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EXHIBIT 99
PROXY STATEMENT FOR APRIL 25, 2001
ANNUAL SHAREHOLDERS' MEETING
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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
RUSSELL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[RUSSELL LOGO}
RUSSELL
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
RUSSELL CORPORATION
To the Shareholders of Russell Corporation:
Notice is hereby given that the Annual Meeting of the Shareholders of
Russell Corporation will be held on Wednesday, April 25, 2001, at 11:00 a.m.,
Central Daylight Time, at the general offices of the Company in Alexander City,
Alabama, for the following purposes:
(1) To elect four (4) directors to the Board of Directors for
three-year terms ending in 2004, and one (1) director to the
Board of Directors for a one-year term ending in 2002;
(2) To vote on the Russell Corporation 2000 Non-Employee
Directors' Compensation Plan; and
(3) To transact such other business as may properly come before
the meeting.
Holders of the Common Stock of the Company at the close of business on
March 7, 2001, are entitled to notice of and to vote upon all matters at the
Annual Meeting.
You are cordially invited to attend the Annual Meeting so that we may
have the opportunity to meet with you and discuss the affairs of the Company.
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY SO THAT THE COMPANY MAY BE ASSURED OF THE PRESENCE OF A QUORUM AT
THE ANNUAL MEETING. A stamped, addressed envelope is enclosed for your
convenience in returning your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
FLOYD G. HOFFMAN
Senior Vice President, Corporate Development,
General Counsel and Secretary
Alexander City, Alabama
March 23, 2001
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RUSSELL CORPORATION
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PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 25, 2001
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This Proxy Statement is furnished by and the accompanying proxy is
solicited on behalf of the Board of Directors of Russell Corporation, an Alabama
corporation (the "Company"), for use at its Annual Meeting of Shareholders to be
held at the general offices of the Company at 755 Lee Street, Alexander City,
Alabama 35011, on Wednesday, April 25, 2001, at 11:00 a.m., Central Daylight
Time, and at any adjournment thereof (the "Annual Meeting"). The Proxy Statement
and accompanying proxy will initially be mailed to shareholders on or about
March 22, 2001.
Shares represented by a properly executed proxy on the accompanying
form will be voted at the Annual Meeting and, when instructions have been given
by the shareholder, will be voted in accordance with those instructions. In the
absence of contrary instructions, the proxies received by the Board of Directors
will be voted FOR the election of all nominees for director of the Company
listed below and FOR the adoption of the Russell Corporation 2000 Non-Employee
Directors' Compensation Plan. A shareholder who has given a proxy may revoke it
at any time prior to its exercise by giving written notice of such revocation to
the Secretary of the Company, by executing and delivering to the Company a later
dated proxy reflecting contrary instructions or by appearing at the Annual
Meeting and taking appropriate steps to vote in person.
ELECTION OF DIRECTORS
Directors of the Company are divided into three classes, with
approximately one-third of the directors being elected at each annual meeting
for three-year terms. The terms of Tim Lewis, C.V. Nalley III, John R. Thomas
and John A. White will expire at the Annual Meeting, and each has been nominated
for reelection at the Annual Meeting to serve until the Annual Meeting of
Shareholders in 2004, and until their successors have been duly elected and
qualified. Mary Jane Robertson was appointed to serve on the Board of Directors
in a newly created directorship whose initial term expires at the Annual Meeting
of Shareholders in 2002, and has been nominated for election at the Annual
Meeting to serve for the remainder of such initial term which expires at the
Annual Meeting of Shareholders in 2002, and until her successor has been duly
elected and qualified. Proxies cannot be voted for more than five persons, and
in the absence of contrary instructions, shares represented by the Board of
Directors' proxies will be voted for the election of these nominees. Should any
nominee be unable or unwilling to accept election, it is expected that the
proxies will vote for the election of such other person for director as the
Board of Directors then recommends. The Board of Directors has no reason to
believe that any of the nominees will be unable to serve or will decline to
serve if elected.
NOMINEES FOR TERMS EXPIRING IN 2004:
[PHOTO] TIM LEWIS Director since 1995
Birmingham, Alabama Age 45
Mr. Lewis is President of T.A. Lewis & Associates, Inc., a
telecommunications consulting firm, and has held this position for more
than five years.
Mr. Lewis is a member of the Corporate Responsibility Committee of the
Board of Directors.
[PHOTO] C.V. NALLEY III Director since 1989
Atlanta, Georgia Age 58
Mr. Nalley is Chief Executive Officer, Nalley Automotive Group, which
consists of automobile and truck sales and leasing companies, and has
held this position for more than five years.
Mr. Nalley is Chairman of the Nominating Committee and a member of the
Management Development and Compensation Committee of the Board of
Directors.
[PHOTO] JOHN R. THOMAS Director since 1966
Alexander City, Alabama Age 64
Mr. Thomas is Chairman, President and Chief Executive Officer of Aliant
Financial Corporation, a bank holding company, and has held these
positions for more than five years. He is a director of Alfa
Corporation, a financial services holding company.
Mr. Thomas is a member of the Audit Committee of the Board of
Directors.
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[PHOTO] JOHN A. WHITE Director since 1992
Fayetteville, Arkansas Age 61
Dr. White has been Chancellor of the University of Arkansas since July
1997. He served as Dean of Engineering of the Georgia Institute of
Technology from 1991 to June 1997. He is a director of Motorola, Inc.,
an electronics and communications technology company; Logility, Inc.,
an internet business-to-business service provider; Eastman Chemical
Company, a chemical and plastics manufacturing company; and J.B. Hunt
Transport Services, Inc., a transportation and shipping company.
Dr. White is Chairman of the Audit Committee and a member of the
Nominating Committee of the Board of Directors.
NOMINEE TO COMPLETE THE TERM EXPIRING IN 2002:
[PHOTO] MARY JANE ROBERTSON Director since 2000
Atlanta, Georgia Age 47
Ms. Robertson has been Executive Vice President and Chief Financial
Officer for Crum&Forster, a property and casualty insurance company,
since 1999. She was previously Senior Vice President and Chief
Financial Officer of Capsure Holdings Corp., an insurance products
company.
Ms. Robertson is a member of the Audit Committee of the Board of
Directors.
DIRECTORS WHOSE TERMS EXPIRE IN 2002:
[PHOTO] HERSCHEL M. BLOOM Director since 1986
Atlanta, Georgia Age 57
Mr. Bloom has been a partner in the law firm of King & Spalding for
more than five years. He is a director of Post Properties, Inc., an
upscale apartment developer.
Mr. Bloom is Chairman of the Management Development and Compensation
Committee and a member of the Executive Committee of the Board of
Directors.
[PHOTO] RONALD G. BRUNO Director since 1992
Birmingham, Alabama Age 49
Mr. Bruno has been President of Bruno Capital Management Corporation,
an investment company for more than five years. He is a director of
Bruno's Supermarkets, Inc., a supermarket chain, SouthTrust Bank and
Books-a-Million, Inc., a retail book sales company.
Mr. Bruno is a member of the Management Development and Compensation
Committee of the Board of Directors.
DIRECTORS WHOSE TERMS EXPIRE IN 2003:
[PHOTO] JOHN F. WARD Director since 1998
Atlanta, Georgia Age 57
Mr. Ward was elected President and Chief Executive Officer of the
Company effective March 31, 1998, and Chairman of the Board effective
April 22, 1998. Prior to his elections to such positions, Mr. Ward was
President of J. F. Ward Group, Inc., a consulting firm specializing in
domestic and international apparel and textile industries from 1996 to
1998. Prior to that time, Mr. Ward was Chief Executive Officer of the
Hanes Group and Senior Vice President of Sara Lee Corporation. Mr. Ward
is a director of the Metro Atlanta Chamber of Commerce and the State of
Georgia Chamber of Commerce. He is a member of the advisory boards of
the Robert C. Goizueta Business School at Emory University and
Kenan-Flager Business School at the University of North Carolina-Chapel
Hill.
Mr. Ward is Chairman of the Executive Committee and a member of the
Corporate Responsibility and Nominating Committees of the Board of
Directors.
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[PHOTO] MARGARET M. PORTER Director since 1997
Birmingham, Alabama Age 50
Ms. Porter presently serves on the boards of the University of Alabama
Health Services Foundation, Eyesight Foundation of Alabama, Inc., The
Children's Health System of Alabama and The National Association of
Children's Hospitals and Related Institutions (NACHRI). Ms. Porter
formerly served as Mayor of Mountain Brook, Alabama, and from 1992 to
1997, as founding Chairman of McWane Center in Birmingham, Alabama.
McWane Center is a non-profit organization which promotes public
understanding of science, technology and the environment and serves as
a statewide resource for Alabama schools.
Ms. Porter is Chairman of the Corporate Responsibility Committee of the
Board of Directors.
[PHOTO] BENJAMIN RUSSELL Director since 1963
Alexander City, Alabama Age 63
Mr. Russell is Chairman and Chief Executive Officer of Russell Lands,
Incorporated, a land and timber company, and has held these positions
for more than the past five years.
Mr. Russell is a member of the Corporate Responsibility Committee of
the Board of Directors.
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information regarding beneficial
ownership of the Company's Common Stock by each director, the Company's five
most highly compensated executive officers and the directors and executive
officers of the Company as a group, all as of March 1, 2001:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
----------------------------------------------------
SOLE VOTING OPTIONS
AND EXERCISABLE OTHER TOTAL PERCENT
INVESTMENT WITHIN BENEFICIAL BENEFICIAL OF
INDIVIDUAL OR GROUP POWER 60 DAYS OWNERSHIP OWNERSHIP CLASS
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John F. Ward 66,662 1,157,066 615,960(1)(2) 1,839,688 5.57%
Herschel M. Bloom 8,396 713 0 9,109 *
Ronald G. Bruno 14,449 713 0 15,162 *
Tim Lewis 1,084 713 0 1,797 *
C.V. Nalley III 12,185 713 0 12,898 *
Margaret M. Porter 3,503 713 0 4,216 *
Mary Jane Robertson 0 0 0 0 *
Benjamin Russell 774,781 713 4,825,720(3) 5,601,214 17.56%
John R. Thomas 109,657 713 490,121(4) 600,491 1.88%
John A. White 3,604 713 0 4,317 *
Jonathan R. Letzler 39,092 100,000 0 139,092 *
JT Taunton, Jr 15,270 52,200 0 67,470 *
Eric N. Hoyle 14,265 57,500 600,960(2) 672,725 2.11%
Carol M. Mabe 5,978 19,142 0 25,120 *
All Executive Officers and
Directors as a group (26 persons) 1,573,451 1,642,595 5,931,801 9,147,847 27.28%
(*) Represents less than one percent (1%).
(1) Includes 15,000 shares owned by Mr. Ward's spouse.
(2) Includes 600,960 shares held by the Company's pension plan, of which
Messrs. Ward and Hoyle are the trustees and with respect to which they
share voting rights. Messrs. Ward and Hoyle disclaim beneficial
ownership with respect to such shares.
(3) Includes (i) 731,296 shares held by the Benjamin and Roberta Russell
Foundation, Incorporated, a charitable corporation of which Mr. Russell
is one of nine directors, (ii) 3,945,024 shares held by a trust created
under the will of Benjamin C. Russell, of which Mrs. Russell is one of
four trustees, (iii) 145,400 shares held by the Adelia Russell
Charitable Foundation, of which Mr. Russell is one of three trustees,
and (iv) 4,000 shares held by a profit sharing plan of which Mr.
Russell is one of two trustees.
(4) Includes (i) 32,372 shares held by a trust of which Mr. Thomas is one
of three trustees, (ii) 454,249 shares owned indirectly by Mr. Thomas
as a general and limited partner in two limited partnerships and (iii)
3,500 shares owned by Mr. Thomas' spouse.
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PRINCIPAL SHAREHOLDERS
The following table sets forth each person who, to the Company's
knowledge, had sole or shared voting or investment power over more than five
percent of the outstanding shares of Common Stock of the Company as of March 1,
2001:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
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Roberta A. Baumgardner 5,868,774 shares (1) 18.40%
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
Benjamin Russell 5,601,214 shares (2) 17.56%
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
Edith L. Russell 4,686,320 shares (3) 14.69%
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
Nancy R. Gwaltney 4,677,642 shares (4) 14.67%
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
AXA 2,165,825 shares (5) 6.79%
25 Avenue Matignon
75008 Paris, France
Helen Alison 1,827,572 shares (6) 5.73%
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
John F. Ward 1,839,688 shares (7) 5.57% (8)
3330 Cumberland Blvd.
Suite 800
Atlanta, Georgia 30339
(1) Includes 1,192,454 shares as to which Mrs. Baumgardner has sole voting
and investment power and 4,676,320 shares as to which she has shared
voting and investment power, consisting of 731,296 shares held by the
Benjamin and Roberta Russell Foundation, Incorporated, a charitable
corporation of which Mrs. Baumgardner is one of nine directors; and
3,945,024 shares held by a trust created under the will of Benjamin C.
