-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AsjKreT5TForxnJeARi/zz+lxSt+ear7tRPrEMg6Z00C9tGY4BneEqGthenReFvj By8nfBGzsnqejtmigDvstg== 0000950144-01-004285.txt : 20010402 0000950144-01-004285.hdr.sgml : 20010402 ACCESSION NUMBER: 0000950144-01-004285 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20001230 FILED AS OF DATE: 20010329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RUSSELL CORP CENTRAL INDEX KEY: 0000085812 STANDARD INDUSTRIAL CLASSIFICATION: KNIT OUTERWEAR MILLS [2253] IRS NUMBER: 630180720 STATE OF INCORPORATION: AL FISCAL YEAR END: 0104 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-05822 FILM NUMBER: 1585145 BUSINESS ADDRESS: STREET 1: 755 LEE STREET STREET 2: P.O. BOX 272 CITY: ALEXANDER CITY STATE: AL ZIP: 35011 BUSINESS PHONE: 2565004000 MAIL ADDRESS: STREET 1: 1 LEE ST STREET 2: P O BOX 272 CITY: ALEXANDER CITY STATE: AL ZIP: 35010 FORMER COMPANY: FORMER CONFORMED NAME: RUSSELL MILLS INC DATE OF NAME CHANGE: 19730809 10-K 1 g67759e10-k.txt RUSSELL CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- --------------- Commission file number 0-1790 RUSSELL CORPORATION (Exact name of registrant as specified in its charter) Alabama 63-0180720 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3330 Cumberland Blvd, Suite 800 Atlanta, Georgia 30339 755 Lee Street Alexander City, Alabama 35011-0272 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (256)500-4000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered - ---------------------------- ----------------------- Common Stock, $.01 par value New York Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of Common Stock, par value $.01, held by non-affiliates of the registrant, as of March 27, 2001, was approximately $447,904,000. As of March 27, 2001, there were 31,900,243 shares of Common Stock, $.01 par value outstanding (excluding treasury shares). -Continued- 2 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Shareholders Report for the year ended December 30, 2000 are incorporated by reference into Parts I, II and IV. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on April 25, 2001 are incorporated by reference into Part I and III. 3 PART I ITEM 1. Business GENERAL Russell Corporation is an international branded apparel company specializing in activewear, casualwear and athletic uniforms. Major brands include Russell Athletic(R), JERZEES(R), Cross Creek(R), and Mossy Oak Apparel(R). The Company designs and merchandises a variety of leisure and sports apparel marketed to sporting goods dealers, department and specialty stores, mass merchandisers, golf pro shops, college bookstores, mail order houses, screen printers and embroiderers, and distributors. Products are derived from a combination of internally produced products and third-party sources. On July 22, 1998, the Company announced a three-year restructuring and reorganization plan to improve the Company's global competitiveness. For further discussion of activities under the plan, see Note 10 of Notes to Consolidated Financial Statements. More than 95% of the Company's total revenues in 2000 were derived from the sale of completed apparel, with the balance from woven fabrics. During each of the two previous fiscal years ending January 1, 2000 and January 2, 1999, completed apparel also accounted for more than 95% of total revenues. Foreign and export sales for 2000 were 9.1%. In each of the immediately preceding two years, foreign and export sales were 10.8% and 10.7%, respectively. One customer, Wal-Mart Stores, Inc. and affiliates, accounted for 17.9% of total revenues in 2000, 19.4% in 1999 and 19.0% in 1998. The Company produces athletic uniforms for most sports activities and for players of all ages and sizes. These products are marketed to professional, collegiate, high school, and other teams as well as to individuals. Activewear and casual apparel, such as t-shirts, fleece sweatshirts and sweatpants, pullovers, jackets, and other knitted apparel products, are produced for the general consumer market. Product lines also include placket shirts, turtlenecks and golf apparel. The Company also produces sports and casual socks, including tube, quarter anklet and crew socks for men, women and children. Woven fabrics are produced and sold to other apparel manufacturers. The Company's principal owned manufacturing facilities are located in Alabama, North Carolina, Mexico, and Honduras. Warehousing and shipping is conducted in Alexander City, Ft. Payne and Montgomery, Alabama; Mt. Airy, North Carolina; West Point, Mississippi; and Vidalia, Georgia. The primary distribution facilities for the International Division are at Russell Europe Limited, located in and around Livingston, Scotland. The Company also maintains warehouses in Mexico and Australia. As a vertically integrated operation, the Company converts raw fibers into finished apparel and fabrics utilizing company-owned facilities, as well as contractors and general suppliers for spinning, knitting and weaving, dyeing and finishing, and cutting and sewing operations. Generally, the Company produces most of the yarns, other than textured and filament yarns, used in the Company's manufacturing processes. As a result of its integrated production process, the majority of the functions required to produce finished apparel and fabrics can be performed by the Company without reliance upon outside contractors. The Company is not, however, solely reliant on owned facilities and operations, particularly in apparel assembly. During the year approximately 84% of its products for domestic consumption were assembled at contractors, owned operations or purchased from other suppliers outside the United States. I-1 4 The Company benefits from flexibility in its production scheduling capability, permitting it to shift product emphasis as markets improve, change or temporarily decline for particular products. This ability to respond quickly to market changes has enabled the Company to manage the utilization of its manufacturing capacity. The Company's revenues and income are subject to seasonal variations. However, due to the time which may elapse between the acceptance of customers' orders and shipment of goods, prices may or may not immediately reflect changes in the Company's cost of raw materials and other costs. Working capital needs may change with the increase or decrease in inventories or accounts receivable as a result of a variety of credit terms and time between production and shipments. Production schedules are based primarily on forecasts incorporating current orders, the history of customer orders, market research, and similar market factors. The Company has no meaningful backlog figures. The Company does not hold any significant patents, franchises or concessions in any of its segments. The Company's ability to manufacture and sell certain licensed apparel products is dependent upon licenses held by the Company to utilize various trademarks and tradenames on such apparel. The licenses are subject to periodic renewal and negotiation and certain minimum payments. I-2 5 SEGMENTS The Company has two reportable segments: Activewear and International. These segments offer similar products and operate in multiple locations. The reportable segments are each managed separately because they manufacture and distribute products into different geographical areas. The segment information found in Note 11 on pages 44 and 45 of the 2000 Annual Report to Shareholders is hereby incorporated by reference. Activewear - The Company's Activewear segment consists of four brands that sell to sporting goods dealers, department and specialty stores, mass merchants, wholesale clubs, college bookstores, screen printers, distributors, golf pro shops, and mail order catalogs. The Company's activewear apparel products include t-shirts, fleece products, such as sweatshirts and sweatpants, athletic uniforms, knit shirts, and other activewear casual apparel. The Activewear segment consists of the primary operations of the Company's JERZEES(R), Russell Athletic(R), Cross Creek(R), and Mossy Oak Apparel(R) brands. Activewear is sold by a combination of a salaried, company-employed sales force and commission agents. The Activewear segment utilizes company-owned manufacturing facilities to produce product, as well as contractors or other vendors for components in the manufacturing process or for the procurement of finished product. Generally, company-owned and operated manufacturing facilities for Activewear consist of fabrication, dyeing and finishing, cutting, and sewing. Russell Yarn consists of the spinning of yarns, the process by which fibers of raw cotton or blends of cotton and synthetic fibers are converted into continuous strands. Yarn uniformity and strength are the principal characteristics which materially affect the efficiency of subsequent manufacturing processes and the quality of the finished fabrics or apparel. This unit manufactures a variety of yarn sizes primarily for use in the balance of the Company's manufacturing processes. Russell Yarn purchases synthetic fibers from one principal supplier. There are approximately four major producers of such fibers in the world. The Company purchases cotton from various merchants and producers. This unit has experienced no material difficulty in purchasing adequate supplies and does not presently anticipate difficulties in the future. Russell Yarn has no contracts for the supply of raw materials extending beyond a year. Fabrication is the process of converting yarn, provided by the Company's yarn unit or purchased from a third party, into cloth or fabrics. This is done through the process of single knitting, supplemented by smaller operations of double knitting and warp knitting. These operations are generally conducted in plant locations in Alabama and North Carolina. These fabrics are then dyed and/or finished in company-owned facilities or by contractors. The dyeing and/or finishing processes impart and affect the appearances, the hand (feel), color fastness, uniformity, shade, and stability (retention and form) of the fabric. I-3 6 Company-owned cutting and sewing operations for Activewear, located in plants in the United States, Mexico, and Honduras, are augmented by various contractors in the Caribbean, North America, Central America and South America. International - The International segment distributes activewear products primarily under the JERZEES(R) and Russell Athletic(R) brands throughout various countries outside the United States and Canada. This segment's major market is Europe, where the Company engages in marketing of activewear. All Other - Other segments that do not meet the quantitative thresholds for determining reportable segments manufacture and sell fabrics to other apparel manufacturers and manufacture and sell socks. Russell Fabrics designs, manufactures and markets quality woven fabrics of cotton, polyester and cotton/polyester blends in a variety of patterns, colors and constructions to other apparel manufacturers, primarily for the manufacture of school and industrial uniforms. DeSoto Mills supplies popularly priced socks for men, women and children primarily under the Company's JERZEES(R) and Russell Athletic(R) brands, through a company-employed sales force principally to the discount retailer and wholesale club markets. COMPETITION The textile-apparel industry in all of the Company's business segments is highly competitive, and the Company has many domestic and foreign competitors, both large textile-apparel companies and smaller concerns. While the sales of a few competitors are substantially greater than those of the Company, no single competitor dominates the industry. EMPLOYEES As of December 30, 2000, the Company had 16,540 employees, as follows: Activewear 15,034 International 450 All Other 736 Shared 320
The Company has never had a strike or work stoppage and considers its relationship with its employees to be good. REGULATION The Company is subject to federal, state and local laws and regulations affecting its business, including those promulgated under the Occupational Safety and Health Act (OSHA), the Consumer Product Safety Act (CPSA), the Flammable Fabrics Act, the Textile Fiber Product Identification Act, and the rules and regulations of the Consumer Products Safety Commission (CPSC). The Company believes that it is in compliance with all applicable governmental regulations under these statutes. The Company believes it is in compliance with all current environmental requirements and expects no major additional expenditures in this area in the foreseeable future. I-4 7 FORWARD-LOOKING INFORMATION With the exception of historical information, the matters and statements discussed, made or incorporated by reference in this Annual Report on Form 10-K constitute forward-looking statements and are discussed, made or incorporated by reference, as the case may be, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Wherever possible, the Company has identified these "forward-looking" statements (as defined in Section 21E of the Securities and Exchange Act of 1934) by words such as "anticipates," "believes," "intends," "estimates," "expects" and similar phrases. In addition, the Company and its representatives may from time to time make other oral or written statements that are also forward-looking statements. Some forward-looking statements concern anticipated sales levels, cost estimates and resulting earnings that are not necessarily indicative of subsequent periods due to the mix of future orders, at once orders and product mix changes, which may vary significantly from year to year or quarter to quarter, and the timing and effect of the Company's restructuring and reorganization plan. These forward-looking statements are based upon assumptions the Company believes are reasonable; however, such statements are subject to risks and uncertainties which could cause the Company's actual results, performance and achievements to differ materially from those expressed in, or implied or contemplated by, these statements. These risks and uncertainties include, but are not limited to, the overall level of consumer spending for apparel; the financial strength of the retail industry; actions by competitors that may impact the Company's business (including in particular changes in pricing); accuracy of forecasts; the existence of excess capacity in the Company's industry; changes in prices of raw materials used in the Company's manufacturing processes; the ability of the Company to reduce cost in more labor-intensive segments of the manufacturing process; the success of planned advertising, marketing and promotional campaigns and international activities; changes in customer relationships; the impact of economic changes in the markets where the Company competes, such as changes in interest rates, currency exchange rates, inflation rates, recession, and other external economic and political factors over which the Company has no control; and other risks and uncertainties discussed or indicated in other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 2. Properties The Company's principal executive offices are located in Atlanta, Georgia and Alexander City, Alabama, with owned manufacturing plants located in Alabama, North Carolina, Mexico and Honduras. The Company has no material mortgages on any of its real property or manufacturing machinery except for capitalized lease obligations (see Note 2 of Notes to Consolidated Financial Statements), and believes that all of its properties are well maintained and suitable for its operations and are currently fully utilized for such purposes, excluding plants that are held for resale as a result of restructuring. (See Note 10 of Notes to Consolidated Financial Statement.) I-5 8 The Company utilizes an aggregate of approximately 9,143,000 square feet of manufacturing, warehousing and office facilities, and has 1,389,000 square feet that is either idle or held for sale. The following table summarizes the approximate areas of such facilities:
Total Primary Use Activewear International All Other Shared Square Feet ----------- ---------- ------------- --------- ------ ----------- Spinning 1,214,000 1,214,000 Knitting and Weaving 872,000 143,000 1,015,000 Dyeing and Finishing 879,000 137,000 1,016,000 Cutting and Sewing 978,000 978,000 Warehousing and Shipping 2,878,000 164,000 424,000 3,466,000 Retail/Outlet Stores 12,000 12,000 Executive Offices, Maintenance Shops and Research and Development Facilities 531,000 531,000 Scotland 97,000 97,000 Mexico 382,000 150,000 532,000 Honduras 231,000 231,000 Idle or held for sale 1,389,000 1,389,000 Other 51,000 51,000
All presently utilized facilities in the U.S. are owned, except the regional sales offices, certain distribution facilities and the Company's headquarters in Atlanta, Georgia (see Notes 2 and 9 of Notes to Consolidated Financial Statements). ITEM 3. Legal Proceedings The Company has been a co-defendant in Sullivan, et al. v. Russell Corporation, et al., in Jefferson County, Alabama. Five families were plaintiffs in this case; other defendants were Avondale Mills, Inc. and Alabama Power Company. The claims asserted at the trial of this case were for trespass and nuisance relating to property owned by the plaintiffs on Lake Martin in a subdivision of Alexander City, Alabama. The damages claimed by the plaintiffs were for decreased value of their homes, mental anguish and punitive damages. In November 1998, the jury returned a verdict against all three defendants in the amount of $155,200 compensatory damages for alleged property devaluation, $0 damages for mental anguish and punitive damages of $52,398,000. The defendants appealed this verdict to the Alabama Supreme Court, which on August 4, 2000, reversed the jury verdict and rendered judgment in favor of the Company and the other defendants on all claims. The plaintiffs filed an application for rehearing before the Alabama Supreme Court, which denied that application and reaffirmed its ruling in favor of the defendants in an opinion issued on January 12, 2001. The Alabama Supreme Court issued a Certificate of Judgment affecting such actions on January 30, 2001. On February 23, 1999, a similar lawsuit was filed in Jefferson County, Alabama, by two former residents of the same residential subdivision, which suit was dismissed with prejudice without liability on the Company's part on February 1, 2001. On January 13, 2000, another lawsuit was filed in Jefferson County, Alabama, by 15 families owning property adjacent to Lake Martin, seeking unspecified damages for alleged nuisance and trespass. The Company plans to vigorously defend this suit. By letter dated January 13, 2000, the Company was notified by the United States Department of Justice (DOJ) that the DOJ intended to institute legal proceedings against the Company and certain other parties alleging violations by those parties of the Clean Water Act in connection with the treatment and discharge of waste at a water treatment facility operated by the City of Alexander City, Alabama. Continuing discussions are being held with the DOJ with regard to the proposed suit by the DOJ. The Company believes it is in compliance with the Clean Water Act and will vigorously oppose the imposition of any monetary penalties or injunctive relief in any lawsuit that may be filed. I-6 9 The Company is a party to various other lawsuits arising out of the conduct of its business, the majority of which, if adversely determined, would not have a material adverse effect upon the Company. ITEM 4. Submission of Matters to a Vote of Security Holders None. EXECUTIVE OFFICERS OF THE COMPANY "Election of Directors" on pages 1 through 3 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 2001 is incorporated herein by reference. Additional executive officers who are not directors are as follows:
Officer Name Age Since Position ---------------- --- ------- ------------------------- Jonathan Letzler 44 1998 Executive Vice President/ President and Chief Executive Officer, JERZEES Robert D. Martin 53 2000 Senior Vice President/ Chief Financial Officer Floyd G. Hoffman 58 1999 Senior Vice President/ Corporate Development, General Counsel and Secretary Eric N. Hoyle 53 1998 Senior Vice President/ President and Chief Executive Officer, Cross Creek Apparel Thomas R. Johnson, Jr. 58 1989 Senior Vice President/ President and Chief Executive Officer, Yarn Carol M. Mabe 52 2000 Senior Vice President/ President and Chief Executive Officer, Russell Athletic JT Taunton, Jr. 58 1983 Senior Vice President/ President and Chief Executive Officer, Fabrics and Services K. Roger Holliday 42 1988 Vice President, Investor Relations and Treasurer Nancy N. Young 52 1998 Vice President, Communications and Community Relations Larry E. Workman 57 1987 Controller
I-7 10
Officer Name Age Since Position ---------------- --- ------- ------------------------- Steve R. Forehand 45 1987 Assistant General Counsel and Assistant Secretary Christopher M. Champion 30 2001 Associate Counsel, Director of Government Relations and Assistant Secretary
Mr. Letzler was employed by the Company in 1998, as Senior Vice President and Chief Executive Officer of JERZEES. Prior to joining the Company, he was with Sara Lee Corporation, from 1980 to 1998, most recently as President of Hanes Hosiery and prior to that he was President of the Hanes Printables Division. Mr. Martin, employed by the Company in 2000, was most recently Senior Vice President and CFO for Sunbeam Corporation's international operations. Prior to joining Sunbeam, he had been with Sara Lee Corporation's branded apparel operations for 21 years, most recently as Vice President and CFO of the European business. Mr. Hoffman was employed by the Company in 1999 in his current position. Prior to joining the Company, he was most recently Vice President-General Counsel and Secretary for OSI Industries, Inc. from 1996 to 1999. Prior to that, he was Vice President-Deputy General Counsel and Assistant Secretary for Sara Lee Corporation. Mr. Hoyle, was employed by the Company in 1998, as the Executive Vice President and Chief Financial Officer of the Company from 1998 to 2000. Prior to joining the Company, he was most recently with Ithaca Industries, from 1994 to 1998, serving as Chief Financial Officer. During the time Mr. Hoyle served as Chief Financial Officer, Ithaca Industries, Inc. filed a petition in bankruptcy court under Chapter 11 of the Bankruptcy Code. Mr. Johnson, employed by the Company since 1989, most recently served as Executive Vice President, Manufacturing. Prior to that, he was Vice President, Greige Manufacturing. Ms. Mabe, employed by the Company in 1999, most recently served as President of Russell Athletic. She was named President and Chief Executive Officer of Russell Athletic and Senior Vice President of Russell Corporation in 2000. Prior to joining Russell she was Vice President of strategic marketing for VF Jeanswear, Inc. She has also held executive positions with Victoria's Secret Stores and Sara Lee Corporation. Mr. Taunton, employed by the Company since 1973, most recently served as Executive Vice President, Sales and Marketing. Prior to that, he served as President of the Fabrics Division from 1988 to 1993. Mr. Holliday, employed by the Company since 1986, was named Vice President, Investor Relations in 1998, and Treasurer in 1996. He served as President of the Licensed Products Division from 1994 to 1996, President of the Knit Apparel Division from 1991 to 1994 and Assistant Treasurer from 1988 to 1991. Ms. Young was employed by the Company in 1998 in her current role. Prior to joining the Company, she was with Sara Lee Corporation from 1984 to 1998, most recently as Director, Corporate Affairs and Community Relations. I-8 11 Mr. Workman, employed by the Company since 1969 as an accountant, served as Manager, Cost Accounting from 1970 to 1987. Mr. Forehand, employed by the Company in 1985 as Director of Taxes, served as Assistant Secretary from 1987 to 1988 and Secretary from 1989 to 1998. Mr. Champion joined the Company in 1994 as a staff attorney. He was named Director, Government Relations in 1999, and assumed his current duties in 2001. All executive officers and all other officers of the Company were elected or re-elected to their positions at the Board of Directors meeting on February 21, 2001. I-9 12 PART II ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters "Dividend and Market Information" on the inside back cover of the Annual Shareholders Report for the year ended December 30, 2000 is incorporated herein by reference. The approximate number of holders of the Company's common stock at March 27, 2001 was 8,000. ITEM 6. Selected Financial Data "Ten Year Selected Financial Data" on pages 22 and 23 of the Annual Shareholders Report for the year ended December 30, 2000 is incorporated herein by reference with respect to fiscal years 2000, 1999, 1998, 1997, and 1996. ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 24 through 27 of the Annual Shareholders Report for the year ended December 30, 2000 is incorporated herein by reference. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 24 through 27 of the Annual Shareholders Report for the year ended December 30, 2000 are incorporated herein by reference. II-1 13 ITEM 8. Financial Statements and Supplementary Data The following consolidated financial statements of the registrant and its subsidiaries included in the Annual Shareholders Report for the year ended December 30, 2000 are incorporated herein by reference: Consolidated Balance Sheets - December 30, 2000 and January 1, 2000 Consolidated Statements of Operations - Years ended December 30, 2000, January 1, 2000 and January 2, 1999 Consolidated Statements of Cash Flows - Years ended December 30, 2000, January 1, 2000 and January 2, 1999 Consolidated Statements of Stockholders' Equity - Years ended December 30, 2000, January 1, 2000 and January 2, 1999 Notes to Consolidated Financial Statements - Years ended December 30, 2000, January 1, 2000 and January 2, 1999 Report of Independent Auditors ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. II-2 14 PART III ITEM 10. Directors and Executive Officers of the Registrant "Election of Directors" on pages 1 through 3 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 2001 is incorporated herein by reference. "Executive Officers of the Company" on pages I-7 through I-9 of this report is incorporated herein by reference. "Section 16(a) Beneficial Ownership Reporting Compliance" on page 6 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 2001 is incorporated herein by reference. ITEM 11. Executive Compensation "Executive Compensation" on pages 10 through 14 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 2001 is incorporated herein by reference. "Management Development and Compensation Committee Report on Executive Compensation" and "Comparative Five-Year Cumulative Total Returns Through 12/30/2000" on pages 7 through 10 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 2001 are incorporated herein by reference, but pursuant to Instruction (9) to Item 402 (a)(3) of Regulation S-K shall not deemed to be filed with the Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934. ITEM 12. Security Ownership of Certain Beneficial Owners and Management (a) "Principal Shareholders" on pages 4 and 5 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 2001 is incorporated herein by reference. (b) Information concerning security ownership of management set forth in the Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 2001 under the captions "Security Ownership of Executive Officers and Directors" on page 3 is incorporated herein by reference. (c) There are no arrangements known to the registrant the operation of which may at a subsequent date result in a change in control of the registrant. ITEM 13. Certain Relationships and Related Transactions "Transactions with Management and Others" on page 6 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 2001 is incorporated herein by reference. III-1 15 PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) List of Documents filed as part of this Report: (1) Financial Statements All financial statements of the registrant as set forth under Item 8 of this Report on Form 10-K (2) Financial Statement Schedule
Schedule Page Number Description Number ------ ------------------------ ------------- II Valuation and Qualifying IV-4 and IV-5 Accounts
All other financial statements and schedules not listed have been omitted since the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required. (3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Page Number or Exhibit Incorporation Numbers Description by Reference to ------- -------------------- --------------- (3a) Restated Articles of IV-8 Incorporation (3b) Certificate of Adoption Exhibit 4.2 to of Resolutions by Board Current Report of Directors of Russell on Form 8-K filed Corporation dated September 17, 1999 October 25, 1989 (3c) Bylaws IV-9 (4a) Rights Agreement dated Exhibit 4.1 to as of September 15, 1999 Current Report on between the Company and Form 8-K filed on SunTrust Bank, Atlanta, September 17, 1999 Georgia (4b) Note Agreement dated as Exhibit (4b) to Annual of August 28, 1997 Report on Form 10-K for relating to the Company's year ended January 1, 2000 6.65% Senior Notes due August 28, 2007
IV-1 16
Page Number or Exhibit Incorporation Numbers Description by Reference to ------- -------------------- --------------- (4c) Credit Agreement dated Exhibit (4c) to Annual as of October 15, 1999 Report on Form 10-K for relating to the Company's year ended January 1, 2000 $250,000,000 Revolving Loan Facility (10a) Form of Deferred Exhibit (10a) to Annual Compensation Agreement Report on Form 10-K for with certain officers year ended December 30, 1995 (10b) Fuel supply contract Exhibit 13(c) to with Russell Lands, Registration Statement Incorporated dated No. 2-56574 May 21, 1975 (10c) 1987 Stock Option Plan Exhibit 1 to Registration Statement No. 33-24898 (10d) Russell Corporation 1997 Exhibit (10f) to Annual Non-Employee Directors' Report on Form 10-K for Stock Grant, Stock Option year ended January 2, 1999 and Deferred Compensation Plan (10e) Amended and Restated Appendix B to Proxy Executive Incentive Plan Statement dated March 16, 2000 (10f) Russell Corporation Exhibit 4(k) to Flexible Deferral Plan Registration Statement No. 333-89765 (10g) Russell Corporation Exhibit 4(k) to 2000 Stock Option Plan Registration Statement No. 333-30238 (10h) Russell Corporation Exhibit 4(k) to Employee Stock Purchase Registration Statement Plan No. 333-30236 (10i) Russell Corporation Exhibit 4(m) to 2000 Non-Employee Registration Statement Directors' Compensation No. 333-55340 Plan (10j) Employment Agreement, Exhibit 10.1 to Quarterly dated March 31, 1998, by Report on Form 10-Q/A for and Between the Company quarter ended April 5, and John F. Ward 1998 as filed with the Securities and Exchange Commission on August 24, 1998
IV-2 17
Page Number or Exhibit Incorporation Numbers Description by Reference to ------- -------------------- --------------- (10l) Executive Deferred Exhibit 10.2 to Quarterly Compensation and Buyout Report on Form 10-Q/A for Plan dated March 31, 1998, quarter ended April 5, by and between the Company 1998 as filed with the and John F. Ward Securities and Exchange Commission on August 24, 1998 10(m) Amended and Restated IV-10 Employment Agreement dated April 1, 2001, by and between the Company and John F. Ward 10(n) Amended and Restated IV-11 Executive Deferred Compensation and Buyout Plan dated April 1, 2001, by and between the Company and John F. Ward 10(o) Employment Agreement Exhibit (10n) to Annual dated November 20, 1998 Report on Form 10-K for by and between the Company year ended January 1, 2000 and Jonathan Letzler 10(p) Russell Corporation IV-12 Supplemental Executive Retirement Plan dated February 23, 2000 (11) Computations of Income/ IV-13 (Loss) per Common Share (13) 2000 Annual Report to IV-14 Shareholders (21) List of Significant IV-15 Subsidiaries (23) Consent of Ernst & Young LLP, IV-16 Independent Auditors (99) Proxy Statement for April 25, 2001 Annual Shareholders' Meeting
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, upon request of the Commission, the registrant will furnish copies to the Commission of any agreement which defines the rights of holders of long-term debt of the registrant for which the total amount of securities authorized thereunder does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis and which have not heretofore been filed with the Commission. (b) Reports on Form 8-K No reports on form 8-K were filed during the fourth quarter of the year ended December 30, 2000. IV-3 18 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS RUSSELL CORPORATION AND SUBSIDIARIES
BALANCE AT ADDITIONS BALANCE BEGINNING CHARGED TO COSTS AT END DESCRIPTION OF PERIOD AND EXPENSES ACQUISITION DEDUCTIONS OF PERIOD - ----------- ---------- ---------------- ----------- ---------- --------- YEAR ENDED DECEMBER 30, 2000 Allowance for doubtful accounts $ 4,520,566 $10,242,005 $ -0- $ 6,946,131(1) $ 7,816,440 Reserve for discounts and returns 3,391,201 7,731,241 -0- $ 9,142,609(2) 1,979,833 ----------- ----------- ---------- ----------- ----------- TOTALS $ 7,911,767 $17,973,246 $ -0- $16,088,740 $ 9,796,273 =========== =========== ========== =========== =========== YEAR ENDED JANUARY 1, 2000 Allowance for doubtful accounts $ 5,363,868 $ 412,214 $ -0- $ 1,255,516(1) $ 4,520,566 Reserve for discounts and returns 3,198,242 1,984,423 -0- 1,791,464(2) 3,391,201 ----------- ----------- ---------- ----------- ----------- TOTALS $ 8,562,110 $ 2,396,637 $ -0- $ 3,046,980 $ 7,911,767 =========== =========== ========== =========== =========== YEAR ENDED JANUARY 2, 1999 Allowance for doubtful accounts $ 7,350,437 $13,927,466 $ -0- $15,914,035(1) $ 5,363,868 Reserve for discounts and returns 3,182,594 8,692,248 -0- 8,676,600(2) 3,198,242 ----------- ----------- ---------- ----------- ----------- TOTALS $10,533,031 $22,619,714 -0- $24,590,635 $ 8,562,110 =========== =========== ========== =========== ===========
(1) Uncollectible accounts written off, net of recoveries. (2) Discounts and returns allowed customers during the year. 19 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS RUSSELL CORPORATION AND SUBSIDIARIES
BALANCE AT ADDITIONS BALANCE BEGINNING CHARGED TO COSTS AT END DESCRIPTION OF PERIOD AND EXPENSES ACQUISITION DEDUCTIONS OF PERIOD - ----------- ----------- ---------------- ----------- ----------- ----------- RESTRUCTURING AND REORGANIZATION RESERVES YEAR ENDED DECEMBER 30, 2000 Asset impairment and accelerated depreciation $14,632,000 $34,000,000 -0- $19,292,000(4)(5) $29,340,000 Employee termination charges 4,770,000 11,834,000 -0- 13,284,000(3) 3,320,000 Inventory write-downs 3,251,000 3,648,000 -0- 3,969,000(5) 2,930,000 Termination of certain licenses and contracts 1,223,000 3,313,000 -0- 2,130,000 2,406,000 Exit cost related to facilities 534,000 4,596,000 -0- 5,130,000(3) -0- Other -0- 7,620,000 -0- 6,169,000(3) 1,451,000 ----------- ----------- --- ----------- ----------- TOTALS $24,410,000 $65,011,000 -0- $49,974,000 $39,447,000 =========== =========== === =========== =========== YEAR ENDED JANUARY 1, 2000 Asset impairment and $ 3,951,000 $28,459,000 -0- $17,778,000(4)(5) $14,632,000 accelerated depreciation Employee termination charges 4,567,000 17,542,000 -0- 17,339,000(3) 4,770,000 Inventory write-downs 1,964,000 4,988,000 -0- 3,701,000(5) 3,251,000 Termination of certain licenses and contracts 1,223,000 -0- -0- -0- 1,223,000 Exit cost related to facilities 534,000 11,743,000 -0- 11,743,000(3) 534,000 Other -0- 7,989,000 -0- 7,989,000(3) -0- ----------- ----------- --- ----------- ----------- TOTALS $12,239,000 $70,721,000 -0- $58,550,000 $24,410,000 =========== =========== === =========== =========== YEAR ENDED JANUARY 2, 1999 Asset impairment and -0- $30,085,000 -0- $26,134,000(3)(4) $ 3,951,000 accelerated depreciation Employee termination charges -0- 8,088,000 -0- 3,521,000(3) 4,567,000 Inventory write-downs 16,109,000 14,145,000 1,964,000 Termination of certain licenses and contracts -0- 7,258,000 -0- 6,035,000(3) 1,223,000 Exit cost related to facilities -0- 1,816,000 -0- 1,282,000(5) 534,000 Other -0- 8,531,000 -0- 8,531,000 -0- ----------- ----------- --- ----------- ----------- TOTALS -0- $71,887,000 -0- $59,648,000 $12,239,000 =========== =========== === =========== ===========
(3) Represents cash paid (4) Represents assets write-off (5) Represents assets sold after write-down 20 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunder duly authorized. RUSSELL CORPORATION (Registrant) Date: 3/29/01 By: /s/ John F. Ward ------- ----------------------------------------- John F. Ward Chairman, President and CEO Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ John F. Ward Chairman, President and CEO 3/29/01 --------------------------- ------- John F. Ward Date Senior Vice President and /s/ Robert D. Martin Chief Financial Officer 3/29/01 --------------------------- ------- Robert D. Martin Date /s/ Herschel M. Bloom Director 3/29/01 --------------------------- ------- Herschel M. Bloom Date /s/ Ronald G. Bruno Director 3/29/01 --------------------------- ------- Ronald G. Bruno Date /s/ Timothy A. Lewis Director 3/29/01 ---------------------------- ------- Timothy A. Lewis Date /s/ C. V. Nalley III Director 3/29/01 ---------------------------- ------- C. V. Nalley III Date
IV-6 21 /s/ Margaret M. Porter Director 3/29/01 ----------------------------- ------- Margaret M. Porter Date /s/ Mary Jane Robertson Director 3/29/01 ----------------------------- ------- Mary Jane Robertson Date /s/ Benjamin Russell Director 3/29/01 ----------------------------- ------- Benjamin Russell Date /s/ John R. Thomas Director 3/29/01 ----------------------------- ------- John R. Thomas Date /s/ John A. White Director 3/29/01 ----------------------------- ------- John A. White Date /s/ Larry E. Workman Controller 3/29/01 ----------------------------- (Principal Accounting Officer) ------- Larry E. Workman Date
IV-7 EX-3.(A) 2 g67759ex3-a.txt RESTATED ARTICLES OF INCORPORATION 1 EXHIBIT (3A) RESTATED ARTICLES OF INCORPORATION 2 RESTATED ARTICLES OF INCORPORATION OF RUSSELL CORPORATION Composite Restated Articles of Incorporation as adopted on April 28, 1982 and as amended through March 8, 1989. 3 RESTATED ARTICLES OF INCORPORATION OF RUSSELL CORPORATION 1. The name of the corporation is Russell Corporation. 2. The period of its duration is perpetual. 3. The purpose or purposes for which the corporation is organized are the transaction of any or all lawful business for which corporations may be incorporated under the Alabama Business Corporation Act, including, but not limited to, the manufacture and sale of textile products. 4. (a) The aggregate number of shares of capital stock which the corporation shall have authority to issue is one hundred sixty million (160,000,000) shares, of which ten million (10,000,000) shares, par value $.01 per share, are to be preferred stock (hereinafter called "Preferred Stock"), and one hundred fifty million (150,000,000) shares, par value $.01 share, are to be common stock (hereinafter called "Common Stock"). (b) The Preferred Stock may be issued in such one or more series as shall from time to time be created and authorized to be issued by the board of directors of the corporation as hereinafter provided. The board of directors is hereby expressly authorized, by resolution or resolutions from time to time adopted providing for the issuance of Preferred Stock, to fix and determine, to the extent not fixed by the provisions hereinafter set forth, the relative rights and preferences of the shares of each series of Preferred Stock, including (but without limiting the generality of the foregoing) any of the following with respect to which the board of directors may make specific provisions: (i) the distinctive name and any serial designations; (ii) the annual dividend rate or rates and the dividend payment dates; (iii) with respect to the declaration and payment of dividends upon each series of the Preferred Stock, whether such dividends are to be cumulative or noncumulative, preferred, subordinate or equal to dividends declared and paid upon other series of the Preferred Stock or upon any other shares of stock of the corporation, and the participating or other special rights, if any, of such dividends; -1- 4 (iv) the redemption provisions, if any, with respect to any series, and, if any series is subject to redemption, the manner and time of redemption and the redemption price or prices; (v) the amount or amounts of preferential or other payment to which any series of Preferred Stock is entitled over any other series of Preferred Stock or over the Common Stock on voluntary or involuntary liquidation, dissolution or winding-up, subject to the provisions set forth in paragraph (d)(ii) of this Article 4; (vi) any sinking fund or other retirement provisions and the extent to which the charges therefor are to have priority over the payment of dividends on or the making of sinking fund or other like retirement provisions for shares of any other series of Preferred Stock or for shares of the Common Stock; (vii) any conversion, exchange, purchase or other privileges to acquire shares of any other series of Preferred Stock or of the Common Stock; (viii) the number of shares of such series; and (ix) the voting rights, if any, of such series, subject to the provisions set forth in paragraph (d)(i) of this Article 4. Each share of each series of Preferred Stock shall have the same relative rights and be identical in all respects with all the other shares of the same series. Before the corporation shall issue any shares of Preferred Stock of any series authorized as hereinbefore provided, a statement setting forth a copy of the resolution or resolutions with respect to such series adopted by the board of directors of the corporation pursuant to the foregoing authority vested in the board of directors shall be made, filed and recorded in accordance with the then applicable requirements, if any, of the laws of the State of Alabama, or, if no statement is then so required, a certificate shall be signed and acknowledged on behalf of the corporation by its Chairman of the Board, President or a Vice-President and its corporate seal shall be affixed thereto and attested by its Secretary or any Assistant Secretary and such certificate shall be filed and kept on file at the principal office of the corporation in the State of Alabama and in such other place or places as the board of directors shall designate. (c) The authority of the board of directors to provide for the issuance of any shares of the corporation's stock shall include, but shall not be limited to, authority to issue shares of stock of the corporation for any purpose and in any manner (including issuance pursuant to rights, warrants, or other options) permitted by law, for delivery as all or part of the consideration for or in connection with the acquisition of all or part of the stock of another corporation or of all or part of the assets of another corporation or enterprise, irrespective of the amount by which the issuance of such stock shall increase the number of shares outstanding (but not in excess of the number of shares authorized). -2- 5 (d) The following relative rights and preferences of the capital stock of the corporation are fixed as follows: (i) Voting Rights. (A) Common Stock. At all elections of directors of the corporation, and in respect of all other matters as to which the vote or consent of shareholders of the corporation shall be required to be taken, the holders of the Common Stock shall be entitled to one (1) vote for each share held by them. (B) Preferred Stock. The holders of each series of the Preferred Stock shall have such voting rights as may be fixed by resolution or resolutions of the board of directors providing for the issuance of each such series. (ii) Liquidation, Dissolution, etc. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the corporation, the assets of the corporation available for distribution to the shareholders (whether from capital or surplus) shall be distributed among those of the respective series of the outstanding Preferred Stock, if any, as may be entitled to any preferential amounts and among the respective holders thereof in accordance with the relative rights and preferences, if any, fixed and determined for each such series and the holders thereof by resolution or resolutions of the board of directors providing for the issue of each such series of the Preferred Stock; and after payment in full of the amounts payable in respect of the Preferred Stock, if any, the holders of any series of the outstanding Preferred Stock who are not entitled to preferential treatment pursuant to resolutions of the board of directors providing for the issue thereof and the holders of the outstanding Common Stock shall be entitled (to the exclusion of the holders of any series of the outstanding Preferred Stock entitled to preferential treatment pursuant to resolutions of the board of directors providing for the issue thereof) to share ratably in all the remaining assets of the corporation available for distribution to its shareholders. A merger, consolidation or reorganization of the corporation with or into one or more corporations, or a sale, lease or other transfer of all or substantially all the assets of the corporation, that does not result in the termination of the enterprise and distribution of the assets to shareholders, shall not be deemed to constitute a liquidation, dissolution or winding-up of the corporation within the meaning of this paragraph (d)(ii), notwithstanding the fact that the corporation may cease to exist or may surrender its Restated Articles of Incorporation. (iii) Dividends and Other Distributions. Dividends on any stock of the corporation shall be payable only out of earnings, surplus or assets of the corporation legally available for the payment of such dividends and only as and when declared by the board of directors. The board of directors of the corporation may, from time to time, distribute to the shareholders of the corporation out of the capital surplus of the corporation a portion of the assets of the corporation to the extent and in the manner provided by law. -3- 6 (e) The corporation shall have the right to purchase, take, receive or otherwise acquire, hold, own, pledge and transfer or otherwise dispose of its own shares. Purchases by the corporation of its own shares, whether direct or indirect, may be made to the extent of unreserved and unrestricted earned surplus and capital surplus of the corporation available therefor. (f) No holder of any share or shares of any class of stock of the corporation shall have any preemptive right to subscribe for any shares of stock of any class of the corporation now or hereafter authorized or for any securities convertible into or carrying any optional rights to purchase or subscribe for any shares of stock of any class of the corporation now or hereafter authorized. 5. The mailing address of the registered office of the corporation is Russell Corporation, P. 0. Box 272, Alexander City, Alabama 35010, and the name of its registered agent at such address is James D. Nabors. 6. The number of directors constituting the present board of directors of the corporation is 11, and the names and addresses of the persons who are serving as directors until the next annual meeting of shareholders or until their successors are elected and qualify are as follows:
NAME ADDRESS E. C. Gwaltney Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 Dwight L. Carlisle, Jr. Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 Frank K. Hall Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 George W. Hardy Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 Emil Hess Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 H. Scott Howell Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 Glenn Ireland, II Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010
-4- 7
NAME ADDRESS Crawford T. Johnson, III Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 Finis Morgan Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 Benjamin Russell Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 John R. Thomas Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010
7. The names and addresses of the original incorporators are as follows:
NAME ADDRESS B. Russell Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 T. C. Russell Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 O. C. Thomas Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 J. H. Henderson Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010 A. L. Harlan Russell Corporation P. 0. Box 272 Alexander City, Alabama 35010
8. (a) Number, Election and Terms. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, a board of directors which, except as otherwise fixed by or pursuant to the provisions of Article 4 hereof relating to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, shall consist of not less than nine nor more than fifteen persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the board of directors pursuant to a resolution adopted by a majority of the entire board of directors. At the annual meeting of shareholders of the corporation held in 1988, the directors shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first -5- 8 class of directors to expire at the annual meeting of shareholders of the corporation to be held in 1989, the term of office of the second class of directors to expire at the annual meeting of shareholders of the corporation to be held in 1990 and the term of office of the third class of directors to expire at the annual meeting of shareholders of the corporation to be held in 1991. At each annual meeting of shareholders of the corporation following such initial classification and election, and except as otherwise so fixed by or pursuant to the provisions of Article 4 hereof relating to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances and except as provided below in this Article 8 in the case of electing a successor to a director elected by the board of directors to fill a vacancy occurring in the membership of the board of directors, directors elected to succeed those directors whose terms expire at such annual meeting shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders of the corporation after their election. (b) Vacancies and Newly Created Directorships. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director so elected to fill a vacancy shall be elected to serve until the next annual meeting of shareholders, at which time a director shall be elected to fill the unexpired portion of the term of office of the director whose successor was elected by the remaining directors. Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose, unless applicable law then permits such directorship to be filled by the affirmative vote of a majority of the remaining directors (even though less than a quorum of the board of directors). No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director. (c) Continuance in Office. Notwithstanding the foregoing provisions of this Article 8, any director whose term of office has expired shall continue to hold office until his successor shall be elected and qualify. (d) Removal. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire board of directors, may be removed from office at any time, without cause, but only by the affirmative vote of at least seventy-five percent (75%) of the total number of votes entitled to be cast by the holders of all of the shares of capital stock of the corporation then entitled to vote generally in the election of directors. The holder of each share of capital stock entitled to vote thereon shall be entitled to cast the same number of votes as the holder of such shares is entitled to cast generally in the election of each director. Subject to the rights of the holders of any series of Preferred Stock then outstanding, a director, or the entire board of directors, may be removed from office at any time, with cause in the manner provided by law. (e) Amendment, Repeal, etc. Notwithstanding any other provisions of these Restated Articles of Incorporation or the Bylaws of the corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Restated Articles of Incorporation or the Bylaws of the corporation), the affirmative vote of at least seventy-five percent (75%) of the total number of votes entitled to be cast by the holders of all of the shares of capital stock of the corporation then entitled to vote generally in the election of directors shall be required to amend, alter, change or repeal, or to adopt any provision as part of these Restated Articles of Incorporation inconsistent with, this Article 8. The holder of each share of capital stock entitled to vote thereon shall be entitled to cast the same number of votes as the holder of such shares is entitled to cast generally in the election of each director. -6- 9 9. Certain Provisions Respecting Business Combinations: Section 9.01. Definitions. For the purposes of this Article 9: (a) An "Affiliate" of, or a person "Affiliated" with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (b) "Announcement Date" means, with respect to any Business Combination, the date of the first public announcement of such Business Combination. (c) "Associate," when used to indicate a relationship with any person, means (i) any corporation or organization (other than the corporation or a Subsidiary) of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, (ii) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a director or officer of the corporation or any of its parents or subsidiaries. (d) A person shall be a "beneficial owner" of any Voting Stock: (i) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote or direct the vote pursuant to any agreement, arrangement or understanding; or (iii) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the corporation; provided, however, that no director or officer of the corporation (nor any Affiliate or Associate of such director or officer) shall, solely by reason of any or all of such directors or officers acting in their capacities as such, be deemed the "beneficial owner" of any shares of Voting Stock that are beneficially owned by any other such director or officer. (e) For the purposes of determining whether a person is an Interested Shareholder pursuant to paragraph (l) of this Section 9.01, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by the Interested Shareholder through -7- 10 application of paragraph (d) of this Section 9.01, but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. (f) "Board" means the board of directors of the corporation. (g) A "Business Combination" shall mean any one or more of the following: (i) any merger or consolidation of the corporation or any Subsidiary with or into (A) any Interested Shareholder or (B) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate of an Interested Shareholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the corporation or any Subsidiary having an aggregate Fair Market Value of $1,000,000 or more; or (iii) the issuance, pledge, transfer or other disposition by the corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the corporation or any Subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of an Interested Shareholder or an Affiliate of any Interested Shareholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the corporation, or any merger or consolidation of the corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity securities, or securities convertible into equity securities, of the corporation or any Subsidiary, including, without limitation, any class or series of Protected Stock, which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder; or (vi) any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (i) through (v). (h) "Consummation Date" means, with respect to any Business Combination, the date on which such Business Combination is effected. (i) "Determination Date" means, with respect to any Interested Shareholder, the date on which such Interested Shareholder first became an Interested Shareholder. -8- 11 (j) "Consummation Date" means any member of the Board who is not an Affiliate, nominee or representative of the Interested Shareholder and was a member of the Board prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Disinterested Director who is a member of the Board and who is not an Affiliate, nominee or representative of the Interested Shareholder and was recommended or elected to succeed a Disinterested Director by a majority of Disinterested Directors on the Board at the time of such recommendation or election. (k) "Fair Market Value" means (i) in the case of stock, the highest closing sale price during the thirty-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange, Inc. Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, Inc., or, if such stock is not listed on the New York Stock Exchange, Inc., on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the thirty-day period preceding the date in question as reported by the National Association of Securities Dealers, Inc. Automated Quotations system or any system then in use, or if no such quotation is available, the fair market value on the date in question of a share of such stock as determined in good faith by a majority of the Disinterested Directors; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Disinterested Directors. (l) "Interested Shareholder" shall mean, in respect of any Business Combination, any person (other than the corporation or any wholly-owned Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the corporation or any wholly-owned Subsidiary or any person organized, appointed or established by the corporation or any wholly-owned Subsidiary for or pursuant to the terms of any such plan) who or which, as of the date of the first public announcement of such Business Combination, or on the day immediately prior to the consummation of any such Business Combination: (i) is the beneficial owner, directly or indirectly, of Voting Stock entitled to cast ten percent or more of the total number of votes entitled to be cast in respect of all the outstanding shares of Voting Stock in any vote of shareholders which may be taken pursuant to this Article 9; or (ii) is an Affiliate of the corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of Voting Stock then entitled to cast ten percent or more of the total number of votes entitled to be cast in respect of all the outstanding shares of Voting Stock in any vote of shareholders which may be taken pursuant to this Article 9; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock of the corporation which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933; provided, however, there shall be disregarded in determining whether a person is an -9- 12 Interested Shareholder in respect of any Business Combination the beneficial ownership, both direct and indirect, of the voting power of the Voting Stock owned beneficially by such person or an ancestor of such person on March 9, 1988, which for purposes of this paragraph (l) shall include any beneficial ownership of Voting Stock resulting from stock splits (including reverse stock splits), stock dividends or recapitalizations of such Voting Stock occurring subsequent to March 9, 1988, unless such person has acquired subsequent to March 9, 1988, other than by gift, devise, bequest or intestate succession, beneficial ownership, either direct or indirect, of one percent (1%) or more of the voting power of the outstanding Voting Stock in addition to the Voting Stock beneficially owned by such person or such person's ancestor on March 9,1988. (m) A "person" shall mean any individual, firm, corporation or other entity. (n) "Protected Stock" means all Voting Stock and all other shares of capital stock of the corporation having, or which may have upon the happening of some contingency, the right to vote for the election of some or all of the directors of the corporation, regardless of whether at the time in question such shares then have a present right to so vote. (o) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the corporation. (p) "Voting Stock" means, at any time, all shares of capital stock of the corporation entitled to vote generally in the election of directors, which shares shall be considered for the purpose of any vote required by this Article 9 as, and shall vote together in any such vote as, one class. In any vote required by this Article 9, the holder of each share of Voting Stock shall be entitled to cast with respect to such share the same number of votes as such holder could cast generally in the election of each director with respect to such share. (q) In the event of any Business Combination in which the corporation survives, the phrase "consideration other than cash to be received" as used in clauses (i) and (ii) of paragraph (b) of Section 9.03 of this Article 9 shall include the shares of Common Stock and/or the shares of any other class of outstanding Protected Stock retained by the holders of such shares. Section 9.02. Higher Vote for Certain Business Combinations. In addition to any affirmative vote required by law or these Restated Articles of Incorporation, and except as otherwise expressly provided in Section 9.03 of this Article 9, any Business Combination shall require the affirmative vote of at least seventy-five percent (75%) of the total number of votes entitled to be cast in respect of all the outstanding shares of Voting Stock. