SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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 Section 240.14a-11(c) or Section
240.14a-12
ITHACA INDUSTRIES, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-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 O-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:
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|_| 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:
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(2) Form, Schedule or Registration Statement No.:
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<PAGE>
2
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
Ithaca Industries, Inc.
Highway 268 West, P.O. Box 620
Wilkesboro, North Carolina 28697
(336) 667-5231
May 1, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Ithaca Industries, Inc. (the "Company") at the offices
of Paul, Weiss, Rifkind, Wharton & Garrison, located at 1285 Avenue of the
Americas, New York, New York on June 10, 1998, at 10:00 a.m., local time.
The Annual Meeting will be held for the following purposes:
(1) To elect 7 directors to hold office until the next Annual Meeting of
Stockholders or until their successors are elected and qualified;
(2) To consider a proposal to reapprove the Company's 1996 Long- Term
Stock Incentive Plan;
(3) To consider a proposal to approve the Company's 1997 Stock Option Plan
for Non-Employee Directors; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 21, 1998
as the record date for determination of stockholders entitled to notice of and
to vote at the meeting, or any adjournment thereof.
A copy of the Annual Report to Stockholders for the fiscal year ended
January 31, 1998 is enclosed.
Whether or not you plan to attend the Annual Meeting, please complete the
enclosed proxy and return it promptly so that your shares will be represented.
The vote of every stockholder is important. The proxy is revocable and will not
affect your right to vote in person if you attend the meeting.
Very truly yours,
/s/ Jim D. Waller
Jim D. Waller
Chairman of the Board,
Chief Executive Officer,
President and Director
<PAGE>
Ithaca Industries, Inc.
Highway 268 West, P.O. Box 620
Wilkesboro, North Carolina 28697
(336) 667-5231
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998 AT 10:00 A.M.
-----------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Ithaca Industries, Inc., a Delaware corporation (the
"Company"), will be held at the offices of Paul, Weiss, Rifkind, Wharton and
Garrison located at 1285 Avenue of the Americas, New York, New York on June 10,
1998 at 10:00 a.m., local time, for the following purposes:
(1) To elect 7 directors to hold office until the next Annual Meeting of
Stockholders or until their successors are elected and qualified;
(2) To consider a proposal to reapprove the Company's 1996 Long- Term
Stock Incentive Plan;
(3) To consider a proposal to approve the Company's 1997 Stock Option
Plan for Non-Employee Directors; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 21, 1998,
as the record date for determination of stockholders entitled to notice of and
to vote at the meeting, or any adjournment thereof. Representation of at least a
majority of all outstanding shares of the Company's common stock (the "Common
Stock") is required to constitute a quorum. Accordingly, it is important that
your stock be represented at the meeting. Whether or not you plan to attend the
Annual Meeting, please complete, date and sign the enclosed proxy card and mail
it promptly in the self-addressed envelope enclosed for your convenience. You
may revoke your proxy at any time before it is voted.
By Order of the Board of Directors,
/s/ Richard P. Thrush
Richard P. Thrush
Secretary
May 1, 1998
YOUR VOTE IS IMPORTANT, ACCORDINGLY, WE URGE YOU
TO DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING.
<PAGE>
Ithaca Industries, Inc.
Highway 268 West, P.O. Box 620
Wilkesboro, North Carolina 28697
(336) 667-5231
PROXY STATEMENT
for Annual Meeting of Stockholders
to be held on June 10, 1998.
INTRODUCTION
This Proxy Statement and the enclosed proxy, which is first being mailed
to the stockholders of Ithaca Industries, Inc. ("Ithaca" or the "Company") on
approximately May 5, 1998, is furnished to you in connection with the
solicitation of proxies on behalf of the Board of Directors of Ithaca to be used
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
offices of Paul, Weiss, Rifkind, Wharton and Garrison located at 1285 Avenue of
the Americas, New York, New York on June 10, 1998 at 10:00 a.m., and at any
subsequent time which may be necessary by any adjournment or adjournments
thereof.
Proxies in proper form received by the time of the meeting will be voted
as specified. A stockholder of the Company (a "Stockholder") giving a proxy may
revoke it at any time before it is exercised by filing with the Secretary of the
Company a revoking instrument or a duly executed proxy bearing a later date, or
by attending the meeting and voting in person. Shares of the Company's common
stock, par value $.01 (the "Common Stock") cannot be voted at the meeting unless
the holder is present or represented by proxy.
The cost of soliciting proxies, including the preparation, assembling and
mailing of the Notice of Meeting, Proxy Statement, form of proxy and other
soliciting material, as well as the cost of forwarding such material to the
beneficial owners of the Common Stock, will be borne by the Company. Directors,
officers and employees of the Company may also solicit proxies, but without
compensation, by further mailings, personal conversations or by telephone. The
Company may reimburse brokers and others holding stock in their names or in the
names of nominees for their reasonable out-of-pocket expenses incurred in
sending the proxy materials to principals and beneficial owners.
Each Stockholder is entitled to one vote per share of Common Stock held as
of the Record Date, as defined below. In determining whether a quorum exists at
the Annual Meeting for purposes of all matters to be voted on, all votes "for"
or "against," as well as all abstentions (including votes to withhold authority
to vote in certain cases), with respect to the proposal receiving the most such
votes, will be counted.
The Board of Directors of the Company (the "Board"), in accordance with
the By-Laws of the Company, has fixed the close of business on April 21, 1998,
as the record date (the "Record Date") for determining the Stockholders entitled
to notice of and to vote at the Annual Meeting or any adjournments thereof. At
the close of business on such date, the outstanding number of voting securities
of the Company was 10,400,000 shares of Common Stock, $.01 par value, each of
which is entitled to one vote.
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Board of Directors
The current number of directors is set at seven. The Board is responsible
for the overall affairs of the Company. To assist it in carrying out its duties,
the Board has delegated certain authority to an Audit Committee and a
Compensation and Stock Option Committee. The Board has no nominating committee
or other committee which performs a similar function.
Meetings of the Board of Directors
There were eight meetings of the Board during the fiscal year ended
January 31, 1998. In addition to the meetings of the Board and its committees at
which all formal actions are taken, additional time on the part of the Company's
directors is required to be expended in the frequent review of Company matters
and documents in numerous communications with the chairman and other executives
during periods between meetings.
The Audit Committee is responsible for meeting with representatives of the
Company's independent certified public accountants and financial management to
review accounting, internal control, auditing and financial reporting matters
and is responsible, among other things, for maintaining liaison with and
exercising supervision over the actions of said accountants in whatever manner
and to whatever extent deemed, at its discretion, necessary, proper and in the
best interest of the Company and its Stockholders. The audit committee consists
of Messrs. Crow, Goldwyn and Handel, three directors who are not and never have
been employees of the Company. The Audit Committee met three times during the
fiscal year ended January 31, 1998.
The Compensation and Stock Option Committee is responsible for reviewing
and approving officer and executive salaries and for reviewing and recommending
for approval by the Board executive and key employee compensation plans,
including incentive compensation and other benefits. The Compensation and Stock
Option Committee consists of Messrs. Branson, Weinstein and Williams, all of
whom are not and never have been employees of the Company. The Compensation and
Stock Option Committee met three times during the fiscal year ended January 31,
1998.
Nominees for the Board of Directors
Seven directors are to be elected at the Annual Meeting to hold office
until the next Annual Meeting of Stockholders or until their successors are
elected and qualified. The nominees for election as directors who are named
below are willing to be elected and to serve. However, in the event that a
nominee at the time of election is unable to serve, or is otherwise unavailable
for election, the Board may elect a substitute nominee. Information concerning
the business experience of the nominee appears in the
2
<PAGE>
section entitled "Business Experience of Directors and Executive Officers." The
nominees for directors are:
o Walter J. Branson
o Marvin B. Crow
o Francis Goldwyn
o Morton Handel
o Jim D. Waller
o David N. Weinstein
o James A. Williams
Vote Required
The vote required for the election of directors is a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors, provided a quorum is present.
Thus, with respect to election of directors, an abstention or broker non-vote
will have no effect.
3
<PAGE>
BUSINESS EXPERIENCE OF DIRECTORS
AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Name Age Present Position With the Company
---- --- ---------------------------------
Walter J. Branson 37 Director
Marvin B. Crow 65 Director
Francis Goldwyn 44 Director
Morton Handel 63 Director
Jim D. Waller 57 Chairman of the Board, Chief Executive
Officer, President, Director
David N. Weinstein 38 Director
James A. Williams 55 Director
Richard P. Thrush 50 Senior Vice President-Finance and
Administration, Chief Financial Officer,
Secretary, Treasurer
David H. Jones 54 Executive Vice President-Sales
R. Dean Riggs 46 Executive Vice President-Manufacturing
Brian F. Slagle 36 Executive Vice President-Hosiery
Walter J. Branson has been a director since 1996. Since 1996, Mr. Branson
has been the Senior Vice President of Development of The Big Party Corporation,
a party supplies retailer. From 1993 to 1996, Mr. Branson was Senior Vice
President and Chief Financial Officer of CWT Specialty Stores, Inc., a women's
apparel retailer.
Marvin B. Crow has been a director since 1996. Mr. Crow has been the
President since 1989 of KBO Enterprises, Inc., which operates TCBY Yogurt stores
and is involved in management consulting. Mr. Crow also serves on the Board of
Directors of Dyersburg Corporation, National Spinning Company, Inc., The Bibb
Company and Ameritex Fabric Yarn Company.
Francis Goldwyn has been a director since 1996. Mr. Goldwyn for the past
five years has been the President of Chapman Management Inc., a provider of
strategic operating and financial consulting services.
Morton Handel has been a director since 1996. Since 1997, Mr. Handel has
been the President and Chief Executive Officer of Ranger Industries, Inc., an
inactive company. Before 1997, Mr. Handel served as President of S&H Consulting
Ltd., a financial consulting company. Presently, Mr. Handel is a director of
CompUSA, Inc., Concurrent Computer Corp., Toy Biz, Inc. and Ranger Industries,
Inc.
Jim D. Waller has been a director since 1985. Mr. Waller became Chief
Executive Officer of the Company in 1991 and President of the Company in 1987.
4
<PAGE>
David N. Weinstein has been a director since 1996. Mr. Weinstein has been
a Managing Director of the High Yield Capital Markets Group at BancBoston
Securities, Inc. since 1996. From 1993 to 1996, Mr. Weinstein was Managing
Director and Co-Head of the High Yield Capital Markets Group at Chase
Securities, Inc. Mr. Weinstein also serves on the Board of Directors of Homeland
Holding Corporation.
James A. Williams has been a director since 1996. In December 1997, Mr.
Williams became a board member of Maidenform Worldwide, Inc., a manufacturer of
women's intimate apparel, and became Chairman of the Board in January 1998. In
addition, since 1993 he has been President and Chief Executive Officer of Great
American Knitting Mills, Inc., a division of Biderman Industries, Inc. which
filed for bankruptcy in July 1995. Mr. Williams also serves on the Board of
Directors of The Bibb Company.
Richard P. Thrush joined the Company in March 1998 as Senior Vice
President-Finance and Administration, Chief Financial Officer, Secretary and
Treasurer. Prior to joining Ithaca, Mr. Thrush was the President of Coralstone
Associates, which provides business advisory services to consumer product
companies, since 1997. From 1992 to 1997, Mr. Thrush was the Chairman and Chief
Executive Officer of Block Industries, Inc., a men's sportswear company, which
filed for bankruptcy in July 1996.
David H. Jones joined the Company in January 1997 as Executive Vice
President-Sales. Prior to joining Ithaca, Mr. Jones was with Gerber
Childrenswear, Inc., which manufactures and distributes bed and bath products
and apparel for children, where he served as President and Chief Executive
Officer from 1994 to 1996 and as Vice President-Sales prior thereto.