Russell of which Mrs. Baumgardner is one of four trustees.
(2) Includes 774,781 shares as to which Mr. Russell has sole voting and
investment power, presently exercisable options to acquire 713 shares
and 4,825,720 shares as to which he has shared voting and investment
power. See Note (3) on page 3.
(3) Includes 10,000 shares as to which Mrs. Russell has sole voting and
investment power, and 4,676,320 shares as to which she has shared
voting and investment power, consisting of 731,296 shares held by the
Benjamin and Roberta Russell Foundation, Incorporated, a charitable
corporation of which Mrs. Russell is one of nine directors, and
3,945,024 shares held by a trust created under the will of Benjamin C.
Russell of which Mrs. Russell is one of four trustees.
(4) Includes 731,296 shares held by the Benjamin and Roberta Russell
Foundation, Incorporated, a charitable corporation of which Mrs.
Gwaltney is one of nine directors; 3,945,024 shares held by a trust
created under the will of Benjamin C. Russell of which Mrs. Gwaltney is
one of four trustees; and 1,322 shares as to which Mrs. Gwaltney has
sole voting and investment power.
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(5) From Schedule 13G filed with the Company on February 12, 2001, which
states that AXA, along with its affiliates, controls an aggregate of
2,165,825 shares. AXA and its affiliates have sole voting power with
respect to 1,469,303 shares, sole dispositive power with respect to
1,283,225 shares, shared voting power with respect to 7,405 shares and
shared dispositive power with respect to 882,600 shares. The names and
addresses of AXA's affiliated companies may be found in the Schedule
13G filed with the Securities and Exchange Commission on February 12,
2001.
(6) From Schedule 13G filed with the Company on February 14, 2001, on
behalf of Helen Alison and National Bank of Commerce in Birmingham,
Alabama. Includes 1,827,572 shares held by trusts created under the
will of J. C. Alison, of which Mrs. Alison is one of two co-trustees
and with respect to which Mrs. Alison has shared voting and investment
power.
(7) Includes 15,000 shares owned by Mr. Ward's spouse, options which are
exercisable within 60 days to acquire 1,157,066 shares and 600,960
shares held by the Company's pension plan, of which Mr. Ward is a
trustee and with respect to which he shares voting rights. Mr. Ward
disclaims beneficial ownership with respect to the shares held by the
Company's pension plan. See notes (1) and (2) on page 3.
(8) For purposes of determining Percent of Class, options exercisable
within sixty days are added to total shares outstanding.
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
The Board of Directors has standing executive, management development
and compensation, audit, nominating and corporate responsibility committees. The
members of each committee are indicated on pages 1 through 3 of this Proxy
Statement.
The Executive Committee is authorized to act in place of the Board of
Directors between meetings of the Board. The Executive Committee held two
meetings during 2000.
The Management Development and Compensation Committee supervises the
Company's general compensation strategies, including incentive compensation,
stock options and benefit programs. The Management Development and Compensation
Committee held five meetings during 2000.
The Audit Committee recommends to the Board of Directors the
appointment of the Company's independent accountants and reviews the audit plan,
financial statements and audit results. The Audit Committee also reviews the
Company's capital structure and financing activities, functions previously
performed by the Finance Committee. The Audit Committee is currently comprised
of three directors who are not officers of the Company and are independent as
defined by the listing standards of the New York Stock Exchange. The Audit
Committee operates under a written charter adopted by the Company's Board of
Directors, a copy of which is attached as Appendix A to this Proxy Statement.
The Audit Committee held two meetings during 2000.
The Nominating Committee recommends candidates for election to the
Company's Board of Directors. The Nominating Committee held one meeting during
2000. Candidates for the Board of Directors submitted by shareholders will be
considered by the Nominating Committee. The names of such candidates, along with
biographical information, should be submitted to the Secretary, Floyd G.
Hoffman, Russell Corporation, 3330 Cumberland Blvd., Suite 800, Atlanta, Georgia
30339.
The Corporate Responsibility Committee provides oversight and guidance
concerning the Company's obligations to its employees and the communities in
which it operates. The Corporate Responsibility Committee held one meeting in
2000.
During the year ended December 30, 2000, the Board of Directors held
seven regular meetings. Each member of the Board attended at least 75% of the
meetings of the Board and the committees of which they are members.
AUDIT COMMITTEE REPORT
In compliance with the requirements of the New York Stock Exchange
(NYSE), the Audit Committee of Russell Corporation adopted a formal written
charter approved by the Board of Directors on June 7, 2000, a copy of which is
attached to this Proxy Statement as Appendix A, which outlines the Audit
Committee's responsibilities and how it carries out those responsibilities. In
connection with the performance of its responsibilities under its charter, the
Audit Committee has:
- Reviewed and discussed the audited financial statements of the
Company with management;
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- Discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61
(required communication by external auditors with audit
committees);
- Received from the independent auditors disclosures regarding
the auditors' independence required by Independence Standards
Board Standard No. 1 and discussed with the auditors the
auditors' independence; and
- Recommended, based upon the review and discussion noted above,
to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form
10-K for the year ended December 30, 2000, for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
JOHN A. WHITE, CHAIRMAN
MARY JANE ROBERTSON
JOHN R. THOMAS
COMPENSATION OF DIRECTORS
Under the Russell Corporation 2000 Non-Employee Directors' Compensation
Plan (the "2000 Directors' Plan"), each non-employee director receives a
quarterly retainer of $8,750 and an annual option to purchase shares of Common
Stock with a value equivalent to $25,000, exercisable for ten years at a price
equal to the market value of the Common Stock on the date of the annual meeting.
In addition, the 2000 Directors' Plan allows a non-employee director to elect to
receive the quarterly retainer fee payable to such director in (i) shares of
Common Stock; (ii) options to purchase shares of Common Stock; or (iii) shares
of Common Stock deposited to a deferral account. Three hundred thousand
(300,000) shares of Common Stock are presently authorized to be issued under the
2000 Directors' Plan, plus those shares of Common Stock remaining under the
Russell Corporation 1997 Non-Employee Directors' Stock Grant, Stock Option and
Deferred Compensation Plan, and 445,411 shares remain available for future
grants.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon review of Forms 3, 4 and 5 and amendments thereto
related to the Company's most recent fiscal year, and written representations
from certain reporting persons that no Form 5 was required, the Company believes
that all Forms 3, 4 and 5 were timely filed during fiscal year 2000, with the
exception of one late-filed Form 4 by Margaret M. Porter.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company entered into a fuel supply contract with Russell Lands,
Incorporated ("Lands") on May 21, 1975, under which Lands provides sawdust,
bark, shavings, chips, and other wood materials for use in the Company's wood
chip boilers. The initial term of the contract was four years, and may be
renewed by agreement of the parties from year-to-year thereafter. In addition,
the contract may be cancelled by either party during any renewal period upon 30
days' notice following the occurrence of certain specified conditions. Benjamin
Russell is Chairman, Chief Executive Officer and a director of Lands, and owns
beneficially approximately 70% of the equity interest in such company.
Management believes this contract is in the best interest of the Company's
shareholders. During the fiscal year ended December 30, 2000, the Company paid
Lands approximately $982,000 for wood materials to operate these boilers.
The Company purchased miscellaneous building materials and supplies
from Russell Do-It Center, a building supply retailer. Russell Do-It Center is a
division of Lands. Management believes these purchases to be in the best
interest of the Company's shareholders. During the fiscal year ended December
30, 2000, the Company paid Russell Do-It Center approximately $61,000 for the
purchases described above.
The Company engaged Eddy Hill Consulting (formerly known as EOD
Strategies, Inc.) to provide various consulting services relating to
enhancements to its minority vendors programs. Tim Lewis owns 100% of the equity
interest in Eddy Hill Consulting. Management believes the engagement of Eddy
Hill Consulting is in the best interest of the Company's shareholders. During
the fiscal year ended December 30, 2000, the Company paid Eddy Hill Consulting
approximately $51,754 for consulting services.
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MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
THE COMMITTEE
The Management Development and Compensation Committee of the Board of
Directors (the "Committee") is responsible for establishing the compensation
policy and administering the compensation programs for the Company's executive
officers and other key employees. The Committee is comprised solely of directors
who are not current or former employees of the Company.
COMPENSATION PHILOSOPHY
The compensation program for executive officers is designed to attract,
motivate and retain talented executives who will strive to attain the Company's
strategic and financial objectives and thereby increase shareholder value. The
main elements of the program are:
- annual compensation (base salary and annual bonus) and
- long-term incentives (stock options).
The Company's philosophy is to provide total compensation at a level
that is consistent with its size and performance relative to other leading
branded consumer apparel companies. These companies include many of those in the
Value Line Apparel Index used in the performance graph on page 9. The Committee
periodically reviews the reasonableness of total compensation levels using
public information from comparable company proxy statements and annual reports
as well as survey information from third-party industry surveys.
In carrying out its duties, the Committee intends to make all
reasonable efforts to comply with the requirements to exempt executive
compensation from the $1 million deduction limitation under Section 162(m) of
the Internal Revenue Code by establishing "performance-based" compensation
programs, unless the Committee determines that such compliance in given
circumstances would not be in the best interests of the Company and its
shareholders.
ANNUAL COMPENSATION
Base Salary. The Committee annually reviews and approves base salaries
for the Company's executive officers, considering the responsibilities of their
positions, their individual performance and their competitive position relative
to comparable companies and industry surveys. Salary ranges are targeted at the
median of the competitive market place. Salary increases, including increases
due to promotions, for the most recent fiscal year are based upon these
criteria.
Annual Incentive Bonus. Executive officers are eligible to receive
annual cash incentive awards under provisions of the Executive Incentive Plan.
Under this plan, the Committee established Earnings Per Share Growth and Return
on Equity goals for the Company and each operating division. The maximum
incentive opportunity is established and communicated to each participant, along
with the performance scale under which incentive awards are earned. Threshold
performance levels are also established for each goal, below which no incentive
award is paid. Individual standards of performance that are agreed upon at the
beginning of each year provide each participant the opportunity to earn
incentive awards based upon the accomplishment of strategic and tactical
objectives. Award opportunities for the Chief Executive Officer and Chief
Financial Officer are tied solely to the accomplishment of financial goals
approved in advance by the Committee.
LONG-TERM COMPENSATION
The Committee believes stock options to be one of the most effective
ways of linking executives with the interests of the shareholders since no gain
is realized by the executive unless the stock price increases. For the
foreseeable future, stock options will be the only form of long-term
compensation at the Company.
Stock option grant guidelines have been established to meet the median
competitive practice of the marketplace. The Company typically grants stock
options annually during the first quarter, although special grants may be made
throughout the year in unique circumstances such as recruiting situations.
Options are granted with an exercise price equal to the market value on the date
of grant. Options granted become exercisable pro-rata on the first four
anniversaries of the grant
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to reinforce retention and further align executives' compensation with
shareholder returns. Options expire ten years from the date of grant.
In recognizing that the restructuring of the Company was substantially
complete and to assist in retaining the management team, the Committee approved
a front-loaded stock option grant to all salaried employees in January 2000.
This grant is intended to replace annual grants that would normally have been
made in 2001 and 2002.
STOCK OWNERSHIP GUIDELINES
The Committee believes that stock ownership by the management team is
essential to a strong linkage between management and the shareholders. Thus, the
Committee has approved Stock Ownership Guidelines that outline the minimum stock
ownership expectations for the officer group. The guidelines range from shares
valued at five times salary midpoint for the Chief Executive Officer to one
times salary midpoint for Vice Presidents. Each officer is expected to be in
compliance with the guidelines within five years of becoming covered by the
guidelines.
CHIEF EXECUTIVE OFFICER
Effective April 1, 1998, the Board of Directors elected John F. Ward
President and Chief Executive Officer, and on April 22, 1998, Mr. Ward was
elected Chairman. His compensation principally consists of base salary, annual
bonus and stock option awards. The Committee made the following decisions
regarding Mr. Ward's compensation:
- - Annual Compensation
Base Salary. The Committee increased Mr. Ward's annual salary by
$25,000 to $700,000, or 3.7%, based on an assessment of competitive
compensation practices and in recognition of his leadership in the
continuing restructuring along with accomplishing the Company's
financial plans.
Annual Incentive. The Committee awarded Mr. Ward an annual incentive
payment for 2000 equal to $519,579, or 74.67% of salary earned in 2000.