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage or separate class vote may be specified, by law or under the rules of, or in any agreement with, any United States securities exchange registered under the Securities Exchange Act of 1934, or any successor act thereto, on which any of the Voting Stock is listed, or otherwise. Section 9.03. When Higher Vote Is Not Required. The provisions of Section 9.02 of this Article 9 shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law and any -10- 13 other Article of these Restated Articles of Incorporation, if all of the conditions specified in either of the following paragraphs (a) and (b) are met: (a) Approval by the Disinterested Director. The Business Combination shall have been approved, either specifically or as a transaction which is within an approved category of transactions, by a majority of the Disinterested Directors (whether such approval is made prior to or subsequent to the acquisition of, or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused or will cause the Interested Shareholder to become an Interested Shareholder). (b) Price and Procedure Requirements. All of the following conditions shall have been met: (i) Common Stock. The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received by holders of the Common Stock of the corporation in such Business Combination, computed on a per share basis, shall be at least equal to the higher of the following: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of Common Stock acquired by the Interested Shareholder (I) within the two-year period immediately prior to the Announcement Date or (II) in the transaction or transactions by which the Interested Shareholder became an Interested Shareholder, as adjusted for any subsequent stock split, stock dividend; subdivision or reclassification with respect to the Common Stock, whichever is higher; or (B) the Fair Market Value per share of the Common Stock on the Announcement Date or the Determination Date, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the Common Stock, whichever is higher. (ii) Protected Stock. The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received per share by holders of shares of any other class of outstanding Protected Stock regardless of whether the Interested Shareholder has previously acquired any shares of a particular class of such Protected Stock shall be at least equal to the highest of the following: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of such class of Protected Stock acquired by the Interested Shareholders (I) within the two-year period immediately prior to the Announcement Date or (II) in the transaction or transactions by which the Interested Shareholder became an Interested Shareholder, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such Protected Stock, whichever is higher; -11- 14 (B) the highest preferential amount per share to which the holders of shares of such class of Protected Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, regardless of whether the Business Combination to be consummated constitutes such an event; or (C) the Fair Market Value per share of such class of Protected Stock on the Announcement Date or the Determination Date, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such Protected Stock, whichever is higher. (iii) Form of Consideration. The consideration to be received by holders of a particular class or series of outstanding Protected Stock (including Common Stock) shall be in cash or in the same form paid by or on behalf of the Interested Shareholder for shares of such class of Protected Stock prior to the Consummation Date. If there have been varying forms of the consideration so paid for shares of any class of Protected Stock, the form of consideration to be received by the holders of such class of Protected Stock shall be either cash or the form used to acquire the largest number of shares of such class of Protected Stock previously so acquired. (iv) Maintain Dividends. After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (A) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock of the corporation; and (B) there shall have been (I) no reduction in the annual rate of dividends paid on the Common Stock except as necessary to reflect any subdivision of the Common Stock, except as approved by a majority of the Disinterested Directors, and (II) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors. (v) Acquisition of Additional Shares. After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination, such Interested Shareholder shall not have become the beneficial owner of any additional shares of Voting Stock except (A) as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder or (B) in a transaction which would not result in any increase in the percentage of beneficial ownership by the Interested Shareholder of any class or series of Voting Stock. (vi) No Disproportionate Benefits. After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise. -12- 15 (vii) Furnish Information. A proxy or information statement describing the proposed Business Combination' and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all shareholders of the corporation at least thirty days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or any such subsequent provisions). Such proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability (or inadvisability) of the Business Combination that the Disinterested Directors, or any of them, may choose to make. (viii) Absence of Certain Changes. Such Interested Shareholder shall not have made any substantial change in the business or equity capital structure of the corporation without the approval of a majority of the Disinterested Directors. Section 9.04. Powers of Board of Directors. A majority of the Disinterested Directors of the corporation shall have the power and duty to determine for the purposes of this Article 9 on the basis of the information known to them after reasonable inquiry, (1) the number of shares of Voting Stock beneficially owned by any person, (2) whether a person is an Interested Shareholder or is an Affiliate or Associate of another person, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (d) of Section 9.01 of this Article 9, (4) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $1,000,000 or more, or (5) whether the requirements of paragraph (a) or (b) of Section 9.03 of this Article 9 have been met with respect to any Business Combination. Section 9.05. No Effect on Fiduciary Obligations of Interested Shareholders. Nothing contained in this Article 9 shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. Section 9.06. No Fiduciary Duty Imposed on Board. The fact that any Business Combination complies with the foregoing sections of this Article 9 shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the shareholders of the corporation nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board, or any member thereof, with respect to evaluations of or actions and responses taken with respect to such Business Combination. Section 9.07. Amendment, Repeal, Etc. Notwithstanding any other provisions of these Restated Articles of Incorporation or the Bylaws of the corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Restated Articles of Incorporation or the Bylaws of the corporation), the affirmative vote of at least seventy-five percent (75%) of the total number of votes entitled to be cast in respect of all of the outstanding shares of Voting Stock shall be required to amend, alter, change or repeal, or to adopt any provision as part of these Restated Articles of Incorporation inconsistent with, this Article 9. -13- 16 Each article set forth above amends the corresponding provision of the original Articles of Incorporation as theretofore amended, and the Restated Articles of Incorporation, which amend in its entirety the original Articles of Incorporation of the corporation and all amendments thereto, supercede the original Articles of Incorporation and all amendments thereto. -14- 17 APPENDIX I In accordance with the provisions of Articles 2 and 12 of Chapter 2A of Title 10 of the Code of Alabama of 1975 and the provisions of Article 4 of the Restated Articles of Incorporation, as amended, of Russell Corporation, an Alabama corporation, the Corporation hereby certifies that the following resolutions were duly adopted by the Board of Directors of the Corporation by action by written consent of said Board of Directors dated October 15, 1988: "RESOLVED, that pursuant to the authority conferred upon the Board of Directors of Russell Corporation (the "Corporation") by Article 4 of the Restated Articles of Incorporation, as amended, of the Corporation (the "Restated Articles"), said Board of Directors hereby fixes and determines the voting rights and designations, preferences, qualifications, privileges, limitations, restrictions, options, and other special and relative rights of 1,150,000 shares out of the class of 10,000,000 shares of authorized preferred stock, par value $.01 per share (such class being the "Preferred Stock"), by establishing and designating an initial series of such Preferred Stock as follows: SECTION 1. Designation. The distinctive serial designation of this series of Preferred Stock shall be "1988 10% Cumulative Preferred Stock" (hereinafter the "1988 Preferred Stock"). Each share of 1988 Preferred Stock shall rank on a parity with or senior to any other series of Preferred Stock and senior to any "junior stock" (herein defined) as herein provided, in the payment of dividends and in the dissolution or winding up of the Corporation. SECTION 2. Number of Shares. The 1988 Preferred Stock shall consist of 1,150,000 shares, which number shall not be increased but may be decreased from time to time by a resolution or resolutions of the Board of Directors. Shares of 1988 Preferred Stock redeemed or purchased by the Corporation shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock, undesignated as to series, subject to reissuance by the Corporation as shares of Preferred Stock of any one or more series other than the 1988 Preferred Stock. SECTION 3. Dividends. (a) Up to and through June 30, 1992, the annual dividends payable on shares of 1988 Preferred Stock shall be $1.00 per share, payable in equal quarterly amounts on March 31, June 30, September 30 and December 31 in each year (each a "Dividend Payment Date") commencing December 31, 1988. The Corporation shall pay dividends on the 1988 Preferred Stock to the registered holders at the close of business on the 15th day of March, June, September and December next preceding the Dividend Payment Date. The amount of dividends payable for each dividend period and for any period shorter than a full dividend period shall be computed on the basis of a 360-day year of twelve 30-day months; provided, the quarterly dividend that is first paid on the 1988 Preferred Stock after the date of its issuance shall be equal to the amount, per share, of $0.25 less the amount, if any, not to exceed $0.25, that was paid or is payable with respect to the shares of the 1987 Preferred Stock of Quality Mills, Inc., a North Carolina corporation, that are, pursuant to the Plan and Agreement of Merger between the Corporation, a subsidiary thereof, and Quality Mills, Inc., converted into shares of the 1988 Preferred Stock, for the quarterly dividend period that commenced on the April 1, July 1, October 1 or January 1 that next preceded the date of the issuance of the 1988 Preferred Stock. (b) On or before May 15, 1992 and on or before each May 15 thereafter, the Corporation (i) shall by action of the Board of Directors, establish the dividend rate for the 1988 Preferred Stock for the one-year period commencing July 1 (the "One-Year Period") of the year in which such dividend rate is established (the "Adjusted Dividend -15- 18 Rate") and (ii) shall cause Written notice of the Adjusted Dividend Rate to be mailed to each person who was a registered holder of the 1988 Preferred Stock at the close of business on a date not more than five business days prior to the date of said notice. The dividend rate may be adjusted by the Corporation annually pursuant to this Section 3(b), but the Corporation may, in its sole discretion, elect not to make a change in the dividend rate in any year. In the event that the Corporation shall not make a change in the dividend rate, the dividend rate for the immediately preceding One-Year Period shall continue as the Adjusted Dividend Rate. The dividend rate in any year commencing on or after July 1, 1992, whether or not adjusted, need not reflect the current market conditions or interest rates prevailing at such times; provided, however, that the amount of the annual dividend established for the One-Year Periods commencing July 1, 1992 and July 1, 1993 shall not be lower than the amount that would be obtained by multiplying (i) the percentage interest rate being paid on one year certificates of deposit having no minimum denomination as generally announced by AmSouth Bank, N.A., Birmingham, Alabama, or any successor to the banking business of said bank, on the May 1 immediately preceding the beginning of each such One-Year Period, or if such May 1 is not a business day, on the next business day thereafter, by (ii) $10.00. (c) Dividends on the shares of the 1988 Preferred Stock shall accrue and be cumulative from the first date of original issuance of any shares thereof. Such dividends shall be deemed to accrue from day to day regardless of whether or not the Corporation shall have funds or assets available for the payment of such dividends, but accumulation of dividends on shares of 1988 Preferred Stock shall not bear interest. The holders of 1988 Preferred Stock, in preference to the holders of any junior stock, shall be entitled to receive, as and when declared by the Board of Directors out of any funds legally available therefor, cumulative preferential cash dividends at the rate fixed or established in Section 3(a) or 3(b) hereof. No dividends shall be declared or paid or set apart for payment on any junior stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid (or declared and a sum sufficient for the payment thereof set apart for such payment) on the 1988 Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such dividends. When dividends are not paid in full upon the 1988 Preferred Stock and upon any other stock ranking on a parity as to dividends with the 1988 Preferred Stock, all dividends declared upon shares of the 1988 Preferred Stock and any other stock ranking on a parity as to dividends shall be declared pro rata so that in all cases the amount of dividends declared per share on the 1988 Preferred Stock and such other stock shall bear to each other the same ratio that accumulated dividends per share on the shares of the 1988 Preferred Stock and such other stock bear to each other. Except as provided in the preceding sentence, unless full cumulative dividends on the 1988 Preferred Stock have been paid or sufficient funds for such payment set aside, no dividends (other than in Common Stock or another stock ranking junior to the 1988 Preferred Stock as to dividends and liquidation rights) may be declared or paid or set aside for payment or other distribution made upon the Common Stock or on any other stock of the Corporation ranking junior to or on parity with the 1988 Preferred Stock as to dividends or liquidation rights, nor may any Common Stock or any other stock of the Corporation ranking junior to or on a parity with the 1988 Preferred Stock as to dividends be redeemed or purchased (nor any payment made to or available for a sinking fund for the redemption of any shares of such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the 1988 Preferred Stock as to dividends and liquidation rights). Any dividend on the 1988 Preferred Stock may be paid by the Corporation's check mailed to the holders entitled thereto at their respective last addresses appearing on the Corporation's stock books. -16- 19 SECTION 4. No Preemptive Rights. No holder of shares of 1988 Preferred Stock shall be entitled as of right to subscribe for or purchase any additional or increased stock of the Corporation of any class, whether now or hereafter authorized, including treasury stock, or obligations convertible into any class of stock, or stock of any class convertible into stock of any other class, or obligations, stock or other securities carrying warrants or rights to subscribe to stock of the Corporation of any class, whether now or hereafter authorized, but any and all shares of stock, bonds, debentures or other securities or obligations, whether or not convertible into stock or carrying warrants entitling the holders thereof to subscribe to stock, may be issued, sold or disposed of from time to time by authority of the Board of Directors of the Corporation to such persons, firms or corporations and for such consideration, as far as it may be permitted by law, as the Board of Directors shall from time to time determine. SECTION 5. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, then, before any distribution or payment shall be made to the holders of any junior stock, the holders of 1988 Preferred Stock shall be entitled to be paid in full in an amount equal to $10.00 per share plus accrued and unpaid dividends to such distribution or payment date, whether or not earned or declared. If, upon any liquidation, dissolution or winding up of the Corporation, such payment shall have been made in full to holders of 1988 Preferred Stock, the remaining assets and funds of the Corporation shall be distributed among the holders of the junior stock, according to their respective rights and preferences and in each case according to their respective shares, and the holders of 1988 Preferred Stock shall not be entitled to any further participation in any distribution of assets by the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, such payment shall not have been made in full to the holders of all outstanding shares of the 1988 Preferred Stock, the holders of the 1988 Preferred Stock and all other classes or series of stock of the Corporation ranking on a parity therewith in the distribution of assets shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they would otherwise be entitled. Nothing herein contained shall be deemed to prevent redemption of 1988 Preferred Stock by the Corporation in the manner provided in Sections 6 and 7 below. Neither the consolidation nor the merger of the Corporation with or into any other corporation or corporations, nor a reorganization of the Corporation alone, nor the sale or transfer of all or any part of its assets, shall be deemed a liquidation, dissolution or winding up of the Corporation within the meaning of the foregoing provisions of this Section 5. Written notice of any voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, stating a payment date and the place where the distributable amounts shall be payable shall be given in accordance with the procedures set forth in Section 6 below. SECTION 6. Redemption at Option of Corporation. On or after December 31, 1993, the Corporation may, at the option of the Board of Directors, redeem the then outstanding 1988 Preferred Stock, in whole or from time to time in part, upon not less than 30 nor more than 60 days' written notice to the persons who were registered holders of the 1988 Preferred Stock at the close of business on a date not more than five business days prior to the date of said notice at a price of $10.00 per share plus accrued and unpaid dividends to the date of redemption, whether or not earned or declared. If less than all the outstanding shares of 1988 Preferred Stock are to be redeemed, the shares to be redeemed shall be determined by lot or pro rata in such manner as the Board of Directors shall deem fair and appropriate. Notice of every redemption of -17- 20 shares of the 1988 Preferred Stock, specifying the date fixed for said redemption and the place where the amount to be paid upon redemption is payable, shall be mailed by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses as they shall appear on the stock books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days prior to the date fixed for redemption. Any notice which is mailed in the manner therein provided shall be conclusively presumed to have been given, whether or not the shareholder receives such notice, and failure to give such notice by mail, or any defect in such notice, to any holder of shares of 1988 Preferred Stock designated for redemption shall not affect the validity of the redemption of any other shares of 1988 Preferred Stock. If notice of redemption shall have been duly mailed and if, on or before the redemption date specified in the notice, the redemption price, together with accrued dividends to the date fixed for redemption, shall have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the shares so called for redemption, so as to be and continue to be available therefor, and then, from and after the date of redemption so designated, notwithstanding that any certificate for shares of 1988 Preferred Stock so called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding, the dividends thereon shall cease to accrue and accumulate, and all rights with respect to the shares of 1988 Preferred Stock so called for redemption shall forthwith on the redemption date cease and terminate, except only the right of the holders thereof to receive the redemption price of the shares so redeemed, plus accrued dividends to the redemption date but without interest, upon surrender of their certificates for the 1988 Preferred Stock. SECTION 7. Redemption at Option of Shareholders. The 1988 Preferred Stock shall be redeemable at the option of the holders thereof, in whole or in part, commencing on June 30, 1992 and on each June 30 thereafter at a price of $10.00 per share plus accrued and unpaid dividends to the date of the redemption payment, whether or not earned or declared. In order for the 1988 Preferred Stock to be redeemed pursuant to this Section 7, the redemption agent designated by the Board of Directors of the Corporation ("Redemption Agent") must receive at its office designated for such purpose on or before the June 15 (or, if such June 15 is not a business day, the next succeeding business day), but not earlier than the May 15 prior to the redemption date, b(i) such 1988 Preferred Stock certificate(s) with the form entitled "Notice of Election to Redeem" on the reverse of the certificate(s) duly completed, or (ii) a telegram, telex, facsimile transmission or letter from a member of a national securities exchange or the National Association of Securities Dealers, Inc., or a commercial bank or a trust company in the United States of America setting forth the name and address and telephone number of the shareholder of such 1988 Preferred Stock, the total number of shares represented by such certificate and the number of such shares to be redeemed, a statement that the option to elect redemption is being exercised thereby and a guarantee that the certificates representing the shares of 1988 Preferred Stock to be redeemed with the form entitled "Notice of Election to Redeem" on the reverse of such certificates duly completed will be received by Redemption Agent not later than five business days after the date of such telegram, telex, facsimile transmission or letter, (and such certificates and form duly completed are received by Redemption Agent by such fifth business day). Any such notice received by Redemption Agent on or after the May 16 preceding such June 15 shall be irrevocable. This redemption option may be exercised by the holders of the 1988 Preferred Stock for less than the entire number of shares owned, provided that a minimum of 100 shares or any whole multiple thereof are tendered for redemption, unless the -18- 21 shareholder owns fewer than 100 shares, in which case all shares owned by shareholder must be tendered for redemption. All questions as to the validity, eligibility (including time of receipt) and acceptance of any certificates for 1988 Preferred Stock for redemption and any notice of revocation will be determined by Redemption Agent, whose determination shall be final and binding. So long as any shares of the 1988 Preferred Stock shall be outstanding, the Corporation shall have appointed and shall maintain a Redemption Agent and shall advise any holder of the 1988 Preferred Stock, upon request, of the name and designated office of such Redemption Agent. The Board of Directors may remove any Redemption Agent so appointed at any time, but in such event, or in the event of any resignation of the appointed Redemption Agent or its failure or inability for any reason to act as such, the Board of Directors shall appoint a successor Redemption Agent. If at any time no Redemption Agent shall have been appointed and be acting as such, the Corporation itself shall be deemed the Redemption Agent and the Corporation's principal office shall be deemed the designated office of the Redemption Agent. SECTION 8. Limitation on Redemption. Notwithstanding Sections 6 and 7, the Corporation shall not be obligated to redeem the 1988 Preferred Stock at any time at which, and to the extent that, the Corporation is prohibited by applicable law from effecting such redemption; provided, that in such case, the Corporation shall redeem all shares of the 1988 Preferred Stock duly tendered for redemption as soon thereafter as such redemption is permitted by applicable law, and to the extent that redemption of less than all of the shares of 1988 Preferred Stock duly tendered for redemption is permitted by applicable law to be redeemed, the Corporation shall redeem such shares pro rata by holder. SECTION 9. No Sinking Fund. The shares of 1988 Preferred Stock shall not be subject to the operation of a purchase or sinking fund. SECTION 10. Voting Rights. Except as provided herein and as otherwise provided by law, the holders of the 1988 Preferred Stock shall have no voting rights. If the equivalent of six quarterly dividends payable on the 1988 Preferred Stock, or on any other series of outstanding preferred stock of the Corporation ranking on a parity with the 1988 Preferred Stock as to dividends or liquidation rights, are in arrears, the number of directors holding office of the Corporation shall be increased by two and the holders of outstanding 1988 Preferred Stock, together with the holders of any other outstanding series of preferred stock having substantially identical voting rights (hereinafter "Other Preferred Stock"), voting as a single class without regard to series, shall be entitled to elect the additional two directors until all dividends in arrears have been paid in full to the end of the last preceding quarterly dividend period. When the voting rights of this Section 10 shall have vested in the holders of the 1988 Preferred Stock, a special meeting to elect the additional directors may be called by the Chairman of the Board or the President of the Corporation or by the holders of 25% or more of the classes of preferred stock affected. Such additional directors shall be nominated by the holders of the 1988 Preferred Stock and the holders of Other Preferred Stock, if any, and shall be elected by a plurality of the votes cast. Such limited voting rights shall not limit or restrict the right of the Corporation from time to time to increase or decrease the number of directors which the Corporation shall have. Any director who shall have been elected pursuant to this Section 10 shall hold office for a term expiring (subject to the earlier termination of the default in dividends) at the next annual meeting of shareholders, and during such term may be removed at any time, either with or without cause, unless otherwise provided by law, by, and only by, the affirmative votes of the holders of record of a majority of the outstanding -19- 22 shares of the 1988 Preferred Stock and Other Preferred Stock given at a special meeting of such shareholders called for that purpose, and any vacancy created by such removal may also be filled at such meeting. A meeting for the removal of a director elected pursuant to this Section 10 and the filling of the vacancy created thereby shall be held upon notice given by the Secretary of the Corporation within 10 days after receipt of a request therefor, signed by the holders of not less than 25% of the outstanding shares of the 1988 Preferred Stock and Other Preferred Stock. Such meeting shall be held at the earliest practicable date thereafter upon the notice required for annual meetings of shareholders. Any vacancy caused by the death or resignation of a director who shall have been elected pursuant to this Section 10 may be filled only at a meeting called for such purpose. Such meeting shall be held upon notice given by the Secretary of the Corporation at the earliest practicable date after any such death or resignation and in any event within 10 days after receipt of a written request signed by the holders of record of at least 10% of the outstanding shares of 1988 Preferred Stock and Other Preferred Stock upon the notice required for annual meetings of shareholders. If any meeting required by this Section 10 to be called shall not have been called within 10 days after personal service of a written request therefor upon the Secretary of the Corporation or within 15 days after mailing the same within the United States of America by registered mail addressed to the Secretary of the Corporation at its principal office, then the holders of record of at least 10% of the outstanding shares of 1988 Preferred Stock and Other Preferred Stock may designate in writing one of their number to call such meeting at the expense of the Corporation and such meeting may be called by such person so designated upon the notice required for annual meetings of shareholders. Any person so designated shall have access to the stock books of the Corporation for the purpose of causing meetings of shareholders to be called pursuant to these provisions. Any meeting held pursuant to this Section 10 shall be held at the place at which the last annual meeting of shareholders was held. At such meeting, the presence in person or by proxy of the holders of a majority of the outstanding shares of all outstanding 1988 Preferred Stock and Other Preferred Stock shall be required to constitute a quorum; in the absence of a quorum a majority of the holders present in person or by proxy shall have the power to adjourn the meeting from time to time without notice, other than announcement at the meeting, until a quorum shall be present. So long as any shares of the 1988 Preferred Stock are outstanding (a) the Corporation shall not, either directly or indirectly, or through merger or consolidation with any other corporation, without the consent of the holders of at least two-thirds of the then outstanding shares of the 1988 Preferred Stock given in person or by proxy, either in writing or by vote at an annual meeting or a special meeting called for the purpose, amend, alter or repeal any of the provisions of the Charter of the Corporation or of this resolution so as to affect adversely the rights, powers or preferences of the 1988 Preferred Stock; and (b) the Corporation shall not, without the consent of the holders of at least two-thirds of the then outstanding shares of 1988 Preferred Stock given in person or by proxy, either in writing or by vote at an annual meeting or a special meeting called for that purpose, (i) create or authorize any additional class of stock ranking on a parity with or prior to the Preferred Stock in respect of dividends or distribution of assets on liquidation, (ii) increase the authorized amount of the Preferred Stock, (iii) create or authorize any series of the Preferred Stock ranking prior to the 1988 Preferred Stock in respect of dividends or distribution of assets on liquidation, or (iv) create or authorize any obligation or security convertible into or evidencing the right to purchase shares of stock of any additional class of stock ranking on a parity with or prior to the 1988 Preferred Stock in respect of dividends or -20- 23 distribution of assets on liquidation, or any series of the Preferred Stock ranking prior to the 1988 Preferred Stock in respect of dividends or distribution of assets on liquidation. SECTION 11. Certain Definitions. As used herein with respect to 1988 Preferred Stock, the following terms shall have the following meanings: (a) The term "junior stock" shall mean (1) as used in Section 3 above, the Common Stock and any other class or series of stock of the Corporation over which 1988 Preferred Stock has preference or priority in the payment of dividends, and (2) as used in Section 5 above, the Common Stock and any other class or series of stock of the Corporation over which 1988 Preferred Stock has preference or priority in the distribution of assets on any liquidation, dissolution or winding up of the Corporation. (b) The term "accrued dividends", with respect to any share of any class or series, shall mean an amount computed at the annual dividend rate for the class or series of which the particular share is a part, from the date on which dividends on such share became cumulative to and including the date to which such dividends are to be accrued, less the aggregate amount of all dividends theretofore paid thereon. (c) The term "Common Stock" shall mean the class of stock designated as the common stock of the Corporation at the date of the adoption of this resolution or any other class of stock resulting from successive changes or reclassification of the common stock. (d) The term "business day" shall mean any day other than a Saturday, Sunday, legal holiday in the State of Alabama or day on which banks in the State of Alabama are generally closed for commercial banking business, and any payment of any dividend on the 1988 Preferred Stock or any redemption price thereof becoming due on any day which is not a business day may be made on the next following business day with the same effect as though made on such due date." -21- EX-3.(C) 3 g67759ex3-c.txt BYLAWS 1 EXHIBIT (3C) BYLAWS 2 BYLAWS OF RUSSELL CORPORATION an Alabama Corporation Composite Bylaws as adopted on April 28, 1982 and as amended through March 15, 1989. 3 TABLE OF CONTENTS ARTICLE I OFFICES ARTICLE II SHAREHOLDERS Section 2.1 Annual Meetings Section 2.2 Special Meetings Section 2.3 Place of Meetings Section 2.4 Notice of Meetings Section 2.5 Closing of Transfer Books or Fixing of Record Date Section 2.6 Voting Record Section 2.7 Proxies Section 2.8 Quorum Section 2.9 Voting of Shares Section 2.10 Voting of Shares by Certain Holders ARTICLE III BOARD OF DIRECTORS Section 3.1 General Powers Section 3.2 Number, Election, Terms and Qualifications Section 3.3 Vacancies and Newly Created Directorships Section 3.4 Meetings Section 3.5 Meeting by Telephone Section 3.6 Quorum Section 3.7 Acts of the Board Section 3.8 Presumption of Assent Section 3.9 Action Without a Meeting Section 3.10 Committees of Directors Section 3.11 Compensation ARTICLE IV WAIVER OF NOTICE
- i - 4 ARTICLE V OFFICERS Section 5.1 Positions Section 5.2 Election and Term of Office Section 5.3 Vacancies Section 5.4 Removal Section 5.5 Chairman of the Board Section 5.6 President Section 5.7 Vice-Presidents Section 5.8 Secretary Section 5.9 Treasurer Section 5.10 Assistant Secretaries and Assistant Treasurers Section 5.11 Salaries ARTICLE VI CERTIFICATES REPRESENTING SHARES Section 6.1 Certificates Representing Shares Section 6.2 Legends on Certificates Section 6.3 Transfer of Shares Section 6.4 Lost, Stolen, Destroyed, or Mutilated Certificates ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES ARTICLE VIII GENERAL Section 8.1 Fiscal Year Section 8.2 Dividends Section 8.3 Checks Section 8.4 Corporate Seal ARTICLE IX AMENDMENT OF BYLAWS
- ii - 5 BYLAWS OF RUSSELL CORPORATION Article I. OFFICES The principal office of the corporation shall be located in Alexander City, Alabama. The corporation may have such other offices, within and without the State of Alabama, as the board of directors may determine or as the business of the corporation may require. The registered office of the corporation, required by the Alabama Business Corporation Act to be maintained in the State of Alabama, may but need not be the same as its principal office in the State of Alabama. The address of the registered office may be changed from time to time by the board of directors. Article II. SHAREHOLDERS Section 2.1 ANNUAL MEETINGS. The annual meeting of the shareholders shall be held on the fourth Wednesday of April in each year, or on such other day within such month as shall be fixed by the board of directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Alabama, such meeting shall be held on the next succeeding business day not a legal holiday. If the election of directors shall not be held on the day designated herein for the annual meeting of the shareholders, or at any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as may be conveniently held. Section 2.2 SPECIAL MEETINGS. Special meetings of the shareholders may be called by the board of directors, the chairman of the board, the president or the holders of not less than one-tenth of all shares of the corporation entitled to vote at the meeting. Section 2.3 PLACE OF MEETINGS. Annual and special meetings of the shareholders shall be held at the principal office of the corporation in the State of Alabama, or at such other place, within or without the State of Alabama, as may be designated by the board of directors and stated in the notice of the meeting. Section 2.4 NOTICE OF MEETINGS. Written notice of shareholder meetings, stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall, unless otherwise prescribed by statute, be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, the secretary, or the officer or other persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid. Notwithstanding the provisions of this section, the stock or bonded indebtedness of the corporation shall not be increased at a meeting unless notice of such meeting shall have been given as may be required by section 234 of the Constitution of Alabama as the same may be amended from time to time. Section 2.5 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a -1- 6 determination of shareholders for any other proper purpose, the board of directors of the corporation may provide that the stock transfer books shall be closed for a stated period but not to exceed fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date to be not more than fifty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof except where the determination has been made through the closing of the stock transfer books and the stated period of closing has expired. Section 2.6 VOTING RECORD. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order with the address of and the number of shares held by each. Such list shall be kept on file at the principal office of the corporation for a period of ten days prior to such meeting of shareholders, and shall be subject to inspection by any shareholder making written request therefor at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. Section 2.7 PROXIES. At all meetings of shareholders, a shareholder may vote in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 2.8 QUORUM. Unless otherwise provided in the articles of incorporation, a majority of the shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If a quorum is not present at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice, other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Section 2.9 VOTING OF SHARES. Subject to the provisions of the next sentence of this Section 2.9, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. At each election for directors every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote, OR, if cumulative voting is authorized by the articles of incorporation, to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares -2- 7 shall equal, or by distributing such votes on the same principle among any number of such candidates. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Constitution of Alabama, the Alabama Business Corporation Act, the articles of incorporation or bylaws. Section 2.10 VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaws of such other corporation may prescribe, or, in the absence of such provision, as the board of directors of such other corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name and no corporate trustee shall be entitled to vote in the election of directors shares held by it solely in a fiduciary capacity if such shares are shares issued by the corporate trustee itself. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Neither treasury shares of its own stock held by the corporation, nor shares held by another corporation if a majority of the shares entitled to vote for the election of directors of such other corporation is held by the corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time. ARTICLE III. BOARD OF DIRECTORS Section 3.1 GENERAL POWERS. The business and affairs of the corporation shall be managed by its board of directors. Section 3.2 NUMBER, ELECTION, TERMS AND QUALIFICATIONS. Except as otherwise fixed by or pursuant to the provisions of Article 4 of the corporation's Restated Articles of Incorporation relating to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the Board of Directors of the corporation shall consist of not less than nine nor more than fifteen persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. The directors shall be divided into three classes, as nearly equal in number as possible. At the Annual Meeting of the Shareholders to be held on April 27, 1988, directors shall be elected for each class, with the term of office of the first class of directors to expire at the Annual Meeting of Shareholders of the corporation to be held in 1989, the term of office of the second class of directors to expire at the Annual Meeting of Shareholders of the corporation to be held in 1990, and the term of office of the third class of directors to expire at the Annual Meeting of Shareholders of the corporation to be held in 1991. At each Annual Meeting of Shareholders of the corporation following such initial classification and election, and except as otherwise so fixed by or pursuant to the provisions of Article 4 of the corporation's Restated Articles of Incorpora- -3- 8 tion relating to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances and except as provided in Section 3.3 hereof in the case of electing a successor to a director elected by the Board of Directors to fill a vacancy occurring in the membership of the Board of Directors, directors elected to succeed those directors whose terms expire at such annual meeting shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders of the corporation after their election. Any director whose term of office has expired shall continue to hold office until his successor shall be elected and qualify. Directors need not be shareholders of the corporation or residents of the State of Alabama. Section 3.3 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director so elected to fill a vacancy shall be elected to serve until the next annual meeting of shareholders, at which time a director shall be elected to fill the unexpired portion of the term of office of the director whose successor was elected by the remaining directors. Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting of shareholders or at a special meeting of shareholders called for that purpose, unless applicable law then permits such directorship to be filled by the affirmative vote of a majority of the remaining directors (even though less than a quorum of the Board of Directors). No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Section 3.4 MEETINGS. Meetings of the board of directors, regular or special, may be held either within or without the State of Alabama. A regular meeting of the board of directors shall be held without notice immediately after, and at the same place as, the annual meeting of shareholders. Other regular meetings may be held upon such notice and at such time and place as shall be determined by the board. Special meetings of the board of directors may be called by the chairman of the board, the president, or the secretary at the request of two directors, on one day written notice to each director, delivered personally or mailed to each director at his business address or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, so addressed, with postage thereon prepaid. If by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice of such meeting. Section 3.5 MEETING BY TELEPHONE. Members of the board of directors or any committee designated thereby may participate in a meeting of such board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. Section 3.6 QUORUM. A majority of the whole number of directors of the board shall constitute a quorum for the transaction of business at any meeting of the board of directors. If less than a majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. If a quorum is present when the meeting is convened, the directors present may continue to do business, taking action by a vote of a majority of a quorum, until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum present or the refusal of any director present to vote. Section 3.7 ACTS OF THE BOARD. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. -4- 9 Section 3.8 PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 3.9 ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the board of directors or a committee thereof at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors or all of the members of the committee, as the case may be. Section 3.10 COMMITTEES OF DIRECTORS. The board of directors, by resolution passed by a majority of the whole board of directors, may designate one or more committees, each committee to consist of one or more of the directors of the corporation. Each such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors, except that no such committee shall have the authority of the board in reference to declaring a dividend or distribution from capital stock, issuing capital stock, amending the articles of incorporation, adopting a plan of merger or consolidation, recommending to the shareholders the sale, lease, mortgage, exchange or other disposition of all or substantially all of the property and assets of the corporation other than in the usual and regular course of business, recommending to the shareholders a voluntary dissolution of the corporation or a revocation of a dissolution, filling vacancies in the board of directors, or amending the bylaws of the corporation. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 3.11 COMPENSATION. By resolution of the board of directors, each director may be paid his expenses, if any, of attendance at each meeting of the board of directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the board of directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Article IV. WAIVER OF NOTICE Whenever any notice is required to be given to any shareholder or director of the corporation under the provisions of the Constitution of Alabama, the Alabama Business Corporation Act, the articles of incorporation, or these bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors or shareholders need be specified in the waiver of notice. The attendance of a director or a shareholder at a meeting shall constitute a waiver of notice of such meeting, except where a director or shareholder attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Article V. OFFICERS Section 5.1 POSITIONS. The officers of the corporation shall be elected by the board of directors and shall consist of a chairman of the board, a president, a secretary, and such -5- 10 other officers and assistant officers as may be deemed necessary by the board of directors. Any two or more offices may be held by the same person. Section 5.2 ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor shall have been elected and shall have qualified or until his death or he shall resign or shall have been removed in the manner hereinafter provided. Section 5.3 VACANCIES. A vacancy in any office may be filled by the board of directors. Section 5.4 REMOVAL. Any officer or agent may be removed by the board of directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 5.5 CHAIRMAN OF THE BOARD. The chairman of the board shall perform such duties as may be prescribed by the board of directors and shall, when present, preside at all meetings of the shareholders and of the board of directors. In the absence of the president, he shall perform the duties of the president. He may sign certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments on behalf of the corporation, except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. Section 5.6 PRESIDENT. The president shall be the chief executive officer of the corporation and shall, subject to the direction of the board of directors, supervise and control the business and affairs of the corporation. In the absence of the chairman of the board or in the event of his death or inability to act, the president shall perform the duties of the chairman of the board, and when so acting, shall have all the powers of and be subject to all the restrictions upon the chairman of the board. The president may sign certificates for shares of the corporation and deeds, mortgages, bonds, contracts or other instruments on behalf of the corporation except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. In general, he shall perform all duties incident to the office of president and chief executive officer and such other duties as may be prescribed by the board of directors. Section 5.7 VICE-PRESIDENTS. The vice-president (or in the event there be more than one vice-president, the vice-presidents) shall perform such duties as from time to time may be assigned to such persons by the president or the board of directors. Any vice-president may sign certificates for shares of the corporation. Section 5.8 SECRETARY. The secretary shall keep the minutes of the proceedings of the shareholders and of the board of directors in one or more books provided for that purpose; see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; be custodian of the corporate records and of the seal of the corporation; see that the seal of the corporation is affixed to all documents, the execution of which on behalf of the corporation under its seal is duly authorized; keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; sign with the chairman of the board, the president, any vice-president, or the treasurer certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the board of directors; have general charge of the stock -6- 11 transfer books of the corporation; and in general perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or the board of directors. Section 5.9 TREASURER. The treasurer shall have charge and custody of and be responsible for all funds and securities of the corporation, receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as may be designated by the board of directors, and in general perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president or the board of directors. The treasurer may sign certificates for shares of the corporation. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the board of directors shall determine. Section 5.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretary, or if there shall be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary. The assistant treasurer, or, if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant secretaries and assistant treasurers shall all perform such other duties as shall be assigned to them by the secretary and treasurer, respectively, or by the president or the board of directors. Section 5.11 SALARIES. The salaries of the officers shall be fixed from time to time by the board of directors, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. Article VI. CERTIFICATES REPRESENTING SHARES SECTION 6.1 CERTIFICATES REPRESENTING SHARES. Certificates representing shares of the corporation shall be in such form as shall be determined by the board of directors. Such certificates shall be signed by the chairman of the board, the president, any vice president, or the treasurer, and by the secretary, an assistant secretary, or an assistant treasurer, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar, other than the corporation itself or one of its employees. Each certificate for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number and class of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe. Section 6.2 LEGENDS ON CERTIFICATES. Any written restriction on the transfer of shares of the corporation must be noted conspicuously on the certificate representing such shares. In addition, if the corporation is authorized to issue shares of more than one class, there shall be set forth upon the face or back of every certificate, or every certificate shall have a statement that the corporation will furnish to any shareholder upon request and without charge, a full statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued, and if the corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and -7- 12 preferences between the shares of each such series so far as the same have been fixed and determined and the authority of the board of directors to fix and determine the relative rights and preferences of subsequent series. Section 6.3 TRANSFER OF SHARES. Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. Section 6.4 LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES. The board of directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed. Article VII. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES Section 7.1 The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, including appeals, (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such claim, action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any claim, action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 7.2 The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed claim, action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense of settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite -8- 13 the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. Section 7.3 To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in sections 7.1 and 7.2, or in defense or any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, notwithstanding that he has not been successful on any other claim, issue or matter in any such action, suit or proceeding. Section 7.4 Any indemnification under sections 7.1 and 7.2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in sections 7.1 and 7.2. Such determination shall be made (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to, or who have been wholly successful on the merits or otherwise with respect to, such claim, action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the shareholders. Section 7.5 Expenses (including attorneys' fees) incurred in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such claim, action, suit, or proceeding as authorized in the manner provided in section 7.4 upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if and to the extent that it shall be ultimately determined that he is not entitled to be indemnified by the corporation as authorized in this Article VII. Section 7.6 The indemnification provided by this Article VII shall not be deemed exclusive of and shall be in addition to any other rights to which those indemnified may be entitled under any statute, rule of law, provisions of articles of incorporation, bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 7.7 The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VII. Article VIII. GENERAL Section 8.1 FISCAL YEAR. The fiscal year of the corporation shall be a 52-53 week year, ending on the Saturday nearest to January 1 of each year, or as otherwise determined by resolution of the board of directors. Section 8.2 DIVIDENDS. The board of directors, from time to time, may declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law. -9- 14 Section 8.3 CHECKS. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. Section 8.4 CORPORATE SEAL. The board of directors shall select a corporate seal which shall have inscribed thereon the name of the corporation, the words "Alabama" and "Corporate Seal," and such seal may include the date of incorporation of the corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. Article IX. AMENDMENT OF BYLAWS These bylaws may be altered, amended or repealed and new bylaws may be adopted by the board of directors or by the shareholders at any regular or special meeting thereof; provided, however, that the board of directors may not alter, amend or repeal any bylaw establishing what constitutes a quorum at shareholders' meetings. -10- 15 RUSSELL CORPORATION BYLAWS HISTORY The present Bylaws of the Company were adopted by the Shareholders of the Company at the Annual Meeting held on April 28, 1982. Section 3.2 and Section 3.3 of the Bylaws were amended by the Directors on March 18, 1988. Article 5 of the Bylaws was amended by the Directors at the Annual Meeting on April 27, 1988. Section 3.2 of the Bylaws was amended by the Directors on February 19, 1993. 16 Section 3.2 of the Bylaws was amended by the Directors on February 27, 1996. Section 3.11 of Article III of the Bylaws was amended by the Directors at the Directors Meeting on July 23, 1997. RESOLUTION RESOLVED, that Section 3.11 of Article III of the bylaws of the Corporation shall be amended in its entirety to read as follows, effective as of this date: Section 3.11 Compensation of Directors. The board of directors may fix the compensation, or manner of determination thereof, of the directors and provide, either generally or in specific instances, for payment or reimbursement of expenses of directors in performance of their duties as directors. No payment of compensation or expenses shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. The above resolution was adopted at the Board of Directors Meeting held July 23, 1997, to be effective on that date. RESOLVED, by the Board of Directors of Russell Corporation, that the number of directors of the Board for this year beginning with the Annual Meeting of the shareholders on April 28, 1993 shall be eleven; and FURTHER RESOLVED, that in accordance with the classification of directors set forth in the Restated Articles of Incorporation, as amended, and the by-laws of the Company, the number of directors to be elected at the Annual Meeting of the Shareholders on April 28, 1993 shall be three and such directors shall be elected for a term of office of three years. The above resolution was adopted at a special meeting of the Board of Directors held on February 19, 1993, to be effective April 28, 1993. 17 RESOLVED, BY THE BOARD OF DIRECTORS OF RUSSELL CORPORATION, THAT THE NUMBER OF DIRECTORS OF THE BOARD FOR THE YEAR BEGINNING WITH THE ANNUAL MEETING OF THE SHAREHOLDERS ON APRIL 24, 1996 SHALL BE TEN; AND FURTHER RESOLVED, THAT IN ACCORDANCE WITH THE CLASSIFICATION OF DIRECTORS SET FORTH IN THE RESTATED ARTICLES OF INCORPORATION, AS AMENDED, AND THE BY-LAWS OF THE COMPANY, THE NUMBER OF DIRECTORS TO BE ELECTED AT THE ANNUAL MEETING OF THE SHAREHOLDERS ON APRIL 24, 1996 SHALL BE TWO AND SUCH DIRECTORS SHALL BE ELECTED FOR A TERM OF OFFICE OF THREE YEARS. THE ABOVE RESOLUTION WAS ADOPTED BY THE BOARD OF DIRECTORS UPON ACTION BY UNANIMOUS WRITTEN CONSENT ON FEBRUARY 27, 1996, TO BE EFFECTIVE APRIL 24, 1996. EX-10.(L) 4 g67759ex10-l.txt EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN 1 EXHIBIT 10(l) EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN THIS AGREEMENT, made and to become effective this 31st day of March, 1998 (the "Effective Date") by and between RUSSELL CORPORATION ("Russell"), an Alabama corporation with its principal office at Alexander City, Alabama and JOHN F. WARD, (the "Executive"). RECITALS: Russell and the Executive have executed an Employment Agreement dated as of the date of this Agreement, incorporated herein and attached hereto as Appendix A (the "Employment Agreement"). Pursuant to the terms of the Employment Agreement, the Executive shall be employed by Russell for a term of three (3) years. The Executive is currently under an agreement with his previous employer, Sara Lee Corporation ("Sara Lee"). By accepting employment with Russell, the Executive will lose certain benefits and opportunities under his agreements with Sara Lee. It is the wish of both Russell and the Executive that the Executive be compensated for such lost benefits and opportunities or that they be replaced with comparable benefits and opportunities. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Employment Agreement. NOW, THEREFORE, in consideration of the mutual covenants and obligations herein and the compensation that Russell agrees herein to pay the Executive, and of other good and valuable consideration, the receipt of which is hereby acknowledged, Russell and the Executive agree as follows: ARTICLE I. RABBI TRUST. A Rabbi Trust, entitled the "Russell Corporation Non-Qualified deferred Compensation Trust," shall be maintained for the benefit of the Executive (the "Trust"). The Trust shall be irrevocable and contain the amounts contributed pursuant to this Agreement and any interest or income generated by such amounts. The Trust shall earn interest at a variable rate (adjusted annually on the anniversary of the Effective Date) equal to the Merrill Lynch Corporate Bond Rate published in The Wall Street Journal. In the event of a Default Termination, as defined in Article VI, the funds in the Trust shall be distributed in accordance with Article VI. After April 1, 2001 the funds in the Trust shall be distributed to the Executive in a lump sum upon the termination of the Executive's employment. The Trust Agreement shall be substantially in the form of Appendix B to this Agreement with no substantive changes which are not acceptable to the Executive and his professional advisors. 2 ARTICLE II. STOCK OPTIONS. 2.1 Vested Stock Options. The Executive currently owns 124,109 options to purchase Sara Lee stock. Of these options, 109,775 are currently fully vested. It is understood that the Executive will exercise these vested options. It is agreed that the exercise of these options, however, does not fully compensate the Executive for the opportunity lost by exercising the options. To compensate the Executive for the lost opportunities created by the exercise of the Sara Lee options, the Executive shall be granted 249,489 options to purchase Russell stock effective as of the Effective Date (computed by multiplying the 109,775 Sara Lee options by 56.666 (the Average of the High and Low price for Sara Lee common stock for January 1, 1998 through January 31, 1998 (the "Sara Lee January Average")) divided by 24.933 (the Average of the High and Low price for Russell Corporation common stock for January 1, 1998 through January 31, 1998 (the "Russell January Average") (the "Conversion Ratio")). Subject to the provisions of Article VI hereof, these Russell stock options shall be immediately vested and exercisable any time within 54 months from the Effective Date at a price determined by taking the average of the high and low price for Russell common stock on the Effective Date as reported in The Wall Street Journal. 2.2 Options That Will Not Vest Before Effective Date. The Executive currently holds 14,334 options to purchase Sara Lee stock that will not vest before the Effective Date. To fully compensate the Executive for these options which will be lost, the Executive shall receive: (a) An amount to be placed in the Trust on the Effective Date equal to $418,925.48 (calculated by subtracting $393,329.96, the aggregate option price from the aggregate market value of Sara Lee stock, computed using the Sara Lee January Average). (b) In order to compensate the Executive for the opportunities lost through the forfeiture of the Sara Lee stock options described in this Section 2.2, such options will be replaced with options to purchase shares of Russell common stock. The number of shares of Russell stock subject to options to be received under this Section 2.2(b) shall be 32,577 (computed by multiplying 14,334 by the Conversion Ratio). Subject to the provisions of Article VI hereof, such options shall be effective as of the Effective Date, immediately vested and exercisable any time within 54 months from the Effective Date at a price determined by taking the average of the high and low price for Russell common stock on the Effective Date as reported in The Wall Street Journal. 2.3 Notwithstanding the foregoing, if the Russell shareholders fail to approve an amendment increasing the number of options which may be granted annually to any one employee so that the provisions of this Article 2 cannot be given full effect, any options previously granted under this Article 2 in excess of this amount shall lapse and be forfeited 2 3 and in lieu of any grant of stock options required by this Article 2 that would exceed the maximum amount that can be granted under the Russell Stock Option Plan (the "Russell Plan"), the Executive shall receive $3,841,510, an amount equal to the agreed value of the options that would otherwise be granted to the Executive under this Article 2, as determined pursuant to Exhibit A. ARTICLE III. RESTRICTED STOCK. The Executive currently has the right to receive 35,260 shares of Sara Lee restricted stock which will be forfeited upon the Executive's commencement of employment with Russell. Russell shall compensate the Executive for the value of such stock in cash. The amount of such compensation shall be $1,998,043.16 (calculated by multiplying 35,260 by the Sara Lee January Average) to be placed in the Trust by Russell on the Effective Date. The amount received under this Article 3, shall be increased to compensate the Executive for any dividends Sara Lee pays to its retired employees who hold restricted stock under the 1989 plan at the time the restrictions lapse. ARTICLE IV. COMPENSATION. The Executive shall lose $302,350 in the form of the remainder of his Sara Lee compensation for 1998 which he would have received given only the passage of time if he had not accepted employment with Russell. This amount shall be provided to the Executive in 12,127 shares of Russell common stock (valued by using the January Average for Russell Stock and rounded up to the nearest whole share). Two-thirds (2/3) of the shares of Russell Stock received under this Article IV shall be restricted from resale and bear a restriction stating that sale of the shares may be only in accordance with this Agreement. One-third of the stock shall become unrestricted upon each of the next two anniversaries of the Effective Date. ARTICLE V. RETIREMENT PLANS. 