503	)			5,130				19,101				—
Reorganization expense					—				—				—				29,805
Operating income (loss)					101,892				96,135				48,138				(19,124	)
Gain on cancellation of pre-petition indebtedness					—				—				—				(1,692,696	)
Fresh start adjustments					—				—				—				(765,726	)
Other (income) loss					1,019				(2,197	)			(2,817	)			359
Interest expense, net (a)					18,080				19,821				20,641				1,751
Income from continuing operations before provision for income taxes					82,793				78,511				30,314				2,437,188
Provision for income taxes					30,556				31,636				12,084				78,150
Income from continuing operations					52,237				46,875				18,230				2,359,038
Loss from discontinued operations, net of taxes					(185	)			(4,358	)			(18,393	)			(501	)
Net income (loss)				$	52,052			$	42,517			$	(163	)		$	2,358,537
Basic income (loss) per common share:
Income from continuing operations				$	1.14			$	1.03			$	0.40			$	44.52
Loss from discontinued operations					(0.01	)			(0.10	)			(0.41	)			(0.01	)
Net income (loss)				$	1.13			$	0.93			$	(0.01	)		$	44.51
Diluted income per common share:
Income (loss) from continuing operations				$	1.12			$	1.02			$	0.40			$	44.52
Loss from discontinued operations					(0.01	)			(0.09	)			(0.40	)			(0.01	)
Net income				$	1.11			$	0.93			$	—			$	44.51
Weighted average number of shares outstanding used in computing income (loss) per common share:
Basic					45,872,308				45,418,069				45,060,724				52,989,965
Diluted					46,804,053				46,178,535				45,462,560				52,989,965

(a)	Includes interest income of $3,410, $1,905, $616 and $46 for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004 and the period January 5, 2003 to February 4, 2003, respectively. Contractual interest for the Predecessor was $15,019 for the period January 5, 2003 to February 4, 2003.

See Notes to Consolidated Financial Statements.

F-7

THE WARNACO GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
AND COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)

				Common Stock				Additional Paid-in Capital				Accumulated Other Comprehensive Income/(Loss)				Retained Earnings (Deficit)				Treasury Stock				Total
PREDECESSOR
Balance at January 4, 2003				$	654			$	908,899			$	(93,223	)		$	(2,358,537	)		$	(313,889	)		$	(1,856,096	)
Net income																	2,358,537								2,358,537
Foreign currency translation adjustments													244												244
Unrealized gain on marketable securities, net of tax													308												308
Comprehensive income																									2,359,089
Amortization of unearned stock compensation									8																8
Reorganization					(204	)			(405,809	)			92,671								313,889				547
Balance at February 4, 2003					450				503,098				—				—				—				503,548
SUCCESSOR
Balance at February 4, 2003					450				503,098				—				—				—				503,548
Net loss																	(163	)							(163	)
Foreign currency translation adjustments													11,556												11,556
Unrealized gain on marketable securities, net of tax													35												35
Comprehensive income																									11,428
Purchase of treasury stock related to employee stock compensation plans																					(385	)			(385	)
Stock issued in connection with stock compensation plans					2				489												—				491
Compensation expense in connection with employee stock compensation plans									5,530																5,530
Balance at January 3, 2004					452				509,117				11,591				(163	)			(385	)			520,612
Net income																	42,517								42,517
Foreign currency translation adjustments													3,988												3,988
Unrealized loss on marketable securities, net of tax													(18	)											(18	)
Comprehensive income																									46,487
Purchase of treasury stock related to stock compensation plans																					(1,030	)			(1,030	)
Stock issued in connection with stock compensation plans					4				2,353												1,402				3,759
Compensation expense in connection with employee stock compensation plans									7,121																7,121
Balance at January 1, 2005					456				518,591				15,561				42,354				(13	)			576,949
Net income																	52,052								52,052
Foreign currency translation adjustments													(11,039	)											(11,039	)
Other													146												146
Comprehensive income																									41,159
Stock issued in connection with stock compensation plans					5				3,462																3,467
Compensation expense in connection with employee stock compensation plans									11,512																11,512
Purchase of treasury stock related to stock compensation plans																					(818	)			(818	)
Repurchases of common stock																					(222	)			(222	)
Balance at December 31, 2005				$	461			$	533,565			$	4,668			$	94,406			$	(1,053	)		$	632,047

See Notes to Consolidated Financial Statements.

F-8

THE WARNACO GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				Period February 5, 2003 to January 3, 2004				Period January 5, 2003 to February 4, 2003
Cash flows from operating activities:
Net income (loss)				$	52,052			$	42,517			$	(163	)		$	2,358,537
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss from discontinued operations					185				4,358				18,393				501
Depreciation and amortization					33,695				32,456				43,474				4,321
Non – cash restructuring expense					640				677				8,356				—
Non – cash reorganization expense					—				—				—				15,561
Stock compensation					11,512				7,121				5,530				8
Loss on sale of White Stag trademark					—				—				3,829				—
Amortization of deferred financing costs					2,228				2,268				1,682				463
Loss (gain) on sale of assets					199				(704	)			(1,035	)			—
Gain on cancellation of pre-petition indebtedness					—				—				—				(1,692,696	)
Fresh start adjustments					—				—				—				(765,726	)
Provision for trade and other bad debts					2,929				508				589				190
Inventory writedown					29,106				28,926				18,374				3,456
Provision (benefit) for deferred income tax					16,863				20,520				(2,191	)			77,584
Foreign exchange gain					1,016				(1,958	)			(5,211	)			—
Equity in earnings of affiliate					(47	)			—				—				—
Landlord reimbursements					966				8,482				2,709				—
Change in operating assets and liabilities:
Accounts receivable					(886	)			(7,715	)			(19,258	)			(6,417	)
Inventories					(27,062	)			(84,650	)			35,283				(28,254	)
Prepaid expenses and other assets					(997	)			8,236				7,466				(6,640	)
Accounts payable, accrued expenses and other liabilities					4,533				(12,072	)			(31,196	)			14,567
Accrued income taxes					10,110				5,846				1,903				274
Net cash provided by (used in) operating activities from continuing operations					137,042				54,816				88,534				(24,271	)
Net cash provided by (used in) operating activities from discontinued operations					1,024				(4,497	)			(4,946	)			(655	)
Net cash provided by (used in) operating activities					138,066				50,319				83,588				(24,926	)
Cash flows from investing activities:
Proceeds on disposal of assets and collection of notes receivable					6,346				24,046				10,687				—
Purchase of property, plant & equipment					(35,325	)			(29,644	)			(28,710	)			(643	)
Business acquisitions, net of cash acquired					(1,514	)			(40,785	)			—				—
Payments related to the CKJEA Acquisition					(1,901	)			—				—				—
Purchase of intangible asset					(4,333	)			—				—				—
Net cash used in investing activities from continuing operations					(36,727	)			(46,383	)			(18,023	)			(643	)
Net cash provided by (used in) investing activities from discontinued operations					—				1,137				(484	)			(102	)
Net cash used in investing activities					(36,727	)			(45,246	)			(18,507	)			(745	)

(continued)

F-9

THE WARNACO GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				Period February 5, 2003 to January 3, 2004				Period January 5, 2003 to February 4, 2003
Cash flows from financing activities:
Repayments of GECC debt				$	—			$	—			$	(4,890	)		$	(715	)
Repayments of capital lease obligations					(405	)			(333	)			(288	)			—
Payment of debt assumed on acquisition of subsidiary					—				(1,000	)			—				—
Repayments of Second Lien Notes					—				—				(200,942	)			—
Payment of deferred financing costs					(1,625	)			(997	)			(9,233	)			—
Proceeds from the issuance of Senior Notes due 2013					—				—				210,000				—
Borrowings (repayments) under revolving credit facility					—				—				(39,200	)			39,200
Proceeds from issuance of stock					3,005				3,997				183				—
Purchase of treasury stock					(1,040	)			(1,030	)			(385	)			—
Repayments of pre-petition debt					—				—				—				(106,112	)
Other					—				—				(100	)			—
Net cash provided by (used in) financing activities					(65	)			637				(44,855	)			(67,627	)
Translation adjustments					(2,661	)			6,421				12,525				(21	)
Increase (decrease) in cash and cash equivalents					98,613				12,131				32,751				(93,319	)
Cash and cash equivalents, excluding restricted cash, at beginning of period					65,588				53,457				20,706				114,025
Cash and cash equivalents, excluding restricted cash, at end of period				$	164,201			$	65,588			$	53,457			$	20,706

See Notes to Consolidated Financial Statements.

F-10

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Note 1—Nature of Operations and Summary of Significant Accounting Policies

Organization: The Warnaco Group, Inc. (‘‘Warnaco Group’’ and, collectively with its subsidiaries, the ‘‘Company’’) was incorporated in Delaware on March 14, 1986 and, on May 10, 1986, acquired substantially all of the outstanding shares of Warnaco Inc. (‘‘Warnaco’’). Warnaco is the principal operating subsidiary of Warnaco Group. Warnaco Group, Warnaco and certain of Warnaco's subsidiaries were reorganized under Chapter 11 of the U.S. Bankruptcy Code, 11 U.S.C. Sections 101-1330, as amended (the ‘‘Bankruptcy Code’’), effective February 4, 2003 (the ‘‘Effective Date’’). See Note 3.

Nature of Operations: The Company designs, sources, manufactures, markets and licenses a broad line of (i) intimate apparel (including bras, panties, sleepwear, loungewear, shapewear and daywear for women and underwear and sleepwear for men); (ii) sportswear for men, women and juniors (including jeanswear, knit and woven shirts, tops and outerwear); and (iii) swimwear for men, women, juniors and children (including swim accessories and fitness and active apparel). The Company's products are sold under a number of highly recognized owned and licensed brand names. The Company offers a diversified portfolio of brands across multiple distribution channels to a wide range of customers. The Company distributes its products to customers, both domestically and internationally, through a variety of channels, including department and specialty stores, independent retailers, chain stores, membership clubs, mass merchandisers and the internet. The Company also currently operates 121 Calvin Klein^® retail stores worldwide (consisting of 59 stores directly operated by the Company, including one on-line store, and 62 stores operated under retail licenses or distributor agreements). The Company’s Swimwear Group also operates two Speedo^® outlet stores which opened in July 2005 and one on-line store.

Basis of Consolidation and Presentation: The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. References in these consolidated financial statements to the ‘‘Predecessor’’ refer to the Company prior to February 4, 2003. References to the ‘‘Successor’’ refer to the Company on and after February 4, 2003 after giving effect to the implementation of fresh start accounting.

The Company operates on a fiscal year basis ending on the Saturday closest to December 31. The period January 2, 2005 to December 31, 2005 (‘‘Fiscal 2005’’), the period January 4, 2004 to January 1, 2005 (‘‘Fiscal 2004’’) and the period February 5, 2003 to January 3, 2004 contained fifty-two weeks, fifty-two weeks and forty-eight weeks, respectively, of operations of the Successor. The period January 5, 2003 to February 4, 2003 contained four weeks of operations of the Predecessor.

All inter-company accounts have been eliminated in consolidation.

The accompanying consolidated financial statements of the Predecessor for the period January 5, 2003 to February 4, 2003 have been presented in accordance with American Institute of Certified Public Accountants Statement of Position (‘‘SOP’’) 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code (‘‘SOP 90-7’’). In the Chapter 11 Cases (as defined in Note 3), substantially all unsecured liabilities and under-secured liabilities as of June 11, 2001 were subject to compromise or other treatment under the First Amended Joint Plan of Reorganization of The Warnaco Group, Inc. and Its Affiliated Debtors and Debtors-In-Possession Under Chapter 11 of the Bankruptcy Code (the ‘‘Reorganization Plan’’).

Pursuant to SOP 90-7, professional fees and other costs associated with the Chapter 11 Cases were expensed as incurred and reported as reorganization items. Interest expense was reported only to the extent that it was to be paid during the Chapter 11 Cases.

Upon emergence from bankruptcy on February 4, 2003, the Company adopted fresh start reporting under the provisions of SOP 90-7. Pursuant to the provisions of SOP 90-7, (i) the Company's reorganization value of $750,000 was allocated to the fair value of the Company's assets and liabilities;

F-11

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

(ii) the Company's accumulated deficit was eliminated; and (iii) the Class A Common Stock, par value $0.01 per share, issued by the Predecessor (the ‘‘Old Common Stock’’) was cancelled. In addition, approximately $2,499,385 of the Company's outstanding pre-petition debt and liabilities were discharged. See Note 3.

Use of Estimates: The Company uses estimates and assumptions in the preparation of its financial statements which affect (i) the reported amounts of assets and liabilities at the date of the consolidated financial statements and (ii) the reported amounts of revenues and expenses. Actual results could materially differ from these estimates. The estimates the Company makes are based upon historical factors, current circumstances and the experience and judgment of the Company's management. The Company evaluates its assumptions and estimates on an ongoing basis and may employ outside experts to assist in its evaluations. The Company believes that the use of estimates affects the application of all of the Company's significant accounting policies and procedures.

Revenue Recognition: The Company recognizes revenue when goods are shipped to customers and title and risk of loss have passed, net of estimated customer returns, allowances and other discounts. The Company recognizes revenue from its consignment accounts and retail stores when goods are sold to consumers, net of allowances for future returns. The determination of allowances and returns involves the use of significant judgment and estimates by the Company. The Company bases its estimates of allowance rates on past experience by product line and account, the financial stability of its customers, the expected rate of retail sales and general economic and retail forecasts. The Company reviews and adjusts its accrual rates each month based on its current experience. During the Company's monthly review, the Company also considers its accounts receivable collection rate and the nature and amount of customer deductions and requests for promotion assistance. The Company believes it is likely that its accrual rates will vary over time and could change materially if the Company's mix of customers, channels of distribution or product mix changes. Current rates of accrual for sales allowances, returns and discounts vary by customer. Revenues from the licensing or sub-licensing of certain trademarks are recognized when the underlying royalties are earned.

Cost of Goods Sold: Cost of goods sold for the Successor consists of the cost of products produced or purchased and certain period costs related to the product procurement and manufacturing process. Product costs include: (i) material, direct labor and overhead (including the costs incurred by external contractors); (ii) duty, quota and related tariffs; (iii) in-bound freight and traffic costs, including inter-plant freight; (iv) procurement and material handling costs; (v) indirect production overhead including inspection, quality control, sample making, production control and planning, cost accounting and preproduction; and (vi) in-stocking costs in the Company's warehouse (in-stocking costs may include but are not limited to costs to receive, unpack and stock product available for sale in its distribution centers). Period costs included in cost of goods sold include: (a) royalty; (b) design and merchandising; (c) prototype costs; (d) manufacturing variances (net of amounts capitalized); (e) loss on seconds; (f) provisions for inventory losses (including provisions for shrinkage and losses on the disposition of excess and obsolete inventory), and (g) direct freight charges incurred to ship finished goods to customers. Costs incurred to store, pick, pack and ship (excluding direct freight charges) inventory to customers are included in shipping and handling costs and are classified in selling, general and administrative (‘‘SG&A’’) expenses. The Company's gross profit and gross margin may not be directly comparable to those of its competitors as income statement classifications of certain expenses may vary by company.

Cash and Cash Equivalents: Cash and cash equivalents include cash in banks, demand deposits and investments in short-term marketable securities with maturities of 90 days or less. Restricted cash on the consolidated statements of cash flows relates to restricted cash balances as of January 5, 2003 and February 4, 2003. The Company did not have any restricted cash balances as of January 3, 2004, January 1, 2005 and December 31, 2005.

F-12

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Accounts Receivable: The Company maintains reserves for estimated amounts that the Company does not expect to collect from its trade customers. Accounts receivable reserves include amounts the Company expects its customers to deduct for returns, allowances, trade discounts, markdowns, amounts for accounts that go out of business or seek the protection of the Bankruptcy Code and amounts related to charges in dispute with customers. The Company's estimate of the allowance amounts that are necessary includes amounts for specific deductions the Company has authorized and an amount for other estimated losses. Adjustments for specific account allowances and negotiated settlements of customer deductions are recorded as deductions to revenue in the period the specific adjustment is identified. The provision for accounts receivable allowances is affected by general economic conditions, the financial condition of the Company's customers, the inventory position of the Company's customers and many other factors. The determination of accounts receivable reserves is subject to significant levels of judgment and estimation by the Company's management. If circumstances change or economic conditions deteriorate, the Company may need to increase the reserve significantly. As of December 31, 2005 and January 1, 2005, the Company recorded $48,258 and $54,943, respectively, of accounts receivable reserves.

Inventories: The Company records purchases of inventory when it assumes title and the risk of loss. The Company values its inventories at the lower of cost, determined on a first-in, first-out basis, or market. The Company evaluates its inventories to determine excess units or slow-moving styles based upon quantities on hand, orders in house and expected future orders. For those items for which the Company believes it has an excess supply or for styles or colors that are obsolete, the Company estimates the net amount that it expects to realize from the sale of such items. The Company's objective is to recognize projected inventory losses at the time the loss is evident rather than when the goods are ultimately sold. The Company's calculation of the reduction in carrying value necessary for the disposition of excess inventory is highly dependent on its projections of future sales of those products and the prices it is able to obtain for such products. The Company reviews its inventory position monthly and adjusts its carrying value for excess or obsolete goods based on revised projections and current market conditions for the disposition of excess and obsolete inventory. If economic conditions worsen, the Company may have to decrease its carrying value of excess or obsolete goods substantially.

Long-lived Assets: As of February 4, 2003, the Company adopted fresh start reporting and, as a result, its long-lived assets, including property, plant and equipment were recorded at their fair values based upon the preliminary appraised values of such assets. Adjustments to the preliminary appraised values were recorded as adjustments to goodwill in the period February 5, 2003 to January 3, 2004. The Company used the work of an independent third party appraisal firm to assist it in determining the fair values of its property, plant and equipment. The Company and the independent third party appraiser determined the fair value of the Company's property, plant and equipment using the planned future use of each asset or group of assets, quoted market prices for assets where a market existed for such assets, the expected future revenue and profitability of the business unit utilizing such assets and the expected future life of such assets. In its determination of fair value, the Company also considered whether an asset would be sold either individually or with other assets and the proceeds the Company expected to receive from such a sale. Long-lived assets in existence at February 4, 2003 are recorded at their fair values net of accumulated depreciation since February 4, 2003. Long-lived assets acquired after February 4, 2003 are recorded at historical costs, net of accumulated depreciation. Assumptions relating to the expected future use of individual assets could affect the fair value of such assets and the depreciation expense recorded related to such assets in the future.

The Company reviews its long-lived assets for possible impairment when events or circumstances indicate that the carrying value of the assets may not be recoverable. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived and intangible assets, which could result in impairment charges in future periods. In addition, depreciation and amortization

F-13

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

expense is affected by the Company's determination of the estimated useful lives of the related assets. The estimated useful lives of fixed assets and finite lived intangible assets are based on their classification and expected usage, as determined by the Company.

Goodwill and Other Intangible Assets: Goodwill represents (i) the amount by which the Company's reorganization value exceeded the fair value of its tangible assets and identified intangible assets less its liabilities allocated in accordance with the provisions of Statement of Financial Accounting Standards (‘‘SFAS’’) No. 141, Business Combinations (‘‘SFAS 141’’), as of February 4, 2003 and (ii) for transactions subsequent to February 4, 2003, the excess of purchase price over fair value of net assets acquired in business combinations under the purchase method of accounting. Pursuant to the provisions of SFAS No. 142, Goodwill and Other Intangible Assets (‘‘SFAS 142’’), goodwill is not amortized and is subject to an annual impairment test which the Company performs in the fourth quarter of each fiscal year. Goodwill was allocated to various reporting units, which are either the operating segment or one reporting level below the operating segment. As of December 31, 2005, the Company's reporting units for purposes of applying the provisions of SFAS 142 are: Warner's^®/Olga^®/Body Nancy Ganz^®/Bodyslimmers^®, Calvin Klein underwear, Lejaby^®, Calvin Klein jeans, Chaps^®, Swimwear (excluding Ocean Pacific^®) and Ocean Pacific. SFAS 142 requires the Company to compare the fair value of the reporting unit to its carrying amount on an annual basis to determine if there is potential impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its carrying value. If the carrying amount of goodwill exceeds its fair value, an impairment loss is recognized. Fair values for goodwill are determined based on discounted cash flows, market multiples or appraised values, as appropriate.

Intangible assets primarily consist of licenses and trademarks. The fair value of such licenses and trademarks owned by the Company at February 4, 2003 was based upon the preliminary appraised values of such assets as determined by the Company and an independent third party appraiser. Adjustments to the preliminary appraised amounts were recorded as adjustments to goodwill in the period February 5, 2003 to January 3, 2004. Licenses and trademarks in existence at February 4, 2003 are recorded at their fair values net of accumulated amortization since February 4, 2003. Licenses and trademarks acquired after February 4, 2003 are recorded at cost net of accumulated amortization. The majority of the Company's license and trademark agreements cover periods of time in excess of forty years. The estimates and assumptions used in the determination of the value of indefinite-lived intangible assets will not have an effect on the Company's future earnings unless a future evaluation of trademark or license value indicates that such asset is impaired. Pursuant to the provisions of SFAS 142, intangible assets with indefinite lives are not amortized. The Company reviews its indefinite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an indefinite-lived intangible asset exceeds its fair value. If the carrying value of an indefinite-lived intangible asset exceeds its fair value (determined based on discounted cash flows), an impairment loss is recognized. Identifiable intangible assets with finite lives are amortized on a straight-line basis over the estimated useful lives of the assets. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of finite-lived intangible asset may not be recoverable. Recoverability of a finite-lived intangible asset is measured by a comparison of its carrying amount to the undiscounted future cash flows expected to be generated by the asset. If the asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined based on discounted cash flows. See Note 13.

The Company did not identify any impairments of goodwill or intangible assets for Fiscal 2005, Fiscal 2004 or the period February 5, 2003 to January 3, 2004.

Property, Plant and Equipment: Property, plant and equipment as of December 31, 2005 and January 1, 2005 is stated at estimated fair value, net of accumulated depreciation, for the assets in

F-14

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

existence at February 4, 2003 and at historical costs, net of accumulated depreciation, for additions during the period February 5, 2003 to December 31, 2005. Property, plant and equipment in existence at February 4, 2003 was stated at fair value as determined by the Company together with the assistance of a third party appraiser. The estimated useful lives of property, plant and equipment are summarized below:

Buildings				20-40 years
Building Improvements (including leasehold improvements)				2-20 years
Machinery and equipment				3-10 years
Furniture and fixtures (including store fixtures)				4-10 years
Computer hardware				3-5 years
Computer software				3-7 years

Depreciation and amortization expense is based on the estimated useful lives of depreciable assets and is provided using the straight line method. Leasehold improvements are amortized over the lesser of the useful lives of the assets or the lease term; or the lease term plus renewal options if renewal of the lease is reasonably assured. Depreciation and amortization expense related to property, plant and equipment was $28,311, $29,226, $27,678, and $4,243 for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004, and the period January 5, 2003 to February 4, 2003, respectively.

Computer Software Costs: Internal and external costs incurred in developing or obtaining computer software for internal use are capitalized in property, plant and equipment in accordance with SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and related guidance, and are amortized on a straight-line basis, over the estimated useful life of the software (3 to 7 years). Interest costs of $1,134 in Fiscal 2005 related to developing or obtaining computer software were capitalized to the cost of the asset in accordance with SFAS No. 34, Capitalization of Interest Costs. General and administrative costs related to developing or obtaining such software are expensed as incurred.

Income Taxes: Deferred income taxes are determined using the liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. A valuation allowance is established to reduce the amount of deferred tax assets to an amount that the Company believes, based upon objectively verifiable evidence, is realizable.

Pension Plans: The Company has a defined benefit pension plan covering certain full-time non-union domestic employees and certain domestic employees covered by a collective bargaining agreement (the ‘‘Pension Plan’’). The Company also has unfunded defined benefit pension plans in foreign countries. The determination of the total liability attributable to benefits owed to participants covered by the defined benefit plans is determined by third party actuaries using assumptions provided by the Company. The assumptions used can have a significant effect on the amount of pension liability recorded by the Company. The actuaries also determine the annual cash contribution to the defined benefit plans. The Pension Plan was under-funded as of December 31, 2005 and January 1, 2005. The Pension Plan and the Company's Reorganization Plan contemplate that the Company will continue to fund its minimum required contributions and any other premiums due under the Employee Retirement Income Security Act of 1974, as amended and the United States Internal Revenue Code of 1986, as amended. Effective January 1, 2003, the Pension Plan was amended and, as a result, no future benefits accrue to participants in the Pension Plan. As a result of the amendment, the Company has not recorded pension expense related to current service for all periods presented and will not record pension expense for current service in any future period. As of December 31, 2005 and January 1, 2005, the Company recorded a Pension Plan liability equal to the amount that the present value of projected benefit obligations exceeded the fair value of Pension Plan assets as determined by

F-15

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

the Pension Plan trustee. The Company's cash contribution to the Pension Plan for 2005 was $4,978 and is expected to be approximately $28,900 in the aggregate from fiscal 2006 through fiscal 2010. The amount of estimated cash contributions that the Company will be required to make to the Pension Plan could increase or decrease depending on the actual return earned by the assets of the Pension Plan and changes in the amount of projected benefit obligation as determined by the Pension Plan actuary. The accrued long-term defined benefit plans liability and accruals for other post retirement benefits are classified as long-term liabilities in the consolidated balance sheet at December 31, 2005. The portion of the total unfunded liability that will be contributed by the Company to the Pension Plan in fiscal 2006 of approximately $12,900 is classified as accrued pension obligations at December 31, 2005.

On October 5, 2003, the Company changed its method of accounting for its defined benefit plans (including the Pension Plan) to a method that accelerates the recognition of gains or losses on Pension Plan assets and the projected benefit obligations (‘‘Accelerated Method’’). The Company previously deferred gains and losses on assets and liabilities in excess of the expected rate of return and amortized the deferred amount into operations over the remaining estimated service life to the extent such gains and losses exceeded 10% of the projected benefit obligation. The Company also deferred the recognition of certain changes in the projected benefit obligations (‘‘Deferred Method’’). The Company believes that the Accelerated Method is preferable to the Deferred Method because the recorded pension liability, using the Accelerated Method, will approximate fair value. Pursuant to SFAS No. 87, Employers' Accounting for Pensions, each quarter the Company recognizes interest cost on projected benefit obligations offset by the expected return on Pension Plan assets. In addition, the Company obtains reports from the Pension Plan actuary and Pension Plan trustee to measure Pension Plan assets and liabilities at year-end. The Company records the effect of actual gains and losses exceeding the expected return on Pension Plan assets and any other changes in the projected benefit obligations determined by the actuary in the fourth quarter of each fiscal year. This change results in additional volatility in pension expense/income in future periods. Therefore, the Company reports pension expense/income on a separate line of its statement of operations in each period. To conform to the current year presentation, pension expense (income) was reclassified from selling, general and administrative expenses to pension expense (income) for all defined benefit plans in foreign countries. See Note 10.

Stock-Based Compensation: Effective February 5, 2003, the Company adopted the fair value method of accounting for stock options for all options granted by the Company after February 4, 2003 pursuant to the prospective method provisions of SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure. The Company uses the Black-Scholes-Merton model to calculate the fair value of stock option awards. The Black-Scholes-Merton model requires the Company to make significant judgments regarding the assumptions used within the Black-Scholes-Merton model, the most significant of which are the stock price volatility assumption, the expected life of the option award and the risk-free rate of return. In determining the stock price volatility assumption used, the Company considered the volatility of the stock prices of selected companies in the apparel industry, the nature of those companies, the Company's stock price volatility since its emergence from bankruptcy and other factors. The Company based its Fiscal 2005 estimate of the expected life of a stock option of six years upon the vesting period of 36-42 months and the option term of ten years for issued and outstanding options. The Company's risk-free rate of return assumption for options granted in Fiscal 2005, Fiscal 2004 and the period February 5, 2003 to January 3, 2004 was equal to the quoted yield for five-year U.S. treasury bonds as of the date of grant. Compensation expense related to stock option grants is determined based on the fair value of the stock option on the grant date and is recognized over the vesting period of the grants on a straight

F-16

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

line basis. Compensation expense related to restricted stock grants is determined based on the fair value of the underlying stock on the grant date and recognized over the vesting period of the grants on a straight-line basis.

Prior to February 5, 2003, the Company followed the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation (‘‘SFAS 123’’). The Company accounted for stock-based compensation for employees using the intrinsic value method as prescribed by Accounting Principles Board (‘‘APB’’) Opinion No. 25, Accounting for Stock Issued to Employees (‘‘APB 25’’), and related interpretations. Under APB 25, no compensation expense was recognized for employee share option grants because the exercise price of the options granted equaled the market price of the underlying shares on the date of grant (the ‘‘intrinsic value method’’). Compensation expense related to restricted stock grants, prior to February 4, 2003, was recognized over the vesting period of the grants.

The following table illustrates the effect that stock-based compensation would have had on net income (loss) and net income (loss) per share of the Predecessor if such compensation had been included in its net income (loss) and net income (loss) per share for the period January 5, 2003 to February 4, 2003:

				Predecessor
				For the Period January 5, 2003 to February 4, 2003
Net income as reported				$	2,358,537
Add:   Stock-based employee compensation cost         included in reported net income, net of related         income tax effects					8
Less:    Stock-based employee compensation cost, net         of income tax effects, that would have been         included in the determination of net income if         the fair value method had been applied to all         awards					(252	)
Net income—pro forma				$	2,358,293
Income per share:
Basic and diluted—as reported				$	44.51
Basic and diluted—pro forma				$	44.50
Weighted average number of shares outstanding:
Basic and diluted					52,989,965

F-17

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Total stock-based compensation expense of the Successor for periods presented after February 4, 2003 was as follows:

				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004
Stock-based compensation expense before income taxes:
Stock options				$	6,765			$	4,489			$	3,255
Restricted stock grants					4,747				2,632				2,275
Total					11,512				7,121				5,530
Income tax benefit:
Stock options					2,477				1,840				1,302
Restricted stock grants					1,738				1,079				910
Total					4,215				2,919				2,212
Stock-based compensation expense after income taxes:
Stock options					4,288				2,649				1,953
Restricted stock grants					3,009				1,553				1,365
Total				$	7,297			$	4,202			$	3,318

The fair values of these stock options were estimated at the date of grant using a Black-Scholes-Merton option pricing model with the following assumptions:

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Weighted average risk free rate of return					3.85	%			3.32	%			2.55	%		n/a
Dividend yield (a)					—				—				—			n/a
Expected volatility of the market price of the Company's common stock				30.0%				35.0%				35.0%				n/a
Expected option life				6 years				5 years				5 years				n/a

(a)	The Company's ability to pay dividends is limited by the terms of the Amended and Restated Credit Agreement and the indenture governing the Senior Notes. See Note 15.

The Predecessor did not grant any stock-based compensation or stock options during the period January 5, 2003 to February 4, 2003.

Advertising Costs: Advertising costs are included in SG&A expenses and are expensed when the advertising or promotion is published or presented to consumers. Cooperative advertising expenses are charged to operations as incurred and are also included in SG&A expenses. The amounts charged to operations for advertising, marketing and promotion expenses (including cooperative advertising, marketing and promotion expenses) for Fiscal 2005, Fiscal 2004, the periods February 5, 2003 to January 3, 2004 and January 5, 2003 to February 4, 2003 were $85,273, $85,972, $66,393, and $7,403, respectively. Cooperative advertising expenses for Fiscal 2005, Fiscal 2004, the periods February 5, 2003 to January 3, 2004 and January 5, 2003 to February 4, 2003 were $15,913, $18,406, $17,509, and $1,420, respectively.

F-18

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Shipping and Handling Costs: Costs to store, pick and pack merchandise and costs related to warehousing and distribution activities (with the exception of freight charges incurred to ship finished goods to customers) are expensed as incurred and are classified in SG&A expenses. Direct freight charges incurred to ship merchandise to customers are expensed as incurred and are classified in cost of goods sold. The amounts charged to SG&A for shipping and handling costs for Fiscal 2005, Fiscal 2004 and the periods February 5, 2003 to January 3, 2004 and January 5, 2003 to February 4, 2003 were $48,840, $45,195, $38,002, and $3,508, respectively.

Leases: The Company recognizes rent expense for operating leases on a straight-line basis (including the effect of reduced or free rent and rent escalations) over the initial lease term. The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight-line basis is included in deferred rent and classified within other long-term liabilities. Cash reimbursements received from landlords for leasehold improvements and other cash payments received from landlords as lease incentives are recorded as deferred rent and classified as other long-term liabilities. Deferred rent related to landlord incentives is amortized using the straight-line method over the initial lease term as an offset to rent expense.

Marketable Securities: Marketable securities are stated at fair value based on quoted market prices. Marketable securities are classified as available-for-sale with any unrealized gains or losses, net of tax, included as a component of stockholders' equity and included in accumulated other comprehensive income.

Assets Held for Sale: The Company classifies non-inventory assets to be sold as assets held for sale. Assets held for sale are reported at estimated fair values less selling costs. Assets held for sale at December 31, 2005 and January 1, 2005 include certain property, plant and equipment identified for disposition.

Notes Receivable: Notes receivable represents the long-term portion of amounts due from third parties evidenced by long-term note agreements, net of allowances for doubtful accounts. Notes receivable earn interest at a rate of 8%. Interest income from notes receivable is included in interest expense, net. The current portion of notes receivable is classified with other current assets.

Deferred Financing Costs: Deferred financing costs represent legal, other professional and bank underwriting fees incurred in connection with the issuance of debt. Such fees are amortized over the life of the related debt using the interest method. Amortization of deferred financing costs is included in interest expense, net.

Financial Instruments: During Fiscal 2005, the Company entered into foreign currency exchange contracts which mature through April 24, 2006 and are designed to fix the number of euros required to satisfy the first one-third of dollar denominated purchases of inventory by certain of the Company’s European subsidiaries. See Note 11. The foreign currency exchange contracts are designated as cash flow hedges. Changes in the fair values of these cash flow hedges are deferred and recorded as a component of other comprehensive income until the associated inventory is sold, at which time the deferred gains or losses are recorded in cost of goods sold. Commissions and fees related to foreign currency exchange contacts are expensed as incurred. See Note 19.

The Company also utilizes interest rate swaps to convert a portion of the interest obligation related to its long-term debt from a fixed rate to floating rates. See Note 15. A number of international financial institutions are counterparties to the Company's outstanding letters of credit, interest rate swap agreements and foreign exchange contracts. The Company monitors its positions with, and the credit quality of, these counterparty financial institutions and does not anticipate nonperformance by these counterparties. Management believes that the Company would not suffer a material loss in the event of nonperformance by these counterparties. The Company does not use derivative financial instruments for speculative or trading purposes and has not done so since the Petition Date (as defined in Note 3).

F-19

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Start-Up Costs: Pre-operating costs relating to the start-up of new product lines and businesses are expensed as incurred.

Other Liabilities: Other long-term liabilities consist primarily of deferred rent and other landlord incentives.

Comprehensive Income (Loss): Comprehensive income (loss) consists of net income (loss), unrealized gain (loss) on marketable securities (net of tax) and cumulative translation adjustments. Because such cumulative translation adjustments are considered a component of permanently invested earnings of foreign subsidiaries, no income taxes are provided on such amounts.

Translation of Foreign Currencies: Cumulative translation adjustments arise primarily from consolidating the net assets and liabilities of the Company's foreign operations at current rates of exchange. Assets and liabilities of the Company's foreign operations are recorded at current rates of exchange at the balance sheet date and translation adjustments are applied directly to stockholders' equity and are included as part of accumulated other comprehensive income. Gains and losses related to the translation of current amounts due from foreign subsidiaries are included in other income (loss) and are expensed in the period incurred. Translation gains and losses related to long-term and permanently invested inter-company balances are recorded in accumulated other comprehensive income. Income and expense items for the Company's foreign operations are translated using monthly average exchange rates.

Reclassifications: For comparative purposes, certain prior period items have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncements: In November 2004, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 (‘‘SFAS 151’’). SFAS 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for costs incurred during fiscal years beginning after November 24, 2004. SFAS 151 is effective January 1, 2006 for the Company. The Company believes the provisions of SFAS 151 are consistent with its current accounting position and does not expect the adoption of SFAS 151 to have a material effect on the Company's consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (‘‘SFAS 123R’’). SFAS 123R requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized ratably over the period that an employee provides service in exchange for the award. SFAS 123R replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board (‘‘APB’’) Opinion No. 25, Accounting for Stock Issued to Employees. On April 14, 2005, the SEC announced the adoption of a rule that defers the required effective date of SFAS 123R. The SEC rule provides that SFAS 123R is now effective for registrants as of the beginning of the first fiscal year beginning after June 15, 2005. Effective February 5, 2003, the Company adopted the fair value method of accounting for stock options for all options granted by the Company after February 4, 2003 pursuant to the prospective method provisions of SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure. Among other matters, SFAS 123R requires companies to estimate the future forfeiture rate of stock-based compensation awards. Since February 5, 2003, the Company has recorded stock-based compensation expense based on actual forfeitures of stock-based compensation awards. The Company has determined that the adoption of SFAS 123R at the commencement of its 2006 fiscal year will not have a material effect on its consolidated financial statements.

F-20

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (‘‘FIN 47’’). FIN 47 clarifies that the term conditional asset retirement obligation as used in SFAS No. 143, Accounting for Asset Retirement Obligations (‘‘SFAS 143’’), refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. SFAS 143 requires an entity to recognize the fair value of a legal obligation to perform asset retirement activities when the obligation is incurred—generally upon acquisition, construction, or development and (or) through the normal operation of the asset. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005 (December 31, 2005 for the Company). Adoption of FIN 47 did not have a material effect on the Company’s consolidated financial statements.

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (‘‘SFAS 154’’). SFAS 154 replaces APB Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented reflecting the new accounting principle as if it had been adopted at the beginning of the earliest period presented. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for prospectively as a change in estimate and that the correction of errors in previously issued financial statements be termed a restatement. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005.

In June 2005, the FASB issued Emerging Issue Task Force Abstract No. 05-6, Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination (‘‘EITF 05-6’’). EITF 05-6 requires that leasehold improvements acquired in a business combination or purchased subsequent to the inception of a lease be amortized over the shorter of the useful life of the assets or a term that includes the remaining lease term and renewals that are deemed to be reasonably assured at the date of acquisition or purchase. EITF 05-6 is effective for leasehold improvements that are purchased or acquired in reporting periods beginning after June 29, 2005. Adoption of EITF 05-6 did not have an effect on the Company’s consolidated financial statements.

Note 2—Acquisitions

Calvin Klein Jeans Business in Europe and Asia: On January 31, 2006, the Company acquired (the "CKJEA Acquisition") 100% of the shares 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 from Fingen Apparel N.V., Fingen S.p.A., Euro Cormar S.p.A., and Calvin Klein, Inc. (collectively, the "Sellers") for total consideration of approximately €240,000 (approximately $292,000), consisting of cash consideration of approximately €179,000 (approximately $218,000) and assumption of indebtedness of approximately €61,000 (approximately $74,000), net of cash acquired of approximately €13,000 (total assumed debt aggregating approximately €74,000 (approximately $90,000)). In addition, as of December 31, 2005, the Company had incurred professional fees and other related costs of approximately $5,500 in connection with the acquisition. The purchase price is subject to certain post-closing adjustments, including adjustments related to the amount of working capital acquired. Approximately €37,000 (approximately $45,000) of the assumed debt was repaid simultaneously with the closing, leaving approximately €37,000 (approximately $45,000) of assumed debt outstanding. The CKJEA Acquisition was consummated pursuant to the terms and conditions of a Stock Purchase Agreement, dated as of December 20, 2005 (as amended as of January 30, 2006). The Company is in the process of determining the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed on acquisition.

F-21

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

The Company funded the acquisition using a combination of cash on hand and borrowings under a new $180,000 term loan facility under the Amended and Restated Credit Agreement. See Note 15— Financing Agreements—Revolving Credit Facility; Amended and Restated Credit Agreement.

In connection with the consummation of the CKJEA Acquisition, the Company will, subject to certain conditions, acquire 100% of the shares of the company that operates the license for Calvin Klein men's and women's Collection apparel and accessories worldwide on or about January 2, 2008. The Calvin Klein Collection license terminates on December 2013, subject to certain conditions.

In addition, in connection with the consummation of the CKJEA Acquisition, on January 31, 2006, the Company acquired various exclusive license agreements and entered into amendments to certain of its existing license agreements with Calvin Klein, Inc. (in its capacity as licensor).

Ocean Pacific: On August 19, 2004, the Company acquired 100% of the outstanding common stock of Ocean Pacific Apparel Corp. (collectively, with its subsidiaries ‘‘OP’’) for $40,000 in cash and the assumption of $1,000 in debt owed to a prior significant shareholder of OP. The assumed debt was repaid simultaneously with the closing. The terms of the acquisition agreement require the Company to make certain contingent payments to the seller if (i) wholesale net revenues (both directly earned by the Company and directly earned by the Company's licensees) exceed a defined threshold for fiscal 2007 and (ii) the operating profits of certain defined direct operations of the Company exceed 5% of wholesale net revenues for fiscal 2007 and fiscal 2008. The contingent payments are based upon the amounts earned by the Company in excess of the applicable thresholds. The defined thresholds represent significant growth in OP's business compared to Fiscal 2004 and 2005. No contingent payments are required if the defined thresholds are not exceeded by the Company. Any contingent payments ultimately made by the Company will be recorded as an increase in the purchase price of OP and an increase in goodwill.

OP, based in Irvine, California, is a surf and beach lifestyle brand which operates both directly and through a network of licensees worldwide and offers a broad array of apparel and accessories for men, women, young men, juniors, and kids under its Op^®, Ocean Pacific^®, and Op Classics^® labels. During Fiscal 2005, the Company exited certain key third party licenses and added certain OP product categories to its wholesale business model.

The results of OP's operations have been included in the Company's consolidated statement of operations (as part of the Company's Swimwear Group) since August 19, 2004 and the acquired assets and liabilities have been included in the Company's consolidated balance sheets. Unaudited pro forma information related to this acquisition is not included since the impact of this transaction is not material to the consolidated results of operations or balance sheet of the Company.

F-22

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Assets acquired and liabilities assumed at August 19, 2004 were as follows:

Accounts receivable				$	1,645
Prepaid and other current assets					1,234
Property, plant and equipment					286
Licenses and trademarks (a)					35,861
Goodwill (b)					17,664
Other					143
Total assets					56,833
Related party debt owed to shareholder					1,000
Accounts payable, accrued liabilities and other current liabilities					2,888
Deferred taxes					12,448
Total liabilities					16,336
Cost of acquisition (c)				$	40,497

(a)	Intangible assets include various trademarks of OP and certain license agreements, the terms of which grant the Company the right to receive royalties from licensees for periods ranging from 1 to 21 years. Any contingent payments ultimately recorded by the Company will be recorded as an increase in the purchase price of OP and as an increase in goodwill in accordance with SFAS 141.

(b)	Goodwill recorded in connection with this acquisition is classified in the Swimwear Group.

(c)	The cost of acquisition reflects the purchase price of $40,000 and additional costs incurred by the Company associated with the acquisition of $678 net of cash acquired of $181.

Distribution Facility: In April 2004, the Company entered into an agreement to terminate its joint venture agreement in regards to a distribution facility located in the Netherlands. The Company acquired the remaining outstanding shares of the company formed under the joint venture for $288, net of cash acquired of $104.

Note 3—Bankruptcy and Fresh Start Reporting

Chapter 11 Cases: On June 11, 2001 (the ‘‘Petition Date’’), Warnaco Group, 36 of its 37 U.S. subsidiaries and one of its Canadian subsidiaries, Warnaco of Canada Company (each a ‘‘Debtor’’ and, collectively, the ‘‘Debtors’’), each filed a voluntary petition for relief under the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the ‘‘Bankruptcy Court’’) (collectively, the ‘‘Chapter 11 Cases’’). The remainder of Warnaco Group's foreign subsidiaries were not debtors in the Chapter 11 Cases, nor were they subject to foreign bankruptcy or insolvency proceedings.

On November 9, 2002, the Debtors filed the Reorganization Plan. On January 16, 2003, the Bankruptcy Court entered (i) its Findings of Fact to and Conclusions of Law Re: Order and Judgment Confirming The First Amended Joint Plan of The Warnaco Group, Inc. and Its Affiliated Debtors and Debtors-In-Possession Under Chapter 11 of Title 11 of the United States Code, dated November 8, 2002, and (ii) an Order and Judgment Confirming The First Amended Joint Plan of The Warnaco Group, Inc. and Its Affiliated Debtors and Debtors-In-Possession Under Chapter 11 of Title 11 of the United States Code, dated November 8, 2002, and Granting Related Relief (the ‘‘Confirmation Order’’).

In accordance with the provisions of the Reorganization Plan and the Confirmation Order, the Reorganization Plan became effective on the Effective Date and the Company entered into a $275,000 Senior Secured Revolving Credit Facility (as amended on November 12, 2003, August 1, 2004 and September 15, 2005, the ‘‘Revolving Credit Facility’’). The Revolving Credit Facility entered into on

F-23

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

the Effective Date provided for a four-year, non-amortizing revolving credit facility. In accordance with the Reorganization Plan, on the Effective Date, the Company issued $200,942 of New Warnaco Second Lien Notes due 2008 (the ‘‘Second Lien Notes’’) to certain pre-petition creditors and others in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the ‘‘Securities Act’’), pursuant to Section 1145(a) of the Bankruptcy Code. The Second Lien Notes were secured by a second priority security interest in substantially all of the Debtors' domestic assets and guaranteed by Warnaco Group and Warnaco's domestic subsidiaries. On June 12, 2003, the Company repaid the Second Lien Notes and the accrued interest thereon, in full, with the proceeds of the offering of Warnaco's 8 7/8% Senior Notes due 2013 (the ‘‘Senior Notes’’). See Note 15.

Set forth below is a summary of certain material provisions of the Reorganization Plan. Among other things, as described below, the Reorganization Plan resulted in the cancellation of the Old Common Stock issued prior to the Effective Date. The holders of Old Common Stock did not receive any distribution on account of the Old Common Stock under the Reorganization Plan. The Company, as reorganized under the Reorganization Plan, issued 44,999,973 shares of common stock, par value $0.01 per share (the ‘‘New Common Stock’’), in reliance on the exemption from registration afforded by Section 1145 of the Bankruptcy Code, which were distributed to pre-petition creditors as described below. In addition, 5,000,000 shares of New Common Stock were reserved for issuance pursuant to management incentive stock awards, including options. On March 12, 2003, subject to approval by the stockholders of the Company's proposed 2003 Stock Incentive Plan (the ‘‘Stock Incentive Plan’’), the Company authorized the grant of 750,000 shares of restricted stock and options to purchase 3,000,000 shares of New Common Stock at the fair market value of the New Common Stock on the date of grant. On May 28, 2003, the stockholders of the Company approved the Stock Incentive Plan. The Company received no proceeds from the issuance of the New Common Stock and the Second Lien Notes; however, approximately $2,499,385 of indebtedness was extinguished in connection with such issuances.

The following is a summary of distributions made pursuant to the Reorganization Plan:

(a)	the Old Common Stock, including all stock options and restricted shares, was extinguished and holders of the Old Common Stock received no distribution on account of the Old Common Stock;

(b)	general unsecured claimants received 2.55% (1,147,050 shares) of the New Common Stock, which the Company distributed in April 2003;

(c)	the Company's pre-petition secured lenders received their pro rata share of $106,112 in cash, Second Lien Notes in the principal amount of $200,000 and 96.26% of the New Common Stock (43,318,350 shares);

(d)	holders of claims arising from or related to certain of the Predecessor's preferred securities received 0.60% of the New Common Stock (268,200 shares);

(e)

pursuant to the terms of his employment agreement, as modified by the Reorganization Plan, Antonio C. Alvarez II, the former President and Chief Executive Officer of the Company, received an incentive bonus in an aggregate amount of $5,873, consisting of $1,950 in cash, Second Lien Notes in the principal amount of $942 and 0.59% of the New Common Stock (266,400 shares valued at $11.19 per share); and

(f)	in addition to the foregoing, allowed administrative and certain priority claims were paid in full in cash.

Reorganization Value: In conjunction with the preparation of the Reorganization Plan, the Company considered many factors in determining its reorganization value, including the amount and nature of its monetary assets, estimated earnings and cash flow to be generated by the Company in the future, the enterprise value of apparel companies selling similar products based on quoted market

F-24

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

prices and the value of recently completed transactions for the purchase and sale of companies or parts of companies in the apparel industry. All of these factors involved the use of judgments and estimates, the most significant of which involve estimates of future earnings and cash flow that the Company will generate. The Company also engaged an independent third party appraisal and consulting firm (the ‘‘BEV Appraiser’’) to assist the Company in preparing a valuation analysis of the reorganized Company. The BEV Appraiser utilized a combination of the market approach and income approaches. The BEV Appraiser, based upon its discussions with the Company, made certain assumptions in its work. The weighted average long-term debt interest rate was assumed to be 7.81% and the weighted average cost of capital was assumed to be 13.80%. The appraiser used three years of financial projections in its evaluation and determined the terminal value based upon the Company's weighted average cost of capital and expected free cash flow using a 5.00% growth rate per annum. The determination of the Company's projected income and free cash flow required the use of significant judgments and estimates by the Company. Changes in economic conditions and many other factors will have a significant effect on the Company's ability to earn the income or generate the free cash flow assumed in its projections. In addition, the cost of equity or debt financing and the changes in general economic conditions will have a significant effect on the Company's ability to finance and fund its operations and the cost associated with its borrowing activities. As a result, variations in the amounts of income and cash flow actually earned by the Company will have a significant effect on its business enterprise value (‘‘BEV’’).

The Company also allocated the overall business enterprise value to its various business units. The determination of the value of each of the Company's business units was based upon the estimated earnings and cash flow to be generated by those business units. The Company also considered the type and amount of assets held by each of those units. In addition, the Company offered several of its business units for sale as part of its reorganization under the Bankruptcy Code. The Company considered the prices offered for those business units in allocating its BEV to its business units. The Company allocated the value of each business unit to the individual assets and liabilities held by each business unit based on the fair value of the specific assets. The Company used the work of third party appraisers to assist it in allocating such fair value.

Based upon the analysis of the BEV Appraiser and considering the factors noted above, the Company determined that the BEV of the reorganized Company was between $730,000 and $770,000. Based upon the timing of the Debtors' emergence from bankruptcy, market conditions at the time of emergence and the net assets of the Company at the Effective Date, the Company determined its reorganization equity value of $503,548 by subtracting the Company's debt of $246,452 on the Effective Date from the mid-point ($750,000) of the BEV valuation range.

Fair Value of Certain Long-Term Tangible and Intangible Assets: In order to implement the provisions of SFAS 141, the Company engaged an independent third party to appraise its various business units and long-term tangible and intangible assets and to assist the Company in allocating the reorganization value of the Company to its various assets and liabilities at February 4, 2003. The Company engaged an independent third party appraisal and consulting firm (the ‘‘Asset Appraiser’’) separate from the BEV Appraiser to assist the Company in determining the fair value of the Company's long-term tangible assets and identifiable intangible assets. Based upon the reorganization value of the Company, the Asset Appraiser provided detailed analysis of certain of the Company's long-term tangible and intangible assets. See Note 13.

Fresh Start Reporting: The Debtors' emergence from bankruptcy proceedings on February 4, 2003 resulted in a new reporting entity and adoption of fresh start reporting as of that date in accordance with SOP 90-7. The consolidated balance sheet as of February 4, 2003 (provided below) gives effect to adjustments in the carrying value of assets and liabilities to fair value in accordance with the provisions of SOP 90-7 and SFAS 141.

F-25

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

The following table reflects the implementation of the Reorganization Plan and the adjustments recorded to the Company's assets and liabilities to reflect the implementation of the Reorganization Plan and the adjustments of such assets and liabilities to fair value at February 4, 2003, based upon the Company's reorganization value of $750,000 (as included in the Reorganization Plan and as approved by the Bankruptcy Court).

Reorganization adjustments resulted primarily from the:

(a)	distribution of cash of $106,112 (including accrued interest of $14,844) to the Company's pre-petition secured lenders;

(b)	forgiveness of the Debtors' pre-petition debt;

(c)	issuance of New Common Stock and Second Lien Notes pursuant to the Reorganization Plan;

(d)	payment of various administrative and other claims associated with the Company's emergence from bankruptcy;

(e)	adjustment of property, plant and equipment carrying values to fair value; and

(f)	adjustment of the carrying value of the Company's various trademarks and license agreements to fair value.

The Company determined the preliminary values of its assets and liabilities after considering the work of the BEV Appraiser and the Asset Appraiser, as well as other valuation estimates.

The table below reflects reorganization adjustments for the discharge of indebtedness, issuance of New Common Stock, issuance of Second Lien Notes and the fresh start adjustments and the resulting fresh start consolidated balance sheet.

F-26

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

				Predecessor February 4, 2003				Discharge of Indebtedness				Issuance of New Securities				Fresh Start Adjustments				Successor February 4, 2003
ASSETS
Current assets:
Cash				$	96,224			$	(75,533)	(a)		$	—			$	15	(f)		$	20,706
Restricted cash					6,100												100	(f)			6,200
Accounts receivable					190,390																190,390
Inventories					370,527												(22,494	)(h)			348,033
Prepaid expenses and other current assets					53,548																53,548
Assets held for sale					1,485																1,485
Current assets of discontinued operations
Deferred income taxes					2,972												4,427	(e)			7,399
Current assets					721,246				(75,533	)			—				(17,952	)			627,761
Property, plant and equipment					153,394												(24,037	)(e)			129,357
Other assets:
Licenses, trademarks and other intangible assets					86,904												274,603	(e)			361,507
Deferred financing costs					859								4,427	(d)							5,286
Other assets					2,703																2,703
Goodwill					—				(515,659	)(b)			503,548	(c)			(213,510	)(e)			(225,621	)
																	3,193	(e)			3,193
													197,019	(d)			114	(f)			197,133
																	2,801	(g)			2,801
																	22,494	(h)			22,494
Total other assets					90,466				(515,659	)			704,994				89,695				369,496
				$	965,106			$	(591,192	)		$	704,994			$	47,706			$	1,126,614
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Liabilities not subject to compromise:
Current liabilities:
Current portion of long-term debt				$	5,050			$	—			$	—			$	—			$	5,050
Debtor-in-possession revolving credit facility					—
Revolving credit facility					—				30,579	(a)			1,950	(d)			2,244	(f)			34,773
													4,427	(d)							4,427
Accounts payable					123,235												(859	)(f)			122,376
Accrued liabilities					109,530				—				(1,950	)(d)			(1,156	)(f)			106,424
													(2,981	)(d)			2,801	(g)			(180	)
Current liabilities of discontinued operations													(942	)(d)							(942	)
Accrued income taxes payable					28,140												—				28,140
Total current liabilities					265,955				30,579				504				3,030				300,068
Long-term debt:
Second Lien Notes due 2008					—				—				200,942	(d)			—				200,942
Capital lease obligations					1,260																1,260
Liabilities subject to compromise					2,499,385				(106,112	)(a)			—				—				2,393,273
									(2,393,273	)(b)											(2,393,273	)
Deferred income taxes					4,964												44,676	(e)			49,640
Other long-term liabilities					71,156																71,156
Stockholders' equity (deficiency):
Common Stock, $0.01 par value					654				(654	)(b)			450	(c)			—				450
Additional paid-in capital					908,939				(908,939	)(b)			503,098	(c)			—				503,098
Accumulated other comprehensive loss					(92,671	)			92,671	(b)			—				—				—
Deficit					(2,380,615	)			2,380,615	(b)			—				—				—
Treasury stock, at cost					(313,889	)			313,889	(b)			—				—				—
Unearned stock compensation					(32	)			32	(b)			—				—				—
Total stockholders' equity (deficiency)					(1,877,614	)			1,877,614				503,548				—				503,548
				$	965,106			$	(591,192	)		$	704,994			$	47,706			$	1,126,614

(footnotes on next page)

F-27

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

(footnotes from previous page)

(a)	Utilized excess cash of $75,533 and borrowed $30,579 under the Revolving Credit Facility to pay $106,112 (including accrued interest of $14,844) to the Company's pre-petition secured creditors; such amounts were included in liabilities subject to compromise.

(b)

Reflects the discharge of pre-petition indebtedness of $2,393,273 (not including $106,112 in cash paid to pre-petition secured lenders) and cancellation of all outstanding shares of Old Common Stock ($654), including all options and restricted stock, additional paid-in capital ($908,939), treasury stock ($313,889), unearned stock compensation ($32) and elimination of accumulated other comprehensive loss ($92,671) and deficit ($2,380,615). A corresponding amount of $515,659 was recorded as a decrease in goodwill.

(c)	Reflects the issuance of 44,999,973 shares of New Common Stock and recognition of reorganization equity value of $503,548 pursuant to the provisions of the Reorganization Plan. A corresponding amount of $503,548 was recorded as an increase in goodwill.

(d)

Reflects the issuance of $200,000 principal amount of Second Lien Notes to creditors pursuant to the terms of the Reorganization Plan, payment of $1,950 in cash bonus to the Company's former Chief Executive Officer pursuant to the terms of the Reorganization Plan and the payment of $4,427 of deferred financing costs. The Company also issued $942 in Second Lien Notes and 266,400 shares of New Common Stock (representing value of $2,981) to its former Chief Executive Officer in payment of a bonus pursuant to the terms of the Reorganization Plan. The total accrued bonus to the former Chief Executive Officer was $5,873. A corresponding amount of $197,019 was recorded as an increase in goodwill.

(e)

Reflects $24,037 adjustment to fixed assets to their fair value of $129,357 as determined by the Asset Appraiser, $277,796 to intangible assets to reflect their fair value of $364,700 as determined by the Asset Appraiser, offset by the allocation of negative goodwill of $3,193 to indefinite lived intangible assets, the recognition of an initial deferred income tax liability of $49,640 and an adjustment of $4,427 to recognize deferred tax assets of $7,399 related to the preliminary fair value adjustments noted above. The deferred tax balance as of February 4, 2003 reflects an initial valuation allowance of $89,319 which was established in connection with fresh start reporting. A corresponding amount of $138,959 was recorded as the initial decrease in goodwill. The Company recorded a deferred income tax liability of $49,640.

(f)	Borrowed $2,244 under the Revolving Credit Facility to pay certain administrative and priority claims aggregating $859 and $1,156, unaccrued tax claims of $114 and the translation escrow account (subsequently released to the Company) of $100 and to provide additional cash funds at closing of $15. A corresponding amount of $114 was recorded as an increase in goodwill.

(g)	Reflects the recording of an unfavorable contract commitment of $2,801 related to one of the Company's distribution facilities. A corresponding amount of $2,801 was recorded as an increase in goodwill.

(h)	Reflects adjustments of $22,494 to adjust inventory to its fair value of $348,033. A corresponding amount of $22,494 was recorded as an increase in goodwill.

Note 4—Discontinued Operations

During the period February 5, 2003 to January 3, 2004, as part of its ongoing restructuring activities, the Company entered into an agreement to sell its A.B.S. by Allen Schwartz^® (‘‘ABS’’) business unit and announced its intention to close its 44 remaining Speedo Authentic Fitness^® retail stores. In addition, in the fourth quarter of 2003, the Company announced its intention to rationalize its Warner's European operation through a sale of the business. A description of discontinued operations is presented below:

Sale of ABS: In November 2003, the Company entered into an agreement to sell the assets of its ABS business unit. The sale of the ABS business unit was finalized on January 30, 2004. The sales price was $15,368 in cash plus the assumption of approximately $2,000 in liabilities. In the fourth quarter of 2003, the Company recorded a loss related to the sale of its ABS business unit of $3,143, which was included in loss from discontinued operations. The loss included an impairment charge of $3,019, before income taxes, related to the write-down of the ABS trademark to net realizable value. Cash proceeds from the sale, net of related expenses, were $15,179.

Closure of 44 Speedo Authentic Fitness Retail Stores: During the fourth quarter of 2003, the Company announced its intention to close its 44 remaining Speedo Authentic Fitness retail stores. As of January 1, 2005, the Company had ceased all operations related to its 44 stores. During Fiscal 2004, the Company recorded, as part of loss from discontinued operations, charges of $2,639 related to future operating lease commitments and landlord settlements, net of possible sublease rental income.

F-28

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Rationalization of Warner's Europe Operations: During the fourth quarter of 2003, the Company announced its plan to exit its Warner's business in Europe. On May 21, 2004, the Company entered into a licensing agreement for its Warner's business in Europe. According to the terms of the agreement, the licensee pays royalties based upon sales. The licensee is not required to pay minimum royalties until fiscal 2007 and no royalties have been earned to date. The Company amended the license agreement in Fiscal 2005.

Summarized operating results for the discontinued operations are as follows:

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Net revenues				$	222			$	17,499			$	65,237			$	5,994
Loss before provision for income taxes (a)					(288	)			(6,336	)			(18,369	)			(501	)
Provision (benefit) for income taxes					(103	)			(1,978	)			24				—
Loss from discontinued operations				$	(185	)		$	(4,358	)		$	(18,393	)		$	(501	)

(a)	Includes the loss on the sale of the ABS business unit of $3,143 for the period February 5, 2003 to January 3, 2004. In addition, loss before provision for income taxes for the period February 5, 2003 to January 3, 2004 includes restructuring charges of $9,826 related to the Warner's operation in Europe and the closure of the Company's 44 remaining Speedo Authentic Fitness retail stores.

The assets and liabilities of the discontinued operations at January 1, 2005 are presented in the consolidated balance sheets as follows:

				January 1, 2005 (a)
Accounts receivable, net				$	1,735
Inventories, net					40
Prepaid expenses and other current assets					504
Property, plant and equipment, net					280
Intangible and other assets					59
Assets of discontinued operations				$	2,618
Accounts payable				$	130
Accrued liabilities					1,320
Liabilities of discontinued operations				$	1,450

(a)	Assets at January 1, 2005 relate to the Warner's business in Europe and liabilities at January 1, 2005 relate to the Warner's business in Europe and the Speedo Authentic Fitness retail stores.

Note 5—Reorganization Items (Predecessor)

In connection with the Chapter 11 Cases, the Company initiated several strategic and organizational changes to streamline its operations, focus on its core businesses and return it to profitability. In connection with these actions, by January 4, 2003 the Company had closed all of its domestic outlet retail stores and certain of its Speedo Authentic Fitness retail stores. In the first quarter of 2003, the Company closed the last three remaining Speedo Authentic Fitness retail stores. Long term obligations related to many of the strategic actions, including the closure and consolidation of certain European facilities, are expected to be fully paid by the end of the first quarter of fiscal 2006.

During the fourth quarter of Fiscal 2002, the Company completed a strategic review of its Intimate Apparel operations in Europe and formalized a plan to consolidate its European manufacturing operations and to restructure certain other manufacturing, sales, and administrative

F-29

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

operations in Europe (the ‘‘Social Plan’’). The Company incurred severance, outplacement, legal, accounting and other expenses associated with the Social Plan covering approximately 350 employees. Through February 4, 2003, the Company had accrued $14,698 related to the minimum level of benefits to be paid to terminated employees in addition to legal fees and other shutdown expenses in connection with the Social Plan. In the period February 5, 2003 to January 3, 2004, the Company recorded an additional $1,723 for obligations due under the Social Plan. The costs incurred after February 4, 2003 are recorded as part of ‘‘restructuring items’’ of the Successor in the consolidated statement of operations.

As a direct result of the Chapter 11 Cases, the Company has recorded certain liabilities, incurred certain legal and professional fees and written-down certain assets. The transactions recorded were consistent with the provisions of SOP 90-7.

Reorganization items included in the consolidated statement of operations for the period January 5, 2003 to February 4, 2003 were $29,805. Included in reorganization items are certain non-cash asset impairment provisions and accruals for items that were paid in cash. Subsequent to February 4, 2003, to the extent that the Company incurred reorganization items in respect of the Chapter 11 Cases, such items have been recorded in SG&A expenses. Included in SG&A expenses for Fiscal 2004 and the period February 5, 2003 to January 3, 2004 are legal and professional fees and certain employee-related costs relating to the Chapter 11 Cases of $662 and $5,012, respectively.

Reorganization items were as follows:

				Predecessor
				Period January 5, 2003 to February 4, 2003
Legal and professional fees				$	4,468
Employee contracts and retention					14,540
Facility shutdown costs					(2	)
Lease terminations					10,098
Aviation and other assets					631
Losses from write-offs and sales of fixed assets					70
				$	29,805
Cash portion of reorganization items				$	14,244
Non-cash portion of reorganization items				$	15,561

The Reorganization Plan was consummated on February 4, 2003. Pursuant to the Reorganization Plan, unsecured pre-petition claimants received their pro rata share of 1,147,050 shares of New Common Stock. The shares were distributed to each individual claimant in 2003.

Note 6—Restructuring Expense (Income)

During Fiscal 2005 the company recorded income related to restructuring items of $503 related primarily to the reversal of accruals due to reductions in the estimated amounts required for employee terminations, partially offset by expenses incurred in connection with the continuation of activities commenced in prior periods associated with the closure, consolidation or sale of certain facilities. During Fiscal 2004 and the period February 5, 2003 to January 3, 2004, the Company incurred restructuring charges of $5,130 and $19,101, respectively, primarily related to the continuation of activities commenced in prior periods associated with the closure and consolidation of certain facilities, the January 2004 sale of the Company's manufacturing facility in Honduras and the February 2004 sale of the Company's San Luis, Mexico manufacturing facility.

Closure and/or Consolidation of Facilities: The Company closed two sewing plants (one located in each of Puerto Cortes, Honduras and Los Angeles, California), one cutting and warehousing facility in

F-30

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Thomasville, Georgia, distribution facilities in Secaucus, New Jersey, distribution facilities in Canada, a technical production support center in Van Nuys, California and certain manufacturing and sales offices in Europe. The Company also completed the consolidation of its executive offices in New York City. In addition, the Company incurred severance and contract termination costs related to the shutdown, in January 2005, of two retail outlet stores in the United Kingdom.

Sale of Manufacturing Facility in Villanueva, Honduras: During the fourth quarter of Fiscal 2003, the Company entered into an agreement to sell its manufacturing operations located in Villanueva, Honduras. The manufacturing operations sold consisted of one cutting center and four sewing facilities. The sale was finalized in January 2004 and in connection with the sale the Company entered into a one-year production agreement with the buyer, pursuant to which the Company guaranteed open purchase order obligations to certain suppliers of the buyer. The Company's obligation to enter into such guarantees expired on July 1, 2004. The production agreement with the buyer allows the Company to set off its payment obligations to the buyer against any payments the Company has made to a supplier pursuant to the related guarantee in the event the buyer defaults on its payment obligations to the supplier.

Sale of Manufacturing Facility in San Luis, Mexico: During the first quarter of Fiscal 2004, the Company entered into an agreement to sell its manufacturing operation located in San Luis, Mexico. The manufacturing operation sold consisted of a combined cutting and sewing facility. The sale was finalized in March 2004. In connection with the sale, the Company entered into an 18-month production agreement with the buyer (expired in Fiscal 2005). The Company has no obligation to guarantee open purchase orders for the buyer.

A summary of restructuring charges is as follows:

				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004
Employee termination costs and related items (a)				$	(1,262	)		$	3,315			$	7,957
Facility shutdown costs, loss on disposal/write-down of property, plant and equipment (b)					864				857				8,517
Inventory write-down (c)					—				—				2,120
Lease and contract termination costs (d)					(130	)			750				2,500
Legal and professional fees					25				208				127
				$	(503	)		$	5,130			$	21,221
Cash portion of restructuring items				$	(1,143	)		$	4,453			$	12,865
Non-cash portion of restructuring items				$	640			$	677			$	8,356

(a)

For Fiscal 2005, includes a gain of $1,485 related to the reversal of accruals for the estimated amounts required for employee terminations, partially offset by severance and other benefits of $223 payable to 38 employees. During the third quarter of Fiscal 2005, the Company determined that certain employee termination accruals of $1,415 related to the Company’s formalized Social Plan to consolidate its European manufacturing operations (initiated in the fourth quarter of Fiscal 2002) were no longer required.

For Fiscal 2004, includes severance and other benefits payable to approximately 672 employees. Severance related costs were paid to employees whose jobs were eliminated as part of restructuring initiatives undertaken in Fiscal 2003 ($2,263), the sale, in the first quarter of Fiscal 2004, of the Company's San Luis, Mexico manufacturing facility ($992) and the January 2005 shutdown of two retail outlet stores in the United Kingdom ($60). During Fiscal 2004, the Company reduced its accrual for employee termination costs by $660, which had been previously accrued.

	For the period February 5, 2003 to January 3, 2004, relates to severance and other benefits payable to approximately 1,656 terminated employees. Substantially all payments to such employees were complete by the end of Fiscal 2004.

(b)	For Fiscal 2005, includes $640 of net losses on disposal / writedowns of assets related to facilities that had been either closed or sold.

F-31

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

	For Fiscal 2004, as relates to closed facilities, includes a net gain of $742 on the sale of property, plant and equipment and write downs of certain items of property, plant and equipment totaling $667.

	For the period February 5, 2003 to January 3, 2004, relates to the write-down or abandonment of certain property, plant and equipment to net realizable value.

(c)	For the period February 5, 2003 to January 3, 2004, the Intimate Apparel group recorded an inventory write-down primarily related to its former manufacturing facility in Honduras which it sold in January 2004. Inventory markdowns are included in cost of goods sold as period costs. See Note 1.

(d)	For Fiscal 2005, amount includes the reversal of an accrual no longer required related to the closure of a technical production support center located in Van Nuys, California. The accrual was no longer required because the Company settled the lease with the landlord earlier than anticipated.

	For the period February 5, 2003 to January 3, 2004, relates to an amount paid to terminate the Company's third-party distribution agreement for Calvin Klein jeans.

Restructuring charges have been recorded in the consolidated statement of operations for Fiscal 2005, Fiscal 2004 and the period February 5, 2003 to January 3, 2004 as follows:

				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004
Cost of goods sold				$	—			$	—			$	2,120
Restructuring expense					(503	)			5,130				19,101
				$	(503	)		$	5,130			$	21,221

Changes in liabilities related to restructuring and reorganization items are summarized below:

				Employee Termination Costs				Facility Shutdown Costs				Legal and Professional Fees				Lease and Contract Termination Costs				Total
Balance at January 3, 2004				$	10,550			$	236			$	420			$	—			$	11,206
Charges for Fiscal 2004					3,315				932				208				750				5,205
Cash reductions for Fiscal 2004					(11,091	)			(1,162	)			(603	)			(175	)			(13,031	)
Effect of foreign currencies					(155	)			(2	)			—				(2	)			(159	)
Balance at January 1, 2005					2,619				4				25				573				3,221
Charges for Fiscal 2005					(1,262	)			224				25				(130	)			(1,143	)
Cash reductions for Fiscal 2005					(1,428	)			(232	)			(30	)			(438	)			(2,128	)
Effect of foreign currencies					373				4				(10	)			(5	)			362
Balance at December 31, 2005				$	302			$	—			$	10			$	—			$	312

Note 7—Related Party Transactions

The Company leased certain real property from an entity controlled by a former employee. All rights and obligations related to this lease were transferred to the new owners of the ABS business unit in the first quarter of Fiscal 2004. See Note 4. Rent expense related to this lease for Fiscal 2004, the period February 5, 2003 to January 3, 2004 and the period January 5, 2003 to February 4, 2003 was $40, $496 and $45, respectively, and is included in income (loss) from discontinued operations.

In 2001, the Company entered into a consulting agreement with Alvarez & Marsal, Inc. (‘‘A&M’’). Under this agreement, several individuals who held executive positions with the Company (including Antonio C. Alvarez II, former President and Chief Executive Officer of the Company, and James P. Fogarty, former Senior Vice President and Chief Financial Officer of the Company) provided services as advisors to the Company. Mr. Alvarez is a co-founding Managing Director and Mr. Fogarty is a Managing Director of A&M. The A&M consulting agreement was terminated on June 11, 2001 and certain A&M employees became employees of the Company.

F-32

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

In connection with the Company's emergence from Chapter 11 bankruptcy protection, it entered into a second consulting agreement with A&M on January 29, 2003, which was supplemented by a March 18, 2003 letter agreement (collectively, the ‘‘A&M Agreement’’), pursuant to which Mr. Alvarez and Mr. Fogarty continued serving the Company as Chief Executive Officer and Chief Financial Officer, respectively, and certain other A&M affiliated persons continued serving the Company in a consulting capacity. The A&M Agreement was effective as of February 4, 2003. Mr. Alvarez and Mr. Fogarty provided transitional assistance to the Company during 2003. During the period February 5, 2003 to January 3, 2004, the Company incurred expenses totaling $3,524 in connection with services performed by A&M. All amounts had been paid as of January 1, 2005.

In connection with the repayment of the Second Lien Notes with the proceeds of the offering of the Senior Notes, Mr. Alvarez received accrued interest and outstanding principal in the amount of $951 related to the Second Lien Notes. In addition, amounts, including accrued interest, were paid to affiliates of some of the initial purchasers of the Senior Notes on account of Second Lien Notes then owned by such affiliates.

In April 2003, the Company recruited Joseph R. Gromek to be its President and Chief Executive Officer. Following an orderly transition, Mr. Alvarez returned to A&M. In September 2003, the Company hired Lawrence R. Rutkowski to be its Senior Vice President—Finance and Chief Financial Officer. Following an orderly transition, Mr. Fogarty returned to A&M.

The Company believes that the terms of the relationships and transactions described above are at least as favorable to the Company as could have been obtained from an unrelated third party.

Note 8—Business Segments and Geographic Information

Business Segments: The Company operates in three business segments: (i) Intimate Apparel Group; (ii) Sportswear Group; and (iii) Swimwear Group.

The Intimate Apparel Group designs, manufactures, sources and markets moderate to premium priced intimate apparel and other products for women and better to premium priced men's underwear and loungewear under the Warner's, Olga, Body Nancy Ganz/Bodyslimmers, J. Lo by Jennifer Lopez^®, Axcelerate/Axcelerate Engineered by Speedo, Calvin Klein, Lejaby, Lejaby Rose and Rasurel^® brand names. As of December 31, 2005, the Intimate Apparel Group also operated 121 Calvin Klein retail stores worldwide (consisting of 59 stores directly operated by the Intimate Apparel Group, including one on-line store, and 62 stores operated under retail licenses or distributor agreements).

The Sportswear Group designs, sources and markets moderate to premium priced men's and women's sportswear under the Calvin Klein and Chaps brands.

The Swimwear Group designs, licenses, sources, manufactures and markets mass market to premium priced swimwear, fitness apparel, swim accessories and related products under the Speedo, Anne Cole^®, Cole of California^®, Catalina^®, Lifeguard^®, Nautica^®, Michael Kors^®, OP, Axcelerate/Axcelerate Engineered by Speedo and Calvin Klein brand names. The Swimwear Group also operates two Speedo outlet stores and one on-line store.

F-33

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Information by business group, excluding discontinued operations, is set forth below:

				Intimate Apparel Group				Sportswear Group				Swimwear Group				Group Total				Corporate / Other Items				Total
Successor
Fiscal 2005
Net revenues				$	595,702			$	517,567			$	391,146			$	1,504,415			$	—			$	1,504,415
Operating income (loss)					66,679				71,845				44,186				182,710				(80,818	)			101,892
Depreciation and amortization					7,231				6,318				6,226				19,775				13,920				33,695
Restructuring income					—				—				—				—				(503	)			(503	)
Capital expenditures					9,365				4,323				5,241				18,929				20,175				39,104
Fiscal 2004
Net revenues				$	588,256			$	455,601			$	380,324			$	1,424,181			$	—			$	1,424,181
Operating income (loss)					55,361				53,757				58,147				167,265				(71,130	)			96,135
Depreciation and amortization					7,454				5,884				4,168				17,506				14,950				32,456
Restructuring expense					—				—				—				—				5,130				5,130
Capital expenditures					9,853				5,587				2,320				17,760				14,100				31,860
For the Period February 5, 2003 to January 3, 2004
Net revenues				$	537,507			$	402,682			$	324,112			$	1,264,301			$	—			$	1,264,301
Operating income (loss)					53,554				26,222				43,926				123,702				(75,564	)			48,138
Depreciation and amortization					8,988				2,495				4,359				15,842				27,632				43,474
Restructuring expense					—				—				—				—				19,101				19,101
Capital expenditures					6,921				3,386				2,760				13,067				17,025				30,092
Predecessor
For the Period January 5, 2003 to February 4, 2003
Net revenues				$	35,306			$	37,834			$	36,980			$	110,120			$	—			$	110,120
Operating income (loss)					2,304				5,542				8,975				16,821				(35,945	)			(19,124	)
Depreciation and amortization					1,102				939				495				2,536				1,785				4,321
Reorganization expense					—				—				—				—				29,805				29,805
Capital expenditures					149				202				10				361				282				643
Balance Sheet
Total Assets:
December 31, 2005				$	280,480			$	232,943			$	362,149			$	875,572			$	346,644			$	1,222,216
January 1, 2005				$	303,484			$	254,728			$	356,288			$	914,500			$	239,404			$	1,153,904
Property, Plant and Equipment:
December 31, 2005				$	19,061			$	9,703			$	17,607			$	46,371			$	70,624			$	116,995
January 1, 2005				$	17,545			$	8,875			$	15,917			$	42,337			$	64,600			$	106,937

The Company does not include corporate departmental expenses, reorganization items, restructuring items and depreciation and amortization of corporate assets in its determination of segment operating income (loss). Corporate departmental expenses include general corporate overhead and certain shared corporate services. The Company evaluates the business groups' results without allocating these corporate/other items. Other companies may allocate these costs to their operating divisions and, as a result, the operating results of the Company's operating groups may not be directly comparable to the results of other companies. The table below summarizes corporate/other expenses for each period presented:

F-34

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Unallocated corporate expenses				$	67,401			$	51,050			$	28,831			$	4,355
Reorganization expense					—				—				—				29,805
Restructuring expense (income)					(503	)			5,130				19,101				—
Depreciation and amortization of corporate assets					13,920				14,950				27,632				1,785
Corporate/other expenses				$	80,818			$	71,130			$	75,564			$	35,945

A reconciliation of Group operating income to income from continuing operations before provision for income taxes for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004, and the period January 5, 2003 to February 4, 2003 is as follows:

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Group operating income				$	182,710			$	167,265			$	123,702			$	16,821
Corporate/other items					(80,818	)			(71,130	)			(75,564	)			(35,945	)
Operating income (loss)					101,892				96,135				48,138				(19,124	)
Gain on cancellation of pre-petition indebtedness					—				—				—				(1,692,696	)
Fresh start adjustments					—				—				—				(765,726	)
Other (income) loss					1,019				(2,197	)			(2,817	)			359
Interest expense, net					18,080				19,821				20,641				1,751
Income from continuing operations before provision for income taxes				$	82,793			$	78,511			$	30,314			$	2,437,188

Geographic Information: Included in the consolidated financial statements are the following amounts relating to geographic locations where the Company has business operations:

				Successor																								Predecessor
				Fiscal 2005				%				Fiscal 2004				%				For the Period February 5, 2003 to January 3, 2004				%				For the Period January 5, 2003 to February 4, 2003				%
Net revenues:
United States				$	1,076,873				71.6	%		$	1,033,543				72.6	%		$	946,341				74.9	%		$	82,824				75.2	%
Canada					92,189				6.1	%			91,655				6.4	%			79,463				6.3	%			5,813				5.3	%
Europe					252,919				16.8	%			236,320				16.6	%			197,857				15.6	%			17,847				16.2	%
Mexico					44,974				3.0	%			33,595				2.4	%			17,709				1.4	%			1,849				1.7	%
Asia					37,460				2.5	%			29,068				2.0	%			22,931				1.8	%			1,787				1.6	%
				$	1,504,415				100.0	%		$	1,424,181				100.0	%		$	1,264,301				100.0	%		$	110,120				100.0	%

F-35

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

				December 31, 2005								January 1, 2005
Property, plant and equipment, net:
United States				$	92,370				79.0	%		$	74,318				69.5	%
All other					24,625				21.0	%			32,619				30.5	%
				$	116,995				100.0	%		$	106,937				100.0	%

Information about Major Customers: For Fiscal 2005, one customer, Federated Department Stores, accounted for 11.4% of the Company’s net revenues. No one customer accounted for more than 10% of the Company's net revenues for Fiscal 2004 or for the period February 5, 2003 to January 3, 2004. One customer, Wal-Mart Stores, Inc., accounted for approximately 16.1% of the Company's net revenues for the period January 5, 2003 to February 4, 2003.

Note 9—Income Taxes 

The following presents the United States and foreign components of income from continuing operations before income taxes and discontinued operations:

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Income from continuing operations before provision for income taxes:
Domestic				$	22,085			$	28,858			$	(13,351	)		$	2,440,938
Foreign					60,708				49,653				43,665				(3,750	)
Total				$	82,793			$	78,511			$	30,314			$	2,437,188

F-36

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

The following presents the components of the Company's total income tax provision from continuing operations:

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Current:
Federal				$	454			$	—			$	—			$	—
State and local					41				910				1,000				—
Foreign					13,198				10,206				13,275				566
Total current tax provision				$	13,693			$	11,116			$	14,275			$	566
Deferred:
Federal				$	8,561			$	10,254			$	1,751			$	521,421
State and local					1,415				2,106				452				112,133
Foreign					6,797				6,575				(4,290	)			(9,186	)
Valuation allowance increase (decrease)					90				1,585				(104	)			(546,784	)
Total deferred tax provision				$	16,863			$	20,520			$	(2,191	)		$	77,584
Provision for income taxes				$	30,556			$	31,636			$	12,084			$	78,150

The following presents the reconciliation of the provision for income taxes to United States federal income taxes computed at the statutory rate:

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Income from continuing operations before provision for income taxes				$	82,793			$	78,511			$	30,314			$	2,437,188
Income tax expense computed at U.S. statutory rate				$	28,978			$	27,479			$	10,610			$	853,016
State income taxes, net of federal benefit					947				1,960				944				72,887
Foreign taxes in excess of (less than) the U.S. statutory rate					(1,252	)			(598	)			(6,312	)			1,879
Net U.S. tax on distribution of foreign earnings					—				—				7,106				—
Fresh start adjustments					—				—				—				(303,251	)
Other, net					1,793				1,210				(160	)			403
Increase (decrease) in valuation allowance					90				1,585				(104	)			(546,784	)
Provision for income taxes				$	30,556			$	31,636			$	12,084			$	78,150

F-37

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

The components of deferred tax assets and liabilities as of December 31, 2005 and January 1, 2005 were as follows:

				December 31, 2005				January 1, 2005
Deferred tax assets:
Inventory				$	10,506			$	12,086
Pension and post-retirement benefits					16,805				17,847
Advertising credits					12,947				13,558
Reserves and accruals					23,637				29,312
Net operating losses					132,445				142,596
Other					4,460				2,161
					200,800				217,560
Valuation allowance					(158,599	)			(165,835	)
Subtotal					42,201				51,725
Gross deferred tax liabilities:
Depreciation and amortization					110,977				106,270
Other					876				8,650
Subtotal					111,853				114,920
Deferred tax liability—net				$	(69,652	)		$	(63,195	)

Successor Company: Realization of the Company's deferred tax assets is dependent upon future earnings in specific tax jurisdictions, the timing and amount of which are uncertain. Accordingly, the Company evaluates all significant available positive and negative evidence, including the existence of losses in recent years and its forecast of future taxable income, in assessing the need for a valuation allowance. The underlying assumptions the Company used in forecasting future taxable income require significant judgment and take into account its recent performance. A valuation allowance is established to reduce the deferred tax assets to the amount that is more likely than not to be realized. As of the end of Fiscal 2005 and 2004, based upon its evaluation of historical and projected results of operation and the current business environment, the Company recorded a valuation allowance on all of its domestic deferred tax assets and certain of its foreign deferred tax assets.

In accordance with the methodology discussed above, the Company recorded a valuation allowance to reflect the estimated amount of deferred tax assets that "more likely than not’’ may not be realized. The valuation allowance decreased to $158,599 (of which $26,642 relates to foreign entities) at December 31, 2005 from $165,835 (of which $30,552 relates to foreign entities) at January 1, 2005, primarily as a result of the utilization of certain net operating loss carryforwards. A portion of the valuation allowance in the amount of approximately $151,080 (of which $20,410 relates to foreign entities) and approximately $157,932 (of which $23,936 relates to foreign entities) at December 31, 2005 and January 1, 2005, respectively, relates to deferred tax assets which were recorded in fresh start accounting. The realization of such amount in future years will be allocated to reduce goodwill and other non-current intangible assets.

Under U.S. tax law, a company that realized cancellation of debt (‘‘COD’’) income while in bankruptcy is entitled to exclude such income from taxable income for U.S. tax reporting purposes. A company that excludes COD income will be required to reduce certain tax attributes in an amount equal to the COD income excluded from taxable income. If the attribute reduction is applied on a consolidated return basis, all of the Company's U.S. consolidated net operating loss (‘‘NOL’’) carryovers generated prior to Fiscal 2004 would be eliminated and certain of its other U.S. tax attributes will be substantially reduced or eliminated. However, by applying the attribute reduction rules on a separate company basis, the Company retained U.S. net operating loss carryforwards of

F-38

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

approximately $246,200 at the end of Fiscal 2003. Under Section 382 of the Internal Revenue Code, the Company can use its NOL carryforwards to reduce U.S. taxable income, if any, by approximately $23,400 per year. There can be no assurance that the Company's position with respect to separate company attribute reduction will be sustained upon review by the Internal Revenue Service. Furthermore, the Company believes that as a result of the COD income, it can increase the annual limitation amount above due to the built-in gain rules under Section 382. There can be no assurance that the Company's position of treating the COD income as an item of built-in gain will be sustained upon review by the Internal Revenue Service, in which case certain losses and expenses generated during the five-year period after emergence will be subject to the annual limitation amount above. Any tax benefit from the utilization of consolidated U.S. net operating losses attributable to periods before emergence from bankruptcy will reduce either goodwill or other intangible assets when realized and will not affect the Company's future results of operations.

At December 31, 2005, the Company had U.S. NOL carryforwards of approximately $295,830 (including approximately $246,200 described above that is subject to Section 382) expiring in periods beginning in 2009 through 2024. The Company had foreign NOL carryforwards of approximately $82,543, of which $2,698 expire between the years 2008 and 2015 and $79,845 have an indefinite life. The Company has approximately $1,104 of U.S. alternative minimum tax credit carryforwards which have an indefinite carryforward period. The Company has foreign tax credit carryforwards of $210, of which $5 expires in 2012 and $205 expires in 2013. The Company has state tax credit carryforwards of $844, of which $714 expire in periods beginning in 2006 through 2011. $130 of the Company's state tax credit carryforwards have an indefinite life.

Tax benefits associated with the exercise of employee stock options and other employee stock programs of $1,356 in Fiscal 2005, $768 in Fiscal 2004 and $249 for the period February 5, 2003 to January 3, 2004, were allocated to shareholders' equity. A corresponding valuation allowance for deferred taxes has been recorded for Fiscal 2005, Fiscal 2004 and the period February 5, 2003 to January 3, 2004. The associated benefit will be credited to equity when realized.

As of December 31, 2005, the total amount of undistributed earnings of foreign subsidiaries was approximately $104,484. The Company's intention is to permanently reinvest these earnings and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which may become payable if undistributed earnings were paid as dividends to the Company. Determination of the amount of unrecognized U.S. income tax liability with respect to such earnings is not practical.

On October 22, 2004, the American Jobs Creation Act of 2004 (the ‘‘AJC Act’’) was signed into law. The AJC Act provides a temporary incentive for U.S. multinationals to repatriate foreign earnings at a 5.25% U.S. tax rate. In 2005 the IRS issued a series of notices which provided clarifying language and guidance regarding the special one-time dividends received deduction. The Company has considered this guidance in light of its tax position and overall business strategy, and it did not repatriate any of its foreign earnings under the special provisions of the AJC Act.