R. Dean Riggs joined the Company in August 1996 as Executive Vice
President-Manufacturing. Mr. Riggs was previously employed by Sara Lee Knit
Products, which manufactures and distributes men's, women's and children's
underwear and activewear. From 1994 to 1995, Mr. Riggs was Vice
President-Operations Planning, and from 1991 to 1994, Mr. Riggs was Vice
President-Operations and Manufacturing.
Brian F. Slagle joined the Company in March 1998. Prior to joining Ithaca,
Mr. Slagle was the President of Glendale Hosiery Company, a manufacturer of
women's hosiery, since 1995. From 1991 to 1995, Mr. Slagle was the Vice
President of Glendale Hosiery Company.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the names and addresses of the only persons
known to the Company as of April 23, 1998 to be the beneficial owners
(individually, each "Owner") of more than five percent of the Company's
outstanding Common Stock and the number of shares of Common Stock so owned, to
the Company's knowledge, as of such date. Such information is based upon a
Schedule 13G filed by each Owner with the Securities and Exchange Commission
(the "Commission").
Security Ownership of Certain Beneficial Owners
of more than Five Percent of Outstanding Shares
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class (1)
- ------------------- -------------------- ----------
The Northwestern Mutual Life 2,536,000 shares (2) 24.38%
Insurance Company
720 East Wisconsin Ave.
Milwaukee, WI 53202
DDJ Capital Management LLC 1,494,326 shares (3) 14.37%
141 Linden Street, Suite 4
Wellesley, MA 02181
Merrill Lynch & Co. 1,252,080 shares (4) 12.04%
Merrill Lynch, Pierce
Fenner & Smith, Incorporated
World Financial Center
250 Vesey St.
New York, NY 10281
The Equitable Companies 967,520 shares (5) 9.3%
Incorporated
1290 Ave of the Americas
New York, NY 10104
Morgan Stanley, Dean Witter, 770,800 shares (6) 7.41%
Discover & Co.
1585 Broadway
New York, NY 10036
Pacholder Associates, Inc. 764,400 shares (7) 7.35%
8044 Montgomery Road
Suite 382
Cincinnati, Ohio 45236
6
<PAGE>
(1) Percentages are based upon the 10,400,000 shares of Common Stock
outstanding at April 23, 1998. Percentages disclosed in the Schedule 13Gs
submitted by each Owner are based on the number of shares of Common Stock
outstanding at or before December 31, 1997, which was 10,000,000 shares.
(2) Based on information contained in a Schedule 13G filed with the Commission
as of February 10, 1998, Northwestern Mutual Life Insurance Company
claimed sole voting power and sole dispositive power with respect to
2,280,000 shares and shared voting power and shared dispositive power with
respect to 256,000 shares. Of the 2,536,000 shares of Common Stock listed
in such schedule, 136,000 shares of Common Stock are owned by the High
Yield Bond Portfolio of Northwestern Mutual Series Fund, Inc., a wholly
owned subsidiary of the Northwestern Mutual Life Insurance Company and
120,000 shares of Common Stock are held in The Such schedule also reports
that Northwestern Mutual Life Insurance Company Group Annuity Separate
Account. Such schedule also reports that Northwestern Mutual Investment
Services, Inc., an indirect wholly owned subsidiary of The Northwestern
Mutual Life Insurance Company serves as an investment advisor to the High
Yield Bond Portfolio.
(3) Based on information contained in a Schedule 13D filed with the Commission
as of April 7, 1998, DDJ Capital Management, LLC claimed sole voting power
and sole dispositive power with respect to all 1,494,320 shares of Common
Stock of The Galileo Fund, L.P. and DDJ Galileo, LLC claimed solve voting
and sole dispositive power over 396,000 shares of Common Stock, Kepler
Overseas Corp. claimed sole voting and sole dispositive power over 4,000
shares of Common Stock and B III Capital Partners, L.P. and DDJ Capital
III, LLC claimed sole voting and sole dispositive power over 1,094,320
shares of Common Stock. According to such schedule, of such 1,494,320
shares of Common Stock, the Galileo Fund, L.P. owns, and DDJ Galileo, LLC
and DDJ Capital Management, LLC beneficially own, as general partner and
investment manager, respectively, of The Galileo Fund, L.P., 396,000
shares of Common Stock, Kepler Overseas Corp. owns, and DDJ Capital
Management, LLC, as investment manager for Kepler Overseas Corp.
beneficially owns, 4,000 shares of Common Stock and B III Capital
Partners, L.P. owns, and DDJ Capital III, LLC and DDJ Capital Management,
LLC beneficially own, as general partner and investment manager,
respectively, of B III Capital Partners, L.P., 1,094,320 shares of Common
Stock. Other than Kepler Overseas Corp., whose principal office is c/o
Goldman Sachs (Cayman), Harbour Centre, Georgetown, Post Office Box 896,
Grand Cayman Islands, all such entities' principal office is located at
141 Linden Street, Suite 4, Wellesley, MA 53202.
(4) Based on information contained in a Schedule 13G filed with the Commission
as of May 9, 1997, Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner &
Smith, Incorporated claimed shared voting power and shared dispositive
power with respect to all 1,252,080 shares.
(5) Based on information contained in a Schedule 13G filed jointly by The
Equitable Companies Incorporated, Alpha Assurances Vie Mutuelle, AXA
Assurances I.A.R.D
7
<PAGE>
Mutuelle, AXA Assurances Vie Mutuelle, AXA Courtauge Assurance Mutuelle
and AXA-UAP with the Commission as of February 10, 1998, each such entity
claimed sole voting power and sole dispositive power with respect to all
967,520 shares of Common Stock. Such Schedule further indicates all
967,520 shares are held by Donaldson, Lufkin & Jenrette Securities
Corporation, a subsidiary of the Equitable Companies Incorporated.
(6) Based on information contained in a Schedule 13G by filed with the
Commission as of February 13, 1998, Morgan Stanley, Dean Witter, Discover
& Co. claimed shared voting power and shared dispositive power with
respect to all 770,800 shares of Common Stock, of which Morgan Stanley &
Co., International Limited, a subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. claimed shared voting power and shared dispositive power
with respect to 520,800 shares of Common Stock. Morgan Stanley & Co.
International Limited principal place of business is 25 Cabot Square,
Canary Wharf, London, E14 4QA, England.
(7) Based on information contained in a Schedule 13G filed with the Commission
as of April 23, 1988, Pacholder Associates, Inc. claimed sole voting power
and sole dispositive power with respect to all 764,400 shares.
8
<PAGE>
The following table sets forth, as of April 21, 1998, the beneficial
ownership of the Company's Common Stock by: (a) the Company's executive officers
named in the Summary Compensation Table below, (b) directors and (c) all
executive officers and directors as a group. The following information was
furnished by the respective directors or officers or obtained from the records
of Ithaca.
Security Ownership of Management
Shares Which
Number May Be Total Shares
of Shares Acquired Within Beneficially Percent of
Name Owned 60 Days (1) Owned Class (2)
- ---- ------- ------------- ------- ----------
Jim D. Waller 8,000 136,611 144,611 1.36%
R. Dean Riggs 0 37,500 37,500 *
David H. Jones 6,000 34,999 40,999 *
Eric N. Hoyle(3) 0 32,499 32,499 *
Walter J. Branson 0 1,500 1,500 *
Marvin C. Crow 0 1,500 1,500 *
Francis Goldwyn 0 1,500 1,500 *
Morton E. Handel 1,000 1,500 2,500 *
Richard P. Thrush(4) 2,000 0 2,000 *
David N. Weinstein 2,000 1,500 3,500 *
James A. Williams 0 1,500 1,500 *
-------- -------- -------- -----
All directors and 19,000 250,609 269,609 2.54%
officers as a group
(10 persons)
- ---------------
* Less than 1%
(1) Includes options to purchase shares within 60 days of April 21, 1998.
(2) Percentages are based upon the number of shares of Ithaca Common Stock
outstanding at April 25, 1998, which was 10,400,000 shares, plus the
number of shares that the group above had a right to acquire within 60
days of April 21, 1998.
(3) As of April 21, 1998, Mr. Hoyle was no longer an executive officer of the
Company.
(4) Mr. Thrush, the Company's current Secretary, Chief Financial Officer and
Treasurer, was not employed by the Company at its 1998 fiscal year end.
9
<PAGE>
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
Non-employee directors are paid $20,000 per year and an additional $1,500
each day the director attends a board or committee meeting.
The following table sets forth all compensation awarded, earned or paid
for services rendered in all capacities to the Company and its subsidiaries
during each of the fiscal years 1998, 1997 and 1996 to the Chief Executive
Officer and the other three executive officers of the Company.
Summary Compensation Table(1)
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Securities
------------------------------- --------------
Fiscal Other Annual Underlying No.
Name and Principal Position Year Salary Bonus Compensation of Options
- ----------------------------- ------ ------- ------- ------------ --------------
($) ($) ($) (2)
<S> <C> <C> <C> <C> <C>
Jim D. Waller 1998 498,346 0 1,296 0
Chairman, President and Chief 1997 490,988 422,005 1,219 273,224
Executive Officer 1996 490,984 0 1,219 0
R. Dean Riggs(3) 1998 202,326 0 1,293 0
Executive Vice President- 1997 80,641 46,369 0 75,000
Manufacturing 1996 0 0 0 0
David H. Jones(4) 1998 216,614 0 58,549(5) 0
Executive Vice President- 1997 8,267 4,755 0 70,000
Sales 1996 0 0 0 0
Eric N. Hoyle(6) 1998 203,080 0 1,270 0
Sr. Vice President 1997 190,500 109,538 1,219 65,000
Finance & Administration 1996 190,000 0 1,544 0
Chief Financial Officer
</TABLE>
(1) As the Company only had three executive officers (other than the Chief
Executive Officer), only such three executive officers are included in
this table.
(2) Excluded perquisites and other personal benefits, securities or property
which, in the aggregate did not exceed the lesser of $50,000 or 10% of the
annual salary and bonus for each named executive officer.
(3) Mr. Riggs joined the Company in August, 1996.
(4) Mr. Jones joined the Company in January, 1997.
(5) Includes moving expenses of $58,499.
(6) Mr. Hoyle left the Company in March, 1998.
10
<PAGE>
Employment Agreement
On January 1, 1997, the Company entered into an employment agreement with
Jim D. Waller, naming Mr. Waller as Chief Executive Officer (the "Employment
Agreement"). The Employment Agreement expires on December 31, 1999, unless an
extension is agreed to in writing by Ithaca and Mr. Waller. Under the Employment
Agreement, Mr. Waller's base salary is $490,000 per year, subject to increases
in the sole discretion of the Board. In addition to Mr. Waller's base salary,
Mr. Waller is eligible to participate in any incentive compensation arrangement
maintained generally by Ithaca for senior executive officers.
If Mr. Waller's employment is terminated during the term of the Employment
Agreement, he will be entitled to receive his base salary until termination. If
such termination is without cause (defined as gross negligence that is
materially detrimental to the Company; wilful, material, continued and bad faith
failure to perform and discharge his duties and responsibilities; or conviction
of a felony involving personal dishonesty) or if Mr. Waller resigns for good
reason (defined as either a failure to re-elect him as Chief Executive Officer,
an assignment of duties significantly different from Chief Executive Officer, a
material limitation of the powers of Chief Executive Officer, a reduction in
base salary, relocation from Wilkesboro, North Carolina or a failure to obtain
the assumption of the Employment Agreement by a successor), until the expiration
of the Employment Agreement, Mr. Waller will be entitled to receive 65% of his
base salary if his employment terminates during the fiscal year ending in the
third year prior to the expiration date, 80% of his base salary if his
employment terminates during the fiscal year ending in the second year prior to
the expiration date and 100% of his base salary if his employment is terminated
thereafter. In the case of Mr. Waller's death during the term of the Employment
Agreement, his designee, estate, personal or legal representative, as the case
may be, shall be entitled to receive his then current base salary until the
earlier of the first anniversary of his death or the date of expiration of the
Employment Agreement. If Mr. Waller is mentally or physically incapacitated
during the term of the Employment Agreement and is unable to perform his duties,
he will be entitled to receive 50% of his base salary until the earlier of one
year after his replacement or the expiration of the agreement.
