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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]
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 (the
"Annual Meeting") of Russell Corporation (the "Company") will be held on
Wednesday, April 22, 1998, at 10:30 a.m., Central Daylight Time, at the general
offices of the Company in Alexander City, Alabama, for the following purposes:
(1) To elect four directors to the Board of Directors for terms of
three years each;
(2) To consider and take action on certain amendments to the 1993
Executive Long-Term Incentive Plan in the manner described in
the accompanying Proxy Statement; 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 4, 1998, are entitled to notice of and to vote upon all matters at the
Annual Meeting.
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 is hereby given may be transacted at any such
adjournment.
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
STEVE R. FOREHAND
Secretary
Russell Corporation
Alexander City, Alabama 35011
March 19, 1998
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RUSSELL CORPORATION
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PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 22, 1998
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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 in Alexander City, Alabama, on
Wednesday, April 22, 1998, at 10:30 a.m., Central Daylight Time, and at any
adjournment thereof (the "Annual Meeting"). It is contemplated that the Proxy
Statement and accompanying proxy will initially be mailed to shareholders on or
about March 19, 1998.
Shares represented by a properly executed proxy in the accompanying form
will be voted at the 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 and FOR the
proposal to amend the 1993 Executive Long-Term Incentive Plan described herein.
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, executing and delivering to the Company a later dated proxy reflecting
contrary instructions or appearing at the Annual Meeting and taking appropriate
steps to vote in person.
ELECTION OF DIRECTORS
The Bylaws of the Company ("Bylaws") provide for a Board of Directors of
not less than nine nor more than 15 members. In addition, the Bylaws also
provide that the Board of Directors shall set the number of directors within the
specified limitations by resolution adopted by a majority of the entire Board of
Directors and that the Board will be divided into three classes, as nearly equal
in number as possible, each of which will serve for three years. On February 28,
1996, a majority of the Board of Directors adopted a resolution which
established the size of the Board of Directors at ten members, effective April
24, 1996. It is proposed to elect four directors to serve until the Annual
Meeting of Shareholders in 2001 and until their successors have been duly
elected and qualified. Proxies cannot be voted for more than four persons. It is
intended that shares represented by the Board of Directors' proxies will be
voted for the election of the following four persons:
NOMINEES TO SERVE UNTIL ANNUAL MEETING OF SHAREHOLDERS IN 2001:
YEAR FIRST SHARES
NAME, AGE AND ELECTED DIRECTOR BENEFICIALLY
PRINCIPAL OCCUPATION OF THE OWNED AS OF PERCENT
OF NOMINEE COMPANY MARCH 4, 1998 OF CLASS(6)
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C.V. Nalley III(55) 1989 1,000 --
Chief Executive Officer,
The Nalley Companies
Atlanta, Georgia
automobile and truck sales
and leasing companies
John R. Thomas (61) 1966 596,756(1) 1.64
Chairman, President and
Chief Executive Officer,
Aliant National Corporation
Alexander City, Alabama
a bank holding company
John A. White (58) 1992 2,000 .01
Chancellor,
University of Arkansas
Fayetteville, Arkansas
Tim Lewis (42) 1995 100 --
President,
T.A. Lewis & Associates, Inc.
Birmingham, Alabama
telecommunications consultants
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EACH OF THE DIRECTORS NAMED BELOW WILL CONTINUE IN OFFICE AFTER THE ANNUAL
MEETING UNTIL HIS OR HER TERM EXPIRES AS INDICATED:
ANNUAL MEETING YEAR FIRST SHARES
AT WHICH ELECTED DIRECTOR BENEFICIALLY
NAME, AGE AND TERM OF THE OWNED AS OF PERCENT
PRINCIPAL OCCUPATION EXPIRES COMPANY MARCH 4, 1998 OF CLASS(6)
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Herschel M. Bloom (54) 1999 1986 5,734 .02
Partner,
King & Spalding
Atlanta, Georgia
attorneys
Ronald G. Bruno (46) 1999 1992 6,268 .02
President,
Bruno Capital
Management Corporation
Birmingham, Alabama
an investment company
John C. Adams (59) 2000 1991 756,761(2)(3) 2.08
Chairman, President and Chief
Executive Officer of the Company
James D. Nabors (55) 2000 1988 1,433,080(2)(3)(4) 3.93
Executive Vice President and
Chief Financial Officer
of the Company
Benjamin Russell (60) 2000 1963 5,890,186(5) 16.15
Chairman and
Chief Executive Officer,
Russell Lands, Incorporated
Alexander City, Alabama
a land and timber company
Margaret M. Porter (47) 2000 1997 1,100 -
Civic Volunteer
Birmingham, Alabama
(1) Includes 110,135 shares owned directly or indirectly, 32,372 shares held
by the Finis Morgan Family Trust, of which Mr. Thomas is one of three
trustees, and 454,249 shares owned indirectly by Mr. Thomas as a general
and limited partner in two limited partnerships. See also Security
Ownership of Management on page 22.
(2) The shares of the Company's Common Stock owned by Messrs. Adams and
Nabors include 80,000 and 37,000 shares, respectively, which may be
acquired by them pursuant to options granted under the Company's
existing stock option plans described below, which options may be
exercised within sixty days of the date of this Proxy Statement. See
also Security Ownership of Management on page 22.
(3) Messrs. Adams and Nabors are two of the trustees of the Company's
pension plan, which owns 600,960 shares of the Company's Common Stock.
As such trustees, they have the right to vote such shares. These shares
are included in the shares shown as beneficially owned by each of such
persons.
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(4) Includes 731,296 shares held by the Benjamin and Roberta Russell
Foundation, Incorporated, a charitable corporation of which Mr. Nabors
is one of nine directors, 32,372 shares held by the Finis Morgan Family
Trust, of which Mr. Nabors is one of three trustees and 21 shares owned
by the Thomas D. Russell Marital Trust, of which Mr. Nabors is one of
two trustees. Mr. Nabors disclaims any beneficial ownership as to all of
such shares.
(5) Includes 731,296 shares held by the Benjamin and Roberta Russell
Foundation, Incorporated, a charitable corporation of which Mr. Russell
is one of nine directors, 3,945,024 shares held by a trust created under
the will of Benjamin C. Russell, of which Mr. Russell is one of four
trustees and 225,000 shares held by the Adelia Russell Charitable
Foundation, of which Mr. Russell is one of three trustees.
(6) Does not include shares to be awarded with respect to fiscal year 1997
pursuant to the 1997 Non-Employee Directors' Stock Grant, Stock Option
and Deferred Compensation Plan discussed on page 4 of this Proxy
Statement.
With the exceptions of Tim Lewis and Margaret M. Porter each of the
above named persons has been a director of the Company for at least the last
five years. Except as noted in the remainder of this paragraph, each of the
above named persons has held the same or comparable positions with the indicated
entities for at least the last five years. Mr. Lewis has served since 1987 as
President of T.A. Lewis &Associates, Inc., a telecommunications consulting
company. From 1983 to 1987 he served as a marketing and sales executive for
Signal Communications, a national long distance telecommunications company.
Margaret M. Porter has served since 1992 as Chairman of McWane Center in
Birmingham, Alabama. McWane Center is a non-profit organization which promotes
the public understanding and appreciation of science, technology and the
environment and is a statewide resource for Alabama schools. From 1984 to 1996,
Ms. Porter served on the Mtn. Brook (Alabama) City Council, serving as President
of the Council during the 1992-1996 term and as Mayor from July, 1996 to
October, 1996. Ms. Porter has also served in various Alabama public interest
organizations including the Board of Trustees of The Children's Hospital of
Alabama, the Board of Directors of the Alabama School of Fine Arts Foundation
and as Chairman of the Literacy Council of Central Alabama.
John R. Thomas is a director of Alfa Corporation. Ronald G. Bruno is a
director of Bruno's, Inc., SouthTrust Bank, N.A. and Books-A-Million, Inc.
Herschel M. Bloom is a director of Post Properties, Inc. John C. Adams is a
director of The Southern Company. John A. White is a director of Motorola, Inc.,
Logility, Inc. and Eastman Chemical Company.
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
the office of director as the Board of Directors of the Company may then
recommend. The Board of Directors has no reason to believe that any of the
persons named will be unable or will decline to serve if elected.
The Company has an Executive Committee consisting of John C. Adams and
James D. Nabors, which is authorized to act in place of the Board of Directors
between meetings of the Board. The Executive Committee held eight meetings
during 1997.
The Company has an Executive Compensation Committee consisting of C.V.
Nalley III, Herschel M. Bloom and Ronald G. Bruno, which supervises the
Company's Executive Incentive Program. The Compensation Committee held two
meetings during 1997.
