SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
File by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Fruit of the Loom, Inc.
_______________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
_______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: 1
_______________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________________________________________
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount Previously Paid:
_______________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
_______________________________________________________________________________
3) Filing Party:
_______________________________________________________________________________
4) Date Filed:
_______________________________________________________________________________
____________________
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
(Bulletin No. 150, 4-09-93)
<PAGE>
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 1994
------------------------
To the Stockholders of
FRUIT OF THE LOOM, INC.:
The Annual Meeting of Stockholders of Fruit of the Loom, Inc. will be held
at 11:00 a.m., Chicago time, on Tuesday, May 17, 1994 on the Skydeck, 100th
Floor, Sears Tower, 233 South Wacker Drive, Chicago, Illinois, for the following
purposes:
(1) To elect nine directors, three directors to be elected by the
holders of Class A Common Stock and six directors to be elected by the
holders of Class A Common Stock and the holders of Class B Common Stock,
voting together as a single class;
(2) To approve the Fruit of the Loom, Inc. Executive Incentive
Compensation Plan; and
(3) To transact such other business as may properly be brought before
the meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on March 23, 1994 as
the record date for determining stockholders entitled to notice of, and to vote
at, the meeting.
By order of the Board of Directors,
KENNETH GREENBAUM
Secretary
April 7, 1994
ALL STOCKHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE FURNISHED FOR THAT PURPOSE.
<PAGE>
FRUIT OF THE LOOM, INC.
5000 SEARS TOWER
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 876-1724
------------------------
PROXY STATEMENT
------------------------
The accompanying proxy is solicited by the Board of Directors of Fruit of
the Loom, Inc. (the "Company") for use at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at 11:00 a.m., Chicago time, on Tuesday, May
17, 1994 on the Skydeck, 100th Floor, Sears Tower, 233 South Wacker Drive,
Chicago, Illinois, and any adjournment thereof. This Proxy Statement and the
accompanying proxy card are being sent to stockholders on or about April 7,
1994.
VOTING SECURITIES; PROXIES
The shares represented by your proxy will be voted and such vote will be in
accordance with the instructions noted on your proxy card. You have the power to
revoke your proxy at any time before it is voted by written notice to the
Secretary of the Company. In addition, stockholders attending the Annual Meeting
may revoke their proxies at that time and vote in person at the meeting.
The Company has two classes of stock outstanding, Class A Common Stock
("Class A Common Stock") and Class B Common Stock ("Class B Common Stock").
Except as otherwise provided by law or the Company's Certificate of
Incorporation, the holders of Class A Common Stock and the holders of Class B
Common Stock vote together as a single class, with each share of Class A Common
Stock having one vote and each share of Class B Common Stock having five votes.
At the close of business on March 23, 1994, the record date for the Annual
Meeting, there were 69,108,749 shares of Class A Common Stock and 6,690,976
shares of Class B Common Stock outstanding, all of which are entitled to vote.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that holders of Class A
Common Stock, voting as a separate class, are entitled to elect that number of
directors constituting at least 25% of the entire board. The holders of Class A
Common Stock and the holders of Class B Common Stock, voting together as a
single class, with each share of Class A Common Stock having one vote and each
share of Class B Common Stock having five votes, are entitled to elect the
remaining directors. Nine directors will be elected at the Annual Meeting, three
of whom will be elected by the holders of Class A Common Stock and six of whom
will be elected by the holders of Class A Common Stock and Class B Common Stock,
voting together as a single class. Directors hold office until the next annual
meeting of stockholders or until their successors have been duly elected and
qualified.
<PAGE>
If no direction to the contrary is given, all proxies received by the Board
of Directors of the Company (the "Board of Directors") from holders of Class A
Common Stock will be voted for the election of the persons shown below as the
nominees of the Board of Directors. The Board of Directors has been advised that
the holders of all shares of Class B Common Stock outstanding intend to vote all
such shares for the election of the persons shown below as the nominees for
election by the holders of Class A Common Stock and the holders of Class B
Common Stock. It is expected that the nominees will be able to stand for
election and be able to serve if elected. In the event that a vacancy in the
slate of nominees should occur before the meeting, proxies will be voted for
another person nominated by the Board of Directors.
INFORMATION AS TO NOMINEES
The following tables set forth information as of March 23, 1994 as to the
nominees for election as directors:
NOMINEES FOR ELECTION BY HOLDERS OF CLASS A COMMON STOCK
<TABLE> <CAPTION>
NAME OF NOMINEE AGE POSITION(S) WITH THE COMPANY AND PRINCIPAL OCCUPATION
- ------------------------------------------ ----------- ---------------------------------------------------------------
<S> <C> <C>
Omar Z. Al Askari(1)...................... 43 Director; Chairman of the Board of Plaid Clothing Group Inc.
and Chief Executive Officer of United Technical Services and
United Eastern Investment Corp.
Dennis S. Bookshester(1)(2)(3)............ 55 Director; Independent Business Consultant; former Chief
Executive Officer of Zale Corp.
Lee W. Jennings(1)........................ 65 Director; President of Jennings & Associates; former Managing
Partner, KPMG Peat Marwick
NOMINEES FOR ELECTION BY HOLDERS OF CLASS A COMMON STOCK AND HOLDERS OF CLASS B
COMMON STOCK
NAME OF NOMINEE AGE POSITION(S) WITH THE COMPANY AND PRINCIPAL OCCUPATION
- ------------------------------------------ ----------- ---------------------------------------------------------------
William Farley(3)......................... 51 Director; Chairman of the Board and Chief Executive Officer of
the Company
John B. Holland........................... 62 Director; President and Chief Operating Officer of the Company
Henry A. Johnson.......................... 75 Director; President of Henry A. Johnson & Associates; former
President and Chief Executive Officer of Spiegel, Inc.
Richard C. Lappin(3)...................... 49 Director and Vice Chairman of the Company
A. Lorne Weil(2).......................... 48 Director; Chairman of the Board and Chief Executive Officer of
Autotote Corporation
Sir Brian G. Wolfson(2)................... 58 Director; Executive Chairman of Wembley plc.
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Executive Committee
2
<PAGE>
------------------------
William Farley. Mr. Farley has been Chairman of the Board and Chief
Executive Officer of the Company since May 1985. During the past five years, Mr.
Farley has also been Chairman and Chief Executive Officer of Farley Industries,
Inc. ("FII"), a company which provides management services to companies
controlled or managed by Mr. Farley. He has held substantially similar positions
with Farley Inc., a manufacturer of prototype auto parts and railroad bearings,
since 1982 and West Point-Pepperell, Inc. ("West Point"), a manufacturer of
household fabrics, from April 1989 through September 1992.
Omar Z. Al Askari. Mr. Al Askari has been a director of the Company since
October 1993. Mr. Al Askari has been Chairman of the Board of Plaid Clothing
Group Inc., a men's tailored clothing business, since 1991. Since 1980, Mr. Al
Askari has also served as President and Chief Executive Officer of United
Technical Services, which sells and services engineered products for the oil
field and construction industries in the United Arab Emirates. He also serves as
Chief Executive Officer of United Eastern Investment Corp., which holds
investments in privately held companies in the United States and the United
Kingdom.
Dennis S. Bookshester. Mr. Bookshester has been a director of the Company
since May 1992. Mr. Bookshester served as the Chief Executive Officer of Zale
Corp. during 1990 and 1991. From 1982 to 1989, he served as Chief Executive
Officer of the retail division of Carson Pirie Scott & Company. Mr. Bookshester
currently is an independent business consultant. He is also a director of AMRE
Inc., Evans Inc., Playboy Enterprises, Inc. and Sundance Homes, Inc.
John B. Holland. Mr. Holland has been a director of the Company since
November 1992 and President of the Company since May 1992. Mr. Holland has
served as Chief Operating Officer of the Company for more than the past five
years. He is also a director of Dollar General Corp. and First Kentucky National
Corp.
Lee W. Jennings. Mr. Jennings has been a director of the Company since
January 1992. Mr. Jennings has been the President of Jennings & Associates, a
strategic consulting firm, for more than the past five years. Prior to the
formation of Jennings & Associates, Mr. Jennings was a Managing Partner of KPMG
Peat Marwick. He is also a director of Alberto Culver Corp., A.O. Smith Corp.,
L&N Housing Corp., Manville Corporation, Prime Capital Corp. and Teppco
Partners, L.P.
Henry A. Johnson. Mr. Johnson has been a director of the Company since July
1988. For more than the past five years, Mr. Johnson has been President of Henry
A. Johnson & Associates, a management consulting firm. Mr. Johnson was
associated with Spiegel, Inc. for over ten years, joining that company as
President and Chief Executive Officer in 1976 and retiring as Vice Chairman in
1987.
Richard C. Lappin. Mr. Lappin has been a director of the Company since
December 1990 and Vice Chairman of the Company since October 1991. Mr. Lappin
has been President and Chief Operating Officer of FII since February 1991. From
October 1989 to February 1991, Mr. Lappin served in various capacities with
Farley Inc., including President and Chief Executive Officer of the Doehler
Jarvis and Southern Fastening Systems divisions of Farley Inc. From 1988 to
October 1989, Mr. Lappin served as President of the North American Operations of
the Champion Spark Plug Company, a manufacturer of automotive products.
A. Lorne Weil. Mr. Weil has been a director of the Company since October
1991. Since 1991, Mr. Weil has been Chairman of the Board and Chief Executive
Officer of Autotote Corporation, a
3
<PAGE>
manufacturer of products for the gaming industry. From 1979 to 1991, Mr. Weil
was the President of Lorne Weil, Inc., a management consulting firm. He is also
a director of General Growth Properties, Inc.
Sir Brian G. Wolfson. Sir Brian Wolfson has been a director of the Company
since May 1992. He has been Executive Chairman of Wembley plc., a company
engaged in the sports and entertainment industry, for more than the past five
years.
BOARD MEETINGS AND COMMITTEES
The Company has an Audit Committee, a Compensation Committee and an
Executive Committee. The Company does not have a standing nominating committee.
The Audit Committee determines the Company's audit policies, reviews audit
reports and recommendations made by the Company's internal auditing staff and
its independent auditors, meets with the Company's independent auditors,
oversees the Company's independent auditors and recommends the engagement of the
Company's independent auditors.
The Compensation Committee establishes the compensation policies to be
followed by the Board of Directors in compensating certain senior executives and
recommends to the Board of Directors the compensation levels for the Chief
Executive Officer and the Chief Operating Officer of the Company. The
Compensation Committee also administers the Company's 1987 Stock Option Plan and
the 1992 Executive Stock Option Plan, including, among other things, determining
the persons to whom stock options and stock appreciation rights are granted and
the price and terms of such options and rights.
The Executive Committee may exercise the powers of the Board of Directors
(other than certain powers specifically reserved to the full Board of Directors)
in the management of the business and affairs of the Company in the intervals
between meetings of the full Board of Directors.
During 1993, the Board of Directors held four meetings, the Audit Committee
met three times, the Compensation Committee met six times and the Executive
Committee did not meet. During the period for which he has been a director, each
of the incumbent directors attended 75% or more of the total number of meetings
of the Board of Directors and of any of the committees on which he served.