The Company and its subsidiaries' income tax returns are routinely examined by U.S., state, and foreign tax authorities. The tax years under examination vary by jurisdiction. The Company regularly assesses the potential outcomes of both ongoing and future examinations for the current or prior years to ensure the Company's provision for income taxes is sufficient. The Company recognizes liabilities based on estimates of whether additional taxes will be due and believes its reserves are adequate in relation to the potential assessments.

Predecessor Company: The provision for income taxes of $78,150 for the period January 5, 2003 to February 4, 2003 consists of a deferred income tax provision of $77,584 related to the increase in the carrying value of certain assets to fair value recorded in connection with the Company's adoption of fresh start reporting and accrued income taxes on foreign earnings of $566.

F-39

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Upon the adoption of fresh start accounting at February 4, 2003, the Company recorded a valuation allowance of $89,319 to reduce deferred tax assets to an amount that the Company believes, based upon objectively verifiable evidence, is realizable. The future recognition of such amount will first reduce goodwill. Should the recognition of net deferred tax assets result in the elimination of goodwill, any additional deferred tax asset recognition will reduce other noncurrent intangible assets. Deferred tax assets recognized in excess of the carrying value of intangible assets will be treated as an increase to additional paid-in capital.

The Company has also established a valuation allowance against certain foreign NOL carry- forwards to reduce them to the amount that will, more likely than not, be realized.

Note 10—Employee Retirement Plans

The Company has a defined benefit Pension Plan in the United States, which covers substantially all full-time domestic employees. The Pension Plan is noncontributory and benefits are based upon years of service. The Company also has defined benefit health care and life insurance plans that provide post-retirement benefits to retired domestic employees (‘‘Other Benefit Plans’’). The Other Benefit Plans are, in most cases, contributory with retiree contributions adjusted annually. The Company also has unfunded defined benefit pension plans in foreign countries.

On October 5, 2003 (the beginning of the fourth quarter of 2003), the Company changed its method of accounting for its defined benefit plans (including the Pension Plan) to a method that accelerates the recognition of gains or losses which are changes in the amount of either the projected benefit obligations or plan assets resulting from experience different than assumed and from changes in assumptions (‘‘Accelerated Method’’). The Company previously deferred gains and losses and amortized the deferred amount into operations over the remaining estimated service life to the extent such gains and losses exceeded 10% of the Pension Plan's projected benefit obligations (‘‘Deferred Method’’). The Company believes that the Accelerated Method is preferable because the recorded pension liability, using the Accelerated Method, will approximate fair value. Pursuant to SFAS No. 87, Employer’s Accounting for Pensions, each quarter the Company recognizes interest cost offset by the expected return on Pension Plan assets. In addition, the Company obtains a report from the Pension Plan trustee and Pension Plan actuary to measure Pension Plan assets and liabilities at year-end. The Company records the impact of actual gains and losses that differ from the expected return on Pension Plan assets and any other changes determined by the actuary in the fourth quarter of each year based upon the year-end measurement. This change results in additional volatility in pension expense or income. Therefore, the Company reports pension expense or income on a separate line of its statement of operations. To conform to the current year presentation, the pension income or expense line item in the statement of operations also includes pension expense or income related to the Company’s unfunded foreign defined benefit pension plans which are considered immaterial to the consolidated financial statements and, therefore, are not included in the following tables.

Effective January 1, 2003 the Pension Plan was amended such that participants in the Pension Plan will not earn any additional pension benefits after December 31, 2002. The accumulated benefit obligation for the Pension Plan was equal to the projected benefit obligation at December 31, 2005 and January 1, 2005 due to the curtailment of plan benefits at December 31, 2002.

F-40

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

A reconciliation of the balance of domestic plan benefit obligations follows:

				Pension Plan								Other Benefit Plans
				December 31, 2005				January 1, 2005				December 31, 2005				January 1, 2005
Change in projected benefit obligations:
Benefit obligation at beginning of period				$	156,436			$	161,677			$	5,233			$	5,868
Service cost					—				—				302				229
Interest cost					8,658				8,338				394				270
Change in actuarial (gain) loss (a)					(647	)			(3,192	)			2,001				(498	)
Benefits paid					(10,241	)			(10,387	)			(685	)			(636	)
Benefit obligation at end of period (b)				$	154,206			$	156,436			$	7,245			$	5,233

(a)

The Pension Plan’s actuarial gain in Fiscal 2005 is primarily related to the net effect of a gain related to the change in discount rate of approximately $6,000, a loss related to plan amendments for prior service cost of approximately $3,500 and a loss related to a change in mortality tables effective December 31, 2005 of approximately $2,000. The Other Benefit Plans actuarial loss in Fiscal 2005 is primarily related to an increase in the Company’s contribution percentage toward the cost of retiree medical benefits. The Pension Plan's actuarial gain in Fiscal 2004 is primarily related to the change in the discount rate.

(b)	Pension Plan benefit obligation reflects the domestic pension plan only. In addition, the Company had foreign defined benefit plan obligations of $3,886 and $4,048 as of December 31, 2005 and January 1, 2005, respectively, of which $3,780 and $3,697 were classified as retirement obligations on the Company's Consolidated Balance Sheet as of December 31, 2005 and January 1, 2005, respectively.

A reconciliation of the change in the fair value of domestic plan assets is as follows:

				Pension Plan								Other Benefit Plans
				December 31, 2005				January 1, 2005				December 31, 2005				January 1, 2005
Fair value of plan assets at beginning of period				$	110,440			$	97,245			$	—			$	—
Actual return on plan assets					6,851				11,296				—				—
Employer's contributions					4,978				12,286				685				636
Benefits paid					(10,241	)			(10,387	)			(685	)			(636	)
Fair value of plan assets at end of period				$	112,028			$	110,440			$	—			$	—
Funded (unfunded) status				$	(42,178	)		$	(45,996	)		$	(7,245	)		$	(5,233	)
Unrecognized net actuarial loss					—				—				2,350				503
Net amount recognized / Retirement obligations				$	(42,178	)		$	(45,996	)		$	(4,895	)		$	(4,730	)

F-41

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

The components of domestic net periodic benefit (income) cost are as follows:

				Pension Plan																Other Benefit Plans
				Successor												Predecessor				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Service cost				$	—			$	—			$	—			$	—			$	302			$	229			$	228			$	9
Interest cost					8,658				8,338				9,269				—				394				270				269				24
Expected return on plan assets					(7,576	)			(6,934	)			(5,154	)			—				—				—				—				—
Gain (loss) on plan assets in
excess of expected return					725				(4,362	)			(10,603	)			—				—				—				—				—
Amortization of prior service cost					—				—				—				—				—				—				—				(34	)
Net actuarial (gain) loss (a)					(647	)			(3,192	)			—				—				154				—				—				—
Net benefit (income) cost (b)				$	1,160			$	(6,150	)		$	(6,488	)		$	—			$	850			$	499			$	497			$	(1	)

(a)	The Pension Plan net actuarial gain in Fiscal 2005 is primarily related to the net effect of a gain related to the change in the discount rate, a loss related to plan amendments for prior service costs and a loss related to a change in the mortality tables. The net actuarial gain in Fiscal 2004 is primarily related to the change in the discount rate.

(b)	The Pension Plan net benefit (income) cost reflects the domestic pension plan only. The amounts do not include foreign defined benefit plans of $403 of expense, $634 of income and $323 of income for Fiscal 2005, Fiscal 2004 and the period February 5, 2003 to January 3, 2004, respectively.

The domestic Pension Plan's weighted average asset allocations are as follows:

				Targeted Asset Allocation				December 31, 2005				January 1, 2005
Asset Category:
Equity securities					40	%			42	%			42	%
Debt securities					20	%			16	%			16	%
Real estate					5	%			7	%			7	%
Other					35	%			35	%			35	%
Total					100	%			100	%			100	%

The Company's investment strategy for the Pension Plan's assets is to invest in a diversified portfolio of assets managed by various fund and money managers. No individual manager accounts for more than 15% of overall Pension Plan assets at December 31, 2005. The Company's goal is to provide for steady growth in the Pension Plan's assets, exceeding the Company's expected return on plan assets of 7%. Individual fund managers are evaluated against a relevant market index and against other managers with similar investment goals. Underperforming investments are reallocated to other investments and fund managers. The portfolio is balanced annually to maintain the Company's targeted allocation percentages by type of investment. The targeted allocation percentages are guidelines; actual investments may differ from the targeted allocations.

The Company expects to contribute approximately $12,900 to the Pension Plan in fiscal 2006 and approximately $16,000 from 2007 through 2010. The amount of cash contributions the Company is required to make to the Pension Plan could increase or decrease depending on the performance of the Pension Plan's assets and other factors which are not in the control of the Company. The Company’s

F-42

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

expected cash contributions to the Other Benefit Plans are equal to the expected benefit payments as shown in the table below due to the nature of the Other Benefit Plans.

Future domestic benefit payments are expected to be:

				Pension Plan				Other Benefit Plans
2006				$	9,900			$	610
2007					9,900				580
2008					9,900				540
2009					10,100				480
2010					10,300				470
2011-2015					54,300				2,260

The weighted-average assumptions used in the actuarial calculations for the Pension Plan and Other Benefit Plans were as follows:

Successor

Predecessor

Fiscal 2005

Fiscal 2004

February 5, 2003 to January 3, 2004

January 5, 2003 to February 4, 2003

Discount Rate

5.85%

5.50%

5.30%

5.30%

Expected return on plan assets

7.00%

7.00%

7.00%

7.00%

Average rate of compensation increase

N/A

N/A

N/A

N/A

The Company's discount rate assumption for both the Pension Plan and Other Benefit Plans was 5.85% for Fiscal 2005, 5.5% for Fiscal 2004 and 5.3% for the period February 5, 2003 to January 3, 2004, and the period January 5, 2003 to February 4, 2003. The Company considers changes in the interest rate for ten-year United States Treasury Bonds and other long-term low risk bond rates as indicative of its discount rate. The Company's expected rate of return in the table above only applies to Pension Plan assets and reflects the Company's expectation of the long-term rate of return on the Pension Plan's assets. The Company evaluates its discount rate and long-term rate of return assumptions annually.

The Company evaluates its assumptions related to the expected return on plan assets in the fourth quarter of each fiscal year and revises the expected return on plan assets for future valuations as required. In the fourth quarter of Fiscal 2002, the Company revised the expected return on plan assets for future valuations to 7% effective with the Pension Benefit Plan's 2003 year. The Company's review in the fourth quarter of Fiscal 2005 did not result in a change in the estimated return assumption for future periods. The rate of compensation increase is not applicable because Pension Plan participants' benefits have been frozen. The Company's Pension Benefit Plan and Other Benefit Plans measurement date is December 31st.

For measurement purposes, the weighted average annual assumed rate of increase in the per capita cost of covered benefits (health care trend rate) related to Other Benefit Plans is as follows:

				December 31, 2005				January 1, 2005
Health care cost trend rate assumed next year					10.0	%			10.5	%
Rate at which the trend rate is assumed to decline
(the ultimate trend rate)					5.0	%			5.0	%
Year trend rate reaches the ultimate rate					2015				2015

F-43

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

A one-percentage point change in assumed health care cost trend rates would have the following effects:

				One Percentage Point Increase				One Percentage Point Decrease
Effect on total of service and interest cost components				$	72			$	(59	)
Effect on health care component of the accumulated post-retirement benefit obligation				$	588			$	(489	)

In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 was passed into law. The Act provides for a subsidy for certain costs related to prescription drug benefits to sponsors of post retirement healthcare plans that provide prescription drug benefits to retirees. FSP No.106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (‘‘FSP 106-2’’), defines the accounting treatment for changes in post retirement benefit liabilities and post retirement benefits expense that are necessitated by the provisions of the Act. FSP 106-2 was effective for the first interim or annual period beginning after June 15, 2004 (the three months ended October 2, 2004 for the Company). Based upon the provisions of the Company's post retirement benefit plans, the retirees eligible to participate in such plans, the participation rate of such retirees and the contribution rates attributable to the participants in the plans, the Company does not believe that the enactment of the Act was a ‘‘Significant Event’’ to its post retirement benefit plans as defined in paragraph 73 of SFAS No. 106, Employers Accounting for Post Retirement Benefits Other Than Pensions, and as a result, the Act did not have a material effect on the Company's post retirement benefit obligation or expense. The Company may amend its existing post retirement plans so that benefits payable under the plans will qualify for reimbursement under the Act in the future. Such amendments, if any, will be reflected in future valuations of the Company's post retirement benefit obligation and determination of the related post retirement benefits expense.

The Company also sponsors a defined contribution plan for substantially all of its domestic employees. Employees can contribute to the plan, on a pre-tax basis, a percentage of their qualifying compensation up to the legal limits allowed. The Company makes matching contributions to the defined contribution plan. The maximum Company contribution on behalf of any individual employee was $5.040, $4.920, and $4.200 for 2005, 2004, and 2003, respectively. Employees vest in the Company contribution over four years. Company contributions to the defined contribution plan, in the aggregate, were $1,667, $1,458, $918, and $83 for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004, and the period January 5, 2003 to February 4, 2003, respectively.

The Company contributed to multi-employer defined benefit pension plans on behalf of union employees of two manufacturing facilities and contributes to a multi-employer defined benefit pension plan on behalf of union employees of a warehouse and distribution facility, which amounts are not significant for the periods presented.

On April 25, 2005, the Company adopted a deferred compensation plan (the ‘‘Deferred Compensation Plan’’) for the benefit of certain employees. The Deferred Compensation Plan allows participating employees to make pre-tax deferrals of up to 50% of their annual base salary and up to 100% of their incentive pay. A bookkeeping account is established for each participant, and each account is increased or decreased by the deemed positive or negative return based on hypothetical investment alternatives approved by the Company and selected by the participating employee. In the case of a change of control, the Company will establish a ‘‘rabbi’’ trust in connection with the Deferred Compensation Plan and will make contributions to the rabbi trust equal to the Deferred Compensation Plan’s aggregate benefit obligations. As of December 31, 2005, the Company had a liability with respect to the Deferred Compensation Plan of $162 for employee contributions and investment activity to date, which is recorded in other long-term liabilities.

F-44

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Note 11—Inventories

				December 31, 2005				January 1, 2005
Finished goods				$	243,125			$	259,451
Work in process / in transit					55,974				45,384
Raw materials					27,175				30,816
				$	326,274			$	335,651

As of December 31, 2005, the Company was party to outstanding foreign currency exchange contracts to purchase approximately $3,352 for a total of approximately €2,745 at a weighted-average exchange rate of 1.221 $/€. The foreign currency exchange contracts mature through April 24, 2006 and are designed to fix the number of euros required to satisfy the first one-third of dollar denominated purchases of inventory by certain of the Company’s European subsidiaries. As of December 31, 2005, the fair value of the outstanding foreign currency exchange contracts was $98. The Company did not have any foreign currency exchange forward contracts outstanding as of January 1, 2005.

Note 12—Property, Plant and Equipment

				December 31, 2005				January 1, 2005
Land and land improvements				$	1,260			$	1,260
Building, building improvements and leasehold
improvements					38,799				33,687
Furniture and fixtures					43,101				32,159
Machinery and equipment					23,545				20,114
Computer hardware and software					64,110				64,549
Construction in progress					22,006				8,053
				$	192,821			$	159,822
Less: Accumulated depreciation and amortization					(75,826	)			(52,885	)
Property, plant and equipment, net				$	116,995			$	106,937

F-45

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Note 13—Intangible Assets and Goodwill

The following tables set forth intangible assets at December 31, 2005 and January 1, 2005 and the activity in the intangible asset accounts during Fiscal 2005 and Fiscal 2004:

				December 31, 2005												January 1, 2005
				Gross Carrying Amount				Accumulated Amortization				Net				Gross Carrying Amount				Accumulated Amortization				Net
Finite lived intangible assets:
Licenses for a term (Company as licensee)				$	108,363			$	10,158			$	98,205			$	104,030			$	6,140			$	97,890
Licenses for a term (Company as licensor)					5,861				1,790				4,071				5,861				425				5,436
Sales order backlog (a)					—				—				—				11,800				11,800				—
Other (a)					—				—				—				662				662				—
					114,224				11,948				102,276				122,353				19,027				103,326
Indefinite lived intangible assets:
Trademarks					154,397				—				154,397				156,679				—				156,679
Licenses in perpetuity					45,500				—				45,500				45,500				—				45,500
					199,897				—				199,897				202,179				—				202,179
Intangible Assets				$	314,121			$	11,948			$	302,173			$	324,532			$	19,027			$	305,505

(a)	During Fiscal 2005, the Company wrote off its fully amortized sales order backlog and other fully amortized finite-lived intangible assets.

				Trademarks				Licenses in Perpetuity				Finite lived Intangible Assets				Total
Balance at January 3, 2004				$	125,327			$	45,500			$	100,696			$	271,523
Acquisition of Ocean Pacific (a)					30,000				—				5,861				35,861
Amortization expense					—				—				(3,231	)			(3,231	)
Translation adjustments					1,352				—				—				1,352
Balance at January 1, 2005					156,679				45,500				103,326				305,505
Acquisition of CK Swimwear (b)					—				—				4,333				4,333
Amortization expense					—				—				(5,383	)			(5,383	)
Translation adjustments					(2,282	)			—				—				(2,282	)
Balance at December 31, 2005				$	154,397			$	45,500			$	102,276			$	302,173

(a)

Following the acquisition of OP on August 19, 2004 (See Note 2), the Company recorded $30,000 related to the fair value of indefinite-lived trademarks acquired. In addition, the Company recorded $5,861, representing the fair value of finite-lived intangible assets related to license agreements which grant the Company the right to receive royalties for a fixed term. The amortization periods related to these finite- lived intangible assets are equal to the estimated duration of each individual license and range from one to 21 years.

(b)

In July 2004, the Company entered into a license agreement granting the Company the exclusive worldwide rights to sell Calvin Klein women’s swimwear. The license was subject to certain remaining rights of a predecessor licensee in certain territories through June 2007. On May 23, 2005, the Company acquired the remaining rights under the Calvin Klein swimwear license for $4,333, which is being amortized through June 2007 using the straight-line method.

The following table summarizes the Company's weighted average amortization period related to each class of finite-lived intangible asset:

F-46

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

				Weighted Average Amortization Period
Finite lived intangible assets:
Licenses for a term (Company as licensee)				38 years
Licenses for a term (Company as licensor)				9 years

The following table summarizes the Company's estimated amortization expense for intangible assets for the next five years:

2006				$	5,730
2007					4,691
2008					3,418
2009					3,286
2010					2,998

The following table summarizes the changes in the carrying amount of goodwill for Fiscal 2005 and for Fiscal 2004:

				Intimate Apparel Group				Sportswear Group				Swimwear Group				Total
Goodwill balance at January 3, 2004				$	22,335			$	10,592			$	15,002			$	47,929
Adjustment:
Acquisition of Ocean Pacific (a)					—				—				17,664				17,664
Acquisition of joint venture (b)					370				—				—				370
Income taxes (c)					(9,525	)			(4,516	)			(8,251	)			(22,292	)
Goodwill balance at January 1, 2005					13,180				6,076				24,415				43,671
Adjustment:
Income taxes (d)					(8,019	)			(4,113	)			(5,402	)			(17,534	)
Other (e)					(49	)			1,854				820				2,625
Goodwill balance at December 31, 2005				$	5,112			$	3,817			$	19,833			$	28,762

(a)

Following the acquisition of OP on August 19, 2004 (See Note 2), the Company recorded $17,664 related to goodwill associated with the acquisition. Approximately $1,713 related to the acquired goodwill and other intangible assets is expected to be deductible for income tax purposes over the next three years. OP is included in the Company's Swimwear Group. Any contingent payments ultimately recorded by the Company will be recorded as an increase in the purchase price of OP and as an increase in goodwill.

(b)	Relates to the acquisition of the remaining shares of the Company's 50% owned joint venture distribution center located in Holland.

(c)	Relates primarily to deferred tax adjustments due to basis differences resulting from the filing of the Company's 2003 U.S. corporate income tax return, offset by the decrease in the valuation allowance as a result of the realization of certain deferred tax assets.

(d)	Relates primarily to adjustments to deferred taxes resulting from a completed assessment of one of the Company's foreign tax returns by taxing authorities, as well as the realization during the current year of certain deferred tax assets that existed as of the Effective Date.

(e)

Reflects, among other items, amounts accrued during Fiscal 2005 for the acquisition by the Company of a business located in Asia that had provided sourcing and buying agent services to the Company. The consideration for the acquisition is based primarily on the cost of inventory sourced by the acquired entity from the date of acquisition through February 26, 2006. The Company expects that the total purchase price for the acquisition will approximate $2,200.

F-47

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Note 14—Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income as of December 31, 2005 and January 1, 2005 are summarized below:

				December 31, 2005				January 1, 2005
Foreign currency translation adjustments (a)				$	4,505			$	15,544
Other					163				17
Total accumulated other comprehensive income				$	4,668			$	15,561

(a)	The decrease in foreign currency translation adjustments from January 1, 2005 to December 31, 2005 primarily reflects the strengthening of the United States dollar compared to the euro.

Note 15—Debt

Debt was as follows:

				December 31, 2005				January 1, 2005
8 7/8% Senior Notes due 2013				$	210,000			$	210,000
Capital lease obligations					—				799
Total debt				$	210,000			$	210,799

Financing Agreements

Senior Notes

On June 12, 2003, Warnaco completed the sale of $210,000 aggregate principal amount of Senior Notes at par value, which notes mature on June 15, 2013 and bear interest at 8 7/8% payable semi-annually on December 15 and June 15 of each year. No principal payments prior to the maturity date are required. The Senior Notes are unconditionally guaranteed, jointly and severally, by Warnaco Group and substantially all of Warnaco's domestic subsidiaries (all of which are 100% owned, either directly or indirectly, by Warnaco). The Senior Notes are effectively subordinate in right of payment to existing and future secured debt (including the Amended and Restated Credit Agreement) and to the obligations (including trade accounts payable) of the subsidiaries that are not guarantors of the Senior Notes. The guarantees of each guarantor are effectively subordinate to that guarantor's existing and future secured debt (including guarantees of the Amended and Restated Credit Agreement) to the extent of the value of the assets securing that debt. There are no restrictions that prevent the guarantor subsidiaries from transferring funds or paying dividends to the Company. The indenture pursuant to which the Senior Notes were issued contains covenants which, among other things, restrict the Company's ability to incur additional debt, pay dividends and make restricted payments, create or permit certain liens, use the proceeds of sales of assets and subsidiaries' stock, create or permit restrictions on the ability of certain of Warnaco's subsidiaries to pay dividends or make other distributions to Warnaco or to Warnaco Group, enter into transactions with affiliates, engage in certain business activities, engage in sale and leaseback transactions and consolidate or merge or sell all or substantially all of its assets. The Company was in compliance with the covenants of the Senior Notes at December 31, 2005. Redemption of the Senior Notes prior to their maturity is subject to premiums as set forth in the indenture. Proceeds from the sale of the Senior Notes were used to repay the outstanding principal balance on the Second Lien Notes of $200,942 and accrued interest thereon of $1,987. The proceeds were also used to pay underwriting fees, legal and professional fees and other expenses associated with the offering in an aggregate amount of approximately $7,071. In connection

F-48

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

with the offering of the Senior Notes, the Company entered into a registration rights agreement with the initial purchasers of the Senior Notes, which, among other things, required Warnaco and the guarantors to complete a registration and exchange of the Senior Notes. In accordance with the registration rights agreement, the Company completed the registration and exchange of the Senior Notes in the first quarter of Fiscal 2004.

Interest Rate Swap Agreements

On September 18, 2003, the Company entered into an interest rate swap agreement (the ‘‘2003 Swap Agreement’’) with respect to the Senior Notes for a total notional amount of $50,000. The 2003 Swap Agreement provides that the Company will receive interest of 8 7/8% and pay a variable rate of interest based upon six month London Interbank Offered Rate (‘‘LIBOR’’) plus 4.11% (8.78% December 31, 2005). The 2003 Swap Agreement expires on June 15, 2013 (the date on which the Senior Notes mature). The Company designated the 2003 Swap Agreement as a fair value hedge of the changes in fair value of $50,000 aggregate principal amount of the $210,000 aggregate principal amount of Senior Notes outstanding. As of December 31, 2005, the fair value of the 2003 Swap Agreement was a loss of $1,366. As of January 1, 2005, the fair value of the 2003 Swap Agreement was a gain of $81.

On November 5, 2004, the Company entered into a second interest rate swap agreement (the ‘‘2004 Swap Agreement’’) with respect to the Company's Senior Notes for a total notional amount of $25,000. The 2004 Swap Agreement provides that the Company will receive interest of 8 7/8% and pay a variable rate of interest based upon six months LIBOR plus 4.34% (9.01% at December 31, 2005). The 2004 Swap Agreement expires on June 15, 2013 (the date on which the Senior Notes mature). The Company designated the 2004 Swap Agreement as a fair value hedge of the changes in fair value of $25,000 aggregate principal amount of the $210,000 aggregate principal amount of Senior Notes outstanding. As of December 31, 2005, the fair value of the 2004 Swap Agreement was a loss of $990. As of January 1, 2005, the fair value of the 2004 Swap Agreement was a loss of $310.

As a result of the 2003 and 2004 Swap Agreements, the weighted average effective interest rate of the Senior Notes was 8.87% and 8.16% as of December 31, 2005 and January 1, 2005, respectively.

As of December 31, 2005 and January 1, 2005, the net fair value of the swap agreements (a loss of $2,356 and $229, respectively) was recorded as part of long-term debt, which was offset by a corresponding gain on the hedged debt. No hedge ineffectiveness is recognized in the consolidated statement of operations, as the provisions of the 2003 and 2004 Swap Agreements match the provisions of the hedged debt.

Revolving Credit Facility; Amended and Restated Credit Agreement

On the Effective Date, the Company entered into the Revolving Credit Facility, which was amended November 12, 2003, August 1, 2004 and September 15, 2005. In addition, as described below, the Revolving Credit Facility was amended and restated on January 31, 2006 in connection with the closing of the CKJEA Acquisition. As of December 31, 2005, the Revolving Credit Facility, as amended, provided for a $175,000 revolving credit facility maturing on February 3, 2009. The Revolving Credit Facility, as amended, includes a provision that allows the Company to increase the maximum available borrowings from $175,000 to $325,000. Borrowings under the Revolving Credit Facility bear interest, at the Company's option, at Citibank N.A.’s base rate plus 0.5% (7.75% at December 31, 2005) or at LIBOR plus 1.5% (approximately 6.04% at December 31, 2005) in each case, on a per annum basis. The rates of interest payable on outstanding borrowings under the Revolving Credit Facility may change based on the Company's financial ratios. The Company enters into contracts to elect the LIBOR option when it expects borrowings to be outstanding for more than 30 days. The remaining balances bear interest based upon Citibank N.A.’s base rate. The Revolving

F-49

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Credit Facility contains financial covenants that, among other things, require the Company to maintain a fixed charge coverage ratio above a minimum level and a leverage ratio below a maximum level and limit the amount of the Company's capital expenditures. In addition, the Revolving Credit Facility contains certain covenants that, among other things, limit investments and asset sales, prohibit the payment of dividends (subject to limited exceptions) and limit the incurrence of material additional indebtedness. The Revolving Credit Facility is guaranteed by the Company and its domestic subsidiaries (other than Warnaco) and the obligations under such guaranty, together with Warnaco's obligations under the Revolving Credit Facility, are secured by a lien on substantially all of the assets of the Company and its domestic subsidiaries.

On November 12, 2003, the Revolving Credit Facility had been amended to modify certain covenants and definitions, including those relating to asset sales, retirement of debt and acquisitions.

On August 1, 2004, the Revolving Credit Facility had been amended to modify certain covenants and reduce the amount of available borrowings from $275,000 to $175,000, thereby reducing fees paid. The covenants which were modified included those relating to incurring debt and liens, investments, asset sales, restricted payments and retirement of debt.

On September 15, 2005, the Revolving Credit Facility had been amended to extend the maturity date from February 3, 2007 to February 3, 2009, to reduce interest rates and fees payable under the facility and to modify certain covenants, including those relating to restricted payments, incurring debt and liens, and acquisitions, as well as financial covenants.

As of December 31, 2005, the Company was in compliance with the covenants of the Revolving Credit Facility, as amended. The Company had paid down all outstanding borrowings under the Revolving Credit Facility as of January 3, 2004 and did not borrow under the Revolving Credit Facility in Fiscal 2005 or Fiscal 2004. As of December 31, 2005, the Company had $92,018 of cash and cash equivalents available as collateral against outstanding letters of credit of $59,956 and $72,183 of other cash and cash equivalents primarily held by foreign subsidiaries. As of December 31, 2005, the Company had $207,062 of credit available, which included available borrowings of $175,000 under its Revolving Credit Facility and cash and cash equivalents net of outstanding letters of credit of $32,062.

On January 31, 2006, the Revolving Credit Facility was amended and restated (the ‘‘Amended and Restated Credit Agreement’’) to, among other things, add a $180,000 term loan facility which was drawn down and used to finance a portion of the CKJEA Acquisition. Generally, the loans under the term loan facility bear interest, at the Company's option, at either Citibank N.A.'s base rate plus 0.50% or at LIBOR plus 1.50%, in each case, on a per annum basis. The term loan facility matures on January 31, 2013 and must be repaid at the rate of $450 per quarter from June 30, 2006 through March 31, 2012 and $42,300 on each of June 30, 2012, September 30, 2012, December 31, 2012 and January 31, 2013. Loans under the Amended and Restated Credit Agreement may be required to be repaid upon the occurrence of certain events, including certain types of asset sales, insurance recoveries, and issuances of debt. In addition, the term loan facility requires the Company to repay term loan principal in amounts equal to 25% of Excess Cash Flow (as defined in the Amended and Restated Credit Agreement), subject to certain conditions.

In addition to the amendments relating to the term loan facility, under the Amended and Restated Credit Agreement, certain covenants were modified, including financial covenants and the covenants relating to indebtedness, acquisitions, asset sales and investments. Further, certain terms and conditions under which an Event of Default (as defined in the Amended and Restated Credit Agreement) may be declared were amended. On January 31, 2006, the Company also increased the maximum borrowings available under the Revolving Credit Facility from $175,000 to $225,000.

F-50

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

The Company's obligations under the term loan facility are guaranteed by the same parties as had guaranteed the Revolving Credit Facility, and are secured by the same assets as had secured the Revolving Credit Facility, except that the lenders under the two loan facilities have different lien priorities in the collateral.

Ocean Pacific Acquisition Debt

On August 19, 2004, the Company assumed $1,000 of debt as part of the acquisition of OP. The debt was paid in full simultaneously with the closing of the acquisition.

Foreign Revolving Credit Facility

During Fiscal 2005, certain of the Company's foreign subsidiaries (the "Foreign Subsidiaries") entered into a $25,000 revolving credit facility with Bank of America, N.A. (the "Foreign Revolving Credit Facility"). The Foreign Revolving Credit Facility provides for a four year, non-amortizing revolving credit facility. Borrowings under the Foreign Revolving Credit Facility accrue interest at LIBOR or, if applicable, the lending bank's base rate, in each case, plus 2.25% or 2.00% (depending on the level of EBITDA (as defined in the Foreign Revolving Credit Facility) of the Foreign Subsidiaries). The Foreign Revolving Credit Facility is secured by first priority security interests on the assets of the Foreign Subsidiaries and the Foreign Subsidiaries guarantee each others' obligations under the Foreign Revolving Credit Facility. The Foreign Revolving Credit Facility contains covenants that require the Foreign Subsidiaries to maintain certain financial ratios and limit the amount of the Foreign Subsidiaries' capital expenditures. In addition, the Foreign Revolving Credit Facility contains certain restrictive covenants which, among other things, limit investments by the Foreign Subsidiaries and prohibit the Foreign Subsidiaries from incurring additional indebtedness. The Company's ability to borrow under the Foreign Revolving Credit Facility is subject to the satisfaction of certain conditions. As of December 31, 2005, the Company had no borrowing outstanding under the Foreign Revolving Credit Facility.

Second Lien Notes

In accordance with The Reorganization Plan, on the Effective Date, the Company issued $200,942 Second Lien Notes to certain pre-petition creditors and others in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 1145(a) of the Bankruptcy Code. The Second Lien Notes were scheduled to mature on February 4, 2008 subject to, in certain instances, earlier repayment in whole or in part. The Second Lien Notes bore an annual interest rate which was the greater of (i) 9.5% plus a margin (initially 0%, and beginning on August 4, 2003, 0.5% would have been added to the margin every six months); and (ii) LIBOR plus 5.0% plus a margin (initially 0%, and beginning on August 4, 2003, 0.5% would have been added to the margin every six months). The indenture pursuant to which the Second Lien Notes were issued contained certain covenants that, among other things, limited investments and asset sales and prohibited the Company from paying dividends (subject to limited exceptions) and incurring material additional indebtedness. The Second Lien Notes were guaranteed by most of the Company's domestic subsidiaries and the obligations under such guarantee, together with the Company's obligations under the Second Lien Notes, were secured by a second priority lien on substantially the same assets which secured the Revolving Credit Facility. On June 12, 2003, the Company repaid all outstanding principal and accrued interest on the Second Lien Notes of $202,929 with the proceeds from the Company's offering of the Senior Notes.

GECC Settlement

On June 12, 2002, the Bankruptcy Court approved the Company's settlement of certain operating lease agreements with General Electric Capital Corporation (‘‘GECC’’). The leases had original terms

F-51

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

from three to seven years and were secured by certain equipment, machinery, furniture, fixtures and other assets. GECC's claims under the leases totaled approximately $51,152. Under the terms of the settlement agreement GECC received $15,200, all of which had been repaid as of January 3, 2004. The remaining amount of the GECC claim of approximately $35,952 was included in liabilities subject to compromise at of January 4, 2003.

The assets acquired pursuant to the terms of the settlement agreement were recorded at their estimated fair value, which was estimated to be equal to the present value of payments due to GECC under the terms of the settlement agreement. Such assets are being depreciated using the straight-line method over their estimated remaining useful lives of two to four years.

Pre-Petition Debt

The Company was in default of substantially all of its U.S. pre-petition credit agreements as of January 4, 2003. All pre-petition debt of the Debtors was classified as liabilities subject to compromise in the consolidated balance sheet at January 4, 2003. In addition, the Company stopped accruing interest on all domestic pre-petition credit facilities and outstanding balances on the Petition Date. The Company continued to accrue interest on certain foreign credit agreements that were subject to standstill and inter-creditor agreements. Such interest of approximately $14,844 was paid pursuant to the Reorganization Plan on February 4, 2003. Such interest was included in liabilities subject to compromise at January 4, 2003.

Note 16—Stockholders’ Equity

Successor Company

Preferred Stock

The Company has authorized an aggregate of 20,000,000 shares of preferred stock, par value $0.01 per share, of which 112,500 shares are designated as Series A preferred stock, par value $0.01 per share. There were no shares of preferred stock issued and outstanding at either December 31, 2005 or January 1, 2005.

Common Stock

The Company has authorized an aggregate of 112,500,000 shares of Common Stock, of which 44,999,973 shares were issued pursuant to the terms of the Reorganization Plan. A further 20,975 shares, 8,807 shares and 25,210 shares were issued to the Company's directors during Fiscal 2005, Fiscal 2004 and the period February 5, 2003 to January 3, 2004, respectively, as partial compensation for serving as members on the Board of Directors of the Company. The total number of shares of New Common Stock issued and outstanding at December 31, 2005 and January 1, 2005 was 46,146,869 and 45,655,515, respectively.

Share Repurchase Program

In July 2005, the Company’s Board of Directors authorized the Company to enter into a share repurchase program of up to 3,000,000 shares of common stock. In order to comply with the terms of applicable debt instruments (which contain certain limitations on share repurchases), the Company expects that purchases under the share repurchase program will be made over the course of the next three years.

During the third quarter of Fiscal 2005, the Company purchased 9,151 shares of its common stock in the open market at a total cost of approximately $222 ($24.25 per share) under the share repurchase program.

F-52

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Repurchased shares are held in treasury pending use for general corporate purposes, including issuances under the Company’s employee stock plans.

2005 Stock Incentive Plan

At the annual meeting of stockholders of the Company held on May 23, 2005, the Company's stockholders approved The Warnaco Group, Inc. 2005 Stock Incentive Plan (the ‘‘2005 Stock Incentive Plan’’) for directors, executive officers and other key employees and consultants of the Company and its affiliates.

The 2005 Stock Incentive Plan permits the granting of incentive stock options, non-qualified stock options, restricted stock, stock awards and other stock-based awards (including but not limited to restricted stock units), some of which may require the satisfaction of performance-based criteria in order to become vested or payable to participants. Subject to adjustment for dividends, distributions, recapitalizations, stock splits, reverse stock splits, reorganizations, mergers, consolidations, split-ups, spin-offs, combinations, repurchases or exchanges of shares or other securities of the Company, issuances of warrants or other rights to purchase shares of common stock or other securities of the Company and other similar events, the aggregate number of shares that may be issued under the 2005 Stock Incentive Plan is 3,000,000 shares of common stock; provided, however, that the aggregate number of shares that may be subject to restricted stock awards and other stock-based awards shall be 750,000. The Compensation Committee of the Company's Board of Directors is responsible for administering the 2005 Stock Incentive Plan. The Company has reserved 3,000,000 shares of its common stock for stock based compensation awards granted pursuant to the 2005 Stock Incentive Plan.

Pursuant to the 2005 Stock Incentive Plan, during Fiscal 2005, the Company granted 169,736 shares of restricted stock to employees. Substantially all of these grants vest annually with respect to one-third of the shares or options on each anniversary of the grant date beginning in 2006 provided that the grantee is employed by the Company on each such anniversary date. The fair market value of the New Common Stock on the date of the restricted stock grants during Fiscal 2005 ranged from $20.87 to $25.52 per share. At December 31, 2005, under the 2005 Stock Incentive Plan, there were approximately 1,308,350 shares available for future grants of stock options and approximately 561,486 shares available for future grants of either stock options or restricted stock awards.

2003 Stock Incentive Plan

The Board of Directors and Compensation Committee thereof are responsible for administration of The Warnaco Group, Inc. 2003 Stock Incentive Plan (the ‘‘2003 Stock Incentive Plan’’) and determined, subject to the provisions of the plans, the number of shares to be issued, the terms of awards, the sale or exercise price, the number of shares awarded and the rate at which awards vested or became exercisable. The Company has reserved 5,000,000 shares of New Common Stock for stock-based compensation awards under the 2003 Stock Incentive Plan. Pursuant to the 2003 Stock Incentive Plan, the Company granted, net of cancellations, 120,282, 196,275 and 654,750 shares of restricted stock during Fiscal 2005, Fiscal 2004 and the period February 5, 2003 to January 3, 2004, respectively. Substantially all the grants of restricted stock in Fiscal 2005 and Fiscal 2004 vest annually with respect to 1/3 of the shares on each anniversary of the grant date beginning in 2005 provided that the grantee is employed by the Company on each date. The fair market value of the New Common Stock on the date of the grants during Fiscal 2005 ranged from $20.87 to $25.52 per share. The fair market value of the New Common Stock on the date of the grants during Fiscal 2004 ranged from $16.30 to $20.91 per share. Substantially all the grants of restricted stock for the period February 5, 2003 to January 3, 2004 vest, with respect to 25% of the shares, six months after the grant date and, with respect to an additional 25% of such shares, each anniversary after the first vesting date

F-53

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

for a period of three years. The fair market value of the New Common Stock on the date of the grants for the period February 5, 2003 to January 3, 2004 ranged from $9.55 to $16.95 per share. At December 31, 2005, under the 2003 Stock Incentive Plan, there were approximately 260,885 shares available for future grants of either stock options or restricted stock awards.

Information related to options is summarized below:

				Fiscal 2005								Fiscal 2004								For the period February 5, 2003 to January 3, 2004
				Options				Weighted Average Exercise Price				Options				Weighted Average Exercise Price				Options				Weighted Average Exercise Price
Outstanding at beginning of period					3,464,500			$	14.28				2,602,000			$	10.85				—
Granted					986,900	(a)			21.05				1,588,000	(b)			18.35				2,906,000	(c)		$	10.80
Exercised					(273,634	)			12.14				(377,500	)			10.56				(17,000	)			10.45
Cancelled					(214,466	)			16.59				(348,000	)			12.23				(287,000	)			10.43
Outstanding at end of period					3,963,300				16.24				3,464,500				14.28				2,602,000				10.85
Options exercisable at end of period					1,582,711			$	13.00				864,250			$	10.63				637,000			$	10.25

(a)

Substantially all options granted during Fiscal 2005 vest annually with respect to one-third of the shares on each anniversary of the grant date beginning in 2006 provided that the grantee is employed by the Company on such date. Exercise prices ranged from $20.87 to $25.52 per share per share, which represented the fair market value of the New Common Stock at the date of grant. The options have a 10 year term.

(b)

Substantially all options granted during Fiscal 2004 vest annually with respect to one-third of the shares on each anniversary of the grant date beginning in 2005 provided that the grantee is employed by the Company on such date. Exercise prices ranged from $16.30 to $20.91 per share, which represented the fair market value of the New Common Stock at the date of grant. The options have a 10 year term.

(c)

Substantially all options granted during the period February 5, 2003 to January 3, 2004 vest, with respect to 25% of the shares, six months after the grant date, and with respect to an additional 25% of such shares, each anniversary after the first vesting date for a period of three years. Exercise prices ranged from $9.55 to $16.95 per share, which represented the fair market value of the New Common Stock at the date of grant. The options have a 10 year term.

Information related to options outstanding at December 31, 2005 is summarized below:

				Options Outstanding												Options Exercisable
Range of Exercise Prices				Outstanding at December 31, 2005				Weighted Average Remaining Contractual Life (Years)				Weighted Average Exercise Price				Exercisable at December 31, 2005				Weighted Average Exercise Price
$9.55-$12.74				$	1,440,000				7.2			$	10.08			$	1,020,000			$	10.05
$12.75-$15.94					16,000				7.6				15.43				8,000				15.43
$15.95-$19.13					1,099,400				8.1				17.64				385,802				17.55
$19.14-$22.33					1,320,900				9.1				21.26				168,909				20.31
$22.34-$25.52					87,000				9.7				24.56				—				—
				$	3,963,300				8.2			$	16.24			$	1,582,711			$	13.00

The following represents the reconciliation of the number of shares of New Common Stock and treasury stock issued and outstanding as of December 31, 2005:

F-54

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

				December 31, 2005				January 1, 2005
Common Stock:
Balance at beginning of year					45,655,515				45,188,683
Shares issued to directors					20,975				8,807
Shares issued upon exercise of stock options					267,834				313,400
Shares issued upon vesting of restricted stock grants					202,545				144,625
Balance at end of year					46,146,869				45,655,515
Treasury Stock:
Balance at beginning of year					638				22,766
Purchases of Common Stock (a)					58,285				50,158
Shares issued upon vesting of restricted stock grants					(10,625	)			(8,186	)
Shares issued upon exercise of stock options					(5,800	)			(64,100	)
Balance at end of year					42,498				638

(a)	For Fiscal 2005, represents 9,151 shares purchased under the Company’s share repurchase program and 49,134 shares surrendered by employees in satisfaction of certain payroll tax obligations associated with the vesting of restricted stock. For Fiscal 2004, represents shares surrendered by employees in satisfaction of certain payroll tax obligations associated with the vesting of restricted stock.

F-55

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Note 17—Income per Common Share

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Numerator for basic and diluted income per common share:
Income from continuing operations				$	52,237			$	46,875			$	18,230			$	2,359,038
Basic:
Weighted average number of shares outstanding used in computing income per common share					45,872,308				45,418,069				45,060,724				52,989,965
Income per common share from continuing operations				$	1.14			$	1.03			$	0.40			$	44.52
Diluted:
Weighted average number of shares outstanding					45,872,308				45,418,069				45,060,724				52,989,965
Effect of dilutive securities:
Employee stock options					694,971				544,972				219,318				—
Unvested employees' restricted stock					236,774				215,494				182,518				—
Weighted average number of shares and share equivalents outstanding					46,804,053				46,178,535				45,462,560				52,989,965
Income per common share from continuing operations				$	1.12			$	1.02			$	0.40			$	44.52
Number of anti-dilutive ‘‘out-of-the-money’’ stock options outstanding					84,600				479,200				246,000				—

Options to purchase shares of common stock at an exercise price greater than the average market price of the underlying shares are anti-dilutive and therefore not included in the computation of diluted income per common share from continuing operations. The effect of dilutive securities was not included in the computation of diluted income per share from continuing operations for the period January 5, 2003 to February 4, 2003 because the effect would have been anti-dilutive.

F-56

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Note 18—Lease and Other Commitments

The Company is a party to various lease agreements for equipment, real estate, furniture, fixtures and other assets, which expire on various dates through 2025. Under these agreements, the Company is required to pay various amounts including property taxes, insurance, maintenance fees, and other costs. The following is a schedule of future minimum rental payments required under non-cancelable operating leases with terms in excess of one year, as of December 31, 2005:

				Rental payments
Year				Real Estate				Equipment
2006				$	23,748			$	4,053
2007					20,044				3,781
2008					16,924				3,220
2009					15,054				1,178
2010					13,282				1,127
2011 and thereafter					63,411				5,465

Rent expense included in the consolidated statements of operations for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004, and the period January 5, 2003 to February 4, 2003 was $27,581, $23,512, $25,159, and $1,760, respectively.

The Company had capital lease obligations of $394 (classified in accrued liabilities) and $799 (classified in long term-debt) as of December 31, 2005 and January 1, 2005, respectively.

Although the specific terms of each of the Company’s license agreements vary, generally such agreements provide for minimum royalty payments and/or royalty payments based upon a percentage of net sales. Such license agreements also generally grant the licensor the right to approve any designs marketed by the licensee. The Company has license agreements with the following minimum guaranteed royalty payments as of December 31, 2005:

Year				Minimum Royalty (a)
2006				$	33,847
2007					37,437
2008					35,386
2009					35,474
2010					32,561
2011 and thereafter					455,279

(a)

Includes all minimum royalty obligations. Some of the Company's license agreements have no expiration date or extend beyond 20 years. The duration of these agreements for the purposes of this item are assumed to be 20 years. Variable based minimum royalty obligations are based upon payments for the most recent fiscal year. Certain of the Company's license agreements also require the Company to pay a specified percentage of net revenue (ranging from 2-3%) to the licensor for advertising and promotion of the licensed products (which amount is not included in minimum royalty obligations for purposes of this item).

The Company has entered into employment agreements with certain members of management. Minimum obligations pursuant to such agreements total $5,185, $3,943, $1,347, $63, $62 and $75 in fiscal 2006, 2007, 2008, 2009, 2010 and thereafter, respectively. These agreements also provide for deferred compensation arrangements and supplemental awards.

During Fiscal 2005, the Company entered into agreements to guarantee certain purchase orders by one of its finished goods contractors with vendors of raw materials (to a maximum of $3,700). As of December 31, 2005, the Company had recorded inventory purchases of $3,200 related to these guarantees and approximately $500 of the guarantees were still outstanding. The guarantees expire at

F-57

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

various times through March 2006. The estimated fair value of the guarantees was not material to the Company’s consolidated financial statements as of December 31, 2005.

As of December 31, 2005, the Company had purchase obligations of $7,930, $350, $350 and $350 for fiscal 2006, 2007, 2008 and 2009, respectively. These obligations include payments for software maintenance and licensing fees, store fixtures, and advertising.

Note 19—Financial Instruments

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments.

Accounts Receivable: The carrying amount of the Company's accounts receivable approximates fair value.

Notes Receivable: The carrying amount of the Company's notes receivable approximates fair value, as the notes bear interest at market rates based upon the risk associated with the debtor.

Accounts Payable: The carrying amount of the Company's accounts payable are approximately equal to their fair value because accounts payable are short-term in nature and the carrying value is equal to the settlement value.

Senior Notes: The Senior Notes mature on June 15, 2013 and bear interest at 8 7/8% payable semi-annually beginning December 15, 2003. The fair value of the Senior Notes is based upon quoted market prices for the Senior Notes.

Interest Rate Swaps: The fair value of the outstanding interest rate swaps is based upon the cost to terminate the contracts.

Letters of Credit: Letters of credit collateralize the Company's obligations to third parties and have terms ranging from 30 days to one year. The face amounts of the letters of credit are a reasonable estimate of the fair value since the value for each is fixed over its relatively short maturity.

Foreign Currency Exchange Forward Contracts: The fair value of the outstanding foreign currency exchange forward contracts is based upon the cost to terminate the contracts. The Company did not have any foreign currency exchange forward contracts outstanding as of January 1, 2005.

The carrying amounts and fair value of the Company's financial instruments are as follows:

				December 31, 2005								January 1, 2005
				Carrying Amount				Fair Value				Carrying Amount				Fair Value
Accounts receivable				$	213,364			$	213,364			$	219,805			$	219,805
Note receivable					7,439				7,439				13,993				13,993
Accounts payable					126,333				126,333				122,418				122,418
Senior Notes					207,644				226,275				209,771				231,000
Interest rate swaps – net loss					2,356				2,356				229				229
Letters of credit					—				59,956				—				61,097
Foreign currency exchange contracts					98				98				—				—

F-58

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Note 20—Cash Flow Information

The following table sets forth supplemental cash flow information for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004, and the period January 5, 2003 to February 4, 2003:

				Successor												Predecessor
				Fiscal 2005				Fiscal 2004				For the Period February 5, 2003 to January 3, 2004				For the Period January 5, 2003 to February 4, 2003
Cash paid (received) during the year for:
Interest expense				$	21,718			$	21,498			$	18,809			$	14,844
Interest income					(3,676	)			(2,211	)			(552	)			(47	)
Income taxes, net of refunds received					439				(2,746	)			13,282				273
Supplemental non-cash investing and financing activities:
Accounts payable for purchase of fixed assets					8,783				5,004				2,788				—
Note receivable on asset sales					—				—				18,700				—

Note 21—Legal Matters

SEC Investigation: As previously disclosed, the Company reached a settlement with the SEC on the proposed allegations related to matters that had been under investigation. Pursuant to the settlement, on May 11, 2004, the SEC issued an administrative order requiring that the Company cease and desist from committing or causing any violations and future violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. The cease-and-desist order, in which the Company neither admits nor denies the findings, was pursuant to the Company's offer of settlement. The Company paid no fine under the SEC settlement. As part of the settlement, the Company agreed to certain undertakings, including retention of an independent consultant to perform a review of the Company's internal controls and policies relating to its inventory systems, internal audit, financial reporting and other accounting functions. On October 29, 2004, the independent consultant delivered its report to the Special Committee of the Board of Directors, which report was thereafter delivered to the SEC. In January 2005, the Board, upon recommendation of the Special Committee, adopted the recommendations contained in the report. In addition, pursuant to the settlement, the Company agreed that for a period of two years its Chief Administrative Officer (who previously served as General Counsel) shall not sign any documents to be filed with the SEC by or on behalf of the Company and shall not participate in or be responsible for the preparation or review of such filings except under limited circumstances. The Company also agreed that for a period of two years its General Counsel shall continue to report directly to the Audit Committee of the Board of Directors on any matters relating to the Company's financial reporting obligations. The Company does not expect the settlement with the SEC to have a material effect on its financial condition, results of operations or business.

Other: In addition to the above, from time to time, the Company is involved in arbitrations or legal proceedings that arise in the ordinary course of its business. The Company cannot predict the timing or outcome of these claims and proceedings. Currently, the Company is not involved in any arbitration and/or legal proceeding that it expects to have a material effect on its financial condition, results of operations or business.

F-59

THE WARNACO GROUP, INC.
   
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Note 22—Supplemental Consolidating Condensed Financial Information

The following tables set forth supplemental consolidating condensed financial information as of December 31, 2005 and January 1, 2005 and for Fiscal 2005, Fiscal 2004, the period February 5, 2003 to January 3, 2004, and the period January 5, 2003 to February 4, 2003 for: (i) The Warnaco Group, Inc., (ii) Warnaco Inc., (iii) the subsidiaries that guarantee the Senior Notes (the ‘‘Guarantor Subsidiaries’’), (iv) the subsidiaries other than the Guarantor Subsidiaries (the ‘‘Non-Guarantor Subsidiaries’’) and (v) The Warnaco Group, Inc. on a consolidated basis. The Senior Notes are guaranteed by substantially all of Warnaco Inc.'s domestic subsidiaries. See Note 15.

				December 31, 2005
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
ASSETS
Current assets:
Cash and cash equivalents				$	—			$	105,770			$	581			$	57,850			$	—			$	164,201
Accounts receivable, net					—				—				144,728				68,636				—				213,364
Inventories					—				74,727				168,997				82,550				—				326,274
Prepaid expenses and other current assets					—				19,710				10,221				17,644				—				47,575
Total current assets					—				200,207				324,527				226,680				—				751,414
Property, plant and equipment, net					—				50,899				41,489				24,607				—				116,995
Investment in subsidiaries					853,302				551,616				—				—				(1,404,918	)			—
Other assets					—				38,360				298,633				16,814				—				353,807
Total assets				$	853,302			$	841,082			$	664,649			$	268,101			$	(1,404,918	)		$	1,222,216
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued liabilities and accrued taxes				$	—			$	116,747			$	45,303			$	90,759			$	—-			$	252,809
Total current liabilities					—				116,747				45,303				90,759				—				252,809
Intercompany accounts					221,255				(171,318	)			21,263				(71,200	)			—				—
Long-term debt					—				210,000				—				—				—				210,000
Other long-term liabilities					—				109,643				13,017				4,700				—				127,360
Stockholders' equity					632,047				576,010				585,066				243,842				(1,404,918	)			632,047
Total liabilities and stockholders' equity				$	853,302			$	841,082			$	664,649			$	268,101			$	(1,404,918	)		$	1,222,216

				January 1, 2005
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
ASSETS
Current assets:
Cash and cash equivalents				$	—			$	44,155			$	122			$	21,311			$	—			$	65,588
Accounts receivable, net					—				—				160,030				59,775				—				219,805
Inventories					—				93,284				153,462				88,905				—				335,651
Prepaid expenses and other current assets					—				19,252				9,961				16,198				—				45,411
Assets of discontinued operations					—				—				39				2,579				—				2,618
Total current assets					—				156,691				323,614				188,768				—				669,073
Property, plant and equipment, net					—				30,323				54,373				22,241				—				106,937
Investment in subsidiaries					812,144				551,616				—				—				(1,363,760	)			—
Other assets					—				47,830				312,255				17,809				—				377,894
Total assets				$	812,144			$	786,460			$	690,242			$	228,818			$	(1,363,760	)		$	1,153,904
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Liabilities of discontinued operations				$	—			$	—			$	480			$	970			$	—			$	1,450
Accounts payable, accrued liabilities and accrued taxes					—				106,235				49,944				77,219				—				233,398
Total current liabilities					—				106,235				50,424				78,189				—				234,848
Intercompany accounts					235,195				(270,597	)			113,943				(78,541	)			—				—
Long-term debt					—				210,000				—				799				—				210,799
Other long-term liabilities					—				109,118				10,891				11,299				—				131,308
Stockholders' equity					576,949				631,704				514,984				217,072				(1,363,760	)			576,949
Total liabilities and stockholders' equity				$	812,144			$	786,460			$	690,242			$	228,818			$	(1,363,760	)		$	1,153,904

F-60

THE WARNACO GROUP, INC.
   
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

				Fiscal 2005
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
Net revenues				$	—			$	463,152			$	614,262			$	427,001			$	—			$	1,504,415
Cost of goods sold					—				348,633				417,674				228,492				—				994,799
Gross profit					—				114,519				196,588				198,509				—				509,616
Selling, general and administrative expenses					—				140,094				140,699				125,871				—				406,664
Pension expense					—				1,160				—				403				—				1,563
Restructuring expense (income)					—				685				—				(1,188	)			—				(503	)
Operating income (loss)					—				(27,420	)			55,889				73,423				—				101,892
Equity in income of subsidiaries					(52,052	)			—				—				—				52,052				—
Intercompany					—				1,223				(14,979	)			13,756				—				—
Other (income) loss					—				(1,093	)			1,087				1,025				—				1,019
Interest (income) expense, net					—				58,554				(41,579	)			1,105				—				18,080
Income (loss) from continuing operations before provision for income taxes					52,052				(86,104	)			111,360				57,537				(52,052	)			82,793
Provision (benefit) for income taxes					—				(31,778	)			41,099				21,235				—				30,556
Income (loss) from continuing operations					52,052				(54,326	)			70,261				36,302				(52,052	)			52,237
Loss from discontinued operations, net of income taxes					—				—				(165	)			(20	)			—				(185	)
Net income (loss)				$	52,052			$	(54,326	)		$	70,096			$	36,282			$	(52,052	)		$	52,052

				Fiscal 2004
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
Net revenues				$	—			$	437,249			$	596,835			$	390,097			$	—			$	1,424,181
Cost of goods sold					—				334,057				400,950				216,191				—				951,198
Gross profit					—				103,192				195,885				173,906				—				472,983
Selling, general and administrative expenses					—				139,706				124,025				114,771				—				378,502
Pension income					—				(6,150	)			—				(634	)			—				(6,784	)
Restructuring expense					—				4,387				109				634				—				5,130
Operating income (loss)					—				(34,751	)			71,751				59,135				—				96,135
Equity in income of subsidiaries					(42,517	)			—				—				—				42,517				—
Intercompany					—				6,824				(18,032	)			11,208				—				—
Other (income) loss					—				(19,243	)			18,961				(1,915	)			—				(2,197	)
Interest (income) expense, net					—				43,895				(25,037	)			963				—				19,821
Income (loss) from continuing operations before provision for income taxes					42,517				(66,227	)			95,859				48,879				(42,517	)			78,511
Provision (benefit) for income taxes					—				(26,686	)			38,626				19,696				—				31,636
Income (loss) from continuing operations					42,517				(39,541	)			57,233				29,183				(42,517	)			46,875
Income (loss) from discontinued operations, net of income taxes					—				—				(4,812	)			454				—				(4,358	)
Net income (loss)				$	42,517			$	(39,541	)		$	52,421			$	29,637			$	(42,517	)		$	42,517

F-61

THE WARNACO GROUP, INC.
   
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

				For the Period February 5, 2003 to January 3, 2004
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
Net revenues				$	—			$	397,490			$	548,996			$	317,815			$	—			$	1,264,301
Cost of goods sold					—				292,208				393,098				186,864				—				872,170
Gross profit					—				105,282				155,898				130,951				—				392,131
Selling, general and administrative expenses					—				135,156				105,698				79,049				—				319,903
Pension income					—				(6,488	)			—				(323	)			—				(6,811	)
Amortization of sales order backlog					—				3,300				8,500				—				—				11,800
Restructuring expense					—				10,311				4,160				4,630				—				19,101
Operating income (loss)					—				(36,997	)			37,540				47,595				—				48,138
Equity in income of subsidiaries					163				—				—				—				(163	)			—
Intercompany					—				7,439				(12,887	)			5,448				—				—
Other (income) expense, net					—				(10,754	)			9,581				(1,644	)			—				(2,817	)
Interest (income) expense, net					—				34,518				(15,881	)			2,004				—				20,641
Income (loss) from continuing operations before provision (benefit) for income taxes					(163	)			(68,200	)			56,727				41,787				163				30,314
Provision for income taxes					—				2,467				632				8,985				—				12,084
Income (loss) from continuing operations					(163	)			(70,667	)			56,095				32,802				163				18,230
Loss from discontinued operations, net of income taxes					—				—				(8,809	)			(9,584	)			—				(18,393	)
Net income (loss)				$	(163	)		$	(70,667	)		$	47,286			$	23,218			$	163			$	(163	)

				For the Period January 5, 2003 to February 4, 2003
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
Net revenues				$	—			$	25,673			$	57,091			$	27,356			$	—			$	110,120
Cost of goods sold					—				15,666				36,852				14,765				—				67,283
Gross profit					—				10,007				20,239				12,591				—				42,837
Selling, general and administrative expenses					—				13,873				9,034				9,249				—				32,156
Reorganization expense (income)					—				29,922				—				(117	)			—				29,805
Operating income (loss)					—				(33,788	)			11,205				3,459				—				(19,124	)
Equity in income of subsidiaries					(2,358,537	)			—				—				—				2,358,537				—
Gain on cancellation of pre-petition indebtedness					—				(1,567,721	)			(124,975	)			—				—				(1,692,696	)
Fresh start adjustments					—				(765,726	)			—				—				—				(765,726	)
Other expense					—				359				—				—				—				359
Interest (income) expense, net					—				1,887				(4	)			(132	)			—				1,751
Income from continuing operations before provision for income taxes					2,358,537				2,297,413				136,184				3,591				(2,358,537	)			2,437,188
Provision for income taxes					—				77,603				—				547				—				78,150
Income from continuing operations					2,358,537				2,219,810				136,184				3,044				(2,358,537	)			2,359,038
Loss from discontinued operations, net of income taxes					—				—				(303	)			(198	)			—				(501	)
Net income				$	2,358,537			$	2,219,810			$	135,881			$	2,846			$	(2,358,537	)		$	2,358,537

F-62

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

				Fiscal 2005
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
Net cash provided by (used in) operating activities from continuing operations				$	(1,965	)		$	77,617			$	11,672			$	49,718			$	—			$	137,042
Net cash provided by (used in) operating activities from discontinued operations					—				—				(274	)			1,298				—				1,024
Net cash provided by (used in) operating activities					(1,965	)			77,617				11,398				51,016				—				138,066
Cash flows from investing activities:
Proceeds on disposal of assets and collection of notes receivable					—				6,299				—				47				—				6,346
Purchase of property, plant and equipment					—				(20,679	)			(6,606	)			(8,040	)			—				(35,325	)
Business acquisitions					—				(1,236	)			—				(278	)			—				(1,514	)
Preacquisition costs					—				—				—				(1,901	)			—				(1,901	)
Purchase of intangible asset					—				—				(4,333	)			—				—				(4,333	)
Net cash used in investing activities					—				(15,616	)			(10,939	)			(10,172	)			—				(36,727	)
Cash flows from financing activities:
Repayment of capital lease obligations					—				—				—				(405	)			—				(405	)
Payment of deferred financing costs					—				(386	)			—				(1,239	)			—				(1,625	)
Proceeds from issuance of stock, net					3,005				—				—				—				—				3,005
Purchase of treasury stock					(1,040	)			—				—				—				—				(1,040	)
Net cash provided by (used in) financing activities					1,965				(386	)			—				(1,644	)			—				(65	)
Translation adjustments					—				—				—				(2,661	)			—				(2,661	)
Increase in cash and cash equivalents					—				61,615				459				36,539				—				98,613
Cash and cash equivalents, excluding restricted cash, at beginning of period					—				44,155				122				21,311				—				65,588
Cash and cash equivalents, excluding restricted cash, at end of period				$	—			$	105,770			$	581			$	57,850			$	—			$	164,201

				Fiscal 2004
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
Net cash provided by (used in) operating activities from continuing operations				$	(2,967	)		$	22,712			$	34,059			$	1,012			$	—			$	54,816
Net cash provided by (used in) operating activities from discontinued operations					—				—				(5,179	)			682				—				(4,497	)
Net cash provided by (used in) operating activities					(2,967	)			22,712				28,880				1,694				—				50,319
Cash flows from investing activities:
Proceeds on disposal of assets and collection of notes receivable					—				8,624				15,179				243				—				24,046
Purchase of property, plant and equipment					—				(20,056	)			(2,941	)			(6,647	)			—				(29,644	)
Business acquisitions					—				—				(40,497	)			(288	)							(40,785	)
Net cash used in investing activities from
continuing operations					—				(11,432	)			(28,259	)			(6,692	)			—				(46,383	)
Net cash provided by investing activities
from discontinued operations					—				—				—				1,137				—				1,137
Net cash used in investing activities					—				(11,432	)			(28,259	)			(5,555	)			—				(45,246	)
Cash flows from financing activities:
Payment of deferred financing costs					—				(997	)			—				—				—				(997	)
Proceeds from issuance of stock, net					2,967				—				—				—				—				2,967
Repayments under other debt agreements					—				—				(1,000	)			(333	)			—				(1,333	)
Net cash provided by (used in) financing activities					2,967				(997	)			(1,000	)			(333	)			—				637
Translation adjustments					—				—				—				6,421				—				6,421
Increase (decrease) in cash and cash equivalents					—				10,283				(379	)			2,227				—				12,131
Cash and cash equivalents, excluding restricted cash, at beginning of period					—				33,872				501				19,084				—				53,457
Cash and cash equivalents, excluding restricted cash, at end of period				$	—			$	44,155			$	122			$	21,311			$	—			$	65,588

F-63

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

				For the Period February 5, 2003 to January 3, 2004
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
Net cash provided by operating activities from continuing operations				$	302			$	82,249			$	5,214			$	769			$	—			$	88,534
Net cash used in operating activities from discontinued operations					—				—				(713	)			(4,233	)			—				(4,946	)
Net cash provided by (used in) operating activities					302				82,249				4,501				(3,464	)			—				83,588
Cash flows from investing activities:
Disposal of fixed and other assets					—				10,687				—				—				—				10,687
Purchase of property, plant and equipment					—				(21,248	)			(3,878	)			(3,584	)			—				(28,710	)
Net cash used in investing activities from continuing operations					—				(10,561	)			(3,878	)			(3,584	)			—				(18,023	)
Net cash used in investing activities from discontinued operations					—				—				(461	)			(23	)			—				(484	)
Net cash used in investing activities					—				(10,561	)			(4,339	)			(3,607	)			—				(18,507	)
Cash flows from financing activities:
Repayments under revolving credit facility					—				(39,200	)			—				—				—				(39,200	)
Issuance of Senior Notes					—				210,000				—				—				—				210,000
Repayment of Second Lien Notes					—				(200,942	)			—				—				—				(200,942	)
Repayment under term loan and other debt agreements					—				(5,050	)			—				(128	)			—				(5,178	)
Other					(302	)			(9,233	)			—				—				—				(9,535	)
Net cash used in financing activities					(302	)			(44,425	)			—				(128	)			—				(44,855	)
Translation adjustments					—				—				—				12,525				—				12,525
Increase in cash and cash equivalents					—				27,263				162				5,326				—				32,751
Cash and cash equivalents, excluding restricted cash, at beginning of period					—				6,610				339				13,757				—				20,706
Cash and cash equivalents, excluding restricted cash, at end of period				$	—			$	33,873			$	501			$	19,083			$	—			$	53,457

				For the Period January 5, 2003 to February 4, 2003
				The Warnaco Group, Inc.				Warnaco Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Elimination Entries				Consolidated
Net cash provided by (used in) operating activities from continuing operations				$	—			$	(126,583	)		$	(1,209	)		$	103,521			$	—			$	(24,271	)
Net cash provided by (used in) operating activities from discontinued operations					—				—				1,469				(2,124	)							(655	)
Net cash provided by (used in) operating activities					—				(126,583	)			260				101,397				—				(24,926	)
Cash flows from investing activities:
Purchase of property, plant and equipment					—				(468	)			(159	)			(16	)			—				(643	)
Net cash used in investing activities from continuing operations					—				(468	)			(159	)			(16	)			—				(643	)
Net cash used in investing activities from discontinued operations					—				—				(102	)			—				—				(102	)
Net cash used in investing activities					—				(468	)			(261	)			(16	)			—				(745	)
Cash flows from financing activities:
Borrowings under revolving credit facility					—				39,200				—				—				—				39,200
Repayments under term loan and other debt agreements					—				785				—				(1,500	)			—				(715	)
Repayments of prepetition debt					—				—				—				(106,112	)			—				(106,112	)
Net cash provided by (used in) financing activities					—				39,985				—				(107,612	)			—				(67,627	)
Translation adjustments					—				—				—				(21	)			—				(21	)
Decrease in cash and cash equivalents					—				(87,066	)			(1	)			(6,252	)			—				(93,319	)
Cash and cash equivalents, excluding restricted cash, at beginning of period					—				93,676				340				20,009				—				114,025
Cash and cash equivalents, excluding restricted cash, at end of period				$	—			$	6,610			$	339			$	13,757			$	—			$	20,706

F-64

THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding per share amounts)

Note 23—Quarterly Results of Operations (Unaudited)

The following tables contain selected financial data for each quarter of Fiscal 2005 and Fiscal 2004. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for each quarter of Fiscal 2005 and Fiscal 2004. The operating results for any period are not necessarily indicative of results for any future periods.

				Fiscal 2005
				First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Net revenues				$	439,541			$	374,679			$	327,651			$	362,544
Gross profit					157,008				112,971				112,665				126,972
Income from continuing operations					29,226				6,581				6,977				9,453
Income (loss) from discontinued operations, net of taxes					125				(253	)			(29	)			(28	)
Net income					29,351				6,328				6,948				9,425
Basic income per common share:
Income from continuing operations				$	0.64			$	0.14			$	0.15			$	0.21
Loss from discontinued operations					—				—				—				(0.01	)
Net income				$	0.64			$	0.14			$	0.15			$	0.20
Diluted income per common share:
Income from continuing operations				$	0.63			$	0.14			$	0.15			$	0.20
Loss from discontinued operations					—				—				—				—
Net income				$	0.63			$	0.14			$	0.15			$	0.20

				Fiscal 2004
				First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Net revenues				$	393,253			$	332,077			$	324,434			$	374,417
Gross profit					141,497				103,432				102,673				125,381
Income from continuing operations					23,702				4,430				1,866				16,877
Income (loss) from discontinued operations, net of taxes					(3,478	)			12				(262	)			(630	)
Net income					20,224				4,442				1,604				16,247
Basic income per common share:
Income from continuing operations				$	0.52			$	0.10			$	0.04			$	0.37
Loss from discontinued operations					(0.07	)			—				(0.01	)			(0.01	)
Net income				$	0.45			$	0.10			$	0.03			$	0.36
Diluted income per common share:
Income from continuing operations				$	0.51			$	0.10			$	0.04			$	0.36
Loss from discontinued operations					(0.07	)			—				(0.01	)			(0.01	)
Net income				$	0.44			$	0.10			$	0.03			$	0.35

F-65

SCHEDULE II

THE WARNACO GROUP, INC.
VALUATION & QUALIFYING ACCOUNTS & RESERVES (5)
(Dollars in thousands)

Description				Balance at Beginning of Period				Additions Charges to Cost and Expenses (1)				Other Additions / Reclassification				Deductions				Balance at End of Period
Period January 5, 2003 to February 4, 2003
Receivable allowances				$	87,512			$	8,806	(3)		$	—			$	(96,318	)(5)		$	—
Tax valuation allowance				$	670,772			$	—			$	(34,669	)(6)		$	(546,784	)(7)		$	89,319
Period February 5, 2003 to January 3, 2004
Receivable allowances				$	—			$	148,677	(3)		$	(6,375	)(4)		$	(84,866	)(2)		$	57,436
Tax valuation allowance				$	89,319			$	(104	)		$	41,894	(6)		$	—			$	131,109
Fiscal 2004
Receivable allowances				$	57,436			$	151,564			$	—			$	(154,057	)(2)		$	54,943
Tax valuation allowance				$	131,109			$	1,585			$	33,141	(6)		$	—			$	165,835
Fiscal 2005
Receivable allowances				$	54,943			$	166,571			$	—			$	(173,256	)(2)		$	48,258
Tax valuation allowance				$	165,835			$	90			$	(7,326	)(6)		$	—			$	158,599

(1)	With respect to receivable allowances, includes bad debts, cash discounts, allowances and sales returns.

(2)	Credits issued and amounts written-off, net of recoveries.

(3)	Amounts include reserve balances for discontinued operations.

(4)	Reclassification of reserve amounts for discontinued operations, which assets were classified as current assets of discontinued operations as of January 3, 2004.

(5)	Reflects elimination of reserves upon the adoption of fresh start accounting and the resulting valuation of accounts receivable at fair value.

(6)

Relates primarily to adjustments to the Company's valuation allowance resulting from changes in its deferred taxes due to: (a) basis differences resulting from the filing of the Company's 2003 U.S. corporate income tax return, (b) finalized assessments of the Company's foreign tax returns by local taxing authorities, and (c) the realization of certain deferred tax assets that existed as of the date of the Company's emergence from bankruptcy.

(7)	Includes an adjustment to the valuation allowance recorded in connection with the Company's adoption of fresh start accounting.

A-1

EX-10.62

EXHIBIT 10.62

PORTIONS OF THIS EXHIBIT 10.62 MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

EXECUTION COPY

CONFIDENTIAL - THIS DOCUMENT AND ITS SUBSTANCE ARE NOT TO BE USED OR DISCUSSED WITHOUT CONSENT OF CALVIN KLEIN, INC. THIS IS A DRAFT WHICH SHALL NOT BE BINDING UPON THE PARTIES AND DOES NOT CONSTITUTE AN OBLIGATION OF THE PARTIES. NO BINDING AGREEMENT OR OBLIGATION WILL RESULT UNLESS A DEFINITIVE WRITTEN AGREEMENT IS EXECUTED AND DELIVERED BY THE PARTIES. NEITHER THIS DRAFT NOR ANY OTHER DRAFT, MEMO, OTHER WRITING NOR ANY ORAL CONVERSATION OR DISCUSSION IS TO BE CONSIDERED BINDING OR A COMMITMENT ON THE PART OF CALVIN KLEIN, INC.

CALVIN KLEIN, INC.

and

CALVIN KLEIN JEANSWEAR ASIA LTD.

THIS AMENDED AND RESTATED LICENSE AGREEMENT is made this 1st day of January 1997, by and between CALVIN KLEIN, INC., a New York corporation having its principal business office at 205 West 39th Street, New York, New York 10018 ("Licensor"), on the one hand and Calvin Klein Jeanswear Asia Ltd., a Hong Kong corporation having its principal business office at c/o Jeanswear Services Hong Kong Ltd., Suite 3506, Tower 1, The Gateway, 25 Canton Road, TST, Kowloon, Hong Kong ("Licensee") and it amends and restates in its entirety a License Agreement dated as of May 14, 1996 (the "Original License Agreement") by and between Licensor and Licensee.

Index

Section

1	Grant (Products/Territory)

2	Term

3	Design

4	Confidentiality

5	Quality Control

6	Operations

7	Advertising

8	Approval Standard

9	Minimum Guaranteed Fees

10	Percentage Fee

11	Equity Interest

12	Audit

13	Trademark

14	Infringement

15	Counterfeit/Parallel Considerations

16	Copyright

17	Other Designers

18	Indemnification/Insurance

19	Breach/Default

CONFIDENTIAL TREATMENT

20	Termination

21	Licensor Representations

22	Licensee Representations

23	Notice

24	Assignment

25	Entire Agreement

26	Independent Contractor

27	No Waiver

28	Severability

29	Governing Law

30	Forum, Jurisdiction and Service of Process

31	Jurisdictional Approval

Schedules/Exhibits/Attachments

Schedule A (Products)
Schedule 3.1.1 Time and Action Calendar
Schedule 24 (Shareholdings)

W  I  T  N   E  S  S  E  T   H:

In consideration of the premises and the mutual covenants hereinafter set forth, Licensor and Licensee do hereby respectively grant, covenant and agree as follows:

Definitions: As used in this Agreement, the following terms have the meanings specified or referred to below.

"Aggregate Net Sales Thresholds" shall have the meaning set forth in Section 2.1.

"Asia" shall have the meaning set forth in Section 1.1.

"Articles" shall have the meaning set forth in Section 1.1.

"Close-out Articles" shall have the meaning set forth in Section 5.4.

"CPI" shall mean the Consumer Price Index (All Cities - All Urban Consumers) as published by the United States Department of Labor (or the successor index).

"Form" shall have the meaning set forth in Section 1.1.

"Irregulars" shall have the meaning set forth in Section 5.4.

"Licensor's Data" shall have the meaning set forth in Section 4.1.

"Licensed Mark" shall have the meaning set forth in Section 1.1.

"Minimum Advertising Expenditure" shall have the meaning set forth in Section 7.2.

"Minimum Guaranteed Fee" shall have the meaning set forth in Section 9.1.

"Minimum Net Sales Thresholds" shall have the meaning set forth in Section 2.2.

"Net Sales" shall have the meaning set forth in Section 10.1.

"Percentage Fee" shall have the meaning set forth in Section 10.1.

"Products" shall have the meaning set forth in Section 1.1.

CONFIDENTIAL TREATMENT

"Salesmen's Samples" shall mean Articles sold to Licensee's commercial agents and salesmen at a discount of at least 50% off the wholesale price for use in promoting and selling Articles.

"Territory" shall have the meaning set forth in Section 1.1.

"Special Fee" shall have the meaning set forth in Section 9.1.

Section 1. Grant (Products/Territory).

1.1.1 Licensor hereby grants to Licensee an exclusive license, except as otherwise provided herein, only throughout certain countries in "Asia," namely Hong Kong, Republic of Korea, Republic of China (Taiwan), China (PRC), Indonesia, Philippines, Singapore, Malaysia, Thailand, New Guinea, Vietnam, Australia, New Zealand, Cambodia, Laos, Myanmar, Burma, Macau, the Federated State of Micronesia and Mariana Islands (Saipan) (except as provided below) (hereinafter referred to as the "Territory") to use the mark "Calvin Klein" and "CK/Calvin Klein" (hereinafter referred to as the "Licensed Mark") only in the form of the logo "Calvin Klein Jeans" and/or "CK/Calvin Klein Jeans" as may be approved by Licensor (hereinafter referred to as the "Form") on and in connection with the manufacture, distribution and sale at wholesale solely of the items of men's (and boys) and women's (and girls) jeans and jeans related apparel and men's (and boys) and women's (and girls) "khaki" pants, skirts, shorts and "khaki" related items as are set forth on Schedule A annexed hereto (hereinafter referred to as "Products"), provided that Licensee acknowledges that Licensor has retained the rights specified below and in Sections 1.1.2 and 1.2. Products produced by or for Licensee and approved by Licensor, from time to time, for each collection for sale under this Agreement hereinafter shall be referred to as "Articles." Notwithstanding the foregoing, the license granted hereunder with respect to manufacture is non-exclusive and Licensor retains the right to *** Licensee acknowledges that Licensor's grant hereunder does ***

1.1.2 Licensee's right to use the Licensed Mark in the ***

1.2 All Articles shall bear the Licensed Mark only in the Form except as hereinafter provided, and no Article shall be sold or otherwise distributed by Licensee under any mark other than the Licensed Mark. Licensor reserves all rights to the *** Licensee specifically acknowledges that Licensor has retained:

(a) the right to use, and to grant to any other third party the right to use, the Licensed Mark, in the Form or otherwise:

(i) in the Territory, with regard to any ***, and

(ii) outside the Territory, with regard to any *** and

	(b)	the right to use, and to grant to any other third party the right to use *** and

	(c)	the right to ***

1.3 Licensee acknowledges that Articles hereunder may bear some similarity of design to other items of merchandise which hereafter may be distributed or sold in the Territory in connection with the Licensed Mark by either Licensor or Licensor's duly authorized licensees or others and further acknowledges that such similarity of design shall not be deemed a breach of or default under this Agreement.

1.4 Licensee acknowledges that ***

1.5 Licensee will use its best efforts to exploit the rights herein granted throughout each and every jurisdiction in the Territory and to sell the maximum quantity of each category of Articles in each and every jurisdiction in the Territory therein consistent with the high standards and prestige represented by the Licensed Mark.

1.6 Licensee shall not export Articles from the Territory and shall not sell Articles to any third party which it knows, has reason to believe or should have reason to believe intends to export Articles from the

CONFIDENTIAL TREATMENT

Territory. However, Licensee may sell Articles to Licensor and/or another authorized licensee of Licensor for Products for sale in other jurisdictions, as may be consented to from time to time by Licensor. Furthermore, Licensee agrees to utilize product identification systems and other desirable measures, as specified from time to time by Licensor for marking Articles to facilitate effective control of the distribution thereof and the monitoring and prevention of parallel or grey goods marketing.

1.7 Licensee acknowledges that Licensor has entered into, and will hereafter enter into, licenses with third parties regarding the use of the Licensed Mark and/or the Form on Articles in jurisdictions outside the Territory and that Licensor may grant third parties the right to produce Products for sale outside the Territory. Licensee agrees to fully co-operate with such third parties, as requested by Licensor including but not by way of limitation, ***

1.8 Furthermore, Licensee agrees that the marketing placement and distribution of Articles in the Territory may but shall not necessarily be the same as that for Products being sold *** Licensee acknowledges that Licensor has heretofore granted an exclusive distributorship to third parties in the Territory and that the license granted hereunder is subject to the same. Licensee agrees to assume and to fully comply with all of Licensor's obligations provided therein or relating thereto, including but not by way of limitation, *** Furthermore, if requested by Licensor, and subject to availability, Licensee will ***

1.9 In the event Licensor desires to ***

1.10 Licensee acknowledges that Licensor has ***

Section 2. Term.

2.1 (a) The initial term of this Agreement will be ten (10) years and six (6) months commencing as of 1 July 1996 and continuing through 31 December 2006, unless sooner terminated in accordance with the provisions hereof. This Agreement shall be renewed for up to two (2) consecutive additional terms of ten (10) years each, commencing 1 January 2007, and 1 January 2017 respectively, but such renewal shall be effective only if (a) Licensee is in compliance with all of the terms and conditions of this Agreement throughout the initial or preceding term, as applicable (b) (subject to Section 2.2(e)) "Net Sales" (as hereinafter defined) during each Annual Period have attained or exceeded the "Aggregate Net Sales Thresholds" set forth below.

Annual Period				Aggregate Net Sales Thresholds
1						***
2						***
3						***
4						***
5						***
6-10						***
11-20						***

(c) Licensee is in compliance with the financial covenants set forth in Section 6, and (d) Licensee has, in the sole determination of Licensor, continued throughout the initial term of the Agreement to maintain the high quality standards necessary to reflect the prestige and reputation of the Articles and the Licensed Mark. Licensor may specifically waive compliance with any of the foregoing. At least 90 days prior to each such renewal, Licensee shall deliver to Licensor a detailed business plan for its operations for the renewal period which shall contain reasonably detailed projections prepared by Licensee in good faith. The eighteen (18) month period commencing 1 July 1996, the twelve (12) month period commencing 1 January 1998 and each twelve (12) month period commencing on each 1st January thereafter during the term of this Agreement, shall each constitute and hereinafter shall be referred to as an "Annual Period."

CONFIDENTIAL TREATMENT

(a) Notwithstanding the provisions of Section 2.1(a), *** for each of the following Annual Periods as follows:

Annual Period						***
1						***
2						***
3						***
4						***
5						***

; provided, that, commencing in the Annual Period in effect on the date ***

2.2 (a) In addition to the provisions of Section 2.1 and subject to Section 2.2(d) below, commencing at any time after the ***

(b) The following are the "Minimum Net Sales Thresholds" which Licensee shall be required to attain for each of the following jurisdictions during the second Annual Period, except as otherwise provided in the table (in each case, a "Second Year Amount") ***

Jurisdiction				Minimum Net Sales Threshold (in millions)
***						***
***						***
***						***
***						***
***						***
***						***
***						***
***						***
***						***
***						***

Jurisdiction				Minimum Net Sales Threshold (in millions)
***						***

For each subsequent Annual Period during the Term the "Minimum Net Sales Threshold" for each jurisdiction will be an amount ***

(c) For purposes of computing the "Minimum Net Sales Threshold" pursuant to Section (b) for ***

(d) Notwithstanding the fact that ***

(e) ***

Section 3. Design.

3.1.1 Licensee will cooperate with Licensor and will each use their respective best efforts in the preparation of seasonal collections of Articles in accordance with the Time and Action Calendar attached hereto as Schedule 3.1.1. Licensee will provide Licensor, *** for Licensor's review and use in developing seasonal collections as provided herein.

3.1.2 In connection therewith, Licensor or Licensor's designee, which may be Calvin Klein Jeanswear Company and/or Calvin Klein Jeanswear Europe S.p.A. ("Designee") will ***

3.2 In order to present cohesive and representative collections of Articles, Licensee will utilize substantially all of the designs or samples submitted by Designee or approved by Licensor and/or such

CONFIDENTIAL TREATMENT

designs or samples developed by Licensor and produce, offer for sale, and ship as ordered, those Articles which are produced therefrom, except as Licensor may otherwise consent. Within thirty (30) days following the close of each seasonal collection, Licensee will provide Licensor with the sales results, by style on a unit basis, of Articles shown and sold for such seasonal collection.

3.3 Licensee may use only sketches, designs, colors and other materials provided by Designee or Licensor or approved by Licensor in connection with Articles. If Licensee rejects any such sketches, designs, color samples or other materials and chooses not to use them in connection with Articles, Licensee must return such sketches, designs, color samples and other materials at Licensee's expense, and may not use them or permit their use by any unauthorized parties thereafter.

3.4 Licensor may use and permit others to use sketches, designs and other materials provided or approved by Licensor for use in connection with Articles in any manner it desires, provided that such use does not conflict with any rights granted Licensee hereunder.

3.5 Licensee will be responsible for making all prototypes (including design as well as production prototypes) and samples as well as for the production of Articles, and Licensee will bear all costs in connection therewith. Licensee will be responsible for and will bear all costs (except to the extent such stores bear such costs) involved in the design, development and construction of showrooms and in-store shops or in-store "stores" or in-store areas in which Articles are sold, all of which shall be subject to the ongoing approval of Licensor. Initially certain services of Licensor's visual display and other personnel may be needed to assist Licensee; the costs of which personnel, as may be, requested or approved in advance by Licensee, will be borne by Licensee. Licensor shall be entitled to inspect Licensee's showrooms, such in-store shops and in-store areas within stores periodically at its expense. Licensee, however, will bear all costs in connection with Licensor's inspection of such showrooms, in-store shops and in-store areas within stores to the extent Licensor determines as a result of such inspection that Licensee's showrooms, or in-store shops or in-store areas within stores are not maintained pursuant to specifications supplied by Licensor. Licensee shall then, at its expense, make any modifications to the design, layout, decor, visual display or merchandise display formats as Licensor shall reasonably require and bear any costs incurred by Licensor as a result of follow-up inspection to determine compliance with Licensor's directions. Furthermore, Licensee will remit directly payment for, or reimburse Licensor for, any out-of-pocket expenses incurred by Licensor or its representatives in connection with this Agreement, which are requested (or approved in advance by Licensee).

3.6 Licensee shall sell to Licensor, Licensor's affiliates or Licensor's licensees (including store licensees, for full price retail and outlet stores) in, or if specifically requested in writing outside of, the Territory, such reasonable quantities of Articles as may be requested ***

3.7 Licensee shall make available to Licensor, *** Licensee shall permit Licensor and its employees and other representatives to purchase Articles for *** Licensor agrees to use its reasonable efforts to enable Licensee and its employees to ***

Section 4. Confidentiality. Licensee acknowledges that all information relating to the terms and provisions of this Agreement and any agreements entered into by the parties on the date hereof and the business and operations of Licensor and its affiliates and/or Designee which it learns during the term, or has learned during negotiation, of this Agreement, all special design concepts which Licensor or its affiliates or its Designee provide to it hereunder and all sketches and designs received by it from Licensor or its affiliates or its Designees (hereinafter referred to as "Licensor's Data") are valuable property of such entities. Licensee acknowledges the need to preserve the confidentiality and secrecy of Licensor's Data and agrees that, both during the term of this Agreement and after the termination hereof, it shall not use (except use required to fulfill the provisions of this Agreement during the term of this Agreement) or disclose same, and it shall take all necessary steps to ensure that use by it or by its authorized designees (which use and which designees shall be solely as necessary for, and in connection with, the manufacture, distribution, sale, advertising or promotion of Articles) shall preserve in all respects such confidentiality and secrecy. Licensee hereby indemnifies Licensor, its affiliates and its Designee against any damage of any kind which may be suffered by any of them as a result of any breach by Licensee, or any of its said

CONFIDENTIAL TREATMENT

designees of the provisions of this paragraph. (For purposes hereof "affiliates" shall consist of those persons, firms, corporations and other entities controlled by, controlling or under common control with the entities in question.)