The Company has an Audit Committee consisting of John A. White, Herschel
M. Bloom, Ronald G. Bruno, Tim Lewis, C.V. Nalley III, Margaret M. Porter,
Benjamin Russell, and John R. Thomas, which recommends to the Board of Directors
the independent accountants selected to be the Company's auditors and reviews
the audit plan, financial statements and audit results. The Audit Committee held
one meeting during 1997.
The Company has a Nominating Committee which recommends candidates for
election to the Company's Board of Directors. The Nominating Committee consists
of Herschel M. Bloom, Margaret M. Porter, Benjamin Russell, John R. Thomas and
John A. White and held one meeting in 1997.
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During the year ended January 3, 1998, the Board of Directors of the
Company held four 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.
Members of the Board who are not employees of the Company receive a
quarterly retainer of $3,750 and a fee of $1,000 for each meeting attended.
Members of committees of the Board who are not employees of the Company receive
$650 per quarter (except the chairman who receives $1,300 per quarter). In
addition, under the Russell Corporation 1997 Non-Employee Directors' Stock
Grant, Stock Option and Deferred Compensation Plan (the "Directors' Plan"),
which was adopted by the Board of Directors on July 23, 1997, each non-employee
director of the Company (an "Eligible Director") receives annually (i) shares of
Common Stock having a value of $5,000, based upon the market value of the Common
Stock on the date of grant and (ii) an option to purchase shares of Common
Stock, exercisable for ten years at a price equal to the market value of the
Common Stock on the date of grant, having, based upon the number of shares
subject thereto, an economic value of $5,000. In addition, the Directors' Plan
allows an Eligible Director to defer the payment of fees to such director at a
fixed rate of interest and to defer the receipt of Common Stock granted pursuant
to the Directors' Plan. Two hundred thousand (200,000) shares of Common Stock
are presently authorized to be issued under the Directors' Plan.
In connection with the adoption of the Directors' Plan, the Board of
Directors terminated the Company's previous policy respecting payment of
compensation to directors who retired after at least six years of service and
who had not, at the time of such retirement, served within the previous ten
years as a corporate officer. The Company established an account with respect to
the accrued benefit for each director who had not retired on the date of
termination of such policy consisting of "phantom units" of Company Common Stock
having a value equal to the accrued benefit of such director on the date of
termination of the policy. Such "phantom units" will be adjusted by crediting
additional "phantom units" equivalent to the shares of Common Stock which could
be acquired by reinvestment if amounts equivalent to the cash dividends on the
Company's Common Stock were paid with respect to the "phantom units." Such
"phantom units" will be further adjusted to reflect stock dividends, stock
splits and other similar changes in the Company's capitalization. Upon
retirement, such director will receive shares of Common Stock equal to the
number of "phantom units" in such director's account on the date of retirement.
PROPOSED AMENDMENTS TO THE
RUSSELL CORPORATION
1993 EXECUTIVE LONG-TERM INCENTIVE PLAN
In 1993, the shareholders of the Company approved the establishment of
the Russell Corporation 1993 Executive Long-Term Incentive Plan, which plan was
amended at the 1997 Annual Meeting of Shareholders (as amended, the "1993
Plan"). The 1993 Plan's purpose is to enable the Company and its affiliates to
attract, retain and motivate key employees and to reward such employees when
superior returns are provided to the Company's shareholders.
The Board of Directors believes the 1993 Plan is a key element of the
Company's Executive Incentive Program (described in this Proxy Statement under
the caption "EXECUTIVE COMPENSATION") because it ties executive compensation
directly to performance of the Company. In order to make the 1993 Plan more
effective, and in order to permit certain cash award payments to be fully
deductible for federal income tax purposes, the Board of Directors has
unanimously approved, subject to shareholder approval, certain amendments to the
1993 Plan ("the Amendments"). The complete text of the Amendments is attached to
this Proxy Statement as Annex A.
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DESCRIPTION OF EXISTING PLAN
GENERAL
Persons eligible to participate in the 1993 Plan include all officers
and key employees of the Company, including directors who are also salaried
employees of the Company and its subsidiaries. The 1993 Plan is presently
administered by the Executive Compensation Committee of the Board of Directors
(the "Committee").
The 1993 Plan presently provides the Committee broad discretion to
fashion the terms of awards in order to provide eligible participants with
incentives as the Committee deems appropriate. The 1993 Plan presently provides
for the issuance of awards in a variety of forms, including:(i) restricted
stock, (ii) incentive stock options, (iii) non-qualified stock options
(incentive and non-qualified stock options are referred to collectively as
"options"), (iv) stock appreciation rights, and (v) performance share and
performance unit awards.
The 1993 Plan presently provides for the grant of up to 2,000,000 shares
of the Common Stock of the Company. Under certain circumstances, shares subject
to an award that remain unissued upon termination of the award are available for
additional awards under the 1993 Plan. In the event of a stock dividend, stock
split, recapitalization or similar event, the Committee equitably adjusts the
aggregate number of shares subject to the 1993 Plan, the number of shares
subject to, or forming the basis for, each outstanding award and the exercise
prices of outstanding options.
The 1993 Plan may be amended, modified or terminated by the Committee.
However, without shareholder approval, no such amendment, modification or
termination may: (a) with limited exceptions, materially increase the total
number of shares which may be issued, (b) materially modify the eligibility
requirements for participation or (c) materially increase the benefits accruing
to participants. Unless earlier terminated by the Board of Directors or
shareholders, the issuance of awards under the 1993 Plan will cease as of
January 1, 2003.
TYPES OF AWARDS
Stock Options. Stock options granted under the 1993 Plan provide for
purchase of the Company's Common Stock at prices not less than 100% of the fair
market value thereof on the date the option is granted (or such higher
percentage of fair market value as may be required for the option to qualify as
an incentive stock option if such option is to be an incentive stock option). No
option granted may be exercisable later than the tenth anniversary date of its
grant (or such shorter period as may be required to qualify the option as an
incentive stock option if such option is to be an incentive stock option).
Options granted under the 1993 Plan are to be exercisable at such times
and subject to such restrictions and conditions as the Committee shall approve,
but in no event may any option be exercisable prior to six months following its
grant. Options may only be transferred under the laws of descent and
distribution and may be exercisable only by the participant during the
participant's lifetime. The exercise price is payable in cash or in shares of
Common Stock of the Company having a fair market value equal to the exercise
price or in a combination of cash and such shares. The Committee may also allow,
along with other means of exercise, cashless exercise as permitted under the
Federal Reserve Board's Regulation T, subject to applicable securities laws.
Upon the death, disability or retirement of a participant, all outstanding
options immediately vest and become exercisable for the shorter of their
remaining term or one year after termination of employment in the case of death
or disability, and three years after termination of employment in the case of
retirement. Upon termination of employment of a participant for any reason other
than set forth in the preceding sentence, all options held by the participant
which are not vested as of the effective date of termination are forfeited and
options which are vested as of the effective date of termination may be
exercised for three months following the effective date of termination of
employment; provided, however, the Committee, in its sole discretion, may
immediately vest all or any portion of the options of a participant which are
not vested as of such date. If
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employment of a participant is terminated by the Company for cause, all
outstanding options held by the participant are forfeited immediately to the
Company and no additional exercise period is allowed, regardless of whether any
of the options are vested.
Stock Appreciation Rights. Stock appreciation rights ("SARs") granted
under the 1993 Plan may take the form of Affiliated SARs, Freestanding SARs and
Tandem SARs. Affiliated SARs may be granted in connection with a related option
and are automatically exercised upon exercise of the related option, with a
grant price being equal to the option price of the related options. Freestanding
SARs may be granted independent of the grant of any option with a grant price at
least equal to the fair market value of a share of Common Stock on the date of
grant. Tandem SARs are granted in conjunction with a related option at a grant
price equal to the option price of the related option. Either the option or the
Tandem SAR will be adjusted for exercise of the other. The term of any SAR
granted under the 1993 Plan may not exceed ten years.
Upon exercise of a SAR, the participant will receive the difference
between the fair market value of a share of Common Stock on the date of exercise
and the grant price multiplied by the number of shares with respect to which the
SAR is exercised. Payment due upon exercise of a SAR may be in cash, in shares
of Common Stock having a fair market value equal to the value of the SAR being
exercised, or partly in cash and partly in shares of Common Stock, as determined
by the Committee in its discretion. The Committee may impose restrictions on the
exercise of SARs. Upon the death, disability or retirement of a participant, all
outstanding SARs shall immediately vest and shall be exercisable for the shorter
of their remaining term or one year after termination of employment in the case
of death or disability and three years after termination of employment in the
case of retirement. Upon termination of employment of a participant for any
reason other than set forth in the preceding sentence, all SARs held by the
participant which are not vested as of the effective date of termination shall
be forfeited and SARs which are vested as of the effective date of termination
may be exercised for three months following the effective date of termination of
employment; provided, however, that the Committee, in its sole discretion, may
immediately vest all or any portion of the SARs of a participant which are not
vested as of such date. If employment of a participant is terminated by the
Company for cause, all outstanding SARs held by the participant are forfeited
immediately to the Company and no additional exercise period is allowed,
regardless of whether any of the SARs are vested. SARs may only be transferred
under the laws of descent and distribution and shall be exercisable during his
or her lifetime only by the participant.