* * *
In July 1991, an involuntary Chapter 7 bankruptcy petition was filed
against Farley Inc. under the Federal Bankruptcy Code in the United States
Bankruptcy Court for the Northern District of Illinois. In September 1991,
Farley Inc. converted the Chapter 7 proceeding into a Chapter 11 reorganization
and a Plan of Reorganization was confirmed in December 1992. In 1992, an
involuntary Chapter 7 bankruptcy petition was filed against VBQ, Inc. In July
1992, Valley Fashions Corp. (formerly West Point Acquisition Corp.) filed a
petition under Chapter 11 to effect a "pre-packaged" bankruptcy reorganization,
which reorganization was confirmed in September 1992. Mr. Farley was Chairman,
and Messrs. Holland and Lappin were officers, of Valley Fashions Corp. and Mr.
Farley was Chairman of VBQ, Inc. Zale Corp., a company of which Mr. Bookshester
formerly was Chief Executive Officer, voluntarily filed for protection from
creditors under Chapter 11 of the Federal Bankruptcy Code in January 1992 after
an involuntary petition was filed against Zale Corp. by certain bondholders.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of Class A Common Stock
and Class B Common Stock, the percentage of each class and the percentage of
total voting power of the Company beneficially owned as of March 23, 1994 by (i)
each Director, (ii) each of the Named Officers (as defined on page 7), (iii) all
directors and executive officers as a group, and to the knowledge of the Board
of Directors, (iv) each person owning more than 5% of a class of the Company's
voting securities. Except as otherwise indicated, each beneficial owner has sole
voting and investment power. This table also reflects the effect of shares
issuable upon the exercise of options which are exercisable on or prior to May
22, 1994.
<TABLE> <CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK PERCENT OF
--------------------------- ------------------------- TOTAL
PERCENT OF PERCENT OF VOTING
NUMBER CLASS NUMBER CLASS POWER(1)
-------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Farley Inc. ........................... -- (2) -- 3,176,764 47.5% 15.5%
233 South Wacker Dr.
5000 Sears Tower
Chicago, IL 60606
Oppenheimer Group, Inc................. 10,633,152(3) 15.4% -- -- 10.4%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Neuberger & Berman..................... 3,899,563(4) 5.6% -- -- 3.8%
605 Third Avenue
New York, NY 10158
William Farley......................... 568,000(5) * 6,690,976(6) 100.0% 33.1%
Omar Z. Al Askari...................... 10,000(7) * -- -- *
Dennis S. Bookshester.................. 14,000(8) * -- -- *
John B. Holland........................ 224,800(9) * -- -- *
Lee W. Jennings........................ 11,000 10) * -- -- *
Henry A. Johnson....................... 14,000 10) * -- -- *
Richard C. Lappin...................... 148,366 11) * -- -- *
A. Lorne Weil.......................... 12,000 10) * -- -- *
Sir Brian G. Wolfson................... 11,000 10) * -- -- *
Richard M. Cion........................ 145,888 12) * -- -- *
Paul M. O'Hara......................... 151,000 13) * -- -- *
All directors and executive officers as
a group (14 persons)................. 1,473,886 14) 2.1% 6,690,976 100.0% 33.7%
</TABLE>
- ---------------
* Less than 1%
(1) The Class A Common Stock has one vote per share and the Class B Common
Stock has five votes per share. This column shows the combined voting power
of all Class A Common Stock and Class B Common Stock beneficially owned by
each of the listed persons. The percentages shown assume no conversion of
Class B Common Stock into Class A Common Stock. On March 23, 1994 there
were 69,108,749 shares of Class A Common Stock and 6,690,976 shares of
Class B Common Stock outstanding.
(2) Excludes 3,176,764 shares of Class A Common Stock issuable upon conversion
of shares of Class B Common Stock.
(3) As reported on a Schedule 13G filed by Oppenheimer Group, Inc. on February
1, 1994. According to such Schedule 13G, Oppenheimer Group, Inc. has shared
investment and voting
(Footnotes continued on following page)
5
<PAGE>
(Footnotes continued from preceding page)
power with respect to all 10,633,152 of these shares, including 9,097,595
shares held by Oppenheimer Capital.
(4) As reported on a Schedule 13G filed by Neuberger & Berman on February 7,
1994. According to such Schedule 13G, Neuberger & Berman has sole voting
power with respect to 1,150,427 of these shares, shared voting power with
respect to 2,342,810 of these shares and no voting power with respect to
the remaining 406,326 of these shares and has shared dispositive power with
respect to all 3,899,563 of these shares.
(5) Excludes 6,690,976 shares of Class A Common Stock issuable upon conversion
of shares of Class B Common Stock; includes 250,000 shares of Class A
Common Stock currently issuable upon exercise of options granted under the
Company's 1992 Executive Stock Option Plan.
(6) Includes 3,176,764 shares of Class B Common Stock owned by Farley Inc. Mr.
Farley has voting control of Farley Inc.
(7) These 10,000 shares of Class A Common Stock are held by United Technical
Services.
(8) Includes 3,000 shares of Class A Common Stock held as custodian for a minor
child and 10,000 shares of Class A Common Stock currently issuable upon
exercise of options granted under the Directors' Plan (as defined).
(9) Includes 75,000 shares of Class A Common Stock currently issuable upon
exercise of options granted under the 1992 Executive Stock Option Plan and
140,000 shares of Class A Common Stock currently issuable upon exercise of
options granted under the 1987 Stock Option Plan.
(10) Includes 10,000 shares of Class A Common Stock currently issuable upon
exercise of options granted under the Directors' Plan.
(11) Mr. Lappin holds 31,700 shares of Class A Common Stock jointly with his
wife. Includes 50,000 shares of Class A Common Stock currently issuable
upon the exercise of an option granted to him in 1991 and 66,666 shares of
Class A Common Stock currently issuable upon exercise of options granted to
him under the 1987 Stock Option Plan.
(12) Mr. Cion owns 1,000 shares of Class A Common Stock jointly with his wife.
Includes 144,888 shares of Class A Common Stock currently issuable upon
exercise of options granted to him under the 1987 Stock Option Plan.
(13) Includes 36,000 shares of Class A Common Stock currently issuable upon
exercise of options granted to him under the 1987 Stock Option Plan.
(14) Includes 1,025,219 shares of Class A Common Stock currently issuable upon
the exercise of options under the Company's stock option plans and 2,100
shares of Class A Common Stock owned by family members of certain directors
and executive officers, beneficial ownership of which is disclaimed by such
persons. Excludes 995,864 shares of Class A Common Stock held by a master
trust which includes the assets of the pension plans of substantially all
affiliated companies controlled by Mr. Farley, the voting of which shares
is controlled or managed by Mr. Farley in his capacity as the investment
committee with respect to such trust. Mr. Farley disclaims beneficial
ownership of these shares. Excludes shares owned by Mr. O'Hara because Mr.
O'Hara resigned from his positions with the Company effective February 28,
1994.
SECTION 16 OF THE SECURITIES EXCHANGE ACT
Section 16 of the Securities Exchange Act of 1934, as amended (the "Act"),
requires the Company's officers, directors and persons who own greater than 10%
of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Based solely on a review of the forms it has received and on written
representations from certain reporting persons that no such forms were required
for them, the Company believes that during 1993 all Section 16 filing
requirements applicable to its officers, directors and 10% beneficial owners
were complied with by such persons.
6
<PAGE>
EXECUTIVE COMPENSATION
INTRODUCTION
Messrs. Farley and Holland receive their salaries and other cash
compensation directly from the Company. All of the Company's other executive
officers are employed by FII and receive their salaries and other cash
remuneration from FII. FII is wholly-owned and controlled by Mr. Farley. It
provides general management, investment banking, financing and other services,
including the services of certain of the Company's executive officers, to the
Company and other companies owned or controlled by Mr. Farley.
Prior to 1992, FII was responsible for providing Mr. Farley's services to
the Company and Mr. Farley received compensation from FII for his services as
Chairman and Chief Executive Officer of the Company. Effective in 1992, the
Company's Board of Directors determined to employ Mr. Farley directly as
Chairman and Chief Executive Officer of the Company.
In November 1992, the Company formed a Compensation Committee which
establishes the compensation policies to be followed by the Board of Directors
in compensating certain senior executives, namely, the Chief Executive Officer
and the Chief Operating Officer of the Company.
The following table provides information concerning the annual and
long-term compensation for the fiscal years ended December 31, 1993, 1992 and
1991 of those persons who were at December 31, 1993 (i) the chief executive
officer and (ii) the four other most highly compensated executive officers of
the Company (collectively, the "Named Officers"). No other individuals are
required to be included in the table.
The cash compensation figures in the table, other than the cash
compensation figures for Mr. Holland and the 1993 and 1992 cash compensation
figures for Mr. Farley, represent the total compensation paid to each of the
Named Officers by FII, even though as employees of FII the Named Officers devote
portions of their time to entities other than the Company.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE> <CAPTION>
LONG-TERM
COMPENSATION(1)
-----------------------
AWARDS
----------- PAYOUTS
ANNUAL COMPENSATION SECURITIES ---------- ALL
------------------------------------- UNDERLYING LTIP OTHER
NAME AND SALARY BONUS OTHER OPTIONS PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR ($) ($) ($)(2) (# SHARES) ($) SATION(2)
- --------------------------- --------- ------------ ------------ --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
William Farley, 1993 $ 850,000 $ 1,150,000 -- -- -- --
Chairman of the Board and 1992 500,000 3,000,000 -- 750,000 -- --
Chief Executive Officer 1991 1,000,000 3,467,302 -- --
John B. Holland, 1993 $ 554,308 $ 236,889 -- -- $ 543,841(3) --
President and Chief 1992 468,462 468,462 -- 225,000 915,898(3) --
Operating Officer 1991 440,864 286,490 60,000 434,675(3)
Richard C. Lappin, 1993 $ 600,000 $ 912,000 -- 50,000 -- $ 8,035(4)
Vice Chairman 1992 562,500 400,000 51,535(5) 50,000 -- 7,798(4)
1991 248,393 400,000 50,000 --
Richard M. Cion, 1993 $ 457,313 $ 250,000 -- 10,000 -- $ 8,035(4)
Senior Executive Vice 1992 425,000 800,000 -- 16,000 -- 7,798(4)
President, Corporate 1991 350,000 350,000 20,000 --
Development
Paul M. O'Hara, 1993 $ 369,958 $ 150,000 -- 10,000 -- $ 8,035(4)
Executive Vice President 1992 366,311 300,000 -- 16,000 -- 7,798(4)
and Chief Financial 1991 350,000 270,000 20,000 --
Officer(6)
</TABLE>
- ---------------
(1) None of the Named Officers had any restricted stock holdings as of December
31, 1993.
(2) Information for years prior to 1992 is not required to be disclosed.
(3) Payouts under the Fruit of the Loom, Inc. Long Term Incentive Plan (the
"Long Term Bonus Plan"). Except for Mr. Holland, no director or executive
officer of the Company participated in the Long Term Bonus Plan. The Long
Term Bonus Plan consisted of separate four year plans beginning each year.
Amounts credited to the cash and stock bonus pools for each four year plan
period depended upon the extent to which the Company's operating earnings,
as defined in the plan, during the four year period exceeded a base level of
operating earnings established by the committee responsible for
administering the plan at the beginning of the four year plan period. No new
four year plan period began subsequent to December 31, 1990.
(4) These amounts represent matching contributions pursuant to a 401(k) defined
contribution profit-sharing plan.
(5) Represents income tax gross up for certain relocation expenses.