5.1 SERP. The Executive is a participant in Sara Lee's defined benefit retirement plans for executives including qualified plans and a Supplemental Executive Retirement Plan ("SERP"). A portion of the SERP benefit has been funded using a grantor revocable trust ("Secular Trust") at Northern Trust in Chicago with Northern Trust as Trustee and the Executive as grantor. Russell shall compensate the Executive $1,880,000 (the preliminary estimate of what would have been the required SERP balance on January 1, 1999 less the current balance in the account increased by the amount of all applicable income and other payroll taxes (the "Preliminary Estimate")). As soon as practicable after September 21, 1998, the final amount due to the Executive under this Section 5.1 (the "Final Amount") shall be determined. Any amount by which the Final Amount exceeds the Preliminary Estimate shall be paid to the Executive by Russell. Any amount by which the Preliminary Estimate shall exceed the Final Amount shall be paid to Russell by the Executive. 5.2 Estate Builder Program. The Executive currently participates in the Sara Lee Estate Builder Program (the "Program"). The Program is a Sara Lee deferral program under which deferred amounts earn interest at a rate well above market. The Executive will be penalized under this Program for accepting employment with Russell. To compensate the Executive for this lost benefit, Russell shall make a cash payment to the Trust of $50,611. 3 4 5.3 ESOP. The Executive shall be compensated for the amount of incremental credit he would have received under his Employee Stock Ownership Plan at Sara Lee as if he had not accepted employment with Russell. The value of the addition that would have been made to the Sara Lee ESOP between the Effective Date and January 1, 1999 shall be paid into the Trust. This value, not to exceed $50,000 unless approved by the Russell Compensation Committee, shall be determined no later than September 30, 1999 and deposited in the Trust as soon as the final amounts are calculated. ARTICLE VI. TERMINATION. The Executive shall receive all compensation and benefits provided for under this agreement unless his employment is terminated before April 1, 2001 in a Default Termination. A Default Termination shall mean a termination either by Russell For Cause (as defined in the Employment Agreement) or by the Executive for any reason other than: Good Reason, Death or Total Disability, as those terms are defined in the Employment Agreement. In the event of a Default Termination, certain compensation and benefits provided for under this Agreement shall be forfeited as follows: (a) Upon the event of a Default Termination, the Executive shall receive a lump sum payment from the Trust. The amount of this payment shall be calculated by multiplying the total amount in the Trust on the day of the Default Termination (the "Default Date") by a fraction, the numerator of which shall be the number of days from the Effective Date to the Default Date (including both the Effective Date and the Default Date) and the denominator of which shall be 1,095. The Executive shall also receive in the same proportion provided for above any amount to be placed in the Trust under this Agreement that has not been placed in the Trust as of the Default Date. (b) Any stock received under Article 4 that is still restricted on the date of the Default Termination shall be forfeited by the Executive. (c) Upon a Default Termination the Executive shall forfeit and surrender to Russell a number of the options granted to him under Article 2 hereof equal to the total number of options granted to him under Article 2 hereof multiplied by a fraction, the numerator of which shall be the number of days between the Default Date and March 31, 2001 (including both the Default Date and March 31) and the denominator of which shall be 1,095. If the number of options required to be forfeited by the Executive under the immediately preceding sentence exceeds the number of options granted to the Executive under Article 2 hereof that have not been exercised by the Executive (such excess being hereinafter referred to as the "Excess Options"), then the Executive shall pay to Russell within ten (10) days of the Default Date an amount of cash equal to the Spread. The "Spread" means an amount equal to (x) the average of the high and low price on the date of acquisition of each share of Russell stock acquired by the Executive pursuant to the exercise of any Options granted to the Executive under Article 2 hereof, (y) minus the amount paid by the Executive for such share of Russell stock pursuant to the exercise of such options, (z) multiplied by a fraction, the numerator of which shall be the number of Russell shares that have been acquired upon the exercise of the Excess Options, and the denominator of which shall be the total number of Russell shares previously acquired by the Executive pursuant to the exercise of options granted to him under Article 2 hereof. For purposes hereof, the Executive shall be deemed 4 5 to have been granted a number of options under Article 2 hereof equal to the total number of shares of Russell stock that can be acquired pursuant to the exercise of such options. ARTICLE VII. REDUCTION OF BENEFITS. The Executive and Russell acknowledge and agree that the amounts required to be paid to or for the benefit of the Executive hereunder, including the stock options provided for in Section 2.2 hereof received in exchange for the Sara Lee stock options that will not have vested before the Effective Date (the "Stock Options"), are being paid in the belief that the Executive will forfeit certain benefits and opportunities under his agreements with Sara Lee by reason of his accepting employment with Russell. If, contrary to such belief, any such benefit or opportunity for which the Executive is being compensated or which are being replaced hereunder is not lost or forfeited as a result of his accepting employment with Russell, and such benefit is actually received by the Executive from Sara Lee then appropriate adjustments shall be made to the amounts previously paid, or to the amounts required to be paid, to the Executive hereunder, including any appropriate adjustment to the Stock Options, and, if so required as a result of any such adjustment, the Executive shall reimburse Russell for any excess amounts previously paid to him. ARTICLE VIII. GENERAL PROVISIONS. 8.1 Governing Law. This Agreement shall be interpreted under the laws of the State of North Carolina. 8.2 Nonassignability. Benefits under this Agreement shall not be subject to anticipation or assignment by any person entitled thereto. 8.3 Binding Agreement. This Agreement shall be binding and inured to the benefit of the Executive, his executors, administrators, heirs and next of kin, and Russell, its successors and assigns. 8.4 Merger or Consolidation. Russell shall not consolidate or merge into or with another corporation or entity, or transfer all or substantially all of its assets to another corporation, partnership, trust or other entity unless such entity shall assume the rights, obligations and liabilities of Russell under the agreement and upon such assumption, shall become obligated to perform the terms and conditions of the agreement. 8.5 Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver, and any such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 8.6 Amendment; Termination. This Agreement may not be amended or terminated except by an instrument in writing signed by the parties hereto. 8.7 Recitals. The recitals to this Agreement shall become part of this Agreement. 5 6 8.8 Funding. This Agreement is intended to be an unfunded plan of deferred compensation maintained for a highly compensated management employee. The obligations of Russell to make payments hereunder shall constitute a general unsecured obligation of Russell to the Executive. To the extent that any person acquires a right to receive payments from the Trust or Russell hereunder, such right shall be no greater than the right of an unsecured creditor of Russell. IN WITNESS WHEREOF, this Agreement has been executed by and in behalf of the parties hereto on the day and year first above written. RUSSELL CORPORATION By: /s/ John C. Adams ---------------------------------------- John C. Adams Chairman of the Board, President and Chief Executive Officer /s/ John F. Ward ------------------------------------------- JOHN F. WARD 6 7 Exhibit A (Example) ARTICLE 2.3 -- EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN LET A = 124,109 OPTIONS TO PURCHASE SARA LEE COMMON STOCK B = PRICE/SHARE OF SARA LEE COMMON STOCK FV = FUTURE VALUE, ASSUMING 13% GROWTH (COMPOUNDED ANNUALLY) FOR 4.5 YEARS; FACTOR = 1.733217. PV = PRESENT VALUE, ASSUMING A DISCOUNT RATE OF 6.9005% (EQUIVALENT TO A PRE-TAX RATE OF 13%, GIVEN A MARGINAL TAX RATE OF 46.919%) FOR 4.5 YEARS; FACTOR = .740613. ASSUME A MARGINAL TAX RATE OF 46.919% FOR ALL YEARS (37.719% FEDERAL, 7.75% STATE, 1.45% MEDICARE). FORMULA: PV [FV(A x B) - (A x B)] EXAMPLE (SARA LEE PRICE = $57/SHARE): .740613 [1.733217 (124,109 x 57.00) - (124,109 x 57,00)] = .740613 [12,261,146 - 7,074,213] = $3,841,510 ========== 8 RUSSELL CORPORATION, ALEXANDER CITY, ALABAMA 35010 RUSSELL CORPORATION INTER-OFFICE CORRESPONDENCE TO: Jack Ward DATE: May 20, 1998 ------------------------------ ------------------------------------- FROM: Steve R. Forehand -------------------------------------------------------------------------- Re: Rabbi Trust Attached are three fully executed counterparts of your Rabbi Trust. I have sent one counterpart to Joe Long, one counterpart to Murray Greason and have retained one counterpart in the company file. Please let me know if you want the company file handled differently. SRF:jb Encl. 9 EXHIBIT C 10 Optionee Statement Exercisable as of 8/14/2000 - ------------------------------------------------------------------------------- JOHN F. WARD 5960 River Chase Cir. N.W. Atlanta, GA 30328 SSN ###-##-####
Expiration Grant Options Options Options Grant Date Date Plan ID Type Granted Option Price Outstanding Vested - ----------------------------------------------------------------------------------------------------------------------------- 03/31/1998 03/31/2008 1993 Plan Incentive 3,682 $27.1563 3,682 3,682 current 03/31/1998 03/31/2008 1993 Plan Non-Qualified 278,384 $27.1563 278,384 278,384 current 03/31/1998 03/31/2008 1993 Plan Incentive 11,046 $27.1563 11,046 7,364 current 3682 on 3/31/2001 03/31/1998 03/31/2008 1993 Plan Non-Qualified 113,954 $27.1563 113,954 75,969 current 37,985 on 3/31/2001 02/24/1999 02/24/2009 1993 Plan Incentive 3,682 $27.1563 3,682 0 current 3,682 on 3/31/2001 02/24/1999 02/24/2009 1993 Plan Non-Qualified 121,318 $27.1563 121,318 62,500 current 58,818 on 3/31/2001 02/24/1999 02/24/2009 1993 Plan Incentive 5,169 $19.3438 5,169 0 current 5,169 on 3/31/2001 02/24/1999 02/24/2009 1993 Plan Non-Qualified 119,831 $19.3438 119,831 31,250 current 88,581 on 3/31/2001 01/18/2000 01/18/2010 Executive Incentive 6611 15.125 6611 0 current Incentive (reload 1,652 on 1/18/2001 eligible) 4,959 on 3/31/2001 01/18/2000 01/18/2010 Executive Non-Qualified 493,369 15.125 493,389 0 current Incentive (reload 123,347 on 1/18/2001 eligible) 370,042 on 3/31/2001 - ----------------------------------------------------------------------------------------------------------------------------- TOTALS 1,157,066 1,157,066 459,149
EX-10.(M) 5 g67759ex10-m.txt AMENDED AND RESTATED EMPLOYMENT AGREEMENT 1 Exhibit (10m) AMENDED AND RESTATED EMPLOYMENT AGREEMENT DATED APRIL 1, 2001, BY AND BETWEEN THE COMPANY AND JOHN F. WARD 2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into and to become effective on the 1st day of April, 2001 (the "Effective Date"), by and between RUSSELL CORPORATION, an Alabama Corporation (the "Company"), and JOHN F. WARD (the "Executive"). RECITALS: WHEREAS, the Company and its affiliates are engaged in the knit products industry. The Executive is experienced in, and knowledgeable concerning, the knit products industry. The Company desires to continue to employ the Executive as President, Chief Executive Officer and Chairman of the Board, and the Executive desires to continue to be employed by the Company in that capacity; WHEREAS, the Company and the Executive entered into that certain Employment Agreement dated as of March 31, 1998, which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001; and WHEREAS, the Company and the Executive desire to amend and restate that Employment Agreement as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and obligations herein and the compensation the Company agrees herein to pay the Executive, and of other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Executive agree as follows: ARTICLE 1. EMPLOYMENT OF EXECUTIVE. Subject to the terms and conditions set forth in this Agreement, the Company hereby employs the Executive and the Executive hereby accepts such employment for the period stated in ARTICLE 3 of this Agreement. ARTICLE 2. POSITION, RESPONSIBILITIES AND DUTIES. 2.1 Position and Responsibilities. During the Term (as defined in Article 3. 1), the Executive shall serve as President, Chief Executive Officer and Chairman of the Board of Directors (pursuant to Article 2.3) of the Company on the conditions herein provided. The Executive shall have overall executive authority and responsibility for the Company and its subsidiaries, with all officers, employees, and consultants of the Company and its subsidiaries reporting directly (or indirectly through subordinates designated by the Executive) to the Executive. The Executive shall provide such executive services in the management of the Company's business not inconsistent with his position and the provisions Page 1 of 20 3 of Article 2.2 as shall be assigned to him from time to time by the Board of Directors of the Company (the "Board"). 2.2 Duties. During the Term and except for illness, reasonable vacation periods, and reasonable leaves of absence, the Executive shall devote his full business time, attention, skill, energies and efforts to the faithful performance of his duties hereunder and to the business and affairs of the Company and any subsidiary or affiliate of the Company, such duties being those customary to executives at the same level in companies of similar size. The Executive shall work to maximize shareholder value while being sensitive to the impact on employees and communities. To maximize shareholder value, significant changes will need to be made, potentially including but not limited to relocation or closing of manufacturing facilities or other operations, restructuring, closing or selling poor return businesses, establishment of nationally competitive compensation plans and replacement of management, contractors and consultants as necessary. Notwithstanding the foregoing, the duties of the Executive shall not be expanded or diminished without the Executive's prior approval. 2.3 Title. (a) The Executive shall be President, Chief Executive Officer, and Chairman of the Board of Directors of the Company, with the Board of Directors to elect, re-elect, and appoint the Executive to those offices throughout the Term. (b) The Executive shall hold the office of President for such time after the Effective Date that he feels necessary. At any time after the Effective Date, the Executive may, in his best judgment, relinquish the title of President for the purpose of hiring or promoting a new President and Chief Operating Officer of the Company. 2.4 Other Activities. Notwithstanding any other provision herein to the contrary, the Executive may serve on corporate, civic, and/or charitable boards or committees as he deems appropriate. ARTICLE 3. TERM. 3.1 Term of Employment. The term ("Term") of the Executive's employment under this Agreement shall commence on the Effective Date and shall continue until the earliest to occur of the following dates (the "Termination Date"): (i) March 31, 2006; (ii) the date of death of the Executive; (iii) the date coinciding with the end of one hundred eighty (180) days of continuous "Total Disability" of the Executive (as defined in Article 7.4); (iv) the effective date of a termination by the Company, including any termination by the Company For Cause (as defined in and pursuant to Articles 3.2 and 3.5); or (v) the effective date of the Executive's resignation, including but not limited to termination by the Executive for Good Reason (as defined in and pursuant to Articles 3.3 and 3.5). Page 2 of 20 4 3.2 Termination for Cause; Automatic Termination. The Company shall at all times have the right to discharge the Executive For Cause (as defined herein), For purposes of this Agreement, "For Cause" shall be limited to: (i) conviction of a felony other than those felonies involving the use of an automobile in violation of any vehicle statute; (ii) a material breach of a provision of this Agreement by the Executive, which breach is not cured within thirty (30) days after Notice of Breach (as defined below) has been given by the Company to the Executive; or (iii) the Final Determination of any action the effect of which is to permanently enjoin the Executive from fulfilling his duties under this Agreement. "Final Determination" as used herein shall mean the exhaustion of all available remedies and appeals by the Executive or the Executive's refusal to pursue such remedies and appeals. Notwithstanding the foregoing, no termination of employment For Cause pursuant to (ii) above shall occur and become effective unless and until: (1) no fewer than thirty (30) days prior to the date of the Notice of Termination (as defined in and pursuant to Article 3.5), the Company provides the Executive with written notice ("Notice of Breach") of its intent to terminate the Executive's employment For Cause, with said Notice of Breach to contain a detailed description of the specific reasons which form the basis for such intent; (2) during such thirty (30) day period after the date of said Notice of Breach is provided but before said Notice of Termination is provided, the Executive shall have the opportunity, with or without legal representation, to appear before the Board (and/or to present written materials to the Board, at the Executive's election) in order to present arguments on his own behalf-, and (3) the Executive shall thereafter be terminated For Cause only if (a) three-quarters of the members of the Board determine that the actions of the Executive as set forth in the Notice of Breach constituted Cause and that the Executive's employment should accordingly be terminated For Cause; and (b) the Board then provides the Executive with a Notice of Termination (as defined in and pursuant to Article 3.5), consistent with the basis set forth in said Notice of Breach, detailing the basis of such For Cause termination of employment. 3.3 Good Reason. Subject to the requirements of Article 3.5 of this Agreement, the Executive may terminate his employment at any time for Good Reason (as defined in this Article 3.3). If the Executive desires to terminate his employment for Good Reason, he shall give notice to the Company as provided in Article 3.5. For purposes of this Agreement, "Good Reason" shall mean the Executive's resignation from the Company's employment for any of the following reasons: (a) Failure by the Board or the Company's shareholders to reelect or reappoint the Executive as President (subject to Article 2.3), Chief Executive Officer, and/or Chairman of the Board of the Company, provided that the Executive then elects to leave the Company's employment within six (6) months of such failure to so reelect or reappoint the Executive; (b) A material modification by the Board of the duties, functions and responsibilities of the Executive as President (subject to 2.3) or Chief Executive Page 3 of 20 5 Officer without his written consent given within six (6) months prior to such modification; (c) The relocation of the Company's executive headquarters outside the Atlanta, Georgia metropolitan area without the Executive's prior written consent; (d) A Change of Control (defined in this Article 3.3(d)) of the Company provided that the Executive terminates his employment (for any reason or no reason) within two (2) years from the date the Change of Control becomes effective. Change in Control of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied: (i) Any person (other than those Persons in control of the Company as of the Effective Date, 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 stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; or (ii) During any period of two (2) consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board (and any new Director, whose election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was so approved (a "Continuing Director")), cease for any reason to constitute a majority thereof; or (iii) The stockholders of the Company approve: (A) a plan of complete liquidation of the Company; or (B) an agreement for the sale or disposition of all or substantially all of the Company's assets; or (C) a merger, consolidation, or reorganization of the Company with or involving any other corporation other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. Page 4 of 20 6 However, in no event shall a "Change in Control" be deemed to have occurred, with respect to a Participant, if the Participant is part of a purchasing group which consummates the Change-in-Control transaction. A Participant shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Participant is an equity participant in the purchasing company or group (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployed continuing Directors). (e) Any material breach of a provision of this Agreement by the Company, which breach is not cured within thirty (30) days after notice has been given to the Company by the Executive as provided in Article 3.5. Without limiting the generality of the foregoing sentence, the Company shall be in material breach of its obligations hereunder if, for example, the Company shall not permit the Executive to exercise such responsibilities as are consistent with the Executive's position as described in Article 2.2 herein and are of such a nature as are usually associated with such officers of other public corporations of approximately equal size, or the Executive shall at any time be required to report to anyone other than directly to the Board, or the Company shall fail to make a payment when due to the Executive. Notwithstanding the foregoing, if the Executive desires to terminate his employment for Good Reason under this Article 3.3(e), he shall give notice to the Company as provided in Article 3.5 and the Company shall have thirty (30) days after notice has been given to it in which to cure the reason for the Executive's desire to terminate his employment for Good Reason. If the reason for the Executive's desire to terminate his employment for Good Reason under this Article 3.3(e) is timely cured by the Company within such thirty (30) day period, the Executive's notice shall become null and void. 3.4 Retirement. Upon the Termination Date hereof (including but not limited to any termination of the Executive's employment due to death of the Executive or Total Disability of the Executive (as defined in Article 7.4) or either by the Company (whether or not For Cause) or the Executive (with or without Good Reason)), said termination of employment shall be treated as retirement of the Executive for the purpose of all Russell plans and benefits. For purposes of Russell's defined benefit retirement plan and its Supplemental Executive Retirement Plan ("SERP"), each year (or portion thereof) of the Executive's employment with the Company from January 1, 1998 through the effective Termination Date shall count and serve as two (2) years of employment pursuant to the SERP program implemented by the Company in the year 2000, which program was retroactive to January 1, 1998. The provisions and rights of the Executive as enumerated Page 5 of 20 7 under this Article 3.4 upon any said termination of employment are in addition to any and all other rights and benefits to which the Executive is entitled (or those in which the Executive is otherwise vested or which the Executive has otherwise earned) under the terms of this Agreement (including but not limited to those rights described in Articles 5, 6, 11, and 12), the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article 30. 3.5 Notice of Termination. Any termination by the Executive for Good Reason or by the Company For Cause shall be communicated by Notice of Termination to the Company or the Executive, as the case may be. For purposes hereof, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision relied upon in this Agreement, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) sets forth the Termination Date. If the Executive's employment is terminated by reason of one of the events described in Article 3.2 [other than 3.2(i)], 3.3(c), or 3.3 (e), the effective Termination Date shall be not less than thirty (30) days nor more than forty-five (45) days after the receipt of the Notice of Termination by the Executive or the Company, as the case may be. If the Executive's employment is terminated by reason of one of the events described in Article 3.3(a) or 3.3(b), the effective Termination Date shall be not more than fifteen (15) days after the receipt of the Notice of Termination by the Company. ARTICLE 4. COMPENSATION. 4.1 Base Salary. For all services rendered by the Executive during the Term, the Company shall pay the Executive as compensation a base annual salary (the "Base Salary"), payable in appropriate installments to conform with regular payroll dates for salaried personnel of the Company. Retroactive to February 28, 2001 from the Effective Date, the annual rate of the Executive's Base Salary shall be, at a minimum, $700,000 (the "Annual Base Salary Rate"), and, effective March 1, 2001, the minimum Annual Base Salary Rate of the Executive shall be $750,000. The Executive's Annual Base Salary Rate shall be reviewed and increased annually by the Board at the Board's discretion (with the timing of any such increase(s) coinciding with the increase(s) of other top executives of the Company and consistent with Company policy) and, as increased, shall thereafter be the Annual Base Salary Rate of the Executive for purposes of this Agreement; provided, however, that the Executive's Annual Base Salary Rate shall at no time be decreased without the prior written consent of the Executive and such Annual Base Salary Rate shall, at a minimum, be increased in accordance with and to reflect any applicable inflationary, cost-of-living index adjustments over the Term of this Agreement. Page 6 of 20 8 4.2 Bonus. In addition to the Base Salary provided for in Article 4.1 and the other benefits provided for in this Agreement, the Executive shall receive each year a target annual bonus ("Target Bonus") of at least 70% of the Executive's Base Salary for said year in the event the Company meets and achieves its reasonable financial plans and projections as set forth in its annual Business Plan for said year. Said criteria as to payment of said Target Bonus may be changed or otherwise altered if the Executive and the Company mutually agree in writing as to said change and criteria. In addition, the Executive shall also be eligible to receive each year a total annual bonus ("Total Bonus") of at least 140% of the Executive's Base Salary for said year (inclusive of the aforementioned Target Bonus paid to the Executive for said year) upon the achievement of certain goals established by the Board, including but not necessarily limited to the aforementioned criteria for said Target Bonus. Provided, however, that if applicable threshold levels for the Target Bonus are met but the above-referenced criteria for the Target Bonus and Total Bonus are not achieved, then the Executive shall receive pro-rata shares of said Target Bonus and Total Bonus equal to the percentages of the above-referenced criteria (for the Target Bonus and Total Bonus) that were achieved. ARTICLE 5. STOCK OPTIONS. In addition to the Base Salary and Bonus compensation provided to the Executive pursuant to Article 4, the Board, in its discretion and during the Term, may grant options to the Executive for the purchase of Russell Corporation common stock; provided, however, that in the first quarter of each of the 2003, 2004, 2005, and 2006 calendar years, the Board shall make an annual grant of not less than 100,000 said options to the Executive, which amount may be increased at the Board's discretion based on the Executive's performance. The exercise price for these options shall equal the average of the high and low of the stock price on the day the grant is made. Such options shall have a term of ten years (as described below), and one-fourth of the total options given in any such year shall vest on and as of each of the four (4) anniversary dates following the date of said grant. Provided, however, that if (a) this Agreement expires or (b) the Executive's employment is terminated (1) because of the Executive's death or Total Disability or (2) by the Company for any reason other than For Cause, all options granted under this Article 5 (whether or not vested) shall immediately become vested and shall be exercisable at the Executive's option for a period of ten (10) years from the date of the respective grant; if the Executive's employment is terminated by the Executive for Good Reason, all options granted under this Article 5 (whether or not vested) shall immediately become vested and shall be exercisable at the Executive's option for a period of ten (10) years from the date of the respective grant; and if the Executive's employment is terminated by the Company For Cause or by the Executive not for Good Reason, all options granted under this Article 5 that are not vested as of the Termination Date shall lapse and be forfeited to the Company, with those vested options as of said Termination Date being exercisable at the Executive's option for a period of ten (10) years from the date of the respective grant. In addition, all options granted by the Company to the Executive pursuant to Article 5 of that Employment Agreement dated as of March 31, 1998 between the Company and the Executive (which Employment Agreement was subsequently amended effective November 1, 1999) shall have Page 7 of 20 9 a term of ten (10) years from the date of the respective grant and shall become fully vested (to the extent said options are not already vested) as of March 31, 2001. ARTICLE 6. SUPPLEMENTAL BENEFITS 6.1 Special Health Care Benefit. In addition to the other benefits provided for in this Agreement (including participation by the Executive and his spouse in the Company Plan (as defined herein) during the Term of this Agreement), the Executive (or his spouse if the Executive predeceases his spouse before he attains the age of 65) shall be entitled, for the period commencing on the effective Termination Date (whether by expiration of this Agreement or by termination of the Executive's employment by either the Company or the Executive for any reason) and ending on the earlier of (i) the date of death for the survivor of the Executive and his spouse or (ii) the Executive and his spouse attaining the age of 65 (the "Coverage Period"), to participate, at the Executive's expense (which shall be no more than and limited to the then-current expense and rate normally payable by the Company's senior executives for purposes of coverage and benefits under the Company Plan as provided herein), in any group health plan or program (whether insured or self-insured, or any combination thereof) provided by the Company for the benefit of its active employees (the "Company Plan"). The Company, consistent with sound business practices, shall use its best efforts to provide the Executive with coverage for the Executive and his spouse under the Company Plan during the Coverage Period (and any period thereafter to the extent required by applicable state and federal law), including, if necessary, amending the applicable provisions of the Company Plan and negotiating the addition of any necessary riders to any group health insurance contract. In the event the Company is unable for whatever reason to provide the Executive and his spouse with coverage under the Company Plan, the Company, at the Executive's expense (which shall be no more than and limited to the then-current expense and rate normally payable by the Company's senior executives for purposes of coverage and benefits under the Company Plan as provided herein), shall provide the Executive with an individual policy of health insurance providing coverage for the Executive and his spouse (the "Individual Policy") during the Coverage Period. The coverage to be provided to the Executive and his spouse pursuant to this ARTICLE 6 (whether under the Company Plan or the Individual Policy) shall consist of coverage which, as of the time the coverage is being provided, is identical (or, with respect to an Individual Policy, substantially identical) to the coverage provided under the Company Plan to active employees and their dependents. Notwithstanding the foregoing, the Company shall coordinate coverage for the Executive under this ARTICLE 6 with any applicable federal or state government programs (e.g., Medicare or Medicaid) when the Executive (or his spouse) is eligible to begin receiving benefits under such program. Any premiums required to be paid for coverage of the Executive (or his spouse) under such government programs shall be paid by the Executive (or his spouse). 6.2 Life Insurance. During the Term of this Agreement, the Company shall provide and be responsible for up to an additional $16,000.00 for insurance and/or other benefits for the Page 8 of 20 10 Executive and shall also be responsible for any and all subsequent, applicable inflationary increases/escalators over the Term of this Agreement as required to continue to provide and maintain said insurance and/or other benefits for the Executive. The Company shall be required, upon the Executive's request and his sole discretion, to convert said insurance (or other benefits) to any other benefits for the Executive (including but not limited to split life, etc.) and shall also be required, if requested by the Executive for estate planning or other purposes, to convert certain compensation (or other benefits) payable or available to the Executive (under this Agreement or otherwise) into (or to otherwise "trade" said compensation or benefits for) other benefits for the Executive (including but not limited to split life, etc.) The provisions and rights of the Executive as enumerated in this Article 6.2 are in addition to (and not in lieu of or as substitute for) any and all other rights and benefits to which the Executive is entitled (or those in which the Executive is otherwise vested or which the Executive has otherwise earned) under the terms of this Agreement, the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article 30. 6.3 Corporate Automobile. During the Term of this Agreement, an automobile of appropriate value shall be provided by the Company. All operating and maintenance expenses of the automobile shall be paid by the Company. 6.4 Corporate Aircraft. During the Term of this Agreement, the Executive shall have the use of corporate aircraft for his business and personal transportation at his discretion and at no cost to him, including reasonable access for his spouse. Applicable income taxes that are attributable to the Executive's personal use of the aircraft, as calculated in an acceptable manner that is the most favorable to the Executive from said tax standpoint, shall be paid by the Executive. 6.5 Club Memberships. During the Term of this Agreement, the Company shall make available, at its own expense, country club access and membership(s) for the Executive and his family near each corporate headquarters of the Company. 6.6 Immediate Eligibility. Any delay in eligibility and any waiting period normally associated with the receipt of any of the benefits provided for by this Agreement shall be waived and the Executive (and his spouse where applicable) shall be eligible to receive benefits as of the Effective Date as if such delays and waiting periods have been satisfied. Notwithstanding the foregoing, this Article 6.7 shall not apply to the qualified retirement plans of Russell if waiving the eligibility requirements or any associated waiting periods would cause a violation under ERISA. Page 9 of 20 11 ARTICLE 7. DISABILITY BENEFITS. 7.1 Commencement of Total Disability. If the Executive suffers a "Total Disability" (as defined in Article 7.4), he shall be deemed totally disabled ("Totally Disabled") for purposes of this Agreement as of the date such Total Disability commenced. 7.2 Benefits Payable Upon Total Disability. In the event of the Total Disability of the Executive, the Company shall continue to pay the Executive his Base Salary during the Disability Period (as defined in this Article 7.2); provided, however, that if the Term shall otherwise expire during the Disability Period pursuant to the provisions of ARTICLE 3, the Company shall cease paying the Executive his Base Salary under this Article 7.2 as of the Termination Date, and the remaining provisions of this Agreement shall apply. In the event that the Executive's Total Disability continues for a period of one hundred eighty (180) days (measured from the date the Executive became Totally Disabled), the Term shall automatically expire and terminate, as provided in subparagraph (iii) of Article 3. 1, at the end of such one hundred eighty day period (the "Disability Period"), with said termination of the Executive's employment being treated, as provided in Article 3.4, as retirement of the Executive for purposes of all Russell plans and benefits. The provisions and rights of the Executive as enumerated under this Article 7 upon any said termination of employment in the event of Total Disability of the Executive are in addition to any and all other rights and benefits to which the Executive is entitled (or those in which the Executive is otherwise vested or which the Executive has otherwise earned) under the terms of this Agreement (including but not limited to those rights described in Articles 5, 6, 11, and 12), the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article 30. 7.3 Cessation of Disability. Notwithstanding the provisions of Article 7.2, if prior to the end of the Disability Period, the Executive's Total Disability shall have ceased under the definition of Total Disability set forth in Article 7.4 and he shall have commenced to perform his regular duties hereunder, the following special provisions shall apply: (i) this Agreement shall continue in full force and effect (except as otherwise provided in ARTICLE 3); and (ii) the Executive shall be entitled to resume his employment under this Agreement and to receive thereafter compensation in accordance with ARTICLE 4 as though he had not been Totally Disabled; provided, however, that unless the Executive shall perform his regular duties hereunder for a continuous period of at least sixty (60) days following a period of Total Disability before he again becomes Totally Disabled, he shall not be entitled to start a new Disability Period, but instead must continue under the remaining portion of the original Disability Period. In this event, the resumption of the original Disability Period shall commence on the date such Total Disability resumed. Page 10 of 20 12 7.4 Definition of Total Disability. For purposes of this Agreement, "Total Disability" shall mean the permanent and total inability, by reason of physical or mental infirmity, or both, of the Executive to perform his regular and customary duties with the Company in a satisfactory manner. The determination of the existence or nonexistence of Total Disability shall be made by the Board, pursuant to a medical examination by a medical doctor licensed to practice medicine in the state of the Executive's principal residence approved by the Board. ARTICLE 8. REIMBURSEMENT OF EXPENSES, OFFICE AND SECRETARIAL ASSISTANCE. The Company recognizes that the Executive will incur, from time to time, expenses for the benefit of the Company and in furtherance of the Company's business, including, but not limited to, expenses for entertainment, travel and other business expenses. The Executive shall be reimbursed for all said expenses in accordance with the Company's policy and practice applicable thereto. In the event of the termination of the Executive's employment for any reason, the Company shall reimburse the Executive (or in the event of death, his personal representative) for expenses incurred by the Executive on behalf of the Company prior to the Termination Date to the extent such expenses have not been previously reimbursed by the Company. Moreover, the Company agrees that, during the Term of this Agreement, the Executive shall be provided, at the Company's expense and under applicable policies of the Company, a fully furnished office at the Company's Atlanta, Georgia headquarters, accompanying office, voice-mail, e-mail, access, and other privileges, adequate secretarial and administrative assistance, and all other similar privileges and/or rights (as may be requested by the Executive), as are consistent with the Executive's position and duties and as are customary to executives at the same level in companies of similar size. ARTICLE 9. OTHER EMPLOYEE BENEFITS. During the Term of this Agreement, the Executive shall be entitled to participate in any and all additional retirement, health, disability, life insurance, long-term disability insurance, long-term incentive plans, nonqualified deferred compensation and tax-qualified retirement plans or any other plans or benefits offered by the Company to its senior executives generally, if and to the extent the Executive is eligible to participate in accordance with the terms and provisions of any such plan or benefit program. Notwithstanding the foregoing, all vesting periods under all Russell benefit plans shall be waived (except where waiving such period would violate ERISA) and the Executive, upon termination of employment for any reason before the age of retirement under those plans, shall be considered to have attained the minimum retirement age provided in those plans. Any and all such other employee benefits and/or plans are in addition to (and not in lieu of or as a substitute for) any and all other rights and benefits to which the Executive is entitled (or those in which the Executive is otherwise vested or which the Executive has otherwise earned) under the terms of this Agreement, the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article Page 11 of 20 13 30. Nothing in this ARTICLE 9 is intended, or shall be construed, to require the Company to institute any particular plan, program or benefit. ARTICLE 10. VACATION. During the Term of this Agreement, the Executive shall be entitled to a minimum four (4) weeks of paid vacation during each Employment Year. ARTICLE 11. TERMINATION COMPENSATION. 11.1 Monthly Compensation. Upon the effective Termination Date (whether by expiration of this Agreement or by termination of the Executive's employment by either the Company or the Executive for any reason), the Executive shall be entitled to continue to receive his Base Salary through the last day of the month in which the Termination Date occurs (the "Termination Month"). 11.2 Compensation and Benefits Continuance. (a) In addition to the compensation provided for in Article 11.1, in the event (i) the Executive's employment is terminated by the Executive for Good Reason or by the Company for any reason other than For Cause or (ii) the Board declines to renew this Employment Agreement with the Executive at the expiration of the Term hereof and upon terms that are no less favorable to the Executive than those contained in this Agreement, the Executive (or in the event of his subsequent death, his designated beneficiary) shall receive an amount equal to the sum of (1) and (2), where (1) equals three times the Executive's then current Base Salary and (2) equals three times that Target Bonus for the year in which the effective date of said termination or expiration occurs, which Target Bonus cannot (pursuant to Article 4.2) be less than 70% of the Executive's then Base Salary; provided, however, that if the Executive terminates his employment for Good Reason under Article 3.3(d) (due to a Change of Control), the amount comprising (2) above shall equal three times that Total Bonus amount of at least 140% of the Executive's Base Salary pursuant to Article 4.2. Said amounts under this Article 11.2(a) shall be payable in equal installments (and in accordance with the Company's ordinary payroll practices) commencing on the first payroll period following the last day of the Termination Month and continuing for a three (3) year period ("Compensation Continuance Period") until the Company's obligations to the Executive under this Article 11.2(a) are satisfied and exhausted. During the Compensation Continuance Period, the Executive shall continue to participate in all employee benefit plans or programs of the Company (as described in ARTICLES 6, 8, and 9), except where doing so would violate ERISA; provided, however, that those Company Plan/health care benefits enumerated under Article 6.1 shall not be limited to said Compensation Continuance Period but shall be provided in accordance with and for that period of time specified in Article 6.1. In addition, pursuant to this Article 11.2(a) and Article 8, the Company shall provide to the Executive the office, office privileges and rights, assistance, and all other rights as required by said Article 8 during said Compensation Continuance Period. Page 12 of 20 14 (b) In the event the Board has not declined to renew this Employment Agreement with the Executive at the expiration of the Term hereof (and upon terms that are no less favorable to the Executive than those contained in this Agreement) but the Executive has nonetheless declined to remain with the Company, the Executive (or in the event of his subsequent death, his designated beneficiary) shall receive an amount equal to the Executive's then current Base Salary. Said amounts under this Article 11.2(b) shall be payable in equal installments (and in accordance with the Company's ordinary payroll practices) commencing on the first payroll period following March 31, 2006 and continuing for a one (1) year period ("Abbreviated Compensation Continuance Period") until the Company's obligations to the Executive under this Article 11.2(b) are satisfied and exhausted. During the Abbreviated Compensation Continuance Period, the Executive agrees to provide to the Company reasonable consulting/advising services as to its operations and business in the event the Company requests such reasonable services and the Executive is able to devote the appropriate and necessary time and effort to provide such services. However, during the three (3) year period following March 31, 2006, the Executive shall continue to participate in all employee benefit plans or programs of the Company (as described in ARTICLES 6, 8, and 9), except where doing so would violate ERISA; provided, however, that those Company Plan/health care benefits enumerated under Article 6.1 shall not be limited to said Abbreviated Compensation Continuance Period but shall be provided in accordance with and for that period of time specified in Article 6.1. In addition, pursuant to this Article 11.2(a) and Article 8, the Company shall provide to the Executive the office, office privileges and rights, assistance, and all other rights as required by said Article 8 during said Abbreviated Compensation Continuance Period. (c) In addition to the compensation provided for in Article 11.1, in the event the Executive terminates his employment via resignation for any reason other than Good Reason, the Executive shall receive all other compensation, benefits, and/or consideration to which he was entitled or which was earned by or vested in the Executive (whether under the terms of this Agreement, the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article 30) as of the effective Termination Date, including but not limited to any and all vested stock options under Article 5, any and all vested supplemental Company Plan benefits as enumerated in Article 6.1, any and all vested stock options/Rabbi Trust proceeds/other amounts and consideration as enumerated in said Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor). The provisions and rights of the Executive enumerated in this Article 11.2(c) are also in addition to all other rights to which the Executive is entitled under Article 3.4 of this Agreement. (d) For purposes of this Article 11, the Executive shall be entitled, but not required, to seek and obtain other employment or work during any applicable period in Page 13 of 20 15 which he may continue to receive compensation after said Termination Date (including any applicable Compensation Continuance Period or Abbreviated Compensation Continuance Period, as the case may be), and no amounts or monies earned by the Executive in such other employment or work during any said applicable period (including any applicable Compensation Continuance Period or Abbreviated Compensation Continuance Period, as the case may be) shall be used to setoff or otherwise reduce the Company's payment obligations in this Article 11. ARTICLE 12. RELOCATION UPON TERMINATION. If (a) the Executive's employment is terminated by the Executive for any reason (whether or not for Good Reason) or by the Company for any reason other than For Cause, (b) the Board declines to renew this Employment Agreement with the Executive at the expiration of the Term hereof and upon terms that are no less favorable to the Executive than those contained in this Agreement, or (c) the Board has not declined to renew this Employment Agreement with the Executive at the expiration of the Term hereof (upon terms that are no less favorable to the Executive than those contained in this Agreement) but the Executive has nonetheless declined to remain with the Company, then the Company shall pay all relocation expenses, including any necessary tax gross up, for any relocation of the Executive (and his spouse) to any city or location in the United States, as may be selected in the Executive's sole discretion. Provided, however, that the Company's obligations under this Article 12 as to payment of said relocation expenses shall be equal to [or more favorable (to the Executive) than] those under the relocation program used in conjunction with the relocation of the Executive (and other employees of the Company) to Atlanta, Georgia in 1999. ARTICLE 13. POST-TERMINATION OBLIGATIONS. All payments and benefits to the Executive under this Agreement shall be subject to the Executive's compliance with the following provisions during the Term and following the termination of the Executive's employment: 13.1 Assistance in Litigation. The Executive shall, upon reasonable notice, furnish such information and assistance to the Company as may reasonably be required by the Company in connection with any litigation in which it is, or may become, a party, and which arises out of facts and circumstances known to the Executive. The Company shall promptly reimburse the Executive for any travel-related and all other out-of-pocket expenses incurred in connection with the fulfillment of his obligations under this Article 13.1. 13.2 Confidential Information. The Executive shall not disclose or reveal to any unauthorized person any trade secret or other confidential information relating to the Company, its subsidiaries or affiliates, or to any businesses operated by them, and the Executive confirms that such information constitutes the exclusive property of the Company; provided, however, that the foregoing shall not prohibit the Executive from disclosing such information to the extent necessary or desirable in connection with obtaining financing for the Company (or furnishing such information under any agreements, documents or instruments under which such financing may have been obtained) or otherwise disclosing Page 14 of 20 16 such information to third parties or governmental agencies in furtherance of the interests of the Company; or as may be required by law. 13.3 Noncompetition. In the event (1) the Executive during the Compensation Continuance Period or the Abbreviated Compensation Continuance Period (as the case may be), without the prior written consent of the Company, engages directly or indirectly, as a licensee, owner, manager, consultant, officer, employee, director, investor or otherwise, in any business in material competition with the Company and (2) the Executive elects to continue to engage in any such activity described in (1) above for thirty (30) days following delivery of notice thereof by the Company to the Executive, then all rights hereunder of the Executive and any person claiming under or through him shall thereupon terminate as of said date thirty (30) days following delivery of said notice, and no person shall be entitled thereafter to receive any payments or benefits hereunder (except for the special health care benefit under Article 6. 1 and all other benefits under employee benefit plans or programs as provided in ARTICLES 3.4, 5, 6, and 9 which have been earned or otherwise fixed or determined to be payable prior to such termination). The Company and the Executive acknowledge and agree that nothing in this Article 13.3 shall be construed to prevent the Executive from engaging in any such activity described in (1) above if the Executive so elects (thereby resulting in termination of the Executive's rights as described above), that the Executive shall not be deemed to have breached this Article or Agreement solely by electing to engage in any such activity described in (1) above, and that the Company may not seek to enjoin or otherwise prevent the Executive from engaging in any such activity under this Article or Agreement. This Article shall not apply to a passive investment by the Executive constituting ownership of less than five percent (5%) of the equity of any entity engaged in any business described in this Article 13.3. 13.4 Failure to Comply. In the event that the Executive shall fail to comply with any other provision of this Article 13.1 or 13.2, and such failure shall continue for thirty (30) days following delivery of notice thereof by the Company to the Executive, all rights hereunder of the Executive and any person claiming under or through him shall thereupon terminate and no person shall be entitled thereafter to receive any payments or benefits hereunder (except for benefits under employee benefit plans or programs as provided in ARTICLES 3.4, 5, 6 and 9 which have been earned or otherwise fixed or determined to be payable prior to such termination). ARTICLE 14. ADDITIONAL PAYMENTS BY COMPANY. In the event that any amount required to be paid or distributed to the Executive pursuant to this Agreement shall constitute a parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the aggregate of such parachute payments and any other amounts otherwise required to be paid or distributed to the Executive by the Company shall cause the Executive to be subject to the excise tax on excess parachute payments under Section 4999 of the Code (the "Excise Tax"), or any successor or similar provision thereof, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount the Page 15 of 20 17 Executive shall receive after the payment of any Excise Tax, shall equal the amount which he would have received if the Excise Tax had not been imposed. ARTICLE 15. PROFESSIONAL FEES. The Company shall be responsible for paying all professional fees (including but not limited to attorneys fees and related costs) incurred by the Executive in connection with his employment with the Company in an amount not to exceed $100,000, without approval of the Company; provided, however, that (1) any such fees charged on behalf of the Executive in conjunction with or related to any negotiation of this Agreement or any subsequent or related agreement(s) (or any amendment(s) thereto) shall also be the responsibility of the Company but shall count against said $100,000 amount and (2) any such professional fees of the Executive which the Company would otherwise pay pursuant to its policies and practices as to senior executives shall remain the responsibility of the Company but shall not count against said $100,000 amount. Additionally, in the event that the Executive incurs any professional fees (including but not limited to attorneys fees and related costs) in protecting or enforcing his rights under this Agreement or under any employee benefit plans or programs sponsored by the Company in which the Executive is a participant, the Company shall reimburse the Executive for such reasonable professional fees and for any other reasonable expenses related thereto. Such reimbursement shall be made within thirty (30) days following final resolution of the dispute or occurrence giving rise to such fees and expenses. ARTICLE 16. BENEFICIARY. The Executive shall name one or more primary beneficiaries and one or more contingent beneficiaries, who shall be entitled to receive any amounts payable following the death of the Executive under ARTICLE 11, which beneficiary or beneficiaries shall be subject to change from time to time by notice in writing to the Board. A beneficiary may be a trust, an individual or the Executive's estate. If the Executive fails to designate a beneficiary, primary or contingent, then and in such event, such benefit shall be paid to the surviving spouse of the Executive or, if he shall leave no surviving spouse, then to the Executive's estate. If a named beneficiary entitled to receive any death benefit is not living or in existence at the death of the Executive or dies prior to asserting a written claim for any such death benefit, then and in any such event, such death benefit shall be paid to the other primary beneficiary or beneficiaries named by the Executive who shall then be living or in existence, if any, otherwise to the contingent beneficiary or beneficiaries named by the Executive who shall then be living or in existence, if any; but if there are no primary or contingent beneficiaries then living or in existence, such benefit shall be paid to the surviving spouse of the Executive or, if he shall leave no surviving spouse, then to the Executive's estate. If a named beneficiary is receiving or is entitled to receive payments of any such death benefit and dies before receiving all of the payments due him, any remaining benefits shall be paid to the other primary beneficiary or beneficiaries named by the Executive who shall then be living or in existence, if any, otherwise to the contingent beneficiary or beneficiaries named by the Executive who shall then be living or in existence, if any; but if there are no primary or contingent beneficiaries then living or in existence, the balance shall be paid to the estate of the beneficiary who was last receiving the payments. Page 16 of 20 18 ARTICLE 17. INDEMNIFICATION. The Company shall indemnify the Executive during his employment and thereafter to the maximum extent permitted by applicable law for any and all liability of the Executive arising out of, or in connection with, his employment by the Company or membership on the Board; provided, that in no event shall such indemnity of the Executive at any time during the period of his employment by the Company be less than the maximum indemnity provided by the Company at any time during such period to any other officer or director under an indemnification insurance policy or the bylaws or charter of the Company or by agreement. ARTICLE 18. SOURCE OF PAYMENTS; NO TRUST. The obligations of the Company to make payments hereunder shall constitute a liability of the Company to the Executive. Such payments shall be from the general funds of the Company, and the Company shall not be required to establish or maintain any special or separate fund, except as specifically provided for in this Agreement, or otherwise to segregate assets to assure that such payments shall be made, and neither the Executive nor his designated beneficiary shall have any interest in any particular asset of the Company by reason of its obligations hereunder. Nothing contained in this Agreement shall create or be construed as creating a trust of any kind or any other fiduciary relationship between the Company and the Executive or any other person. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. ARTICLE 19. SEVERABILITY. All agreements and covenants contained herein are severable, and in the event any of them shall be held to be invalid by any competent court, this Agreement shall be interpreted as if such invalid agreements or covenants were not contained herein. ARTICLE 20. ASSIGNMENT PROHIBITED. This Agreement is personal to each of the parties hereto, and neither party may assign nor delegate any of his or its rights or obligations hereunder without first obtaining the written consent of the other party; provided, however, that nothing in this ARTICLE 20 shall preclude (i) the Executive from designating a beneficiary to receive any benefit payable under this Agreement upon his death or (ii) the executors, administrators, or other legal representatives of the Executive or his estate from assigning any rights under this Agreement to the person or persons entitled thereto. ARTICLE 21. NO ATTACHMENT. Except as otherwise provided in this Agreement or required by applicable law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. ARTICLE 22. HEADINGS. The headings of articles, paragraphs and sections herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. Page 17 of 20 19 ARTICLE 23. GOVERNING LAW. The parties intend that this Agreement and the performance hereunder and all suits and special proceedings hereunder shall be construed in accordance with and under and pursuant to the laws of the State of Georgia and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of Georgia shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted. ARTICLE 24. BINDING EFFECT. This Agreement shall be binding upon, and inure to the benefit of, the Executive and his heirs, executors, administrators and legal representatives and the Company and its permitted successors and assigns. ARTICLE 25. COUNTERPARTS. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. ARTICLE 26. NOTICES. All notices, requests and other communications to any party under this Agreement shall be in writing (including telefacsimile transmission or similar writing) and shall be given to such party at its address or telefacsimile number set forth below or such other address or telefacsimile number as such party may hereafter specify for the purpose by notice to the other party: (a) If to the Executive: John F. Ward 5960 River Chase Circle Atlanta, Georgia 30328 (b) If to the Company: Russell Corporation 3330 Cumberland Boulevard Suite 800 Atlanta, Georgia 30339 Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (ii) if given by any other means, when delivered at the address specified in this ARTICLE 26. ARTICLE 27. MODIFICATION OF AGREEMENT. No waiver or modification of this Agreement or of any covenant, condition, or limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith. No evidence of any waiver or Page 18 of 20 20 modification shall be offered or received in evidence at any proceeding, arbitration, or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed as aforesaid. The parties further agree that the provisions of this ARTICLE 27 may not be waived except as herein set forth. ARTICLE 28. TAXES. To the extent required by applicable law, the Company shall deduct and withhold all necessary Social Security taxes and all necessary federal and state withholding taxes and any other similar sums required by law to be withheld from any payments made pursuant to the terms of this Agreement. ARTICLE 29. RECITALS. The Recitals to this Agreement are incorporated herein and shall constitute an integral part of this Agreement. ARTICLE 30. EFFECT OF PRIOR AGREEMENTS. This Agreement (including the Amended and Restated Executive Deferred Compensation and Buyout Plan effective as of the date hereof, which is attached hereto and incorporated herein by reference) supersedes and replaces any prior employment agreement, understanding or arrangement (whether written or oral) between the Company and the Executive. Each of the parties hereto has relied on his or its own judgment in entering into this Agreement. Page 19 of 20 21 IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written. EXECUTIVE /s/ John F. Ward --------------------------------------------- John F. Ward WITNESS: /s/ illegible - ------------------------- RUSSELL CORPORATION By: /s/ Robert D. Martin ------------------------------------------ Signature of Appropriate Representative ROBERT D. MARTIN ------------------------------------------ Printed Name of Appropriate Representative Its SENIOR VP, CFO [Title] ----------------------- Attest: /s/ illegible - ------------------------- Secretary/Asst. Secretary Page 20 of 20 22 ATTACHMENT A 23 AMENDED AND RESTATED EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN THIS AMENDED AND RESTATED EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN (this "Agreement"), made and to become effective this 1st day of April, 2001 (the "Effective Date") by and between RUSSELL CORPORATION (the "Company"), an Alabama corporation with its principal office at Atlanta, Georgia, and JOHN F. WARD (the "Executive"). RECITALS: WHEREAS, the Company and the Executive have executed an Amended and Restated Employment Agreement dated as of the date of this Agreement, incorporated herein and attached hereto as Appendix A (the "Employment Agreement"). Pursuant to the terms of the Employment Agreement, the Executive shall be employed by the Company for a term of five (5) years; WHEREAS, when the Executive originally accepted employment with the Company, the Executive lost certain benefits and opportunities under his agreements with his previous employer, Sara Lee Corporation ("Sara Lee"), and the Company and the Executive agreed that the Executive should be compensated for such lost benefits and opportunities or that they be replaced with comparable benefits and opportunities; WHEREAS, the Executive and the Company entered into an Executive Deferred Compensation Plan and Buyout Agreement, incorporated herein and attached hereto as Appendix B (the "Prior Agreement"), for the purpose of providing said compensation for lost benefits and opportunities; and WHEREAS, the Executive and the Company desire to amend and restate that Prior Agreement as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and obligations in this Agreement and said Employment Agreement and the compensation that the Company agrees therein to pay the Executive, and of other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Executive agree as follows: ARTICLE I. RABBI TRUST. 1.1 Continued Maintenance. A Rabbi Trust, entitled the "Russell Corporation Non-Qualified Deferred Compensation Trust," shall continue to be maintained for the benefit 24 of the Executive (the "Trust"). The Trust shall continue to be irrevocable and contain the amounts contributed and deposited thereto by the Company pursuant to the Prior Agreement in addition to any interest or income generated by such amounts. The Trust shall continue to at least earn interest at a variable rate (adjusted annually on the anniversary of the Effective Date) equal to the Merrill Lynch Corporate Bond Rate published in The Wall Street Journal. 1.2 Entitlement to Monetary Amount. Pursuant to this Agreement and the Prior Agreement, the Executive is entitled to receive (and the Company guarantees that it will distribute and pay to the Executive) no less than that monetary amount (the "Monetary Amount") equal to those amounts contributed and deposited to said Trust by the Company under said Prior Agreement plus interest on such amounts, with said interest accruing from March 31, 1998 through the date of distribution and payment of said Monetary Amount and at a variable rate (adjusted annually on the anniversary of the Effective Dates of said Prior Agreement and this Agreement) equal to the Merrill Lynch Corporate Bond Rate published in The Wall Street Journal. 1.3 Distribution/Payment Date. In the event of a Default Termination (as defined in and pursuant to Article VI of said Prior Agreement) on or before March 31, 2001, the Company shall distribute and pay to the Executive that amount as determined in accordance with Article VI of said Prior Agreement provided, however, that the Executive shall have the right to elect to receive said distribution and payment over a deferred or extended period of time (as requested and specified by the Executive), whether by annuity or otherwise. Effective April 1, 2001 and upon the earlier of (i) the date of any subsequent termination of the Executive's employment for any reason under the Employment Agreement and (ii) March 31, 2006, an amount equal in value to the funds in the Trust as of the earlier of said dates shall be distributed and paid by the Company to the Executive in a lump sum, provided, however, that the Executive shall have the right to elect to receive said distribution and payment over a deferred or extended period of time (as requested and specified by the Executive), whether by annuity or otherwise. Such distribution and payment to the Executive is guaranteed by the Company, and the Company shall be required to distribute and pay said amount from the funds of the Trust or from other sources and/or accounts. 1.4 Discrepancy at Distribution Date. Upon distribution and payment of said amount as set forth in Article 1.3 above, if said amount is less than the aforementioned Monetary Amount, the Company shall make and guarantee a supplementary distribution and payment to the Executive in an amount equal to said shortfall/deficiency. Upon distribution and payment of said amount as set forth in Article 1.3 above, if said amount is more than the aforementioned Monetary Amount, said excess amount shall be deemed an additional contribution to the Trust funds and shall be distributed and paid to the Executive in accordance with this Article I. 2 25 ARTICLE II. STOCK OPTIONS AND DEPOSITED AMOUNTS. 2.1 Vested Stock Options. To compensate the Executive for the lost opportunities as to certain Sara Lee stock options (which opportunities were lost as a result of accepting employment with the Company), the Executive received, under said Prior Agreement and as of March 31, 1998, grants of options to purchase: (1) 249,489 shares of the Company's stock (pursuant to Article 2.1 of said Prior Agreement) and (2) 32,577 shares of the Company's stock (pursuant to Article 2.2(b) of said Prior Agreement) (total options equal to 282,066). The Executive was immediately and is currently vested in these stock options, provided, however, that in the event of a Default Termination (as defined in and pursuant to Article VI of said Prior Agreement) on or before March 31, 2001, the vesting and/or forfeiture of said stock options shall be determined in accordance with Article VI of said Prior Agreement. Effective April 1, 2001, said stock options shall not be subject to any divestiture or forfeiture pursuant to Article VI of said Prior Agreement or otherwise. Said stock options shall be exercisable by the Executive for a period of ten (10) years from March 31, 1998 (i.e. through March 31, 2008) at a price determined by taking the average of the high and low price for the Company's common stock on the Effective Date of said Prior Agreement as reported in the Wall Street Journal. Attached hereto and incorporated herein by reference as Appendix C is a list reflecting said vested stock options, applicable price(s), and applicable grant and exercisability date(s). 2.2 Amounts Deposited and Contributed to Trust. To compensate the Executive for certain opportunities and compensation from Sara Lee (which opportunities and compensation were lost as a result of accepting employment with the Company), the Company was obligated to contribute to the Trust (or to the Executive, as required under said Prior Agreement) those principal amounts specified in Articles 2.2(a), III, 5.1, 5.2, and 5.3 of said Prior Agreement. The distribution and payment of the amount of the funds in the Trust shall be in accordance with the provisions in Article 1.3 above. 2.3 The Company warrants and represents that, as of the Effective Date, it has fully complied with all deposit, contribution, grant, payment, consideration, and other obligations under all applicable articles of said Prior Agreement, including any and all such obligations of the Company as to Article 5.1 of said Prior Agreement (regarding compensation by the Company to the Executive due to his participation in Sara Lee's defined benefit retirement plans for executives, including qualified plans and a Supplemental Executive Retirement Plan ("SERP")) and Article 5.3 of said Prior Agreement (regarding payment of compensation by the Company to the Executive for the amount of incremental credit the Executive would have received under his Employee Stock Ownership Plan at Sara Lee if he had not accepted employment with the Company). The Company thus warrants and represents that no such obligations of the Company remain under said Prior Agreement. The Company also agrees that the Executive has fully complied with all applicable obligations under said Prior Agreement, including any and all excess payment obligations 3 26 of the Executive as to Article 5.1 of said Prior Agreement (regarding compensation by the Company to the Executive due to his participation in Sara Lee's defined benefit retirement plans for executives, including qualified plans and a Supplemental Executive Retirement Plan ("SERP")). Nothing in this Agreement is intended or shall be construed to eliminate or waive any deposit, contribution, grant, payment, consideration, and other obligation of the Company under all applicable articles of said Prior Agreement. To the extent that any said deposit, contribution, grant, payment, consideration, and other obligation of the Company under said Prior Agreement remains and has not been satisfied by the Company, the Company hereby agrees to comply with and satisfy said obligation(s) on or before the Effective Date. ARTICLE III. GENERAL PROVISIONS. 3.1 Governing Law. This Agreement shall be interpreted under the laws of the State of Georgia. 3.2 Nonassignability. Benefits under this Agreement shall not be subject to anticipation or assignment by any person entitled thereto. 3.3 Binding Agreement. This Agreement shall be binding and inure to the benefit of the Executive, his executors, administrators, heirs and next of kin, and the Company, its successors and assigns. 3.4 Merger or Consolidation. The Company shall not consolidate or merge into or with another corporation or entity, or transfer all or substantially all of its assets to another corporation, partnership, trust or other entity unless such entity shall assume the rights, obligations and liabilities of the Company under this Agreement and said Prior Agreement and upon such assumption, shall become obligated to perform the terms and conditions of this Agreement and said Prior Agreement. 3.5 Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver, and any such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 3.6 Amendment; Termination. This Agreement may not be amended or terminated except by an instrument in writing signed by the parties hereto. 3.7 Recitals. The recitals to this Agreement shall become part of this Agreement. 3.8 Capitalized Terms. Any capitalized terms not otherwise defined herein shall have the meanings given to them in the Employment Agreement. 4 27 IN WITNESS WHEREOF, this Agreement has been executed by and in behalf of the parties hereto on the day and year first above written. RUSSELL CORPORATION By: /s/ Robert D. Martin ------------------------------------------- Signature of Appropriate Representative ROBERT D.MARTIN ------------------------------------------- Printed Name of Appropriate Representative Its: SENIOR VP, CFO [Title] ------------------- /s/ John F. Ward ---------------------------------------------- JOHN F. WARD 5 28 EXHIBIT A EX-10.(N) 6 g67759ex10-n.txt EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN 1 EXHIBIT (10N) AMENDED AND RESTATED EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN DATED APRIL 1, 2001 BY AND BETWEEN THE COMPANY AND JOHN F. WARD 2 AMENDED AND RESTATED EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN THIS AMENDED AND RESTATED EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN (this "Agreement"), made and to become effective this 1st day of April, 2001 (the "Effective Date") by and between RUSSELL CORPORATION (the "Company"), an Alabama corporation with its principal office at Atlanta, Georgia, and JOHN F. WARD (the "Executive"). R E C I T A L S: WHEREAS, the Company and the Executive have executed an Amended and Restated Employment Agreement dated as of the date of this Agreement, incorporated herein and attached hereto as Appendix A (the "Employment Agreement"). Pursuant to the terms of the Employment Agreement, the Executive shall be employed by the Company for a term of five (5) years; WHEREAS, when the Executive originally accepted employment with the Company, the Executive lost certain benefits and opportunities under his agreements with his previous employer, Sara Lee Corporation ("Sara Lee"), and the Company and the Executive agreed that the Executive should be compensated for such lost benefits and opportunities or that they be replaced with comparable benefits and opportunities; WHEREAS, the Executive and the Company entered into an Executive Deferred Compensation Plan and Buyout Agreement, incorporated herein and attached hereto as Appendix B (the "Prior Agreement"), for the purpose of providing said compensation for lost benefits and opportunities; and WHEREAS, the Executive and the Company desire to amend and restate that Prior Agreement as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and obligations in this Agreement and said Employment Agreement and the compensation that the Company agrees therein to pay the Executive, and of other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Executive agree as follows: ARTICLE I. RABBI TRUST. 1.1 Continued Maintenance. A Rabbi Trust, entitled the "Russell Corporation Non-Qualified Deferred Compensation Trust," shall continue to be maintained for the benefit 3 of the Executive (the "Trust"). The Trust shall continue to be irrevocable and contain the amounts contributed and deposited thereto by the Company pursuant to the Prior Agreement in addition to any interest or income generated by such amounts. The Trust shall continue to at least earn interest at a variable rate (adjusted annually on the anniversary of the Effective Date) equal to the Merrill Lynch Corporate Bond Rate published in The Wall Street Journal. 1.2 Entitlement to Monetary Amount. Pursuant to this Agreement and the Prior Agreement, the Executive is entitled to receive (and the Company guarantees that it will distribute and pay to the Executive) no less than that monetary amount (the "Monetary Amount") equal to those amounts contributed and deposited to said Trust by the Company under said Prior Agreement plus interest on such amounts, with said interest accruing from March 31, 1998 through the date of distribution and payment of said Monetary Amount and at a variable rate (adjusted annually on the anniversary of the Effective Dates of said Prior Agreement and this Agreement) equal to the Merrill Lynch Corporate Bond Rate published in The Wall Street Journal. 1.3 Distribution/Payment Date. In the event of a Default Termination (as defined in and pursuant to Article VI of said Prior Agreement) on or before March 31, 2001, the Company shall distribute and pay to the Executive that amount as determined in accordance with Article VI of said Prior Agreement, provided, however, that the Executive shall have the right to elect to receive said distribution and payment over a deferred or extended period of time (as requested and specified by the Executive), whether by annuity or otherwise. Effective April 1, 2001 and upon the earlier of (i) the date of any subsequent termination of the Executive's employment for any reason under the Employment Agreement and (ii) March 31, 2006, an amount equal in value to the funds in the Trust as of the earlier of said dates shall be distributed and paid by the Company to the Executive in a lump sum, provided, however, that the Executive shall have the right to elect to receive said distribution and payment over a deferred or extended period of time (as requested and specified by the Executive), whether by annuity or otherwise. Such distribution and payment to the Executive is guaranteed by the Company, and the Company shall be required to distribute and pay said amount from the funds of the Trust or from other sources and/or accounts. 1.4 Discrepancy at Distribution Date. Upon distribution and payment of said amount as set forth in Article 1.3 above, if said amount is less than the aforementioned Monetary Amount, the Company shall make and guarantee a supplementary distribution and payment to the Executive in an amount equal to said shortfall/deficiency. Upon distribution and payment of said amount as set forth in Article 1.3 above, if said amount is more than the aforementioned Monetary Amount, said excess amount shall be deemed an additional contribution to the Trust funds and shall be distributed and paid to the Executive in accordance with this Article I. 2 4 ARTICLE II. STOCK OPTIONS AND DEPOSITED AMOUNTS. 2.1 Vested Stock Options. To compensate the Executive for the lost opportunities as to certain Sara Lee stock options (which opportunities were lost as a result of accepting employment with the Company), the Executive received, under said Prior Agreement and as of March 31, 1998, grants of options to purchase: (1) 249,489 shares of the Company's stock (pursuant to Article 2.1 of said Prior Agreement) and (2) 32,577 shares of the Company's stock (pursuant to Article 2.2(b) of said Prior Agreement) (total options equal to 282,066). The Executive was immediately and is currently vested in these stock options, provided, however, that in the event of a Default Termination (as defined in and pursuant to Article VI of said Prior Agreement) on or before March 31, 2001, the vesting and/or forfeiture of said stock options shall be determined in accordance with Article VI of said Prior Agreement. Effective April 1, 2001, said stock options shall not be subject to any divestiture or forfeiture pursuant to Article VI of said Prior Agreement or otherwise. Said stock options shall be exercisable by the Executive for a period of ten (10) years from March 31, 1998 (i.e. through March 31, 2008) at a price determined by taking the average of the high and low price for the Company's common stock on the Effective Date of said Prior Agreement as reported in The Wall Street Journal. Attached hereto and incorporated herein by reference as Appendix C is a list reflecting said vested stock options, applicable price(s), and applicable grant and exercisability date(s). 2.2 Amounts Deposited and Contributed to Trust. To compensate the Executive for certain opportunities and compensation from Sara Lee (which opportunities and compensation were lost as a result of accepting employment with the Company), the Company was obligated to contribute to the Trust (or to the Executive, as required under said Prior Agreement) those principal amounts specified in Articles 2.2(a), III, 5.1, 5.2, and 5.3 of said Prior Agreement. The distribution and payment of the amount of the funds in the Trust shall be in accordance with the provisions in Article 1.3 above. 2.3 The Company warrants and represents that, as of the Effective Date, it has fully complied with all deposit, contribution, grant, payment, consideration, and other obligations under all applicable articles of said Prior Agreement, including any and all such obligations of the Company as to Article 5.1 of said Prior Agreement (regarding compensation by the Company to the Executive due to his participation in Sara Lee's defined benefit retirement plans for executives, including qualified plans and a Supplemental Executive Retirement Plan ("SERP")) and Article 5.3 of said Prior Agreement (regarding payment of compensation by the Company to the Executive for the amount of incremental credit the Executive would have received under his Employee Stock Ownership Plan at Sara Lee if he had not accepted employment with the Company). The Company thus warrants and represents that no such obligations of the Company remain under said Prior Agreement. The Company also agrees that the Executive has fully complied with all applicable obligations under said Prior Agreement, including any and all excess payment obligations 3 5 of the Executive as to Article 5.1 of said Prior Agreement (regarding compensation by the Company to the Executive due to his participation in Sara Lee's defined benefit retirement plans for executives, including qualified plans and a Supplemental Executive Retirement Plan ("SERP")). Nothing in this Agreement is intended or shall be construed to eliminate or waive any deposit, contribution, grant, payment, consideration, and other obligation of the Company under all applicable articles of said Prior Agreement. To the extent that any said deposit, contribution, grant, payment, consideration, and other obligation of the Company under said Prior Agreement remains and has not been satisfied by the Company, the Company hereby agrees to comply with and satisfy said obligation(s) on or before the Effective Date. ARTICLE III. GENERAL PROVISIONS. 3.1 Governing Law. This Agreement shall be interpreted under the laws of the State of Georgia. 3.2 Nonassignability. Benefits under this Agreement shall not be subject to anticipation or assignment by any person entitled thereto. 3.3 Binding Agreement. This Agreement shall be binding and inure to the benefit of the Executive, his executors, administrators, heirs and next of kin, and the Company, its successors and assigns. 3.4 Merger or Consolidation. The Company shall not consolidate or merge into or with another corporation or entity, or transfer all or substantially all of its assets to another corporation, partnership, trust or other entity unless such entity shall assume the rights, obligations and liabilities of the Company under this Agreement and said Prior Agreement and upon such assumption, shall become obligated to perform the terms and conditions of this Agreement and said Prior Agreement. 3.5 Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver, and any such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 3.6 Amendment; Termination. This Agreement may not be amended or terminated except by an instrument in writing signed by the parties hereto. 3.7 Recitals. The recitals to this Agreement shall become part of this Agreement. 3.8 Capitalized Terms. Any capitalized terms not otherwise defined herein shall have the meanings given to them in the Employment Agreement. 4 6 IN WITNESS WHEREOF, this Agreement has been executed by and in behalf of the parties hereto on the day and year first above written. RUSSELL CORPORATION By: /s/ Robert D. Martin --------------------------------------- Signature of Appropriate Representative ROBERT D. MARTIN --------------------------------------- Printed Name of Appropriate Representative Its: SENIOR VP, CFO [Title] ---------------------------------- /s/ John F. Ward ------------------------------------------- JOHN F. WARD 5 7 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into and to become effective on the 1st day of April, 2001 (the "Effective Date"), by and between RUSSELL CORPORATION, an Alabama Corporation (the "Company"), and JOHN F. WARD (the "Executive"). R E C I T A L S: WHEREAS, the Company and its affiliates are engaged in the knit products industry. The Executive is experienced in, and knowledgeable concerning, the knit products industry. The Company desires to continue to employ the Executive as President, Chief Executive Officer and Chairman of the Board, and the Executive desires to continue to be employed by the Company in that capacity; WHEREAS, the Company and the Executive entered into that certain Employment Agreement dated as of March 31, 1998, which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001; and WHEREAS, the Company and the Executive desire to amend and restate that Employment Agreement as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and obligations herein and the compensation the Company agrees herein to pay the Executive, and of other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Executive agree as follows: ARTICLE 1. EMPLOYMENT OF EXECUTIVE. Subject to the terms and conditions set forth in this Agreement, the Company hereby employs the Executive and the Executive hereby accepts such employment for the period stated in ARTICLE 3 of this Agreement. ARTICLE 2. POSITION, RESPONSIBILITIES AND DUTIES. 2.1 Position and Responsibilities. During the Term (as defined in Article 3.1), the Executive shall serve as President, Chief Executive Officer and Chairman of the Board of Directors (pursuant to Article 2.3) of the Company on the conditions herein provided. The Executive shall have overall executive authority and responsibility for the Company and its subsidiaries, with all officers, employees, and consultants of the Company and its subsidiaries reporting directly (or indirectly through subordinates designated by the Executive) to the Executive. The Executive shall provide such executive services in the management of the Company's business not inconsistent with his position and the provisions Page 1 of 20 8 of Article 2.2 as shall be assigned to him from time to time by the Board of Directors of the Company (the "Board"). 2.2 Duties. During the Term and except for illness, reasonable vacation periods, and reasonable leaves of absence, the Executive shall devote his full business time, attention, skill, energies and efforts to the faithful performance of his duties hereunder and to the business and affairs of the Company and any subsidiary or affiliate of the Company, such duties being those customary to executives at the same level in companies of similar size. The Executive shall work to maximize shareholder value while being sensitive to the impact on employees and communities. To maximize shareholder value, significant changes will need to be made, potentially including but not limited to relocation or closing of manufacturing facilities or other operations, restructuring, closing or selling poor return businesses, establishment of nationally competitive compensation plans and replacement of management, contractors and consultants as necessary. Notwithstanding the foregoing, the duties of the Executive shall not be expanded or diminished without the Executive's prior approval. 2.3 Title. (a) The Executive shall be President, Chief Executive Officer, and Chairman of the Board of Directors of the Company, with the Board of Directors to elect, re-elect, and appoint the Executive to those offices throughout the Tenn. (b) The Executive shall hold the office of President for such time after the Effective Date that he feels necessary. At any time after the Effective Date, the Executive may, in his best judgment, relinquish the title of President for the purpose of hiring or promoting a new President and Chief Operating Officer of the Company. 2.4 Other Activities. Notwithstanding any other provision herein to the contrary, the Executive may serve on corporate, civic, and/or charitable boards or committees as he deems appropriate. ARTICLE 3. TERM. 3.1 Term of Employment. The term ("Term") of the Executive's employment under this Agreement shall commence on the Effective Date and shall continue until the earliest to occur of the following dates (the "Termination Date"): (i) March 31, 2006; (ii) the date of death of the Executive; (iii) the date coinciding with the end of one hundred eighty (180) days of continuous "Total Disability" of the Executive (as defined in Article 7.4); (iv) the effective date of a termination by the Company, including any termination by the Company For Cause (as defined in and pursuant to Articles 3.2 and 3.5); or (v) the effective date of the Executive's resignation, including but not limited to termination by the Executive for Good Reason (as defined in and pursuant to Articles 3.3 and 3.5). Page 2 of 20 9 3.2 Termination for Cause; Automatic Termination. The Company shall at all times have the right to discharge the Executive For Cause (as defined herein). For purposes of this Agreement, "For Cause" shall be limited to: (i) conviction of a felony other than those felonies involving the use of an automobile in violation of any vehicle statute; (ii) a material breach of a provision of this Agreement by the Executive, which breach is not cured within thirty (30) days after Notice of Breach (as defined below) has been given by the Company to the Executive; or (iii) the Final Determination of any action the effect of which is to permanently enjoin the Executive from fulfilling his duties under this Agreement. "Final Determination" as used herein shall mean the exhaustion of all available remedies and appeals by the Executive or the Executive's refusal to pursue such remedies and appeals. Notwithstanding the foregoing, no termination of employment For Cause pursuant to (ii) above shall occur and become effective unless and until: (1) no fewer than thirty (30) days prior to the date of the Notice of Termination (as defined in and pursuant to Article 3.5), the Company provides the Executive with written notice ("Notice of Breach") of its intent to terminate the Executive's employment For Cause, with said Notice of Breach to contain a detailed description of the specific reasons which form the basis for such intent; (2) during such thirty (30) day period after the date of said Notice of Breach is provided but before said Notice of Termination is provided, the Executive shall have the opportunity, with or without legal representation, to appear before the Board (and/or to present written materials to the Board, at the Executive's election) in order to present arguments on his own behalf; and (3) the Executive shall thereafter be terminated For Cause only if (a) three-quarters of the members of the Board determine that the actions of the Executive as set forth in the Notice of Breach constituted Cause and that the Executive's employment should accordingly be terminated For Cause; and (b) the Board then provides the Executive with a Notice of Termination (as defined in and pursuant to Article 3.5), consistent with the basis set forth in said Notice of Breach, detailing the basis of such For Cause termination of employment. 3.3 Good Reason. Subject to the requirements of Article 3.5 of this Agreement, the Executive may terminate his employment at any time for Good Reason (as defined in this Article 3.3). If the Executive desires to terminate his employment for Good Reason, he shall give notice to the Company as provided in Article 3.5. For purposes of this Agreement, "Good Reason" shall mean the Executive's resignation from the Company's employment for any of the following reasons: (a) Failure by the Board or the Company's shareholders to reelect or reappoint the Executive as President (subject to Article 2.3), Chief Executive Officer, and/or Chairman of the Board of the Company, provided that the Executive then elects to leave the Company's employment within six (6) months of such failure to so reelect or reappoint the Executive; (b) A material modification by the Board of the duties, functions and responsibilities of the Executive as President (subject to 2.3) or Chief Executive Page 3 of 20 10 Officer without his written consent given within six (6) months prior to such modification; (c) The relocation of the Company's executive headquarters outside the Atlanta, Georgia metropolitan area without the Executive's prior written consent; (d) A Change of Control (defined in this Article 3.3(d)) of the Company, provided that the Executive terminates his employment (for any reason or no reason) within two (2) years from the date the Change of Control becomes effective. Change in Control of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied: (i) Any person (other than those Persons in control of the Company as of the Effective Date, 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 stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; or (ii) During any period of two (2) consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board (and any new Director, whose election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was so approved (a "Continuing Director")), cease for any reason to constitute a majority thereof; or (iii) The stockholders of the Company approve: (A) a plan of complete liquidation of the Company; or (B) an agreement for the sale or disposition of all or substantially all of the Company's assets; or (C) a merger, consolidation, or reorganization of the Company with or involving any other corporation other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. Page 4 of 20 11 However, in no event shall a "Change in Control" be deemed to have occurred, with respect to a Participant, if the Participant is part of a purchasing group which consummates the Change-in-Control transaction. A Participant shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Participant is an equity participant in the purchasing company or group (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployed continuing Directors). (e) Any material breach of a provision of this Agreement by the Company, which breach is not cured within thirty (30) days after notice has been given to the Company by the Executive as provided in Article 3.5. Without limiting the generality of the foregoing sentence, the Company shall be in material breach of its obligations hereunder if, for example, the Company shall not permit the Executive to exercise such responsibilities as are consistent with the Executive's position as described in Article 2.2 herein and are of such a nature as are usually associated with such officers of other public corporations of approximately equal size, or the Executive shall at any time be required to report to anyone other than directly to the Board, or the Company shall fail to make a payment when due to the Executive. Notwithstanding the foregoing, if the Executive desires to terminate his employment for Good Reason under this Article 3.3(e), he shall give notice to the Company as provided in Article 3.5 and the Company shall have thirty (30) days after notice has been given to it in which to cure the reason for the Executive's desire to terminate his employment for Good Reason. If the reason for the Executive's desire to terminate his employment for Good Reason under this Article 3.3(e) is timely cured by the Company within such thirty (30) day period, the Executive's notice shall become null and void. 3.4 Retirement. Upon the Termination Date hereof (including but not limited to any termination of the Executive's employment due to death of the Executive or Total Disability of the Executive (as defined in Article 7.4) or either by the Company (whether or not For Cause) or the Executive (with or without Good Reason)), said termination of employment shall be treated as retirement of the Executive for the purpose of all Russell plans and benefits. For purposes of Russell's defined benefit retirement plan and its Supplemental Executive Retirement Plan ("SERP"), each year (or portion thereof of the Executive's employment with the Company from January 1, 1998 through the effective Termination Date shall count and serve as two (2) years of employment pursuant to the SERP program implemented by the Company in the year 2000, which program was retroactive to January 1, 1998. The provisions and rights of the Executive as enumerated Page 5 of 20 12 under this Article 3.4 upon any said termination of employment are in addition to any and all other rights and benefits to which the Executive is entitled (or those in which the Executive is otherwise vested or which the Executive has otherwise earned) under the terms of this Agreement (including but not limited to those rights described in Articles 5, 6, 11, and 12), the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article 30. 3.5 Notice of Termination. Any termination by the Executive for Good Reason or by the Company For Cause shall be communicated by Notice of Termination to the Company or the Executive, as the case may be. For purposes hereof, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision relied upon in this Agreement, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) sets forth the Termination Date. If the Executive's employment is terminated by reason of one of the events described in Article 3.2 [other than 3.2(i)], 3.3(c), or 3.3(e), the effective Termination Date shall be not less than thirty (30) days nor more than forty-five (45) days after the receipt of the Notice of Termination by the Executive or the Company, as the case may be. If the Executive's employment is terminated by reason of one of the events described in Article 3.3(a) or 3.3(b), the effective Termination Date shall be not more than fifteen (15) days after the receipt of the Notice of Termination by the Company. ARTICLE 4. COMPENSATION. 4.1 Base Salary. For all services rendered by the Executive during the Term, the Company shall pay the Executive as compensation a base annual salary (the "Base Salary"), payable in appropriate installments to conform with regular payroll dates for salaried personnel of the Company. Retroactive to February 28, 2001 from the Effective Date, the annual rate of the Executive's Base Salary shall be, at a minimum, $700,000 (the "Annual Base Salary Rate"), and, effective March 1, 2001, the minimum Annual Base Salary Rate of the Executive shall be $750,000. The Executive's Annual Base Salary Rate shall be reviewed and increased annually by the Board at the Board's discretion (with the timing of any such increase(s) coinciding with the increase(s) of other top executives of the Company and consistent with Company policy) and, as increased, shall thereafter be the Annual Base Salary Rate of the Executive for purposes of this Agreement; provided, however, that the Executive's Annual Base Salary Rate shall at no time be decreased without the prior written consent of the Executive and such Annual Base Salary Rate shall, at a minimum, be increased in accordance with and to reflect any applicable inflationary, cost-of-living index adjustments over the Term of this Agreement. Page 6 of 20 13 4.2 Bonus, In addition to the Base Salary provided for in Article 4.1 and the other benefits provided for in this Agreement, the Executive shall receive each year a target annual bonus ("Target Bonus") of at least 70% of the Executive's Base Salary for said year in the event the Company meets and achieves its reasonable financial plans and projections as set forth in its annual Business Plan for said year. Said criteria as to payment of said Target Bonus may be changed or otherwise altered if the Executive and the Company mutually agree in writing as to said change and criteria. In addition, the Executive shall also be eligible to receive each year a total annual bonus ("Total Bonus") of at least 140% of the Executive's Base Salary for said year (inclusive of the aforementioned Target Bonus paid to the Executive for said year) upon the achievement of certain goals established by the Board, including but not necessarily Limited to the aforementioned criteria for said Target Bonus. Provided, however, that if applicable threshold levels for the Target Bonus are met but the above-referenced criteria for the Target Bonus and Total Bonus are not achieved, then the Executive shall receive pro-rata shares of said Target Bonus and Total Bonus equal to the percentages of the above-referenced criteria (for the Target Bonus and Total Bonus) that were achieved. ARTICLE 5. STOCK OPTIONS. In addition to the Base Salary and Bonus compensation provided to the Executive pursuant to Article 4, the Board, in its discretion and during the Term, may grant options to the Executive for the purchase of Russell Corporation common stock; provided, however, that in the first quarter of each of the 2003, 2004, 2005, and 2006 calendar years, the Board shall make an annual grant of not less than 100,000 said options to the Executive, which amount may be increased at the Board's discretion based on the Executive's performance. The exercise price for these options shall equal the average of the high and low of the stock price on the day the grant is made. Such options shall have a term of ten years (as described below), and one-fourth of the total options given in any such year shall vest on and as of each of the four (4) anniversary dates following the date of said grant. Provided, however, that if (a) this Agreement expires or (b) the Executive's employment is terminated (1) because of the Executive's death or Total Disability or (2) by the Company for any reason other than For Cause, all options granted under this Article 5 (whether or not vested) shall immediately become vested and shall be exercisable at the Executive's option for a period of ten (10) years from the date of the respective grant; if the Executive's employment is terminated by the Executive for Good Reason, all options granted under this Article 5 (whether or not vested) shall immediately become vested and shall be exercisable at the Executive's option for a period of ten (10) years from the date of the respective grant; and if the Executive's employment is terminated by the Company For Cause or by the Executive not for Good Reason, all options granted under this Article 5 that are not vested as of the Termination Date shall lapse and be forfeited to the Company, with those vested options as of said Termination Date being exercisable at the Executive's option for a period of ten (10) years from the date of the respective grant. In addition, all options granted by the Company to the Executive pursuant to Article 5 of that Employment Agreement dated as of March 31, 1998 between the Company and the Executive (which Employment Agreement was subsequently amended effective November 1, 1999) shall have Page 7 of 20 14 a term of ten (10) years from the date of the respective grant and shall become fully vested (to the extent said options are not already vested) as of March 31, 2001. ARTICLE 6. SUPPLEMENTAL BENEFITS 6.1 Special Health Care Benefit. In addition to the other benefits provided for in this Agreement (including participation by the Executive and his spouse in the Company Plan (as defined herein) during the Term of this Agreement), the Executive (or his spouse if the Executive predeceases his spouse before he attains the age of 65) shall be entitled, for the period commencing on the effective Termination Date (whether by expiration of this Agreement or by termination of the Executive's employment by either the Company or the Executive for any reason) and ending on the earlier of (i) the date of death for the survivor of the Executive and his spouse or (ii) the Executive and his spouse attaining the age of 65 (the "Coverage Period"), to participate, at the Executive's expense (which shall be no more than and limited to the then-current expense and rate normally payable by the Company's senior executives for purposes of coverage and benefits under the Company Plan as provided herein), in any group health plan or program (whether insured or self-insured, or any combination thereof) provided by the Company for the benefit of its active employees (the "Company Plan"). The Company, consistent with sound business practices, shall use its best efforts to provide the Executive with coverage for the Executive and his spouse under the Company Plan during the Coverage Period (and any period thereafter to the extent required by applicable state and federal law), including, if necessary, amending the applicable provisions of the Company Plan and negotiating the addition of any necessary riders to any group health insurance contract. In the event the Company is unable for whatever reason to provide the Executive and his spouse with coverage under the Company Plan, the Company, at the Executive's expense (which shall be no more than and limited to the then-current expense and rate normally payable by the Company's senior executives for purposes of coverage and benefits under the Company Plan as provided herein), shall provide the Executive with an individual policy of health insurance providing coverage for the Executive and his spouse (the "Individual Policy") during the Coverage Period. The coverage to be provided to the Executive and his spouse pursuant to this ARTICLE 6 (whether under the Company Plan or the Individual Policy) shall consist of coverage which, as of the time the coverage is being provided, is identical (or, with respect to an Individual Policy, substantially identical) to the coverage provided under the Company Plan to active employees and their dependents. Notwithstanding the foregoing, the Company shall coordinate coverage for the Executive under this ARTICLE 6 with any applicable federal or state government programs (eg., Medicare or Medicaid) when the Executive (or his spouse) is eligible to begin receiving benefits under such program. Any premiums required to be paid for coverage of the Executive (or his spouse) under such government programs shall be paid by the Executive (or his spouse). 6.2 Life Insurance. During the Term of this Agreement, the Company shall provide and be responsible for up to an additional $16,000.00 for insurance and/or other benefits for the Page 8 of 20 15 Executive and shall also be responsible for any and all subsequent, applicable inflationary increases/escalators over the Term of this Agreement as required to continue to provide and maintain said insurance and/or other benefits for the Executive. The Company shall be required, upon the Executive's request and his sole discretion, to convert said insurance (or other benefits) to any other benefits for the Executive (including but not limited to split life, etc.) and shall also be required, if requested by the Executive for estate planning or other purposes, to convert certain compensation (or other benefits) payable or available to the Executive (under this Agreement or otherwise) into (or to otherwise "trade" said compensation or benefits for) other benefits for the Executive (including but not limited to split life, etc.) The provisions and rights of the Executive as enumerated in this Article 6.2 are in addition to (and not in lieu of or as substitute for) any and all other rights and benefits to which the Executive is entitled (or those in which the Executive is otherwise vested or which the Executive has otherwise earned) under the terms of this Agreement, the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article 30. 6.3 Corporate Automobile. During the Term of this Agreement, an automobile of appropriate value shall be provided by the Company. All operating and maintenance expenses of the automobile shall be paid by the Company. 6.4 Corporate Aircraft. During the Term of this Agreement, the Executive shall have the use of corporate aircraft for his business and personal transportation at his discretion and at no cost to him, including reasonable access for his spouse. Applicable income taxes that are attributable to the Executive's personal use of the aircraft, as calculated in an acceptable manner that is the most favorable to the Executive from said tax standpoint, shall be paid by the Executive. 6.5 Club Memberships. During the Term of this Agreement, the Company shall make available, at its own expense, country club access and membership(s) for the Executive and his family near each corporate headquarters of the Company. 6.6 Immediate Eligibility . Any delay in eligibility and any waiting period normally associated with the receipt of any of the benefits provided for by this Agreement shall be waived and the Executive (and his spouse where applicable) shall be eligible to, receive benefits as of the Effective Date as if such delays and waiting periods have been satisfied. Notwithstanding the foregoing, this Article 6.7 shall not apply to the qualified retirement plans of Russell if waiving the eligibility requirements or any associated waiting periods would cause a violation under ERISA. Page 9 of 20 16 ARTICLE 7. DISABILITY BENEFITS. 7.1 Commencement of Total Disability. If the Executive suffers a "Total Disability" (as defined in Article 7.4), he shall be deemed totally disabled ("Totally Disabled") for purposes of this Agreement as of the date such Total Disability commenced. 7.2 Benefits Payable Upon Total Disability. In the event of the Total Disability of the Executive, the Company shall continue to pay the Executive his Base Salary during the Disability Period (as defined in this Article 7.2); provided, however, that if the Term shall otherwise expire during the Disability Period pursuant to the provisions of ARTICLE 3, the Company shall cease paying the Executive his Base Salary under this Article 7.2 as of the Termination Date, and the remaining provisions of this Agreement shall apply. In the event that the Executive's Total Disability continues for a period of one hundred eighty (180) days (measured from the date the Executive became Totally Disabled), the Term shall automatically expire and terminate, as provided in subparagraph (iii) of Article 3. 1, at the end of such one hundred eighty day period (the "Disability Period"), with said termination of the Executive's employment being treated, as provided in Article 3.4, as retirement of the Executive for purposes of all Russell plans and benefits. The provisions and rights of the Executive as enumerated under this Article 7 upon any said termination of employment in the event of Total Disability of the Executive are in addition to any and all other rights and benefits to which the Executive is entitled (or those in which the Executive is otherwise vested or which the Executive has otherwise earned) under the terms of this Agreement (including but not limited to those rights described in Articles 5, 6, 11, and 12), the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article 30. 7.3 Cessation of Disability. Notwithstanding the provisions of Article 7.2, if prior to the end of the Disability Period, the Executive's Total Disability shall have ceased under the definition of Total Disability set forth in Article 7.4 and he shall have commenced to perform his regular duties hereunder, the following special provisions shall apply: (i) this Agreement shall continue in full force and effect (except as otherwise provided in ARTICLE 3); and (ii) the Executive shall be entitled to resume his employment under this Agreement and to receive thereafter compensation in accordance with ARTICLE 4 as though he had not been Totally Disabled; provided, however, that unless the Executive shall perform his regular duties hereunder for a continuous period of at least sixty (60) days following a period of Total Disability before he again becomes Totally Disabled, he shall not be entitled to start a new Disability Period, but instead must continue under the remaining portion of the original Disability Period. In this event, the resumption of the original Disability Period shall commence on the date such Total Disability resumed. Page 10 of 20 17 7.4 Definition of Total Disability. For purposes of this Agreement, "Total Disability" shall mean the permanent and total inability, by reason of physical or mental infirmity, or both, of the Executive to perform his regular and customary duties with the Company in a satisfactory manner. The determination of the existence or nonexistence of Total Disability shall be made by the Board, pursuant to a medical examination by a medical doctor licensed to practice medicine in the state of the Executive's principal residence approved by the Board. ARTICLE 8. REIMBURSEMENT OF EXPENSES, OFFICE AND SECRETARIAL ASSISTANCE. The Company recognizes that the Executive will incur, from time to time, expenses for the benefit of the Company and in furtherance of the Company's business, including, but not limited to, expenses for entertainment, travel and other business expenses. The Executive shall be reimbursed for all said expenses in accordance with the Company's policy and practice applicable thereto. In the event of the termination of the Executive's employment for any reason, the Company shall reimburse the Executive (or in the event of death, his personal representative) for expenses incurred by the Executive on behalf of the Company prior to the Termination Date to the extent such expenses have not been previously reimbursed by the Company. Moreover, the Company agrees that, during the Term of this Agreement, the Executive shall be provided, at the Company's expense and under applicable policies of the Company, a fully furnished office at the Company's Atlanta, Georgia headquarters, accompanying office, voice-mail, e-mail, access, and other privileges, adequate secretarial and administrative assistance, and all other similar privileges and/or rights (as may be requested by the Executive), as are consistent with the Executive's position and duties and as are customary to executives at the same level in companies of similar size. ARTICLE 9. OTHER EMPLOYEE BENEFITS. During the Term of this Agreement, the Executive shall be entitled to participate in any and all additional retirement, health, disability, life insurance, long-term disability insurance, long-term incentive plans, nonqualified deferred compensation and tax-qualified retirement plans or any other plans or benefits offered by the Company to its senior executives generally, if and to the extent the Executive is eligible to participate in accordance with the terms and provisions of any such plan or benefit program. Notwithstanding the foregoing, all vesting periods under all Russell benefit plans shall be waived (except where waiving such period would violate ERISA) and the Executive, upon termination of employment for any reason before the age of retirement under those plans, shall be considered to have attained the minimum retirement age provided in those plans. Any and all such other employee benefits and/or plans are in addition to (and not in lieu of or as a substitute for) any and all other rights and benefits to which the Executive is entitled (or those in which the Executive is otherwise vested or which the Executive has otherwise earned) under the terms of this Agreement, the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article Page 11 of 20 18 30. Nothing in this ARTICLE 9 is intended, or shall be construed, to require the Company to institute any particular plan, program or benefit. ARTICLE 10. VACATION. During the Term of this Agreement, the Executive shall be entitled to a minimum four (4) weeks of paid vacation during each Employment Year. ARTICLE 11. TERMINATION COMPENSATION. 11.1 Monthly Compensation. Upon the effective Termination Date (whether by expiration of this Agreement or by termination of the Executive's employment by either the Company or the Executive for any reason), the Executive shall be entitled to continue to receive his Base Salary through the last day of the month in which the Termination Date occurs (the "Termination Month"). 11.2 Compensation and Benefits Continuance. (a) In addition to the compensation provided for in Article 11.1, in the event (i) the Executive's employment is terminated by the Executive for Good Reason or by the Company for any reason other than For Cause or (ii) the Board declines to renew this Employment Agreement with the Executive at the expiration of the Term hereof and upon terms that are no less favorable to the Executive than those contained in this Agreement, the Executive (or in the event of his subsequent death, his designated beneficiary) shall receive an amount equal to the sum of (1) and (2), where (1) equals three times the Executive's then current Base Salary and (2) equals three times that Target Bonus for the year in which the effective date of said termination or expiration occurs, which Target Bonus cannot (pursuant to Article 4.2) be less than 70% of the Executive's then Base Salary; provided, however, that if the Executive terminates his employment for Good Reason under Article 3.3(d) (due to a Change of Control), the amount comprising (2) above shall equal three times that Total Bonus amount of at least 140% of the Executive's Base Salary pursuant to Article 4.2. Said amounts under this Article 11.2(a) shall be payable in equal installments (and in accordance with the Company's ordinary payroll practices) commencing on the first payroll period following the last day of the Termination Month and continuing for a three (3) year period ("Compensation Continuance Period") until the Company's obligations to the Executive under this Article 11.2(a) are satisfied and exhausted. During the Compensation Continuance Period, the Executive shall continue to participate in all employee benefit plans or programs of the Company (as described in ARTICLES 6, 8, and 9), except where doing so would violate ERISA; provided, however, that those Company Plan/health care benefits enumerated under Article 6.1 shall not be limited to said Compensation Continuance Period but shall be provided in accordance with and for that period of time specified in Article 6.1. In addition, pursuant to this Article 11.2(a) and Article 8, the Company shall provide to the Executive the office, office privileges and rights, assistance, and all other rights as required by said Article 8 during said Compensation Continuance Period. Page 12 of 20 19 (b) In the event the Board has not declined to renew this Employment Agreement with the Executive at the expiration of the Term hereof (and upon terms that are no less favorable to the Executive than those contained in this Agreement) but the Executive has nonetheless declined to remain with the Company, the Executive (or in the event of his subsequent death, his designated beneficiary) shall receive an amount equal to the Executive's then current Base Salary. Said amounts under this Article 11.2(b) shall be payable in equal installments (and in accordance with the Company's ordinary payroll practices) commencing on the first payroll period following March 31, 2006 and continuing for a one (1) year period ("Abbreviated Compensation Continuance Period") until the Company's obligations to the Executive under this Article 11.2(b) are satisfied and exhausted. During the Abbreviated Compensation Continuance Period, the Executive agrees to provide to the Company reasonable consulting/advising services as to its operations and business in the event the Company requests such reasonable services and the Executive is able to devote the appropriate and necessary time and effort to provide such services. However, during the three (3) year period following March 31, 2006, the Executive shall continue to participate in all employee benefit plans or programs of the Company (as described in ARTICLES 6, 8, and 9), except where doing so would violate ERISA; provided, however, that those Company Plan/health care benefits enumerated under Article 6.1 shall not be limited to said Abbreviated Compensation Continuance Period but shall be provided in accordance with and for that period of time specified in Article 6.1. In addition, pursuant to this Article 11.2(a) and Article 8, the Company shall provide to the Executive the office, office privileges and rights, assistance, and all other rights as required by said Article 8 during said Abbreviated Compensation Continuance Period. (c) In addition to the compensation provided for in Article 11.1, in the event the Executive terminates his employment via resignation for any reason other than Good Reason, the Executive shall receive all other compensation, benefits, and/or consideration to which he was entitled or which was earned by or vested in the Executive (whether under the terms of this Agreement, the aforementioned Employment Agreement dated as of March 31, 1998 (which was subsequently amended effective November 1, 1999 and which has a term through and including March 31, 2001), and/or the Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor), which is incorporated herein by reference as set forth in Article 30) as of the effective Termination Date, including but not limited to any and all vested stock options under Article 5, any and all vested supplemental Company Plan benefits as enumerated in Article 6.1, any and all vested stock options/Rabbi Trust proceeds/other amounts and consideration as enumerated in said Amended and Restated Executive Deferred Compensation and Buyout Plan (or its predecessor). The provisions and rights of the Executive enumerated in this Article 11.2(c) are also in addition to all other rights to which the Executive is entitled under Article 3.4 of this Agreement. (d) For purposes of this Article 11, the Executive shall be entitled, but not required, to seek and obtain other employment or work during any applicable period in Page 13 of 20 20 which he may continue to receive compensation after said Termination Date (including any applicable Compensation Continuance Period or Abbreviated Compensation Continuance Period, as the case may be), and no amounts or monies earned by the Executive in such other employment or work during any said applicable period (including any applicable Compensation Continuance Period or Abbreviated Compensation Continuance Period, as the case may be) shall be used to setoff or otherwise reduce the Company's payment obligations in this Article 11. ARTICLE 12. RELOCATION UPON TERMINATION. If (a) the Executive's employment is terminated by the Executive for any reason (whether or not for Good Reason) or by the Company for any reason other than For Cause, (b) the Board declines to renew this Employment Agreement with the Executive at the expiration of the Term hereof and upon terms that are no less favorable to the Executive than those contained in this Agreement, or (c) the Board has not declined to renew this Employment Agreement with the Executive at the expiration of the Term hereof (upon terms that are no less favorable to the Executive than those contained in this Agreement) but the Executive has nonetheless declined to remain with the Company, then the Company shall pay all relocation expenses, including any necessary tax gross up, for any relocation of the Executive (and his spouse) to any city or location in the United States, as may be selected in the Executive's sole discretion. Provided, however, that the Company's obligations under this Article 12 as to payment of said relocation expenses shall be equal to [or more favorable (to the Executive) than] those under the relocation program used in conjunction with the relocation of the Executive (and other employees of the Company) to Atlanta, Georgia in 1999. ARTICLE 13. POST-TERMINATION OBLIGATIONS. All payments and benefits to the Executive under this Agreement shall be subject to the Executive's compliance with the following provisions during the Term and following the termination of the Executive's employment: 13.1 Assistance in Litigation. The Executive shall, upon reasonable notice, furnish such information and assistance to the Company as may reasonably be required by the Company in connection with any litigation in which it is, or may become, a party, and which arises out of facts and circumstances known to the Executive. The Company shall promptly reimburse the Executive for any travel-related and all other out-of-pocket expenses incurred in connection with the fulfillment of his obligations under this Article 13.1. 