Restricted Stock. The Committee may grant restricted shares of Common
Stock to such key persons, in such amounts, and subject to such terms and
conditions (which may depend upon or be related to performance goals and other
conditions) as the Committee shall determine in its discretion. Restricted stock
awards may be made independently of or in connection with any other award under
the 1993 Plan. Certificates for the shares of Common Stock covered by the award
have appropriate restrictive legends placed on them with respect to such
restrictions. Subject to the applicable restrictions, the grantee has the rights
of a shareholder with respect to the restricted stock, including the right to
vote and to receive dividends with respect to such shares. The shares of
restricted stock may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable restriction period
established by the Committee or upon earlier satisfaction of any other
conditions specified by the Committee in its sole discretion. In addition, no
restricted stock granted under the Plan may become vested in a participant
sooner than six months following the date of its grant. In the event employment
of a participant is terminated by reason of death, disability or retirement, all
outstanding shares of restricted stock immediately become 100% vested as of the
date of employment termination. In the event employment of a participant shall
terminate for any other reason, all shares of restricted stock held by the
participant which are not vested as of the effective date of termination of
employment are immediately forfeited and returned to the Company; provided,
however, that the Committee, in its sole discretion, has the right, except in
the case of termination of employment for cause, to provide for the lapsing of
restrictions on the restricted stock following employment termination, upon such
terms and provisions as it deems proper.
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Performance Shares and Performance Units. The Committee may grant
Performance Share and Performance Unit awards to such key persons, in such
amounts, and subject to such terms and conditions as the Committee shall in its
discretion determine. The grantee of such awards receives payment of the value
of a Performance Share or Performance Unit earned in cash or shares of Common
Stock, or in a combination of cash and shares of Common Stock, which have an
aggregate fair market value equal to the value of the earned Performance Shares
or Performance Units at the close of the applicable performance period, in such
combination as the Committee shall, in its sole discretion, determine. In the
event the employment of a participant is terminated by reason of death,
disability, retirement, or involuntary termination without cause during the
performance period, the participant shall receive a prorated payout of the
Performance Units and Performance Shares earned, which shall be determined by
the Committee, in its sole discretion, and shall be based upon the length of
time the participant held the award during the performance period and shall be
further adjusted based upon the achievement of the pre-established performance
goals. Such payment in the event of termination shall be made at the same time
as payments are made to participants who did not terminate employment during the
applicable performance period; provided, however, that the Committee, in its
sole discretion, shall have the power to accelerate the payment of Performance
Units and Performance Shares to participants whose employment has terminated. In
the event that a participant's employment terminates for any reason other than
the foregoing reasons, all Performance Units and Performance Shares are
forfeited by the participant to the Company. Performance Units and Performance
Shares may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent and distribution.
During the participant's lifetime, the participant's rights under the 1993 Plan
are exercisable only by the participant.
CHANGE IN CONTROL
In the event that (i) any "person," including a "group," as such terms
are defined under the Securities Exchange Act of 1934 (other than those persons
in control of the Company as of January 1, 1993, or other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or a corporation owned directly or indirectly by the shareholders of
the Company in substantially the same proportions as their ownership of stock of
the Company) acquires beneficial ownership of more than thirty percent of the
outstanding shares of Common Stock, (ii) during any period of two consecutive
years, there is a change in the majority of the members of the Board of
Directors without approval of incumbent board members, (iii) the shareholders of
the Company approve a plan of complete liquidation of the Company, an agreement
for the sale or disposition of all or substantially all the Company's assets or
a merger, consolidation or reorganization of the Company with or involving any
other corporation, other than in a transaction that would result in the voting
securities of the Company outstanding immediately prior to such transaction
continuing to represent at least fifty percent of the outstanding Common Stock
of the Company immediately after such transaction, then any option or
SAR outstanding under the 1993 Plan becomes fully vested and fully exercisable,
any restriction periods and restrictions imposed on restricted stock lapse, the
target value obtainable under all Performance Units and Performance Shares is
deemed to have been fully earned for the entire performance period and the
Committee may, in its discretion, make any other modifications to any awards as
determined by the Committee to be appropriate before the effective date of such
transaction.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1993 PLAN AWARDS
General. The following brief description of the tax consequences of
awards under the 1993 Plan is based upon present General Federal tax laws and
does not purport to be a complete description of the Federal tax consequences of
the 1993 Plan. The following discussion assumes that the restrictions on
deductibility of compensation by the Company are not subject to or meet the
requirements for an exception from the provisions of Section 162(m) of the
Internal Revenue Code of 1986 (the "Code").
There are generally no Federal tax consequences either to the optionee
or to the Company upon the grant of an option. On exercise of an incentive stock
option, the optionee will not recognize any income and the Company will not be
entitled to a deduction for tax purposes, although such exercise may give rise
to liability
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for the optionee under the alternative minimum tax provisions of the Code.
Generally, if the optionee disposes of shares acquired upon exercise of an
incentive stock option within two years of the date of grant or one year of the
date of exercise, the optionee will recognize compensation income and the
Company will be entitled to a deduction for tax purposes in the amount of the
excess of the fair market value of the shares of common stock on the date of
exercise over the option exercise price. Otherwise, the Company will not be
entitled to any deduction for tax purposes upon disposition of such shares, and
the entire gain for the optionee will be treated as a capital gain. On exercise
of a non-qualified stock option, the amount by which the fair market value of
the common stock on the date of exercise exceeds the option exercise price will
generally be taxable to the optionee as compensation income and will generally
be deductible for tax purposes by the Company. The disposition of shares of
Common Stock acquired upon exercise of a non-qualified stock option will
generally result in a capital gain or loss for the optionee, but will have no
tax consequences for the Company.
The grant of a SAR, Performance Share or Performance Unit award will not
result in income for the grantee or in a tax deduction for the Company. Upon the
settlement of such a right or award, the grantee will recognize ordinary income
equal to the fair market value of any shares of common stock and/or any cash
received and the Company will be entitled to a tax deduction in the same amount.
An award of restricted shares of Common Stock will not result in income for the
grantee or in a tax deduction for the Company until such time as the shares are
no longer subject to forfeiture unless the grantee elects otherwise. At that
time, the grantee generally will recognize ordinary income equal to the fair
market value of the shares less any amount paid for them and the Company will be
entitled to tax deduction in the same amount. Dividends paid on forfeitable
restricted shares are treated as compensation for Federal tax purposes.
Performance Measures. Under Section 162(m) of the Code, in order for
awards under the 1993 Plan to certain specified persons (generally the person
serving as chief executive officer at the end of the Company's fiscal year and
the four other most highly compensated officers at such time (each, a "Covered
Employee") to be fully deductible by the Company for federal income tax
purposes, in the event the total compensation paid to a Covered Employee exceeds
$1 million dollars during the Company's fiscal year, awards under the 1993 Plan
to such Covered Employees (other than stock options the value of which is based
solely on the increase in the value of the stock after the date of the grant or
the award) must be paid solely on account of attainment of one or more
pre-established, objective performance goals. The 1993 Plan provides that until
the shareholders approve a change in the general performance measures set forth
in the 1993 Plan, awards granted to Covered Employees designed to qualify for
the performance-based exception under Section 162(m) of the Code shall be based
upon one or more of the following performance measures selected by the
Committee; return on equity; earnings per share; operating cash flow; income
before taxes; net income; return on revenue; total shareholder return; and stock
price appreciation of the Company's Common Stock.
The Committee maintains full discretion with respect to the performance
targets to be established with respect to the performance measure or measures
chosen from among the foregoing authorized performance measures. Under the 1993
Plan, as more particularly described under the caption "EXECUTIVE COMPENSATION -
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION - LONG-TERM
INCENTIVE PLAN," the Company presently utilizes only stock options and
Performance Units under the 1993 Plan in connection with the Company's Executive
Incentive Program. The existing Performance Units awarded under the 1993 Plan
utilize total shareholder return to measure performance. While the Committee
does not presently anticipate changing total shareholder return as the
performance measure used with respect to Performance Units granted under the
1993 Plan, the Committee is permitted under the 1993 Plan to choose a different
performance measure from among those authorized with respect to awards under the
1993 Plan granted to Covered Employees designed to qualify for the
performance-based exception to Section 162(m) of the Code. The 1993 Plan also
provides that, while it is expected that awards made under the 1993 Plan will
generally be made in a manner which will allow for full deductibility of such
awards under Section 162(m) of the Code, the Committee retains discretion to
determine that awards under the 1993 Plan shall not be made in such a manner. In
addition, the 1993 Plan also provides that if Section 162(m) of the Code is
amended to provide greater flexibility with respect to awards made under the
1993 Plan, the Committee has the authority to make adjustments to such awards as
it deems appropriate.