Section 5. Quality Control.

5.1 The components, workmanship, fit and durability of Articles will at all times be of the highest quality and commensurate with the reputation, image and prestige of the Licensed Mark. Licensee will maintain production and other quality control procedures so as to ensure that the quality of Articles meets or surpasses that of the approved samples of Articles. Articles will be distributed, merchandised and sold with packaging and sales promotion materials appropriate for highest quality products of that type of merchandise. All Articles will be manufactured, sold, labeled, packaged, distributed and advertised in accordance with all applicable laws and regulations in the Territory.

5.2 Licensor will have the right to design and/or approve the styles, designs, packaging, components, workmanship, fit, quality, display, merchandising, advertising and promotion of all Articles so as to ensure that Articles manufactured, merchandised, sold, advertised and promoted hereunder are consistent with the reputation, image and prestige of the Licensed Mark as a designation for highest quality products.

5.3 (a) Before selling, distributing or promoting any Article, Licensee will deliver to Licensor for its approval, free of charge, one (1) prototype sample of each such Article together with prototype tags, labels and packaging to be used in connection therewith. In the event any such prototype sample fails to meet with Licensor's approval, Licensee shall promptly correct such prototype and re-submit it for Licensor's approval. Licensor may require Licensee to purchase labels, tags and other identification including packaging materials from Licensor, or Licensor's designated supplier in order to protect the Licensed Mark and to preclude or prevent counterfeiting or unauthorized use of materials utilizing the Licensed Mark.

(b) Licensee will deliver to Licensor, free of charge, one (1) initial production sample of each Article together with the tags, labels and packaging to be used in connection therewith. In addition, from time to time in order to ensure that Licensor is maintaining the quality standards set forth herein upon Licensor's request, Licensee will deliver to Licensor, free of charge, such reasonable number of then current production samples of each Article produced hereunder together with the tags, labels and packaging being used in connection therewith. In the event Licensor determines that the initial production sample delivered to Licensor or any Article subsequently submitted to Licensor fails to meet the quality standards set forth herein, Licensee will make any corrections determined by Licensor to be necessary to meet such quality standards. All Articles to be sold hereunder will be at least equal in quality to the samples approved by Licensor.

(c) Licensor and its duly authorized representatives will have the right, upon reasonable advance notice and during normal business hours, to examine Articles in the process of being manufactured and to inspect all facilities utilized by Licensee or its contractors in connection therewith. Licensee shall include in its arrangements with third party contractors a similar provision permitting Licensor's inspections of such contractor's facilities.

5.4 All Articles will bear the Licensed Mark only in the Form and only in such form and manner as may be approved by Licensor. Notwithstanding the foregoing, *** Licensee will cause to appear on all Articles produced hereunder, and on their labels, packaging and the like, on all advertising, promotional, merchandising and publicity material used in connection therewith, and on any printed matter of any kind on which the Licensed Mark, the Form or any other "Calvin Klein" or "CK" or "CK/Calvin Klein" identification appears (including business cards, invoices, stationery and other printed matter), such legends, markings and notices as Licensor may request. Before using or releasing any proposed advertising (including any and all co-operative trade and consumer advertising), promotional, merchandising or publicity material or any such other printed matter, Licensee will submit same together with the proposed placement thereof to Licensor for Licensor's approval. The same will not be used or released prior to receipt of Licensor's approval.

CONFIDENTIAL TREATMENT

5.5 After any sample, copy, art work or other material has been approved, Licensee will not depart therefrom in any respect without the prior written approval of Licensor. If Licensor should disapprove any sample Article, tag, label, package or the like, or any advertising, promotional, merchandising or publicity material or the proposed placement thereof or any other printed matter, Licensee will not use or permit the use of the same in any manner, whether or not in connection with the Articles or the Licensed Mark or otherwise.

5.6 In order to maintain the reputation, image and prestige of the Licensed Mark, Licensee's distribution patterns shall consist of those retail outlets whose location, merchandising and overall operations, and whose positioning of Articles are consistent with (a) the high quality of Articles, (b) the reputation, image and prestige of the Licensed Mark, and (c) the exclusive nature of distribution and market placement applicable to such Articles and as are approved by Licensor on an ongoing basis. ***

Section 6. Operations. During the term of this Agreement, Licensee shall use such trade name incorporating the Licensed Mark in the Form, and no other name or mark, as is specifically approved by Licensor as the name of an entity which shall operate solely in connection with and arising from its performance of its obligations and responsibilities hereunder. Licensee shall comply with all legal requirements applicable to the establishment and maintenance of the same including the filing of a fictitious name certificate (sometimes referred to as a "d/b/a" or "doing business as" form) where applicable. Licensee shall be permitted to use the name "CK Jeanswear Asia Ltd.," only for so long as Licensee operates solely as the licensee hereunder and shall change its name from "Calvin Klein Jeanswear Asia Ltd." within 30 days of the date hereof. The use of the Licensed Mark in the Form in connection with the operation of such entity shall be subject to the provisions of paragraph 13 below. In connection with the operation of such entity Licensee shall:

(a) employ, on an exclusive basis, a "President" and/or a "Managing Director" who shall be subject to the ongoing approval of Licensor;

(b) employ, on an exclusive basis, as part of its staff such personnel (including personnel to liaise with Licensor) as will enable Licensee, in the opinion of Licensor, to exploit the license herein granted and to maintain the quality standards required hereunder which personnel would customarily include sales, merchandising, public relations (who may be retained as consultants or through a servicing arrangement with Licensor), visual display and production (including quality control) personnel and the initial staffing shall consist of one full-time Managing Director, one full-time merchandiser, one part-time logistical person and one part-time accounting person;

(c) establish as soon as practicable and thereafter maintain throughout the term of this Agreement, a separate showroom in Hong Kong, and a separate showroom in such other jurisdiction in the Territory, as may be required by Licensor as and when it establishes a central "Calvin Klein" headquarters in the Territory, in which such showroom shall be located and in every case wherever and at the time an agent or distributor is delegated for such jurisdiction, for the sole purpose of displaying, promoting and selling Articles, the general location (and relocation) and general decor of which will be subject to the on-going approval of Licensor, and the architect retained by Licensee will be subject to the approval of Licensor both at the time such showroom is established and thereafter throughout the term of this Agreement;

(d) establish and maintain throughout the term of this Agreement, production and other facilities, whether by ownership, or by contractual arrangement, in order to exploit the license herein granted and to maintain the quality standards required hereunder;

(e) *** Licensee will deliver to Licensor ***; and

(f) furnish Licensor with information regarding the above and such other information regarding the company as Licensor may, from time to time, request including (i) providing Licensor in writing, with ***, (ii) ***, (iii) ***, and (iv) ***

(g) Within sixty (60) days following the close of the second Annual Period and each Annual Period thereafter, Licensee will provide Licensor with a ***. Licensee will also furnish Licensor with

CONFIDENTIAL TREATMENT

such additional specific information and data as may be requested by Licensor. Licensor and Licensee will then review and discuss certain aspects of the operations under this Agreement. Licensor may recommend such changes in the operations, design or merchandising of Articles, or change in distribution patterns as it deems necessary or desirable to exploit the license granted under this Agreement and/or to ensure the cohesive development, presentation, sale merchandising, distribution, advertising and/or promotion of Articles and the Licensed Mark with and within the range of other merchandise produced by Licensor or by other authorized licensees of the Licensed Mark, and Licensee agrees to use its best efforts to implement such changes as promptly as practicable.

Section 7. Advertising.

7.1 Subject to the last sentence of Section 7.4, Licensee will spend for ***

7.2 Licensee will remit to Licensor to ***, not less than the following amounts (the "Minimum Advertising Expenditure"):

Annual Period				Minimum Advertising Expenditure
1st						***
2nd						***
3rd and each Annual Period thereafter						***

However, ***. Nothwithstanding the foregoing, if the *** (subject to the last sentence of Section 7.4 hereof) during such Annual Period.

7.3 For purposes hereof, ***

7.4 Any qualified expenditure incurred by Licensee during any Annual Period for ***

7.5 CRK Advertising operates as the advertising agency responsible for advertising campaigns relating to ***

Section 8. Approval Standard. Licensee acknowledges that approvals required pursuant to this Agreement, under Sections 2, 3, 5, 6(c), 7.3 and 13.1, may be based solely on Licensors subjective aesthetic standards and may be granted, withheld and/or changed in Licensor's sole and absolute discretion.

Section 9. Minimum Guaranteed Fees.

9.1 (a) In consideration of the license granted and the services to be performed by Licensor hereunder, Licensee will pay to Licensor in the manner provided in Section 9.2 below a Minimum Guaranteed Fee for each Annual Period as follows:

***

***

***

***

***

The Minimum Guaranteed Fee for the sixth through the tenth Annual Periods will be as mutually determined by the parties but in no event *** In the event this Agreement is renewed, the Minimum Guaranteed Fees for each of the 11th through the 20th Annual Periods, will be as mutually determined by the parties but in no event ***

CONFIDENTIAL TREATMENT

(a) Notwithstanding the provisions of Section 9.1(a), to the extent *** for each of the following Annual Periods as follows:

Annual Period						***
1						***
2						***
3						***
4						***
5						***

; provided, that, commencing in the Annual Period in effect on the ***

9.2 The Minimum Guaranteed Fee for each Annual Period will be paid in advance in four (4) equal quarterly installments on the first day of January, April, July and October during each Annual Period except that the Minimum Guaranteed Fee for the first Annual Period shall be paid in five (5) equal installments simultaneously with the execution hereof, on 1 July 1996, 1 January 1997, 1 April 1997 and on 1 October 1997.

9.3 *** of the Minimum Guaranteed Fee shall be allocated as a royalty for the use of the Licensed Mark and the remaining *** shall be allocated as a fee for the design and other services to be performed by Licensor.

Section 10. Percentage Fee.

10.1 In consideration of the license granted and the services to be performed by Licensor hereunder, Licensee shall pay to Licensor (i) a Percentage Fee computed at the rate of *** For purposes hereof, "Net Sales" shall mean (i) *** [approximately 1.5 pages redacted]

10.2 Fifty percent (50%) of the Percentage Fee shall be allocated as a royalty for the use of the Licensed Mark and the remaining fifty percent (50%) shall be allocated as a fee for the design and other services to be performed by Licensor.

10.3 The Percentage Fee payments hereunder shall be accounted for and paid quarterly, within thirty (30) days following the close of each three (3) month period during each Annual Period. The Percentage Fee payable for each accounting period during each Annual Period shall be computed on the basis of Net Sales from the beginning of such Annual Period through the last day of such accounting period with a credit for the Minimum Guaranteed Fees and Percentage Fees, if any, theretofore paid to Licensor for such Annual Period.

10.4 Licensee shall deliver to Licensor at the time each Percentage Fee payment is due, statements signed by the chief financial officer of Licensee and certified by him as accurate. Each such statement shall indicate, by month, the amount of Net Sales, and shall show in detail, separately for each category of Articles and each jurisdiction in the Territory for each account of Licensee, the style number, description, number of units, unit price and the total amount of gross sales of Articles shipped during the period covered by such statement, the type and amount of discounts and credits from gross sales which may be deducted therefrom (separately as to each type of discount or credit), a computation of the amount of Percentage Fee payable hereunder in respect of Net Sales for such period. Each such statement shall indicate by month the amount and details of all advertising and promotional expenditures incurred by Licensee during such period. Such statements shall be furnished to Licensor whether or not any Articles have been sold or advertising placed during the period for which such statements are due.

10.5 Licensee shall furnish to Licensor, not later than ninety (90) days following the close of each Annual Period during the term of this Agreement (or portion thereof in the event of prior termination for any reason), a report certified by its independent certified public accountants, or the equivalent thereof in the Territory, covering such Annual Period (or portion thereof) and containing the same information, required to be contained in the statements referred to in paragraph 10.4 above.

10.6 ***

CONFIDENTIAL TREATMENT

10.7 All payments required of Licensee hereunder shall be made to Licensor in New York, New York or, if specified by Licensor, to an account in the Territory in United States dollars (or, if so designated by Licensor, an alternative currency) via wire transfers specifying federal funds, or in such other manner as Licensor designate, with simultaneous telex notification and telephone confirmation to Licensor to the accounting and licensing department. The Percentage Fee (and other amounts provided for herein) shall be computed and paid in accordance with Licensee's accounting records which are kept in United States dollars.

10.8 If applicable, Licensee shall compute and pay on behalf of Licensor all withholding taxes which any governmental authority in the Territory may impose on Licensor with respect to the fees paid by Licensee to Licensor. The amount of such taxes shall be appropriately deducted from payments of fees. Licensee shall furnish Licensor with an official receipt (together with a translation thereof if not in English) promptly after each such payment of taxes. In the event such taxes are not paid when due, all resulting penalties and interest shall be borne by Licensee.

Section 11. Equity Interest. One hundred percent (100%) equity interest in Licensee is held by CK Jeanswear N.V., a Dutch holding company, on the date hereof. Licensee shall cause the transfer of ten percent (10%) of such equity interest to Licensor free of charge as directed by Licensor.

Section 12. Audit.

12.1 Licensee will prepare and maintain, in such manner as will allow them to be audited in accordance with generally accepted accounting principles consistently applied, *** Licensor and its duly authorized representatives have the right, during regular business hours and upon reasonable notice, for ***

12.2 If, as a result of any examination of Licensee's books and records, it is shown that the ***

Section 13. Trademark.

13.1 Licensee agrees that (a) no name or names shall be co-joined with the Licensed Mark, (b) it will not use the name "Calvin Klein," "CK" or "CK/Calvin Klein" or any portion or derivative thereof in its corporate name except as provided in Sections 23 and 6 hereof, and (c) no name or names shall be used in connection with the Licensed Mark in any advertising, promotion, publicity, labeling, packaging or printed matter of any kind utilized by Licensee in connection with Articles unless specifically consented to, and only in the Form, and only in the form approved, by Licensor. Any such use by Licensee pursuant to clause (c) above shall clearly indicate that the Calvin Klein Trademark Trust ("CKTT") is the owner and Licensor is the beneficial owner of the Licensed Mark and that Licensee is using the same pursuant to a license granted by Licensor.

13.2 Licensee acknowledges that CKTT is the owner and Licensor is the beneficial owner of all right, title and interest in and to the Licensed Mark as to Products in the Territory in any form or embodiment thereof and is also the owner of the goodwill attached or which shall become attached to the Licensed Mark and the Form in connection with the business and goods in relation to which the same has been, is or shall be used. Sales by Licensee and its affiliates shall be deemed to have been made by CKTT for purposes of trademark registration and all uses of the Licensed Mark and the Form by Licensee and its affiliates shall inure to the benefit of CKTT. Licensee will not, at any time, do or suffer to be done any act or thing which may in any way adversely affect any rights of Licensor or CKTT in and to the Licensed Mark or the mark or logo "CK" or any registrations thereof or any applications for registration thereof, or any applications for registration of the Form or which, directly or indirectly, may reduce the value of the Licensed Mark or detract from its reputation, image or prestige or that of Licensor or Calvin Klein.

13.3 Licensee will, at Licensor's request, execute any and all documents including Registered User Agreements and take any actions required by Licensor to confirm CKTT's ownership and Licensor's beneficial ownership of all rights in and to the Licensed Mark as to Products in the Territory and the respective rights of CKTT, Licensor and Licensee pursuant to this Agreement. Licensee will cooperate with Licensor and will, at Licensor's request, take any actions requested by Licensor in connection with

CONFIDENTIAL TREATMENT

the filing and prosecution by Licensor of applications in CKTT's name (or if applicable, Licensor's name) to register the Licensed Mark for Articles in the Territory and in connection with the maintenance and renewal of such registrations as may issue. Upon termination of this Agreement, Licensee shall execute any documents required by Licensor to evidence such termination. Licensee will bear all expenses in connection with the filing of Registered User Agreements and with any documents required to evidence termination of this Agreement including termination of such Registered User Agreements.

13.4 Licensee will use the Licensed Mark in the Territory strictly in compliance with the legal requirements obtaining therein and will use such markings in connection therewith as may be required by applicable legal provisions. Licensee will comply with all governmental regulations in connection with the manufacture, distribution and sale of Articles.

13.5 Whether during the term of this Agreement or subsequent to its termination, Licensee will never (a) challenge Licensor's ownership of or the validity of the Licensed Mark or any application for registration thereof, or any trademark registration thereof, or any rights of Licensor therein, nor (b) challenge the fact that Licensee's rights pursuant to this Agreement are solely those of a licensee.

Section 14. Infringement. In the event that Licensee learns of any infringement or imitation of the Licensed Mark with respect to Products which would be considered a counterfeit of the Articles, or of any use by any person of a trademark similar to the Licensed Mark with respect to Products which would be considered a deliberate use of something substantially similar to the Licensed Mark, it will promptly notify Licensor thereof. Licensee will take no action, including, but not by way of limitation, settling any action, appealing any adverse decision or discontinuing any action taken by it, except to the extent the same is approved in advance by Licensor. All costs and expenses incurred in any action or proceeding (including investigatory expenses and attorneys' fees, if applicable, court costs and filing fees) will be borne as determined in Section 15. Any damages recovered or sums obtained in settlement in or with respect to any action shall (i) first be applied to proportionately reimburse Licensee for the expenses incurred and actually paid by it and to reimburse Licensor for the expenses incurred and actually paid by it, (ii) the balance, if any, shall belong and shall be paid over to on a fifty-fifty basis to Licensee and Licensor. In no event will any infringement by a third party justify the withholding of any payment of royalty or design fee by Licensee.

Section 15. Counterfeit/Parallel Considerations.

(a) Licensor will use commercially reasonable efforts, including, without limitation, establishing an enforcement network of attorneys, investigators and customs inspectors in the Territory (the "Network") to minimize and deter (i) the diversion into and sale within the Territory of products, corresponding to the Articles, authorized for sale by its other licensees solely outside the Territory (including, without limitation, unauthorized distribution of such products by the manufacturers and subcontractors of such licensees) ("Parallel Imports") and (ii) the importation into, or sale or manufacture within, the Territory of counterfeit Articles; in each case subject to Licensee's compliance with its reimbursement obligations set forth in this subsection, the other subsections of this Section, and subject to applicable law. Licensee will cooperate in such efforts, and will promptly *** as follows:

	(A)	***

	(B)	***; and

	(C)	***

(b) Licensee will use commercially reasonable efforts to minimize and deter the diversion of Articles for sale outside of the Territory (including, without limitation, unauthorized distribution of Articles by Licensee's manufacturers and subcontractors) ("Diversion"). Such efforts will include, without limitation, the utilization of such processes, controls, identification methods and reporting and auditing procedures as Licensor may from time to time reasonably request. Licensee will cooperate with Licensor in Licensor's efforts to minimize and deter Diversion ("Anti-Diversion Efforts"). Without limiting the foregoing:

CONFIDENTIAL TREATMENT

	(i)	Licensee will promptly provide such information as Licensor may from time to time reasonably request concerning its manufacturing, subcontracting and distribution locations, activities and shipments, product and label identification systems and data and sales to and by its customers; and

	(ii)	Licensee will promptly ***

(c) In addition to the foregoing, promptly after receipt of any certification by Licensor (with available supporting evidence) specifying the quantity of Articles recovered or otherwise identified as having been involved in any incident of Diversion or attempted Diversion, ***

(d) Where appropriate and consented to by Licensee, Licensor will initiate criminal or civil actions against persons outside the Territory seeking to manufacture counterfeit Articles or sell or ship counterfeit Articles into the Territory (excluding, for this purpose, manufacturers or subcontractors described in the definitions of Diversion or Parallel Imports). The cost related to any such actions shall be entirely for Licensee's account.

(e) Licensor will consult with Licensee in planning and enforcement activities pursuant to this Section 15. In addition, the parties will consult and cooperate to forecast Licensor's reimbursable expenses hereunder and make suitable arrangements so that Licensor may receive Licensee's payments in respect thereof at or shortly before such expenses are incurred.

(f) Whenever it is not readily apparent whether actions or proceedings involve counterfeit Articles, Parallel Imports or Diversion, Licensor will determine the nature of such items in good faith, taking into account all relevant information provided by Licensee.

(g) The parties agree to mutually explore alternative structures that will facilitate the prevention of Parallel Imports and Diversion in the Republic of Korea.

Section 16. Copyright. Any copyright which may be created in connection with any material using or used in connection with the Licensed Mark shall be the property of Licensor. Licensee shall do any and all things required by Licensor to preserve and protect said rights.

Section 17. Other Designers. During the term of this Agreement, Licensee will not *** Licensee shall not advertise or otherwise use the Licensed Mark or any other "Calvin Klein" identification together with any other trademark or name, or any other identification of any other fashion designer or any other fashion designer's merchandise; and Licensee shall use its best efforts to see that its purchasers of Articles comply with this restriction. During the term of this Agreement, Licensee's affiliates (as defined in Paragraph 4 of this Agreement, and to include any person or entity directly or indirectly owning or controlling a majority interest in Licensee) may distribute, sell or advertise Products under the name of other designers, except: *** This statement shall not be deemed to limit any affiliate from manufacturing goods as a contractor for such designers.

Section 18. Indemnification/Insurance.

18.1 Licensee does hereby indemnify Licensor, CKTT and Calvin Klein, individually, against and save and hold each of them harmless of and from any and all losses, liability, damages and expenses (including reasonable attorneys' fees and expenses) which they or either of them incur or for which they or either of them may become liable or be compelled to pay in any action or claim against them or either of them, for or by reason of any acts, whether of omission or commission, that may be committed or suffered by Licensee or any of its affiliates or any of their respective servants, agents or employees in connection with Licensee's performance of this Agreement and transactions arising therefrom. The provisions of this paragraph and the obligations of Licensee set forth therein shall survive expiration or other termination of this Agreement.

18.2 Licensee will procure and maintain at its own expense in full force and effect at all times during which Articles are being sold with a responsible insurance carrier acceptable to Licensor, a public liability insurance policy including products liability coverage with respect to Articles as well as contractual

CONFIDENTIAL TREATMENT

liability (to the extent customarily available in the Territory, as indicated by Licensee's insurance representative, on an annual basis) with respect to this Agreement, with a limit of liability of not less than *** Such insurance policy shall insure against occurrences happening at any time during which Articles are being sold or used regardless of when claims may be made. Such insurance policy shall be written for the benefit of Licensor, Licensee and Calvin Klein, individually, and will provide for at least ten (10) days prior written notice to Licensor and Licensee of the cancellation, non renewal or substantial modification thereof. Such insurance may be obtained by Licensee in conjunction with a policy of products liability insurance which covers products other than Articles. Licensee will deliver a certificate of such insurance to Licensor promptly upon issuance of said insurance policy and shall, annually and otherwise from time to time, upon reasonable request by Licensor, promptly furnish to licensor evidence of the maintenance of said insurance policy. Nothing contained in this paragraph 18.2 shall be deemed to limit, in any way, the indemnification provisions of paragraph 18.1 above.

Section 19. Breach/Default.

19.1 (a) If Licensee fails to make any payment to Licensor on the date such payment is due as provided hereunder:

(1) Licensee shall pay interest on the unpaid balance of the amount due at a rate equal to ***; and

(2) if such default continues uncured for a period of ten (10) days after the date such payment initially became due Licensor shall have the right to terminate this Agreement forthwith by and upon written notice to Licensee.

(a) If Licensee fails to perform any of the terms, conditions, agreements or covenants in this Agreement on its part to be performed which failure may adversely affect the Licensed Mark, Licensor may terminate this Agreement forthwith by written notice: (i) if such default is incurable, or (ii) if such default is curable but continues uncured for a period of ten (10) days after written notice thereof has been given to Licensee by Licensor. If Licensee fails to comply with the provisions of paragraph 1.6 above, Licensor may terminate this Agreement effective upon ten (10) days prior written notice to Licensee.

(b) If Licensee fails to pay any amounts due any of Licensor's affiliates within ten (10) days following written notice thereof from Licensor or if Licensee or Corrado Fratini breaches or defaults under the Shareholder Agreement referred to in Section 24, beyond the applicable cure period, Licensor may terminate this Agreement effective upon ten (10) days prior written notice to Licensee.

(c) If Licensee shall otherwise fail to perform, or if Licensor fails to perform, any of the terms, conditions, agreements or covenants in this Agreement on its respective part to be performed, the non-defaulting party may terminate this Agreement forthwith by written notice: (i) if such default is incurable; or (ii) if such default is curable but continues uncured for a period of thirty (30) days after written notice thereof has been given to the defaulting party in writing by the other party; or (iii) if such default is curable but it is not reasonably curable within 30 days, if the defaulting party promptly and diligently takes all necessary actions to cure such default, but such default continues uncured for a period of sixty (60) days after written notice thereof has been given to the defaulting party in writing by the other party.

19.2 In the event Licensee files a petition in bankruptcy, or is adjudicated a bankrupt, or if it becomes insolvent, or makes an assignment for the benefit of creditors, or files a petition or otherwise seeks relief under or pursuant to any bankruptcy, insolvency or reorganization statute or proceeding, or if it discontinues its business for a period of sixty (60) days or more, or if it discontinues reasonable commercial exploitation of Articles for a period of sixty (60) days or more, or if a custodian, receiver or trustee is appointed for it or a substantial portion of its business or assets for any reason, or if it defaults on any obligation which is secured by a security interest in any Articles, or if it adopts resolutions for the filing of or entering into any type of insolvency proceeding, or assignment for the benefit of its creditors, or liquidation of the business, this Agreement shall automatically terminate forthwith.

CONFIDENTIAL TREATMENT

19.3 No assignee for the benefit of creditors, custodian, receiver, trustee in bankruptcy, sheriff or any other officer of the court or official charged with taking over custody of Licensee's assets or business shall have the right to continue this Agreement or to exploit or in any way use the Licensed Mark if this Agreement terminates pursuant to paragraph 19.2 above.

19.4 Notwithstanding any termination in accordance with the foregoing, Licensor shall have, and hereby reserves, all the rights and remedies which it has or which are granted to it by operation of law, to collect fees due, earned or payable by Licensee pursuant to this Agreement, to be compensated for damages for breach of the Agreement and to enjoin the unlawful or unauthorized use of the Licensed Mark without the necessity of posting any bond or proving any actual damages (which injunctive relief may also be sought prior to or in lieu of termination). Licensee hereby waives any and all rights relating to claims for wrongful termination, loss of goodwill or damages in connection with any such termination and agrees that it will never allege any such claims. In the event of termination of the Agreement by Licensor pursuant to paragraph 19.1 and/or paragraph 19.2 above, the entire unpaid balance of the Minimum Guaranteed Fees for the remaining balance of the then current term of this Agreement shall immediately become due and payable by Licensee to Licensor and Licensee agrees to make such payment within thirty (30) days following written demand therefor by Licensor. Such amounts shall be in addition to any other amounts due Licensor, hereunder, including, without limitation, any unpaid but accrued Percentage Fees and any unpaid Special Fee.

Section 20. Termination.

20.1 On the expiration or earlier termination pursuant to Section 18 or otherwise of this Agreement, all the rights of Licensee hereunder shall forthwith terminate and automatically revert to Licensor. Notwithstanding the foregoing, in the event of expiration or earlier termination of this Agreement (other than pursuant to paragraph 19.2 above or by Licensor pursuant to paragraph 19.1 above), Licensee shall be entitled, for ***

20.2 Except as provided in paragraph 20.1 above, on the expiration or earlier termination of this Agreement, Licensee shall forthwith discontinue all use of the Licensed Mark (including discontinuing use of the Licensed Mark or "CK" in its corporate name), shall no longer have the right to use the Licensed Mark or any variation or simulation thereof, and shall transfer to Licensor all registrations, filings and rights with regard to the Licensed Mark which it may have possessed at any time. In addition, Licensee shall thereupon deliver to Licensor or to Licensor's designee, free of charge, or at Licensor's option shall destroy, all materials utilized in connection with Articles and all labels, tags and other material in its possession with the Licensed Mark thereon. Licensee will use its best efforts to cause stencils, sketches and other materials in the possession of third parties to be destroyed or otherwise rendered unusable. Licensee shall not reproduce or adapt any of said stencils, sketches or other materials for use on or in connection with merchandise subsequent to the termination of this Agreement.

20.3 Licensor may, in its sole discretion, at any time, enter into such arrangements as its desires pursuant to which Products bearing the Licensed Mark may be shown, advertised, distributed or sold in the Territory by it or by any duly authorized third party other than Licensee provided only that no shipment of such Products will be permitted prior to the date of termination of this Agreement.

Section 21. Licensor Representations. Licensor represents and warrants that it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder. CKTT has applications to register, or registrations of the mark "Calvin Klein" and/or the mark "CK/Calvin Klein" in the jurisdiction in the Territory; as indicated on the schedule attached hereto.

Section 22. Licensee Representations. Licensee represents and warrants that it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder. Licensee further represents and warrants that no broker or finder brought about this transaction and Licensee hereby indemnifies Licensor against and holds it harmless of and from any and all liabilities (including, without limitation, reasonable attorneys' fees and disbursements paid or incurred in connection with any such liabilities) for any brokerage commissions or finders' fees in connection with this Agreement or the transactions contemplated hereby.

CONFIDENTIAL TREATMENT

Section 23. Notice. All reports, approvals and notices required or permitted by this Agreement to be given to any party shall be in writing and shall be delivered personally, by reputable overnight courier, telecopied or sent by certified, registered or express mail (in each case with return receipt requested), postage prepaid. Any such notice shall be deemed given when so delivered personally, telecopied or sent by reputable overnight courier or, on the date received (as evidenced by a signed receipt) if deposited in the mail, in each case to the party concerned at its address as set forth above (with facsimile confirmation to Licensor at (212) 768-8930) or at such other address as a party may specify by notice to the other. Copies of all notices sent to Licensor shall be sent to the attention of (i) Licensing Department (ii) Corporate Affairs Department and (iii) General Counsel.

Section 24. Assignment.

(a) Licensee acknowledges and recognizes: that it has been granted the license herein because of its particular expertise, knowledge, judgment, skill and ability; that it has substantial and direct responsibilities to perform this Agreement in accordance with all of the terms contained herein; that Licensor is relying on Licensee's unique knowledge, experience and capabilities to perform this Agreement in a specific manner consistent with the high standards of integrity and quality associated with Licensor and its business; that the granting of the license under this Agreement creates a relationship of confidence and trust between Licensee and Licensor, and that this Agreement is one under which applicable law excuses Licensor from accepting performance from, or rendering performance to, a person or entity other than Licensee, within the meaning of Section 365(c) and (e) of the Bankruptcy Code (title 11, U.S. Code). Except as set forth in Section 24(b), neither this Agreement nor the license or other rights granted to Licensee hereunder may be assigned, sublicensed, or otherwise transferred. Any attempted assignment, transfer or sublicensing whether voluntary or by operation of law, directly or indirectly, shall be void and of no force or effect.

(b) The parties acknowledge and agree that Licensee was formed for the sole purpose of operating as the licensee hereunder and will not engage in or conduct any other activities or operations. For purposes hereof, any transfer of all or a controlling portion or a majority of the shares of the Licensee by CK Jeanswear N.V., its affiliates, Corrado Fratini and/or Marcello Fratini, in a single transaction or in a series of transactions, of their respective shares, effecting a reduction in their interest in Licensee, except to Licensor, or a Licensor-approved shareholder, or to a corporate entity of which Corrado Fratini and/or Marcello Fratini own the majority of shares, shall be deemed a transfer in violation of the terms hereof and prohibited hereunder. Set forth on Schedule 24 hereto is a list of the shareholders of Licensee and their respective shareholdings. Prompt notice of any transfer by CK Jeanswear N.V. or its affiliates (other than Calvin Klein, Inc. or its successors, assignees or transferees) of more than five percent (5%) (whether over a period of time or all at once), shall be delivered to Licensor. Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding upon the parties and permitted successors and assigns.

Section 25. Entire Agreement. This Agreement contains the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, supersedes all prior oral and written understandings and agreements relating thereto, and may not be modified, discharged or terminated, nor may any of the provisions hereof be waived, orally. This Agreement amends and restates the Original License Agreement which is expressly superseded by this Agreement; provided, that, any representations and warranties set forth in this Agreement shall not be deemed to have been given again in connection with the execution and delivery of this Agreement, but shall only be deemed to have been made as of the date of the Original License Agreement and not as of the date of this Agreement.

Section 26. Independent Contractor. Nothing herein shall be construed to constitute the parties hereto as partners or as joint venturers, or either as agent of the other, and Licensee shall have no power to obligate or bind Licensor in any manner whatsoever. Licensor shall have no responsibility for the operation or production of Licensee's manufacturing, distribution or sales facilities or for any decisions that may be made in connection therewith regardless of whether Licensor approved any of the same.

CONFIDENTIAL TREATMENT

Section 27. No Waiver. No waiver by either party, whether expressed or implied, of any breach hereof or default hereunder shall constitute a continuing waiver of such provision or of any other provision of this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver by Licensor of any violation of or default under any of the provisions of this Agreement by Licensee.

Section 28. Severability. If any provision or any portion of any provision of this Agreement shall be held to be void or unenforceable, the remaining provisions of this Agreement and the remaining portion of any provision held void or unenforceable in part shall continue in full force and effect.

Section 29. Governing Law. This Agreement shall be considered as having been entered into in the State of New York and shall be construed and interpreted in accordance with the laws of that state applicable to agreements made and to be performed therein. However, disputes regarding the Licensed Mark shall be resolved in accordance with the U.S. Federal trademark laws and related laws, statutes, rules and regulations of the United States unless there are no U.S. Federal laws, statutes, rules or regulations dispositive of such a dispute, in which event such disputes shall be resolved in accordance with the laws of the State of New York.

Section 30. Forum, Jurisdiction and Service of Process. The parties expressly agree that (a) the courts of the State of New York and/or the federal courts located in the State of New York shall be the exclusive forum for the adjudication of any disputes relating to this Agreement or the subject matter hereof and (b) that any judgment, award or order issued by the courts of the State of New York and/or the federal courts located in the State of New York shall be enforceable in the courts in any jurisdiction in the Territory. Licensee expressly and irrevocably (a) submits to the jurisdiction of the courts of the State of New York and/or the federal courts located in the State of New York and waives any right to contest the jurisdiction of such courts to adjudicate disputes relating to this Agreement or the subject matter hereof and, (b) waives any objection to the laying of venue of any suit or proceeding in the above-described courts. Notwithstanding anything to the contrary in this Agreement, Licensee expressly agrees that Licensor shall have the right to enjoin use of the Licensed Mark and the Form in any venue or jurisdiction in the Territory. Service of any notice, process, motion or other document in connection with proceedings relating in any way to this Agreement or the subject matter hereof may be effectuated by: (a) as to Licensor, either by personal service or in the same manner as notices are to be given pursuant to paragraph 23 above; and (b) as to Licensee, by service upon (i) the Prentice-Hall Corporation System, Inc. ("Prentice-Hall"), 375 Hudson Street, New York, New York 10014, as agent for Licensee, or (ii) upon such attorney with an office in New York, New York, as agent for Licensee, as may be specified by Licensee by notice to Licensor, or (iii) any other manner permitted by law, provided, in each case, a copy thereof is sent to Licensee in accordance with the provisions of paragraph 23 above. Licensee shall execute any consent forms required by Prentice-Hall in order to effect the appointment of Prentice-Hall as its agent for service of process and Licensee expressly and irrevocably agrees that service upon the Prentice-Hall shall be effective and sufficient service of process upon Licensee.

Section 31. Jurisdictional Approval. This Agreement shall be subject to the obtaining of any and all required recordation and approvals of this Agreement by the appropriate agencies of the government of Hong Kong, if any. If such approvals are not obtained within three (3) months after the earlier of the presentation of this Agreement to such agencies and the date of execution hereof, Licensor may, in its sole discretion, terminate this Agreement by giving written notice to Licensee at any time after such period and prior to the time such approvals are obtained. Licensee shall promptly present this Agreement for any such approvals. Licensor and Licensee shall cooperate with each other and use their respective best efforts to obtain as promptly as possible any such approvals. Licensee shall bear any expense incurred in connection with obtaining and maintaining any such approvals. Promptly after the granting of any such approval, Licensee shall notify Licensor of the date thereof and shall provide Licensor with a copy thereof in both the original language and, if applicable, in English. Notwithstanding anything to the contrary herein, if any such approval is conditioned upon the deletion, insertion or modification of any provision or any portion of any provision hereof, Licensor shall retain the right to rescind this Agreement in its entirety by and upon written notice given to Licensee in the event the required deletions, insertions or modifications affect the terms of this Agreement so as to render, in the sole discretion of Licensor, the

CONFIDENTIAL TREATMENT

transactions contemplated by this Agreement an undesirable business venture. In the event this Agreement is so rescinded, neither party shall be in any way liable to the other, except for payments due to Licensor or its designees with respect to transactions which have already occurred, or as otherwise provided herein.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.

CALVIN KLEIN, INC.

By: /s/ Barry Schuntz                                

CALVIN KLEIN JEANSWEAR ASIA LTD.

By: /s/ Illegible                                                    

CONFIDENTIAL TREATMENT

Schedule A

***

CONFIDENTIAL TREATMENT

Schedule 24

Shareholders				%
CK Jeanswear N.V.					100	%

EX-10.63

EXHIBIT 10.63

PORTIONS OF THIS EXHIBIT 10.63 MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

January 31, 2006

WF Overseas Fashion C.V. (‘‘W’’)
CK Jeanswear Asia Limited (‘‘CKJA’’)
CK Jeanswear Australia, Ltd. (‘‘CKJAus’’)
CK Jeanswear New Zealand, Ltd. (‘‘CKJNZ’’)
CK Jeanswear Korea, Ltd. (‘‘CKJK’’)
CK Jeanswear Shanghai, Ltd. (‘‘CKJS’’)
CK Jeanswear Europe S.p.A. (‘‘CKJE’’)
(‘‘CKJA Group Entities’’)
CK Jeanswear N.V. (as ‘‘guarantor’’) (‘‘CKJNV’’)
(‘‘CKJ Entities’’)

Re:	Calvin Klein Inc. (‘‘CKI’’)/CKJA — Jeans License Agreement (May 1996, Amended and Restated d. as of 1 January 1997) (‘‘CK Jeans Asia License’’), including as to assigned portions to CKJAus (Australia), CKJNZ (New Zealand), CKJ Korea (S. Korea), CKJ Shanghai (PRC China) and CKJ Europe (Japan), sometimes ‘‘Assigned Licenses’’

CKI and W Heads of Agreement d. 29 September 2005 (‘‘Heads of Agreement’’)

Ladies and Gentlemen:

Pursuant to the Heads of Agreement, the parties contemplated that W would acquire the CALVIN KLEIN businesses (and/or the rights to assets thereto) in whatever structure, form and format as such transaction occurs) of Fingen S.p.A., Fingen Apparel, N.V. (and, as applicable, their parents, subsidiaries and affiliates responsible for the operation of the CALVIN KLEIN businesses) (the ‘‘Transaction’’).

As contemplated in the Heads of Agreement, effective upon the conclusion of the Transaction (to be 17 January 2006, or such later date as mutually agreed between the parties to the Transaction, but not later than 31 December 2006) (the ‘‘Effective Date’’), it is agreed by CKI and W that the captioned license and ‘‘Assigned Licenses’’ shall be and hereby is amended as to the ‘‘term’’ and CKI’s rights in the event of a failure to reach certain minimum net levels, all as follows:

1. § 2.1 shall be amended as follows:

‘‘2.1 Subject to the terms and conditions of § 2.2, the term of this Agreement will be forty nine (49) years and eight (8) months commencing as of 1 May 1996 and ending forty (40) years after the closing of the Transaction on 31 December of the applicable year but not later than 31 December 2046, unless sooner terminated in accordance with the provisions hereof. The twelve (12) month-period commencing 1 January 2006 and each twelve (12) month period commencing on each 1 January thereafter during the term of this Agreement, shall each constitute and hereinafter shall be referred to as an ‘Annual Period.’’’

2. § 2.2 shall be amended to state as follows:

‘‘(a) shall for the ***

(b) The following are the ‘‘Minimum Net Sales Thresholds’’ which Licensee shall be required to attain in each of the following jurisdictions ***

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As to retail Net Sales under this Agreement, which occur ***

Jurisdiction

New MNST’s (US $ millions)

Base Contract Original MNST’s (US $, millions)

2006

2007

2008

2009

2010

2011 et seq.*

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	* ***

(c) For purposes of computing the ‘‘Minimum Net Sales Threshold’’ pursuant to ***

(d) shall, for the ***.

(e) If Licensee fails to meet the aggregate MNST’s as referenced in § 2.2 (b) for any Annual Period, the provision relating to the overall aggregate MNST’s under § 2.2 (a) shall ***

(f) In the event that Licensee fails to attain the Minimum Net Sales Threshold (‘MNST’) set forth below for any Annual Period commencing in ***

Minimum Net Sales Thresholds

For each Annual Period commencing 2006, 2016, 2026, 2036, respectively, during each ten (10) year period, the product of:

(i) the greater of

	(x)	the Minimum Net Sales Threshold for the *** and

	(y)	***

3.	For Annual Periods commencing 1 January 2006, § 9.1 shall read as follows:

‘‘9.1 In consideration of the license granted and the services to be performed by Licensor hereunder, Licensee will pay to Licensor a Minimum Guaranteed Fee for each Annual Period as follows:

	***

The Minimum Guaranteed Fee for the 16^th through the 20^th Annual Periods will be the ***

The Minimum Guaranteed Fees for the 21st through the 25th Annual Periods will be the ***

The Minimum Guaranteed Fee for the 26^th through the 30^th Annual Periods will be the ***

The Minimum Guaranteed Fee for the 31^st through the 35^th Annual Periods will be the ***

CONFIDENTIAL TREATMENT

The Minimum Guaranteed Fee for the 36^th through the 40^th Annual Periods will be the ***

The Minimum Guaranteed Fee for the 41^st through the 45^th Annual Periods will be the ***

The Minimum Guaranteed Fee for the 46^th Annual Period through the 50^th Annual Periods will be the ***

The parties acknowledge and agree that the total MGF in each Annual Period include ***

4. § 23 (b) shall be amended to add the following at the end:

‘‘Notwithstanding anything herein contained, a change of control Transfer shall be permitted if in accordance with all of the applicable provisions of the CKI/CF Group Irrevocable Consent d. 29 September 2005. In the event of any such CKI-permitted change-of-control Transfer, the provisions hereof shall apply to any ‘successor in interest’ permitted Transferee (except that Notice shall apply to any transfer of more than 35% of the Transferee). Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding upon the parties and permitted successors and assigns.’’

5.	Except as set forth herein, the CK Jeans Asia License (and Assigned Licenses as applicable) shall remain in full force and effect. For the avoidance of doubt, the parties acknowledge that no further ‘‘Override’’ payments are due and owing. Any defined terms used herein not specifically defined herein shall have the meanings ascribed to them in the CK Jeans Asia License.

6.	To the extent that there is any discrepancy between this Amendment and Agreement and the CK Jeans Asia License, this Amendment and Agreement shall govern and control.

7.	This Amendment and Agreement and the CK Jeans Asia License shall be considered as having been entered into in the State of New York and shall be construed and interpreted in accordance with the laws of that state applicable to agreements made and to be performed therein.

8.	Following the closing of the Transaction, this Amendment and Agreement, the CK Jeans Asia License and the Assigned Licenses may be assigned within the Warnaco family of companies, in accordance with the terms as agreed by CKI and set forth in writing, simultaneously herewith.

Warnaco U.S., Inc., a Delaware corporation, is the general partner of WF Overseas Fashion C.V., a limited partnership (‘‘commanditaire vennootschap’’) organized and existing under the laws of the Netherlands, and, solely in such capacity, is executing this Amendment and Agreement on behalf and for the exclusive risk and benefit of WF Overseas Fashion C.V.

CONFIDENTIAL TREATMENT

The parties have executed this Amendment and Agreement effective upon W’s acquisition of the CKJ Entities this 31^st day of January 2006.

	Calvin Klein, Inc.
	By: /s/ Tom Murry
	Name:				Tom Murry
	Title:				President and COO
	WF Overseas Fashion C.V.
	By: Warnaco U.S., Inc., its general partner
	By: /s/ Stanley P. Silverstein
	Name:				Stanley P. Silverstein
	Title:				President and Secretary
	CK Jeanswear Asia Limited CK Jeanswear Australia, Ltd. CK Jeanswear New Zealand, Ltd. CK Jeanswear Korea, Ltd. CK Jeanswear Shanghai, Ltd. CK Jeanswear Europe S.p.A. CK Jeanswear N.V.
	By: /s/ Lawrence R. Rutkowski
	Name:				Lawrence R. Rutkowski
	Title:				Vice President and Treasurer

EX-10.64

EXHIBIT 10.64

PORTIONS OF THIS EXHIBIT 10.64 MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

Deirdre Miles-Graeter
CK Jeanswear World — Store License
8 Dec 2000/6 Sep 01/
13 Nov 01 /3 Dec 01 /16 Jan 02
6 March 2002

Calvin Klein

CK Jeanswear N.V. Olympic Palaza, 1st floor Fred. Roeskestraat 123. 1076 EE Amsterdam				CK Jeanswear Asia Limited Tower 1, The Gateway, Suite 3596 25 Canton Rd., TST, Hong Kong				CK Jeanswear Europe S.p.a. Via Provinciale Lucchese,181/11 50019 Sest Fiorentino Italy

Re: ‘‘CK/Calvin Klein Jeans Stores’’ — Europe and Asia

Ladies and Gentlemen:

CK Jeanswear N.V. (‘‘CKJNV’’) and Calvin Klein, Inc. (‘‘CKI’’) previously entered into a store license relating to the firm of the logo ‘‘CK/Calvin Klein Jeans’’, which was subsequently (12 Jan 99) assigned as to ‘‘Asia’’ to CK Jeanswear Asia Limited (‘‘CKJ Asia’’), and which was subsequently (2 Jan 98) sublicensed as to ‘‘Europe’’ to CK Jeanswear Europe S.p.A. (‘‘CKJ Europe’’). This confirms that each of CKJNV, CKJ Asia and CKJ Europe, each respectively ‘‘Operator’’ as applicable, and CKI have agreed as follows, effective upon execution of this amended and restated agreement as of 1 September 2001:

1. (a) CKI hereby grants to Operator a license to use the trademark in the form of the logo ‘‘CK/Calvin Klein Jeans’’ (‘‘Mark’’) on and in connection with the operation of a *** as defined in the amended and restated license agreement dated as of 1 January 1997 between CKI and CK Jeanswear Europe S.p.A., as amended to include *** as defined on the date hereof in the amended and restated license agreement dated as of 1 January 1997 between CKI and CK Jeanswear Asia Ltd. (‘‘CK Jeans A’’) (‘‘the Master Asia License’’), and (iii) ***, hereinafter the ‘‘Territory’’; for the sole purpose of selling therein at *** (as hereinafter defined). Operator will sell *** All use by Operator of the Mark is subject to CKI’s prior approval. Operator will promptly, following execution of this Agreement, deliver to CKI a proposed plan for any and each jurisdiction in the Territory, in which it desires or intends to open Stores, for CKI’s review, recommendations and in all instances reasonable prior approval. *** to be covered by such plans and opened in the ‘‘Territory’’ defined in the Master Europe License (the ‘‘Europe Territory’’) will *** Operator shall provide CKI annually, not later than *** Operator is required to ***

				Total Additional
***						***				***
***						***				***
***						***				***
***						***				***

Operator is to itself *** However, CKI shall permit Operator, and Operator will ***

(b) For purposes hereof, Merchandise shall consist only of ‘‘Articles’’ as respectively defined in the Master Europe License and the Master Asia License.

(c) CKI reserves the right to ***

(d) Notwithstanding the provisions of *** Section 1(a)(ii) above, Operator shall be permitted to *** Any and all such Stores shall be considered ‘‘Stores’’ for the purposes of this Agreement, and shall be subject to the prior approval of CKI as to the ***, and shall be subject to all the terms of this Agreement including but not limited to *** Operator shall not be permitted to sublicense the rights under this Section 1(d) to any unaffiliated third party.

2. (a) CKI shall have the right to approve the number and each specific location of each Store (prior to the execution of any lease or other commitment), and to approve the design, signage, layout, fixtures and decoration of each such Store and to designate the architect or Store planner utilized in connection with the build-out of each such Store (as set forth below), as well as all packaging, Store tags or labels, business

CONFIDENTIAL TREATMENT

materials (including business cards), advertising and promotional materials so as to ensure that the same are of the highest quality, and are consistent with the ‘‘Calvin Klein’’ image. Operator recognizes that CKI will grant such approvals as to location and number subject to and consistent with its other programs for related retail outlets, and only if such locations are reflected in the plan(s) approved pursuant to Section 1(a).

Operator recognizes that its public actions and statements con affect the image of CKI, the Mark, the Merchandise and other trademarks used by CKI and/or its licensees and other designees, CKI’s other licensees and their respective products. Accordingly, (i) the use and release by Operator of any and all advertising, promotional or publicity material (including press releases and other public relations media events) and (ii) any other corporate release, data or information which Operator has reason to believe might become public and, if so, could affect such image, will be prepared or conducted in consultation with and subject to the prior approval of CKI’s Public Relations Department. After any such approval, Operator will not modify such approved material or activities in any respect, without CKI’s prior approval. CKI shall have the right to inspect each Store to ensure compliance with this Agreement. Operator shall co-operate with CKI in any such inspection, shall promptly take steps to correct all deficiencies as noted by CKI during or following such inspection and will bear the expense of any follow up inspection.

(b) Operator will:

	(i)	bear all costs incurred in connection with development, build-out and operation of the Stores, including without limitation: (A) travel and other expenses and costs of CKI’s designated architect and/or Store planner who will design or approve the design of the Stores; (B) out-of-pocket expenses, travel expenses and per diem expenses of CKI personnel, including without limitation design, Store planning, Store opening set-up, on-site inspections and visual display; (C) remit to CKI ***

	(ii)	conduct and operate the Stores in accordance with all applicable health, safety, occupancy, tax and other governmental laws, rules and regulations;

	(iii)	maintain the Stores in a sanitary condition and in good repair at all times, and in accordance with the design, Store set-up (merchandising) and visual display specifications, standards and guidelines of CKI, and refurbish the Stores as may be reasonably necessary in order to keep the Stores in an up-to-date condition;

	(iv)	employ only competent, trained and exemplary personnel (and provide for dress codes and uniforms for the same) including a General Manager for all retail operations hereunder as well as Store managers, all subject to CKI’s ongoing approval;

	(v)	retain public relations personnel or consultants to promote the Mark and the Stores under the supervision of and as approved by CKI and its public relations personnel;

	(vi)	purchase a supply of Merchandise for each Store which constitutes, in the reasonable opinion of CKI, a representative collection and which will satisfy consumer demands;

	(vii)	prepare and deliver to CKI ***

	(viii)	not dispute or otherwise allege wrongful termination (except in the case of a bona fide dispute as to whether Operator is or was in breach), in the event this Agreement is terminated by CKI due to Operator’s breach or default; and

	(ix)	keep confidential all material, data and proprietary information of CKI, which shall include but not be limited to the design and decor specifications and prototypes utilized in connection with the Stores.

(c) Operator will expend such amounts for advertising and promotion and public relations event (which shall be subject to the approval of CKI) as are reasonable and appropriate in connection with Operator’s exploitation of the license granted hereby, but not less than *** during such Annual Period.

CONFIDENTIAL TREATMENT

(d) Upon reasonable prior written notice, CKI and its representatives may, no more than once each year unless good cause is shown, examine the books and records (and any and all underlying data) of Operator during the term of the Agreement, and for a period of three years following termination hereof. Such books, records and data will be maintained for at least three years following the year to which they relate.

3. (a) Operator acknowledges that; (i) Calvin Klein Trademark Trust (‘‘CKTT’’) CKTT is the owner, and CKI is a beneficial owner, of all right, title and interest in and to the Mark and the goodwill attached or will become attached thereto (including goodwill arising from advertising expenditures applicable to the grant hereunder); (ii) all use thereof by Operator will inure to the benefit of CKTT; and (iii) CKTT and/or CKI retains all rights to use and to grant others the right to use the Mark except as specifically granted to Operator herein. Operator will not do or permit to be done anything which will detract from the value or reputation of the Mark and do all things which may reasonably be required by CKI in order to confirm CKI’s beneficial ownership and CKTT’s ownership of the Mark.

(b) In the event Operator learns of any infringement or imitation of the Mark or use by any person of a trademark similar to the Mark, it will immediately notify CKI. Operator will cooperate with CKI in any action taken by CKI to protect its rights and those of CKTT in and to the Mark. Operator will take no such action itself without prior written approval of CKI.

4. Operator will indemnify and save CKTT, CKI and Calvin Klein harmless from any and all claims that may arise or be asserted against either of them from Operator’s use of the Mark, Operator’s sale of the Merchandise or Operator’s establishment, ownership or operation of the Store, and all costs and expenses, including reasonable counsel fees, incurred in connection with defense of the same. Operator will procure and maintain insurance as reasonably required by CKI in order to insure the property and contents of the Store and its operations, and from liability claims as referred to herein.

5. (a) The term of this Agreement shall commence of the date hereof and shall continue in effect through the current initial term (through 31 December 2005), and renewal term(s) if any of the Master Europe License as to the ‘‘Territory’’ referred to in Section 1(a)(i), subject to compliance with the exploitation and Store roll-out requirements noted in Section 1 hereof, and shall terminate automatically and forthwith as to such ‘‘Territory’’ or termination of the Master Europe License above and the current initial term, and renewal term(s) if any of the Master Asia license as to the ‘‘Territory’’ referred to in Section (a)(ii) and (iii) above, and shall terminate automatically and forthwith as to such ‘‘Territory’’ on termination of the Master Asia License.

(b) Except as set forth otherwise in this section, in the event of any *** If Operator files a bankruptcy petition, is adjudicated a bankrupt or becomes involved in a bankruptcy or insolvency proceeding, this Agreement will terminate automatically and forthwith. ***

(c) Upon termination of this Agreement, Operator will immediately discontinue use of the Mark in connection with the Stores, will alter the interior and exterior of the Stores so as to distinguish them from their former appearance and will dispose of any inventory of Merchandise, on a non-exclusive basis, only in the ordinary course of business, or otherwise as specifically directed by CKI, for a period not to exceed 90 days following the date of such termination. No such disposal may occur unless Operator provides CKI with a detailed schedule of its inventory, certified by its chief financial officer in form and content satisfactory to CKI, within 30 days following termination of this Agreement. Notwithstanding the foregoing, CKI has the option, exercisable by written notice sent either prior to or not later than 30 days following the date of termination, to have any Store, and Operator’s entire interest therein, assigned to it, (A) if such termination is due to breach by Operator at the lower of (i) the net depreciated cost to Operator and (ii) the then current market value of such Store, including the lease thereof and the improvements therein, or (B) if for other reasons (or upon expiration), at the then current market value of such Store, including the lease and the improvements therein.

6. Each party to this Agreement is an independent contractor and nothing herein contained and no action arising from or relating to this Agreement shall be construed to constitute the parties as joint venturers or either as agent of the other.

CONFIDENTIAL TREATMENT

7. No waiver, express or implied, of any provision of this Agreement, or of any breach or default hereof, shall constitute a continuing waiver hereof except as expressly provided in a writing signed by the waiving party.

8. (a) Neither this Agreement or any rights granted hereunder may be assigned or otherwise transferred by Operator, except as agreed on by CKI. Any sublicense agreement shall be in the form attached hereto with only such modifications as CKI may approve in advance; and the selection (identity) of any sublicensee shall also be subject to CKI’s prior approval. *** The existing provisions of the existing sublicenses which may conflict with the preceding sentence are excepted.

( b) If Corrado and Marcello Fratini cease to have the power directly or indirectly to elect or cause the election of at least a majority of Operator’s directors and direct the management and operations of Operator, CKI may immediately terminate this Agreement by written notice. Operator will provide CKI with at least 20 days’ prior notice of any event or transaction that would activate the right of termination provided in the preceding sentence. Except as provided above, this Agreement shall inure to the benefit of and shall be binding upon the parties and their respective successors and assigns.

9. This Agreement shall be considered as having been entered into in the State of New York and shall be construed and interpreted in accordance with the laws of that state applicable to agreements made and to be performed therein. However, disputes regarding the Mark shall be resolved in accordance with the Federal trademark laws and related laws, statutes, rules and regulations of the United States unless there are no Federal laws, statutes, rules or regulations dispositive of such a dispute, in which case such dispute shall be resolved in accordance with the laws of the State of New York. Operator represents and warrants that it is not entitled to immunity from judicial proceedings commenced in the State of New York, U.S.A. (whether relating to state laws or federal laws) and expressly agrees that, should any judicial proceedings be brought, it will not claim any immunity from such proceedings and that they shall be brought In New York, New York and shall be conducted in English. Operator irrevocably submits to the jurisdiction of the courts of the State of New York and/or the federal courts located therein and waives the right to contest such jurisdiction and to the laying of venue in such courts. Operator is completing forms relating to the appointment of the Corporation Services Company to act as its agent for service relating to any dispute or adjudication hereunder, simultaneously with the execution of this Agreement and will maintain such appointment throughout the term of this Agreement (including extensions, renewals and the non-exclusive inventory disposal period referred to herein).

If the foregoing fully and accurately sets forth our understanding with regard to the subject matter hereof, please so signify by signing below where indicated.

Very truly yours,

CALVIN KLEIN, INC.

By:/s/ Illegible

Agreed to:

CK JEANSWEAR N.V.

By: /s/ Illegible

CK JEANSWEAR ASIA LIMITED

By: /s/ Illegible

CK JEANSWEAR EUROPE S.P.A.

By: /s/ Illegible

CONFIDENTIAL TREATMENT

SCHEDULE 1(d)
OUTLET

***

EX-10.65

EXHIBIT 10.65

PORTIONS OF THIS EXHIBIT 10.65 MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

January 31, 2006

WF Overseas Fashion C.V. ("W")
CK Jeanswear N.V.
CK Jeanswear Asia Limited
CK Jeanswear Europe S.p.A.

Re:	CKI/CKJNV – Amended and Restated Jeans Store License d. as of 6 March 2002 ("Jeans Store License") Calvin Klein, Inc. ("CKI")/W Heads of Agreement d. 29 September 2005 ("Heads of Agreement")

Ladies and Gentlemen:

Pursuant to the Heads of Agreement, the parties contemplated that W would acquire the CALVIN KLEIN businesses (and/or the rights to assets thereto) in whatever structure, form and format as such transaction occurs) of Fingen S.p.A., Fingen Apparel, N.V. (and, as applicable, their parents, subsidiaries and affiliates responsible for the operation of the CALVIN KLEIN businesses) (the "Transaction").

As contemplated in the Heads of Agreement noted above, CKI and W agree to amend the Jeans Store License, effective upon and following the closing of the Transaction (to be 17 January 2006, or such later date as mutually agreed between the parties to the Transaction, but not later than 31 December 2006) to extend the term as follows:

1.	§5(a) shall be amended to state as follows:

"5(a). The term of this Agreement shall commence as of the date hereof and shall continue in effect through the term of the CK Jeans Europe License as to the "Territory" covered thereunder, and through the term of the CK Jeans Asia License as to the "Territory" covered thereunder subject to compliance with the exploitation and Store roll-out requirements noted in Section 1 hereof, and shall terminate automatically and forthwith as to such "Territory" for Europe referred to in §1(a)(i) above on termination of the Master Europe License (or jurisdiction thereunder); and shall terminate automatically and forthwith as to such "Territory" for Asia referred to in §(a)(iii) and §(a)(iii) above on termination of the Master Asia License" (or jurisdiction thereunder )."

2.	(a)    CKI and W hereby confirm that W is permitted, ***

	(b)    CKI and W also hereby confirm that the ***

3.       Except as set forth herein, the Jeans Store License remains in full force and effect. Any defined terms used herein not specifically defined herein, shall have the meanings ascribed to them in the Jeans Store License.

4.       To the extent that there is any discrepancy between this Agreement and the Jeans Store License, this Agreement shall govern and control.

5.       This Agreement and the Jeans Store License shall be considered as having been entered into in the State of New York and shall be construed and interpreted in accordance with the laws of that state applicable to agreements made and to be performed therein.

6.       Following the closing of the Transaction, this Agreement and the Jeans Store License may be assigned within the Warnaco family of companies, in accordance with the terms as agreed by CKI and as set forth in writing, simultaneously herewith.

Warnaco U.S., Inc., a Delaware corporation, is the general partner of WF Overseas Fashion C.V., a limited partnership ("commanditaire vennootschap") organized and existing under the laws of the Netherlands, and, solely in such capacity, is executing this Agreement on behalf and for the exclusive risk and benefit of WF Overseas Fashion C.V.

CONFIDENTIAL TREATMENT

The parties have signed this Agreement this 31 day of January 2006.

Calvin Klein, Inc.

By: /s/ Tom Murry                                
Name: Tom Murry
Title: President and COO

WF Overseas Fashion C.V.

By: Warnaco U.S., Inc., its general partner

By: /s/ Stanley P. Silverstein                    
Name: Stanley P. Silverstein
Title: President and Secretary

CK Jeanswear N.V.
CK Jeanswear Asia Limited
CK Jeanswear Europe S.p.A.

By: /s/ Lawrence R. Rutkowski                
Name: Lawrence R. Rutkowski
Title: Vice President and Treasurer

CONFIDENTIAL TREATMENT

Schedule

***

EX-10.66

EXHIBIT 10.66

PORTIONS OF THIS EXHIBIT 10.66 MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

EXECUTION COPY

CONFIDENTIAL - THIS DOCUMENT AND ITS SUBSTANCE ARE NOT TO BE USED OR DISCUSSED WITHOUT CONSENT OF CALVIN KLEIN, INC. THIS IS A DRAFT WHICH SHALL NOT BE BINDING UPON THE PARTIES AND DOES NOT CONSTITUTE AN OBLIGATION OF THE PARTIES. NO BINDING AGREEMENT OR OBLIGATION WILL RESULT UNLESS A DEFINITIVE WRITTEN AGREEMENT IS EXECUTED AND DELIVERED BY THE PARTIES. NEITHER THIS DRAFT NOR ANY OTHER DRAFT, MEMO, OTHER WRITING NOR ANY ORAL CONVERSATION OR DISCUSSION IS TO BE CONSIDERED BINDING OR A COMMITMENT ON THE PART OF CALVIN KLEIN, INC.

CALVIN KLEIN, INC.

and

CK JEANSWEAR EUROPE, S.p.A.

THIS AMENDED AND RESTATED LICENSE AGREEMENT ("Agreement") is made this 1st day of January 1997, by and between CALVIN KLEIN, INC., a New York corporation having its principal business office at 205 West 39th Street, New York, New York 10018 (hereinafter referred to as "Licensor"), on the one hand and CK Jeanswear Europe, S.p.A. having its address, at Via Provinciale Lucchese, 181/11, 50019, Sesto Fiorentino, Italy (hereinafter referred to as "Licensee") and it amends and restates in its entirety a License Agreement dated as of May 9, 1995, as amended (the "Original License Agreement"), by and between Licensor and Corrado Fratini and Marcello Fratini (subsequently assigned to Licensee).

CONFIDENTIAL TREATMENT

Index

Section

1				Grant (Products/Territory)
2				Term
3				Design
4				Confidentiality
5				Quality Control
6				Operations
7				Advertising
8				Approval Standard
9				Minimum Guaranteed Fees
10				Percentage Fee
11				Equity Interest
12				Audit
13				Trademark
14				Infringement
15				Copyright
16				Other Designers
17				Indemnification/Insurance
18				Breach/Default
19				Termination
20				Licensor Representations
21				Licensee Representations
22				Notice
23				Assignment
24				Entire Agreement
25				Independent Contractor
26				No Waiver
27				Severability
28				Governing Law
29				Service

Schedules/Exhibits/Attachments
Schedule A (Products)
Schedule 3.1.1 Time and Action Calendar
Schedule 24 (Shareholdings)

CONFIDENTIAL TREATMENT

W   I   T   N   E   S   S   E   T   H:

In consideration of the premises and the mutual covenants hereinafter set forth, Licensor and Licensee do hereby respectively grant, covenant and agree as follows:

Definitions: As used in this Agreement, the following terms have the meanings specified or referred to below.

"Articles" shall have the meaning set forth in Section 1.1.1.

"CPI" shall mean the Consumer Price Index (All Cities - All Urban Consumers) as published by the United States Department of Labor (or the successor index).

"Eastern Europe" shall have the meaning set forth in Section 1.1.1.

"Form" shall have the meaning set forth in Section 1.1.1.

"Irregular and Close-out Articles" shall have the meaning set forth in Section 10.1.

"Licensor's Data" shall have the meaning set forth in Section 4.1.

"Licensed Mark" shall have the meaning set forth in Section 1.1.1.

"Middle East" shall have the meaning set forth in Section 1.1.1.

"Minimum Advertising Expenditure" shall have the meaning set forth in Section 7.2.

"Minimum Guaranteed Fee" shall have the meaning set forth in Section 9.1.

"Minimum Net Sales Thresholds" shall have the meaning set forth in Section 2.

"Net Sales" shall have the meaning set forth in Section 10.1.

"Percentage Fee" shall have the meaning set forth in Section 10.1.

"Products" shall have the meaning set forth in Section 1.1.1.

"Salesmen's Samples" shall mean Articles sold to Licensee's commercial agents and salesmen at a discount of at least 50% off the wholesale price for use in promoting and selling Articles.

"Southern Africa" shall have the meaning set forth in Section 1.1.1.

"Territory" shall have the meaning set forth in Section 1.1.1.

"Western Europe" shall have the meaning set forth in Section 1.1.1.

Section 1. Grant (Products/Territory)

1.1.1    Licensor hereby grants to Licensee an exclusive license only throughout certain countries in (i) "Western Europe," namely Ireland, Great Britain, France, Monte Carlo, Germany, Spain, Portugal, Andorra, Italy, San Marino, Vatican City, Belgium, the Netherlands, Luxembourg, Denmark, Sweden, Norway, Finland, Austria, Switzerland, Liechtenstein, Greece, Cyprus, Turkey and Malta, (ii) the "Middle East," namely Lebanon, Israel, Palestine, Jordan, Syria, Iran, Saudi Arabia, Yemen, Qatar, Kuwait, Bahrain, Oman, and the United Arab Emirates, and (iii) "Eastern Europe," namely Hungary, Czech Republic, Poland, Bosnia-Herzogovina, Croatia, Serbia, Slovenia, Romania, Bulgaria, Slovak Republic, Macedonia, Moldavia, Lithuania, Latvia, Estonia, Ukraine, Belorussia, Russia (C.I.S.), Georgia, Armenia, Azerbaijan, Kazakhstan, and Uzbekistan (except as provided below including Section 10.4.2) (Western Europe, together with the Middle East, Eastern Europe and Southern Africa (as defined below) are hereinafter referred to as the "Territory") to use the mark "Calvin Klein" and "CK/Calvin Klein" (hereinafter referred to as the "Licensed Mark") only in the form of the logo Calvin Klein Jeans" and/or "CK/Calvin Klein Jeans" as may be approved by Licensor ("Form") on and in connection with the manufacture, distribution and sale at wholesale solely of the items of women's jeans and jeans related apparel and men's jeans and jeans related apparel as are set forth on Schedule A annexed hereto (hereinafter referred to as "Products"). In addition to the foregoing, Licensor hereby grants effective 1

CONFIDENTIAL TREATMENT

June 1997 to Licensee an exclusive license in South Africa, Botswana, Mozambique, Namibia, Swaziland and Zimbabwe (collectively, "Southern Africa") to use the Licensed Mark in the Form solely for the purpose of permitting Licensee to grant a sublicense to a third party for the distribution and sale of Products in Southern Africa to be approved in advance by Licensor (the "Sublicense"); provided, that, if the Contract Fee (as defined in the Sublicense) is not paid to Licensor simultaneously with the execution of the Sublicense or not later than thirty (30) days following execution of the Sublicense, then Southern Africa shall not be part of the Territory and the provisions of this sentence shall be null and void and of no further force and effect. Products produced by or for Licensee and approved by Licensor, from time to time, for each collection for sale under this Agreement hereinafter shall be referred to as "Articles." Notwithstanding the foregoing, the license granted hereunder with respect to manufacture is non-exclusive and Licensor retains the right to *** Licensee acknowledges that Licensor's grant hereunder does ***

1.1.2 Licensee's right to use the Licensed Mark in the Form on Articles is ***

1.2 All Articles shall bear the Licensed Mark only in the Form except as hereinafter provided, and no Article shall be sold or otherwise distributed by Licensee under any mark other than the Licensed Mark. Licensor reserves all rights to the *** Licensee specifically acknowledges that Licensor has retained:

(a) the right to use, and to grant to any other third party the right to use, the Licensed Mark:

(i)    in the Territory, with regard to *** and

(ii)    outside the Territory, with regard to ***

(b) the right to use, and to grant to any other third party the right to use the mark *** and

(c) the right to ***

1.3 Licensee acknowledges that Articles hereunder may bear some similarity of design to other items of merchandise which hereafter may be distributed or sold in the Territory in connection with the Licensed Mark by either Licensor or Licensor's duly authorized licensees or others and further acknowledges that such similarity of design shall not be deemed a breach of or default under this Agreement.

1.4 Licensee acknowledges that ***

1.5 Licensee will use its best efforts to exploit the rights herein granted throughout each and every jurisdiction in the Territory and to sell the maximum quantity of each category of Articles in each and every jurisdiction in the Territory therein consistent with the high standards and prestige represented by the Licensed Mark.

1.6 Licensee shall not export Articles from the Territory and shall not sell Articles to any third party which it knows, has reason to believe or should have reason to believe intends to export Articles from the Territory.

1.7 Licensee acknowledges that Licensor has entered into, and will hereafter enter into, licenses with third parties regarding the use of the Licensed Mark and/or the Form on Articles in jurisdictions outside the Territory and that Licensor may grant third parties the right to produce Products for sale outside the Territory. Licensee agrees to fully co-operate with such third parties, as requested by Licensor including but not by way of limitation, ***

1.8 Furthermore, Licensee agrees that the marketing placement and distribution of Articles in the Territory may but shall not necessarily be the same as that for Products being sold *** Licensee acknowledges that Licensor has heretofore granted exclusive distributorships to third parties in the Territory and that the license granted hereunder is subject to the same. Licensee agrees to assume and to fully comply with all of Licensor's obligations provided therein or relating thereto, including but not by way of limitation, *** Licensee further acknowledges that Licensor has heretofore entered into an

CONFIDENTIAL TREATMENT

exclusive distributorship with a third party for the jurisdictions of *** Furthermore, if requested by Licensor, and subject to availability, Licensee will ***

Section 2. Term

2.1 Except as set forth in Section 2.2, the initial term of this Agreement will be ten (10) years and eight (8) months commencing as of 1 May 1995 and continuing through 31 December 2005, unless sooner terminated in accordance with the provisions hereof. This Agreement shall be renewed for up to two (2) consecutive additional terms of ten (10) years, each commencing 1 January 2006, and 1 January 2016, respectively, but such renewal shall be effective only if (a) Licensee is in compliance with all of the terms and conditions of this Agreement throughout the initial term, or the then current term, as applicable, (b) "Net Sales" for Western Europe during each Annual Period have attained or exceeded the "Minimum Net Sales Thresholds" set forth below:

Annual Period				Western Europe Minimum Net Sales Thresholds
1 (95-96)						***
2 (1997)						***
3 (1998)						***
4 (1999)						***
5 (2000)						***
6-10 (2001-2005)						***
11-20 (2006-2015)						***

(c) Licensee is in compliance with the minimum net worth and other financial covenants required herein, and (d) Licensee has, in the sole determination of Licensor, continued throughout the initial term of the Agreement to maintain the high quality standards necessary to reflect the prestige and reputation of the Articles and the Licensed Mark. Licensor may specifically waive compliance with any of the foregoing. At least 90 days prior to each such renewal, Licensee shall deliver to Licensor a detailed business plan for its operations for the renewal period which shall contain reasonably detailed projections prepared by Licensee in good faith. The twenty (20) month period commencing 1 May 1995, the twelve (12) month period commencing 1 January 1997 and each twelve (12) month period commencing on each 1 January thereafter during the term of this Agreement, shall each constitute and hereinafter shall be referred to as an "Annual Period."

2.2 Notwithstanding the provisions of Section 2.1, the initial term of this Agreement for Eastern Europe and the Middle East shall terminate on 31 December 2000 and may not be renewed unless before December 31, 1997, (i) Licensee shall have submitted a *** In addition, notwithstanding the provisions of Section 2.1, the ***

Section 3. Design

3.1.1 Licensee will cooperate with Licensor and Licensee and Licensor will each use their respective best efforts in the preparation of seasonal collections of Articles in accordance with the Time and Action Calendar attached hereto as Schedule 3.1.1. Licensee will provide Licensor, at least ***

3.1.2 In connection therewith, Licensor or Licensor's designee, Calvin Klein Jeanswear Company ("Designee") will ***

3.2 In order to present cohesive and representative collections of Articles, Licensee will utilize substantially all of the designs or samples submitted by Designee or approved by Licensor and/or such designs or samples developed by Licensor and produce, offer for sale, and ship as ordered, those Articles which are produced therefrom, except as Licensor may otherwise consent. Within thirty (30) days following the close of each seasonal collection, Licensee will provide Licensor with the sales results, by style on a unit basis, of Articles shown and sold for such seasonal collection.

3.3 Licensee may use only sketches, designs, colors and other materials provided by Designee or Licensor or approved by Licensor in connection with Articles. If Licensee rejects any such sketches,

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designs, color samples or other materials and chooses not to use them in connection with Articles, Licensee must return such sketches, designs, color samples and other materials at Licensee's expense, and may not use them or permit their use by any unauthorized parties thereafter.

3.4 Licensor may use and permit others to use sketches, designs and other materials provided or approved by Licensor for use in connection with Articles in any manner it desires, provided that such use does not conflict with any rights granted Licensee hereunder.

3.5 Licensee will be responsible for making all prototypes and samples as well as for the production of Articles, and Licensee will bear all costs in connection therewith. Licensee will be responsible for and will bear all costs involved in the design, development and construction of showrooms and in-store shops or stores in which Articles are sold, all of which shall be subject to the ongoing approval of Licensor (except to the extent such stores bear such costs) including costs of Licensor's visual display personnel which may include certain per diem costs based upon reasonable third party rates, for services usually performed by third parties based upon estimates provided to and approved by Licensee, and the costs (including per diem costs based upon rates of and services performed by third parties) of other personnel including in-store coordinators, advertising and public relations (other than design) with respect to services performed in connection with this Agreement. Furthermore, Licensee will remit directly payment for, or reimburse Licensor for, any out-of-pocket expenses incurred by Licensor or its representatives in connection with this Agreement (1) which are required by Licensor consistent with its corporate operating procedures, (2) which are requested (or approved in advance) by Licensee, or (3) with respect to travel to and throughout the Territory in connection with this Agreement, the cost of round trip business class airfare or first class airfare if so provided by Licensor's internal travel policies in effect from time to time, hotel accommodations, food and local transportation incurred by Licensor's representatives, based upon proposed travel plans and estimated expenses delivered to and requested by or approved by Licensee in advance.

3.6 Licensee shall sell to Licensor, Licensor's affiliates or Licensor's licensees (including store licensees, for full price retail and outlet stores) in, or if specifically requested in writing outside of, the Territory, such reasonable quantities of Articles as may be requested at discounts ***

Section 4. Confidentiality

4. Licensee acknowledges that all information relating to the business and operations of Licensor and its affiliates and/or Designee which it learns during the term, or has learned during negotiation, of this Agreement, all special design concepts which Licensor or its affiliates or its Designee provide to it hereunder and all sketches and designs received by it from Licensor or its affiliates or its Designees (hereinafter referred to as "Licensor's Data") are valuable property of such entities. Licensee acknowledges the need to preserve the confidentiality and secrecy of Licensor's Data and agrees that, both during the term of this Agreement and after the termination hereof, it shall not use (except use required to fulfill the provisions of this Agreement during the term of this Agreement) or disclose same, and it shall take all necessary steps to ensure that use by it or by its authorized designees (which use and which designees shall be solely as necessary for, and in connection with, the manufacture, distribution, sale, advertising or promotion of Articles) shall preserve in all respects such confidentiality and secrecy. Licensee hereby indemnifies Licensor, its affiliates and its Designee against any damage of any kind which may be suffered by any of them as a result of any breach by Licensee or its said designees of the provisions of this paragraph. (For purposes hereof "affiliates" shall consist of those persons, firms, corporations and other entities controlled by, controlling or under common control with the entities in question.)

Section 5. Quality Control

5.1 The components, workmanship, fit and durability of Articles will at all times be of the highest quality and commensurate with the reputation, image and prestige of the Licensed Mark. Licensee will maintain production and other quality control procedures so as to ensure that the quality of Articles meets or surpasses that of the approved samples of Articles. Articles will be distributed, merchandised and sold with packaging and sales promotion materials appropriate for highest quality products of that

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type of merchandise. All Articles will be manufactured, sold, labeled, packaged, distributed and advertised in accordance with all applicable laws and regulations in the Territory.

5.2 Licensor will have the right to approve the styles, designs, packaging, components, workmanship, fit, quality, display, merchandising, advertising and promotion of all Articles so as to ensure that Articles manufactured, merchandised, sold, advertised and promoted hereunder are consistent with the reputation, image and prestige of the Licensed Mark as a designation for highest quality products.

5.3 (a) Before selling, distributing or promoting any Article, Licensee will deliver to Licensor for its approval, free of charge, one (1) prototype samples of each such Article together with prototype tags, labels and packaging to be used in connection therewith. In the event any such prototype sample fails to meet with Licensor's approval, Licensee shall promptly correct such prototype and re-submit it for Licensor's approval. Licensor may require Licensee to purchase labels, tags and other identification including packaging materials from Licensor, or Licensor's designated supplier in order to protect the Licensed Mark and to preclude or prevent counterfeiting or unauthorized use of materials utilizing the Licensed Mark.

(b) Licensee will deliver to Licensor, free of charge, one (1) initial production sample of each Article together with the tags, labels and packaging to be used in connection therewith. In addition, from time to time in order to ensure that Licensor is maintaining the quality standards set forth herein upon Licensor's request, Licensee will deliver to Licensor, free of charge, such reasonable number of then current production samples of each Article produced hereunder together with the tags, labels and packaging being used in connection therewith. In the event Licensor determines that the initial production sample delivered to Licensor or any Article subsequently submitted to Licensor fails to meet the quality standards set forth herein, Licensee will make any corrections determined by Licensor to be necessary to meet such quality standards. All Articles to be sold hereunder will be at least equal in quality to the samples approved by Licensor.

(c) Licensor and its duly authorized representatives will have the right, upon reasonable advance notice and during normal business hours, to examine Articles in the process of being manufactured and to inspect all facilities utilized by Licensee or its contractors in connection therewith. Licensee shall include in its arrangements with third party contractors a similar provision permitting Licensors inspections of such contractor's facilities.

5.4 All Articles will bear the Licensed Mark only in the Form and only in such form and manner as may be approved by Licensor. Notwithstanding the foregoing, *** Licensee will cause to appear on all Articles produced hereunder, and on their labels, packaging and the like, on all advertising, promotional, merchandising and publicity material used in connection therewith, and on any printed matter of any kind on which the Licensed Mark, the Form or any other "Calvin Klein" or "CK" or "CK/Calvin Klein" identification appears (including business cards, invoices, stationery and other printed matter), such legends, markings and notices as Licensor may request. Before using or releasing any proposed advertising (including any and all co-operative trade and consumer advertising), promotional, merchandising or publicity material or any such other printed matter, Licensee will submit same together with the proposed placement thereof to Licensor for Licensors approval. The same will not be used or released prior to receipt of Licensor's approval.

5.5 After any sample, copy, art work or other material has been approved, Licensee will not depart therefrom in any respect with the prior written approval of Licensor. If Licensor should disapprove any sample Article, tag, label, package or the like, or any advertising, promotional, merchandising or publicity material or the proposed placement thereof or any other printed matter, Licensee will not use or permit the use of the same in any manner, whether or not in connection with the Articles or the Licensed Mark or otherwise.

5.6 In order to maintain the reputation, image and prestige of the Licensed Mark, Licensee's distribution patterns shall consist of those retail outlets whose location, merchandising and overall operations, and whose positioning and price selling for Articles are consistent with (a) the high quality of

CONFIDENTIAL TREATMENT

Articles, (b) the reputation, image and prestige of the Licensed Mark, and (c) the exclusive nature of distribution and market placement applicable to such Articles and as are approved by Licensor on an ongoing basis. ***

Section 6. Operations

6. During the term of this Agreement, Licensee shall use such trade name incorporating the Licensed Mark in the Form, and no other name or mark, as is specifically approved by Licensor as the name of an entity which shall operate solely in connection with and arising from its performance of its obligations and responsibilities hereunder. Licensee shall comply with all legal requirements applicable to the establishment and maintenance of the same. Licensee shall be permitted to use the name "CK Jeanswear Europe, S.p.A." only for so long as such entity operates solely as licensee hereunder. The use of the Licensed Mark in the Form in connection with the operation of such entity shall be subject to the provisions of paragraph 13 below. In connection with the operation of such division or entity Licensee shall:

(a) employ, on an exclusive basis, a "President" and/or a Managing Director who shall be subject to the ongoing approval of Licensor;

(b) employ, on an exclusive basis, sales, merchandising, public relations (who may be retained as consultants or through a servicing arrangement with Licensor), visual display and production (including quality control) personnel as part of its staff as will enable Licensee, in the opinion of Licensor, to exploit the license herein granted and to maintain the quality standards required hereunder;

(c) establish as soon as practicable and thereafter maintain throughout the term of this Agreement, a separate showroom in Milan, Italy, and separate showrooms in other jurisdictions in the Territory, wherever and at the time an agent is delegated for such jurisdiction, for the sole purpose of displaying, promoting and selling Articles, the general location and general decor of which will be subject to the approval of Licensor, and the architect retained by Licensee will be either selected or approved by Licensor both at the time such showroom is established and thereafter throughout the term of this Agreement;

(d) establish and maintain throughout the term of this Agreement, production and other facilities, whether by ownership, or by contractual arrangement, in order to exploit the license herein granted and to maintain the quality standards required hereunder;

(e) employ or retain public relations personnel or consultants (which may be directly employed by Licensor and retained by or remunerated by Licensee) to assist in promoting the Licensed Mark and the sale of Articles in the Territory;

(f)*** and

(g) furnish Licensor with information regarding the above and such other information regarding the company division or subdivision as Licensor may, from time to time, request including (i) providing Licensor in writing, with net sales estimates (prospectively for three (3) years) by September 30 of the prior year, (ii) estimated total net sales and total aggregate advertising and promotional expenses (actual) by January 30 of the following year, (iii) monthly notices of net sales within ten (10) days following the last day of such month, and (iv) annually, broad based market information and analysis of the Products covered hereunder (including independent market research as to commensurate or comparable merchandise).

(h) ***

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Section 7. Advertising

7.1 Licensee will spend for cooperative advertising and promotion of Articles and the Licensed Mark, during each Annual Period, such amounts ***

7.2.1 ***

Annual Period				***
1st						***
2nd						***
3rd and each subsequent Annual Period						***

Notwithstanding the foregoing, *** [approximately 1.5 pages redacted]

7.2.2 ***

Annual Period				***
1st and 2nd						***
3rd						***
4th and 5th						***
if this Agreement is ***, for each subsequent Annual Period						***

7.2.3 Licensee will remit to Licensor to ***

Annual Period				***
1st and 2nd						***
3rd and 4th						***
5th						***
if this Agreement is ***, for each subsequent Annual Period						***

***

7.2.4 Notwithstanding the provisions of Sections 7.2.1, 7.2.2 and 7.2.3, no minimum advertising expenditure shall be ***

7.3 For purposes hereof, ***

7.4 ***

7.5 CRK Advertising operates as the advertising agency responsible for advertising campaigns relating to ***

Section 8. Approval Standard

8. Licensee acknowledges that approvals required pursuant to this Agreement, under Sections 2, 3, 5, 6(c), 7.3 and 13.1, may be based solely on Licensor's subjective aesthetic standards and may be granted, withheld and or charged in Licensor's sale and absolute discretion.

Section 9. Minimum Guaranteed Fees

9.1 In consideration of the license granted and the services to be performed by Licensor hereunder, Licensee will pay to Licensor a Minimum Guaranteed Fee for each Annual Period as follows:

***

The Minimum Guaranteed Fee for the sixth through the tenth Annual Periods will be as mutually determined by the parties, but in no event *** In the event that this Agreement is renewed, the Minimum Guaranteed Fees for each of the 11th through the 20th Annual Periods will be as mutually determined by the parties, but in no event ***

CONFIDENTIAL TREATMENT

9.2 The Minimum Guaranteed Fee for each Annual Period will be paid in advance in four (4) equal quarterly installments on the first day of January, April, July and October during each Annual Period except that the installments of the Minimum Guaranteed Fee for the first Annual Period shall be paid simultaneously with the execution hereof, on 1 January 1996, on 1 April 1996 and on 1 October 1996. ***

9.3 *** of the Minimum Guaranteed Fee shall be allocated as a royalty for the use of the Licensed Mark and the remaining *** shall be allocated as a fee for the design and other services to be performed by Licensor.

Section 10. Percentage Fee

10.1 In consideration of the license granted and the services to be performed by Licensor hereunder, Licensee shall pay to Licensor *** For purposes hereof, "Net Sales" shall be deemed to mean the ***

Notwithstanding the foregoing, Licensee shall pay to Licensor in accordance with Section 10.3 *** Such payments shall be in US dollars based on the actual conversion rate of Italian lire into US dollars (determined pursuant to Section 10.7) (the "actual rate"); provided, that solely for purposes of determining ***

Notwithstanding the foregoing, (i) no Percentage Fee shall be payable ***

For purposes of this Agreement, "Net Sales" generated by the ***

For purposes of this Agreement, the term "Irregular and Close-out Articles" shall mean (i) ***

10.2 Fifty percent (50%) of the Percentage Fee shall be allocated as a royalty for the use of the Licensed Mark and the remaining fifty percent (50%) shall be allocated as a fee for the design and other services to be performed by Licensor.

10.3 The Percentage Fee payments hereunder shall be accounted for and paid quarterly, within thirty (30) days following the close of each three (3) month period during each Annual Period, except that the initial accounting and payment will be made within thirty (30) days following the close of the initial eight (8) month period of the first Annual Period. The Percentage Fee payable for each accounting period during each Annual Period shall be computed on the basis of Net Sales from the beginning of such Annual Period through the last day of such accounting period with a credit for the Minimum Guaranteed Fees and Percentage Fees, if any, theretofore paid to Licensor for such Annual Period.

10.4.1 Licensee shall deliver to Licensor at the time each Percentage Fee payment is due, statements signed by the chief financial officer of Licensee and certified by him as accurate. Each such statement shall indicate, by month, the amount of Net Sales, and shall show in detail, separately for each category of Articles and each jurisdiction in the Territory for each account of Licensee, the style number, description, number of units, unit price and the total amount of gross sales of Articles shipped during the period covered by such statement, the type and amount of discounts and credits from gross sales which may be deducted therefrom (separately as to each type of discount or credit), a computation of the amount of Percentage Fee payable hereunder in respect of Net Sales for such period. Each such statement shall indicate by month the amount and details of all advertising and promotional expenditures incurred by Licensee during such period. Such statements shall be furnished to Licensor whether or not any Articles have been sold or advertising placed during the period for which such statements are due.