This incentive award was directly related to the Company's performance
relative to the goals for EPS Growth (weighted 60%) and Return on
Equity (weighted 40%)) that the Committee approved at the beginning of
2000. The Company reported ongoing EPS of $1.90, which was a 17%
increase over 1999 (before non-recurring items) that resulted in a
payment equal to the aggressive target that had been set for that
component. The Company's ROE of 11.5% was slightly above the target
established by the Committee and resulted in an incentive award
slightly above target for that component.
- - Long-term Compensation
Stock Options. In January 2000, the Committee approved a stock option
grant of 500,000 shares to Mr. Ward, which represents the front-loaded
grant discussed earlier in this report. These options have an exercise
price of $15.13, which was 100% of the fair market value on the grant
date. The terms and conditions that apply to Mr. Ward's stock option
grants are described in the notes to the Stock Option Grant Table on
page 11.
- - Other Benefits.
In addition to participating in the same benefit programs as all other
executives of the Company, Mr. Ward began participating in a
supplemental executive retirement plan ("SERP") that the Committee
approved during 2000 for him and other executives. The SERP provides
him a competitive retirement benefit equal to 4% of the 3-year final
average pay per year of service up to a maximum of 25 years, less any
benefits under Russell's Qualified Defined Benefit and Excess Plans.
In addition, the Company has an employment agreement with Mr. Ward
which provides certain other benefits and payments in connection with
Mr. Ward's continued service. In December, the Committee renewed this
agreement effective April 1, 2001. Some of these benefits and payments
are described in the Summary Compensation Table and the notes thereto
beginning on page 10. Additional provisions of Mr. Ward's agreements
are described on page 14.
- 8 -
12
CONCLUSION
The Committee believes that the executive compensation programs directly link
the pay opportunities of the Company's executives to the financial and
shareholder returns of the Company. These programs reinforce the linkage between
pay and performance, and between executive compensation and shareholder return,
and allow the Company to attract and retain the caliber of executives required
in the highly competitive global environment in which executives of the Company
must perform.
MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE
HERSCHEL M. BLOOM, CHAIRMAN
RONALD G. BRUNO
C.V. NALLEY III
COMPARATIVE FIVE-YEAR CUMULATIVE TOTAL RETURNS THROUGH 12/31/00
VALUE OF $100 INVESTED ON 12/31/95 AT FISCAL YEAR-END:
1995 1996 1997 1998 1999 2000
Russell Corporation $100.00 $109.05 $ 99.14 $ 77.34 $ 65.83 $ 62.84
S&P 500 100.00 123.25 164.21 210.85 253.61 227.89
Value Line Apparel Index 100.00 136.96 159.77 197.66 214.72 268.09
NOTES
1) Assumes that the value of the investment in the Company's Common Stock and in
each index was $100 on the last trading day preceding the first day of the fifth
preceding fiscal year and that all dividends were reinvested.
2) The Value Line Apparel Index presently includes: Columbia Sportswear Company;
Guess?; Hartmarx Corporation; Jones Apparel Group; Kellwood Company; Liz
Claiborne, Inc.; Nautica Enterprises, Inc.; Oshkosh B'Gosh, Inc.; Oxford
Industries, Inc.; Tommy Hilfiger Corp.; VF Corporation; Warnaco Group, Inc.; and
the Company.
- 9 -
13
3) The Value Line Apparel Index has undergone several changes since 1995, with
only eight of the original twelve companies remaining on the list. The original
Index also included Farah, Incorporated, Fruit of the Loom, Inc., Garan,
Incorporated, and Phillips-Van Heusen Corporation. Garan, Incorporated, was
deleted from the Index in 1996, Farah, Incorporated, was deleted in 1998,
Phillips-Van Heusen Corporation was deleted in 1999 and Fruit of the Loom, Inc.
was deleted in 2000. Value Line added Jones Apparel Group, Nautica Enterprises,
Inc., St. Johns Knits, Inc., Tommy Hilfiger Corp. and Warnaco Group, Inc. in
1997, added Polo-Ralph Lauren and Quicksilver, Inc. in 1998 and added Columbia
Sportswear Company and Guess? in 2000. Quicksilver, Inc. was deleted from the
Index in 1999 after only one year, and St. Johns Knits, Inc. and Polo-Ralph
Lauren were both deleted after only two years.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following information is furnished for the fiscal years ended
December 30, 2000, January 1, 2000 and January 2, 1999, with respect to the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company during 2000 whose salary and bonus
exceeded $100,000 (collectively, the "Named Executive Officers").
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------- -----------------------------------
AWARDS PAYOUTS
---------------------- ---------
NAME AND OTHER RESTRICTED ALL
PRINCIPAL FISCAL ANNUAL STOCK OPTIONS/ LTIP OTHER
POSITION YEAR SALARY BONUS (1) COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
- ----------------------------------------------------------------------------------------------------------------------------------
John F. Ward 2000 $695,833 $519,579 $49,637(2) 500,000
Chairman, 1999 670,833 474,279 30,668(3) 250,000
President 1998 490,000 350,000 44,375(4) $ 325,913(5) 407,066(6) $3,496,031(7)
and C.E.O
Jonathan R. Letzler 2000 302,500 208,485 4,566(2) 100,000
Executive V.P. & 1999 265,000 200,764 14,169(3) 25,000
C.E.O. JERZEES 1998 17,809 65,000 3,515(4) 1,079,690(8) 125,000
JT Taunton, Jr 2000 312,000 198,340 5,151(2) 32,000
Sr. V.P., President & 1999 306,900 216,750 12,000
C.E.O. Fabrics 1998 300,000 38,500 8,000
and Services
Eric N. Hoyle 2000 290,724 130,909 9,994(2) 100,000
Sr. V.P., President & 1999 305,833 154,293 15,961(3) 40,000
C.E.O. Cross Creek 1998 116,935 52,621 13,710(4) 25,000
Apparel LLC
Carol M. Mabe 2000 239,167 141,000 4,503(2) 56,570
Senior V.P. & C.E.O 1999 64,167 31,333 3,392(2) 92,063(9) 25,000
Russell Athletic 1998
(1) Bonus payments are reported for the year in which related services were
performed.
(2) Pursuant to Mr. Ward's employment agreement, includes personal use of
Company aircraft, Company provided automobile, insurance policy premium
payments and tax consulting payments. For Messrs. Letzler and Taunton,
includes tax consulting payments. For Mr. Hoyle, includes personal use
of Company aircraft and tax consulting payments. For Ms. Mabe, includes
personal use of Company aircraft.
(3) Pursuant to Mr. Ward's employment agreement, includes personal use of
Company aircraft, club dues and Company provided automobile. For
Messrs. Letzler and Hoyle, includes personal use of Company aircraft.
- 10 -
14
(4) Pursuant to Mr. Ward's employment agreement, includes personal use of
Company aircraft, personal office closure expenses, temporary housing,
club dues and Company provided automobile. For Mr. Letzler includes
personal use of Company aircraft and temporary housing. For Mr. Hoyle
includes personal use of Company aircraft, temporary housing and
Company provided automobile.
(5) Pursuant to Mr. Ward's employment agreement, one-third of this amount
vested on March 31, 1998, with the remainder vesting ratably over the
next two succeeding years.
(6) Pursuant to Mr. Ward's Amended and Restated Employment Agreement,
125,000 options vest on March 31, 2001. The exercise price is $27.1563
and the options are exercisable until March 31, 2008. Pursuant to the
Amended and Restated Executive Deferred Compensation and Buyout Plan,
282,066 vested options were issued to Mr. Ward at an exercise price of
$27.1563, the fair market value on the date of grant, and are
exercisable until March 31, 2008.
(7) Amounts paid to Mr. Ward or deposited into a rabbi trust for his
benefit to replace benefits and opportunities Mr. Ward forfeited
pursuant to agreements with his former employer as a result of
accepting employment with the Company.
(8) Pursuant to Mr. Letzler's employment agreement, one-third of this
amount vested on December 15, 1999, with the remainder vesting ratably
over the next two succeeding years. As of January 1, 2001, Mr.
Letzler's restricted shares consisted of 16,666 shares, or one-third of
the original grant of 50,000 shares, with a value of $258,323.
(9) Pursuant to Ms. Mabe's employment agreement, one-third of this amount
vested on November 1, 2000, with the remainder vesting ratably over the
next two years. As of January 1, 2001, Ms. Mabe's restricted shares
consisted of 4,000 shares, or two thirds of the original grant of 6,000
shares, with a value of $62,000.
OPTION/SAR GRANTS IN FISCAL 2000
The following table sets forth grants of stock options to the Named
Executive Officers for the year ended December 30, 2000. No SAR grants were made
during such fiscal year.
INDIVIDUAL GRANTS (1)
- ------------------------------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS/SARS PRICE APPRECIATION
OPTIONS/SARS GRANTED EXERCISE FOR OPTION TERM
GRANTED TO EMPLOYEES PRICE EXPIRATION ---------------------------
NAME IN 2000 IN 2000 PER SHARE DATE 5% 10%
- ------------------ ------------ ------------ --------- ---------- ------------ -------------
John F. Ward 500,000(2) 18.91 15.1250 1/18/10 $4,756,016 $12,052,677
Jonathan R. Letzler 100,000 3.78 15.1250 1/18/10 951,203 2,410,535
JT Taunton, Jr 32,000 1.21 15.1250 1/18/10 304,385 771,371
Eric N. Hoyle 100,000 3.78 15.1250 1/18/10 951,203 2,410,535
Carol M. Mabe 56,570 2.14 15.1250 1/18/10 538,095 1,363,640
(1) The stock options were granted at an exercise price equal to the fair
market value of the Company's Common Stock on the date of the grant.
The stock options become exercisable ratably over four years beginning
on the first anniversary of the grant. No other instruments were
granted in tandem with the options, nor do they carry tax reimbursement
features.
(2) See "MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION - Chief Executive Officer."
- 11 -
15
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 2000 AND YEAR-END VALUE TABLE
The following table sets forth information concerning the exercise of
stock options for the Named Executive Officers for the fiscal year ended
December 30, 2000:
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
ACQUIRED VALUE AT DECEMBER 30, 2000 AT DECEMBER 30, 2000 (2)
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
John F. Ward 0 $0 427,900 729,167 $ 0 $ 0
Jonathan R. Letzler 0 0 68,750 181,250 0 0
JT Taunton, Jr 0 0 41,200 41,000 0 0
Eric N. Hoyle 0 0 22,500 140,000 0 0
Carol M. Mabe 0 0 6,250 75,320 1,953 5,859
(1) This amount represents the aggregate of the market value of the
Company's Common Stock at the time each option was exercised less the
exercise price for such option.
(2) This amount represents the aggregate of the number of options
multiplied by the difference between the closing price of the Company's
Common Stock on the last trading day prior to December 30, 2000, and
the exercise price for such option.
LONG-TERM INCENTIVE PLAN AWARDS IN FISCAL 2000
The Company's Executive Incentive Plan provides for the award of
long-term incentives to officers of the Company. The Company has not granted
long-term incentive awards subsequent to January 28, 1998, and has no present
plans to grant such awards in the future.
PENSION PLAN
The officers of the Company participate in the Russell Corporation
Revised Pension Plan (the "Pension Plan"), a defined benefit plan covering all
employees of the Company. The amount of contributions made by the Company to the
Pension Plan is not reflected in the cash compensation table above, since the
amount of the contribution with respect to a specified person is not and cannot
readily be separately or individually calculated by the regular actuaries for
the Pension Plan.
Benefits under the Pension Plan are based upon years of credited
service at retirement and upon "Final Average Earnings," which is the average
base compensation for the highest 60 consecutive months out of the final 120
months of employment. This compensation consists only of salary and excludes any
bonus and any form of contribution to other benefit plans or any other form of
compensation. Normal or delayed retirement benefits are payable upon retirement
on the first day of any month following attainment of age 65 and continue for
the life of the employee (and his spouse, if any) or in accordance with other
elections permitted by the Pension Plan.
On January 26, 1994, the Board of Directors adopted a supplemental
retirement plan covering any participant's compensation in excess of the
limitation amount specified in Section 401, et seq., of the Internal Revenue
Code. This plan is a non-qualified plan, thereby rendering any benefits subject
to claims of general creditors and not deductible until paid.
On December 5, 2000, the Board of Directors adopted the Russell
Corporation Supplemental Retirement Plan (the "SERP"), an additional defined
benefit plan covering key employees of the Company. Benefits under the SERP are
based upon years of credited service at retirement and upon "Final Average Pay,"
which is the average compensation for the highest 36 consecutive months out of
the final 120 months of employment and, unlike the Pension Plan, includes
amounts received as bonuses during that period.
The following table presents estimated annual benefits payable from the
Pension Plan, the SERP and the supplemental retirement plan mentioned above upon
normal or delayed retirement to participants in specified remuneration and
years-of-credited service classifications. The amounts shown assume the current
maximum social security benefit and that the participant has elected for
benefits to be payable for a single life only.