The Employment Agreement contains restrictions on disclosure by Mr. Waller
of confidential information and restricts Mr. Waller's right to compete with the
Company anywhere the Company does business during the term of his employment and
for 24 months thereafter. As described above, the Employment Agreement is
terminable upon the death of Mr. Waller, by the Company for cause (as defined
above), upon disability or by Mr. Waller under certain circumstances. In
addition, unless Mr. Waller's employment is terminated for cause (as defined
above) by the Company, or Mr. Waller terminates his employment other than for
good reason (as defined above), Mr. Waller is entitled to continue to
participate in all group health, medical and employee benefits plans and
programs to which he was previously entitled for the remaining term of the
Employment Agreement.
11
<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The following report submitted by the Compensation and Stock Option
Committee of the Board of Directors addresses the Company's executive
compensation policies for the fiscal year ended January 31, 1998.
The Compensation and Stock Option Committee is composed of three members,
all outside directors. The Compensation and Stock Option Committee provides
guidance for the Company's executive compensation programs to insure a direct
relationship between executive compensation and corporate performance. In
addition, the Compensation and Stock Option Committee makes final decisions
regarding stock option awards under the Company's plans.
The executive compensation program is focused on attainment of sales goals
and profitability targets. The Company's program consists of three principal
types of compensation including annual base salary, incentive bonuses and stock
option awards. Executive officers are rewarded when the Company achieves
financial goals related to total revenues and net income and when the executive
officer achieves individual performance goals related to the executive officer's
specific area of responsibility.
Annual Base Salary
Each year the Compensation and Stock Option Committee reviews the base
salary of each executive officer as recommended by the Chief Executive Officer.
Base salaries for executive officers were established at levels considered
appropriate in light of the duties and scope of responsibilities of each
officer's position and the salaries paid to comparable officers by other peer
group companies.
Incentive Bonus
Incentive bonuses, paid to executive officers in April following the
fiscal year end, are based on the achievement of the Company's financial goals
and the individual's performance goals. A bonus accrual is made based on
achievement of the Company's goals. If the Company's goals are not made, the
accrual may be reduced or eliminated. However, the Compensation and Stock Option
Committee may choose to award a performance bonus to an executive officer based
on individual performance goals. No executive officer received an incentive
bonus for the fiscal year ended January 31, 1998.
Stock Options
Stock options are awarded by the Compensation and Stock Option Committee
to executive officers to provide incentive for the executive officer to focus on
the future financial performance of the Company and as a means to encourage the
officer to remain employed with the Company. Stock option grants are made when
executive officers join the Company and thereafter at the discretion of the
Compensation
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and Stock Option Committee. Because performance goals were not met, performance
based stock options did not vest for the fiscal year ended January 31, 1998.
Chief Executive Officer
The Compensation and Stock Option Committee determines the compensation
package for the Chief Executive Officer by comparing his compensation package to
the Chief Executive Officer compensation package of other peer group companies.
The Compensation and Stock Option Committee also takes into consideration years
of service, experience, leadership, dedication and vision.
This report has been provided by the Compensation and Stock Option
Committee:
Walter J. Branson
David N. Weinstein
James A. Williams
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PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common
Stock from the first trade of record after the initial exchange of the Company's
Senior Subordinated Bonds for the Common Stock on May 19, 1997 to January 31,
1998, with the Russell 2000 Index and a peer group index prepared by Interstate
Johnson Lane (the "Peer Group Index"), consisting of 25 public textile and
apparel companies. All cumulative returns assume the investment of $100 in each
of the Common Stock, the Russell 2000 Index and the Peer Group Index on May 19,
1997 (the first available stock quote on the Common Stock). The comparison
assumes that all dividends are reinvested.
[GRAPHIC OMITTED]
5/19/97 1/30/98
------- -------
Ithaca Industries, Inc. 100 46.2
Russell 2000 100 112.9
Peer Group 100 115.2
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During the Company's last fiscal year there were no Compensation and Stock
Option Interlocks.
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PROPOSAL 2: 1996 LONG-TERM STOCK INCENTIVE PLAN
Introduction
The Ithaca 1996 Long-Term Stock Incentive Plan (the "LTIP") was adopted as
part of the Company's plan of reorganization, dated as of August 29, 1996. The
Board ratified its adoption on January 14, 1997. In order to preserve
deductibility under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") of payments made to certain individuals under the LTIP by
satisfying a special transition rule for plans adopted by private companies that
become public, by its terms, the LTIP will terminate as of the date of the first
meeting of the Stockholders of the Company at which directors are to be elected
that occurs after the Company's registration of any class of common equity
securities under Section 12 of the Securities and Exchange Act of 1934 (the
"Exchange Act") and no awards may be granted thereafter unless the LTIP has been
reapproved by the Company's Stockholders. Consequently, the Company is seeking
the approval of the Stockholders to extend the terms of the LTIP until January
31, 2006. In all other respects, the LTIP will remain unchanged. If the
Stockholders do not reapprove the LTIP, the LTIP will terminate in accordance
with its terms and no further grants will be made. The following is a summary of
the material features of the LTIP. The LTIP is incorporated by reference to the
Company's Form 8-K, dated September 3, 1996.
Purposes
The purposes of the LTIP are to promote the interests of Ithaca and its
Stockholders by (i) attracting and retaining exceptional officers and other key
employees and consultants of the Company and its subsidiaries; (ii) motivating
such individuals by means of performance-related incentives to achieve
longer-range performance goals; and (iii) enabling such individuals to
participate in the long-term growth and financial success of the Company.
Administration
The LTIP is administered by the Compensation and Stock Option Committee
which by the terms of the LTIP is to be comprised of two or more members of the
Board, each of whom is intended to be a "Director" (within the meaning of Rule
16b-3 promulgated under the Exchange Act and an "outside director" (within the
meaning of Section 162 (m)) of the Code), although, the mere fact that the
Compensation and Stock Option Committee does not consist of non-employee
directors and outside directors will not invalidate any awards made by it.
Eligible Participants
Any officer, other key employee or consultant to the Company or any of its
subsidiaries who is not a member of the Compensation and Stock Option Committee
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is eligible to participate in the LTIP. The Compensation and Stock Option
Committee has the sole and complete authority to determine the participants to
whom awards shall be granted (a "Participant" or the "Participants"). The
Company estimates that, as of the date of this Proxy Statement, approximately 38
individuals are eligible to participate in the LTIP.
Number of Shares Authorized under the LTIP
The LTIP authorizes the grant of awards to Participants with respect to a
maximum of 928,962 shares of the Common Stock, which awards may be made in the
form of (a) nonqualified stock options, (b) stock options intended to qualify as
incentive stock options under Section 422 of the Code, (c) stock appreciation
rights, (d) restricted stock and/or restricted stock units, (e) performance
awards and (f) other stock based awards. In any calendar year, a Participant may
not receive stock options or stock appreciation rights for more than 273,224
shares of Common Stock. No more than 109,290 shares of Common Stock or the
equivalent cash value thereof, may be paid to a Participant in connection with
the settlement of any award(s) designated as a Performance Compensation Award
(as defined below) in respect of a single performance period. Any Performance
Compensation Award (as defined below) that is deferred shall not (between the
date that the award is deferred and the payment date), increase (i) with respect
to an award payable in cash, by a measuring factor for each fiscal year greater
than a reasonable rate of interest set by the Compensation and Stock Option
Committee or (ii) with respect to an award payable in shares of the Company, by
an amount greater than the appreciation of a share of the Common Stock from the
date such award is deferred to the payment date. If any award granted under the
LTIP is forfeited, or if an award has expired, terminated or been canceled for
any reason whatsoever (other than by reason of exercise or vesting), then the
shares of Common Stock covered by such award may be granted to another
Participant pursuant to the terms of the LTIP, to the maximum extent permitted
under Section 162(m) of the Code.
Terms and Conditions of Awards under the LTIP
Stock options intended to qualify as incentive stock options will be
subject to terms, conditions and such rules as may be prescribed by Section 422
of the Code. Additionally, non-qualified and incentive stock options granted
under the LTIP shall be subject to such terms, including exercise price and
conditions and timing of exercise, as may be determined by the Compensation and
Stock Option Committee and specified in the applicable award agreement. Payment
in respect of the exercise of an option granted under the LTIP may be made (a)
in cash, (b) its equivalent, (c) if and to the extent permitted by the
Compensation and Stock Option Committee and subject to such rules as may be
established by the Compensation and Stock Option Committee, by exchanging Common
Stock owned by the optionee (which are not the subject of any pledge or other
security interest and which have been owned by such optionee for at least 6
months), (d) through the delivery of irrevocable instructions to a broker to
sell the Common Stock being acquired upon exercise of the option and to deliver
promptly to the Company an amount equal to the aggregate exercise price or (e)
by a combination of the foregoing, provided that the combined value of all cash,
cash equivalents and the fair market value
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of shares of Common Stock so tendered to the Company (as of the date of such
tender) is at least equal to the aggregate exercise price of the option.
Stock appreciation rights granted under the LTIP may not be exercisable
earlier than six months after the date of grant but shall otherwise be subject
to such terms, including grant price and conditions and limitations applicable
to exercise as may be determined by the Compensation and Stock Option Committee
and specified in the applicable award agreement. Stock appreciation rights may
be granted in tandem with another award, in addition to another award, or
freestanding and unrelated to another award. A stock appreciation right shall
entitle the Participant to receive an amount equal to the excess of the fair
market value of a share of Common Stock over the grant price on the date of
exercise thereof. The Compensation and Stock Option Committee shall determine
whether a stock appreciation right shall be settled in cash, Common Stock or a
combination of cash and Common Stock.
Restricted stock and restricted stock units granted under the LTIP shall
be subject to such terms and conditions as may be determined by the Compensation
and Stock Option Committee in its sole discretion, including, without
limitation, the duration of the period during which, and the conditions, if any,
under which, the restricted stock and restricted stock units may be forfeited to
the Company. Each restricted stock unit shall have a value equal to the fair
market value of a share of Common Stock. Upon the lapse of the restrictions
applicable thereto, or otherwise in accordance with the applicable award
agreement, restricted stock units shall be paid in cash, shares of Common Stock,
other securities or other property, as determined in the sole discretion of the
Compensation and Stock Option Committee. Dividends paid on any shares of
restricted stock may be paid directly to the participant, withheld by the
Company subject to vesting of the restricted shares or may be reinvested in
additional shares of restricted stock or in additional restricted stock units,
as determined by the Compensation and Stock Option Committee in its sole
discretion.
Performance awards granted under the LTIP shall consist of a right
denominated in cash or shares of Common Stock, payable at such time and in such
form as the Compensation and Stock Option Committee shall determine, payable in
amounts determined by the Compensation and Stock Option Committee, based upon
the achievement of such performance goals during such performance periods as the
Compensation and Stock Option Committee shall establish. Subject to the terms of
the LTIP and any applicable award agreement, the Compensation and Stock Option
Committee shall determine the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
performance award and the amount and kind of any payment or transfer to be made
pursuant to any performance award. Performance awards may be paid in a lump sum
or in installments following the close of the performance period or, in
accordance with procedures established by the Compensation and Stock Option
Committee, on a deferred basis.
In addition to the foregoing types of awards, the Compensation and Stock
Option Committee shall have the authority to grant to Participants an "Other
Stock-Based Award", which shall consist of any right which is (a) not a stock
option, stock
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appreciation right, restricted stock or restricted unit award or performance
award, and (b) an award of shares of Common Stock or an award denominated or
payable in, valued in whole or in part by reference to, or otherwise based on or
related to, shares of Common Stock (including, without limitation, securities
convertible into shares of Common Stock), as deemed by the Compensation and
Stock Option Committee to be consistent with the purposes of the LTIP; provided
that any such rights must comply, to the extent deemed desirable by the
Compensation and Stock Option Committee, with Rule 16b-3 and applicable law.