(6) Mr. O'Hara resigned from his positions with the Company effective February
28, 1994.
8
<PAGE>
OPTION GRANTS IN 1993
The following table provides information on grants of stock options in 1993
to the Named Officers pursuant to the 1987 Stock Option Plan. No stock options
were granted to the Named Officers pursuant to the 1992 Executive Stock Option
Plan in 1993, and no stock appreciation rights were granted under either of
these plans during 1993.
OPTION GRANTS IN 1993
<TABLE> <CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE GRANT DATE
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#) 1993 ($/SH) DATE ($)(1)
- ---------------------------------- ------------ --------------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
William Farley.................... -- -- -- -- --
John B. Holland................... -- -- -- -- --
Richard C. Lappin................. 50,000(2) 11.16% $ 36.625 5/19/03 $ 841,000
Richard M. Cion................... 10,000(2) 2.23 36.625 5/19/03 168,200
Paul M. O'Hara.................... 10,000(2) 2.23 36.625 5/19/03 168,200
</TABLE>
- ---------------
(1) Based on the Black-Scholes model of option valuation. The actual value, if
any, an executive may realize will depend on the excess of the stock price
over the exercise price on the date the option is exercised; the Company
cannot predict whether the value realized by an executive will be at or near
the value estimated by the Black-Scholes model. The estimated values (i)
assume a risk-free rate of return of 6.04%, stock price volatility of
34.678%, a dividend yield of $0 per share and an option term of ten years
and one day and (ii) reflect a reduction of approximately 22% to reflect the
probability of forfeiture due to termination prior to vesting and the
probability of a shortened option term due to termination of employment
prior to the option expiration date.
(2) These options vest (subject to acceleration under certain circumstances)
with respect to 1/3 of the underlying shares of Class A Common Stock on May
18, 1994, 1995 and 1996; however, Mr. O'Hara forfeited these options upon
his resignation.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN 1993 AND YEAR-END 1993 OPTION VALUES
The following table provides information on the Named Officers' unexercised
options at December 31, 1993. None of the Named Officers exercised any options
during 1993.
YEAR-END 1993 OPTION VALUES
<TABLE> <CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1993 AT DECEMBER 31, 1993 ($)(1)
----------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------- ------------ --------------- -------------- -----------------
<S> <C> <C> <C> <C>
William Farley................................ 250,000 500,000(2) $ -- $ --
John B. Holland............................... 215,000 150,000(2) 1,826,875 --
Richard C. Lappin............................. 100,000 50,000 693,750 --
Richard M. Cion............................... 141,555 10,000 1,436,519 --
Paul M. O'Hara................................ 36,000 10,000 77,500 --
</TABLE>
- ---------------
(1) Values are calculated by subtracting the exercise price from the closing
price of the Company's Class A Common Stock on the New York Stock Exchange
on December 31, 1993 of $24.125.
(2) One-half of these options do not become exercisable unless the closing price
of the Company's Class A Common Stock reaches or exceeds $45 per share for
ninety consecutive days within six years after January 31, 1992, the date of
grant, and the remaining half of these options do not become exercisable
unless the closing price of the Company's Class A Common Stock reaches or
exceeds $60 per share for ninety consecutive days within six years after the
date of grant.
PENSION PLANS
FRUIT OF THE LOOM, INC. OPERATING COMPANY PENSION PLAN--Messrs. Farley and
Holland are covered by the pension plan for Fruit of the Loom operating company
employees (the "Operating Company Pension Plan") and do not currently
participate in the FII Pension Plan described below.
The Operating Company Pension Plan covers all employees of the Company and
its participating subsidiaries after the completion of one year of service and
the attainment of age 21.
The following table indicates the approximate amounts of annual retirement
income that would be payable under the Operating Company Pension Plan and the
Supplemental Benefit Plan (defined below) based on various assumptions as to
compensation and years of service for certain employees, assuming benefits are
computed under a straight life annuity formula. There is no social security or
other offset deducted from the amounts shown.
10
<PAGE>
PENSION PLAN TABLE(1)(2)
<TABLE> <CAPTION>
5 YEAR AVERAGE 15 YEARS OF 20 YEARS OF 25 YEARS OF 30 YEARS OF 35 YEARS OF
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE
- -------------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 300,000.................................. $ 82,433 $ 109,911 $ 137,389 $ 147,693 $ 157,997
400,000.................................. 110,933 147,911 184,889 198,756 212,622
500,000.................................. 139,433 185,911 232,389 249,818 267,247
600,000.................................. 167,933 223,911 279,889 300,881 321,872
700,000.................................. 196,433 261,911 327,389 351,943 376,497
800,000.................................. 224,933 299,911 374,889 403,006 431,122
900,000.................................. 253,433 337,911 422,389 454,068 485,747
1,000,000.................................. 281,933 375,911 469,889 505,131 540,372
1,100,000.................................. 310,433 413,911 517,389 556,193 594,997
</TABLE>
- ---------------
(1) Assumes individual retires at age 65 with indicated years of service but
further assumes covered compensation as it was determined in 1993, which was
$22,716 (Table II of Covered Compensation Tables for 1993 Enrolled Actuaries
Report, December 1992) as updated each year for annual covered compensation.
(2) Maximum pension limits for 1991, 1992 and 1993 under Internal Revenue Code
Section 415 were $108,963, $112,221 and $115,641, respectively. The maximum
pension limit for 1994 will be $118,800 due to indexing. Amounts in excess
of these limits are paid under the Supplemental Benefit Plan.
Contributions to the Operating Company Pension Plan, which are made by the
Company and its participating subsidiaries, are computed on an actuarial basis
and, as such, individual employee payments (or accruals) cannot be calculated.
Compensation covered by the Operating Company Pension Plan generally consists of
all compensation paid to a participant for personal services rendered as an
employee of the Company or a participating subsidiary, but excluding bonuses,
deferred compensation and payments under certain benefit programs. Covered
compensation for each of the Named Officers for 1993 equals the respective
amounts shown in the Salary column of the Summary Compensation Table. The
Operating Company Pension Plan provides that participants' benefits fully vest
after five years of service or the attainment of age 65.
The Operating Company Pension Plan retirement benefits are computed at the
rate of 1% of a participant's final average covered compensation (the average of
the highest five consecutive full plan years of compensation during the last ten
plan years of service) plus either .75%, .70% or .65% (depending on the
participant's social security retirement age) of a participant's final average
earnings in excess of the average social security wage base for the 35-year
period preceding the participant's social security retirement age. The resulting
sum is multiplied by the participant's years of service up to 25 years and is
increased by 1.5% for each year of service over 25 years.
Under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), a participant's covered compensation under a
qualified retirement plan is limited to a maximum annual amount of $222,220 for
1991, $228,860 for 1992 and $235,840 for 1993. For 1994, this amount is reduced
to $150,000. Amendments made to Sections 401(a)(5) and 401(l) of the Internal
Revenue Code by the Omnibus Budget Reconciliation Act of 1993 reduced the amount
of permitted disparity between benefits provided under a qualified pension plan
with respect to a
11
<PAGE>
participant's compensation up to the social security wage base and the benefits
provided with respect to compensation above the social security wage base. For
the executive officers of the Company who participate in the Operating Company
Pension Plan, any reduction in benefits under such plan caused by these
limitations will be made up dollar-for-dollar by benefits under the supplemental
benefit plan for the Fruit of the Loom operating company employees (the
"Supplemental Benefit Plan"). Non-officer participants in the Operating Company
Pension Plan will receive benefits under the Supplemental Benefit Plan in an
amount equal to the reduction in benefits under the Operating Company Pension
Plan attributable to the Internal Revenue Code Section 401(a)(17) limitation on
compensation and the Internal Revenue Code Section 415 limitation on annual
pension benefits.
The estimated number of years of service credited for Messrs. Farley and
Holland under the Operating Company Pension Plan are 3 years and 32 years,
respectively. No other executive officer of the Company participates in the
Operating Company Pension Plan.
FII PENSION PLAN--All executive officers of the Company who are FII
employees are covered by the salaried portion of the Retirement Program of
Farley Inc. (the "FII Pension Plan"). The FII Pension Plan covers all salaried
employees of FII and the Metals divisions of Farley Inc. and may include hourly
employees if designated for coverage.
The following table indicates the approximate amounts of annual retirement
income that would be payable under the FII Pension Plan based on various
assumptions as to compensation and years of service for certain employees,
assuming benefits are computed under a straight life annuity formula. There is
no social security or other offset deducted from the amounts shown.
PENSION PLAN TABLE(1)(2)
<TABLE> <CAPTION>
35 YEARS
5 YEAR OF SERVICE
AVERAGE 15 YEARS OF 20 YEARS OF 25 YEARS OF 30 YEARS OF (MAXIMUM
COMPENSATION SERVICE SERVICE SERVICE SERVICE UNDER PLAN)
- ---------------------------------------------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 75,000...................................... $ 15,960 $ 21,280 $ 26,600 $ 31,920 $ 37,240
100,000...................................... 21,960 29,280 36,600 43,920 51,240
125,000...................................... 27,960 37,280 46,600 55,920 65,240
150,000...................................... 33,960 45,280 56,600 67,920 79,240
175,000...................................... 39,960 53,280 66,600 79,920 93,240
200,000...................................... 45,960 61,280 76,600 91,920 107,240
225,000...................................... 51,960 69,280 86,600 103,920 115,641
235,840...................................... 54,555 72,740 90,925 109,110 115,641
</TABLE>
- ---------------
(1) Assumes individual retires at age 65 with indicated years of service but
further assumes covered compensation as it was determined in 1993 which was
$22,716 (Table II of Covered Compensation Tables for 1993 Enrolled Actuaries
Report, December 1992) as updated each year for annual covered compensation.
(2) Maximum pension limits for 1991, 1992 and 1993 under Internal Revenue Code
Section 415 were $108,963, $112,221 and $115,641, respectively. The maximum
pension limit for 1994 will be $118,800 due to indexing. FII does not have
any nonqualified, excess benefit plans.
12
<PAGE>
Contributions to the FII Pension Plan, which are made by FII, are computed
on an actuarial basis and, as such, individual employee payments (or accruals)
cannot be calculated. Compensation covered by the FII Pension Plan consists of
all payments made to a participant for personal services rendered as an employee
of FII which are subject to Federal income tax withholding, excluding imputed
income attributable to certain fringe benefit programs. With respect to
executive officers, covered compensation includes all compensation other than
Section 401(k) salary deferrals which are not recognized by the FII Pension
Plan, up to a maximum of $222,220 for 1991, $228,860 for 1992 and $235,840 for
1993. For 1994, this amount is reduced to $150,000. Covered compensation for
each of the Named Officers for 1993 equals the aggregate of the respective
amounts shown in the Salary and Bonus columns of the Summary Compensation Table,
up to the 1993 limit of $235,840. The salaried portion of the FII Pension Plan
provides that participants' benefits fully vest after five years of service.
The FII Pension Plan retirement benefits are computed at the rate of 1% of
a participant's highest average covered compensation (the average of five
consecutive full plan years of highest compensation during the last ten plan
years of service) up to the average wage base (i.e. "covered compensation" as
that term is defined in Revenue Ruling 71-446) plus 1.6% of a participant's
highest average covered compensation in excess of the average wage base. The
resulting sum is multiplied by the participant's years of benefit service.
