FRUIT OF THE LOOM LTD, DEF 14A, 1999-04-14

FRUIT OF THE LOOM LTD
DEF 14A, 1999-04-14
MEN'S & BOYS' FURNISHGS, WORK CLOTHG, & ALLIED GARMENTS

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<PAGE> 1

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

FRUIT OF THE LOOM, LTD.
- --------------------------------------------------------------------------------
(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:

- --------------------------------------------------------------------------------
<PAGE> 2

[FRUIT OF THE LOOM LOGO]

NOTICE OF ANNUAL ORDINARY GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 1999

To the Shareholders of
FRUIT OF THE LOOM, LTD.:

The Annual Ordinary General Meeting of Shareholders of Fruit of the Loom,
Ltd. will be held at 10:00 a.m., Chicago time, on Tuesday, May 18, 1999 at The
Metropolitan Club, 66th Floor, Sears Tower, 233 South Wacker Drive, Chicago,
Illinois, for the following purposes:

(1) To elect seven directors, two directors to be elected by the
holders of Class A ordinary shares and five directors to be elected by the
holders of Class A ordinary shares and the holders of Class B ordinary
shares, voting together as a single class; and

(2) To transact such other business as may properly be brought before
the meeting and any adjournment thereof.

The Board of Directors has fixed the close of business on March 22, 1999 as
the record date for determining shareholders entitled to notice of, and to vote
at, the Annual Ordinary General Meeting.

By order of the Board of Directors,
/s/ JOHN J. RAY III

JOHN J. RAY III
Vice President, General Counsel and
Secretary

April 15, 1999

ALL SHAREHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE FURNISHED FOR THAT PURPOSE.
<PAGE> 3

FRUIT OF THE LOOM, LTD.
c/o 5000 SEARS TOWER
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 876-1724

PROXY STATEMENT

The accompanying proxy is solicited by the Board of Directors of Fruit of
the Loom, Ltd. (the "Company") for use at the Company's Annual Ordinary General
Meeting of Shareholders (the "Annual Meeting") to be held at 10:00 a.m., Chicago
time, on Friday, May 18, 1999 at The Metropolitan Club, 66th Floor, Sears Tower,
233 South Wacker Drive, Chicago, Illinois, and at any adjournment thereof. This
Proxy Statement and the accompanying proxy card are being sent to shareholders
on or about April 15, 1999.

VOTING SECURITIES; PROXIES

The shares represented by your proxy will be voted, and such vote will be
in accordance with the instructions noted on your proxy card. You have the power
to revoke your proxy at any time before it is voted by delivering written notice
to the Secretary of the Company. In addition, shareholders attending the Annual
Meeting may revoke their proxies at that time and vote in person at the Annual
Meeting.

On March 4, 1999, Fruit of the Loom, Inc. ("FOL") became a subsidiary of
the Company, a Cayman Islands holding company, pursuant to a reorganization (the
"Reorganization") approved by the stockholders of FOL on November 12, 1998. In
connection with the Reorganization, all outstanding shares of Class A common
stock of FOL were automatically converted into Class A ordinary shares ("Class A
shares") of the Company and all outstanding shares of Class B common stock of
FOL were automatically converted into shares of exchangeable participating
preferred stock of FOL ("FOL Preferred Stock"). The holders of the FOL Preferred
Stock also received, in the aggregate, four (4) Class B redeemable ordinary
shares ("Class B shares") of the Company. Except as provided by law or the
Company's Amended and Restated Memorandum of Association, the Class B shares, in
the aggregate, have voting rights equal to five (5) times the number of shares
of FOL Preferred Stock held by William Farley and his affiliates then
outstanding. As of March 22, 1999, the record date for the annual meeting, there
were 5,229,421 shares of FOL Preferred Stock outstanding and 66,851,070 Class A
shares outstanding. Each Class B share had voting rights as of March 22, 1999
equivalent to 6,536,776.3 votes per share. All of the outstanding Class A shares
and Class B shares are entitled to vote at the meeting.

PROPOSAL 1

ELECTION OF DIRECTORS

The Company's Amended and Restated Memorandum of Association provides that
holders of Class A shares, voting as a separate class, are entitled to elect
that number of directors constituting at least 25% of the entire board. The
holders of Class A shares and the holders of Class B shares, voting together as
a single class, with each Class A share having one vote and each Class B share
having 6,536,776.3 votes, are entitled to elect the remaining directors. Seven
directors will be elected at the Annual Meeting, two of whom will be elected by
the holders of Class A shares, voting as a separate class, and five of whom will
be elected by the holders of Class A shares and Class B shares, voting together
as a single class. Directors hold office until the next annual meeting of
shareholders or until their successors have been duly elected and qualified.
<PAGE> 4

If no direction to the contrary is given, all proxies received by the Board
of Directors of the Company (the "Board of Directors" or the "Board") from
holders of Class A shares will be voted for the election of the persons shown
below as the nominees of the Board of Directors. The Board of Directors has been
advised that the holders of all Class B shares outstanding intend to vote all
such shares for the election of the persons shown below as the nominees for
election by the holders of Class A shares and Class B shares, voting together as
a single class. It is expected that all of the nominees will be able to stand
for election and be able to serve if elected. In the event that a vacancy in the
slate of nominees should occur before the meeting, proxies will be voted for
another person nominated by the Board of Directors.

INFORMATION AS TO NOMINEES

The following tables set forth information as to the nominees for election
as directors:

NOMINEES FOR ELECTION BY HOLDERS OF CLASS A SHARES

NOMINEES FOR ELECTION BY HOLDERS OF CLASS A SHARES AND
HOLDERS OF CLASS B SHARES

<TABLE>
<CAPTION>
NAME OF NOMINEE AGE POSITION(S) WITH THE COMPANY AND PRINCIPAL OCCUPATION
- --------------- --- -----------------------------------------------------
<S> <C> <C>
William Farley(3)(4)...................... 56 Director; Chairman of the Board, Chief Executive
Officer, President and Chief Operating Officer of the
Company.
Dennis S. Bookshester(1)(2)(3)............ 60 Director; Chairman of Cutanix Corporation.
Henry A. Johnson.......................... 80 Director; President of Henry A. Johnson & Associates.
A. Lorne Weil(2)(4)....................... 53 Director; Chairman of the Board and Chief Executive
Officer of Autotote Corporation.
Sir Brian Wolfson(1)(2)(3)................ 63 Director; Chairman of Natural Health Trends Corp.
</TABLE>

- ---------------

(1) Member of Audit Committee

(2) Member of Compensation Committee

(3) Member of Executive Committee

(4) Member of Pension Committee

William Farley. Mr. Farley, age 56, has been Chairman of the Board, Chief
Executive Officer, President and Chief Operating Officer of the Company since
January 1998. Mr. Farley has been Chairman of the Board and Chief Executive
Officer of FOL since May 1985. In February 1998, Mr. Farley was appointed to the
positions of President and Chief Operating Officer of FOL. For more than five
years, Mr. Farley has also been Chairman and Chief Executive Officer of Farley
Industries, Inc. ("FII"). He has held substantially similar positions with
Farley Inc. for more than the past five years. Mr. Farley has also been Chairman
of the Board of Acme Boot Company, Inc. ("Acme Boot"), a subsidiary of Farley
Inc., for more than the past five years.

Omar Z. Al Askari. Mr. Al Askari, age 49, has been a director of the
Company since January 1998, and has been a director of FOL since October 1993.
Since 1980, Mr. Al Askari has served as President and Chief Executive Officer of
United Technical Services, which sells and services

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<PAGE> 5

engineered products for the oil field and construction industries in the United
Arab Emirates. He also serves as Chief Executive Officer of United Eastern
Investment Corp., which holds investments in privately held companies in the
United States and the United Kingdom. Mr. Al Askari was Chairman of the Board of
Plaid Clothing Group, Inc., a men's tailored clothing business, from October
1991 until December 1996. Plaid Clothing Group, Inc. voluntarily filed for
protection from creditors under Chapter 11 of the Federal Bankruptcy Code in
July 1995.