Subject to the terms of the LTIP and any applicable award agreement, the
Compensation and Stock Option Committee shall determine the terms and conditions
of any such other stock-based award, including the price, if any, at which
securities may be purchased pursuant to any other stock-based award granted
under the LTIP. In the sole and complete discretion of the Compensation and
Stock Option Committee, an award, whether made as any other stock-based award or
as any other type of award issuable under the LTIP, may provide the participant
with dividends or dividend equivalents, payable in cash, shares of Common Stock,
other securities or other property on a current or deferred basis.
The Compensation and Stock Option Committee shall also have the discretion
to designate any award as a "Performance Compensation Award." While awards in
the form of stock options and stock appreciation rights are intended to qualify
as "Performance-Based Compensation" under Section 162(m) of the Code, provided
that the exercise price or the grant price, as the case may be, is established
by the Compensation and Stock Option Committee to be equal to the fair market
value per share of Common Stock as of the date of grant, this form of award
enables the Compensation and Stock Option Committee to treat certain other
awards under the LTIP as Performance Based Compensation and thus preserve
deductibility by the Company for federal income tax purposes of such awards
which are made to participants in the LTIP.
Each Performance Compensation Award shall be payable only upon achievement
over a specified performance period of a duration of at least one year of a
pre-established objective performance goal established by the Compensation and
Stock Option Committee for such period. The Compensation and Stock Option
Committee may designate one or more performance criteria for purposes of
establishing a performance goal with respect to Performance Compensation Awards
made pursuant to the LTIP. The performance criteria that will be used to
establish such performance goals shall be based on the attainment of specific
levels of performance of the Company (or subsidiary, affiliate, division or
operational unit of the Company) and shall be limited to the following: return
on net assets, return on shareholders' equity, return on assets, return on
capital, shareholder returns, profit margin, earnings before interest, taxes,
depreciation and amortization, earnings per share, net earnings, operating
earnings, price per share, sales or market share.
With regard to a particular performance period, the Compensation and Stock
Option Committee shall have the discretion, subject to the terms of the LTIP, to
select the length of the performance period, the type(s) of Performance
Compensation Award(s) to be issued, the performance goals that will be used to
measure performance for the period and the performance formula that will be used
to determine what portion,
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if any, of the Performance Compensation Award has been earned for the period.
Such discretion shall be exercised by the Compensation and Stock Option
Committee in writing no later than 90 days after the commencement of the period.
Performance for the period shall be measured and certified by the Compensation
and Stock Option Committee upon the period's close. In determining entitlement
to payment in respect of a Performance Compensation Award, the Compensation and
Stock Option Committee may through use of negative discretion reduce or
eliminate such award, provided such discretion is permitted under Section 162(m)
of the Code. The Compensation and Stock Option Committee may not use negative
discretion with respect to any option or stock appreciation right other than an
option or stock appreciation right that is intended to be a Performance
Compensation Award.
In the event that the Compensation and Stock Option Committee determines
that any corporate transaction or event affects the shares of Common Stock
awarded pursuant to the LTIP, such that an adjustment is appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the LTIP, then the Compensation and Stock Option
Committee shall, in such manner as it may deem equitable, adjust any or all of
(a) the number of shares or other securities of the Company (or number and kind
of other securities or property) with respect to which awards may be granted,
(b) the number of shares of Common Stock or other securities of the Company (or
number and kind of other securities or property) subject to outstanding awards
and (c) the grant or exercise price with respect to any award or (d) if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
award in consideration for the cancellation of such award; provided, in each
case that no such adjustment shall be authorized to the extent such authority
would cause an award designated by the Compensation and Stock Option Committee
as a Performance Compensation Award or an option or stock appreciation right
with an exercise price or grant price (as applicable) equal to the fair market
value of a share of Common Stock to fail to qualify as Performance Based
Compensation.
Change of Control
In the event of a Change of Control of the Company (as defined in the
LTIP), any outstanding awards which are unexercisable or otherwise unvested
shall automatically be deemed exercisable or otherwise vested as of immediately
prior to the Change of Control.
Transferability
Each award and each right under any award, shall be exercisable only by
the Participant during the Participant's lifetime or if permissible under
applicable law, by the Participant's guardian or legal representative. No award
may be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant other than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or any affiliate; provided that the designation of
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a beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale, transfer or encumbrance.
Amendment
The Board may amend, alter, suspend, discontinue, or terminate the LTIP or
any portion thereof at any time; provided that no such amendment, alteration,
suspension, discontinuation or termination shall be made without Stockholder
approval if such approval is necessary to comply with any tax or regulatory
requirement, including for these purposes any approval requirement which is a
prerequisite for exemptive relief from Section 16(b) of the Exchange Act or Code
Section 162(m) (provided that the Company is subject to the requirements of
Section 16 of the Exchange Act or Code Section 162(m), as the case may be, as of
the date of such action).
Awards and Anticipated Awards
As of April 15, 1998, options representing 918,679 shares of Common Stock
were awarded to 42 individuals (4 of whom have left the employ of the Company)
and Alvarez & Marsal, Inc. Options representing 519,405 shares of Common Stock
were awarded as nonqualified stock options, of which 359,354 were vested as of
January 31, 1998. Options representing 399,280 shares of Common Stock were
awarded as Performance Compensation Awards, of which 126,695 were vested as of
April 15, 1998.
No determination has been made by the Board or the Compensation and Stock
Option Committee regarding the number of awards to be granted in the future.
Federal Income Tax Consequences Relating to the LTIP
The federal income tax consequences of the grant and exercise of an option
are summarized below. The summary is not intended to be complete and is not
intended as tax advice to any person.
Nonqualified Stock Options. The grant of a nonqualified stock option has
no immediate federal income tax effect; the Participant will not recognize
taxable income and the Company will not receive a tax deduction. When the
Participant exercises the option, the Participant will recognize ordinary income
in an amount equal to the excess of the fair market value of the Common Stock on
the date of exercise over the exercise price, and the Company will generally
receive a tax deduction equal to the amount of income recognized. Nonqualified
stock options granted under the LTIP are intended to qualify as
qualified-performance-based compensation for purposes of Section 162(m) of the
Code.
Incentive Stock Options. When a Participant is granted an incentive stock
option, or when the Participant exercises the option, the Participant will
generally not recognize taxable income (except for purposes of the alternative
minimum tax) and the Company will not receive a tax deduction, unless the
Participant does not hold the shares of Common Stock for at least two years from
the date of grant and one year from
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the date of exercise (the "Holding Period"). If the Participant does hold the
shares of Common stock for the required Holding Period, any gain or loss upon a
subsequent disposition of the shares of Common Stock will be treated as
long-term capital gain or loss.
Stock Appreciation Rights. No income will be recognized by a Participant
at the time a restricted stock award is granted. The vesting of the shares of
Common Stock subject to the award is generally a taxable event which requires
the Participant to recognize, as ordinary income, the then fair market value of
the shares of Common Stock. Ithaca ordinarily will be entitled to claim a
federal income tax deduction in an amount equal to the ordinary income
recognized by the Participant. A Participant may elect pursuant to Section 83(b)
of the Code to have the income recognized at the date the award is granted on
the then fair market value of the shares of Common Stock. In the case of an
83(b) election, Ithaca will be entitled to a corresponding deduction at the time
of the grant.
Restricted Stock Awards. If Common Stock received pursuant to a stock
award made through the LTIP is subject to a restriction on continued ownership
which is dependent upon the recipient continuing to perform services for the
Company (a "risk of forfeiture"), the Participant should not recognize
compensation income upon receipt of the shares of Common Stock unless he/she
makes a so-called "83(b) election" as discussed below. Instead, the Participant
will recognize compensation income (and the Company will be entitled to a
deduction) when the shares of Common Stock are no longer subject to a risk of
forfeiture, in an amount equal to the fair market value of such Common Stock at
such time. Absent a Participant making an 83(b) election, dividends paid with
respect to shares of Common Stock which are subject to a risk of forfeiture will
be treated as compensation income for the Participant (and a compensation
deduction will be available to the Company for the dividend) until the shares of
Common Stock are no longer subject to a risk of forfeiture.
Performance Awards. Normally, a participant will not recognize taxable
income upon the grant of such awards. Subsequently, when the conditions and
requirements for the grants have been satisfied and the payment determined, any
cash received and the fair market value of any Common Stock received will
constitute ordinary income to the Participant. The Company will also then be
entitled to deduction in the same amount.
Vote Required
The vote required to reapprove the LTIP is a majority of the votes of the
shares of Common Stock present in person or represented by proxy at the meeting
and entitled to vote, provided a quorum is present. Abstentions will have the
effect of a vote against the LTIP and broker non-votes will have no effect on
the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REAPPROVAL OF THE LTIP.
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PROPOSAL 3: 1997 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
Introduction
On July 24, 1997, the Board adopted the Ithaca 1997 Stock Option Plan for
Non-Employee Directors (the "1997 Plan"). The Company is currently contemplating
the submission of an application to be listed on the NASDAQ National Market.
Consequently, the Company is seeking Stockholder approval of the 1997 Plan in
order to assure compliance with NASDAQ National Market stockholder approval
requirements for plans which grant capital stock to directors, should the
Company become subject to such requirements. The following is a summary of the
material features of the 1997 Plan. The 1997 Plan is incorporated by reference
to Post-Effective Amendment No. 1 to the Company's Registration Statement on
Form S-1, dated October 29, 1997.
Purposes
The purpose of the 1997 Plan is to secure for the Company the benefits of
the additional incentive inherent in the ownership of shares of Common Stock of
the Company by non-employee directors of the Company and to help the Company
secure and retain the services of such non-employee directors.
Administration
The 1997 Plan is intended to be a self-governing formula plan. To this
end, the 1997 Plan requires minimal discretionary action by any administrative
body with regard to any transaction under the 1997 Plan. To the extent, if any,
that questions of administration arise, these shall be resolved by the Board.
Subject to the express provisions of the 1997 Plan, the Board shall have plenary
authority to interpret the 1997 Plan, to prescribe, amend and rescind the rules
and regulations relating to it and to make all other determinations deemed
necessary and advisable for the administration of the 1997 Plan. The
determination of the Board shall be conclusive.
Eligible Participants
The 1997 Plan enables the Company to make nonqualified stock option grants
to directors of the Company who are not employees of the Company or its
affiliates. There are currently six non-employee directors.
Number of Shares Authorized Under the 1997 Plan
Options representing 45,000 shares of Common Stock ("Director Shares") are
available for award under the 1997 Plan. If, and to the extent that, options
granted under the 1997 Plan terminate, expire or are canceled for any reason
before they are exercised, new options may be granted in respect of the Director
Shares covered by such terminated, expired or canceled options. In addition, the
1997 Plan provides the
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Board with discretion to adjust any or all of (1) the number of shares of Common
Stock or other securities of the Company (or number and kind of other securities
or property) with respect to which options may be granted, (2) the number of
shares of Common Stock or other securities of the Company (or number and kind of
other securities or property) subject to outstanding options and (3) the grant
or exercise price with respect to any option if deemed appropriate, make
provision for a cash payment to the holder of an outstanding option in
consideration for the cancellation of such option, if the Board determines that
certain corporate transactions or events affect the Director Shares such that an
adjustment would be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the 1997
Plan.
Terms and Conditions of Awards Under the 1997 Plan
Each option granted under the 1997 Plan will vest and become exercisable
on the date immediately preceding the Company's Annual Meeting which first
occurs after the date of grant, provided that the director is in the service of
the Company on such date. If a director ceases to serve the Company as a
director, any options which have not vested will be canceled by the Company
without consideration.