13.2 Confidential Information. The Executive shall not disclose or reveal to any unauthorized person any trade secret or other confidential information relating to the Company, its subsidiaries or affiliates, or to any businesses operated by them, and the Executive confirms that such information constitutes the exclusive property of the Company; provided, however, that the foregoing shall not prohibit the Executive from disclosing such information to the extent necessary or desirable in connection with obtaining financing for the Company (or furnishing such information under any agreements, documents or instruments under which such financing may have been obtained) or otherwise disclosing Page 14 of 20 21 such information to third parties or governmental agencies in furtherance of the interests of the Company; or as may be required by law. 13.3 Noncompetition. In the event (1) the Executive during the Compensation Continuance Period or the Abbreviated Compensation Continuance Period (as the case may be), without the prior written consent of the Company, engages directly or indirectly, as a licensee, owner, manager, consultant, officer, employee, director, investor or otherwise, in any business in material competition with the Company and (2) the Executive elects to continue to engage in any such activity described in (1) above for thirty (30) days following delivery of notice thereof by the Company to the Executive, then all rights hereunder of the Executive and any person claiming under or through him shall thereupon terminate as of said date thirty (30) days following delivery of said notice, and no person shall be entitled thereafter to receive any payments or benefits hereunder (except for the special health care benefit under Article 6.1 and all other benefits under employee benefit plans or programs as provided in ARTICLES 3.4, 5, 6, and 9 which have been earned or otherwise fixed or determined to be payable prior to such termination). The Company and the Executive acknowledge and agree that nothing in this Article 13.3 shall be construed to prevent the Executive from engaging in any such activity described in (1) above if the Executive so elects (thereby resulting in termination of the Executive's rights as described above), that the Executive shall not be deemed to have breached this Article or Agreement solely by electing to engage in any such activity described in (1) above, and that the Company may not seek to enjoin or otherwise prevent the Executive from engaging in any such activity under this Article or Agreement. This Article shall not apply to a passive investment by the Executive constituting ownership of less than five percent (5%) of the equity of any entity engaged in any business described in this Article 13.3. 13.4 Failure to Comply. In the event that the Executive shall fail to comply with any other provision of this Article 13.1 or 13.2, and such failure shall continue for thirty (30) days following delivery of notice thereof by the Company to the Executive, all rights hereunder of the Executive and any person claiming under or through him shall thereupon terminate and no person shall be entitled thereafter to receive any payments or benefits hereunder (except for benefits under employee benefit plans or programs as provided in ARTICLES 3.4, 5, 6 and 9 which have been earned or otherwise fixed or determined to be payable prior to such termination). ARTICLE 14. ADDITIONAL PAYMENTS BY COMPANY. In the event that any amount required to be paid or distributed to the Executive pursuant to this Agreement shall constitute a parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the aggregate of such parachute payments and any other amounts otherwise required to be paid or distributed to the Executive by the Company shall cause the Executive to be subject to the excise tax on excess parachute payments under Section 4999 of the Code (the "Excise Tax"), or any successor or similar provision thereof, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount the Page 15 of 20 22 Executive shall receive after the payment of any Excise Tax, shall equal the amount which he would have received if the Excise Tax had not been imposed. ARTICLE 15. PROFESSIONAL FEES. The Company shall be responsible for paying all professional fees (including but not limited to attorneys fees and related costs) incurred by the Executive in connection with his employment with the Company in an amount not to exceed $100,000, without approval of the Company; provided, however, that (1) any such fees charged on behalf of the Executive in conjunction with or related to any negotiation of this Agreement or any subsequent or related agreement(s) (or any amendment(s) thereto) shall also be the responsibility of the Company but shall count against said $100,000 amount and (2) any such professional fees of the Executive which the Company would otherwise pay pursuant to its policies and practices as to senior executives shall remain the responsibility of the Company but shall not count against said $100,000 amount. Additionally, in the event that the Executive incurs any professional fees (including but not limited to attorneys fees and related costs) in protecting or enforcing his rights under this Agreement or under any employee benefit plans or programs sponsored by the Company in which the Executive is a participant, the Company shall reimburse the Executive for such reasonable professional fees and for any other reasonable expenses related thereto. Such reimbursement shall be made within thirty (30) days following final resolution of the dispute or occurrence giving rise to such fees and expenses. ARTICLE 16. BENEFICIARY. The Executive shall name one or more primary beneficiaries and one or more contingent beneficiaries, who shall be entitled to receive any amounts payable following the death of the Executive under ARTICLE 11, which beneficiary or beneficiaries shall be subject to change from time to time by notice in writing to the Board. A beneficiary may be a trust, an individual or the Executive's estate. If the Executive fails to designate a beneficiary, primary or contingent, then and in such event, such benefit shall be paid to the surviving spouse of the Executive or, if he shall leave no surviving spouse, then to the Executive's estate. If a named beneficiary entitled to receive any death benefit is not living or in existence at the death of the Executive or dies prior to asserting a written claim for any such death benefit, then and in any such event, such death benefit shall be paid to the other primary beneficiary or beneficiaries named by the Executive who shall then be living or in existence, if any, otherwise to the contingent beneficiary or beneficiaries named by the Executive who shall then be living or in existence, if any; but if there are no primary or contingent beneficiaries then living or in existence, such benefit shall be paid to the surviving spouse of the Executive or, if he shall leave no surviving spouse, then to the Executive's estate. If a named beneficiary is receiving or is entitled to receive payments of any such death benefit and dies before receiving all of the payments due him, any remaining benefits shall be paid to the other primary beneficiary or beneficiaries named by the Executive who shall then be living or in existence, if any, otherwise to the contingent beneficiary or beneficiaries named by the Executive who shall then be living or in existence, if any; but if there are no primary or contingent beneficiaries then living or in existence, the balance shall be paid to the estate of the beneficiary who was last receiving the payments. Page 16 of 20 23 ARTICLE 17. INDEMNIFICATION. The Company shall indemnify the Executive during his employment and thereafter to the maximum extent permitted by applicable law for any and all liability of the Executive arising out of, or in connection with, his employment by the Company or membership on the Board; provided, that in no event shall such indemnity of the Executive at any time during the period of his employment by the Company be less than the maximum indemnity provided by the Company at any time during such period to any other officer or director under an indemnification insurance policy or the bylaws or charter of the Company or by agreement. ARTICLE 18. SOURCE OF PAYMENTS; NO TRUST. The obligations of the Company to make payments hereunder shall constitute a liability of the Company to the Executive. Such payments shall be from the general funds of the Company, and the Company shall not be required to establish or maintain any special or separate fund, except as specifically provided for in this Agreement, or otherwise to segregate assets to assure that such payments shall be made, and neither the Executive nor his designated beneficiary shall have any interest in any particular asset of the Company by reason of its obligations hereunder. Nothing contained in this Agreement shall create or be construed as creating a trust of any kind or any other fiduciary relationship between the Company and the Executive or any other person. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. ARTICLE 19. SEVERABILITY. All agreements and covenants contained herein are severable, and in the event any of them shall be held to be invalid by any competent court, this Agreement shall be interpreted as if such invalid agreements or covenants were not contained herein. ARTICLE 20. ASSIGNMENT PROHIBITED. This Agreement is personal to each of the parties hereto, and neither party may assign nor delegate any of his or its rights or obligations hereunder without first obtaining the written consent of the other party; provided, however, that nothing in this ARTICLE 20 shall preclude (i) the Executive from designating a beneficiary to receive any benefit payable under this Agreement upon his death or (ii) the executors, administrators, or other legal representatives of the Executive or his estate from assigning any rights under this Agreement to the person or persons entitled thereto. ARTICLE 21. NO ATTACHMENT. Except as otherwise provided in this Agreement or required by applicable law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. ARTICLE 22. HEADINGS. The headings of articles, paragraphs and sections herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. Page 17 of 20 24 ARTICLE 23. GOVERNING LAW. The parties intend that this Agreement and the performance hereunder and all suits and special proceedings hereunder shall be construed in accordance with and under and pursuant to the laws of the State of Georgia and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of Georgia shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted. ARTICLE 24. BINDING EFFECT. This Agreement shall be binding upon, and inure to the benefit of, the Executive and his heirs, executors, administrators and legal representatives and the Company and its permitted successors and assigns. ARTICLE 25. COUNTERPARTS. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. ARTICLE 26. NOTICES. All notices, requests and other communications to any party under this Agreement shall be in writing (including telefacsimile transmission or similar writing) and shall be given to such party at its address or telefacsimile number set forth below or such other address or telefacsimile number as such party may hereafter specify for the purpose by notice to the other party: (a) If to the Executive: John F. Ward 5960 River Chase Circle Atlanta, Georgia 30328 (b) If to the Company: Russell Corporation 3330 Cumberland Boulevard Suite 800 Atlanta, Georgia 30339 Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (ii) if given by any other means, when delivered at the address specified in this ARTICLE 26. ARTICLE 27. MODIFICATION OF AGREEMENT. No waiver or modification of this Agreement or of any covenant, condition, or limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith. No evidence of any waiver or Page 18 of 20 25 modification shall be offered or received in evidence at any proceeding, arbitration, or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed as aforesaid. The parties further agree that the provisions of this ARTICLE 27 may not be waived except as herein set forth. ARTICLE 28. TAXES. To the extent required by applicable law, the Company shall deduct and withhold all necessary Social Security taxes and all necessary federal and state withholding taxes and any other similar sums required by law to be withheld from any payments made pursuant to the terms of this Agreement. ARTICLE 29. RECITALS. The Recitals to this Agreement are incorporated herein and shall constitute an integral part of this Agreement. ARTICLE 30. EFFECT OF PRIOR AGREEMENTS. This Agreement (including the Amended and Restated Executive Deferred Compensation and Buyout Plan effective as of the date hereof, which is attached hereto and incorporated herein by reference) supersedes and replaces any prior employment agreement, understanding or arrangement (whether written or oral) between the Company and the Executive. Each of the parties hereto has relied on his or its own judgment in entering into this Agreement. Page 19 of 20 26 IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written. EXECUTIVE /s/ John F. Ward --------------------------------------------- John F. Ward WITNESS: /s/ Joyce I. Knox - ------------------------------ RUSSELL CORPORATION By: /s/ Robert D. Martin ------------------------------------------ Signature of Appropriate Representative Robert D. Martin ------------------------------------------ Printed Name of Appropriate Representative Its Senior VP, CFO [Title] --------------- Attest: /s/ - ----------------------------- Secretary/Asst. Secretary Page 20 of 20 27 EXHIBIT B EX-10.(P) 7 g67759ex10-p.txt SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN 1 EXHIBIT (10P) RUSSELL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EFFECTIVE FEBRUARY 23, 2000 2 TABLE OF CONTENTS
PAGE ARTICLE 1. ESTABLISHMENT AND OBJECTIVES......................................... 1 1.1. Establishment.......................................................... 1 1.2. Purpose................................................................ 1 ARTICLE 2. DEFINITIONS.......................................................... 1 ARTICLE 3. ADMINISTRATION....................................................... 5 3.1. Administration......................................................... 5 3.2. The Plan Administrator................................................. 6 3.3. Membership of the Committee............................................ 6 3.4. Action of the Committee................................................ 6 3.5. Advisors and Agents of the Committee................................... 6 3.6. Liability of the Committee; Indemnification............................ 6 3.7. Service in More than One Capacity...................................... 7 3.8. Allocations and Delegations of Responsibility.......................... 7 3.9. Expenses............................................................... 7 ARTICLE 4. ELIGIBILITY AND PARTICIPATION........................................ 7 4.1. Eligibility............................................................ 7 4.2. Participation.......................................................... 7 ARTICLE 5. BENEFITS............................................................. 8 5.1. Supplemental Benefit................................................... 8 5.2. Early Retirement Reduction............................................. 8 5.3. Postponed Retirement................................................... 8 5.4. Disability Benefit..................................................... 9 5.5. Death Benefits......................................................... 9 5.6. Form of Benefit........................................................ 9 5.7. Change of Control...................................................... 9 ARTICLE 6. VESTING.............................................................. 10 ARTICLE 7. BENEFICIARY DESIGNATION.............................................. 10 ARTICLE 8. RIGHTS OF PARTICIPANTS............................................... 10 8.1. Contractual Obligation................................................. 10 8.2. Unsecured Interest..................................................... 10 8.3. Employment............................................................. 11 8.4. Nontransferability..................................................... 11 ARTICLE 9. CLAIMS PROCEDURE..................................................... 11 9.1. Filing a Claim......................................................... 11 9.2. Review of Claim Denial................................................. 11 ARTICLE 10. AMENDMENT AND TERMINATION........................................... 11
- i - 3 ARTICLE 11. ADDITIONAL PROVISIONS............................................... 12 11.1. Successors............................................................. 12 11.2. Gender and Number...................................................... 12 11.3. Severability........................................................... 12 11.4. Governing Law.......................................................... 12 11.5. Funding................................................................ 12 11.6. Tax Withholding........................................................ 12 11.7. Other Plans............................................................ 12
- ii - 4 RUSSELL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ARTICLE 1. ESTABLISHMENT AND OBJECTIVES 1.1. Establishment. Russell Corporation, (the "Company"), hereby establishes the Russell Corporation Supplemental Executive Pension Plan (the "Plan") effective February 23, 2000. 1.2. Purpose. The purpose of the Plan is to retain and motivate designated select management and highly compensated Employees of the Company and its Subsidiaries who are Participants in the Plan by providing supplemental retirement benefits to enhance their economic security. The Plan is an unfunded defined benefit pension plan for a "select group of management and highly-compensated Employees" within the meaning of sections 201(2), 301(3), and 401(a)(1) of the Employee Retirement Security Act of 1974, as amended. ARTICLE 2. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below. Capitalized terms used in this Plan and not otherwise defined herein shall have the same meaning set forth in the Pension Plan. 2.1. "Accrued Benefit" shall have the meaning set forth in section 1.1 of the Pension Plan. 2.2. "Actuarial Equivalent" shall have the meaning set forth in section 1.3 of the Pension Plan. 2.3. "Affiliate" shall mean any corporation, trade, or business if it is a Subsidiary of the Company or otherwise affiliated with the Company and designated as an Affiliate by the Committee. 2.4. "Beneficiary" shall mean the person or persons designated under Article 7. 2.5. "Board" shall mean the Board of Directors of the Company. 2.6. "Bonus" shall mean the amount, if any, of any annual bonus awarded to a Participant under the Company's Management Incentive Programs or annual bonus plans. 2.7. "Change of Control" means, any one or more of the following: (a) any person (as such term is used in Rule 13d-5 of the SEC under the Exchange Act) or group (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other than a Subsidiary, any employee benefit plan (or any related trust) of the Company or any of its Subsidiaries or any Excluded Person, becomes the Beneficial Owner of 20% or more of the common stock of the Company or of Voting Securities 5 representing 20% or more of the combined voting power of the Company (such a person or group, a "20% Owner"), except that (i) no Change of Control shall be deemed to have occurred solely by reason of such beneficial ownership by a corporation with respect to which both more than 70% of the common stock of such corporation and Voting Securities representing more than 70% of the aggregate voting power of such corporation are then owned, directly or indirectly, by the persons who were the direct or indirect owners of the common stock and Voting Securities of the Company immediately before such acquisition in substantially the same proportions as their ownership, immediately before such acquisition, of the common stock and Voting Securities of the Company, as the case may be and (ii) such corporation shall not be deemed a 20% Owner; or (b) the Incumbent Directors (determined using the Effective Date as the baseline date) cease for any reason to constitute at least two-thirds of the directors of the Company then serving; or (c) approval by the stockholders of the Company of a merger, reorganization, consolidation, or similar transaction, or a plan or agreement for the sale or other disposition of all or substantially all of the consolidated assets of the Company or a plan of liquidation of the Company (any of the foregoing transactions, a "Reorganization Transaction") which, based on information included in the proxy and other written materials distributed to the Company's stockholders in connection with the solicitation by the Company of such stockholder approval, is not expected to qualify as an Exempt Reorganization Transaction; or (d) the consummation by the Company of a Reorganization Transaction that for any reason fails to qualify as an Exempt Reorganization Transaction as of the date of such consummation, notwithstanding the fact that such Reorganization Transaction was expected to so qualify as of the date of such stockholder approval. Notwithstanding the occurrence of any of the foregoing events, a Change of Control shall not occur with respect to a Participant if, in advance of such event, the Participant agrees in writing that such event shall not constitute a Change of Control. 2.8. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and regulations and rulings thereunder. References to a particular section of the Code include references to successor provisions of the Code or any successor statute. 2.9. "Company" shall mean Russell Corporation. 2.10. "Committee" shall mean the committee appointed by the Board to administer the Plan pursuant to Section 3.1 hereof. 2.11. "Credited Service" shall mean Years of Service (as defined in Section 1.69 of the Pension Plan as in effect as of the Effective Date hereof) earned on or after January 1, 1998. 2.12. "Disability" or "Disabled" means a mental or physical condition which, either with or without reasonable accommodations, renders a Participant incapable of performing the duties and responsibilities assigned to him immediately prior to incurring such condition as determined -2- 6 by the Committee in good faith, upon receipt of medical advice from one or more individuals, selected by the Committee, who are qualified to give professional medical advice. 2.13. "Early Retirement Age" shall mean attainment of at least fifty-five (55) years of age with at least five (5) Years of Service. 2.14. "Early Retirement Date" shall mean the first of the month coincident with or next following the date upon which the Participant attains Early Retirement Age. 2.15. "Earnings" shall have the meaning set forth in Section 1.23 of the Pension Plan; provided, that for purposes of this Plan, "Earnings" shall also include a Participant's Bonus and any amount which would otherwise be Earnings absent an election by Participant to defer such amounts or convert such amounts into a different form of benefit. 2.16. "Effective Date" has the meaning set forth in Section 1.1. 2.17. "Eligible Employee" shall mean an Employee who meets the requirements of Section 4.1. 2.18. "Employee" shall mean an individual who is employed by the Company or an Affiliate, or Subsidiary. 2.19. "Excess Plan" shall mean the Russell Corporation Supplemental Retirement Benefit Plan, as amended and restated. 2.20. "Excess Plan Benefit" shall mean the Supplemental Retirement Benefit payable under the Excess Plan. 2.21. Exchange Act" means the Securities Exchange Act of 1934, as amended. References to a particular section of the Exchange Act include references to successor provisions. 2.22. "Exempt Reorganization Transaction" means a Reorganization Transaction which results in the Persons who were the direct or indirect owners of the outstanding common stock and Voting Securities of the Company immediately before such Reorganization Transaction becoming, immediately after the consummation of such Reorganization Transaction, the direct or indirect owners of both more than 70% of the then-outstanding common stock of the Surviving Corporation and Voting Securities representing more than 70% of the aggregate voting power of the Surviving Corporation, in substantially the same respective proportions as such Persons' ownership of the common stock and Voting Securities of the Company immediately before such Reorganization Transaction. 2.23. "Final Average Pay" shall mean the average monthly amount determined by dividing Participant's total Earnings during the 3 consecutive years in which such total was the highest, selected from the last 10 consecutive years prior to retirement by 36; provided, that for purposes of this Section 2.23, "year" shall mean the 12-month period ending on the last day of the fiscal quarter preceding the date on which such Participant has a Termination of Employment -3- 7 or other date as of which a calculation in respect thereto is made and each 12-month period prior thereto. 2.24. "Gross Supplemental Pension Benefit" shall have the meaning set forth in Section 5.1 hereof. 2.25. "Incumbent Directors" means, as of any specified baseline date, individuals then serving as members of the Board who were members of the Board as of the date immediately preceding such baseline date; provided that any subsequently-appointed or elected member of the Board whose election, or nomination for election by stockholders of the Company or the Surviving Corporation, as applicable, was approved by a vote or written consent of at least two-thirds of the directors then comprising the Incumbent Directors shall also thereafter be considered an Incumbent Director, unless the initial assumption of office of such subsequently-elected or appointed director was in connection with (i) an actual or threatened election contest, including a consent solicitation, relating to the election or removal of one or more members of the Board, (ii) a "tender offer" (as such term is used in Section 14(d) of the Exchange Act), (iii) a proposed Reorganization Transaction, or (iv) a request, nomination or suggestion of any Beneficial Owner of Voting Securities representing 15% or more of the aggregate voting power of the Voting Securities of the Company or the Surviving Corporation, as applicable. 2.26. "100% Joint and Survivor Annuity" shall mean an annuity that is the Actuarial Equivalent of a Single Life Annuity, that provides a reduced level monthly benefit to the Participant for his lifetime and, upon his death, an annuity for the life of his Beneficiary in a monthly amount equal to the amount payable to the Participant during his life. 2.27. "Normal Retirement Age" shall mean age 65. 2.28. "Normal Retirement Date" shall mean the first of the month coincident with or next following the date upon which the Participant attains Normal Retirement Age. 2.29. "Offset Amount" shall have the meaning set forth in Section 5.1 hereof. 2.30. "Participant" shall mean an Eligible Employee who has satisfied the requirements of Section 4.1 of the Plan. 2.31. "Pension Plan" shall mean the Russell Corporation Revised Pension Plan (as amended and restated effective January 1, 1997) as it may be amended from time to time provided that section references hereunder shall refer to sections as renumbered and amended. 2.32. "Plan Year" shall mean the calendar year. 2.33. "Qualified Joint & Survivor Annuity" shall have the meaning set forth in Section 1.55 of the Pension Plan. 2.34. "SEC" means the United States Securities and Exchange Commission, or any successor thereto. -4- 8 2.35. "Single Life Annuity" shall mean an annuity providing equal monthly payments for the lifetime of a Participant with no survivor benefits. 2.36. "Subsidiary" means, (a) any corporation of which more than 50% of the Voting Securities are at the time, directly or indirectly, owned by such Person, and (b) any partnership or limited liability company in which such Person has a direct or indirect interest (whether in the form of voting power or participation in profits or capital contribution) of more than 50%. 2.37. "Supplemental Pension Benefit" means the Participant's Supplemental Pension Benefit determined pursuant to Article 5 hereof. 2.38. "Termination of Employment" shall mean the retirement, resignation, death, or other voluntary or involuntary termination of a Participant's employment relationship with the Company and all Affiliates. 2.39. "Voting Securities" of a corporation means securities of such corporation that are entitled to vote generally in the election of directors, but not including any other class of securities of such corporation that may have voting power by reason of the occurrence of a contingency. 2.40. "Year of Service" shall have the meaning set forth in Section 1.69 of the Pension Plan. ARTICLE 3. ADMINISTRATION 3.1. Administration. Subject to Article 10, the Plan shall be administered by the Board or a committee of the Board appointed by the Board to administer the Plan (the "Committee"). Any references herein to "Committee" are references to the Board or the Committee, as applicable. The Committee may from time to time establish rules for the administration of the Plan that are not inconsistent with the provisions of this Plan. The Committee shall have the discretion to construe and interpret the terms of the Plan including, but not limited to: (a) subject to any limitations under the Plan or applicable law, to make and enforce such rules and regulations of the Plan and prescribe the use of such forms as it shall deem necessary for the efficient administration of the Plan; (b) to require any person to furnish such information as it may request as a condition to receiving any benefit under the Plan; (c) to decide on questions concerning the Plan and the eligibility of any Participant to participate in the Plan, in accordance with the provisions of the Plan; (d) to compute or have computed the amount of benefits which shall be payable to any person in accordance with the provisions of the Plan; and (e) to appoint and remove, as it deems advisable, the Plan Administrator. -5- 9 The determination of the Committee as to any issue or disputed question arising under this Plan, including questions of construction and interpretation, shall be final, binding, and conclusive upon all persons. 3.2. The Plan Administrator. The Committee may appoint a Plan Administrator who may (but need not) be a member of the Committee, and in the absence of such appointment, the Committee shall be the Plan Administrator. The Plan Administrator shall perform the responsibilities delegated to him or her by the Committee. 3.3. Membership of the Committee. The Committee shall consist of at least three members. Any member of the Committee may resign by delivering his or her written resignation to the secretary of the Company; the resignation shall become effective when received by the secretary of the Company (or at any other time agreed upon by the member and the Board). The Board may remove any member of the Committee at any time, with or without cause, upon notice to the member being removed; provided that if any individual member of the Committee is a Participant of an Employer, his or her membership on the Committee shall terminate automatically upon his or her termination of employment unless the Company specifies otherwise. Notice of the appointment, resignation, or removal of a member of the Committee shall be given by the Board to the members of the Committee. 3.4. Action of the Committee. A vote of a majority of the members of the Committee shall be required for any action taken by the Committee. Resolutions may be adopted or other action taken without a meeting upon the written consent of all members of the Committee. Any person dealing with the Committee shall be entitled to rely upon a certificate of any member of the Committee, or its secretary, as to any act or determination of the Committee. 3.5. Advisors and Agents of the Committee. The Committee may, subject to periodic review, (a) authorize one or more of its members or an agent to execute or deliver any instrument, and make any payment on its behalf and (b) utilize the services of associates and engage accountants, agents, clerks, legal counsel, record keepers and professional consultants (any of whom may also be serving an Employer or a Subsidiary of the Company) to assist in the administration of this Plan or to render advice with regard to any responsibility under this Plan. 3.6. Liability of the Committee; Indemnification. The members of the Committee and the Plan Administrator shall have no liability with respect to any action or omission made by them in good faith nor from any action made in reliance upon (a) the advice or opinion of any accountant, legal counsel, medical adviser or other professional consultant or (b) any resolutions of the Board certified by the secretary or assistant secretary of the Company. Each member of the Committee and each Participant to whom are delegated duties, responsibilities and authority with respect to the Plan shall be indemnified and held harmless by the Company and the Employers and their respective successors against all claims, liabilities, fines and penalties and all expenses (including but not limited to reasonable attorneys fees) reasonably incurred by or imposed upon such member or Participant which arise as a result of his or her actions or failure to act in connection with the operation and administration of the Plan, to the extent lawfully allowable and to the extent that such claim liability, fine, penalty or expense is not paid for by liability insurance purchased by or paid for by the Company or an Employer. Notwithstanding the foregoing, the Company shall not indemnify any person for any such amount incurred -6- 10 through any settlement or compromise of any action unless the Company consents in writing to such settlement or compromise. 3.7. Service in More than One Capacity. Any person or group of persons may serve the Plan in more than one capacity. 3.8. Allocations and Delegations of Responsibility. (a) Delegation of Responsibility. The Board, the Committee and the Plan Administrator, respectively, shall have the authority to delegate from time to time, in writing, all or any part of his or its responsibilities under the Plan to such person or persons as he or it may deem advisable (and may authorize such person, upon receiving the written consent of the delegating authority, to delegate such responsibilities to such other person or persons as the delegating authority shall authorize), and in the same manner to revoke any such delegation of responsibility. Any action of the delegate in the exercise of such delegated responsibilities shall have the same force and effect for all purposes hereunder as if such action had been taken by the delegating authority. Neither the Board, the Company, the Committee nor the Plan Administrator shall be liable for any acts or omissions of any such delegate. The delegate shall periodically report to the delegating authority concerning the discharge of the delegated responsibilities. (b) Allocations of Responsibility. The Board, the Committee and, if the Plan Administrator is more than one person, the Plan Administrator shall have the authority to allocate from time to time, in writing, all or any part of its responsibilities under the Plan to one or more of its members as it may deem advisable, and in the same manner to revoke such allocation of responsibilities. Any action of the member to whom responsibilities are allocated in the exercise of such allocated responsibilities shall have the same force and effect for all purposes hereunder as if such action had been taken by the allocating authority. Neither the Board, the Employers, the Committee nor the Plan Administrator shall be liable for any acts or omissions of such member. The member to whom responsibilities have been allocated shall periodically report to the allocating authority concerning the discharge of the allocated responsibilities. 3.9. Expenses. The cost of payment of benefits under this Plan and the expenses of administering the Plan shall be borne by the Company. ARTICLE 4. ELIGIBILITY AND PARTICIPATION 4.1. Eligibility. Each key management employee (Grade 20 and above), officer or highly compensated Employee of the Company, its Affiliates and Subsidiaries as designated by the Company's Chief Executive Officer or the Committee shall be eligible to participate in the Plan ("Eligible Employee"). As of the Effective Date, the Employees identified on Schedule A hereto have been designated by the Chief Executive Officer and shall be eligible to participate in the Plan. 4.2. Participation. Eligible Employees set forth on Schedule A hereto shall participate in the Plan as of the Effective Date. Any other Eligible Employee designated who is eligible to -7- 11 participate shall commence participation upon such designation by the Chief Executive Officer or the Committee. ARTICLE 5. SUPPLEMENTAL PENSION BENEFIT 5.1. Supplemental Pension Benefit. Subject to the provisions in Section 5.6 and Article 7, each Participant shall be entitled to a Supplemental Pension Benefit in the form of a Single Life Annuity payable at Normal Retirement Age equal to (a) reduced by (b), where (a) equals 2% of Participant's Final Average Pay multiplied by the Participant's Credited Service provided that the maximum number of years of Credited Service considered hereunder shall be 25 (the "Gross Supplemental Pension Benefit") and (b) equals the sum of (i) and (ii) below multiplied by a fraction the numerator of which is the Credited Service calculated hereunder and the denominator of which is the Participant's Credited Service calculated under the Pension Plan (the "Offset Amount"): (i) an amount equal to the Participant's Accrued Benefit ; and (ii) an amount equal to the Excess Plan Benefit 5.2. Early Retirement Reduction. If a Participant retires before attaining Normal Retirement Age, but upon or after attaining Early Retirement Age, the Participant shall be entitled to a Supplemental Pension Benefit on his early Retirement Date calculated in accordance with Section 5.1, above, with the following changes: (a) for each year the Participant's benefit hereunder commences prior to Normal Retirement Age, the Gross Supplemental Pension Benefit shall be reduced by (i) 3% for each of the first five years prior to Normal Retirement Age and (ii) 5% for each of the next five years prior to Normal Retirement Age; and (b) the Offset Amount shall be reduced by the factors set forth in Section 4.2 of the Pension Plan as if Participant at his age upon commencement of benefits hereunder were entitled to Early Retirement under the Pension Plan and would receive a benefit calculated pursuant to that section without regard to any service requirement thereunder. 5.3. Postponed Retirement. If a Participant continues in employment beyond Normal Retirement Age or is re-employed following his Normal Retirement Date, benefit shall be adjusted as provided in Section 4.4 of the Pension Plan. 5.4. Disability Benefit. If the Board determined that a Participant hereunder is Disabled, such Participant shall be entitled to a Supplemental Pension Benefit in accordance with the terms, conditions and timing in Section 5.1 provided that the calculation of such benefit shall be based on Final Average Pay calculations as of the date upon which the Board determined the Participant was Disabled and shall include the period of such Disability as Credited Service for purposes of the calculation. -8- 12 5.5. Death Benefits. (a) If a Participant who is at least 55 years of age dies while employed with at least 5 Years of Service, the surviving spouse, if any, shall be entitled to an immediate benefit equal to the amount such surviving spouse would have received if the Participant had elected to receive his benefit in the form of a 100% Joint and Survivor Annuity payment option commencing immediately. (b) If a Participant dies while employed and after at least 5 Years of Service, but before attaining at least age 55, the surviving spouse, if any, shall be entitled to benefit calculated as described above, provided that it shall be calculated and payable as of the date the Participant would have attained age 55. (c) If a Participant who is at least 55 years of age with at least 5 Years of Service upon Termination of Employment dies after such Termination of Employment, but prior to commencing benefits hereunder, the surviving spouse, if any, shall be entitled to an immediate benefit equal to the amount such surviving spouse would have received if the Participant had elected to receive his benefit in the form of the Qualified Joint and Survivor Annuity payment option commencing immediately. (d) Except as provided in this Section 5.5 or otherwise provided as a result of Participant's election of an optional form of benefit in accordance with Section 5.6, no benefits shall be payable hereunder upon a Participant's death. 5.6. Form of Benefit. (a) Normal Form of Benefit. Unless the Participant otherwise elects hereunder, the Supplemental Pension Benefit shall be payable in the form of a Single Life Annuity. (b) Optional Forms of Benefit. Participant may elect, by furnishing the Committee with written notification of such election 90 or more days prior to the commencement of benefits hereunder, to receive the Supplemental Pension Benefit in any form of payment then available under Article 7 of the Pension Plan. (c) Level Income Option. In addition to the forms of payment available under the Pension Plan, a Participant may elect, provided that the Supplemental Pension Benefit hereunder is sufficient, by providing the Committee with written notification of such election 90 or more days prior to commencement of benefits hereunder, to receive payment of his Supplemental Pension Benefit in the form of an adjusted annuity of equivalent Actuarial Value payable in a greater amount before such Participant is eligible to first receive benefits under the Pension Plan and the Excess Plan, so that the total income, including the sum of the benefits payable under (i) this Plan, (ii) the Pension Plan and (iii) the Excess Plan to which the Participant shall be entitled are as nearly uniform as possible both before and after first becoming eligible for benefits under the Pension Plan and/or the Excess Plan (the "Level Payment Option"). (d) Benefits not in Excess of $10,000. Notwithstanding any other provision herein to the contrary, if upon Participant's Termination of Employment, the Actuarial -9- 13 Equivalent lump-sum value of Participant's vested benefit does not exceed $10,000, then, such benefit shall be paid to participant in an immediate lump-sum. 5.7. Change of Control. Upon a Change of Control, Participant's benefit shall become 100% fully vested and the Actuarial Equivalent lump-sum value of Participant's vested benefit shall be immediately paid to Participant in a single lump-sum cash payment within thirty (30) days following the Change of Control; provided that Participants shall be entitled to act at any time during the 10 day period following a Change of Control (prior to receiving payment) not to receive such lump-sum payment and to instead leave the benefit with the Plan. Participant's benefit under the Plan following the Change of Control shall be reduced by the Actuarial Equivalent of the amount, if any, of such lump-sum payment received by Participant pursuant to this Section 5.7. ARTICLE 6. VESTING Participants shall become 100% fully vested upon being on the first of the following to occur (a) being credited with 5 or more years of Credited Service, (b) attaining age 61, and (c) a Change of Control. If Participant shall have a Termination of Employment before benefits hereunder become vested and non-forfeitable, Participant shall forfeit the right to any Supplemental Pension Benefit or other benefit hereunder upon such Termination of Employment. ARTICLE 7. BENEFICIARY DESIGNATION A Participant shall designate a Beneficiary or Beneficiaries who, upon the Participant's death, will receive the amounts that were otherwise due and payable to Participant prior to Participant's death. All such designations shall be in writing and signed by the Participant. The Participant also may change his Beneficiary or Beneficiaries by a signed, written instrument delivered to the Committee. The payment of amounts shall be in accordance with the last unrevoked written designation of Beneficiary that has been signed and delivered to the Committee. For purposes of this Plan, the term "Beneficiary" means, the person or persons designated under paragraphs (a) or (b) below, as applicable. (a) Unmarried Participants. Each unmarried Participant may designate a Beneficiary or Beneficiaries to receive the amounts that were otherwise due and payable to Participant prior to Participant's death. Such designation shall not be effective unless it is made on a form provided for that purpose by the Committee during the Participant's lifetime. The Participant may, from time to time during the Participant's lifetime, on a form approved by and filed with the Committee, change the Participant's Beneficiary or Beneficiaries. (b) Married Participants. The Beneficiary of each Participant who is married shall be the surviving spouse of such Participant, unless the Participant, with the spouse's written consent, designates another Beneficiary or Beneficiaries. Each married Participant may, from time to time during the Participant's lifetime, on a form approved by and filed with the Committee, change such Participant's designation of Beneficiaries but only if the -10- 14 Participant's spouse consents in writing to such Beneficiary designation on a form supplied by the Committee. ARTICLE 8. RIGHTS OF PARTICIPANTS 8.1. Contractual Obligation. It is intended that the Company be under a contractual obligation to pay Supplemental Pension Benefits when due. Payment of Supplemental Pension Benefits under this Plan shall be made out of the Company's general assets. 8.2. Unsecured Interest. No Participant or Beneficiary shall have any interest whatsoever in any specific asset of the Company. To the extent that any person acquires a right to receive payments under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. 8.3. Employment. Nothing in this Plan shall interfere with or limit in any way the right of the Company or an Affiliate to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or an Affiliate. 8.4. Nontransferability. In no event shall the Company make any payment under this Plan to any assignee or creditor of a Participant or a Beneficiary. Prior to the time of payment hereunder, a Participant or a Beneficiary shall have no rights by way of anticipation or otherwise to dispose of any interest under this Plan nor shall such rights be assigned or transferred by operation of law. ARTICLE 9. CLAIMS PROCEDURE 9.1. Filing a Claim. Each individual eligible for benefits under this Plan ("Claimant") may submit his application for benefits ("Claim") to the Plan Administrator (or to such other person as may be designated by the Plan Administrator) in writing in such form as is provided or approved by the Plan Administrator. A Claimant shall have no right to seek review of a denial or benefits, or to bring any action in any court to enforce a Claim, prior to his filing a Claim and exhausting his rights to review under Sections 9.1 and 9.2. When a Claim has been filed properly, it shall be evaluated and the Claimant shall be notified of the approval or the denial of the Claim within thirty (30) days after the receipt of such Claim. A Claimant shall be given a written notice in which the Claimant shall be advised as to whether the Claim is granted or denied, in whole or in part. If a Claim is denied, in whole or in part, the notice shall contain (a) the specific reasons for the denial, (b) references to pertinent Plan provisions upon which the denial is based, (c) a description of any additional material or information necessary to perfect the Claim and an explanation of why such material or information is necessary, and (d) the Claimant's right to seek review of the denial. 9.2. Review of Claim Denial. If a Claim is denied, in whole or in part, the Claimant shall have the right to (a) request in writing that the Committee (or such other person as shall be designated in writing by the Committee) review the denial, (b) review pertinent documents, and (c) submit issues and comments in writing. Within thirty (30) days after a request for review is -11- 15 received, the review shall be made and the Claimant shall be advised in writing of the decision on review. The decision on review by the Committee shall be forwarded to the Claimant in writing and shall include specific reasons for the decision and references to Plan provisions upon which the decision is based. ARTICLE 10. AMENDMENT AND TERMINATION The Company expects the Plan to be permanent, but since future conditions affecting the Company cannot be anticipated or foreseen, the Board necessarily must and does hereby reserve the right to amend, modify, or terminate the Plan at any time by written resolution. No such amendment or termination shall deprive any Participant of benefits accrued at the time of such amendment or termination. Notice of such amendment or termination shall be given in writing to each Participant and Beneficiary of a deceased Participant having an interest in the Plan. Any of the provisions of this Article 10 to the contrary notwithstanding, if the Board shall amend the Plan in a manner to find the benefits obligation hereunder is a manner which results in all or any portion of the benefits under the Plan being taxable hereunder prior to the date of payment specified herewith, the Board shall have the authority to amend the benefit formula hereunder to contain such adjusted benefit amount hereunder as the Board in its discretion shall determine to be equitable to provide Participants an accelerated after tax benefit hereunder reasonably expected to be equal to the after tax benefit hereunder reasonably expect without such amendment. ARTICLE 11. ADDITIONAL PROVISIONS 11.1. Successors. All obligations of the Company under the Plan with respect to benefits hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise of all or substantially all of the business or assets of the Company. 11.2. Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 11.3. Severability. If any part of the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any other part of the Plan. Any Section or part of a Section so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid. 11.4. Governing Law. The Plan shall be construed in accordance with and governed by the laws of the State of Alabama other than its laws respecting choice of law. 11.5. Funding. Benefits hereunder shall constitute an unfunded obligation to the Company, but the Company may create reserves, funds, and/or provide for amounts to be held in trust on the Company's behalf. Payment of benefits may be made by the Company, on behalf of the Company by such a trust or through a service or benefit provider to the Company or such trust. No Participant, Employee, or any other person shall have any right, title or interest whatsoever in or to, or any preferred claim in or to, any such trust assets or to any other -12- 16 investment reserves, accounts or funds that the Company may purchase, establish, or accumulate to aid in providing the payments described in the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust or a fiduciary relationship of any kind between the Company and a Participant, Employee, or any other person. 11.6. Tax Withholding. The Company may withhold or cause to be withheld from any benefit payment any withholding or other taxes required to be withheld with respect to such payment and such sum as the Company may reasonably estimate as necessary to cover any withholding or other taxes which may be due and owing as a result of any Supplemental Pension Benefit or the creation or maintenance of this Plan. 11.7. Other Plans. No benefit payable hereunder shall be deemed compensation to the Participant for the purposes of computing benefits to which such Participant may be entitled under the Qualified Plan, the Excess Plan or any other plan or arrangement of the Company for the benefit of its employees. Executed this 22nd day of December, 2000. THE RUSSELL CORPORATION By: /s/ Michael W. Hager ----------------------------- Its: Senior Vice President -13- EX-11 8 g67759ex11.txt COMPUTATIONS OF INCOME/(LOSS) PER COMMON SHARE 1 Exhibit (11) COMPUTATIONS OF INCOME/(LOSS) PER COMMON SHARE RUSSELL CORPORATION AND SUBSIDIARIES
Year Ended -------------------------------------------------- December 30, January 1, January 2, 2000 2000 1999 ------------ ----------- ------------ Basic: Net Income (Loss) $14,515,000 $ 8,388,000 $(10,379,000) =========== =========== ============ Weighted Average Common Shares Outstanding 32,405,926 33,842,751 36,216,571 =========== =========== ============ Income (Loss) $ .45 $ .25 $ (.29) per Share-Basic =========== =========== ============ Diluted: Net Income (Loss) $14,515,000 $ 8,388,000 $(10,379,000) =========== =========== ============ Weighted Average Common Shares Outstanding 32,405,926 33,842,751 36,216,571 Net Effect of Dilutive Stock Options 280,080 23,750 -0- ----------- ----------- ------------ Total 32,686,006 33,866,501 36,216,571 =========== =========== ============ Income (Loss) $ .44 $ .25 $ (.29) Per Share-Diluted =========== =========== ============
IV-13 EX-13 9 g67759ex13.txt 2000 ANNUAL REPORT TO SHAREHOLDERS 1 EXHIBIT (13) 2000 ANNUAL REPORT TO SHAREHOLDERS 2 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES TEN-YEAR SELECTED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except Common Stock Data and Financial Statistics) 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- OPERATIONS Net sales $1,217,578 $1,142,234 $ 1,180,118 Cost of goods sold 876,726 844,961 878,106 Interest expense 32,401 28,060 27,824 Income (loss) before income taxes (a) 33,077 20,330 (10,265) Income taxes (a) 18,562 11,942 114 Net income (loss) applicable to common shares (a) 14,515 8,388 (10,379) - ---------------------------------------------------------------------------------------------------------------------- FINANCIAL DATA Depreciation and amortization $ 54,645 $ 63,891 $ 74,368 Net income plus depreciation and amortization 69,160 72,279 63,989 Capital expenditures 59,457 53,376 72,864 Working capital 471,414 460,041 435,819 Long-term debt and redeemable preferred stock 384,211 377,865 323,043 Stockholders' equity 525,940 549,342 614,771 Capital employed 910,151 927,207 937,814 Total assets 1,153,160 1,153,131 1,153,564 - ---------------------------------------------------------------------------------------------------------------------- COMMON STOCK DATA Net income (loss) assuming dilution (a) $ .44 $ .25 $ (.29) Dividends .56 .56 .56 Book value 16.49 16.74 17.31 Price Range: High 22.94 25.12 33.88 Low 12.13 12.13 18.00 - ---------------------------------------------------------------------------------------------------------------------- FINANCIAL STATISTICS Net sales times: Receivables(b) 6.2 6.2 5.6 Inventories(b) 3.1 3.0 3.2 Capital employed(b) 1.3 1.2 1.2 Interest coverage(a) 2.0 1.7 .6 Income (loss) before income taxes as a percent of sales(a) 2.7% 1.8% (.9)% Net income (loss) as a percent of sales(a) 1.2% .7% (.9)% Net income (loss) as a percent of stockholders' equity(a)(b) 2.7% 1.4% (1.6)% - ---------------------------------------------------------------------------------------------------------------------- OTHER DATA Net common shares outstanding (000s omitted) 31,896 32,814 35,519 Approximate number of common shareholders 8,000 8,000 8,000 - ----------------------------------------------------------------------------------------------------------------------
(a) Fiscal 1993 includes a noncash, pre-tax charge of $34,583,000 associated with the write-down of certain fixed assets and goodwill. The after-tax impact of this write-down on 1993 earnings was ($.56) per common share. Fiscal 1998, 1999, and 2000 include pre-tax charges of $83,007,000, $70,721,000, and $65,011,000, respectively, associated with restructuring, asset impairment and other unusual charges as described in Note 10 to the Consolidated Financial Statements. The after-tax impact of these charges on 1998, 1999 and 2000 earnings was ($1.46), ($1.38), and ($1.46), respectively, per common share. (b) Average of amounts at beginning and end of each fiscal year. 22 3
(Dollars in thousands, except Common Stock Data and Financial Statistics) 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net sales $1,228,198 $1,244,204 $1,152,633 $1,098,259 Cost of goods sold 857,531 846,166 816,834 739,700 Interest expense 28,165 25,738 21,698 19,434 Income (loss) before income taxes(a) 88,352 129,545 87,733 127,585 Income taxes(a) 33,904 47,969 33,616 48,759 Net income (loss) applicable to common shares(a) 54,448 81,576 54,117 78,826 - --------------------------------------------------------------------------------------------------------------------------------- FINANCIAL DATA Depreciation and amortization $ 74,421 $ 72,226 $ 68,010 $ 67,042 Net income plus depreciation and amortization 128,869 153,802 122,127 145,868 Capital expenditures 72,926 114,031 86,556 38,562 Working capital 501,431 412,591 438,070 310,330 Long-term debt and redeemable preferred stock 360,607 255,935 287,878 144,163 Stockholders' equity 665,602 679,823 632,558 628,662 Capital employed 1,026,209 935,758 920,436 772,825 Total assets 1,247,962 1,195,180 1,118,164 1,046,577 - --------------------------------------------------------------------------------------------------------------------------------- COMMON STOCK DATA Net income (loss) assuming dilution(a) $ 1.47 $ 2.11 $ 1.38 $ 1.96 Dividends .53 .50 .48 .42 Book value 18.25 17.87 16.34 15.84 Price Range: High 38.38 33.75 31.25 32.63 Low 25.00 23.13 22.00 24.00 - --------------------------------------------------------------------------------------------------------------------------------- FINANCIAL STATISTICS Net sales times: Receivables(b) 5.3 5.5 5.3 5.6 Inventories(b) 3.4 3.7 3.8 3.9 Capital employed(b) 1.3 1.3 1.4 1.4 Interest coverage(a) 4.1 6.0 5.0 7.6 Income (loss) before income taxes as a percent of sales(a) 7.2% 10.4% 7.6% 11.6% Net income (loss) as a percent of sales(a) 4.4% 6.6% 4.7% 7.2% Net income (loss) as a percent of stockholders' equity (a)(b) 8.2% 12.4% 8.6% 13.0% - --------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Net common shares outstanding (000s omitted) 36,463 38,049 38,715 39,689 Approximate number of common shareholders 10,100 12,300 12,300 13,000 - --------------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except Common Stock Data and Financial Statistics) 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------ OPERATIONS Net sales $ 930,787 $899,136 $ 804,585 Cost of goods sold 613,325 592,837 553,160 Interest expense 16,948 15,841 18,097 Income (loss) before income taxes(a) 80,717 129,507 90,866 Income taxes(a) 31,619 47,269 34,027 Net income (loss) applicable to common shares(a) 49,080 81,945 56,279 - ------------------------------------------------------------------------------------------------------------------ FINANCIAL DATA Depreciation and amortization $ 66,226 $ 60,444 $ 56,594 Net income plus depreciation and amortization 115,306 142,389 112,873 Capital expenditures 83,979 109,161 89,532 Working capital 277,993 285,469 255,392 Long-term debt and redeemable preferred stock 163,334 186,122 185,923 Stockholders' equity 587,651 570,003 502,501 Capital employed 750,985 756,125 688,424 Total assets 1,017,044 964,933 818,220 - ------------------------------------------------------------------------------------------------------------------ COMMON STOCK DATA Net income (loss) assuming dilution(a) $ 1.19 $ 1.99 $ 1.38 Dividends .39 .34 .32 Book value 14.54 13.97 12.39 Price Range: High 36.87 40.37 36.25 Low 26.00 27.75 19.75 - ------------------------------------------------------------------------------------------------------------------ FINANCIAL STATISTICS Net sales times: Receivables(b) 5.3 5.8 5.9 Inventories(b) 3.7 4.6 4.8 Capital employed(b) 1.2 1.2 1.2 Interest coverage(a) 5.8 9.2 6.0 Income (loss) before income taxes as a percent of sales(a) 8.7% 14.4% 11.3% Net income (loss) as a percent of sales(a) 5.3% 9.1% 7.0% Net income (loss) as a percent of stockholders' equity (a)(b) 8.5% 15.3% 11.7% - ------------------------------------------------------------------------------------------------------------------ OTHER DATA Net common shares outstanding (000s omitted) 40,405 40,810 40,569 Approximate number of common shareholders 13,000 13,000 18,000 - ------------------------------------------------------------------------------------------------------------------