Dennis S. Bookshester. Mr. Bookshester, age 60, has been a director of the
Company since January 1998, and has been a director of FOL since May 1992. Mr.
Bookshester served as a director of Farley Inc. from February 1997 until June of
1998. Mr. Bookshester currently serves as Chairman of Cutanix Corporation. He is
also a director of Arthur Treachers, Inc., Evans, Inc., Playboy Enterprises,
Inc. and Sundance Homes, Inc.

Henry A. Johnson. Mr. Johnson, age 80, has been a director of the Company
since January 1998, and has been a director of FOL since July 1988. For more
than the past five years, Mr. Johnson has been President of Henry A. Johnson &
Associates, a management consulting firm.

Mark H. McCormack. Mr. McCormack, age 68, has been a director since
January 1998, and has been a director of FOL since September 1997. Mr. McCormack
has been President and Chief Executive Officer of IMG for more than the past
five years. IMG is an athlete representation firm and promotional manager and
owner of worldwide sporting and classical music events. Through its affiliated
companies, IMG produces televised sports programming and distributes sports
television rights. Mr. McCormack is also a Director of Gulfstream Aerospace
Corporation and Planet Hollywood International, Inc.

A. Lorne Weil. Mr. Weil, age 53, has been a director since January 1998,
and has been a director of FOL since October 1991. Since 1990, Mr. Weil has been
Chairman of the Board and Chief Executive Officer of Autotote Corporation, a
manufacturer of products for the gaming industry. He is also a director of
General Growth Properties, Inc.

Sir Brian Wolfson. Sir Brian Wolfson, age 63, has been a director of the
Company since January 1998, and has been a director of FOL since May 1992. Sir
Brian Wolfson currently serves as Chairman of Natural Health Trends Corp. He was
Executive Chairman of Wembley plc., a company engaged in the sports and
entertainment industry, from January 1986 until September 1995. He is also a
director of Autotote Corporation and Playboy Enterprises, Inc.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL OF THE
NOMINEES FOR ELECTION AS DIRECTORS.

BOARD MEETINGS AND COMMITTEES

The Board of Directors has an Audit Committee, a Compensation Committee, an
Executive Committee and a Pension Committee. The Board does not have a standing
nominating committee.

The Audit Committee oversees the establishment and review of the Company's
internal accounting controls, determines the Company's audit policies, reviews
audit reports and recommendations made by the Company's internal auditing staff
and its independent auditors, meets with the Company's independent auditors,
oversees the Company's independent auditors and recommends the engagement of the
Company's independent auditors.

The Compensation Committee establishes, implements and monitors the
Company's strategy, policies and plans for the compensation and benefits of all
executive officers of the Company. The Compensation Committee administers the
Company's 1987 Stock Option Plan, the Company's Executive Incentive Compensation
Plan (the "1994 Plan"), the Company's 1995 Executive Incentive Compensation Plan
(the "1995 EICP") and the Company's 1996 Incentive Compensation Plan (the "1996
ICP"). The Compensation Committee, among other things, determines the persons

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<PAGE> 6

to whom stock options, stock appreciation rights and long-term incentives are
granted and the price and/or terms of such options, rights and incentives.

The Executive Committee may exercise the powers of the Board of Directors
(other than certain powers specifically reserved to the full Board of Directors)
in the management of the business and affairs of the Company in the intervals
between meetings of the full Board of Directors.

The Pension Committee establishes, implements and manages the benefits
provided under the Company's qualified pension and 401(k) plan.

In 1998, Messrs. Al Askari, Bookshester and Wolfson served on the Audit
Committee; Messrs. Bookshester, Weil and Wolfson served as members of the
Compensation Committee; Messrs. Bookshester, Farley and Wolfson served as
members of the Executive Committee, and Messrs. Farley, McCormack and Weil
served as members of the Pension Committee.

During 1998, the Board of Directors held eight meetings, the Audit
Committee held four meetings, the Compensation Committee held six meetings and
the Executive Committee met once. The Pension Committee, which was formed in
1998, did not meet during that year. During 1998, all of the incumbent directors
except Mr. McCormack attended greater than 75% of the total number of meetings
of the Board of Directors. During 1998, all of the incumbent directors attended
greater than 75% of the total number of meetings of any committees of the Board
on which they served.

COMPENSATION OF DIRECTORS

Each director who is not also an employee of the Company receives an annual
cash retainer of $41,000 and receives $1,000 for each meeting of the Board of
Directors that he attends and $1,000 for each committee meeting that he attends,
except as otherwise established. Non-employee directors may elect to forego all
or a portion of their annual cash retainers for a specified period in exchange
for option grants. Effective February 13, 1997, certain non-employee directors
elected to forego one-half of their annual cash retainers for a four-year period
and, in exchange, each received a ten-year, non-qualified option grant effective
February 13, 1997 to purchase 10,000 shares of Class A shares at $41.00 per
share. Such options vest monthly at the rate of 2.083% per month commencing
April 1, 1998. Under the Company's 1995 Non-Employee Director Stock Plan (the
"1995 Directors Plan"), each new non-employee director receives an initial grant
of 2,500 restricted stock units to be settled by delivery of Class A shares or
an amount of cash equal to the closing price as of the settlement date. Each
continuing director receives an annual grant of 2,500 restricted stock units.
Restricted stock units vest after a two-year service period.

The Company provides no retirement benefits to non-employee directors.
Directors who are also employees of the Company receive no additional
compensation from the Company for services rendered in their capacity as
directors.

* * *

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<PAGE> 7

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number of Class A shares and Class B
shares, the percentage of each class and the percentage of total voting power of
the Company beneficially owned as of March 22, 1999 by (i) each director of the
Company, (ii) the Named Officers appearing in the table below (as defined on
page 8), (iii) all directors and current executive officers as a group, and (iv)
to the knowledge of the Board of Directors, each person owning more than 5% of a
class of the Company's voting securities. Except as otherwise indicated, each
beneficial owner has sole voting and investment power. This table reflects
shares issuable upon the exercise of options which are exercisable within 60
days of March 22, 1999.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
--------------------- ----------------------------------
PERCENT OF
PERCENT PERCENT TOTAL VOTING
NUMBER OF CLASS NUMBER OF CLASS POWER(1)
--------- -------- ------ -------- ------------
<S> <C> <C> <C> <C> <C>
FMR Corp...................... 1,861,425(2) 2.8% -- -- 2.0%
82 Devonshire Street
Boston, MA 02109
Merrill Lynch & Co.
Incorporated................ 4,665,419(3) 7.0% -- -- 5.0%
World Financial Center,
North Tower
250 Versey Street
New York, NY 10381
Dreman Value
Management, LLC............. 3,869,815(4) 5.8% -- -- 4.2%
10 Exchange Place
Jersey City, NY 07302
J.P. Morgan & Co.
Incorporated................ 2,769,300(5) 4.1% -- -- 3.0%
60 Wall Street
New York, NY 10260
Farley Inc.................... 454,855 0.7% 2.08 52.0% 15.1%
5000 Sears Tower
233 South Wacker Drive
Chicago, IL 60606
William Farley................ 1,778,780(6) 2.7%(7) 1.92 48.0% 15.4%
5000 Sears Tower
233 South Wacker Drive
Chicago, IL 60606
Omar Z. Al Askari............. 21,624(8) * -- -- *
Dennis S. Bookshester......... 21,499(9) * -- -- *
Henry A. Johnson.............. 16,000(10) * -- -- *
Mark McCormack................ -- * -- -- *
A. Lorne Weil................. 20,124(11) * -- -- *
Sir Brian Wolfson............. 13,500(12) * -- -- *
Brian J. Hanigan.............. 24,042(13) * -- -- *
Richard C. Lappin............. 428,245(14) * -- -- *
G. William Newton............. 29,145(15) * -- -- *
John J. Ray III............... 11,666(16) * -- -- *
John W. Salisbury, Jr......... 47,986(17) * -- -- *
Felix Sulzberger.............. 33,333(18) * -- -- *
Larry K. Switzer.............. 269,267(19) * -- -- *
Edgar Turner.................. 16,666(20) * -- -- *
</TABLE>

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<PAGE> 8

- ---------------

* Less than 1%

(1) Each Class A share has one vote and each Class B share has 6,536,776.3
votes. This column shows the combined voting power of all Class A shares
and Class B shares beneficially owned by each of the listed persons.