- 8 -
11
DESCRIPTION OF THE AMENDMENTS TO THE 1993 PLAN
The following discussion summarizes the terms of the Amendments to the
1993 Plan. The Amendments will become effective immediately upon their adoption
by the shareholders of the Company.
Number of Shares Issuable Under 1993 Plan. The Board of Directors has
determined that, in order to provide the Company with necessary flexibility in
attracting, retaining and motivating key employees, the aggregate number of
shares of Common Stock of the Company authorized for issuance under the 1993
Plan and, as described below under the caption "Individual Award Limits," the
maximum awards to any individual participant, should be increased. Accordingly,
the Amendments increase the aggregate number of shares of Common Stock
authorized for issuance under the 1993 Plan from 2,000,000 to 4,000,000 shares,
no more than 750,000 shares of which may be issued in the form of Restricted
Shares, subject, as provided in the 1993 Plan, to adjustment in the event of a
recapitalization, stock dividend, stock split or similar event. As of March 4,
1998, 50,840 shares of Common Stock had been issued pursuant to the 1993 Plan
and there were outstanding under the 1993 Plan options to acquire 1,448,800
shares of the Common Stock of the Company.
Addition of Cash Awards to 1993 Plan. As part of its total executive
compensation program, the Company presently maintains a short-term incentive
plan (see "EXECUTIVE COMPENSATION - EXECUTIVE COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION - SHORT-TERM INCENTIVE PLAN") (the "Short-Term Incentive
Plan"). While compensation previously paid under the Short-Term Incentive Plan
has not been affected by the limitations on deductibility under Section 162(m)
of the Code, the Board of Directors has determined that it is advisable to make
awards under the Short-Term Incentive Plan subject to the provisions of the 1993
Plan in order to make such awards eligible for the exception for
"performance-based" compensation under Section 162(m) of the Code. Accordingly,
the Amendments will amend the 1993 Plan in several respects to provide generally
for the issuance of "Cash-Based Awards" and the method of payment of such
awards. Each "Cash-Based Award" shall have a target dollar amount, as determined
by the Committee, and shall be generally treated for purpose of the 1993 Plan in
a manner substantially similar to the manner in which awards of Performance
Units and Performance Shares are treated for purposes of the manner and timing
of payment, treatment in the event of a change in control of the Company and the
termination of awards in the event of the death, disability, retirement, or
termination of employment of the participant.
In connection with the authorization of Cash-Based Awards, the
Amendments add to the 1993 Plan an additional performance measure which may be
selected by the Committee for purposes of determining whether an award has been
earned - return on assets employed - which is the measure presently being
utilized with respect to determining the amount of an award earned under the
Short-Term Incentive Plan.
Individual Award Limits. In order for awards paid to Covered Employees
under the 1993 Plan to be fully tax deductible under Section 162(m) of the Code,
the 1993 Plan must provide for limitations on the size or amount of awards which
may be made to a participant during specified time periods. The Amendments amend
section 4.1(b) of the 1993 Plan to change the existing limitations on awards to
individual participants under the 1993 Plan to the following:
(i) A participant may not be awarded stock options to acquire more
than 500,000 shares of Common Stock during any fiscal year of
the Company. The 1993 Plan presently limits a participant to
receipt of options to acquire 50,000 shares of Common Stock
during any fiscal year of the Company.
(ii) A participant may not be granted SARs with respect to more than
500,000 shares of Common Stock during any fiscal year of the
Company. The 1993 Plan presently limits a participant to receipt
of SARs with respect to 50,000 shares of Common Stock during any
fiscal year of the Company.
- 9 -
12
(iii) A participant may not be granted more than 200,000 shares of
restricted stock during any fiscal year of the Company. The 1993
Plan presently limits a participant to the receipt of grants
with respect to 50,000 shares of restricted stock during any
fiscal year of the Company.
(iv) A participant may not be granted Performance Shares, Performance
Units or Cash-Based Awards during any fiscal year of the Company
having a maximum aggregate payout, measured at the time such
awards are granted, in excess of the value of 200,000 shares of
Common Stock of the Company on the date of grant. The 1993 Plan
presently provides that a participant may not be granted
Performance Shares or Performance Units with respect to
performance periods ending during or concurrently with the end
of any fiscal year of the Company which, measured at the times
such awards are granted, when aggregated with the value of all
other awards previously granted with respect to such performance
periods (determined at the time such other awards were granted),
have a maximum value (with respect to Performance Units) or a
fair market value on the date of grant, determined in accordance
with the provisions of the 1993 Plan (with respect to
Performance Shares) in excess of $700,000. Because Cash-Based
Awards were not previously subject to the provisions of the 1993
Plan, there are at present no limitations in the 1993 Plan on
the value or amount of Cash-Based Awards which may be granted to
a participant during any fiscal year of the Company.
Such limits constitute separate limits as to each participant with
respect to each type of award. Accordingly, a participant is permitted to
receive grants of awards of each type up to the limitations specified on grants
of such awards with respect to each period specified, without regard to whether
the participant has received a grant of another type of award with respect to
such period.
The 1993 Plan states that these share limits or the size of individual
awards are to be appropriately adjusted in the event of a recapitalization,
stock dividend, stock split, or similar event.
Exercise of Options. The Amendments remove the requirement under the
1993 Plan that an option granted under the 1993 Plan may not become exercisable
prior to six months following the date of its grant. This provision was included
in the 1993 Plan to comply with the requirements for exempting transactions
pursuant to the 1993 Plan from the "short-swing" profit provisions of Section
16(b) of the Securities Exchange Act of 1934. Such provision is no longer
required to be contained in the 1993 Plan in order for transactions under the
1993 Plan to qualify for such exemption and has been deleted.
Deferral of Payment of Awards. The Amendments amend the 1993 Plan to
permit the Committee to require participants to defer receipt of payment or
delivery of shares under the 1993 Plan under such rules and procedures as the
Committee may determine. The 1993 Plan presently allows the Committee to permit,
but not require, such deferrals.
PLAN BENEFITS
No payments of Performance Units were made under the 1993 Plan with
respect to the three-year award period ended January 3, 1998. The number of
Performance Units awarded under the 1993 Plan to the individuals named in the
Summary Compensation Table appearing elsewhere in this Proxy Statement in the
last fiscal year of the Company is described more fully under the caption
"EXECUTIVE COMPENSATION - LONG-TERM INCENTIVE PLAN AWARDS IN 1997" of the Proxy
Statement below. The number of Performance Units and the target value awarded
under the 1993 Plan to the Executive Group, the Non-Executive Director Group and
the Non-Executive Officer Employee Group in the Last fiscal year were 859,133
units and $859,133, 0 units and $0, and 0 units, and $0, respectively. The
threshold value of the payouts of such awards and the maximum value of the
payouts of such awards are 25% and 200%, respectively, of the target value of
such awards.
- 10 -
13
Information concerning stock options under the 1993 Plan that were
awarded during fiscal year 1997 under the 1993 Plan to such individuals is
described more fully under the caption "EXECUTIVE COMPENSATION -
OPTIONS/SAR GRANTS IN 1997" of the Proxy Statement below. The number of options
granted under the 1993 Plan to the Executive Group, the Non-Executive Director
Group and the Non-Executive Officer Employee Group in the last fiscal year was
67,100, 0, and 213,600, respectively. All options granted to persons in such
groups have an exercise price per share of $30.875 and an expiration date of
January 24, 2007.
Information concerning Short-Term Incentive Plan payments awarded to
individuals named in the Summary Compensation Table appearing elsewhere in this
Proxy Statement in the last fiscal year of the Company is described more fully
under the caption "EXECUTIVE COMPENSATION - SUMMARY COMPENSATION TABLE" of the
Proxy Statement below. The amount of Short-Term Incentive Plan payments awarded
in the last fiscal year of the Company to the Executive Group, the Non-Executive
Director Group and the Non-Executive Officer Employee Group were $188,200, $0,
and $602,400, respectively.
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 adoption of the Amendments. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
AMENDMENTS.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY AND OBJECTIVES
The 1993 Plan is a key component of the Executive Incentive Program (the
"Program") which encompasses all elements of compensation. The goals of the
Program are to support our overall objectives of enhancing shareholder value,
maintaining and improving our quality standards and maximizing our competitive
advantage resulting from vertical integration. This is accomplished through the
following practices:
1) Hiring and retaining the caliber of executive talent needed to
manage the Company currently as well as to position it
strategically for the future. A management team that is both
stable and performance-oriented, with a focus on teamwork, is
critical to our success;
2) Having a pay-for-performance philosophy throughout the Company
that integrates our compensation program with annual and
long-term strategic planning and that links incentive
compensation not only to Company performance but also to
individual and overall market performance;
3) Enhancing the pay-for-performance philosophy by placing a
substantial portion of pay for senior executives "at-risk"; and
4) Establishing the proper mix of program elements to appropriately
balance our financial, quality, customer, and strategic goals
for both the short-term and long-term.