23 4 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS 2000 VS. 1999 NET SALES Net sales increased 6.6%, or $75,344,000, to $1,217,578,000 for fiscal 2000 from $1,142,234,000 for fiscal 1999. The overall net increase consisted of a 10.2% increase, or $89,763,000, within the Company's Activewear segment of which, approximately $24,400,000 related to acquisitions during fiscal year 2000 (see Note 12 to the Consolidated Financial Statements for more information concerning the Company's fiscal year 2000 acquisitions); a 10.8% decline, or $13,308,000, within the Company's International segment; and a 0.8% decrease, or $1,111,000, for the "All Other" segment. The majority of the sales increase within the Activewear segment was due to strong sales within the Company's JERZEES and JERZEES Outdoors brand of activewear. Overall dozens shipped within the Activewear segment were up approximately 16% over the prior year. Favorable product mix changes within the Activewear segment offset the negative impact of lower selling prices within certain categories. Approximately $10,250,000 of the sales decline within the International segment was attributable to the weaker euro and British pound sterling against the U.S. dollar. The remaining decline was attributable to an unfavorable sales mix shift, unexpected shipping delays caused by systems problems, and restructuring or discontinuance of lines of businesses. GROSS MARGIN PERCENTAGE The Company's overall gross margin percentage increased to 28.0% for fiscal 2000 versus 26.0% in fiscal 1999. Excluding the impact of restructuring, asset impairment and other unusual charges (special charges), as described in Note 10 to the Consolidated Financial Statements, of $18,187,000 and $32,039,000 for 2000 and 1999, respectively, the overall gross margin percentage increased to 29.5% for 2000 from 28.8% for 1999. Gross margins were impacted by the overall net increase in net sales mentioned above and continue to be positively impacted by the reduction in manufacturing costs as a result of the Company's continued efforts to move the assembly of garments to low-cost geographic locations. In addition, the Company continues to improve and streamline other manufacturing processes. The Company's overall gross margin percentage was not significantly impacted by the fiscal 2000 acquisitions. SELLING, GENERAL AND ADMINISTRATIVE (SG&A) SG&A as a percent of net sales decreased to 18.9% for fiscal 2000 versus 19.0% in fiscal 1999. Excluding the impact of special charges of $3,677,000 and $6,088,000 for 2000 and 1999, respectively, SG&A as a percent of net sales increased slightly to 18.6% for 2000 from 18.5% for 1999. The Company continues to increase its advertising and marketing spending over that of prior years in an effort to raise brand awareness within the markets of the JERZEES, Russell Athletic and Cross Creek brands. The increased spending to raise brand awareness has been partially offset by lower distribution costs as a result of major reconfiguration changes of certain distribution facilities during 1999. The Company's overall SG&A as a percent of net sales was not significantly impacted by the fiscal 2000 acquisitions. EARNINGS BEFORE INTEREST AND TAXES (EBIT) The Company's overall EBIT as a percent of net sales increased to 10.7% for fiscal 2000 from 10.4% in fiscal 1999 when calculated exclusive of special charges of $65,011,000 and $70,721,000 for 2000 and 1999, respectively. The Activewear segment EBIT, exclusive of special charges, as a percent of net sales increased to 14.1% for fiscal 2000 from 13.0% in fiscal 1999. Again, this improvement is attributed primarily to the overall increase in net sales mentioned above and reduced manufacturing costs associated with the continued move of much of the Company's apparel assembly operations offshore. The International segment EBIT, exclusive of special charges, as a percent of net sales decreased to a negative 7.1% for fiscal 2000 from a positive 7.4% in fiscal 1999. A major component of the decline within the International segment was due to foreign currency issues mentioned above, which adversely impacted both sales and margins in Europe. Additionally, the International segment incurred higher freight and distribution costs than in the prior year as a result of product shipping delays at the Company's Europe facility during the first quarter of 2000. The "All Other" segment EBIT, exclusive of special charges, as a percent of net sales increased to 15.8% for fiscal 2000 from 13.8% in fiscal 1999, primarily due to lower manufacturing costs. The Company's overall EBIT as a percent of net sales was not significantly impacted by the fiscal 2000 acquisitions. 1999 VS. 1998 NET SALES Net sales decreased 3.2%, or $37,884,000, to $1,142,234,000 for fiscal 1999 from $1,180,118,000 for fiscal 1998. The decrease consisted primarily of declines of 3.4%, or $30,754,000 and 2.1%, or $2,631,000 within the Company's Activewear and International segments, respectively. The majority of the sales decline within the Activewear segment was due to price declines and the discontinuance of certain lines of businesses in fiscal 1998 as part of the restructuring and reorganization plan described below. GROSS MARGIN PERCENTAGE The Company's overall gross margin percentage increased to 26.0% for fiscal 1999 versus 25.6% in fiscal 1998. Excluding the impact of special charges of $32,039,000 and $22,227,000 for fiscal 1999 and fiscal 1998, respectively, the gross margin percentage increased to 28.8% for fiscal 1999 from 27.5% for fiscal 1998. Gross margins were positively impacted by the reduction in manufacturing cost as a result of the Company's aggressive move to assemble garments in low-cost geographic locations versus the prior fiscal year. However, the positive impact experienced as a result of those cost reductions was partially offset by lower selling prices. 24 5 SELLING, GENERAL AND ADMINISTRATIVE (SG&A) SG&A as a percent of net sales decreased to 19.0% for fiscal 1999 from 20.9% in fiscal 1998. Excluding the impact of special charges of $6,088,000 and $21,318,000 for the fiscal years 1999 and 1998, respectively, SG&A as a percent of net sales decreased to 18.5% for fiscal 1999 from 19.1% in fiscal 1998, primarily due to lower distribution costs, which were partially offset with increases in advertising and marketing expenses. EARNINGS BEFORE INTEREST AND TAXES (EBIT) The Company's overall EBIT as a percent of net sales increased to 10.4% for fiscal 1999 from 8.5% in fiscal 1998 when calculated exclusive of special charges of $70,721,000 and $83,007,000 for fiscal 1999 and 1998, respectively. The Activewear segment EBIT, exclusive of special charges, as a percent of net sales was 13.0% for fiscal 1999 up from 11.2% for fiscal 1998. This improvement was attributed to reduced manufacturing cost associated with the move of much of the Company's apparel assembly operations offshore. The International segment EBIT, exclusive of special charges, as a percent of net sales increased to 7.4% for fiscal 1999 up from a negative 3.6% for fiscal 1998. This significant turnaround was primarily due to the elimination of certain unprofitable product lines and businesses as part of the Company's restructuring and reorganization plan. For information concerning income tax provisions for fiscal years 2000, 1999 and 1998, as well as information regarding differences between effective tax rates and statutory tax rates, see Note 6 to the Consolidated Financial Statements. MULTI-YEAR RESTRUCTURING AND REORGANIZATION PLAN On July 22, 1998, the Company announced its intention to undertake a major restructuring and reorganization to improve the Company's global competitiveness. Elements of the multi-year strategic plan included: the closing of approximately 25 of the Company's 90 worldwide facilities over the next three years, including selected manufacturing plants, distribution centers and offices; expanding production outside the United States; consolidating and downsizing the licensed products businesses; disposing of owned shopping-center real estate; reorganizing the corporate structure; establishing a dual headquarters in the metropolitan Atlanta area; as well as other cost savings activities. It was anticipated that the three-year plan would ultimately reduce costs by approximately $80 million pre-tax annually and would result in the elimination of approximately 4,000 domestic positions. The Company announced it would incur charges over three years for restructuring, asset impairment and other unusual charges as a result of the restructuring and reorganization plan. These charges would relate to the closing of facilities, including plants, distribution centers and offices; and consolidation and/or exiting certain product lines and brands and disposing of owned shopping-center real estate; and would be reflected in the Company's consolidated financial statements over the next three years beginning in the third quarter of 1998. The recognition of these charges would depend, in large part, on expansion of production capabilities outside the United States. The Company continues to execute its multi-year strategic plan. This plan, as originally announced in July 1998, anticipated charges of $125 million after-tax, including the closure of 25 facilities impacting 4,000 positions, primarily associated with the movement of apparel assembly operations to lower cost areas. Additionally, the plan as announced in 1998 would also generate one-time expenses associated with the establishment of a dual headquarters in Atlanta. That move is now nearly complete. In line with previous announcements in 2000 which revised the restructuring plan, the Company has recorded charges to-date of $142.2 million, after-tax, including the closure of 30 facilities, impacting more than 5,000 positions. Additional projects are also being considered, and the Company estimates future special charges will be in the $15 million range after-tax during fiscal 2001. For information concerning restructuring, asset impairment and other unusual charges associated with the multi-year restructuring and reorganization plan for fiscal 2000, 1999 and 1998, see Note 10 to the Consolidated Financial Statements. The Company has achieved actual savings from the restructuring and reorganization plan which are in line with the savings anticipated at the inception of the plan. LIQUIDITY AND CAPITAL RESOURCES The balance sheet continues to reflect the conservative financial nature of the Company and its strong financial condition. At the end of fiscal 2000, long-term debt to total capitalization increased to 42.2% versus 40.8% at the end of fiscal 1999. The increase is primarily the result of the Company purchasing approximately 1 million of its outstanding common shares for approximately $15.2 million, and acquisitions of approximately $40.0 million (see Note 12 to the Consolidated Financial Statements), which were funded through the credit facility (long-term debt). Current ratios were 3.8 and 4.0, respectively, for year-end 2000 and 1999. Operations provided approximately $97.2 million and increased borrowings provided $52.3 million of the cash requirements in fiscal 2000. This cash was used for capital expenditures, acquisitions, payments on long-term debt, dividends and treasury stock repurchases. Capital expenditures during fiscal 2000 were approximately $59.5 million. Approximately 95%, or $56.2 million, of the fiscal 2000 expenditures were within the Activewear segment. 25 6 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) During fiscal 1999, operations provided approximately $86.2 million, and increased borrowings provided $63.5 million of the Company's cash requirements. This cash was used for capital expenditures, payments on long-term debt, dividends and treasury stock repurchases. Capital expenditures during fiscal 1999 were approximately $53.4 million. Approximately 92%, or $49.4 million, of the fiscal 1999 expenditures were within the Activewear segment. The Company anticipates that fiscal 2001 capital expenditures will be in the range of approximately $55 million. The majority of the fiscal 2001 capital expenditures will be for further enhancements of the Company's manufacturing and distribution capabilities. At December 30, 2000, the Company had accrued liabilities of approximately $5.7 million related to employee severance and costs to exit certain facilities, licenses and contracts. The Company anticipates that the continued execution of its restructuring and reorganization plan during fiscal 2001 will require no significant increase in cash, if the Company successfully disposes of all property and equipment affected by the restructuring and reorganization plan. In December 1999, the Board of Directors adjusted the stock repurchase authorization upward to 5,000,000 shares. Purchases of the Company's Common Stock totaled $15,151,000 in 2000, representing 994,649 shares, compared to $53,368,000 representing 2,705,361 shares in 1999. At December 30, 2000, the Company could repurchase an additional 3,878,751 shares under its current authorization. In prior years, the Company was dependent on informal uncommitted lines of credit to finance its working capital requirements. During the fourth quarter of 1999, the Company entered into a five-year $250 million unsecured revolving credit facility which assures the Company availability of funds at market-based rates. (See Note 2 to the Consolidated Financial Statements for additional details related to the Company's credit facility). At year-end, the Company had $62 million of availability from informal lines of credit with two banks. The Company believes that the combination of its credit facility and the two informal lines of credit will be sufficient for its cash requirements during fiscal year 2001 and does not presently intend to issue any additional long-term debt (other than available borrowings under the existing credit facility) or equity securities in fiscal 2001. During fiscal years 2000, 1999 and 1998, the Company utilized two interest rate swap agreements in the management of its interest rate exposure on long-term debt. These agreements effectively converted a portion of the Company's interest rate exposure from a fixed to a floating rate basis and from a floating to a fixed rate basis. The effect of these agreements lowered the effective interest rate on the Company's long-term debt from 6.66% to 6.57%; 6.67% to 6.34%; and 6.74% to 6.47% in 2000, 1999 and 1998, respectively. On October 10, 2000, the Company terminated its fixed to floating interest rate swap agreement. For information concerning ongoing litigation of the Company, see Note 9 to the Consolidated Financial Statements. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS For information concerning the impact of recently issued accounting standards, see Note 1 to the Consolidated Financial Statements. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risks relating to fluctuations in interest rates, currency exchange rates and commodity prices. The objective of financial risk management at the Company is to minimize the negative impact of interest rate, foreign exchange rate and commodity price fluctuations on the Company's earnings, cash flows and equity. To manage these risks, the Company uses various derivative financial instruments, including interest rate swap agreements, forward currency exchange contracts and commodity futures contracts. The Company only uses commonly traded instruments. These contracts are entered into with major financial institutions, thereby minimizing the risk of credit loss. Also, refer to Notes 1 and 4 to the Consolidated Financial Statements for a more complete description of the Company's accounting policies and use of such instruments. The following analyses present the sensitivity of the market value, earnings and cash flows of the Company's financial instruments to hypothetical changes in interest rates, exchange rates and commodity prices as if these changes occurred at December 30, 2000. The range of changes chosen for these analyses reflects the Company's view of changes which are reasonably possible over a one-year period. Market values are the present values of projected future cash flows based on the interest rate assumptions or quoted market prices where available. These forward-looking disclosures are selective in nature and only address the potential impacts from financial instruments. They do not include other potential effects, which could impact the Company's business as a result of these changes in interest rates, exchange rates and commodity prices. 26 7 INTEREST RATE AND DEBT SENSITIVITY ANALYSIS At December 30, 2000, the Company had debt totaling $423,482,000 and one interest rate swap agreement with a notional value of $48,250,000. The interest rate swap was entered into as a hedge of an underlying debt instrument to effectively change the characteristics of the interest rate without altering the debt instrument. At December 30, 2000, the interest rate swap agreement converted $48,250,000 of outstanding variable rate debt to fixed rate debt for a period of time. For fixed rate debt, interest rate changes affect the fair market value but do not impact earnings or cash flows. At December 30, 2000, after adjusting for the effect of the interest rate swap agreement, the Company had fixed rate debt of $294,679,000 and variable rate debt of $128,803,000. Assuming all other variables remain constant, a one percentage point increase in interest rates would decrease the fair market value of the fixed rate debt by approximately $9,200,000 at December 30, 2000. Pre-tax earnings and cash flows would be negatively impacted by approximately $1,300,000 from a one percentage point increase in interest rates holding other variables constant. CURRENCY EXCHANGE RATE SENSITIVITY The Company and its subsidiaries have foreign currency exposures related to buying, selling and financing in currencies other than their respective functional currencies. The Company also has foreign currency exposure related to foreign denominated revenues and profits translated into U.S. dollars. These exposures are primarily concentrated in the euro, British pound sterling and Mexican peso. The Company enters into foreign currency forward contracts to manage the transaction risk associated with doing business in foreign currencies. It is the Company's policy to hedge currency exposures of firm commitments and anticipated transactions denominated in non-functional currencies to protect against the possibility of diminished cash flow and adverse impacts on earnings. The potential loss in fair value of the Company's foreign currency forward contracts at December 30, 2000, from a hypothetical 10% adverse change in quoted foreign currency exchange rates, primarily the euro, would be approximately $2.3 million. However, this hypothetical adverse impact on the value of foreign currency forward contracts would be offset by the benefit of translating foreign currency denominated transactions into U.S. dollars at more favorable exchange rates. The Company generally views its investments in foreign subsidiaries with a functional currency other than the U.S. dollar as long-term. As a result, the Company does not generally hedge these net investments. COMMODITY PRICE SENSITIVITY The availability and price of cotton is subject to wide fluctuations due to unpredictable factors such as weather conditions, governmental regulations, economic climate or other unforeseen circumstances. To reduce price risk caused by market fluctuations, the Company enters into futures contracts to fix prices on varying proportions of its cotton needs, thereby minimizing the risk of decreased margins from cotton price increases. A sensitivity analysis has been prepared to estimate the Company's exposure to market risk from its cotton position, excluding inventory on hand and fixed price contracts. The fair value of the Company's position is calculated by valuing its net position at quoted futures prices. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in such prices. The potential loss in fair value of the Company's cotton futures position at December 30, 2000, from a hypothetical 10% decrease in cotton prices would be approximately $668,000. FORWARD LOOKING INFORMATION This annual report, including management's discussion and analysis, contains certain statements that describe the Company's beliefs concerning future business conditions and prospects, growth opportunities, new product lines, offshore apparel assembly and related cost savings, and the outlook for the Company based upon currently available information. Wherever possible, the Company has identified these "forward looking" statements (as defined in Section 21E of the Securities and Exchange Act of 1934) by words such as "anticipates," "believes," "intends," "estimates," "expects," "projects" and similar phrases. These forward looking statements are based upon assumptions the Company believes are reasonable. Such forward looking statements are subject to risks and uncertainties, which could cause the Company's actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including among other matters, significant competitive activity, including promotional and price competition, changes in customer demand for the Company's products, inherent risks in the marketplace associated with new products and new product lines, including uncertainties about trade and consumer acceptance and other risk factors listed from time to time in the Company's SEC reports and announcements. These risks and uncertainties include, but are not limited to, the matters discussed under the caption "Forward Looking Information" in the Company's Annual Report on Form 10-K for the year ended December 30, 2000, which will be filed by March 30, 2001. The Company assumes no obligation to publicly update any forward looking statements whether as a result of new information, future events or otherwise. 27 8 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 30, 2000 and January 1, 2000
(In thousands, except share data) 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash $ 4,193 $ 9,123 Trade accounts receivable, less allowances of $9,796 in 2000 and $7,912 in 1999 198,610 191,803 Inventories 406,446 387,841 Prepaid expenses and other current assets 18,013 14,874 Future income tax benefits -- 11,481 Income tax receivable 12,879 -- - -------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 640,141 615,122 PROPERTY, PLANT AND EQUIPMENT: Land 10,106 11,207 Buildings 291,477 329,439 Machinery and equipment 884,389 877,312 Construction-in-progress 27,750 11,985 - -------------------------------------------------------------------------------------------------------------------------- 1,213,722 1,229,943 Less allowances for depreciation and amortization (760,714) (747,343) - -------------------------------------------------------------------------------------------------------------------------- 453,008 482,600 OTHER ASSETS 60,011 55,409 - -------------------------------------------------------------------------------------------------------------------------- $ 1,153,160 $ 1,153,131 ========================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable $ 61,387 $ 72,972 Employee compensation 33,528 32,627 Accrued expenses 33,620 27,242 Deferred income taxes 921 -- Income taxes payable -- 826 Current maturities of long-term debt 39,271 21,414 - -------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 168,727 155,081 LONG-TERM DEBT, LESS CURRENT MATURITIES 384,211 377,865 DEFERRED LIABILITIES: Income taxes 45,928 38,741 Pension and other 28,354 32,102 - -------------------------------------------------------------------------------------------------------------------------- 74,282 70,843 COMMITMENTS AND CONTINGENCIES -- -- STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share; authorized 150,000,000 shares, issued 41,419,958 shares 414 414 Paid-in capital 47,104 48,294 Retained earnings 716,460 720,111 Treasury stock (2000 - 9,524,424 and 1999 - 8,605,925 shares) (226,470) (213,461) Accumulated other comprehensive loss (11,568) (6,016) - -------------------------------------------------------------------------------------------------------------------------- 525,940 549,342 - -------------------------------------------------------------------------------------------------------------------------- $ 1,153,160 $ 1,153,131 ==========================================================================================================================
See notes to consolidated financial statements. 28 9 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 30, 2000, January 1, 2000 and January 2, 1999
(In thousands, except share and per share data) 2000 1999 1998 - --------------------------------------------------------------------------------------------- NET SALES $ 1,217,578 $ 1,142,234 $ 1,180,118 COSTS AND EXPENSES: Cost of goods sold 876,726 844,961 878,106 Selling, general and administrative expenses 229,991 217,571 246,518 Other - net 45,383 31,312 37,935 Interest expense 32,401 28,060 27,824 - --------------------------------------------------------------------------------------------- 1,184,501 1,121,904 1,190,383 - --------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES 33,077 20,330 (10,265) PROVISION FOR INCOME TAXES 18,562 11,942 114 - --------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 14,515 $ 8,388 $ (10,379) ============================================================================================= NET INCOME (LOSS) PER COMMON SHARE: Basic $ .45 $ .25 $ (.29) Diluted $ .44 $ .25 $ (.29) WEIGHTED-AVERAGE SHARES OUTSTANDING: Basic 32,405,926 33,842,751 36,216,571 Diluted 32,686,006 33,866,501 36,216,571
See notes to consolidated financial statements. 29 10 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 30, 2000, January 1, 2000, and January 2, 1999
(In thousands) 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $ 14,515 $ 8,388 $ (10,379) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 54,645 63,891 74,368 Deferred income taxes 19,589 2,024 (19,568) Loss (gain) on sale of property, plant and equipment 574 573 (111) Non-cash restructuring, asset impairment and other unusual charges 37,209 26,440 55,742 Foreign currency transaction loss 2,276 1,100 634 Changes in operating assets and liabilities: Trade accounts receivable (97) (12,625) 52,038 Inventories (13,699) (22,496) (18,192) Prepaid expenses and other current assets (2,970) (2,926) (583) Other assets 14,200 (6,127) 1,189 Accounts payable and accrued expenses (11,585) 29,438 16,299 Income taxes (13,951) (932) 12,372 Pension and other deferred liabilities (3,535) (569) 6,216 - -------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 97,171 86,179 170,025 Investing activities Purchase of property, plant and equipment (59,457) (53,376) (72,864) Cash paid for acquisitions (39,972) -- -- Proceeds from sale of property, plant and equipment 6,450 4,572 2,224 - -------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (92,979) (48,804) (70,640) FINANCING ACTIVITIES Borrowings on credit facility - net 52,303 76,383 -- Payments on short-term debt -- (12,908) (26,416) Payments on notes payable (26,564) (32,214) (26,828) Dividends on common stock (18,166) (19,000) (20,326) Distribution of treasury stock 952 -- 2,072 Cost of common stock for treasury (15,151) (53,368) (22,355) - -------------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (6,626) (41,107) (93,853) Effect of exchange rate changes on cash (2,496) (997) (289) - -------------------------------------------------------------------------------------------------------------------------- Net (decrease) increase in cash (4,930) (4,729) 5,243 Cash balance at beginning of year 9,123 13,852 8,609 - -------------------------------------------------------------------------------------------------------------------------- CASH BALANCE AT END OF YEAR $ 4,193 $ 9,123 $ 13,852 ==========================================================================================================================
See notes to consolidated financial statements. 30 11 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended December 30, 2000, January 1, 2000, and January 2, 1999
Accumulated Other Common Paid-in Treasury Retained Comprehensive (In thousands, except share data) Stock Capital Stock Earnings Income (Loss) Total - ------------------------------------------------------------------------------------------------------------------------------ Balance at January 3, 1998 $ 414 $ 48,654 $(140,170) $ 761,428 $ (4,724) $665,602 Comprehensive loss: Net loss -- -- -- (10,379) -- (10,379) Foreign currency translation adjustments -- -- -- -- 157 157 -------- Comprehensive loss (10,222) -------- Exercise of stock options -- (360) -- -- -- (360) Treasury stock acquired (1,041,800 shares) -- -- (22,355) -- -- (22,355) Treasury stock reissued (98,572 shares) -- -- 2,432 -- -- 2,432 Cash dividends ($.56 per share) -- -- -- (20,326) -- (20,326) - ------------------------------------------------------------------------------------------------------------------------------ Balance at January 2, 1999 414 48,294 (160,093) 730,723 (4,567) 614,771 Comprehensive income: Net income -- -- -- 8,388 -- 8,388 Foreign currency translation adjustments -- -- -- -- (1,449) (1,449) -------- Comprehensive income 6,939 -------- Treasury stock acquired (2,705,361 shares) -- -- (53,368) -- -- (53,368) Cash dividends ($.56 per share) -- -- -- (19,000) -- (19,000) - ------------------------------------------------------------------------------------------------------------------------------ Balance at January 1, 2000 414 48,294 (213,461) 720,111 (6,016) 549,342 Comprehensive income: Net income -- -- -- 14,515 -- 14,515 Foreign currency translation adjustments -- -- -- -- (5,552) (5,552) -------- Comprehensive income 8,963 -------- Treasury stock acquired (994,649 shares) -- -- (15,151) -- -- (15,151) Treasury stock reissued (76,150 shares) -- (1,190) 2,142 -- -- 952 Cash dividends ($.56 per share) -- -- -- (18,166) -- (18,166) - ------------------------------------------------------------------------------------------------------------------------------ Balance at December 30, 2000 $ 414 $ 47,104 $(226,470) $ 716,460 $ (11,568) $525,940 ==============================================================================================================================
See notes to consolidated financial statements. 31 12 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Russell Corporation is an international branded apparel company specializing in activewear, casualwear and athletic uniforms. Major brands include Russell Athletic, JERZEES, Cross Creek, and Mossy Oak apparel. The Company designs and merchandises a variety of leisure and sports apparel marketed to sporting goods dealers, department and specialty stores, mass merchandisers, golf pro shops, college bookstores, screen printers and embroiderers, distributors, mail order houses, and other apparel manufacturers. Products are derived from a combination of internally produced products, contractors and third-party sources. REVENUE RECOGNITION The Company records revenues when products are shipped to customers. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Russell Corporation and its subsidiaries after the elimination of intercompany accounts and transactions. USE OF ESTIMATES The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. INVENTORIES Inventories of finished goods, work-in-process and raw materials are carried at the lower of cost or market, with cost for a substantial portion of inventories determined under the Last-In, First-Out (LIFO) method. Certain inventories are carried under the First-In, First-Out (FIFO) method, or the average cost method, and were valued at approximately $69,628,000 in 2000 and $67,450,000 in 1999. Inventories are summarized as follows:
(In thousands) 2000 1999 - ---------------------------------------------------------- Finished goods $ 293,587 $ 279,212 Work-in-process 69,568 68,297 Raw materials and supplies 41,718 45,288 - ---------------------------------------------------------- 404,873 392,797 LIFO and lower-of-cost or market adjustments, net 1,573 (4,956) - ---------------------------------------------------------- $ 406,446 $ 387,841 ==========================================================
Replacement cost of inventories carried on LIFO exceeded the net LIFO carrying value by $8,530,000 at December 30, 2000. PROPERTY, PLANT AND EQUIPMENT The provision for depreciation of property, plant and equipment (recorded at cost), including assets capitalized under capital lease agreements, has been computed generally on the straight-line method at rates based upon their estimated useful lives. Initial estimated useful lives range from 25 to 37 years for buildings and from 3 to 12 years for machinery and equipment. When events and circumstances indicate that the useful lives or salvage values may have changed, the Company adjusts the related useful life and records depreciation over the shortened useful life after giving consideration to the revised salvage values. Revisions to the remaining estimated useful lives and salvage values of plants scheduled for closing resulted in an increase in depreciation expense of $995,000 in 2000 and $7,149,000 in 1999. (See Note 10.) OTHER ASSETS Included in other assets is goodwill of approximately $14,017,000 and $11,672,000, which is net of accumulated amortization of $2,850,000 and $7,923,000, at December 30, 2000, and January 1, 2000, respectively. Goodwill is being amortized over 15 years on a straight-line basis. The carrying value of goodwill is reviewed if the facts and circumstances suggest that it may be impaired. If this review indicates that goodwill will not be recoverable based upon the undiscounted cash flows of the entity acquired over the remaining amortization period, the Company's carrying value of the goodwill is reduced by the excess of the carrying value over the fair value of the entity acquired. During 2000, the Company recorded impairment charges of $7,735,000 related to goodwill. (See Note 10.) Also included within other assets are approximately $15,400,000 of other intangible assets related to fiscal 2000 acquisitions. (See Note 12.) LONG-LIVED ASSETS The Company records impairment losses on long-lived assets under the provisions of Financial Accounting Standards Board (FASB) Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." When events and circumstances indicate that assets may be impaired, and the undiscounted cash flows estimated to be generated from those assets are less than the carrying value of such assets, the Company records an impairment loss equal to the 32 13 excess of the carrying value (including allocated goodwill, where appropriate) over the asset's fair value. Asset impairment charges related to the closing of certain facilities and retail store locations are described more fully in Note 10. INCOME TAXES The Company accounts for income taxes under the provisions of FASB Statement No. 109, "Accounting for Income Taxes." Under Statement No. 109, deferred tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured at the enacted tax rates that will be in effect when the taxes are expected to be paid. ADVERTISING, MARKETING AND PROMOTIONS EXPENSE The cost of advertising, marketing and promotions is expensed as incurred. The Company incurred $48,921,000, $45,522,000 and $37,236,000 in such costs during 2000, 1999 and 1998, respectively. STOCK-BASED COMPENSATION The Company issues awards under its incentive compensation plans as described in Note 7. These stock options and awards are accounted for in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS Financial instruments that subject the Company to credit risk are primarily trade accounts receivable. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number and diversity of customers comprising the Company's customer base. Management believes that any risk associated with trade accounts receivable is adequately provided for in the allowance for doubtful accounts. Wal-Mart represented 24.0% and 25.4% of the Company's net accounts receivable at December 30, 2000, and January 1, 2000, respectively. HEDGING ACTIVITIES The Company periodically enters into futures contracts as hedges for its purchases of cotton inventory. Realized gains and losses on these hedges are deferred and reflected in cost of sales as such inventory is sold. Deferred gains and losses on such contracts were insignificant at both December 30, 2000, and January 1, 2000. The Company utilizes forward exchange contracts in its international operations to hedge inventory purchases and sales denominated in foreign currencies, defined as currencies other than a foreign subsidiary's functional currency. Forward contracts that do not qualify as hedges are marked to market on a current basis with the resulting gains and losses reflected in the statements of operations. The Company uses an interest rate swap agreement to manage interest rate exposure on long-term debt. The differential to be received, or paid, under this agreement is accrued as interest rates change and recorded as an adjustment to interest expense. The related amount payable to, or receivable from, the counterparty to this agreement is included in other liabilities. The Company believes that the possibility of credit losses associated with third-party non-performance is remote. (See Note 4.) EARNINGS PER COMMON SHARE The Company reports earnings per common share in accordance with FASB Statement No. 128, "Earnings Per Share." Basic earnings per common share is computed by using the weighted-average number of common shares outstanding during the period without consideration of common stock equivalents. Diluted earnings per common share is computed by using the weighted-average number of common shares outstanding plus common stock equivalents (employee stock options) unless such stock options are anti-dilutive. FISCAL YEAR The Company's fiscal year ends on the Saturday nearest to January 1, which periodically results in a fiscal year of 53 weeks. Fiscal years 2000, 1999 and 1998 ended on December 30, 2000, January 1, 2000, and January 2, 1999, respectively, and each contained 52 weeks. NEW ACCOUNTING PRONOUNCEMENT FASB Statement No. 133, as amended, "Accounting for Derivative Instruments and Hedging Activities," will require the Company to recognize all derivatives on the balance sheet at fair value beginning in fiscal 2001. Derivatives that are not hedges must be adjusted to fair value through income. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. 33 14 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company plans to adopt the new Statement effective December 31, 2000, and will record the effect of the transition to these new accounting requirements in the first quarter of 2001. The Company uses derivatives, including futures contracts, forward contracts and swap contracts, to manage its exposure to movements in commodity prices, foreign exchange rates and interest rates, respectively. The Company's futures contracts are designated as cash flow hedges against anticipated purchases of commodities and the swap contract is a cash flow hedge against the related debt instrument. The majority of the foreign currency forward contracts, as they are currently used in operations, will not qualify for hedge accounting. In accordance with the provisions of Statement 133, the Company will record a transition adjustment upon adoption. The expected pre-tax impact of this transition adjustment is to decrease accumulated other comprehensive income by approximately $930,000 and to decrease net assets by approximately $930,000. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to fiscal 2000 presentation. These changes had no impact on previously reported results of operations or stockholders' equity. FOREIGN CURRENCIES Assets and liabilities recorded in foreign currencies on the books of foreign subsidiaries are translated at the exchange rate in effect on the balance sheet date. Translation adjustments resulting from this process are charged or credited to accumulated other comprehensive income or loss. Revenues, costs and expenses are translated at average rates of exchange prevailing during the year. Transaction gains or losses result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated. Transaction gains and losses are included in other expenses for the period in which the exchange rate changes. NOTE 2 LONG-TERM DEBT Long-term debt includes the following:
(In thousands) 2000 1999 - --------------------------------------------------------------------- Revolving credit facility due October 15, 2004 $ 127,003 $ 76,236 Notes payable to financial institutions: 6.72% notes due annually through 2002 21,429 32,143 6.65% notes due annually 2001 through 2007 125,000 125,000 6.78% notes due annually 2003 through 2008 100,000 100,000 Variable rate (6.44% at December 30, 2000) note due semi-annually through 2005 48,250 58,950 Capital lease obligations (variable rate of 5.10% at December 30, 2000) due 2017 1,800 6,950 - --------------------------------------------------------------------- 423,482 399,279 Less current maturities (39,271) (21,414) - --------------------------------------------------------------------- $ 384,211 $ 377,865 =====================================================================
On October 15, 1999, the Company entered into a five-year $250 million unsecured revolving credit facility with a group of six banks. The credit facility assures the Company availability of funds at market-based rates, provided the Company continues to meet the various covenants set forth in the credit agreement. The credit facility consists of a swing line of credit bearing interest at the banks' current market rates and revolving loans, which bear interest at LIBOR plus a margin ranging from .45% to .90% based on the Company's leverage ratio, as defined in the credit agreement, at the time of the borrowing. At December 30, 2000, the Company was able to borrow at LIBOR plus .55%. The credit facility also calls for a facility fee payable quarterly, in arrears, at a rate of .15% to .30% on the total available facility of $250 million. The facility fee at December 30, 2000 was .20%. As of December 30, 2000, the Company had $10,800,000 outstanding under the swing line of credit at a rate of 7.78% and $116,203,000 outstanding in revolving loans at a weighted average rate 34 15 of 6.94%. At December 30, 2000, the total balance outstanding under this credit facility was $127,003,000, and $122,997,000 was available for borrowing. The weighted-average interest rates of borrowings under the credit facility during fiscal 2000 and 1999 were 6.81% and 6.17%, respectively. The weighted-average interest rate of borrowings outstanding under the credit facility at December 30, 2000 was 7.01%, (6.32% at January 1, 2000). The Company's credit facility contains restrictive covenants that require the maintenance of minimum consolidated tangible net worth; total debt to earnings before income tax, interest, depreciation and amortization (EBITDA) ratio; consolidated earnings before income tax and interest (EBIT) to consolidated interest ratio; and places limits on dividends and other borrowings. The notes payable to financial institutions are unsecured and contain restrictions on the payment of dividends; incurrence of indebtedness; liens or leases; acquisition of investments; retirement of capital stock; and the maintenance of working capital. At December 30, 2000, $38,797,000 of retained earnings was unrestricted for payment of dividends. The capital lease obligations relate to land, buildings and machinery and equipment financed primarily by industrial revenue bonds. The carrying value of property capitalized under the capital lease obligations amounted to $1,260,000 and $4,051,000 at December 30, 2000 and January 1, 2000, respectively. Aggregate maturities of long-term debt at December 30, 2000, are as follows for fiscal years:
(In thousands) - ----------------------------- 2001 $ 39,271 2002 39,271 2003 45,224 2004 172,227 2005 39,974 Thereafter 87,515 - ----------------------------- $ 423,482 =============================
NOTE 3 SHORT-TERM DEBT Prior to October 15, 1999, the Company could borrow up to approximately $287 million under informal line of credit arrangements with six banks, on such terms as the Company and the banks mutually agreed. Generally, the arrangements could be canceled by either party at any time. The Company has reduced the number of informal line of credit agreements from six to two with a maximum availability of approximately $62 million as of December 30, 2000. There were no outstanding borrowings under the two informal line of credit agreements at December 30, 2000. The weighted-average interest rates of bank borrowings during 2000, 1999 and 1998 were 7.8%, 5.3% and 6.3%, respectively. NOTE 4 FINANCIAL INSTRUMENTS COTTON FUTURES The Company utilizes commodity futures contracts in connection with estimating product sales prices in advance of the selling seasons. These transactions effectively limit the Company's risk associated with future cotton price increases as well as the benefits of future price decreases. At December 30, 2000, the Company had outstanding futures contracts that represented approximately 2% of its anticipated fiscal year 2001 cotton requirements. INTEREST RATE SWAP AGREEMENTS The Company has utilized two interest rate swap agreements in the management of interest rate exposure on long-term debt. The Company entered into a fixed to floating rate swap agreement in 1992. Under this agreement, which would have originally expired on August 31, 2002, the Company received a fixed rate payment of 6.14% on the outstanding balance of the related debt and paid a floating rate based upon LIBOR, as determined at six month intervals. On October 10, 2000, the Company terminated this swap agreement and recorded a deferred loss of approximately $600,000, which will be amortized through August 31, 2002 (the remaining term of the hedged debt). In 1995, the Company entered into a floating to fixed rate swap agreement. Under this agreement, which expires June 30, 2005, the Company receives a variable rate based upon LIBOR plus .29%, as determined quarterly, and pays a fixed rate of 6.67% on the outstanding balance of the related debt (approximately $48 million and $59 million at December 30, 2000, and January 1, 2000, respectively). 35 16 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) These agreements, when combined, effectively lowered the weighted-average interest rate on the Company's long-term debt from 6.66% to 6.57%; 6.67% to 6.34%; and 6.74% to 6.47% in 2000, 1999 and 1998, respectively. The Company believes that future changes in interest rates will not have a material impact on the Company's consolidated financial position or results of operations. The fair value of the swap agreements, as indicated below, is the estimated termination value of the agreements at the balance sheet date and may not be indicative of the current termination values. CURRENCY CONTRACTS The Company uses forward exchange contracts to hedge inventory purchases and anticipated sales denominated in currencies other than a subsidiary's functional currency. These contracts lock in exchange rates on the anticipated transactions, thus limiting the uncertainty of product cost and sales values due to currency fluctuations. These contracts have been marked to market as of year-end with the resulting gains and losses included in the statements of operations because they do not qualify as hedges under current hedging rules. OTHER FINANCIAL INSTRUMENTS At December 30, 2000, and January 1, 2000, the carrying value of financial instruments such as cash, trade accounts receivable and payables approximated their fair values, based on the short-term maturities of these instruments. The fair value of the Company's long-term debt is estimated using discounted cash flow analyses, based upon the Company's current incremental borrowing rates for similar types of borrowing arrangements. The following table summarizes fair value information for financial instruments, including derivative instruments: 2000 1999 - --------------------------------------------------------------------------- LIABILITY (ASSETS) CARRYING FAIR Carrying Fair (In thousands) VALUE VALUE Value Value - --------------------------------------------------------------------------- Long-term debt $ 423,482 $ 422,543 $ 399,279 $ 405,281 Interest-rate swap agreement terminated on October 10, 2000 (521) -- (5,551) (5,188) Interest-rate swap agreement terminating June 30, 2005 -- 557 -- 574 Forward currency exchange contracts 953 953 -- -- Cotton futures contracts -- 376 -- 303 Investments (trading portfolio) (8,882) (8,882) (6,586) (6,586) NOTE 5 EMPLOYEE RETIREMENT BENEFITS The Company has a qualified, noncontributory, defined benefit pension plan (Retirement Plan), covering substantially all of its United States employees, and a savings plan that is qualified under Section 401(k) of the Internal Revenue Code (Savings Plan). Benefits for the Retirement Plan are based upon years of service and the employee's highest consecutive five years of compensation during the last ten years of employment. The Company's funding policy for the Retirement Plan is to contribute annually the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. Net pension cost of the Retirement Plan included the following components:
(In thousands) 2000 1999 - ----------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 132,249 $ 138,968 Service cost 4,120 6,419 Interest cost 10,331 9,195 Actuarial loss (gain) 6,310 (12,625) Benefits paid (9,803) (7,105) Curtailment benefit (778) (2,603) - ----------------------------------------------------------------- Benefit obligation at end of year 142,429 132,249 ================================================================= CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 133,801 125,721 Actual return on plan assets (8,883) 14,113 Company contributions 7,444 1,072 Benefits paid (9,803) (7,105) - ----------------------------------------------------------------- Fair value of plan assets at end of year 122,559 133,801 ================================================================= Funded status of the plan (underfunded) overfunded (19,870) 1,552 Unrecognized prior service cost 1,400 2,364 Unrecognized net actuarial loss (gain) 4,720 (22,072) Unrecognized transition asset (2,343) (3,021) - ----------------------------------------------------------------- Accrued benefit cost $ (16,093) $ (21,177) =================================================================
WEIGHTED-AVERAGE ASSUMPTIONS as of December 31 2000 1999 - ----------------------------------------------------------------- Discount rate 7.50% 7.50% Expected return on plan assets 9.50% 9.00% Rate of compensation increase 4.00% 4.00%
36 17
(In thousands) 2000 1999 1998 - ----------------------------------------------------------------------- COMPONENTS OF NET PERIODIC BENEFIT COST Service cost $ 4,120 $ 6,419 $ 5,807 Interest cost 10,331 9,195 8,142 Expected return on plan assets (11,816) (10,446) (9,851) Net amortization and deferral (462) (315) (429) Effect of curtailment 187 (1,935) -- - ----------------------------------------------------------------------- Net pension cost $ 2,360 $ 2,918 $ 3,669 =======================================================================
Curtailments (principally related to reductions in employment associated with the move of apparel assembly offshore) decreased net pension costs in 1999 and contributed to a slight increase in 2000. Plan assets at December 30, 2000, include 600,960 shares of the Company's common stock having a market value of $9,277,620. Dividends paid to the plan by the Company were $337,000 for 2000 and 1999, respectively. The Company's Savings Plan allows substantially all United States employees to defer portions of their annual compensation and to participate in Company matching and discretionary contributions. Compensation expense associated with this plan was $1,001,000, $1,213,000 and $1,426,000 in 2000, 1999 and 1998, respectively. NOTE 6 INCOME TAXES Foreign operations contributed approximately $(33,994,000), $5,367,000 and $(7,060,000) to the Company's income (loss) before income taxes in 2000, 1999 and 1998, respectively. Significant components of the provision for income taxes are as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------ CURRENTLY Currently Currently (In thousands) PAYABLE DEFERRED Payable Deferred Payable Deferred - ------------------------------------------------------------------------------------------ Federal $ (6,695) $ 16,627 $ 8,731 $ 252 $ 16,142 $ (15,105) State 1,554 4,028 791 (2,514) 3,391 (2,210) Foreign 4,114 (1,066) 396 4,286 149 (2,253) - ------------------------------------------------------------------------------------------ Totals $ (1,027) $ 19,589 $ 9,918 $ 2,024 $ 19,682 $ (19,568) ==========================================================================================
The reconciliation of income tax computed by applying the statutory federal income tax rate of 35% to income before income taxes to total income tax expense is as follows:
(In thousands) 2000 1999 1998 - -------------------------------------------------------------------------------- Taxes (benefit) at statutory rate on income before income taxes $ 11,577 $ 7,115 $ (3,593) State income taxes, net of federal income tax benefit 1,028 (1,120) 1,174 Goodwill 2,972 328 1,622 Charitable contribution of appreciated property (2,188) -- -- Tax effects of foreign operations - net 2,119 -- -- Change in valuation allowance on foreign/state NOLs 4,000 3,948 -- Other - net (946) 1,671 911 - -------------------------------------------------------------------------------- $ 18,562 $ 11,942 $ 114 ================================================================================
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 30, 2000, and January 1, 2000, are as follows:
(In thousands) 2000 1999 - ----------------------------------------------------------------- Deferred tax liabilities: Property, plant and equipment $ 57,127 $ 50,756 Inventories 17,351 3,846 Accounts receivable and other 526 1,200 - ----------------------------------------------------------------- Total deferred tax liabilities 75,004 55,802 - ----------------------------------------------------------------- Deferred tax assets: Pension and postemployment obligations 8,768 11,048 Inventories -- 3,996 Foreign and state net operating loss carryforwards 12,218 9,180 Employee benefits 5,305 4,372 Capital loss and credit carryforwards 1,455 -- Other 8,590 4,127 - ----------------------------------------------------------------- Total deferred tax assets 36,336 32,723 Valuation allowance for deferred tax assets (8,181) (4,181) - ----------------------------------------------------------------- Net deferred tax assets 28,155 28,542 - ----------------------------------------------------------------- Net deferred tax liabilities $ 46,849 $ 27,260 =================================================================
Net operating loss carryforwards (NOLs) are available to offset future earnings within the time periods specified by law. At December 30, 2000, the Company had U.S. state NOLs of approximately $211,000,000 expiring in 2013-2015. International NOLs total approximately $17,000,000. The International NOLs pertain primarily to the Company's United Kingdom and Australian operations. NOLs can be carried forward indefinitely in the United Kingdom and Australia. 37 18 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In the fourth quarter of fiscal year 1999, the Company announced a restructuring of its European operations (see Note 10). As a result of the restructuring, the Company increased its valuation allowance related to NOL carry-forwards in the United Kingdom to $4,181,000 because, under the current global tax structure, these NOLs will most likely generate no global tax savings. During 2000, the Company continued to incur tax deductible restructuring charges which, when combined with the implementation of certain tax strategies, resulted in additional U.S. state NOL carryforwards. The Company recorded a $4,000,000 valuation allowance in 2000 related to state NOL carryforwards. The Company does not provide for federal income taxes on the undistributed earnings of its international subsidiaries because earnings are reinvested and, in the opinion of management, will continue to be reinvested indefinitely. At December 30, 2000, the Company had not provided federal income taxes on earnings of individual international subsidiaries of approximately $15,000,000. Should these earnings be distributed in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes and withholding taxes in the various international jurisdictions. Determination of the related amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with the hypothetical calculation. Withholding of approximately $750,000 would be payable if all previously unremitted earnings as of December 30, 2000, were remitted to the U.S. Company. NOTE 7 STOCK RIGHTS PLAN AND STOCK OPTION PLANS On September 15, 1999, the Board of Directors declared a dividend, which was issued on October 25, 1999, of one Right for each share of common stock outstanding, which, when exercisable, entitles the holder to purchase a unit of one one-hundredth share of Series A Junior Participating Preferred Stock, par value $.01, at a purchase price of $85. Upon certain events relating to the acquisition of, or right to acquire, beneficial ownership of 15% or more of the Company's outstanding common stock by a third party, or a change in control of the Company, the Rights entitle the holder to acquire, after the Rights are no longer redeemable by the Company, shares of common stock for each Right held at a significant discount to market. The Rights will expire on October 25, 2009, unless redeemed earlier by the Company at $.01 per Right under certain circumstances. The Rights were issued to replace rights previously issued to purchase Series A Junior Participating Preferred Stock, whose rights expired on October 25, 1999. The Company has adopted the Executive Incentive Plan (formerly known as the 1993 Executive Long-Term Incentive Plan). Persons eligible to participate in the Executive Incentive Plan include all officers and key employees of the Company and its subsidiaries. The Executive Incentive Plan permits the issuance of awards in several forms including restricted stock, incentive stock options, nonqualified stock options, reload stock options, bonus shares, defined shares, stock appreciation rights and performance shares and performance unit awards. The Company has also adopted the Russell Corporation 2000 Stock Option Plan (2000 Option Plan). All of the Company's employees, including officers, are eligible to participate in the 2000 Option Plan, and awards may also be made to persons performing consulting services for the Company or any majority-owned subsidiary. The 2000 Option Plan permits the issuance of awards in a variety of forms, including incentive stock options, nonqualified stock options, reload stock options, restricted shares, bonus shares, deferred shares, freestanding stock appreciation rights, tandem stock appreciation rights, performance units and performance shares. Under the Executive Incentive Plan, the 2000 Option Plan and predecessor stock option plans, a total of 7,253,210 shares of common stock were reserved for issuance at December 30, 2000. The options are granted at a price equal to the stock's fair market value at the date of grant. All options, except the ones granted in 1999, are exercisable two years after the date of grant and expire 10 years after the date of grant. The stock options that were granted during 1999 are exercisable equally over periods of either two or four years and expire 10 years after the date of grant. The following table summarizes the status of options under the Executive Incentive Plan, 2000 Option Plan and predecessor plans:
2000 1999 1998 - -------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price - -------------------------------------------------------------------------------------- Outstanding at beginning of year 2,979,266 $ 25.06 2,394,416 $ 27.02 1,414,950 $ 28.21 Granted at fair value 2,644,605 $ 15.25 935,650 $ 19.82 999,766 $ 25.34 Exercised -- -- -- -- 20,300 $ 27.74 Expired -- -- 4,500 $ 22.06 -- -- Forfeited 521,105 $ 19.87 346,300 $ 26.24 -- -- - -------------------------------------------------------------------------------------- Outstanding at end of year 5,102,766 $ 20.50 2,979,266 $ 25.06 2,394,416 $ 27.02 ====================================================================================== Exercisable at end of year 2,134,704 $ 27.33 1,142,750 $ 28.20 1,133,350 $ 27.60 ======================================================================================
38 19 At December 30, 2000, options outstanding representing 315,613 shares were exercisable at prices which ranged from $15.34 to $23.00 per share, having a weighted-average contractual life of 8.02 years, and options representing 1,819,091 shares were exercisable at prices which ranged from $23.01 to $31.34 per share, having a weighted-average contractual life of 4.97 years. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (Statement No. 123), provides an alternative to APB Opinion No. 25 in accounting for stock-based compensation issued to employees. The statement allows for a fair value based method of accounting for employee stock options and similar equity instruments. However, for companies that continue to follow the accounting provisions of APB Opinion No. 25, Statement No. 123 requires disclosure of the pro forma effect on net income and earnings per share as if the accounting provisions of the fair value method of Statement No. 123 had been employed. For the purposes of this disclosure, the fair value of the Company's employee stock options was estimated at the date of grant using an option pricing model. The fair values derived for options granted during fiscal years 2000, 1999 and 1998 and weighted-average assumptions used to determine these values were as follows:
2000 1999 1998 - ------------------------------------------------------------------------ Risk-free interest rate 6.1% 5.5% 5.2% Dividend yield 3.6% 3.0% 2.2% Volatility factor .323 .229 .198 Weighted-average expected life of options 10 YEARS 10 years 10 years Estimated fair value per option $ 4.11 $ 6.01 $ 7.40
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:
(In thousands, except per share data) 2000 1999 1998 - ---------------------------------------------------------------------------- Pro forma net income (loss) $ 11,529 $ 4,430 $ (12,798) Pro forma income (loss) per share: Basic $ .36 $ .13 $ (.35) Diluted $ .35 $ .13 $ (.35)
On July 26, 2000, the Board of Directors adopted the Russell Corporation 2000 Non-Employee Directors' Compensation Plan (the "Directors' Plan") as a replacement for the Russell Corporation 1997 Non-Employee Directors' Stock Grant, Stock Option and Deferred Compensation Plan (the "Prior Plan"). Under the Directors' Plan, each nonemployee director of the Company (an "Eligible Director") receives annually (i) a fee of $35,000, to be paid in quarterly installments of $8,750, and (ii) an option to purchase a number of shares of common stock equal to $25,000 multiplied by 4 (or the number of full and partial quarters remaining until the next annual meeting), and divided by the fair market value of the shares of common stock as of the grant date. Eligible Directors may also elect to receive all or a portion of their annual fee in shares, stock options or deferred shares. Under the Directors' Plan and the Prior Plan 2,464 and 1,936 shares of stock grants were issued in 2000 and 1999 and options to purchase an aggregate of 35,096 shares of common stock at a price of $16.28 and 3,733 shares at a price of $20.09 were granted in 2000 and 4,768 shares at a price of $20.81 were granted in 1999. Options to purchase an aggregate of 35,096 and 3,733 shares at prices of $16.28 and $20.09 for 2000 and 4,768 at a price of $20.81 are presently outstanding under the Directors' Plan and the Prior Plan. NOTE 8 SUPPLEMENTAL CASH FLOW INFORMATION Net cash provided by operating activities in the consolidated statements of cash flows reflects cash payments for interest and income taxes as follows:
(In thousands) 2000 1999 1998 - --------------------------------------------------------------------- Interest $ 32,135 $ 28,849 $ 28,929 Income taxes - net of refunds 12,677 11,081 9,177
NOTE 9 COMMITMENTS AND CONTINGENCIES At December 30, 2000, the Company had commitments for the acquisition of property and equipment totaling $6,796,000 and commitments for the acquisition of cotton totaling $30,155,000. The Company was also committed under noncancelable operating leases with initial or remaining terms of one year or more to minimum rental payments by fiscal years as follows:
(In thousands) Non-related Party Related Party Total - ------------------------------------------------------------------ 2001 $ 4,260 $ 2,391 $ 6,651 2002 2,993 2,426 5,419 2003 2,186 2,459 4,645 2004 1,816 2,493 4,309 2005 1,652 2,527 4,179 Thereafter 4,873 12,482 17,355 - ------------------------------------------------------------------ $ 17,780 $ 24,778 $ 42,558 ==================================================================
39 20 2000 ANNUAL REPORT - RUSSELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company had $14,450,000 and $11,230,000 outstanding under letters of credit for the purchase of inventories at December 30, 2000, and January 1, 2000, respectively. Lease and rental expense for fiscal years 2000, 1999 and 1998 was $11,312,000, $8,962,000 and $9,943,000, respectively. The Company has been a co-defendant in Sullivan, et al. v. Russell Corporation, et al., in Jefferson County, Alabama. Five families were plaintiffs in this case; other defendants were Avondale Mills, Inc., and Alabama Power Company. The claims asserted at the trial of this case were for trespass and nuisance relating to property owned by the plaintiffs on Lake Martin in a subdivision of Alexander City, Alabama. The damages claimed by the plaintiffs were for decreased value of their homes, mental anguish and punitive damages. In November 1998, the jury returned a verdict against all three defendants in the amount of $155,200 compensatory damages for alleged property devaluation, $0 damages for mental anguish and punitive damages of $52,398,000. The defendants appealed this verdict to the Alabama Supreme Court, which on August 4, 2000, reversed the jury verdict and rendered judgment in favor of the Company and the other defendants on all claims. The plaintiffs filed an application for rehearing before the Alabama Supreme Court, which denied that application and reaffirmed its ruling in favor of the defendants in an opinion issued on January 12, 2001. The Alabama Supreme Court issued a Certificate of Judgment affecting such actions on January 30, 2001. On February 23, 1999, a similar lawsuit was filed in Jefferson County, Alabama, by two former residents of the same residential subdivision, which suit was dismissed with prejudice without liability on the Company's part on February 1, 2001. On January 13, 2000, another lawsuit was filed in Jefferson County, Alabama, by 15 families owning property adjacent to Lake Martin, seeking unspecified damages for alleged nuisance and trespass. The Company plans to vigorously defend this suit. By letter dated January 13, 2000, the Company was notified by the United States Department of Justice (DOJ) that the DOJ intended to institute legal proceedings against the Company and certain other parties alleging violations by those parties of the Clean Water Act in connection with the treatment and discharge of waste at a water treatment facility operated by the City of Alexander City, Alabama. Preliminary discussions are being held with the DOJ with regard to the proposed suit by the DOJ. The Company believes it is in compliance with the Clean Water Act and will vigorously oppose the imposition of any monetary penalties or injunctive relief in any lawsuit that may be filed. NOTE 10 RESTRUCTURING, ASSET IMPAIRMENT AND OTHER UNUSUAL CHARGES (SPECIAL CHARGES) On July 22, 1998, the Company announced the Board of Directors had approved a three-year restructuring and reorganization plan to improve the Company's global competitiveness. The charges reflected in the statements of operations are as follows:
(In thousands) 2000 1999 1998 - ----------------------------------------------------------------------------- RESTRUCTURING CHARGES: Employee termination charges $ 11,834 $ 17,542 $ 8,088 Exit costs related to facilities 4,596 11,743 4,480 Termination of certain licenses and contracts 3,313 -- 7,257 - ----------------------------------------------------------------------------- $ 19,743 $ 29,285 $ 19,825 - ----------------------------------------------------------------------------- ASSET IMPAIRMENT CHARGES: Impairment of facilities used in operations $ 1,668 $ 13,389 $ 1,553 Impairment of facilities and equipment held for disposal 23,602 7,921 3,628 Impairment of intangible assets 7,735 -- 22,240 $ 33,005 $ 21,310 $ 27,421 OTHER UNUSUAL CHARGES: Inventory losses including shipping and warehousing costs $ 3,648 $ 4,988 $ 16,109 Losses (recoveries) on receivables (272) -- 11,120 Accelerated depreciation on facilities and equipment to be taken out of service 995 7,149 -- Expenses associated with the establishment of dual headquarters 3,121 6,088 -- Charges related to retirement and subsequent replacement of CEO(1) -- -- 8,000 Other 4,771 1,901 532 - ----------------------------------------------------------------------------- $ 12,263 $ 20,126 $ 35,761 - ----------------------------------------------------------------------------- TOTALS BEFORE TAX $ 65,011 $ 70,721 $ 83,007 ============================================================================= TOTALS AFTER TAX $ 47,570 $ 46,632 $ 52,957 =============================================================================
(1) These charges were not an element of the restructuring and reorganization plan previously described. 40 21 These charges have been classified in the statements of operations as follows:
(In thousands) 2000 1999 1998 - ------------------------------------------------------------------------- Cost of goods sold $ 18,187 $ 32,039 $ 22,227 Selling, general and administrative expenses 3,677 6,088 21,318 Other - net 43,147 32,594 39,462 - ------------------------------------------------------------------------- $ 65,011 $ 70,721 $ 83,007 =========================================================================
Charges recorded by segments were as follows:
2000 - ---------------------------------------------------------------------------- ASSET OTHER RESTRUCTURING IMPAIRMENT UNUSUAL (In thousands) CHARGES CHARGES CHARGES - ---------------------------------------------------------------------------- Activewear $ 15,380 $ 18,265 $ 2,627 International 4,363 14,740 6,515 All Other -- -- 3,121 - ---------------------------------------------------------------------------- $ 19,743 $ 33,005 $ 12,263 ============================================================================
1999 - ---------------------------------------------------------------------------- Asset Other Restructuring Impairment Unusual (In thousands) Charges Charges Charges - ---------------------------------------------------------------------------- Activewear $ 23,544 $ 16,612 $ 8,174 International 2,879 2,751 5,864 All Other 2,862 1,947 6,088 - ---------------------------------------------------------------------------- $ 29,285 $ 21,310 $ 20,126 ============================================================================
1998 - ---------------------------------------------------------------------------- Asset Other Restructuring Impairment Unusual (In thousands) Charges Charges Charges - ---------------------------------------------------------------------------- Activewear $ 19,311 $ 25,755 $ 24,860 International 514 622 2,901 All Other -- 1,044 8,000 - ---------------------------------------------------------------------------- $ 19,825 $ 27,421 $ 35,761 ============================================================================
A summary of the activity related to the restructuring and asset impairment charges is as follows:
LIABILITY LIABILITY AT 2000 2000 AT JAN. 1, EXPENSE AMOUNT DEC. 30, (In thousands) 2000 INCURRED PAID 2000 - -------------------------------------------------------------------- CASH RELATED: Exit costs related to facilities $ 534 $ 4,596 $ 5,130 $ -- Employee termination charges 4,770 11,834 13,284 3,320 Other 1,223 10,377 9,194 2,406 - -------------------------------------------------------------------- $ 6,527 $ 26,807 $ 27,608 $ 5,726 ====================================================================
Liability Liability At 1999 1999 At Jan. 2, Expense Amount Jan. 1, (In thousands) 1999 Incurred Paid 2000 - -------------------------------------------------------------------- CASH RELATED: Exit costs related to facilities $ 534 $ 11,743 $ 11,743 $ 534 Employee termination charges 4,567 17,542 17,339 4,770 Other 1,223 7,847 7,847 1,223 - -------------------------------------------------------------------- $ 6,324 $ 37,132 $ 36,929 $ 6,527 ====================================================================
Liability 1998 1998 At Expense Amount Jan. 2, (In thousands) Incurred Paid 1999 - ---------------------------------------------------------------------- CASH RELATED: Exit costs related to facilities $ 4,480 $ 3,946 $ 534 Employee termination charges 8,088 3,521 4,567 Other 14,697 13,474 1,223 - ----------------------------------------------------------------------- $ 27,265 $ 20,941 $ 6,324 =======================================================================
(In thousands) 2000 1999 1998 - ----------------------------------------------------------------------- NON-CASH RELATED: Impairment of facilities $ 26,098 $ 28,459 $ 5,180 Impairment of intangible assets 7,735 -- 22,240 Other 4,371 5,130 28,322 - ----------------------------------------------------------------------- $ 38,204 $ 33,589 $ 55,742 =======================================================================
The restructuring charges in 2000 relate primarily to plant closings and the restructuring of the Russell Athletic and Woodbrook brands in Europe. Revenues and operating losses related to the Russell Athletic and Woodbrook brands in Europe were approximately $14,000,000 and $(4,500,000), respectively. The restructuring charges in 1999 relate primarily to plant closings and the reconfiguration of distribution facilities. There were no significant revenue losses related to the 1999 restructuring charges. Revenues and operating losses for 1998 related to discontinued businesses with separately identifiable operations were approximately $46,366,000 and $(21,032,000), respectively. 41 22 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) RESTRUCTURING CHARGES In 2000, the Company continued to move sewing operations to a combination of Company-owned and contractor locations in Central America and Mexico. The Company closed six domestic apparel operations, one textile research facility and one yarn-manufacturing facility in 2000. During the year, approximately 1,700 employees were terminated. The Company expensed approximately $11.8 million in fiscal year 2000 for employee severance benefits, including approximately $1.3 million for workers' compensation claims from prior year employee terminations where the estimated costs were lower than actual costs. The Company also expensed $3.8 million associated with the ongoing maintenance cost of facilities that are being held for sale. In 2000, the Company announced the restructuring of the Russell Athletic line of business in Europe, the Cross Creek brand in Australia and the Woodbrook brand in Europe. In connection with the restructuring of these lines of business, the Company recorded $3.3 million related to the cancellation of reseller contracts and $.8 million related to leased facilities in Europe. In 1999, the Company closed 14 domestic apparel operations and announced the closure of two manufacturing plants in Scotland. The Company also closed two yarn-manufacturing facilities and one cloth fabrication facility. Reconfiguration of distribution facilities continued throughout the year and was completed during fiscal 2000. In 1999, approximately 2,200 employees were terminated. The Company expensed approximately $17.5 million in fiscal year 1999 related to severance charges, of which approximately $3.0 million related to health insurance costs from prior year employee terminations where the estimated costs were lower than actual costs. Also during 1999, the Company incurred approximately $4.1 million associated with the removal of equipment from a distribution facility and approximately $7.7 million associated with ongoing maintenance costs of facilities that were being held for sale during the year. On October 15, 1999, the Company announced that it would be closing its Scottish manufacturing plants in Bo'ness and Livingston. These facilities were closed by the end of fiscal 2000. Due to the ongoing impact of increased competition within the European marketplace and the fact that many of the Company's competitors source their product requirements from developing countries, the economics of maintaining a manufacturing base in Scotland were no longer viable. The Company plans to source 100% of its European product requirements from contractors or joint ventures, augmented by products exported from the United States. During 1998, the Company began moving a substantial part of its sewing operations to a combination of owned and contractor locations in Central America and Mexico as part of its restructuring and reorganization plan to improve global competitiveness by reducing costs. The Company closed four domestic sewing facilities and reconfigured two others in 1998. In order to further control costs, the plan realigned and consolidated certain manufacturing and distribution functions and facilities to accommodate a more orderly and efficient product flow of goods throughout the manufacturing and distribution processes. The 1998 restructuring and reorganization plan called for exiting 34 Company-operated retail or outlet stores in 13 states. In total, approximately 2,000 employees were severed in 1998. The facilities closed included manufacturing plants, distribution centers and offices and retail stores. Also, as part of the plan, the Company discontinued certain licensed products in 1998 and recorded charges for the termination of the related agreements. ASSET IMPAIRMENT CHARGES The Company recorded asset impairment charges of $1.7 million and $13.4 million in 2000 and 1999, respectively, related to the reconfiguration of certain domestic distribution facilities. The reconfiguration is now substantially complete. Assets held for disposal at December 30, 2000, are carried at $40.7 million and are expected to be disposed of during fiscal year 2001. Charges for impairment of assets held for disposal of $23.6 million, $7.9 million and $3.6 million were recorded in 2000, 1999 and 1998, respectively, when the facilities and equipment (primarily yarn-manufacturing and apparel assembly) were removed from operations. These assets have been written down to their fair values (less cost to sell) and depreciation has been suspended since the date they were first classified as assets held for disposal. Fair values used in recording asset impairment charges were determined by reference to third-party 42 23 appraisals or internal analyses based upon recent sales prices of comparable facilities. Net gains and losses recorded during 2000 associated with sales of facilities and equipment that were being held for disposal at the beginning of fiscal year 2000 resulted in a net gain of approximately $1.3 million. The 2000 asset impairment charges included $7.1 million to write-down building and apparel assembly assets located in Europe related to the Russell Athletic and Woodbrook brands' operations in Europe. In 2000, the Company also recorded an impairment charge of $7.7 million to write off the remaining carrying value of goodwill associated with the European business. This charge was necessary as a result of the Company's revised undiscounted cash flow forecast for the European business performed as a result of the Company's decision to restructure the Russell Athletic and Woodbrook brands in Europe. In 1998, the Company recorded asset impairment charges of approximately $1.6 million related to shopping center real estate held for disposal. The carrying value of these assets exceeded the estimated fair values of the assets. Fair values were determined by utilizing a combination of discounted cash flow projections, internally estimated disposal proceeds or third-party appraisals. Asset impairment charges of $22.2 million also were recorded in 1998 for intangible assets related to discontinued trademarks and unamortized goodwill. All facilities and products acquired in these business combinations were either sold, closed or are held for sale at December 30, 2000. For goodwill associated with property and equipment, the projected future cash flow from the sale of the facilities indicated that the goodwill had no value. For other intangibles, such as trademarks, the projected cash flows were substantially reduced as a result of the restructuring and reorganization plan. OTHER UNUSUAL CHARGES As a result of restructuring certain product lines in 2000, the Company recorded charges of $3.6 million to reduce the carrying value of discontinued inventories to their estimated net realizable values. The Company also recorded $4.8 million of miscellaneous other unusual charges, of which $3.0 million relates to the cost of restructuring the Russell Athletic line of business in Europe. In addition, the Company incurred an additional $3.1 million of cost associated with the move to Atlanta for the establishment of its dual headquarters. The Company recorded special charges of $5.0 million during fiscal year 1999 to reduce the carrying value of discontinued inventories (primarily in Europe) to their estimated net realizable values. As plans were finalized in 1999 to close plants, the Company recorded an additional provision for depreciation of $7.1 million with respect to planned facility closures that had not been announced. In addition, the Company incurred $6.1 million of costs associated with the move to Atlanta for the establishment of its dual headquarters. As a result of exiting certain products, brands and trademarks, the Company recorded special charges in 1998 to reduce the carrying value of discontinued inventory to its estimated net realizable value. The inventory consisted primarily of headwear products under a discontinued brand, items held at retail locations and inventory produced to satisfy the terms of certain licensing agreements, which the Company terminated. During fiscal year 1998, management implemented more stringent credit and collection policies that significantly restrict shipments to slow paying customers and intensify and accelerate collection efforts through agencies and other means. In connection with implementation of the new policies, the Company recorded a charge of approximately $11.1 million to write off affected customer accounts receivable. The Company also recorded charges of approximately $8.0 million during fiscal year 1998 related to the retirement and subsequent replacement of the Chairman, President and Chief Executive Officer of the Company, which was not an element of the 1998 restructuring and reorganization plan. These charges are included in selling, general and administrative expenses. 43 24 2000 ANNUAL REPORT - RUSSELL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 11 SEGMENT INFORMATION DESCRIPTION OF THE TYPES OF PRODUCTS FROM WHICH EACH REPORTABLE SEGMENT DERIVES ITS REVENUES Russell Corporation has two reportable segments: activewear and international operations. The Company's activewear segment consists of three strategic business units that sell the following products to sporting goods dealers, department and specialty stores, mass merchants, wholesale clubs, college bookstores, screen printers, distributors, golf pro shops and mail order catalogs: T-shirts, fleece products (such as sweatshirts and pants), athletic uniforms and knit shirts. The international strategic business unit manufactures and distributes activewear products to international locations in approximately 50 countries. Other segments that do not meet the quantitative thresholds for determining reportable segments sell fabrics to other apparel manufacturers, and manufacture and sell socks to mass merchants. These are included in the "All Other" data presented herein. MEASUREMENT OF SEGMENT PROFIT OR LOSS AND SEGMENT ASSETS The Company evaluates performance and allocates resources based on profit or loss from operations before interest, income taxes, restructuring, reorganization and other unusual charges (Segment EBIT). The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies except that inventories are valued at standard cost at the segment level, where as a substantial portion of inventories are valued on a Last-In, First-Out (LIFO) basis in the consolidated financial statements. Intersegment transfers are recorded at the Company's cost; there is no intercompany profit or loss on intersegment transfers. During fiscal year 1998, the Company did not allocate assets to segments but did allocate depreciation for the purpose of determining segment EBIT. Accordingly, segment asset data is not available for fiscal year 1998. SEGMENT FINANCIAL INFORMATION FOR THE YEAR ENDED DECEMBER 30, 2000
(In thousands) Activewear International All Other Total - ------------------------------------------------------------------------------------ Net sales $ 967,835 $ 110,393 $ 139,350 $ 1,217,578 Depreciation and amortization expense 48,343 2,268 4,034 54,645 Segment EBIT (loss) 136,278 (7,829) 21,962 150,411 Total assets 969,644 84,012 99,504 1,153,160 2000 purchases of long-lived assets 56,204 1,421 1,832 59,457
SEGMENT FINANCIAL INFORMATION FOR THE YEAR ENDED JANUARY 1, 2000
(In thousands) Activewear International All Other Total - ------------------------------------------------------------------------------------ Net sales $ 878,072 $ 123,701 $ 140,461 $ 1,142,234 Depreciation and amortization expense 49,251 2,680 4,811 56,742 Segment EBIT 114,084 9,154 19,426 142,664 Total assets 947,401 114,013 91,717 1,153,131 1999 purchases of long-lived assets 49,368 1,616 2,392 53,376
SEGMENT FINANCIAL INFORMATION FOR THE YEAR ENDED JANUARY 2, 1999
(In thousands) Activewear International All Other Total - ------------------------------------------------------------------------------------ Net sales $ 908,826 $ 126,332 $ 144,960 $ 1,180,118 Depreciation and amortization expense 66,445 3,199 4,724 74,368 Segment EBIT (loss) 101,518 (4,603) 19,640 116,555
RECONCILIATION OF SEGMENT EBIT TO CONSOLIDATED PRE-TAX INCOME (LOSS)
(In thousands) 2000 1999 1998 - --------------------------------------------------------------------- Total segment EBIT $ 150,411 $ 142,664 $ 116,555 Restructuring, asset impairment and other unusual charges (65,011) (70,721) (83,007) Unallocated amounts: Corporate expenses (20,263) (23,182) (16,605) Inventory cost adjustments 341 (371) 616 Interest expense (32,401) (28,060) (27,824) Income (loss) before income taxes $ 33,077 $ 20,330 $ (10,265)
44 25 GEOGRAPHIC INFORMATION
(In thousands) 2000 1999 1998 - ------------------------------------------------------------------------- NET SALES: United States $ 1,107,185 $ 1,018,533 $ 1,053,786 Europe 85,751 101,496 104,341 Other foreign countries 24,642 22,205 21,991 - ------------------------------------------------------------------------- Consolidated total $ 1,217,578 $ 1,142,234 $ 1,180,118 ========================================================================= (In thousands) 2000 1999 - ------------------------------------------------------------------------- LONG-LIVED ASSETS: United States $ 447,177 $ 464,953 Europe 5,261 17,046 Other foreign countries 570 601 - ------------------------------------------------------------------------- Consolidated total $ 453,008 $ 482,600 =========================================================================
Revenues are attributed to countries based on the location of customers. MAJOR CUSTOMER Net sales to Wal-Mart represent approximately 17.9%, 19.4% and 19.0% of the Company's consolidated net sales for fiscal 2000, 1999 and 1998, respectively. NOTE 12 ACQUISITIONS On March 8, 2000, the Company announced the acquisition of apparel rights from Haas Outdoors, Inc., and the formation of Mossy Oak Apparel Company, a wholly owned subsidiary. The $20.6 million acquisition was accounted for using the purchase method of accounting. The excess of the purchase price over the net assets acquired, approximately $12.7 million, was recorded as an intangible (license agreement) asset. The consolidated statements of operations include the results of operations for Mossy Oak Apparel Company subsequent to March 8, 2000. On April 13, 2000, the Company announced the acquisition of the worldwide rights to the Discus and Discus Athletic brands for $2.8 million. This transaction was accounted for as the purchase of brand rights. On September 5, 2000, the Company announced the acquisition of A&C International, which designs, sources, markets and distributes a broad line of woven casual apparel. The transaction of approximately $13.5 million was accounted for using the purchase method. The excess of the purchase price over net assets acquired, approximately $11.1 million, was recorded as goodwill. The goodwill will be amortized using the straight-line method over 15 years. The consolidated statements of operations include the results of operations of the acquired business from the date of acquisition. NOTE 13 SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of unaudited quarterly results of operations (in thousands, except per share data):
QUARTER ENDED - ----------------------------------------------------------------------- YEAR ENDED DECEMBER 30, 2000 APRIL 2 JULY 2 OCT. 1 DEC. 30 - ----------------------------------------------------------------------- Net sales $ 251,982 $ 282,462 $ 356,909 $ 326,225 Gross profit 64,685 73,246 105,225 97,696 Net income 466 2,472 526 11,051 Net income per common share: Basic $ .01 $ .08 $ .02 $ .35 Diluted $ .01 $ .07 $ .02 $ .34 Special charges, described in Note 10, on an after-tax basis that are included in the above net income $ 5,608 $ 4,917 $ 25,250 $ 11,795 Quarter ended - ----------------------------------------------------------------------- Year ended January 1, 2000 April 4 July 4 Oct. 3 Jan. 1 - ----------------------------------------------------------------------- Net sales $ 233,177 $ 260,449 $ 344,915 $ 303,693 Gross profit 56,382 60,673 103,429 76,789 Net income (loss) (14,351) 1,443 19,937 1,359 Net income (loss) per common share: (basic and diluted) $ (.41) $ .04 $ .60 $ .04 Special charges, described in Note 10, on an after-tax basis that are included in the above net income (loss) $ 17,941 $ 4,570 $ 3,964 $ 20,157
45 26 2000 ANNUAL REPORT -- RUSSELL CORPORATION AND SUBSIDIARIES REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND SHAREHOLDERS RUSSELL CORPORATION We have audited the accompanying consolidated balance sheets of Russell Corporation and Subsidiaries as of December 30, 2000, and January 1, 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three fiscal years in the period ended December 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Russell Corporation and Subsidiaries at December 30, 2000, and January 1, 2000, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended December 30, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP February 2, 2001 Birmingham, Alabama 46 EX-21 10 g67759ex21.txt LIST OF SIGNIFICANT SUBSIDIARIES 1 EXHIBIT (21) LIST OF SIGNIFICANT SUBSIDIARIES Cross Creek Apparel, LLC (organized under the laws of North Carolina) DeSoto Mills, Inc. (incorporated in Alabama) Russell Europe Limited (organized under the laws of the United Kingdom) Mossy Oak Apparel Company (incorporated in Delaware) IV-15 EX-23 11 g67759ex23.txt CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS 1 Exhibit (23) Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Russell Corporation of our report dated February 2, 2001, included in the 2000 Annual Report to Shareholders of Russell Corporation. Our audits also included the financial statement schedule of Russell Corporation listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements of Russell Corporation listed below of our report dated February 2, 2001, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of Russell Corporation. Form S-8 Registration Statement No. 33-24898 Form S-3 Registration Statement No. 33-47906 Form S-3 Registration Statement No. 33-54361 Form S-8 Registration Statement No. 33-69679 Form S-8 Registration Statement No. 333-89765 Form S-8 Registration Statement No. 333-30236 Form S-8 Registration Statement No. 333-30238 Form S-8 Registration Statement No. 333-55338 Form S-8 Registration Statement No. 333-55340 /s/ Ernst & Young LLP Birmingham, Alabama March 27, 2001 IV-16 EX-99 12 g67759ex99.txt PROXY STATEMENT FOR APRIL 25, 2001 1 EXHIBIT 99 PROXY STATEMENT FOR APRIL 25, 2001 ANNUAL SHAREHOLDERS' MEETING 2 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 - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (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: 3 [RUSSELL LOGO} RUSSELL NOTICE OF ANNUAL MEETING OF SHAREHOLDERS RUSSELL CORPORATION To the Shareholders of Russell Corporation: Notice is hereby given that the Annual Meeting of the Shareholders of Russell Corporation will be held on Wednesday, April 25, 2001, at 11:00 a.m., Central Daylight Time, at the general offices of the Company in Alexander City, Alabama, for the following purposes: (1) To elect four (4) directors to the Board of Directors for three-year terms ending in 2004, and one (1) director to the Board of Directors for a one-year term ending in 2002; (2) To vote on the Russell Corporation 2000 Non-Employee Directors' Compensation Plan; and (3) To transact such other business as may properly come before the meeting. Holders of the Common Stock of the Company at the close of business on March 7, 2001, are entitled to notice of and to vote upon all matters at the Annual Meeting. You are cordially invited to attend the Annual Meeting so that we may have the opportunity to meet with you and discuss the affairs of the Company. WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, PLEASE SIGN AND RETURN THE ENCLOSED PROXY SO THAT THE COMPANY MAY BE ASSURED OF THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING. A stamped, addressed envelope is enclosed for your convenience in returning your proxy. BY ORDER OF THE BOARD OF DIRECTORS FLOYD G. HOFFMAN Senior Vice President, Corporate Development, General Counsel and Secretary Alexander City, Alabama March 23, 2001 4 RUSSELL CORPORATION - -------------------------------------------------------------------------------- PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 25, 2001 - -------------------------------------------------------------------------------- This Proxy Statement is furnished by and the accompanying proxy is solicited on behalf of the Board of Directors of Russell Corporation, an Alabama corporation (the "Company"), for use at its Annual Meeting of Shareholders to be held at the general offices of the Company at 755 Lee Street, Alexander City, Alabama 35011, on Wednesday, April 25, 2001, at 11:00 a.m., Central Daylight Time, and at any adjournment thereof (the "Annual Meeting"). The Proxy Statement and accompanying proxy will initially be mailed to shareholders on or about March 22, 2001. Shares represented by a properly executed proxy on the accompanying form will be voted at the Annual Meeting and, when instructions have been given by the shareholder, will be voted in accordance with those instructions. In the absence of contrary instructions, the proxies received by the Board of Directors will be voted FOR the election of all nominees for director of the Company listed below and FOR the adoption of the Russell Corporation 2000 Non-Employee Directors' Compensation Plan. A shareholder who has given a proxy may revoke it at any time prior to its exercise by giving written notice of such revocation to the Secretary of the Company, by executing and delivering to the Company a later dated proxy reflecting contrary instructions or by appearing at the Annual Meeting and taking appropriate steps to vote in person. ELECTION OF DIRECTORS Directors of the Company are divided into three classes, with approximately one-third of the directors being elected at each annual meeting for three-year terms. The terms of Tim Lewis, C.V. Nalley III, John R. Thomas and John A. White will expire at the Annual Meeting, and each has been nominated for reelection at the Annual Meeting to serve until the Annual Meeting of Shareholders in 2004, and until their successors have been duly elected and qualified. Mary Jane Robertson was appointed to serve on the Board of Directors in a newly created directorship whose initial term expires at the Annual Meeting of Shareholders in 2002, and has been nominated for election at the Annual Meeting to serve for the remainder of such initial term which expires at the Annual Meeting of Shareholders in 2002, and until her successor has been duly elected and qualified. Proxies cannot be voted for more than five persons, and in the absence of contrary instructions, shares represented by the Board of Directors' proxies will be voted for the election of these nominees. Should any nominee be unable or unwilling to accept election, it is expected that the proxies will vote for the election of such other person for director as the Board of Directors then recommends. The Board of Directors has no reason to believe that any of the nominees will be unable to serve or will decline to serve if elected. NOMINEES FOR TERMS EXPIRING IN 2004: [PHOTO] TIM LEWIS Director since 1995 Birmingham, Alabama Age 45 Mr. Lewis is President of T.A. Lewis & Associates, Inc., a telecommunications consulting firm, and has held this position for more than five years. Mr. Lewis is a member of the Corporate Responsibility Committee of the Board of Directors. [PHOTO] C.V. NALLEY III Director since 1989 Atlanta, Georgia Age 58 Mr. Nalley is Chief Executive Officer, Nalley Automotive Group, which consists of automobile and truck sales and leasing companies, and has held this position for more than five years. Mr. Nalley is Chairman of the Nominating Committee and a member of the Management Development and Compensation Committee of the Board of Directors. [PHOTO] JOHN R. THOMAS Director since 1966 Alexander City, Alabama Age 64 Mr. Thomas is Chairman, President and Chief Executive Officer of Aliant Financial Corporation, a bank holding company, and has held these positions for more than five years. He is a director of Alfa Corporation, a financial services holding company. Mr. Thomas is a member of the Audit Committee of the Board of Directors. - 1 - 5 [PHOTO] JOHN A. WHITE Director since 1992 Fayetteville, Arkansas Age 61 Dr. White has been Chancellor of the University of Arkansas since July 1997. He served as Dean of Engineering of the Georgia Institute of Technology from 1991 to June 1997. He is a director of Motorola, Inc., an electronics and communications technology company; Logility, Inc., an internet business-to-business service provider; Eastman Chemical Company, a chemical and plastics manufacturing company; and J.B. Hunt Transport Services, Inc., a transportation and shipping company. Dr. White is Chairman of the Audit Committee and a member of the Nominating Committee of the Board of Directors. NOMINEE TO COMPLETE THE TERM EXPIRING IN 2002: [PHOTO] MARY JANE ROBERTSON Director since 2000 Atlanta, Georgia Age 47 Ms. Robertson has been Executive Vice President and Chief Financial Officer for Crum&Forster, a property and casualty insurance company, since 1999. She was previously Senior Vice President and Chief Financial Officer of Capsure Holdings Corp., an insurance products company. Ms. Robertson is a member of the Audit Committee of the Board of Directors. DIRECTORS WHOSE TERMS EXPIRE IN 2002: [PHOTO] HERSCHEL M. BLOOM Director since 1986 Atlanta, Georgia Age 57 Mr. Bloom has been a partner in the law firm of King & Spalding for more than five years. He is a director of Post Properties, Inc., an upscale apartment developer. Mr. Bloom is Chairman of the Management Development and Compensation Committee and a member of the Executive Committee of the Board of Directors. [PHOTO] RONALD G. BRUNO Director since 1992 Birmingham, Alabama Age 49 Mr. Bruno has been President of Bruno Capital Management Corporation, an investment company for more than five years. He is a director of Bruno's Supermarkets, Inc., a supermarket chain, SouthTrust Bank and Books-a-Million, Inc., a retail book sales company. Mr. Bruno is a member of the Management Development and Compensation Committee of the Board of Directors. DIRECTORS WHOSE TERMS EXPIRE IN 2003: [PHOTO] JOHN F. WARD Director since 1998 Atlanta, Georgia Age 57 Mr. Ward was elected President and Chief Executive Officer of the Company effective March 31, 1998, and Chairman of the Board effective April 22, 1998. Prior to his elections to such positions, Mr. Ward was President of J. F. Ward Group, Inc., a consulting firm specializing in domestic and international apparel and textile industries from 1996 to 1998. Prior to that time, Mr. Ward was Chief Executive Officer of the Hanes Group and Senior Vice President of Sara Lee Corporation. Mr. Ward is a director of the Metro Atlanta Chamber of Commerce and the State of Georgia Chamber of Commerce. He is a member of the advisory boards of the Robert C. Goizueta Business School at Emory University and Kenan-Flager Business School at the University of North Carolina-Chapel Hill. Mr. Ward is Chairman of the Executive Committee and a member of the Corporate Responsibility and Nominating Committees of the Board of Directors. - 2 - 6 [PHOTO] MARGARET M. PORTER Director since 1997 Birmingham, Alabama Age 50 Ms. Porter presently serves on the boards of the University of Alabama Health Services Foundation, Eyesight Foundation of Alabama, Inc., The Children's Health System of Alabama and The National Association of Children's Hospitals and Related Institutions (NACHRI). Ms. Porter formerly served as Mayor of Mountain Brook, Alabama, and from 1992 to 1997, as founding Chairman of McWane Center in Birmingham, Alabama. McWane Center is a non-profit organization which promotes public understanding of science, technology and the environment and serves as a statewide resource for Alabama schools. Ms. Porter is Chairman of the Corporate Responsibility Committee of the Board of Directors. [PHOTO] BENJAMIN RUSSELL Director since 1963 Alexander City, Alabama Age 63 Mr. Russell is Chairman and Chief Executive Officer of Russell Lands, Incorporated, a land and timber company, and has held these positions for more than the past five years. Mr. Russell is a member of the Corporate Responsibility Committee of the Board of Directors. SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth information regarding beneficial ownership of the Company's Common Stock by each director, the Company's five most highly compensated executive officers and the directors and executive officers of the Company as a group, all as of March 1, 2001:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP ---------------------------------------------------- SOLE VOTING OPTIONS AND EXERCISABLE OTHER TOTAL PERCENT INVESTMENT WITHIN BENEFICIAL BENEFICIAL OF INDIVIDUAL OR GROUP POWER 60 DAYS OWNERSHIP OWNERSHIP CLASS - ---------------------------------- John F. Ward 66,662 1,157,066 615,960(1)(2) 1,839,688 5.57% Herschel M. Bloom 8,396 713 0 9,109 * Ronald G. Bruno 14,449 713 0 15,162 * Tim Lewis 1,084 713 0 1,797 * C.V. Nalley III 12,185 713 0 12,898 * Margaret M. Porter 3,503 713 0 4,216 * Mary Jane Robertson 0 0 0 0 * Benjamin Russell 774,781 713 4,825,720(3) 5,601,214 17.56% John R. Thomas 109,657 713 490,121(4) 600,491 1.88% John A. White 3,604 713 0 4,317 * Jonathan R. Letzler 39,092 100,000 0 139,092 * JT Taunton, Jr 15,270 52,200 0 67,470 * Eric N. Hoyle 14,265 57,500 600,960(2) 672,725 2.11% Carol M. Mabe 5,978 19,142 0 25,120 * All Executive Officers and Directors as a group (26 persons) 1,573,451 1,642,595 5,931,801 9,147,847 27.28% (*) Represents less than one percent (1%).
(1) Includes 15,000 shares owned by Mr. Ward's spouse. (2) Includes 600,960 shares held by the Company's pension plan, of which Messrs. Ward and Hoyle are the trustees and with respect to which they share voting rights. Messrs. Ward and Hoyle disclaim beneficial ownership with respect to such shares. (3) Includes (i) 731,296 shares held by the Benjamin and Roberta Russell Foundation, Incorporated, a charitable corporation of which Mr. Russell is one of nine directors, (ii) 3,945,024 shares held by a trust created under the will of Benjamin C. Russell, of which Mrs. Russell is one of four trustees, (iii) 145,400 shares held by the Adelia Russell Charitable Foundation, of which Mr. Russell is one of three trustees, and (iv) 4,000 shares held by a profit sharing plan of which Mr. Russell is one of two trustees. (4) Includes (i) 32,372 shares held by a trust of which Mr. Thomas is one of three trustees, (ii) 454,249 shares owned indirectly by Mr. Thomas as a general and limited partner in two limited partnerships and (iii) 3,500 shares owned by Mr. Thomas' spouse. - 3 - 7 PRINCIPAL SHAREHOLDERS The following table sets forth each person who, to the Company's knowledge, had sole or shared voting or investment power over more than five percent of the outstanding shares of Common Stock of the Company as of March 1, 2001:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS - --------------------------- -------------------- -------- Roberta A. Baumgardner 5,868,774 shares (1) 18.40% 755 Lee Street P.O. Box 272 Alexander City, Alabama 35011-0272 Benjamin Russell 5,601,214 shares (2) 17.56% 755 Lee Street P.O. Box 272 Alexander City, Alabama 35011-0272 Edith L. Russell 4,686,320 shares (3) 14.69% 755 Lee Street P.O. Box 272 Alexander City, Alabama 35011-0272 Nancy R. Gwaltney 4,677,642 shares (4) 14.67% 755 Lee Street P.O. Box 272 Alexander City, Alabama 35011-0272 AXA 2,165,825 shares (5) 6.79% 25 Avenue Matignon 75008 Paris, France Helen Alison 1,827,572 shares (6) 5.73% 755 Lee Street P.O. Box 272 Alexander City, Alabama 35011-0272 John F. Ward 1,839,688 shares (7) 5.57% (8) 3330 Cumberland Blvd. Suite 800 Atlanta, Georgia 30339
(1) Includes 1,192,454 shares as to which Mrs. Baumgardner has sole voting and investment power and 4,676,320 shares as to which she has shared voting and investment power, consisting of 731,296 shares held by the Benjamin and Roberta Russell Foundation, Incorporated, a charitable corporation of which Mrs. Baumgardner is one of nine directors; and 3,945,024 shares held by a trust created under the will of Benjamin C. Russell of which Mrs. Baumgardner is one of four trustees. (2) Includes 774,781 shares as to which Mr. Russell has sole voting and investment power, presently exercisable options to acquire 713 shares and 4,825,720 shares as to which he has shared voting and investment power. See Note (3) on page 3. (3) Includes 10,000 shares as to which Mrs. Russell has sole voting and investment power, and 4,676,320 shares as to which she has shared voting and investment power, consisting of 731,296 shares held by the Benjamin and Roberta Russell Foundation, Incorporated, a charitable corporation of which Mrs. Russell is one of nine directors, and 3,945,024 shares held by a trust created under the will of Benjamin C. Russell of which Mrs. Russell is one of four trustees. (4) Includes 731,296 shares held by the Benjamin and Roberta Russell Foundation, Incorporated, a charitable corporation of which Mrs. Gwaltney is one of nine directors; 3,945,024 shares held by a trust created under the will of Benjamin C. Russell of which Mrs. Gwaltney is one of four trustees; and 1,322 shares as to which Mrs. Gwaltney has sole voting and investment power. - 4 - 8 (5) From Schedule 13G filed with the Company on February 12, 2001, which states that AXA, along with its affiliates, controls an aggregate of 2,165,825 shares. AXA and its affiliates have sole voting power with respect to 1,469,303 shares, sole dispositive power with respect to 1,283,225 shares, shared voting power with respect to 7,405 shares and shared dispositive power with respect to 882,600 shares. The names and addresses of AXA's affiliated companies may be found in the Schedule 13G filed with the Securities and Exchange Commission on February 12, 2001. (6) From Schedule 13G filed with the Company on February 14, 2001, on behalf of Helen Alison and National Bank of Commerce in Birmingham, Alabama. Includes 1,827,572 shares held by trusts created under the will of J. C. Alison, of which Mrs. Alison is one of two co-trustees and with respect to which Mrs. Alison has shared voting and investment power. (7) Includes 15,000 shares owned by Mr. Ward's spouse, options which are exercisable within 60 days to acquire 1,157,066 shares and 600,960 shares held by the Company's pension plan, of which Mr. Ward is a trustee and with respect to which he shares voting rights. Mr. Ward disclaims beneficial ownership with respect to the shares held by the Company's pension plan. See notes (1) and (2) on page 3. (8) For purposes of determining Percent of Class, options exercisable within sixty days are added to total shares outstanding. COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS The Board of Directors has standing executive, management development and compensation, audit, nominating and corporate responsibility committees. The members of each committee are indicated on pages 1 through 3 of this Proxy Statement. The Executive Committee is authorized to act in place of the Board of Directors between meetings of the Board. The Executive Committee held two meetings during 2000. The Management Development and Compensation Committee supervises the Company's general compensation strategies, including incentive compensation, stock options and benefit programs. The Management Development and Compensation Committee held five meetings during 2000. The Audit Committee recommends to the Board of Directors the appointment of the Company's independent accountants and reviews the audit plan, financial statements and audit results. The Audit Committee also reviews the Company's capital structure and financing activities, functions previously performed by the Finance Committee. The Audit Committee is currently comprised of three directors who are not officers of the Company and are independent as defined by the listing standards of the New York Stock Exchange. The Audit Committee operates under a written charter adopted by the Company's Board of Directors, a copy of which is attached as Appendix A to this Proxy Statement. The Audit Committee held two meetings during 2000. The Nominating Committee recommends candidates for election to the Company's Board of Directors. The Nominating Committee held one meeting during 2000. Candidates for the Board of Directors submitted by shareholders will be considered by the Nominating Committee. The names of such candidates, along with biographical information, should be submitted to the Secretary, Floyd G. Hoffman, Russell Corporation, 3330 Cumberland Blvd., Suite 800, Atlanta, Georgia 30339. The Corporate Responsibility Committee provides oversight and guidance concerning the Company's obligations to its employees and the communities in which it operates. The Corporate Responsibility Committee held one meeting in 2000. During the year ended December 30, 2000, the Board of Directors held seven regular meetings. Each member of the Board attended at least 75% of the meetings of the Board and the committees of which they are members. AUDIT COMMITTEE REPORT In compliance with the requirements of the New York Stock Exchange (NYSE), the Audit Committee of Russell Corporation adopted a formal written charter approved by the Board of Directors on June 7, 2000, a copy of which is attached to this Proxy Statement as Appendix A, which outlines the Audit Committee's responsibilities and how it carries out those responsibilities. In connection with the performance of its responsibilities under its charter, the Audit Committee has: - Reviewed and discussed the audited financial statements of the Company with management; - 5 - 9 - Discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 (required communication by external auditors with audit committees); - Received from the independent auditors disclosures regarding the auditors' independence required by Independence Standards Board Standard No. 1 and discussed with the auditors the auditors' independence; and - Recommended, based upon the review and discussion noted above, to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 30, 2000, for filing with the Securities and Exchange Commission. AUDIT COMMITTEE JOHN A. WHITE, CHAIRMAN MARY JANE ROBERTSON JOHN R. THOMAS COMPENSATION OF DIRECTORS Under the Russell Corporation 2000 Non-Employee Directors' Compensation Plan (the "2000 Directors' Plan"), each non-employee director receives a quarterly retainer of $8,750 and an annual option to purchase shares of Common Stock with a value equivalent to $25,000, exercisable for ten years at a price equal to the market value of the Common Stock on the date of the annual meeting. In addition, the 2000 Directors' Plan allows a non-employee director to elect to receive the quarterly retainer fee payable to such director in (i) shares of Common Stock; (ii) options to purchase shares of Common Stock; or (iii) shares of Common Stock deposited to a deferral account. Three hundred thousand (300,000) shares of Common Stock are presently authorized to be issued under the 2000 Directors' Plan, plus those shares of Common Stock remaining under the Russell Corporation 1997 Non-Employee Directors' Stock Grant, Stock Option and Deferred Compensation Plan, and 445,411 shares remain available for future grants. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Based solely upon review of Forms 3, 4 and 5 and amendments thereto related to the Company's most recent fiscal year, and written representations from certain reporting persons that no Form 5 was required, the Company believes that all Forms 3, 4 and 5 were timely filed during fiscal year 2000, with the exception of one late-filed Form 4 by Margaret M. Porter. TRANSACTIONS WITH MANAGEMENT AND OTHERS The Company entered into a fuel supply contract with Russell Lands, Incorporated ("Lands") on May 21, 1975, under which Lands provides sawdust, bark, shavings, chips, and other wood materials for use in the Company's wood chip boilers. The initial term of the contract was four years, and may be renewed by agreement of the parties from year-to-year thereafter. In addition, the contract may be cancelled by either party during any renewal period upon 30 days' notice following the occurrence of certain specified conditions. Benjamin Russell is Chairman, Chief Executive Officer and a director of Lands, and owns beneficially approximately 70% of the equity interest in such company. Management believes this contract is in the best interest of the Company's shareholders. During the fiscal year ended December 30, 2000, the Company paid Lands approximately $982,000 for wood materials to operate these boilers. The Company purchased miscellaneous building materials and supplies from Russell Do-It Center, a building supply retailer. Russell Do-It Center is a division of Lands. Management believes these purchases to be in the best interest of the Company's shareholders. During the fiscal year ended December 30, 2000, the Company paid Russell Do-It Center approximately $61,000 for the purchases described above. The Company engaged Eddy Hill Consulting (formerly known as EOD Strategies, Inc.) to provide various consulting services relating to enhancements to its minority vendors programs. Tim Lewis owns 100% of the equity interest in Eddy Hill Consulting. Management believes the engagement of Eddy Hill Consulting is in the best interest of the Company's shareholders. During the fiscal year ended December 30, 2000, the Company paid Eddy Hill Consulting approximately $51,754 for consulting services. - 6 - 10 MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION THE COMMITTEE The Management Development and Compensation Committee of the Board of Directors (the "Committee") is responsible for establishing the compensation policy and administering the compensation programs for the Company's executive officers and other key employees. The Committee is comprised solely of directors who are not current or former employees of the Company. COMPENSATION PHILOSOPHY The compensation program for executive officers is designed to attract, motivate and retain talented executives who will strive to attain the Company's strategic and financial objectives and thereby increase shareholder value. The main elements of the program are: - annual compensation (base salary and annual bonus) and - long-term incentives (stock options). The Company's philosophy is to provide total compensation at a level that is consistent with its size and performance relative to other leading branded consumer apparel companies. These companies include many of those in the Value Line Apparel Index used in the performance graph on page 9. The Committee periodically reviews the reasonableness of total compensation levels using public information from comparable company proxy statements and annual reports as well as survey information from third-party industry surveys. In carrying out its duties, the Committee intends to make all reasonable efforts to comply with the requirements to exempt executive compensation from the $1 million deduction limitation under Section 162(m) of the Internal Revenue Code by establishing "performance-based" compensation programs, unless the Committee determines that such compliance in given circumstances would not be in the best interests of the Company and its shareholders. ANNUAL COMPENSATION Base Salary. The Committee annually reviews and approves base salaries for the Company's executive officers, considering the responsibilities of their positions, their individual performance and their competitive position relative to comparable companies and industry surveys. Salary ranges are targeted at the median of the competitive market place. Salary increases, including increases due to promotions, for the most recent fiscal year are based upon these criteria. Annual Incentive Bonus. Executive officers are eligible to receive annual cash incentive awards under provisions of the Executive Incentive Plan. Under this plan, the Committee established Earnings Per Share Growth and Return on Equity goals for the Company and each operating division. The maximum incentive opportunity is established and communicated to each participant, along with the performance scale under which incentive awards are earned. Threshold performance levels are also established for each goal, below which no incentive award is paid. Individual standards of performance that are agreed upon at the beginning of each year provide each participant the opportunity to earn incentive awards based upon the accomplishment of strategic and tactical objectives. Award opportunities for the Chief Executive Officer and Chief Financial Officer are tied solely to the accomplishment of financial goals approved in advance by the Committee. LONG-TERM COMPENSATION The Committee believes stock options to be one of the most effective ways of linking executives with the interests of the shareholders since no gain is realized by the executive unless the stock price increases. For the foreseeable future, stock options will be the only form of long-term compensation at the Company. Stock option grant guidelines have been established to meet the median competitive practice of the marketplace. The Company typically grants stock options annually during the first quarter, although special grants may be made throughout the year in unique circumstances such as recruiting situations. Options are granted with an exercise price equal to the market value on the date of grant. Options granted become exercisable pro-rata on the first four anniversaries of the grant - 7 - 11 to reinforce retention and further align executives' compensation with shareholder returns. Options expire ten years from the date of grant. In recognizing that the restructuring of the Company was substantially complete and to assist in retaining the management team, the Committee approved a front-loaded stock option grant to all salaried employees in January 2000. This grant is intended to replace annual grants that would normally have been made in 2001 and 2002. STOCK OWNERSHIP GUIDELINES The Committee believes that stock ownership by the management team is essential to a strong linkage between management and the shareholders. Thus, the Committee has approved Stock Ownership Guidelines that outline the minimum stock ownership expectations for the officer group. The guidelines range from shares valued at five times salary midpoint for the Chief Executive Officer to one times salary midpoint for Vice Presidents. Each officer is expected to be in compliance with the guidelines within five years of becoming covered by the guidelines. CHIEF EXECUTIVE OFFICER Effective April 1, 1998, the Board of Directors elected John F. Ward President and Chief Executive Officer, and on April 22, 1998, Mr. Ward was elected Chairman. His compensation principally consists of base salary, annual bonus and stock option awards. The Committee made the following decisions regarding Mr. Ward's compensation: - - Annual Compensation Base Salary. The Committee increased Mr. Ward's annual salary by $25,000 to $700,000, or 3.7%, based on an assessment of competitive compensation practices and in recognition of his leadership in the continuing restructuring along with accomplishing the Company's financial plans. Annual Incentive. The Committee awarded Mr. Ward an annual incentive payment for 2000 equal to $519,579, or 74.67% of salary earned in 2000. This incentive award was directly related to the Company's performance relative to the goals for EPS Growth (weighted 60%) and Return on Equity (weighted 40%)) that the Committee approved at the beginning of 2000. The Company reported ongoing EPS of $1.90, which was a 17% increase over 1999 (before non-recurring items) that resulted in a payment equal to the aggressive target that had been set for that component. The Company's ROE of 11.5% was slightly above the target established by the Committee and resulted in an incentive award slightly above target for that component. - - Long-term Compensation Stock Options. In January 2000, the Committee approved a stock option grant of 500,000 shares to Mr. Ward, which represents the front-loaded grant discussed earlier in this report. These options have an exercise price of $15.13, which was 100% of the fair market value on the grant date. The terms and conditions that apply to Mr. Ward's stock option grants are described in the notes to the Stock Option Grant Table on page 11. - - Other Benefits. In addition to participating in the same benefit programs as all other executives of the Company, Mr. Ward began participating in a supplemental executive retirement plan ("SERP") that the Committee approved during 2000 for him and other executives. The SERP provides him a competitive retirement benefit equal to 4% of the 3-year final average pay per year of service up to a maximum of 25 years, less any benefits under Russell's Qualified Defined Benefit and Excess Plans. In addition, the Company has an employment agreement with Mr. Ward which provides certain other benefits and payments in connection with Mr. Ward's continued service. In December, the Committee renewed this agreement effective April 1, 2001. Some of these benefits and payments are described in the Summary Compensation Table and the notes thereto beginning on page 10. Additional provisions of Mr. Ward's agreements are described on page 14. - 8 - 12 CONCLUSION The Committee believes that the executive compensation programs directly link the pay opportunities of the Company's executives to the financial and shareholder returns of the Company. These programs reinforce the linkage between pay and performance, and between executive compensation and shareholder return, and allow the Company to attract and retain the caliber of executives required in the highly competitive global environment in which executives of the Company must perform. MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE HERSCHEL M. BLOOM, CHAIRMAN RONALD G. BRUNO C.V. NALLEY III COMPARATIVE FIVE-YEAR CUMULATIVE TOTAL RETURNS THROUGH 12/31/00 VALUE OF $100 INVESTED ON 12/31/95 AT FISCAL YEAR-END:
1995 1996 1997 1998 1999 2000 Russell Corporation $100.00 $109.05 $ 99.14 $ 77.34 $ 65.83 $ 62.84 S&P 500 100.00 123.25 164.21 210.85 253.61 227.89 Value Line Apparel Index 100.00 136.96 159.77 197.66 214.72 268.09
NOTES 1) Assumes that the value of the investment in the Company's Common Stock and in each index was $100 on the last trading day preceding the first day of the fifth preceding fiscal year and that all dividends were reinvested. 2) The Value Line Apparel Index presently includes: Columbia Sportswear Company; Guess?; Hartmarx Corporation; Jones Apparel Group; Kellwood Company; Liz Claiborne, Inc.; Nautica Enterprises, Inc.; Oshkosh B'Gosh, Inc.; Oxford Industries, Inc.; Tommy Hilfiger Corp.; VF Corporation; Warnaco Group, Inc.; and the Company. - 9 - 13 3) The Value Line Apparel Index has undergone several changes since 1995, with only eight of the original twelve companies remaining on the list. The original Index also included Farah, Incorporated, Fruit of the Loom, Inc., Garan, Incorporated, and Phillips-Van Heusen Corporation. Garan, Incorporated, was deleted from the Index in 1996, Farah, Incorporated, was deleted in 1998, Phillips-Van Heusen Corporation was deleted in 1999 and Fruit of the Loom, Inc. was deleted in 2000. Value Line added Jones Apparel Group, Nautica Enterprises, Inc., St. Johns Knits, Inc., Tommy Hilfiger Corp. and Warnaco Group, Inc. in 1997, added Polo-Ralph Lauren and Quicksilver, Inc. in 1998 and added Columbia Sportswear Company and Guess? in 2000. Quicksilver, Inc. was deleted from the Index in 1999 after only one year, and St. Johns Knits, Inc. and Polo-Ralph Lauren were both deleted after only two years. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following information is furnished for the fiscal years ended December 30, 2000, January 1, 2000 and January 2, 1999, with respect to the Company's Chief Executive Officer and each of the four other most highly compensated executive officers of the Company during 2000 whose salary and bonus exceeded $100,000 (collectively, the "Named Executive Officers").
ANNUAL COMPENSATION LONG TERM COMPENSATION -------------------------------- ----------------------------------- AWARDS PAYOUTS ---------------------- --------- NAME AND OTHER RESTRICTED ALL PRINCIPAL FISCAL ANNUAL STOCK OPTIONS/ LTIP OTHER POSITION YEAR SALARY BONUS (1) COMPENSATION AWARDS SARS PAYOUTS COMPENSATION - ---------------------------------------------------------------------------------------------------------------------------------- John F. Ward 2000 $695,833 $519,579 $49,637(2) 500,000 Chairman, 1999 670,833 474,279 30,668(3) 250,000 President 1998 490,000 350,000 44,375(4) $ 325,913(5) 407,066(6) $3,496,031(7) and C.E.O Jonathan R. Letzler 2000 302,500 208,485 4,566(2) 100,000 Executive V.P. & 1999 265,000 200,764 14,169(3) 25,000 C.E.O. JERZEES 1998 17,809 65,000 3,515(4) 1,079,690(8) 125,000 JT Taunton, Jr 2000 312,000 198,340 5,151(2) 32,000 Sr. V.P., President & 1999 306,900 216,750 12,000 C.E.O. Fabrics 1998 300,000 38,500 8,000 and Services Eric N. Hoyle 2000 290,724 130,909 9,994(2) 100,000 Sr. V.P., President & 1999 305,833 154,293 15,961(3) 40,000 C.E.O. Cross Creek 1998 116,935 52,621 13,710(4) 25,000 Apparel LLC Carol M. Mabe 2000 239,167 141,000 4,503(2) 56,570 Senior V.P. & C.E.O 1999 64,167 31,333 3,392(2) 92,063(9) 25,000 Russell Athletic 1998
(1) Bonus payments are reported for the year in which related services were performed. (2) Pursuant to Mr. Ward's employment agreement, includes personal use of Company aircraft, Company provided automobile, insurance policy premium payments and tax consulting payments. For Messrs. Letzler and Taunton, includes tax consulting payments. For Mr. Hoyle, includes personal use of Company aircraft and tax consulting payments. For Ms. Mabe, includes personal use of Company aircraft. (3) Pursuant to Mr. Ward's employment agreement, includes personal use of Company aircraft, club dues and Company provided automobile. For Messrs. Letzler and Hoyle, includes personal use of Company aircraft. - 10 - 14 (4) Pursuant to Mr. Ward's employment agreement, includes personal use of Company aircraft, personal office closure expenses, temporary housing, club dues and Company provided automobile. For Mr. Letzler includes personal use of Company aircraft and temporary housing. For Mr. Hoyle includes personal use of Company aircraft, temporary housing and Company provided automobile. (5) Pursuant to Mr. Ward's employment agreement, one-third of this amount vested on March 31, 1998, with the remainder vesting ratably over the next two succeeding years. (6) Pursuant to Mr. Ward's Amended and Restated Employment Agreement, 125,000 options vest on March 31, 2001. The exercise price is $27.1563 and the options are exercisable until March 31, 2008. Pursuant to the Amended and Restated Executive Deferred Compensation and Buyout Plan, 282,066 vested options were issued to Mr. Ward at an exercise price of $27.1563, the fair market value on the date of grant, and are exercisable until March 31, 2008. (7) Amounts paid to Mr. Ward or deposited into a rabbi trust for his benefit to replace benefits and opportunities Mr. Ward forfeited pursuant to agreements with his former employer as a result of accepting employment with the Company. (8) Pursuant to Mr. Letzler's employment agreement, one-third of this amount vested on December 15, 1999, with the remainder vesting ratably over the next two succeeding years. As of January 1, 2001, Mr. Letzler's restricted shares consisted of 16,666 shares, or one-third of the original grant of 50,000 shares, with a value of $258,323. (9) Pursuant to Ms. Mabe's employment agreement, one-third of this amount vested on November 1, 2000, with the remainder vesting ratably over the next two years. As of January 1, 2001, Ms. Mabe's restricted shares consisted of 4,000 shares, or two thirds of the original grant of 6,000 shares, with a value of $62,000. OPTION/SAR GRANTS IN FISCAL 2000 The following table sets forth grants of stock options to the Named Executive Officers for the year ended December 30, 2000. No SAR grants were made during such fiscal year.