(2) As reported on a Schedule 13G filed by FMR Corp., Edward C. Johnson 3d and
Abigail P. Johnson on March 10, 1999. According to such Schedule 13G, FMR
Corp. has sole voting power over 48,025 shares and sole dispositive power
over 1,861,425 shares. Edward C. Johnson 3d and Abigail P. Johnson have
shared and sole dispositive power over 1,861,425 shares.

(3) As reported on a Schedule 13G filed by Merrill Lynch & Co. Incorporated on
February 8, 1999. According to such Schedule 13G, Merrill Lynch & Co.
Incorporated has shared and dispositive power over 4,665,419 shares.

(4) As reported on a Schedule 13G filed by Dreman Value Management L.L.C. on
January 22, 1999. According to such Schedule 13G, Dreman Value Management,
L.L.C. has sole voting power over 216,455 shares, shared voting power over
108,800 shares and sole dispositive power over 3,869,815 shares.

(5) As reported on a Schedule 13G filed by J.P. Morgan & Co. Incorporated on
December 31, 1998. According to such Schedule 13G, J.P. Morgan & Co.
Incorporated has sole voting power over 1,953,000 shares, shared voting
power of 1,500 shares, sole dispositive power over 2,765,500 shares and
shared dispositive power over 2,900 shares.

(6) Excludes 4,980,501 Class A shares issuable upon the exchange of Mr.
Farley's and Farley Inc.'s FOL Preferred Stock for the Company's Class A
shares, which are exchangeable based upon the ratio of .9524 Class A shares
for each share of FOL Preferred Stock exchanged. Includes 1,778,760 Class A
shares currently issuable upon exercise of options granted to Mr. Farley
under the Company's stock option plans. Excludes 995,864 Class A shares
held by a master trust, which includes the assets of the pension plans of
all affiliated companies managed by Mr. Farley, the voting of which shares
is controlled or managed by Mr. Farley in his capacity as the investment
committee with respect to each such plan. Mr. Farley disclaims beneficial
ownership of the shares held in the master trust.

(7) Excludes 2.08 Class B shares owned by Farley Inc. shown elsewhere in the
table. Also excludes 454,855 Class A shares owned by Farley Inc. shown
elsewhere in the table. Mr. Farley owns 100% of the stock of Farley Inc.

(8) Includes 5,000 Class A shares held by United Technical Services and 1,000
Class A shares held by United Eastern Investment Corp. (both companies are
controlled by Mr. Al Askari). Includes 14,999 Class A shares currently
issuable upon the exercise of options granted to Mr. Al Askari by the
Company.

(9) Includes 1,000 Class A shares which are owned by the Dennis S. Bookshester
Revocable Trust dated February 17, 1989. Includes 17,499 Class A shares
currently issuable upon the exercise of options granted to Mr. Bookshester
by the Company.

(10) Includes 1,000 Class A shares owned by Mr. Johnson's spouse, the beneficial
ownership of which is disclaimed by Mr. Johnson. Includes 12,500 Class A
shares currently issuable upon the exercise of options granted to Mr.
Johnson by the Company.

(footnotes continue on the following page)

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<PAGE> 9

(11) Includes 17,499 Class A shares currently issuable upon the exercise of
options granted to Mr. Weil by the Company.

(12) Includes 12,500 Class A shares currently issuable upon the exercise of
options granted to Sir Brian Wolfson by the Company.

(13) Includes 24,042 Class A shares currently issuable upon the exercise of
options granted to Mr. Hanigan by the Company.

(14) Includes 31,700 Class A shares held jointly with his spouse and 396,545
Class A shares currently issuable upon the exercise of options granted to
Mr. Lappin by the Company.

(15) Includes 28,104 Class A shares currently issuable upon the exercise of
options granted to Mr. Newton by the Company.

(16) Includes 11,666 Class A shares currently issuable upon the exercise of
options granted to Mr. Ray by the Company.

(17) Includes 41,666 Class A shares currently issuable upon the exercise of
options granted to Mr. Salisbury by the Company.

(18) Includes 33,333 Class A shares currently issuable upon the exercise of
options granted to Mr. Sulzberger by the Company.

(19) Includes 269,267 Class A shares currently issuable upon the exercise of
options granted to Mr. Switzer by the Company.

(20) Includes 16,666 Class A shares currently issuable upon the exercise of
options granted to Mr. Turner by the Company.

(21) Includes 21,666 Class A shares currently issuable upon the exercise of
options granted to Mr. Tyra by the Company.

(22) Includes 2,030,920 Class A shares currently issuable upon the exercise of
options granted by the Company and 1,000 Class A shares owned by the spouse
of a director, beneficial ownership of which is disclaimed by such
director.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Act"), requires the Company's officers, directors and persons who beneficially
own greater than 10% of a registered class of the Company's equity securities to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC"). Based solely on a review of the forms it has
received and on representations from certain reporting persons that no such
forms were required for them, the Company believes that during 1998 all Section
16(a) filing requirements applicable to its officers, directors and 10%
beneficial owners were complied with by such persons, except that due to
administrative error, Mr. Newton filed a late Form 4 with respect to a stock
option exercise and sale.

EXECUTIVE COMPENSATION

INTRODUCTION

The following table provides information concerning the annual and
long-term compensation amounts for the fiscal years ended January 2, 1999 and
December 31, 1997 and 1996 of those persons who were at January 2, 1999 (i) the
Chief Executive Officer, (ii) the four other most highly compensated executive
officers of the Company (collectively, with the Chief Executive Officer, the
"Named Officers") and (iii) two other individuals who would have been considered
as the most highly compensated executive officers of the Company if they were
executive officers as of January 2, 1999. No other individuals are required to
be included in the table. For convenience of reference, the Summary Compensation
Table set forth herein and compensation and stock ownership data set forth
elsewhere in this proxy statement refers only to the Company, notwithstanding
that payments or benefits were directly paid from FOL, a subsidiary of the
Company
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<PAGE> 10

subsequent to the Reorganization. Prior to the Reorganization, the executive
officers of the Company were executive officers of FOL. In connection with the
Reorganization, the Company assumed all of the benefit and stock based
compensation programs of FOL.

For Messrs. Lappin and Switzer, the compensation figures in the table for
1996 represent the total compensation paid by FII to such Named Officers who
were employees of FII until March 31, 1996 and the total compensation paid by
FOL to such Named Officers from April 1 to December 31, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- -----------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ LTIP
NAME AND SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS ALL OTHER
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (# SHARES) ($) COMPENSATION
- ------------------ ---- -------- ---------- ------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William Farley............... 1998 $550,000(1) $ 0 $238,289(2) $ 0 1,545,800 $ 0 $ 21,775(3)
Chairman of the Board, 1997 0 0 145,591 0 940,000 0 19,377
Chief Executive Officer, 1996 950,000 1,900,000 152,786 5,757,000 605,800 2,317,163 30,057
President and Chief
Operating Officer
Felix Sulzberger............. 1998 365,000 50,000 83,114(4) 0 25,000 0 0
President -- European 1997 48,139 0 325,000 861,875 75,000 0 0
Operations
Larry K. Switzer............. 1998 369,231 0 6,431(6) 0 0 0 1,070,786(7)
Former Executive Vice 1997 599,615 0 28,107 0 176,000 0 4,130
President and Chief 1996 500,000 585,000 35,513 1,969,500 134,000 605,325 14,743
Financial Officer(5)
John W. Salisbury, Jr........ 1998 350,000 50,000 60,383(8) 0 175,000 0 0
President -- Retail 1997 107,692 75,000 16,104 0 75,000 0 0
Richard C. Lappin............ 1998 285,827 0 8,809(9) 0 0 0 9,510(3)
Former President and 1997 834,760 0 31,860 0 293,500 0 7,917
Chief Operating Officer(5) 1996 775,000 976,500 230,926 3,287,550 231,600 834,300 41,000
G. William Newton............ 1998 250,000 50,000 13,502(10) 0 37,567 0 10,380(3)
Vice President -- 1997 250,000 15,000 62,108 0 12,500 0 684
Finance, Acting Chief 1996 250,000 202,500 5,340 782,400 45,200 0 617
Financial Officer
Vincent J. Tyra.............. 1998 250,000 50,000 14,607(11) 0 110,000 0 0
President -- Activewear 1997 76,923 75,000 34,566 0 35,000 0 0
</TABLE>