The Program is designed to optimize the connection between executive
pay, corporate strategy and return to shareholders. Specifically, the Program is
intended to meet these objectives:
- Establish target awards
- Set corporate and business unit goals in concert with the
strategic planning process
- Communicate award opportunities in advance
- Focus executives' actions on appropriate needs and reward
true success
- Motivate participants
- 11 -
14
The Executive Compensation Committee (the "Committee") believes these
objectives are met by the Program.
ELEMENTS OF THE PROGRAM
The Program is comprised of the following elements:
Base salaries;
Short-term incentives; and
Long-term incentives.
The following describes the elements of the Program, as well as the 1993
Plan, in more detail.
BASE SALARIES
The Company's practice is to target base salaries for executives at the
50th percentile of the market. For salary comparison purposes, the "market"
includes companies in the Company's industry, in similar industries and those
with headquarters in smaller cities. The companies used for this market analysis
of compensation are different than those included in the Value Line Apparel
Index shown in the performance graph contained in this Proxy Statement. The
Committee believes the market for executive talent extends beyond the textile
and apparel industry and includes individuals whose experience includes a
manufacturing focus similar to the Company's. In addition, due to the Company's
location, the Committee does not believe market compensation amounts for
executives should be influenced by compensation at companies in areas with
higher costs of living.
In deciding the amount of specific salary increases, factors such as
overall responsibility, tenure, internal equity, market levels of pay, and, most
importantly, job performance, are considered. No specific weighting is assigned
to these factors. Salaries for executive officers were essentially at market
during 1997.
To ensure that executive salary levels continue to reflect the
Committee's philosophy, the Company intends to periodically conduct similar pay
comparisons, and did so in early 1997. The Committee believes that maintaining
competitive compensation will ensure that the Company has the executive
management expertise required for the future. Considering the entire
compensation package, the Committee believes that targeting base salaries at the
50th percentile of the market is a key element in the overall program to attract
and retain talented executives.
SHORT-TERM INCENTIVE PLAN
The Program is designed to motivate participants to achieve
predetermined goals for Return on Assets Employed ("ROAE") and quality. The
Committee believes the Program's performance orientation represents an
improvement over other plans used in prior years. Specifically, the short-term
incentive program includes the following elements:
1) Eligible participants include not only executives but also other
employees who fulfill key roles in the Company;
2) Target awards are established at the beginning of the year to
motivate participants and guide their efforts; and
3) Cash awards that reflect ROAE, quality and individual performance
results for the year are paid after the end of the year.
The plan's financial performance measure, ROAE, is measured at the
overall level for executives in corporate staff and manufacturing positions. For
this purpose, ROAE is defined as (a) net income before taxes and interest,
divided by (b) the sum of assets used in the business.
- 12 -
15
Target awards for executive officers are based upon the median of the
competitive market (as described in "Base Salaries" above). In assigning target
awards, the relative responsibility of each position also is considered. Based
upon this, target awards for some positions may be adjusted, on a subjective
basis, to be slightly above or below market levels. Executives at the business
unit level are measured on ROAE results at the single business unit level, with
a 75% weighting. Based upon their respective business unit, the executives'
remaining 25%of the financial performance portion of the award is based either
upon overall corporate ROAE results, or upon ROAE results for a combination of
select business units.
Target level awards are paid if the target ROAE goal is achieved. In
addition, if actual ROAE results are less than target ROAE but equal a
predetermined threshold, awards will be paid at one-half of target amounts. If
actual ROAE results are greater than target ROAE and equal or exceed a
predetermined maximum, awards will be paid at one and one-half times target
amounts. Awards for performance between these levels are made based upon an
interpolation within the range. Each award is paid at 120% of the amount derived
from this formula, but a participant's award is subject to downward adjustment
if the participant's performance evaluation, including contribution to achieving
the Company's quality goals, is less than "outstanding."
Incentive awards for three of the executives named in the Summary
Compensation Table in this Proxy Statement were based solely upon overall
corporate ROAE results. The incentive awards for the other executives were based
upon business unit ROAE results and ROAE results for a combination of business
units. Adjustments based upon individual performance were made to the payouts
for certain of the named officers in accordance with the provisions of the plan.
For 1997, the Executive Compensation Committee determined that corporate
ROAE performance was below the threshold level goal. For this reason, three of
the named executive officers received no awards. ROAE results for the business
unit under the supervision of one of the named executive officers were above
threshold but below target and results of one executive's business unit were at
maximum. In addition, awards for each of these executives were adjusted for
individual performance. Payments made to the named executives shown in the
Summary Compensation Table elsewhere in this Proxy Statement reflect these
results.
LONG-TERM INCENTIVE PLAN
The long-term incentive element of the 1993 Plan includes a variety of
stock based performance awards. The Committee presently intends that long-term
incentives be granted in the form of stock options and, for corporate officers
only, performance units. The Committee intends to balance the short-term
incentive payments with long-term stock options and performance units to reward
executives and key employees when superior returns are provided to shareholders.
With these elements, the Committee believes it has established a strong
link between the participants' long-term financial interests and the long-term
interests of our shareholders in the following manner:
1) Stock Options. Pay will be closely aligned with return to
shareholders since no benefit is received by participants unless
the stock price increases.
2) Performance Units. The long-term incentive element of the 1993
Plan focuses on the Company's Total Shareholder Return ("TSR"),
relative to both a broad market index (the S&P Industrials) as
well as to the Company's historical performance. TSR includes
stock price increases plus dividends, divided by beginning stock
price for the period of measurement. When the Company's TSR is at
the median of the S & P Industrials, and also at a predetermined
absolute level, target awards will be paid.
Stock option grants have been a component of previous incentive
programs. Under the 1993 Plan, the Committee made grants of stock options and
performance units to executive officers during 1997. Award sizes for each
position are below the median of the competitive market described under "Base
Salaries" above. The
- 13 -
16
economic value of the total long-term grants comes half from stock options and
half from performance units. The Committee worked with an independent consultant
when this plan was designed to determine these values and the resulting award
sizes. In making these grants, the Committee's intent was to make awards that
were competitive with the market on an annualized basis. For this reason, the
Committee did not consider existing stock holdings of executives, or prior
grants, in deciding the number of stock options or performance units to grant to
an executive officer. These awards are consistent with the Committee's goals for
the overall compensation program.
Payment of performance units would be made depending upon the
measurement of the Company's TSR over a three-year period, with a new three-year
period beginning each fiscal year. The primary comparison would focus on the
Company's TSR against that of the S & P Industrials Index (the "Index"). A
secondary comparison against the Company's historical performance could result
in a maximum reduction of 50% of awards otherwise earned. (The Committee's
determination of the amount of target awards is discussed above.) This secondary
comparison focuses on TSR for the period of measurement against the Company's
own historical performance.
Preliminary awards will be based upon comparing the Company's actual
TSR for a three-year performance period to the TSRs of each company in the
Index. If the Company's TSR ranks at the median of the Index companies, target
awards will be earned. If the Company's TSR is at a predetermined maximum
percentile (the 90th percentile), maximum awards (at two times target) will be
earned. Minimum non zero awards, at 50% of target awards, will be earned if the
Company's TSR is at a predetermined threshold percentile (the 33rd percentile).
If the Company's TSR ranks above threshold but below median, or above median but
below maximum, awards earned for performance between points will be interpolated
on a straight-line basis.
Next, the Company's actual TSR for the three-year period will be
compared against an absolute benchmark established at the inception of the plan
determined by using the Company's historical performance and the historical
performance of the Index. If the Company's actual three-year TSR is at or above
this absolute level, the preliminary awards earned based upon the relative TSR
comparison will be paid. However, if actual TSR is below this benchmark,
preliminary awards earned may be reduced by a maximum of 50%.
By measuring relative TSR, the Committee believes this plan rewards
executives for their contributions to Company performance, isolated from broad
stock market performance. By measuring absolute TSR, the Committee believes this
plan rewards executives appropriately based upon actual returns received by
shareholders.
The third three-year performance cycle for the performance unit plan
included the years 1995 through 1997. Because the Company's three-year TSR was
below the 33rd percentile TSR of the Index companies, no awards were earned for
this plan cycle.
SPECIFICS OF 1997 CEO COMPENSATION
During 1997, the compensation of the Chief Executive Officer, Mr. Adams,
consisted of the following:
Base salary of $600,000 was derived by reference to executive pay at the
market companies described earlier in this report. This amount is essentially at
the median base salary for the market. Mr. Adams' salary increase from 1996 to
1997 was intended to move him closer to the market median amount. Although no
one factor was weighted more than any other by the Committee, this increase
generally was based upon the Committee's assessment of his performance during
1996 and his contributions to the performance of the Company. In assessing Mr.