10.4.2 The Percentage Fee payable for each jurisdiction in the Middle East and Eastern Europe shall be computed and accounted for separately from other jurisdictions in the Territory. As promptly as practicable, Licensee will provide Licensor with information as to the market in each jurisdiction in the Middle East and Eastern Europe (of the type referred to in § 6(g)) and details of the operations in these jurisdictions (of the type referred to in § 6(h)), and any other information as may be reasonably requested by Licensor. The foregoing information to be supplied by Licensee shall be provided to Licensor in order to develop and mutually agree upon a satisfactory business plan, Minimum Guaranteed Fees and Minimum Net Sales Thresholds for these jurisdictions as contemplated by Section 2.2.

10.5 Licensee shall furnish to Licensor, not later than ninety (90) days following the close of each Annual Period during the term of this Agreement (or portion thereof in the event of prior termination

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for any reason), a report certified by its independent certified public accountants, or the equivalent thereof in the Territory, covering such Annual Period (or portion thereof) and containing the same information, required to be contained in the statements referred to in paragraph 10.4 above.

10.6 ***

10.7 All payments required of Licensee hereunder shall be made to Licensor in New York, New York or, if specified by Licensor, to an account in the Territory in United States dollars (or, if so designated by Licensor, an alternative currency) via wire transfers specifying federal funds, or in such other manner as Licensor designate, with simultaneous telex notification and telephone confirmation to Licensor to the accounting and licensing department. The Percentage Fee (and other amounts provided for herein) shall be computed in accordance with Licensee's accounting records which are kept in Italian Lire on the basis of the conversion rate of Italian lire, into United States dollars in effect as the official conversion rate in Italy, currently as published by Banca di Italia (Central Bank of Italy) unless there is a variance of 5% or more between that and the conversion rate as published by Dow Jones Telerate, Inc. (in the U.S.) in which case, the conversion rate as published by Dow Jones Telerate, Inc. in The Wall Street Journal will apply as of the close of business on the date prior to the date such amount is due. However, Licensor may permit Licensee to make. such payment in Italian Lire, in lieu of the adjusted US dollar amount, at Licensor's option, from time to time, upon notice to Licensee. Licensee will simultaneously provide Licensor with the basis for use of the conversion rate utilized.

10.8 If applicable, Licensee shall compute and pay on behalf of Licensor all withholding taxes which any governmental authority in the Territory may impose on Licensor with respect to the fees paid by Licensee to Licensor. The amount of such taxes shall be appropriately deducted from payments of fees. Licensee shall furnish Licensor with an official receipt (together with a translation thereof if not in English) promptly after each such Payment of taxes. In the event such taxes are not paid when due, all resulting penalties and interest shall be borne by Licensee.

Section 11. Equity Interest

11. Licensee has caused ten percent (10%) of the stated capital in Licensee to be transferred to Licensor.

Section 12. Audit

12.1 Licensee will prepare and maintain, in such manner as will allow them to be audited in accordance with generally accepted accounting principles consistently applied, *** Licensor and its duly authorized representatives have the right, during regular business hours and upon reasonable notice, ***

12.2 If, as a result of any examination of Licensee's books and records, it is shown that the ***

Section 13. Trademark

13.1 Licensee agrees that (a) no name or names shall be co-joined with the Licensed Mark, (b) it will not use the name "Calvin Klein," "CK" or "CK/Calvin Klein" or any portion or derivative thereof in its corporate name except as provided in Sections 23 and 6 hereof, and (c) no name or names shall be used in connection with the Licensed Mark in any advertising, promotion, publicity, labeling, packaging or printed matter of any kind utilized by Licensee in connection with Articles unless specifically consented to, and only in the Form, and only in the form approved, by Licensor. Any such use by Licensee pursuant to clause (c) above shall clearly indicate that the Calvin Klein Trademark Trust ("CKTT") is the owner and Licensor is the beneficial owner of the Licensed Mark and that Licensee is using the same pursuant to a license granted by Licensor.

13.2 Licensee acknowledges that CKTT is the owner and Licensor is the beneficial owner of all right, title and interest in and to the Licensed Mark as to Products in the Territory in any form or embodiment thereof and is also the owner of the goodwill attached or which shall become attached to the Licensed Mark and the Form in connection with the business and goods in relation to which the same has been, is or shall be used. Sales by Licensee and its affiliates shall be deemed to have been made by CKTT for

CONFIDENTIAL TREATMENT

purposes of trademark registration and all uses of the Licensed Mark and the Form by Licensee and its affiliates shall inure to the benefit of CKTT. Licensee will not, at any time, do or suffer to be done any act or thing which may in any way adversely affect any rights of Licensor or CKTT in and to the Licensed Mark or any registrations thereof or any applications for registration thereof of the Form or which, directly or indirectly, may reduce the value of the Licensed Mark or detract from its reputation, image or prestige or that of Licensor or Calvin Klein.

13.3 Licensee will, at Licensor's request, execute any and all documents including Registered User Agreements and take any actions required by Licensor to confirm CKTT's ownership and Licensor's beneficial ownership of all rights in and to the Licensed Mark as to Products in the Territory and the respective rights of Licensor and Licensee pursuant to this Agreement. Licensee will cooperate with Licensor and will, at Licensor's request, take any actions requested by Licensor in connection with the filing and prosecution by Licensor of applications in CKTT's name (or if applicable, Licensor's name) to register the Licensed Mark for Articles in the Territory and in connection with the maintenance and renewal of such registrations as may issue. Upon termination of this Agreement, Licensee shall execute any documents required by Licensor to evidence such termination. Licensee will bear all expenses in connection with the filing of Registered User Agreements and with any documents required to evidence termination of this Agreement including termination of such Registered User Agreements.

13.4 Licensee will use the Licensed Mark in the Territory strictly in compliance with the legal requirements obtaining therein and will use such markings in connection therewith as may be required by applicable legal provisions. Licensee will comply with all governmental regulations in connection with the manufacture, distribution and sale of Articles.

13.5 Whether during the term of this Agreement or subsequent to its termination, Licensee will never (a) challenge Licensor's ownership of or the validity of the Licensed Mark or any application for registration thereof, or any trademark registration thereof, or any rights of Licensor therein, nor (b) challenge the fact that Licensee's rights pursuant to this Agreement are solely those of a licensee.

Section 14. Infringement

14. In the event that Licensee learns of any infringement or imitation of the Licensed Mark with respect to Products which would be considered a counterfeit of the Articles, or of any use by any person of a trademark similar to the Licensed Mark with respect to Products which would be considered a deliberate use of something substantially similar to the Licensed Mark, it will promptly notify Licensor thereof. Licensee will take no action, including, but not by way of limitation, settling any action, appealing any adverse decision or discontinuing any action taken by it, except to the extent the same is approved in advance by Licensor. All costs and expenses incurred in any action or proceeding (including investigatory expenses and attorneys' fees, if applicable, court costs and filing fees) will be borne as determined in Section 15. Any damages recovered or sums obtained in settlement in or with respect to any action shall (i) first be applied to proportionately reimburse Licensee for the expenses incurred and actually paid by it and to reimburse Licensor for the expenses incurred and actually paid by it, and (ii) the balance, if any, shall belong and shall be paid over to on a fifty-fifty basis to Licensee and Licensor. In no event will any infringement by a third party justify the withholding of any payment of royalty or design fee by Licensee.

Section 15. Parallel Imports; Copyright

15.1 Licensor will use commercially reasonable efforts, including, without limitation, establishing an enforcement network of attorneys, investigators and customs inspectors in the Territory (the "Network") to minimize and deter (i) the diversion into and sale within the Territory of products, corresponding to the Articles, authorized for sale by its other licensees solely outside the Territory (including, without limitation, unauthorized distribution of such products by the manufacturers and subcontractors of such licensees) ("Parallel Imports"), and (ii) the importation into, or sale or manufacture within, the Territory of counterfeit Articles; in each case subject to Licensee's compliance with its reimbursement obligations

CONFIDENTIAL TREATMENT

set forth in this subsection, the other subsections of this Section, and subject to applicable law. Licensee will cooperate in such efforts, and will promptly *** as follows:

(A) ***

(B) ***

(C) ***

15.2 Licensee will use commercially reasonable efforts to minimize and deter the diversion of Articles for sale outside of the Territory (including, without limitation, unauthorized distribution of Articles by Licensee's manufacturers and subcontractors) ("Diversion"). Such efforts will include, without limitation, the utilization of such processes, controls, identification methods and reporting and auditing procedures as Licensor may from time to time reasonably request. Licensee will cooperate with Licensor in Licensor's efforts to minimize and deter Diversion ("Anti-Diversion Efforts"). Without limiting the foregoing:

(a) Licensee will promptly provide such information as Licensor may from time to time reasonably request concerning its manufacturing, subcontracting and distribution locations, activities and shipments, product and label identification systems and data and sales to and by its customers; and

(b) Licensee will promptly ***

15.3 In addition to the foregoing, promptly after receipt of any certification by Licensor with available supporting evidence specifying the quantity of Articles recovered or otherwise identified as having been involved in any incident of Diversion or attempted Diversion, ***

15.4 Where appropriate and consented to by Licensee, Licensor will initiate criminal or civil actions against the persons outside Territory seeking to manufacture counterfeit Articles or sell or ship counterfeit Articles into the Territory (excluding, for this purpose, manufacturers or subcontractors described in the definitions of Diversion or Parallel Imports). The cost related to any such actions shall be entirely for Licensee's account.

15.5 Licensor will consult with Licensee in planning and enforcement activities pursuant to this Section 15. In addition, the parties will consult and cooperate to forecast Licensor's reimbursable expenses hereunder and make suitable arrangements so that Licensor may receive Licensee's payments in respect thereof at or shortly before such expenses are incurred.

15.6 Whenever it is not readily apparent whether actions or proceedings involve counterfeit Articles, Parallel Imports or Diversion, Licensor will determine the nature of such items in good faith, taking into account all relevant information provided by Licensee.

15.7 Any copyright which may be created in connection with any material using or used in connection with the Licensed Mark shall be the property of Licensor. Licensee shall do any and all things required by Licensor to preserve and protect said rights.

Section 16. Other Designers

16. During the term of this Agreement, *** Licensee shall not advertise or otherwise use the Licensed Mark or any other "Calvin Klein" identification together with any other trademark or name, or any other identification of any other fashion designer or any other fashion designer's merchandise; and Licensee shall use its best efforts to see that its purchasers of Articles comply with this restriction. During the term of this Agreement, Licensee's affiliates (as defined in Paragraph 4 of this Agreement, and to include any person or entity directly or indirectly owning or controlling a majority interest in Licensee) may distribute, sell or advertise Products under the name of other designers, except: *** This statement shall not be deemed to limit any affiliate from manufacturing goods as a contractor for such designers.

Section 17. Indemnification/Insurance

17.1 Licensee does hereby indemnify Licensor, CKTT and Calvin Klein, individually, against and save and hold each of them harmless of and from any and all losses, liability, damages and expenses (including

CONFIDENTIAL TREATMENT

reasonable attorneys' fees and expenses) which they or either of them incur or for which they or either of them may become liable or be compelled to pay in any action or claim against them or either of them, for or by reason of any acts, whether of omission or commission, that may be committed or suffered by Licensee or any of its affiliates or any of their respective servants, agents or employees in connection with Licensee's performance of this Agreement and transactions arising therefrom. The provisions of this paragraph and the obligations of Licensee set forth therein shall survive expiration or other termination of this Agreement.

17.2 Licensee will procure and maintain at its own expense in full force and effect at all times during which Articles are being sold with a responsible insurance carrier acceptable to Licensor, a public liability insurance policy including products liability coverage with respect to Articles as well as contractual liability with respect to this Agreement, with a limit of liability of not less than *** Such insurance policy shall insure against occurrences happening at any time during which Articles are being sold or used regardless of when claims may be made. Such insurance policy shall be written for the benefit of Licensor, Licensee and Calvin Klein, individually, and will provide for at least ten (10) days prior written notice to Licensor and Licensee of the cancellation, non renewal or substantial modification thereof. Such insurance may be obtained by Licensee in conjunction with a policy of products liability insurance which covers products other than Articles. Licensee will deliver a certificate of such insurance to Licensor promptly upon issuance of said insurance policy and shall, annually and otherwise from time to time, upon reasonable request by Licensor, promptly furnish to licensor evidence of the maintenance of said insurance policy. Nothing contained in this paragraph 17.2 shall be deemed to limit, in any way, the indemnification provisions of paragraph 17.1 above.

Section 18. Breach/Default

18.1If Licensee fails to make any payment on the date such payment is due as provided hereunder: (a) Licensee shall pay interest on the unpaid balance of the amount due at a rate equal to ***; and (b) if such default continues uncured for a period of ten (10) days after the date such payment initially became due Licensor shall have the right to terminate this Agreement forthwith by and upon written notice to Licensee. If Licensee fails to perform any of the terms, conditions, agreements or covenants in this Agreement on its part to be performed which failure may adversely affect the Licensed Mark, Licensor may terminate this Agreement forthwith by written notice: (i) if such default is incurable, or (ii) if such default is curable but continues uncured for a period of ten (10) days after written notice thereof has been given to Licensee by Licensor, or (iii) if such default is curable but not within said ten (10) day period and (A) if all reasonable steps necessary to cure such default have not been taken by Licensee within said ten (10) day period or (B) if Licensee fails to diligently take all steps necessary to cure such default as promptly as practical. If Licensee fails to comply with the provisions of paragraph 1.6 above, Licensor may terminate this Agreement effective upon ten (10) days prior written notice to Licensee. If Licensee fails to pay any amounts due any of Licensor's affiliates or Licensee's within ten (10) days following written notice thereof from Licensor, Licensor may terminate this Agreement effective upon ten (10) days prior written notice to Licensee. If Licensee shall otherwise fail to perform, or if Licensor fails to perform, any of the terms, conditions, agreements or covenants in this Agreement on its respective part to be performed, the non-defaulting party may terminate this Agreement forthwith by written notice: (i) if such default is incurable, or (ii) if such default is curable but continues uncured for a period of thirty (30) days after written notice thereof has been given to the defaulting party in writing by the other party, or (iii) if such default is curable but not within said thirty (30) day period and (A) all reasonable steps necessary to cure such default have not been taken by the defaulting within said thirty (30) day period or (B) such defaulting party fails to diligently take all steps necessary to cure such default as promptly as practicable.

18.2 In the event Licensee files a petition in bankruptcy, or is adjudicated a bankrupt, or if it becomes insolvent, or makes an assignment for the benefit of creditors, or files a petition or otherwise seeks relief under or pursuant to any bankruptcy, insolvency or reorganization statute or proceeding, or if it discontinues its business for a period of sixty (60) days or more, or if it discontinues reasonable commercial exploitation of Articles for a period of sixty (60) days or more, or if a custodian, receiver or trustee is appointed for it or a substantial portion of its business or assets for any reason, or if it defaults

CONFIDENTIAL TREATMENT

on any obligation which is secured by a security interest in any Articles, or if it files for a petition for "Amministrazione Controllata" or if it files a petition for a settlement with creditors ("Concordato Preventivo") or if it adopts resolutions for the filing of or entering into any type of insolvency proceeding, or assignment for the benefit of its creditors, or liquidation of the business, this Agreement shall automatically terminate forthwith.

18.3 No assignee for the benefit of creditors, custodian, receiver, trustee in bankruptcy, sheriff or any other officer of the court or official charged with taking over custody of Licensee's assets or business shall have the right to continue this Agreement or to exploit or in any way use the Licensed Mark if this Agreement terminates pursuant to paragraph 18.2 above.

18.4 Notwithstanding any termination in accordance with the foregoing, Licensor shall have, and hereby reserves, all the rights and remedies which it has or which are granted to it by operation of law, to collect fees due, earned or payable by Licensee pursuant to this Agreement, to be compensated for damages for breach of the Agreement and to enjoin the unlawful or unauthorized use of the Licensed Mark without the necessity of posting any bond or proving any actual damages (which injunctive relief may also be sought prior to or in lieu of termination) Licensee hereby waives any and all rights relating to claims for wrongful termination, loss of goodwill or damages in connection with any such termination and agrees that it will never allege any such claims. In the event of termination of the Agreement by Licensor pursuant to paragraph 18.1 and/or paragraph 18.2 above, the entire unpaid balance of the Minimum Guaranteed Fees for the remaining balance of the then current term of this Agreement shall immediately become due and payable by Licensee to Licensor and Licensee agrees to make such payment within thirty (30) days following written demand therefor by Licensor. Such amounts shall be in addition to any other amounts due Licensor, hereunder, including, without limitation, any unpaid but accrued Sales Fees.

Section 19. Termination

19.1 On the expiration or earlier termination of this Agreement, all the rights of Licensee hereunder shall forthwith terminate and automatically revert to Licensor. Notwithstanding the foregoing, in the event of expiration or earlier termination of this Agreement (other than pursuant to paragraph 18.2 above or by Licensor pursuant to paragraph 18.1 above), Licensee shall be entitled, ***

19.2 Except as provided in paragraph 19.1 above, on the expiration or earlier termination of this Agreement, Licensee shall forthwith discontinue all use of the Licensed Mark, shall no longer have the right to use the Licensed Mark or any variation or simulation thereof, and shall transfer to Licensor all registrations, filings and rights with regard to the Licensed Mark which it may have possessed at any time. In addition, Licensee shall thereupon deliver to Licensor or to Licensor's designee, free of charge, or at Licensor's option shall destroy, all materials utilized in connection with Articles and all labels, tags and other material in its possession with the Licensed Mark thereon. Licensee will use its best efforts to cause stencils, sketches and other materials in the possession of third parties to be destroyed or otherwise rendered unusable. Licensee shall not reproduce or adapt any of said stencils, sketches or other materials for use on or in connection with merchandise subsequent to the termination of this Agreement.

19.3 Licensor may, in its sole discretion, at any time, enter into such arrangements as its desires pursuant to which Products bearing the Licensed Mark may be shown, advertised, distributed or sold in the Territory by it or by any duly authorized third party other than Licensee provided only that no shipment of such Products will be permitted prior to the date of termination of this Agreement.

Section 20. Licensor Representations

20. Licensor represents and warrants that it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder. CKTT has applications to register, or registrations of the mark "Calvin Klein" and/or the mark "CK/Calvin Klein" in certain of the jurisdictions in the Territory as specified in Section 20 of the Original License Agreement.

CONFIDENTIAL TREATMENT

Section 21. Licensee Representations

21. Licensee represents and warrants that it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder. Licensee further represents and warrants that no broker or finder brought about this transaction and Licensee hereby indemnifies Licensor against and holds it harmless of and from any and all liabilities (including, without limitation, reasonable attorneys' fees and disbursements paid or incurred in connection with any such liabilities) for any brokerage commissions or finders' fees in connection with this Agreement or the transactions contemplated hereby.

Section 22. Notice

22. All reports, approvals and notices required or permitted by this Agreement to be given to any party shall be in writing and shall be delivered personally, by reputable overnight courier, telecopied or sent by certified, registered or express mail (in each case with return receipt requested), postage prepaid. Any such notice shall be deemed given when so delivered personally, telecopied or sent by reputable overnight courier or, on the date received (as evidenced by a signed receipt) if deposited in the mail, in each case to the party concerned at its address as set forth above (with facsimile confirmation to Licensor at (212) 768-8930) or at such other address as a party may specify by notice to the other. Copies of all notices sent to Licensor shall be sent to the attention of (i) Licensing Department (ii) Corporate Affairs Department and (iii) General Counsel.

Section 23. Assignment

23. (a) Licensee acknowledges and recognizes: that it has been granted the license herein because of its particular expertise, knowledge, judgment, skill and ability; that it has substantial and direct responsibilities to perform this Agreement in accordance with all of the terms contained herein; that Licensor is relying on Licensee's unique knowledge, experience and capabilities to perform this Agreement in a specific manner consistent with the high standards of integrity and quality associated with Licensor and its business; that the granting of the license under this Agreement creates a relationship of confidence and trust between Licensee and Licensor; and that this Agreement is one under which applicable law excuses Licensor from accepting performance from, or rendering performance to, a person or entity other than Licensee, within the meaning of Section 365(c) and (e) of the Bankruptcy Code (title 11, U.S. Code). Neither this Agreement nor the license or other rights granted hereunder may be assigned, sublicensed, or otherwise transferred. Any attempted assignment, transfer or sublicensing whether voluntary or by operation of law, directly or indirectly, shall be void and of no force or effect.

(b) The parties acknowledge and agree that Licensee was formed for the sole purpose of operating as the licensee hereunder and will not engage in or conduct any other activities or operations. For purposes of this Agreement, any transfer of all or a controlling portion or a majority of the shares of the Licensee by CK Jeanswear N.V., its affiliates, Corrado Fratini and/or Marcello Fratini, in a single transaction or in a series of transactions, of their respective shares, effecting a reduction in their interest in Licensee, except to Licensor, or a Licensor-approved shareholder, or to a corporate entity of which Corrado Fratini and/or Marcello Fratini own the majority of shares, shall be deemed a transfer in violation of the terms hereof and prohibited hereunder. Set forth on Schedule 23 hereto is a list of the shareholders of Licensee and their respective shareholdings. Prompt notice of any transfer by CK Jeanswear N.V. or its affiliates (other than Calvin Klein, Inc. or its successors, assignees or transferees) of more than five percent (5%) (whether over a period of time or all at once), shall be delivered to Licensor. Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding upon the parties and permitted successors and assigns.

Section 24. Entire Agreement

24. This Agreement contains the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, supersedes all prior oral and written understandings and agreements relating thereto, and may not be modified, discharged or terminated, nor may any of the provisions hereof be waived, orally. This Agreement amends and restates the Original License Agreement and all of the amendments thereto which are expressly superseded by this Agreement; provided, that, any

CONFIDENTIAL TREATMENT

representations and warranties set forth in this Agreement shall not be deemed to have been given again in connection with the execution and delivery of this Agreement, but shall only be deemed to have been made as of the date of the Original License Agreement and not as of the date of this Agreement.

Section 25. Independent Contractor

25. Nothing herein shall be construed to constitute the parties hereto as partners or as joint venturers, or either as agent of the other, and Licensee shall have no power to obligate or bind Licensor in any manner whatsoever. Licensor shall have no responsibility for the operation or production of Licensee's manufacturing, distribution or sales facilities or for any decisions that may be made in connection therewith regardless of whether Licensor approved any of the same.

Section 26. No Waiver

26. No waiver by either party, whether expressed or implied, of any breach hereof or default hereunder shall constitute a continuing waiver of such provision or of any other provision of this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver by Licensor of any violation of or default under any of the provisions of this Agreement by Licensee.

Section 27. Severability

27. If any provision or any portion of any provision of this Agreement shall be held to be void or unenforceable, the remaining provisions of this Agreement and the remaining portion of any provision held void or unenforceable in part shall continue in full force and effect.

Section 28. Governing Law

28. This Agreement shall be considered as having been entered into in the State of New York and shall be construed and interpreted in accordance with the laws of that state applicable to agreements made and to be performed therein. However, disputes regarding the Licensed Mark shall be resolved in accordance with the U.S. Federal trademark laws and related laws, statutes, rules and regulations of the United States unless there are no U.S. Federal laws, statutes, rules or regulations dispositive of such a dispute, in which event such disputes shall be resolved in accordance with the laws of the State of New York.

Section 29. Service

29. The service of any notice, process, motion or other document in connection with a suit brought in regard to this Agreement, may be effectuated by: (a) as to Licensor, either by personal service upon Licensor or in the same manner as notices are to be given pursuant to paragraph 22 above; and (b) as to Licensee, by service upon (i) The Prentice-Hall Corporation System, Inc., 375 Hudson Street, New York, New York 10014, as agent for Licensee, or (ii) upon such attorney with an office in New York, New York as agent for Licensee as may be specified by Licensee by notice to Licensor; provided that in either case, a copy thereof is sent to Licensee in accordance with the provisions of paragraph 22 above. Licensee will execute any consent forms required by The Prentice-Hall Corporation System, Inc. and specifically consents to service upon The Prentice-Hall Corporation System, Inc. and to the jurisdiction and venue of the courts of the State of New York. The parties agree that any judgement, award or order issued by any court of the State of New York and/or the federal courts in such state may be enforced by the courts in Italy under the Code of Civil Procedure of Italy or otherwise in any court in any jurisdiction of the Territory, the jurisdiction of which courts in New York is hereby consented to by the parties for purposes of this Agreement notwithstanding any jurisdictional statute to the contrary. In addition, Licensee specifically acknowledges and agrees that Licensor has the right, provided herein, to enjoin use of the Licensed Mark and the Form and to do so in any and all appropriate venues as determined by Licensor in any jurisdiction in the Territory, and/or in the State of New York, for enforcement in any jurisdiction in the Territory, including the courts in Italy.

CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.

CALVIN KLEIN, INC.

BY: /s/ Barry Schwartz            
        Name:
        Title:

CK JEANSWEAR EUROPE, S.p.A.

BY: /s/ Illegible                        
        Name:
        Title:

CONFIDENTIAL TREATMENT

Schedule A

***

EX-10.67

EXHIBIT 10.67

PORTIONS OF THIS EXHIBIT 10.67 MARKED BY AN *** HAVE BEEN OMITTED
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

January 31, 2006

WF Overseas Fashion C.V. (‘‘W’’)
CK Jeanswear Europe, S.p.A. (‘‘CKJE’’)

Re:	Calvin Klein, Inc. (‘‘CKI’’) and CK Jeanswear Europe, S.p.A. (‘‘CKJE’’) Jeans License Agreement (May 95, Amended and Restated d. as of 1 January 1997 (‘‘CK Jeans Europe License’’)

CKI and W Heads of Agreement d. 29 September 2005 (‘‘Heads of Agreement’’)

Ladies and Gentlemen:

Pursuant to the Heads of Agreement, the parties contemplated that W would acquire the CALVIN KLEIN businesses (and/or the rights to assets thereto) in whatever structure, form and format as such transaction occurs) of Fingen S.p.A., Fingen Apparel, N.V. (and, as applicable, their parents, subsidiaries and affiliates responsible for the operation of the CALVIN KLEIN businesses) (the ‘‘Transaction’’).

As contemplated in the Heads of Agreement, effective upon the conclusion of the Transaction (the ‘‘Effective Date’’), it is agreed by CKI and W that the captioned license shall be and is hereby amended (to be 17 January 2006, or such later date as mutually agreed between the parties to the Transaction, but not later than 31 December 2006) to (i) extend the ‘‘term’’, and (ii) provide for ‘‘shortfall’’ payments as to royalties and advertising commitment payments in the event that there is a failure to meet minimum net sales levels or ‘‘thresholds,’’ all as follows:

1. § 2.1 shall be amended as follows:

‘‘2.1 Subject to the terms and conditions of § 2.2, the term of this Agreement will be fifty (50) years and eight (8) months commencing as of 1 May 1995 and ending forty (40) years after the closing of the Transaction on 31 December of the applicable year, but not later than 31 December 2046 unless sooner terminated in accordance with the provisions hereof. The twelve (12) month period commencing 1 January 2006 and each twelve (12) month period commencing 1 January 2006 and each twelve (12) month period commencing on each of 1 January thereafter during the term of this Agreement, shall each constitute and hereinafter shall be referred to as an ‘‘Annual Period.‘‘

2. § 2.2 shall be amended as follows:

‘‘2.2 The ’’Minimum Net Sales Threshold’’ for ***, shall be respectively, the product of:

(i)    the greater of

	(x)	the Minimum Net Sales Threshold for the *** and

	(y)	***

(ii)    a fraction, the numerator of which is ***

In the event that Licensee *** under § 18.1 or of the ‘‘best efforts’’ requirements of § 1.5 for such Annual Period and *** as contemplated under §18.1 or related to §1.5 ***

provided however, that Licensor has and will ***

3. For Annual Periods commencing 1 January 2006, § 9.1 shall read as follows:

‘‘9.1 In consideration of the license granted and the services to be performed by Licensor hereunder, Licensee will pay to Licensor a Minimum Guaranteed Fee¹ for each Annual Period as follows:

***

	1    ***

CONFIDENTIAL TREATMENT

The Minimum Guaranteed Fee for the 16^th through the 20^th Annual Periods will be the ***

The Minimum Guaranteed Fees for each of the 21st through the 25th Annual Periods will be the ***

The Minimum Guaranteed Fee for the 26^th through the 30^th Annual Periods will be the ***

The Minimum Guaranteed Fee for the 31^st through the 35^th Annual Periods will be the ***

The Minimum Guaranteed Fee for the 36^th through the 40^th Annual Periods will be the ***

The Minimum Guaranteed Fee for the 41^st through the 45^th Annual Periods will be the ***

The Minimum Guaranteed Fee for the 46^th through the 50^th Annual Periods will be the ***

4. The second sentence of § 23 (b) shall be amended to add the following at the end:

‘‘In the event of any CKI-permitted change-of-control Transfer from the original shareholders, the provisions hereof shall apply to any ‘successor in interest’ permitted Transferee (except that Notice shall apply to any transfer of more than 35% of the Transferee). Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding upon the parties and permitted successors and assigns.’’

5.	Effective for the 2006 Annual Period et seq., ***

6.

Except as set forth herein, the CK Jeans Europe License shall remain in full force and effect, including that the ‘‘Design Credit’’ and the ‘‘Advertising Credit’’ shall remain in effect as provided in the CK Jeans Europe License. Notwithstanding anything to the contrary in the CK Jeans Europe License or any amendment thereto, including the Amendment dated 29 April 2002, the Design Credit shall be available to reduce, and may be applied to, the amount of Percentage Fees and Minimum Guaranteed Fees, as applicable. For the avoidance of doubt, the parties acknowledge that no further ‘‘Override’’ payments are due and owing. Any defined terms used herein not specifically defined herein shall have the meanings ascribed to them in the CK Jeans Europe License.

7.	To the extent that there is any discrepancy between this Letter Agreement and the CK Jeans Europe License, this Letter Agreement shall govern and control.

8.	This Letter Agreement and the CK Jeans Europe License shall be considered as having been entered into in the State of New York and shall be construed and interpreted in accordance with the laws of that state applicable to agreements made and to be performed therein.

9.	Following the closing of the Transaction, this Letter Agreement and the CK Jeans Europe License may be assigned within the Warnaco family of companies, in accordance with the terms as agreed by CKI and set forth in writing, simultaneously herewith.

Warnaco U.S., Inc., a Delaware corporation, is the general partner of WF Overseas Fashion C.V., a limited partnership (‘‘commanditaire vennootschap’’) organized and existing under the laws of the Netherlands, and, solely in such capacity, is executing this Letter Agreement on behalf and for the exclusive risk and benefit of WF Overseas Fashion C.V.

CONFIDENTIAL TREATMENT

The parties have executed this Letter Agreement effective upon the conclusion of the Transaction this 31^st day of January 2006.

	Calvin Klein, Inc.
	By: /s/ Tom Murry
	Name:				Tom Murry
	Title:				President and COO
	WF Overseas Fashion C.V.
	By: Warnaco U.S., Inc., its general partner
	By: /s/ Stanley P. Silverstein
	Name:				Stanley P. Silverstein
	Title:				President and Secretary
	CK Jeanswear Europe S.p.A.
	By: /s/ Lawrence R. Rutkowski
	Name:				Lawrence R. Rutkowski
	Title:				Vice President and Treasurer

EX-10.68

EXHIBIT 10.68

PORTIONS OF THIS EXHIBIT 10.68 MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

CONFIDENTIAL — NEITHER THIS DOCUMENT, ITS TERMS OR PROVISIONS OR THE RELATIONSHIP CONTEMPLATED THEREIN IS TO BE DISCUSSED OR USED WITHOUT THE CONSENT OF CALVIN KLEIN, INC. OR WF OVERSEAS FASHION C.V. A DRAFT DOES NOT CONSTITUTE AN OBLIGATION OF THE PARTIES. NO BINDING AGREEMENT WILL RESULT UNLESS A DEFINITIVE WRITTEN AGREEMENT IS EXECUTED AND DELIVERED BY THE PARTIES. THERE IS NO OBLIGATION TO EXECUTE ANY SUCH AGREEMENT.

LICENSE AGREEMENT

BETWEEN

CALVIN KLEIN, INC.

AND

CK JEANSWEAR EUROPE S.P.A.

AND

WF OVERSEAS FASHION C.V.

CONFIDENTIAL TREATMENT

TABLE OF CONTENTS

ARTICLE I.   GRANT
				1.1				License
								1.1.1				Exclusion of Retail Sales
								1.1.2				Right to Manufacture
				1.2				Reservation
								1.2.1				Retail Stores; Company-Controlled Stores
								1.2.2				E-Commerce/Promotional Goods
								1.2.3				Third Party Licensees
				1.3				Limitations
				1.4				Definitional Disputes
				1.5				Exploitation of the License
								1.5.1				Best Efforts
								1.5.2				Non-Competition
				1.6				Showrooms; In-Store Shops; Trade Shows
								1.6.1				Showrooms
								1.6.2				In-Store Shops
								1.6.3				Trade Shows
								1.6.4				Visual Design Personnel
ARTICLE II.   LICENSE PERIOD
				2.1				License Period
ARTICLE III.   SALES
				3.1				Sales/Marketing and Production Plans
				3.2				Deliberately Omitted
				3.3				Sales to CKI and its Employees
ARTICLE IV.   LICENSE FEES
				4.1				Requirement of Fees
								4.1.1				Percentage Fees
								4.1.2				Gross and Net Sales
								4.1.3				Minimum Guaranteed Fees
								4.1.4				Allocation of Minimum Guaranteed Fees and Percentage Fees
				4.2				Statements
				4.3				Books and Records
				4.4				Underpayments
				4.5				Manner of Payment
				4.6				Interest on Late Payment
				4.7				No Set-Off
				4.8				Taxes
				4.9				Financial Statements
				4.10				Financial Covenants

CONFIDENTIAL TREATMENT

ARTICLE V.   ADVERTISING AND PROMOTION
					5.1			Advertising
								5.1.1				Initial Support/Reimbursement
								5.1.2				Advertising Obligation
								5.1.3				CRK Fee
								5.1.4				Co-operative Advertising and Public Relations
					5.2			‘Usage’
					5.3			Approval of Materials, Activities
					5.4			Samples
ARTICLE VI.   QUALITY AND STANDARDS
					6.1			Distinctiveness and Quality of the Licensed Mark
								6.1.1				Consistency with Other Products
					6.2			Design
								6.2.1				Time and Action Calendar
								6.2.2				Themes
								6.2.3				Design Concepts
								6.2.4				Certain Other Approvals
								6.2.5				CKI Designs
								6.2.6				Prototypes
								6.2.7				Final Approval and Sales
					6.3			Manufacture of Licensed Products by Third Parties
					6.4			Non-Conforming Products
					6.5			Approvals
					6.6			Marketing, Labeling, Packaging, Promotions, Business Materials
					6.7			Inspection of Facilities
					6.8			Samples and Artwork
					6.9			Know-how
					6.10			Meetings
					6.11			Design Direction
					6.12			Design Rights
					6.13			Shops, Stores, Retail Outlets
					6.14			Disposal of Seconds and Close-Outs
								6.14.1				Seconds
								6.14.2				Close-Outs
					6.15			Standards of Conduct
								6.15.1				Standards
								6.15.2				Audit Requirement
								6.15.3				Approval
								6.15.4				Use of Facility
					6.16			Personnel
ARTICLE VII.   THE LICENSED MARK
					7.1			Rights to the Licensed Mark.
								7.1.1				Ownership of Licensed Mark
								7.1.2				No Adverse Actions
								7.1.3				Registrations
								7.1.4				Survival

CONFIDENTIAL TREATMENT

					7.2			Protecting the Licensed Mark.
					7.3			Use of the Licensed Mark
								7.3.1				Compliance with Legal Requirements
								7.3.2				Use with Other Name
								7.3.3				Execution of Documents
					7.4			Ownership of Copyright
					7.5			Infringements, Counterfeits and Parallel Imports
								7.5.1				Infringements
								7.5.2				Counterfeits and Parallel Imports
												7.5.2.1				The Network
												7.5.2.2				Diversion
								7.5.3				Criminal Proceedings
								7.5.4				Enforcement Activities
								7.5.5				Nature of Proceedings
								7.5.6				Cooperation
					7.6			Trademark Security
								7.6.1				Counterfeit Protection
					7.7			Use of Licensed Mark on Invoices, etc.
					7.8			Monitoring
ARTICLE VIII.   TERM AND TERMINATION
					8.1			Expiration
					8.2			Other Rights Unaffected
					8.3			Right of Termination of the License
					8.4			Termination With Notice and Right to Cure
					8.5			Effect of Termination
					8.6			Inventory Upon Termination
					8.7			Freedom to License
					8.8			Rights Personal
					8.9			Trustee in Bankruptcy
					8.10			Compensation
ARTICLE IX.   INDEMNIFICATION AND INSURANCE
					9.1			Indemnification by the Licensee
					9.2			Notice of Suit or Claim
					9.3			Indemnification by CKI
					9.4			Insurance
								9.4.1				Requirement
								9.4.2				General Provision
								9.4.3				Approved Carrier/Policy Changes
								9.4.4				Evidence of Coverage
								9.4.5				Territory
ARTICLE X.   COMPLIANCE WITH LAWS
					10.1			Compliance with Laws
					10.2			Equitable Relief

CONFIDENTIAL TREATMENT

ARTICLE  XI.   MISCELLANEOUS
					11.1			Warranties and Representations of the Parties
					11.2			Definitions
					11.3			Notices
					11.4			Assignment
					11.5			Sublicense
					11.6			Assignment by CKI
					11.7			No Agency
					11.8			Suspension of Obligations
					11.9			Benefit
					11.10			Entire Agreement; Amendment
					11.11			Non-Waiver
					11.12			Severability
					11.13			Headings
					11.14			Counterparts
					11.15			Governing Law
					11.16			Jurisdiction
					11.17			Non-Solicitation
					11.18			Confidentiality
					11.19			Cross-Termination
					11.20			Assignment Within Warnaco Family

				SCHEDULE 6.13				APPROVED ACCOUNTS
				SCHEDULE 6.14				APPROVED SECONDS AND CLOSE-OUTS ACCOUNTS
				SCHEDULE S				SHAREHOLDERS
EXHIBITS
				EXHIBIT T				TERRITORY
				EXHIBIT P				PRODUCTS
				EXHIBIT B				ROYALTY STATEMENT
				EXHIBIT D				THIRD-PARTY MANUFACTURING AGREEMENT
				EXHIBIT E				PRODUCTION FACILITY EVALUATION FORM
				SCHEDULE OF ISSUED REGISTRATIONS AND PENDING APPLICATIONS FOR ‘‘CK/ CALVIN KLEIN’’ TRADEMARKS IN CLASS 25

CONFIDENTIAL TREATMENT

LICENSE AGREEMENT

LICENSE AGREEMENT, dated as of January 31, 2006, between CALVIN KLEIN, INC. (‘‘CKI’’), a New York corporation, CK JEANSWEAR EUROPE S.P.A. (the ‘‘Licensee’’), an Italian corporation and WF Overseas Fashion C.V., a limited partnership (‘‘commanditaire vennootschap’’) organized and existing under the laws of the Netherlands (‘‘Warnaco’’).

WITNESSETH:

WHEREAS, Licensee desires to obtain from CKI, and CKI is willing to grant to the Licensee, a license in the Territory (as hereinafter defined), to use the trademark ‘‘CK/CALVIN KLEIN’’ to be used in the form designated by CKI from time to time (‘‘Licensed Mark’’) in connection with the manufacture, wholesale sale, distribution, advertising and promotion of certain women’s and men’s bridge apparel, as defined in Exhibit P (collectively, the ‘‘Products’’), subject to the terms contained in this Agreement. Products bearing the Licensed Mark are hereinafter referred to as ‘‘Licensed Products.’’

WHEREAS, Warnaco U.S., Inc. a Delaware corporation, is the general partner of WF Overseas Fashion C.V., and, solely in such capacity, is executing this Agreement on behalf and for the exclusive risk and benefit of WF Overseas Fashion C.V.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I.    GRANT

1.1 License.    CKI hereby grants to the Licensee an exclusive license (the ‘‘License’’), without the right to assign, and the right to sublicense with CKI’s prior written consent (exercisable in CKI’s sole and absolute discretion) and subject to and in accordance with the terms contained in this Agreement, to use the Licensed Mark, during the License Period in connection with the manufacture and sale, distribution, advertising, and promotion in the ‘‘Territory,’’ set forth on Exhibit T, of Licensed Products to approved customers ***

1.1.1 Exclusion of Retail Sales.  The License excludes the sale, distribution, and promotion of Licensed Products via commerce conducted on, made available through, or facilitated by *** or upon prior approval of CKI, which CKI may withhold in its sole and absolute discretion, The License also excludes the right to *** only as approved by CKI, and except as permitted as to such Licensed Products pursuant to other agreements between the parties (and their affiliates). However, the foregoing does not ***

1.1.2 Right to Manufacture.  The Licensee’s right to manufacture in the Territory and elsewhere in the world is non-exclusive (others may and will have the right to produce Products within the Territory for export and sale outside the Territory). Licensee shall have the right to import into the Territory Licensed Products manufactured outside the Territory; provided, however, that the Licensee takes reasonable precautions to prevent all labels, tags, packaging material, business supplies and advertising and promotional materials and all other forms of identification bearing the Trademark (collectively, ‘‘Labels’’) from being used otherwise than in connection with the distribution and sale of Licensed Products within the Territory. The Licensee shall neither export Licensed Products from the Territory, nor sell Licensed Products to any entity which it knows, or reasonably should know, intends to export Licensed Products from the Territory.

1.2 Reservation.    CKI reserves all rights in and to the Licensed Mark except as specifically granted herein including, without limitation, those rights set forth in this § 1.2. CKI may exercise any of its rights, or authorize others to exercise such rights, at any time, in accordance with the terms and conditions set forth herein.

1.2.1 Retail Stores; Company-Controlled Stores.    CKI reserves the right to*** In the case of E Commerce arrangement covering *** However, CKI shall in connection with the sale,

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distribution and promotion of Licensed Products through the CKI Stores, purchase Licensed Products from the Licensee , at mutually agreed upon prices, terms and conditions, provided that Licensee timely produces, ships and delivers such Licensed Products in quantities as may reasonably be required by CKI. If (i) Licensee cannot sell or supply any Licensed Products due to a continuing force majeure event or other event outside of Licensee’s reasonable control (i.e., more than thirty calendar days) or (ii) Licensee fails to timely deliver for two consecutive quarters the products so ordered (other than minor shortages), then during the pendency of such force majeure event or after such failures to deliver, CKI or its Affiliates shall have the right to manufacture or have manufactured for it by others, and to sell, distribute and promote such Licensed Products through CKI Stores for the next two years, at which time the provisions hereof shall again apply, CKI shall also require that any such retail stores in the Territory owned or operated by an authorized licensee of CKI shall purchase the Licensed Products from Licensee. The Licensee acknowledges and agrees that ***

1.2.2    E-Commerce/Promotional Goods. CKI reserves the right to ***

1.2.3 Third Party Licensees.    CKI may grant third parties the right to produce Products for distribution and sale outside the Territory. Licensee agrees to fully co-operate with such third parties, and upon CKI’s request, Licensee will, furnish samples of Licensed Products, provide at cost (without markup), any patterns, trim samples, samples of garments and other materials, names of contractors and sources of supply, reasonably necessary to manufacture Licensed Products as reasonably requested on a timely basis by such licensees, in accordance with such third parties’ reasonable design and production schedules and subject to appropriate confidentiality undertakings. Licensee will timely supply CKI’s distributors or other third party licensees outside the Territory, with Licensed Products for distribution in such quantities as CKI may reasonably request on such credit or other terms as Licensee may impose on its customers generally, ***

1.3 Limitations.    The Licensee understands and agrees that CKI, and its other licensees and sublicensees, may manufacture or authorize third parties to manufacture Licensed Products in the Territory for sale outside of the Territory, or to manufacture and sell or authorize third parties to manufacture and sell products of any and all types and descriptions other than the Products in or outside the Territory. In this regard, the Licensee acknowledges and agrees that products that bear some similarity of design to the Licensed Products may be manufactured, distributed or sold in the Territory in connection with the Licensed Mark by either CKI or a third party authorized to use the Licensed Mark, and the Licensee further acknowledges and agrees that such similarity of design will not be deemed a breach of or default under this Agreement. In addition, no license is granted hereunder for the manufacture, sale or distribution of the Licensed Products to be used for publicity purposes (other than publicity of the Licensed Products), in combination sales or as premiums or giveaways, or to be disposed of under or in connection with similar methods of merchandising, such rights being specifically reserved for CKI or otherwise subject to CKI’s prior review and approval. Licensee agrees that the marketing, placement and distribution of Licensed Products in the Territory may but shall not necessarily be the same as that for Products being sold in the U.S. or elsewhere in the world by CKI’s duly authorized licensee, but shall be commensurate with the marketing, placement and distribution of Licensed Products in comparison with other competitive and competitors’ ‘‘bridge’’ or ‘‘diffusion’’ lines sold both in the U.S. and the Territory.

1.4 Definitional Disputes.    The Licensee acknowledges that due to the nature of the marketplace, the definition of Products may change or may not be amenable to precise delineation. In addition, the Licensee acknowledges that CKI does have and may hereafter have, other licensees within the Territory. However, CKI will use its reasonable efforts to *** In the event of any dispute between the Licensee and any other licensee of CKI in the Territory with respect to whether particular merchandise is covered by one or the other of their respective licenses, or there is otherwise a dispute over the definition of Licensed Products, CKI shall render, based upon its reasonable (but with all due consideration given to aesthetic and quality factors) good faith judgement, commercial reasonableness, and a reasonable written determination.

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1.5    Exploitation of the License.

1.5.1 Best Efforts.    At all times during the License Period, the Licensee shall use its reasonable best efforts to exploit the License throughout each and every country the Territory, including, but not limited to: (i) selling what reasonably constitutes a full line of Products within each seasonal collection of Licensed Products (each, a ‘‘Collection’’), subject to seasonal differences, and a sufficiently representative quantity of each type of Product within each Collection; (ii) timely developing, producing and offering for sale the Licensed Products so that they may be sold and shipped to consumers on a timely basis; (iii) maintaining a sales force sufficient to provide effective distribution throughout all areas of the Territory; (iv) cooperating with CKI’s and any of its licensees’ marketing, merchandising, sales, and anti-counterfeiting programs as may be applicable, and (v) maintaining necessary financial position to adequately support the operations and obligations herein.

1.5.2 Non-Competition.    The Licensee shall devote itself and all of its employees and operations exclusively to the operations of this license and other ‘‘CALVIN KLEIN’’ operations licensed by CKI. The Licensee’s Affiliates shall not enter into or obtain from any person or entity a license in the Territory for any of the Products bearing the name of any designer or designer brand (or any derivative or formative thereof) of *** without the prior written consent of CKI and except for arrangements and agreements in effect on and as of the Effective Date of this Agreement. ***

1.6    Showrooms; In-Store Shops; Trade Shows.

1.6.1 Showrooms.    Licensee shall maintain a separate showroom within the existing premises in Milan of CKI’s affiliate, Calvin Klein Europe S.r.l. (‘‘CKE’’), under a form of sublease or sharing arrangement, to be entered into by the parties. If at any time the showroom shall be relocated due to unavailability of CKE’s premises, the location shall be subject to the approval (not to be unreasonably withheld) of CKI. Furthermore, CKI may require an additional showroom to be established in London; and, if the parties so agree, an additional showroom in Frankfurt or another city in Germany. Such showroom(s) shall be used for the sole purpose of displaying, promoting and selling Licensed Products. All such separate areas in the showrooms shall be subject to the standards of CKI, and shall be designed and maintained in conformity with the prestige associated with the Licensed Mark. The plans for each showroom, including décor, set-up and display (and material changes thereto), and for any renovations thereto shall be subject to the reasonable prior written approval of CKI, which approval shall not be unreasonably withheld or delayed;provided, however, that CKI shall have 10 business days after its receipt of such plans to approve or disapprove such plans or such longer period as is reasonable under the circumstances. Promptly after the execution of this Agreement, CKI and the Licensee will mutually agree *** The Licensee may (i) display the Licensed Mark on showroom doors and office directories and (ii) display the Licensed Products for sale in other showroom spaces, subject to the prior written approval of CKI. The parties shall meet upon request to establish a budget for required or requested renovations to the showrooms.

1.6.2 In-Store Shops.    The Licensee will participate in in-store shop or fixturing programs, with the Licensee’s customers throughout the Territory, and will spend amounts on in-store décor, refurbishments and fixturing (including development costs of consultants for design and fixturing prototypes and on sales personnel or coordinators, sufficient to ensure and the appropriate as may be applicable to enhance the presentation of Licensed Products within its retail accounts, including appropriate stocking and merchandise mix, to be developed with and under the direction of CKI (and outside consultants where required by CKI for the prototype development). Appropriate budgets for such in-store shop programs shall be developed, reviewed and agreed upon by the parties. All such programs shall be designed in conformity with the prestige associated with the Licensed Mark, and plans for any such shop-in-shop areas shall be subject to the prior written approval of CKI. In-shop décor, refurbishing and fixturing are essential to the exploitation of the License Agreement; in addition to other expenses hereunder (and not considered either a qualified Co-op or Public Relations expenditure).

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1.6.3 Trade Shows.    The Licensee shall display the Licensed Products at a separate booth space at all tradeshows attended by the Licensee to promote Products. The design of such booth shall be developed in consultation with CKI’s visual design personnel, as provided in § 1.6.4.

1.6.4 Visual Design Personnel.    The Licensee shall consult with and utilize CKI’s visual design personnel in connection with the design, development and construction of showrooms, trade show booths, fixturing, signage and any in-store shops or in-store areas for the sale of Licensed Products within the stores of the Licensee’s customers, and shall provide all funds necessary in connection therewith (including, but not limited to, reasonable per diem rates for work performed by CKI’s visual display personnel based upon estimated amounts or anticipated expenditures, as provided or discussed and agreed upon in advance, or based upon agreed-upon-in-advance budgets), it being understood and agreed that the fabrication, manufacturing, production or construction of showrooms, trade show booths and fixtures may be performed by third parties. All such design, development and construction shall be subject to CKI’s ongoing approval. Licensee will arrange for the opening of shop-in-shops within department stores and specialty stores using appropriate fixtures and signage, and to maintain seasonal visual display and ‘‘set-ups’’ of Licensed Products, as approved by Licensor, and to fully stock such shop-in-shops with an appropriate merchandise mix of Licensed Products, all as approved by CKI, pursuant to and consistent with Licensee’s shop-in-shop development program. Such in-store development programs shall be financed in a manner comparable to and commensurate with those of CKI’s competitors as to Licensed Products. CKI may periodically inspect Licensee’s showrooms, shows at trade exhibitions, and such shop-in-shops. Any such inspection will be at CKI’s expense unless CKI determines as a result of such inspection that Licensee’s showrooms, trade exhibition shows or in-store shops or in-store areas have not been maintained in accordance with CKI’s specifications, in which case Licensee will at its expense promptly make any modifications to design, layout, decor, visual display or merchandise display formats as CKI may reasonably require and will bear the costs incurred in connection therewith, including any costs incurred by CKI in connection with follow-up inspections to determine the satisfactory completion of such modifications. The Licensee shall also promptly reimburse CKI for the reasonable costs and expenses of any CKI personnel, such as visual display, advertising and public relations (other than design), with respect to services performed by CKI under this § 1.6 or otherwise requested by the Licensee based upon estimated amounts or anticipated expenditures, as provided or discussed in advance, and based upon agreed-upon-in-advance budgets. In addition, the Licensee shall pay or reimburse CKI for reasonable out-of-pocket expenses incurred by CKI or its representatives, whether for travel or otherwise, including round-trip business-class airfare or first-class airfare if provided by CKI’s internal travel policies in effect from time to time, hotel accommodations and food and local transportation, in connection with this Agreement, such as travel to Italy to review or approve prototypes, based upon estimated amounts or anticipated expenditures, as provided and discussed in advance with Licensee, and based upon agreed-upon-in-advance budgets.

ARTICLE II.    LICENSE PERIOD

2.1 License Period.    The license period shall commence effective 1 January 2006, with certain preliminary design and development being initiated prior to 1 January 2006 (‘‘preliminary period’’), with the Spring 2006 season being anticipated to be the first season for which Licensed Products will be offered for sale (and the parties may initiate preliminary design and other development in contemplation thereof in order to be able to offer for sale such Spring 2006 season,but if the time for development, presentation, production, marketing and showroom is deemed by the parties to be not sufficient to timely and appropriately launch such Collection, the initial season shall be Fall 2006 (or Pre-Fall 2006). The term shall end forty (40) years from the closing of the Transaction described and defined in the Heads of Agreement dated 29 September 2005 between inter alia, CKI and Warnaco Inc., (not to be later than 31 December 2006) on 31 December 2046, unless sooner terminated as herein provided. The first period commencing 1 January 2006 and ending on 31 December 2006, including the preliminary period, and each 12-month period commencing on 1 January thereafter during the License Period are each referred to herein as an ‘‘Annual Period.’’ Notwithstanding the

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foregoing, the Licensee shall not commence offering Licensed Products for the Spring 2006 season unless and until CKI determines in its good-faith judgement (including aesthetic and creative considerations) that all elements necessary for a successful launch, including, without limitation, product design, development and production, marketing strategy, advertising materials and placement, and if applicable, launch events, have been satisfied. The term of this Agreement may sometimes be referred to as the ‘‘License Period’’ or ‘‘Term.’’

The ‘‘Minimum Net Sales Thresholds’’ for each Annual Period are as indicated below:

Annual Period				Year				Minimum Net Sales* Thresholds (Euros, millions)
1					2006					***
2					2007					***
3					2008					***
4					2009					***
5					2010					***
6					2011					***				***
7					2012					***				***
8					2013					***				***
9					2014					***				***
10					2015					***				***
11 through 20				2016 through 2025						***				***
21 through 30				2026 through 2035						***				***
31 through 41				2036 through 2046						***				***

*    For purposes of calculating Net Sales for the MNST’s, ***

If Licensee fails to attain the minimum net sales thresholds (‘‘MNST’s’’) of Articles during any Annual Period, as set forth above (except as specifically indicated in the immediately following paragraph), ***

Notwithstanding the foregoing, if Licensee has *** Expiration or termination of the License shall not affect any obligation of the Licensee to make payments hereunder accruing prior to such expiration or termination.

ARTICLE III.    SALES

3.1    Sales/Marketing and Production Plans.    Licensee shall deliver to CKI: ***

3.2    Deliberately Omitted.

3.3 Sales to CKI and its Employees.  The Licensee shall be obligated to sell Licensed Products to CKI, its Affiliates and its third-party store licensees, for sale and distribution by (i) CKI and its Affiliates through CKI Stores, via E-Commerce, or otherwise; or (ii) by its third-party store licensees, through the stores of such licensees. The Licensee acknowledges and agrees that such sales of Licensed Products shall be in quantities designated by CKI, its Affiliates, or reasonably required by its licensees, as the case may be, and shall be at the ***

ARTICLE IV.    LICENSE FEES

4.1 Requirement of Fees.    All Licensed Products sold by the Licensee or its Affiliates (including those from which the Licensed Mark may have been removed, e.g., irregulars) require the payment of Fees by the Licensee to CKI as set forth in this Article IV, except as otherwise provided

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in § 4.1.1. ‘‘Affiliates’’ of any party means all individuals and business entities, whether corporations, limited liability companies, partnerships, joint ventures or otherwise, which now or hereafter control, or are controlled, directly or indirectly, by such party, or are under common control with such party.

4.1.1 Percentage Fees.    In respect of each Annual Period or portion thereof during the License Period, the Licensee shall pay CKI Percentage Fees computed *** as follows:

Annual Period/Year				***				***
1 (2006)				***				***
2 (2007)				***				***
3 (2008)				***				***
4 (2009)				***				***
5 et seq (2010 et seq)				***				***

* The rates applicable to ***

For sales directly at ***, as noted in § 1.2.1 and §1.2.3.

As noted in § 1.2.1 above, the Percentage Fee shall be ***

Percentage Fees shall be accounted for and payable ***

4.1.2    Gross and Net Sales. ‘‘Gross Sales’’ means *** "Net Sale’’ means ***

4.1.3 Minimum Guaranteed Fees. In respect of each Annual Period or portion thereof during the License Period, the Licensee shall pay to CKI the minimum fees listed below (the ‘‘Minimum Guaranteed Fees’’ or ‘‘MGF’s’’ ) ***

Annual Period/Year				Minimum Guaranteed Fee (MGF) (Euros)
1 (2006)						***
2 (2007)						***
3 (2008)						***
***						***
***						***
***						***				***
***						***
***						***
***						***
***						***
***						***
***						***
						***

4.1.4 Allocation of Minimum Guaranteed Fees and Percentage Fees.    For purposes of CKI internal allocation, *** of the Minimum Guaranteed Fees and *** of the Percentage Fees shall be allocated as a royalty for the use of the Licensed Mark and the remaining *** shall be allocated as ‘‘fees’’ for the design, including the reviews and approval procedures, and other overall services under or relating to the Agreement.

4.2 Statements.    Quarterly within each Annual Period 30 days in arrears, the Licensee shall deliver to CKI *** or in such simplified format as may be agreed to by the parties, signed by the ***, stating that the Licensee is in compliance with the terms and conditions hereof and setting forth *** Licensee will use all reasonable efforts to provide Licensor with *** Within 90 days of the end of each Annual Period, the Licensee shall also deliver to CKI a *** and in accordance with the provisions hereof. Receipt or acceptance by CKI of any statement furnished, or of any sums paid by

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the Licensee, shall not preclude CKI from questioning their correctness at any time; provided, however, that reports submitted by the Licensee, shall be binding and conclusive on the Licensee.

4.3 Books and Records.    The Licensee shall, at its sole cost and expense, maintain complete and accurate books and records (specifically including, without limitation, the originals or copies of documents supporting entries in the books of account or electronic records) covering all transactions arising out of or relating to this Agreement. Such books and records shall be maintained in accordance with international accounting principles generally accepted in  Italy, and under the laws thereof (‘‘ GAAP’’). CKI and its duly authorized representatives shall have the right, upon reasonable prior written notice from CKI and during normal business hours, once during each Annual Period and for three years after such Annual Period, to examine and copy said books and records and all other documents and materials in the possession of and under the control of the Licensee with respect to all transactions arising out of or relating to this Agreement (such audits are to be completed within 6 months of commencement, provided Licensee and its accountants promptly respond fully and completely to all inquires of CKI, including all books, records, back-up, answers to question and other reasonable requests, and afford CKI and its representatives entry and accommodations at all times during such period). Each Annual Period shall be subject to audit once (and when finalized as provided hereunder, not subject to additional audits under this Agreement (except CKI’s shareholders)). The exercise by CKI of any right to audit at any time or times or the acceptance by CKI of any statement or payment shall be without prejudice to any of CKI’s rights or remedies. (Nor will any acceptance of audit results affect or limit any rights of CKI as a shareholder.) The Licensed Products shall be assigned style numbers unique from any other products the Licensee may manufacture or sell. The style number assigned to each Licensed Product shall be identical to the style number utilized to identify the Licensed Product in all of the Licensee’s books and records. All documents evidencing the sale of Licensed Products shall state the style number of each such Product. The Licensee shall not use terms such as ‘‘assorted’’ or ‘‘irregular’’ without a style specification with respect to the Licensed Products . Once finalized and all disputes resolved, as provided hereunder and under § 4.4, results shall be binding on both parties under this Agreement.

4.4 Underpayments.    If, upon any examination of the Licensee’s books and records pursuant to § 4.3, CKI shall discover any Fee underpayment by the Licensee, the Licensee will make all payments required to be made to correct and eliminate such underpayment within 10 days of CKI’s demand together with interest thereon. In addition, if said examination reveals a Fee underpayment of *** or more for any Annual Period, the Licensee will reimburse CKI for the reasonable out-of-pocket cost of said examination within 10 days of CKI’s demand . In the event Licensee disagrees with any finding underlying CKI’s demands, it shall so notify CKI within 15 business days of demand, with reasons and specifics as to why. The parties will then promptly meet and fully co-operate on a continuing, best-efforts basis to present any ‘‘counter finding’’ or other back-ups and in good faith resolve the same before payment is due. Notwithstanding the foregoing, if such dispute remains unresolved within 90 days of Licensee’s receipt of CKI’s initial demand (unless extended by CKI) despite and provided CKI has used good faith best efforts to resolve within said time period, CKI’s last demand or final demand as may have been revised during such post audit meetings or discussions shall apply, and Licensee shall promptly remit such amounts (and interest) .

4.5 Manner of Payment.    All payments required by the Licensee hereunder shall be made to CKI in US $ dollars via wire transfer specifying federal funds ***

The Percentage Fees based upon Net Sales made in a currency other than US $ dollars (and certain other amounts provided for or contemplated under this Agreement), if applicable, shall be computed on the basis of the conversion rate of the currency in which the sale or other transaction occurred into US $ dollars in effect, as published in the Wall Street Journal, as of the close of business on the last business day of the relevant quarterly period during the Annual Period, and two (2) business days prior to the remittance due date (or where no remittance ‘‘due date’’ is applicable, the remittance date) for other applicable amounts. In the event that the Licensee is required to withhold certain

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amounts for payment to the appropriate governmental authorities, the Licensee will supply to CKI the official receipts evidencing payment therefore, promptly upon receipt (as noted in §4.8).

4.6 Interest on Late Payment.    In addition to any other remedy available to CKI, if any payment due under this Agreement is delayed for any reason, including, without limitation, as a result of any Fee underpayment, interest shall accrue and be payable, to the extent legally enforceable, on such unpaid principal amounts from and after the date on which the same became due, at the rate of ***

4.7 No Set-Off.    The obligation of the Licensee to pay Fees hereunder shall be absolute, notwithstanding any claim which the Licensee may assert against CKI. The Licensee shall not have the right to set-off, compensate or make any deduction from such Fee payments for any reason whatsoever.

4.8 Taxes.    The Licensee will bear all taxes, duties and other governmental charges in the Territory relating to or arising under this Agreement, including, without limitation, any state or federal income taxes on the Licensee (except withholding taxes on Fees due CKI and taxes on CKI’s income), any stamp or documentary taxes or duties, turnover, sales or use taxes, value added taxes, excise taxes, customs or exchange control duties or any other charges relating to or on any Fee payable by the Licensee to CKI. The Licensee shall obtain, at its own cost and expense, all licenses, Federal Reserve Bank, commercial bank or other bank approvals, and any other documentation necessary for the importation of materials and Products and the transmission of Fees and all other payments relevant to the Licensee’s performance under this Agreement. If any tax or withholding is imposed on Fees, that is, and to the extent it may become applicable, when or where payments of Minimum Guaranteed Fees and/or Percentage Fees are made directly to CKI from any jurisdiction outside the United States, the Licensee shall compute and pay on behalf of CKI all withholding taxes which any governmental authority in the Territory may impose on CKI with respect to the Fees paid by the Licensee to CKI. The amount of such taxes shall be appropriately deducted from payments, and immediately paid to such governmental authorities. Such amounts shall not be held in reserve by Licensee pending later due dates. The Licensee shall obtain and provide certified proof of the tax payment of the amount withheld, and promptly transmit it to CKI. In the event such taxes are not paid when due, all resulting penalties and interest shall be borne by the Licensee.

4.9    Financial Statements.    Licensee shall deliver to CKI,:

(i) within 180 days after the close of each of Licensee’s fiscal year’s during or concurrent with an Annual Period, copies of its annual financial reports (balance sheets, statements of income and cash flow) which may be unaudited (but if the Licensee otherwise prepares or is otherwise required to prepare, audited reports, it will so provide them to CKI) prepared in accordance with International GAAP, reported on by a recognized accounting firm together with English translation thereof; and

(ii) within 60 days after the close of each calendar quarter copies of its quarterly financial reports, which will be prepared on a basis consistent with the annual financial reports.

4.10    Financial Covenants.    Licensee (and its parent Warnaco Inc.) will ***

Licensee will immediately upon the occurrence of any default deliver a certificate by the Chief Financial Officer setting forth the details of any such default and action the Licensee is taking or proposed to take with respect thereto.

ARTICLE V.    ADVERTISING AND PROMOTION

5.1    Advertising.

5.1.1    Initial Support/Reimbursement.    Deliberately Omitted.

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5.1.2 Advertising Obligation. For each Annual Period, the Licensee shall remit to CKI an amount (the ‘‘Advertising Obligation’’ or ‘‘Minimum Advertising Expenditure,’’ a/k/a ‘‘MAE’’) equal to ***

Annual Period/Year				Minimum Advertising Expenditure (Euros)
1    (2006)						***
2    (2007)						***
3    (2008)						***
4    (2009)						***
5 et seq  (2010 et seq)						***

The Licensee shall pay to CKI in respect of the Advertising Obligation for each Annual Period, no later than *** CKI shall use the Advertising Obligation, in its sole and absolute discretion, in connection with the advertising, marketing and promotion of the Licensed Mark and the Licensed Products. Although the final decision as to the advertising program’s form, content and placement must remain with CKI, CKI agrees to consider Licensee’s input and agrees that prior to the commencement of each campaign season, CKI and CRK will meet and listen to Licensee’s needs and overall strategy, and CKI and CRK will also review CRK’s concepts for the upcoming season with Licensee. (Although CRK will give reasonable consideration as to Licensee’s input, decisions will be in CKI’s sole discretion and based on CKI’s subjective aesthetic judgement and other considerations.) If there are material changes to what CKI, CRK and Licensee discussed at the beginning of the season by CKI, CRK will apprise Licensee of the same. ***

5.1.3 CRK Fee. As the advertising agency heretofore responsible for advertising campaigns relating to ‘‘CK/Calvin Klein’’ and Licensed Mark activities, CRK Advertising (‘‘CRK’’), a division of CKI, has developed certain expertise regarding the image of the Licensed Mark. *** Notwithstanding anything to the contrary in the foregoing, in no event shall CKI require the Licensee to ***

5.1.4 Co-operative Advertising and Public Relations. *** All Co-operative Advertising shall be (i) in accordance with the parameters reasonably promulgated by CKI from time to time, including, without limitation, creative, as approved by CKI, as well as the Licensed Products presented in such Co-operative Advertising, and timing and applicable placement (the publication as well as the particular location within the publication) (sometimes referred to as a ‘‘media plan’’), and (ii) subject to CKI’s approval as provided in § 5.1.3. The Licensee shall be obligated to notify its accounts of these requirements and ensure their compliance with such requirements, including obtaining CKI’s approval prior to use. The Licensee shall provide CKI with its ***

For purposes of this Agreement ‘‘Co-operative Advertising’’ means advertisements by or in connection with retail accounts in local publications, such as newspapers and certain approved retail catalogs (for CK/Calvin Klein Bridge Stores), if any, which CKI may specifically approve in writing after viewing the same), and applicable ‘‘sharing’’ of expenses by such retail account with the Licensee, by way of advertising reimbursements, credits, charge-backs, or payments, only. Expenditures for ‘‘co-op’’ advertising not included within the definition hereunder or not in compliance with CKI’s parameters will not constitute a ‘‘qualified’’ expenditure for Co-operative Advertising hereunder.

‘‘Co-operative Advertising’’ does not include and shall not consist of advertisements in trade publications (except for certain prestigious fashion trade publications as may be approved by CKI in writing on a case-by-case basis) or any expenses or costs of (without limitation) packaging, fixturing, display materials, point-of-sale (‘‘POS’’) or point-of-purchase (‘‘POP’’) materials, or advertising or selling materials or ‘‘tools’’ or seminars or training sessions, in-store merchandising contributions or

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sharing of expenses, or any other selling or merchandising expenses or events, or any promotional materials, events or activities, such as press kits, goody bags (gifts), or any consumer advertising.

Public Relations events, activities and efforts shall include editorial coverage in prestigious fashion magazines, launch events for press, editors, buyers, fashion shows or trunk shows (‘‘mini’’ fashion shows at key retail stores), and involvement with highly publicized events such as ‘‘concerts,’’ as may be reviewed with and approved by CKI. Any PR event or activity to be conducted or overseen by a 3^rd party shall be conducted or overseen by CRK or a 3^rd party approved by CRK (‘‘PR Agency of Record’’) at market rates.

The CRK Fee shall be applied on actual services and materials developed, produced or provided by CRK for such Co-op/PR Obligation-qualified expenditures hereunder.

5.2 "Usage". If the Licensee requests advertising support including, without limitation, the acquisition of rights to use images of models in jurisdictions within the Territory where rights have not been obtained or for uses for which authorization has not been granted, the Licensee shall pay over to CKI the reasonable incremental costs associated with such advertising support. Such amounts shall be credited to the MAE, but may be credited over a number of Annual Periods not limited to the Annual Period in which the expense occurs.

5.3 Approval of Materials, Activities. The use and release of any and all promotional material (printed or otherwise) relating to the Licensed Products or the Licensee’s activities pursuant to this Agreement in the nature of press releases, interviews or other similar public relations events, and any other corporate release, data or information which will or is likely to become public and, if so, could affect such image, will be prepared or conducted in consultation with, and subject to the prior approval of (or approval subject to reasonable CKI-required modifications of), CKI’s public relations department (to be provided or responded to promptly (as per §  6.5 ) and not to be unreasonably delayed). After any such approval, the Licensee will not modify the approved material or activity in any material respect unless such modification is specifically approved by CKI’s public relations department. Any advertising marketing or promotional or public relations activity, event or effort shall be reviewed with and approved by CKI in advance (not to be unreasonably delayed). All materials bearing the Licensed Mark, including, without limitation, all advertising, promotional materials, packaging and collateral (e.g., POP or POS materials) shall be subject to CKI’s approval (not to be unreasonably delayed), and developed by CKI or pursuant to CKI’s direction.

5.4 Samples. The Licensee shall provide to CKI, *** in the promotion of Licensed Products, including advertising shoots, public relations promotions, editorial promotions, press coverage and celebrity use, including where needed in advance of regular production cycles (e.g., fashion shows, merchandising displays within showrooms, advertising shoots). Licensed Products which constitute celebrity, editorial and/or public relations ‘‘samples’’ which are gifted to recipient without cost, by Licensee*** Included in such ‘‘Promo Articles ’’ shall be a reasonable number of Licensed Products to be provided to CKI (CRK) for its use for particular celebrity ‘‘individuals’’ and press or editorial recipients, as requested and/or specified by CKI, ***

If and to the extent tax forms evidencing the value of any such gift items to celebrity ‘‘individuals’’ for purposes of income tax requirements under any governmental authority are or become required, Licensee shall provide the same as soon as such practice could be reasonably implemented.

ARTICLE VI.    QUALITY AND STANDARDS

6.1 Distinctiveness and Quality of the Licensed Mark. The Licensee shall maintain the distinctiveness of the Licensed Mark and the image and high quality of the goods and merchandise bearing the Licensed Mark presently manufactured and sold by CKI and its other licensees, and the prestigious marketing of same as presently maintained by CKI and its other licensees. The Licensee agrees that all Licensed Products manufactured or sold by it will be of high quality as to workmanship, fit, design and materials, and shall be at least equal in quality, workmanship, fit, design

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and material to the samples of Licensed Products submitted by the Licensee and approved by CKI pursuant to § 6.2.6. All manufacturing and production shall be of a quality in keeping with the prestige of the Licensed Mark. In addition, the Licensee agrees that it will only use the Licensed Mark in the form thereof then approved by CKI, and that all Licensed Products shall bear the Licensed Mark in such approved form. CKI shall give the Licensee reasonable prior notice of any change in the form of the Licensed Mark and shall permit the Licensee to use a superceded form of the Licensed Mark for up to 6 months in order to enable the Licensee to sell inventory, complete and sell work-in-process, and to deplete inventories of labels, tags, packaging, and other materials bearing the Licensed Mark. In the event CKI elects to change the form of the Licensed Mark, the Licensee’s obligations in respect to the image and high quality of the goods and merchandise bearing the Licensed Mark, and the prestigious marketing of same as required by this § 6.1, shall be consistent with the actions of CKI and its other licensees in respect to Licensed Products bearing such new form of the Licensed Mark. However, on reasonable advance request (within 20 days prior to the end of the 6-months period) if Licensee provides CKI with its inventory of Licensed Products and other materials utilizing the old form, with anticipated outside ‘‘depletion’’ dates for the materials, CKI may provide additional time for such depletion. However, all Licensed Products to be shipped from and after the 6-months period (except for Close-outs or Seconds from prior seasons) will carry new labels, regardless of excess label stock.

6.1.1 Consistency with Other Products. The Licensed Products hereunder are among a range of lines of men’s, women’s, boys’ and girls’ apparel and accessories products which are produced and/or sold by CKI, its licensees and other duly authorized parties under the Licensed Mark and other related trademarks. In order to provide for consistency in scope, and to prevent confusion in the market, the Licensee agrees to use commercially reasonable efforts to ensure that it will only use the Licensed Mark in the form thereof then approved by CKI and that the placement of items constituting Licensed Products in the market will be consistent with other merchandise bearing the Licensed Mark and be distinguishable from the placement of product lines bearing other trademarks.

6.2    Design.

6.2.1 Time and Action Calendar. The Licensee shall prepare, for the Licensed Products, and at least 60 days prior to the commencement of each Annual Period, shall deliver to CKI for its approval (reasonably exercised within the standard design policy and procedures of CKI and timing, development and production and placement schedules), a proposed time and action calendar (‘‘Time and Action Calendar’’) for the Collections to be developed during such Annual Period; provided; however, that the Time and Action Calendar for the first Annual Period shall be delivered for approval no later than the date of execution hereof. The substance and format of each Time and Action Calendar shall be as approved by CKI from time to time. In accordance with each Time and Action Calendar, and at least 60 days before the development stage of any Collection, the Licensee will provide a merchandising plan setting forth for each Product category the number of styles, estimated unit production, in-store delivery dates, target manufacturer’s suggested retail price, target market segment and, where applicable, historical sales statistics for CKI’s review and approval.

6.2.2 Themes. The Licensee shall maintain during the License Period a design staff capable of timely developing seasonal collections of Licensed Products pursuant to the Time and Action Calendars, in order to exploit the License and to maintain the prestige and reputation of the Licensed Mark, as required hereunder. The Licensee’s design team shall have meetings with CKI’s-designated creative or design person or persons, the purpose of which will be to discuss and establish agreed-upon themes that will be covered for the season (such agreed upon themes hereafter referred to as the ‘‘Agreed Upon Season’s Themes’’).

6.2.3 Design Concepts. Based on the Agreed Upon Season’s Themes, the Licensee shall create, develop and present for CKI’s review and approval, a program in a tangible illustrative format of design themes and concepts (‘‘Design Concepts’’) with respect to the proposed designs for the applicable Collection, together with relevant      trims     , samples of fabrics and other components.

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The Licensee shall present the Design Concepts to CKI in a ‘‘Design Concepts Presentation Meeting’’, the purpose of which is to provide CKI with a clear and concrete understanding of the themes, fabrications, styles, attitude and direction of such Collection through the use of either design boards, sketches and/or ‘‘rigs’’ as well as samples of trim, fabrics and other components in each of the Licensee’s suggested colors and qualities, also swatches, yarns and illustrations sufficient to give CKI a clear understanding of the particular Products and components the Licensee wishes to develop based upon approved Design Concepts. CKI shall, within  10 business days from presentation of the Design Concepts identified at the Design Concepts Presentation Meetings approve or disapprove and/or provide suggestions, modifications or recommendations, as determined by CKI in its sole and absolute discretion. Any Design Concept which is not rejected or required to be modified within such 10 business day period shall be deemed approved. Any Design Concept or component thereof presented, initiated or submitted by CKI to Licensee to be included in the applicable Collection shall be included in the Approved Design Concepts except as otherwise may be agreed by CKI. All approved and deemed approved Design Concepts are referred to herein as the ‘‘Approved Design Concepts.’’ The Licensee shall provide CKI with a photographic record, duplicate ‘‘boards’’ or such other comparable method acceptable to CKI, of the Approved Design Concepts so that CKI has a means to verify compliance with the Approved Design Concepts at subsequent stages of the approval process, within 10 business days after approval of the Approved Design Concepts. The Licensee shall have  10 business days to resubmit for CKI’s approval any Design Concept to which CKI directed modifications to be made. If any resubmitted Design Concept, as changed, does not strictly conform to CKI’s request for changes, and such strict conformity cannot be obtained after one resubmission, such Design Concept shall not become an Approved Design Concept. No Licensed Products (including samples) shall be distributed and/or sold by the Licensee unless such Licensed Products are in substantial conformity with Approved Design Concepts. Approved Design Concepts shall only be deemed approved for the specific Collection for which they have been submitted and approved, unless CKI agrees otherwise in writing.

6.2.4 Certain Other Approvals. The Licensee shall provide and present to CKI proposed styles, designs, fabrications (fabric, leather or other materials, swatches in reasonably sufficient size to determine ‘‘hand’’ as well as color, content and other matters, trim, samples, labels (quality), artwork, if requested by CKI (e.g., layouts and relevant technical information for graphic motifs, patterns (such as florals, stripes, checks))) and other materials in quantities and sufficient variety to enable CKI to review and approve (including to require modifications to or changes in), on a timely basis, sufficiently in advance of the market and production timing.

6.2.5 CKI Designs. CKI may provide the Licensee with creative concepts and fashion direction as to each Collection, including recommendations as to color, material, design and styling of Products and such additional design assistance including sketches, samples, suggestions or other information or data as CKI determines in its sole discretion. For each Collection, the Licensee shall utilize substantially all of the designs, fabrics, trim or other material submitted or approved by CKI and shall produce on a timely basis pre-production prototypes for CKI’s review and approval.

6.2.6 Prototypes. Prior to showing each season’s Collection to the trade or commencing production of the Products for such Collection in accordance with the Time and Action Calendars, the Licensee shall produce pre-production prototypes (both initial (first) and second prototypes, where required by CKI) of each Product in the approved fabrications, or , if applicable, in those fabrications specifically requested by CKI (or, if CKI so permits on a season-by-season, case-by-case basis, pre-production prototypes of each ‘‘body’’ or style of Product in representative fabrications or those fabrications specifically requested by CKI), along with swatches and samples of sufficient size in order to determine hand and/or other aspects related to the Products that the Licensee proposes to include in such Collection, for CKI’s approval. No previously approved Licensed Products shall be included in a subsequent Collection unless and only if presented for inclusion and approved by CKI for such subsequent Collection. CKI shall have the right to approve or disapprove of any or all aspects of each prototype and to require modifications to meet its requirements for approval. Notwithstanding such

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requirements or approvals, all responsibility (and liability) for the merchantability, fit and technical requirements of such Licensed Products is and will belong to Licensee. If CKI disapproves any proposed carryover of a ‘‘core’’ item (i.e., part of the Collection for at least four prior seasons, if any), then the Licensee will discontinue such product within three months to enable the Licensee to fulfill outstanding orders. (Prototypes which have been approved by CKI, or those subject to changes being made by the Licensee, upon resubmission of corrected prototypes and subsequent approval by CKI, shall hereinafter be referred to as ‘‘Approved Prototypes.’’). The Licensee shall provide CKI with a photographic record of all Approved Prototypes for each Collection, and also, the Licensee shall promptly provide CKI, with a record of the use (i.e., the factory location in which each prototype will be used to produce the specific Licensed Products) of the Approved Prototypes, which shall include notification (i.e., e-mail, fax, modified purchase order to factory producing the particular item of Licensed Product) and evidence (e.g., in the form of duplicate or modified prototype) of any changes required by CKI. CKI may request that prototypes be developed in a standard size or to provide CKI with a variety of sizes and styles, covering the spectrum, to assure itself of ‘‘fit’’ and sizing.

6.2.7 Final Approval and Sales. The final composition of each Collection shall be determined and agreed upon by the Licensee and CKI, and is subject to the approval of CKI, upon presentation and edit of the sample line produced from Approved Prototypes for technical quality and final editing purposes. Thereafter, the Licensee shall timely sell, market, produce and ship such Collection based on the Approved Prototypes.

6.3 Manufacture of Licensed Products by Third Parties. All contractors wherever located which the Licensee desires to use in connection with the manufacture of Licensed Products are subject to the prior written approval of CKI, which consent shall not be unreasonably withheld or delayed; provided, however, that CKI shall have 10 business days after its receipt of a written request from the Licensee to use a manufacturer or such longer period as is reasonable under the circumstances to approve or disapprove such manufacturer. In order to maintain CKI’s high standard of quality control and to insure that appropriate measures are taken against counterfeiting, the Licensee shall provide CKI with the following information: (i) name and address of each proposed manufacturer; (ii) type of Licensed Products to be manufactured; (iii) quantity of Licensed Products to be manufactured; and (iv) any other relevant information. The Licensee shall obtain the signature of an authorized representative from each approved third-party manufacturer used by the Licensee on an agreement (a ‘‘Third-Party Manufacturing Agreement’’), substantially in the form of Exhibit D. The Licensee shall not knowingly enter into a Third-Party Manufacturing Agreement with any third party that has materially breached a similar agreement with CKI or its Affiliates or any licensee of CKI or its Affiliates. The Licensee acknowledges that it shall remain primarily liable and completely obligated under all of the provisions of this Agreement in respect of such contracting or assembly arrangements.

6.4 Non-Conforming Products. In the event that any Licensed Products are, in the judgement (which shall include subjective aesthetic considerations and standards) of CKI, not being manufactured, distributed or sold with first quality workmanship or in strict adherence to the prototypes approved by CKI, CKI shall notify the Licensee thereof in writing, and the Licensee shall promptly initiate corrections or changes to production of such Licensed Product to conform thereto. Where non-conformity is material, substantial or may adversely affect the reputation or prestige or value of the Licensed Mark or CKI’s business operations, CKI may require that no further sale or shipment of such Licensed Mark be made until such corrections are made. If Licensed Products as changed do not strictly conform after CKI’s request and such strict conformity cannot be obtained after one resubmission, such Licensed Products (the ‘‘Non-Conforming Products’’) shall be disposed of in a way which shall not reduce the value of the Licensed Mark or detract from its reputation, which may include, without limitation, the destruction of the Non-Conforming Products, the donation of such Non-Conforming Products to eleemosynary institutions, the sale of such Non-Conforming Products in a private sale, with proceeds to be given to charity, or the removal of Labels and other identification prior to sale, or other method reasonably approved by CKI. As noted, CKI may require the Licensee to cease further shipment and sale of such Licensed Products, to recall any Licensed

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Products that are not consistent with approved quality standards and the approved prototypes and/or to purchase at the Licensee’s expense any such Licensed Products found in the marketplace. ***

6.5 Approvals. All approvals by CKI required under this Agreement must be obtained in advance of use of the item subject to approval, which approval must be in writing from CKI to the Licensee. Except as otherwise expressly provided hereunder, a submission for approval shall be deemed approved unless CKI delivers a notice of disapproval within 10 business days after its receipt of a written request for approval (together with the submission as well as all information, details and specifications reasonably necessary to review, determine and provide an approval). All matters requiring approval of CKI shall be granted or withheld in the sole and absolute good-faith discretion of CKI and may be based solely on CKI’s subjective aesthetic standards. CKI shall provide an explanation for disapprovals, unless such disapproval reflects an issue of taste or subjective judgement. CKI has no obligation to approve, review or consider any item which does not strictly comply with the required submission procedures. Approval by CKI shall not be construed as a determination that the approved matter complies with all applicable regulations and laws. No disapproved item shall be manufactured, sold, used, distributed or advertised by the Licensee under the Licensed Mark. The Licensee may revise any disapproved item and resubmit it. The Licensee must strictly comply with all of CKI’s decisions. CKI may amend the approval forms as appropriate. Otherwise, the parties may mutually agree to amend the approval forms as they deem appropriate. In the event that it is reasonably necessary for CKI to do on-site approvals, the Licensee shall pay any and all reasonable expenses and airfare incurred by CKI with respect to such on-site approvals. CKI to provide Licensee with advance notice as to any such trips or anticipated on-site approval situations to reasonably co-ordinate with Licensee.

6.6 Marketing, Labeling, Packaging, Promotions, Business Materials. All packaging, labeling, including within the Licensed Product (‘‘Labels’’) must be approved by CKI. The use of any Label that has not been approved is expressly prohibited. CKI reserves the right to require the Licensee to purchase Labels to be used on the Licensed Products only from sources designated by CKI, provided that such sources provide the Labels to the Licensee in a reasonably competitive manner as to price and delivery schedules. All Licensed Products manufactured, distributed or sold by, or on behalf of, the Licensee shall be marked, labeled, packaged, advertised, distributed and sold in accordance with this Agreement. At the request of CKI, the Licensee shall cause to be placed on (or attached to) all Licensed Products (by way of labels, tags or inserts, and/or packaging) an appropriate notice designating CKI as the ‘‘licensor’’ of the Licensed Mark, and/or CKTT as the owner of the Licensed Mark. The manner of presentation of such notice shall be determined by CKI. Any and all proposed advertising, promotional, business (including stationary, business cards, invoices) or marketing or publicity material (including issuing press releases, interviews or other public relations media), any POS, POP or other promotional material and any other printed material or other form of communications to be used in connection with the marketing, promotion, sale or distribution of the Licensed Mark must be approved by CKI (as to content, form and specific use, including timing and duration of use) prior to use by Licensee, as noted in the 2^nd sentence of § 6.5 above, as to 10 business days, submission and information. If CKI should disapprove any sample tag, label, package or the like, or any advertising, promotional, merchandising, marketing or publicity material, activity or event or the proposed placement or use thereof or any other printed matter, event or activity, Licensee will not use or permit the use of the same in any manner, whether or not in connection with Licensed Products or the Licensed Mark.

6.7 Inspection of Facilities. CKI and its duly authorized representatives shall have the right, during normal business hours and upon reasonable notice, to inspect all facilities utilized by the Licensee (and its contractors and suppliers to the extent the Licensee may do so) in connection with the manufacture, sale, storage or distribution of Licensed Products, and to examine the Licensed Products in the process of manufacture.

6.8 Samples and Artwork. CKI may make available to the Licensee certain samples, designs, colors, fabric samples, tags, labels, packaging, catalogues and artwork available to CKI, and the cost of

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providing such materials shall be borne by the Licensee at prices equal to CKI’s cost (A) as may be requested by Licensee or (B), in the case of ‘‘multi-regional’’ items which CKI requires to be utilized amongst its multiple licensees for Licensed Products, not to exceed $25,000 per annum without the Licensee’s prior consent. The payment for these already ‘‘developed’’ materials are separate and apart from the payment of any CRK fee for the development of such samples, designs, colors, fabric samples, tags, labels, packaging, catalogues and artwork directly for Licensee for each Collection of Articles which shall also be borne by Licensee. All right, title and interest in and to samples, sketches, designs, and other materials furnished to the Licensee or submitted by CKI in connection with the Licensed Products, including any modifications or improvements thereof which may be created by CKI, shall remain the sole property of CKI as between the Licensee and CKI, and are ‘‘licensed’’ hereunder solely and exclusively for use in connection with the manufacture, sale, distribution and promotion of Licensed Products in the Territory, otherwise subject to the terms and conditions of this License Agreement.

6.9 Know-how. The Licensee shall have the right to request visits to CKI’s offices or showrooms to meet with its personnel, in order to obtain additional know-how and assistance, all as and only as CKI deems appropriate. The scheduling of such visits shall be at times mutually convenient to the parties hereto. In connection with such visits, the Licensee shall bear all expenses of the Licensee’s representatives.

6.10 Meetings. CKI may from time to time hold meetings of CKI’s licensees. The Licensee shall, upon receipt of reasonable notice, attend such meetings at its own expense but shall not be required to attend more than two such meetings per year.

6.11 Design Direction. The designs of the Licensed Products shall at all times be consistent with CKI’s design aesthetic for the Licensed Mark. CKI may submit samples to the Licensee of or for products it deems to be core to the image of the overall ‘‘CALVIN KLEIN’’ trademark and/or product lines, and the Licensee shall develop Licensed Products based thereon and shall use commercially reasonable efforts to market same.