The estimated credited years of benefit service for Messrs. Lappin, Cion
and O'Hara are 4 years, 8 years and 5 years, respectively.
COMPENSATION OF DIRECTORS
All directors who are not also executive officers of the Company receive a
retainer of $30,000 per annum for serving on the Board of Directors and $1,000
for each meeting of the Board of Directors and each committee meeting which they
attend. Pursuant to the Fruit of the Loom, Inc. Directors' Stock Option Plan
(the "Directors' Plan"), each non-executive officer director was issued in 1993
and will be issued each year, including 1994, in which such director is
re-elected to the Board of Directors, an option to purchase 2,500 shares of
Class A Common Stock. Under the Directors' Plan, any new non-executive officer
director would be initially granted an option to purchase 7,500 shares of Class
A Common Stock. The exercise price of each option granted under the Directors'
Plan is the market price of the Class A Common Stock on the date of grant.
Directors who are also executive officers of the Company receive no additional
compensation from the Company for services rendered in their capacity as
directors.
13
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is composed entirely
of outside directors, none of whom are employees or former employees of the
Company. During 1993, the Compensation Committee was responsible for the overall
compensation paid to Messrs. Farley and Holland, the only individuals listed in
the Summary Compensation Table who are compensated directly by the Company. See
"Executive Compensation--Introduction" above.
EXECUTIVE COMPENSATION POLICY AND OBJECTIVES. The Compensation Committee's
executive compensation policy is intended to create a commonality of interest
between the executives and the Company's stockholders by linking the executives'
total compensation to the performance of the Company. As more specifically
described below, the compensation program also seeks to achieve the following
goals, namely, retaining Messrs. Farley and Holland in their present positions,
compensating them at appropriate levels taking into account the growth of the
Company and providing them with both cash and equity incentives to enhance the
Company's value for all its stockholders. Mr. Farley establishes the
compensation for the executive officers of the Company who are employed by FII.
Mr. Farley believes that it is important to attract, retain and motivate highly
competent executives. Salaries are set at levels he believes will attract and
retain such persons and annual bonuses are paid based on individual and Company
performance.
COMPENSATION ELEMENTS. For 1993, the Company's executive officer
compensation program was composed of base salary, cash bonuses based on Company
and individual performance, and stock options; however, no stock options were
granted to Messrs. Farley or Holland in 1993.
Base Salary. In determining the base salaries of Messrs. Farley and
Holland, the Compensation Committee relied on data provided to it by Hewitt
Associates, an independent compensation consulting firm, and considered the base
salaries paid to chief executive officers and presidents, respectively, at other
growth oriented consumer products companies of comparable size (i.e., companies
producing a broad range of products for retail sale to the general public which
experienced median annual growth in total shareholder return of approximately
24% over a three year period and which have median sales, net income and assets
similar to those of the Company), which the Compensation Committee believes are
the Company's major competitors for senior executive talent. Based on this
analysis, the Compensation Committee established the base salary of Mr. Farley
for 1993 at $850,000, which amount was determined by targeting Mr. Farley's base
salary to the 75th percentile of salaries paid to chief executive officers at
these comparably sized growth oriented consumer products companies. For 1993,
the Compensation Committee established Mr. Holland's base salary at $550,000,
approximately the 60th percentile of salaries paid to chief operating officers
of these companies. In determining the base salary of Mr. Holland, the
Compensation Committee took into consideration Mr. Holland's receipt in 1993 of
a payout under the Long Term Bonus Plan. Mr. Farley determined the base salaries
of the other Named Officers based upon his review of surveys of salaries paid to
individuals holding comparable officer positions at other growth oriented
consumer products companies of comparable size, targeting salaries generally at
the top quarter of the ranges in these surveys. The increases in the base
salaries paid to the Named Officers in 1993 over those paid to them in 1992
reflect increases in salaries paid by the comparison companies. In determining
the base salaries for 1993, neither the Compensation Committee nor Mr. Farley
considered Company performance, because bonuses and stock option awards were the
components of the executive compensation packages designed to tie total
compensation to Company performance.
14
<PAGE>
Bonus. As discussed below, the Compensation Committee determined that the
total cash bonus paid to Mr. Farley for 1993 would be $1,150,000, which is
$1,850,000 less than the bonus paid to Mr. Farley for 1992 and results in total
cash compensation to Mr. Farley of $1,500,000 less than the amount he received
for 1992. The Compensation Committee believes this lower bonus is appropriate in
light of the decline in the Company's stock price and the Company's reduced
earnings per share ("EPS") growth.
In determining 1993 bonuses, the Compensation Committee adopted a cash
bonus plan (the "1993 Cash Bonus Plan") for Mr. Farley and Mr. Holland based
upon the increase, if any, in the Company's 1993 EPS before extraordinary items
and the cumulative effect of changes in accounting principles above 1992 EPS
before extraordinary items and the cumulative effect of changes in accounting
principles. Based upon a payment, to Mr. Farley only, of $50,000 for each one
percent increase in EPS before extraordinary items and the cumulative effect of
changes in accounting principles, Mr. Farley was paid a cash bonus for 1993 of
$650,000. In computing the EPS amount under the 1993 Cash Bonus Plan, the
Company included the increase in EPS resulting from the redemption and
retirement of approximately $72,900,000 of Acme Boot Company, Inc. securities
held by the Company (the "Acme Redemption") amounting to approximately $.55 per
share. Mr. Holland's cash bonus was also based upon the increase in the
Company's EPS before extraordinary items and the cumulative effect of changes in
accounting principles. For 1994, the 1993 Cash Bonus Plan will be replaced by
the Executive Compensation Plan (as described below).
In addition, the Compensation Committee awarded Mr. Farley a supplemental
performance bonus of $500,000 for 1993. In recommending that this supplemental
bonus be paid to Mr. Farley, the Compensation Committee noted that despite the
Company's reduced EPS growth in 1993, under Mr. Farley's leadership the Company
was successful in achieving several significant financial and non-financial
goals during 1993 which are expected to have a substantial positive impact on
the Company's long-term growth. These include the following: (1) the Company
completed its tender offer and subsequent merger with Salem Sportswear
Corporation and, in December 1993, the Company initiated the acquisition of
Artex Manufacturing Co., Inc. (d/b/a Jostens Sportswear), a subsidiary of
Jostens, Inc., which was consummated in January 1994; (2) the Acme Redemption
was completed; (3) the Company entered into a new $800,000,000 unsecured bank
credit agreement with certain existing and new bank lenders, permitting the
Company to refinance all of its secured domestic bank agreements with unsecured
debt; (4) the Company completed a public offering of an aggregate of
$300,000,000 of investment grade notes and debentures; and (5) the Company's
wholly-owned subsidiary, Fruit of the Loom Canada, Inc., completed a private
placement of unsecured senior debt to certain insurance companies, which
provided net proceeds of approximately $130,000,000.
Mr. Farley determined the 1993 bonuses for each of the other Named Officers
based upon his subjective evaluation of their performance in their positions and
contributions to the Company, as well as a consideration of the Company
performance measure contained in the 1993 Cash Bonus Plan. No particular weights
were assigned to any of the factors considered in establishing these bonuses.
Options. No stock options were awarded to Messrs. Farley and Holland in
1993 because of the option grants to them in 1992. In determining the number of
options granted to each of the other Named Officers in 1993, the Compensation
Committee considered the individual's performance, the positions held and the
total number and exercisable value of options already held by the individual,
15
<PAGE>
assigning no specific weight to any one factor. Considering these three factors,
the Compensation Committee believed that Mr. Lappin's contribution to the
success of the Company was more significant and that he was therefore entitled
to a larger award of options than the other two Named Officers receiving
options. Mr. Lappin, moreover, is a more recently elected officer and had not
been previously granted as many options as Messrs. Cion and O'Hara had been
awarded. Option awards to Messrs. Cion and O'Hara were smaller than in previous
years because of the sizes of the awards previously granted to them. The
Compensation Committee determined the sizes of option awards to the Company's
executive officers on an individual basis and did not predesignate a specific
size for the aggregate stock option awards to executive officers as a group. The
Compensation Committee believes it is generally in the best interest of the
Company to regularly grant options to the Company's executive officers.
PROPOSED FRUIT OF THE LOOM, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN. To
foster alignment of the interests of the executive officers and certain other
senior management personnel with stockholder interests, in 1993 the Compensation
Committee retained Hewitt Associates to assist it with the design and
implementation of incentive plans for the Company's executive officers and
managers. Upon its review of the incentive plans designed in consultation with
Hewitt Associates, the Compensation Committee has recommended, and the Board of
Directors has adopted, subject to stockholder approval, the Fruit of the Loom
Executive Incentive Compensation Plan (the "Executive Compensation Plan") (see
"Adoption of Fruit of the Loom, Inc. Executive Incentive Compensation Plan"
below). The Executive Compensation Plan, which is intended to be effective for
years beginning in 1994, has three components: an annual incentive award
component, a performance share component and a stock option component.
The Compensation Committee currently intends for compensation paid pursuant
to the Executive Compensation Plan to be tax deductible to the Company pursuant
to Section 162(m) of the Internal Revenue Code ("Section 162(m)"). Section
162(m) provides that compensation paid to the Named Officers in excess of
$1,000,000 cannot be deducted by the Company for Federal income tax purposes
unless, in general, such compensation is performance based, is established by an
independent committee of directors, is objective and the plan or agreement
providing for such performance based compensation has been approved in advance
by stockholders. In the future, however, if, in the judgment of the Compensation
Committee, the benefits to the Company of a compensation program that does not
satisfy the arbitrary and inflexible conditions of Section 162(m) outweigh the
costs to the Company of the failure to satisfy these conditions, the
Compensation Committee may adopt such a program.
Compensation Committee
Dennis S. Bookshester
A. Lorne Weil
Sir Brian G. Wolfson
William Farley
Chairman of the Board and
Chief Executive Officer
of the Company establishes
the compensation to be paid
to the executive officers of the
Company other than himself and Mr. Holland
16
<PAGE>
PERFORMANCE GRAPH
The graph set forth below compares the cumulative total shareholder return
on the Class A Common Stock for the last five years with the cumulative total
return of the S&P 500 Index and the Value Line Apparel Industry Index ("Industry
Index") over the same period (assuming the investment of $100 in the Class A
Common Stock and in each index on December 31, 1988 and the reinvestment of all
dividends, if any).
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
FRUIT OF THE LOOM, INC., S&P 500 INDEX AND VALUE LINE APPAREL INDUSTRY INDEX
(PERFORMANCE RESULTS THROUGH DECEMBER 31, 1993)
<TABLE> <CAPTION>
1988 1989 1990 1991 1992 1993
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
The Company............................ $ 100.00 $ 233.33 $ 139.22 $ 433.33 $ 762.74 $ 378.43
S&P 500................................ 100.00 131.49 127.32 166.21 179.30 197.23
Industry Index......................... 100.00 133.98 109.87 191.25 235.11 176.83
</TABLE>
FII MANAGEMENT AGREEMENT
Effective January 1, 1993, the Company entered into a new management
agreement (the "1993 Management Agreement") with FII pursuant to which FII
agreed to render general management, investment banking, financing and other
services to the Company, including the services of the Company's executive
officers, excluding William Farley and John B. Holland. Under the terms of the
1993 Management Agreement, the Company paid $9,900,000 to FII in 1993 based upon
FII's cost of providing management services. FII is also entitled to a financing
fee for 1993 which has not yet been determined. Payments made by the Company to
FII under the 1993 Management Agreement were approved by the Board of Directors.