Adams' performance, the Committee considered a number of corporate performance
measures, including increase in revenue, net income, return on assets, earnings
per share, and stock price performance. The Committee evaluates these factors
subjectively in making decisions about Mr. Adams' base salary.
- 14 -
17
For 1997, Mr. Adams' annual incentive target award remained at 60% of
salary, as in prior years. Because corporate ROAE was below the threshold
performance level established, Mr. Adams received no bonus payment for 1997
performance.
Mr. Adams' stock option grant during 1997 was 19,400 shares. The number
of stock options granted to Mr. Adams was determined in the same manner as stock
option grants to all other executive officers. For a discussion of the
Committee's determination of the number of stock options granted to a named
executive officer, see the discussion above under the caption "Long-Term
Incentive Plan."
Mr. Adams also received a grant of performance units at a target award
level equal to 45% of base salary. The performance period over which these units
can be earned is 1997 through 1999. As noted earlier, no performance unit awards
were earned for the 1995-1997 plan cycle.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Under Section 162(m) of the Internal Revenue Code of 1986, as amended,
Congress has limited to $1 million per year the tax deduction available to
public companies for certain compensation paid to designated executive officers.
The regulations under such section provide an exception from this limitation for
certain performance-based compensation, assuming that various requirements are
met, and provide for certain transition rules. The Board of Directors has
proposed certain amendments to the 1993 Plan for consideration by the
shareholders at the Annual Meeting designed to permit Short Term Incentive Plan
awards to continue to comply with the exceptions for performance-based
compensation to the limits on deductibility of executive compensation under
Section 162(m). To the extent feasible, the Committee intends that awards of
compensation under the Program to its executive officers will qualify for
deductibility under Section 162(m), but the Committee and the Board of Directors
of the Company reserve the right, in light of the overall goals and objectives
of the Company, to exceed such limitations if doing so is determined to be in
the best interests of the Company and its shareholders.
Executive Compensation Committee
C.V. Nalley III, Ronald G. Bruno,
Herschel M. Bloom
- 15 -
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COMPARATIVE FIVE-YEAR TOTAL RETURNS
RUSSELL CORPORATION, S&P 500, VALUE LINE APPAREL INDEX
PERFORMANCE RESULTS THROUGH 12/31/97
[GRAPH]
VALUE OF $100 INVESTED ON 12/31/92 AT:
1992 1993 1994 1995 1996 1997
- - ------------------------------------------------------------------------------------
Russell Corporation $100.00 $ 91.20 $102.71 $ 92.40 $100.77 $ 91.61
S&P 500 100.00 110.09 111.85 153.80 189.56 252.82
Value Line Apparel Index 100.00 92.97 102.43 112.34 153.85 179.48
- - ------------------------------------------------------------------------------------
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: Farah, Inc.; Fruit of
the Loom, Inc.; Oshkosh B'Gosh, Inc.; Hartmarx Corporation; Jones Apparel Group;
Kellwood Company; Liz Claiborne, Inc.; Nautica Enterprises, Inc.; Oxford
Industries, Inc.; Phillips-Van Heusen Corporation; St. John Knits, Inc.; Tommy
Hilfiger Corp.; Tultex Corporation; VF Corporation; Warnaco Group, Inc.; and the
Company.
- 16 -
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SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended January 3,
1998, January 4, 1997, and December 30, 1995 with respect to the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company during 1997 whose salary and bonus exceeded $100,000.
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------- ----------------------------
AWARDS PAYOUTS
-------- --------
NAME AND OTHER RESTRICTED
PRINCIPAL ANNUAL(R) STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS(A) COMPENSATION AWARDS SAR'S PAYOUTS COMPENSATION
- - -----------------------------------------------------------------------------------------------------------------
John C. Adams 1997 $600,000 $ -- $14,616 -- 19,400 -- --
Chairman, 1996 551,000 285,000 8,597 -- 19,800 -- --
President 1995 540,000 -- 6,187 -- 18,000 -- --
and CEO
James D. Nabors 1997 330,000 -- 502 -- 6,900 -- --
Exec. V. P. 1996 309,667 120,000 627 -- 7,200 -- --
and CFO 1995 304,000 -- -- -- 6,600 -- --
JT Taunton, Jr. 1997 290,000 -- -- -- 6,100 -- --
Exec. V.P. - Sales 1996 265,000 105,000 -- -- 6,200 -- --
and Marketing 1995 261,000 -- -- -- 5,600 -- --
W.J. Spires, Jr. 1997 220,000 84,200 -- -- 3,600 -- --
President - Cross 1996 193,333 21,000 -- -- 3,600 -- --
Creek Apparel, Inc. 1995 185,000 -- -- -- 3,400 -- --
Dale W. Wachtel 1997 210,000 104,000 -- -- 2,700 -- --
President - 1996 188,433 94,200 -- -- 2,700 -- --
Russell Athletic 1995 185,956 -- -- -- 2,500 -- --
(A) Bonus payments are reported for the year in which related services were
performed.
(B) Value of personal use of aircraft.
OPTION/SAR GRANTS IN 1997
The following information concerns grants of incentive stock options to
the named executives for the year ended January 3, 1998. No SAR grants were made
during such fiscal year.
- - -----------------------------INDIVIDUAL GRANTS(1)---------------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS/SARS FOR OPTION TERM
OPTIONS/SARS GRANTED EXERCISE ------------------------------
GRANTED TO EMPLOYEES PRICE EXPIRATION
NAME IN 1997 IN 1997 PER SHARE DATE 5% 10%
- - ---------------- ------------ ------------- --------- ----------- ------------- ---------------
John C. Adams 19,400 6.91 $30.875 1/24/07 $262,288 $772,120
James D. Nabors 6,900 2.46 30.875 1/24/07 93,288 274,620
JT Taunton, Jr. 6,100 2.17 30.875 1/24/07 82,472 242,780
W.J. Spires, Jr. 3,600 1.28 30.875 1/24/07 48,672 143,280
Dale W. Wachtel 2,700 0.96 30.875 1/24/07 36,504 107,460
- 17 -
20
(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 in full on the second anniversary of
the grant. No other instruments were granted in tandem with the options,
nor do they carry either reload or tax reimbursement features.
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND YEAR-END VALUE TABLE
The following information is furnished for the year ended January 3,
1998, with respect to the Company's Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company for stock option
exercises which occurred during fiscal 1997.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES AT JANUARY 3, 1998 AT JANUARY 3, 1998 (2)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------- ------------- ------------- ------------- ------------- ------------- -------------
John C. Adams -- $ -- 80,000 19,000 $9,625 $ --
James D. Nabors -- -- 37,000 6,900 8,750 --
JT Taunton, Jr. 1,700 26,350 24,000 6,100 4,450 --
W.J. Spires, Jr. 3,500 64,313 19,700 8,200 6,300 --
Dale W. Wachtel 1,000 14,000 15,900 2,700 5,075 --
(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 New York Stock Exchange, Inc. on January 2, 1998, less the
exercise price for such option.
LONG-TERM INCENTIVE PLAN AWARDS IN 1997
The 1993 Executive Long-Term Incentive Plan provides for the award of
long-term cash incentives to officers of the Company. Performance Units may be
awarded based upon achievement of target goals over a three year period.
Performance Units were awarded in accordance with the following schedule:
PERFORMANCE
NUMBER OF OTHER PERIOD ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
SHARES, UNTIL PRICE-BASED PLANS
UNITS OR MATURATION -----------------------------------------------------
NAME OTHER RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM
- - ------------- ------------- ------------- ------------- ------------- -------------
John C. Adams 270,000 1997-1999 $67,500 $270,000 $540,000
James D. Nabors 99,000 1997-1999 24,750 99,000 198,000
JT Taunton, Jr. 87,000 1997-1999 21,750 87,000 174,000
W.J. Spires, Jr. 44,000 1997-1999 11,000 44,000 88,000
Dale W. Wachtel 42,000 1997-1999 10,500 42,000 84,000
Performance units are earned based upon Company Total Shareholder Return
("TSR") relative to a peer group, the S & P Industrials. Threshold, target and
maximum awards are earned when TSR is at the 33rd percentile, the median
percentile or the 90th percentile of the peer group. Awards earned based upon
relative TSR performance may be decreased by up to 50% if the Company's absolute
TSR for the performance period is less than a predetermined level.
- 18 -
21
For further discussion of the 1993 Executive Long-Term Incentive Plan,
see the discussion above under the captions "PROPOSED AMENDMENTS TO THE RUSSELL
CORPORATION 1993 EXECUTIVE LONG-TERM INCENTIVE PLAN" AND "EXECUTIVE COMPENSATION
- - - EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION - LONG-TERM
INCENTIVE PLAN".