- 12 -
16
PENSION PLAN TABLE
YEARS OF CREDITED SERVICE
AVERAGE ---------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 AND OVER
------------ -------- -------- -------- -------- ---------
$ 350,000 $ 35,000 $ 70,000 $105,000 $140,000 $175,000
400,000 40,000 80,000 120,000 160,000 200,000
450,000 45,000 90,000 135,000 180,000 225,000
500,000 50,000 100,000 150,000 200,000 250,000
600,000 60,000 120,000 180,000 240,000 300,000
700,000 70,000 140,000 210,000 280,000 350,000
800,000 80,000 160,000 240,000 320,000 400,000
900,000 90,000 180,000 270,000 360,000 450,000
1,000,000 100,000 200,000 300,000 400,000 500,000
1,100,000 110,000 220,000 330,000 440,000 550,000
1,200,000 120,000 240,000 360,000 480,000 600,000
1,300,000 130,000 260,000 390,000 520,000 650,000
Years of service at December 30, 2000 credited under the Pension Plan
for individuals shown in the Summary Compensation Table on page 10 are as
follows: Mr. Ward, 2 years; Mr. Taunton, 25 years; Mr. Letzler, 2 years; Mr.
Hoyle, 2 years; and Ms. Mabe, 1 year. Years of service at December 30, 2000
credited under the SERP for individuals shown in the Summary Compensation Table
on page 10 are as follows: Mr. Ward, 2 years; Mr. Taunton, 2 years; Mr. Letzler,
2 years; Mr. Hoyle, 2 years; and Ms. Mabe, 1 year.
STOCK OPTION PLANS
The Company has previously adopted the 1987 Stock Option Plan pursuant
to which the Company granted to key employees of the Company either incentive
stock options or nonqualified stock options. The terms of the options did not
exceed ten years from the dates of grant, and the option prices equaled fair
market value of the shares covered at the times of grant. The 1987 Stock Option
Plan has expired and there are no further options outstanding under it.
The Company also has adopted the Executive Incentive Plan (formerly
known as the 1993 Executive Long-Term Incentive Plan). The Management
Development and Compensation Committee of the Board of Directors (the
"Committee") presently administers the plan and has broad discretion to fashion
the terms and, subject to limitations specified in the plan, the size of awards
in order to provide appropriate incentives. Awards may be issued in a variety of
forms, including: (a) restricted, deferred and bonus shares; (b) incentive,
non-qualified and accelerated stock ownership options (all such options are
referred to collectively as "options"); (c) freestanding and tandem stock
appreciation rights; and (d) performance shares, performance units and
cash-based awards. In addition to conditions and restrictions required under the
plan, the Committee may impose additional conditions and restrictions with
respect to the exercise or receipt of benefits under any award.
The aggregate number of shares of Common Stock authorized for issuance
under the Executive Incentive Plan is 5,500,000 plus any shares reversed for
issuance under awards still outstanding under the Company's 1987 Stock Option
Plan to the extent such awards are forfeited, terminated or settled without
issuance of the reserved shares. Any shares of Common Stock (whether subject to
or received pursuant to an award under any Company plan) withheld or applied to
pay the exercise price or related required tax withholding reduce the number of
shares treated as issued under the Executive Incentive Plan and thereby increase
the aggregate number of shares available for issuance.
The Company has also adopted the Russell Corporation 2000 Stock Option
Plan (the "2000 Option Plan"). The 2000 Option Plan is an incentive compensation
plan that gives the Committee broad discretion to grant awards, and fashion the
terms of such awards, to any employee or consultant of the Company. The 2000
Option Plan permits the issuance of awards in a variety of forms, including: (a)
incentive stock options; (b) non-qualified stock options; (c) reload stock
options; (d) restricted shares; (e) bonus shares; (f) deferred shares; (g)
freestanding stock appreciation rights; (h) tandem stock appreciation rights;
(i) performance units; and (j) performance shares. The aggregate number of
shares of Common Stock authorized for issuance under the 2000 Option Plan is
1,500,000, subject to appropriate adjustment upon the occurrence of dividends,
distributions, recapitalizations, stock splits or other similar events.
- 13 -
17
EMPLOYMENT AGREEMENTS
As noted above, John F. Ward was employed as President and Chief
Executive Officer of the Company, effective March 31, 1998. The Company entered
into an agreement with Mr. Ward providing for the employment of Mr. Ward until
March 31, 2001, at an annual base salary of $650,000, subject to increase(s) in
the discretion of the Board of Directors and a bonus of $350,000 for 1998. The
employment agreement provides that the Company will offer health care and
certain other supplemental benefits to Mr. Ward. As noted in the Summary
Compensation Table, Mr. Ward was also entitled to receive certain payments for
reimbursement of expenses in connection with his relocation and employment with
the Company.
Mr. Ward's employment agreement has been amended effective April 1,
2001 to provide for his continued employment until March 31, 2006. Effective
March 1, 2001, Mr. Ward's annual base salary shall be a minimum of $750,000. The
annual base salary is subject to increase(s) in the discretion of the Board of
Directors. Mr. Ward is entitled to receive a potential annual bonus of at least
140% of base salary, upon the achievement of certain goals established by the
Board of Directors. The amended agreement also provides that any termination of
employment of Mr. Ward after April 1, 2001 shall be treated as retirement for
purposes of the Company's various plans and benefits. Each year of Mr. Ward's
employment, commencing on January 1, 1998, shall be treated as two (2) years of
employment for purposes of determining Mr. Ward's participation in the SERP.
Options granted to Mr. Ward pursuant to the prior agreement will become fully
vested on March 31, 2001, pursuant to the terms of the amended and restated
employment agreement. The amended agreement provides for additional annual
option awards of at least 100,000 shares per year in each of 2003, 2004, 2005,
and 2006, which options shall vest over a four year period beginning on the date
of the grant.
As noted above in note 7 to the Summary Compensation Table, to
compensate Mr. Ward for the forfeiture of certain benefits from his former
employer, under the 1998 agreement the Company agreed to make a cash payment to
him of approximately $1,028,000, to put into a trust for his benefit
approximately $2,467,000, to issue him 12,127 shares of Common Stock of the
Company, and to grant him options to purchase 282,066 shares of the Company's
Common Stock at $27.1563, the market price on March 31, 1998. After April 1,
2001, the amounts placed in the trust were to be paid to Mr. Ward in a lump sum
upon the termination of his employment with the Company. The Company has amended
this deferred compensation agreement with Mr. Ward effective April 1, 2001.
Under the terms of the amended agreement, the amounts placed in trust will
continue to be deferred, and will be paid to Mr. Ward after March 31, 2006
unless his employment is terminated by the Company for cause or is terminated by
Mr. Ward for any reason other than death, total disability or certain other
reasons set forth in the agreements. In the event of such termination prior to
March 31, 2006, Mr. Ward will be entitled to receive the entire amount remaining
in the Trust. Mr. Ward, at his option, may receive the trust amount as a single
lump sum payment, or may request payment over a deferred or extended period of
time.
Effective December 7, 1998, Jonathan R. Letzler was employed as the
President and Chief Executive Officer of the Company's JERZEES Division pursuant
to an agreement providing for his employment in such position until December 7,
2002, at an annual base salary of $265,000 (subject to annual increases in the
discretion of the Chief Executive Officer of the Company and with the
concurrence of the Board of Directors). Mr. Letzler received a signing bonus of
$65,000 and is entitled to receive annual bonuses with a bonus potential of at
least 100% of his base salary, provided that his bonuses for each of the 1998
and 1999 calendar years was to be at least 50% of his base salary. Under the
agreement, Mr. Letzler may participate in any benefit plan offered by the
Company to its executives generally. The agreement provides that in the event of
any termination of employment of Mr. Letzler, all vesting periods under the
Company's benefit plans shall be waived and Mr. Letzler will be deemed to have
reached the minimum age for retirement under all such plans. Mr. Letzler was
also entitled to receive certain payments for reimbursement of expenses in
connection with his relocation and employment with the Company. Pursuant to the
agreement, Mr. Letzler was granted an option on December 7, 1998, to purchase
125,000 shares of Common Stock at the market price of $21.5938 per share, and an
option on February 24, 1999 to purchase 25,000 shares of Common Stock at the
market price of $19.3438 per share. Each option vests in equal annual
installments over a four-year period from the date of grant. Mr. Letzler was
also granted 50,000 restricted shares of Common Stock on December 7, 1998, with
the restrictions lapsing as to one-third of such shares at the end of each year
of his employment with the Company.
- 14 -
18
PROPOSAL TO APPROVE THE ADOPTION OF THE RUSSELL CORPORATION
2000 NON-EMPLOYEE DIRECTORS' COMPENSATION PLAN
(PROPOSAL 2)
On July 26, 2000, the Board of Directors adopted the Russell
Corporation 2000 Non-Employee Directors' Compensation Plan (the "2000 Directors'
Plan"). The purpose of the 2000 Directors' Plan is to enable the Company to
attract and retain experienced and knowledgeable individuals to serve on the
Company's Board of Directors, and to allow such directors to obtain an equity
interest in the Company in order to align their interests with those of the
Company's stockholders. A summary of the 2000 Directors' Plan is set forth
below. The summary is qualified in its entirety by reference to the complete
text of the 2000 Directors' Plan which is attached to this Proxy Statement as
Appendix B. If approved, the 2000 Directors' Plan will replace the current 1997
Non-Employee Directors' Stock Grant, Stock Option and Deferred Compensation Plan
(the "Prior Plan").
DESCRIPTION OF 2000 DIRECTORS' PLAN
GENERAL
The purpose of the 2000 Directors' Plan is to assist the Company in
attracting and retaining experienced and knowledgeable directors and increasing
their commitment to the Company's success through equity ownership. Any
individuals, other than officers or other employees of the Company or its
subsidiaries, (1) serving as directors on the Board of Directors of the Company
immediately following the Annual Meeting or (2) elected or appointed to serve as
directors on the Board of Directors of the Company at some time other than the
Annual Meeting are eligible to participate in the 2000 Directors' Plan (the
"Eligible Directors"). The Management Development and Compensation Committee of
the Board of Directors (the "Committee") presently administers the 2000
Directors' Plan and has broad discretion to fashion the terms of awards. The
2000 Directors' Plan currently provides for the grant of up to 500,000 shares of
the Common Stock of the Company, reduced by the number of shares issued pursuant
to awards under the Prior Plan. Unless earlier terminated by the Board of
Directors or shareholders, the issuance of awards under the 2000 Directors' Plan
will cease as of August 1, 2010.
TYPES OF AWARDS
Annual Option Grants. Each Eligible Director immediately following the
Annual Meeting automatically receives an option to purchase a number of shares
of Common Stock with a value equivalent to $25,000 determined in accordance with
procedures specified in the 2000 Directors' Plan. An Eligible Director who is
not elected at the Annual Meeting will receive at the time of becoming a
Director an option to purchase an amount of shares of Common Stock calculated
with reference to the time remaining until the next Annual Meeting. Each
Eligible Director received an initial option to purchase a number of shares of
Common Stock with a value equivalent to $15,000. The Company will continue to
award annual option grants under the 2000 Directors' Plan after the Annual
Meeting only if shareholders approve the 2000 Directors' Plan at the Annual
Meeting.
Annual Fees. Annual fees are payable to the Eligible Directors
quarterly on March 31, June 30, September 30 and December 31 of each year.
Eligible Directors may elect to receive their annual fee in various combinations
of the following: (1) shares of Common Stock equal to that portion of the
quarterly fee subject to the election divided by the fair market value on the
date the quarterly fee payment is due; (2) an option to purchase shares of
Common Stock equal to the annual fee or portion thereof subject to the election,
multiplied by four and divided by the fair market value of the shares as of the
Annual Meeting date in the year to which the election relates; or (3) shares
equal to the amount of the quarterly fee installment subject to such election
divided by the fair market value of the shares on the date the quarterly fee
installment is due and payable, deposited to a deferral account to be paid to
the Eligible Director on a date that is at least two years from the date of the
election, provided, however, that any shares in a deferral account shall be
delivered immediately upon an individual's ceasing to be an Eligible Director.
Option Period and Exercise. Each option granted pursuant to the 2000
Directors' Plan will have a ten year term. Options, whether awarded pursuant to
an annual grant or pursuant to the election of an Eligible Director, may be
exercised on the first to occur of the following: (1) the one-year anniversary
of the grant date; (2) an Eligible Director's Death; (3) an Eligible Director
ceasing to serve due to disability; (4) a change in control (as defined in the
2000 Directors' Plan); (5) retirement upon reaching mandatory retirement age; or
(6) retirement upon attaining age 65.