Each vested option will terminate on the earliest of the following (1) ten
years from the date of grant, (2) one year from the termination of the
optionee's service as a Non-Employee Director due to death or disability (as
defined in the 1997 Plan), (3) six months from the termination of the optionee's
service as a Non-Employee Director due to the expiration (and non-renewal) of
the term for which the optionee was elected to serve, or (4) the date the
optionee is removed as a director or resigns as a director prior to the end of
the term for which such director was elected to serve.
All options granted on July 24, 1997 have an exercise price of $6.00 per
share. If the Common Stock is trading on an over-the-counter market, the
exercise price for any future grants under the 1997 Plan will be equal to the
mean between the reported high and low sales prices of the Common Stock on the
date immediately preceding the date of grant, or if there were no sales on such
date, on the closest preceding date on which there were sales of Common Stock;
however, if the Common Stock is not trading on an over-the-counter-market, the
exercise price will be the fair market value of a share of Common Stock as of
the date such option is granted, as determined in good faith by the Board.
Any Director Shares purchased are to be paid for in cash, or its
equivalent or (1) by exchanging Common Stock owned by the optionee (which are
not the subject of any pledge or other security interest and which have been
owned by such optionee for at least six months), (2) subject to such rules as
may be established by the Board, through delivery of irrevocable instructions to
a broker to sell the Common Stock deliverable upon the exercise of the option
and to deliver promptly to the Company an amount equal to the aggregate exercise
price or (3) by a combination of the foregoing, provided that the combined value
of all cash and cash equivalents and the fair market
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value of any Common Stock so tendered to the Company, as of the date of such
tender, is at least equal to such aggregate exercise price.
Change of Control
In the event of a Change of Control of the Company (as defined in the 1997
Plan), any outstanding awards then held by an optionee which are unexercisable
or otherwise unvested will automatically be deemed exercisable or otherwise
vested immediately prior to such Change of Control.
Amendment
The Board may terminate or amend the 1997 Plan at any time, provided that
(1) any such amendment complies with all applicable laws and applicable stock
exchange listing requirements, (2) any amendment or termination for which
Stockholder approval is necessary to comply with any tax or regulatory
requirement will not be effective until such approval has been obtained and (3)
no amendment or termination, without the consent of the holder of an option
under the 1997 Plan, may adversely affect the rights of such person with respect
to any option previously granted.
Transferability
During the optionee's lifetime, only the optionee (or, if permissible
under applicable law, the optionee's legal guardian or representative) may
exercise an option. Furthermore, no option may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by an optionee other than
by will or by the laws of descent and distribution, and any such purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall
be void and unenforceable against the Company or any of its affiliates, provided
that the designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance.
Awards and Anticipated Awards
Pursuant to the 1997 Plan, each person who served as a Non-Employee
Director on July 24, 1997 was granted an option to purchase 1,500 Director
Shares. Thereafter, during the term of the 1997 Plan, each year, each person who
is a Non-Employee Director on the date immediately after the Annual Meeting will
receive an option to purchase 1,500 shares of Common Stock, on such date,
however, if the Company's equity securities are listed on a national securities
exchange or an over-the-counter-market, such options will be granted only if the
1997 Plan has been approved by the Stockholders of the Company prior to the date
of grant.
Federal Income Tax Consequences Relating to the 1997 Plan
The 1997 Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section 401(a) of the Code.
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All options granted under the 1997 Plan will be nonqualified stock options
subject to Section 83 of the Code.
Vote Required
The vote required to approve the 1997 Plan is a majority of the votes of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting and entitled to vote, provided a quorum is present. Abstentions
will have the effect of a vote against the 1997 Plan and broker non-votes will
have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 1997
PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of KPMG Peat Marwick LLP ("KPMG") was selected by the
Board as the Company's independent public accountants to audit the consolidated
financial statements of the Company for the fiscal year ended January 31, 1998.
An independent public accountant has not yet been selected for the current
fiscal year because the Company is still in the process of reviewing proposals
from various independent public accountants to perform its accounting and
auditing work.
A representative of KPMG is expected to be present at the Annual Meeting,
will have the opportunity to make a statement, if he or she desires to do so,
and will be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
There was a failure by each of Walter J. Branson, Marvin B. Crow, Francis
Goldwyn, Morton Handel, David N. Weinstein and James A. Williams to file a Form
3, an Initial Statement of Beneficial Ownership of Securities, on a timely basis
with the Commission as required under Section 16(a) of the Exchange Act.
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MISCELLANEOUS
Stockholder Proposals
Pursuant to the By-Laws of the Company, proposals of Stockholders intended
to be presented at the 1999 Annual Meeting must be received by management of the
Company at its executive offices not less than 60 and no more than 90 days in
advance of June 10, 1999.
Other Business
As of the date of this Proxy Statement, the Board is not aware of any
matters that will be presented for action at the Annual Meeting other than those
described above. Should other business be properly brought before the Annual
Meeting, it is intended that the accompanying proxy will be voted thereon in the
discretion of the person named as proxies.
Date: May 1, 1998 By Order of the Board of
Directors,
/s/ Jim D. Waller
Jim D. Waller
Chairman of the Board,
Chief Executive Officer,
President and Director
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EXHIBIT A
ITHACA INDUSTRIES, INC.
1996 Long-Term Stock Incentive Plan
SECTION 1. Purpose. The purposes of this Ithaca Industries, Inc. 1996
Long-Term Stock Incentive Plan are to promote the interests of Ithaca
Industries, Inc. and its stockholders by (i) attracting and retaining
exceptional officers and other key employees and consultants of the Company and
its Subsidiaries, as defined below; (ii) motivating such individuals by means of
performance-related incentives to achieve longer-range performance goals; and
(iii) enabling such individuals to participate in the long-term growth and
financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by or controls the Company and (ii) any entity in which the Company
has a significant equity interest, in either case as determined by the
Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted Stock
Award, Restricted Stock Unit Award, Performance Award, Other Stock-Based Award
or Performance Compensation Award.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Change of Control" shall mean the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition, in one or a series
of related transactions, of all or substantially all of the assets of the
Company to any "person" or "group" (as such terms are used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) other than a disposition to a Person or
Persons who are the "beneficial owners" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of at least fifty percent (50%) of the combined voting
power of the outstanding voting stock of the Company at the time of
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disposition, (ii) any person or group other than the Company, any employee
benefit plan of the Company, or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of Shares of the Company) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 50% of
the total voting power of the voting stock of the Company, including by way of
merger, consolidation or otherwise or (iii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of the directors of the Company, then still in office, who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board, then in office); provided that in no event
shall any public offering of the Company's equity securities pursuant to an
effective registration statement under the Securities Act of 1933 be deemed to
constitute a Change of Control.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean (i) a committee of the Board designated by the
Board to administer the Plan and composed of not less two directors, each of
whom is intended to be a "Non-Employee Director" (within the meaning of Rule
16b-3) and an "outside director" (within the meaning of Code section 162(m)) to
the extent Rule 16b-3 and Code section 162(m), respectively, are applicable to
the Company or (ii) during any period when Rule 16b-3 and Code section 162(m)
are not applicable to the Company, if at any time such a committee has not been
so designated by the Board, the Board or any authorized committee thereof.
"Company" shall mean Ithaca Industries, Inc., together with any successor
thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean, (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 the Shares, as of any date, (i) the mean between the high and
low sales prices of the Shares as reported on the composite tape for securities
traded on the New York Stock Exchange for the immediately preceding trading date
(or if not then trading on the New York Stock Exchange, the mean between the
high and low sales
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price of the Shares on the stock exchange or over-the-counter market on which
the Shares are principally trading on such date), or if there were no sales on
such date, on the closest preceding date on which there were sales of Shares or
(ii) in the event there shall be no public market for the Shares on such date,
the fair market value of the Shares as determined in good faith by the
Committee.
"Incentive Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to meet
the requirements of Section 422 of the Code or any successor provision thereto.
"Negative Discretion" shall mean the discretion authorized by the Plan to
be applied by the Committee to eliminate or reduce the size of a Performance
Compensation Award; provided that the exercise of such discretion would not
cause the Performance Compensation Award to fail to qualify as
"Performance-Based Compensation" under Section 162(m) of the Code. By way of
example and not by way of limitation, in no event shall any discretionary
authority granted to the Committee by the Plan including, but not limited to,
Negative Discretion, be used to (a) grant or provide payment in respect of
Performance Compensation Awards for a Performance Period if the Performance
Goals for such Performance Period have not been attained; or (b) increase a
Performance Compensation Award above the maximum amount payable under Sections
4(a) or 11(d)(vi) of the Plan. Notwithstanding anything herein to the contrary,
in no event shall Negative Discretion be exercised by the Committee with respect
to any Option or Stock Appreciation Right (other than an Option or Stock
Appreciation Right that is intended to be a Performance Compensation Award under
Section 11 of the Plan).
"Non-Qualified Stock Option" shall mean a right to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is not intended
to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Other Stock-Based Award" shall mean any right granted under Section 10 of
the Plan.
"Participant" shall mean any officer or other key employee or consultant
of the Company or its Subsidiaries eligible for an Award under Section 5 and
selected by the Committee to receive an Award under the Plan.
"Performance Award" shall mean any right granted under Section 9 of the
Plan.
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"Performance Compensation Award" shall mean any Award designated by the
Committee as a Performance Compensation Award pursuant to Section 11 of the
Plan.
"Performance Criteria" shall mean the criterion or criteria that the
Committee shall select for purposes of establishing the Performance Goal(s) for
a Performance Period with respect to any Performance Compensation Award under
the Plan. The Performance Criteria that will be used to establish the
Performance Goal(s) shall be based on the attainment of specific levels of
performance of the Company (or Subsidiary, Affiliate, division or operational
unit of the Company) and shall be limited to the following: Return on net
assets, return on shareholders' equity, return on assets, return on capital,
shareholder returns, profit margin, earnings before interest, taxes,
depreciation and amortization (EBITDA), earnings per Share, net earnings,
operating earnings, market price per Share and sales or market share. To the
extent required under Section 162(m) of the Code, the Committee shall, within
the first 90 days of a Performance Period (or, if longer, within the maximum
period allowed under Section 162(m) of the Code), define in an objective fashion
the manner of calculating the Performance Criteria it selects to use for such
Performance Period.
"Performance Formula" shall mean, for a Performance Period, the one or
more objective formulas applied against the relevant Performance Goal to
determine, with regard to the Performance Compensation Award of a particular
Participant, whether all, some portion but less than all, or none of the
Performance Compensation Award has been earned for the Performance Period.
"Performance Goals" shall mean, for a Performance Period, the one or more
goals established by the Committee for the Performance Period based upon the
Performance Criteria. The Committee is authorized at any time during the first
90 days of a Performance Period, or at any time thereafter (but only to the
extent the exercise of such authority after the first 90 days of a Performance
Period would not cause the Performance Compensation Awards granted to any
Participant for the Performance Period to fail to qualify as Performance-Based
Compensation under Section 162(m) of the Code), in its sole and absolute
discretion, to adjust or modify the calculation of a Performance Goal for such
Performance Period to the extent permitted under Section 162(m) of the Code in
order to prevent the dilution or enlargement of the rights of Participants, (a)
in the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event or development affecting the Company; or (b) in
recognition of, or in anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the Company, or in
response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.
"Performance Period" shall mean the one or more periods of time of at
least one year in duration, as the Committee may select, over which the
attainment of
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one or more Performance Goals will be measured for the purpose of determining a
Participant's right to and the payment of a Performance Compensation Award.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.
"Plan" shall mean this Ithaca Industries, Inc. 1996 Long-Term Stock
Incentive Plan.
"Restricted Stock" shall mean any Share granted under Section 8 of the
Plan.
"Restricted Stock Unit" shall mean any unit granted under Section 8 of the
Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the Staff thereof.
"Shares" shall mean the common shares of the Company, $.01 par value, or
such other securities of the Company (i) into which such common shares shall be
changed by reason of a recapitalization, merger, consolidation, split-up,
combination, exchange of shares or other similar transaction or (ii) as may be
determined by the Committee pursuant to Section 4(b).