PENSION PLAN
Officers of the Company are covered by the Russell Corporation Revised
Pension Plan (the "Plan"), a defined benefit plan covering all employees of the
Company. The amount of contributions made by the Company to the 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 Plan.
Benefits under the Plan are based upon years of credited service at
retirement and upon "Final Average Earnings," which is the average base
compensation for the highest sixty 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 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.
The following table presents estimated annual benefits payable from the
Plan 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.
PENSION PLAN TABLE
YEARS OF CREDITED SERVICE
5 YEAR AVERAGE ----------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
---------------- ------- ------- ------- ------- ------- -------
$ 150,000 $23,612 $ 31,483 $ 39,354 $ 47,225 $ 55,096 $ 59,221
175,000 27,737 36,983 46,229 55,475 64,721 69,533
200,000 31,862 42,483 53,104 63,725 74,346 79,846
225,000 35,987 47,983 59,979 71,975 83,971 90,158
250,000 40,112 53,483 66,854 80,225 93,596 100,471
300,000 48,362 64,483 80,604 96,725 112,846 121,096
350,000 56,612 75,483 94,354 113,325 132,096 141,721
400,000 64,862 86,483 108,104 129,725 151,346 162,346
450,000 73,112 97,483 121,854 146,225 170,596 182,971
500,000 81,362 108,483 135,604 162,725 189,846 203,596
600,000 97,862 130,483 163,104 195,725 228,346 244,846
700,000 114,362 152,483 190,604 228,725 266,846 286,096
800,000 130,862 174,483 218,104 261,725 305,346 327,346
900,000 147,362 196,483 245,604 294,725 343,846 368,598
1,000,000 163,862 218,483 273,104 327,725 382,346 409,846
Years of service credited under the plan for individuals shown in the
summary compensation table on page 17 are as follows: Mr. Adams, 21 years; Mr.
Nabors, 27 years; Mr. Taunton, 22 years; Mr. Spires, 26 years; and Mr. Wachtel,
21 years.
- 19 -
22
STOCK OPTION PLANS
The Company has previously adopted the 1978 Stock Option Plan and the
1987 Stock Option Plan (the "Stock Option Plans") pursuant to which the Company
grants to key employees of the Company either incentive stock options ("ISO's")
or nonqualified stock options ("NQSO's"). The term of the options cannot exceed
ten years from the date of grant, and the option price must equal fair market
value of the shares covered at the time of grant. No further options are subject
to being granted under the Stock Option Plans.
The 1993 Executive Long-Term Incentive Plan (the "1993 Plan") previously
discussed herein is a flexible plan which gives the Executive Compensation
Committee broad discretion to fashion the terms of awards in order to provide
eligible participants with stock based incentives as the Committee deems
appropriate. It permits the issuance of awards in a variety of forms, including:
(a) restricted stock (b) incentive stock options (c) non-qualified stock options
(d) stock appreciation rights and (e) performance share and performance unit
awards.
The 1993 Plan presently provides for the grant of up to 2,000,000 shares
of the Common Stock of the Company, which amount will be increased to 4,000,000
shares of Common Stock if the proposed amendments to the 1993 Plan previously
discussed herein are approved by the shareholders. Issuance of awards under the
1993 Plan will cease as of January 1, 2003.
OTHER MATTERS
The Board of Directors of the Company does not know at this time of any
other matters to come before the Annual Meeting.
- 20 -
23
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 4,
1998.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- - -------------------------------- -------------------- --------
Edith L. Russell 4,686,320 shares (1) 12.85
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
Benjamin Russell 5,890,186 shares (2)(7) 16.15
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
Roberta A. Baumgardner 8,061,606 shares (3) 22.11
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
Helen Alison 2,064,192 shares (4) 5.66
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
Nancy R. Gwaltney 4,677,642 shares (5) 12.83
755 Lee Street
P.O. Box 272
Alexander City, Alabama 35011-0272
Merrill Lynch Asset Management, L.P. 2,327,174 shares (6) 6.38
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(1) 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 of record and beneficially owned by a trust created under the will
of Benjamin C. Russell of which Mrs. Russell is one of four trustees.
The trustees of the trust created under the will of Benjamin C. Russell
can invade the corpus of the trust for the benefit of Mrs. Russell.
(2) Includes 988,866 shares as to which Mr. Russell has sole voting and
investment power and 4,901,320 shares as to which he has shared voting
and investment power. See Note (5) on page 3.
- 21 -
24
(3) Includes 1,321,094 shares as to which Mrs. Baumgardner has sole voting
and investment power and 6,740,512 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;
3,945,024 shares held of record and beneficially owned by a trust
created under the will of Benjamin C. Russell of which Mrs. Baumgardner
is one of four trustees; and 2,064,192 shares held by the estate of J.
C. Alison of which Mrs. Baumgardner is one of three co-executors.
(4) Includes 2,064,192 shares held by the estate of J. C. Alison, of which
Mrs. Alison is one of three co-executors and with respect to which Mrs.
Alison has shared voting and investment power.
(5) 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.
(6) Information contained in Schedule 13G filed with the Company on February
6, 1998. The Schedule 13G states that Merrill Lynch Asset Management,
L.P. has sole voting power with respect to no shares, sole dispositive
power with respect to no shares and shared voting and dispositive power
with respect to 2,327,174 shares.
(7) See Note (6) on page 3.
SECURITY OWNERSHIP OF MANAGEMENT
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------
SOLE VOTING OPTIONS
AND EXERCISABLE OTHER PERCENT
INVESTMENT WITHIN BENEFICIAL OF
NAME OF INDIVIDUAL OR GROUP POWER 60 DAYS OWNERSHIP CLASS
- - ---------------------------- -----------------------------------------------------------
John C. Adams 49,538 80,000 627,223 (1)(2) 2.08
James D. Nabors 31,431 37,000 1,364,649 (2)(3) 3.93
Tim Lewis 100(7) 0 0 -
Herschel M. Bloom 5,734(7) 0 0 .02
C.V. Nalley III 1,000(7) 0 0 -
Ronald G. Bruno 6,268(7) 0 0 .02
John A. White 2,000(7) 0 0 .01
John R. Thomas 106,635(7) 0 490,121(4)(6) 1.64
Benjamin Russell 988,866(7) 0 4,901,320(5) 16.15
Margaret M. Porter 1,100(7) 0 0 -
JT Taunton, Jr. 10,374 24,100 0 .09
W.J. Spires, Jr. 27,581 19,700 0 .13
Dale W. Wachtel 7,189 15,900 0 .06
All Executive Officers and Directors
as a Group (24 persons) 1,828,379 330,900 6,018,695 22.44
(1) Includes 26,263 shares owned by Mr. Adams' spouse.
(2) See Note (3) on page 2.
(3) See Note (4) on page 3.
(4) See Note (1) on page 2.
(5) See Note (5) on page 3.
(6) Includes 3,500 shares owned by Mr. Thomas' spouse.
(7) See Note (6) on page 3.
- 22 -
25
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
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 required filings were timely for 1997.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company entered into a fuel supply contract with Russell Lands,
Incorporated on May 21, 1975, under which Russell Lands, Incorporated 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 Russell Lands, Incorporated, 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
January 3, 1998, the Company paid Russell Lands, Incorporated approximately
$1,100,000 for wood materials to operate these boilers.
The Company purchased miscellaneous building materials and supplies from
Russell Do-It Center, a building supply retailer. The Company also purchased
concrete for various construction and repair projects from Area Concrete, Inc.
Russell Do-It Center is a division of and Area Concrete, Inc. is a wholly owned
subsidiary of Russell Lands, Incorporated. Benjamin Russell is Chairman, Chief
Executive Officer and a director of Russell Lands, Incorporated and owns
beneficially approximately 70% of the equity interest in such company.
Management believes these purchases to be in the best interest of the Company's
shareholders. During the fiscal year ended January 3, 1998, the Company paid
Russell Do-It Center and Area Concrete, Inc. approximately $65,900 and $31,400,
respectively, for the purchases described above.
AUDITORS
Ernst & Young LLP, independent accountants, was selected as the
Company's auditors for 1997 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.
PROPOSALS BY SHAREHOLDERS
The next annual meeting of shareholders is scheduled to be held on April
28, 1999, 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
20, 1998.
- 23 -
26
GENERAL INFORMATION
The Board of Directors of the Company has fixed the close of business on
March 4, 1998, 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 36,462,672 shares of Common Stock, each share of
which is entitled to one (1) vote on all matters to be considered at the Annual
Meeting.
As of the date of the 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. 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.
Pursuant to Section 10-2B-7.25 of the Code of Alabama 1975, as amended,
and the Bylaws, a majority of the Common Stock shares 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 the 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
Bylaws require, for the approval of the Amendments to the 1993 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
the Amendments to the 1993 Plan. 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, the Amendments to the 1993
Plan) where the brokers have complied with Rule 451 concerning the delivery of
proxy materials to beneficial owners of the Company's Common Stock held by such
brokers.