It is anticipated that the Company will enter
17
<PAGE>
into a management agreement for 1994 under substantially the same terms and
conditions as the 1993 Management Agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an option to acquire 50,000 shares of Class A Common Stock at
an exercise price of $13.75 per share, Mr. Cion has the right to require the
Company to purchase one-third of the shares subject to the option at a price of
$23.75 per share in each of the three years commencing in 1992.
OTHER MATTERS
In March 1988, a class action suit entitled Endo et al. v. Albertine, et
al. was filed in the United States District Court for the Northern District of
Illinois (the "District Court") against the Company, its then directors, certain
of its executive officers, its then underwriters and the Company's current and
former independent auditors in connection with the Company's initial public
offering of Class A Common Stock and certain debt securities in March 1987. The
suit alleges, among other things, violations of Federal and state securities
laws against all of the defendants, as well as breaches of fiduciary duties by
the director and officer defendants, and seeks unspecified damages.
Motions to dismiss the complaint were filed by all defendants. In December
1990, a magistrate judge recommended that the District Court dismiss all of the
plaintiffs' claims with prejudice. On January 29, 1993, the District Court
adopted in part and rejected in part the magistrate judge's recommendation for
dismissal of the complaint. As a result, the litigation will continue as to
various remaining counts of the complaint. Both the defendants and plaintiffs
recently filed motions for summary judgment. It is uncertain as to when rulings
on these motions will be issued. Management and the Board of Directors believe
that this suit is without merit and intend to continue to defend themselves
vigorously in this litigation.
On December 23, 1993, James J. Locke, as Trustee of Locke Family Trust, and
I. Jack Saline filed a lawsuit against the Company and certain of its officers,
including William Farley, John B. Holland and Richard C. Lappin in the United
States District Court for the Northern District of Illinois. The lawsuit was
then amended to add additional plaintiffs. The lawsuit was filed as a class
action, but the issue of class certification has not yet been addressed by the
parties or the court. The plaintiffs claim that all of the defendants engaged in
conduct violating Section 10(b) of the Act and that Mr. Farley and Mr. Holland
also violated Section 20(a) of the Act. The plaintiffs allege that beginning
before June 1992 and continuing through early June 1993, the Company, with the
knowledge and assistance of the individual defendants, issued positive public
statements about the Company's expected sales increases and growth through 1993
and afterwards. The plaintiffs also allege that beginning in approximately
mid-1992 and continuing afterwards, the Company's business was not as strong and
its growth prospects were not as certain as represented. The plaintiffs further
allege that during the end of 1992 and beginning of 1993, certain of the
individual defendants traded in the stock of the Company while in the possession
of material, non-public information. The plaintiffs ask for unspecified amounts
as compensatory damages, pre-judgment and post-judgment interest, attorney's
fees, costs and expert witness fees, and ask the court to impose a constructive
trust on the proceeds of the individual defendants' trades to satisfy any
potential judgment. Although the lawsuit is at a preliminary stage and the
Company has not yet responded to the complaint, management, the Board of
Directors and the individual defendants believe that this suit is without merit
and intend to defend themselves vigorously in this litigation.
18
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
William Farley, the Chairman of the Board and Chief Executive Officer of
the Company, establishes the compensation to be paid to the executive officers
of the Company who are employed by FII. Mr. Farley did not determine his own
1993 compensation.
Mr. Farley and Richard Lappin are executive officers and directors of Acme
Boot Company, Inc. ("Acme") and establish compensation for executive officers of
Acme. Mr. Farley is a director of FII and establishes compensation for the
executive officers of FII, and Messrs. Farley and Lappin are executive officers
of FII. Mr. Farley is also an executive officer and director of Farley Inc.
PROPOSAL 2
ADOPTION OF THE FRUIT OF THE LOOM, INC. EXECUTIVE
INCENTIVE COMPENSATION PLAN
Subject to the approval of the Company's stockholders, the Board of
Directors approved the adoption of the Executive Compensation Plan effective as
of January 1, 1994. Stockholder approval of the Executive Compensation Plan is
sought (1) to qualify the Executive Compensation Plan pursuant to Rule 16b-3
under the Act, and thereby render certain transactions under the Executive
Compensation Plan exempt from certain provisions of Section 16 of the Act and
(2) to qualify the Executive Compensation Plan under Section 162(m), and thereby
allow the Company to deduct for Federal income tax purposes compensation paid to
the Named Officers under the Executive Compensation Plan.
The following summary of certain features of the Executive Compensation
Plan is qualified in its entirety by reference to the full text of the Executive
Compensation Plan, which is set forth in the attached Exhibit A.
GENERAL
All officers, directors and key employees of (1) the Company (2) any parent
or subsidiary of the Company designated by the Board of Directors or (3) any
entity which provides services to the Company or to any parent or subsidiary of
the Company pursuant to a written agreement are eligible to participate in the
Executive Compensation Plan. The Executive Compensation Plan will be
administered by the Compensation Committee, a standing committee composed
entirely of independent directors, or any other committee appointed by the Board
of Directors consisting of two or more directors eligible to administer the
Executive Compensation Plan under the "disinterested administration" provision
of Rule 16b-3 under the Act (in any case, the "Committee").
The Executive Compensation Plan is a flexible plan that will provide the
Committee broad discretion to fashion the terms of the awards to provide
eligible participants with stock-based incentives as the Committee deems
appropriate. It will permit the issuance of awards in a variety of forms,
including: (i) non-qualified and incentive stock options (collectively,
"options"), (ii) performance shares and (iii) annual incentive awards.
The Executive Compensation Plan provides for the grant of up to 3,600,000
shares of the Class A Common Stock, or approximately 4.7% of the voting
securities outstanding of the
19
<PAGE>
Company. Under certain circumstances, shares subject to an award that remain
unissued upon termination of the award will become available for additional
awards under the Executive Compensation Plan. In the event of a stock dividend,
stock split, recapitalization or similar event, the Committee will equitably
adjust the aggregate number of shares subject to the Executive Compensation Plan
and the number, class and price of shares subject to awards outstanding.
The Executive Compensation Plan may be amended, modified or terminated by
the Board of Directors, subject to stockholder approval if required by
applicable law. No amendment may be made in any manner which fails to comply
with Rule 16b-3(c)(ii)(B) under the Act. The Committee shall have no authority
to cancel awards outstanding and issue replacement awards.
At all times when the Committee determines that it is desirable to satisfy
the conditions of Section 162(m), all awards granted under the Executive
Compensation Plan shall comply with such conditions; provided, however, that if,
in the judgment of the Committee, the benefits to the Company of a compensation
program that does not satisfy the arbitrary conditions of Section 162(m)
outweigh the costs to the Company of the failure to satisfy the conditions, then
compliance with Section 162(m) will not be required. In addition, in the event
that changes are made to Section 162(m) to permit greater flexibility with
respect to any awards available under the Executive Compensation Plan, the
Committee may, subject to the restrictions set forth in the preceding paragraph
on amendment of the Executive Compensation Plan, make any adjustments it deems
appropriate.
Unless earlier terminated by the Board of Directors or stockholders, the
Executive Compensation Plan will terminate on December 31, 2003.
AWARDS UNDER THE EXECUTIVE COMPENSATION PLAN
Stock Options. The Committee in its discretion shall determine the number
of shares of Class A Common Stock subject to stock options to be granted to each
participant, but no participant may be granted options to purchase more than
100,000 shares during any one plan year. The Committee may grant nonqualified
stock options, incentive stock options or a combination thereof to the
participants. Options granted under the Executive Compensation Plan will provide
for the purchase of Class A Common Stock at prices not less than 100% of the
fair market value thereof on the date the option is granted. No option granted
shall be exercisable later than the tenth anniversary date of its grant.
Options granted under the Executive Compensation Plan shall be exercisable
at such times and subject to such restrictions and conditions as the Committee
shall approve, but in no event may any option be exercisable prior to six months
following its grant. Options may only be transferred under the laws of descent
and distribution or pursuant to a qualified domestic relations order ("QDRO")
and shall be exercisable only by the participant during such participant's
lifetime or the recipient of the participant's rights pursuant to a QDRO. The
option exercise price is payable in cash or in shares of Class A Common Stock
having a fair market value equal to the exercise price or in a combination of
cash and such shares. The Committee may also allow, along with other means of
exercise, cashless exercises as permitted under the Federal Reserve Board's
Regulation T, subject to applicable securities laws. Upon termination of a
participant's employment due to death, disability or retirement, all options
outstanding shall immediately vest and shall be exercisable for the shorter of
their remaining term or one year after termination of employment in the case of
20
<PAGE>
death or disability, and three years after termination of employment in the case
of retirement. If a participant's employment has terminated due to disability or
retirement and such participant dies during the exercise period after
termination, then the remaining exercise period under options outstanding shall
be the longer of one year after death or the remaining portion of the exercise
period triggered by the employment termination. Upon termination of employment
of a participant other than for any reason set forth above, all options held by
the participant which are not vested as of the effective date of termination
shall be forfeited, and in the case of termination at the request of the Company
without cause or voluntary termination by the participant (other than due to
retirement), the participant may exercise any vested options, if he is an
officer, director or 10% stockholder of the Company ("insider"), for six months
and one day, or, if he is not an insider, for three months, following the
termination of employment, and in the case of termination by the Company for
cause, the participant may exercise any vested options for a period of 30 days
following the termination of employment. However, Committee, in its sole
discretion, may immediately vest all or any portion of the options of a
participant not vested as of such date.
Performance Shares. The Company may grant performance shares to
participants in such amounts, and subject to such terms and conditions, as the
Committee shall in its discretion determine; provided, however, that none of the
Named Officers may earn more than 50,000 performance shares with respect to any
performance period, unless the Company's stockholders vote to change this
maximum number. Each performance share shall have a value equal to the fair
market value of a share of Class A Common Stock on the date the performance
share is earned. The Committee in its discretion shall set performance goals to
be achieved over performance periods of not less than two years; the extent to
which the performance goals are met will determine the number of performance
shares earned by participants. The performance measure to be used for purposes
of grants to the Named Officers shall be "total stockholder return" (calculated
as a fraction, the numerator of which is the sum of (i) the fair market value of
a share of Class A Common Stock on the last day of the applicable performance
period and (ii) the dividends declared with respect to such share during the
performance period, and the denominator of which is the fair market value of a
share of Class A Common Stock on the first day of such performance period),
unless and until the Company's stockholders vote to change the performance
measures. In the event that applicable tax and/or securities laws change to
permit the Committee discretion to alter the governing performance measures
without obtaining stockholder approval of such changes, the Committee shall have
sole discretion to make such changes without obtaining stockholder approval. In
addition, in the event the Committee determines that it is advisable to grant
performance shares which do not qualify for the "performance-based" compensation
exemption under Section 162(m), the Committee may make such grants without
satisfying the requirements of Section 162(m).