- 15 -
19
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
GENERAL
There are generally no federal income tax consequences to either the
participant or the Company upon the grant of an option. Upon exercise of an
option, the amount by which the fair market value of the shares on the exercise
date exceeds the exercise price on the exercise date is generally taxable to the
participant as compensation income and will generally be deductible by the
Company. The disposition of shares acquired through exercise of a stock option
generally results in a capital gain or loss for the participant (which may be
short-term or long-term, according to whether the participant's holding period
following the date of exercise is no longer than one year or is longer than one
year), but will have no tax consequences for the Company. Upon receipt by a
participant of an annual grant of shares of Common Stock under the 2000
Directors' Plan, a participant will recognize ordinary income equal to the fair
market value of any shares of Common Stock and cash received, and the Company
will be entitled to a tax deduction in the same amount.
AMENDMENT, MODIFICATION OR TERMINATION
The Board of Directors may at any time and from time to time, alter,
amend, suspend or terminate the 2000 Directors' Plan in whole or in part without
the approval of the Company's shareholders. The 2000 Directors' Plan provides
that, without an Eligible Director's consent, no amendment, modification or
termination may materially adversely affect any award granted prior thereto.
VOTE REQUIRED; RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding
shares of the Company's Common Stock represented in person or by proxy at the
Annual Meeting is necessary to approve the adoption of the 2000 Directors' Plan.
The Board of Directors recommends that shareholders vote FOR the approval of the
2000 Directors' Plan.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter for action at the Annual Meeting other than those matters
stated in the Notice of the Annual Meeting. Accordingly, if other matters should
properly come before the Annual Meeting, it is intended that the holders of the
proxies will act in respect thereto in accordance with their best judgment.
AUDITORS
Ernst & Young LLP, independent accountants, served as the Company's
auditors for 2000 after having previously served in the same capacity since
1930. Representatives of Ernst & Young will be in attendance at the Annual
Meeting and will be given the opportunity to make a statement and to respond to
appropriate questions.
AUDIT AND AUDIT-RELATED FEES
Ernst & Young billed the Company an aggregate amount of $456,208 for
professional services rendered for the audit of the Company's annual financial
statements for fiscal year 2000 and the reviews of the financial statements
included in the Company's Forms 10-Q for fiscal year 2000, and billed an
aggregate amount of $950,010 for audit-related fees for fiscal year 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
Ernst & Young neither rendered to nor billed the Company for
professional services including supervising the operation of the Company's
information systems and design or implementation of hardware or software to
aggregate source data underlying the Company's financial statements during
fiscal year 2000.
- 16 -
20
ALL OTHER FEES
Ernst & Young billed the Company an aggregate amount of $1,604,152 for
professional services during fiscal year 2000, excluding amounts billed in
connection with audit services, audit-related services and financial information
systems design implementation. The Audit Committee, in conducting its review of
auditor independence, considered whether the performance of services by the
independent accountants in addition to their audit services was compatible with
maintaining the independence of Ernst & Young as auditors.
SHAREHOLDER PROPOSALS
The next annual meeting of shareholders is scheduled to be held on
April 24, 2002, and shareholders of the Company may submit proposals for
consideration for inclusion in the Proxy Statement of the Company relating to
such annual meeting of shareholders. However, in order for such proposals to be
considered for inclusion in the Proxy Statement of the Company relating to such
annual meeting, such proposals must be received by the Company not later than
November 23, 2001.
If a shareholder fails to notify the Company on or before February 6,
2002 of a proposal which such shareholder intends to present at the Company's
April 24, 2002 Annual Meeting by a means other than inclusion of such proposal
in the Company's proxy materials for that meeting, then if the proposal is
presented at such annual meeting, the holders of the Board of Directors' proxies
at such meeting may use their discretionary voting authority with respect to
such proposal, regardless of whether the proposal was discussed in the Company's
Proxy Statement for such meeting.
GENERAL INFORMATION
The Board of Directors of the Company has fixed the close of business
on March 7, 2001, as the record date for determining the holders of the Common
Stock of the Company entitled to notice of and to vote at the Annual Meeting. As
of such date, the Company had issued and outstanding and entitled to vote at the
Annual Meeting an aggregate of 31,895,534 shares of Common Stock, each share of
which is entitled to one (1) vote on all matters to be considered at the Annual
Meeting.
Pursuant to Section 10-2B-7.25 of the Code of Alabama 1975, as amended,
and the Company's Bylaws, a majority of the shares of Common Stock entitled to
vote, represented in person or by proxy, will constitute a quorum at a meeting
of the shareholders. Section 10-2B-7.28 of the Code of Alabama 1975, as amended,
requires that each of the nominees to be elected to the Board of Directors
receive the affirmative vote of a majority of the votes cast by the holders of
shares of Common Stock represented at the Annual Meeting as part of the quorum.
The vote for election of directors does not include shares which abstain from
voting on a matter or which are not voted on such matter by a nominee because
such nominee is not permitted to exercise discretionary voting authority and the
nominee has not received voting instructions from the beneficial owner of such
shares. Section 10-2B-7.25 of the Code of Alabama 1975, as amended, and the
Company's Bylaws require, for the approval of the adoption of the 2000
Non-Employee Directors' Compensation Plan, the affirmative vote of the holders
of a majority of the outstanding shares of the Company's Common Stock
represented in person or by proxy at a meeting of shareholders at which a quorum
is present and entitled to vote with respect to such proposals. Generally,
brokers who act as nominees will be permitted to exercise discretionary voting
authority where they have received no instructions in uncontested elections for
directors and on certain other matters which are not contested (not including,
however, approval of the adoption of the 2000 Directors' Plan) where the brokers
have complied with New York Stock Exchange Rule 451 concerning the delivery of
proxy materials to the beneficial owners of the Company's Common Stock held by
such brokers. Abstentions and broker non-votes will not be counted as votes
against the proposal to approve the adoption of the 2000 Non-Employee Directors'
Compensation Plan; provided, however, that at least a majority of the
outstanding shares of the Company's Common Stock is voted with respect to the
proposal. Section 10-2B-7.25(c) only requires that votes cast in favor of this
proposal exceed the votes cast opposing the proposal and the rules of the NYSE
concur provided total votes cast on the proposal exceeds fifty percent (50%) in
interest of all securities entitled to vote.
The Annual Meeting may be adjourned from time to time without notice
other than announcement at the Annual Meeting, or at any adjournment thereof,
and any business for which notice was given in the accompanying Notice of Annual
Meeting of Shareholders may be transacted at any such adjournment.
In addition to the use of the mails, proxies may be solicited by
personal interview or by telephone or telegraph. The cost of solicitation of
proxies will be borne by the Company. The Company may request brokerage houses,
nominees, custodians, and fiduciaries to forward soliciting material to the
beneficial owners of the stock held of record and will
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reimburse such persons for any reasonable expense incurred in forwarding the
material.
Copies of the Company's Annual Report on Form 10-K for the year ended
December 30, 2000, in form as filed with the Securities and Exchange Commission,
may be obtained from Floyd G. Hoffman, the Senior Vice President, Corporate
Development, General Counsel and Secretary of the Company, without charge, by
persons who were shareholders beneficially or of record as of March 7, 2001.
By Order of the Board of Directors
FLOYD G. HOFFMAN
Senior Vice President, Corporate Development,
General Counsel and Secretary
Alexander City, Alabama
March 23, 2001
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APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF RUSSELL CORPORATION
ORGANIZATION
(a) The Audit Committee of the Board of Directors (the "Committee") of
Russell Corporation (the "Company") shall be appointed by the Board of
Directors and shall comprise at least three (3) directors, each of whom
are independent of management and the Company, as defined by the
relevant listing authority. The Board of Directors shall be responsible
for making the determination that members of the Committee are
independent as required by the relevant listing authority.
(b) All Committee members shall be financially literate, as such
qualification is interpreted by the Board of Directors in its business
judgment, or shall become financially literate within a reasonable
period of time after appointment to the Committee, and at least one
member shall have accounting or related financial management expertise,
as the Board of Directors interprets such qualification in its business
judgment.
STATEMENT OF POLICY
(a) The Committee, through regular or special meetings with management, the
Company's internal auditors and the independent auditors, shall provide
assistance to the Board of Directors in fulfilling its oversight
responsibility relating to the Company's financial statements and the
financial reporting process, the systems of internal accounting and
financial controls, the internal audit function, and the annual
independent audit of the Company's financial statements.
(b) The Committee shall maintain free and open communication between the
Committee, the Company's independent auditors, the internal auditors
and management.
(c) The Committee is empowered to investigate any matter brought to its
attention with full access to all books, records, facilities, and
personnel of the Company and the authority to retain outside counsel or
other experts for this purpose. The Board of Directors retains
responsibility for overseeing the Company's financial statements and
financial reporting process, legal compliance and ethics programs.
RESPONSIBILITIES AND PROCESSES
(a) The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board of Directors and
report the results of its activities to the Board.
(b) It is not the duty of the Committee (1) to plan or conduct audits, (2)
to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting
principles, (3) to conduct investigations, to resolve disagreements, if
any, between management and the independent auditor, or (4) to assure
compliance with laws and regulations and the Company's code of conduct.
Management is responsible for preparing the Company's financial
statements, and the independent auditors are responsible for auditing
those financial statements.
(c) The Committee shall:(1) ensure that the independent auditor provides
annually to the Committee a formal written statement delineating all
relationships between the independent auditor and the Company, (2)
actively engage in a dialogue with the independent auditor with respect
to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditor, and (3)
recommend that the Board take appropriate action in response to the
independent auditor's report to satisfy itself of the independent
auditor's independence.
(c) The following shall be the principal recurring processes of the
Committee in carrying out its oversight responsibilities. The processes
are set forth as a guide with the understanding that the Committee may
supplement them as appropriate:
- The Committee shall have a clear understanding with management
and the independent auditors that the independent auditors are
ultimately accountable to the Board and the Committee, as
representatives of the
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Company's shareholders. The Committee shall have the ultimate
authority and responsibility to evaluate and, where
appropriate, recommend replacement of the independent
auditors. The Committee shall discuss with the auditors their
independence from management and the Company and the matters
included in the written disclosures required by the
Independence Standards Board. Annually, the Committee shall
review and recommend to the Board the selection of the
Company's independent auditors.
- The Committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their
respective audits, review and approve the annual internal
audit plan, review the internal audit reports and approve the
appointment of the Director of Internal Audit. Additionally,
the Committee shall discuss with management, the internal
auditors, and the independent auditors the adequacy and
effectiveness of the accounting and financial controls,
including the Company's system to monitor and manage business
risk, and legal and ethical compliance programs. Further, the
Committee shall meet separately with the internal auditors and
the independent auditors, with and without management present,
to discuss the results of their examinations.
- The Committee shall review the interim financial statements
with management and the independent auditors prior to the
filing of the Company's Quarterly Report on Form IO-Q. Also,
the Committee shall discuss the results of the quarterly
review and any other matters required to be communicated to
the Committee by the independent auditors under generally
accepted auditing standards. The chair of the Committee may
represent the entire Committee for the purposes of this
review.
- The Committee shall review with management and the independent
auditors the financial statements to be included in the
Company's Annual Report on Form 10-K (or the annual report to
shareholders if distributed prior to the filing of Form 10-K),
including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in
the financial statements. Also, the Committee shall discuss
the results of the annual audit and any other matters required
to be communicated to the Committee by the independent
auditors under generally accepted auditing standards.
The Committee shall review and reassess this Charter at least annually and
submit its recommendations to the Board of Directors for approval.
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APPENDIX B
RUSSELL CORPORATION
2000 NON-EMPLOYEE DIRECTORS' COMPENSATION PLAN
Article 1. Establishment, Objectives and Duration
1.1. Establishment of the Plan. Russell Corporation, an Alabama corporation
(the "Company") hereby establishes the Russell Corporation 2000 Non-Employee
Directors' Compensation Plan (the "Plan"), effective August 1, 2000 (the
"Effective Date") which was duly approved by the Board of Directors of the
Company (the "Board") on July 26, 2000 and shall be presented for approval by
the shareholders of the Company at the next regularly scheduled annual meeting
of the Company's shareholders following the Effective Date.
1.2. Objectives of the Plan. The Plan is intended to allow Eligible
Directors of the Company to acquire or increase equity ownership in the Company,
thereby strengthening their commitment to the success of the Company, aligning
their interests with those of the shareholders of the Company, and to assist the
Company in attracting and retaining experienced and knowledgeable individuals to
serve as directors.
1.3. Duration of the Plan. The Plan shall commence on the Effective Date and
shall remain in effect, subject to the right of the Board to amend or terminate
the Plan at any time pursuant to Article 10 hereof, until the earlier of (a) the
10 year anniversary of the Effective Date and (b) the date all Shares subject to
the Plan shell have been delivered according to the Plan's provisions; provided
that the Plan shall remain in effect with respect to and shall govern any grants
made hereunder including any amounts deferred in connection with such grants.