- ---------------

(1) Mr. Farley elected to forego $950,000 of salary earned as Chairman of the
Board and Chief Executive Officer in 1997, 1998 and 1999 in consideration
of the grant of options in 1997 under the terms of the Executive Equity
Investment Program. In fiscal year 1998, Mr. Farley assumed the additional
duties of President and Chief Operating Officer for which the Board agreed
to increase his compensation to the annual rate of $1,500,000. Because he
agreed to forego $950,000 of salary, he received $550,000 in fiscal year
1998.

(2) Includes $108,524 of tax reimbursements, $86,634 of estate planning fees
and other payments.

(3) Represents split dollar and term life insurance premiums paid by the
Company for the benefit of Messrs. Farley, Lappin and Newton and, in the
case of Mr. Newton, $9,608 in earnings on deferred compensation.

(4) Includes housing and car allowances of $42,349 and $25,473, respectively,
and other payments.

(footnotes continue on the following page)

8
<PAGE> 11

(5) Messrs. Lappin and Switzer ceased to be executive officers in January 1998
and August 1998, respectively.

(6) Includes medical, dental and tax reimbursements.

(7) Includes severance payments of $1,068,806 paid to Mr. Switzer in 1998 and
split dollar life insurance premiums.

(8) Includes $28,863 of tax reimbursements, $29,136 in relocation expense
reimbursement and other payments.

(9) Includes $6,175 of tax reimbursement and reimbursement of deductible for
medical and dental plan.

(10) Includes $12,238 paid to Mr. Newton in lieu of participation in the
Company's qualified deferred contribution plan and other perquisites.

(11) Includes $7,165 of tax reimbursements and $7,293 in use of Company
automobile and other payments.

OPTION GRANTS IN 1998

The following table sets forth certain information concerning stock options
granted during 1998 by the Company to the Named Officers. The hypothetical grant
date present values shown in the last column below for stock options granted in
1998 are presented pursuant to the rules of the SEC and are calculated under the
Modified Black-Scholes Option Pricing Model for pricing options. The Company is
not aware of any model or formula that will determine with reasonable accuracy
present values for stock options. The actual pre-tax amount, if any, realized
upon the exercise of any stock option will depend upon the excess, if any, of
the market price of the Class A shares over the exercise price per share of the
stock option at the time the stock option is exercised. There is no assurance
that the hypothetical present values of the stock options reflected in this
table will be realized. The Company did not grant any stock appreciation rights
in 1998.

INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE PRESENT VALUE(2)
NAME GRANTED(#) FISCAL YEAR(1) ($/SHARE) EXPIRATION DATE ($)
- ---- ---------- -------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
William Farley........... 1,545,800(3) 38.3% $19.125 11/10/2002 $8,246,225
Richard C. Lappin........ -- --
Larry K. Switzer......... -- --
Felix Sulzberger......... 25,000(4) 0.8% $30.125 2/24/2008 348,375
John W. Salisbury, Jr.... 50,000(4) 1.2% $30.125 2/24/2008 696,750
125,000(3) 3.1% $19.125 11/10/2002 666,825
G. William Newton........ 5,000(5) 0.1% $30.125 2/24/2008 69,675
32,567(3) 0.8% $19.125 11/10/2002 173,732
Vincent J. Tyra.......... 30,000(4) 0.7% $30.125 2/24/2008 418,050
15,000(6) 0.4% $19.188 9/10/2008 137,987
65,000(3) 1.6% $19.125 11/10/2002 346,749
</TABLE>

- ---------------

(1) Options were granted to employees during 1998 to purchase a total of
4,037,059 shares.

(2) The hypothetical grant date present values are calculated under the modified
Black-Scholes Option Pricing Model, which is a mathematical formula used to
value options traded on stock

(footnotes continue on the following page)

9
<PAGE> 12

exchanges. This formula considers a number of factors in hypothesizing an
option's present value. Range of factors used to value 1998 option grants
include the stock's expected volatility rate (53.0%, 38.9% and 44.3% for
those options expiring November 10, 2002, February 24, 2008 and September
10, 2008, respectively), risk free rate of return (4.50%, 5.64% and 4.66%
for those options expiring November 10, 2002, February 24, 2008 and
September 10, 2008, respectively), dividend yield (0% for all options),
projected time of exercise (3.5 years for those options expiring November
10, 2002, and 7 years for those options expiring February 24, 2008 and
September 10, 2008) and projected risk of forfeiture rate for vesting
period (5% per annum).

(3) These special options were granted under the 1995 EICP for a four-year term
at an exercise price equal to 120% of the closing price of the Class A
shares on the date of grant and become exercisable in three equal annual
installments beginning on November 10, 1999.

(4) These options were granted under the 1996 ICP for a ten-year term at an
exercise price equal to 100% of the closing price of the Class A shares on
the date of grant and become exercisable in three equal annual installments
beginning on February 24, 1999.

(5) This option was granted under the 1995 EICP for a ten-year term at an
exercise price equal to 100% of the closing price of the Class A shares on
the date of grant and becomes exercisable in three equal annual
installments beginning on February 24, 1999.

(6) This option was granted under the 1995 EICP for a ten-year term at an
exercise price equal to 100% of the closing price of the Class A shares on
the date of grant and becomes exercisable in three equal annual
installments beginning on September 10, 1999.

AGGREGATED OPTION/SAR EXERCISES IN 1998
AND 1998 FISCAL YEAR-END OPTION/SAR VALUES

The following table sets forth certain information concerning the number
and value of stock options held by the Named Officers at January 2, 1999. None
of the Named Officers received any Company stock appreciation rights in 1998.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTION/SARS AT OPTIONS/SARS AT
SHARES JANUARY 2, 1999(#) JANUARY 2, 1999(1)($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William Farley............. -- -- 1,342,847 2,634,983 $ 0 $ 0
Richard C. Lappin.......... -- -- 396,545 0 0 0
Larry K. Switzer........... -- -- 269,267 0 0 0
Felix Sulzberger........... -- -- 25,000 75,000 0 0
John W. Salisbury, Jr...... -- -- 25,000 225,000 0 0
G. William Newton, Jr...... 25,275 $327,000 7,204 67,043 0 0
Vincent J. Tyra............ -- -- 11,666 133,334 0 0
</TABLE>

- ---------------

(1) Values are calculated by subtracting the exercise price from the closing
price of Class A shares on the New York Stock Exchange on December 31, 1998
(the last trading day of the 1998 fiscal year), which was $13.8125.

PENSION PLANS

All of the Company's executive officers are covered by the qualified
pension plan for the Company's operating company employees (the "Pension Plan")
and the nonqualified excess benefit plan which covers certain employees of FOL
(the "Supplemental Benefit Plan," together

10
<PAGE> 13

with the Pension Plan referred to as the "FOL Plan"). The Pension Plan covers
all employees of the Company and its participating subsidiaries after the
completion of one year of service and the attainment of age 21.