6.12 Design Rights. The Licensee acknowledges and agrees that CKI owns or shall own all design rights, regardless of whether such designs were created by CKI or by or on behalf of the Licensee, except with respect to Excluded Designs. The Licensee agrees to make, procure and execute all assignments necessary to vest ownership of design rights in CKI. The Licensee shall not do or allow to be done anything which may adversely affect any of CKI’s design rights. All designs used by the Licensee for the Licensed Products, except with respect to Excluded Designs, shall be used exclusively for the Licensed Products and may not be used under any other mark, whether during the License Period or any time thereafter, without the prior written consent of CKI. The Licensee shall disclose and freely make available to CKI any and all developments or improvements it may make relating to the Licensed Products and to their manufacture, promotion and sales, including, without limitation, developments and improvements in any machine, process or product design, that may be disclosed or suggested by CKI or regarding any patent or trademark which the Licensee is entitled to utilize. ‘‘Excluded Design’’ means a design (i) submitted by the Licensee and not approved by CKI; (ii) not distinguishable from similar generic products generally available in the marketplace; or (iii) not distinguishable from a product which has previously appeared in the Licensee’s product line and the Licensee advised CKI of such condition at the time of submission. In the event of clause (i) or (iii) above, the Licensee shall retain title to such designs but shall permit CKI to use such designs during the Term o f this License Agreement. CKI may use and permit others to use said designs and other materials in any manner it desires, provided that such use does not conflict with any rights granted the Licensee hereunder or belonging to Licensee. The Licensee specifically acknowledges that such designs and other materials may be used by CKI and its Affiliates and other licensees of CKI and its Affiliates on Licensed Products in jurisdictions outside the Territory and on products other than Licensed Products anywhere in the world, subject to the limitations described herein. Notwithstanding the foregoing, CKI shall not acquire any ownership interests in any patents,

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trademarks or copyright rights owned or commissioned by Licensee and utilized for products other than Licensed Products, but utilized as well in connection with the Licensed Products.

6.13 Shops, Stores, Retail Outlets. Subject to § 6.14, the Licensed Products sold by the Licensee may be *** Nothing herein shall be deemed to ***

6.14 Disposal of Seconds and Close-Outs. Seconds and Close-Outs sold by the Licensee may be sold only to Approved Accounts and Approved Seconds and Close-Outs Accounts, including those customers identified on Schedule 6.14. Whenever the Licensee shall wish to sell Seconds and Close-Outs to customers not previously approved by CKI, the Licensee shall submit to CKI a written list of the proposed customers for Seconds and Close-Outs for CKI’s prior written approval. The proposed customers approved from such list, together with the customers listed on Schedule 6.14, are referred to as the ‘‘Approved Seconds and Close-Outs Accounts.’’ Notwithstanding CKI’s approval of any customer, CKI may at any time subject sales to any such customer, including, without limitation, any such customer listed on Schedule 6.14, to any conditions or limitations CKI considers appropriate; provided, however, that in order to be effective, any such conditions or limitations must be set forth in a writing provided to the Licensee. Nothing herein shall be deemed to prohibit CKI from withdrawing its approval of any Approved Seconds and Close-Outs Account for ‘‘good’’ bona fide reasons, including, without limitation, any such Approved Seconds and Close-Outs Account listed on Schedule 6.14, upon written notice to the Licensee (at which time, such customer shall cease to be an Approved Seconds and Close-Outs Account for purposes of this Agreement); provided, however, that the Licensee may fulfill any firm orders entered into prior to the Licensee’s receipt of CKI’s withdrawal of approval.

6.14.1 Seconds. The Licensee shall only sell Licensed Products which are damaged, imperfect, non-first quality or defective goods (‘‘Seconds’’) in a way which shall not *** Notwithstanding anything to the contrary ***

6.14.2    Close-Outs. ***

6.15    Standards of Conduct.

6.15.1 Standards. The Licensee acknowledges that CKI is a wholly owned subsidiary of Phillips-Van Heusen Corporation (‘‘PVH’’). The Licensee acknowledges that it has received copies of, read and understands PVH’s publication ‘‘A Shared Commitment — Requirements for Suppliers, Contractors, Business Partners’’ and PVH’s ‘‘Statement of Corporate Responsibility.’’ The Licensee shall conduct its business in compliance with the moral, ethical and legal standards set forth in such publications, as the same may from time to time be revised by PVH upon reasonable notice to the Licensee (the ‘‘Standards’’) and shall cause all manufacturers, contractors and suppliers which manufacture Licensed Products or from whom the Licensee obtains Licensed Products or materials for the manufacture of Licensed Products to abide by the Standards.

6.15.2 Audit Requirement. For each facility utilized by Licensee for the manufacturing of the Licensed Products (whether directly produced or produced by or through a contractor, subcontractor or supplier) the Licensee will arrange to have the facility audited for compliance with the Standards unless PVH notifies the Licensee in writing that it already has a current audit with respect to such facility that evidences compliance with the Standards. Audits on each facility used must thereafter be conducted no less often than annually. Each audit shall be conducted by a suitable auditor (whether internal or external) designated by the Licensee, subject to Licensor’s and PVH’s approval. Disapproval by Licensor and PVH may only be for grounded reasons. Each audit shall be conducted using the evaluation form attached hereto asExhibit E or a substantively similar form approved by PVH. The Licensee shall identify to PVH in writing each facility in which Licensed Product (or part thereof) are produced or which is to be re-audited and PVH shall notify the Licensee within 30 days of PVH’s receipt of such notice if PVH has currently approved the facility for production and when re-audit is required. If a facility is currently approved for production, the Licensee shall have no obligation to arrange for a current audit of the facility. If a facility is denied

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approval by PVH as of such date, Licensee will not place any new orders in such facility and will only use the facility to fulfill currently existing, non-cancelable orders. Licensee will stop producing in such facility starting from the immediately subsequent season. All audits shall be conducted at the Licensee’s sole expense. All support to be given by PVH will be at PVH’s expense.

Notwithstanding anything to the contrary contained in this §6.15.2, ***

6.15.3 Approval. A comprehensive audit report prepared by the auditor shall be provided to PVH, attention the director of PVH’s Human Rights Program Department, promptly upon its completion. PVH shall have 30 days from its receipt of an audit report to notify the Licensee: a) of its approval of the audited facility either (i) fully without remarks; or (ii) with request to re-audit within a certain period (‘‘Red Flag’’); or b) of its disapproval of the facility that is the subject thereof in which case Licensee may fulfill any firm orders entered into prior to the Licensee’s receipt of PVH’s disapproval and cease to utilize such disapproved facility from the subsequent season. If PVH does not give notice to the Licensee within such 30-day period, the facility shall be deemed approved by PVH. PVH shall set forth in its notice of disapproval its reason(s) for disapproval in reasonable detail.

6.15.4    Use of Facility. Unless and until the Licensee delivers to PVH an audit report for a facility that evidences compliance with the Standards and PVH approves such facility, the facility shall not be used for the production of Licensed Products. If the Licensee uses a facility that has not been approved in accordance herewith, fails timely to cause an approved auditor to submit to PVH an audit report evidencing continued compliance with the Standards when a re-audit of a facility is required in accordance with the terms hereof or if the Licensee or any of its manufacturers, contractors or suppliers with respect to Licensed Products shall, in PVH’s sole determination, fail to abide by the Standards, CKI’s sole remedy with respect to such breach of this § 6.15.4, to the extent that CKI is not otherwise damaged as a result of such breach, shall be to terminate the License and all of the other rights granted to the Licensee under this Agreement, as provided in § 8.3 below. Nothing in this § 6.15.4 shall be deemed to confer third-party beneficiary rights upon any person, corporation, partnership or other entity.

6.16 Personnel. Licensee shall perform its obligations hereunder through a separate sub− division of the Licensee exclusively dedicated, and the employees of which shall be dedicated to the performance of the Licensee’s obligations hereunder; provided, however, that financial, logistics and other back-office support need not be exclusive, except with respect to operations of other licenses with CKI. Licensee shall employ, on an exclusively devoted basis (to operations hereunder and to operations under the CKI Jeans License and CKI Jeans and ‘‘bridge’’ Accessories Licenses), a ‘‘President’’ who is subject to the initial reasonable approval of CKI, as is any successor thereto, as well as other personnel as may be needed to successfully exploit the business. Managing Directors may be substantially devoted to the operations hereunder as well as to other Fingen S.p.A. and affiliated entities, business and operations. Such personnel would include sales, merchandising, technical, product development and other production, visual display, quality control and retail development personnel. CKI may, on an ongoing basis, advise Licensee of any problems or difficulties, if any, it may be experiencing, and Licensee will use all reasonable efforts to address any such concerns to CKI’s reasonable satisfaction.

ARTICLE VII.    THE LICENSED MARK

7.1 Rights to the Licensed Mark.

7.1.1 Ownership of Licensed Mark. The Licensee acknowledges that the Calvin Klein Trademark Trust (‘‘CKTT’’) is the owner, and CKI is the beneficial owner, of all right, title and interest in and to the Licensed Mark, and to any variant, modification or embodiment thereof, for Products in the Territory; and that CKTT and CKI also own the goodwill related to such marks and to the business and goods in relation to which such marks have been or will be used. The Licensee will not at any time directly or indirectly do or suffer to be done any act or thing that might in any way adversely affect any rights of CKTT or CKI in and to any of such marks, any registrations thereof

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or any applications for registration thereof, or which might reduce the value thereof or detract from their reputation, image or prestige of that of CKTT, CKI or Mr. Calvin Klein. Sales by the Licensee shall be deemed to have been made by CKTT for purposes of trademark registration and all uses of the Licensed Mark by the Licensee and any and all goodwill generated by use of the Licensed Mark shall inure to the benefit of CKI and CKTT.

7.1.2 No Adverse Actions. The Licensee shall not, at any time, do, or otherwise suffer to be done, any act or thing which may at any time, in any way, adversely affect any rights of CKI or CKTT in and to the Licensed Mark or any registrations thereof or which, directly or indirectly, may reduce the value of the Licensed Mark or detract from its reputation. The Licensee shall not file or prosecute a trademark or service mark application or applications to register the Licensed Mark or any trademark, name or other mark confusingly similar thereto in respect of the Licensed Products or any other goods or services in the Territory or elsewhere. The Licensee shall not, during the term of the License Period or thereafter, (i) contest CKTT’s or CKI’s title, right, ownership or other interest in or to the Licensed Mark in any jurisdiction or attack the validity of the License or the Licensed Mark or (ii) contest the fact that the Licensee’s rights under this Agreement (a) are solely those of a manufacturer, licensee and, if appropriate, distributor; and (b) subject to the provisions of § 8.5, cease upon termination of the License Period.

7.1.3 Registrations. The Licensee acknowledges and agrees that CKTT, as the sole and exclusive owner of the Licensed Mark, has the exclusive right to apply for registrations and to extend appropriate registrations of the Licensed Mark for all categories of goods, including, without limitation, the Products. CKI, on behalf of CKTT, shall maintain at its expense and as determined by CKI consistent with its past practice the registrations for the currently existing Licensed Mark in the Territory with respect to Products. The Licensee agrees to cooperate with CKTT and/or CKI in the preparation, filing and prosecution of applications for registration, or extensions of existing registrations, or other documentation relative to the Licensed Mark. CKI represents that CKTT has applications and registrations for the ‘‘CK/CALVIN KLEIN’’ mark for products in International Class 25 (apparel) in a number of jurisdictions in the Territory, as per schedule to be attached.

7.1.4 Survival. The provisions of this § 7.1 shall survive the termination of the License Period and this Agreement.

7.2 Protecting the Licensed Mark. The Licensee shall cooperate fully and in good faith with CKI and CKTT for the purpose of securing, preserving and protecting CKTT’s and CKI’s rights in and to the Licensed Mark and any secondary trademark that the Licensee may develop and use with the approval of CKI. Any such secondary mark will be owned by CKTT. At the request of CKI, the Licensee shall execute and deliver to CKI any and all documents and do all other acts and things which CKI and/or CKTT deems necessary or appropriate to make fully effective or to implement the provisions of this Agreement relating to the ownership or registration of the Licensed Mark, including, without limitation, information regarding use and supporting documentation therefore, as well as labels, hang tags, packaging, and other appropriate specimens evidencing use of the Licensed Mark in each country in the Territory.

7.3 Use of the Licensed Mark.

7.3.1 Compliance with Legal Requirements. The Licensee will use the Licensed Mark in the Territory strictly in compliance with the legal requirements therein. The Licensee shall duly display all other notices with respect to the Licensed Mark, on the Licensed Products and otherwise, as are or may be required by the trademark laws and regulations applicable within the Territory. Upon expiration or termination of the License for any reason whatsoever, the Licensee will execute and deliver to CKI any and all documents required by CKI.

7.3.2 Use with Other Name. The Licensee shall not (a) co-join any name or names with the Licensed Mark, (b) use the name ‘‘Calvin Klein’’ or ‘‘CK’’ or ‘‘CK/Calvin Klein’’ or any portion or derivative thereof in its corporate name except as previously approved or subsequently approved by

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CKI in writing, or (c) use any other name, or names in connection with the Licensed Mark, in any advertising, promotion, publicity, labeling, packaging or other printed matter of any kind in connection with the distribution or sale of Licensed Products except as may be approved in writing by CKI. Any use of the Licensee’s corporate name or that of its Affiliates in connection with the Licensed Mark will be subject to the approval of CKI. If CKI approves any use of the Licensed Mark in connection with the Licensee’s corporate name, the Licensee will clearly indicate that the Licensee is using the Licensed Mark pursuant to a license from CKI as may be required by CKI. The Licensee will use such trade name to designate the operations under this Agreement as is approved by CKI, and will file a fictitious name certificate (‘‘d/b/a’’) or use of ‘‘trade name’’ certificate or notice, as is generally used or required in the various jurisdictions in the Territory to reflect such use, as is reasonably approved by CKI).

7.3.3 Execution of Documents. At CKI’s request, the Licensee will execute any and all documents (including registered user agreements) and take any actions required by CKI to confirm CKTT’s ownership or CKI’s beneficial ownership of the marks referred to in §7.1.1 and the respective rights of CKTT, CKI and the Licensee pursuant to this Agreement.

7.4 Ownership of Copyright. Except as specifically provided herein, any copyright which may be created in any sketch, design, print, Label or the like designed or approved or used with the Licensed Mark by the Licensee will be the property of CKI. The Licensee shall not, at any time, do, or otherwise suffer to be done, any act or thing which may adversely affect any rights that CKI may have in such sketches, designs, prints, Labels and the like and will, at CKI’s request, do all things reasonably required by CKI to preserve and protect said rights.

7.5 Infringements, Counterfeits and Parallel Imports.

7.5.1 Infringements. In the event that Licensee learns of any infringement or imitation of the Licensed Mark with respect to Products (other than insignificant, immaterial or de minimus situations) which it believes could be considered a counterfeit of the Licensed Products, or of any use by any person of a trademark similar to the Licensed Mark with respect to Products which it believes could be considered a deliberate use of something substantially similar to the Licensed Mark and is either substantive, significant or would adversely affect the prestige, reputation or value of the Licensed Mark), it will promptly notify CKI thereof. The Licensee will take no action, including, but not by way of limitation, settling any action, appealing any adverse decision or discontinuing any action taken by it, except to the extent the same is approved in advance by CKI. All costs and expenses incurred in any action or proceeding (including investigatory expenses and attorneys’ fees, if applicable, court costs and filing fees) will be borne as determined in § 7.5.2. Any damages recovered or sums obtained in settlement in or with respect to any action shall (i) first be applied proportionately to reimburse CKI and the Licensee for the respective expenses incurred and actually paid by it and (ii) the balance, if any, shall belong and shall be paid over to, on a fifty-fifty basis, to CKI and the Licensee. In no event will any infringement by a third party justify the withholding of any payment of Fee or other amount by the Licensee.

7.5.2 Counterfeits and Parallel Imports.

7.5.2.1 The Network. CKI currently maintains certain staff which maintains an enforcement network of attorneys, investigators and customs inspectors in the Territory (the ‘‘Network’’) to minimize and deter (i) the diversion into and sale within and from the Territory of products (including those which would correspond to Licensed Products) authorized for sale by its Affiliates and other licensees, which may include, without limitation, unauthorized distribution of such products by the manufacturers and subcontractors thereof (‘‘Parallel Imports’’) and (ii) the importation into, or sale or manufacture within as well as from, the Territory of counterfeit Licensed Products or infringing Products; in each case subject to contributions from and reimbursement by various licensees (as well as other authorized users of the Licensed Mark and other marks of CKI and CKTT), and subject to applicable law. CKI generally requires, and will continue to require, its licensees in their respective agreements to restrict exports from their respective ‘‘territories’’ (as per the final sentence of § 1.1.2)

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in order to prevent importation of applicable merchandise into another licensee’s ‘‘territory.’’ The Licensee acknowledges and agrees that CKI is under no obligation to maintain any such Network or other arrangement, and may curtail, modify, terminate or discontinue such Network in whole or in part at any time. For the time being, unless or until CKI otherwise determines and so advises the Licensee in CKI’s reasonable discretion, the Licensee will cooperate in such efforts as reasonably requested by CKI, and under procedures as CKI may agree upon with Licensee, and will timely remit and/or, as applicable, promptly reimburse out-of-pocket expenses reasonably incurred by CKI in such efforts (including, without limitation, reasonable attorneys’ fees and expenses) as follows: *** Upon the Licensee’s request, CKI will meet with the Licensee to discuss CKI’s enforcement activities and the costs associated therewith.

7.5.2.2 Diversion. The Licensee shall use all commercially reasonable efforts to minimize and deter the diversion of Licensed Products for sale outside of the Territory, including, without limitation, the unauthorized distribution of Licensed Products by the Licensee’s manufacturers and subcontractors (‘‘Diversion’’). The Licensee shall cooperate with CKI in CKI’s efforts to minimize and deter Diversion (‘‘Anti-Diversion Efforts’’). Without limiting the foregoing the Licensee shall promptly (i) provide such information as CKI may from time to time reasonably request concerning its manufacturing, subcontracting and distribution locations, activities and shipments, product and label identification systems and data and sales to and by its customers; and (ii) as provided in § 7.5.4, reimburse all agreed upon out-of-pocket expenses reasonably incurred by CKI in its Anti-Diversion Efforts (including, without limitation, reasonable attorneys’ fees and expenses).

7.5.3 Criminal Proceedings. CKI may, but need not elect to, initiate criminal or civil actions against persons or entities outside the Territory seeking to manufacture counterfeit Licensed Products or sell or ship counterfeit Licensed Products into the Territory (excluding, for this purpose, manufacturers or subcontractors described in the definitions of Diversion or Parallel Imports). The cost related to any such actions shall be borne entirely by the Licensee, if the Licensee requests that such action be taken, or by CKI, if CKI determines to take such action.

7.5.4 Enforcement Activities. CKI will consult with the Licensee in connection with the enforcement activities undertaken pursuant to this § 7.5. In connection with this § 7.5.4 through § 7.5.6, and § 7.5.2, Licensee and CKI from time to time will use reasonable efforts to apply a substantive portion of the budgeted amounts and expenditures towards more substantive, significant and/or material actions (and acts of infringement, counterfeiting, etc.) in order to enhance the effectiveness of application of resources. In addition, upon the request of the Licensee, the parties will consult one time each Annual Period to forecast CKI’s continuing and reimbursable expenses hereunder and enter into suitable arrangements as may be agreed upon with Licensee, including retainer arrangements, so that CKI may receive the Licensee’s payments in respect thereof at or shortly before such expenses are incurred.

7.5.5 Nature of Proceedings. Whenever it is not readily apparent whether actions or proceedings involve counterfeit Licensed Products, Parallel Imports or Diversion, CKI will, where practical and subject to time constraints, contact CKJE for information or input, and then reasonably determine the nature of such items in good faith (with all due caution as to ramifications of erroneous determinations as to whether ‘‘counterfeit’’ or not), taking into account all relevant information provided by the Licensee.

7.5.6 Cooperation.  The Licensee shall cooperate with CKI in all actions taken by CKI pursuant to this § 7.5, whether on its own or at the Licensee’s request, and in all criminal proceedings, as may be required or reasonably requested.

7.6 Trademark Security.

7.6.1 Counterfeit Protection. The Licensee shall use all commercially reasonable efforts to prevent counterfeiting of the Licensed Products. All Licensed Products shall bear and use any reasonable counterfeit preventive system, devices or labels, provided that Licensee may decide in its own good faith discretion, which system, devise or labels to use.

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7.7 Use of Licensed Mark on Invoices, etc. The use of the Licensed Mark by the Licensee on invoices, order forms, stationery and related materials, in advertising in telephone or other directory listings is permitted only upon CKI’s prior written approval of format in which the Licensed Mark is to be so used, the juxtaposition of the Licensed Mark with other words and phrases, and the specific trade name (and form and format thereof), the content of the copy and filing of a fictitious name certificate (‘‘d/b/a’’) or ‘‘trade name’’ certificate or notice, if using the Licensed Mark or portion (e.g., ‘‘CK’’) in such name (or other regional notice of ‘‘trade’’ name or use of the Licensed Mark) as applicable, as approved by CKI.

7.8 Monitoring. The Licensee shall use reasonable efforts to monitor the use of the Licensed Mark by the Licensee’s customers and to require its customers to advertise, display and promote the Licensed Mark in a manner consistent with the terms and conditions of this Agreement.

ARTICLE VIII.    TERM AND TERMINATION

8.1 Expiration. The License and, subject to § 8.5, the other rights granted to the Licensee hereunder shall terminate at the end of the License Period and all rights shall immediately revert to CKI.

8.2 Other Rights Unaffected. It is understood and agreed that termination of the License or other rights granted to the Licensee hereunder by CKI on any ground shall be without prejudice to any other rights or remedies which CKI may have.

8.3 Right of Termination of the License. If any of the following grounds for termination shall occur, CKI may elect, by written notice to the Licensee, to terminate

(A) upon 20 business days notice unless cured within such 20 business days in the case of any of subsections ‘‘(b)’’ through ‘‘(e)’’;

(B) in the case of subsections ‘‘(f),’’ ‘‘(g),’’ ‘‘(h)’’ (alone or with other breaches or defaults), upon 30 business days notice (without any cure period); and

(C) upon 25 business days notice, unless cured within such 25 business days, in the case of subsections ‘‘(l)’’ or ‘‘(m)’’ (provided not with other breaches or defaults under other noted subsections),

the License and other rights granted to the Licensee hereunder:

(a)  Deliberately Omitted ;

(b) The Licensee shall repeatedly sell or distribute individual items of Licensed Products (in other words, ‘‘a pattern’’ of behavior) , or shall sell at any time a significant quantity of Licensed Products in breach of CKI’s review and approval rights under § 6.2;

(c) Failure by the Licensee to perform or observe any term or covenant or agreement contained in § 11.4 or in § 4.10;

(d) The Licensee shall sell or distribute Licensed Products to retailers not approved by CKI or disapproved by CKI in accordance with or otherwise in breach of §§ 6.13 or 6.14 (unless such sale or distribution was inadvertent, and was of an insignificant quantity of products or single or isolated account, and the Licensee promptly represents to CKI in writing that steps to avoid such sales or distribution in the future are being taken (which steps are to be delineated in such writing), and are deemed acceptable to CKI’s reasonable satisfaction, and further provided that the Licensee does not repeat any such sales or distribution in breach of §§ 6.13 or 6.14 within the same Annual Period);

(e) Underpayment by the Licensee of Fees (including non-timely (i.e., on or within 15 business days of the due date) payment of any installment of Minimum Guaranteed Fees or MAE hereunder) of 7.5% or more with respect to any Annual Period, or of 5% or more with respect to any two (2) consecutive Annual Periods, unless such underpayment of fees (not MGF’s or MAE’s) was result of clerical or bank errors, or constitutes a ‘‘bona fide’’ dispute between the parties, which is the

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subject of continuing good faith efforts to ‘‘resolve,’’ not known to a responsible officer or other financial person, and promptly corrected as soon as ‘‘known’’ or so  advised by CKI);

(f) The Licensee institutes for its protection, or is made a defendant, in any proceeding under bankruptcy, insolvency, reorganization or receivership law, or the Licensee is placed in receivership or makes an assignment for benefit of creditors or is, or states that it is, unable to meet its debts in the regular course of business, and such involuntary proceedings or receiverships are not dismissed or vacated within 60 days of filing or appointment;

(g) Cessation by the Licensee of its business;

(h) The Licensee assigns, attempts to assign (entering into a binding term sheet or contingent contract or agreement, not just ‘‘discussion’’) , sublicense (without CKI’s approval), or otherwise transfers or attempts to transfer any of its rights or obligations hereunder. Any such attempted or completed assignment, sublicense or transfer (‘‘Transfer’’), whether voluntary or by operation of law, directly or indirectly, will be void and of no force or effect. For purposes of this Agreement, any transfer of all or a controlling portion or a majority of the shares of the Licensee or other ‘‘CK’’ affiliates by CK Jeanswear N.V., Fingen S.p.A., its affiliates, shall be deemed a transfer in violation of the terms hereof and prohibited as a ‘‘Transfer’’ hereunder. Prompt notice of any transfer by CK Jeanswear N.V., Fingen S.p.A. or its affiliates (other than Calvin Klein, Inc. or its successors, assignees or transferees) of more than five percent (5%) (whether over a period of time or all at once) (‘‘Notice’’) , shall be delivered to Licensor . Notwithstanding anything herein contained, a change-of-control Transfer shall be permitted if in accordance with all of the applicable provisions of the CKI/CF Group Irrevocable Consent d. 29 September 2005. In the event of any such CKI-permitted change-of-control Transfer, the provisions hereof shall apply to any ‘‘successor in interest’’ permitted Transferee (except that Notice shall apply to any transfer of more than 35% of the Transferee) . Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding upon the parties and permitted successors and assigns.

(i) A change, effect or circumstance occurs that is materially adverse to the business, condition, operations, performance or properties of Licensee’s ability to perform timely its otherwise material obligations under this Agreement , which would, with the normal passage of time, without cash infusion or other material improvement, result in liquidation, substantial discontinuance or even cessation of business (‘‘Material Adverse Effect’’) ;

(j) A final unappealable money judgement is entered against the Licensee in excess of € 2,500,000, which has not been satisfied and which would have a  Material Adverse Effect ;

(k)  Any indebtedness of the Licensee in excess of Euros €5 million is accelerated or otherwise comes due and payable before its stated maturity and is not subject to cure under the applicable instrument , which would have a Material Adverse Effect ;

(l) The failure by the Licensee to perform or observe any material term or covenant or agreement contained in this Agreement, other than those specified in §§ 8.3(a) to (k), and other than those cured to CKI’s reasonable satisfaction, within the applicable cure period (25 business days) for the second time in any Annual Period; or

(m) The repeated violation by the Licensee of any material term or covenant or agreement contained in this Agreement, other than those specified in §§ 8.3(a) to (k) and other than those cured to CKI’s reasonable satisfaction within the applicable cure period (25 business days).

8.4 Termination With Notice and Right to Cure. In the event of the failure by the Licensee to perform or observe any material term or covenant or agreement contained in this Agreement, other than those specified in § 8.3, CKI may terminate the License and the other rights granted to the Licensee under this Agreement by giving notice of termination to the Licensee (a ‘‘Notice of Termination’’), which termination shall become effective automatically unless the Licensee completely cures the breach within 30 days of the giving of the Notice of Termination unless such cure cannot be

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completed within 30 days, in which case termination will not become effective so long as the Licensee is in good faith diligently and expeditiously attempting to cure such breach, only for up to, but not beyond, 90 days.

8.5 Effect of Termination. Upon the expiration or termination of the License and the License Period for any reason whatsoever, all of the rights of the Licensee under this Agreement shall forthwith terminate and immediately revert to CKI; all Fees on sales theretofore made shall become immediately due and payable; the Licensee shall forthwith discontinue all use of the Licensed Mark, except that the Licensee may, on a non-exclusive basis, during the period (i) commencing on the date of the expiration of the License Period pursuant to § 2.1 or termination of the License because of the breach of § 3.2 and ending 4 months thereafter or (ii) commencing on the date of the termination of the License pursuant to clause (b), (c), (d) or (e) of § 8.3 and ending 4 months thereafter (unless at the advance request of Licensee, which request includes an up-to-date inventory schedule, with anticipated disposition dates, CKI in writing agrees to extend such Disposal Period for up to an additional  30, 60 or 90-day period only, in no event to exceed 6 months in aggregate) (the ‘‘Disposal Period’’), consummate all sales of Licensed Products which were firm on the date of such expiration or termination and sell the balance of the Inventory not purchased by CKI within 45 days following date of expiration or termination, and sold within the applicable Disposal Period as provided in § 8.6; provided, however, that any advertising used during the Disposal Period shall be subject to CKI’s prior written approval and such disposition of the Licensed Products shall continue to be subject to the Licensee’s obligations hereunder, including, but not limited to, payments to be made to CKI, and Fees with respect thereto shall be due on the last day of the Disposal Period. Without limiting the generality of the first clause of this § 8.5, the Licensee acknowledges that activities, including sales during the Disposal Period, are on a non-exclusive basis. Subsequent to the Disposal Period or, if none, subsequent to such termination, the Licensee shall no longer use the Licensed Mark, any variation, imitation or simulation thereof, or any trademark similar thereto; and the Licensee shall thereupon deliver to CKI, free of charge, all sketches, designs, colors and the like in its possession or control, designed or approved by CKI, and all Labels supplied by CKI in the Licensee’s possession or control. CKI shall have the option, exercisable upon notice to the Licensee within 30 days of such expiration or termination, to negotiate the purchase of Labels which have not been supplied by CKI. If such negotiations do not result in the purchase of such Labels or any part of W-I-P, the Licensee shall destroy the unused Labels and W-I-P (except for greige goods or other unidentifiable generic materials otherwise useable by Licensee) at the end of the Disposal Period or, if none, upon such termination, under the supervision of CKI, and the Licensee shall supply to CKI a certificate of destruction thereof signed by a duly authorized officer of the Licensee.

8.6 Inventory Upon Termination. Upon the expiration or termination of the License and the License Period for any reason whatsoever, the Licensee shall deliver to CKI within 15 business days a complete and accurate schedule of Inventory of Licensed Products (i.e., inventory constituting finished Licensed Products on hand at termination, work-in-process, a/k/a ‘‘W-I-P,’’ to be completed and received in warehouse within 3 months only) as of the close of business on the date of) such expiration or termination (the ‘‘Inventory Schedule’’). CKI thereupon shall have the option, exercisable by written notice to the Licensee within 15 days after its receipt of the Inventory Schedule, to purchase (or to have its designee purchase) any or all of the Inventory (other than Inventory required to consummate sales of Licensed Products which were firm on the date of such expiration or termination) for an amount *** In the event such notice is sent by CKI, CKI (or its designee) may collect the Inventory referred to therein within 90 days after CKI’s notice. CKI (or its designee) will pay for the Inventory upon collection. In the event such notice is not sent, the Licensee may dispose of the Licensed Products during any Disposal Period pursuant to § 8.5; provided, however, that such disposition shall continue to be subject to the Licensee’s obligations hereunder, including, without limitation, with respect to the payment of fees and the approval of customers and advertising. At the end of the Disposal Period, or if none, upon such termination, any Licensed Products remaining in the Licensee’s possession or control, including, without limitation, in any stores of the Licensee, shall, at

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the request of CKI, be destroyed. To the extent the Licensee completely removes the Licensed Mark from the Licensed Products, and all Labels attached to such Licensed Products, and such Licensed Products are not recognizable as a Licensed Product and cannot be distinguished from similar generic products generally available in the marketplace, such Products shall no longer be Licensed Products. CKI shall have the right at any time, and at its expense, to conduct a physical inventory of the Licensed Products then in the Licensee’s possession or control.

8.7 Freedom to License. CKI shall be free to license to others the use of the Licensed Mark in connection with the manufacture, sale, distribution and promotion of Licensed Products in the Territory upon termination or expiration of this Agreement and to enter into discussions and negotiations applicable thereto, provided only that no shipment of Licensed Products and no publication of institutional or consumer advertising of the Licensed Products pursuant to any such new license will be permitted prior to the termination or expiration of this Agreement.

8.8 Rights Personal. The License and rights granted hereunder are personal to the Licensee. No assignee for the benefit of creditors, receiver, trustee in bankruptcy, sheriff or any other officer or court charged with taking over custody of the Licensee’s assets or business, shall have any right to continue performance of this Agreement or to exploit or in any way use the Licensed Mark if this Agreement is terminated pursuant to §§ 8.3, 8.4 or 11.8, except as may be required by law.

8.9 Trustee in Bankruptcy. Notwithstanding the provisions of § 8.8, in the event that, pursuant to the applicable bankruptcy law (the ‘‘Code’’), a trustee in bankruptcy, receiver or other comparable person, of the Licensee, or the Licensee, as debtor, is permitted to assume this Agreement and does so and, thereafter, desires to assign this Agreement to a third party, which assignment satisfies the requirements of the Code, the trustee or the Licensee, as the case may be, shall notify CKI of same in writing. Said notice shall set forth the name and address of the proposed assignee, the proposed consideration for the assignment and all other relevant details thereof. The giving of such notice shall be deemed to constitute an offer to CKI to have this Agreement assigned to it or its designee for such consideration, or its equivalent in money, and upon such terms as are specified in the notice. The aforesaid offer may be accepted by CKI only by written notice given to the trustee or the Licensee, as the case may be, within 15 days after CKI’s receipt of the notice to such party. If CKI fails to deliver such notice within said 15 days, such party may complete the assignment referred to in its notice, but only if such assignment is to the entity named in said notice and for the consideration and upon the terms specified therein. Nothing contained herein shall be deemed to preclude or impair any rights which CKI may have as a creditor in any bankruptcy proceeding.

8.10  Compensation. Without limiting any right or remedy of CKI, if CKI terminates this Agreement pursuant to § 8.3, CKI shall have the right to ***

ARTICLE IX.    INDEMNIFICATION AND INSURANCE

9.1 Indemnification by the Licensee. The Licensee does hereby indemnify and hold harmless CKI, its Affiliates, including, without limitation, PVH, CKTT, and its and their current and former respective directors, officers, employees, agents, trustees, and representatives, as well as Mr. Calvin Klein, his heirs, his estate and their respective legal representatives (each, an ‘‘Indemnified Party’) from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and expenses (including allocable costs of in-house counsel)), which an Indemnified Party may incur or be obligated to pay in any third party action, claim or proceeding, for or by reason of any acts, whether of omission or commission, that may be committed by the Licensee (which for purposes of this § 9.1, includes its Affiliates, but not Guarantor) or any of their servants, agents or employees in connection with the Licensee’s performance of this Agreement, including but not limited to:

(a) to the extent permitted by law, any alleged defect in any Licensed Product, regardless of whether the action is based upon negligence or strict liability, and regardless of whether the alleged negligence is characterized as ‘‘passive’’ or ‘‘active’’;

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(b) the manufacture, labeling, sale or distribution of any Licensed Product by the Licensee;

(c) any violation of any warranty, representation or agreement made by the Licensee pertaining to a Licensed Product; or

(d) the claim of any broker, finder or agent used by the Licensee in connection with the making of this Agreement or any transactions contemplated by this Agreement.

CKI shall give the Licensee prompt written notice of any such claim or action and thereupon the Licensee shall undertake and conduct the defense of any suit so brought. In the event an appropriate action is not taken by the Licensee within 30 days of its receipt of notice from CKI, CKI shall have the right to defend such claim or action in its own name, but no settlement or compromise of any such claim or action may be made without the prior written consent of the Licensee, such consent not to be unreasonably withheld or delayed. In either case, CKI and the Licensee shall keep each other fully advised of all developments and shall cooperate fully with each other and in all respects in connection with any such defense. Such indemnification shall be deemed to apply solely to the amount of the judgement, if any, against CKI and reasonable sums paid by CKI in connection with its defense, and shall not apply to any consequential damages suffered by CKI which are not included in the aforementioned judgement. The provisions of this § 9.1 and the Licensee’s obligations hereunder shall survive any termination of the License or rescission of this Agreement.

9.2 Notice of Suit or Claim. The Licensee shall promptly inform CKI by written notice of any suit or claim against the Licensee relating to the Licensee’s performance under this Agreement, whether such suit or claim is for personal injury, involves alleged defects in the Licensed Products manufactured, sold or distributed hereunder, or otherwise.

9.3 Indemnification by CKI. CKI does hereby indemnify and hold harmless the Licensee and its Affiliates, and their respective managers, directors, members, shareholders, employees and agents from and against any and all losses, liability, damages and expenses (including reasonable attorneys’ fees, costs and expenses, but excluding consequential damages, incidental damages and lost profits) which any of them may incur or for which it may become liable or compelled to pay in any action or claim alleging: (i) CKI’s breach of any representation or warranty of CKI hereunder in § 11.1; or (ii) that the Licensee’s use of the Licensed Mark in accordance with the terms of this Agreement violates the bona fide trademark ownership rights of a third party in the United States or Canada. The Licensee will promptly notify CKI of any action or claim brought to its attention; provided, however, that the failure to promptly notify CKI shall not relieve CKI of its obligation hereunder, except to the extent (if any) that CKI actually prejudiced thereby. The provisions of this § 9.3 and the obligations of CKI set forth herein shall survive the expiration or other termination of this Agreement.

9.4 Insurance.

9.4.1 Requirement. Without limiting the Licensee’s liability pursuant to the indemnity provisions of this Agreement, the Licensee shall maintain comprehensive general liability insurance in the amount of at least *** with a broad form property damage liability endorsement. This insurance shall include broad form blanket contractual liability, personal injury liability, products and completed operations liability. Each coverage shall be written on an ‘‘occurrence’’ form.

9.4.2 General Provision. The insurance described in § 9.4.1 shall include: (i) a cross-liability endorsement naming each of CKI, CKTT, and Mr. Calvin Klein; (ii) an endorsement stating that CKI shall receive at least 30 days’ written notice prior to cancellation or non-renewal of coverage; (iii) an endorsement naming each of CKI, CKTT, and Mr. Calvin Klein as additional insureds; (iv) an endorsement stating that the insurance required by this Agreement is primary and that any insurance purchased by CKI, CKTT, or Mr. Calvin Klein shall only apply in excess of the insurance purchased by the Licensee; (v) a waiver of subrogation in favor of each of CKI, CKTT, and Mr. Calvin Klein; and (vi) an endorsement stating that each of CKI, CKTT, and Mr. Calvin Klein may recover for any loss caused CKI, its agents or employees, whether caused by the negligence (including active, passive and gross negligence) of the Licensee, or otherwise.

CONFIDENTIAL TREATMENT

9.4.3 Approved Carrier/Policy Changes. All insurance shall be obtained from primary, and financially capable and reputable, insurance companies. The Licensee shall give at least 30 days’ prior written notice to CKI of the cancellation or any modification of such insurance policy that would affect any of CKI’s, CKTT’s, or Mr. Calvin Klein’s status or benefits thereunder. This insurance may be obtained for CKI, CKTT, or Mr. Calvin Klein by the Licensee in conjunction with a policy which covers products other than the Licensed Products.

9.4.4 Evidence of Coverage. No later than 20 days from the date hereof, the Licensee shall furnish to CKI evidence, in form and substance satisfactory to CKI, of the maintenance and renewal of the required insurance copies of policies with applicable riders and endorsements) and certificates of insurance.

9.4.5 Territory. The insurance set forth in this § must cover the entire Territory to the extent available in each jurisdiction in the Territory.

ARTICLE X.    COMPLIANCE WITH LAWS

10.1 Compliance with Laws. The Licensee shall comply with all laws, rules, regulations and requirements of any governmental body which may be applicable to the operations of the Licensee contemplated hereby, including, without limitation, as they relate to the manufacture, distribution, sale or promotion of Licensed Products, notwithstanding the fact that CKI may have approved such item or conduct.

10.2 Equitable Relief. CKI shall be entitled to equitable relief by way of temporary and permanent injunction and such other and further relief at law or in equity as any court with jurisdiction may deem just and proper. The Licensee waives the requirement of the posting of a bond in connection with any application by CKI for equitable relief.

ARTICLE XI.    MISCELLANEOUS

11.1 Warranties and Representations of the Parties. Each of the parties hereby represents and warrants to the other party that: it is a corporation (or limited liability company, as applicable) duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; it has the full right, power and authority to enter into, and perform its obligations under, this Agreement; and all necessary corporate acts have been effected by it to render this Agreement valid and binding upon it.

11.2 Definitions. Each of the following terms (unless deliberately omitted) has the meaning ascribed thereto in the applicable § therein contained:

CONFIDENTIAL TREATMENT

Defined Term

Advertising Obligation

Advertising Overage

Advertising Shortfall

Affiliates

Agreed Upon Season’s Themes

Annual Period

Anti-Diversion Efforts

Annual Period

Approved Accounts

Approved Design Concepts

Approved Prototypes

Approved Seconds and Closeouts

Accounts

CKI

CKI Stores

CKTT

Close-Outs

Code

Collection

Co-operative Advertising

CRK

CRK Fee

Design Concepts

Disclosing Party

Disposal Period

Diversion

E-Commerce

Excluded Design

Gross Sales

Minimum Guaranteed Fees

Indemnified Party

Initial License Period

Inventory

Inventory Schedule

Labels

License

Licensed Mark

License Period

Licensed Products

Licensee

Licensing Forecast

Minimum Net Sales Threshold

Net Sales

Network

Non-Conforming Products

Notice of Termination

Parallel Imports

Percentage Fees

PR Overage

PR Shortfall

Products

PVH

Renewal License Period

Seconds

Standards

Territory

Time And Action Calendar

Third-Party Manufacturing

Agreement

Trademark Security Plan

Transfer

CONFIDENTIAL TREATMENT

11.3 Notices. All reports and notices required or permitted to be given under this Agreement shall be in writing and shall, unless specifically provided otherwise in this Agreement, be deemed to have been given if personally delivered or faxed (on the date of messengering or faxing), or if mailed, three business days from the date of mailing (by certified or registered mail, return receipt requested and postage prepaid), or if by overnight air courier, one business day from the date of overnight air courier handling as follows:

If to CKI, to:		Calvin Klein, Inc. 205 West 39th Street New York, New York 10018 Attention: President and Chief Operating Officer Telephone: (212) 292-9901 Facsimile: (212) 292-9933

With a copy to:		Calvin Klein, Inc. 205 West 39th Street New York, New York 10018 Attention: General Counsel Telephone: (212) 292-9652 Facsimile: (212) 764-6784

If to the Licensee, to:		CK Jeanswear Europe S.p.A. Via Provinciale Lucchese 181 50019 Sesto Fiorentino, Florence, Italy Attn.: Chief Executive Officer Telephone: +39 055 305 442 Facsimile: +39 055 310 506

If to Warnaco, to:		WF Overseas Fashion C.V. c/o Warnaco Inc. 501 Seventh Avenue New York, New York 10018 Attn: General Counsel Telephone: (212) 287-8282 Facsimile: (212) 287-8275

Requests for approvals with appropriate submissions shall be sent to the applicable party, either CRK, the President or the designated design staff member. Financial reports shall be sent to the designated party in the Finance Department. A party may change its address for receipt of notices at any time upon notice to the other party.

11.4 Assignment. The License and all rights granted to the Licensee hereunder are personal in nature, and the Licensee shall not Transfer the License, this Agreement or its rights and interest hereunder, or any part hereof, without the prior written consent of CKI, which consent may be withheld by CKI in its sole and absolute discretion.

11.5 Sublicense. The Licensee is prohibited from granting any sublicenses under this Agreement unless approved by CKI.

Licensee shall have the right to grant a distributorship or distributorships (excluding a sublicense) for limited areas or jurisdictions in the Territory), but no such distributorship shall reduce in any way Licensee's obligations hereunder nor may such distributorship or any sublicense agreement be entered into unless the following terms and conditions are first satisfied:

CONFIDENTIAL TREATMENT

(i) The term of any distributorship or sublicense agreement shall be no more than five (5) years or five (5) years plus five (5) years contingent on at least compliance (with automatic termination upon termination of this Agreement);

(ii) The distributor or sublicensee must agree to comply in its activities as a distributor or sublicensee with all of the provisions of this Agreement applicable to such distribution;

(iii) The distributor or sublicensee must agree not to assign, transfer, or further grant the distributorship agreement or sublicense agreement itself or any of the rights granted to it thereunder without CKI's prior written consent; and

(iv) The distributor or sublicensee must acknowledge that each of CKI, CKTT and Mr. Calvin Klein are third-party beneficiaries, must afford CKI rights of inspection, approval and termination consistent with its rights pursuant to this Agreement, which it may exercise directly, including rights of termination, and must indemnify CKI, CKTT and Mr. Calvin Klein from liabilities and claims specifically in accordance with the provisions hereof;

(v) Licensee must deliver a copy of each distributorship and proposed sublicense agreement and must subsequently deliver a copy of each material amendment thereof, to CKI, prior to the execution thereof in the case of any proposed sublicense for review and approval, and shall deliver a conformed copy to CKI promptly after its execution and the execution of each amendment thereto;

(vi) if Licensee enters into an agreement and fails to control, pursuant to this Agreement or the terms of the distributorship agreement or sublicense agreement, the distributor or sublicense thereunder, and as a result of such failure fails to prevent a breach by such distributor or sublicensee of any provision of this Agreement or the distributorship agreement or sublicense agreement, CKI may, in addition to all of its other rights and remedies under this Agreement, require Licensee to ameliorate the effect of such breach; and

(vii)  if applicable, ***

11.6 Assignment by CKI. CKI shall have a complete and unrestricted right to Transfer any or all of its rights and interests in this Agreement, provided that such transferee is bound by all of the terms hereof, and subject to the Licensee’s right to continue to exercise all of its rights hereunder.

11.7 No Agency. The Licensee shall not represent itself as the agent or legal representative of CKI or its Affiliates for any purpose whatsoever and shall have no right to create or assume any obligation of any kind, express or implied, for or on behalf of them in any way whatsoever. CKI shall similarly not represent itself as the agent or legal representative of the Licensee or its Affiliates for any purposes whatsoever and shall have no right to create or assume any obligation of any kind, express or implied, for or on behalf of them in any way whatsoever.

11.8 Suspension of Obligations. If the Licensee shall be prevented from performing any of its obligations because of Federal governmental regulation or martial order, or by war, declared or undeclared, or other major and material calamities such as fire, earthquake, or similar Acts of God, the Licensee’s obligations shall be suspended during the period of such conditions except for payment and provided the Licensee promptly commences and proceeds diligently to ameliorate the effect. If such condition continues for a period of more than 60 days, CKI shall have the right to terminate this Agreement.

11.9 Benefit. This Agreement shall inure to the benefit of and be binding upon the parties hereto, and, subject to §§ 11.4 and 11.6, their successors and assigns. PVH, CKTT and Mr. Calvin Klein (with respect to §§ 9.1 and 9.4) shall be third-party beneficiaries of this Agreement and, whether or not expressly set forth herein, shall have the right (a) to exercise, and enforce against the Licensee, the rights of CKI hereunder if CKI fails to exercise such rights, and (b) to exercise, and enforce against the Licensee, the same rights as CKI hereunder in addition to (and not in lieu of) any

CONFIDENTIAL TREATMENT

rights CKI has hereunder. Nothing herein shall be deemed to give the Licensee any rights to make any claim against PVH, CKTT and/or Mr. Calvin Klein.

11.10 Entire Agreement; Amendment. This Agreement, including the exhibits hereto, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and all prior agreements, contracts, promises, representations and statements between them, if any, whether written or oral, with respect thereto are merged into and superseded by this Agreement (except as specifically set forth herein). This Agreement may not be amended or modified, except in a writing signed by both parties hereto and exchanged between them.

11.11 Non-Waiver. No waiver by either party of any breach hereof or default hereunder will constitute a continuing wavier of such provision or of any other provision of this Agreement. Acceptance of payment by CKI will not be deemed a waiver by CKI of any violation of or default under any of the provisions of this Agreement by the Licensee or an election of remedies as to which any and all rights (and all remedies) are expressly reserved and retained.

11.12 Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provisions shall not be affected or impaired in any other jurisdiction, nor shall the remaining provisions contained herein in any way be affected or impaired thereby, unless CKI determines such provision was material, in which case CKI may terminate this Agreement.

11.13 Headings. The headings of the Articles and sections of this Agreement are for convenience only and in no way limit, define or affect the terms or conditions of this Agreement.

11.14 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.15 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW. (HOWEVER, DISPUTES REGARDING THE LICENSED MARK WILL BE RESOLVED IN ACCORDANCE WITH THE U.S. FEDERAL TRADEMARK LAWS AND RELATED LAWS, STATUES, RULES AND REGULATIONS OF THE UNITED STATES UNLESS THERE ARE NO U.S. FEDERAL LAWS, STATUTES, RULES OR REGULATIONS DISPOSITIVE OF SUCH DISPUTE, IN WHICH EVENT SUCH DISPUTES WILL BE RESOLVED IN ACCORDANCE WITH THE PREVIOUSLY DESCRIBED LAWS OF THE STATE OF NEW YORK.)

11.16 Jurisdiction. Any legal action or proceeding with respect to this Agreement shall be brought in the federal or state courts seated in the County of New York, State of New York and, by execution and delivery of this Agreement, each party hereby accepts for itself and in respect to its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts. The Licensee hereby irrevocably and unconditionally waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing or maintaining of any such action or proceeding in such respective jurisdictions, and specifically acknowledges and agrees that any judicial opinion and/or decision rendered, judgement award in order issued by the courts of the State of New York and/or the federal courts located therein, will be enforceable in any jurisdiction. Any such opinion, decision, judgement and/or order may be deposited in the applicable jurisdictional venue and court in Italy or elsewhere in the Territory with full force and effect as if rendered within such venue and by such judicial authority with the same full force and effect. Each party irrevocably and unconditionally consents to the service of process of the aforementioned courts in any such action or proceeding by the mailing of copies

CONFIDENTIAL TREATMENT

thereof by registered or certified mail, postage prepaid, to the other party at its address for notices provided in § 11.3, such service to become effective 30 days after such mailing.

11.17 Non-Solicitation.

(a) The Licensee agrees that ***

(b) CKI agrees that ***

11.18 Confidentiality. Each of the parties hereto acknowledges that it may receive from the other (the ‘‘Disclosing Party’’): (a) prints, designs, ideas, sketches, and other materials or information, including, without limitation; (b) financial or business information; (c) a formula, pattern, compilation, program, device, method, technique, or process; or (d) other information that in each case derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use which the Disclosing Party intends to use on or in connection with lines of merchandise other than the Licensed Products and which have not as yet found their way into the channels of distribution. The parties recognize that these materials are valuable property of the Disclosing Party. Each of the parties hereto acknowledges the need to preserve the confidentiality and secrecy of these materials and agrees to take all necessary steps to ensure that use by it, or by its contractors, will in all respects preserve such confidentiality and secrecy, while acknowledging that each of the parties works with others on product development and designs. None of the parties shall, at any time during the License Period or any time thereafter, disclose or use for any purpose, other than as contemplated by this Agreement, any confidential information and data relating to the business of the other, except as required or otherwise considered necessary in or to its business, but under its normal and customary confidentiality procedures applicable overall as to such use. Nothing herein shall be deemed to limit CKI’s rights under §§ 6.8 and 6.12. The provisions of this § 11.18 shall not apply to information that (i) is now or hereafter becomes generally available to the public, other than as a result of a breach hereof, or (ii) is obtained from a third party that, to the knowledge of the party receiving the information, is not under any obligation to keep such information confidential. Notwithstanding anything in this § 11.18 to the contrary, if any party becomes legally compelled (including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the confidential information, such party shall provide the others with prompt written notice of such requirement so that the party whose information it is may seek a protective order or other appropriate remedy. If such protective order or other remedy is not obtained, the party under compulsion to disclose the information agrees to disclose only that portion of the confidential information, which it is advised by counsel, is legally required to be disclosed, and it agrees to take all reasonable steps to preserve the confidentiality of the confidential information (including by obtaining, at the cost of the owner of the information, an appropriate protective order or other reliable assurance that confidential treatment will be accorded the confidential information). In addition, the party under compulsion to disclose the information shall not oppose any effort (and shall, if and to the extent requested by the owner of the information, cooperate with, assist and join with the owner of the information, at the expense of the owner of the information) in any action by the owner of the information to obtain a protective order or other reliable assurance that confidential treatment will be accorded the confidential information.

11.19 Cross Termination. ***

11.20 Assignment Within Warnaco Family. Following the closing of the Transaction, pursuant to which Warnaco will, in accordance with its terms, acquire the business of Operator, this Agreement may be assigned within the Warnaco family of companies in accordance with the terms as agreed by CKI and set forth in writing simultaneously herewith.

CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

CALVIN KLEIN, INC.

By: /s/ Tom Murry
Name: Tom Murry
Title: President and COO

    
CK JEANSWEAR EUROPE, S.P.A.

By: /s/ Lawrence R. Rutkowski
Name: Lawrence R. Rutkowski
Title: Vice President and Treasurer

    
WF OVERSEAS FASHION C.V.

By: Warnaco U.S., Inc., its general partner

By: /s/ Stanley P. Silverstein
Name: Stanley P. Silverstein
Title: President and Secretary

CONFIDENTIAL TREATMENT

SCHEDULE 6.13

APPROVED ACCOUNTS

CONFIDENTIAL TREATMENT

SCHEDULE 6.14

APPROVED SECONDS AND CLOSE-OUTS ACCOUNTS

CONFIDENTIAL TREATMENT

SCHEDULE S

SHAREHOLDERS

Name/Address/Position		#/% Shareholdings

CONFIDENTIAL TREATMENT

EXHIBIT T

TERRITORY

European Union at 1 May 2004, which included Austria, Belgium, Luxembourg, Netherlands, Denmark, Finland, France, Germany, Great Britain, Greece, Ireland, Italy, Portugal, Spain, Sweden, Estonia, Latvia, Lithuania, Czech Republic, Slovakia, Slovenia, Hungary, Poland, Malta, Cyprus.

Also Norway, Switzerland, Monte Carlo, Vatican City, Liechtenstein, Iceland and

Eastern Europe and Russia, consisting of:

Croatia, Bosnia-Herzegovina, Serbia, Macedonia, Bulgaria, Romania, Moldavia, Ukraine, Byelorussia, ex-C.I.S. (Russia), Georgia, Armenia, Azerbaijan, Kazakhstan and Uzbekistan.

Middle East:

Lebanon, Israel, Palestine, Jordan, Iran, Saudi Arabia, Yemen, Qatar, Kuwait, Bahrain, Oman, UAE, Egypt and Turkey.*

Africa**:

South Africa, Tunisia, Algeria, Morocco, Ivory Coast, Senegal, Nigeria.

* Not Syria, as regulations preclude protection of trademark, until registration of trademark may occur, as advised by CKI.

** N.B. — for trademark, only OAPI application/registration.

CONFIDENTIAL TREATMENT

EXHIBIT P

PRODUCTS

Products shall mean:

***

CONFIDENTIAL TREATMENT

EXHIBIT B

ROYALTY STATEMENT

FORM MUST BE SUBMITTED COMPLETED

CALVIN KLEIN, INC.

Page

             of             

Date

NAME OF LICENSEE:

LICENSEE’S ADDRESS:

LICENSED PRODUCT:

205        For each month during the period of      to           (the ‘‘Period’’).

For the month of            .

Category

Style No.

Units

Gross Sales

Discounts

Net Sales

Percentage Fees

For the month of            .

Category

Style No.

Units

Gross Sales

Discounts

Net Sales

Percentage Fees

For the month of            .

Category

Style No.

Units

Gross Sales

Discounts

Net Sales

Percentage Fees

TOTAL

205	NET SALES BY ACCOUNT

205	INVENTORY AS OF THE END OF THE PERIOD:

Style Number				Units				Wholesale Price

CONFIDENTIAL TREATMENT

The undersigned,          the          of the Licensee, does hereby certify that the foregoing information provided to CKI pursuant to the License Agreement is complete and accurate.

IN WITNESS WHEREOF, the undersigned has executed this Royalty Statement on this    day of        ,   .

LICENSEE :

By:______________________________________

Name:

Title: Chief Financial Officer or other duly authorized executive officer as applicable

The completion of this statement does not limit the Licensee’s right to receive credit for payments of Minimum Guaranteed Fees and Percentage Fees as set forth said License Agreement.

CONFIDENTIAL TREATMENT

EXHIBIT D

THIRD-PARTY
MANUFACTURING
AGREEMENT

AGREEMENT, dated        ,      , by and between              (the ‘‘Licensee’’), having an address at            , and           (the ‘‘Manufacturer’’), having an address at             .

WITNESSETH:

WHEREAS, the Licensee pursuant to a License Agreement with CALVIN KLEIN, INC. (‘‘CKI’’) has been granted a license (‘‘License’’) to use the CK/CALVIN KLEIN trademark (the ‘‘Licensed Mark’’) in connection with the distribution, sale and marketing of certain goods (‘‘Licensed Products’’);

WHEREAS, CKI, a subsidiary of Phillips-Van Heusen Corporation (‘‘PVH’’), is the licensee and beneficial owner of the trademarks CALVIN KLEIN, CK and CK/CALVIN KLEIN for certain products, which are owned of record by the Calvin Klein Trademark Trust (‘‘CKTT’’), and PVH is the owner, licensee or sublicensee of the trademarks VAN HEUSEN, IZOD, IZOD CLUB, BASS, G.H. BASS, GEOFFREY BEENE, ARROW, KENNETH COLE NEW YORK, REACTION BY KENNETH COLE, BCBG MAX AZRIA and DKNY, and PVH’s policy is not to place, and to cause its subsidiaries and their respective licensees and sublicensees not to place, orders with any manufacturer or subcontractor that breaches the provisions contained in this Agreement and similar provisions contained in other third-party manufacturing agreements of PVH or any of its affiliates, including, without limitation, CKI;

WHEREAS, the License entitles the Licensee to subcontract the manufacture and/or assembly of the Licensed Products to third parties, subject to certain express limitations and conditions; and

WHEREAS, the Licensee has selected the Manufacturer as a manufacturer to produce the Licensed Products for the Licensee subject and pursuant to the terms and conditions set forth below;

NOW, THEREFORE, the parties hereby agree as follows:

1. The Manufacturer shall have no rights in or to the Licensed Mark or in any mark similar thereto by reason of its manufacture of the Licensed Products and shall only use the Licensed Mark in strict accordance with the Licensee’s instructions.

2. The Manufacturer recognizes the validity of the Licensed Mark and will take no action, either during the term of this Agreement or at any time thereafter, in derogation of CKI’s and/or CKTT’s entire right and interest in and to the Licensed Mark or any value thereof or prestige related thereto. The Manufacturer will not, either during the term of this Agreement or at any time thereafter, oppose, petition to cancel or otherwise interfere with any registration CKI or CKTT has now or may obtain in the future for the Licensed Mark.

3. The Manufacturer will manufacture and sell the Licensed Products and/or assemble the Licensed Products and will deliver them only to the Licensee or to the Licensee’s authorized representative or agents. Any and all Licensed Products produced by the Manufacturer which do not meet the Licensee’s quality standards or result from overruns or cancellations of the Licensee’s orders (collectively, ‘‘Rejected Products’’) will be strictly accounted for and physically maintained, at the Manufacturer’s sole expense, in the Manufacturer’s warehouse or such other place as may be under the Manufacturer’s exclusive access and control. Rejected Products not bearing the Licensed Mark or any identifying logo may be sold to any third party;provided; however, that all labels, hang tags, and other identifying marks must be removed from such Rejected Products before sale to such a third party. Rejected Products bearing the Licensed Mark or any identifying logo may be sold to any third

CONFIDENTIAL TREATMENT

party; provided, however, that (A) such Rejected Products must be held for a minimum period of three months after the original ship date of the Licensee’s purchase order, and (B) all labels must be cut and the Product clearly and significantly stamped ‘‘irregular’’ before sale to such a third party. ^*1 *

4. The Manufacturer will follow the specifications and standards from time to time stipulated by the Licensee and will permit the Licensee, CKI and PVH to inspect the manufacturing processes and provide samples of the Licensed Products in order for the Licensee, CKI or PVH, as the case may be, to satisfy itself that the specifications and standards are being met.

5. The Manufacturer acknowledges that the Licensee may provide it with certain prints, designs, ideas, sketches and other materials or trade secrets which may or will be used in connection with the Licensed Products and/or lines of merchandise other than the Licensed Products which have not been announced to the public or entered the stream of commerce. The Manufacturer recognizes that such materials are exclusive and valuable property of CKI or PVH and acknowledges the need to preserve the confidentiality and secrecy of such materials. The Manufacturer agrees to take all reasonable precautions to protect the secrecy of the materials, samples and designs prior to their commercial distribution or the showing of samples of same for sale. The Manufacturer will also take all reasonable precautions to protect the secrecy of the original designs created either by CKI, PVH or the Licensee for Licensed Products prior to their advertisement, commercial distribution or the showing of samples for sale. During the term of this Agreement, the Manufacturer will not disclose or use for any purpose not contemplated by this Agreement any confidential information or data that is proprietary to CKI, PVH or the Licensee.

6. The Manufacturer shall institute procedures to control the storage, requisition from storage and use all labels, packages and other materials bearing the Licensed Mark to safeguard against the escape or unauthorized use of the Licensed Mark or Licensed Products.

7. The Manufacturer will adhere to the standards and guidelines set forth in PVH’s publication ‘‘A Shared Commitment — Requirements for Suppliers, Contractors, Business Partners’’ and PVH’s ‘‘Statement of Corporate Responsibility,’’ copies of which the Manufacturer acknowledges it has received. The Manufacturer further acknowledges that it has read and understands such publications. The Manufacturer will communicate immediately to the Licensee

any departure from such standards and guidelines. The Manufacturer acknowledges that compliance with such standards and guidelines is a prerequisite to a continuing relationship with the Licensee.

In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provisions shall not be affected or impaired in any other jurisdiction, nor shall the remaining provisions contained herein in any way be affected or impaired thereby.

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PRINCIPALS OF CONFLICTS OF LAW.

1	**Bracketed language should be deleted where agreement is with subcontractor.

CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

LICENSEE:

By:____________________________
    Name:
    Title:

MANUFACTURER:

    
By:____________________________
    Name:
    Title:

CONFIDENTIAL TREATMENT

EXHIBIT E

PRODUCTION FACILITY EVALUATION FORM

FORM MUST BE SUBMITTED COMPLETED

CALVIN KLEIN, INC.

Page

         of         

Date

NAME OF LICENSEE:
LICENSEE’S ADDRESS:

LICENSED PRODUCT:

PRODUCTION FACILITY:

Name:____________________________________________________________________

Name of President of Production Facility______________________________________________

Address:                                                                                                                         &nbs ;                                          

Product:                                                                                                                         &nbs ;                                            

Date Factory Evaluation Completed:                                                                                                                    

Signed:                         

                   (Note: Must be signed by an authorized officer of the division producing Licensed Products)

                    (Print Name)

                                                                                Submit to the attention of:

    
CALVIN KLEIN, INC.
205 West 39^th Street
New York, NY 10018
Attention:

CONFIDENTIAL TREATMENT

Deirdre Miles-Graeter 10 May 2005

SCHEDULE OF ISSUED REGISTRATIONS AND
PENDING APPLICATIONS FOR ‘‘CK/CALVIN KLEIN’’ TRADEMARKS IN CLASS 25

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

Algeria

16 Aug 95

Reg. No. 49384

18,25 (CK/Calvin Klein)

30 Dec 95

Reg. No. 50097

18,25 (CK/Calvin Klein)

Armenia

14 Oct 98

Reg. No. 3633

18,25 (CK/Calvin Klein)

21 Apr 97

Reg. No. 4134

24,25,42 (CK/Calvin Klein)

Austria

11 Oct 93

Reg. No. 153,247

18,24,25 (CK/Calvin Klein)

Azerbaijan

10 Jun 99

Reg. No. 990586

18,25 (CK/Calvin Klein)

Bahrain

31 May 95

Reg. No. 18853

25(CK/Calvin Klein)

Byelorussian

18 Dec 97

Reg. No. 7637

18,25 (CK/Calvin Klein)

24 Apr 97

Ser. No. 970,704

24,25,42 (CK/Calvin Klein)

Bulgaria

23 May 95

Reg. No. 27675

3,18,24,25 (CK/Calvin Klein)

Croatia

28 Jun 95

Reg. No. Z-951067

18,25 (CK/Calvin Klein)

18 Mar 93

Reg. No. Z-930655

3,25(re-reg Yugoslav#34173)

CTM

1 Apr 96

Reg. No. 66712

3,4,8,9,14,16,18,20,21, 24,25,26,27,35,42(CK/Calvin Klein)

21 Aug 97

Reg. No. 617415

9,25 (CK/Calvin Klein)

Cyprus

5 Mar 96

Reg. No. 44740

25 (CK/Calvin Klein)

Czech Republic

27 Mar 97

Reg. No. 198,533

9,18,25 (CK/Calvin Klein)

Denmark

10 Dec 93

Reg. No. 08562/1993

3,18,25 (CK/Calvin Klein)

Egypt

18 Apr 95

Reg. No. 95389

25 (CK/Calvin Klein)

Estonia

21Feb97

Reg. No. 22535

18,25(CK/Calvin Klein)

Finland

6Feb95

Reg. No. 136190

18,25 (CK/Calvin Klein)

France (St. Martin, St. Barthelomy, French Guiana & other French Antilles)

25 Aug 93

Reg. No. 93/481421

25 (CK/Calvin Klein)

Georgia

30 Apr 98

Reg. No. 9139

18,25 (CK/Calvin Klein)

7 Jul 98

Reg. No. 9934

24,25,42 (CK/Calvin Klein)

Germany

5 Jul 94

Reg. No. 2070077

25 (CK/Calvin Klein)

Greece

26 Oct 93

Reg. No. 116,446

18,25 (CK/Calvin Klein)

19 Sep 96

Reg. No. 130,753

9,25 (CK/Calvin Klein)

Hungary

15 Nov 95

Reg. No. 145,249

18,25 (CK/Calvin Klein)

Iceland

27 Apr 94

Reg. No. 284/1994

18,25 (CK/Calvin Klein)

CONFIDENTIAL TREATMENT

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

Iran

4 May 96

Reg. No. 79864

18,25 (CK/Calvin Klein)

Ireland

21 Sep 93

Reg. No. 157,276

25 (CK/Calvin Klein)

21 Aug 97

Reg. No. 208,239

8,21,25,26,27,35 (CK/Calvin Klein)

Israel

4Feb97

Reg. No. 98092

25 (CK/Calvin Klein)

Italy

12 Apr 96

Reg. No. 675,586

25 (CK/Calvin Klein)

Jordan

8 May 95

Reg. No. 37965(r)

25 (CK/Calvin Klein)

Kazakhstan

1 Oct 97

Reg. No. 6157

18,25(CK/Calvin Klein)

24Feb99

Reg. No. 8324

24,25,35,42 (CK/Calvin Klein)

Kuwait

30 Nov 96

Reg. No. 31697

25 (CK/Calvin Klein)

Latvia

20 Aug 97

Reg. No. LV M-37968

18,25 (CK/Calvin Klein)

Lebanon

14 Jun 95

Reg. No. 66134

18,25 (CK/Calvin Klein)

Liechtenstein

24Feb95

Reg. No. 9322

18,25 (CK/Calvin Klein)

Lithuania

25 Aug 95

Reg. No. LT-31807

18,25(CK/Calvin Klein)

Malta & Gozo

8 May 96

Reg. No. 25650

25 (CK/Calvin Klein)

Morocco

22 Aug 95

Reg. No. 57300

18,25(CK/Calvin Klein)

1 Mar 96

Reg. No. 58871

3,4,8,9,14,16,18,20,21,24,25,26, 27,35,42(CK/Calvin Klein)

Nigeria

9 Dec 93

Reg. No. 57750

25 (CK/Calvin Klein)

Norway

10 Nov 94

Reg. No. 165,458

25 (CK/Calvin Klein)

*OAPI

24 Nov 95

Reg. No. 35745

18,25 (CK/Calvin Klein)

Oman

29 May 96

Reg. No. 13673

25 (CK/Calvin Klein)

Poland

28 May 99

Reg. No. 106459

18,25 (CK/Calvin Klein)

Portugal

15 Dec 94

Reg. No. 295,319

25(CK/Calvin Klein)

Qatar

11 Jun 02

Reg. No. 13233

25 (CK/Calvin Klein)

Romania

16 Aug 95

Reg. No. 24051

18,25 (CK/Calvin Klein)

Russian Federation (former USSR)

18 Jul 97

Reg. No. 154,946

18,24,25 (CK/Calvin Klein)

15 Sep 98

Reg. No. 167,772

24,25,42 (CK/Calvin Klein)

(Republic of) Saudi Arabia

11 Sep 94

Reg. No. 319/11

25 (CK/Calvin Klein)

Slovak Republic

28 Jan 99

Reg. No. 184071

18,25(CK/Calvin Klein)

Slovenia

20 Dec 96

Reg. No. 9570583

18,25 (CK/Calvin Klein)

CONFIDENTIAL TREATMENT

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

South Africa (Covers Venda Transkei & Bophuthatswana)

24 Apr 95

Reg. No. B95/05079

25 (CK/Calvin Klein)

Spain

20 Apr 94

Reg. No. 1,786,568

25 (CK/Calvin Klein)

Sweden

28 Jul 95

Reg. No. 303,850

25 (CK/Calvin Klein)

Switzerland

5 Oct 93

Reg. No. 416,838

18, 25 (CK/Calvin Klein)

Tunisia

23 May 96

Reg. No. EE96.0642

3,9,14,16,18,24,25,26,

27,35,42 (CK/Calvin Klein)

Turkey

16Feb96

Reg. No. 167310

25(CK/Calvin Klein)

United Arab

Emirates

24 Nov 97

Reg. No. 13022

25 (CK/Calvin Klein)

United Kingdom

19 Aug 00

Reg. No. 1,545,492

25 (CK/Calvin Klein)

16 Jun 98

Reg. No. 2,169,731

25,35,42(CK/Calvin Klein)(ext goods)

Ukraine

12 Nov 99

Reg. No. 13942

18,25(CK/Calvin Klein)

18 Apr 97

Reg. No. 17758

24,25,42 (CK/Calvin Klein)

Uzbekistan

4 Jul 95

Reg. No. 5832

18,25 (CK/Calvin Klein)

West Bank (Palestine)

7 Mar 96

Reg. No. 4118

25 (CK/Calvin Klein)

Yemen

15 Jan 98

Reg. No. 8333

25 (CK/Calvin Klein)

*OAPI-Benin Guinea, Burkina Faso(formerly Upper Volta), Cameroon, Central African Republic,
Chad, Congo, Gabon, Guinea Bissau(Conakry),Guinea Bissau, Ivory Coast, Mali, Mauritania, Niger, Senegal, Togo

EX-10.69

EXHIBIT 10.69

PORTIONS OF THIS EXHIBIT 10.69 MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

CONFIDENTIAL — NEITHER THIS DOCUMENT, ITS TERMS OR PROVISIONS OR THE RELATIONSHIP CONTEMPLATED THEREIN IS TO BE DISCUSSED OR USED WITHOUT THE CONSENT OF CALVIN KLEIN, INC. OR WF OVERSEAS FASHION C.V. A DRAFT DOES NOT CONSTITUTE AN OBLIGATION OF THE PARTIES. NO BINDING AGREEMENT WILL RESULT UNLESS A DEFINITIVE WRITTEN AGREEMENT IS EXECUTED AND DELIVERED BY THE PARTIES. THERE IS NO OBLIGATION TO EXECUTE ANY SUCH AGREEMENT.

LICENSE AGREEMENT

BETWEEN

CALVIN KLEIN, INC.

AND

CK JEANSWEAR EUROPE S.P.A.

AND

WF OVERSEAS FASHION C.V.

CONFIDENTIAL TREATMENT

TABLE OF CONTENTS

ARTICLE I. GRANT
1.1License
1.1.1Exclusion of Retail Sales
1.1.2Right to Manufacture
1.2Reservation
1.2.1Retail Stores; Company-Controlled Stores
1.2.2E-Commerce/Promotional Goods
1.2.3Third Party Licensees
1.3Limitations
1.4Definitional Disputes
1.5Exploitation of the License
1.5.1Best Efforts
1.5.2Non-Competition
1.6Showrooms; In-Store Shops; Trade Shows
1.6.1Showrooms
1.6.2In-Store Shops
1.6.3Trade Shows
1.6.4Visual Design Personnel
ARTICLE II. LICENSE PERIOD
2.1License Period
ARTICLE III. SALES
3.1Sales/Marketing and Production Plans
3.2Deliberately Omitted
3.3Sales to CKI and its Employees
ARTICLE IV. LICENSE FEES
4.1Requirement of Fees
4.1.1Percentage Fees
4.1.2Gross and Net Sales
4.1.3Minimum Guaranteed Fees
4.1.4Allocation of Minimum Guaranteed Fees and Percentage Fees
4.2Statements
4.3Books and Records
4.4Underpayments
4.5Manner of Payment
4.6Interest on Late Payment
4.7No Set-Off
4.8Taxes
4.9Financial Statements
4.10Financial Covenants
ARTICLE V. ADVERTISING
5.1Advertising
5.1.1Initial Support/Reimbursement
5.1.2 Advertising Obligation
5.1.3CRK Fee
5.1.4Co-operative Advertising and Public Relations
5.2‘Usage’

CONFIDENTIAL TREATMENT

5.3Approval of Materials, Activities
5.4Samples
ARTICLE VI. QUALITY AND STANDARDS
6.1Distinctiveness and Quality of the Licensed Mark
6.1.1Consistency with Other Products
6.2Design
6.2.1Time and Action Calendar
6.2.2Themes
6.2.3Design Concepts
6.2.4Certain Other Approvals
6.2.5CKI Designs
6.2.6Prototypes
6.2.7Final Approval and Sales
6.3Manufacture of Licensed Products by Third Parties
6.4Non-Conforming Products
6.5Approvals
6.6Marketing, Labeling, Packaging, Promotions, Business Materials
6.7Inspection of Facilities
6.8Samples and Artwork
6.9Know-how
6.10Meetings
6.11Design Direction
6.12Design Rights
6.13Shops, Stores, Retail Outlets
6.14Disposal of Seconds and Close-Outs
6.14.1Seconds
6.14.2Close-Outs
6.15Standards of Conduct
6.15.1    Standards
6.15.2    Audit Requirement
6.15.3    Approval
6.15.4    Use of Facility
6.16Personnel
ARTICLE VII. THE LICENSED MARK
7.1Rights to the Licensed Mark.
7.1.1Ownership of Licensed Mark
7.1.2No Adverse Actions
7.1.3Registrations
7.1.4Survival
7.2Protecting the Licensed Mark.
7.3Use of the Licensed Mark
7.3.1Compliance with Legal Requirements
7.3.2Use with Other Name
7.3.3Execution of Documents
7.4Ownership of Copyright
7.5Infringements, Counterfeits and Parallel Imports
7.5.1Infringements
7.5.2Counterfeits and Parallel Imports

CONFIDENTIAL TREATMENT

7.5.2.1    The Network
7.5.2.2    Diversion
7.5.3Criminal Proceedings
7.5.4Enforcement Activities
7.5.5Nature of Proceedings
7.5.6Cooperation
7.6 Trademark Security
7.6.1Counterfeit Protection
7.7Use of Licensed Mark on Invoices, etc.
7.8Monitoring
ARTICLE VIII. TERM AND TERMINATION
8.1Expiration
8.2Other Rights Unaffected
8.3Right of Termination of the License
8.4Termination With Notice and Right to Cure
8.5Effect of Termination
8.6Inventory Upon Termination
8.7Freedom to License
8.8Rights Personal
8.9Trustee in Bankruptcy
8.10Compensation
ARTICLE IX. INDEMNIFICATION AND INSURANCE
9.1Indemnification by the Licensee
9.2Notice of Suit or Claim
9.3Indemnification by CKI
9.4 Insurance
9.4.1Requirement
9.4.2General Provision
9.4.3Approved Carrier/Policy Changes
9.4.4Evidence of Coverage
9.4.5Territory
ARTICLE X. COMPLIANCE WITH LAWS
10.1Compliance with Laws
10.2Equitable Relief
ARTICLE XI. MISCELLANEOUS
11.1Warranties and Representations of the Parties
11.2Definitions
11.3Notices
11.4Assignment
11.5Sublicense
11.6Assignment by CKI
11.7No Agency
11.8Suspension of Obligations
11.9Benefit
11.10Entire Agreement; Amendment
11.11Non-Waiver
11.12Severability
11.13Headings

CONFIDENTIAL TREATMENT

11.14Counterparts
11.15Governing Law
11.16Jurisdiction
11.17Non-Solicitation
11.18Confidentiality
11.19Assignment Within Warnaco Family

SCHEDULES
SCHEDULE 6.13				APPROVED ACCOUNTS
SCHEDULE 6.14				APPROVED SECONDS AND CLOSE-OUTS ACCOUNTS
EXHIBIT S				SHAREHOLDERS
EXHIBITS
EXHIBIT T				TERRITORY
EXHIBIT P				PRODUCTS
EXHIBIT B				ROYALTY STATEMENT
EXHIBIT D				THIRD-PARTY MANUFACTURING AGREEMENT
EXHIBIT E				PRODUCTION FACILITY EVALUATION FORM

SCHEDULE OF ISSUED REGISTRATIONS AND PENDING APPLICATIONS FOR ‘‘CK/CALVIN KLEIN’’ TRADEMARKS IN CLASS 25

CONFIDENTIAL TREATMENT

LICENSE AGREEMENT

LICENSE AGREEMENT, dated as of January 31, 2006, between CALVIN KLEIN, INC. (‘‘CKI’’), a New York corporation, CK JEANSWEAR EUROPE S.P.A., an Italian corporation (‘‘CKJE’’ or ‘‘Licensee’’) and WF Overseas Fashion C.V., a limited partnership (‘‘commanditaire vennootschap’’) organized and existing under the laws of the Netherlands (‘‘Warnaco’’).

WITNESSETH:

WHEREAS, Licensee desires to obtain from CKI, and CKI is willing to grant to the Licensee, a license in the Territory (as hereinafter defined), to use the trademark "CK/CALVIN KLEIN" to be used in the form designated by CKI from time to time (‘‘Licensed Mark’’) in connection with the manufacture, wholesale sale, distribution, advertising and promotion of bridge women’s belts, leather gloves, handbags and small leather goods (accessories), and men’s belts, leather gloves, hand bags and small leather goods, as specifically described on Exhibit P (the ‘‘Products’’), subject to the terms contained in this Agreement. Products bearing the Licensed Mark are hereinafter referred to as ‘‘Licensed Products.’’

WHEREAS, Warnaco U.S., Inc. a Delaware corporation, is the general partner of WF Overseas Fashion C.V., and, solely in such capacity, is executing this Agreement on behalf and for the exclusive risk and benefit of WF Overseas Fashion C.V.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I. GRANT

1.1    License.    CKI hereby grants to the Licensee an exclusive license (the ‘‘License’’), without the right to assign, and the right to sublicense with CKI’s prior written consent exercisable in CKI’s sole and absolute discretion and subject to and in accordance with the terms contained in this Agreement, to use the Licensed Mark, during the License Period in connection with the manufacture and sale, distribution, advertising, and promotion in the ‘‘Territory,’’ set forth on Exhibit T, of Licensed Products to approved customers ***

1.1.1    Exclusion of Retail Sales.    The License excludes the sale, distribution, and promotion of Licensed Products via commerce conducted on, made available through, or facilitated by *** or upon the prior approval of CKI, which CKI may withhold in its sole and absolute discretion, The License also excludes the right to *** only as approved by CKI, and except as permitted as to such Licensed Products pursuant to other agreements between the parties (and their affiliates). However, the foregoing does not***

1.1.2 Right to Manufacture. The Licensee’s right to manufacture in the Territory and elsewhere in the world is non-exclusive (others may and will have the right to produce Products within the Territory for export and sale outside the Territory). Licensee shall have the right to import into the Territory Licensed Products manufactured outside the Territory; provided, however, that the Licensee takes reasonable precautions to prevent all labels, tags, packaging material, business supplies and advertising and promotional materials and all other forms of identification bearing the Trademark (collectively, ‘‘Labels’’) from being used otherwise than in connection with the distribution and sale of Licensed Products within the Territory. The Licensee shall neither export Licensed Products from the Territory, nor sell Licensed Products to any entity which it knows, or reasonably should know, intends to export Licensed Products from the Territory.

1.2 Reservation.    CKI reserves all rights in and to the Licensed Mark except as specifically granted herein including, without limitation, those rights set forth in this § 1.2. CKI may exercise any of its rights, or authorize others to exercise such rights, at any time, in accordance with the terms and conditions set forth herein.

1.2.1 Retail Stores; Company-Controlled Stores.    CKI reserves the right to *** However, CKI shall, in connection with the sale, distribution and promotion of Licensed Products through the CKI

CONFIDENTIAL TREATMENT

Stores, purchase Licensed Products from the Licensee, at mutually agreed upon prices, terms and conditions, provided that Licensee timely produces, ships and delivers such Licensed Products in quantities as may be required by CKI. If (i) Licensee cannot sell or supply any Licensed Products due to a continuing force majeure event or other event outside of Licensee’s reasonable control (i.e., more than thirty calendar days) or (ii) Licensee fails to timely deliver for two consecutive quarters, the products so ordered (other than minor shortages), then during the pendency of such force majeure event or after such failures to deliver, CKI (or its Affiliates) shall have the right to manufacture or have manufactured for it by others, and to sell, distribute and promote such Licensed Products through CKI Stores for the next two years, at which time the provisions hereof shall again apply, CKI shall also require that any such retail stores in the Territory owned or operated by an authorized licensee of CKI shall purchase the Licensed Products from Licensee. The Licensee acknowledges and agrees that ***

1.2.2 E-Commerce/Promotional Goods.    CKI reserves the right to *** In the case of E-commerce arrangements covering ***

1.2.3 Third Party Licensees.    CKI may grant third parties the right to produce Products for distribution and sale outside the Territory. Licensee agrees to fully co-operate with such third parties, and upon CKI’s request, Licensee will, furnish samples of Licensed Products, provide at cost (without markup), any patterns, trim samples, samples of garments and other materials, names of contractors and sources of supply, reasonably necessary to manufacture Licensed Products as reasonably requested on a timely basis by such licensees, in accordance with such third parties’ reasonable design and production schedules and subject to appropriate confidentiality undertakings. Licensee will timely supply CKI’s distributors or other third party licensees outside the Territory, with Licensed Products for distribution in such quantities as CKI may reasonably request on such credit or other terms as Licensee may impose on its customers generally, ***

1.3 Limitations.    The Licensee understands and agrees that CKI, and its other licensees and sublicensees, may manufacture or authorize third parties to manufacture Licensed Products in the Territory for sale outside of the Territory, or to manufacture and sell or authorize third parties to manufacture and sell products of any and all types and descriptions other than the Products in or outside the Territory. In this regard, the Licensee acknowledges and agrees that products that bear some similarity of design to the Licensed Products may be manufactured, distributed or sold in the Territory in connection with the Licensed Mark by either CKI or a third party authorized to use the Licensed Mark, and the Licensee further acknowledges and agrees that such similarity of design will not be deemed a breach of or default under this Agreement. In addition, no license is granted hereunder for the manufacture, sale or distribution of the Licensed Products to be used for publicity purposes (other than publicity of the Licensed Products), in combination sales or as premiums or giveaways, or to be disposed of under or in connection with similar methods of merchandising, such rights being specifically reserved for CKI or otherwise subject to CKI’s prior review and approval. Licensee agrees that the marketing, placement and distribution of Licensed Products in the Territory may but shall not necessarily be the same as that for Products being sold in the U.S. or elsewhere in the world by CKI’s duly authorized licensee, but shall be commensurate with the marketing, placement and distribution of Licensed Products in comparison with other competitive and competitors’ ‘‘bridge’’ or ‘‘diffusion’’ lines sold both in the U.S. and the Territory.

1.4 Definitional Disputes.    The Licensee acknowledges that due to the nature of the marketplace, the definition of Products may change or may not be amenable to precise delineation. In addition, the Licensee acknowledges that CKI does have and may hereafter have, other licensees within the Territory. However, CKI will use its reasonable efforts to *** In the event of any dispute between the Licensee and any other licensee of CKI in the Territory with respect to whether particular merchandise is covered by one or the other of their respective licenses, or there is otherwise a dispute over the definition of Licensed Products, CKI shall render, based upon its reasonable (but with all due consideration given to aesthetic and quality factors) good faith judgement, commercial reasonableness, and a reasonable written determination.

CONFIDENTIAL TREATMENT

1.5 Exploitation of the License.

1.5.1 Best Efforts.    At all times during the License Period, the Licensee shall use its reasonable best efforts to exploit the License throughout each and every country the Territory, including, but not limited to: (i) selling what reasonably constitutes a full line of Products within each seasonal collection of Licensed Products (each, a ‘‘Collection’’), subject to seasonal differences, and a sufficiently representative quantity of each type of Product within each Collection; (ii) timely developing, producing and offering for sale the Licensed Products so that they may be sold and shipped to consumers on a timely basis; (iii) maintaining a sales force sufficient to provide effective distribution throughout all areas of the Territory; (iv) cooperating with CKI’s and any of its licensees’ marketing, merchandising, sales, and anti-counterfeiting programs as may be applicable, and (v) maintaining necessary financial position to adequately support the operations and obligations herein.

1.5.2 Non-Competition.    The Licensee shall devote itself and all of its employees and operations exclusively to the operations of this license and other ‘‘CALVIN KLEIN’’ operations licensed by CKI. The Licensee’s Affiliates shall not enter into or obtain from any person or entity a license in the Territory for any of the Products bearing the name of any designer or designer brand (or any derivative or formative thereof) of *** without the prior written consent of CKI and except for arrangements and agreements in effect on and as of the Effective Date of this Agreement. ***

1.6 Showrooms; In-Store Shops; Trade Shows.

1.6.1 Showrooms.    The Licensee shall maintain a separate showroom area adjacent to or within the bridge apparel showroom within the existing premises in Milan of CKI’s affiliate, Calvin Klein Europe S.r.l. (‘‘CKE’’), under a form of sublease or sharing arrangement, to be entered into by the parties. If at any time the showroom shall be relocated due to unavailability of CKE’s premises, the location shall be subject to the approval (not to be unreasonably withheld) of CKI. Furthermore, CKI may require an additional showroom area within the bridge apparel area to be established in London; and, if the parties so agree, an additional showroom in Frankfurt or another city in Germany (if any) . Such showroom area (s) shall be used for the sole purpose of displaying, promoting and selling Licensed Products. All such separate area in the showrooms shall be subject to the standards of CKI, and shall be designed and maintained in conformity with the prestige associated with the Licensed Mark. The plans for each showroom, including décor, set-up and display (and material changes thereto), and for any renovations thereto shall be subject to the reasonable prior written approval of CKI, which approval shall not be unreasonably withheld or delayed; provided, however, that CKI shall have 10 business days after its receipt of such plans to approve or disapprove such plans or such longer period as is reasonable under the circumstances. Promptly after the execution of this Agreement and the bridge apparel agreement, CKI and the Licensee will mutually agree *** The Licensee may (i) display the Licensed Mark on showroom doors and office directories and (ii) display the Licensed Products for sale in other showroom spaces, subject to the prior written approval of CKI. The parties shall meet upon request to establish a budget for required or requested renovations to the showrooms.