After the applicable performance period has ended, the Compensation
Committee shall certify the extent to which the established performance goals
have been achieved, and each holder of performance shares shall be entitled to
receive payout on the number of performance shares earned by the participant
over the performance period, to be determined as a function of the extent to
which the corresponding performance goals have been achieved. The grantee of a
performance share award shall receive payment of performance shares earned in
cash or shares of Class A Common Stock (or in a combination of cash and shares
of Class A Common Stock) which have, as of the close of the applicable
performance period, an aggregate fair market value equal to the value of the
earned performance shares. In the event the employment of a participant is
terminated
21
<PAGE>
by reason of death, disability or retirement or at the request of the Company
without cause during the performance period, the participant shall receive a
prorated payout with respect to the performance shares earned, which shall be
determined by the Committee, in its sole discretion, and shall be based upon the
length of time the participant held the performance shares during the applicable
performance period and upon achievement of the established performance goals.
Such payment in the event of termination shall be made at the same time as
payments are made to participants who did not terminate employment during the
applicable performance period. If a participant's employment is terminated for
any other reason, all performance shares shall be forfeited by the participant
to the Company. Performance shares may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution or pursuant to a QDRO. During the participant's
lifetime, the participant's rights under the Executive Compensation Plan shall
be exercisable only by the participant, the participant's legal representative
or the recipient of the participant's performance shares due to a QDRO.
Annual Incentive Awards. The Committee shall annually determine which
eligible participants shall be afforded the opportunity to receive cash
incentive awards under the Executive Compensation Plan. Prior to the beginning
of each plan year, except in 1994 as permitted by the transition provisions of
Section 162(m), the Committee shall establish performance goals for that plan
year based on any combination of corporate, regional, local, and/or individual
goals, provided that all such goals qualify for the performance-based exemption
under Section 162(m), unless and until the Committee determines that one or more
award opportunities shall not qualify for the performance-based exemption.
However, except for the Named Officers, an employee who becomes eligible after
the beginning of a plan year may participate for that year. The performance
measures to be used shall be chosen from among the following: (i) return on
equity, (ii) return on capital, (iii) earnings per share, and (iv) cash flow.
Each plan year, the Committee, in its sole discretion, may select among the
various performance measures specified. However, in the case of participants who
are not Named Officers, the Committee may approve performance measures that are
not so specified without obtaining stockholder approval. Prior to the beginning
of each plan year, the Committee shall establish a target award opportunity for
each participant (the "Target Award"). The Target Award shall be a function of
one or more performance measures and goals selected by the Committee, at its
sole discretion, and shall reflect the participant's job responsibilities and
opportunity and authority to affect overall financial results. Except with
respect to the Named Officers, a participant's Target Award may be changed
during the plan year. At the end of each plan year, the Committee shall certify
the extent to which the performance goals have been achieved and the final award
shall be computed for each participant as determined by the Committee according
to the established performance measures and goals. Final award amounts may vary
above or below the Target Award, based on the level of achievement of the
established corporate, regional, local and/or individual performance goals. With
respect to the Named Officers, the final award determination shall be a function
of the degree to which the established performance measures and goals have been
achieved; provided, however, that the Committee, in its sole discretion, may
adjust such final award determinations downward. The Committee may establish
minimum levels of performance which must be achieved during a plan year before
any final awards shall be paid to participants and may establish guidelines
governing the maximum final awards that may be earned by participants (either in
the aggregate, by employee class, or among individual participants) during each
plan year; provided, however, that none of the Named Officers may
22
<PAGE>
receive incentive awards totaling more than $3,500,000 with respect to any
single plan year. In addition, the Committee may, in its sole discretion,
decrease, but not increase, the amount of a final award otherwise payable to a
participant who is a Named Officer. In the event a participant's employment is
terminated by reason of death, disability or retirement or at the request of the
Company without cause, the participant shall receive a prorated payout, which
shall be determined by the Committee, in its sole discretion, based upon the
length of time that the participant was included in the Executive Compensation
Plan during the plan year. In the event a participant's employment is terminated
for any other reason, all of the participant's rights to a final award for the
plan year then in progress shall be forfeited. However, except in the event of
an employment termination for cause, the Committee, in its sole discretion, may
pay a prorated final award for the portion of that plan year that the
participant was employed by the Company, computed as determined by the
Committee.
CHANGES IN CONTROL
Upon the occurrence of certain change in control events, (i) all options
outstanding shall become immediately exercisable; (ii) the target payout
obtainable under all performance shares and annual incentive awards shall be
deemed to have been fully earned for the entire performance period and, within
30 days of the change in control, each participant shall be paid in cash a pro
rata portion of such target payout based on the elapsed portion of the
applicable performance period, provided that there shall not be an accelerated
payout with respect to performance shares granted less than six months prior to
the effective date of the change in control, and (iii) the Committee may, in its
discretion, make any other modifications to any awards as determined by the
Committee to be deemed appropriate before the effective date of such change in
control.
DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES
The following summary of tax consequences with respect to the stock option
and performance share components of the Executive Compensation Plan is not
comprehensive and is based upon laws and regulations in effect on April 7, 1994.
Such laws and regulations are subject to change.
There are generally no Federal tax consequences either to the optionee or
to the Company upon the grant of an option. On exercise of an incentive stock
option, the optionee will not recognize any income and the Company will not be
entitled to a deduction for tax purposes, although such exercise may give rise
to a liability for the optionee under the alternative minimum tax provisions of
the Internal Revenue Code. Generally, if the optionee disposes of shares
acquired upon exercise of an incentive stock option within two years of the date
of grant or one year of the date of exercise, the optionee will recognize
compensation income and the Company will be entitled to a deduction for tax
purposes in the amount of the excess of the fair market value of the shares of
Class A Common Stock on the date of exercise over the option exercise price (or
the gain on sale, if less). Otherwise, the Company will not be entitled to any
deduction for tax purposes upon disposition of such shares, and the entire gain
for the optionee will be treated as a capital gain. On exercise of a
non-qualified stock option, the amount by which the fair market value of the
Class A Common Stock on the date of exercise exceeds the option exercise price
will generally be taxable to the optionee as compensation income and will
generally be deductible for tax purposes by the Company. The dispositions of
shares of Class A Common Stock acquired upon exercise of a
23
<PAGE>
non-qualified stock option will generally result in a capital gain or loss for
the optionee, but will have no tax consequences for the Company.
The grant of a performance share award will not result in income for the
grantee or in a tax deduction for the Company. Upon the settlement of such a
right or award, the grantee will recognize ordinary income equal to the fair
market value of any shares of Class A Common Stock and/or any cash received and
the Company will be entitled to a tax deduction in the same amount.
1994 AWARDS
Subject to stockholder approval of the Executive Compensation Plan, each of
the Named Officers (other than Mr. O'Hara) has been granted performance shares
based upon a two-year performance period beginning January 1, 1994. If the
target total stockholder return for this two-year period is achieved, Mr. Farley
will earn 25,000 performance shares, Messrs. Holland and Lappin will each earn
10,000 performance shares and Mr. Cion will earn 4,000 performance shares.
In addition, each of the Named Officers (other than Mr. O'Hara) has been
granted an opportunity to receive a cash incentive award based upon the
Company's achievement of certain return on equity levels in 1994 and the
increase in earnings per share for 1994 compared to 1993. If the target levels
for return on equity and growth in earnings per share are achieved, Mr. Farley
will receive a cash award equal to 100% of his 1994 base salary, each of Messrs.
Holland and Lappin will receive a cash award equal to 70% of his respective 1994
base salary and Mr. Cion will receive a cash award equal to 60% of his 1994 base
salary.
No stock options have as yet been granted under the Executive Compensation
Plan.
The benefits to be received by participants in the Executive Compensation
Plan are not currently determinable, nor can the benefits which would have been
received for 1993, if the Executive Compensation Plan had then been in effect,
be determined.
24
<PAGE>
VOTE REQUIRED
Three directors of the Company will be elected by a plurality of the shares
of Class A Common Stock, voting as a separate class, present in person or
represented by proxy and entitled to vote at the Annual Meeting. Six directors
will be elected by the holders of a plurality of the voting power of the shares
of Class A Common Stock and Class B Common Stock, voting together as a single
class, present in person or represented by proxy and entitled to vote at the
Annual Meeting.
Approval of the Executive Compensation Plan requires the affirmative vote
of the holders of a majority of the voting power of the shares of Class A Common
Stock and the Class B Common Stock, voting together as a single class, present
in person or represented by proxy and entitled to vote at the Annual Meeting, a
quorum being present.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the shareholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
SOLICITATION
This solicitation is made by the Company and the cost of this proxy
solicitation will be paid by the Company. The Company may use the services of
its directors, officers and employees (who will receive no additional
compensation) to solicit proxies personally or by telephone. The Company may
also request brokers, fiduciaries, custodians and nominees to send proxies,
proxy statements and other material to their principals at the Company's
expense. In addition, the Company has engaged Chemical Bank to solicit proxies
from brokers, banks, nominees and other institutional holders. The Company will
pay Chemical Bank a fee of $4,500 for its services.
INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
selected Ernst & Young to audit the financial statements of the Company and its
subsidiaries for the year ended December 31, 1994. A representative of Ernst &
Young is expected to be present at the Annual Meeting with the opportunity to
make a statement, if he desires, and will be available to respond to appropriate
questions with respect to that firm's examination of the Company's consolidated
financial statements.
PROPOSALS OF SECURITY HOLDERS
Proposals of stockholders intended to be included in proxy materials for
presentation at the 1995 Annual Meeting of Stockholders must be received by the
Secretary of the Company, 5000 Sears Tower, 233 South Wacker Drive, Chicago,
Illinois 60606, no later than December 8, 1994.
OTHER BUSINESS
It is not anticipated that any matters will be presented to the
stockholders other than those mentioned in the accompanying Notice of Annual
Meeting of Stockholders. However, if other matters are brought before the
meeting, it is intended that the persons named in the proxy will vote as the
Board of Directors directs.
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<PAGE>
EXHIBIT A
FRUIT OF THE LOOM, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
<PAGE>
FRUIT OF THE LOOM, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 Establishment of the Plan. Fruit of the Loom, Inc., a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "Fruit of the Loom, Inc.
Executive Incentive Compensation Plan" (hereinafter referred to as the "Plan"),
as set forth in this document. The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Performance Shares and Annual Incentive
Awards.
Subject to approval by the Company's stockholders, the Plan shall become
effective as of January 1, 1994 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the success
and enhance the value of the Company by linking the personal interests of
Participants (as hereinafter defined) to those of the Company's stockholders,
and by providing Participants with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract and retain the services of Participants upon whose
judgment, interest and special effort the successful conduct of its operation
largely is dependent.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 13 hereof, until December 31, 2003.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word is
capitalized:
<TABLE>
<S> <C>
<FN>
(a) "Annual Incentive Award" means the short-term incentive opportunities granted pursuant to the terms of
Article 8 hereof.
(b) "Award" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options,
Incentive Stock Options, Performance Shares or Annual Incentive Awards.
(c) "Award Agreement" means an agreement entered into by each Participant and the Company, setting forth
the terms and provisions applicable to Awards granted to Participants under this Plan.
(d) "Award Opportunity" means the various levels of annual incentive award payouts which a Participant may
earn under the Plan, as established by the Committee pursuant to Article 8 hereof.
(e) "Beneficial Owner" or "Beneficial Ownership" shall have the meaning ascribed to such term in Rule
13d-3 of the General Rules and Regulations under the Exchange Act.
(f) "Board" or "Board of Directors" means the Board of Directors of the Company.