1.4. Prior Plan. Effective August 1, 2000 no new grants will be made under
the Russell Corporation 1997 Non-Employee Directors' Stock Grant, Stock Option
and Deferred Compensation Plan (the "Prior Plan"). Any grants made under the
Prior Plan shall continue to be subject to the terms and conditions of the Prior
Plan; provided, that, the Prior Plan shall remain in effect with respect to and
shall govern any grants made under the Prior Plan including any amounts deferred
thereunder.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings
set forth below:
2.1. "Annual Fee" shall mean that portion of the Retainer payable to an
Eligible Director in cash, which initially shall be $35,000 per year payable in
four quarterly installments in an amount equal to $8,750, as well as any
additional cash payments made to an Eligible Director with respect to committee
service or other service to the Board without regard to any election pursuant to
Article 7.
2.2. "Annual Meeting of Shareholders" means the regularly scheduled annual
meeting of the Company's shareholders.
2.3. "Annual Option Grant" shall mean that portion of the Retainer payable
to an Eligible Director in Options without regard to any election pursuant to
Article 7.
2.4. "Article" means an Article of the Plan.
2.5. "Beneficial Owner" has the meaning specified in Rule 13d-3 of the SEC
under the Exchange Act.
2.6. "Board" has the meaning set forth in Section 1.1
2.7. "Cause" means (i) an Eligible Director's conviction of a felony or
other crime involving fraud, dishonesty or moral turpitude; (ii) willful or
reckless material misconduct in the performance of his or her duties as a
Director; or (iii) habitual neglect of duties; provided, that an Eligible
Director who agrees to resign his position on the Board in lieu of being removed
for Cause, may be deemed to have been removed for Cause for purposes of this
Plan.
2.8. "Change of Control" means, unless otherwise defined in an Option
Agreement, any one or more of the following:
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Any person (as such term is used in Rule 13d-5 of the SEC under the
Exchange Act)or group (as such term is defined in Sections 3(a)(9) and
13(d)(3) of the Exchange Act), other than a Subsidiary, any employee
benefit plan (or any related trust)of the Company or any of its
Subsidiaries or any Excluded Person, becomes the Beneficial Owner of 20%
or more of the common stock of the Company or of Voting Securities
representing 20% or more of the combined voting power of the Company
(such as a person or group, a "20% Owner"), except that (i) to Change of
Control,shall be deemed to have occurred solely by reason of such
beneficial ownership by a corporation with respect to which both more
than 70% of the common stock of such corporation and Voting Securities
representing more than 70% of the aggregate voting power of such
corporation are then owned, directly or indirectly, by the persons who
were the direct or indirect owners of the common stock and Voting
Securities of the Company immediately before such acquisition in
substantially the same proportions as their ownership, immediately
before such acquisition, of the common stock and Voting Securities of
the Company, as the case may be and (ii) such corporation shall not be
deemed a 20% Owner, or
The Incumbent Directors cease for any reason to constitute at least
two-thirds of the directors of the Company then serving; or
approval by the stock holders of the Company of a merger,
reorganization, consolidation, or similar transaction, or a plan or
agreement for the sale or other disposition of all or substantially all
of the consolidated assets of the Company or a plan of liquidation of
the Company (any of the foregoing transactions, a "Reorganization
Transaction") which, based on information included in the proxy and
other written materials distributed to the Company's stockholders in
connection with the solicitation by the Company of such stockholders
approval, is not expected to qualify as an Exempt Reorganization
Transaction; or
the consummation by the Company of a Reorganization Transaction that for
any reason fails to qualify as an Exempt Reorganization Transaction as
of the date of such consummation, notwithstanding the fact that such
Reorganization Transaction was expected to so qualify as of the date of
such stockholder approval.
Notwithstanding the occurrence of any of the foregoing events, a Change of
Control shall not occur with respect to an Eligible Director if, in advance of
such event, the Eligible Director agrees in writing that such even shall not
constitute a Change of Control.
2.9. "Change of Control Value" means the Fair Market Value of a Share on the
date of a Change of Control.
2.10. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and regulations and rulings thereunder. References to a particular section
of the Code include references to successor provisions of the Code or any
successor statute.
2.11. "Committee" has the meaning set forth in Article 3.
2.12. "Common Stock" means the common stock, $0.01 par value, of the Company.
2.13. "Company" has the meaning set forth in Section 1.1.
2.14. "Deferral Account" means the account or accounts maintained for an
Eligible Director pursuant to Section 7.2(c) hereof.
2.15. "Deferral Date" has the meaning set forth in Section 7.2(c).
2.16. "Deferred Share" means a Share that is granted to an Eligible Director
on a deferred basis upon such Eligible Director's election pursuant to Section
7.2(c) hereof.
2.17. "Disability" means a physical or mental condition which, with or
without reasonable accommodations and as determined by the Committee in good
faith, upon receipt of such medical advice as the Committee deems appropriate,
renders an individual unable or incompetent to perform the duties or
responsibilities of a director which condition has existed for 180 days and
which is expected to be permanent or of indefinite duration.
2.18. "Effective Date" has the meaning set forth in Section 1.1
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2.19. "Election Year" means the period commencing on the Annual Meeting of
Shareholders in any year and ending on the day before the Annual Meeting of
Shareholders the following year.
2.20. "Eligible Director" means (i) any individual serving as a director on
the Board of Directors of the Company immediately following the Annual Meeting
of Shareholders of the Company and (ii) any individual elected or appointed to
serve as director on the Board of Directors of the Company at some time other
than the Annual Meeting of Shareholders; provided, that a director who is an
officer of the Company or a Subsidiary or otherwise employed by the Company or a
Subsidiary shall not be an Eligible Director.
2.21. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to a particular section of the Exchange Act include references to
successor provisions.
2.22. "Excluded Person" means any Person who, along with such Person's
Affiliates and Associates (as such terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act) is the Beneficial Owner of
15% or more of the Shares outstanding as of the Effective Date, provided that
such Person, including such Person's Affiliates and Associates, does not
acquire, after the Effective Date hereof, additional Shares in excess of 1% of
the then outstanding Shares, exclusive of (i) Shares acquired by such Person and
such Person's Affiliates and Associates as a result of stock dividends, stock
splits, recapitalizations or similar transactions in which the Company did not
receive any consideration for issuing the Shares in question or as a result of
repurchases of stock by the Company; (ii) Shares acquired by such Person and
such Person's Affiliates and Associates as a result of gifts, devises, bequests
and intestate succession; and (iii) Shares acquired by such Person and such
Person's Affiliates and Associates as a result of participation by such Person
and such Person's Affiliates and Associates in any dividend reinvestment plan,
stock option plan or other similar plan or arrangement of the Company.
2.23. "Exempt Reorganization Transaction" means a Reorganization Transaction
which results in the Persons who were the direct or indirect owners of the
outstanding common stock and Voting Securities of the Company immediately before
such Reorganization Transaction becoming, immediately after the consummation of
such Reorganization Transaction, the direct or indirect owners of both or more
than 70% of the then-outstanding common stock of the Surviving Corporation and
Voting Securities representing more than 70% of the aggregate voting power of
the Surviving Corporation, in substantially the same respective proportions as
such Persons' ownership of the common stock and Voting Securities of the Company
immediately before such Reorganization Transaction.
2.24. "Fair Market Value" means (a) with respect to any property other than
Shares, the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee, and (b)
with respect to Shares, as of any date, )i) the average of the high and low
trading prices on such date on the New York Stock Exchange Composite
Transactions Tape (or, if no sale of Shares was reported for such date, on the
next preceding date on which a sale of Shares was reported), (ii) if the Shares
are not listed on the New York Stock Exchange, the average of the high and low
trading prices of the Shares on such other national exchange on which the Shares
are principally traded or as reported by the NASDAQ Stock Market. or similar
organization, or if no such quotations are available, the average of the high
bid and low asked quotations in the over-the-counter market; or (iii) in the
event that there shall be no public market for the Shares, the fair market value
of the Shares as determined by the Committee.
2.25. "Grant Date" has the meaning set forth in Section 5.1.
2.26. "including" or "includes" mean "including, without limitation," or
"includes, without limitation," respectively.
2.27. "Incumbent Directors" means, as of any date, individuals then serving
as members of the Board who were members of the Board as of the Effective Date;
provided that any subsequently-appointed or elected member of the Board whose
election, or nomination for election by stockholders of the Company or the
Surviving Corporation, as applicable, was approved by a vote or written consent
of a least two-thirds of the directors then comprising the Incumbent Directors
shall also thereafter be considered an Incumbent Director, unless the initial
assumption of office of such subsequently-elected or appointed director was in
connection with (i) an actual or threatened election consent, including a
consent solicitation, relating to the election or removal of one or more members
of the Board, (ii) a "tender offer" (as such term is used in Section 14(d) of
the Exchange Act), (iii) a proposed Reorganization Transaction, or (iv) a
request, nomination or suggestion of any Beneficial Owner of Voting Securities
representing 15% or more of the aggregate voting power of the Voting Securities
of the Company or the Surviving Corporation, as applicable.
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2.28. "Mandatory Retirement Age" means the age for mandatory retirement
according to the policy of the Board, if any, in place from time to time.
2.29. "Mature Shares" means Shares for which the holder thereof has good
title, free and clear of all liens and encumbrances, and which such holder
either (i) has held for at least six months or (ii) has purchased on the open
market.
2.30. "Option" means an option to purchase shares of Common Stock of the
Company.
2.31. "Option Agreement" means a written agreement by which an Option is
evidenced.
2.32. "Option Price" means the price at which a Share may be purchased by an
Eligible Director pursuant to an Option.
2.33. "Option Term" means the period beginning on the Grant Date of an Option
and ending on the expiration date of such Option, as specified in the Option
Agreement for such Option and as may, consistent with the provisions of the
Plan, be extended from time to time by the Committee prior to the expiration
date of such Option then in effect.
2.34. "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.35. "Plan" has the meaning set forth in Section 1.1.
2.36. "Reorganization Transaction" has the meaning set forth in Section
2.8(c).
2.37. "Retainer" shall mean the amount payable to an Eligible Director each
year for service on the Board whether payable in cash, Shares or Options as such
amount may be set from time to time by the Board, which initially shall be a
total of $60,000 per year in the form of of an Annual Fee in an amount of
$35,000 per year and an Annual Option Grant (described in Section 6.1) which has
value of approximately $25,000 per year.
2.38. "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the Exchange
Act , together with any successor rule, as in effect from time to time.
2.39. "SEC" means the United States Securities and Exchange Commission, or
any successor thereto.
2.40. "Section" means, unless the context otherwise requires, a Section of
the Plan.
2.41. "Section 16 Person" means a person who is subject to obligations under
Section 16 of the Exchange Act with respect to transactions involving equity
securities of the Company.
2.42. "Share" means a share of Common Stock.
2.43. "Subsidiary" means (a) any corporation of which more than 50% of the
Voting Securities are at the time, directly or indirectly, owned by the Company,
and (b) any partnership or limited liability company in which the Company has a
direct or indirect interest (whether in the form of voting power or
participation in profits or capital contribution)of more than 50%.
2.44. "Substitute Options" has the meaning set forth in Section 9.3.
2.45. "Surviving Corporation" means the corporation resulting from a
Reorganization Transaction or, if Voting Securities representing at least 50% of
the aggregate voting power of such resulting corporation are directly or
indirectly owned by another corporation, such other corporation.
2.46. "Termination of Affiliation" occurs on the first day on which an
individual is for any reason no longer serving as a Director of the Company.
2.47. "Voting Securities" of a corporation means securities of such
corporation that are entitled to vote generally in the election of directors,
but not including any other class of securities of such corporation that may
have voting power by reason of the occurrence of a contingency.
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Article 3. Administration
3.1. Committee. Subject to Article 10, and to Section 3.2, the Plan shall be
administered by the Board, or a committee of the Board appointed by the Board to
administer the Plan ("Plan Committee"). The number of members of the Plan
Committee shall from time to time be increased or decreased, and shall be
subject to such conditions, in each case as the Board deems appropriate to
permit transactions in Shares pursuant to the Plan to satisfy such conditions of
applicable securities or other laws then in effect. Any references herein to
"Committee" are references to the Board or the Plan Committee, as applicable.