1.6.2 In-Store Shops.    The Licensee will participate in in-store shop or fixturing programs, with the Licensee’s customers throughout the Territory, and will spend amounts on in-store décor, refurbishments and fixturing (including development costs of consultants for design and fixturing prototypes and on sales personnel or coordinators, sufficient to ensure and the appropriate as may be applicable to enhance the presentation of Licensed Products within its retail accounts, including appropriate stocking and merchandise mix, to be developed with and under the direction of CKI (and outside consultants where required by CKI for the prototype development). Appropriate budgets for such in-store shop programs shall be developed, reviewed and agreed upon by the parties. All such programs shall be designed in conformity with the prestige associated with the Licensed Mark, and plans for any such shop-in-shop areas shall be subject to the prior written approval of CKI. In-shop décor, refurbishing and fixturing are essential to the exploitation of the License Agreement; in addition to other expenses hereunder (and not considered either a qualified Co-op or Public Relations expenditure).

CONFIDENTIAL TREATMENT

1.6.3 Trade Shows.    The Licensee shall display the Licensed Products at a separate booth space at all tradeshows attended by the Licensee to promote Products. The design of such booth shall be developed in consultation with CKI’s visual design personnel, as provided in § 1.6.4.

1.6.4 Visual Design Personnel.    The Licensee shall consult with and utilize CKI’s visual design personnel in connection with the design, development and construction of showrooms, trade show booths, fixturing, signage and any in-store shops or in-store areas for the sale of Licensed Products within the stores of the Licensee’s customers, and shall provide all funds necessary in connection therewith (including, but not limited to, reasonable per diem rates for work performed by CKI’s visual display personnel based upon estimated amounts or anticipated expenditures, as provided or discussed and agreed upon in advance, or based upon agreed-upon-in-advance budgets), it being understood and agreed that the fabrication, manufacturing, production or construction of showrooms, trade show booths and fixtures may be performed by third parties. All such design, development and construction shall be subject to CKI’s ongoing approval. Licensee will arrange for the opening of shop-in-shops within department stores and specialty stores using appropriate fixtures and signage, and to maintain seasonal visual display and ‘‘set-ups’’ of Licensed Products, as approved by Licensor, and to fully stock such shop-in-shops with an appropriate merchandise mix of Licensed Products, all as approved by CKI, pursuant to and consistent with Licensee’s shop-in-shop development program. Such in-store development programs shall be financed in a manner comparable to and commensurate with those of CKI’s competitors as to Licensed Products. CKI may periodically inspect Licensee’s showrooms, shows at trade exhibitions, and such shop-in-shops . Any such inspection will be at CKI’s expense unless CKI determines as a result of such inspection that Licensee’s showrooms, trade exhibition shows or in-store shops or in-store areas have not been maintained in accordance with CKI’s specifications, in which case Licensee will at its expense promptly make any modifications to design, layout, decor, visual display or merchandise display formats as CKI may reasonably require and will bear the costs incurred in connection therewith, including any costs incurred by CKI in connection with follow-up inspections to determine the satisfactory completion of such modifications. The Licensee shall also promptly reimburse CKI for the reasonable costs and expenses of any CKI personnel, such as visual display, advertising and public relations (other than design), with respect to services performed by CKI under this § 1.6 or otherwise requested by the Licensee based upon estimated amounts or anticipated expenditures, as provided or discussed in advance, and based upon agreed-upon-in-advance budgets. In addition, the Licensee shall pay or reimburse CKI for reasonable out-of-pocket expenses incurred by CKI or its representatives, whether for travel or otherwise, including round-trip business-class airfare or first-class airfare if provided by CKI’s internal travel policies in effect from time to time, hotel accommodations and food and local transportation, in connection with this Agreement, such as travel to Italy to review or approve prototypes, based upon estimated amounts or anticipated expenditures, as provided and discussed in advance with Licensee, and based upon agreed-upon-in-advance budgets.

ARTICLE II. LICENSE PERIOD

2.1  License Period.    The license period shall commence effective 1 January 2006, with certain preliminary design and development being initiated prior to 1 January 2006 (‘‘preliminary period’’), with the Spring 2006 season being anticipated to be the first season for which Licensed Products will be offered for sale (and the parties may initiate preliminary design and other development in contemplation thereof in order to be able to offer for sale such Spring 2006 season,but if the time for development, presentation, production, marketing and showroom is deemed by the parties to be not sufficient to timely and appropriately launch such Collection, the initial season shall be Fall 2006 (or Pre-Fall 2006). The term shall end forty (40) years from the closing of the Transaction described and defined in the Heads of Agreement dated 29 September 2005 between, inter alia, CKI and Warnaco Inc., (not to be later than 31 December 2006) on 31 December 2046, unless sooner terminated as herein provided. The period commencing 1 January 2006 and ending on 31 December 2006, including the preliminary period, and each 12-month period commencing on 1 January thereafter during the License Period are each referred to herein as an ‘‘Annual Period.’’ Notwithstanding the foregoing, the Licensee shall not commence offering Licensed Products for the Spring 2006 season unless and until CKI determines in its good-faith judgement

CONFIDENTIAL TREATMENT

(including aesthetic and creative considerations) that all elements necessary for a successful launch, including, without limitation, product design, development and production, marketing strategy, advertising materials and placement, and if applicable, launch events, have been satisfied. The term of this agreement may sometimes be referred to as the ‘‘License Period’’ or ‘‘Term.’’ 

The ‘‘Minimum Net Sales Thresholds’’ for each Annual Period are as indicated below:

Annual Period				Year				Minimum Net Sales* Thresholds (Euros, millions)
1				2006				***
2				2007				***
3				2008				***
4				2009				***
5				2010				***
6				2011				***						***
7				2012				***						***
8				2013				***						***
9				2014				***						***
10				2015				***						***
11 through 20				2016 through 2025				***						***
21 through 30				2026 through 2035				***						***
31 through 41				2036 through 2046				***						***

	* For purposes of calculating Net Sales for the MNST’s, ***

If Licensee fails to attain the minimum net sales thresholds (‘‘MNST’s’’) of Articles during any Annual Period, as set forth above (except as specifically indicated in the immediately following paragraph), ***

Notwithstanding the foregoing, if Licensee has *** Expiration or termination of the License shall not affect any obligation of the Licensee to make payments hereunder accruing prior to such expiration or termination.

ARTICLE III. SALES

3.1 Sales/Marketing and Production Plans.    Licensee shall deliver to CKI: ***

3.2 Deliberately Omitted.

3.3 Sales to CKI and its Employees.  The Licensee shall be obligated to sell Licensed Products to CKI, its Affiliates and its third-party store licensees, for sale and distribution by (i) CKI and its Affiliates through CKI Stores, via E-Commerce, or otherwise; or (ii) by its third-party store licensees, through the stores of such licensees. The Licensee acknowledges and agrees that such sales of Licensed Products shall be in quantities designated by CKI, its Affiliates, or reasonably required by its licensees, as the case may be, and shall be at the ***

ARTICLE IV. LICENSE FEES

4.1 Requirement of Fees.    All Licensed Products sold by the Licensee or its Affiliates (including those from which the Licensed Mark may have been removed, e.g., irregulars) require the payment of Fees by the Licensee to CKI as set forth in this Article IV, except as otherwise provided in § 4.1.1. ‘‘Affiliates’’ of any party means all individuals and business entities, whether corporations, limited liability companies, partnerships, joint ventures or otherwise, which now or hereafter control, or are controlled, directly or indirectly, by such party, or are under common control with such party.

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4.1.1 Percentage Fees.    In respect of each Annual Period or portion thereof during the License Period, the Licensee shall pay CKI Percentage Fees computed *** as follows:

Annual Period/Year						***				***
1    (2006)						***				***
2    (2007)						***				***
3    (2008)						***				***
4    (2009)						***				***
5 et seq (2010 et seq)						***				***

	* The rates applicable to *** as defined herein shall be as noted, provided that in each such case such ***

For sales directly at ***, as noted in § 1.2.1 or § 1.2.3.

As noted in § 1.2.1 above, the Percentage Fee shall be ***

Percentage Fees shall be accounted for and payable ***

4.1.2 Gross and Net Sales.    ‘‘Gross Sales’’ means *** "Net Sales’’ means ***

4.1.3 Minimum Guaranteed Fees.    In respect of each Annual Period or portion thereof during the License Period, the Licensee shall pay to CKI the minimum fees listed below (the ‘‘Minimum Guaranteed Fees’’ or ‘‘MGF’s’’) ***

Annual Period/Year

Minimum Guaranteed Fee (MGF) (Euros)

1(2006)

***

2(2007)

***

3(2008)

***

4(2009)

***

5(2010)

***

6 through 10 (2011 through 2015)

***

***

11 through 15 (2016 through 2020)

***

16 through 20 (2021 through 2025)

***

21 through 25 (2026 through 2030)

***

26 through 30 (2031 through 2035)

***

31 through 35 (2036 through 2040)

***

36 through 40 (2041 through 2046)

***

***

4.1.4 Allocation of Minimum Guaranteed Fees and Percentage Fees.    For purposes of CKI internal allocation, *** of the Minimum Guaranteed Fees and *** of the Percentage Fees shall be

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allocated as a royalty for the use of the Licensed Mark and the remaining *** shall be allocated as ‘‘fees’’ for the design, including the reviews and approval procedures, and other overall services under or relating to the Agreement.

4.2 Statements.    Quarterly within each Annual Period 30 days in arrears, the Licensee shall deliver to CKI *** or in such simplified format as may be agreed to by the parties, signed by the ***, stating that the Licensee is in compliance with the terms and conditions hereof and setting forth for ***. Licensee will use all reasonable efforts to provide Licensor with *** Within 90 days of the end of each Annual Period, the Licensee shall also deliver to CKI a *** and in accordance with the provisions hereof. Receipt or acceptance by CKI of any statement furnished, or of any sums paid by the Licensee, shall not preclude CKI from questioning their correctness at any time; provided, however, that reports submitted by the Licensee, shall be binding and conclusive on the Licensee.

4.3 Books and Records.    The Licensee shall, at its sole cost and expense, maintain complete and accurate books and records (specifically including, without limitation, the originals or copies of documents supporting entries in the books of account or electronic records) covering all transactions arising out of or relating to this Agreement. Such books and records shall be maintained in accordance with international accounting principles generally accepted in Italy, and under the laws thereof (‘‘GAAP’’). CKI and its duly authorized representatives shall have the right, upon reasonable prior written notice from CKI and during normal business hours, once during each Annual Period and for three years after such Annual Period, to examine and copy said books and records and all other documents and materials in the possession of and under the control of the Licensee with respect to all transactions arising out of or relating to this Agreement (such audits are to be completed within 6 months of commencement, provided Licensee and its accountants promptly respond fully and completely to all inquires of CKI, including all books, records, back-up, answers to question and other reasonable requests, and afford CKI and its representatives entry and accommodations at all times during such period). Each Annual Period shall be subject to audit once (and when finalized as provided hereunder, not subject to additional audits under this Agreement (except CKI’s shareholders)). The exercise by CKI of any right to audit at any time or times or the acceptance by CKI of any statement or payment shall be without prejudice to any of CKI’s rights or remedies. (Nor will any acceptance of audit results affect or limit any rights of CKI as a shareholder.) The Licensed Products shall be assigned style numbers unique from any other products the Licensee may manufacture or sell. The style number assigned to each Licensed Product shall be identical to the style number utilized to identify the Licensed Product in all of the Licensee’s books and records. All documents evidencing the sale of Licensed Products shall state the style number of each such Product. The Licensee shall not use terms such as ‘‘assorted’’ or ‘‘irregular’’ without a style specification with respect to the Licensed Products. Once finalized and all disputes resolved, as provided hereunder and under § 4.4, results shall be binding on both parties under this Agreement.

4.4 Underpayments.    If, upon any examination of the Licensee’s books and records pursuant to § 4.3, CKI shall discover any Fee underpayment by the Licensee, the Licensee will make all payments required to be made to correct and eliminate such underpayment within 10 days of CKI’s demand together with interest thereon. In addition, if said examination reveals a Fee underpayment of *** or more for any Annual Period, the Licensee will reimburse CKI for the reasonable out-of-pocket cost of said examination within 10 days of CKI’s demand. In the event Licensee disagrees with any finding underlying CKI’s demands, it shall so notify CKI within 15 business days of demand, with reasons and specifics as to why. The parties will then promptly meet and fully co-operate on a continuing, best-efforts basis to present any ‘‘counter finding’’ or other back-ups and in good faith resolve the same before payment is due. Notwithstanding the foregoing, if such dispute remains unresolved within 90 days of Licensee’s receipt of CKI’s initial demand (unless extended by CKI) despite and provided CKI has used good faith best efforts to resolve within said time period, CKI’s last demand or final demand as may have been revised during such post audit meetings or discussions shall apply, and Licensee shall promptly remit such amounts (and interest).

4.5 Manner of Payment.    All payments required by the Licensee hereunder shall be made to CKI in US $ dollars via wire transfer specifying federal funds ***

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The Percentage Fees based upon Net Sales made in a currency other than US $ dollars (and certain other amounts provided for or contemplated under this Agreement), if applicable, shall be computed on the basis of the conversion rate of the currency in which the sale or other transaction occurred into US $ dollars in effect, as published in the Wall Street Journal, as of the close of business on the last business day of the relevant quarterly period during the Annual Period, and two (2) business days prior to the remittance due date (or where no remittance ‘‘due date’’ is applicable, the remittance date) for other applicable amounts. In the event that the Licensee is required to withhold certain amounts for payment to the appropriate governmental authorities, the Licensee will supply to CKI the official receipts evidencing payment therefore, promptly upon receipt (as noted in §4.8).

4.6 Interest on Late Payment.    In addition to any other remedy available to CKI, if any payment due under this Agreement is delayed for any reason, including, without limitation, as a result of any Fee underpayment, interest shall accrue and be payable, to the extent legally enforceable, on such unpaid principal amounts from and after the date on which the same became due, at the rate of ***

4.7 No Set-Off.    The obligation of the Licensee to pay Fees hereunder shall be absolute, notwithstanding any claim which the Licensee may assert against CKI. The Licensee shall not have the right to set-off, compensate or make any deduction from such Fee payments for any reason whatsoever.

4.8 Taxes.    The Licensee will bear all taxes, duties and other governmental charges in the Territory relating to or arising under this Agreement, including, without limitation, any state or federal income taxes on the Licensee (except withholding taxes on Fees due CKI and taxes on CKI’s income), any stamp or documentary taxes or duties, turnover, sales or use taxes, value added taxes, excise taxes, customs or exchange control duties or any other charges relating to or on any Fee payable by the Licensee to CKI. The Licensee shall obtain, at its own cost and expense, all licenses, Federal Reserve Bank, commercial bank or other bank approvals, and any other documentation necessary for the importation of materials and Products and the transmission of Fees and all other payments relevant to the Licensee’s performance under this Agreement. If any tax or withholding is imposed on Fees, that is, and to the extent it may become applicable, when or where payments of Minimum Guaranteed Fees and/or Percentage Fees are made directly to CKI from any jurisdiction outside the United States, the Licensee shall compute and pay on behalf of CKI all withholding taxes which any governmental authority in the Territory may impose on CKI with respect to the Fees paid by the Licensee to CKI. The amount of such taxes shall be appropriately deducted from payments, and immediately paid to such governmental authorities. Such amounts shall not be held in reserve by Licensee pending later due dates. The Licensee shall obtain and provide certified proof of the tax payment of the amount withheld, and promptly transmit it to CKI. In the event such taxes are not paid when due, all resulting penalties and interest shall be borne by the Licensee.

4.9 Financial Statements.    Licensee shall deliver to CKI,:

(i) within 180 days after the close of each of Licensee’s fiscal year’s during or concurrent with an Annual Period, copies of its annual financial reports (balance sheets, statements of income and cash flow) which may be unaudited (but if the Licensee otherwise prepares or is otherwise required to prepare, audited reports, it will so provide them to CKI) prepared in accordance with International GAAP, reported on by a recognized accounting firm together with English translation thereof; and

(ii) within 60 days after the close of each calendar quarter copies of its quarterly financial reports, which will be prepared on a basis consistent with the annual financial reports.

4.10 Financial Covenants.    Licensee (and its parent Warnaco Inc.) will ***

Licensee will immediately upon the occurrence of any default deliver a certificate by its Chief Financial Officer setting forth the details of any such default and action the Licensee is taking or proposed to take with respect thereto.

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ARTICLE V. ADVERTISING AND PROMOTION

5.1 Advertising.

5.1.1 Initial Support/Reimbursement.    Deliberately Omitted.

5.1.2 Advertising Obligation.    For each Annual Period, the Licensee shall remit to CKI an amount (the ‘‘Advertising Obligation’’ or ‘‘Minimum Advertising Expenditure,’’ a/k/a ‘‘MAE’’) equal to ***

Annual Period/Year				Minimum Advertising Expenditure (Euros)
1(2006)						***
2(2007)						***
3(2008)						***
4(2009)						***
5 et seq  (2010 et seq)						***

The Licensee shall pay to CKI in respect of the Advertising Obligation for each Annual Period, no later than *** CKI shall use the Advertising Obligation, in its sole and absolute discretion, in connection with the advertising, marketing and promotion of the Licensed Mark and the Licensed Products. Although the final decision as to the advertising program’s form, content and placement must remain with CKI, CKI agrees to consider Licensee’s input and agrees that prior to the commencement of each campaign season, CKI and CRK will meet and listen to Licensee’s needs and overall strategy, and CKI and CRK will also review CRK’s concepts for the upcoming season with Licensee. (Although CRK will give reasonable consideration as to Licensee’s input, decisions will be in CKI’s sole discretion and based on CKI’s subjective aesthetic judgement and other considerations.) If there are material changes to what CKI, CRK and Licensee discussed at the beginning of the season by CKI, CRK will apprise Licensee of the same. ***

5.1.3 CRK Fee. As the advertising agency heretofore responsible for advertising campaigns relating to ‘‘CK/Calvin Klein’’ and Licensed Mark activities, CRK Advertising (‘‘CRK’’), a division of CKI, has developed certain expertise regarding the image of the Licensed Mark. *** Notwithstanding anything to the contrary in the foregoing, in no event shall CKI require the Licensee ***

5.1.4 Co-operative Advertising and Public Relations. *** All Co-operative Advertising shall be (i) in accordance with the parameters reasonably promulgated by CKI from time to time, including, without limitation, creative, as approved by CKI, as well as the Licensed Products presented in such Co-operative Advertising, and timing and applicable placement (the publication as well as the particular location within the publication) (sometimes referred to as a ‘‘media plan’’), and (ii) subject to CKI’s approval as provided in § 5.1.3. The Licensee shall be obligated to notify its accounts of these requirements and ensure their compliance with such requirements, including obtaining CKI’s approval prior to use. The Licensee shall provide CKI with***

For purposes of this Agreement ‘‘Co-operative Advertising’’ means advertisements by or in connection with retail accounts in local publications, such as newspapers and certain approved retail catalogs (for CK/Calvin Klein Bridge Stores), if any, which CKI may specifically approve in writing after viewing the same), and applicable ‘‘sharing’’ of expenses by such retail account with the Licensee, by way of advertising reimbursements, credits, charge-backs, or payments, only. Expenditures for ‘‘co-op’’ advertising not included within the definition hereunder or not in compliance with CKI’s parameters will not constitute a ‘‘qualified’’ expenditure for Co-operative Advertising hereunder.

‘‘Co-operative Advertising’’ does not include and shall not consist of advertisements in trade publications (except for certain prestigious fashion trade publications as may be approved by CKI in writing on a case-by-case basis) or any expenses or costs of (without limitation) packaging, fixturing, display materials, point-of-sale (‘‘POS’’) or point-of-purchase (‘‘POP’’) materials, or advertising or selling materials or

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‘‘tools’’ or seminars or training sessions, in-store merchandising contributions or sharing of expenses, or any other selling or merchandising expenses or events, or any promotional materials, events or activities, such as press kits, goody bags (gifts), or any consumer advertising.

Public Relations events, activities and efforts shall include editorial coverage in prestigious fashion magazines, launch events for press, editors, buyers, fashion shows or trunk shows (‘‘mini’’ fashion shows at key retail stores), and involvement with highly publicized events such as ‘‘concerts,’’ as may be reviewed with and approved by CKI. Any PR event or activity to be conducted or overseen by a 3^rd party shall be conducted or overseen by CRK or a 3^rd party approved by CRK (‘‘PR Agency of Record’’) at market rates.

The CRK Fee shall be applied on actual services and materials developed, produced or provided by CRK for such Co-op/PR Obligation-qualified expenditures hereunder.

5.2 "Usage". If the Licensee requests advertising support including, without limitation, the acquisition of rights to use images of models in jurisdictions within the Territory where rights have not been obtained or for uses for which authorization has not been granted, the Licensee shall pay over to CKI the reasonable incremental costs associated with such advertising support. Such amounts shall be credited to the MAE, but may be credited over a number of Annual Periods not limited to the Annual Period in which the expense occurs.

5.3 Approval of Materials, Activities.    The use and release of any and all promotional material (printed or otherwise) relating to the Licensed Products or the Licensee’s activities pursuant to this Agreement in the nature of press releases, interviews or other similar public relations events, and any other corporate release, data or information which will or is likely to become public and, if so, could affect such image, will be prepared or conducted in consultation with, and subject to the prior approval of (or approval subject to reasonable CKI-required modifications of), CKI’s public relations department (to be provided or responded to promptly (as per § 6.5) and not to be unreasonably delayed). After any such approval, the Licensee will not modify the approved material or activity in any material respect unless such modification is specifically approved by CKI’s public relations department. Any advertising marketing or promotional or public relations activity, event or effort shall be reviewed with and approved by CKI in advance (not to be unreasonably delayed). All materials bearing the Licensed Mark, including, without limitation, all advertising, promotional materials, packaging and collateral (e.g., POP or POS materials) shall be subject to CKI’s approval (not to be unreasonably delayed), and developed by CKI or pursuant to CKI’s direction.

5.4 Samples. The Licensee shall provide to CKI, *** in the promotion of Licensed Products, including advertising shoots, public relations promotions, editorial promotions, press coverage and celebrity use, including where needed in advance of regular production cycles (e.g., fashion shows, merchandising displays within showrooms, advertising shoots). Licensed Products which constitute celebrity, editorial and/or public relations ‘‘samples’’ which are gifted to recipient without cost, by Licensee *** Included in such ‘‘Promo Articles’’ shall be a reasonable number of Licensed Products to be provided to CKI (CRK) for its use for particular celebrity ‘‘individuals’’ and press or editorial recipients, as requested and/or specified by CKI, ***

If and to the extent tax forms evidencing the value of any such gift items to celebrity ‘‘individuals’’ for purposes of income tax requirements under any governmental authority are or become required, Licensee shall provide the same as soon as such practice could be reasonably implemented.

ARTICLE VI. QUALITY AND STANDARDS

6.1 Distinctiveness and Quality of the Licensed Mark.    The Licensee shall maintain the distinctiveness of the Licensed Mark and the image and high quality of the goods and merchandise bearing the Licensed Mark presently manufactured and sold by CKI and its other licensees, and the prestigious marketing of same as presently maintained by CKI and its other licensees. The Licensee agrees that all Licensed Products manufactured or sold by it will be of high quality as to workmanship, fit, design and

CONFIDENTIAL TREATMENT

materials, and shall be at least equal in quality, workmanship, fit, design and material to the samples of Licensed Products submitted by the Licensee and approved by CKI pursuant to § 6.2.6. All manufacturing and production shall be of a quality in keeping with the prestige of the Licensed Mark. In addition, the Licensee agrees that it will only use the Licensed Mark in the form thereof then approved by CKI, and that all Licensed Products shall bear the Licensed Mark in such approved form. CKI shall give the Licensee reasonable prior notice of any change in the form of the Licensed Mark and shall permit the Licensee to use a superceded form of the Licensed Mark for up to 6 months in order to enable the Licensee to sell inventory, complete and sell work-in-process, and to deplete inventories of labels, tags, packaging, and other materials bearing the Licensed Mark. In the event CKI elects to change the form of the Licensed Mark, the Licensee’s obligations in respect to the image and high quality of the goods and merchandise bearing the Licensed Mark, and the prestigious marketing of same as required by this § 6.1, shall be consistent with the actions of CKI and its other licensees in respect to Licensed Products bearing such new form of the Licensed Mark. However, on reasonable advance request (within 20 days prior to the end of the 6-months period) if Licensee provides CKI with its inventory of Licensed Products and other materials utilizing the old form, with anticipated outside ‘‘depletion’’ dates for the materials, CKI may provide additional time for such depletion. However, all Licensed Products to be shipped from and after the 6-months period (except for Close-outs or Seconds from prior seasons) will carry new labels, regardless of excess label stock.

6.1.1 Consistency with Other Products.    The Licensed Products hereunder are among a range of lines of men’s, women’s, boys’ and girls’ apparel and accessories products which are produced and/or sold by CKI, its licensees and other duly authorized parties under the Licensed Mark and other related trademarks. In order to provide for consistency in scope, and to prevent confusion in the market, the Licensee agrees to use commercially reasonable efforts to ensure that it will only use the Licensed Mark in the form thereof then approved by CKI and that the placement of items constituting Licensed Products in the market will be consistent with other merchandise bearing the Licensed Mark and be distinguishable from the placement of product lines bearing other trademarks.

6.2 Design.

6.2.1 Time and Action Calendar.    The Licensee shall prepare, for the Licensed Products, and at least 60 days prior to the commencement of each Annual Period, shall deliver to CKI for its approval (reasonably exercised within the standard design policy and procedures of CKI and timing, development and production and placement schedules), a proposed time and action calendar (‘‘Time and Action Calendar’’) for the Collections to be developed during such Annual Period; provided; however, that the Time and Action Calendar for the first Annual Period shall be delivered for approval no later than the date of execution hereof. The substance and format of each Time and Action Calendar shall be as approved by CKI from time to time. In accordance with each Time and Action Calendar, and at least 60 days before the development stage of any Collection, the Licensee will provide a merchandising plan setting forth for each Product category the number of styles, estimated unit production, in-store delivery dates, target manufacturer’s suggested retail price, target market segment and, where applicable, historical sales statistics for CKI’s review and approval.

6.2.2 Themes.    The Licensee shall maintain during the License Period a design staff capable of timely developing seasonal collections of Licensed Products pursuant to the Time and Action Calendars, in order to exploit the License and to maintain the prestige and reputation of the Licensed Mark, as required hereunder. The Licensee’s design team shall have meetings with CKI’s-designated creative or design person or persons, the purpose of which will be to discuss and establish agreed-upon themes that will be covered for the season (such agreed upon themes hereafter referred to as the ‘‘Agreed Upon Season’s Themes’’).

6.2.3 Design Concepts.    Based on the Agreed Upon Season’s Themes, the Licensee shall create, develop and present for CKI’s review and approval, a program in a tangible illustrative format of design themes and concepts (‘‘Design Concepts’’) with respect to the proposed designs for the applicable Collection, together with relevant trims, samples of fabrics and other components. The Licensee shall

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present the Design Concepts to CKI in a ‘‘Design Concepts Presentation Meeting’’, the purpose of which is to provide CKI with a clear and concrete understanding of the themes, fabrications, styles, attitude and direction of such Collection through the use of either design boards, sketches and/or ‘‘rigs’’ as well as samples of trim, fabrics and other components in each of the Licensee’s suggested colors and qualities, also swatches, yarns and illustrations sufficient to give CKI a clear understanding of the particular Products and components the Licensee wishes to develop based upon approved Design Concepts. CKI shall, within 10 business days from presentation of the Design Concepts identified at the Design Concepts Presentation Meetings approve or disapprove and/or provide suggestions, modifications or recommendations, as determined by CKI in its sole and absolute discretion. Any Design Concept which is not rejected or required to be modified within such 10 business day period shall be deemed approved. Any Design Concept or component thereof presented, initiated or submitted by CKI to Licensee to be included in the applicable Collection shall be included in the Approved Design Concepts except as otherwise may be agreed by CKI. All approved and deemed approved Design Concepts are referred to herein as the ‘‘Approved Design Concepts.’’ The Licensee shall provide CKI with a photographic record, duplicate ‘‘boards’’ or such other comparable method acceptable to CKI, of the Approved Design Concepts so that CKI has a means to verify compliance with the Approved Design Concepts at subsequent stages of the approval process, within 10 business days after approval of the Approved Design Concepts. The Licensee shall have 10 business days to resubmit for CKI’s approval any Design Concept to which CKI directed modifications to be made. If any resubmitted Design Concept, as changed, does not strictly conform to CKI’s request for changes, and such strict conformity cannot be obtained after one resubmission, such Design Concept shall not become an Approved Design Concept. No Licensed Products (including samples) shall be distributed and/or sold by the Licensee unless such Licensed Products are in substantial conformity with Approved Design Concepts. Approved Design Concepts shall only be deemed approved for the specific Collection for which they have been submitted and approved, unless CKI agrees otherwise in writing.

6.2.4 Certain Other Approvals.    The Licensee shall provide and present to CKI proposed styles, designs, fabrications (fabric, leather or other materials, swatches in reasonably sufficient size to determine ‘‘hand’’ as well as color, content and other matters, trim, samples, labels (quality), artwork, if requested by CKI (e.g., layouts and relevant technical information for graphic motifs, patterns (such as florals, stripes, checks))) and other materials in quantities and sufficient variety to enable CKI to review and approve (including to require modifications to or changes in), on a timely basis, sufficiently in advance of the market and production timing.

6.2.5 CKI Designs.    CKI may provide the Licensee with creative concepts and fashion direction as to each Collection, including recommendations as to color, material, design and styling of Products and such additional design assistance including sketches, samples, suggestions or other information or data as CKI determines in its sole discretion. For each Collection, the Licensee shall utilize substantially all of the designs, fabrics, trim or other material submitted or approved by CKI and shall produce on a timely basis pre-production prototypes for CKI’s review and approval.

6.2.6 Prototypes.    Prior to showing each season’s Collection to the trade or commencing production of the Products for such Collection in accordance with the Time and Action Calendars, the Licensee shall produce pre-production prototypes (both initial (first) and second prototypes, where required by CKI) of each Product in the approved fabrications, or, if applicable, in those fabrications specifically requested by CKI (or, if CKI so permits on a season-by-season, case-by-case basis, pre-production prototypes of each ‘‘body’’ or style of Product in representative fabrications or those fabrications specifically requested by CKI), along with swatches and samples of sufficient size in order to determine hand and/or other aspects related to the Products that the Licensee proposes to include in such Collection, for CKI’s approval. No previously approved Licensed Products shall be included in a subsequent Collection unless and only if presented for inclusion and approved by CKI for such subsequent Collection. CKI shall have the right to approve or disapprove of any or all aspects of each prototype and to require modifications to meet its requirements for approval. Notwithstanding such requirements or approvals, all responsibility (and liability) for the merchantability, fit and technical

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requirements of such Licensed Products is and will belong to Licensee. If CKI disapproves any proposed carryover of a ‘‘core’’ item (i.e., part of the Collection for at least four prior seasons, if any), then the Licensee will discontinue such product within three months to enable the Licensee to fulfill outstanding orders. (Prototypes which have been approved by CKI, or those subject to changes being made by the Licensee, upon resubmission of corrected prototypes and subsequent approval by CKI, shall hereinafter be referred to as ‘‘Approved Prototypes.’’). The Licensee shall provide CKI with a photographic record of all Approved Prototypes for each Collection, and also, the Licensee shall promptly provide CKI, with a record of the use (i.e., the factory location in which each prototype will be used to produce the specific Licensed Products) of the Approved Prototypes, which shall include notification (i.e., e-mail, fax, modified purchase order to factory producing the particular item of Licensed Product) and evidence (e.g., in the form of duplicate or modified prototype) of any changes required by CKI. CKI may request that prototypes be developed in a standard size or to provide CKI with a variety of sizes and styles, covering the spectrum, to assure itself of ‘‘fit’’ and sizing.

6.2.7 Final Approval and Sales.    The final composition of each Collection shall be determined and agreed upon by the Licensee and CKI, and is subject to the approval of CKI, upon presentation and edit of the sample line produced from Approved Prototypes for technical quality and final editing purposes. Thereafter, the Licensee shall timely sell, market, produce and ship such Collection based on the Approved Prototypes.

6.3 Manufacture of Licensed Products by Third Parties.    All contractors wherever located which the Licensee desires to use in connection with the manufacture of Licensed Products are subject to the prior written approval of CKI, which consent shall not be unreasonably withheld or delayed; provided, however, that CKI shall have 10 business days after its receipt of a written request from the Licensee to use a manufacturer or such longer period as is reasonable under the circumstances to approve or disapprove such manufacturer. In order to maintain CKI’s high standard of quality control and to insure that appropriate measures are taken against counterfeiting, the Licensee shall provide CKI with the following information: (i) name and address of each proposed manufacturer; (ii) type of Licensed Products to be manufactured; (iii) quantity of Licensed Products to be manufactured; and (iv) any other relevant information. The Licensee shall obtain the signature of an authorized representative from each approved third-party manufacturer used by the Licensee on an agreement (a ‘‘Third-Party Manufacturing Agreement’’), substantially in the form of Exhibit D. The Licensee shall not knowingly enter into a Third-Party Manufacturing Agreement with any third party that has materially breached a similar agreement with CKI or its Affiliates or any licensee of CKI or its Affiliates. The Licensee acknowledges that it shall remain primarily liable and completely obligated under all of the provisions of this Agreement in respect of such contracting or assembly arrangements.

6.4 Non-Conforming Products.    In the event that any Licensed Products are, in the judgement (which shall include subjective aesthetic considerations and standards) of CKI, not being manufactured, distributed or sold with first quality workmanship or in strict adherence to the prototypes approved by CKI, CKI shall notify the Licensee thereof in writing, and the Licensee shall promptly initiate corrections or changes to production of such Licensed Product to conform thereto. Where non-conformity is material, substantial or may adversely affect the reputation or prestige or value of the Licensed Mark or CKI’s business operations, CKI may require that no further sale or shipment of such Licensed Mark be made until such corrections are made. If Licensed Products as changed do not strictly conform after CKI’s request and such strict conformity cannot be obtained after one resubmission, such Licensed Products (the ‘‘Non-Conforming Products’’) shall be disposed of in a way which shall not reduce the value of the Licensed Mark or detract from its reputation, which may include, without limitation, the destruction of the Non-Conforming Products, the donation of such Non-Conforming Products to eleemosynary institutions, the sale of such Non-Conforming Products in a private sale, with proceeds to be given to charity, or the removal of Labels and other identification prior to sale, or other method reasonably approved by CKI. As noted, CKI may require the Licensee to cease further shipment and sale of such Licensed Products, to recall any Licensed Products that are not consistent with approved quality

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standards and the approved prototypes and/or to purchase at the Licensee’s expense any such Licensed Products found in the marketplace. ***

6.5 Approvals.    All approvals by CKI required under this Agreement must be obtained in advance of use of the item subject to approval, which approval must be in writing from CKI to the Licensee. Except as otherwise expressly provided hereunder, a submission for approval shall be deemed approved unless CKI delivers a notice of disapproval within 10 business days after its receipt of a written request for approval (together with the submission as well as all information, details and specifications reasonably necessary to review, determine and provide an approval). All matters requiring approval of CKI shall be granted or withheld in the sole and absolute good-faith discretion of CKI and may be based solely on CKI’s subjective aesthetic standards. CKI shall provide an explanation for disapprovals, unless such disapproval reflects an issue of taste or subjective judgement. CKI has no obligation to approve, review or consider any item which does not strictly comply with the required submission procedures. Approval by CKI shall not be construed as a determination that the approved matter complies with all applicable regulations and laws. No disapproved item shall be manufactured, sold, used, distributed or advertised by the Licensee under the Licensed Mark. The Licensee may revise any disapproved item and resubmit it. The Licensee must strictly comply with all of CKI’s decisions. CKI may amend the approval forms as appropriate. Otherwise, the parties may mutually agree to amend the approval forms as they deem appropriate. In the event that it is reasonably necessary for CKI to do on-site approvals, the Licensee shall pay any and all reasonable expenses and airfare incurred by CKI with respect to such on-site approvals. CKI to provide Licensee with advance notice as to any such trips or anticipated on-site approval situations to reasonably co-ordinate with Licensee.

6.6 Marketing, Labeling, Packaging, Promotions, Business Materials.    All packaging, labeling, including within the Licensed Product (‘‘Labels’’) must be approved by CKI. The use of any Label that has not been approved is expressly prohibited. CKI reserves the right to require the Licensee to purchase Labels to be used on the Licensed Products only from sources designated by CKI, provided that such sources provide the Labels to the Licensee in a reasonably competitive manner as to price and delivery schedules. All Licensed Products manufactured, distributed or sold by, or on behalf of, the Licensee shall be marked, labeled, packaged, advertised, distributed and sold in accordance with this Agreement. At the request of CKI, the Licensee shall cause to be placed on (or attached to) all Licensed Products (by way of labels, tags or inserts, and/or packaging) an appropriate notice designating CKI as the ‘‘licensor’’ of the Licensed Mark, and/or CKTT as the owner of the Licensed Mark. The manner of presentation of such notice shall be determined by CKI. Any and all proposed advertising, promotional, business (including stationary, business cards, invoices) or marketing or publicity material (including issuing press releases, interviews or other public relations media), any POS, POP or other promotional material and any other printed material or other form of communications to be used in connection with the marketing, promotion, sale or distribution of the Licensed Mark must be approved by CKI (as to content, form and specific use, including timing and duration of use) prior to use by Licensee, as noted in the 2^nd sentence of § 6.5 above, as to 10 business days, submission and information. If CKI should disapprove any sample tag, label, package or the like, or any advertising, promotional, merchandising, marketing or publicity material, activity or event or the proposed placement or use thereof or any other printed matter, event or activity, Licensee will not use or permit the use of the same in any manner, whether or not in connection with Licensed Products or the Licensed Mark.

6.7 Inspection of Facilities.    CKI and its duly authorized representatives shall have the right, during normal business hours and upon reasonable notice, to inspect all facilities utilized by the Licensee (and its contractors and suppliers to the extent the Licensee may do so) in connection with the manufacture, sale, storage or distribution of Licensed Products, and to examine the Licensed Products in the process of manufacture.

6.8 Samples and Artwork.    CKI may make available to the Licensee certain samples, designs, colors, fabric samples, tags, labels, packaging, catalogues and artwork available to CKI, and the cost of providing such materials shall be borne by the Licensee at prices equal to CKI’s cost (A) as may be requested by Licensee or (B), in the case of ‘‘multi-regional’’ items which CKI requires to be utilized

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amongst its multiple licensees for Licensed Products, not to exceed $25,000 per annum without the Licensee’s prior consent. The payment for these already ‘‘developed’’ materials are separate and apart from the payment of any CRK fee for the development of such samples, designs, colors, fabric samples, tags, labels, packaging, catalogues and artwork directly for Licensee for each Collection of Articles which shall also be borne by Licensee. All right, title and interest in and to samples, sketches, designs, and other materials furnished to the Licensee or submitted by CKI in connection with the Licensed Products, including any modifications or improvements thereof which may be created by CKI, shall remain the sole property of CKI as between the Licensee and CKI, and are ‘‘licensed’’ hereunder solely and exclusively for use in connection with the manufacture, sale, distribution and promotion of Licensed Products in the Territory, otherwise subject to the terms and conditions of this License Agreement.

6.9 Know-how.    The Licensee shall have the right to request visits to CKI’s offices or showrooms to meet with its personnel, in order to obtain additional know-how and assistance, all as and only as CKI deems appropriate. The scheduling of such visits shall be at times mutually convenient to the parties hereto. In connection with such visits, the Licensee shall bear all expenses of the Licensee’s representatives.

6.10 Meetings.    CKI may from time to time hold meetings of CKI’s licensees. The Licensee shall, upon receipt of reasonable notice, attend such meetings at its own expense but shall not be required to attend more than two such meetings per year.

6.11 Design Direction.    The designs of the Licensed Products shall at all times be consistent with CKI’s design aesthetic for the Licensed Mark. CKI may submit samples to the Licensee of or for products it deems to be core to the image of the overall ‘‘CALVIN KLEIN’’ trademark and/or product lines, and the Licensee shall develop Licensed Products based thereon and shall use commercially reasonable efforts to market same.

6.12 Design Rights.    The Licensee acknowledges and agrees that CKI owns or shall own all design rights, regardless of whether such designs were created by CKI or by or on behalf of the Licensee, except with respect to Excluded Designs. The Licensee agrees to make, procure and execute all assignments necessary to vest ownership of design rights in CKI. The Licensee shall not do or allow to be done anything which may adversely affect any of CKI’s design rights. All designs used by the Licensee for the Licensed Products, except with respect to Excluded Designs, shall be used exclusively for the Licensed Products and may not be used under any other mark, whether during the License Period or any time thereafter, without the prior written consent of CKI. The Licensee shall disclose and freely make available to CKI any and all developments or improvements it may make relating to the Licensed Products and to their manufacture, promotion and sales, including, without limitation, developments and improvements in any machine, process or product design, that may be disclosed or suggested by CKI or regarding any patent or trademark which the Licensee is entitled to utilize. ‘‘Excluded Design’’ means a design (i) submitted by the Licensee and not approved by CKI; (ii) not distinguishable from similar generic products generally available in the marketplace; or (iii) not distinguishable from a product which has previously appeared in the Licensee’s product line and the Licensee advised CKI of such condition at the time of submission. In the event of clause (i) or (iii) above, the Licensee shall retain title to such designs but shall permit CKI to use such designs during the Term of this License Agreement. CKI may use and permit others to use said designs and other materials in any manner it desires, provided that such use does not conflict with any rights granted the Licensee hereunder or belonging to Licensee. The Licensee specifically acknowledges that such designs and other materials may be used by CKI and its Affiliates and other licensees of CKI and its Affiliates on Licensed Products in jurisdictions outside the Territory and on products other than Licensed Products anywhere in the world, subject to the limitations described herein. Notwithstanding the foregoing, CKI shall not acquire any ownership interests in any patents, trademarks or copyright rights owned or commissioned by Licensee and utilized for multiple or other than Licensed Products, but utilized as well in connection with the Licensed Products.

6.13 Shops, Stores, Retail Outlets.    Subject to § 6.14, the Licensed Products sold by the Licensee may be *** Nothing herein shall be deemed to ***

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6.14 Disposal of Seconds and Close-Outs.    Seconds and Close-Outs sold by the Licensee may be sold only to Approved Accounts and Approved Seconds and Close-Outs Accounts, including those customers identified on Schedule 6.14. Whenever the Licensee shall wish to sell Seconds and Close-Outs to customers not previously approved by CKI, the Licensee shall submit to CKI a written list of the proposed customers for Seconds and Close-Outs for CKI’s prior written approval. The proposed customers approved from such list, together with the customers listed on Schedule 6.14, are referred to as the ‘‘Approved Seconds and Close-Outs Accounts.’’ Notwithstanding CKI’s approval of any customer, CKI may at any time subject sales to any such customer, including, without limitation, any such customer listed on Schedule 6.14, to any conditions or limitations CKI considers appropriate; provided, however, that in order to be effective, any such conditions or limitations must be set forth in a writing provided to the Licensee. Nothing herein shall be deemed to prohibit CKI from withdrawing its approval of any Approved Seconds and Close-Outs Account for ‘‘good’’ bona fide reasons, including, without limitation, any such Approved Seconds and Close-Outs Account listed on Schedule 6.14, upon written notice to the Licensee (at which time, such customer shall cease to be an Approved Seconds and Close-Outs Account for purposes of this Agreement); provided, however, that the Licensee may fulfill any firm orders entered into prior to the Licensee’s receipt of CKI’s withdrawal of approval.

6.14.1 Seconds.    The Licensee shall only sell Licensed Products which are damaged, imperfect, non-first quality or defective goods (‘‘Seconds’’) in a way which shall not *** Notwithstanding anything to the contrary, ***

6.14.2 Close-Outs. ***

6.15 Standards of Conduct .

6.15.1 Standards. The Licensee acknowledges that CKI is a wholly owned subsidiary of Phillips-Van Heusen Corporation (‘‘PVH’’). The Licensee acknowledges that it has received copies of, read and understands PVH’s publication ‘‘A Shared Commitment — Requirements for Suppliers, Contractors, Business Partners’’ and PVH’s ‘‘Statement of Corporate Responsibility.’’ The Licensee shall conduct its business in compliance with the moral, ethical and legal standards set forth in such publications, as the same may from time to time be revised by PVH upon reasonable notice to the Licensee (the ‘‘Standards’’) and shall cause all manufacturers, contractors and suppliers which manufacture Licensed Products or from whom the Licensee obtains Licensed Products or materials for the manufacture of Licensed Products to abide by the Standards.

6.15.2 Audit Requirement.    For each facility utilized by Licensee for the manufacturing of the Licensed Products (whether directly produced or produced by or through a contractor, subcontractor or supplier) the Licensee will arrange to have the facility audited for compliance with the Standards unless PVH notifies the Licensee in writing that it already has a current audit with respect to such facility that evidences compliance with the Standards. Audits on each facility used must thereafter be conducted no less often than annually. Each audit shall be conducted by a suitable auditor (whether internal or external) designated by the Licensee, subject to Licensor’s and PVH’s approval. Disapproval by Licensor and PVH may only be for grounded reasons. Each audit shall be conducted using the evaluation form attached hereto as Exhibit E or a substantively similar form approved by PVH. The Licensee shall identify to PVH in writing each facility in which Licensed Product (or part thereof) are produced or which is to be re-audited and PVH shall notify the Licensee within 30 days of PVH’s receipt of such notice if PVH has currently approved the facility for production and when re-audit is required. If a facility is currently approved for production, the Licensee shall have no obligation to arrange for a current audit of the facility. If a facility is denied approval by PVH as of such date, Licensee will not place any new orders in such facility and will only use the facility to fulfill currently existing, non-cancelable orders. Licensee will stop producing in such facility starting from the immediately subsequent season. All audits shall be conducted at the Licensee’s sole expense. All support to be given by PVH will be at PVH’s expense.

Notwithstanding anything to the contrary contained in this §6.15.2, ***

6.15.3 Approval.    A comprehensive audit report prepared by the auditor shall be provided to PVH, attention the director of PVH’s Human Rights Program Department, promptly upon its

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completion. PVH shall have 30 days from its receipt of an audit report to notify the Licensee: a) of its approval of the audited facility either (i) fully without remarks; or (ii) with request to re-audit within a certain period (‘‘Red Flag’’); or b) of its disapproval of the facility that is the subject thereof in which case Licensee may fulfill any firm orders entered into prior to the Licensee’s receipt of PVH’s disapproval and cease to utilize such disapproved facility from the subsequent season. If PVH does not give notice to the Licensee within such 30-day period, the facility shall be deemed approved by PVH. PVH shall set forth in its notice of disapproval its reason(s) for disapproval in reasonable detail.

6.15.4 Use of Facility.    Unless and until the Licensee delivers to PVH an audit report for a facility that evidences compliance with the Standards and PVH approves such facility, the facility shall not be used for the production of Licensed Products. If the Licensee uses a facility that has not been approved in accordance herewith, fails timely to cause an approved auditor to submit to PVH an audit report evidencing continued compliance with the Standards when a re-audit of a facility is required in accordance with the terms hereof or if the Licensee or any of its manufacturers, contractors or suppliers with respect to Licensed Products shall, in PVH’s sole determination, fail to abide by the Standards, CKI’s sole remedy with respect to such breach of this § 6.15.4, to the extent that CKI is not otherwise damaged as a result of such breach, shall be to terminate the License and all of the other rights granted to the Licensee under this Agreement, as provided in § 8.3 below. Nothing in this § 6.15.4 shall be deemed to confer third-party beneficiary rights upon any person, corporation, partnership or other entity.

6.16 Personnel.    Licensee shall perform its obligations hereunder through a separate sub− division of the Licensee exclusively dedicated, and the employees of which shall be dedicated to the performance of the Licensee’s obligations hereunder; provided, however, that financial, logistics and other back-office support need not be exclusive, except with respect to operations of other licenses with CKI. Licensee shall employ, on an exclusively devoted basis (to operations hereunder and to operations under the CKI Jeans License and CKI Jeans and ‘‘bridge’’ Accessories Licenses), a ‘‘President’’ who is subject to the initial reasonable approval of CKI, as is any successor thereto, as well as other personnel as may be needed to successfully exploit the business. Managing Directors may be substantially devoted to the operations hereunder as well as to other Fingen S.p.A. and affiliated entities, business and operations. Such personnel would include sales, merchandising, technical, product development and other production, visual display, quality control and retail development personnel. CKI may, on an ongoing basis, advise Licensee of any problems or difficulties, if any, it may be experiencing, and Licensee will use all reasonable efforts to address any such concerns to CKI’s reasonable satisfaction.

ARTICLE VII. THE LICENSED MARK

7.1 Rights to the Licensed Mark.

7.1.1 Ownership of Licensed Mark.    The Licensee acknowledges that the Calvin Klein Trademark Trust (‘‘CKTT’’) is the owner, and CKI is the beneficial owner, of all right, title and interest in and to the Licensed Mark, and to any variant, modification or embodiment thereof, for Products in the Territory; and that CKTT and CKI also own the goodwill related to such marks and to the business and goods in relation to which such marks have been or will be used. The Licensee will not at any time directly or indirectly do or suffer to be done any act or thing that might in any way adversely affect any rights of CKTT or CKI in and to any of such marks, any registrations thereof or any applications for registration thereof, or which might reduce the value thereof or detract from their reputation, image or prestige of that of CKTT, CKI or Mr. Calvin Klein. Sales by the Licensee shall be deemed to have been made by CKTT for purposes of trademark registration and all uses of the Licensed Mark by the Licensee and any and all goodwill generated by use of the Licensed Mark shall inure to the benefit of CKI and CKTT.

7.1.2 No Adverse Actions.    The Licensee shall not, at any time, do, or otherwise suffer to be done, any act or thing which may at any time, in any way, adversely affect any rights of CKI or CKTT in and to the Licensed Mark or any registrations thereof or which, directly or indirectly, may reduce the value of the Licensed Mark or detract from its reputation. The Licensee shall not file or prosecute a trademark or service mark application or applications to register the Licensed Mark or any trademark,

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name or other mark confusingly similar thereto in respect of the Licensed Products or any other goods or services in the Territory or elsewhere. The Licensee shall not, during the term of the License Period or thereafter, (i) contest CKTT’s or CKI’s title, right, ownership or other interest in or to the Licensed Mark in any jurisdiction or attack the validity of the License or the Licensed Mark or (ii) contest the fact that the Licensee’s rights under this Agreement (a) are solely those of a manufacturer, licensee and, if appropriate, distributor; and (b) subject to the provisions of § 8.5, cease upon termination of the License Period.

7.1.3 Registrations.    The Licensee acknowledges and agrees that CKTT, as the sole and exclusive owner of the Licensed Mark, has the exclusive right to apply for registrations and to extend appropriate registrations of the Licensed Mark for all categories of goods, including, without limitation, the Products. CKI, on behalf of CKTT, shall maintain at its expense and as determined by CKI consistent with its past practice the registrations for the currently existing Licensed Mark in the Territory with respect to Products. The Licensee agrees to cooperate with CKTT and/or CKI in the preparation, filing and prosecution of applications for registration, or extensions of existing registrations, or other documentation relative to the Licensed Mark. CKI represents that CKTT has applications and registrations for the ‘‘CK/CALVIN KLEIN’’ mark for products in International Class 18 (leather accessories) in a number of jurisdictions in the Territory, as per schedule to be attached.

7.1.4 Survival.    The provisions of this § 7.1 shall survive the termination of the License Period and this Agreement.

7.2 Protecting the Licensed Mark.    The Licensee shall cooperate fully and in good faith with CKI and CKTT for the purpose of securing, preserving and protecting CKTT’s and CKI’s rights in and to the Licensed Mark and any secondary trademark that the Licensee may develop and use with the approval of CKI. Any such secondary mark will be owned by CKTT. At the request of CKI, the Licensee shall execute and deliver to CKI any and all documents and do all other acts and things which CKI and/or CKTT deems necessary or appropriate to make fully effective or to implement the provisions of this Agreement relating to the ownership or registration of the Licensed Mark, including, without limitation, information regarding use and supporting documentation therefore, as well as labels, hang tags, packaging, and other appropriate specimens evidencing use of the Licensed Mark in each country in the Territory.

7.3 Use of the Licensed Mark.

7.3.1 Compliance with Legal Requirements.    The Licensee will use the Licensed Mark in the Territory strictly in compliance with the legal requirements therein. The Licensee shall duly display all other notices with respect to the Licensed Mark, on the Licensed Products and otherwise, as are or may be required by the trademark laws and regulations applicable within the Territory. Upon expiration or termination of the License for any reason whatsoever, the Licensee will execute and deliver to CKI any and all documents required by CKI.

7.3.2 Use with Other Name.    The Licensee shall not (a) co-join any name or names with the Licensed Mark, (b) use the name ‘‘Calvin Klein’’ or ‘‘CK’’ or ‘‘CK/Calvin Klein’’ or any portion or derivative thereof in its corporate name except as previously approved or subsequently approved by CKI in writing, or (c) use any other name, or names in connection with the Licensed Mark, in any advertising, promotion, publicity, labeling, packaging or other printed matter of any kind in connection with the distribution or sale of Licensed Products except as may be approved in writing by CKI. Any use of the Licensee’s corporate name or that of its Affiliates in connection with the Licensed Mark will be subject to the approval of CKI. If CKI approves any use of the Licensed Mark in connection with the Licensee’s corporate name, the Licensee will clearly indicate that the Licensee is using the Licensed Mark pursuant to a license from CKI as may be required by CKI. The Licensee will use such trade name to designate the operations under this Agreement as is approved by CKI, and will file a fictitious name certificate (‘‘d/b/a’’) or use of ‘‘trade name’’ certificate or notice, as is generally used or required in the various jurisdictions in the Territory to reflect such use, as is reasonably approved by CKI).

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7.3.3 Execution of Documents.    At CKI’s request, the Licensee will execute any and all documents (including registered user agreements) and take any actions required by CKI to confirm CKTT’s ownership or CKI’s beneficial ownership of the marks referred to in §7.1.1 and the respective rights of CKTT, CKI and the Licensee pursuant to this Agreement.

7.4 Ownership of Copyright. Except as specifically provided herein, any copyright which may be created in any sketch, design, print, Label or the like designed or approved or used with the Licensed Mark by the Licensee will be the property of CKI. The Licensee shall not, at any time, do, or otherwise suffer to be done, any act or thing which may adversely affect any rights that CKI may have in such sketches, designs, prints, Labels and the like and will, at CKI’s request, do all things reasonably required by CKI to preserve and protect said rights.

7.5 Infringements, Counterfeits and Parallel Imports.

7.5.1 Infringements.    In the event that Licensee learns of any infringement or imitation of the Licensed Mark with respect to Products (other than insignificant, immaterial or de minimus situations) which it believes could be considered a counterfeit of the Licensed Products, or of any use by any person of a trademark similar to the Licensed Mark with respect to Products which it believes could be considered a deliberate use of something substantially similar to the Licensed Mark and is either substantive, significant or would adversely affect the prestige, reputation or value of the Licensed Mark), it will promptly notify CKI thereof. The Licensee will take no action, including, but not by way of limitation, settling any action, appealing any adverse decision or discontinuing any action taken by it, except to the extent the same is approved in advance by CKI. All costs and expenses incurred in any action or proceeding (including investigatory expenses and attorneys’ fees, if applicable, court costs and filing fees) will be borne as determined in § 7.5.2. Any damages recovered or sums obtained in settlement in or with respect to any action shall (i) first be applied proportionately to reimburse CKI and the Licensee for the respective expenses incurred and actually paid by it and (ii) the balance, if any, shall belong and shall be paid over to, on a fifty-fifty basis, to CKI and the Licensee. In no event will any infringement by a third party justify the withholding of any payment of Fee or other amount by the Licensee.

7.5.2 Counterfeits and Parallel Imports.

7.5.2.1 The Network.    CKI currently maintains certain staff which maintains an enforcement network of attorneys, investigators and customs inspectors in the Territory (the ‘‘Network’’) to minimize and deter (i) the diversion into and sale within and from the Territory of products (including those which would correspond to Licensed Products) authorized for sale by its Affiliates and other licensees, which may include, without limitation, unauthorized distribution of such products by the manufacturers and subcontractors thereof (‘‘Parallel Imports’’) and (ii) the importation into, or sale or manufacture within as well as from, the Territory of counterfeit Licensed Products or infringing Products; in each case subject to contributions from and reimbursement by various licensees (as well as other authorized users of the Licensed Mark and other marks of CKI and CKTT), and subject to applicable law. CKI generally requires, and will continue to require, its licensees in their respective agreements to restrict exports from their respective ‘‘territories’’ (as per the final sentence of § 1.1.2) in order to prevent importation of applicable merchandise into another licensee’s ‘‘territory.’’ The Licensee acknowledges and agrees that CKI is under no obligation to maintain any such Network or other arrangement, and may curtail, modify, terminate or discontinue such Network in whole or in part at any time. For the time being, unless or until CKI otherwise determines and so advises the Licensee in CKI’s reasonable discretion, the Licensee will cooperate in such efforts as reasonably requested by CKI, and under procedures as CKI may agree upon with Licensee, and will timely remit and/or, as applicable, promptly reimburse out-of-pocket expenses reasonably incurred by CKI in such efforts (including, without limitation, reasonable attorneys’ fees and expenses) as follows: *** Upon the Licensee’s request, CKI will meet with the Licensee to discuss CKI’s enforcement activities and the costs associated therewith.

7.5.2.2 Diversion.    The Licensee shall use all commercially reasonable efforts to minimize and deter the diversion of Licensed Products for sale outside of the Territory, including, without

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limitation, the unauthorized distribution of Licensed Products by the Licensee’s manufacturers and subcontractors (‘‘Diversion’’). The Licensee shall cooperate with CKI in CKI’s efforts to minimize and deter Diversion (‘‘Anti-Diversion Efforts’’). Without limiting the foregoing the Licensee shall promptly (i) provide such information as CKI may from time to time reasonably request concerning its manufacturing, subcontracting and distribution locations, activities and shipments, product and label identification systems and data and sales to and by its customers; and (ii) as provided in § 7.5.4, reimburse all agreed upon out-of-pocket expenses reasonably incurred by CKI in its Anti-Diversion Efforts (including, without limitation, reasonable attorneys’ fees and expenses).

7.5.3 Criminal Proceedings.    CKI may, but need not elect to, initiate criminal or civil actions against persons or entities outside the Territory seeking to manufacture counterfeit Licensed Products or sell or ship counterfeit Licensed Products into the Territory (excluding, for this purpose, manufacturers or subcontractors described in the definitions of Diversion or Parallel Imports). The cost related to any such actions shall be borne entirely by the Licensee, if the Licensee requests that such action be taken, or by CKI, if CKI determines to take such action.

7.5.4 Enforcement Activities.    CKI will consult with the Licensee in connection with the enforcement activities undertaken pursuant to this § 7.5. In connection with this § 7.5.4 through § 7.5.6, and § 7.5.2, Licensee and CKI from time to time will use reasonable efforts to apply a substantive portion of the budgeted amounts and expenditures towards more substantive, significant and/or material actions (and acts of infringement, counterfeiting, etc.) in order to enhance the effectiveness of application of resources. In addition, upon the request of the Licensee, the parties will consult one time each Annual Period to forecast CKI’s continuing and reimbursable expenses hereunder and enter into suitable arrangements as may be agreed upon with Licensee, including retainer arrangements, so that CKI may receive the Licensee’s payments in respect thereof at or shortly before such expenses are incurred.

7.5.5 Nature of Proceedings.    Whenever it is not readily apparent whether actions or proceedings involve counterfeit Licensed Products, Parallel Imports or Diversion, CKI will, where practical and subject to time constraints, contact CKJE for information or input, and then reasonably determine the nature of such items in good faith (with all due caution as to ramifications of erroneous determinations as to whether ‘‘counterfeit’’ or not), taking into account all relevant information provided by the Licensee.

7.5.6 Cooperation. The Licensee shall cooperate with CKI in all actions taken by CKI pursuant to this § 7.5, whether on its own or at the Licensee’s request, and in all criminal proceedings, as may be required or reasonably requested.

7.6 Trademark Security.

7.6.1 Counterfeit Protection.    The Licensee shall use all commercially reasonable efforts to prevent counterfeiting of the Licensed Products. All Licensed Products shall bear and use any reasonable counterfeit preventive system, devices or labels, provided that Licensee may decide in its own good faith discretion, which system, devise or labels to use.

7.7 Use of Licensed Mark on Invoices, etc.    The use of the Licensed Mark by the Licensee on invoices, order forms, stationery and related materials, in advertising in telephone or other directory listings is permitted only upon CKI’s prior written approval of format in which the Licensed Mark is to be so used, the juxtaposition of the Licensed Mark with other words and phrases, and the specific trade name (and form and format thereof), the content of the copy and filing of a fictitious name certificate (‘‘d/b/a’’) or ‘‘trade name’’ certificate or notice, if using the Licensed Mark or portion (e.g., ‘‘CK’’) in such name (or other regional notice of ‘‘trade’’ name or use of the Licensed Mark) as applicable, as approved by CKI.

7.8 Monitoring.    The Licensee shall use reasonable efforts to monitor the use of the Licensed Mark by the Licensee’s customers and to require its customers to advertise, display and promote the Licensed Mark in a manner consistent with the terms and conditions of this Agreement.

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ARTICLE VIII. TERM AND TERMINATION

8.1 Expiration.    The License and, subject to § 8.5, the other rights granted to the Licensee hereunder shall terminate at the end of the License Period and all rights shall immediately revert to CKI.

8.2 Other Rights Unaffected.    It is understood and agreed that termination of the License or other rights granted to the Licensee hereunder by CKI on any ground shall be without prejudice to any other rights or remedies which CKI may have.

8.3 Right of Termination of the License.    If any of the following grounds for termination shall occur, CKI may elect, by written notice to the Licensee, to terminate

(A) upon 20 business days notice unless cured within such 20 business days in the case of any of subsections ‘‘(b)’’ through ‘‘(e)’’;

(B) in the case of subsections ‘‘(f),’’ ‘‘(g),’’ ‘‘(h)’’ (alone or with other breaches or defaults), upon 25 business days notice (without any cure period); and

(C) upon 25 business days notice, unless cured within such 30 business days, in the case of subsections ‘‘(l)’’ or ‘‘(m)’’ (provided not with other breaches or defaults under other noted subsections),

the License and other rights granted to the Licensee hereunder:

(a) Deliberately Omitted ;

(b) The Licensee shall repeatedly sell or distribute individual items of Licensed Products (in other words, ‘‘a pattern’’ of behavior), or shall sell at any time a significant quantity of Licensed Products in breach of CKI’s review and approval rights under § 6.2;

(c) Failure by the Licensee to perform or observe any term or covenant or agreement contained in § 11.4 or in § 4.10;

(d) The Licensee shall sell or distribute Licensed Products to retailers not approved by CKI or disapproved by CKI in accordance with or otherwise in breach of §§ 6.13 or 6.14 (unless such sale or distribution was inadvertent, and was of an insignificant quantity of products or single or isolated account, and the Licensee promptly represents to CKI in writing that steps to avoid such sales or distribution in the future are being taken (which steps are to be delineated in such writing), and are deemed acceptable to CKI’s reasonable satisfaction, and further provided that the Licensee does not repeat any such sales or distribution in breach of §§ 6.13 or 6.14 within the same Annual Period);

(e) Underpayment by the Licensee of Fees (including non-timely (i.e., on or within 15 business days of the due date) payment of any installment of Minimum Guaranteed Fees or MAE hereunder) of 7.5% or more with respect to any Annual Period, or of 5% or more with respect to any two (2) consecutive Annual Periods, unless such underpayment of fees (not MGF’s or MAE’s) was result of clerical or bank errors, or constitutes a ‘‘bona fide’’ dispute between the parties, which is the subject of continuing good faith efforts to ‘‘resolve,’’ not known to a responsible officer or other financial person, and promptly corrected as soon as ‘‘known’’ or so advised by CKI);

(f) The Licensee institutes for its protection, or is made a defendant, in any proceeding under bankruptcy, insolvency, reorganization or receivership law, or the Licensee is placed in receivership or makes an assignment for benefit of creditors or is, or states that it is, unable to meet its debts in the regular course of business, and such involuntary proceedings or receiverships are not dismissed or vacated within 60 days of filing or appointment;

(g) Cessation by the Licensee of its business;

(h) The Licensee assigns, attempts to assign (entering into a binding term sheet or contingent contract or agreement, not just ‘‘discussion’’) , sublicense (without CKI’s approval), or otherwise transfers or attempts to transfer any of its rights or obligations hereunder. Any such attempted or completed assignment, sublicense or transfer (‘‘Transfer’’), whether voluntary or by operation of law, directly or

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indirectly, will be void and of no force or effect. For purposes of this Agreement, any transfer of all or a controlling portion or a majority of the shares of the Licensee or other ‘‘CK’’ affiliates by CK Jeanswear N.V., Fingen S.p.A., its affiliates, shall be deemed a transfer in violation of the terms hereof and prohibited as a ‘‘Transfer’’ hereunder. Prompt notice of any transfer by CK Jeanswear N.V., Fingen S.p.A. or its affiliates (other than Calvin Klein, Inc. or its successors, assignees or transferees) of more than five percent (5%) (whether over a period of time or all at once) (‘‘Notice’’) , shall be delivered to Licensor. Notwithstanding anything herein contained, a change-of-control Transfer shall be permitted if in accordance with all of the applicable provisions of the CKI/CF Group Irrevocable Consent d. 29 September 2005. In the event of any such CKI-permitted change-of-control Transfer, the provisions hereof shall apply to any ‘‘successor in interest’’ permitted Transferee (except that Notice shall apply to any transfer of more than 35% of the Transferee) . Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding upon the parties and permitted successors and assigns.

(i) A change, effect or circumstance occurs that is materially adverse to the business, condition, operations, performance or properties of Licensee’s ability to perform timely its otherwise material obligations under this Agreement, which would, with the normal passage of time, without cash infusion or other material improvement, result in liquidation, substantial discontinuance or even cessation of business (‘‘Material Adverse Effect’’);

(j) A final judgement is entered against the Licensee in excess of € 2,500,000 which has not been satisfied and which would have a Material Adverse Effect;

(k) Any indebtedness of the Licensee in excess of Euros €5 million is accelerated or otherwise comes due and payable before its stated maturity and is not subject to cure under the applicable instrument, which would have a Material Adverse Effect;

(l) The failure by the Licensee to perform or observe any material term or covenant or agreement contained in this Agreement, other than those specified in §§ 8.3(a) to (k) and other than those cured to CKI’s reasonable satisfaction, within the applicable cure period (25 business days) for the second time in any Annual Period; or

(m) The repeated violation by the Licensee of any material term or covenant or agreement contained in this Agreement, other than those specified in §§ 8.3(a) to (k) and other than those cured to CKI’s reasonable satisfaction within the applicable cure period (25 business days).

8.4 Termination With Notice and Right to Cure.    In the event of the failure by the Licensee to perform or observe any material term or covenant or agreement contained in this Agreement, other than those specified in § 8.3, CKI may terminate the License and the other rights granted to the Licensee under this Agreement by giving notice of termination to the Licensee (a ‘‘Notice of Termination’’), which termination shall become effective automatically unless the Licensee completely cures the breach within 30 days of the giving of the Notice of Termination unless such cure cannot be completed within 30 days, in which case termination will not become effective so long as the Licensee is in good faith diligently and expeditiously attempting to cure such breach, only for up to, but not beyond, 90 days.

8.5 Effect of Termination.    Upon the expiration or termination of the License and the License Period for any reason whatsoever, all of the rights of the Licensee under this Agreement shall forthwith terminate and immediately revert to CKI; all Fees on sales theretofore made shall become immediately due and payable; the Licensee shall forthwith discontinue all use of the Licensed Mark, except that the Licensee may, on a non-exclusive basis, during the period (i) commencing on the date of the expiration of the License Period pursuant to § 2.1 or termination of the License because of the breach of § 3.2 and ending 4 months thereafter or (ii) commencing on the date of the termination of the License pursuant to clause (b), (c), (d) or (e) of § 8.3 and ending 4 months thereafter (unless at the advance request of Licensee, which request includes an up-to-date inventory schedule, with anticipated disposition dates, CKI in writing agrees to extend such Disposal Period for up to an additional 30, 60 or 90-day period only, in no event to exceed 6 months in aggregate) (the ‘‘Disposal Period’’), consummate all sales of Licensed Products which were firm on the date of such expiration or termination and sell the balance of the

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Inventory not purchased by CKI within 45 days following date of expiration or termination, and sold within the applicable Disposal Period as provided in § 8.6; provided, however, that any advertising used during the Disposal Period shall be subject to CKI’s prior written approval and such disposition of the Licensed Products shall continue to be subject to the Licensee’s obligations hereunder, including, but not limited to, payments to be made to CKI, and Fees with respect thereto shall be due on the last day of the Disposal Period. Without limiting the generality of the first clause of this § 8.5, the Licensee acknowledges that activities, including sales during the Disposal Period, are on a non-exclusive basis. Subsequent to the Disposal Period or, if none, subsequent to such termination, the Licensee shall no longer use the Licensed Mark, any variation, imitation or simulation thereof, or any trademark similar thereto; and the Licensee shall thereupon deliver to CKI, free of charge, all sketches, designs, colors and the like in its possession or control, designed or approved by CKI, and all Labels supplied by CKI in the Licensee’s possession or control. CKI shall have the option, exercisable upon notice to the Licensee within 30 days of such expiration or termination, to negotiate the purchase of Labels which have not been supplied by CKI. If such negotiations do not result in the purchase of such Labels or any part of W-I-P, the Licensee shall destroy the unused Labels and W-I-P (except for greige goods or other unidentifiable generic materials otherwise useable by Licensee) at the end of the Disposal Period or, if none, upon such termination, under the supervision of CKI, and the Licensee shall supply to CKI a certificate of destruction thereof signed by a duly authorized officer of the Licensee.

8.6 Inventory Upon Termination.    Upon the expiration or termination of the License and the License Period for any reason whatsoever, the Licensee shall deliver to CKI within 15 business days a complete and accurate schedule of Inventory of Licensed Products (i.e., inventory constituting finished Licensed Products on hand at termination, work-in-process, a/k/a ‘‘W-I-P,’’ to be completed and received in warehouse within 3 months only) as of the close of business on the date of) such expiration or termination (the ‘‘Inventory Schedule’’). CKI thereupon shall have the option, exercisable by written notice to the Licensee within 15 days after its receipt of the Inventory Schedule, to purchase (or to have its designee purchase) any or all of the Inventory (other than Inventory required to consummate sales of Licensed Products which were firm on the date of such expiration or termination) for an amount *** In the event such notice is sent by CKI, CKI (or its designee) may collect the Inventory referred to therein within 90 days after CKI’s notice. CKI (or its designee) will pay for the Inventory upon collection. In the event such notice is not sent, the Licensee may dispose of the Licensed Products during any Disposal Period pursuant to § 8.5; provided, however, that such disposition shall continue to be subject to the Licensee’s obligations hereunder, including, without limitation, with respect to the payment of fees and the approval of customers and advertising. At the end of the Disposal Period, or if none, upon such termination, any Licensed Products remaining in the Licensee’s possession or control, including, without limitation, in any stores of the Licensee, shall, at the request of CKI, be destroyed. To the extent the Licensee completely removes the Licensed Mark from the Licensed Products, and all Labels attached to such Licensed Products, and such Licensed Products are not recognizable as a Licensed Product and cannot be distinguished from similar generic products generally available in the marketplace, such Products shall no longer be Licensed Products. CKI shall have the right at any time, and at its expense, to conduct a physical inventory of the Licensed Products then in the Licensee’s possession or control.

8.7 Freedom to License.    CKI shall be free to license to others the use of the Licensed Mark in connection with the manufacture, sale, distribution and promotion of Licensed Products in the Territory upon termination or expiration of this Agreement and to enter into discussions and negotiations applicable thereto, provided only that no shipment of Licensed Products and no publication of institutional or consumer advertising of the Licensed Products pursuant to any such new license will be permitted prior to the termination or expiration of this Agreement.

8.8 Rights Personal.    The License and rights granted hereunder are personal to the Licensee. No assignee for the benefit of creditors, receiver, trustee in bankruptcy, sheriff or any other officer or court charged with taking over custody of the Licensee’s assets or business, shall have any right to continue performance of this Agreement or to exploit or in any way use the Licensed Mark if this Agreement is terminated pursuant to §§ 8.3, 8.4 or 11.8, except as may be required by law.

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8.9 Trustee in Bankruptcy.    Notwithstanding the provisions of § 8.8, in the event that, pursuant to the applicable bankruptcy law (the ‘‘Code’’), a trustee in bankruptcy, receiver or other comparable person, of the Licensee, or the Licensee, as debtor, is permitted to assume this Agreement and does so and, thereafter, desires to assign this Agreement to a third party, which assignment satisfies the requirements of the Code, the trustee or the Licensee, as the case may be, shall notify CKI of same in writing. Said notice shall set forth the name and address of the proposed assignee, the proposed consideration for the assignment and all other relevant details thereof. The giving of such notice shall be deemed to constitute an offer to CKI to have this Agreement assigned to it or its designee for such consideration, or its equivalent in money, and upon such terms as are specified in the notice. The aforesaid offer may be accepted by CKI only by written notice given to the trustee or the Licensee, as the case may be, within 15 days after CKI’s receipt of the notice to such party. If CKI fails to deliver such notice within said 15 days, such party may complete the assignment referred to in its notice, but only if such assignment is to the entity named in said notice and for the consideration and upon the terms specified therein. Nothing contained herein shall be deemed to preclude or impair any rights which CKI may have as a creditor in any bankruptcy proceeding.

8.10 Compensation.    Without limiting any right or remedy of CKI, if CKI terminates this Agreement pursuant to § 8.3, CKI shall have the right to ***

ARTICLE IX. INDEMNIFICATION AND INSURANCE

9.1 Indemnification by the Licensee.    The Licensee does hereby indemnify and hold harmless CKI, its Affiliates, including, without limitation, PVH, CKTT, and its and their current and former respective directors, officers, employees, agents, trustees, and representatives, as well as Mr. Calvin Klein, his heirs, his estate and their respective legal representatives (each, an ‘‘Indemnified Party’) from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and expenses (including allocable costs of in-house counsel)), which an Indemnified Party may incur or be obligated to pay in any third party action, claim or proceeding, for or by reason of any acts, whether of omission or commission, that may be committed by the Licensee (which for purposes of this § 9.1, includes its Affiliates, but not Guarantor) or any of their servants, agents or employees in connection with the Licensee’s performance of this Agreement, including but not limited to:

(a) to the extent permitted by law, any alleged defect in any Licensed Product, regardless of whether the action is based upon negligence or strict liability, and regardless of whether the alleged negligence is characterized as ‘‘passive’’ or ‘‘active’’;

(b) the manufacture, labeling, sale or distribution of any Licensed Product by the Licensee;

(c) any violation of any warranty, representation or agreement made by the Licensee pertaining to a Licensed Product; or

(d) the claim of any broker, finder or agent used by the Licensee in connection with the making of this Agreement or any transactions contemplated by this Agreement.

CKI shall give the Licensee prompt written notice of any such claim or action and thereupon the Licensee shall undertake and conduct the defense of any suit so brought. In the event an appropriate action is not taken by the Licensee within 30 days of its receipt of notice from CKI, CKI shall have the right to defend such claim or action in its own name, but no settlement or compromise of any such claim or action may be made without the prior written consent of the Licensee, such consent not to be unreasonably withheld or delayed. In either case, CKI and the Licensee shall keep each other fully advised of all developments and shall cooperate fully with each other and in all respects in connection with any such defense. Such indemnification shall be deemed to apply solely to the amount of the judgement, if any, against CKI and reasonable sums paid by CKI in connection with its defense, and shall not apply to any consequential damages suffered by CKI which are not included in the aforementioned judgement. The provisions of this § 9.1 and the Licensee’s obligations hereunder shall survive any termination of the License or rescission of this Agreement.

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9.2 Notice of Suit or Claim.    The Licensee shall promptly inform CKI by written notice of any suit or claim against the Licensee relating to the Licensee’s performance under this Agreement, whether such suit or claim is for personal injury, involves alleged defects in the Licensed Products manufactured, sold or distributed hereunder, or otherwise.

9.3 Indemnification by CKI.    CKI does hereby indemnify and hold harmless the Licensee and its Affiliates, and their respective managers, directors, members, shareholders, employees and agents from and against any and all losses, liability, damages and expenses (including reasonable attorneys’ fees, costs and expenses, but excluding consequential damages, incidental damages and lost profits) which any of them may incur or for which it may become liable or compelled to pay in any action or claim alleging: (i) CKI’s breach of any representation or warranty of CKI hereunder in § 11.1; or (ii) that the Licensee’s use of the Licensed Mark in accordance with the terms of this Agreement violates the bona fide trademark ownership rights of a third party in the United States or Canada. The Licensee will promptly notify CKI of any action or claim brought to its attention; provided, however, that the failure to promptly notify CKI shall not relieve CKI of its obligation hereunder, except to the extent (if any) that CKI actually prejudiced thereby. The provisions of this § 9.3 and the obligations of CKI set forth herein shall survive the expiration or other termination of this Agreement.

9.4 Insurance.

9.4.1 Requirement.    Without limiting the Licensee’s liability pursuant to the indemnity provisions of this Agreement, the Licensee shall maintain comprehensive general liability insurance in the amount of at least *** with a broad form property damage liability endorsement. This insurance shall include broad form blanket contractual liability, personal injury liability, products and completed operations liability. Each coverage shall be written on an ‘‘occurrence’’ form.

9.4.2 General Provision.    The insurance described in § 9.4.1 shall include: (i) a cross-liability endorsement naming each of CKI, CKTT, and Mr. Calvin Klein; (ii) an endorsement stating that CKI shall receive at least 30 days’ written notice prior to cancellation or non-renewal of coverage; (iii) an endorsement naming each of CKI, CKTT, and Mr. Calvin Klein as additional insureds; (iv) an endorsement stating that the insurance required by this Agreement is primary and that any insurance purchased by CKI, CKTT, or Mr. Calvin Klein shall only apply in excess of the insurance purchased by the Licensee; (v) a waiver of subrogation in favor of each of CKI, CKTT, and Mr. Calvin Klein; and (vi) an endorsement stating that each of CKI, CKTT, and Mr. Calvin Klein may recover for any loss caused CKI, its agents or employees, whether caused by the negligence (including active, passive and gross negligence) of the Licensee, or otherwise.

9.4.3 Approved Carrier/Policy Changes.    All insurance shall be obtained from primary, and financially capable and reputable, insurance companies. The Licensee shall give at least 30 days’ prior written notice to CKI of the cancellation or any modification of such insurance policy that would affect any of CKI’s, CKTT’s, or Mr. Calvin Klein’s status or benefits thereunder. This insurance may be obtained for CKI, CKTT, or Mr. Calvin Klein by the Licensee in conjunction with a policy which covers products other than the Licensed Products.

9.4.4 Evidence of Coverage.    No later than 20 days from the date hereof, the Licensee shall furnish to CKI evidence, in form and substance satisfactory to CKI, of the maintenance and renewal of the required insurance copies of policies with applicable riders and endorsements) and certificates of insurance.

9.4.5 Territory.    The insurance set forth in this § 9.4 must cover the entire Territory to the extent available in each jurisdiction in the Territory.

ARTICLE X. COMPLIANCE WITH LAWS

10.1 Compliance with Laws.    The Licensee shall comply with all laws, rules, regulations and requirements of any governmental body which may be applicable to the operations of the Licensee

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contemplated hereby, including, without limitation, as they relate to the manufacture, distribution, sale or promotion of Licensed Products, notwithstanding the fact that CKI may have approved such item or conduct.

10.2 Equitable Relief.    CKI shall be entitled to equitable relief by way of temporary and permanent injunction and such other and further relief at law or in equity as any court with jurisdiction may deem just and proper. The Licensee waives the requirement of the posting of a bond in connection with any application by CKI for equitable relief.

ARTICLE XI. MISCELLANEOUS

11.1 Warranties and Representations of the Parties.    Each of the parties hereby represents and warrants to the other party that: it is a corporation (or limited liability company, as applicable) duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; it has the full right, power and authority to enter into, and perform its obligations under, this Agreement; and all necessary corporate acts have been effected by it to render this Agreement valid and binding upon it.

11.2 Definitions.    Each of the following terms (unless deliberately omitted) has the meaning ascribed thereto in the applicable § therein contained:

Defined Term

Advertising Obligation
Advertising Overage
Advertising Shortfall
Affiliates
Agreed Upon Season’s Themes
Annual Period
Anti-Diversion Efforts
Annual Period
Approved Accounts
Approved Design Concepts
Approved Prototypes
Approved Seconds and Closeouts Accounts
CKI
CKI Stores
CKTT
Close-Outs
Code
Collection
Co-operative Advertising
CRK
CRK Fee
Design Concepts
Disclosing Party
Disposal Period
Diversion
E-Commerce
Excluded Design
Gross Sales
Minimum Guaranteed Fees
Indemnified Party
Initial License Period
Inventory
Inventory Schedule
Labels
License
Licensed Mark
License Period
Licensed Products
Licensee
Licensing Forecast
Minimum Net Sales Threshold

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Net Sales
Network
Non-Conforming Products
Notice of Termination
Parallel Imports
Percentage Fees
PR Overage
PR Shortfall
Products
PVH
Renewal License Period
Seconds
Standards
Territory
Time And Action Calendar
Third-Party Manufacturing Agreement
Trademark Security Plan
Transfer

11.3 Notices.    All reports and notices required or permitted to be given under this Agreement shall be in writing and shall, unless specifically provided otherwise in this Agreement, be deemed to have been given if personally delivered or faxed (on the date of messengering or faxing), or if mailed, three business days from the date of mailing (by certified or registered mail, return receipt requested and postage prepaid), or if by overnight air courier, one business day from the date of overnight air courier handling as follows:

If to CKI, to:	Calvin Klein, Inc. 205 West 39th Street New York, New York 10018 Attention: President and Chief Operating Officer Telephone: (212) 292-9901 Facsimile: (212) 292-9933

With a copy to:	Calvin Klein, Inc. 205 West 39th Street New York, New York 10018 Attention: General Counsel Telephone: (212) 292-9652 Facsimile: (212) 764-6784

If to the Licensee, to:	CK Jeanswear Europe S.p.A. Via Provinciale Lucchese 181 50019 Sesto Fiorentino, Florence, Italy Attn.: Chief Executive Officer Telephone: +39 055 305 442 Facsimile: +39 055 310 506

If to Warnaco, to:	WF Overseas Fashion C.V. c/o Warnaco Inc. 501 Seventh Avenue New York, New York 10018 Attn: General Counsel Telephone: (212) 287-8282 Facsimile: (212) 287-8275

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Requests for approvals with appropriate submissions shall be sent to the applicable party, either CRK, the President or the designated design staff member. Financial reports shall be sent to the designated party in the Finance Department. A party may change its address for receipt of notices at any time upon notice to the other party.

11.4 Assignment.    The License and all rights granted to the Licensee hereunder are personal in nature, and the Licensee shall not Transfer the License, this Agreement or its rights and interest hereunder, or any part hereof, without the prior written consent of CKI, which consent may be withheld by CKI in its sole and absolute discretion.

11.5 Sublicense.    The Licensee is prohibited from granting any sublicenses under this Agreement unless approved by CKI.

Licensee shall have the right to grant a distributorship or distributorships (excluding a sublicense) for limited areas or jurisdictions in the Territory), but no such distributorship shall reduce in any way Licensee's obligations hereunder nor may such distributorship or any sublicense agreement be entered into unless the following terms and conditions are first satisfied:

(i) the term of any distributorship or sublicense agreement shall be no more than five (5) years or five (5) years plus five (5) years contingent on at least compliance (with automatic termination upon termination of this Agreement);

(ii) The distributor or sublicensee must agree to comply in its activities as a distributor or sublicensee with all of the provisions of this Agreement applicable to such distribution;

(iii) The distributor or sublicensee must agree not to assign, transfer, or further grant the distributorship agreement or sublicense agreement itself or any of the rights granted to it thereunder without CKI's prior written consent; and

(iv) The distributor or sublicensee must acknowledge that each of CKI, CKTT and Mr. Calvin Klein are third-party beneficiaries, must afford CKI rights of inspection, approval and termination consistent with its rights pursuant to this Agreement, which it may exercise directly, including rights of termination, and must indemnify CKI, CKTT and Mr. Calvin Klein from liabilities and claims specifically in accordance with the provisions hereof;

(v) Licensee must deliver a copy of each distributorship, and proposed sublicense agreement must subsequently deliver a copy of each material amendment thereof, to CKI, prior to the execution thereof in the case of any proposed sublicense for review and approval , and shall deliver a conformed copy to CKI promptly after its execution and the execution of each amendment thereto;

(vi) if Licensee enters into an agreement and fails to control, pursuant to this Agreement or the terms of the distributorship agreement, the distributor or sublicense thereunder, and as a result of such failure fails to prevent a breach by such distributor or sublicense agreement of any provision of this Agreement or the distributorship agreement or sublicense agreement, CKI may, in addition to all of its other rights and remedies under this Agreement, require Licensee to ameliorate the effect of such breach; and

(vii) if applicable, ***

11.6 Assignment by CKI.    CKI shall have a complete and unrestricted right to Transfer any or all of its rights and interests in this Agreement, provided that such transferee is bound by all of the terms hereof, and subject to the Licensee’s right to continue to exercise all of its rights hereunder.

11.7 No Agency.    The Licensee shall not represent itself as the agent or legal representative of CKI or its Affiliates for any purpose whatsoever and shall have no right to create or assume any obligation of any kind, express or implied, for or on behalf of them in any way whatsoever. CKI shall similarly not represent itself as the agent or legal representative of the Licensee or its Affiliates for any purpose whatsoever and shall have no right to create or assume any obligation of any kind, express or implied, for or on behalf of them in any way whatsoever.

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11.8 Suspension of Obligations.    If the Licensee shall be prevented from performing any of its obligations because of Federal governmental regulation or martial order, or by war, declared or undeclared, or other major and material calamities such as fire, earthquake, or similar Acts of God, the Licensee’s obligations shall be suspended during the period of such conditions except for payment and provided the Licensee promptly commences and proceeds diligently to ameliorate the effect. If such condition continues for a period of more than 60 days, CKI shall have the right to terminate this Agreement.

11.9 Benefit.    This Agreement shall inure to the benefit of and be binding upon the parties hereto, and, subject to §§ 11.4 and 11.6, their successors and assigns. PVH, CKTT and Mr. Calvin Klein (with respect to §§ 9.1 and 9.4) shall be third-party beneficiaries of this Agreement and, whether or not expressly set forth herein, shall have the right (a) to exercise, and enforce against the Licensee, the rights of CKI hereunder if CKI fails to exercise such rights, and (b) to exercise, and enforce against the Licensee, the same rights as CKI hereunder in addition to (and not in lieu of) any rights CKI has hereunder. Nothing herein shall be deemed to give the Licensee any rights to make any claim against PVH, CKTT and/or Mr. Calvin Klein.

11.10 Entire Agreement; Amendment.    This Agreement, including the exhibits hereto, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and all prior agreements, contracts, promises, representations and statements between them, if any, whether written or oral, with respect thereto are merged into and superseded by this Agreement, except as specifically set forth herein. This Agreement may not be amended or modified, except in a writing signed by both parties hereto and exchanged between them.

11.11 Non-Waiver.    No waiver by either party of any breach hereof or default hereunder will constitute a continuing wavier of such provision or of any other provision of this Agreement. Acceptance of payment by CKI will not be deemed a waiver by CKI of any violation of or default under any of the provisions of this Agreement by the Licensee or an election of remedies as to which any and all rights (and all remedies) are expressly reserved and retained.