"Stock Appreciation Right" shall mean any right granted under Section 7 of
the Plan.
"Subsidiary" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee
"Substitute Awards" shall have the meaning specified in Section 4(c).
SECTION 3. Administration. (a) The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to a
Participant and designate those Awards which shall constitute Performance
Compensation Awards; (iii) deter-
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mine the number of Shares to be covered by, or with respect to which payments,
rights, or other matters are to be calculated in connection with, Awards; (iv)
determine the terms and conditions of any Award; (v) determine whether, to what
extent, and under what circumstances Awards may be settled or exercised in cash,
Shares, other securities, other Awards or other property, or canceled,
forfeited, or suspended and the method or methods by which Awards may be
settled, exercised, canceled, forfeited, or suspended; (vi) determine whether,
to what extent, and under what circumstances cash, Shares, other securities,
other Awards, other property, and other amounts payable with respect to an Award
(subject to Section 162(m) of the Code with regard to Performance Compensation
Awards) shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) interpret, administer reconcile any
inconsistency, correct any default and/or supply any omission in the Plan and
any instrument or agreement relating to, or Award made under, the Plan; (viii)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
(ix) establish and administer Performance Goals and certify whether, and to what
extent, they have been attained; and (x) make any other determination and take
any other action that the Committee deems necessary or desirable for the
administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Award, and any shareholder.
(c) The mere fact that a Committee member shall fail to qualify as a
"Non-Employee Director" or "outside director" within the meaning of Rule 16b-3
and Code section 162(m), respectively, shall not invalidate any award made by
the Committee which award is otherwise validly made under the Plan.
(d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award
hereunder.
(e) With respect to any Performance Compensation Award granted to a
Participant under the Plan, the Plan shall be interpreted and construed in
accordance with Section 162(m) of the Code.
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section 4(b),
the aggregate number of Shares with respect to which Awards may be granted under
the Plan shall be 928,962; the maximum number of Shares with respect to which
Options and Stock Appreciation Rights may be granted to any Participant in
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any fiscal year shall be 273,224 and the maximum number of Shares which may be
paid to a Participant in the Plan in connection with the settlement of any
Award(s) designated as Performance Compensation Awards in respect of a single
Performance Period shall be 109,290 or, in the event such Performance
Compensation Award is paid in cash, the equivalent cash value thereof. If, after
the effective date of the Plan, any Shares covered by an Award granted under the
Plan, or to which such an Award relates, are forfeited, or if an Award has
expired, terminated or been canceled for any reason whatsoever (other than by
reason of exercise or vesting), then the Shares covered by such Award shall, to
the maximum extent permitted under Section 162(m) of the Code, again be, or
shall become, Shares with respect to which Awards may be granted hereunder.
(b) Adjustments. 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, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee in its discretion 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 of Shares or other securities of the Company (or number and kind
of other securities or property) with respect to which Awards may be granted,
(ii) the number of Shares or other securities of the Company (or number and kind
of other securities or property) subject to outstanding Awards, and (iii) the
grant or exercise price with respect to any Award or, if deemed appropriate,
make provision for a cash payment to the holder of an outstanding Award in
consideration for the cancellation of such Award; provided, in each case, that
no such adjustment shall be authorized to the extent that such authority or
adjustment would cause an Award designated by the Committee as a Performance
Compensation Award under Section 11 of the Plan or an Option or Stock
Appreciation Right with an exercise price or grant price (as applicable) equal
to Fair Market Value of a Share to fail to qualify as "performance-based
compensation" under Section 162(m) of the Code.
(c) Substitute Awards. Awards may, in the discretion of the Committee, be
made under the Plan in assumption of, or in substitution for, outstanding awards
previously granted by the Company or its Affiliates or a company acquired by the
Company or with which the Company combines ("Substitute Awards"). The number of
Shares underlying any Substitute Awards shall be counted against the aggregate
number of Shares available for Awards under the Plan.
(d) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
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SECTION 5. Eligibility. Any officer or other key employee or consultant to
the Company or any of its Subsidiaries (including any prospective officer, key
employee or consultant), who is not a member of the Committee, shall be eligible
to be designated a Participant.
SECTION 6. Stock Options.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Options shall
be granted, the number of Shares to be covered by each Option, the exercise
price therefor and the conditions and limitations applicable to the exercise of
the Option. The Committee shall have the authority to grant Incentive Stock
Options, or to grant Non-Qualified Stock Options, or to grant both types of
Options. In the case of Incentive Stock Options, the terms and conditions of
such grants shall be subject to and comply with such rules as may be prescribed
by Section 422 of the Code, as from time to time amended, and any regulations
implementing such statute. All Options when granted under the Plan are intended
to be Non-Qualified Stock Options, unless the applicable Award Agreement
expressly states that the Option is intended to be an Incentive Stock Option. If
an Option is intended to be an Incentive Stock Option, and if for any reason
such Option (or any portion thereof) shall not qualify as an Incentive Stock
Option, then, to the extent of such nonqualification, such Option (or portion
thereof) shall be regarded as a Non-Qualified Stock Option appropriately granted
under the Plan; provided that such Option (or portion thereof) otherwise
complies with the Plan's requirements relating to Non-Qualified Stock Options.
(b) Exercise Price. The Committee shall establish the exercise price at
the time each Option is granted, which exercise price shall be set forth in the
applicable Award Agreement.
(c) Exercise. Each Option shall be exercisable at such times and subject
to such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award Agreement or thereafter. The Committee may
impose such conditions with respect to the exercise of Options, including
without limitation, any relating to the application of federal or state
securities laws, as it may deem necessary or advisable. Options with an exercise
price equal to the Fair Market Value per Share as of the date of grant are
intended to qualify as "performanced-based compensation" under Section 162(m) of
the Code. In the sole discretion of the Committee, Options may be granted with
an exercise price that is less than the Fair Market Value per Share and such
Options may, but need not, be intended to qualify as Performanced Based
Compensation in accordance with Section 11 hereof.
(d) Payment. No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the aggregate exercise price therefor is
received by the Company. Such payment may be made in cash, or its equivalent,
or, if and to the extent permitted by the Committee, (i) by exchanging Shares
owned by the optionee
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(which are not the subject of any pledge or other security interest and which
have been owned by such optionee for at least 6 months) or (ii) subject to such
rules as may be established by the Committee, through delivery of irrevocable
instructions to a broker to sell such Shares and deliver promptly to the Company
an amount equal to the aggregate exercise price, or by a combination of the
foregoing, provided that the combined value of all cash and cash equivalents and
the Fair Market Value of any such Shares so tendered to the Company as of the
date of such tender is at least equal to such aggregate exercise price.
SECTION 7. Stock Appreciation Rights.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Stock
Appreciation Rights shall be granted, the number of Shares to be covered by each
Stock Appreciation Right Award, the grant price thereof and the conditions and
limitations applicable to the exercise thereof. Stock Appreciation Rights with a
grant price equal to the Fair Market Value per Share of the date of grant are
intended to qualify as "performanced-based compensation" under Section 162(m) of
the Code. In the sole discretion of the Committee, Stock Appreciation Rights may
be granted with a grant price that is less than the Fair Market Value per Share
and such Options may, but need not, be intended to qualify as Performanced Based
Compensation in accordance with Section 11 hereof. Stock Appreciation Rights may
be granted in tandem with another Award, in addition to another Award, or
freestanding and unrelated to another Award. Stock Appreciation Rights granted
in tandem with or in addition to an Award may be granted either at the same time
as the Award or at a later time. Stock Appreciation Rights shall not be
exercisable earlier than six months after the date of grant.
(b) Exercise and Payment. A Stock Appreciation Right shall entitle the
Participant to receive an amount equal to the excess of the Fair Market Value of
a Share on the date of exercise of the Stock Appreciation Right over the grant
price thereof. The Committee shall determine whether a Stock Appreciation Right
shall be settled in cash, Shares or a combination of cash and Shares.
(c) Other Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine, at or after the grant
of a Stock Appreciation Right, the term, methods of exercise, methods and form
of settlement, and any other terms and conditions of any Stock Appreciation
Right. Any such determination by the Committee may be changed by the Committee
from time to time and may govern the exercise of Stock Appreciation Rights
granted or exercised prior to such determination as well as Stock Appreciation
Rights granted or exercised thereafter. The Committee may impose such conditions
or restrictions on the exercise of any Stock Appreciation Right as it shall deem
appropriate.
SECTION 8. Restricted Stock and Restricted Stock Units.
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(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Shares of
Restricted Stock and Restricted Stock Units shall be granted, the number of
Shares of Restricted Stock and/or the number of Restricted Stock Units to be
granted to each Participant, the duration of the period during which, and the
conditions, if any, under which, the Restricted Stock and Restricted Stock Units
may be forfeited to the Company, and the other terms and conditions of such
Awards.
(b) Transfer Restrictions. Shares of Restricted Stock and Restricted Stock
Units may not be sold, assigned, transferred, pledged or otherwise encumbered,
except, in the case of Restricted Stock, as provided in the Plan or the
applicable Award Agreements. Certificates issued in respect of Shares of
Restricted Stock shall be registered in the name of the Participant and
deposited by such Participant, together with a stock power endorsed in blank,
with the Company. Upon the lapse of the restrictions applicable to such Shares
of Restricted Stock, the Company shall deliver such certificates to the
Participant or the Participant's legal representative.
(c) Payment. Each Restricted Stock Unit shall have a value equal to the
Fair Market Value of a Share. Restricted Stock Units shall be paid in cash,
Shares, other securities or other property, as determined in the sole discretion
of the Committee, upon the lapse of the restrictions applicable thereto, or
otherwise in accordance with the applicable Award Agreement. Dividends paid on
any Shares of Restricted Stock may be paid directly to the Participant, withheld
by the Company subject to vesting of the Restricted Shares pursuant to the terms
of the applicable Award Agreement, or may be reinvested in additional Shares of
Restricted Stock or in additional Restricted Stock Units, as determined by the
Committee in its sole discretion.
SECTION 9. Performance Awards.
(a) Grant. The Committee shall have sole and complete authority to
determine the Participants who shall receive a "Performance Award", which shall
consist of a right which is (i) denominated in cash or Shares, (ii) payable in
amounts, as determined by the Committee, based upon the achievement of such
performance goals during such performance periods as the Committee shall
establish, and (iii) payable at such time and in such form as the Committee
shall determine.
(b) Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the performance goals
to be achieved during any performance period, the length of any performance
period, the amount of any Performance Award and the amount and kind of any
payment or transfer to be made pursuant to any Performance Award.
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(c) Payment of Performance Awards. Performance Awards may be paid in a
lump sum or in installments following the close of the performance period or, in
accordance with procedures established by the Committee, on a deferred basis.
SECTION 10. Other Stock-Based Awards.
(a) General. The Committee shall have authority to grant to Participants
an "Other Stock-Based Award", which shall consist of any right which is (i) not
an Award described in Sections 6 through 9 above and (ii) an Award of Shares or
an Award denominated or payable in, valued in whole or in part by reference to,
or otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as deemed by the Committee to be consistent
with the purposes of the Plan. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the terms and
conditions of any such Other Stock-Based Award, including the price, if any, at
which securities may be purchased pursuant to any Other Stock-Based Award
granted under this Plan.
(b) Dividend Equivalents. In the sole and complete discretion of the
Committee, an Award, whether made as an Other Stock-Based Award under this
Section 10 or as an Award granted pursuant to Sections 6 through 9 hereof, may
provide the Participant with dividends or dividend equivalents, payable in cash,
Shares, other securities or other property on a current or deferred basis.
SECTION 11. Performance Compensation Awards.
(a) General. The Committee shall have the authority, at the time of grant
of any Award described in Sections 6 through 10 (other than Options and Stock
Appreciation Rights granted with an exercise price or grant price, as the case
may be, equal to the Fair Market Value per Share on the date of grant, to
designate such Award as a Performance Compensation Award in order to qualify
such Award as Performance-Based Compensation under Section 162(m) of the Code.