The following table indicates the approximate amounts of annual retirement
income that would be payable under the FOL Plan to the Company's executive
officers based on various assumptions as to compensation and years of service
for certain employees, assuming benefits are computed under a straight life
annuity formula and assuming benefits are not restricted due to limitations
imposed by Sections 401(a)(17), 401(a)(5) and 401(1) or 415 of the Internal
Revenue Code of 1986, as amended (the "Code"), discussed below. These amounts do
not assume any offsets under the retirement plan of Farley Inc. in which Mr.
Farley participated prior to January 1, 1992 and in which Mr. Lappin
participated prior to April 1, 1996. There is no social security or other offset
deducted from the amounts shown.

PENSION PLAN TABLE(1)(2)

<TABLE>
<CAPTION>
15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
COMPENSATION OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 300,000...................... $ 81,298 $108,397 $135,496 $145,658 $155,821
400,000...................... 109,798 146,397 182,996 196,721 210,446
500,000...................... 138,298 184,397 230,496 247,783 265,071
600,000...................... 166,798 222,397 277,996 298,846 319,696
700,000...................... 195,298 260,397 325,496 349,908 374,321
800,000...................... 223,798 298,397 372,996 400,971 428,946
900,000...................... 252,298 336,397 420,496 452,033 483,571
1,000,000...................... 280,798 374,397 467,996 503,096 538,196
1,100,000...................... 309,298 412,397 515,496 554,158 592,821
1,200,000...................... 337,798 450,397 562,996 605,221 647,446
1,300,000...................... 366,298 488,397 610,496 656,283 702,071
1,400,000...................... 394,798 526,397 657,996 707,346 756,696
1,500,000...................... 423,298 564,397 705,496 758,408 811,321
1,600,000...................... 451,798 602,397 752,996 809,471 865,946
1,700,000...................... 480,298 640,397 800,496 860,533 920,571
1,800,000...................... 508,798 678,397 847,996 911,596 975,196
</TABLE>

- ---------------

(1) Assumes individual retires at age 65 on December 31, 1998 with indicated
years of service and further assumes covered compensation as it was
determined in 1998, which was $31,200, as updated each year by the Internal
Revenue Service for annual covered compensation. The annual covered
compensation for 1999 will increase to $33,100.

(2) Maximum pension limits for 1996, 1997, 1998 and 1999 under Section 415 of
the Code, were $120,000, $125,000, $130,000 and $130,000 respectively.
Amounts in excess of these limits are paid under the Supplemental Benefit
Plan.

Contributions to the Pension Plan, which are made by the Company and its
participating subsidiaries, are computed on an actuarial basis and, as such,
individual employee payments or accruals cannot be calculated. Compensation
covered by the Pension Plan generally consists of all compensation paid to a
participant for personal services rendered as an employee of the Company or a
participating subsidiary, but excludes bonuses, deferred compensation and
certain other payments under benefit programs. Compensation used to determine
benefits under the FOL Plan for each of the Named Officers for 1998 equals the
respective amounts shown in the Salary column of the Summary Compensation Table.
The Pension Plan provides that participants' benefits fully vest after five
years of service or the attainment of age 65.

11
<PAGE> 14

The Pension Plan retirement benefits are computed at the rate of 1% of a
participant's final average base compensation (the average of the highest five
consecutive full plan years of base compensation during the last ten plan years
of service) plus either .75%, .70% or .65% (depending on the participant's
social security retirement age) of the participant's final average base
compensation in excess of the average social security wage base for the 35-year
period preceding the participant's social security retirement age. The resulting
sum is multiplied by the participant's years of service up to 25 years and is
then increased by 1.5% for each year of service over 25 years.

Under Section 401(a)(17) of the Code, a participant's compensation under a
qualified retirement plan was limited to a maximum annual amount of $160,000 for
1998. For 1999, this amount remains at $160,000. Amendments made to Sections
401(a)(5) and 401(l) of the Code by the Omnibus Budget Reconciliation Act of
1993 reduced the amount of permitted disparity between benefits provided under a
qualified pension plan with respect to a participant's compensation up to the
average social security wage base and the benefits provided with respect to
compensation above the average social security wage base. Under Section 415 of
the Code, a participant's annual benefit was limited to $130,000 for 1998 and
1999. For officers of the Company, any reduction in benefits under the Pension
Plan caused by these three limitations will be made up dollar-for-dollar by
benefits under the Supplemental Benefit Plan. Non-officer participants in the
Pension Plan will receive benefits under the Supplemental Benefit Plan in an
amount equal to the reduction in benefits under the Pension Plan attributable to
Section 401(a)(17) of the Code limitation on compensation and Section 415 of the
Code limitation on annual pension benefits.

The estimated number of years of service credited for Messrs. Farley,
Sulzberger, Salisbury, Newton and Tyra under the FOL Plan is 16, 1, 1, 4 and 1
years, respectively. Years of service for Mr. Farley includes his years of
service with FII.

The Company established the Supplemental Executive Retirement Plan (the
"FOL SERP") on January 1, 1995 for certain officers, including Messrs. Farley
and Newton.

The FOL SERP provides for retirement benefits equal to the excess of (a)
over (b), where: (a) equals the product of 1.9% of the participant's final
average FOL SERP compensation (the average of the highest five consecutive full
plan years of base compensation plus short-term bonuses during the last ten plan
years of service, without applying the dollar limitation of Section 401(a)(17)
of the Code and the number, not in excess of 25, of the Participant's Benefit
Accrual Years of Service (defined as the sum of (1) the number of years of
service after December 31, 1994 that would be credited to the participant under
the Pension Plan and (2) the number of additional years of service credited to
the participant by the Compensation Committee), increased by 1.5% for each
Benefit Accrual Year of Service in excess of 25; and (b) equals the
participant's primary social security benefit. The FOL SERP benefit is further
reduced by a portion of the benefit paid under the FOL Plan and the Farley Inc.
retirement plan in the case of Messrs. Farley and Lappin.

The estimated annual benefits payable under the FOL SERP upon retirement at
normal retirement age, assuming pay increases of 5% per year, for Messrs. Farley
and Newton are $1,241,410 and $146,138, respectively. In connection with Mr.
Switzer's termination, he received benefits under the FOL SERP in the amount of
$1,266,834 and benefits under the Supplemental Benefit Plan in the amount of
$177,132.

Additional Benefit Accrual Years of Service were given to selected
participants in the FOL SERP. The estimated number of Benefit Accrual Years of
Service at December 31, 1998 credited for Messrs. Farley and Newton are 20 and 8
years, respectively.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements (each an "Agreement" and
collectively, the "Agreements") with certain of the officers, including certain
of its executive officers. The Agreements generally provide for payment of an
annual base salary that will be reviewed each year

12
<PAGE> 15

and may not be decreased from the amount in effect in the previous year. The
Agreements also give the participating officer the right to continue to
participate in employee benefit programs at not less than historical levels, and
in the case of Mr. Farley, life insurance equal to ten times his annual rate of
base salary. The Agreements impose on the officers certain post-termination
non-competition and confidentiality obligations. The Agreements require officers
to devote substantial time to the Company's business, consistent with their
duties, but permits them to devote time to other business interests as well, as
limited by the terms of the Agreement.

The Agreements provide for certain payments and benefits upon termination
of employment in addition to those previously accrued. If employment terminates
due to normal retirement, approved early retirement, death or disability, the
participating officers will receive: (i) in lieu of annual incentive
compensation for that year, an amount equal to the average annual incentive
compensation paid in the three preceding years or executive's target annual
incentive compensation, if greater, prorated to reflect the part of the year
completed before termination, (ii) in settlement of outstanding long-term
incentives such as performance shares or units, cash calculated assuming maximum
performance in case of death or disability, or target performance in case of
retirement, prorated to reflect the part of the performance period completed
before termination and with vesting accelerated and (iii) in case of disability,
continued participation in employee benefit plans until age 65.