3.2. Powers of Committee. Subject to the express provisions of the Plan, the
Committee has full and final authority and sole discretion as follows:
to determine the terms and conditions applicable to each Option,
Deferral Account, Deferred Share and other benefit hereunder including,
but not limited to, the Option Price, the Option Term;
to construe and interpret the Plan and to make all determinations
necessary or advisable for the administration of the Plan;
to make, amend, and rescind rules relating to the Plan, including rules
with respect to the exercisability and nonforfeitability of Options and
Deferred Shares upon the Termination of Affiliation of an Eligible
Director;
to determine the terms and conditions of all Option Agreements and,
with the consent of the Eligible Director, to amend any such Option
Agreement at any time, among other things, to permit transfers of
Options to the extent permitted by the Plan; provided that the consent
of the Eligible Director shall not be required for any amendment which
(i) does not adversely affect the rights of the Eligible Director, or
(ii) is necessary or advisable (as determined by the Committee)to carry
out the purpose of the grant Options as a result of any new, or change
in existing, applicable law;
to accelerate the exercisability (including exercisability within a
period of less than six months after the Grant Date) of, and to
accelerate or waive any or all of the terms and conditions applicable
to, any Option or any group of other benefits hereunder for any reason
and at any time, including in connection with a Termination of
Affiliation;
subject to Sections 1.3 and 5.2, to extend the time during which any
Option or other benefit may be exercised;
to delegate to officers, employees or independent contractors of the
Company matters involving the routine administration of the Plan and
which are not specifically required by any provision of this Plan to be
performed by the Committee;
to impose such additional terms and conditions upon the grant, exercise
or retention of Options and other grants as the Committee may, before
or concurrently with the grant thereof, deem appropriate, and
to take any other action with respect to any matters relating to the
Plan for which it is responsible.
All determinations on any matter relating to the Plan, any Option Agreement,
Deferral Election, Deferred Shares Deferral Account, or other agreement under
the Plan may be made in the sole and absolute discretion of the Committee, and
all such determinations of the Committee shall be final, conclusive and binding
on all Persons. No member of the Committee shall be liable for any action or
determination made with respect to the Plan or any Annual Option Grant.
3.3. Majority Rule. A majority of the members of the Committee shall
constitute a quorum, and any action taken by a majority present at a meeting at
which a quorum is present or any action taken without a meeting evidenced by a
writing executed by a majority of the whole Committee shall constitute the
action of the Committee.
3.4. Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to Eligible Directors and
such pertinent facts related thereto as the Committee may require. The Committee
shall furnish the Committee with such clerical and other assistance as is
necessary in the performance of its duties.
3.5. Plan Operation in Compliance with Rule 16b-3 of the 1934 Act. The Plan
shall be interpreted and administered to comply with Rule 16b-3 promulgated
under the 1934 Act, as then applicable to the Company's employee benefit plans.
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Article 4. Shares Subject to the Plan
4.1. Number of Shares Available. Subject to adjustment as provided in
Section 4.2, the number of Shares hereby reserved for delivery under the Plan is
the sum of (a) three hundred thousand (300,000) Shares, and (b) the Shares
previously reserved for delivery under the Prior Plan reduced by the number of
Shares issued pursuant to Awards under such Prior Plan; provided, that Annual
Option Grants made prior to presentation of this Plan for approval by
shareholders at the next Annual Meeting of Shareholders following the Effective
Date shall be made solely from treasury shares; provided further, that following
the presentation for approval at the Annual Meeting of Shareholders, Annual
Option Grants shall be made only if shareholders approve the Plan at such
meeting. If any Shares (whether subject to or received pursuant to an Annual
Option Grant under this or any other Plan, purchased on the open-market or
otherwise obtained) are applied as payment to the Company in connection with the
exercise of an Annual Option Grant hereunder, or the withholding of taxes
related thereto, such Shares shall reduce the number of Shares treated as issued
under this Plan. The Committee may from time to time determine the appropriate
methodology for calculating the number of Shares issued pursuant to the Plan.
4.2. Adjustments in Authorized Shares. In the event that the Committee
determines that any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization, stock split,
reverse stock split, subdivision, consolidation or reduction of capital,
reorganization, merger, scheme of arrangement, split-up, spin-off or combination
involving the Company or repurchase or exchange of Shares or other rights to
purchase Shares or other securities of the Company, or other similar corporate
transaction or event that occurs at any time after the Effective Date affects
the Shares such that any adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and types of Shares (or other securities or property of the
Company or any Person that is a party to a Reorganization Transaction with the
Company) with respect to which Options and Shares may be granted, (ii) the
number and type of Shares (or other securities or property of the Company or any
Person that is a party to a Reorganization Transaction with the Company) subject
to outstanding Options, and (iii) the grant or exercise price with respect to
any Option or, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Option or the substitution of other property for Shares
subject to an outstanding Option; provided, that the number of Shares subject to
any Option denominated in Shares shall always be a whole number.
Article 5. General Conditions of Options
5.1. Grant Date. The Grant Date of Options received (a) pursuant to an
Annual Option Grant shall be the date of the Annual Meeting of Shareholders in
the calendar year to which such grant relates or such later date as specified by
the Committee in the Option Agreement and (b) in lieu of cash in accordance with
an Eligible Director's election pursuant to Article 7 shall be the date of the
Annual Meeting of Shareholders for the calendar year to which such election
related unless otherwise provided in the Option Agreement.
5.2. Term. Subject to the following proviso, the Option Term shall be 10
years from the Grant Date, and shall be subject to earlier termination as herein
specified; provided, that any deferral of a cash payment or of the delivery of
Shares with respect to an Option that is exercised within ten years may, if so
permitted, extend more than 10 years after the Grant Date of the Annual Option
Grant to which the deferral relates.
5.3. Option Agreement. The terms and conditions of each Option shall be set
forth in an Option Agreement.
5.4. Option Price. The Option Price of an Option under this Plan shall be
100% of the Fair Market Value of a Share on the Grant Date; provided, however,
that any Option granted as a Substitute Option pursuant to Section 9.3 may be
granted at such Option Price as the Committee determines to be necessary to
achieve preservation of economic value as provided in Section 9.3.
5.5. Restrictions on Share Transferability. The Committee may include in the
Option Agreement such restrictions on any Shares acquired pursuant to the
exercise or vesting of an Option as it may deem advisable, including
restrictions under applicable federal securities laws.
5.6. Exercise. Unless otherwise specified in the Option Agreement, Options
(whether from an Annual Grant or pursuant to an Eligible Director's election
pursuant to Article 7) shall become fully exercisable on the first to occur of
the following:(a) the one-year anniversary of the Grant Date, (b) an Eligible
Director's death, (c) Termination of Affiliation on account of Disability, (d) a
Change of Control of the Company, (e) mandatory retirement upon attaining
Mandatory Retirement Age, and (f) retirement
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upon attaining age 65.
5.7. Payment. Options shall be exercised by the delivery of a written notice
of exercise to the Company, setting forth the number of Shares with respect to
which the Option is to be exercised, accompanied by full payment for the Shares
made by cash, personal check or wire transfer or, subject to the approval of the
Committee, any one or more of the following means:
Mature Shares, valued at their Fair Market Value on the date of
exercise; or
pursuant to procedures approved by the Committee, through the sale of
the Shares acquired on exercise of the Option through a broker-dealer
to whom the Eligible Director has submitted an irrevocable notice of
exercise and irrevocable instructions to deliver promptly to the
Company the amount of sale or loan proceeds sufficient to pay for such
Shares.
5.8. Termination of Affiliation. Except as otherwise provided in an Option
Agreement (including an Option Agreement as amended by the Committee), and
subject to the provisions of Section 9.1, the extent to which the Eligible
Director shall have the right to exercise an Option following Termination of
Affiliation shall be determined in accordance with the following provisions of
this Section 5.8.
For Cause. If an Eligible Director has a Termination of Affiliation for
Cause, any unexercised Option shall terminate effective immediately upon such
Termination of Affiliation for Cause;
On Account of Death, Disability, Retirement or Mandatory Retirement. If
an Eligible Director has a Termination of Affiliation on account of death,
disability, voluntary retirement on or after attaining age 65 or upon attaining
Mandatory Retirement Age, any unexercised Option whether or not exercisable
immediately before such Termination of Affiliation, may be exercised, in whole
or in part, at any time after such Termination of Affiliation (but in either
case only during the Option Term) by the Eligible Director or, after his or her
death, by (i)his or her personal representative or the person to whom the Option
is transferred by will or the applicable laws of descent and distribution, or
(ii) the Eligible Director's beneficiary designated in accordance with Article
8.
Involuntary Removal. If an Eligible Director is removed by the Company
other than for Cause including, but not limited to, the Company's decision not
to reslate such Eligible Director for reelection, any unexercised Option whether
or not exercisable immediately before such Termination of Affiliation, may be
exercised in whole or in part, at any time within the first six (6) months
following such Termination of Affiliation (but only during the Option Term) by
the Eligible Director or, after his death or her death, by (i) his or her
personal representative or the person to whom the Option is transferred by will
or the applicable laws of descent or distribution, or (ii) the Eligible
Director's beneficiary designated in accordance with Article 8.
Any Other Reason. If an Eligible Director has a Termination of
Affiliation for any other reason including, but not limited to, failure to be
reelected to the Board or voluntary resignation including failure to run for
reelection, any unexercised Option to the extent exercisable immediately before
such Termination of Affiliation, shall remain exercisable in whole or in part
for six (6) months after such Termination of Affiliation (but only during the
Option Term) by the Eligible Director or, after his or her death, by (A) his or
her personal representative or the person to whom the Option is transferred by
will or the applicable laws of descent and distribution, or (B) the Eligible
Director's beneficiary designated in accordance with Article 8.
5.9. Nontransferability of Annual Option Grants.
(i) Except as provided in Section 5.9(c) below, each Option shall
be exercisable only by the Eligible Director during the
Eligible Director's lifetime, or, if permissible under
applicable law, by the Eligible Director's guardian or legal
representative or by a transferree receiving such Annual
Option Grant pursuant to a qualified domestic relations order
(a "QDRO") as defined in the Code or Title I of the Employee
Retirement Income Security Act of 1974 or the rules
thereunder.
(ii) Except as provided in Section 5.9(c) below, no Option
(prior to the time Shares are issued) may be assigned,
alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Eligible Director otherwise than by will or by
the laws of descent and distribution or pursuant to a QDRO,
and any such purported assignment, alienation, pledge,
attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Subsidiary; provided,
that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
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(iii) To the extent and in the manner permitted by the
Committee, and subject to such terms and conditions as may be
prescribed by the Committee, an Eligible Director may transfer
an Option to (i) a spouse, sibling, parent or lineal
descendant (including a lineal descendant by adoption) (any of
the foregoing, an "Immediate Family Member") of the Eligible
Director; (ii) a trust, the primary beneficiaries of which
consist exclusively of the Eligible Director or Immediate
Family Members, or (iii) a corporation, partnership or similar
entity, the owners of which consist exclusively of the
Eligible Director or Immediate Family Members of the Eligible
Director.
Article 6. Annual Option Grants
6.1. Subject to the terms and provisions of this Plan, commencing on the
Effective Date and thereafter immediately following the Annual Meeting of
Shareholders in each subsequent year, each Eligible Director shall automatically
receive an Option to purchase a number of Shares equal to (a) multiplied by (b)
and divided by (c) where: (a) equals $15,000 on the Effective Date and
thereafter, $25,000, (b) equals four (4) and (c) equals the Fair Market Value of
Shares as of the date of the Annual Meeting of Shareholders; provided, that
fractional Shares shall be rounded up to the next larger whole number of Shares.
An Eligible Director who is not initially elected at the Annual Meeting of
Shareholders shall, within ten (10) days of becoming an Eligible Director,
receive a pro rata portion of the Annual Option Grant to purchase a number of
Shares equal to (x) multiplied by (y) and divided by (z) where: (x) equals
$25,000, (y) equals the number of full and partial quarters remaining until the
next Annual Meeting of Shareholders and (z) equals the Fair Market Value of
Shares as of the Grant Date; provided that fractional Shares shall be rounded up
to the next larger whole number of Shares.
Article 7. Annual Fees
7.1. Annual Fees. The Company shall pay each Eligible Director an Annual Fee
in such amount as may be set by the Board from time to time; provided, that such
Annual Fee shall be payable in equal quarterly installments (each an "Quarterly
Fee Installment," collectively "Quarterly Fee Installments") on March 31, June
30, September 30, and December 31, commencing on the first such date following
the Effective Date and; provided further, that Eligible Directors shall receive
such Quarterly Fee Installment only if serving on the Board as an Eligible
Director on the date such Quarterly Fee Installment is due and payable. The
Annual Fee shall be payable in cash unless an election to receive an alternative
form of payment pursuant to Sections 7.2 &7.3 has been properly filed with the
Company's secretary as set forth below.