(b) Eligibility. The Committee will, in its sole discretion, designate
within the first 90 days of a Performance Period (or, if longer, within the
maximum period allowed under Section 162(m) of the Code) which Participant will
be eligible to receive Performance Compensation Awards in respect of such
Performance Period. However, designation of a Participant eligible to receive an
Award hereunder for a Performance Period shall not in any manner entitle the
Participant to receive payment in respect of any Performance Compensation Award
for such Performance Period. The determination as to whether or not such
Participant becomes entitled to payment in respect of any Performance
Compensation Award shall be decided solely in accordance with the provisions of
this Section 11. Moreover, designation of a Participant eligible to receive an
Award hereunder for a particular Performance Period shall not require
designation of such Participant eligible to receive an Award hereunder in any
subsequent Performance Period and designation of one person as
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Participant eligible to receive an Award hereunder shall not require designation
of any other person as a Participant eligible to receive an Award hereunder in
such period or in any other period.
(c) Discretion of Committee with Respect to Performance Compensation
Awards. With regard to a particular Performance Period, the Committee shall have
full discretion to select the length of such Performance Period, the type(s) of
Performance Compensation Awards to be issued, the Performance Criteria that will
be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the
Performance Goals(s) that is(are) to apply to the Company and the Performance
Formula. Within the first 90 days of a Performance Period (or, if longer, within
the maximum period allowed under Section 162(m) of the Code), the Committee
shall, with regard to the Performance Compensation Awards to be issued for such
Performance Period, exercise its discretion with respect to each of the matters
enumerated in the immediately preceding sentence of this Section 11(c) and
record the same in writing.
(d) Payment of Performance Compensation Awards
(i) Condition to Receipt of Payment. Unless otherwise provided in the
applicable Award Agreement, a Participant must be employed by the Company on the
last day of a Performance Period to be eligible for payment in respect of a
Performance Compensation Award for such Performance Period.
(ii) Limitation. A Participant shall be eligible to receive payment in
respect of a Performance Compensation Award only to the extent that: (1) the
Performance Goals for such period are achieved; and (2) the Performance Formula
as applied against such Performance Goals determines that all or some portion of
such Participant's Performance Award has been earned for the Performance Period.
(iii) Certification. Following the completion of a Performance Period, the
Committee shall meet to review and certify in writing whether, and to what
extent, the Performance Goals for the Performance Period have been achieved and,
if so, to calculate and certify in writing that amount of the Performance
Compensation Awards earned for the period based upon the Performance Formula.
The Committee shall then determine the actual size of each Participant's
Performance Compensation Award for the Performance Period and, in so doing, may
apply Negative Discretion, if and when it deems appropriate.
(iv) Negative Discretion. In determining the actual size of an individual
Performance Award for a Performance Period, the Committee may reduce or
eliminate the amount of the Performance Compensation Award earned under the
Performance Formula in the Performance Period through the use of Negative
Discretion if, in its sole judgement, such reduction or elimination is
appropriate.
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(v) Timing of Award Payments. The Awards granted for a Performance Period
shall be paid to Participants as soon as administratively possible following
completion of the certifications required by this Section 11.
(vi) Maximum Award Payable. Notwithstanding any provision contained in
this Plan to the contrary, the maximum Performance Compensation Award payable to
any one Participant under the Plan for a Performance Period is 109,290 Shares
or, in the event the Performance Compensation Award is paid in cash, the
equivalent cash value thereof on the last day of the Performance Period to which
such Award relates. Furthermore, any Performance Compensation Award that has
been deferred shall not (between the date as of which the Award is deferred and
the payment date) increase (i) with respect to a Performance Compensation Award
that is payable in cash, by a measuring factor for each fiscal year greater than
a reasonable rate of interest set by the Committee or (ii) with respect to a
Performance Compensation Award that is payable in Shares, by an amount greater
than the appreciation of a Share from the date such Award is deferred to the
payment date.
SECTION 12. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement, including for these purposes any
approval requirement which is a prerequisite for exemptive relief from Section
16(b) of the Exchange Act or Code section 162(m) (provided that the Company is
subject to the requirements of Section 16 of the Exchange Act or Code section
162(m), as the case may be, as of the date of such action).
(b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate,
any Award theretofore granted, prospectively or retroactively; provided that any
such waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would impair the rights of any Participant or any holder or
beneficiary of any Award theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder or
beneficiary.
(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual or nonrecurring events (including, without limitation, the events
described in Section 4(b) hereof) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, 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
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<PAGE>
benefits intended to be made available under the Plan; provided that no such
adjustment shall be authorized to the extent that such authority or adjustment
would cause an Award designated by the Committee as a Performance Compensation
Award under Section 11 of the Plan to fail to qualify as "Performance-Based
Compensation" under Section 162(m) of the Code.
SECTION 13. Change of Control. In the event of a Change of Control after
the date of the adoption of this Plan, any outstanding Awards then held by
Participants which are unexercisable or otherwise unvested shall automatically
be deemed exercisable or otherwise vested, as the case may be, as of immediately
prior to such Change of Control.
SECTION 14. General Provisions.
(a) Nontransferability.
(i) Each Award, and each right under any Award, shall be exercisable only
by the Participant during the Participant's lifetime, or, if permissible under
applicable law, by the Participant's legal guardian or representative.
(ii) No Award may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant otherwise than by will or
by the laws of descent and distribution, and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate; provided that the
designation of a beneficiary shall not constitute an assignment, alienation,
pledge, attachment, sale, transfer or encumbrance.
(b) No Rights to Awards. No Participant or other Person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Participants, or holders or beneficiaries of Awards. The terms and
conditions of Awards and the Committee's determinations and interpretations with
respect thereto need not be the same with respect to each Participant (whether
or not such Participants are similarly situated).
(c) Share Certificates. All certificates for Shares or other securities of
the Company or any Affiliate delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which such Shares or other securities are then listed,
and any applicable Federal or state laws, and the Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.
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<PAGE>
(d) Withholding. A Participant may be required to pay to the Company or
any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Award, from any payment due or transfer
made under any Award or under the Plan or from any compensation or other amount
owing to a Participant the amount (in cash, Shares, other securities, other
Awards or other property) of any applicable withholding taxes in respect of an
Award, its exercise, or any payment or transfer under an Award or under the Plan
and to take such other action as may be necessary in the opinion of the Company
to satisfy all obligations for the payment of such taxes.
(e) Award Agreements. Each Award hereunder shall be evidenced by an Award
Agreement which shall be delivered to the Participant and shall specify the
terms and conditions of the Award and any rules applicable thereto, including
but not limited to the effect on such Award of the death, disability or
termination of employment or service of a Participant and the effect, if any, of
such other events as may be determined by the Committee.
(f) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other compensation arrangements, which may, but need not, provide for the
grant of options, restricted stock, Shares and other types of Awards provided
for hereunder (subject to shareholder approval if such approval is required),
and such arrangements may be either generally applicable or applicable only in
specific cases.
(g) No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of, or in any
consulting relationship to, the Company or any Affiliate. Further, the Company
or an Affiliate may at any time dismiss a Participant from employment or
discontinue any consulting relationship, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(h) No Rights as Stockholder. Subject to the provisions of the applicable
Award, no Participant or holder or beneficiary of any Award shall have any
rights as a stockholder with respect to any Shares to be distributed under the
Plan until he or she has become the holder of such Shares. Notwithstanding the
foregoing, in connection with each grant of Restricted Stock hereunder, the
applicable Award shall specify if and to what extent the Participant shall not
be entitled to the rights of a stockholder in respect of such Restricted Stock.
(i) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware.
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<PAGE>
(j) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to such applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
(k) Other Laws. The Committee may refuse to issue or transfer any Shares
or other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws.
(l) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(m) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
(n) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 16. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of the date of its
approval by the shareholders of the Company.
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(b) Expiration Date. Unless sooner terminated by the Board, the Plan shall
remain effective until January 31, 2006 (the "Expiration Date"). No Award shall
be granted under the Plan after the first meeting of shareholders of the Company
at which directors are to be elected that occurs after the Company's
registration of any class of common equity securities under Section 12 of the
Securities Exchange Act of 1934 unless the Plan has been re-approved by the
Company's shareholders. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award granted hereunder may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under any such
Award shall, continue after the Expiration Date.
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EXHIBIT B
ITHACA INDUSTRIES, INC.
1997 Stock Option Plan For Non-Employee Directors
Ithaca Industries, Inc., a Delaware corporation (the "Company"), hereby
formulates and adopts the following Stock Option Plan (the "Plan") for
non-employee directors of the Company.
1. Purpose. The purpose of the Plan is to secure for the Company the
benefits of the additional incentive inherent in the ownership of shares of
common stock, par value $.01 per share, of the Company (the "Shares") by
non-employee directors of the Company and to help the Company secure and retain
the services of such non-employee directors.
2. Administration.
(a) The Plan is intended to be a self-governing formula plan. To
this end, the Plan requires minimal discretionary action by any administrative
body with regard to any transaction under the Plan. To the extent, if any, that
questions of administration arise, these shall be resolved by the Board of
Directors of the Company (the "Board of Directors").
(b) Subject to the express provisions of the Plan, the Board of
Directors shall have plenary authority to interpret the Plan, to prescribe,
amend and rescind the rules and regulations relating to it and to make all other
determinations deemed necessary and advisable for the administration of the
Plan. The determination of the Board of Directors shall be conclusive.
3. Common Stock Subject to Options.
(a) Subject to the adjustment provisions of Paragraph 23 below, a
maximum of 45,000 Shares may be made subject to options granted under the Plan
(each an "Option"). If, and to the extent that, Options granted under the Plan
shall terminate, expire or be canceled for any reason without having been
exercised, new Options may be granted in respect of the Shares covered by such
terminated, expired or canceled Options. The granting and terms of such new
Options shall comply in all respects with the provisions of the Plan.
(b) Shares issued upon the exercise of any Option granted under the
Plan may be authorized and unissued Shares or issued Shares held in the
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Company's treasury or both. There shall be reserved at all times for sale under
the Plan a number of Shares, of either authorized and unissued Shares, Shares
held in the Company's treasury, or both, equal to the maximum number of Shares
which may be purchased pursuant to Options granted or that may be granted under
the Plan.
4. Individuals Eligible. Only directors of the Company who are not
employees of the Company or any affiliate of the Company ("Outside Directors")
shall participate in the Plan.
5. Grant of Options. A director receiving an Option pursuant to the Plan
is hereinafter referred to as an "Optionee."
(a) On the Effective Date (as defined in Section 27(a) hereof) the
compensation committee of the Board approved the grant to each person who was an
Outside Director on the Effective Date of an Option to purchase 1,500 Shares on
the Effective Date on terms and conditions consistent with those contained
herein. Such Options shall be subject to the terms and provisions of the Plan.
(b) Each person who is an Outside Director on the date immediately
after each of the Company's annual meetings of its stockholders occurring after
the Effective Date and during the term of the Plan and after approval by the
Board of the Plan will receive, on such date (the "Annual Grant Date"), an
Option to purchase 1,500 Shares; provided, however, that if on such Annual Grant
Date the Company's equity securities are listed on a national securities
exchange, such Options will be granted only if the Plan has been approved by the
stockholders of the Company prior to such Annual Grant Date.
6. Type of Options. All Options granted under the Plan shall be
"nonqualified" stock options subject to the provisions of section 83 of the
Internal Revenue Code of 1986, as amended (the "Code").
7. Form of Agreements with Optionees. Each Option granted pursuant to the
Plan shall be evidenced by a written option agreement (an "Option Agreement")
and shall have such form, terms and provisions, not inconsistent with the
provisions of the Plan, as the Board of Directors shall provide for in such
Option Agreement.
8. Price.
(a) The exercise price per Share purchasable under any Option
granted pursuant to the Plan on the Effective Date shall be $6.00.