11.12 Severability.    In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provisions shall not be affected or impaired in any other jurisdiction, nor shall the remaining provisions contained herein in any way be affected or impaired thereby, unless CKI determines such provision was material, in which case CKI may terminate this Agreement.

11.13 Headings.    The headings of the Articles and sections of this Agreement are for convenience only and in no way limit, define or affect the terms or conditions of this Agreement.

11.14 Counterparts.    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.15 Governing Law.    THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW. (HOWEVER, DISPUTES REGARDING THE LICENSED MARK WILL BE RESOLVED IN ACCORDANCE WITH THE U.S. FEDERAL TRADEMARK LAWS AND RELATED LAWS, STATUES, RULES AND REGULATIONS OF THE UNITED STATES UNLESS THERE ARE NO U.S. FEDERAL LAWS, STATUTES, RULES OR REGULATIONS DISPOSITIVE OF SUCH DISPUTE, IN WHICH EVENT SUCH DISPUTES WILL BE RESOLVED IN ACCORDANCE WITH THE PREVIOUSLY DESCRIBED LAWS OF THE STATE OF NEW YORK.)

11.16 Jurisdiction.    Any legal action or proceeding with respect to this Agreement shall be brought in the federal or state courts seated in the County of New York, State of New York and, by execution and delivery of this Agreement, each party hereby accepts for itself and in respect to its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts. The Licensee hereby irrevocably

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and unconditionally waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing or maintaining of any such action or proceeding in such respective jurisdictions, and specifically acknowledges and agrees that any judicial opinion and/or decision rendered, judgement award in order issued by the courts of the State of New York and/or the federal courts located therein, will be enforceable in any jurisdiction. Any such opinion, decision, judgement and/or order may be deposited in the applicable jurisdictional venue and court in Italy or elsewhere in the Territory with full force and effect as if rendered within such venue and by such judicial authority with the same full force and effect. Each party irrevocably and unconditionally consents to the service of process of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the other party at its address for notices provided in § 11.3, such service to become effective 30 days after such mailing.

11.17 Non-Solicitation.

(a) The Licensee agrees that ***

(b) CKI agrees that ***

11.18 Confidentiality.    Each of the parties hereto acknowledges that it may receive from the other (the ‘‘Disclosing Party’’): (a) prints, designs, ideas, sketches, and other materials or information, including, without limitation; (b) financial or business information; (c) a formula, pattern, compilation, program, device, method, technique, or process; or (d) other information that in each case derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use which the Disclosing Party intends to use on or in connection with lines of merchandise other than the Licensed Products and which have not as yet found their way into the channels of distribution. The parties recognize that these materials are valuable property of the Disclosing Party. Each of the parties hereto acknowledges the need to preserve the confidentiality and secrecy of these materials and agrees to take all necessary steps to ensure that use by it, or by its contractors, will in all respects preserve such confidentiality and secrecy, while acknowledging that each of the parties works with others on product development and designs. None of the parties shall, at any time during the License Period or any time thereafter, disclose or use for any purpose, other than as contemplated by this Agreement, any confidential information and data relating to the business of the other, except as required or otherwise considered necessary in or to its business, but under its normal and customary confidentiality procedures applicable overall as to such use. Nothing herein shall be deemed to limit CKI’s rights under §§ 6.8 and 6.12. The provisions of this § 11.18 shall not apply to information that (i) is now or hereafter becomes generally available to the public, other than as a result of a breach hereof, or (ii) is obtained from a third party that, to the knowledge of the party receiving the information, is not under any obligation to keep such information confidential. Notwithstanding anything in this § 11.18 to the contrary, if any party becomes legally compelled (including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the confidential information, such party shall provide the others with prompt written notice of such requirement so that the party whose information it is may seek a protective order or other appropriate remedy. If such protective order or other remedy is not obtained, the party under compulsion to disclose the information agrees to disclose only that portion of the confidential information, which it is advised by counsel, is legally required to be disclosed, and it agrees to take all reasonable steps to preserve the confidentiality of the confidential information (including by obtaining, at the cost of the owner of the information, an appropriate protective order or other reliable assurance that confidential treatment will be accorded the confidential information). In addition, the party under compulsion to disclose the information shall not oppose any effort (and shall, if and to the extent requested by the owner of the information, cooperate with, assist and join with the owner of the information, at the expense of the owner of the information) in any action by the owner of the information to obtain a protective order or other reliable assurance that confidential treatment will be accorded the confidential information.

11.19 Assignment Within Warnaco Family.    Following the closing of the Transaction, pursuant to which Warnaco will, in accordance with its terms, acquire the business of Licensee, this Agreement may

CONFIDENTIAL TREATMENT

be assigned within the Warnaco family of companies in accordance with the terms as agreed by CKI and set forth in writing simultaneously herewith.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

CALVIN KLEIN, INC.

By: /s/ Tom Murry                                        
Name: Tom Murry
Title: President and COO

CK JEANSWEAR EUROPE, S.P.A.

By: /s/ Lawrence R. Rutkowski                 
Name: Lawrence R. Rutkowski
Title: Vice President and Treasurer

WF OVERSEAS FASHION C.V.

By: Warnaco U.S., Inc., its general partner

By: /s/ Stanley P. Silverstein                        
Name: Stanley P. Silverstein
Title: President and Secretary

CONFIDENTIAL TREATMENT

SCHEDULE 6.13

APPROVED ACCOUNTS

CONFIDENTIAL TREATMENT

SCHEDULE 6.14

APPROVED SECONDS AND CLOSE-OUTS ACCOUNTS

CONFIDENTIAL TREATMENT

SCHEDULE S

SHAREHOLDERS

Name/Address/Position				#/% Shareholdings

CONFIDENTIAL TREATMENT

EXHIBIT T

TERRITORY

European Union at 1 May 2004, which included Austria, Belgium, Luxembourg, Netherlands, Denmark, Finland, France, Germany, Great Britain, Greece, Ireland, Italy, Portugal, Spain, Sweden, Estonia, Latvia, Lithuania, Czech Republic, Slovakia, Slovenia, Hungary, Poland, Malta, Cyprus.

Also Norway, Switzerland, Monte Carlo, Vatican City, Liechtenstein, Iceland and

Eastern Europe and Russia, consisting of:

Croatia, Bosnia-Herzegovina, Serbia, Macedonia, Bulgaria, Romania, Moldavia, Ukraine, Byelorussia, ex-C.I.S. (Russia), Georgia, Armenia, Azerbaijan, Kazakhstan and Uzbekistan.

Middle East:

Lebanon, Israel, Palestine, Jordan, Iran, Saudi Arabia, Yemen, Qatar, Kuwait, Bahrain, Oman, UAE, Egypt and Turkey.*

Africa**:

South Africa, Tunisia, Algeria, Morocco, Ivory Coast, Senegal, Nigeria.

* Not Syria, as regulations preclude protection of trademark, until registration of trademark may occur, as advised by CKI.

** N.B. — for trademark, only OAPI application/registration.

CONFIDENTIAL TREATMENT

EXHIBIT P (page 1 of 2)

PRODUCTS

*** [approximately 2 pages redacted]

CONFIDENTIAL TREATMENT

EXHIBIT B

ROYALTY STATEMENT

FORM MUST BE SUBMITTED COMPLETED

CALVIN KLEIN, INC.

	Page	______ of ______

	Date	____________

NAME OF LICENSEE:

LICENSEE’S ADDRESS:

LICENSED PRODUCT:

205        For each month during the period of        to          (the ‘‘Period’’).

For the month of            .

Category

Style No.

Units

Gross Sales

Discounts

Net Sales

Percentage Fees

For the month of            .

Category

Style No.

Units

Gross Sales

Discounts

Net Sales

Percentage Fees

For the month of            .

Category

Style No.

Units

Gross Sales

Discounts

Net Sales

Percentage Fees

TOTAL

205        NET SALES BY ACCOUNT

205        INVENTORY AS OF THE END OF THE PERIOD:

Style Number				Units				Wholesale Price

CONFIDENTIAL TREATMENT

The undersigned,          the          of the Licensee, does hereby certify that the foregoing information provided to CKI pursuant to the License Agreement is complete and accurate.

IN WITNESS WHEREOF, the undersigned has executed this Royalty Statement on this    day of        ,   .

LICENSEE :

By:______________________________________
Name:
Title: Chief Financial Officer or other duly authorized executive officer as applicable

The completion of this statement does not limit the Licensee’s right to receive credit for payments of Minimum Guaranteed Fees and Percentage Fees as set forth said License Agreement.

CONFIDENTIAL TREATMENT

EXHIBIT D

THIRD-PARTY
MANUFACTURING
AGREEMENT

AGREEMENT, dated        ,      , by and between              (the ‘‘Licensee’’), having an address at            , and           (the ‘‘Manufacturer’’), having an address at             .

WITNESSETH:

WHEREAS, the Licensee pursuant to a License Agreement with CALVIN KLEIN, INC. (‘‘CKI’’) has been granted a license (‘‘License’’) to use the CK/CALVIN KLEIN trademark (the ‘‘Licensed Mark’’) in connection with the distribution, sale and marketing of certain goods (‘‘Licensed Products’’);

WHEREAS, CKI, a subsidiary of Phillips-Van Heusen Corporation (‘‘PVH’’), is the licensee and beneficial owner of the trademarks CALVIN KLEIN, CK and CK/CALVIN KLEIN for certain products, which are owned of record by the Calvin Klein Trademark Trust (‘‘CKTT’’), and PVH is the owner, licensee or sublicensee of the trademarks VAN HEUSEN, IZOD, IZOD CLUB, BASS, G.H. BASS, GEOFFREY BEENE, ARROW, KENNETH COLE NEW YORK, REACTION BY KENNETH COLE, BCBG MAX AZRIA and DKNY, and PVH’s policy is not to place, and to cause its subsidiaries and their respective licensees and sublicensees not to place, orders with any manufacturer or subcontractor that breaches the provisions contained in this Agreement and similar provisions contained in other third-party manufacturing agreements of PVH or any of its affiliates, including, without limitation, CKI;

WHEREAS, the License entitles the Licensee to subcontract the manufacture and/or assembly of the Licensed Products to third parties, subject to certain express limitations and conditions; and

WHEREAS, the Licensee has selected the Manufacturer as a manufacturer to produce the Licensed Products for the Licensee subject and pursuant to the terms and conditions set forth below;

NOW, THEREFORE, the parties hereby agree as follows:

1. The Manufacturer shall have no rights in or to the Licensed Mark or in any mark similar thereto by reason of its manufacture of the Licensed Products and shall only use the Licensed Mark in strict accordance with the Licensee’s instructions.

2. The Manufacturer recognizes the validity of the Licensed Mark and will take no action, either during the term of this Agreement or at any time thereafter, in derogation of CKI’s and/or CKTT’s entire right and interest in and to the Licensed Mark or any value thereof or prestige related thereto. The Manufacturer will not, either during the term of this Agreement or at any time thereafter, oppose, petition to cancel or otherwise interfere with any registration CKI or CKTT has now or may obtain in the future for the Licensed Mark.

3. The Manufacturer will manufacture and sell the Licensed Products and/or assemble the Licensed Products and will deliver them only to the Licensee or to the Licensee’s authorized representative or agents. Any and all Licensed Products produced by the Manufacturer which do not meet the Licensee’s quality standards or result from overruns or cancellations of the Licensee’s orders (collectively, ‘‘Rejected Products’’) will be strictly accounted for and physically maintained, at the Manufacturer’s sole expense, in the Manufacturer’s warehouse or such other place as may be under the Manufacturer’s exclusive access and control. Rejected Products not bearing the Licensed Mark or any identifying logo may be sold to any third party; provided; however, that all labels, hang tags, and other identifying marks must be removed from such Rejected Products before sale to such a third party. Rejected Products bearing the Licensed Mark or any identifying logo may be sold to any third party; provided, however, that (A) such Rejected Products must be held for a minimum period of three months after the original ship date of the Licensee’s

CONFIDENTIAL TREATMENT

purchase order, and (B) all labels must be cut and the Product clearly and significantly stamped ‘‘irregular’’ before sale to such a third party. **

4. The Manufacturer will follow the specifications and standards from time to time stipulated by the Licensee and will permit the Licensee, CKI and PVH to inspect the manufacturing processes and provide samples of the Licensed Products in order for the Licensee, CKI or PVH, as the case may be, to satisfy itself that the specifications and standards are being met.

5. The Manufacturer acknowledges that the Licensee may provide it with certain prints, designs, ideas, sketches and other materials or trade secrets which may or will be used in connection with the Licensed Products and/or lines of merchandise other than the Licensed Products which have not been announced to the public or entered the stream of commerce. The Manufacturer recognizes that such materials are exclusive and valuable property of CKI or PVH and acknowledges the need to preserve the confidentiality and secrecy of such materials. The Manufacturer agrees to take all reasonable precautions to protect the secrecy of the materials, samples and designs prior to their commercial distribution or the showing of samples of same for sale. The Manufacturer will also take all reasonable precautions to protect the secrecy of the original designs created either by CKI, PVH or the Licensee for Licensed Products prior to their advertisement, commercial distribution or the showing of samples for sale. During the term of this Agreement, the Manufacturer will not disclose or use for any purpose not contemplated by this Agreement any confidential information or data that is proprietary to CKI, PVH or the Licensee.

6. The Manufacturer shall institute procedures to control the storage, requisition from storage and use all labels, packages and other materials bearing the Licensed Mark to safeguard against the escape or unauthorized use of the Licensed Mark or Licensed Products.

7. The Manufacturer will adhere to the standards and guidelines set forth in PVH’s publication ‘‘A Shared Commitment — Requirements for Suppliers, Contractors, Business Partners’’ and PVH’s ‘‘Statement of Corporate Responsibility,’’ copies of which the Manufacturer acknowledges it has received. The Manufacturer further acknowledges that it has read and understands such publications. The Manufacturer will communicate immediately to the Licensee any departure from such standards and guidelines. The Manufacturer acknowledges that compliance with such standards and guidelines is a prerequisite to a continuing relationship with the Licensee.

In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provisions shall not be affected or impaired in any other jurisdiction, nor shall the remaining provisions contained herein in any way be affected or impaired thereby.

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PRINCIPALS OF CONFLICTS OF LAW.

	**   Bracketed language should be deleted where agreement is with subcontractor.

CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

LICENSEE:

By:____________________________
        Name:
        Title:

MANUFACTURER:

By:____________________________
        Name:
        Title:

CONFIDENTIAL TREATMENT

EXHIBIT E

PRODUCTION FACILITY EVALUATION FORM

FORM MUST BE SUBMITTED COMPLETED

CALVIN KLEIN, INC.

	Page	______ of ______

	Date	____________

NAME OF LICENSEE:

LICENSEE’S ADDRESS:

LICENSED PRODUCT:

PRODUCTION FACILITY:

Name:__________________________________________________________________________

Name of President of Production Facility________________________________________________

Address:________________________________________________________________________

Product:________________________________________________________________________

Date Factory Evaluation Completed:__________________________________________________

Signed:  ________________________________

(Note: Must be signed by an authorized officer of the division producing Licensed Products)

(Print Name)

Submit to the attention of:

CALVIN KLEIN, INC.
205 West 39^th Street
New York, NY 10018
Attention:

Deirdre Miles-Graeter 10 May 2005

CONFIDENTIAL TREATMENT

SCHEDULE OF ISSUED REGISTRATIONS AND
PENDING APPLICATIONS FOR ‘‘CK/CALVIN KLEIN’’ TRADEMARKS IN CLASS 25

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

Algeria

16 Aug 95

Reg. No. 49384

18,25 (CK/Calvin Klein)

30 Dec 95

Reg. No. 50097

18,25 (CK/Calvin Klein)

Armenia

14 Oct 98

Reg. No. 3633

18,25 (CK/Calvin Klein)

21 Apr 97

Reg. No. 4134

24,25,42 (CK/Calvin Klein)

Austria

11 Oct 93

Reg. No. 153,247

18,24,25 (CK/Calvin Klein)

Azerbaijan

10 Jun 99

Reg. No. 990586

18,25 (CK/Calvin Klein)

Bahrain

31 May 95

Reg. No. 18853

25(CK/Calvin Klein)

Byelorussian

18 Dec 97

Reg. No. 7637

18,25 (CK/Calvin Klein)

24 Apr 97

Ser. No. 970,704

24,25,42 (CK/Calvin Klein)

Bulgaria

23 May 95

Reg. No. 27675

3,18,24,25 (CK/Calvin Klein)

Croatia

28 Jun 95

Reg. No. Z-951067

18,25 (CK/Calvin Klein)

18 Mar 93

Reg. No. Z-930655

3,25(re-reg Yugoslav#34173)

CTM

1 Apr 96

Reg. No. 66712

3,4,8,9,14,16,18,20,21, 24,25,26,27,35,42 (CK/Calvin Klein)

21 Aug 97

Reg. No. 617415

9,25 (CK/Calvin Klein)

Cyprus

5 Mar 96

Reg. No. 44740

25 (CK/Calvin Klein)

Czech Republic

27 Mar 97

Reg. No. 198,533

9,18,25 (CK/Calvin Klein)

Denmark

10 Dec 93

Reg. No. 08562/1993

3,18,25 (CK/Calvin Klein)

Egypt

18 Apr 95

Reg. No. 95389

25 (CK/Calvin Klein)

Estonia

21 Feb 97

Reg. No. 22535

18,25(CK/Calvin Klein)

Finland

6 Feb 95

Reg. No. 136190

18,25 (CK/Calvin Klein)

France

25 Aug 93

Reg. No. 93/481421

25 (CK/Calvin Klein)

(St. Martin, St. Barthelomy, French Guiana & other French Antilles)

Georgia

30 Apr 98

Reg. No. 9139

18,25 (CK/Calvin Klein)

7 Jul 98

Reg. No. 9934

24,25,42 (CK/Calvin Klein)

Germany

5 Jul 94

Reg. No. 2070077

25 (CK/Calvin Klein)

Greece

26 Oct 93

Reg. No. 116,446

18,25 (CK/Calvin Klein)

19 Sep 96

Reg. No. 130,753

9,25 (CK/Calvin Klein)

Hungary

15 Nov 95

Reg. No. 145,249

18,25 (CK/Calvin Klein)

Iceland

27 Apr 94

Reg. No. 284/1994

18,25 (CK/Calvin Klein)

Iran

4 May 96

Reg. No. 79864

18,25 (CK/Calvin Klein)

Ireland

21 Sep 93

Reg. No. 157,276

25 (CK/Calvin Klein)

21 Aug 97

Reg. No. 208,239

8,21,25,26,27,35 (CK/Calvin Klein)

Israel

4 Feb 97

Reg. No. 98092

25 (CK/Calvin Klein)

Italy

12 Apr 96

Reg. No. 675,586

25 (CK/Calvin Klein)

Jordan

8 May 95

Reg. No. 37965(r)

25 (CK/Calvin Klein)

Kazakhstan

1 Oct 97

Reg. No. 6157

18,25(CK/Calvin Klein)

24 Feb 99

Reg. No. 8324

24,25,35,42 (CK/Calvin Klein)

Kuwait

30 Nov 96

Reg. No. 31697

25 (CK/Calvin Klein)

CONFIDENTIAL TREATMENT

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

Latvia

20 Aug 97

Reg. No. LV M-37968

18,25 (CK/Calvin Klein)

Lebanon

14 Jun 95

Reg. No. 66134

18,25 (CK/Calvin Klein)

Liechtenstein

24 Feb 95

Reg. No. 9322

18,25 (CK/Calvin Klein)

Lithuania

25 Aug 95

Reg. No. LT-31807

18,25(CK/Calvin Klein)

Malta & Gozo

8 May 96

Reg. No. 25650

25 (CK/Calvin Klein)

Morocco

22 Aug 95

Reg. No. 57300

18,25(CK/Calvin Klein)

1 Mar 96

Reg. No. 58871

3,4,8,9,14,16,18,20,21,24,25,26, 27,35,42(CK/Calvin Klein)

Nigeria

9 Dec 93

Reg. No. 57750

25 (CK/Calvin Klein)

Norway

10 Nov 94

Reg. No. 165,458

25 (CK/Calvin Klein)

*OAPI

24 Nov 95

Reg. No. 35745

18,25 (CK/Calvin Klein)

Oman

29 May 96

Reg. No. 13673

25 (CK/Calvin Klein)

Poland

28 May 99

Reg. No. 106459

18,25 (CK/Calvin Klein)

Portugal

15 Dec 94

Reg. No. 295,319

25(CK/Calvin Klein)

Qatar

11 Jun 02

Reg. No. 13233

25 (CK/Calvin Klein)

Romania

16 Aug 95

Reg. No. 24051

18,25 (CK/Calvin Klein)

Russian

Federation

(former USSR)

18 Jul 97

Reg. No. 154,946

18,24,25 (CK/Calvin Klein)

15 Sep 98

Reg. No. 167,772

24,25,42 (CK/Calvin Klein)

(Republic of)

Saudi Arabia

11 Sep 94

Reg. No. 319/11

25 (CK/Calvin Klein)

Slovak Republic

28 Jan 99

Reg. No. 184071

18,25(CK/Calvin Klein)

Slovenia

20 Dec 96

Reg. No. 9570583

18,25 (CK/Calvin Klein)

South Africa

24 Apr 95

Reg. No. B95/05079

25 (CK/Calvin Klein)

(Covers Venda

Transkei &

Bophuthatswana)

Spain

20 Apr 94

Reg. No. 1,786,568

25 (CK/Calvin Klein)

Sweden

28 Jul 95

Reg. No. 303,850

25 (CK/Calvin Klein)

Switzerland

5 Oct 93

Reg. No. 416,838

18, 25 (CK/Calvin Klein)

Tunisia

23 May 96

Reg. No. EE96.0642

3,9,14,16,18,24,25,26, 27,35,42 (CK/Calvin Klein)

Turkey

16 Feb 96

Reg. No. 167310

25(CK/Calvin Klein)

United Arab

Emirates

24 Nov 97

Reg. No. 13022

25 (CK/Calvin Klein)

United Kingdom

19 Aug 00

Reg. No. 1,545,492

25 (CK/Calvin Klein)

16 Jun 98

Reg. No. 2,169,731

25,35,42(CK/Calvin Klein)(ext goods)

Ukraine

12 Nov 99

Reg. No. 13942

18,25(CK/Calvin Klein)

18 Apr 97

Reg. No. 17758

24,25,42 (CK/Calvin Klein)

Uzbekistan

4 Jul 95

Reg. No. 5832

18,25 (CK/Calvin Klein)

West Bank

(Palestine)

7 Mar 96

Reg. No. 4118

25 (CK/Calvin Klein)

Yemen

15 Jan 98

Reg. No. 8333

25 (CK/Calvin Klein)

CONFIDENTIAL TREATMENT

	*OAPI-Benin Guinea, Burkina Faso(formerly Upper Volta), Cameroon, Central African Republic, Chad, Congo, Gabon, Guinea Bissau(Conakry),Guinea Bissau, Ivory Coast, Mali, Mauritania, Niger, Senegal, Togo

EX-10.70

EXHIBIT 10.70

PORTIONS OF THIS EXHIBIT 10.70 MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

CONFIDENTIAL — NEITHER THIS DOCUMENT, ITS TERMS OR PROVISIONS OR THE RELATIONSHIP CONTEMPLATED THEREIN IS TO BE DISCUSSED OR USED WITHOUT THE CONSENT OF CALVIN KLEIN, INC. OR WF OVERSEAS FASHION C.V. A DRAFT DOES NOT CONSTITUTE AN OBLIGATION OF THE PARTIES. NO BINDING AGREEMENT WILL RESULT UNLESS A DEFINITIVE WRITTEN AGREEMENT IS EXECUTED AND DELIVERED BY THE PARTIES. THERE IS NO OBLIGATION TO EXECUTE ANY SUCH AGREEMENT.

LICENSE AGREEMENT

BETWEEN

CALVIN KLEIN, INC.

AND

CK JEANSWEAR EUROPE S.P.A.
CK JEANSWEAR ASIA LIMITED

AND

WF OVERSEAS FASHION C.V.

CONFIDENTIAL TREATMENT

TABLE OF CONTENTS

ARTICLE I. GRANT
1.1License
1.1.1Exclusion of Retail Sales
1.1.2Right to Manufacture
1.2Reservation
1.2.1Retail Stores; Company-Controlled Stores
1.2.2E-Commerce/Promotional Goods
1.2.3Third Party Licensees
1.3Limitations
1.4Definitional Disputes
1.5Exploitation of the License
1.5.1Best Efforts
1.5.2Non-Competition
1.6Showrooms; In-Store Shops; Trade Shows
1.6.1Showrooms
1.6.2In-Store Shops
1.6.3Trade Shows
1.6.4Visual Design Personnel
ARTICLE II. LICENSE PERIOD
2.1License Period
ARTICLE III. SALES
3.1Sales/Marketing and Production Plans
3.2Deliberately Omitted
3.3Sales to CKI and its Employees
ARTICLE IV. LICENSE FEES
4.1Requirement of Fees
4.1.1Percentage Fees
4.1.2Gross and Net Sales
4.1.3Minimum Guaranteed Fees
4.1.4Allocation of Minimum Guaranteed Fees and Percentage Fees
4.2Statements
4.3Books and Records
4.4Underpayments
4.5Manner of Payment
4.6Interest on Late Payment
4.7No Set-Off
4.8Taxes
4.9Financial Statements
4.10Financial Covenants
ARTICLE V. ADVERTISING AND PROMOTION
5.1Advertising
5.1.1Initial Support/Reimbursement
5.1.2 Advertising Obligation
5.1.3CRK Fee
5.1.4Co-operative Advertising and Public Relations

CONFIDENTIAL TREATMENT

5.2‘Usage’
5.3Approval of Materials, Activities
5.4Samples
ARTICLE VI. QUALITY AND STANDARDS
6.1Distinctiveness and Quality of the Licensed Mark
6.1.1Consistency with Other Products
6.2Design
6.2.1Time and Action Calendar
6.2.2Themes
6.2.3Design Concepts
6.2.4Certain Other Approvals
6.2.5CKI Designs
6.2.6Prototypes
6.2.7Final Approval and Sales
6.3Manufacture of Licensed Products by Third Parties
6.4Non-Conforming Products
6.5Approvals
6.6Marketing, Labeling, Packaging, Promotions, Business Materials
6.7Inspection of Facilities
6.8Samples and Artwork
6.9Know-how
6.10Meetings
6.11Design Direction
6.12Design Rights
6.13Shops, Stores, Retail Outlets
6.14Disposal of Seconds and Close-Outs
6.14.1Seconds
6.14.2Close-Outs
6.15Standards of Conduct
6.15.1    Standards
6.15.2    Audit Requirement
6.15.3    Approval
6.15.4    Use of Facility
6.16Personnel
ARTICLE VII. THE LICENSED MARK
7.1Rights to the Licensed Mark.
7.1.1Ownership of Licensed Mark
7.1.2No Adverse Actions
7.1.3Registrations
7.1.4Survival
7.2Protecting the Licensed Mark.
7.3Use of the Licensed Mark
7.3.1Compliance with Legal Requirements
7.3.2Use with Other Name
7.3.3Execution of Documents
7.4Ownership of Copyright
7.5Infringements, Counterfeits and Parallel Imports

CONFIDENTIAL TREATMENT

7.5.1Infringements
7.5.2Counterfeits and Parallel Imports
7.5.2.1    The Network
7.5.2.2    Diversion
7.5.3Criminal Proceedings
7.5.4Enforcement Activities
7.5.5Nature of Proceedings
7.5.6Cooperation
7.6 Trademark Security
7.6.1Counterfeit Protection
7.7Use of Licensed Mark on Invoices, etc.
7.8Monitoring
ARTICLE VIII. TERM AND TERMINATION
8.1Expiration
8.2Other Rights Unaffected
8.3Right of Termination of the License
8.4Termination With Notice and Right to Cure
8.5Effect of Termination
8.6Inventory Upon Termination
8.7Freedom to License
8.8Rights Personal
8.9Trustee in Bankruptcy
8.10Compensation
ARTICLE IX. INDEMNIFICATION AND INSURANCE
9.1Indemnification by the Licensee
9.2Notice of Suit or Claim
9.3Indemnification by CKI
9.4 Insurance
9.4.1Requirement
9.4.2General Provision
9.4.3Approved Carrier/Policy Changes
9.4.4Evidence of Coverage
9.4.5Territory
ARTICLE X. COMPLIANCE WITH LAWS
10.1Compliance with Laws
10.2Equitable Relief
ARTICLE XI. MISCELLANEOUS
11.1Warranties and Representations of the Parties
11.2Definitions
11.3Notices
11.4Assignment
11.5Sublicense
11.6Assignment by CKI
11.7No Agency
11.8Suspension of Obligations
11.9Benefit
11.10Entire Agreement; Amendment
11.11Non-Waiver

CONFIDENTIAL TREATMENT

11.12Severability
11.13Headings
11.14Counterparts
11.15Governing Law
11.16Jurisdiction
11.17Non-Solicitation
11.18Confidentiality
11.19Cross-Termination
11.20Assignment Within Warnaco Family

SCHEDULES
SCHEDULE 6.13				APPROVED ACCOUNTS
SCHEDULE 6.14				APPROVED SECONDS AND CLOSE-OUTS ACCOUNTS
SCHEDULE S				SHAREHOLDERS
EXHIBITS
EXHIBIT T				TERRITORY
EXHIBIT P				PRODUCTS
EXHIBIT B				ROYALTY STATEMENT
EXHIBIT D				THIRD-PARTY MANUFACTURING AGREEMENT
EXHIBIT E				PRODUCTION FACILITY EVALUATION FORM

SCHEDULE OF CALVIN KLEIN TRADEMARKS CL. 18

CONFIDENTIAL TREATMENT

LICENSE AGREEMENT

LICENSE AGREEMENT, dated as of January 31, 2006, between CALVIN KLEIN, INC. ("CKI"), a New York corporation, and CK JEANSWEAR EUROPE S.P.A., an Italian corporation ("CKJE"), CK JEANSWEAR ASIA LIMITED, a Hong Kong corporation (hereinafter individually and collectively the "CKJA", and together with CKJE, "Licensee") and WF Overseas Fashion C.V., a limited partnership ("commanditaire vennootschap") organized and existing under the laws of the Netherlands ("Warnaco").

WITNESSETH:

WHEREAS, Licensee desires to obtain from CKI, and CKI is willing to grant to the Licensee, a license in the Territory (as hereinafter defined), to use the trademark "CALVIN KLEIN" to be used in the logo form "Calvin Klein Jeans" in the form designated by CKI from time to time ("Licensed Mark") in connection with the manufacture, wholesale sale, distribution, advertising and promotion of certain women's and men's "jeans"-styles, type or "level "small leather goods/accessories, handbags items , as defined in Exhibit P (the "Products"), subject to the terms contained in this Agreement. Products bearing the Licensed Mark are hereinafter referred to as "Licensed Products."

WHEREAS, Warnaco U.S., Inc. a Delaware corporation, is the general partner of WF Overseas Fashion C.V., and, solely in such capacity, is executing this Agreement on behalf and for the exclusive risk and benefit of WF Overseas Fashion C.V.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I.    GRANT

1.1    License.    CKI hereby grants to the Licensee an exclusive license (the "License"), without the right to assign, and the right to sublicense with CKI's prior written consent exercisable in CKI's sole and absolute discretion (not to be unreasonably withheld or delayed), and subject to and in accordance with the terms contained in this Agreement, to use the Licensed Mark, during the License Period in connection with the manufacture and sale, distribution, advertising, and promotion in the "Territory," set forth on Exhibit T, of Licensed Products to approved customers ***

1.1.1    Exclusion of Retail Sales.    The License excludes the sale, distribution, and promotion of Licensed Products via commerce conducted on, made available through, or facilitated by *** or upon the prior approval of CKI, which CKI may withhold in its sole and absolute discretion. The License also excludes the right to *** only as approved by CKI, and except as permitted as to such Licensed Products pursuant to other agreements between the parties (and their affiliates). However, the foregoing does not ***

1.1.2    Right to Manufacture.    The Licensee's right to manufacture in the Territory and elsewhere in the world is non-exclusive (others may and will have the right to produce Products within the Territory for export and sale outside the Territory). Licensee shall have the right to import into the Territory Licensed Products manufactured outside the Territory; provided, however, that the Licensee takes reasonable precautions to prevent all labels, tags, packaging material, business supplies and advertising and promotional materials and all other forms of identification bearing the Trademark (collectively, "Labels") from being used otherwise than in connection with the distribution and sale of Licensed Products within the Territory. The Licensee shall neither export Licensed Products from the Territory, nor sell Licensed Products to any entity which it knows, or reasonably should know, intends to export Licensed Products from the Territory.

1.2    Reservation.    CKI reserves all rights in and to the Licensed Mark except as specifically granted herein including, without limitation, those rights set forth in this § 1.2. CKI may exercise any of its rights, or authorize others to exercise such rights, at any time, in accordance with the terms and conditions set forth herein.

1.2.1    Retail Stores; Company-Controlled Stores.    CKI reserves the right *** However, CKI shall, in connection with the sale, distribution and promotion of Licensed Products through the CKI

CONFIDENTIAL TREATMENT

Stores, purchase Licensed Products from the Licensee, at mutually agreed upon prices, terms and conditions, provided that Licensee timely produces, ships and delivers such Licensed Products in quantities as may reasonably be required by CKI. If (i) Licensee cannot sell or supply any Licensed Products due to a continuing force majeure event or other event outside of Licensee's reasonable control (i.e., more than thirty calendar days) or (ii) Licensee fails to timely deliver for two consecutive quarters a significant portion of the products so ordered (other than minor shortages), then during the pendency of such force majeure event or after such failures to deliver, CKI or its Affiliates shall have the right to manufacture or have manufactured for it by others, and to sell, distribute and promote Licensed Products through CKI Stores for the next two years, at which time the provisions hereof shall again apply. CKI shall also require that any such retail stores in the Territory owned or operated by an authorized licensee of CKI shall purchase the Licensed Products from Licensee. The Licensee acknowledges and agrees that *** for purposes of § 4.1.1, § 5.1.2, and § 5.4 hereunder.

1.2.2    E-Commerce/Promotional Goods.    CKI reserves the right to *** In the case of E-commerce arrangements covering ***

1.2.3    Third Party Licensees.    CKI may grant third parties the right to produce Products for distribution and sale outside the Territory. Licensee agrees to fully co-operate with such third parties, and upon CKI's request, Licensee will, furnish samples of Licensed Products, provide at cost (without markup), any patterns, trim samples, samples of garments and other materials, names of contractors and sources of supply, reasonably necessary to manufacture Licensed Products as reasonably requested on a timely basis by such licensees, in accordance with such third parties' reasonable design and production schedules and subject to appropriate confidentiality undertakings. Licensee will timely supply CKI's distributors or other third party licensees outside the Territory, with Licensed Products for distribution in such quantities as CKI may reasonably request on such credit or other terms as Licensee may impose on its customers generally, ***

1.3    Limitations.    The Licensee understands and agrees that CKI, and its other licensees and sublicensees, may manufacture or authorize third parties to manufacture Licensed Products in the Territory for sale outside of the Territory, or to manufacture and sell or authorize third parties to manufacture and sell products of any and all types and descriptions other than the Products in or outside the Territory. In this regard, the Licensee acknowledges and agrees that products that bear some similarity of design to the Licensed Products may be manufactured, distributed or sold in the Territory in connection with the Licensed Mark by either CKI or a third party authorized to use the Licensed Mark, and the Licensee further acknowledges and agrees that such similarity of design will not be deemed a breach of or default under this Agreement. In addition, no license is granted hereunder for the manufacture, sale or distribution of the Licensed Products to be used for publicity purposes (other than publicity of the Licensed Products), in combination sales or as premiums or giveaways, or to be disposed of under or in connection with similar methods of merchandising, such rights being specifically reserved for CKI or otherwise subject to CKI's prior review and approval. Licensee agrees that the marketing, placement and distribution of Licensed Products in the Territory may but shall not necessarily be the same as that for Products being sold in the U.S. or elsewhere in the world by CKI's duly authorized licensee, but shall be commensurate with the marketing, placement and distribution of Licensed Products in comparison with other competitive and competitors' jeanswear lines sold both in the U.S. and the Territory.

1.4    Definitional Disputes.    The Licensee acknowledges that due to the nature of the marketplace, the definition of Products may change or may not be amenable to precise delineation. In addition, the Licensee acknowledges that CKI does have and may hereafter have, other licensees within the Territory. However, CKI will use its reasonable efforts to *** In the event of any dispute between the Licensee and any other licensee of CKI in the Territory with respect to whether particular merchandise is covered by one or the other of their respective licenses, or there is otherwise a dispute over the definition of Licensed Products, CKI shall render, based upon its reasonable (but with all due consideration given to aesthetic and quality factors) good faith judgement, commercial reasonableness, and a reasonable written determination.

CONFIDENTIAL TREATMENT

1.5    Exploitation of the License.

1.5.1    Best Efforts.    At all times during the License Period, the Licensee shall use its reasonable best efforts to exploit the License throughout each and every country of the Territory, including, but not limited to: (i) selling what reasonably constitutes a full line of Products within each seasonal collection of Licensed Products (each, a "Collection"), subject to seasonal differences, and a sufficiently representative quantity of each type of Product within each Collection; (ii) timely developing, producing and offering for sale the Licensed Products so that they may be sold and shipped to consumers on a timely basis; (iii) maintaining a sales force sufficient to provide effective distribution throughout all areas of the Territory; (iv) cooperating with CKI's and any of its licensees' marketing, merchandising, sales, and anti-counterfeiting programs as may be applicable, and (v) maintaining necessary financial position to adequately support the operations and obligations herein.

1.5.2    Non-Competition.     The Licensee shall devote itself and all of its employees and operations exclusively to the operations of this license and other "CALVIN KLEIN" operations licensed by CKI. The Licensee's Affiliates shall not enter into or obtain from any person or entity a license in the Territory for any of the Products bearing the name of any designer or designer brand (or any derivative or formative thereof) of *** without the prior written consent of CKI and except for arrangements and agreements in effect on and as of the Effective Date of this Agreement. ***

1.6    Showrooms; In-Store Shops; Trade Shows.    

1.6.1    Showrooms.    Licensee shall maintain a separate area within its existing jeanswear showrooms in Milan, the United Kingdom, Hong Kong (and, if applicable, Tokyo) and wherever else it maintains jeanswear apparel showrooms. Such showroom area (s) shall be used for the sole purpose of displaying, promoting and selling Licensed Products. All such separate areas in the showrooms shall be subject to the standards of CKI, and shall be designed and maintained in conformity with the prestige associated with the Licensed Mark. The plans for each showroom area , including décor, set-up and display (and material changes thereto), and for any renovations thereto shall be subject to the reasonable prior written approval of CKI, which approval shall not be unreasonably withheld or delayed; provided, however, that CKI shall have 10 business days after its receipt of such plans to approve or disapprove such plans or such longer period as is reasonable under the circumstances. Promptly after the execution of this Agreement and the bridge apparel agreement , CKI and the Licensee will mutually agree *** The Licensee may (i) display the Licensed Mark on showroom doors and office directories and (ii) display the Licensed Products for sale in other showroom spaces, subject to the prior written approval of CKI. The parties shall meet upon request to establish a budget for required or requested renovations to the showrooms.

1.6.2    In-Store Shops.    The Licensee will participate in in-store shop or fixturing programs, with the Licensee's customers throughout the Territory, and will spend amounts on in-store décor, refurbishments and fixturing (including development costs of consultants for design and fixturing prototypes and on sales personnel or coordinators, sufficient to ensure and the appropriate as may be applicable to enhance the presentation of Licensed Products within its retail accounts, including appropriate stocking and merchandise mix, to be developed with and under the direction of CKI (and outside consultants where required by CKI for the prototype development). Appropriate budgets for such in-store shop programs shall be developed, reviewed and agreed upon by the parties. All such programs shall be designed in conformity with the prestige associated with the Licensed Mark, and plans for any such shop-in-shop areas shall be subject to the prior written approval of CKI. In-shop décor, refurbishing and fixturing are essential to the exploitation of the License Agreement; in addition to other expenses hereunder (and not considered either a qualified Co-op or Public Relations expenditure).

1.6.3    Trade Shows.    The Licensee shall display the Licensed Products at a separate booth space at all tradeshows attended by the Licensee to promote Products. The design of such booth shall be developed in consultation with CKI's visual design personnel, as provided in § 1.6.4.

1.6.4    Visual Design Personnel.    The Licensee shall consult with and utilize CKI's visual design personnel in connection with the design, development and construction of showrooms, trade show booths,

CONFIDENTIAL TREATMENT

fixturing, signage and any in-store shops or in-store areas for the sale of Licensed Products within the stores of the Licensee's customers, and shall provide all funds necessary in connection therewith (including, but not limited to, reasonable per diem rates for work performed by CKI's visual display personnel based upon estimated amounts or anticipated expenditures, as provided or discussed and agreed upon in advance, or based upon agreed-upon-in-advance budgets), it being understood and agreed that the fabrication, manufacturing, production or construction of showrooms, trade show booths and fixtures may be performed by third parties. All such design, development and construction shall be subject to CKI's ongoing approval. Licensee will arrange for the opening of shop-in-shops within department stores and specialty stores using appropriate fixtures and signage, and to maintain seasonal visual display and "set-ups" of Licensed Products, as approved by Licensor, and to fully stock such shop-in-shops with an appropriate merchandise mix of Licensed Products, all as approved by CKI, pursuant to and consistent with Licensee's shop-in-shop development program. Such in-store development programs shall be financed in a manner comparable to and commensurate with those of CKI's competitors as to Licensed Products. CKI may periodically inspect Licensee's showrooms, shows at trade exhibitions, and such shop-in-shops . Any such inspection will be at CKI's expense unless CKI determines as a result of such inspection that Licensee's showrooms, trade exhibition shows or in-store shops or in-store areas have not been maintained in accordance with CKI's specifications, in which case Licensee will at its expense promptly make any modifications to design, layout, decor, visual display or merchandise display formats as CKI may reasonably require and will bear the costs incurred in connection therewith, including any costs incurred by CKI in connection with follow-up inspections to determine the satisfactory completion of such modifications. The Licensee shall also promptly reimburse CKI for the reasonable costs and expenses of any CKI personnel, such as visual display, advertising and public relations (other than design), with respect to services performed by CKI under this § 1.6 or otherwise requested by the Licensee based upon estimated amounts or anticipated expenditures, as provided or discussed in advance, and based upon agreed-upon-in-advance budgets. In addition, the Licensee shall pay or reimburse CKI for reasonable out-of-pocket expenses incurred by CKI or its representatives, whether for travel or otherwise, including round-trip business-class airfare or first-class airfare if provided by CKI's internal travel policies in effect from time to time, hotel accommodations and food and local transportation, in connection with this Agreement, such as travel to Italy to review or approve prototypes, based upon estimated amounts or anticipated expenditures, as provided and discussed in advance with Licensee, and based upon agreed-upon-in-advance budgets.

ARTICLE II.    LICENSE PERIOD

2.1    License Period.     The license period shall commence effective 1 January 2006, with certain preliminary design and development being initiated prior to 1 January 2006 ("preliminary period"), with the Spring 2006 season being anticipated to be the first season for which Licensed Products will be offered for sale (and the parties may initiate preliminary design and other development in contemplation thereof in order to be able to offer for sale such Spring 2006 season, but if the time for development, presentation, production, marketing and showroom is deemed by the parties to be not sufficient to timely and appropriately launch such Collection, the initial season shall be Fall 2006 (or Pre-Fall 2006). The term shall end forty (40) years from the closing of the Transaction described and defined in the Heads of Agreement dated 29 September 2005 between, inter alia, CKI and Warnaco Inc. , (not to be later than 31 December 2006), on 31 December 2046, unless sooner terminated as herein provided. The first period commencing 1 January 2006 and ending on 31 December 2006, including the preliminary period, and each 12-month period commencing on 1 January thereafter during the License Period are each referred to herein as an "Annual Period." Notwithstanding the foregoing, the Licensee shall not commence offering Licensed Products for the Spring 2006 season unless and until CKI determines in its good-faith judgement (including aesthetic and creative considerations) that all elements necessary for a successful launch, including, without limitation, product design, development and production, marketing strategy, advertising materials and placement, and if applicable, launch events, have been satisfied. The term of this Agreement may sometimes be referred to as the "License Period" or "Term."

CONFIDENTIAL TREATMENT

The Minimum Net Sales Thresholds for each Annual Period are as indicated below:

Annual Period

Year

Minimum Net Sales* Thresholds

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*	For purposes of calculating Net Sales for the MNST's, ***

If Licensee fails to attain the minimum net sales thresholds ("MNST's") of Articles during any Annual Period, as set forth above (except as specifically indicated in the immediately following paragraph), ***

Notwithstanding the foregoing, if Licensee has *** Expiration or termination of the License shall not affect any obligation of the Licensee to make payments hereunder accruing prior to such expiration or termination.

ARTICLE III.    SALES

3.1    Sales/Marketing and Production Plans.     Licensee shall deliver to CKI: ***

3.2    Deliberately Omitted.

3.3    Sales to CKI and its Employees.    The Licensee shall be obligated to sell Licensed Products to CKI, its Affiliates and its third-party store licensees, for sale and distribution by (i) CKI and its Affiliates through CKI Stores, via E-Commerce, or otherwise; or (ii) by its third-party store licensees, through the stores of such licensees. The Licensee acknowledges and agrees that such sales of Licensed Products shall be in quantities designated by CKI, its Affiliates, or reasonably required by its licensees, as the case may be, and shall be at the ***

ARTICLE IV.    LICENSE FEES

4.1    Requirement of Fees.     All Licensed Products sold by the Licensee or its Affiliates (including those from which the Licensed Mark may have been removed, e.g., irregulars) require the payment of Fees by the Licensee to CKI as set forth in this Article IV, except as otherwise provided in § 4.1.1. "Affiliates" of any party means all individuals and business entities, whether corporations, limited liability companies, partnerships, joint ventures or otherwise, which now or hereafter control, or are controlled, directly or indirectly, by such party, or are under common control with such party.

CONFIDENTIAL TREATMENT

4.1.1    Percentage Fees.     In respect of each Annual Period or portion thereof during the License Period, the Licensee shall pay CKI Percentage Fees computed *** as follows:

Annual Period/Year				***				***
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*	The rates applicable to *** as defined herein shall be as noted, provided that in each such case such ***

	For sales directly at ***, as noted in § 1.2.1 or § 1.2.3.

	As noted in § 1.2.1 above, the Percentage Fee shall be***

	Percentage Fees shall be accounted for and payable ***

4.1.2    Gross and Net Sales.     "Gross Sales" means *** "Net Sales"

4.1.3    Minimum Guaranteed Fees.     In respect of each Annual Period or portion thereof during the License Period, the Licensee shall pay to CKI the minimum fees listed below (the "Minimum Guaranteed Fees" or "MGF's") ***

Annual Period/Year

Minimum Guaranteed Fee (MGF) (US $)

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*** (TBD Separately from Asia)

1 (2006)

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2 (2007)

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3 (2008)

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4 (2009)

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5 (2010)

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6 through 10 (2011 through 2015)

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11 through 15 (2016 through 2020)

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16 through 20 (2021 through 2025)

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21 through 25 (2026 through 2030)

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26 through 30 (2031 through 2035)

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31 through 35 (2036 through 2040)

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36 through 41 (2041 through 2046)

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CONFIDENTIAL TREATMENT

4.1.4    Allocation of Minimum Guaranteed Fees and Percentage Fees.     For purposes of CKI internal allocation, *** of the Minimum Guaranteed Fees and *** of the Percentage Fees shall be allocated as a royalty for the use of the Licensed Mark and the remaining *** shall be allocated as "fees" for the design, including the reviews and approval procedures, and other overall services under or relating to the Agreement.

4.2    Statements.    Quarterly within each Annual Period 30 days in arrears, the Licensee shall deliver to CKI *** or in such simplified format as may be agreed to by the parties, signed by the *** stating that the Licensee is in compliance with the terms and conditions hereof and setting forth *** Licensee will use all reasonable efforts to provide Licensor with *** Within 90 days of the end of each Annual Period, the Licensee shall also deliver to CKI a *** and in accordance with the provisions hereof. Receipt or acceptance by CKI of any statement furnished, or of any sums paid by the Licensee, shall not preclude CKI from questioning their correctness at any time; provided, however, that reports submitted by the Licensee, shall be binding and conclusive on the Licensee.

4.3    Books and Records.     The Licensee shall, at its sole cost and expense, maintain complete and accurate books and records (specifically including, without limitation, the originals or copies of documents supporting entries in the books of account or electronic records) covering all transactions arising out of or relating to this Agreement. Such books and records shall be maintained in accordance with international accounting principles generally accepted in Italy, and under the laws thereof ("GAAP"). CKI and its duly authorized representatives shall have the right, upon reasonable prior written notice from CKI and during normal business hours, once during each Annual Period and for three years after such Annual Period, to examine and copy said books and records and all other documents and materials in the possession of and under the control of the Licensee with respect to all transactions arising out of or relating to this Agreement (such audits are to be completed within 6 months of commencement, provided Licensee and its accountants promptly respond fully and completely to all inquires of CKI, including all books, records, back-up, answers to question and other reasonable requests, and afford CKI and its representatives entry and accommodations at all times during such period). Each Annual Period shall be subject to audit once (and when finalized as provided hereunder, not subject to additional audits under this Agreement (except CKI's shareholders)). The exercise by CKI of any right to audit at any time or times or the acceptance by CKI of any statement or payment shall be without prejudice to any of CKI's rights or remedies. (Nor will any acceptance of audit results affect or limit any rights of CKI as a shareholder.) The Licensed Products shall be assigned style numbers unique from any other products the Licensee may manufacture or sell. The style number assigned to each Licensed Product shall be identical to the style number utilized to identify the Licensed Product in all of the Licensee's books and records. All documents evidencing the sale of Licensed Products shall state the style number of each such Product. The Licensee shall not use terms such as "assorted" or "irregular" without a style specification with respect to the Licensed Products. Once finalized and all disputes resolved, as provided hereunder and under § 4.4, results shall be binding on both parties under this Agreement.

4.4    Underpayments.     If, upon any examination of the Licensee's books and records pursuant to § 4.3, CKI shall discover any Fee underpayment by the Licensee, the Licensee will make all payments required to be made to correct and eliminate such underpayment within 10 days of CKI's demand together with interest thereon. In addition, if said examination reveals a Fee underpayment of *** or more for any Annual Period, the Licensee will reimburse CKI for the reasonable out-of-pocket cost of said examination within 10 days of CKI's demand. In the event Licensee disagrees with any finding underlying CKI's demands, it shall so notify CKI within 15 business days of demand, with reasons and specifics as to why. The parties will then promptly meet and fully co-operate on a continuing, best-efforts basis to present any "counter finding" or other back-ups and in good faith resolve the same before payment is due. Notwithstanding the foregoing, if such dispute remains unresolved within 90 days of Licensee's receipt of CKI's initial demand (unless extended by CKI) despite and provided CKI has used good faith best efforts to resolve within said time period, CKI's last demand or final demand as may have been revised during such post audit meetings or discussions shall apply, and Licensee shall promptly remit such amounts (and interest).

CONFIDENTIAL TREATMENT

4.5    Manner of Payment.     All payments required by the Licensee hereunder shall be made to CKI in US $ dollars via wire transfer specifying federal funds ***

The Percentage Fees based upon Net Sales made in a currency other than US $ dollars (and certain other amounts provided for or contemplated under this Agreement), if applicable, shall be computed on the basis of the conversion rate of the currency in which the sale or other transaction occurred into US $ dollars in effect, as published in the Wall Street Journal, as of the close of business on the last business day of the relevant quarterly period during the Annual Period, and two (2) business days prior to the remittance due date (or where no remittance "due date" is applicable, the remittance date) for other applicable amounts. In the event that the Licensee is required to withhold certain amounts for payment to the appropriate governmental authorities, the Licensee will supply to CKI the official receipts evidencing payment therefore, promptly upon receipt (as noted in §4.8).

4.6    Interest on Late Payment.     In addition to any other remedy available to CKI, if any payment due under this Agreement is delayed for any reason, including, without limitation, as a result of any Fee underpayment, interest shall accrue and be payable, to the extent legally enforceable, on such unpaid principal amounts from and after the date on which the same became due, at the rate of ***

4.7    No Set-Off.     The obligation of the Licensee to pay Fees hereunder shall be absolute, notwithstanding any claim which the Licensee may assert against CKI. The Licensee shall not have the right to set-off, compensate or make any deduction from such Fee payments for any reason whatsoever.

4.8    Taxes.     The Licensee will bear all taxes, duties and other governmental charges in the Territory relating to or arising under this Agreement, including, without limitation, any state or federal income taxes on the Licensee (except withholding taxes on Fees due CKI and taxes on CKI's income), any stamp or documentary taxes or duties, turnover, sales or use taxes, value added taxes, excise taxes, customs or exchange control duties or any other charges relating to or on any Fee payable by the Licensee to CKI. The Licensee shall obtain, at its own cost and expense, all licenses, Federal Reserve Bank, commercial bank or other bank approvals, and any other documentation necessary for the importation of materials and Products and the transmission of Fees and all other payments relevant to the Licensee's performance under this Agreement. If any tax or withholding is imposed on Fees, that is, and to the extent it may become applicable, when or where payments of Minimum Guaranteed Fees and/or Percentage Fees are made directly to CKI from any jurisdiction outside the United States, the Licensee shall compute and pay on behalf of CKI all withholding taxes which any governmental authority in the Territory may impose on CKI with respect to the Fees paid by the Licensee to CKI. The amount of such taxes shall be appropriately deducted from payments, and immediately paid to such governmental authorities. Such amounts shall not be held in reserve by Licensee pending later due dates. The Licensee shall obtain and provide certified proof of the tax payment of the amount withheld, and promptly transmit it to CKI. In the event such taxes are not paid when due, all resulting penalties and interest shall be borne by the Licensee.

4.9    Financial Statements.     Licensee shall deliver to CKI,:

(i) within 180 days after the close of each of Licensee's fiscal year's during or concurrent with an Annual Period, copies of its annual financial reports (balance sheets, statements of income and cash flow) which may be unaudited (but if the Licensee otherwise prepares or is otherwise required to prepare, audited reports, it will so provide them to CKI) prepared in accordance with International GAAP, reported on by a recognized accounting firm together with English translation thereof; and

(ii) within 60 days after the close of each calendar quarter copies of its quarterly financial reports, which will be prepared on a basis consistent with the annual financial reports.

    Financial Covenants.     Licensee (and its parent Warnaco Inc.) will ***

Licensee will immediately upon the occurrence of any default deliver a certificate by its Chief Financial Officer setting forth the details of any such default and action the Licensee is taking or proposed to take with respect thereto.

CONFIDENTIAL TREATMENT

ARTICLE V.    ADVERTISING AND PROMOTION

5.1    Advertising.    

5.1.1    Initial Support/Reimbursement.     Deliberately Omitted.

5.1.2    Advertising Obligation.    For each Annual Period, the Licensee shall remit to CKI an amount (the "Advertising Obligation" or "Minimum Advertising Expenditure," a/k/a "MAE") equal to ***

Annual Period/Year				Minimum Advertising Expenditure (US $)
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The Licensee shall pay to CKI in respect of the Advertising Obligation for each Annual Period, no later than *** CKI shall use the Advertising Obligation, in its sole and absolute discretion, in connection with the advertising, marketing and promotion of the Licensed Mark and the Licensed Products. Although the final decision as to the advertising program's form, content and placement must remain with CKI, CKI agrees to consider Licensee's input and agrees that prior to the commencement of each campaign season, CKI and CRK will meet and listen to Licensee's needs and overall strategy, and CKI and CRK will also review CRK's concepts for the upcoming season with Licensee. (Although CRK will give reasonable consideration as to Licensee's input, decisions will be in CKI's sole discretion and based on CKI's subjective aesthetic judgement and other considerations.) If there are material changes to what CKI, CRK and Licensee discussed at the beginning of the season by CKI, CRK will apprise Licensee of the same. ***

5.1.3    CRK Fee.     As the advertising agency heretofore responsible for advertising campaigns relating to " Calvin Klein" and Licensed Mark activities, CRK Advertising ("CRK"), a division of CKI, has developed certain expertise regarding the image of the Licensed Mark. *** Notwithstanding anything to the contrary in the foregoing, in no event shall CKI require the Licensee to ***

5.1.4    Co-operative Advertising and Public Relations.     *** All Co-operative Advertising shall be (i) in accordance with the parameters reasonably promulgated by CKI from time to time, including, without limitation, creative, as approved by CKI, as well as the Licensed Products presented in such Co-operative Advertising, and timing and applicable placement (the publication as well as the particular location within the publication) (sometimes referred to as a "media plan"), and (ii) subject to CKI's approval as provided in § 5.1.3. The Licensee shall be obligated to notify its accounts of these requirements and ensure their compliance with such requirements, including obtaining CKI's approval prior to use. The Licensee shall provide CKI with ***

For purposes of this Agreement "Co-operative Advertising" means advertisements by or in connection with retail accounts in local publications, such as newspapers and certain approved retail catalogs (for Calvin Klein Bridge Stores), if any, which CKI may specifically approve in writing after viewing the same), and applicable "sharing" of expenses by such retail account with the Licensee, by way of advertising reimbursements, credits, charge-backs, or payments, only. Expenditures for "co-op" advertising not included within the definition hereunder or not in compliance with CKI's parameters will not constitute a "qualified" expenditure for Co-operative Advertising hereunder.

"Co-operative Advertising" does not include and shall not consist of advertisements in trade publications (except for certain prestigious fashion trade publications as may be approved by CKI in writing on a case-by-case basis) or any expenses or costs of (without limitation) packaging, fixturing, display materials, point-of-sale ("POS") or point-of-purchase ("POP") materials, or advertising or selling

CONFIDENTIAL TREATMENT

materials or "tools" or seminars or training sessions, in-store merchandising contributions or sharing of expenses, or any other selling or merchandising expenses or events, or any promotional materials, events or activities, such as press kits, goody bags (gifts), or any consumer advertising.

Public Relations events, activities and efforts shall include editorial coverage in prestigious fashion magazines, launch events for press, editors, buyers, fashion shows or trunk shows ("mini" fashion shows at key retail stores), and involvement with highly publicized events such as "concerts," as may be reviewed with and approved by CKI. Any PR event or activity to be conducted or overseen by a 3^rd party shall be conducted or overseen by CRK or a 3^rd party approved by CRK ("PR Agency of Record") at market rates.

The CRK Fee shall be applied on actual services and materials developed, produced or provided by CRK for such Co-op/PR Obligation-qualified expenditures hereunder.

5.2    "Usage".     If the Licensee requests advertising support including, without limitation, the acquisition of rights to use images of models in jurisdictions within the Territory where rights have not been obtained or for uses for which authorization has not been granted, the Licensee shall pay over to CKI the reasonable incremental costs associated with such advertising support. Such amounts shall be credited to the MAE, but may be credited over a number of Annual Periods not limited to the Annual Period in which the expense occurs.

5.3    Approval of Materials, Activities.     The use and release of any and all promotional material (printed or otherwise) relating to the Licensed Products or the Licensee's activities pursuant to this Agreement in the nature of press releases, interviews or other similar public relations events, and any other corporate release, data or information which will or is likely to become public and, if so, could affect such image, will be prepared or conducted in consultation with, and subject to the prior approval of (or approval subject to reasonable CKI-required modifications of), CKI's public relations department (to be provided or responded to promptly (as per § 6.5) and not to be unreasonably delayed). After any such approval, the Licensee will not modify the approved material or activity in any material respect unless such modification is specifically approved by CKI's public relations department. Any advertising marketing or promotional or public relations activity, event or effort shall be reviewed with and approved by CKI in advance (not to be unreasonably delayed). All materials bearing the Licensed Mark, including, without limitation, all advertising, promotional materials, packaging and collateral (e.g., POP or POS materials) shall be subject to CKI's approval (not to be unreasonably delayed), and developed by CKI or pursuant to CKI's direction.

5.4    Samples.     The Licensee shall provide to CKI, *** in the promotion of Licensed Products, including advertising shoots, public relations promotions, editorial promotions, press coverage and celebrity use, including where needed in advance of regular production cycles (e.g., fashion shows, merchandising displays within showrooms, advertising shoots). Licensed Products which constitute celebrity, editorial and/or public relations "samples" which are gifted to recipient without cost, by Licensee *** Included in such "Promo Articles" shall be a reasonable number of Licensed Products to be provided to CKI (CRK) for its use for particular celebrity "individuals" and press or editorial recipients, as requested and/or specified by CKI, ***

If and to the extent tax forms evidencing the value of any such gift items to celebrity "individuals" for purposes of income tax requirements under any governmental authority are or become required, Licensee shall provide the same as soon as such practice could be reasonably implemented.

ARTICLE VI.    QUALITY AND STANDARDS

6.1    Distinctiveness and Quality of the Licensed Mark.     The Licensee shall maintain the distinctiveness of the Licensed Mark and the image and high quality of the goods and merchandise bearing the Licensed Mark presently manufactured and sold by CKI and its other licensees, and the prestigious marketing of same as presently maintained by CKI and its other licensees. The Licensee agrees that all Licensed Products manufactured or sold by it will be of high quality as to workmanship, fit, design and

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materials, and shall be at least equal in quality, workmanship, fit, design and material to the samples of Licensed Products submitted by the Licensee and approved by CKI pursuant to § 6.2.6. All manufacturing and production shall be of a quality in keeping with the prestige of the Licensed Mark. In addition, the Licensee agrees that it will only use the Licensed Mark in the form thereof then approved by CKI, and that all Licensed Products shall bear the Licensed Mark in such approved form. CKI shall give the Licensee reasonable prior notice of any change in the form of the Licensed Mark and shall permit the Licensee to use a superceded form of the Licensed Mark for up to 6 months in order to enable the Licensee to sell inventory, complete and sell work-in-process, and to deplete inventories of labels, tags, packaging, and other materials bearing the Licensed Mark. In the event CKI elects to change the form of the Licensed Mark, the Licensee's obligations in respect to the image and high quality of the goods and merchandise bearing the Licensed Mark, and the prestigious marketing of same as required by this § 6.1, shall be consistent with the actions of CKI and its other licensees in respect to Licensed Products bearing such new form of the Licensed Mark. However, on reasonable advance request (within 20 days prior to the end of the 6-months period) if Licensee provides CKI with its inventory of Licensed Products and other materials utilizing the old form, with anticipated outside "depletion" dates for the materials, CKI may provide additional time for such depletion. However, all Licensed Products to be shipped from and after the 6-months period (except for Close-outs or Seconds from prior seasons) will carry new labels, regardless of excess label stock.

6.1.1    Consistency with Other Products.     The Licensed Products hereunder are among a range of lines of men's, women's, boys' and girls' apparel and accessories products which are produced and/or sold by CKI, its licensees and other duly authorized parties under the Licensed Mark and other related trademarks. In order to provide for consistency in scope, and to prevent confusion in the market, the Licensee agrees to use commercially reasonable efforts to ensure that it will only use the Licensed Mark in the form thereof then approved by CKI and that the placement of items constituting Licensed Products in the market will be consistent with other merchandise bearing the Licensed Mark and be distinguishable from the placement of product lines bearing other trademarks.

6.2    Design.    

6.2.1    Time and Action Calendar.     The Licensee shall prepare, for the Licensed Products, and at least 60 days prior to the commencement of each Annual Period, shall deliver to CKI for its approval (reasonably exercised within the standard design policy and procedures of CKI and timing, development and production and placement schedules), a proposed time and action calendar ("Time and Action Calendar") for the Collections to be developed during such Annual Period; provided; however, that the Time and Action Calendar for the first Annual Period shall be delivered for approval no later than the date of execution hereof. The substance and format of each Time and Action Calendar shall be as approved by CKI from time to time. In accordance with each Time and Action Calendar, and at least 60 days before the development stage of any Collection, the Licensee will provide a merchandising plan setting forth for each Product category the number of styles, estimated unit production, in-store delivery dates, target manufacturer's suggested retail price, target market segment and, where applicable, historical sales statistics for CKI's review and approval.

6.2.2    Themes.     The Licensee shall maintain during the License Period a design staff capable of timely developing seasonal collections of Licensed Products pursuant to the Time and Action Calendars, in order to exploit the License and to maintain the prestige and reputation of the Licensed Mark, as required hereunder. The Licensee's design team shall have meetings with CKI's-designated creative or design person or persons, the purpose of which will be to discuss and establish agreed-upon themes that will be covered for the season (such agreed upon themes hereafter referred to as the "Agreed Upon Season's Themes").

6.2.3    Design Concepts.     Based on the Agreed Upon Season's Themes, the Licensee shall create, develop and present for CKI's review and approval, a program in a tangible illustrative format of design themes and concepts ("Design Concepts") with respect to the proposed designs for the applicable Collection, together with relevant trims, samples of fabrics and other components. The Licensee shall

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present the Design Concepts to CKI in a "Design Concepts Presentation Meeting", the purpose of which is to provide CKI with a clear and concrete understanding of the themes, fabrications, styles, attitude and direction of such Collection through the use of either design boards, sketches and/or "rigs" as well as samples of trim, fabrics and other components in each of the Licensee's suggested colors and qualities, also swatches, yarns and illustrations sufficient to give CKI a clear understanding of the particular Products and components the Licensee wishes to develop based upon approved Design Concepts. CKI shall, within 10 business days from presentation of the Design Concepts identified at the Design Concepts Presentation Meetings approve or disapprove and/or provide suggestions, modifications or recommendations, as determined by CKI in its sole and absolute discretion. Any Design Concept which is not rejected or required to be modified within such 10 business day period shall be deemed approved. Any Design Concept or component thereof presented, initiated or submitted by CKI to Licensee to be included in the applicable Collection shall be included in the Approved Design Concepts except as otherwise may be agreed by CKI. All approved and deemed approved Design Concepts are referred to herein as the "Approved Design Concepts." The Licensee shall provide CKI with a photographic record, duplicate "boards" or such other comparable method acceptable to CKI, of the Approved Design Concepts so that CKI has a means to verify compliance with the Approved Design Concepts at subsequent stages of the approval process, within 10 business days after approval of the Approved Design Concepts. The Licensee shall have 10 business days to resubmit for CKI's approval any Design Concept to which CKI directed modifications to be made. If any resubmitted Design Concept, as changed, does not strictly conform to CKI's request for changes, and such strict conformity cannot be obtained after one resubmission, such Design Concept shall not become an Approved Design Concept. No Licensed Products (including samples) shall be distributed and/or sold by the Licensee unless such Licensed Products are in substantial conformity with Approved Design Concepts. Approved Design Concepts shall only be deemed approved for the specific Collection for which they have been submitted and approved, unless CKI agrees otherwise in writing.

6.2.4    Certain Other Approvals.     The Licensee shall provide and present to CKI proposed styles, designs, fabrications (fabric, leather or other materials, swatches in reasonably sufficient size to determine "hand" as well as color, content and other matters, trim, samples, labels (quality), artwork, if requested by CKI (e.g., layouts and relevant technical information for graphic motifs, patterns (such as florals, stripes, checks))) and other materials in quantities and sufficient variety to enable CKI to review and approve (including to require modifications to or changes in), on a timely basis, sufficiently in advance of the market and production timing.

6.2.5    CKI Designs.     CKI may provide the Licensee with creative concepts and fashion direction as to each Collection, including recommendations as to color, material, design and styling of Products and such additional design assistance including sketches, samples, suggestions or other information or data as CKI determines in its sole discretion. For each Collection, the Licensee shall utilize substantially all of the designs, fabrics, trim or other material submitted or approved by CKI and shall produce on a timely basis pre-production prototypes for CKI's review and approval.

6.2.6    Prototypes.     Prior to showing each season's Collection to the trade or commencing production of the Products for such Collection in accordance with the Time and Action Calendars, the Licensee shall produce pre-production prototypes (both initial (first) and second prototypes, where required by CKI) of each Product in the approved fabrications, or, if applicable, in those fabrications specifically requested by CKI (or, if CKI so permits on a season-by-season, case-by-case basis, pre-production prototypes of each "body" or style of Product in representative fabrications or those fabrications specifically requested by CKI), along with swatches and samples of sufficient size in order to determine hand and/or other aspects related to the Products that the Licensee proposes to include in such Collection, for CKI's approval. No previously approved Licensed Products shall be included in a subsequent Collection unless and only if presented for inclusion and approved by CKI for such subsequent Collection. CKI shall have the right to approve or disapprove of any or all aspects of each prototype and to require modifications to meet its requirements for approval. Notwithstanding such requirements or approvals, all responsibility (and liability) for the merchantability, fit and technical

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requirements of such Licensed Products is and will belong to Licensee. If CKI disapproves any proposed carryover of a "core" item (i.e., part of the Collection for at least four prior seasons, if any), then the Licensee will discontinue such product within three months to enable the Licensee to fulfill outstanding orders. (Prototypes which have been approved by CKI, or those subject to changes being made by the Licensee, upon resubmission of corrected prototypes and subsequent approval by CKI, shall hereinafter be referred to as "Approved Prototypes."). The Licensee shall provide CKI with a photographic record of all Approved Prototypes for each Collection, and also, the Licensee shall promptly provide CKI, with a record of the use (i.e., the factory location in which each prototype will be used to produce the specific Licensed Products) of the Approved Prototypes, which shall include notification (i.e., e-mail, fax, modified purchase order to factory producing the particular item of Licensed Product) and evidence (e.g., in the form of duplicate or modified prototype) of any changes required by CKI. CKI may request that prototypes be developed in a standard size or to provide CKI with a variety of sizes and styles, covering the spectrum, to assure itself of "fit" and sizing.

6.2.7    Final Approval and Sales.    The final composition of each Collection shall be determined and agreed upon by the Licensee and CKI, and is subject to the approval of CKI, upon presentation and edit of the sample line produced from Approved Prototypes for technical quality and final editing purposes. Thereafter, the Licensee shall timely sell, market, produce and ship such Collection based on the Approved Prototypes.

6.3    Manufacture of Licensed Products by Third Parties.     All contractors wherever located which the Licensee desires to use in connection with the manufacture of Licensed Products are subject to the prior written approval of CKI, which consent shall not be unreasonably withheld or delayed; provided, however, that CKI shall have 10 business days after its receipt of a written request from the Licensee to use a manufacturer or such longer period as is reasonable under the circumstances to approve or disapprove such manufacturer. In order to maintain CKI's high standard of quality control and to insure that appropriate measures are taken against counterfeiting, the Licensee shall provide CKI with the following information: (i) name and address of each proposed manufacturer; (ii) type of Licensed Products to be manufactured; (iii) quantity of Licensed Products to be manufactured; and (iv) any other relevant information. The Licensee shall obtain the signature of an authorized representative from each approved third-party manufacturer used by the Licensee on an agreement (a "Third-Party Manufacturing Agreement"), substantially in the form of Exhibit D. The Licensee shall not knowingly enter into a Third-Party Manufacturing Agreement with any third party that has materially breached a similar agreement with CKI or its Affiliates or any licensee of CKI or its Affiliates. The Licensee acknowledges that it shall remain primarily liable and completely obligated under all of the provisions of this Agreement in respect of such contracting or assembly arrangements.

6.4    Non-Conforming Products.     In the event that any Licensed Products are, in the judgement (which shall include subjective aesthetic considerations and standards) of CKI, not being manufactured, distributed or sold with first quality workmanship or in strict adherence to the prototypes approved by CKI, CKI shall notify the Licensee thereof in writing, and the Licensee shall promptly initiate corrections or changes to production of such Licensed Product to conform thereto. Where non-conformity is material, substantial or may adversely affect the reputation or prestige or value of the Licensed Mark or CKI's business operations, CKI may require that no further sale or shipment of such Licensed Mark be made until such corrections are made. If Licensed Products as changed do not strictly conform after CKI's request and such strict conformity cannot be obtained after one resubmission, such Licensed Products (the "Non-Conforming Products") shall be disposed of in a way which shall not reduce the value of the Licensed Mark or detract from its reputation, which may include, without limitation, the destruction of the Non-Conforming Products, the donation of such Non-Conforming Products to eleemosynary institutions, the sale of such Non-Conforming Products in a private sale, with proceeds to be given to charity, or the removal of Labels and other identification prior to sale, or other method reasonably approved by CKI. As noted, CKI may require the Licensee to cease further shipment and sale of such Licensed Products, to recall any Licensed Products that are not consistent with approved quality

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standards and the approved prototypes and/or to purchase at the Licensee's expense any such Licensed Products found in the marketplace. ***

6.5    Approvals.     All approvals by CKI required under this Agreement must be obtained in advance of use of the item subject to approval, which approval must be in writing from CKI to the Licensee. Except as otherwise expressly provided hereunder, a submission for approval shall be deemed approved unless CKI delivers a notice of disapproval within 10 business days after its receipt of a written request for approval (together with the submission as well as all information, details and specifications reasonably necessary to review, determine and provide an approval). All matters requiring approval of CKI shall be granted or withheld in the sole and absolute good-faith discretion of CKI and may be based solely on CKI's subjective aesthetic standards. CKI shall provide an explanation for disapprovals, unless such disapproval reflects an issue of taste or subjective judgement. CKI has no obligation to approve, review or consider any item which does not strictly comply with the required submission procedures. Approval by CKI shall not be construed as a determination that the approved matter complies with all applicable regulations and laws. No disapproved item shall be manufactured, sold, used, distributed or advertised by the Licensee under the Licensed Mark. The Licensee may revise any disapproved item and resubmit it. The Licensee must strictly comply with all of CKI's decisions. CKI may amend the approval forms as appropriate. Otherwise, the parties may mutually agree to amend the approval forms as they deem appropriate. In the event that it is reasonably necessary for CKI to do on-site approvals, the Licensee shall pay any and all reasonable expenses and airfare incurred by CKI with respect to such on-site approvals. CKI to provide Licensee with advance notice as to any such trips or anticipated on-site approval situations to reasonably co-ordinate with Licensee.

6.6    Marketing, Labeling, Packaging, Promotions, Business Materials.     All packaging, labeling, including within the Licensed Product ("Labels") must be approved by CKI. The use of any Label that has not been approved is expressly prohibited. CKI reserves the right to require the Licensee to purchase Labels to be used on the Licensed Products only from sources designated by CKI, provided that such sources provide the Labels to the Licensee in a reasonably competitive manner as to price and delivery schedules. All Licensed Products manufactured, distributed or sold by, or on behalf of, the Licensee shall be marked, labeled, packaged, advertised, distributed and sold in accordance with this Agreement. At the request of CKI, the Licensee shall cause to be placed on (or attached to) all Licensed Products (by way of labels, tags or inserts, and/or packaging) an appropriate notice designating CKI as the "licensor" of the Licensed Mark, and/or CKTT as the owner of the Licensed Mark. The manner of presentation of such notice shall be determined by CKI. Any and all proposed advertising, promotional, business (including stationary, business cards, invoices) or marketing or publicity material (including issuing press releases, interviews or other public relations media), any POS, POP or other promotional material and any other printed material or other form of communications to be used in connection with the marketing, promotion, sale or distribution of the Licensed Mark must be approved by CKI (as to content, form and specific use, including timing and duration of use) prior to use by Licensee, as noted in the 2^nd sentence of § 6.5 above, as to 10 business days, submission and information. If CKI should disapprove any sample tag, label, package or the like, or any advertising, promotional, merchandising, marketing or publicity material, activity or event or the proposed placement or use thereof or any other printed matter, event or activity, Licensee will not use or permit the use of the same in any manner, whether or not in connection with Licensed Products or the Licensed Mark.

6.7    Inspection of Facilities.     CKI and its duly authorized representatives shall have the right, during normal business hours and upon reasonable notice, to inspect all facilities utilized by the Licensee (and its contractors and suppliers to the extent the Licensee may do so) in connection with the manufacture, sale, storage or distribution of Licensed Products, and to examine the Licensed Products in the process of manufacture.

6.8    Samples and Artwork.     CKI may make available to the Licensee certain samples, designs, colors, fabric samples, tags, labels, packaging, catalogues and artwork available to CKI, and the cost of providing such materials shall be borne by the Licensee at prices equal to CKI's cost (A) as may be requested by Licensee or (B), in the case of "multi-regional" items which CKI requires to be utilized

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amongst its multiple licensees for Licensed Products, not to exceed $25,000 per annum without the Licensee's prior consent. The payment for these already "developed" materials are separate and apart from the payment of any CRK fee for the development of such samples, designs, colors, fabric samples, tags, labels, packaging, catalogues and artwork directly for Licensee for each Collection of Articles which shall also be borne by Licensee. All right, title and interest in and to samples, sketches, designs, and other materials furnished to the Licensee or submitted by CKI in connection with the Licensed Products, including any modifications or improvements thereof which may be created by CKI, shall remain the sole property of CKI as between the Licensee and CKI, and are "licensed" hereunder solely and exclusively for use in connection with the manufacture, sale, distribution and promotion of Licensed Products in the Territory.

6.9    Know-how.     The Licensee shall have the right to request visits to CKI's offices or showrooms to meet with its personnel, in order to obtain additional know-how and assistance, all as and only as CKI deems appropriate. The scheduling of such visits shall be at times mutually convenient to the parties hereto. In connection with such visits, the Licensee shall bear all expenses of the Licensee's representatives.

6.10    Meetings.     CKI may from time to time hold meetings of CKI's licensees. The Licensee shall, upon receipt of reasonable notice, attend such meetings at its own expense but shall not be required to attend more than two such meetings per year.

6.11    Design Direction.     The designs of the Licensed Products shall at all times be consistent with CKI's design aesthetic for the Licensed Mark. CKI may submit samples to the Licensee of or for products it deems to be core to the image of the overall "CALVIN KLEIN" trademark and/or product lines, and the Licensee shall develop Licensed Products based thereon and shall use commercially reasonable efforts to market same.

6.12    Design Rights.     The Licensee acknowledges and agrees that CKI owns or shall own all design rights, regardless of whether such designs were created by CKI or by or on behalf of the Licensee, except with respect to Excluded Designs. The Licensee agrees to make, procure and execute all assignments necessary to vest ownership of design rights in CKI. The Licensee shall not do or allow to be done anything which may adversely affect any of CKI's design rights. All designs used by the Licensee for the Licensed Products, except with respect to Excluded Designs, shall be used exclusively for the Licensed Products and may not be used under any other mark, whether during the License Period or any time thereafter, without the prior written consent of CKI. The Licensee shall disclose and freely make available to CKI any and all developments or improvements it may make relating to the Licensed Products and to their manufacture, promotion and sales, including, without limitation, developments and improvements in any machine, process or product design, that may be disclosed or suggested by CKI or regarding any patent or trademark which the Licensee is entitled to utilize. "Excluded Design" means a design (i) submitted by the Licensee and not approved by CKI; (ii) not distinguishable from similar generic products generally available in the marketplace; or (iii) not distinguishable from a product which has previously appeared in the Licensee's product line and the Licensee advised CKI of such condition at the time of submission. In the event of clause (i) or (iii) above, the Licensee shall retain title to such designs but shall permit CKI to use such designs during the Term of this License Agreement. CKI may use and permit others to use said designs and other materials in any manner it desires, provided that such use does not conflict with any rights granted the Licensee hereunder or belonging to Licensee. The Licensee specifically acknowledges that such designs and other materials may be used by CKI and its Affiliates and other licensees of CKI and its Affiliates on Licensed Products in jurisdictions outside the Territory and on products other than Licensed Products anywhere in the world, subject to the limitations described herein. Notwithstanding the foregoing, CKI shall not acquire any ownership interests in any patents, trademarks or copyright rights owned or commissioned by Licensee and utilized for multiple or other than Licensed Products, but utilized as well in connection with the Licensed Products.

6.13    Shops, Stores, Retail Outlets.     Subject to § 6.14, the Licensed Products sold by the Licensee may be *** Nothing herein shall be deemed to ***

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6.14    Disposal of Seconds and Close-Outs.     Seconds and Close-Outs sold by the Licensee may be sold only to Approved Accounts and Approved Seconds and Close-Outs Accounts, including those customers identified on Schedule 6.14. Whenever the Licensee shall wish to sell Seconds and Close-Outs to customers not previously approved by CKI, the Licensee shall submit to CKI a written list of the proposed customers for Seconds and Close-Outs for CKI's prior written approval. The proposed customers approved from such list, together with the customers listed on Schedule 6.14, are referred to as the "Approved Seconds and Close-Outs Accounts." Notwithstanding CKI's approval of any customer, CKI may at any time subject sales to any such customer, including, without limitation, any such customer listed on Schedule 6.14, to any conditions or limitations CKI considers appropriate; provided, however, that in order to be effective, any such conditions or limitations must be set forth in a writing provided to the Licensee. Nothing herein shall be deemed to prohibit CKI from withdrawing its approval of any Approved Seconds and Close-Outs Account for "good" bona fide reasons, including, without limitation, any such Approved Seconds and Close-Outs Account listed on Schedule 6.14, upon written notice to the Licensee (at which time, such customer shall cease to be an Approved Seconds and Close-Outs Account for purposes of this Agreement); provided, however, that the Licensee may fulfill any firm orders entered into prior to the Licensee's receipt of CKI's withdrawal of approval.

6.14.1    Seconds.     The Licensee shall only sell Licensed Products which are damaged, imperfect, non-first quality or defective goods ("Seconds") in a way which shall not *** Notwithstanding anything to the contrary, ***

6.14.2    Close-Outs.     ***

6.15    Standards of Conduct .    

6.15.1    Standards.     The Licensee acknowledges that CKI is a wholly owned subsidiary of Phillips-Van Heusen Corporation ("PVH"). The Licensee acknowledges that it has received copies of, read and understands PVH's publication "A Shared Commitment – Requirements for Suppliers, Contractors, Business Partners" and PVH's "Statement of Corporate Responsibility." The Licensee shall conduct its business in compliance with the moral, ethical and legal standards set forth in such publications, as the same may from time to time be revised by PVH upon reasonable notice to the Licensee (the "Standards") and shall cause all manufacturers, contractors and suppliers which manufacture Licensed Products or from whom the Licensee obtains Licensed Products or materials for the manufacture of Licensed Products to abide by the Standards.

6.15.2    Audit Requirement.     For each facility utilized by Licensee for the manufacturing of the Licensed Products (whether directly produced or produced by or through a contractor, subcontractor or supplier) the Licensee will arrange to have the facility audited for compliance with the Standards unless PVH notifies the Licensee in writing that it already has a current audit with respect to such facility that evidences compliance with the Standards. Audits on each facility used must thereafter be conducted no less often than annually. Each audit shall be conducted by a suitable auditor (whether internal or external) designated by the Licensee, subject to Licensor's and PVH's approval. Disapproval by Licensor and PVH may only be for grounded reasons. Each audit shall be conducted using the evaluation form attached hereto as Exhibit E or a substantively similar form approved by PVH. The Licensee shall identify to PVH in writing each facility in which Licensed Product (or part thereof) are produced or which is to be re-audited and PVH shall notify the Licensee within 30 days of PVH's receipt of such notice if PVH has currently approved the facility for production and when re-audit is required. If a facility is currently approved for production, the Licensee shall have no obligation to arrange for a current audit of the facility. If a facility is denied approval by PVH as of such date, Licensee will not place any new orders in such facility and will only use the facility to fulfill currently existing, non-cancelable orders. Licensee will stop producing in such facility starting from the immediately subsequent season. All audits shall be conducted at the Licensee's sole expense. All support to be given by PVH will be at PVH's expense.

Notwithstanding anything to the contrary contained in this §6.15.2, ***

6.15.3    Approval.     A comprehensive audit report prepared by the auditor shall be provided to PVH, attention the director of PVH's Human Rights Program Department, promptly upon its

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completion. PVH shall have 30 days from its receipt of an audit report to notify the Licensee: a) of its approval of the audited facility either (i) fully without remarks; or (ii) with request to re-audit within a certain period ("Red Flag"); or b) of its disapproval of the facility that is the subject thereof in which case Licensee may fulfill any firm orders entered into prior to the Licensee's receipt of PVH's disapproval and cease to utilize such disapproved facility from the subsequent season. If PVH does not give notice to the Licensee within such 30-day period, the facility shall be deemed approved by PVH. PVH shall set forth in its notice of disapproval its reason(s) for disapproval in reasonable detail.

6.15.4    Use of Facility.     Unless and until the Licensee delivers to PVH an audit report for a facility that evidences compliance with the Standards and PVH approves such facility, the facility shall not be used for the production of Licensed Products. If the Licensee uses a facility that has not been approved in accordance herewith, fails timely to cause an approved auditor to submit to PVH an audit report evidencing continued compliance with the Standards when a re-audit of a facility is required in accordance with the terms hereof or if the Licensee or any of its manufacturers, contractors or suppliers with respect to Licensed Products shall, in PVH's sole determination, fail to abide by the Standards, CKI's sole remedy with respect to such breach of this § 6.15.4, to the extent that CKI is not otherwise damaged as a result of such breach, shall be to terminate the License and all of the other rights granted to the Licensee under this Agreement, as provided in § 8.3 below. Nothing in this § 6.15.4 shall be deemed to confer third-party beneficiary rights upon any person, corporation, partnership or other entity.

6.16    Personnel.     Licensee shall perform its obligations hereunder through a separate sub- division of the Licensee exclusively dedicated, and the employees of which shall be dedicated to the performance of the Licensee's obligations hereunder; provided, however, that financial, logistics and other back-office support need not be exclusive, except with respect to operations of other licenses with CKI. Licensee shall employ, on an exclusively devoted basis (to operations hereunder and to operations under the CKI Jeans License and CKI Jeans and "bridge" Accessories Licenses), a "President" who is subject to the initial reasonable approval of CKI, as is any successor thereto, as well as other personnel as may be needed to successfully exploit the business. Managing Directors may be substantially devoted to the operations hereunder as well as to other Fingen S.p.A. and affiliated entities, business and operations. Such personnel would include sales, merchandising, technical, product development and other production, visual display, quality control and retail development personnel. CKI may, on an ongoing basis, advise Licensee of any problems or difficulties, if any, it may be experiencing, and Licensee will use all reasonable efforts to address any such concerns to CKI's reasonable satisfaction.

ARTICLE VII.    THE LICENSED MARK

7.1    Rights to the Licensed Mark.    

7.1.1    Ownership of Licensed Mark.     The Licensee acknowledges that the Calvin Klein Trademark Trust ("CKTT") is the owner, and CKI is the beneficial owner, of all right, title and interest in and to the Licensed Mark, and to any variant, modification or embodiment thereof, for Products in the Territory; and that CKTT and CKI also own the goodwill related to such marks and to the business and goods in relation to which such marks have been or will be used. The Licensee will not at any time directly or indirectly do or suffer to be done any act or thing that might in any way adversely affect any rights of CKTT or CKI in and to any of such marks, any registrations thereof or any applications for registration thereof, or which might reduce the value thereof or detract from their reputation, image or prestige of that of CKTT, CKI or Mr. Calvin Klein. Sales by the Licensee shall be deemed to have been made by CKTT for purposes of trademark registration and all uses of the Licensed Mark by the Licensee and any and all goodwill generated by use of the Licensed Mark shall inure to the benefit of CKI and CKTT.

7.1.2    No Adverse Actions.     The Licensee shall not, at any time, do, or otherwise suffer to be done, any act or thing which may at any time, in any way, adversely affect any rights of CKI or CKTT in and to the Licensed Mark or any registrations thereof or which, directly or indirectly, may reduce the value of the Licensed Mark or detract from its reputation. The Licensee shall not file or prosecute a trademark or service mark application or applications to register the Licensed Mark or any trademark,

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name or other mark confusingly similar thereto in respect of the Licensed Products or any other goods or services in the Territory or elsewhere. The Licensee shall not, during the term of the License Period or thereafter, (i) contest CKTT's or CKI's title, right, ownership or other interest in or to the Licensed Mark in any jurisdiction or attack the validity of the License or the Licensed Mark or (ii) contest the fact that the Licensee's rights under this Agreement (a) are solely those of a manufacturer, licensee and, if appropriate, distributor; and (b) subject to the provisions of § 8.5, cease upon termination of the License Period.