In the case of Mr. Farley, if his employment is terminated by the Company
other than for cause or by Mr. Farley for good reason, Mr. Farley will receive:
(i) if such termination precedes a change in control, an amount equal to his
then-current rate of annual salary plus the average of the annual incentive
compensation awards paid to him in the three years prior to his termination, or
if Mr. Farley did not receive incentive compensation in such years, the target
annual incentive compensation in such years, multiplied by five, reduced pro
rata to the extent the number of full months remaining until Mr. Farley reaches
age 65 is less than sixty months, plus the amount specified in clause (i) of the
preceding paragraph; or (ii) if termination follows a change in control, an
amount equal to his then-current rate of annual salary plus an amount equal to
the greater of the average of the three highest annual incentive compensation
awards paid to him during the last ten calendar years or the current maximum
annual incentive opportunity reduced pro rata to the extent the number of full
months remaining until Mr. Farley reaches age 65 is less than 60 months,
multiplied by five, plus the amount specified in clause (i) of the preceding
paragraph, except the amount shall not be subject to proration.

In the case of other participating officers, if their employment is
terminated by the Company other than for cause, or by the participating
executive for good reason, such officer will receive: (x) if such termination
precedes a change in control, an amount equal to his then current salary plus an
assumed annual incentive of 50% thereof ("Total Severance"), multiplied by two;
and (y) if such termination follows a change in control, an amount equal to his
Total Severance multiplied by three. In the case of Mr. Farley and other
participating officers, if such termination follows a change in control, a
lump-sum cash payment of the present value of accrued benefits under any
supplemental pension plan if such benefits are not fully funded or secured, and
continued participation in employee benefit plans for three years (five years in
the case of Mr. Farley). If payments following a change in control are subject
to the "golden parachute" excise tax, the Company will pay Mr. Farley and the
participating officers an additional "gross-up" amount so that their after-tax
benefits are the same as if no excise tax had applied. The Company must continue
indemnification and officers' and directors' liability insurance during the
officer's employment and for up to six years thereafter and reimburse the
officers for expenses incurred in good faith in enforcing the Agreement. Mr.
Sulzberger has an agreement providing that if his employment is terminated,
other than for cause, he is entitled to receive two years salary continuation,
plus any unvested shares of restricted stock previously granted to him become
fully vested.

13
<PAGE> 16

COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION

GENERAL

The Compensation Committee is composed entirely of outside independent
directors, none of whom is currently or was formerly an officer or employee of
the Company or any of its subsidiaries or affiliates.

The Compensation Committee is responsible for establishing, implementing
and monitoring the Company's strategy, policies and plans for the compensation
of all executive officers of the Company. The Company's strategy is (i) to
attract high-caliber management talent at both the entry and mid-career levels
to meet the organization's executive resource needs, (ii) to retain
top-performing executives at the corporate level and in each of the subsidiaries
and business units, (iii) to provide compensation opportunities that are fair
and competitive with those provided by comparable organizations, (iv) to
motivate and reward its executives based on corporate, subsidiary, business unit
and individual annual and long-term business performance, strategic progress and
the creation of shareholder value, (v) to create a mutuality of interest with
the Company's shareholders, by linking a major portion of total compensation to
the business and stock performance of the Company, and (vi) to ensure that the
Company's compensation expenditures are cost and tax-effective and in compliance
with applicable regulatory requirements.

In accordance with the responsibilities delegated by, and subject to the
oversight of, the Board of Directors, at the beginning of each year the
Compensation Committee reviews the Company's overall corporate strategy and
objectives which are subject to approval by the Board of Directors. These form
the basis both for supporting corporate, subsidiary and business unit annual
performance goals which are subject to Compensation Committee review and
approval at the beginning of each year and for executive officer performance
initiatives. Based on this review, the Compensation Committee in its sole
discretion determines the Company's total compensation structure for the year,
including the elements and level of compensation opportunities and the variable
portion of "at risk" pay for performance and equity participation in light of
marketplace pay levels and practices. After year-end, results achieved and
strategic progress at the corporate, subsidiary, business unit and individual
levels are assessed by the Compensation Committee, relative to previously
approved goals and taking into consideration prevailing economic and business
conditions and opportunities, performance by comparable organizations and
shareholder value. No particular weightings are assigned by the Compensation
Committee to any such factors.

The Compensation Committee has been assisted in its review and evaluation
by executive compensation consultants retained by the Compensation Committee to
serve as outside experts in the discharge of its responsibilities. The
consultants provide advice to the Compensation Committee with respect to the
effectiveness, appropriateness and regulatory compliance status of the Company's
executive incentive plans, and the competitiveness of compensation paid to
executive officers of the Company, including the Chief Executive Officer. In
doing so, the consultants review with the Compensation Committee survey data
regarding compensation practices and payments by comparable organizations and
the relationship of executive officer pay to performance and shareholder value.
The comparator organizations selected by the Compensation Committee for this
purpose include (i) seven major apparel companies, six of which are included in
the Value Line Apparel Industry Index appearing in the Performance Graph, and
(ii) 14 other major non-durable consumer products companies of comparable size
to the Company (i.e., companies in the same size range producing a broad range
of products for retail sale to the general public). The comparator groups are
regarded by the Company as the marketplace for critical management talent for
the Company.

14
<PAGE> 17

Total compensation for target performance under the Company's compensation
program for executive officers in 1998 was generally positioned at average or
median up to the 90th percentile of the comparator groups, depending upon each
officer's position or level and the degree of difficulty and challenge
associated with the year's performance objectives. The Compensation Committee
has balanced the program with a high proportion of compensation based on
variable performance incentives so that actual annual and long-term compensation
levels will vary from year to year below and above those of the comparator
groups directly with results achieved by the Company and the individual.

1998 COMPENSATION

The Company's 1998 compensation program at target performance for its
executive officers, including the Chief Executive Officer, was comprised of base
salary, annual cash incentives, stock options and performance units. In 1998,
about 90% of the total compensation at target performance of the Chief Executive
Officer was variable, based on annual business and long-term stock performance,
and approximately 75% of the total compensation at target performance of
executive officers as a group was variable based on the same factors.

BASE SALARY. Salaries are established in consideration of the competitive
marketplace (as discussed above) at the appropriate level relative to the
responsibilities, experience and individual performance of each executive
officer, in addition to overall corporate financial circumstances. Base salaries
are generally subject to annual review for adjustment by the Compensation
Committee. The Chief Executive Officer elected to forego $950,000 of salary
earned as Chairman of the Board and Chief Executive Officer in 1997, 1998 and
1999 in consideration of the grant of options in 1997 under the terms of the
Executive Equity Investment Program (described below). In fiscal year 1998, the
Chief Executive Officer assumed the additional duties of President and Chief
Operating Officer for which the Board agreed to increase his compensation to the
annual rate of $1,500,000. Because he agreed to forego $950,000 of salary, he
received $550,000 in fiscal year 1998. The salaries of the Company's other
executive officers were not increased in 1998 from 1997 levels.

ANNUAL CASH INCENTIVES. Under the 1995 EICP, the Chief Executive Officer
and the other executive officers were eligible to receive cash incentive awards
based upon achievement of specified earnings levels in 1998. Upon achievement of
targeted levels of performance, the Chief Executive Officer was eligible to
receive a cash award equal to 100% of his 1998 base salary and other executive
officers were eligible to receive cash awards equal to specified percentages up
to 50% of their base salaries. Upon achievement of maximum performance levels,
the Chief Executive Officer was eligible to receive a cash award of 200% of his
base salary and other executive officers were eligible to receive cash awards
equal to specified percentages up to 90% of their base salaries.

Although the Company reported a profit of $1.88 per share for 1998 as
compared to a net loss in the prior year, due to below threshold consolidated
corporate earnings for 1998, nominal amounts were awarded to the executive
officers based on individual and business unit performance and as of the date of
this Proxy Statement, no amounts have been determined for the Chief Executive
Officer with respect to 1998 performance.

