The former CEO of bankrupt apparel manufacturer Warnaco Group Inc, Linda Wachner, has agreed to substantially reduce her severance demands from an original $25.1 million, it emerged on Monday.

According to a filing with the SEC, Ms Wacher will receive a $3.5m unsecured claim for shares of a reorganised Warnaco as well as $200,000 in cash. Reports say she will donate all of the cash to cancer research.

The New York-based clothing giant had its reorganisation plan approved last week and expects to emerge from bankruptcy early next year. The settlement over Wachner's severance is subject to court approval.

Warnaco sacked Wachner in November 2001 - five months after it filed for Chapter 11 bankruptcy protection - but it failed to pay her severance as shareholders said its downfall was partly due to her management decisions.

She later claimed she helped engineer Warnaco's turnaround before her departure and was therefore entitled to severance.