7.2. Alternative Forms of Payment. In lieu of receiving the Annual Fee in
cash Quarterly Fee Installments as described in 7.1 above, an Eligible Director
may elect in accordance with Section 7.3 to receive all or a portion of the
Annual Fee in any one or any combination of the following alternative forms of
payment:
Shares. An Eligible Director may elect to receive quarterly installments
of Shares; provided, that the number of Shares delivered each quarter shall be
equal to the portion of the Quarterly Fee Installment subject to such Eligible
Director's election and otherwise payable on that date divided by the Fair
Market Value of Shares on the date the Quarterly Fee Installment is due;
provided further, that only whole Shares shall be delivered to such Eligible
Director and the remainder shall be payable in cash;
Options. An Eligible Director may elect to receive an Option to purchase
a number of Shares equal to (i) the Annual Fee or portion thereof subject to the
election, multiplied by (ii) four (4), and (iii) divided by the Fair Market
Value of a Share as of the Annual Meeting of Shareholders in the calendar year
to which the election relates.
Deferred Shares. An Eligible Director may elect to receive Shares on a
deferred basis ("Deferred Shares"). Upon an election under this Section 7.2(c),
quarterly installments of a number of Shares (including whole and fractional
Shares)equal to the amount of the Quarterly Fee Installment subject to such
election divided by the Fair Market Value of a Share on the date such Quarterly
Fee Installment is due shall be credited to a separate account (the "Deferred
Account") on the date such Quarterly Fee Installment is due. The Eligible
Director shall specify a date (the "Deferral Date") that is at least two years
after the date of such election to receive Shares from the Deferral Account;
provided, that Shares in the Deferral Account shall be delivered immediately
upon the Eligible Director's Termination of Affiliation for any reason and,
provided further, that to the extent the number of Shares to be delivered
includes fractional Shares, such fractional Shares, such fractional amounts
shall be payable in cash.
7.3. Form of Election. All elections made pursuant to this Article 7 shall
be made in accordance with this Section 7.3 as follows:
B-8
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An Eligible Director may elect with respect to any Election Year to
receive all or a portion of the Annual Fee due in such Election Year in
any of the alternative forms set forth in Section 7.2 above, by
completing a form (the "Election Form") designating in increments of at
least ten percent (10%) the portion of the Annual Fee due in such
Election Year that is subject to such election, identifying the
alternative form of payment and, if applicable, the Deferral Date and
filing the Election Form with the Company's Secretary.
An individual who is an Eligible Director as of the Effective Date of
this Plan may make such election with respect to Quarterly Fee
Installments not payable as of the date of the election and filing it
with the Company's Secretary at any time within the first thirty (30)
days following the Effective Date. Such Election shall be irrevocable
through the Election Year and remain in effect until the next Election
Form is filed.
For Election Years commencing after the Effective Date, elections must
be made by filing the Election Form prior to the beginning of the
Election Year to which such election relates. Such election may be
modified or revoked at any time before the beginning of the Election
Year to which it relates by filing a new Election Form. Elections shall
become irrevocable as of the date of the Annual Meeting of Shareholders
at the beginning of the Election Year to which such election relates,
remain irrevocable through that Election Year, and shall remain in
effect until the next Election Form is filed.
An individual who first becomes an Eligible Director at the Annual
Meeting of Shareholders at the start of the Election Year or who is
appointed or elected at some time after the Election Year commences
shall make such election within thirty (30) days of becoming an
Eligible Director and shall be effective with respect to any portions
of the Annual Fee not due and payable as of the date of the election.
Such Election shall be irrevocable through the Election Year and shall
remain in effect until the next Election Form is filed.
Article 8. Beneficiary Designation
Each Eligible Director under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Eligible Director, shall be in a form
prescribed by the Company, and will be effective only when filed by the Eligible
Director in writing with the Company during the Eligible Director's lifetime. In
the absence of such designation, benefits remaining unpaid at the Eligible
Director's death shall be paid to the Eligible Director's estate.
Article 9. Change of Control and Certain Corporate Transactions
9.1. Change of Control. If a Change of Control occurs, any unexercised
Option, whether or not exercisable on the date of such Change of Control, shall
thereupon be fully exercisable, in whole or in part.
9.2. Pooling of Interests Accounting. If the Committee determines:
that the consummation of a sale or merger of the Company (a "Closing")
is reasonably likely to occur but for the circumstances described in
this Section;
that, based on the advice of the Company's independent accountants and
such other factors that the Committee deems relevant, the grant of any
Option or exercise of some or all outstanding Options or any other
grant hereunder would preclude the use of pooling of interests
accounting ("pooling") after the Closing; and
the preclusion of pooling can reasonably be expected to have a material
adverse effect on the terms of such sale or merger or on the likelihood
of a Closing (a "Pooling Material Adverse Effect"), then the Committee
may:
(i) make adjustments to such Options (including the substitution, effective
upon such Closing, of Options denominated in shares or other equity securities
of another party to such proposed sale or merger transaction) or other grant
prior to the Closing so as to permit pooling after the Closing.
(ii) cause the Company to pay the benefits attributable to such Option
(including for this purpose not only the spread between the then Fair Market
Value of the Shares subject to such Option and the Option Price applicable
thereto, but also the
B-9
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additional value of such Options in excess of such spread, as determined by the
Committee) or other grant in the form of Shares if such payment would not cause
the transaction to remain or become ineligible for pooling; or
(iii) provided that the Committee has determined, based on the advice of the
Company's independent accountants and such other factors that the Committee
deems relevant, that no reasonable alternative is available to the Company to
prevent such a Pooling Material Adverse Effect, cancel any or all such Options
or other grant without the consent of any affected Eligible Director.
9.3. Substituting Options in Certain Corporate Transactions. In connection
with the Company's acquisition, however effected, of another corporation or
entity (the "Acquired Entity")or the assets thereof, the Committee may, at its
discretion, grant Options ("Substitute Options") associated with the stock or
other equity interest in such Acquired Entity ("Acquired Entity Option") held by
such Eligible Director immediately prior to such Acquisition in order to
preserve for Eligible Director the economic value of all or a portion of such
Acquired Entity Option at such price as the Committee determines necessary to
achieve preservation of economic value. Any shares issued pursuant to substitute
options under this section shall be in addition to the Shares under Section 4.1
hereof.
Article 10. Amendment, Modification, and Termination
10.1. Amendment, Modification, and Termination. Subject to the terms of the
Plan, the Board may at any time and from time to time, alter, amend, suspend and
terminate the Plan in whole or in part without the approval of the Company's
stockholders.
10.2. Adjustments Upon Certain Unusual or Nonrecurring Events. The Committee
may make adjustments in the terms and conditions of Options in recognition of
unusual or nonrecurring events (including the events described in Section
4.2)affecting the Company or the financial statements of the Company or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan.
10.3. Options Previously Granted. Notwithstanding any other provision of the
Plan to the contrary, no termination, amendment or modification of the Plan
shall adversely affect in any material way any Option previously granted under
the Plan, without the written consent of the Eligible Director who holds such
Option, provided that to the extent any Option shall be adversely affected by
any amendment or restatement to the Plan, the provisions of the Plan in effect
as of the date of Grant of such Option shall prevail.
Article 11. Additional Provisions
11.1. Successors. All obligations of the Company under the Plan with respect
to benefits granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise of all or substantially all of the
business or assets of the Company.
11.2. Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
11.3. Severability. If any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any other part of the Plan. Any Section or part
of a Section so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such Section or
part of a Section to the fullest extent possible while remaining lawful and
valid.
11.4. Requirements of Law. The granting of Options and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or stock exchanges as may be
required. Notwithstanding any provision of the Plan or any Option Agreement,
Eligible Directors shall not be entitled to exercise and the Company shall not
be obligated to deliver any Shares or other benefits to an Eligible Director, if
such exercise or delivery would constitute a violation by the Eligible Director
or the Company of any applicable law or regulation.
11.5. Notification Under Code Section 83(b). If the Eligible Director, in
connection with a grant hereunder makes the election permitted under Section
83(b) of the Code to include in such Eligible Director's gross income in the
year of transfer the amounts specified in Section 83(b) of the Code, then such
Eligible Director shall notify the Company of such election within
B-10
34
10 days of filing the notice of the election with the Internal Revenue Service,
in addition to any filing and notification required pursuant to regulations
issued under Section 83(b) of the Code. The Committee may, in connection with
the grant or at any time thereafter prior to such an election being made,
prohibit an Eligible Director from making the election described above.
11.6. Securities Law Compliance. If the Committee deems it necessary to
comply with any applicable securities law, or the requirements of any stock
exchange upon which Shares may be listed, the Committee may impose any
restriction on Shares acquired pursuant to grants hereunder as it may deem
advisable. All certificates for Shares delivered under the Plan shall be subject
to such stop transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the SEC, any
stock exchange upon which Shares are then listed, any applicable securities law,
and the Committee may cause a legend or legends to be placed on any such
certificates to refer to such restrictions. If so requested by the Company, the
Eligible Director shall represent to the Company in writing that he or she will
not sell or offer to sell any Shares unless a registration statement shall be in
effect with respect to such Shares under the Securities Act of 1933 or unless he
or she shall have furnished to the Company evidence satisfactory to the Company
that such registration is not required.
If the Committee determines that the exercise of, or delivery of Shares would
violate any applicable provision of securities laws or the listing requirements
of any stock exchange upon which any of the Company's equity securities are then
listed, then the Committee may postpone any such exercise or delivery, as
applicable, but the Company shall use all reasonable efforts to cause such
exercise or delivery to comply with all such provisions at the earliest
practicable date.
11.7. No Rights as a Stockholder. An Eligible Director shall not have any
rights as a stockholder with respect to the Shares which may be deliverable
until such shares have been delivered to him or her.
11.8. Governing Law. The Plan shall be construed in accordance with and
governed by the laws of the State of Alabama other than its laws respecting
choice of law.
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RUSSELL CORPORATION
Alexander City, Alabama
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - April 25, 2001
(This Proxy is solicited by the Board of Directors of the Company)
The undersigned shareholder of Russell Corporation (the "Company") hereby
appoints Herschel M. Bloom and Margaret M. Porter, and each of them, with full
power of substitution, proxies to vote the shares of stock which the undersigned
could vote if personally present at the Annual Meeting of Shareholders of
Russell Corporation to be held at the general offices of the Company in
Alexander City, Alabama, on April 25, 2001 at 11:00 a.m., Central Daylight Time,
or any adjournment thereof.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR ELECTION OF THE PERSONS
NOMINATED BY THE BOARD OF DIRECTORS AS DIRECTORS AND FOR THE PROPOSAL TO APPROVE
THE ADOPTION OF THE RUSSELL CORPORATION 2000 NON-EMPLOYEE DIRECTORS'
COMPENSATION PLAN.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
- FOLD AND DETACH HERE -
PLEASE COMPLETE THIS CARD
AND RETURN IT IN
THE ENVELOPE PROVIDED
36
Please mark your vote as
indicated in this example [X]
1. ELECTION OF DIRECTORS - For terms expiring with the Annual Meeting of
Shareholders in 2004: Tim Lewis, C.V. Nalley III, John R. Thomas, John
A. White. For a term expiring with the Annual Meeting of Shareholders
in 2002: Mary Jane Robertson
[ ] FOR all nominees above [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for all nominees above
INSTRUCTION: To withhold authority to vote for an individual nominee,
write his or her name in the space provided below.
- -------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE RUSSELL CORPORATION 2000 NON-EMPLOYEE
DIRECTORS' COMPENSATION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN WITH RESPECT TO
proposal to approve the Russell Corporation 2000 Non-Employee
Directors' Compensation Plan as described in the Proxy Statement of the
Company dated March 23, 2001.
3. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.
------------------------------------------
------------------------------------------
Signature(s) of Shareholder
Date 2001
-----------------------,
PLEASE DATE AND SIGN EXACTLY AS NAME APPEARS
ON THIS PROXY. IF SHARES ARE HELD JOINTLY,
EACH SHAREHOLDER SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC. SHOULD USE
FULL TITLE AND, IF MORE THAN ONE, ALL SHOULD
SIGN. IF THE SHAREHOLDER IS A CORPORATION,
PLEASE SIGN FULL CORPORATE NAME BY AN
AUTHORIZED OFFICER.
- FOLD AND DETACH HERE -
DETACH CARD Please detach proxy at perforation before mailing.
VOTE BY MAIL
Return your proxy in the
POSTAGE-PAID envelope
provided
Your vote must be received by 5:00 p.m. Eastern Time
on April 24, 2001, to be counted in the final tabulation.
VOTE BY MAIL
Please mark, sign and date your proxy card and return it in the postage-paid
envelope provided or return it to: SunTrust, P.O. Box 4625, Atlanta, GA 30302.
TO CHANGE YOUR VOTE
Any subsequent vote be any means will change your prior vote. The last vote
received before 5:00 p.m. Eastern Time, April 24, 2001, will be the one counted.
You may also revoke your proxy by voting in person at the Annual Meeting.