1995 EXECUTIVE INCENTIVE COMPENSATION PLAN. The 1995 EICP provides for the
grant of stock options, stock appreciation rights ("SARs"), restricted stock,
deferred stock, dividend equivalents, other stock-related awards and performance
or annual incentive awards that may be settled in cash, stock or other property
("Awards"). The Board of Directors believes that the 1995 EICP provides
effective means to attract, retain and reward executives and other key employees
of high quality and provides the Compensation Committee, which administers the
1995 EICP, with the flexibility to structure executive compensation so as to
grant performance incentives that motivate the Company's executives to expend
their maximum efforts in the creation of long-term shareholder value.

15
<PAGE> 18

The Compensation Committee regularly makes stock option and long term
performance grants at the beginning of each fiscal year to the Company's
executive officers and other key employees throughout the Company. The size of
long term performance and stock option grants are determined on an individual,
discretionary basis in consideration of prior year corporate results and each
recipient's performance, contributions and responsibilities without assigning
specific weight to any factor. In addition, the Compensation Committee considers
long-term incentive and equity grant levels among the comparator groups.

The Compensation Committee does not predesignate a specific size for
aggregate performance unit and stock option awards to executive officers as a
group. Neither does the Compensation Committee consider stock holdings, prior
option grants and other long-term awards or the appreciation thereon when making
future stock option and long-term award determinations, nor does the
Compensation Committee have a specific policy as to the portion of total
compensation represented by stock options and other long-term equity awards.

Four executive officers, including the Chief Executive Officer, received
regular long term grants in the form of performance restricted stock under the
1995 EICP to be earned based upon 1998 earnings per share goals for the Chief
Executive Officer and 1998 operating earnings goals for the other executive
officers. Each earned performance restricted share entitled the participant to
receive one restricted share of Class A Common Stock subject to future vesting
requirements. No shares were earned based on 1998 performance.

In February 1997, the Company adopted the Executive Equity Investment
Program (the "Investment Program"), which draws its shares from the 1995 EICP.
The Investment Program was implemented by the Compensation Committee in 1997 to
foster executive "at risk" investment in the Company, long-term equity ownership
and commitment to the future of the Company by permitting selected executives to
forego receipt of future compensation and/or regular annual stock option grants
for a specified period in exchange for a current grant of non-qualified options
with an exercise price equal to fair market value at the date of grant.

Mr. Farley elected to participate in the Executive Equity Investment
Program and received a grant in February 1997 in lieu of his then base salary
and regular stock option grants for 1997, 1998 and 1999. Therefore, Mr. Farley
did not receive regular stock option grants for 1997 or 1998. Other executive
officers and key employees received their regular stock option grants as
scheduled for 1998.

In November 1998, the Committee made a special grant of premium priced
short-term stock options to executive officers including the Chief Executive
Officer and other key employees in recognition of strategic progress by the
management team in cost reductions, completing the move of manufacturing
offshore, improving customer service, new product development, inventory
reduction and reduction in long-term debt. These special options were awarded at
a 20% premium above fair market at date of grant, exercisable for a limited term
of four years and subject to three-year vesting at the rate of one-third per
annum.

16
<PAGE> 19

TAX CONSIDERATIONS

As noted above, the Compensation Committee's executive compensation
strategy is designed to be cost and tax-effective. Therefore, the Compensation
Committee's policy is to preserve corporate tax deductions, including the
deductibility of compensation paid to the Named Officers pursuant to Section
162(m) of the Internal Revenue Code, while maintaining the flexibility to
approve compensation arrangements which it deems to be in the best interests of
the Company and its shareholders, but which may not always qualify for full tax
deductibility.

* * *

MEMBERS OF THE COMPENSATION COMMITTEE DURING 1998

A. Lorne Weil, Chairman
Dennis S. Bookshester
Sir Brian Wolfson

PERFORMANCE GRAPH

The graph set forth below compares the cumulative total shareholder return
on the Class A shares (based upon the trading of FOL Class A Common Stock during
the performance period) for the last five years with the cumulative total return
of the Standard & Poor's 500 Index and the Value Line Apparel Industry Index
("Industry Index") over the same period (assuming the investment of $100 in FOL
Class A Common Stock and in each index on December 31, 1993 and the reinvestment
of all dividends, if any).

[Performance Results Graph]

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998(1)
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------
Fruit Of The Loom, Inc. $100.0 $111.9 $100.5 $157.0 $106.2 $ 57.3
----------------------------------------------------------------------------------------
Peer Group(2) 100.0 98.7 119.4 159.9 166.0 150.3
----------------------------------------------------------------------------------------
S&P 500 100.0 101.3 139.4 171.4 228.8 293.9
----------------------------------------------------------------------------------------
</TABLE>

- -------------------
(1) Reflects the last trading day of Fruit of the Loom's 1998 fiscal year
(1/1/98 to 1/2/98).

(2) Peer group includes 17 companies in Value Line Apparel Industry Index
(including Fruit of the Loom).

17
<PAGE> 20

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

From 1993 to 1998, the Company guaranteed the repayment of debt incurred by
Acme Boot and/or loaned funds to Acme Boot. In June 1998, Acme Boot entered into
agreements with unrelated parties for the sale of certain assets and its
business. Financing for the sale of the business was completed in the third
quarter of 1998, at which time the Company satisfied the Acme Boot guarantees in
full and Acme Boot made loan repayments to the Company of $9,000,000.

On February 24, 1999 the Board of Directors, excluding Mr. Farley, approved
the Company's guarantee of $65,000,000 of indebtedness of Mr. Farley. The
Company's obligations under the guarantee are secured by 2,507,512 shares of FOL
Preferred Stock and all of Mr. Farley's assets. In consideration of the
guarantee, which is scheduled to expire in September 2000, Mr. Farley pays the
Company an annual guarantee fee equal to 2% of the outstanding principal balance
of the loan. The Board received an opinion from an independent financial advisor
that the terms of the transaction are commercially reasonable. In addition, in
October 1998, the Company advanced $3,500,000 to Mr. Farley, which amount will
be repaid by Mr. Farley no later than March 31, 1999.

In connection with the Reorganization, in exchange for their FOL Class B
common stock, Mr. Farley and Farley Inc. received 5,229,421 shares of FOL
Preferred Stock and four (4) Class B shares. The Board of Directors received a
fairness opinion from an independent financial advisor that the terms of the
transaction are fair to the Class A shareholders of FOL. See "Voting Securities;
Proxies."

OTHER MATTERS

On July 1, 1998, the New England Health Care Employees' Pension Fund filed
a purported class action on behalf of all those who purchased Fruit of the Loom,
Inc. common stock and publicly traded options between July 24, 1996, and
September 5, 1997 (the "Class Period") against the Company and William Farley,
Bernhard Hansen, Richard C. Lappin, G. William Newton, Burgess D. Ridge, Larry
K. Switzer and John D. Wigodsky, each of whom is a current or former officer of
the Company, in the United States District Court for the Western District of
Kentucky (the "New England Action"). The plaintiff claims that the defendants
engaged in conduct violating Section 10(b) of the Securities Exchange Act of
1934 (the "Act"), and that the Company and Mr. Farley are also liable under
Section 20(a) of the Act. According to the plaintiff, the Company, with the
knowledge and assistance of the individual defendants, made certain material
misrepresentations and failed to disclose certain material facts about the
Company's condition and prospects during the Class Period, causing the plaintiff
and the class to buy Company shares or options at artificially inflated prices.
The plaintiff also alleges that during the Class Period, the individual
defendants sold shares of the Company while possessing material non-public
information. The plaintiff asks for unspecified amounts as damages, interest and
costs and ancillary relief. The defendants filed a motion to dismiss the action
which is currently being briefed. The defendants also filed a motion to change
venue from Bowling Green, Kentucky, and such motion is not yet fully briefed.