(b) The exercise price per Share purchasable under all other Options
granted pursuant to the Plan shall be the Fair Market Value (as defined below)
of a Share as of the date such Option is granted.
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<PAGE>
For purposes of the Plan, "Fair Market Value" of a Share as of any
grant date shall mean:
(i) the mean between the high and low sales prices of a Share
as reported on the composite tape for securities traded on the New York Stock
Exchange for the immediately preceding trading date (or if not then trading on
the New York Stock Exchange, the mean between the high and low sales price of a
Share on the stock exchange or over-the-counter market on which the Shares are
principally trading on such date), or if, there were no sales on such date, on
the closest preceding date on which there were sales of Shares; or
(ii) in the event there shall be no public market for the
Shares on such date, the fair market value of a Shares as determined in good
faith by Board of Directors.
9. Vesting of Options.
(a) Each Option granted to an Optionee hereunder shall vest and
become exercisable on the date immediately preceding the Company's annual
stockholders' meeting which first occurs after the date of grant; provided that
the Optionee continues in the service of the Company as a director until such
date. At any given time, the portion of the Option which has become vested and
exercisable as described above (or pursuant to subsection (c) below) is
hereinafter referred to as the "Vested Portion."
(b) If the Optionee's service with the Company is terminated for any
reason, the Option shall, to the extent not then vested, be cancelled by the
Company without consideration and the Vested Portion of the Option shall remain
exercisable as set forth in Section 10 below.
(c) Notwithstanding any other provision of the Plan to the contrary,
in the event of a Change of Control (as defined below) the Option shall to the
extent not yet vested, immediately become fully vested and exercisable as of
immediately prior to such Change of Control.
For purposes of this Plan, "Change of Control" shall mean the occurrence
of any of the following: (i) the sale, lease, transfer, conveyance or other
disposition, in one or a series of related transactions, of all or substantially
all of the assets of the Company to any "person" or "group" (as such terms are
used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act") other than a disposition to a person or persons who are the
"beneficial owners" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
Shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the
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<PAGE>
passage of time), directly or indirectly, of at least fifty percent (50%) of the
combined voting power of the outstanding voting stock of the Company at the time
of disposition, (ii) any person or group (other than the Company, any employee
benefit plan of the Company, or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of Shares of the Company) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all Shares that any such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 50% of
the total voting power of the voting stock of the Company, including by way of
merger, consolidation or otherwise or (iii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Company
was approved by a vote of a majority of the directors of the Company, then still
in office, who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board, then in office; provided that in
no event shall any public offering of the Company's equity securities pursuant
to an effective registration statement under the Securities Act of 1933 be
deemed to constitute a Change of Control.
10. Duration of Options. Notwithstanding any provision of the Plan
to the contrary, the unexercised portion of any Option granted under the Plan
shall automatically and without notice terminate and become null and void at the
time of the earliest to occur of the following:
(a) The expiration of ten years from the date on which such Option
was granted;
(b) The expiration of one year from the date the Optionee's service
as an Outside Director shall terminate due to death or "Disability" (as defined
below);
(c) The expiration of six months from the date the Optionee's
service as an Outside Director shall terminate due to the expiration (and
non-renewal) of the term for which he was elected to serve; and
(d) the date the Optionee is removed as a Director or resigns as a
director prior to the end of the term for which such director was elected to
serve.
For purposes of this Plan, "Disability" shall mean the Optionee becoming
physically or mentally incapacitated and consequently unable, for a period of
six (6) months in any twelve (12) consecutive month period, to perform his
duties as a director of the Company.
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<PAGE>
11. Exercise of Options.
No Shares shall be delivered pursuant to any exercise of an Option
until payment in full of the aggregate exercise price therefor is received by
the Company. Such payment may be made in cash, or its equivalent or (i) by
exchanging Shares owned by the Optionee (which are not the subject of any pledge
or other security interest and which have been owned by such Optionee for at
least 6 months), (ii) subject to such rules as may be established by the Board
of Directors, through delivery of irrevocable instructions to a broker to sell
the Shares deliverable upon the exercise of the Option and to deliver promptly
to the Company an amount equal to the aggregate exercise price or by a
combination of the foregoing, provided that the combined value of all cash and
cash equivalents and the Fair Market Value of any such Shares so tendered to the
Company as of the date of such tender is at least equal to such aggregate
exercise price.
12. Nontransferability of Options.
(a) During the Optionee's lifetime, each Option, and each right
under any Option, shall be exercisable only by the Optionee, or, if permissible
under applicable law, by the Optionee's legal guardian or representative.
(b) No Option may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by an Optionee otherwise than by will or by
the laws of descent and distribution, and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any of its affiliates; provided that the
designation of a beneficiary shall not constitute an assignment, alienation,
pledge, attachment, sale, transfer or encumbrance.
13. Share Certificates. All certificates for Shares or other securities of
the Company or any of its affiliates delivered under the Plan pursuant to any
Option or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Board of Directors may deem advisable under the Plan
or the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities are
then listed, and any applicable Federal or state laws, and the Board of
Directors may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
14. No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any of its affiliates from adopting or
continuing in effect other compensation arrangements, which may, but need not,
provide for the grant of options, restricted stock, Shares and other types of
compensatory awards (subject to shareholder approval if such approval is
required),
5
<PAGE>
and such arrangements may be either generally applicable or applicable only in
specific cases.
15. No Right to Continued Director Status. The grant of an Option shall
not be construed as giving an Optionee the right to continue to serve as an
Outside Director or otherwise be retained in the employ of, or in any consulting
relationship to, the Company or any of its affiliates.
16. No Rights as Stockholder. Subject to the provisions of the applicable
Option Agreement, no Optionee or holder or beneficiary of any Option shall have
any rights as a stockholder with respect to any Shares or other securities to be
distributed under the Plan until he or she has become the holder of such Shares
or other securities.
17. Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan and any Option Agreement shall be
determined in accordance with the laws of the State of Delaware.
18. Severability. If any provision of the Plan or any Option is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any person, entity or Option, or would disqualify the Plan or any Option
under any law deemed applicable by the Board of Directors, such provision shall
be construed or deemed amended to conform the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Board of
Directors, materially altering the intent of the Plan or the Option, such
provision shall be stricken as to such jurisdiction, person, entity or Option
and the remainder of the Plan and any such Option shall remain in full force and
effect.
19. Other Laws. The Board of Directors may refuse to issue or transfer any
Shares or other consideration under an Option if, acting in its sole discretion,
it determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by an Optionee, other holder or beneficiary in
connection with the exercise of such Option shall be promptly refunded to the
relevant Optionee, holder or beneficiary. Without limiting the generality of the
foregoing, no Option granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Board of Directors in its sole discretion has determined that any such
offer, if made, would be in compliance with all applicable requirements of the
U.S. federal securities laws.
20. No Trust or Fund Created. Neither the Plan nor any Option shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any of its affiliates and an Optionee or any
other person or entity. To the extent that any person acquires a right to
receive
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<PAGE>
payments from the Company or any of its affiliates pursuant to an Option, such
right shall be no greater than the right of any unsecured general creditor of
the Company or any of its affiliates.
21. No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Board of Directors shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares or whether such fractional Shares
or any rights thereto shall be canceled, terminated, or otherwise eliminated.
22. Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
23. Adjustment Upon Changes in Capitalization, etc. In the event that the
Board of Directors 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, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, issuance of warrants or other rights
to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment is
determined by the Board of Directors in its discretion 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 Board of Directors shall,
in such manner as it may deem equitable, adjust any or all of (i) the number of
Shares or other securities of the Company (or number and kind of other
securities or property) with respect to which Options may be granted, (ii) the
number of Shares or other securities of the Company (or number and kind of other
securities or property) 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 in
consideration for the cancellation of such Option.
24. Purchase for Investment. Whether or not the Options and Shares covered
by the Plan have been registered under the Securities Act of 1933, as amended,
each person exercising an Option under the Plan may be required by the Company
to give a representation in writing that such person is acquiring such Shares
for investment and not with a view to, or for sale in connection with, the
distribution of any part thereof. The Company will endorse any necessary legend
referring to the foregoing restriction upon the certificate or certificates
representing any Shares issued or transferred to the Optionee upon the exercise
of any option granted under the Plan.
25. Amendment/Termination. The Plan may be terminated or amended at any
time by the Board of Directors; provided, however, that (i) any such amendment
shall comply with all applicable laws and applicable stock exchange listing
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<PAGE>
requirements and (ii) no such termination or amendment shall be made without
shareholder approval if such approval is necessary to comply with any tax or
regulatory requirement applicable to the Plan and provided that no termination
or amendment of the Plan, without the consent of the Optionee, may adversely
affect the rights of such person with respect to any Option previously granted
under the Plan.
26. Withholding. An Optionee may be required to pay to the Company and the
Company shall have the right and is hereby authorized to withhold from the
settlement of any Option granted hereunder or from any compensation or other
amount owing to an Optionee the amount (in cash, Shares, other securities, or
other property) of any applicable withholding taxes in respect of an Option or
its exercise and to take such other action as may be necessary in the opinion of
the Company to satisfy all obligations for the payment of such taxes.
27. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of May 14, 1997.
(b) Expiration Date. No Option shall be granted under the Plan after
May 13, 2007. Unless otherwise expressly provided in the Plan or in an
applicable Option Agreement, any Option granted hereunder may, and the authority
of the Board of Directors to amend, alter, adjust, suspend, discontinue, or
terminate any such Option or to waive any conditions or rights under any such
Option shall, continue after May 13, 2007.
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<PAGE>
ITHACA INDUSTRIES, INC.
Highway 268 West, P.O. Box 620
Wilkesboro, North Carolina 28697
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Richard P. Thrush and Brian T. Fearn, and
each of them, proxy and attorney-in-fact for the undersigned, with full power of
substitution, to vote on behalf of the undersigned at the 1998 Annual Meeting of
Stockholders (the "Annual Meeting") of Ithaca Industries, Inc., a Delaware
corporation (the "Company"), to be held at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison located at 1285 Avenue of the Americas, New York, New York on
June 10, 1998, at 10:00 a.m., local time, and at any adjournment or postponement
of the Annual Meeting, all of the shares of Common Stock ($.01 par value) of the
Company standing in the name of the undersigned or which the undersigned may be
entitled to vote on the matters described on the reverse side of this card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ITHACA
INDUSTRIES, INC. PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE>
A |X| Please mark your
vote as in this
example.
For the nominees
listed on the right WITHHOLD AUTHORITY
(except as marked to to vote for all nominees
the contrary below) listed to the right
|_| |_|
1. Proposal to elect
as directors of the
Company the
following persons,
to hold office for a term of one year expired at the
meeting to be held in 1999.
(INSTRUCTIONS: To withhold authority to vote for
any individual nominees, cross out that nominee's name.)
The Board of Directors recommends a vote FOR each of the Items below.
FOR AGAINST ABSTAIN
Nominees: Walter J. Branson 2. To consider a proposal |_| |_| |_|
Marvin B. Crow to reapprove the
Francis Goldwyn Company's 1996 Long-
Morton Handel Term Stock Incentive
Jim D. Waller Plan.
David N. Weinstein
James A. Williams
3. To consider a |_| |_| |_|
proposal to approve
the Company's 1997
Stock Option Plan
for Non-Employee
Directors.
4. In their direction, the proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
All of the proposals have been proposed
by the Company.
The undersigned hereby revokes all
proxies heretofore given by the
undersigned to vote at the Annual
Meeting and any adjournment or
postponements therefor.
Please mark here if you plan to attend the Annual Meeting. |_|
SIGNATURE(S)__________________________________________________DATE______________
SIGNATURE(S)__________________________________________________DATE______________
NOTE: Please sign exactly as your name appears on this card. Joint owners
should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation,
please sign full corporate name and signed authorized officer's name
and title. If a partnership, please sign in partnership name and sign
authorized person's name and title.