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 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
January 3, 1998, in form as filed with the Securities and Exchange Commission,
may be obtained from Steve R. Forehand, the Secretary of the Company, without
charge, by persons who were shareholders beneficially or of record as of March
4, 1998.
RUSSELL CORPORATION
Steve R. Forehand
Secretary
Alexander City, Alabama
March 19, 1998
- 24 -
27
ANNEX A
The 1993 Executive Long Term Incentive Plan (the "Plan) is hereby
amended as follows:
A. The following term and accompanying definition under Article 2 of the
Plan shall be amended to read as follows:
(b) "Award" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options,
SARS, Restricted Stock, Performance Units, Performance Shares,
or Cash-Based Awards.
B. The following term and condition shall be added to the Plan under
Article 2:
(jj) "Cash-Based Awards" means an Award granted to a Participant, as
described in Article 9 herein.
C. Section 4.1(a)(i) of the Plan shall be amended in its entirety to read
as follows:
(a) Subject to adjustment as provided in Section 4.3 of the Plan, the
total number of Shares available for issuance under the Plan
may not exceed four million (4,000,000), no more than seven
hundred fifty thousand (750,000) of which may be issued in the
form of Restricted Stock. These four million (4,000,000)
Shares may be either authorized but unissued or reacquired or
treasury Shares.
D. Section 4.1(b) of the Plan shall be amended in its entirety to read as
follows:
(b) (i) STOCK OPTIONS. The maximum aggregate number of Shares to
which Stock Options granted under the Plan pertain,
pursuant to any Awards granted in any one fiscal year to
any one single Participant, shall be five hundred
thousand (500,000) Shares.
(ii) SARS. The maximum aggregate number of Shares that may be
granted in the form of SARs, pursuant to any awards
granted in any one fiscal year to any one single
Participant, shall be five hundred thousand (500,000)
Shares.
(iii) RESTRICTED STOCK. The maximum aggregate number of Shares
that may be granted with respect to Awards granted in
the form of Restricted Stock granted in any one fiscal
year to any one Participant shall be two hundred
thousand (200,000) Shares.
(iv) PERFORMANCE UNITS/PERFORMANCE SHARES AND CASH-BASED
AWARDS. The maximum aggregate payout with respect to
Performance Units/Performance Shares and Cash-Based
Awards granted in any one fiscal year to any one
Participant shall be equal to the value of two hundred
thousand (200,000) Shares.
E. Section 6.5 of the Plan shall be amended in its entirety to read as
follows:
6.5 EXERCISE OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
A-1
28
F. Article 9 of the Plan shall be amended in its entirety to read as
follows:
ARTICLE 9. PERFORMANCE UNITS, PERFORMANCE SHARES, AND CASH-BASED AWARDS
9.1 GRANT OF PERFORMANCE UNITS/PERFORMANCE SHARES AND CASH-BASED
AWARDS. Subject to the terms of the Plan, Performance Units, Performance
Shares and Cash-Based Awards may be granted to eligible Employees at any
time and from time to time, as shall be determined by the Committee.
Subject to Article 4 of this Plan the Committee shall have complete
discretion in determining the number of Performance Units, Performance
Shares and/or Cash-Based Awards granted to each participant.
9.2 VALUE OF PERFORMANCE UNITS/SHARES AND CASH-BASED AWARDS.
Each Performance Unit shall have an initial value that is established by
the Committee at the time of grant. Each Performance Share shall have an
initial value equal to the Fair Market Value of a Share on the date of
grant. Each Cash-Based Award shall have a value as determined by the
Committee. The Committee shall set performance goals in its discretion
which, depending on the extent to which they are met, will determine the
number and/or value of Performance Units/Shares and Cash-Based Awards
that will be paid out to the Participants. The time period during which
the performance goals must be met shall be called a "Performance
Period. "Performance Periods shall, in all cases, exceed six (6) months
in length.
9.3 EARNING OF PERFORMANCE UNITS/SHARES AND CASH-BASED AWARDS.
After the applicable Performance Period has ended, the holder of
Performance Units/Shares and Cash-Based Awards shall be entitled to
receive payout on the number of Performance Units/Shares and Cash-Based
Awards earned by the Participant over the Performance Period, to be
determined as a function of the extent to which corresponding
performance goals have been achieved.
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES AND
CASH-BASED AWARDS. Payment of earned Performance Units/Shares and
Cash-Based Awards shall be made in a single lump sum, within forty-five
(45) calendar days following the close of the applicable Performance
Period. The Committee, in its sole discretion, may pay earned
Performance Units/Shares and Cash-Based Awards in the form of cash or in
Shares (or in a combination thereof), which have an aggregate Fair
Market Value equal to the value of the earned Performance Units/Shares
or Cash-Based Awards at the close of the applicable Performance Period.
Prior to the beginning of each Performance Period, Participants
may elect to defer the receipt of Performance Unit/Share or Cash-Based
Award payout upon such terms as the Committee deems appropriate.
9.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY,
RETIREMENT, OR INVOLUNTARY TERMINATION (WITHOUT CAUSE). In the event the
employment of a Participant is terminated by reason of death,
Disability, Retirement, or involuntary termination without Cause during
a Performance Period, the Participant shall receive a prorated payout of
the Performance Units/Shares or Cash-Based Awards. The prorated payout
shall be determined by the Committee, in its sole discretion, and shall
be based upon the length of time that the Participant held the
Performance Units/Shares or Cash-Based Awards during the Performance
Period, and shall further be adjusted based on the achievement of the
preestablished performance goals.
Payment of earned Performance Units/Shares or Cash-Based Awards
shall be made at the same time payments are made to Participants who did
not terminate employment during the applicable Performance Period;
provided, however, the Committee, in its sole discretion, shall have the
power to accelerate the payment of earned Performance Units/Shares or
Cash-Based Awards to Participants whose employment has terminated.
A-2
29
9.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event
that a Participant's employment terminates for any reason other than
those reasons set forth in Section 9.5 herein, all Performance
Units/Shares and Cash-Based Awards shall be forfeited by the Participant
to the Company, and shall once again be available for grant under the
Plan.
9.7 NONTRANSFERABILITY. Performance Units/Shares and Cash-Based
Awards may not be sold, transferred, pledged, assigned, or otherwise
alienate or hypothecated, other than by will or by the laws of descent
and distribution. Further, a Participant's right under the Plan shall be
exercisable during the Participant's lifetime only by the Participant.
G. Article 11 of the Plan shall be amended in its entirety to read as
follows:
ARTICLE 11. DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares
that would otherwise be due to such Participant by virtue of the
exercise of an Option or SAR, the lapse or waiver of restrictions with
respect to Restricted Stock, or the satisfaction of any requirements or
goals with respect to Performance Units/Shares or Cash-Based Awards. If
any such deferral election is required or permitted, the Committee
shall, in its sole discretion, establish rules and procedures for such
payment deferrals.
H. Paragraph (c) of Article 13 of the Plan shall be amended in its entirety
to read as follows:
(c) The target value attainable under all Performance Units,
Performance Shares and Cash-Based Awards shall be deemed
to have been fully earned for the entire Performance
Period as of the effective date of the Change in
Control, and shall be paid out in cash to Participants
within thirty (30) days following the effective date of
the Change in Control; provided, however, that there
shall not be an accelerated payout with respect to
Performance Units, Performance Shares or Cash-Based
Awards which were granted less than six (6) months prior
to the effective date of the Change in Control.
A-3
30
APPENDIX
RUSSELL CORPORATION
ALEXANDER CITY, ALABAMA
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - APRIL 22, 1998
(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 Ronald G. Bruno, 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 22, 1998 at 10:30 a.m., Central
Daylight Time, or any adjournment thereof:
(1) ELECTION OF DIRECTORS
For the term expiring with the Annual Meeting of Shareholders in 2001:
C.V. Nalley III, John R. Thomas, John A. White, Tim Lewis
[ ] FOR all nominees above [ ] WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees above
INSTRUCTION: To withhold authority to vote for an individual nominee, write the
nominee's name in the space provided below:
- - ---------------------------------------------------------------------------------------------------
(over)
(2) PROPOSAL TO ADOPT AMENDMENTS TO THE 1993 EXECUTIVE LONG-TERM INCENTIVE
PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN WITH RESPECT TO
proposal to approve the adoption of amendments to the 1993 Executive Long-Term
Incentive Plan as described in the Proxy Statement of the Company dated March 19, 1998.
(3) IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
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 AMEND THE 1993 EXECUTIVE LONG-TERM INCENTIVE PLAN.
Please date and sign exactly as name appears on the envelope in which this material was mailed.
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.
---------------------------------------------------
Signature(s) of Shareholder(s)
--------------------------------------------------
Date , 1998
----------------------------------------