7.1.3    Registrations.     The Licensee acknowledges and agrees that CKTT, as the sole and exclusive owner of the Licensed Mark, has the exclusive right to apply for registrations and to extend appropriate registrations of the Licensed Mark for all categories of goods, including, without limitation, the Products. CKI, on behalf of CKTT, shall maintain at its expense and as determined by CKI consistent with its past practice the registrations for the currently existing Licensed Mark in the Territory with respect to Products. The Licensee agrees to cooperate with CKTT and/or CKI in the preparation, filing and prosecution of applications for registration, or extensions of existing registrations, or other documentation relative to the Licensed Mark. CKI represents that CKTT has applications and registrations for the " CALVIN KLEIN" mark for products in International Class 18 (leather accessories) in a number of jurisdictions in the Territory, as per schedule to be attached.

7.1.4    Survival.     The provisions of this § 7.1 shall survive the termination of the License Period and this Agreement.

7.2    Protecting the Licensed Mark.     The Licensee shall cooperate fully and in good faith with CKI and CKTT for the purpose of securing, preserving and protecting CKTT's and CKI's rights in and to the Licensed Mark and any secondary trademark that the Licensee may develop and use with the approval of CKI. Any such secondary mark will be owned by CKTT. At the request of CKI, the Licensee shall execute and deliver to CKI any and all documents and do all other acts and things which CKI and/or CKTT deems necessary or appropriate to make fully effective or to implement the provisions of this Agreement relating to the ownership or registration of the Licensed Mark, including, without limitation, information regarding use and supporting documentation therefore, as well as labels, hang tags, packaging, and other appropriate specimens evidencing use of the Licensed Mark in each country in the Territory.

7.3    Use of the Licensed Mark.    

7.3.1    Compliance with Legal Requirements.     The Licensee will use the Licensed Mark in the Territory strictly in compliance with the legal requirements therein. The Licensee shall duly display all other notices with respect to the Licensed Mark, on the Licensed Products and otherwise, as are or may be required by the trademark laws and regulations applicable within the Territory. Upon expiration or termination of the License for any reason whatsoever, the Licensee will execute and deliver to CKI any and all documents required by CKI.

7.3.2    Use with Other Name.     The Licensee shall not (a) co-join any name or names with the Licensed Mark, (b) use the name "Calvin Klein" or "CK" or "CK/Calvin Klein" or any portion or derivative thereof in its corporate name except as previously approved or subsequently approved by CKI in writing, or (c) use any other name, or names in connection with the Licensed Mark, in any advertising, promotion, publicity, labeling, packaging or other printed matter of any kind in connection with the distribution or sale of Licensed Products except as may be approved in writing by CKI. Any use of the Licensee's corporate name or that of its Affiliates in connection with the Licensed Mark will be subject to the approval of CKI. If CKI approves any use of the Licensed Mark in connection with the Licensee's corporate name, the Licensee will clearly indicate that the Licensee is using the Licensed Mark pursuant to a license from CKI as may be required by CKI. The Licensee will use such trade name to designate the operations under this Agreement as is approved by CKI, and will file a fictitious name certificate ("d/b/a") or use of "trade name" certificate or notice, as is generally used or required in the various jurisdictions in the Territory to reflect such use, as is reasonably approved by CKI).

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7.3.3    Execution of Documents.     At CKI's request, the Licensee will execute any and all documents (including registered user agreements) and take any actions required by CKI to confirm CKTT's ownership or CKI's beneficial ownership of the marks referred to in §7.1.1 and the respective rights of CKTT, CKI and the Licensee pursuant to this Agreement.

7.4    Ownership of Copyright.     Except as specifically provided herein, any copyright which may be created in any sketch, design, print, Label or the like designed or approved or used with the Licensed Mark by the Licensee will be the property of CKI. The Licensee shall not, at any time, do, or otherwise suffer to be done, any act or thing which may adversely affect any rights that CKI may have in such sketches, designs, prints, Labels and the like and will, at CKI's request, do all things reasonably required by CKI to preserve and protect said rights.

7.5    Infringements, Counterfeits and Parallel Imports.    

7.5.1    Infringements.     In the event that Licensee learns of any infringement or imitation of the Licensed Mark with respect to Products (other than insignificant, immaterial or de minimus situations) which it believes could be considered a counterfeit of the Licensed Products, or of any use by any person of a trademark similar to the Licensed Mark with respect to Products which it believes could be considered a deliberate use of something substantially similar to the Licensed Mark and is either substantive, significant or would adversely affect the prestige, reputation or value of the Licensed Mark), it will promptly notify CKI thereof. The Licensee will take no action, including, but not by way of limitation, settling any action, appealing any adverse decision or discontinuing any action taken by it, except to the extent the same is approved in advance by CKI. All costs and expenses incurred in any action or proceeding (including investigatory expenses and attorneys' fees, if applicable, court costs and filing fees) will be borne as determined in § 7.5.2. Any damages recovered or sums obtained in settlement in or with respect to any action shall (i) first be applied proportionately to reimburse CKI and the Licensee for the respective expenses incurred and actually paid by it and (ii) the balance, if any, shall belong and shall be paid over to, on a fifty-fifty basis, to CKI and the Licensee. In no event will any infringement by a third party justify the withholding of any payment of Fee or other amount by the Licensee.

7.5.2    Counterfeits and Parallel Imports.    

7.5.2.1    The Network.     CKI currently maintains certain staff which maintains an enforcement network of attorneys, investigators and customs inspectors in the Territory (the "Network") to minimize and deter (i) the diversion into and sale within and from the Territory of products (including those which would correspond to Licensed Products) authorized for sale by its Affiliates and other licensees, which may include, without limitation, unauthorized distribution of such products by the manufacturers and subcontractors thereof ("Parallel Imports") and (ii) the importation into, or sale or manufacture within as well as from, the Territory of counterfeit Licensed Products or infringing Products; in each case subject to contributions from and reimbursement by various licensees (as well as other authorized users of the Licensed Mark and other marks of CKI and CKTT), and subject to applicable law. CKI generally requires, and will continue to require, its licensees in their respective agreements to restrict exports from their respective "territories" (as per the final sentence of § 1.1.2) in order to prevent importation of applicable merchandise into another licensee's "territory." The Licensee acknowledges and agrees that CKI is under no obligation to maintain any such Network or other arrangement, and may curtail, modify, terminate or discontinue such Network in whole or in part at any time. For the time being, unless or until CKI otherwise determines and so advises the Licensee in CKI's reasonable discretion, the Licensee will cooperate in such efforts as reasonably requested by CKI, and under procedures as CKI may agree upon with Licensee, and will timely remit and/or, as applicable, promptly reimburse out-of-pocket expenses reasonably incurred by CKI in such efforts (including, without limitation, reasonable attorneys' fees and expenses) as follows: *** Upon the Licensee's request, CKI will meet with the Licensee to discuss CKI's enforcement activities and the costs associated therewith.

7.5.2.2    Diversion.     The Licensee shall use all commercially reasonable efforts to minimize and deter the diversion of Licensed Products for sale outside of the Territory, including, without

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limitation, the unauthorized distribution of Licensed Products by the Licensee's manufacturers and subcontractors ("Diversion"). The Licensee shall cooperate with CKI in CKI's efforts to minimize and deter Diversion ("Anti-Diversion Efforts"). Without limiting the foregoing the Licensee shall promptly (i) provide such information as CKI may from time to time reasonably request concerning its manufacturing, subcontracting and distribution locations, activities and shipments, product and label identification systems and data and sales to and by its customers; and (ii) as provided in § 7.5.4, reimburse all agreed upon out-of-pocket expenses reasonably incurred by CKI in its Anti-Diversion Efforts (including, without limitation, reasonable attorneys' fees and expenses).

7.5.3    Criminal Proceedings.     CKI may, but need not elect to, initiate criminal or civil actions against persons or entities outside the Territory seeking to manufacture counterfeit Licensed Products or sell or ship counterfeit Licensed Products into the Territory (excluding, for this purpose, manufacturers or subcontractors described in the definitions of Diversion or Parallel Imports). The cost related to any such actions shall be borne entirely by the Licensee, if the Licensee requests that such action be taken, or by CKI, if CKI determines to take such action.

7.5.4    Enforcement Activities.     CKI will consult with the Licensee in connection with the enforcement activities undertaken pursuant to this § 7.5. In connection with this § 7.5.4 through § 7.5.6, and § 7.5.2, Licensee and CKI from time to time will use reasonable efforts to apply a substantive portion of the budgeted amounts and expenditures towards more substantive, significant and/or material actions (and acts of infringement, counterfeiting, etc.) in order to enhance the effectiveness of application of resources. In addition, upon the request of the Licensee, the parties will consult one time each Annual Period to forecast CKI's continuing and reimbursable expenses hereunder and enter into suitable arrangements as may be agreed upon with Licensee, including retainer arrangements, so that CKI may receive the Licensee's payments     in respect thereof at or shortly before such expenses are incurred.

7.5.5    Nature of Proceedings.     Whenever it is not readily apparent whether actions or proceedings involve counterfeit Licensed Products, Parallel Imports or Diversion, CKI will, where practical and subject to time constraints, contact CKJE for information or input, and then reasonably determine the nature of such items in good faith (with all due caution as to ramifications of erroneous determinations as to whether "counterfeit" or not), taking into account all relevant information provided by the Licensee.

7.5.6    Cooperation.     The Licensee shall cooperate with CKI in all actions taken by CKI pursuant to this § 7.5, whether on its own or at the Licensee's request, and in all criminal proceedings, as may be required or reasonably requested.

7.6    Trademark Security.    

7.6.1    Counterfeit Protection.     The Licensee shall use all commercially reasonable efforts to prevent counterfeiting of the Licensed Products. All Licensed Products shall bear and use any reasonable counterfeit preventive system, devices or labels, provided that Licensee may decide in its own good faith discretion, which system, devise or labels to use.

7.7    Use of Licensed Mark on Invoices, etc.     The use of the Licensed Mark by the Licensee on invoices, order forms, stationery and related materials, in advertising in telephone or other directory listings is permitted only upon CKI's prior written approval of format in which the Licensed Mark is to be so used, the juxtaposition of the Licensed Mark with other words and phrases, and the specific trade name (and form and format thereof), the content of the copy and filing of a fictitious name certificate ("d/b/a") or "trade name" certificate or notice, if using the Licensed Mark or portion (e.g., "CK") in such name (or other regional notice of "trade" name or use of the Licensed Mark) as applicable, as approved by CKI.

7.8    Monitoring.     The Licensee shall use reasonable efforts to monitor the use of the Licensed Mark by the Licensee's customers and to require its customers to advertise, display and promote the Licensed Mark in a manner consistent with the terms and conditions of this Agreement.

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ARTICLE VIII.    TERM AND TERMINATION

8.1    Expiration.     The License and, subject to § 8.5, the other rights granted to the Licensee hereunder shall terminate at the end of the License Period and all rights shall immediately revert to CKI.

8.2    Other Rights Unaffected.     It is understood and agreed that termination of the License or other rights granted to the Licensee hereunder by CKI on any ground shall be without prejudice to any other rights or remedies which CKI may have.

8.3    Right of Termination of the License.     If any of the following grounds for termination shall occur, CKI may elect, by written notice to the Licensee, to terminate

(A)    upon 20 business days notice unless cured within such 20 business days in the case of any of subsections "(b)" through "(e)";

(B)    in the case of subsections "(f)," "(g)," "(h)" (alone or with other breaches or defaults), upon 30 business days notice (without any cure period); and

(C)    upon 25 business days notice, unless cured within such 25 business days, in the case of subsections "(l)" or "(m)" (provided not with other breaches or defaults under other noted subsections),

the License and other rights granted to the Licensee hereunder:

(a)    Deliberately Omitted;

(b)    The Licensee shall repeatedly sell or distribute individual items of Licensed Products (in other words, "a pattern" of behavior), or shall sell at any time a significant quantity of Licensed Products in breach of CKI's review and approval rights under § 6.2;

(c)    Failure by the Licensee to perform or observe any term or covenant or agreement contained in § 11.4 or in § 4.10;

(d)    The Licensee shall sell or distribute Licensed Products to retailers not approved by CKI or disapproved by CKI in accordance with or otherwise in breach of §§ 6.13 or 6.14 (unless such sale or distribution was inadvertent, and was of an insignificant quantity of products or single or isolated account, and the Licensee promptly represents to CKI in writing that steps to avoid such sales or distribution in the future are being taken (which steps are to be delineated in such writing), and are deemed acceptable to CKI's reasonable satisfaction, and further provided that the Licensee does not repeat any such sales or distribution in breach of §§ 6.13 or 6.14 within the same Annual Period);

(e)    Underpayment by the Licensee of Fees (including non-timely (i.e., on or within 15 business days of the due date) payment of any installment of Minimum Guaranteed Fees or MAE hereunder) of 7.5% or more with respect to any Annual Period, or of 5% or more with respect to any two (2) consecutive Annual Periods, unless such underpayment of fees (not MGF's or MAE's) was result of clerical or bank errors, or constitutes a "bona fide" dispute between the parties, which is the subject of continuing good faith efforts to "resolve," not known to a responsible officer or other financial person, and promptly corrected as soon as "known" or so advised by CKI);

(f)    The Licensee institutes for its protection, or is made a defendant, in any proceeding under bankruptcy, insolvency, reorganization or receivership law, or the Licensee is placed in receivership or makes an assignment for benefit of creditors or is, or states that it is, unable to meet its debts in the regular course of business, and such involuntary proceedings or receiverships are not dismissed or vacated within 60 days of filing or appointment;

(g)    Cessation by the Licensee of its business;

(h)    The Licensee assigns, attempts to assign (entering into a binding term sheet or contingent contract or agreement, not just "discussion"), sublicense (without CKI's consent), or otherwise transfers or attempts to transfer any of its rights or obligations hereunder. Any such attempted or completed assignment, sublicense or transfer ("Transfer"), whether voluntary or by operation of law, directly or

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indirectly, will be void and of no force or effect. For purposes of this Agreement, any transfer of all or a controlling portion or a majority of the shares of the Licensee or other "CK" affiliates by CK Jeanswear N.V., Fingen S.p.A., its affiliates, shall be deemed a transfer in violation of the terms hereof and prohibited as a "Transfer" hereunder. Prompt notice of any transfer by CK Jeanswear N.V., Fingen S.p.A. or its affiliates (other than Calvin Klein, Inc. or its successors, assignees or transferees) of more than five percent (5%) (whether over a period of time or all at once) ("Notice"), shall be delivered to Licensor. Notwithstanding anything herein contained, a change-of-control Transfer shall be permitted if in accordance with all of the applicable provisions of the CKI/CF Group Irrevocable Consent d. 29 September 2005. In the event of any such CKI-permitted change-of-control Transfer, the provisions hereof shall apply to any "successor in interest" permitted Transferee (except that Notice shall apply to any transfer of more than 35% of the Transferee) . Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding upon the parties and permitted successors and assigns.

(i)    A change, effect or circumstance occurs that is materially adverse to the business, condition, operations, performance or properties of Licensee's ability to perform timely its otherwise material obligations under this Agreement, which would, with the normal passage of time, without cash infusion or other material improvement, result in liquidation, substantial discontinuance or even cessation of business ("Material Adverse Effect");

(j)    A final unappealable judgement is entered against the Licensee in excess of € 2,500,000 which has not been satisfied and which would have a Material Adverse Effect;

(k)    Any indebtedness of the Licensee in excess of Euros €5 million is accelerated or otherwise comes due and payable before its stated maturity and is not subject to cure under the applicable instrument, which would have a Material Adverse Effect;

(l)    The failure by the Licensee to perform or observe any material term or covenant or agreement contained in this Agreement, other than those specified in §§ 8.3(a) to (k), and other than those cured to CKI's reasonable satisfaction, within the applicable cure period (25 business days) for the second time in any Annual Period; or

(m)    The repeated violation by the Licensee of any material term or covenant or agreement contained in this Agreement, other than those specified in §§ 8.3(a) to (k) and other than those cured to CKI's reasonable satisfaction within the applicable cure period (25 business days).

8.4    Termination With Notice and Right to Cure.     In the event of the failure by the Licensee to perform or observe any material term or covenant or agreement contained in this Agreement, other than those specified in § 8.3, CKI may terminate the License and the other rights granted to the Licensee under this Agreement by giving notice of termination to the Licensee (a "Notice of Termination"), which termination shall become effective automatically unless the Licensee completely cures the breach within 30 days of the giving of the Notice of Termination unless such cure cannot be completed within 30 days, in which case termination will not become effective so long as the Licensee is in good faith diligently and expeditiously attempting to cure such breach, only for up to, but not beyond, 90 days.

8.5    Effect of Termination.     Upon the expiration or termination of the License and the License Period for any reason whatsoever, all of the rights of the Licensee under this Agreement shall forthwith terminate and immediately revert to CKI; all Fees on sales theretofore made shall become immediately due and payable; the Licensee shall forthwith discontinue all use of the Licensed Mark, except that the Licensee may, on a non-exclusive basis, during the period (i) commencing on the date of the expiration of the License Period pursuant to § 2.1 or termination of the License because of the breach of § 3.2 and ending 4 months thereafter or (ii) commencing on the date of the termination of the License pursuant to clause (b), (c), (d) or (e) of § 8.3 and ending 4 months thereafter (unless at the advance request of Licensee, which request includes an up-to-date inventory schedule, with anticipated disposition dates, CKI in writing agrees to extend such Disposal Period for up to an additional 30, 60 or 90-day period only, in no event to exceed 6 months in aggregate) (the "Disposal Period"), consummate all sales of Licensed Products which were firm on the date of such expiration or termination and sell the balance of the

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Inventory not purchased by CKI within 45 days following date of expiration or termination, and sold within the applicable Disposal Period as provided in § 8.6; provided, however, that any advertising used during the Disposal Period shall be subject to CKI's prior written approval and such disposition of the Licensed Products shall continue to be subject to the Licensee's obligations hereunder, including, but not limited to, payments to be made to CKI, and Fees with respect thereto shall be due on the last day of the Disposal Period. Without limiting the generality of the first clause of this § 8.5, the Licensee acknowledges that activities, including sales during the Disposal Period, are on a non-exclusive basis. Subsequent to the Disposal Period or, if none, subsequent to such termination, the Licensee shall no longer use the Licensed Mark, any variation, imitation or simulation thereof, or any trademark similar thereto; and the Licensee shall thereupon deliver to CKI, free of charge, all sketches, designs, colors and the like in its possession or control, designed or approved by CKI, and all Labels supplied by CKI in the Licensee's possession or control. CKI shall have the option, exercisable upon notice to the Licensee within 30 days of such expiration or termination, to negotiate the purchase of Labels which have not been supplied by CKI. If such negotiations do not result in the purchase of such Labels or any part of W-I-P, the Licensee shall destroy the unused Labels and W-I-P (except for greige goods or other unidentifiable generic materials otherwise useable by Licensee) at the end of the Disposal Period or, if none, upon such termination, under the supervision of CKI, and the Licensee shall supply to CKI a certificate of destruction thereof signed by a duly authorized officer of the Licensee.

8.6    Inventory Upon Termination.     Upon the expiration or termination of the License and the License Period for any reason whatsoever, the Licensee shall deliver to CKI within 15 business days a complete and accurate schedule of Inventory of Licensed Products (i.e., inventory constituting finished Licensed Products on hand at termination, work-in-process, a/k/a "W-I-P," to be completed and received in warehouse within 3 months only) as of the close of business on the date of) such expiration or termination (the "Inventory Schedule"). CKI thereupon shall have the option, exercisable by written notice to the Licensee within 15 days after its receipt of the Inventory Schedule, to purchase (or to have its designee purchase) any or all of the Inventory (other than Inventory required to consummate sales of Licensed Products which were firm on the date of such expiration or termination) for an amount *** In the event such notice is sent by CKI, CKI (or its designee) may collect the Inventory referred to therein within 90 days after CKI's notice. CKI (or its designee) will pay for the Inventory upon collection. In the event such notice is not sent, the Licensee may dispose of the Licensed Products during any Disposal Period pursuant to § 8.5; provided, however, that such disposition shall continue to be subject to the Licensee's obligations hereunder, including, without limitation, with respect to the payment of fees and the approval of customers and advertising. At the end of the Disposal Period, or if none, upon such termination, any Licensed Products remaining in the Licensee's possession or control, including, without limitation, in any stores of the Licensee, shall, at the request of CKI, be destroyed. To the extent the Licensee completely removes the Licensed Mark from the Licensed Products, and all Labels attached to such Licensed Products, and such Licensed Products are not recognizable as a Licensed Product and cannot be distinguished from similar generic products generally available in the marketplace, such Products shall no longer be Licensed Products. CKI shall have the right at any time, and at its expense, to conduct a physical inventory of the Licensed Products then in the Licensee's possession or control.

8.7    Freedom to License.     CKI shall be free to license to others the use of the Licensed Mark in connection with the manufacture, sale, distribution and promotion of Licensed Products in the Territory upon termination or expiration of this Agreement and to enter into discussions and negotiations applicable thereto, provided only that no shipment of Licensed Products and no publication of institutional or consumer advertising of the Licensed Products pursuant to any such new license will be permitted prior to the termination or expiration of this Agreement.

8.8    Rights Personal.     The License and rights granted hereunder are personal to the Licensee. No assignee for the benefit of creditors, receiver, trustee in bankruptcy, sheriff or any other officer or court charged with taking over custody of the Licensee's assets or business, shall have any right to continue performance of this Agreement or to exploit or in any way use the Licensed Mark if this Agreement is terminated pursuant to §§ 8.3, 8.4 or 11.8, except as may be required by law.

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8.9    Trustee in Bankruptcy.     Notwithstanding the provisions of § 8.8, in the event that, pursuant to the applicable bankruptcy law (the "Code"), a trustee in bankruptcy, receiver or other comparable person, of the Licensee, or the Licensee, as debtor, is permitted to assume this Agreement and does so and, thereafter, desires to assign this Agreement to a third party, which assignment satisfies the requirements of the Code, the trustee or the Licensee, as the case may be, shall notify CKI of same in writing. Said notice shall set forth the name and address of the proposed assignee, the proposed consideration for the assignment and all other relevant details thereof. The giving of such notice shall be deemed to constitute an offer to CKI to have this Agreement assigned to it or its designee for such consideration, or its equivalent in money, and upon such terms as are specified in the notice. The aforesaid offer may be accepted by CKI only by written notice given to the trustee or the Licensee, as the case may be, within 15 days after CKI's receipt of the notice to such party. If CKI fails to deliver such notice within said 15 days, such party may complete the assignment referred to in its notice, but only if such assignment is to the entity named in said notice and for the consideration and upon the terms specified therein. Nothing contained herein shall be deemed to preclude or impair any rights which CKI may have as a creditor in any bankruptcy proceeding.

8.10     Compensation.     Without limiting any right or remedy of CKI, if CKI terminates this Agreement pursuant to § 8.3, CKI shall have the right to ***

ARTICLE IX.    INDEMNIFICATION AND INSURANCE

9.1    Indemnification by the Licensee.     The Licensee does hereby indemnify and hold harmless CKI, its Affiliates, including, without limitation, PVH, CKTT, and its and their current and former respective directors, officers, employees, agents, trustees, and representatives, as well as Mr. Calvin Klein, his heirs, his estate and their respective legal representatives (each, an "Indemnified Party') from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys' fees and expenses (including allocable costs of in-house counsel)), which an Indemnified Party may incur or be obligated to pay in any third party action, claim or proceeding, for or by reason of any acts, whether of omission or commission, that may be committed by the Licensee (which for purposes of this § 9.1, includes its Affiliates, but not Guarantor) or any of their servants, agents or employees in connection with the Licensee's performance of this Agreement, including but not limited to:

(a)    to the extent permitted by law, any alleged defect in any Licensed Product, regardless of whether the action is based upon negligence or strict liability, and regardless of whether the alleged negligence is characterized as "passive" or "active";

(b)    the manufacture, labeling, sale or distribution of any Licensed Product by the Licensee;

(c)    any violation of any warranty, representation or agreement made by the Licensee pertaining to a Licensed Product; or

(d)    the claim of any broker, finder or agent used by the Licensee in connection with the making of this Agreement or any transactions contemplated by this Agreement.

CKI shall give the Licensee prompt written notice of any such claim or action and thereupon the Licensee shall undertake and conduct the defense of any suit so brought. In the event an appropriate action is not taken by the Licensee within 30 days of its receipt of notice from CKI, CKI shall have the right to defend such claim or action in its own name, but no settlement or compromise of any such claim or action may be made without the prior written consent of the Licensee, such consent not to be unreasonably withheld or delayed. In either case, CKI and the Licensee shall keep each other fully advised of all developments and shall cooperate fully with each other and in all respects in connection with any such defense. Such indemnification shall be deemed to apply solely to the amount of the judgement, if any, against CKI and reasonable sums paid by CKI in connection with its defense, and shall not apply to any consequential damages suffered by CKI which are not included in the aforementioned judgement. The provisions of this § 9.1 and the Licensee's obligations hereunder shall survive any termination of the License or rescission of this Agreement.

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9.2    Notice of Suit or Claim.     The Licensee shall promptly inform CKI by written notice of any suit or claim against the Licensee relating to the Licensee's performance under this Agreement, whether such suit or claim is for personal injury, involves alleged defects in the Licensed Products manufactured, sold or distributed hereunder, or otherwise.

9.3    Indemnification by CKI.     CKI does hereby indemnify and hold harmless the Licensee and its Affiliates, and their respective managers, directors, members, shareholders, employees and agents from and against any and all losses, liability, damages and expenses (including reasonable attorneys' fees, costs and expenses, but excluding consequential damages, incidental damages and lost profits) which any of them may incur or for which it may become liable or compelled to pay in any action or claim alleging: (i) CKI's breach of any representation or warranty of CKI hereunder in § 11.1; or (ii) that the Licensee's use of the Licensed Mark in accordance with the terms of this Agreement violates the bona fide trademark ownership rights of a third party in the United States or Canada. The Licensee will promptly notify CKI of any action or claim brought to its attention; provided, however, that the failure to promptly notify CKI shall not relieve CKI of its obligation hereunder, except to the extent (if any) that CKI actually prejudiced thereby. The provisions of this § 9.3 and the obligations of CKI set forth herein shall survive the expiration or other termination of this Agreement.

9.4    Insurance.    

9.4.1    Requirement.     Without limiting the Licensee's liability pursuant to the indemnity provisions of this Agreement, the Licensee shall maintain comprehensive general liability insurance in the amount of at least *** with a broad form property damage liability endorsement. This insurance shall include broad form blanket contractual liability, personal injury liability, products and completed operations liability. Each coverage shall be written on an "occurrence" form.

9.4.2    General Provision.     The insurance described in § 9.4.1 shall include: (i) a cross-liability endorsement naming each of CKI, CKTT, and Mr. Calvin Klein; (ii) an endorsement stating that CKI shall receive at least 30 days' written notice prior to cancellation or non-renewal of coverage; (iii) an endorsement naming each of CKI, CKTT, and Mr. Calvin Klein as additional insureds; (iv) an endorsement stating that the insurance required by this Agreement is primary and that any insurance purchased by CKI, CKTT, or Mr. Calvin Klein shall only apply in excess of the insurance purchased by the Licensee; (v) a waiver of subrogation in favor of each of CKI, CKTT, and Mr. Calvin Klein; and (vi) an endorsement stating that each of CKI, CKTT, and Mr. Calvin Klein may recover for any loss caused CKI, its agents or employees, whether caused by the negligence (including active, passive and gross negligence) of the Licensee, or otherwise.

9.4.3    Approved Carrier/Policy Changes.     All insurance shall be obtained from primary, and financially capable and reputable, insurance companies. The Licensee shall give at least 30 days' prior written notice to CKI of the cancellation or any modification of such insurance policy that would affect any of CKI's, CKTT's, or Mr. Calvin Klein's status or benefits thereunder. This insurance may be obtained for CKI, CKTT, or Mr. Calvin Klein by the Licensee in conjunction with a policy which covers products other than the Licensed Products.

9.4.4    Evidence of Coverage.     No later than 20 days from the date hereof, the Licensee shall furnish to CKI evidence, in form and substance satisfactory to CKI, of the maintenance and renewal of the required insurance copies of policies with applicable riders and endorsements) and certificates of insurance.

9.4.5    Territory.     The insurance set forth in this § 9.4 must cover the entire Territory to the extent available in each jurisdiction in the Territory.

ARTICLE X.    COMPLIANCE WITH LAWS

10.1    Compliance with Laws.     The Licensee shall comply with all laws, rules, regulations and requirements of any governmental body which may be applicable to the operations of the Licensee

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contemplated hereby, including, without limitation, as they relate to the manufacture, distribution, sale or promotion of Licensed Products, notwithstanding the fact that CKI may have approved such item or conduct.

10.2    Equitable Relief.     CKI shall be entitled to equitable relief by way of temporary and permanent injunction and such other and further relief at law or in equity as any court with jurisdiction may deem just and proper. The Licensee waives the requirement of the posting of a bond in connection with any application by CKI for equitable relief.

ARTICLE XI.    MISCELLANEOUS

11.1    Warranties and Representations of the Parties.     Each of the parties hereby represents and warrants to the other party that: it is a corporation (or limited liability company, as applicable) duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; it has the full right, power and authority to enter into, and perform its obligations under, this Agreement; and all necessary corporate acts have been effected by it to render this Agreement valid and binding upon it.

11.2    Definitions.     Each of the following terms (unless deliberately omitted) has the meaning ascribed thereto in the applicable § therein contained:

Defined Term
Advertising Obligation
Advertising Overage
Advertising Shortfall
Affiliates
Agreed Upon Season's Themes
Annual Period
Anti-Diversion Efforts
Annual Period
Approved Accounts
Approved Design Concepts
Approved Prototypes
Approved Seconds and Closeouts
Accounts
CKI
CKI Stores
CKTT
Close-Outs
Code
Collection
Co-operative Advertising
CRK
CRK Fee
Design Concepts
Disclosing Party
Disposal Period
Diversion
E-Commerce
Excluded Design
Gross Sales
Minimum Guaranteed Fees
Indemnified Party
Initial License Period
Inventory
Inventory Schedule
Labels
License
Licensed Mark
License Period
Licensed Products
Licensee
Licensing Forecast
Minimum Net Sales Threshold
Net Sales
Network
Non-Conforming Products
Notice of Termination
Parallel Imports
Percentage Fees
PR Overage
PR Shortfall
Products
PVH
Renewal License Period
Seconds
Standards
Territory
Time And Action Calendar
Third-Party Manufacturing
Agreement
Trademark Security Plan
Transfer

CONFIDENTIAL TREATMENT

11.3    Notices.     All reports and notices required or permitted to be given under this Agreement shall be in writing and shall, unless specifically provided otherwise in this Agreement, be deemed to have been given if personally delivered or faxed (on the date of messengering or faxing), or if mailed, three business days from the date of mailing (by certified or registered mail, return receipt requested and postage prepaid), or if by overnight air courier, one business day from the date of overnight air courier handling as follows:

If to CKI, to:				Calvin Klein, Inc. 205 West 39th Street New York, New York 10018 Attention: President and Chief Operating Officer Telephone: (212) 292-9901 Facsimile: (212) 292-9933
With a copy to:				Calvin Klein, Inc. 205 West 39th Street New York, New York 10018 Attention: General Counsel Telephone: (212) 292-9652 Facsimile: (212) 764-6784
If to the Licensee, to:				CK Jeanswear Europe S.p.A. Via Provinciale Lucchese 181 50019 Sesto Fiorentino, Florence, Italy Attn.: Chief Executive Officer Telephone: +39 055 305 442 Facsimile: +39 055 310 506
If to Warnaco, to:				WF Overseas Fashion C.V. c/o Warnaco Inc. 501 Seventh Avenue New York, New York 10018 Attn: General Counsel Telephone: (212) 287-8282 Facsimile: (212) 287-8275

Requests for approvals with appropriate submissions shall be sent to the applicable party, either CRK, the President or the designated design staff member. Financial reports shall be sent to the designated party in the Finance Department. A party may change its address for receipt of notices at any time upon notice to the other party.

11.4    Assignment.     The License and all rights granted to the Licensee hereunder are personal in nature, and the Licensee shall not Transfer the License, this Agreement or its rights and interest hereunder, or any part hereof, without the prior written consent of CKI, which consent may be withheld by CKI in its sole and absolute discretion.

11.5    Sublicense.     The Licensee is prohibited from granting any sublicenses under this Agreement, unless approved by CKI.

Licensee shall have the right to grant a distributorship or distributorships (excluding a sublicense) for limited areas or jurisdictions in the Territory), but no such distributorship shall reduce in any way Licensee's obligations hereunder nor may such distributorship or any sublicense agreement be entered into unless the following terms and conditions are first satisfied:

(i)    the term of any distributorship or sublicense agreement shall be no more than five (5) years or five (5) years plus five (5) years contingent on at least compliance (with automatic termination upon termination of this Agreement);

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(ii)    The distributor or sublicensee must agree to comply in its activities as a distributor or sublicensee with all of the provisions of this Agreement applicable to such distribution;

(iii)    The distributor or sublicensee must agree not to assign, transfer, or further grant the distributorship agreement or sublicense agreement itself or any of the rights granted to it thereunder without CKI's prior written consent; and

(iv)    The distributor or sublicensee must acknowledge that each of CKI, CKTT and Mr. Calvin Klein are third-party beneficiaries, must afford CKI rights of inspection, approval and termination consistent with its rights pursuant to this Agreement, which it may exercise directly, including rights of termination, and must indemnify CKI, CKTT and Mr. Calvin Klein from liabilities and claims specifically in accordance with the provisions hereof;

(v)    Licensee must deliver a copy of each distributorship and proposed sublicense agreement and must subsequently deliver a copy of each material amendment thereof to CKI, prior to the execution thereof in the case of any proposed sublicense for review and approval, and shall deliver a conformed copy to CKI promptly after its execution and the execution of each amendment thereto;

(vi)    if Licensee enters into an agreement and fails to control, pursuant to this Agreement or the terms of the distributorship agreement or sublicense agreement, the distributor or sublicensee thereunder, and as a result of such failure fails to prevent a breach by such distributor or sublicense agreement of any provision of this Agreement or the distributorship agreement or sublicense agreement, CKI may, in addition to all of its other rights and remedies under this Agreement, require Licensee to ameliorate the effect of such breach; and

(vii)    if applicable, ***

11.6    Assignment by CKI.     CKI shall have a complete and unrestricted right to Transfer any or all of its rights and interests in this Agreement, provided that such transferee is bound by all of the terms hereof, and subject to the Licensee's right to continue to exercise all of its rights hereunder.

11.7    No Agency.     The Licensee shall not represent itself as the agent or legal representative of CKI or its Affiliates for any purpose whatsoever and shall have no right to create or assume any obligation of any kind, express or implied, for or on behalf of them in any way whatsoever. CKI shall similarly not represent itself as the agent or legal representative of the Licensee or its Affiliates for any purpose whatsoever and shall have no right to create or assume any obligation of any kind, express or implied, for or on behalf of them in any way whatsoever.

11.8    Suspension of Obligations.     If the Licensee shall be prevented from performing any of its obligations because of Federal governmental regulation or martial order, or by war, declared or undeclared, or other major and material calamities such as fire, earthquake, or similar Acts of God, the Licensee's obligations shall be suspended during the period of such conditions except for payment and provided the Licensee promptly commences and proceeds diligently to ameliorate the effect. If such condition continues for a period of more than 60 days, CKI shall have the right to terminate this Agreement.

11.9    Benefit.     This Agreement shall inure to the benefit of and be binding upon the parties hereto, and, subject to §§ 11.4 and 11.6, their successors and assigns. PVH, CKTT and Mr. Calvin Klein (with respect to §§ 9.1 and 9.4) shall be third-party beneficiaries of this Agreement and, whether or not expressly set forth herein, shall have the right (a) to exercise, and enforce against the Licensee, the rights of CKI hereunder if CKI fails to exercise such rights, and (b) to exercise, and enforce against the Licensee, the same rights as CKI hereunder in addition to (and not in lieu of) any rights CKI has hereunder. Nothing herein shall be deemed to give the Licensee any rights to make any claim against PVH, CKTT and/or Mr. Calvin Klein.

11.10    Entire Agreement; Amendment.     This Agreement, including the exhibits hereto, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and all prior agreements, contracts, promises, representations and statements between them, if any, whether written or

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oral, with respect thereto are merged into and superseded by this Agreement, except as specifically set forth herein. This Agreement may not be amended or modified, except in a writing signed by both parties hereto and exchanged between them.

11.11    Non-Waiver.     No waiver by either party of any breach hereof or default hereunder will constitute a continuing wavier of such provision or of any other provision of this Agreement. Acceptance of payment by CKI will not be deemed a waiver by CKI of any violation of or default under any of the provisions of this Agreement by the Licensee or an election of remedies as to which any and all rights (and all remedies) are expressly reserved and retained.

11.12    Severability.     In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provisions shall not be affected or impaired in any other jurisdiction, nor shall the remaining provisions contained herein in any way be affected or impaired thereby, unless CKI determines such provision was material, in which case CKI may terminate this Agreement.

11.13    Headings.     The headings of the Articles and sections of this Agreement are for convenience only and in no way limit, define or affect the terms or conditions of this Agreement.

11.14    Counterparts.     This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.15    Governing Law.     THIS AGREEMENT AND THE RIGHTS AND     OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW. (HOWEVER, DISPUTES REGARDING THE LICENSED MARK WILL BE RESOLVED IN ACCORDANCE WITH THE U.S. FEDERAL TRADEMARK LAWS AND RELATED LAWS, STATUES, RULES AND REGULATIONS OF THE UNITED STATES UNLESS THERE ARE NO U.S. FEDERAL LAWS, STATUTES, RULES OR REGULATIONS DISPOSITIVE OF SUCH DISPUTE, IN WHICH EVENT SUCH DISPUTES WILL BE RESOLVED IN ACCORDANCE WITH THE PREVIOUSLY DESCRIBED LAWS OF THE STATE OF NEW YORK.)

11.16    Jurisdiction.     Any legal action or proceeding with respect to this Agreement shall be brought in the federal or state courts seated in the County of New York, State of New York and, by execution and delivery of this Agreement, each party hereby accepts for itself and in respect to its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts. The Licensee hereby irrevocably and unconditionally waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing or maintaining of any such action or proceeding in such respective jurisdictions, and specifically acknowledges and agrees that any judicial opinion and/or decision rendered, judgement award in order issued by the courts of the State of New York and/or the federal courts located therein, will be enforceable in any jurisdiction. Any such opinion, decision, judgement and/or order may be deposited in the applicable jurisdictional venue and court in Italy or elsewhere in the Territory with full force and effect as if rendered within such venue and by such judicial authority with the same full force and effect. Each party irrevocably and unconditionally consents to the service of process of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the other party at its address for notices provided in § 11.3, such service to become effective 30 days after such mailing.

11.17    Non-Solicitation.    

(a)    The Licensee agrees that ***

(b)    CKI agrees that ***

11.18    Confidentiality.     Each of the parties hereto acknowledges that it may receive from the other (the "Disclosing Party"): (a) prints, designs, ideas, sketches, and other materials or information, including,

CONFIDENTIAL TREATMENT

without limitation; (b) financial or business information; (c) a formula, pattern, compilation, program, device, method, technique, or process; or (d) other information that in each case derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use which the Disclosing Party intends to use on or in connection with lines of merchandise other than the Licensed Products and which have not as yet found their way into the channels of distribution. The parties recognize that these materials are valuable property of the Disclosing Party. Each of the parties hereto acknowledges the need to preserve the confidentiality and secrecy of these materials and agrees to take all necessary steps to ensure that use by it, or by its contractors, will in all respects preserve such confidentiality and secrecy, while acknowledging that each of the parties works with others on product development and designs. None of the parties shall, at any time during the License Period or any time thereafter, disclose or use for any purpose, other than as contemplated by this Agreement, any confidential information and data relating to the business of the other, except as required or otherwise considered necessary in or to its business, but under its normal and customary confidentiality procedures applicable overall as to such use. Nothing herein shall be deemed to limit CKI's rights under §§ 6.8 and 6.12. The provisions of this § 11.18 shall not apply to information that (i) is now or hereafter becomes generally available to the public, other than as a result of a breach hereof, or (ii) is obtained from a third party that, to the knowledge of the party receiving the information, is not under any obligation to keep such information confidential. Notwithstanding anything in this § 11.18 to the contrary, if any party becomes legally compelled (including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the confidential information, such party shall provide the others with prompt written notice of such requirement so that the party whose information it is may seek a protective order or other appropriate remedy. If such protective order or other remedy is not obtained, the party under compulsion to disclose the information agrees to disclose only that portion of the confidential information, which it is advised by counsel, is legally required to be disclosed, and it agrees to take all reasonable steps to preserve the confidentiality of the confidential information (including by obtaining, at the cost of the owner of the information, an appropriate protective order or other reliable assurance that confidential treatment will be accorded the confidential information). In addition, the party under compulsion to disclose the information shall not oppose any effort (and shall, if and to the extent requested by the owner of the information, cooperate with, assist and join with the owner of the information, at the expense of the owner of the information) in any action by the owner of the information to obtain a protective order or other reliable assurance that confidential treatment will be accorded the confidential information.

11.19    Cross-Termination.     ***

11.20    Assignment Within Warnaco Family.     Following the closing of the Transaction, pursuant to which Warnaco will, in accordance with its terms, acquire the business of Licensee, this Agreement may be assigned within the Warnaco family of companies in accordance with the terms as agreed by CKI and set forth in writing simultaneously herewith.

CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

CALVIN KLEIN, INC.

				By: /s/ Tom Murry
				Name: Tom Murry
				Title: President and COO
				CK JEANSWEAR EUROPE, S.P.A.
				By: /s/ Lawrence R. Rutkowski
				Name: Lawrence R. Rutkowski
				Title: Vice President and Treasurer
				CK JEANSWEAR ASIA LIMITED
				By: /s/ Lawrence R. Rutkowski
				Name: Lawrence R. Rutkowski
				Title: Vice President and Treasurer
				WF OVERSEAS FASHION C.V.
				By: Warnaco U.S., Inc., its general partner
				By: /s/ Stanley P. Silverstein
				Name: Stanley P. Silverstein
				Title: President and Secretary

CONFIDENTIAL TREATMENT

SCHEDULE 6.13

APPROVED ACCOUNTS

CONFIDENTIAL TREATMENT

SCHEDULE 6.14

APPROVED SECONDS AND CLOSE-OUTS ACCOUNTS

CONFIDENTIAL TREATMENT

SCHEDULE S

SHAREHOLDERS

Name/Address/Position				#/% Shareholdings

CONFIDENTIAL TREATMENT

EXHIBIT T

TERRITORY

European Union at 1 May 2004, which included Austria, Belgium, Luxembourg, Netherlands, Denmark, Finland, France, Germany, Great Britain, Greece, Ireland, Italy, Portugal, Spain, Sweden, Estonia, Latvia, Lithuania, Czech Republic, Slovakia, Slovenia, Hungary, Poland, Malta, Cyprus.

Also Norway, Switzerland, Monte Carlo, Vatican City, Liechtenstein, Iceland and

Eastern Europe and Russia, consisting of: Croatia, Bosnia-Herzegovina, Serbia, Macedonia, Bulgaria, Romania, Moldavia, Ukraine, Byelorussia, ex-C.I.S. (Russia), Georgia, Armenia, Azerbaijan, Kazakhstan and Uzbekistan.

Middle East:

Lebanon, Israel, Palestine, Jordan, Iran, Saudi Arabia, Yemen, Qatar, Kuwait, Bahrain, Oman, UAE, Egypt and Turkey.*

Africa**:

South Africa, Tunisia, Algeria, Morocco, Ivory Coast, Senegal, Nigeria.

Asia:

Hong Kong, Republic of Korea, Republic of China (Taiwan), China (PRC), Indonesia, Philippines, Singapore, Malaysia, Thailand, New Guinea, Vietnam, Australia, New Zealand, Cambodia, Laos, Myanmar, Macau, the Federated State of Micronesia and Mariana Islands (but excluding U.S. Saipan) Japan (not India, Pakistan, other jurisdictions).

*	Not Syria, as regulations preclude protection of trademark, until registration of trademark may occur, as advised by CKI.

**	N.B. – for trademark, only OAPI application/registration.

CONFIDENTIAL TREATMENT

EXHIBIT P (page 1 of 2)

PRODUCTS

*** [approximately 2 pages redacted]

CONFIDENTIAL TREATMENT

EXHIBIT B

ROYALTY STATEMENT

FORM MUST BE SUBMITTED COMPLETED

CALVIN KLEIN, INC.

Page _____of______

Date _____________

NAME OF LICENSEE:

LICENSEE'S ADDRESS:

LICENSED PRODUCT:

205	For each month during the period of ___________to _______________(the "Period").

For the month of __________________.

Category Style No. Units Gross Sales Discounts Net Sales Percentage Fees

For the month of __________________.

Category Style No. Units Gross Sales Discounts Net Sales Percentage Fees

For the month of __________________.

Category Style No. Units Gross Sales Discounts Net Sales Percentage Fees

TOTAL

205        NET SALES BY ACCOUNT

205        INVENTORY AS OF THE END OF THE PERIOD:

Style NumberUnitsWholesale Price

CONFIDENTIAL TREATMENT

The undersigned, _______________the ______________ of the Licensee, does hereby certify that the foregoing information provided to CKI pursuant to the License Agreement is complete and accurate.

IN WITNESS WHEREOF, the undersigned has executed this Royalty Statement on this ____ day of ___________, ____.

LICENSEE :

By: ________________________________________
Name:

Title: Chief Financial Officer or other duly authorized executive officer as applicable

The completion of this statement does not limit the Licensee's right to receive credit for payments of Minimum Guaranteed Fees and Percentage Fees as set forth said License Agreement.

CONFIDENTIAL TREATMENT

EXHIBIT D

THIRD-PARTY
MANUFACTURING
AGREEMENT

AGREEMENT, dated _________ __, _________, by and between ____________________ (the "Licensee"), having an address at ___________________, and ________________(the "Manufacturer"), having an address at ____________________.

WITNESSETH:

WHEREAS, the Licensee pursuant to a License Agreement with CALVIN KLEIN, INC. ("CKI") has been granted a license ("License") to use the CALVIN KLEIN trademark (the "Licensed Mark") in connection with the distribution, sale and marketing of certain goods ("Licensed Products");

WHEREAS, CKI, a subsidiary of Phillips-Van Heusen Corporation ("PVH"), is the licensee and beneficial owner of the trademarks CALVIN KLEIN, CK and CK/CALVIN KLEIN for certain products, which are owned of record by the Calvin Klein Trademark Trust ("CKTT"), and PVH is the owner, licensee or sublicensee of the trademarks VAN HEUSEN, IZOD, IZOD CLUB, BASS, G.H. BASS, GEOFFREY BEENE, ARROW, KENNETH COLE NEW YORK, REACTION BY KENNETH COLE, BCBG MAX AZRIA and DKNY, and PVH's policy is not to place, and to cause its subsidiaries and their respective licensees and sublicensees not to place, orders with any manufacturer or subcontractor that breaches the provisions contained in this Agreement and similar provisions contained in other third-party manufacturing agreements of PVH or any of its affiliates, including, without limitation, CKI;

WHEREAS, the License entitles the Licensee to subcontract the manufacture and/or assembly of the Licensed Products to third parties, subject to certain express limitations and conditions; and

WHEREAS, the Licensee has selected the Manufacturer as a manufacturer to produce the Licensed Products for the Licensee subject and pursuant to the terms and conditions set forth below;

NOW, THEREFORE, the parties hereby agree as follows:

1.    The Manufacturer shall have no rights in or to the Licensed Mark or in any mark similar thereto by reason of its manufacture of the Licensed Products and shall only use the Licensed Mark in strict accordance with the Licensee's instructions.

2.    The Manufacturer recognizes the validity of the Licensed Mark and will take no action, either during the term of this Agreement or at any time thereafter, in derogation of CKI's and/or CKTT's entire right and interest in and to the Licensed Mark or any value thereof or prestige related thereto. The Manufacturer will not, either during the term of this Agreement or at any time thereafter, oppose, petition to cancel or otherwise interfere with any registration CKI or CKTT has now or may obtain in the future for the Licensed Mark.

3.    The Manufacturer will manufacture and sell the Licensed Products and/or assemble the Licensed Products and will deliver them only to the Licensee or to the Licensee's authorized representative or agents. Any and all Licensed Products produced by the Manufacturer which do not meet the Licensee's quality standards or result from overruns or cancellations of the Licensee's orders (collectively, "Rejected Products") will be strictly accounted for and physically maintained, at the Manufacturer's sole expense, in the Manufacturer's warehouse or such other place as may be under the Manufacturer's exclusive access and control. Rejected Products not bearing the Licensed Mark or any identifying logo may be sold to any third party; provided; however, that all labels, hang tags, and other identifying marks must be removed from such Rejected Products before sale to such a third party. Rejected Products bearing the Licensed Mark or any identifying logo may be sold to any third party; provided, however, that (A) such Rejected Products must be held for a minimum period of three months after the original ship date of the Licensee's

CONFIDENTIAL TREATMENT

purchase order, and (B) all labels must be cut and the Product clearly and significantly stamped "irregular" before sale to such a third party. ^**

4.    The Manufacturer will follow the specifications and standards from time to time stipulated by the Licensee and will permit the Licensee, CKI and PVH to inspect the manufacturing processes and provide samples of the Licensed Products in order for the Licensee, CKI or PVH, as the case may be, to satisfy itself that the specifications and standards are being met.

5.    The Manufacturer acknowledges that the Licensee may provide it with certain prints, designs, ideas, sketches and other materials or trade secrets which may or will be used in connection with the Licensed Products and/or lines of merchandise other than the Licensed Products which have not been announced to the public or entered the stream of commerce. The Manufacturer recognizes that such materials are exclusive and valuable property of CKI or PVH and acknowledges the need to preserve the confidentiality and secrecy of such materials. The Manufacturer agrees to take all reasonable precautions to protect the secrecy of the materials, samples and designs prior to their commercial distribution or the showing of samples of same for sale. The Manufacturer will also take all reasonable precautions to protect the secrecy of the original designs created either by CKI, PVH or the Licensee for Licensed Products prior to their advertisement, commercial distribution or the showing of samples for sale. During the term of this Agreement, the Manufacturer will not disclose or use for any purpose not contemplated by this Agreement any confidential information or data that is proprietary to CKI, PVH or the Licensee.

6.    The Manufacturer shall institute procedures to control the storage, requisition from storage and use all labels, packages and other materials bearing the Licensed Mark to safeguard against the escape or unauthorized use of the Licensed Mark or Licensed Products.

7.     The Manufacturer will adhere to the standards and guidelines set forth in PVH's publication "A Shared Commitment - Requirements for Suppliers, Contractors, Business Partners" and PVH's "Statement of Corporate Responsibility," copies of which the Manufacturer acknowledges it has received. The Manufacturer further acknowledges that it has read and understands such publications. The Manufacturer will communicate immediately to the Licensee any departure from such standards and guidelines. The Manufacturer acknowledges that compliance with such standards and guidelines is a prerequisite to a continuing relationship with the Licensee.

In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provisions shall not be affected or impaired in any other jurisdiction, nor shall the remaining provisions contained herein in any way be affected or impaired thereby.

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PRINCIPALS OF CONFLICTS OF LAW.

**	Bracketed language should be deleted where agreement is with subcontractor.

CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

				LICENSEE:
				By:
				Name:
				Title:
				MANUFACTURER:
				By:
				Name:
				Title:

CONFIDENTIAL TREATMENT

EXHIBIT E

PRODUCTION FACILITY EVALUATION FORM

FORM MUST BE SUBMITTED COMPLETED

CALVIN KLEIN, INC.

Page _____of______

Date _____________

NAME OF LICENSEE:

LICENSEE'S ADDRESS:

LICENSED PRODUCT:

PRODUCTION FACILITY:

Name: _________________________________________________________________________________

Name of President of Production Facility __________________________________________________

Address: _______________________________________________________________________________

_______________________________________________________________________________________

Product:________________________________________________________________________________

Date Factory Evaluation Completed:______________________________________________________

Signed:             ______________________________________

                (Note: Must be signed by an authorized officer of the division producing Licensed Products)

______________________________________

(Print Name)

Submit to the attention of:

CALVIN KLEIN, INC.
205 West 39^th Street
New York, NY 10018
Attention:
Deirdre Miles-Graeter

CONFIDENTIAL TREATMENT

4 October 2005

SCHEDULE OF CALVIN KLEIN TRADEMARKS CL. 18

COUNTRY				APPLICATION/ REG. DATE				APPLICATION(S.NO.)/ REGISTRATION NO.		CLASS
Afghanistan				4 Jun 96				Reg. No. 5269		3,9,14,18,25
Albania				2 Jul 97				Reg. No. 6555		3,18,24,25,42
Algeria				3 Feb 92				Reg. No. 62374		3,9,14,16,18,24,25,42
Andorra				13 Dec 96				Reg. No. 957		3,9,14,18,25
Angola				1 Apr 96				Reg. No. 004665		18
Armenia (4)				11 Jun 97				Reg. No. 1855		3,9,14,16,18,24,25,42
										(re-reg of USSR 85858)
Australia				28 Feb 97				Reg. No. 728,703		3,8,16,18,20,21,24,25,26,27,35,42
Austria				30 May 97				Reg. No. 95,305		16,18,35,42
Azerbaijan				3 Apr 98				Reg. No. 980,565		3,9,14,16,18,24,25,42
										(re-reg of USSR 85858)
Bahrain				29 Jun 89				Reg. No. 12657		18
Bangladesh				21 May 96				Ser. No. 46,969		18
Belorussian				4-Oct-93				Reg. No. 1259		3,9,14,16,18,24,25,42
										(re-reg of USSR 85858)
Benelux				12 May 97				Reg. No. 615,779		16,18,20,21,24,26,27,35,42
Bosnia-
Herzegovina				5 Apr 96				Reg. No. BAZ 96519		3,9,14,18,25
Brunei				20 Jun 98				Reg. No. 24,840		18
Bulgaria				21 Feb 96				Reg. No. 27674		3,18,24,25
Cambodia				4 Apr 96				Reg. No. 7089		18
China				21 Apr 93				Reg. No. 638,716		18
Croatia				8 Oct 97				Reg. No. Z- 960554		14,18

CONFIDENTIAL TREATMENT

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

CTM

1 Apr 96

Reg. No. 79707

3,4,8,9,14,16,18,20,21,

24,25,26,27,35,42

Cyprus

20 Sep 95

Reg. No. 43454

18

Czech Republic

20 Jan 91

Reg. No. 168,158

3,18,25

Denmark

30 Dec 77

Reg. No. 04451/1977

3,9,14,18,24,25

Egypt

23 Apr 97

Ser . No. 106565

18

Estonia

11 Aug 94

Reg. No. 12297

3,9,14,16,18,24,25,42 (re-reg of USSR)

Finland

5 May 83

Reg. No. 85327

3,14,16,18,24,25

France

31 May 77

Reg. No. 1,018,501

3,9,14,18,24,25

(St. Martin, St. Barthelomy, French Guiana & other French Antilles)

28 Apr 87

Reg. No. 1,405,842

3,9,14,18,24,25

Gaza Strip

(Palestine)

14 Feb 96

Reg. No. 3575

18

Georgia

27 Jan 97

Reg. No. 4411

3,9,14,16,18,24,25,42 (re-reg of USSR 85858)

Germany

9 Nov 90

Reg. No. 647386

3,9,14,16,18,24,25,42

11 Jul 78

Reg. No. 973637

3,9,14,18,24,25

Ghana

26 Apr 89

Reg. No. 24,235

18

Greece

17 Feb 98

Reg. No. 126,514

9,18

Guyana

19 Apr 96

Reg. No. 15,451A

18

19 Apr 17

Hong Kong

10 Jul 80

Reg. No. 1955/84 (S)

18

CONFIDENTIAL TREATMENT

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

Hungary (3)

24 May 89

Reg. No. 128,535

3,18,24,25

India

23 Jan 96

Reg. No. 566,078

18

23 Jan 06

Indonesia

20 Oct 97

Reg. No. 400,498

18

Iran

10 Jun 92

Reg. No. 69505

3,9,14,16,18,24,25,35

Ireland

1 Apr 97

Reg. No. 207,116

16,18

Israel

30 Aug 84

Reg. No. 50337

18

26 Jun 15

6 Sep 98

Reg. No. 113537

18 (ext. goods)

10 Jul 18

Italy

18 Mar 85

Reg. No. 346,124

9,14,18,24,25

Japan

23 Aug 77

Reg. No. 1,294,434

17(18,24,25)

25 Dec 85

Reg. No. 1,830,626

21(14,18,25) reclassified 8/05

25 Dec 85

Reg. No. 1,830,627

21(14,18,25)(Katakana) reclassified 8/05

30 Jun 81

Reg. No. 1,466,762

22(18,25)

30 Jun 81

Reg. No. 1,466,763

22(18,25)(Katakana)

Jordan

8 May 95

Reg. No. 37781 (r)

18 (CK/Calvin Klein)

Kazakhstan

23 Jun 95

Reg. No. 2037

3,9,14,16,18,24,25,42

(re-reg of USSR 85858)

Kenya

13 Mar 96

Reg. No. 44020

18

Kuwait

1 Aug 94

Reg. No. 26856

18

Kyrgyzstan

1 Nov 88

Reg. No. 182

3,9,14,16,18,24,25,42

(Re-reg of USSR No. 85858)

Laos

3 Sep 97

Reg. No. 5842

8,9,14,16,18,20,21,26,27,35,42

Latvia (3)

30 Jun 93

Reg. No. LV M19392

3,9,14,16,18,24,25,42

(re-reg of USSR)

Lesotho

20 Apr 98

Ser. No. LS/M/98/00149

3,18

Liberia

23 Mar 92

Reg. No. 24392/342

3,14,16,18,24,25,42

Libya

will come

3,14,18,24,25,35,42

CONFIDENTIAL TREATMENT

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

Liechtenstein

16 Aug 93

Reg. No. 8816

9,14,16,18,24,25,42

Lithuania

27 Sep 93

Reg. No. LT- 12685

3,9,14,16,18,24,25,42

Macau

6 Jan 93

Reg. No. 9378-M

18

Macedonia

17 May 02

Reg. No. 08165

18

Malawi

1 Apr 98

Reg. No. 109/98

18

Malaysia

12 Sep 95

Reg. No. 9546/95

18

Malta & Gozo

3 May 96

Ser. No. 25654

18

Mauritius

21 Apr 98

Reg. No. A/43No53

No Classes (3,9,16,18,23-26)

Moldavia

18 Feb 94

Reg. No. 352

3,9,14,16,18,24,25,42

(re-reg of USSR 85858)

Monaco

20 Mar 97

Reg. No. 97-18071

9,16,18,42

Mongolia

13 May 96

Reg. No. 1948

3,14,16,18,24,25

Montserrat

19 Apr 97

Reg. No. 1528

18,24,42 UK 2130032

Myanmar

(F/K/A Burma)

27 May 96

Reg. No. 4/2223/96

3,9,14,18,25,25(MU),25(WU)

Namibia

1 Mar 98

Reg. No. 98/0366

18

Nepal

18 Dec 96

Reg. No. 12184/053

18

Netherlands

Antilles

21 Feb 96

Reg. No. 00497

3,4,8,9,14,16,18,20,21,24,25,26,27

(Curacao, Bonaire

Saba, St.

St. Eustatius

Maarten)

New Zealand

9 May 80

Reg. No. B132527

18

Nigeria

20 May 98

Reg. No. 65075

18

Norway

11 May 94

Reg. No. 162,557

3,16,18,24,25

CONFIDENTIAL TREATMENT

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

OAPI

9 May 89

Reg. No. 28977

3,9,14,16,18,24,25

Oman

15 Feb 93

Reg. No. 8070

18

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

Pakistan

3 Aug 92

Ser. No. 116549

18

Philippines

1 Mar 01

Reg. No. 4-96-110658

18

Poland (3)

17 May 89

Reg. No. 67629

3,18,24,25

Portugal

18 Oct 93

Reg. No. 279,542

18

Qatar

18 Aug 97

Ser. No. 17367

18

Romania

25 May 89

Reg. No. 15922

3,18,24,25

Russian

1 Nov 88

Reg. No. 85858

3,9,14,16,18,24,25,42

Federation

(Re-reg of USSR)

(former USSR)

(Republic of)

Saudi Arabia

19 Apr 98

Reg. No. 433/5

18

Seychelles

20 Apr 98

Reg. No. 4665

18

Singapore

11 Sep 95

Reg. No. 8648/95

18

Slovak Republic

20 Jan 91

Reg. No. 168,158

3,18,25

Slovenia

2 Apr 98

Reg. No. 9870456

18

South Africa

(Covers Venda

Transkei &

26 Mar 80

Reg. No. 80/1805

18

Bophuthatswana)

South Korea

7 Feb 94

Reg. No. 284,636

K12(3,18,26)

27 Dec 94

Reg. No. 304,729

K27(18,25)

23 Feb 02

Reg. No. 250,928

K25(18)

CONFIDENTIAL TREATMENT

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

2 Mar 93

Reg. No. 258,991

K23(18)(24)

Spain

20 Nov 97

Reg. No. 2,091,389

18

Sri Lanka

13 Sep 95

Reg. No. 75694

18

Sudan

7 Dec 95

Reg. No. 24899

18

Suriname

4 Aug 95

Reg. No. 14,504

18

Swaziland

1 Apr 98

Reg. No. 156/98

3,18

Sweden

5 May 95

Reg. No. 301,064

3,9,16,18,24,25

Switzerland

11 Apr 95

Reg. No. 436,944

4,8,14,16,18,20,21,27,31,35,42

Tajikistan

12 Jul 94

Reg. No. TJ 300

3,9,14,16,18,24,25,42

(rereg USSR No.85858)

Taiwan

1 Jul 91

Reg. No. 527,398

43(18)

16 Jun 91

Reg. No. 526,301

64(18)

Tangier

19 Mar 96

Reg. No. 10958

3,9,14,18,25

Thailand

27 Aug 96

Reg. No. Kor64653

18

Tunisia

23 May 96

Reg. No. EE 96.0641

3,9,14,16,18,24,25,26,

Turkey

16 Feb 96

Reg. No. 167298

9,16,18,24,25

Turkmenistan

3 Sep 97

Reg. No. 1049

3,9,14,16,18,24,25,42

(re-reg of USSR 85858)

Uganda

6 May 98

Reg. No. 21558

18

Ukraine

1 Nov 88

Reg. No. 4610

3,9,14,16,18,24,25,42

(re-reg of USSR 85858)

United Arab

Emirates

24 Nov 97

Reg. No. 13005

18

United Kingdom

18 Apr 97

Reg. No. 2,130,032

18,24,42

16 Jul 08

CONFIDENTIAL TREATMENT

COUNTRY

APPLICATION/ REG. DATE

APPLICATION(S.NO.)/ REGISTRATION NO.

CLASS

Uzbekistan

13 Aug 93

Reg. No. 883

3,9,14,16,18,24,25,42

(re-reg of USSR 85858)

Vietnam

10 Dec 93

Reg. No. 9981

14,18

West Bank

(Palestine)

7 Mar 96

Reg. No. 4113

18

Yemen

(Republic of)

10 Jul 97

Reg. No. 7295

18

F.R. Yugoslavia

(Serbia/Montenegro)

16 Apr 96

Reg. No. 41470

9,18

Zaire

1 Jun 89

Reg. No. 1804/89

3,18,25

Zambia

31 Mar 98

Reg. No. 178/98

18

Zimbabwe

1 Apr 98

Reg. No. 442/98

18

EX-10.71

EXHIBIT 10.71

PORTIONS OF THIS EXHIBIT 10.71 MARKED BY AN *** HAVE BEEN OMITTED
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT

January 31, 2006

CK Jeanswear N.V.				CK Jeanswear Europe S.p.A.				WF Overseas Fashion C.V.
Olympic Palaza, 1st floor				Via Provinciale Lucchese, 181/11				Netherlands
Fred. Roeskestraat 123,				50019 Sesto Fiorentino
1076 EE Amsterdam				Italy

Re: "CK/Calvin Klein" Store License - Europe

Ladies and Gentlemen:

CK Jeanswear Europe S.p.A. ("CKJE") and Calvin Klein, Inc. ("CKI") are simultaneously entering into a store license relating to the form of the mark "CK/Calvin Klein" for use on full-price free-standing retail stores, for the sale therein of certain "CK/Calvin Klein" Women's and Men's Bridge Apparel, and certain "CK/Calvin Klein" Women's and Men's Bridge small leather goods (accessories) and handbags, pursuant to the Bridge Apparel License and the Bridge Accessories License. This confirms that CKJE, CK Jeanswear N.V. ("CKJNV") (hereinafter referred to as Operator, respectively) and CKI have agreed as follows:

1.     (a) CKI hereby grants to Operator a license to use the trademark "CK/Calvin Klein" ("Mark") on and in connection with the operation of free-standing retail shops ("Stores") (plus the outlet Stores permitted by Section 1(d)) located in the "Territory," as defined on the date hereof in the Bridge Apparel License; for the sole purpose of selling therein at retail to consumers only, the "Merchandise" (as herein defined). Operator will sell no products other than Merchandise in the Stores. All use by Operator of the Mark is subject to CKI's prior approval. Operator shall provide CKI annually, not later than 90 days prior to the end of each Annual Period, for CKI's reasonable prior approval, a schedule with existing Stores together with plans for the establishment of additional Stores in the Territory, on a jurisdiction-by-jurisdiction basis. Operator is required to open and maintain Stores within the Territory, and in certain designated key locations (cities and countries) therein, based on the Roll-Out Schedule attached hereto, as noted below.

Operator is required to open, maintain and continuously operate *** of the number of full-price retail stores indicated on the Roll-Out Schedules attached (rounded up to the next whole number, determined at the close of each Annual Period hereunder). If (a) the attached Roll-Out Schedules have not been met, or (b) if *** of the required number of Stores that have been opened have been shut or have discontinued operations (shut down for more than 30 business days) (hereinafter "shut"), as reviewed at the close of the Annual Period, compared to the prior Annual Period, and such "shut" Stores have not re-opened, relocated, or replacement full-price Stores opened within the same Annual Period, or the subsequent Annual Period (so that the "net" number of full-price Stores that have been "shut" is less than *** as reviewed at the close of the said subsequent Annual Period (or, the said "same" Annual Period, if applicable)¹, in case of either (a) or (b) above, CKI may terminate this Store License on 12 months prior written notice. However, CKI may permit Operator, and Operator will continue to comply with all of its obligations hereunder, to operate and maintain existing Stores, for up to two (2) years as permitted at that time by CKI in writing (but not longer than the then current term of any Store sublicense, as to any sublicensed Store), on a Store-by-Store basis.

(b) For purposes hereof, Merchandise shall consist of *** as respectively defined in the Bridge Apparel and Bridge Accessories License. Upon the prior written consent of CKI, as to the particular Licensed Products and styles thereof, on a non-exclusive season to season basis, ***

Notwithstanding anything otherwise contained herein, ***

(c) CKI reserves the right to ***

(d) Operator shall be permitted to open in the Territory, on a non-exclusive basis, up to ***, ***. Any and all such Stores shall be considered "Stores" for the purposes of this Agreement, and shall be

	1***

CONFIDENTIAL TREATMENT

subject to the prior approval of CKI as to the*** and shall be subject to all the terms of this Agreement including but not limited to ***. Operator shall not be permitted to sublicense the rights under this Section 1(d) to any unaffiliated third party, except on a single store by store basis or a country wide basis only, only as approved in advance by CKI².

2. (a) CKI shall have the right to approve the number and each specific location of each Store (prior to the execution of any lease or other commitment), and to approve the design, signage, layout, fixtures and decoration of each such Store and to designate the architect or Store planner utilized in connection with the build-out of each such Store (as set forth below), as well as all packaging, Store tags or labels, business materials (including business cards), advertising and promotional materials so as to ensure that the same are of the highest quality, and are consistent with the "Calvin Klein" image. Operator recognizes that CKI will grant such approvals as to location and number subject to and consistent with its other programs for related retail outlets, and only if such locations are reflected in the plan(s) approved pursuant to Section 1(a).

Operator recognizes that its public actions and statements can affect the image of CKI, the Mark, the Merchandise and other trademarks used by CKI and/or its licensees and other designees, CKI's other licensees and their respective products. Accordingly, (i) the use and release by Operator of any and all advertising, promotional or publicity material (including press releases and other public relations media events) and (ii) any other corporate release, data or information which Operator has reason to believe might become public and, if so, could affect such image, will be prepared or conducted in consultation with and subject to the prior approval of CKI's Public Relations Department. After any such approval, Operator will not modify such approved material or activities in any material respect, without CKI's prior approval. CKI shall have the right to inspect each Store to ensure compliance with this Agreement. Operator shall co-operate with CKI in any such inspection, shall promptly take steps to correct all deficiencies as noted by CKI during or following such inspection and will bear the expense of any follow up inspection.

(b) Operator will:

(i) bear all costs incurred in connection with *** referred to in Section 1 (d) above. On the Store by Store planning, the parties shall confer prior to incurring any such expenses and agree upon an estimated budget.

(ii) conduct and operate the Stores in accordance with all applicable health, safety, occupancy, tax and other governmental laws, rules and regulations;

(iii) maintain the Stores in a sanitary condition and in good repair at all times, and in accordance with the design, Store set-up (merchandising) and visual display specifications, standards and guidelines of CKI, as promulgated from time to time, and refurbish the Stores as may be reasonably necessary in order to keep the Stores in an up-to-date condition (every 5 years);

(iv) employ only competent, trained and exemplary personnel (and provide for dress codes and uniforms for the same) including a General Manager for all retail operations hereunder as well as Store managers, all subject to CKI's ongoing approval;

(v) retain public relations personnel or consultants to promote the Mark and the Stores under the supervision of and as approved by CKI and its public relations personnel;

(vi) purchase a supply of Merchandise for each seasonal collection for each Store which constitutes, in the reasonable opinion of CKI, a representative collection and which is intended to satisfy consumer demands;

(vii) prepare and deliver to CKI within ***

2 Currently there are Calvin Klein Collection Store licensees for Milan and Rome (covering Bologna, Verona and Florence) as to which CKI has agreed to use good faith efforts to provide such licensee rights of "first refusal" or "first offer" as applicable as to any "Store" in its "exclusive" area, which may become available under a multi-jurisdictional "CK/Calvin Klein" store license, and if Operator wishes to sublicense any such "exclusive area", agrees to so provide the same.

CONFIDENTIAL TREATMENT

(viii) keep confidential all material, data and proprietary information of CKI, which shall include but not be limited to the design and decor specifications and prototypes utilized in connection with the Stores; and

(ix) maintain adequate financing in order to open and maintain the Store and to purchase inventory as required hereunder and demonstrate the same as required by CKI during the term hereof; and

(x) timely remit all amounts payable hereunder (including by example to supplier licensees, vendors, etc.), including ***, or any portion thereof) on the balance of any unpaid overdue amounts not in dispute).

(c) Operator will expend (and/or require its Store sublicensees to respectively spend as to their respective Stores) such amounts for advertising and promotion and public relations events (which shall be subject to the approval of CKI, to be provided promptly and not unreasonably withheld) as are reasonable and appropriate in connection with Operator's exploitation of the license granted hereby, *** under the Bridge Apparel and Bridge Accessories Licenses, as well as any other licensees as to***, during each Annual Period.

(d) Upon reasonable prior written notice, CKI and its representatives may, no more than once each year unless good cause is shown, examine the books and records (and any and all underlying data) of Operator during the term of the Agreement, and for a period of three years following termination hereof. Such books, records and data will be maintained for at least three years following the year to which they relate.

3.     (a) Operator acknowledges that: (i) Calvin Klein Trademark Trust ("CKTT") CKTT is the owner, and CKI is a beneficial owner, of all right, title and interest in and to the Mark and the goodwill attached or will become attached thereto (including goodwill arising from advertising expenditures applicable to the grant hereunder ); (ii) all use thereof by Operator will inure to the benefit of CKTT; and (iii) CKTT and/or CKI retains all rights to use and to grant others the right to use the Mark except as specifically granted to Operator herein. Operator will not do or permit to be done anything which will detract from the value or reputation of the Mark and do all things which may reasonably be required by CKI in order to confirm CKI's beneficial ownership and CKTT's ownership of the Mark.

(b) In the event Operator learns of any infringement or imitation of the Mark or use by any person of a trademark confusingly similar to the Mark, it will immediately notify CKI. Operator will cooperate with CKI in any action taken by CKI to protect its rights and those of CKTT in and to the Mark. Operator will take no such action itself without prior written approval of CKI.

4.     Operator will indemnify and save CKTT, CKI and Calvin Klein harmless from any and all claims that may arise or be asserted against either of them from Operator's use of the Mark, Operator's sale of the Merchandise or Operator's establishment, ownership or operation of the Store, and all costs and expenses, including reasonable counsel fees, incurred in connection with defense of the same. Operator will procure and maintain insurance as reasonably required by CKI and available in the Territory in order to insure the property and contents of the Store, and its operations, and from liability claims as referred to herein.

5.     (a) The term of this Agreement shall commence as of 1 January 2006, and shall continue in effect throughout the full term of the Bridge Apparel License (i.e., up to and including 31 December 2046) unless sooner terminated in accordance herewith as to the "Territory" referred to in Section 1(a)(i).

Notwithstanding the foregoing, CKI may terminate this Agreement if ***

In the event of the termination or reversion of any jurisdiction or Region under the Bridge Apparel License, the same termination or reversion of such jurisdiction or Region shall occur automatically and simultaneously under this Store License, and shall immediately and automatically result in the termination of the applicable Stores, and Store sublicenses under § 1 (a) above.

(b) Except as set forth otherwise in this section, in the event of any breach or default by either party which continues uncured for a period of 30 days after written notice thereof from the

CONFIDENTIAL TREATMENT

non-defaulting party, the non-defaulting party may terminate this Agreement by written notice effective immediately. If Operator files a bankruptcy petition, is adjudicated a bankrupt or becomes involved in a bankruptcy or insolvency proceeding, this Agreement will terminate automatically and forthwith. If Operator opens or permits any sublicensee to open any Store in an unapproved location, or a Store in excess of the number of Stores approved by CKI, such failure shall be deemed a material breach under the terms of this Agreement, and CKI may immediately terminate this Agreement effective upon written notice to Operator. If Operator fails to pay or any sublicensee fails to pay any amount due CKI on the due date, interest shall accrue thereon at a rate equal to 3 percentage points over the prime rate charged by Chase from the due date until paid in full and (ii) if such default continues uncured for a period of 30 days following the due date, CKI may terminate this Agreement forthwith by written notice.

(c) Upon termination of this Agreement, Operator will immediately discontinue use of the Mark in connection with the Stores, will alter the interior and exterior of the Stores so as to distinguish them from their former appearance and will dispose of any inventory of Merchandise, on a non-exclusive basis, only in the ordinary course of business, or otherwise as specifically directed by CKI, for a period not to exceed 90 days following the date of such termination. No such disposal may occur unless Operator provides CKI with a detailed schedule of its inventory, certified by its chief financial officer in form and content satisfactory to CKI, within 30 days following termination of this Agreement. Notwithstanding the foregoing, CKI has the option, exercisable by written notice sent either prior to or not later than 30 days following the date of termination, to have any Store, and Operator's entire interest therein, assigned to it, (A) if such termination is due to breach by Operator at the lower of (i) the net depreciated cost to Operator and (ii) the then current market value of such Store, including the lease thereof and the improvements therein, or (B) if for other reasons (or upon expiration), at the then current market value of such Store, including the lease and the improvements therein.

6.     Each party to this Agreement is an independent contractor and nothing herein contained and no action arising from or relating to this Agreement shall be construed to constitute the parties as joint venturers or either as agent of the other.

7.     No waiver, express or implied, of any provision of this Agreement, or of any breach or default hereof, shall constitute a continuing waiver hereof except as expressly provided in a writing signed by the waiving party.

8.     (a) Neither this Agreement or any rights granted hereunder may be assigned or otherwise transferred by Operator, except as agreed to by CKI. Any sublicense agreement shall be in the form attached hereto or as approved by CKI with only such modifications as CKI may approve in advance; and the selection (identity) of any sublicensee shall also be subject to CKI's prior approval. Only single-Store (or country wide) sublicenses may be granted, unless otherwise approved in advance by CKI.

(b) Except as provided above, and specifically as provided under the CKI/CF Group Consent dated as of 29 September 2005, this Agreement shall inure to the benefit of and shall be binding upon the parties and their respective successors and assigns. In the event of any CKI-permitted change-of-control transfer from the then current shareholder(s) as required hereunder, the restrictions and provisions hereof shall apply to any successor-in-interest permitted transferee.

9.     This Agreement shall be considered as having been entered into in the State of New York and shall be construed and interpreted in accordance with the laws of that state applicable to agreements made and to be performed therein. However, disputes regarding the Mark shall be resolved in accordance with the Federal trademark laws and related laws, statutes, rules and regulations of the United States unless there are no Federal laws, statutes, rules or regulations dispositive of such a dispute, in which case such dispute shall be resolved in accordance with the laws of the State of New York. Operator represents and warrants that it is not entitled to immunity from judicial proceedings commenced in the State of New York, U.S.A. (whether relating to state laws or federal laws) and expressly agrees that, should any judicial proceedings be brought, it will not claim any immunity from such proceedings and that they shall be brought in New York, New York and shall be conducted in

CONFIDENTIAL TREATMENT

English. Operator irrevocably submits to the jurisdiction of the courts of the State of New York and/or the federal courts located therein and waives the right to contest such jurisdiction and to the laying of venue in such courts. Operator is completing forms relating to the appointment of the Corporation Services Company to act as its agent for service relating to any dispute or adjudication hereunder, simultaneously with the execution of this Agreement and will maintain such appointment throughout the term of this Agreement (including extensions, renewals and the non-exclusive inventory disposal period referred to herein).

10.     Following the closing of the transaction, pursuant to which Warnaco Inc. will, in accordance with its terms, acquire the business of the Operator, this Agreement may be assigned within the Warnaco family of companies in accordance with the terms as agreed by CKI and set forth in writing simultaneously herewith.

Warnaco U.S., Inc., a Delaware corporation, is the general partner of WF Overseas Fashion C.V., a limited partnership ("commanditaire vennootschap") organized and existing under the laws of the Netherlands, and solely in such capacity, is executing this Agreement on behalf and for the exclusive risk and benefit of WF Overseas Fashion C.V.

If the foregoing fully and accurately sets forth our understanding with regard to the subject matter hereof, please so signify by signing below where indicated.

	Very truly yours,
	Calvin Klein, Inc.
	By: /s/ Tom Murry
	Name:				Tom Murry
	Title:				President and COO

Agreed to:

CK JEANSWEAR N.V.

By:    /s/ Lawrence R. Rutkowski
Name:				Lawrence R. Rutkowski
Title:				Vice President and Treasurer
CK JEANSWEAR EUROPE S.P.A.
By:    /s/ Lawrence R. Rutkowski
Name:				Lawrence R. Rutkowski
Title:				Vice President and Treasurer
CK JEANSWEAR ASIA LIMITED
By:    /s/ Lawrence R. Rutkowski
Name:				Lawrence R. Rutkowski
Title:				Vice President and Treasurer
WF OVERSEAS FASHION C.V.
By: Warnaco U.S., Inc., its general partner
By:    /s/ Stanley P. Silverstein
Name:				Stanley P. Silverstein
Title:				President and Secretary

CONFIDENTIAL TREATMENT

SCHEDULE 1(d)

OUTLET

***

CONFIDENTIAL TREATMENT

EXHIBIT RO

***

EX-12.1

Exhibit 12.1

THE WARNACO GROUP, INC.
RATIO OF EARNINGS TO FIXED CHARGES

				2005				2004
				(Dollars in millions)
Interest expense				$	18.1			$	19.8
Capitalized interest					1.1				—
Interest on operating leases					17.7				15.0
Total fixed charges					36.9				34.8
Pre-tax income (loss) from continuing operations					82.8				78.5
Fixed charges					36.9				34.8
Less: Capitalized interest					(1.1	)			—
Total adjusted earnings				$	118.6			$	113.3
Fixed charge coverage					3.21				3.26
Deficit of earnings to fixed charges					n/a				n/a

EX-21.1

EXHIBIT 21.1

THE WARNACO GROUP, INC.
SUBSIDIARIES OF THE WARNACO GROUP, INC.

The following is a list of subsidiaries of The Warnaco Group, Inc. (‘‘Warnaco’’). Subsidiaries of Warnaco, to the extent not listed below, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.

Company				Country or State of Incorporation
184 Benton Street Inc.				Delaware
4278941 Canada Inc.				Canada
A.B.S. Clothing Collection, Inc.				California
A.E.S. Advanced Euro Service S.r.l.				Italy
Authentic Fitness de Mexico, S.A. de C.V.				Mexico
Authentic Fitness On-line Inc.				Nevada
C.F. Hathaway Company				Delaware
C.K. Jeanswear Europe S.p.A.				Italy
Calvin Klein France SnC				France
Calvin Klein Jeanswear Company				Delaware
Calvin Klein Jeanswear Korea Limited				Korea
CCC Acquisition Corp.				Delaware
Centro de Corte de Tetla S.A. de C.V.				Mexico
CK Jeanswear Asia Limited				Hong Kong
CK Jeanswear Australia Pty Ltd.				Australia
CK Jeanswear N.V.				Netherlands
CK Jeanswear NZ Limited				New Zealand
CKJ Fashion (Shanghai) Ltd.				People's Republic of China
CKJ Holdings, Inc.				Delaware
CKU.com Inc.				Delaware
Designer Holdings Ltd.				Delaware
Designer Holdings Overseas Limited				Hong Kong
Distribution D GmbH				Germany
Donatex-Warnaco S.A.				Belgium
Eratex GmbH				Germany
Euralis S.A.S.				France
Euro Retail S.r.l.				Italy
F.A. France SARL.				France
Fingen Apparel U.K. Limited				United Kingdom
Gold Lightening Limited				Hong Kong
Gregory Street, Inc.				Delaware
Hamlet Shirt Company Ltd.				United Kingdom
Indigo Blue S.A.				Switzerland
Jeanswear Holdings, Inc.				Delaware
Jeanswear Services Ltd.				United Kingdom
Juarmex S.A. de C.V.				Mexico

THE WARNACO GROUP, INC.
SUBSIDIARIES OF THE WARNACO GROUP, INC.

Company				Country or State of Incorporation
Kai Jay Manufacturing Company				Delaware
Lejaby S.A.S.				France
Lejaby Taiwan Co., Ltd.				Taiwan
Lenitex-Warnaco GesmbH				Austria
Leratex-Warnaco Ltd.				United Kingdom
Linda Vista de Tlaxcala S.A. de C.V.				Mexico
Linda Vista de Veracruz S.A. de C.V.				Mexico
Lintex-Warnaco S.A.				Switzerland
Mullion International Ltd.				British Virgin Islands
Myrtle Avenue, Inc.				Delaware
Ocean Pacific Apparel Corp.				Delaware
OP Europe SARL				France
Outlet Stores, Inc.				Delaware
PMJ S.A.				France
Ubertech Products, Inc.				Delaware
Vista de Huamantla S.A. de C.V.				Mexico
Vista de Puebla S.A. de C.V.				Mexico
Vista de Yucatan, S.A. de C.V.				Mexico
WAC Internacional Distribucion de Puebla S.A. de C.V.				Mexico
Warnaco (H.K.) Ltd.				Barbados
Warnaco (Macao) Company Limited				Macao
Warnaco B.V.				Netherlands
Warnaco Denmark A/S				Denmark
Warnaco France SARL				France
Warnaco Germany GmbH				Germany
Warnaco Holland B.V.				Netherlands
Warnaco Inc.				Delaware
Warnaco International Trading (Shanghai) Co. Ltd.				Peoples Republic of China
Warnaco Intimo S.A.				Spain
Warnaco Limited				United Kingdom
Warnaco Men's Sportswear Inc.				Delaware
Warnaco Netherlands B.V.				Netherlands
Warnaco of Canada Company				Canada
Warnaco Portugal-Vestuario e Acessorios, Sociedade Unipessoal, Lda.				Portugal
Warnaco Puerto Rico, Inc.				Delaware

THE WARNACO GROUP, INC.
SUBSIDIARIES OF THE WARNACO GROUP, INC.

Company				Country or State of Incorporation
Warnaco Retail Inc.				Delaware
Warnaco Shanghai Co. Ltd.				People's Republic of China
Warnaco Singapore Private Ltd.				Singapore
Warnaco Sourcing Inc.				Delaware
Warnaco SrL				Italy
Warnaco Swimwear Inc.				Delaware
Warnaco Swimwear Products Inc.				Delaware
Warnaco U.S. Inc.				Delaware
Warner's (EIRE) Teoranta				Ireland
Warner's (United Kingdom) Limited				Northern Ireland
Warner's Aiglon S.A.				France
Warner's Company (Belgium) S.A.				Belgium
Warner's de Mexico S.A. de C.V.				Mexico
WAS Logistics B.V.				Netherlands
WBR Industria e Comercio Vestuario S.A.				Brazilian Joint Venture
WF Overseas Fashion C.V.				Netherlands

EX-23.1

EXHIBIT 23.1

THE WARNACO GROUP, INC.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-108744, 333-121771 and 333-125159 on Form S-8 of our reports dated March 2, 2006, relating to the consolidated financial statements and financial statement schedule of The Warnaco Group, Inc. and Subsidiaries (the ‘‘Company’’) and management's report of the effectiveness of internal control over financial reporting, (which report on the consolidated financial statements and financial statement schedule expresses an unqualified opinion and includes explanatory paragraphs relating to 1) the Company's plan of reorganization and emergence from bankruptcy as a new entity on February 4, 2003 and 2) a change in method of accounting for defined benefit pension plans), appearing in this Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2005.

/s/ DELOITTE & TOUCHE LLP

New York, New York
March 2, 2006

EX-31.1

EXHIBIT 31.1

THE WARNACO GROUP, INC.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Joseph R. Gromek, certify that:

1. I have reviewed this Annual Report on Form 10-K of The Warnaco Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 2, 2006				By:				/s/ Joseph R. Gromek                                 JOSEPH R. GROMEK CHIEF EXECUTIVE OFFICER

EX-31.2

EXHIBIT 31.2

THE WARNACO GROUP, INC.
CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Lawrence R. Rutkowski, certify that:

1. I have reviewed this Annual Report on Form 10-K of The Warnaco Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 2, 2006				By:				/s/ Lawrence R. Rutkowski                     LAWRENCE R. RUTKOWSKI     CHIEF FINANCIAL OFFICER

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
OF THE WARNACO GROUP, INC.
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of The Warnaco Group, Inc. (the "Company") for the fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Joseph R. Gromek, as Chief Executive Officer of the Company, and Lawrence R. Rutkowski, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge, based upon a review of the Report, subject to the qualifications noted below:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In rendering this certification, we note the following qualifications:

(1)	Certain information in the Report relates to periods prior to Joseph R. Gromek's affiliation with the Company. Mr. Gromek was elected President and Chief Executive Officer of the Company on April 15, 2003; and

(2)	Certain information in the Report relates to periods prior to Lawrence R. Rutkowski's affiliation with the Company. Mr. Rutkowski was elected Senior Vice President—Finance and Chief Financial Officer of the Company on September 15, 2003.

/s/ Joseph R. Gromek           
Name: Joseph R. Gromek
Title: Chief Executive Officer
Date: March 2, 2006

/s/ Lawrence R. Rutkowski           
Name: Lawrence R. Rutkowski
Title: Chief Financial Officer
Date: March 2, 2006