A-1
<PAGE>
(g) "Cause" means: (i) willful misconduct on the part of a Participant that is materially detrimental to
the Company; or (ii) the conviction of a Participant for the commission of a felony or crime involving
moral turpitude. Notwithstanding the foregoing, if the Participant has entered into an employment
agreement that is binding as of the date of employment termination, and if such employment agreement
defines "Cause," such definition of "Cause" shall apply. "Cause" under either (i) or (ii) shall be
determined in good faith by the Committee.
(h) "Change in Control" shall be deemed to have occurred if:
(i) An acquisition by any Person of Beneficial Ownership of the shares of Common Stock of the Company
then outstanding (the "Company Common Stock Outstanding") or the voting securities of the Company
then outstanding entitled to vote generally in the election of directors (the "Company Voting
Securities Outstanding"); provided such acquisition of Beneficial Ownership would result in the
Person's beneficially owning (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) twenty-five percent (25%) or more of the Company Common Stock Outstanding or twenty-five
percent (25%) or more of the combined voting power of the Company Voting Securities Outstanding;
and provided further, that immediately prior to such acquisition such Person was not a direct or
indirect Beneficial Owner of twenty-five percent (25%) or more of the Company Common Stock
Outstanding or twenty-five percent (25%) or more of the combined voting power of Company Voting
Securities Outstanding, as the case may be; or
(ii) The approval by the stockholders of the Company of a reorganization, merger, consolidation,
complete liquidation or dissolution of the Company, the sale or disposition of all or
substantially all of the assets of the Company or similar corporate transaction (in each case
referred to in this Section 2(h) as a "Corporate Transaction") or, if consummation of such
Corporate Transaction is subject, at the time of such approval by stockholders, to the consent of
any government or governmental agency, the obtaining of such consent (either explicitly or
implicitly); or
(iii) A change in the composition of the Board such that the individuals who, as of the Effective Date,
constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board; provided, however, for purposes of
this Section 2(h), that any individual who becomes a member of the Board subsequent to the
Effective Date whose election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of those individuals who are members of the Board and
who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent Board; but,
provided, further, that any such individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, including any successor to such Rule) or other
actual or threatened solicitation of proxies or consents by or on behalf of a Person other than
the Board shall not be so considered as a member of the Incumbent Board.
A-2
<PAGE>
Notwithstanding the provisions set forth in subparagraphs (i) and (ii) of this Section 2(h), the
following shall not constitute a Change in Control for purposes of this Plan: (1) any acquisition by
or consummation of a Corporate Transaction with any Subsidiary or an employee benefit plan (or related
trust) sponsored or maintained by the Company or an affiliate; or (2) any acquisition or consummation
of a Corporate Transaction following which more than fifty percent (50%) of, respectively, the shares
then outstanding of common stock of the corporation resulting from such acquisition or Corporate
Transaction and the combined voting power of the voting securities then outstanding of such
corporation entitled to vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and entities who were
Beneficial Owners, respectively, of the Company Common Stock Outstanding and Company Voting Securities
Outstanding immediately prior to such acquisition or Corporate Transaction in substantially the same
proportions as their ownership, immediately prior to such acquisition or Corporate Transaction, of the
Company Common Stock Outstanding and Company Voting Securities Outstanding, as the case may be.
(i) "Code" means the Internal Revenue Code of 1986, as amended from time to time.
(j) "Committee" means the committee appointed by the Board to administer the Plan with respect to grants
of Awards, as specified in Article 3.
(k) "Company" means Fruit of the Loom, Inc., a Delaware corporation, or any successor thereto as provided
in Article 16 hereof.
(l) "Director" means any individual who is a member of the Board of Directors of the Company.
(m) "Disability" shall have the meaning ascribed to such term in the Participant's governing long-term
disability plan.
(n) "Employee" means any full-time, nonunion employee of the Company, the Company's Subsidiaries or any of
the entities referred to in Section 5.1 hereof. Directors who are not otherwise employed by the
Company, the Company's Subsidiaries or any of the entities referred to in Section 5.1 hereof shall not
be considered Employees under this Plan.
(o) "Effective Date" shall have the meaning ascribed to such term in Section 1.1 hereof.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any
successor act thereto.
(q) "Fair Market Value" shall be determined as follows:
(i) If, on the relevant date, the Shares are traded on a national or regional securities exchange or
on the Nasdaq National Market ("Nasdaq"), on the basis of the closing sale price on the principal
securities exchange on which the Shares may then be traded or, if there is no such sale on the
relevant date, then on the last previous day on which a sale was reported;
(ii) If, on the relevant date, the Shares are not listed on any securities exchange or traded on
Nasdaq, but otherwise are publicly traded and reported on Nasdaq, on the basis of the mean
between the closing bid and asked quotations in such other over-the-counter market as reported by
Nasdaq; but, if there are no bid and asked quotations in the over-the-counter market as reported
by Nasdaq on that date, then the mean between the closing bid and asked quotations in the
over-the-counter market as reported by Nasdaq on the last previous day such bid and asked prices
were quoted; and
(iii) If, on the relevant date, the Shares are not publicly traded as described in (i) or (ii), on the
basis of the good faith determination of the Committee.
A-3
<PAGE>
(r) "Final Award" means the actual annual award earned during a Plan Year by a Participant, as determined
by the Committee at the end of the Plan Year pursuant to Article 8 hereof.
(s) "Incentive Payment Date" means the seventy-fifth (75th) day following the last day of the Plan Year
during which the Final Award under Article 8 hereof was earned, or such earlier date upon which Final
Awards are paid to Participants.
(t) "Incentive Stock Option" or "ISO" means an option to purchase Shares, granted under Article 6 hereof
which is designated as an Incentive Stock Option and is intended to meet the requirements of Section
422 of the Code.
(u) "Insider" shall mean an Employee who is, on the relevant date, an officer, director or ten percent
(10%) beneficial owner of any class of the Company's equity securities that is registered pursuant to
Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act.
(v) "Named Executive Officer" means a Participant who, as of the date of vesting and/or payout of an Award
is one of the group of "covered employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
(w) "Nonqualified Stock Option" or "NQSO" means an option to purchase Shares granted under Article 6
hereof, and which is not intended to meet the requirements of Code Section 422.
(x) "Option" means an Incentive Stock Option or a Nonqualified Stock Option.
(y) "Option Price" means the price at which a Share may be purchased by a Participant pursuant to an
Option, as determined by the Committee.
(z) "Participant" means an Employee who has outstanding an Award granted under the Plan.
(aa) "Performance Share" means an Award granted to an Employee, as described in Article 7 hereof.
(ab) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used
in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof.
(ac) "Plan Year" shall mean, for purposes of Article 8 hereof, a fiscal year which coincides with each
calendar year during the term of the Plan.
(ad) "Retirement" shall have the meaning ascribed to such term in the Participant's governing retirement
plan.
(ae) "Shares" means the shares of Class A Common Stock of the Company.
(af) "Subsidiary" means any corporation, partnership, joint venture or other entity in which the Company
has a majority voting interest.
(ag) "Target Incentive Award" means the annual incentive award to be paid to Participants pursuant to
Article 8 hereof in the event "targeted" performance results, as established by the Committee, are
achieved.
(ah) "Window Period" means the period beginning on the third business day following the date of public
release of the Company's quarterly sales and earnings information, and ending on the twelfth (12th)
business day following such date.
</TABLE>
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board
consisting of not less than two (2)
A-4
<PAGE>
Directors who meet the "disinterested administration" rules of Rule 16b-3 under
the Exchange Act. The members of the Committee shall be appointed from time to
time by, and shall serve at the discretion of, the Board of Directors.
The Committee shall be comprised solely of Directors who are eligible to
administer the Plan pursuant to Rule 16b-3(c)(2) under the Exchange Act.
However, if for any reason the Committee does not qualify to administer the
Plan, as contemplated by Rule 16b-3(c)(2) of the Exchange Act, the Board of
Directors may appoint a new Committee so as to comply with Rule 16b-3(c)(2).
3.2 Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions hereof, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the size and types of Awards (including
the determination of the size of Award Opportunities in each Plan Year);
determine the terms and conditions of Awards in a manner consistent with the
Plan (including the terms and conditions of each Participant's inclusion under
Article 8 hereof in each Plan Year); construe and interpret the Plan and any
agreement or instrument entered into under the Plan; establish, amend or waive
rules and regulations for the Plan's administration; and (subject to the
provisions of Article 13 hereof) amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the
discretion of the Committee as provided in the Plan. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee may delegate its
authority as identified herein.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all Persons,
including the Company, its stockholders, Employees, Participants and their
estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
hereof, the total number of Shares available for grant under the Plan shall be
three million six hundred thousand (3,600,000). These Shares may be either
authorized but unissued or reacquired Shares.
The following rules shall apply for purposes of the determination of the
number of Shares available for grant under the Plan:
<TABLE>
<S> <C>
<FN>
(a) While an Option or Performance Share is outstanding, it shall be counted against the authorized pool of
Shares, regardless of its vested status.
(b) The grant of an Option shall reduce the Shares available for grant under the Plan by the number of
Shares subject to such Award.
(c) The Committee shall in each case determine the appropriate number of Shares to deduct from the
authorized pool in connection with the grant of Performance Shares.
(d) In the event an Award Opportunity is paid in the form of Shares or derivatives of Shares, the authorized
pool shall be reduced by the number of Shares or Share derivatives paid to the Participant, as
determined by the Committee.
(e) To the extent that an Award is settled in cash rather than in Shares, the authorized Share pool shall be
credited with the appropriate number of Shares represented by the cash settlement of the Award, as
determined at the sole discretion of the Committee (subject to the limitation set forth in Section 4.2
hereof).
</TABLE>
A-5
<PAGE>
4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires or lapses for any reason, any Shares subject to such Award
again shall be available for the grant of an Award under the Plan. However, in
the event that prior to the Award's cancellation, termination, expiration or
lapse, the holder of the Award at any time received one or more "benefits of
ownership" pursuant to such Award (as defined by the Securities and Exchange
Commission, pursuant to any rule or interpretation promulgated under Section 16
of the Exchange Act), the Shares subject to such Award shall not be made
available for regrant under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under the
Plan, and in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that the number of Shares
subject to any Award shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan and be granted Awards shall be those persons
who are either (1) officers, directors or key Employees of (i) the Company, (ii)
any parent (as defined in the Securities Act of 1933, as amended ["Securities
Act"]) of the Company or (iii) any direct or indirect Subsidiary of the Company
which is designated by the Board of Directors; or (2) officers, directors or key
Employees of any other entity which provides services to the Company, its parent
or any direct or indirect Subsidiary of the Company pursuant to a written
agreement ("Service Provider"). Of those persons described in the preceding
sentence, the Committee shall, from time to time, in its sole discretion, select
those persons who are to be granted Awards under the Plan.
The Committee may designate, in writing, any person who would otherwise be
eligible to participate in the Plan as not eligible to participate in the Plan.