INDIVIDUAL GRANTS (1) - ------------------------------------------------------------------------------ POTENTIAL REALIZABLE NUMBER OF VALUE AT ASSUMED SECURITIES % OF TOTAL ANNUAL RATES OF STOCK UNDERLYING OPTIONS/SARS PRICE APPRECIATION OPTIONS/SARS GRANTED EXERCISE FOR OPTION TERM GRANTED TO EMPLOYEES PRICE EXPIRATION --------------------------- NAME IN 2000 IN 2000 PER SHARE DATE 5% 10% - ------------------ ------------ ------------ --------- ---------- ------------ ------------- John F. Ward 500,000(2) 18.91 15.1250 1/18/10 $4,756,016 $12,052,677 Jonathan R. Letzler 100,000 3.78 15.1250 1/18/10 951,203 2,410,535 JT Taunton, Jr 32,000 1.21 15.1250 1/18/10 304,385 771,371 Eric N. Hoyle 100,000 3.78 15.1250 1/18/10 951,203 2,410,535 Carol M. Mabe 56,570 2.14 15.1250 1/18/10 538,095 1,363,640
(1) The stock options were granted at an exercise price equal to the fair market value of the Company's Common Stock on the date of the grant. The stock options become exercisable ratably over four years beginning on the first anniversary of the grant. No other instruments were granted in tandem with the options, nor do they carry tax reimbursement features. (2) See "MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION - Chief Executive Officer." - 11 - 15 AGGREGATED OPTION/SAR EXERCISES IN FISCAL 2000 AND YEAR-END VALUE TABLE The following table sets forth information concerning the exercise of stock options for the Named Executive Officers for the fiscal year ended December 30, 2000:
NUMBER OF VALUE OF UNEXERCISED SHARES UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS ACQUIRED VALUE AT DECEMBER 30, 2000 AT DECEMBER 30, 2000 (2) NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- ----------- ----------- ----------- ------------- ----------- ------------- John F. Ward 0 $0 427,900 729,167 $ 0 $ 0 Jonathan R. Letzler 0 0 68,750 181,250 0 0 JT Taunton, Jr 0 0 41,200 41,000 0 0 Eric N. Hoyle 0 0 22,500 140,000 0 0 Carol M. Mabe 0 0 6,250 75,320 1,953 5,859
(1) This amount represents the aggregate of the market value of the Company's Common Stock at the time each option was exercised less the exercise price for such option. (2) This amount represents the aggregate of the number of options multiplied by the difference between the closing price of the Company's Common Stock on the last trading day prior to December 30, 2000, and the exercise price for such option. LONG-TERM INCENTIVE PLAN AWARDS IN FISCAL 2000 The Company's Executive Incentive Plan provides for the award of long-term incentives to officers of the Company. The Company has not granted long-term incentive awards subsequent to January 28, 1998, and has no present plans to grant such awards in the future. PENSION PLAN The officers of the Company participate in the Russell Corporation Revised Pension Plan (the "Pension Plan"), a defined benefit plan covering all employees of the Company. The amount of contributions made by the Company to the Pension Plan is not reflected in the cash compensation table above, since the amount of the contribution with respect to a specified person is not and cannot readily be separately or individually calculated by the regular actuaries for the Pension Plan. Benefits under the Pension Plan are based upon years of credited service at retirement and upon "Final Average Earnings," which is the average base compensation for the highest 60 consecutive months out of the final 120 months of employment. This compensation consists only of salary and excludes any bonus and any form of contribution to other benefit plans or any other form of compensation. Normal or delayed retirement benefits are payable upon retirement on the first day of any month following attainment of age 65 and continue for the life of the employee (and his spouse, if any) or in accordance with other elections permitted by the Pension Plan. On January 26, 1994, the Board of Directors adopted a supplemental retirement plan covering any participant's compensation in excess of the limitation amount specified in Section 401, et seq., of the Internal Revenue Code. This plan is a non-qualified plan, thereby rendering any benefits subject to claims of general creditors and not deductible until paid. On December 5, 2000, the Board of Directors adopted the Russell Corporation Supplemental Retirement Plan (the "SERP"), an additional defined benefit plan covering key employees of the Company. Benefits under the SERP are based upon years of credited service at retirement and upon "Final Average Pay," which is the average compensation for the highest 36 consecutive months out of the final 120 months of employment and, unlike the Pension Plan, includes amounts received as bonuses during that period. The following table presents estimated annual benefits payable from the Pension Plan, the SERP and the supplemental retirement plan mentioned above upon normal or delayed retirement to participants in specified remuneration and years-of-credited service classifications. The amounts shown assume the current maximum social security benefit and that the participant has elected for benefits to be payable for a single life only. - 12 - 16
PENSION PLAN TABLE YEARS OF CREDITED SERVICE AVERAGE --------------------------------------------------------------------------------- REMUNERATION 5 10 15 20 AND OVER ------------ -------- -------- -------- -------- --------- $ 350,000 $ 35,000 $ 70,000 $105,000 $140,000 $175,000 400,000 40,000 80,000 120,000 160,000 200,000 450,000 45,000 90,000 135,000 180,000 225,000 500,000 50,000 100,000 150,000 200,000 250,000 600,000 60,000 120,000 180,000 240,000 300,000 700,000 70,000 140,000 210,000 280,000 350,000 800,000 80,000 160,000 240,000 320,000 400,000 900,000 90,000 180,000 270,000 360,000 450,000 1,000,000 100,000 200,000 300,000 400,000 500,000 1,100,000 110,000 220,000 330,000 440,000 550,000 1,200,000 120,000 240,000 360,000 480,000 600,000 1,300,000 130,000 260,000 390,000 520,000 650,000
Years of service at December 30, 2000 credited under the Pension Plan for individuals shown in the Summary Compensation Table on page 10 are as follows: Mr. Ward, 2 years; Mr. Taunton, 25 years; Mr. Letzler, 2 years; Mr. Hoyle, 2 years; and Ms. Mabe, 1 year. Years of service at December 30, 2000 credited under the SERP for individuals shown in the Summary Compensation Table on page 10 are as follows: Mr. Ward, 2 years; Mr. Taunton, 2 years; Mr. Letzler, 2 years; Mr. Hoyle, 2 years; and Ms. Mabe, 1 year. STOCK OPTION PLANS The Company has previously adopted the 1987 Stock Option Plan pursuant to which the Company granted to key employees of the Company either incentive stock options or nonqualified stock options. The terms of the options did not exceed ten years from the dates of grant, and the option prices equaled fair market value of the shares covered at the times of grant. The 1987 Stock Option Plan has expired and there are no further options outstanding under it. The Company also has adopted the Executive Incentive Plan (formerly known as the 1993 Executive Long-Term Incentive Plan). The Management Development and Compensation Committee of the Board of Directors (the "Committee") presently administers the plan and has broad discretion to fashion the terms and, subject to limitations specified in the plan, the size of awards in order to provide appropriate incentives. Awards may be issued in a variety of forms, including: (a) restricted, deferred and bonus shares; (b) incentive, non-qualified and accelerated stock ownership options (all such options are referred to collectively as "options"); (c) freestanding and tandem stock appreciation rights; and (d) performance shares, performance units and cash-based awards. In addition to conditions and restrictions required under the plan, the Committee may impose additional conditions and restrictions with respect to the exercise or receipt of benefits under any award. The aggregate number of shares of Common Stock authorized for issuance under the Executive Incentive Plan is 5,500,000 plus any shares reversed for issuance under awards still outstanding under the Company's 1987 Stock Option Plan to the extent such awards are forfeited, terminated or settled without issuance of the reserved shares. Any shares of Common Stock (whether subject to or received pursuant to an award under any Company plan) withheld or applied to pay the exercise price or related required tax withholding reduce the number of shares treated as issued under the Executive Incentive Plan and thereby increase the aggregate number of shares available for issuance. The Company has also adopted the Russell Corporation 2000 Stock Option Plan (the "2000 Option Plan"). The 2000 Option Plan is an incentive compensation plan that gives the Committee broad discretion to grant awards, and fashion the terms of such awards, to any employee or consultant of the Company. The 2000 Option Plan permits the issuance of awards in a variety of forms, including: (a) incentive stock options; (b) non-qualified stock options; (c) reload stock options; (d) restricted shares; (e) bonus shares; (f) deferred shares; (g) freestanding stock appreciation rights; (h) tandem stock appreciation rights; (i) performance units; and (j) performance shares. The aggregate number of shares of Common Stock authorized for issuance under the 2000 Option Plan is 1,500,000, subject to appropriate adjustment upon the occurrence of dividends, distributions, recapitalizations, stock splits or other similar events. - 13 - 17 EMPLOYMENT AGREEMENTS As noted above, John F. Ward was employed as President and Chief Executive Officer of the Company, effective March 31, 1998. The Company entered into an agreement with Mr. Ward providing for the employment of Mr. Ward until March 31, 2001, at an annual base salary of $650,000, subject to increase(s) in the discretion of the Board of Directors and a bonus of $350,000 for 1998. The employment agreement provides that the Company will offer health care and certain other supplemental benefits to Mr. Ward. As noted in the Summary Compensation Table, Mr. Ward was also entitled to receive certain payments for reimbursement of expenses in connection with his relocation and employment with the Company. Mr. Ward's employment agreement has been amended effective April 1, 2001 to provide for his continued employment until March 31, 2006. Effective March 1, 2001, Mr. Ward's annual base salary shall be a minimum of $750,000. The annual base salary is subject to increase(s) in the discretion of the Board of Directors. Mr. Ward is entitled to receive a potential annual bonus of at least 140% of base salary, upon the achievement of certain goals established by the Board of Directors. The amended agreement also provides that any termination of employment of Mr. Ward after April 1, 2001 shall be treated as retirement for purposes of the Company's various plans and benefits. Each year of Mr. Ward's employment, commencing on January 1, 1998, shall be treated as two (2) years of employment for purposes of determining Mr. Ward's participation in the SERP. Options granted to Mr. Ward pursuant to the prior agreement will become fully vested on March 31, 2001, pursuant to the terms of the amended and restated employment agreement. The amended agreement provides for additional annual option awards of at least 100,000 shares per year in each of 2003, 2004, 2005, and 2006, which options shall vest over a four year period beginning on the date of the grant. As noted above in note 7 to the Summary Compensation Table, to compensate Mr. Ward for the forfeiture of certain benefits from his former employer, under the 1998 agreement the Company agreed to make a cash payment to him of approximately $1,028,000, to put into a trust for his benefit approximately $2,467,000, to issue him 12,127 shares of Common Stock of the Company, and to grant him options to purchase 282,066 shares of the Company's Common Stock at $27.1563, the market price on March 31, 1998. After April 1, 2001, the amounts placed in the trust were to be paid to Mr. Ward in a lump sum upon the termination of his employment with the Company. The Company has amended this deferred compensation agreement with Mr. Ward effective April 1, 2001. Under the terms of the amended agreement, the amounts placed in trust will continue to be deferred, and will be paid to Mr. Ward after March 31, 2006 unless his employment is terminated by the Company for cause or is terminated by Mr. Ward for any reason other than death, total disability or certain other reasons set forth in the agreements. In the event of such termination prior to March 31, 2006, Mr. Ward will be entitled to receive the entire amount remaining in the Trust. Mr. Ward, at his option, may receive the trust amount as a single lump sum payment, or may request payment over a deferred or extended period of time. Effective December 7, 1998, Jonathan R. Letzler was employed as the President and Chief Executive Officer of the Company's JERZEES Division pursuant to an agreement providing for his employment in such position until December 7, 2002, at an annual base salary of $265,000 (subject to annual increases in the discretion of the Chief Executive Officer of the Company and with the concurrence of the Board of Directors). Mr. Letzler received a signing bonus of $65,000 and is entitled to receive annual bonuses with a bonus potential of at least 100% of his base salary, provided that his bonuses for each of the 1998 and 1999 calendar years was to be at least 50% of his base salary. Under the agreement, Mr. Letzler may participate in any benefit plan offered by the Company to its executives generally. The agreement provides that in the event of any termination of employment of Mr. Letzler, all vesting periods under the Company's benefit plans shall be waived and Mr. Letzler will be deemed to have reached the minimum age for retirement under all such plans. Mr. Letzler was also entitled to receive certain payments for reimbursement of expenses in connection with his relocation and employment with the Company. Pursuant to the agreement, Mr. Letzler was granted an option on December 7, 1998, to purchase 125,000 shares of Common Stock at the market price of $21.5938 per share, and an option on February 24, 1999 to purchase 25,000 shares of Common Stock at the market price of $19.3438 per share. Each option vests in equal annual installments over a four-year period from the date of grant. Mr. Letzler was also granted 50,000 restricted shares of Common Stock on December 7, 1998, with the restrictions lapsing as to one-third of such shares at the end of each year of his employment with the Company. - 14 - 18 PROPOSAL TO APPROVE THE ADOPTION OF THE RUSSELL CORPORATION 2000 NON-EMPLOYEE DIRECTORS' COMPENSATION PLAN (PROPOSAL 2) On July 26, 2000, the Board of Directors adopted the Russell Corporation 2000 Non-Employee Directors' Compensation Plan (the "2000 Directors' Plan"). The purpose of the 2000 Directors' Plan is to enable the Company to attract and retain experienced and knowledgeable individuals to serve on the Company's Board of Directors, and to allow such directors to obtain an equity interest in the Company in order to align their interests with those of the Company's stockholders. A summary of the 2000 Directors' Plan is set forth below. The summary is qualified in its entirety by reference to the complete text of the 2000 Directors' Plan which is attached to this Proxy Statement as Appendix B. If approved, the 2000 Directors' Plan will replace the current 1997 Non-Employee Directors' Stock Grant, Stock Option and Deferred Compensation Plan (the "Prior Plan"). DESCRIPTION OF 2000 DIRECTORS' PLAN GENERAL The purpose of the 2000 Directors' Plan is to assist the Company in attracting and retaining experienced and knowledgeable directors and increasing their commitment to the Company's success through equity ownership. Any individuals, other than officers or other employees of the Company or its subsidiaries, (1) serving as directors on the Board of Directors of the Company immediately following the Annual Meeting or (2) elected or appointed to serve as directors on the Board of Directors of the Company at some time other than the Annual Meeting are eligible to participate in the 2000 Directors' Plan (the "Eligible Directors"). The Management Development and Compensation Committee of the Board of Directors (the "Committee") presently administers the 2000 Directors' Plan and has broad discretion to fashion the terms of awards. The 2000 Directors' Plan currently provides for the grant of up to 500,000 shares of the Common Stock of the Company, reduced by the number of shares issued pursuant to awards under the Prior Plan. Unless earlier terminated by the Board of Directors or shareholders, the issuance of awards under the 2000 Directors' Plan will cease as of August 1, 2010. TYPES OF AWARDS Annual Option Grants. Each Eligible Director immediately following the Annual Meeting automatically receives an option to purchase a number of shares of Common Stock with a value equivalent to $25,000 determined in accordance with procedures specified in the 2000 Directors' Plan. An Eligible Director who is not elected at the Annual Meeting will receive at the time of becoming a Director an option to purchase an amount of shares of Common Stock calculated with reference to the time remaining until the next Annual Meeting. Each Eligible Director received an initial option to purchase a number of shares of Common Stock with a value equivalent to $15,000. The Company will continue to award annual option grants under the 2000 Directors' Plan after the Annual Meeting only if shareholders approve the 2000 Directors' Plan at the Annual Meeting. Annual Fees. Annual fees are payable to the Eligible Directors quarterly on March 31, June 30, September 30 and December 31 of each year. Eligible Directors may elect to receive their annual fee in various combinations of the following: (1) shares of Common Stock equal to that portion of the quarterly fee subject to the election divided by the fair market value on the date the quarterly fee payment is due; (2) an option to purchase shares of Common Stock equal to the annual fee or portion thereof subject to the election, multiplied by four and divided by the fair market value of the shares as of the Annual Meeting date in the year to which the election relates; or (3) shares equal to the amount of the quarterly fee installment subject to such election divided by the fair market value of the shares on the date the quarterly fee installment is due and payable, deposited to a deferral account to be paid to the Eligible Director on a date that is at least two years from the date of the election, provided, however, that any shares in a deferral account shall be delivered immediately upon an individual's ceasing to be an Eligible Director. Option Period and Exercise. Each option granted pursuant to the 2000 Directors' Plan will have a ten year term. Options, whether awarded pursuant to an annual grant or pursuant to the election of an Eligible Director, may be exercised on the first to occur of the following: (1) the one-year anniversary of the grant date; (2) an Eligible Director's Death; (3) an Eligible Director ceasing to serve due to disability; (4) a change in control (as defined in the 2000 Directors' Plan); (5) retirement upon reaching mandatory retirement age; or (6) retirement upon attaining age 65. - 15 - 19 FEDERAL INCOME TAX CONSEQUENCES OF AWARDS GENERAL There are generally no federal income tax consequences to either the participant or the Company upon the grant of an option. Upon exercise of an option, the amount by which the fair market value of the shares on the exercise date exceeds the exercise price on the exercise date is generally taxable to the participant as compensation income and will generally be deductible by the Company. The disposition of shares acquired through exercise of a stock option generally results in a capital gain or loss for the participant (which may be short-term or long-term, according to whether the participant's holding period following the date of exercise is no longer than one year or is longer than one year), but will have no tax consequences for the Company. Upon receipt by a participant of an annual grant of shares of Common Stock under the 2000 Directors' Plan, a participant will recognize ordinary income equal to the fair market value of any shares of Common Stock and cash received, and the Company will be entitled to a tax deduction in the same amount. AMENDMENT, MODIFICATION OR TERMINATION The Board of Directors may at any time and from time to time, alter, amend, suspend or terminate the 2000 Directors' Plan in whole or in part without the approval of the Company's shareholders. The 2000 Directors' Plan provides that, without an Eligible Director's consent, no amendment, modification or termination may materially adversely affect any award granted prior thereto. VOTE REQUIRED; RECOMMENDATION The affirmative vote of the holders of a majority of the outstanding shares of the Company's Common Stock represented in person or by proxy at the Annual Meeting is necessary to approve the adoption of the 2000 Directors' Plan. The Board of Directors recommends that shareholders vote FOR the approval of the 2000 Directors' Plan. OTHER MATTERS As of the date of this Proxy Statement, the Board of Directors does not intend to present, and has not been informed that any other person intends to present, any matter for action at the Annual Meeting other than those matters stated in the Notice of the Annual Meeting. Accordingly, if other matters should properly come before the Annual Meeting, it is intended that the holders of the proxies will act in respect thereto in accordance with their best judgment. AUDITORS Ernst & Young LLP, independent accountants, served as the Company's auditors for 2000 after having previously served in the same capacity since 1930. Representatives of Ernst & Young will be in attendance at the Annual Meeting and will be given the opportunity to make a statement and to respond to appropriate questions. AUDIT AND AUDIT-RELATED FEES Ernst & Young billed the Company an aggregate amount of $456,208 for professional services rendered for the audit of the Company's annual financial statements for fiscal year 2000 and the reviews of the financial statements included in the Company's Forms 10-Q for fiscal year 2000, and billed an aggregate amount of $950,010 for audit-related fees for fiscal year 2000. FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION Ernst & Young neither rendered to nor billed the Company for professional services including supervising the operation of the Company's information systems and design or implementation of hardware or software to aggregate source data underlying the Company's financial statements during fiscal year 2000. - 16 - 20 ALL OTHER FEES Ernst & Young billed the Company an aggregate amount of $1,604,152 for professional services during fiscal year 2000, excluding amounts billed in connection with audit services, audit-related services and financial information systems design implementation. The Audit Committee, in conducting its review of auditor independence, considered whether the performance of services by the independent accountants in addition to their audit services was compatible with maintaining the independence of Ernst & Young as auditors. SHAREHOLDER PROPOSALS The next annual meeting of shareholders is scheduled to be held on April 24, 2002, and shareholders of the Company may submit proposals for consideration for inclusion in the Proxy Statement of the Company relating to such annual meeting of shareholders. However, in order for such proposals to be considered for inclusion in the Proxy Statement of the Company relating to such annual meeting, such proposals must be received by the Company not later than November 23, 2001. If a shareholder fails to notify the Company on or before February 6, 2002 of a proposal which such shareholder intends to present at the Company's April 24, 2002 Annual Meeting by a means other than inclusion of such proposal in the Company's proxy materials for that meeting, then if the proposal is presented at such annual meeting, the holders of the Board of Directors' proxies at such meeting may use their discretionary voting authority with respect to such proposal, regardless of whether the proposal was discussed in the Company's Proxy Statement for such meeting. GENERAL INFORMATION The Board of Directors of the Company has fixed the close of business on March 7, 2001, as the record date for determining the holders of the Common Stock of the Company entitled to notice of and to vote at the Annual Meeting. As of such date, the Company had issued and outstanding and entitled to vote at the Annual Meeting an aggregate of 31,895,534 shares of Common Stock, each share of which is entitled to one (1) vote on all matters to be considered at the Annual Meeting. Pursuant to Section 10-2B-7.25 of the Code of Alabama 1975, as amended, and the Company's Bylaws, a majority of the shares of Common Stock entitled to vote, represented in person or by proxy, will constitute a quorum at a meeting of the shareholders. Section 10-2B-7.28 of the Code of Alabama 1975, as amended, requires that each of the nominees to be elected to the Board of Directors receive the affirmative vote of a majority of the votes cast by the holders of shares of Common Stock represented at the Annual Meeting as part of the quorum. The vote for election of directors does not include shares which abstain from voting on a matter or which are not voted on such matter by a nominee because such nominee is not permitted to exercise discretionary voting authority and the nominee has not received voting instructions from the beneficial owner of such shares. Section 10-2B-7.25 of the Code of Alabama 1975, as amended, and the Company's Bylaws require, for the approval of the adoption of the 2000 Non-Employee Directors' Compensation Plan, the affirmative vote of the holders of a majority of the outstanding shares of the Company's Common Stock represented in person or by proxy at a meeting of shareholders at which a quorum is present and entitled to vote with respect to such proposals. Generally, brokers who act as nominees will be permitted to exercise discretionary voting authority where they have received no instructions in uncontested elections for directors and on certain other matters which are not contested (not including, however, approval of the adoption of the 2000 Directors' Plan) where the brokers have complied with New York Stock Exchange Rule 451 concerning the delivery of proxy materials to the beneficial owners of the Company's Common Stock held by such brokers. Abstentions and broker non-votes will not be counted as votes against the proposal to approve the adoption of the 2000 Non-Employee Directors' Compensation Plan; provided, however, that at least a majority of the outstanding shares of the Company's Common Stock is voted with respect to the proposal. Section 10-2B-7.25(c) only requires that votes cast in favor of this proposal exceed the votes cast opposing the proposal and the rules of the NYSE concur provided total votes cast on the proposal exceeds fifty percent (50%) in interest of all securities entitled to vote. The Annual Meeting may be adjourned from time to time without notice other than announcement at the Annual Meeting, or at any adjournment thereof, and any business for which notice was given in the accompanying Notice of Annual Meeting of Shareholders may be transacted at any such adjournment. In addition to the use of the mails, proxies may be solicited by personal interview or by telephone or telegraph. The cost of solicitation of proxies will be borne by the Company. The Company may request brokerage houses, nominees, custodians, and fiduciaries to forward soliciting material to the beneficial owners of the stock held of record and will - 17 - 21 reimburse such persons for any reasonable expense incurred in forwarding the material. Copies of the Company's Annual Report on Form 10-K for the year ended December 30, 2000, in form as filed with the Securities and Exchange Commission, may be obtained from Floyd G. Hoffman, the Senior Vice President, Corporate Development, General Counsel and Secretary of the Company, without charge, by persons who were shareholders beneficially or of record as of March 7, 2001. By Order of the Board of Directors FLOYD G. HOFFMAN Senior Vice President, Corporate Development, General Counsel and Secretary Alexander City, Alabama March 23, 2001 - 18 - 22 APPENDIX A CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF RUSSELL CORPORATION ORGANIZATION (a) The Audit Committee of the Board of Directors (the "Committee") of Russell Corporation (the "Company") shall be appointed by the Board of Directors and shall comprise at least three (3) directors, each of whom are independent of management and the Company, as defined by the relevant listing authority. The Board of Directors shall be responsible for making the determination that members of the Committee are independent as required by the relevant listing authority. (b) All Committee members shall be financially literate, as such qualification is interpreted by the Board of Directors in its business judgment, or shall become financially literate within a reasonable period of time after appointment to the Committee, and at least one member shall have accounting or related financial management expertise, as the Board of Directors interprets such qualification in its business judgment. STATEMENT OF POLICY (a) The Committee, through regular or special meetings with management, the Company's internal auditors and the independent auditors, shall provide assistance to the Board of Directors in fulfilling its oversight responsibility relating to the Company's financial statements and the financial reporting process, the systems of internal accounting and financial controls, the internal audit function, and the annual independent audit of the Company's financial statements. (b) The Committee shall maintain free and open communication between the Committee, the Company's independent auditors, the internal auditors and management. (c) The Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the Company and the authority to retain outside counsel or other experts for this purpose. The Board of Directors retains responsibility for overseeing the Company's financial statements and financial reporting process, legal compliance and ethics programs. RESPONSIBILITIES AND PROCESSES (a) The primary responsibility of the Committee is to oversee the Company's financial reporting process on behalf of the Board of Directors and report the results of its activities to the Board. (b) It is not the duty of the Committee (1) to plan or conduct audits, (2) to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles, (3) to conduct investigations, to resolve disagreements, if any, between management and the independent auditor, or (4) to assure compliance with laws and regulations and the Company's code of conduct. Management is responsible for preparing the Company's financial statements, and the independent auditors are responsible for auditing those financial statements. (c) The Committee shall:(1) ensure that the independent auditor provides annually to the Committee a formal written statement delineating all relationships between the independent auditor and the Company, (2) actively engage in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditor, and (3) recommend that the Board take appropriate action in response to the independent auditor's report to satisfy itself of the independent auditor's independence. (c) The following shall be the principal recurring processes of the Committee in carrying out its oversight responsibilities. The processes are set forth as a guide with the understanding that the Committee may supplement them as appropriate: - The Committee shall have a clear understanding with management and the independent auditors that the independent auditors are ultimately accountable to the Board and the Committee, as representatives of the A-1 23 Company's shareholders. The Committee shall have the ultimate authority and responsibility to evaluate and, where appropriate, recommend replacement of the independent auditors. The Committee shall discuss with the auditors their independence from management and the Company and the matters included in the written disclosures required by the Independence Standards Board. Annually, the Committee shall review and recommend to the Board the selection of the Company's independent auditors. - The Committee shall discuss with the internal auditors and the independent auditors the overall scope and plans for their respective audits, review and approve the annual internal audit plan, review the internal audit reports and approve the appointment of the Director of Internal Audit. Additionally, the Committee shall discuss with management, the internal auditors, and the independent auditors the adequacy and effectiveness of the accounting and financial controls, including the Company's system to monitor and manage business risk, and legal and ethical compliance programs. Further, the Committee shall meet separately with the internal auditors and the independent auditors, with and without management present, to discuss the results of their examinations. - The Committee shall review the interim financial statements with management and the independent auditors prior to the filing of the Company's Quarterly Report on Form IO-Q. Also, the Committee shall discuss the results of the quarterly review and any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards. The chair of the Committee may represent the entire Committee for the purposes of this review. - The Committee shall review with management and the independent auditors the financial statements to be included in the Company's Annual Report on Form 10-K (or the annual report to shareholders if distributed prior to the filing of Form 10-K), including their judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements. Also, the Committee shall discuss the results of the annual audit and any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards. The Committee shall review and reassess this Charter at least annually and submit its recommendations to the Board of Directors for approval. A-2 24 APPENDIX B RUSSELL CORPORATION 2000 NON-EMPLOYEE DIRECTORS' COMPENSATION PLAN Article 1. Establishment, Objectives and Duration 1.1. Establishment of the Plan. Russell Corporation, an Alabama corporation (the "Company") hereby establishes the Russell Corporation 2000 Non-Employee Directors' Compensation Plan (the "Plan"), effective August 1, 2000 (the "Effective Date") which was duly approved by the Board of Directors of the Company (the "Board") on July 26, 2000 and shall be presented for approval by the shareholders of the Company at the next regularly scheduled annual meeting of the Company's shareholders following the Effective Date. 1.2. Objectives of the Plan. The Plan is intended to allow Eligible Directors of the Company to acquire or increase equity ownership in the Company, thereby strengthening their commitment to the success of the Company, aligning their interests with those of the shareholders of the Company, and to assist the Company in attracting and retaining experienced and knowledgeable individuals to serve as directors. 1.3. Duration of the Plan. The Plan shall commence on the Effective Date and shall remain in effect, subject to the right of the Board to amend or terminate the Plan at any time pursuant to Article 10 hereof, until the earlier of (a) the 10 year anniversary of the Effective Date and (b) the date all Shares subject to the Plan shell have been delivered according to the Plan's provisions; provided that the Plan shall remain in effect with respect to and shall govern any grants made hereunder including any amounts deferred in connection with such grants. 1.4. Prior Plan. Effective August 1, 2000 no new grants will be made under the Russell Corporation 1997 Non-Employee Directors' Stock Grant, Stock Option and Deferred Compensation Plan (the "Prior Plan"). Any grants made under the Prior Plan shall continue to be subject to the terms and conditions of the Prior Plan; provided, that, the Prior Plan shall remain in effect with respect to and shall govern any grants made under the Prior Plan including any amounts deferred thereunder. Article 2. Definitions Whenever used in the Plan, the following terms shall have the meanings set forth below: 2.1. "Annual Fee" shall mean that portion of the Retainer payable to an Eligible Director in cash, which initially shall be $35,000 per year payable in four quarterly installments in an amount equal to $8,750, as well as any additional cash payments made to an Eligible Director with respect to committee service or other service to the Board without regard to any election pursuant to Article 7. 2.2. "Annual Meeting of Shareholders" means the regularly scheduled annual meeting of the Company's shareholders. 2.3. "Annual Option Grant" shall mean that portion of the Retainer payable to an Eligible Director in Options without regard to any election pursuant to Article 7. 2.4. "Article" means an Article of the Plan. 2.5. "Beneficial Owner" has the meaning specified in Rule 13d-3 of the SEC under the Exchange Act. 2.6. "Board" has the meaning set forth in Section 1.1 2.7. "Cause" means (i) an Eligible Director's conviction of a felony or other crime involving fraud, dishonesty or moral turpitude; (ii) willful or reckless material misconduct in the performance of his or her duties as a Director; or (iii) habitual neglect of duties; provided, that an Eligible Director who agrees to resign his position on the Board in lieu of being removed for Cause, may be deemed to have been removed for Cause for purposes of this Plan. 2.8. "Change of Control" means, unless otherwise defined in an Option Agreement, any one or more of the following: B-1 25 Any person (as such term is used in Rule 13d-5 of the SEC under the Exchange Act)or group (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other than a Subsidiary, any employee benefit plan (or any related trust)of the Company or any of its Subsidiaries or any Excluded Person, becomes the Beneficial Owner of 20% or more of the common stock of the Company or of Voting Securities representing 20% or more of the combined voting power of the Company (such as a person or group, a "20% Owner"), except that (i) to Change of Control,shall be deemed to have occurred solely by reason of such beneficial ownership by a corporation with respect to which both more than 70% of the common stock of such corporation and Voting Securities representing more than 70% of the aggregate voting power of such corporation are then owned, directly or indirectly, by the persons who were the direct or indirect owners of the common stock and Voting Securities of the Company immediately before such acquisition in substantially the same proportions as their ownership, immediately before such acquisition, of the common stock and Voting Securities of the Company, as the case may be and (ii) such corporation shall not be deemed a 20% Owner, or The Incumbent Directors cease for any reason to constitute at least two-thirds of the directors of the Company then serving; or approval by the stock holders of the Company of a merger, reorganization, consolidation, or similar transaction, or a plan or agreement for the sale or other disposition of all or substantially all of the consolidated assets of the Company or a plan of liquidation of the Company (any of the foregoing transactions, a "Reorganization Transaction") which, based on information included in the proxy and other written materials distributed to the Company's stockholders in connection with the solicitation by the Company of such stockholders approval, is not expected to qualify as an Exempt Reorganization Transaction; or the consummation by the Company of a Reorganization Transaction that for any reason fails to qualify as an Exempt Reorganization Transaction as of the date of such consummation, notwithstanding the fact that such Reorganization Transaction was expected to so qualify as of the date of such stockholder approval. Notwithstanding the occurrence of any of the foregoing events, a Change of Control shall not occur with respect to an Eligible Director if, in advance of such event, the Eligible Director agrees in writing that such even shall not constitute a Change of Control. 2.9. "Change of Control Value" means the Fair Market Value of a Share on the date of a Change of Control. 2.10. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and regulations and rulings thereunder. References to a particular section of the Code include references to successor provisions of the Code or any successor statute. 2.11. "Committee" has the meaning set forth in Article 3. 2.12. "Common Stock" means the common stock, $0.01 par value, of the Company. 2.13. "Company" has the meaning set forth in Section 1.1. 2.14. "Deferral Account" means the account or accounts maintained for an Eligible Director pursuant to Section 7.2(c) hereof. 2.15. "Deferral Date" has the meaning set forth in Section 7.2(c). 2.16. "Deferred Share" means a Share that is granted to an Eligible Director on a deferred basis upon such Eligible Director's election pursuant to Section 7.2(c) hereof. 2.17. "Disability" means a physical or mental condition which, with or without reasonable accommodations and as determined by the Committee in good faith, upon receipt of such medical advice as the Committee deems appropriate, renders an individual unable or incompetent to perform the duties or responsibilities of a director which condition has existed for 180 days and which is expected to be permanent or of indefinite duration. 2.18. "Effective Date" has the meaning set forth in Section 1.1 B-2 26 2.19. "Election Year" means the period commencing on the Annual Meeting of Shareholders in any year and ending on the day before the Annual Meeting of Shareholders the following year. 2.20. "Eligible Director" means (i) any individual serving as a director on the Board of Directors of the Company immediately following the Annual Meeting of Shareholders of the Company and (ii) any individual elected or appointed to serve as director on the Board of Directors of the Company at some time other than the Annual Meeting of Shareholders; provided, that a director who is an officer of the Company or a Subsidiary or otherwise employed by the Company or a Subsidiary shall not be an Eligible Director. 2.21. "Exchange Act" means the Securities Exchange Act of 1934, as amended. References to a particular section of the Exchange Act include references to successor provisions. 2.22. "Excluded Person" means any Person who, along with such Person's Affiliates and Associates (as such terms are defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) is the Beneficial Owner of 15% or more of the Shares outstanding as of the Effective Date, provided that such Person, including such Person's Affiliates and Associates, does not acquire, after the Effective Date hereof, additional Shares in excess of 1% of the then outstanding Shares, exclusive of (i) Shares acquired by such Person and such Person's Affiliates and Associates as a result of stock dividends, stock splits, recapitalizations or similar transactions in which the Company did not receive any consideration for issuing the Shares in question or as a result of repurchases of stock by the Company; (ii) Shares acquired by such Person and such Person's Affiliates and Associates as a result of gifts, devises, bequests and intestate succession; and (iii) Shares acquired by such Person and such Person's Affiliates and Associates as a result of participation by such Person and such Person's Affiliates and Associates in any dividend reinvestment plan, stock option plan or other similar plan or arrangement of the Company. 2.23. "Exempt Reorganization Transaction" means a Reorganization Transaction which results in the Persons who were the direct or indirect owners of the outstanding common stock and Voting Securities of the Company immediately before such Reorganization Transaction becoming, immediately after the consummation of such Reorganization Transaction, the direct or indirect owners of both or more than 70% of the then-outstanding common stock of the Surviving Corporation and Voting Securities representing more than 70% of the aggregate voting power of the Surviving Corporation, in substantially the same respective proportions as such Persons' ownership of the common stock and Voting Securities of the Company immediately before such Reorganization Transaction. 2.24. "Fair Market Value" means (a) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee, and (b) with respect to Shares, as of any date, )i) the average of the high and low trading prices on such date on the New York Stock Exchange Composite Transactions Tape (or, if no sale of Shares was reported for such date, on the next preceding date on which a sale of Shares was reported), (ii) if the Shares are not listed on the New York Stock Exchange, the average of the high and low trading prices of the Shares on such other national exchange on which the Shares are principally traded or as reported by the NASDAQ Stock Market. or similar organization, or if no such quotations are available, the average of the high bid and low asked quotations in the over-the-counter market; or (iii) in the event that there shall be no public market for the Shares, the fair market value of the Shares as determined by the Committee. 2.25. "Grant Date" has the meaning set forth in Section 5.1. 2.26. "including" or "includes" mean "including, without limitation," or "includes, without limitation," respectively. 2.27. "Incumbent Directors" means, as of any date, individuals then serving as members of the Board who were members of the Board as of the Effective Date; provided that any subsequently-appointed or elected member of the Board whose election, or nomination for election by stockholders of the Company or the Surviving Corporation, as applicable, was approved by a vote or written consent of a least two-thirds of the directors then comprising the Incumbent Directors shall also thereafter be considered an Incumbent Director, unless the initial assumption of office of such subsequently-elected or appointed director was in connection with (i) an actual or threatened election consent, including a consent solicitation, relating to the election or removal of one or more members of the Board, (ii) a "tender offer" (as such term is used in Section 14(d) of the Exchange Act), (iii) a proposed Reorganization Transaction, or (iv) a request, nomination or suggestion of any Beneficial Owner of Voting Securities representing 15% or more of the aggregate voting power of the Voting Securities of the Company or the Surviving Corporation, as applicable. B-3 27 2.28. "Mandatory Retirement Age" means the age for mandatory retirement according to the policy of the Board, if any, in place from time to time. 2.29. "Mature Shares" means Shares for which the holder thereof has good title, free and clear of all liens and encumbrances, and which such holder either (i) has held for at least six months or (ii) has purchased on the open market. 2.30. "Option" means an option to purchase shares of Common Stock of the Company. 2.31. "Option Agreement" means a written agreement by which an Option is evidenced. 2.32. "Option Price" means the price at which a Share may be purchased by an Eligible Director pursuant to an Option. 2.33. "Option Term" means the period beginning on the Grant Date of an Option and ending on the expiration date of such Option, as specified in the Option Agreement for such Option and as may, consistent with the provisions of the Plan, be extended from time to time by the Committee prior to the expiration date of such Option then in effect. 2.34. "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof. 2.35. "Plan" has the meaning set forth in Section 1.1. 2.36. "Reorganization Transaction" has the meaning set forth in Section 2.8(c). 2.37. "Retainer" shall mean the amount payable to an Eligible Director each year for service on the Board whether payable in cash, Shares or Options as such amount may be set from time to time by the Board, which initially shall be a total of $60,000 per year in the form of of an Annual Fee in an amount of $35,000 per year and an Annual Option Grant (described in Section 6.1) which has value of approximately $25,000 per year. 2.38. "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the Exchange Act , together with any successor rule, as in effect from time to time. 2.39. "SEC" means the United States Securities and Exchange Commission, or any successor thereto. 2.40. "Section" means, unless the context otherwise requires, a Section of the Plan. 2.41. "Section 16 Person" means a person who is subject to obligations under Section 16 of the Exchange Act with respect to transactions involving equity securities of the Company. 2.42. "Share" means a share of Common Stock. 2.43. "Subsidiary" means (a) any corporation of which more than 50% of the Voting Securities are at the time, directly or indirectly, owned by the Company, and (b) any partnership or limited liability company in which the Company has a direct or indirect interest (whether in the form of voting power or participation in profits or capital contribution)of more than 50%. 2.44. "Substitute Options" has the meaning set forth in Section 9.3. 2.45. "Surviving Corporation" means the corporation resulting from a Reorganization Transaction or, if Voting Securities representing at least 50% of the aggregate voting power of such resulting corporation are directly or indirectly owned by another corporation, such other corporation. 2.46. "Termination of Affiliation" occurs on the first day on which an individual is for any reason no longer serving as a Director of the Company. 2.47. "Voting Securities" of a corporation means securities of such corporation that are entitled to vote generally in the election of directors, but not including any other class of securities of such corporation that may have voting power by reason of the occurrence of a contingency. B-4 28 Article 3. Administration 3.1. Committee. Subject to Article 10, and to Section 3.2, the Plan shall be administered by the Board, or a committee of the Board appointed by the Board to administer the Plan ("Plan Committee"). The number of members of the Plan Committee shall from time to time be increased or decreased, and shall be subject to such conditions, in each case as the Board deems appropriate to permit transactions in Shares pursuant to the Plan to satisfy such conditions of applicable securities or other laws then in effect. Any references herein to "Committee" are references to the Board or the Plan Committee, as applicable. 3.2. Powers of Committee. Subject to the express provisions of the Plan, the Committee has full and final authority and sole discretion as follows: to determine the terms and conditions applicable to each Option, Deferral Account, Deferred Share and other benefit hereunder including, but not limited to, the Option Price, the Option Term; to construe and interpret the Plan and to make all determinations necessary or advisable for the administration of the Plan; to make, amend, and rescind rules relating to the Plan, including rules with respect to the exercisability and nonforfeitability of Options and Deferred Shares upon the Termination of Affiliation of an Eligible Director; to determine the terms and conditions of all Option Agreements and, with the consent of the Eligible Director, to amend any such Option Agreement at any time, among other things, to permit transfers of Options to the extent permitted by the Plan; provided that the consent of the Eligible Director shall not be required for any amendment which (i) does not adversely affect the rights of the Eligible Director, or (ii) is necessary or advisable (as determined by the Committee)to carry out the purpose of the grant Options as a result of any new, or change in existing, applicable law; to accelerate the exercisability (including exercisability within a period of less than six months after the Grant Date) of, and to accelerate or waive any or all of the terms and conditions applicable to, any Option or any group of other benefits hereunder for any reason and at any time, including in connection with a Termination of Affiliation; subject to Sections 1.3 and 5.2, to extend the time during which any Option or other benefit may be exercised; to delegate to officers, employees or independent contractors of the Company matters involving the routine administration of the Plan and which are not specifically required by any provision of this Plan to be performed by the Committee; to impose such additional terms and conditions upon the grant, exercise or retention of Options and other grants as the Committee may, before or concurrently with the grant thereof, deem appropriate, and to take any other action with respect to any matters relating to the Plan for which it is responsible. All determinations on any matter relating to the Plan, any Option Agreement, Deferral Election, Deferred Shares Deferral Account, or other agreement under the Plan may be made in the sole and absolute discretion of the Committee, and all such determinations of the Committee shall be final, conclusive and binding on all Persons. No member of the Committee shall be liable for any action or determination made with respect to the Plan or any Annual Option Grant. 3.3. Majority Rule. A majority of the members of the Committee shall constitute a quorum, and any action taken by a majority present at a meeting at which a quorum is present or any action taken without a meeting evidenced by a writing executed by a majority of the whole Committee shall constitute the action of the Committee. 3.4. Company Assistance. The Company shall supply full and timely information to the Committee on all matters relating to Eligible Directors and such pertinent facts related thereto as the Committee may require. The Committee shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties. 3.5. Plan Operation in Compliance with Rule 16b-3 of the 1934 Act. The Plan shall be interpreted and administered to comply with Rule 16b-3 promulgated under the 1934 Act, as then applicable to the Company's employee benefit plans. B-5 29 Article 4. Shares Subject to the Plan 4.1. Number of Shares Available. Subject to adjustment as provided in Section 4.2, the number of Shares hereby reserved for delivery under the Plan is the sum of (a) three hundred thousand (300,000) Shares, and (b) the Shares previously reserved for delivery under the Prior Plan reduced by the number of Shares issued pursuant to Awards under such Prior Plan; provided, that Annual Option Grants made prior to presentation of this Plan for approval by shareholders at the next Annual Meeting of Shareholders following the Effective Date shall be made solely from treasury shares; provided further, that following the presentation for approval at the Annual Meeting of Shareholders, Annual Option Grants shall be made only if shareholders approve the Plan at such meeting. If any Shares (whether subject to or received pursuant to an Annual Option Grant under this or any other Plan, purchased on the open-market or otherwise obtained) are applied as payment to the Company in connection with the exercise of an Annual Option Grant hereunder, or the withholding of taxes related thereto, such Shares shall reduce the number of Shares treated as issued under this Plan. The Committee may from time to time determine the appropriate methodology for calculating the number of Shares issued pursuant to the Plan. 4.2. Adjustments in Authorized Shares. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, subdivision, consolidation or reduction of capital, reorganization, merger, scheme of arrangement, split-up, spin-off or combination involving the Company or repurchase or exchange of Shares or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event that occurs at any time after the Effective Date affects the Shares such that any adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and types of Shares (or other securities or property of the Company or any Person that is a party to a Reorganization Transaction with the Company) with respect to which Options and Shares may be granted, (ii) the number and type of Shares (or other securities or property of the Company or any Person that is a party to a Reorganization Transaction with the Company) subject to outstanding Options, and (iii) the grant or exercise price with respect to any Option or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Option or the substitution of other property for Shares subject to an outstanding Option; provided, that the number of Shares subject to any Option denominated in Shares shall always be a whole number. Article 5. General Conditions of Options 5.1. Grant Date. The Grant Date of Options received (a) pursuant to an Annual Option Grant shall be the date of the Annual Meeting of Shareholders in the calendar year to which such grant relates or such later date as specified by the Committee in the Option Agreement and (b) in lieu of cash in accordance with an Eligible Director's election pursuant to Article 7 shall be the date of the Annual Meeting of Shareholders for the calendar year to which such election related unless otherwise provided in the Option Agreement. 5.2. Term. Subject to the following proviso, the Option Term shall be 10 years from the Grant Date, and shall be subject to earlier termination as herein specified; provided, that any deferral of a cash payment or of the delivery of Shares with respect to an Option that is exercised within ten years may, if so permitted, extend more than 10 years after the Grant Date of the Annual Option Grant to which the deferral relates. 5.3. Option Agreement. The terms and conditions of each Option shall be set forth in an Option Agreement. 5.4. Option Price. The Option Price of an Option under this Plan shall be 100% of the Fair Market Value of a Share on the Grant Date; provided, however, that any Option granted as a Substitute Option pursuant to Section 9.3 may be granted at such Option Price as the Committee determines to be necessary to achieve preservation of economic value as provided in Section 9.3. 5.5. Restrictions on Share Transferability. The Committee may include in the Option Agreement such restrictions on any Shares acquired pursuant to the exercise or vesting of an Option as it may deem advisable, including restrictions under applicable federal securities laws. 5.6. Exercise. Unless otherwise specified in the Option Agreement, Options (whether from an Annual Grant or pursuant to an Eligible Director's election pursuant to Article 7) shall become fully exercisable on the first to occur of the following:(a) the one-year anniversary of the Grant Date, (b) an Eligible Director's death, (c) Termination of Affiliation on account of Disability, (d) a Change of Control of the Company, (e) mandatory retirement upon attaining Mandatory Retirement Age, and (f) retirement B-6 30 upon attaining age 65. 5.7. Payment. Options shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares made by cash, personal check or wire transfer or, subject to the approval of the Committee, any one or more of the following means: Mature Shares, valued at their Fair Market Value on the date of exercise; or pursuant to procedures approved by the Committee, through the sale of the Shares acquired on exercise of the Option through a broker-dealer to whom the Eligible Director has submitted an irrevocable notice of exercise and irrevocable instructions to deliver promptly to the Company the amount of sale or loan proceeds sufficient to pay for such Shares. 5.8. Termination of Affiliation. Except as otherwise provided in an Option Agreement (including an Option Agreement as amended by the Committee), and subject to the provisions of Section 9.1, the extent to which the Eligible Director shall have the right to exercise an Option following Termination of Affiliation shall be determined in accordance with the following provisions of this Section 5.8. For Cause. If an Eligible Director has a Termination of Affiliation for Cause, any unexercised Option shall terminate effective immediately upon such Termination of Affiliation for Cause; On Account of Death, Disability, Retirement or Mandatory Retirement. If an Eligible Director has a Termination of Affiliation on account of death, disability, voluntary retirement on or after attaining age 65 or upon attaining Mandatory Retirement Age, any unexercised Option whether or not exercisable immediately before such Termination of Affiliation, may be exercised, in whole or in part, at any time after such Termination of Affiliation (but in either case only during the Option Term) by the Eligible Director or, after his or her death, by (i)his or her personal representative or the person to whom the Option is transferred by will or the applicable laws of descent and distribution, or (ii) the Eligible Director's beneficiary designated in accordance with Article 8. Involuntary Removal. If an Eligible Director is removed by the Company other than for Cause including, but not limited to, the Company's decision not to reslate such Eligible Director for reelection, any unexercised Option whether or not exercisable immediately before such Termination of Affiliation, may be exercised in whole or in part, at any time within the first six (6) months following such Termination of Affiliation (but only during the Option Term) by the Eligible Director or, after his death or her death, by (i) his or her personal representative or the person to whom the Option is transferred by will or the applicable laws of descent or distribution, or (ii) the Eligible Director's beneficiary designated in accordance with Article 8. Any Other Reason. If an Eligible Director has a Termination of Affiliation for any other reason including, but not limited to, failure to be reelected to the Board or voluntary resignation including failure to run for reelection, any unexercised Option to the extent exercisable immediately before such Termination of Affiliation, shall remain exercisable in whole or in part for six (6) months after such Termination of Affiliation (but only during the Option Term) by the Eligible Director or, after his or her death, by (A) his or her personal representative or the person to whom the Option is transferred by will or the applicable laws of descent and distribution, or (B) the Eligible Director's beneficiary designated in accordance with Article 8. 5.9. Nontransferability of Annual Option Grants. (i) Except as provided in Section 5.9(c) below, each Option shall be exercisable only by the Eligible Director during the Eligible Director's lifetime, or, if permissible under applicable law, by the Eligible Director's guardian or legal representative or by a transferree receiving such Annual Option Grant pursuant to a qualified domestic relations order (a "QDRO") as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974 or the rules thereunder. (ii) Except as provided in Section 5.9(c) below, no Option (prior to the time Shares are issued) may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Eligible Director otherwise than by will or by the laws of descent and distribution or pursuant to a QDRO, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Subsidiary; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. B-7 31 (iii) To the extent and in the manner permitted by the Committee, and subject to such terms and conditions as may be prescribed by the Committee, an Eligible Director may transfer an Option to (i) a spouse, sibling, parent or lineal descendant (including a lineal descendant by adoption) (any of the foregoing, an "Immediate Family Member") of the Eligible Director; (ii) a trust, the primary beneficiaries of which consist exclusively of the Eligible Director or Immediate Family Members, or (iii) a corporation, partnership or similar entity, the owners of which consist exclusively of the Eligible Director or Immediate Family Members of the Eligible Director. Article 6. Annual Option Grants 6.1. Subject to the terms and provisions of this Plan, commencing on the Effective Date and thereafter immediately following the Annual Meeting of Shareholders in each subsequent year, each Eligible Director shall automatically receive an Option to purchase a number of Shares equal to (a) multiplied by (b) and divided by (c) where: (a) equals $15,000 on the Effective Date and thereafter, $25,000, (b) equals four (4) and (c) equals the Fair Market Value of Shares as of the date of the Annual Meeting of Shareholders; provided, that fractional Shares shall be rounded up to the next larger whole number of Shares. An Eligible Director who is not initially elected at the Annual Meeting of Shareholders shall, within ten (10) days of becoming an Eligible Director, receive a pro rata portion of the Annual Option Grant to purchase a number of Shares equal to (x) multiplied by (y) and divided by (z) where: (x) equals $25,000, (y) equals the number of full and partial quarters remaining until the next Annual Meeting of Shareholders and (z) equals the Fair Market Value of Shares as of the Grant Date; provided that fractional Shares shall be rounded up to the next larger whole number of Shares. Article 7. Annual Fees 7.1. Annual Fees. The Company shall pay each Eligible Director an Annual Fee in such amount as may be set by the Board from time to time; provided, that such Annual Fee shall be payable in equal quarterly installments (each an "Quarterly Fee Installment," collectively "Quarterly Fee Installments") on March 31, June 30, September 30, and December 31, commencing on the first such date following the Effective Date and; provided further, that Eligible Directors shall receive such Quarterly Fee Installment only if serving on the Board as an Eligible Director on the date such Quarterly Fee Installment is due and payable. The Annual Fee shall be payable in cash unless an election to receive an alternative form of payment pursuant to Sections 7.2 &7.3 has been properly filed with the Company's secretary as set forth below. 7.2. Alternative Forms of Payment. In lieu of receiving the Annual Fee in cash Quarterly Fee Installments as described in 7.1 above, an Eligible Director may elect in accordance with Section 7.3 to receive all or a portion of the Annual Fee in any one or any combination of the following alternative forms of payment: Shares. An Eligible Director may elect to receive quarterly installments of Shares; provided, that the number of Shares delivered each quarter shall be equal to the portion of the Quarterly Fee Installment subject to such Eligible Director's election and otherwise payable on that date divided by the Fair Market Value of Shares on the date the Quarterly Fee Installment is due; provided further, that only whole Shares shall be delivered to such Eligible Director and the remainder shall be payable in cash; Options. An Eligible Director may elect to receive an Option to purchase a number of Shares equal to (i) the Annual Fee or portion thereof subject to the election, multiplied by (ii) four (4), and (iii) divided by the Fair Market Value of a Share as of the Annual Meeting of Shareholders in the calendar year to which the election relates. Deferred Shares. An Eligible Director may elect to receive Shares on a deferred basis ("Deferred Shares"). Upon an election under this Section 7.2(c), quarterly installments of a number of Shares (including whole and fractional Shares)equal to the amount of the Quarterly Fee Installment subject to such election divided by the Fair Market Value of a Share on the date such Quarterly Fee Installment is due shall be credited to a separate account (the "Deferred Account") on the date such Quarterly Fee Installment is due. The Eligible Director shall specify a date (the "Deferral Date") that is at least two years after the date of such election to receive Shares from the Deferral Account; provided, that Shares in the Deferral Account shall be delivered immediately upon the Eligible Director's Termination of Affiliation for any reason and, provided further, that to the extent the number of Shares to be delivered includes fractional Shares, such fractional Shares, such fractional amounts shall be payable in cash. 7.3. Form of Election. All elections made pursuant to this Article 7 shall be made in accordance with this Section 7.3 as follows: B-8 32 An Eligible Director may elect with respect to any Election Year to receive all or a portion of the Annual Fee due in such Election Year in any of the alternative forms set forth in Section 7.2 above, by completing a form (the "Election Form") designating in increments of at least ten percent (10%) the portion of the Annual Fee due in such Election Year that is subject to such election, identifying the alternative form of payment and, if applicable, the Deferral Date and filing the Election Form with the Company's Secretary. An individual who is an Eligible Director as of the Effective Date of this Plan may make such election with respect to Quarterly Fee Installments not payable as of the date of the election and filing it with the Company's Secretary at any time within the first thirty (30) days following the Effective Date. Such Election shall be irrevocable through the Election Year and remain in effect until the next Election Form is filed. For Election Years commencing after the Effective Date, elections must be made by filing the Election Form prior to the beginning of the Election Year to which such election relates. Such election may be modified or revoked at any time before the beginning of the Election Year to which it relates by filing a new Election Form. Elections shall become irrevocable as of the date of the Annual Meeting of Shareholders at the beginning of the Election Year to which such election relates, remain irrevocable through that Election Year, and shall remain in effect until the next Election Form is filed. An individual who first becomes an Eligible Director at the Annual Meeting of Shareholders at the start of the Election Year or who is appointed or elected at some time after the Election Year commences shall make such election within thirty (30) days of becoming an Eligible Director and shall be effective with respect to any portions of the Annual Fee not due and payable as of the date of the election. Such Election shall be irrevocable through the Election Year and shall remain in effect until the next Election Form is filed. Article 8. Beneficiary Designation Each Eligible Director under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Eligible Director, shall be in a form prescribed by the Company, and will be effective only when filed by the Eligible Director in writing with the Company during the Eligible Director's lifetime. In the absence of such designation, benefits remaining unpaid at the Eligible Director's death shall be paid to the Eligible Director's estate. Article 9. Change of Control and Certain Corporate Transactions 9.1. Change of Control. If a Change of Control occurs, any unexercised Option, whether or not exercisable on the date of such Change of Control, shall thereupon be fully exercisable, in whole or in part. 9.2. Pooling of Interests Accounting. If the Committee determines: that the consummation of a sale or merger of the Company (a "Closing") is reasonably likely to occur but for the circumstances described in this Section; that, based on the advice of the Company's independent accountants and such other factors that the Committee deems relevant, the grant of any Option or exercise of some or all outstanding Options or any other grant hereunder would preclude the use of pooling of interests accounting ("pooling") after the Closing; and the preclusion of pooling can reasonably be expected to have a material adverse effect on the terms of such sale or merger or on the likelihood of a Closing (a "Pooling Material Adverse Effect"), then the Committee may: (i) make adjustments to such Options (including the substitution, effective upon such Closing, of Options denominated in shares or other equity securities of another party to such proposed sale or merger transaction) or other grant prior to the Closing so as to permit pooling after the Closing. (ii) cause the Company to pay the benefits attributable to such Option (including for this purpose not only the spread between the then Fair Market Value of the Shares subject to such Option and the Option Price applicable thereto, but also the B-9 33 additional value of such Options in excess of such spread, as determined by the Committee) or other grant in the form of Shares if such payment would not cause the transaction to remain or become ineligible for pooling; or (iii) provided that the Committee has determined, based on the advice of the Company's independent accountants and such other factors that the Committee deems relevant, that no reasonable alternative is available to the Company to prevent such a Pooling Material Adverse Effect, cancel any or all such Options or other grant without the consent of any affected Eligible Director. 9.3. Substituting Options in Certain Corporate Transactions. In connection with the Company's acquisition, however effected, of another corporation or entity (the "Acquired Entity")or the assets thereof, the Committee may, at its discretion, grant Options ("Substitute Options") associated with the stock or other equity interest in such Acquired Entity ("Acquired Entity Option") held by such Eligible Director immediately prior to such Acquisition in order to preserve for Eligible Director the economic value of all or a portion of such Acquired Entity Option at such price as the Committee determines necessary to achieve preservation of economic value. Any shares issued pursuant to substitute options under this section shall be in addition to the Shares under Section 4.1 hereof. Article 10. Amendment, Modification, and Termination 10.1. Amendment, Modification, and Termination. Subject to the terms of the Plan, the Board may at any time and from time to time, alter, amend, suspend and terminate the Plan in whole or in part without the approval of the Company's stockholders. 10.2. Adjustments Upon Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the terms and conditions of Options in recognition of unusual or nonrecurring events (including the events described in Section 4.2)affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. 10.3. Options Previously Granted. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment or modification of the Plan shall adversely affect in any material way any Option previously granted under the Plan, without the written consent of the Eligible Director who holds such Option, provided that to the extent any Option shall be adversely affected by any amendment or restatement to the Plan, the provisions of the Plan in effect as of the date of Grant of such Option shall prevail. Article 11. Additional Provisions 11.1. Successors. All obligations of the Company under the Plan with respect to benefits granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise of all or substantially all of the business or assets of the Company. 11.2. Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 11.3. Severability. If any part of the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any other part of the Plan. Any Section or part of a Section so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid. 11.4. Requirements of Law. The granting of Options and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or stock exchanges as may be required. Notwithstanding any provision of the Plan or any Option Agreement, Eligible Directors shall not be entitled to exercise and the Company shall not be obligated to deliver any Shares or other benefits to an Eligible Director, if such exercise or delivery would constitute a violation by the Eligible Director or the Company of any applicable law or regulation. 11.5. Notification Under Code Section 83(b). If the Eligible Director, in connection with a grant hereunder makes the election permitted under Section 83(b) of the Code to include in such Eligible Director's gross income in the year of transfer the amounts specified in Section 83(b) of the Code, then such Eligible Director shall notify the Company of such election within B-10 34 10 days of filing the notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code. The Committee may, in connection with the grant or at any time thereafter prior to such an election being made, prohibit an Eligible Director from making the election described above. 11.6. Securities Law Compliance. If the Committee deems it necessary to comply with any applicable securities law, or the requirements of any stock exchange upon which Shares may be listed, the Committee may impose any restriction on Shares acquired pursuant to grants hereunder as it may deem advisable. All certificates for Shares delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the SEC, any stock exchange upon which Shares are then listed, any applicable securities law, and the Committee may cause a legend or legends to be placed on any such certificates to refer to such restrictions. If so requested by the Company, the Eligible Director shall represent to the Company in writing that he or she will not sell or offer to sell any Shares unless a registration statement shall be in effect with respect to such Shares under the Securities Act of 1933 or unless he or she shall have furnished to the Company evidence satisfactory to the Company that such registration is not required. If the Committee determines that the exercise of, or delivery of Shares would violate any applicable provision of securities laws or the listing requirements of any stock exchange upon which any of the Company's equity securities are then listed, then the Committee may postpone any such exercise or delivery, as applicable, but the Company shall use all reasonable efforts to cause such exercise or delivery to comply with all such provisions at the earliest practicable date. 11.7. No Rights as a Stockholder. An Eligible Director shall not have any rights as a stockholder with respect to the Shares which may be deliverable until such shares have been delivered to him or her. 11.8. Governing Law. The Plan shall be construed in accordance with and governed by the laws of the State of Alabama other than its laws respecting choice of law. B-11 35 RUSSELL CORPORATION Alexander City, Alabama PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - April 25, 2001 (This Proxy is solicited by the Board of Directors of the Company) The undersigned shareholder of Russell Corporation (the "Company") hereby appoints Herschel M. Bloom and Margaret M. Porter, and each of them, with full power of substitution, proxies to vote the shares of stock which the undersigned could vote if personally present at the Annual Meeting of Shareholders of Russell Corporation to be held at the general offices of the Company in Alexander City, Alabama, on April 25, 2001 at 11:00 a.m., Central Daylight Time, or any adjournment thereof. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR ELECTION OF THE PERSONS NOMINATED BY THE BOARD OF DIRECTORS AS DIRECTORS AND FOR THE PROPOSAL TO APPROVE THE ADOPTION OF THE RUSSELL CORPORATION 2000 NON-EMPLOYEE DIRECTORS' COMPENSATION PLAN. (CONTINUED AND TO BE SIGNED ON THE OTHER SIDE) - FOLD AND DETACH HERE - PLEASE COMPLETE THIS CARD AND RETURN IT IN THE ENVELOPE PROVIDED 36 Please mark your vote as indicated in this example [X] 1. ELECTION OF DIRECTORS - For terms expiring with the Annual Meeting of Shareholders in 2004: Tim Lewis, C.V. Nalley III, John R. Thomas, John A. White. For a term expiring with the Annual Meeting of Shareholders in 2002: Mary Jane Robertson [ ] FOR all nominees above [ ] WITHHOLD AUTHORITY to vote (except as marked to the contrary) for all nominees above INSTRUCTION: To withhold authority to vote for an individual nominee, write his or her name in the space provided below. - ------------------------------------------------------------------------------- 2. PROPOSAL TO APPROVE THE RUSSELL CORPORATION 2000 NON-EMPLOYEE DIRECTORS' COMPENSATION PLAN [ ] FOR [ ] AGAINST [ ] ABSTAIN WITH RESPECT TO proposal to approve the Russell Corporation 2000 Non-Employee Directors' Compensation Plan as described in the Proxy Statement of the Company dated March 23, 2001. 3. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. ------------------------------------------ ------------------------------------------ Signature(s) of Shareholder Date 2001 -----------------------, PLEASE DATE AND SIGN EXACTLY AS NAME APPEARS ON THIS PROXY. IF SHARES ARE HELD JOINTLY, EACH SHAREHOLDER SHOULD SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC. SHOULD USE FULL TITLE AND, IF MORE THAN ONE, ALL SHOULD SIGN. IF THE SHAREHOLDER IS A CORPORATION, PLEASE SIGN FULL CORPORATE NAME BY AN AUTHORIZED OFFICER. - FOLD AND DETACH HERE - DETACH CARD Please detach proxy at perforation before mailing. VOTE BY MAIL Return your proxy in the POSTAGE-PAID envelope provided Your vote must be received by 5:00 p.m. Eastern Time on April 24, 2001, to be counted in the final tabulation. VOTE BY MAIL Please mark, sign and date your proxy card and return it in the postage-paid envelope provided or return it to: SunTrust, P.O. Box 4625, Atlanta, GA 30302. TO CHANGE YOUR VOTE Any subsequent vote be any means will change your prior vote. The last vote received before 5:00 p.m. Eastern Time, April 24, 2001, will be the one counted. You may also revoke your proxy by voting in person at the Annual Meeting. -----END PRIVACY-ENHANCED MESSAGE-----