On August 26, 1998, Carol Bradley filed a purported derivative action on
behalf of the Company, against William Farley, Richard C. Lappin, Omar Z. Al
Askari, Dennis S. Bookshester, Henry A. Johnson, Mark H. McCormack, Larry K.
Switzer, A. Lorne Weil and Sir Brian Wolfson, each of whom is a current or
former director of the Company, and the Company, as a nominal defendant, in the
Warren Circuit Court of the State of Kentucky. The plaintiff asserts various
common law claims against the individual defendants including, inter alia,
breach of fiduciary duty, waste of corporate assets, breach of contract and
constructive fraud claims. The plaintiff also asserts an insider trading claim
against defendants Farley, Lappin and Switzer. The claims asserted against the
individual defendants are based on the same alleged misrepresentations and
omissions which form the basis of the claims asserted by the plaintiff in the
New England Action as described above. The plaintiff seeks unspecified
compensatory and punitive damages, attorneys' fees and costs and ancillary

18
<PAGE> 21

relief. On September 18, 1998, defendant Farley, with the consent of the
Company, removed this action from state court to the United States District
Court for the Western District of Kentucky. Those defendants subsequently filed
a motion to dismiss on the ground that the plaintiff failed to make an
appropriate demand on the Company prior to filing the action. That motion has
been briefed and is awaiting a court ruling. The defendants also filed a motion
to change venue from Bowling Green Kentucky, and such motion is not yet briefed.

VOTE REQUIRED; QUORUM

Two directors of the Company will be elected by a majority of the votes of
the Class A shares, voting as a separate class, present in person or represented
by proxy and entitled to vote at the Annual Meeting. Five directors will be
elected by the holders of a majority of the voting power of the Class A shares
and Class B shares, voting together as a single class, present in person or
represented by proxy and entitled to vote at the Annual Meeting.

Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The holders of one-third of the shares entitled to vote
at the Annual Meeting, present in person or represented by proxy, shall
constitute a quorum. Abstentions and broker non-votes will be included in
determining the presence of a quorum. Abstentions will be considered present and
entitled to vote with respect to any proposal presented at the Annual Meeting or
any adjournment thereof. Broker non-votes with respect to any proposal will not
be considered present and entitled to vote with respect to such proposal.
Neither abstentions nor broker non-votes will have any effect on the voting on
the proposal to elect seven directors to the Company's Board of Directors.

SOLICITATION

This solicitation is made by the Company, and the cost of this proxy
solicitation will be paid by the Company. The Company may use the services of
its directors, officers and employees (who will receive no additional
compensation) to solicit proxies personally or by telephone. The Company may
also request brokers, fiduciaries, custodians and nominees to send proxies,
proxy statements and other material to their principals at the Company's
expense. In addition, the Company has engaged Georgeson & Company, Inc. to
solicit proxies from brokers, banks, nominees and other institutional holders.
The Company will pay a fee of $7,000 to Georgeson for its services.

INDEPENDENT AUDITORS

The Board of Directors, upon recommendation of the Audit Committee, has
selected Ernst & Young LLP to audit the financial statements of the Company and
its subsidiaries for the fiscal year ended January 2, 2000. A representative of
Ernst & Young LLP is expected to be present at the Annual Meeting with the
opportunity to make a statement, if such representative desires, and will be
available to respond to appropriate questions with respect to that firm's
examination of the Company's consolidated financial statements.

PROPOSALS OF SECURITY HOLDERS

Proposals of shareholders intended to be included in proxy materials for
presentation at the 1999 Annual Meeting of Shareholders of the Company must be
received by John J. Ray III, the Secretary of the Company, c/o 5000 Sears Tower,
233 South Wacker Drive, Chicago, Illinois 60606, by February 15, 2000.
Additionally, the Company will retain discretionary authority to vote on any
shareholder proposal for which the Company does not receive notice by February
15, 2000. The 1999 Annual Meeting of Shareholders of the Company is expected to
occur in May 2000.

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<PAGE> 22

OTHER BUSINESS

It is not anticipated that any matters will be presented to the
shareholders other than those listed in the accompanying Notice of Annual
Ordinary General Meeting of Shareholders and described in this Proxy Statement.
However, if other matters are brought before the meeting, it is intended that
the persons named in the accompanying proxy will vote as the Board of Directors
directs.

20
<PAGE> 23
P PROXY SOLICITATION

FRUIT OF THE LOOM, LTD.
R
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

O FOR THE ANNUAL ORDINARY GENRAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 18, 1999
X

Y
THE UNDERSIGNED HEREBY APPOINTS WILLIAM FARLEY AND JOHN J. RAY III AS
PROXIES, EACH WITH POWER OF SUBSTITUTION, AND HEREBY AUTHORIZES THEM TO
REPRESENT THE UNDERSIGNED AND TO VOTE, AS DESIGNATED ON THE REVERSE SIDE, ALL
THE SHARES OF CLASS A ORDINARY SHARES HELD OF RECORD BY THE UNDERSIGNED ON
MARCH 22, 1999, AT THE ANNUAL ORDINARY GENERAL MEETING OF SHAREHOLDERS OF FRUIT
OF THE LOOM, LTD. TO BE HELD ON MAY 18, 1999, AND AT ANY ADJOURNMENTS THEREOF,
UPON THE MATTERS SET FORTH IN THE NOTICE OF ANNUAL ORDINARY GENERAL MEETING OF
SHAREHOLDERS AND PROXY STATEMENT, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED.

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)

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<TABLE>

<S> <C> <C>
THE BROAD OF DIRECOTRS UNANIMOUSLY RECOMMENDS THAT SHAREHODERS VOTE FOR ALL THE PLEASE MARK [X]
NOMINEES LISTED BELOW (PROPOSAL 1) YOUR VOTES AS
INDICATED IN THIS
EXAMPLE

<S> <C> <C> <C>
1. ELECTION OF DIRECTORS - NOTE: HOLDERS OF CLASS A
ORDINARY SHARES VOTE IN SECTIONS A AND B BELOW.
FOR WITHHOLD
A. DIRECTORS ELECTED BY HOLDERS OF CLASS A ORDINARY FOR ALL 2. IN THEIR DISCRETION, THE PROXIES ARE
SHARES VOTING AS A SEPARATE CLASS OMAR Z. AL ASKARI [ ] [ ] AUTHORIZED TO VOTE UPON SUCH OTHER
MARK H. MCCORMACK [ ] [ ] BUSINESS AS MAY PROPERLY BE BROUGHT
BEFORE THE MEETING AND ANY ADJOURNMENT
THEREOF.
(TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE ---------------------
PROVIDED TO THE RIGHT)

FOR WITHHOLD THIS PROXY, WHEN PROPERLY EXECUTED WILL BE
B. DIRECTORS ELECTED BY HOLDERS OF CLASS A ORDINARY FOR ALL VOTED IN THE MANNER DIRECTED HEREIN BY THE
SHARES AND HOLDERS OF CLASS B ORDINARY SHARES VOTING [ ] [ ] UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
TOGETHER AS A CLASS: DENNIS BOOKSHESTER, WILLIAM [ ] [ ] IS MADE, THE PROXY WILL BE VOTED "FOR" ALL
FARLEY, HENRY A. JOHNSON, A. LORN WEIL AND SIR BRIAN THE NOMINEES LISTED ABOVE.
WOLLSON.

(TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE ---------------------
PROVIDED TO THE RIGHT)

SIGNATURE SIGNATURE DATE
-------------------------------------- -------------------------------------- ----------------------------
NOTE: PLEASE DATE YOUR PROXY AND SIGN EXACTLY AS THE NAME OR NAMES APPEAR ON YOUR STOCK CERTIFICATE. ALL JOINT OWNERS OF STOCK
SHOULD SIGN ABOVE. SIGN YOUR FULL TITLE WHEN SIGNING AS AN EXECUTOR, ADMINISTRATOR, PERSONAL REPRESENTATIVE, TRUSTEE, ETC. PLEASE
RETURN YOUR PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.

</TABLE>

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