No person who is a member of the Committee shall be eligible to be granted any
Award under the Plan while so serving. Any person who is a Director of the
Company, but who is neither an officer nor an Employee of the Company, any
parent of the Company, any direct or indirect Subsidiary of the Company or a
Service Provider shall not be eligible to be granted an Award under the Plan.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees those to
whom Awards shall be granted, and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Employees at any time and from time to time as shall
be determined by the Committee. The
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Committee shall have discretion in determining the number of Shares subject to
Options granted to each Participant; provided, however, that the maximum number
of Shares subject to Options which may be granted to any single Participant
during any one (1) Plan Year is one hundred thousand (100,000). The Committee
may grant ISOs, NQSOs or a combination thereof.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains and such other provisions as the
Committee shall determine. The Option Agreement shall further specify whether
the Option is intended to be an ISO within the meaning of Code Section 422, or
an NQSO, the grant of which is intended not to fall under the provisions of Code
Section 422.
6.3 Option Price. The Option Price for each grant of an Option under this
Article 6 shall be at least equal to one hundred percent (100%) of the Fair
Market Value of a Share on the date the Option is granted.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of its
grant.
6.5 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant. However, in no event may any Option granted
under this Plan become exercisable prior to six (6) months following the date of
its grant.
6.6 Payment. Options shall be exercised by the delivery of a written notice
of exercise to the Company, setting forth the number of Shares with respect to
which the Option is to be exercised, accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or (b) by tendering previously acquired
Shares having an aggregate Fair Market Value at the time of exercise equal to
the total Option Price (provided that the Shares which are tendered must have
been held by the Participant for at least six (6) months prior to their tender
to satisfy the Option Price) or (c) by a combination of (a) and (b).
The Committee also may allow cashless exercises as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
6.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan as it may deem advisable, including, without limitation, restrictions
under applicable Federal securities laws, under
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the requirements of any stock exchange or market upon which such Shares are then
listed and/or traded and under any blue sky or state securities laws applicable
to such Shares.
6.8 Termination of Employment Due to Death, Disability or Retirement.
<TABLE>
<S> <C>
<FN>
(a) Termination by Death. In the event the employment of a Participant is terminated by reason of death, all
outstanding Options granted to that Participant shall immediately vest and shall remain exercisable at
any time prior to their expiration date, or for one (1) year after the date of death, whichever period
is shorter, by (i) such person(s) as shall have been named as the Participant's beneficiary, (ii) such
person(s) that have acquired the Participant's rights under such Options by will or by the laws of
descent and distribution or (iii) the Participant's estate or representative of the Participant's
estate.
(b) Termination by Disability. In the event the employment of a Participant is terminated by reason of
Disability, all outstanding Options granted to that Participant shall immediately vest as of the date
the Committee determines the definition of Disability to have been satisfied and shall remain
exercisable at any time prior to their expiration date, or for one (1) year after the date that the
Committee determines the definition of Disability to have been satisfied, whichever period is shorter.
(c) Termination by Retirement. In the event the employment of a Participant is terminated by reason of
Retirement, all outstanding Options granted to that Participant shall immediately vest and shall remain
exercisable at any time prior to their expiration date, or for three (3) years after the effective date
of Retirement, whichever period is shorter.
(d) Employment Termination Followed by Death. In the event that a Participant's employment terminates by
reason of Disability or Retirement, and within the exercise period following such termination the
Participant dies, then the remaining exercise period under outstanding Options shall equal the longer
of: (i) one (1) year following death; or (ii) the remaining portion of the exercise period which was
triggered by the employment termination. Such Options shall be exercisable by: (i) such person(s) who
shall have been named as the Participant's beneficiary; (ii) such person(s) who have acquired the
Participant's rights under such Options by will or by the laws of descent and distribution; or (iii) the
Participant's estate or representative of the Participant's estate.
</TABLE>
6.9 Termination of Employment for Other Reasons. If the employment of a
Participant shall terminate for any reason other than the reasons set forth in
Section 6.8 hereof, all Options held by the Participant which are not vested as
of the effective date of employment termination immediately shall be forfeited
to the Company (and shall once again become available for grant under the Plan).
However, the Committee, in its sole discretion, shall have the right to
immediately vest all or any portion of such Options, subject to such terms as
the Committee, in its sole discretion, deems appropriate.
Options which are vested as of the effective date of employment termination
may be exercised as follows:
<TABLE>
<S> <C>
<FN>
(a) In the event an Insider's employment is terminated at the request of the Company without Cause, or such
Insider voluntarily terminates his or her employment, such Participant may exercise vested Options
within six (6) full calendar months and one (1) day following the Participant's final day of employment;
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(b) In the event the employment of a Participant who is not an Insider is terminated at the request of the
Company without Cause, or such Participant voluntarily terminates his or her employment, such
Participant may exercise vested Options within three (3) full calendar months following the
Participant's final day of employment; or
(c) If a Participant is involuntarily terminated by the Company for Cause, such Participant may exercise
vested Options within thirty (30) days following the Participant's final day of employment.
</TABLE>
6.10 Nontransferability of Options. No Option granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, by the laws of descent and distribution or pursuant to a
qualified domestic relations order ("QDRO"). Further, all Options granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant or the recipient of the Participant's Option pursuant to a
QDRO.
ARTICLE 7. PERFORMANCE SHARES
7.1 Grant of Performance Shares. Subject to the terms of the Plan,
Performance Shares may be granted to eligible Employees at any time and from
time to time, as shall be determined by the Committee. The Committee shall have
complete discretion in determining the number of Performance Shares granted to
each Participant; provided, however, that unless and until the Company's
stockholders vote to change the maximum number of Performance Shares that may be
earned by any one Named Executive Officer (subject to the terms of Article 13
hereof), none of the Named Executive Officers may earn more than 50,000
Performance Shares with respect to any performance period.
7.2 Value of Performance Shares. Each Performance Share shall have a value
equal to the Fair Market Value of a Share on the date the Performance Share is
earned. The Committee shall set performance goals in its discretion which,
depending on the extent to which they are met, will determine the number of
Performance Shares that will be earned by the Participants. The time period
during which the performance goals must be met shall be called a "performance
period." Performance periods shall, in all cases, equal or exceed two (2) years
in length.
Unless and until the Company's stockholders vote to change the general
performance measures (subject to the terms of Article 13 hereof), the attainment
of which shall determine the number of Performance Shares earned under the Plan,
the performance measure to be used for purposes of grants to Named Executive
Officers shall be "total shareholder return." For this purpose, "total
shareholder return" shall be calculated as a fraction, the numerator of which is
the sum of: (i) the Fair Market Value of a Share on the last day of the
applicable performance period and (ii) the dividends declared with respect to
such Share during the performance period; and the denominator of which is the
Fair Market Value of a Share on the first day of such performance period.
In the event that applicable tax and/or securities laws (including, but not
limited to, Code Section 162(m) and Section 16 of the Exchange Act) change to
permit Committee discretion to alter the governing performance measures without
obtaining stockholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining stockholder approval.
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7.3 Earning of Performance Shares. After the applicable performance period
has ended the Compensation Committee shall certify the extent to which the
established performance goals have been achieved. Subsequently, each holder of
Performance Shares shall be entitled to receive payout on the number of
Performance Shares earned by the Participant over the performance period, to be
determined as a function of the extent to which the corresponding performance
goals have been achieved.
7.4 Form and Timing of Payment of Performance Shares. Payment of earned
Performance Shares shall be made, in a single lump sum, promptly but in no event
later than seventy-five (75) calendar days following the close of the applicable
performance period. The Committee, in its sole discretion, may pay earned
Performance Shares in the form of cash or in Shares (or in a combination
thereof) which have, as of the close of the applicable performance period, an
aggregate Fair Market Value equal to the value of the earned Performance Shares.
7.5 Termination of Employment Due to Death, Disability or Retirement or at
the Request of the Company Without Cause. In the event the employment of a
Participant is terminated by reason of death, Disability or Retirement or at the
request of the Company without Cause during a performance period, the
Participant shall receive a prorated payout with respect to the Performance
Shares. The prorated payout shall be determined by the Committee, in its sole
discretion, and shall be based upon the length of time that the Participant held
the Performance Shares during the performance period, and shall further be
adjusted based on the achievement of the established performance goals.
Payment of earned Performance Shares shall be made at the same time
payments are made to Participants who did not terminate employment during the
applicable performance period.
7.6 Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 7.5 hereof, all Performance Shares shall be forfeited by the
Participant to the Company.
7.7 Nontransferability. Performance Shares may not be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other than by will, by
the laws of descent and distribution or pursuant to a QDRO. Further, a
Participant's rights under the Plan shall be exercisable during the
Participant's lifetime only by the Participant, the Participant's legal
representative or the recipient of the Participant's Performance Shares pursuant
to a QDRO.
ARTICLE 8. ANNUAL INCENTIVE AWARDS
8.1 Participation. Participation under this Article 8 shall be determined
annually by the Committee based upon the criteria set forth in Section 5.1
hereof. Employees who are selected to participate under this Article 8 shall be
so notified in writing, and shall be apprised of the performance goals and
related Award Opportunities, payable in cash, for the relevant Plan Year, as
described herein, prior to the beginning of the Plan Year.
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8.2 Partial Plan Year Participation. Except for Named Executive Officers,
an Employee who becomes eligible after the beginning of the Plan Year, but prior
to October 1 of such Plan Year, may participate under this Article 8 for that
Plan Year. Such situations include, but are not limited to: (i) new hires, (ii)
the promotion of an Employee from a position which did not previously meet the
eligibility criteria or (iii) the transfer of an Employee from an affiliate
which does not participate in the Plan.
Named Executive Officers who become eligible after the beginning of a Plan
Year, and Employees who are not Named Executive Officers but who become eligible
on or after October 1 of such Plan Year, may first participate under this
Article 8 for the succeeding Plan Year.
The Committee, in its sole discretion, retains the right to prohibit or
allow participation in the initial Plan Year of eligibility for any of the
aforementioned Employees.
8.3 Change in Employment Position. In the event that, during a Plan Year, a
Participant other than a Named Executive Officer changes employment positions to
a new position which corresponds to a different level of Award Opportunity than
that existing on the first day of such Plan Year, the Participant's Award
Opportunity shall be adjusted by the Committee, in its sole discretion, to
reasonably reflect the appropriate level of the Participant's Award Opportunity
for the entire Plan Year. Notwithstanding the previous sentence, except as
provided in Section 13.3 hereof, the Award Opportunity of a Named Executive
Officer may not be adjusted by the Committee as described in this Section 8.3.
8.4 Performance Goals. The performance goals pertaining to the 1994 Plan
Year shall be established by the Committee prior to April 1, 1994. Prior to the
beginning of each succeeding Plan Year, the Committee shall establish
performance goals for that Plan Year. The goals may be based on any combination
of corporate, regional, local and/or individual goals; provided, however, that
all such goals applicable to Named Executive Officers qualify for the
performance based exemption under Code Section 162(m), unless and until the
Committee determines that, pursuant to Section 13.3 hereof, one or more Award
Opportunities shall not qualify for the performance based exemption.
After the performance goals are established (but prior to the beginning of
the relevant Plan Year, unless provided otherwise, according to Section 13.3
hereof), the Committee shall align the potential levels of achievement of the
performance goals with the Award Opportunities (the "Target Incentive Award"),
such that the level of achievement of the established performance goals at the
end of the Plan Year will determine the Final Award amounts.
The Committee may, in its sole discretion, decrease the amount of a Final
Award otherwise payable to a Participant under this Article 8. The Committee
shall have no discretion, however, to increase the amount of a Final Award
otherwise payable to a Named Executive Officer under this Article 8.
Except as otherwise permitted pursuant to the application of Section 13.3
hereof, the performance measures to be used shall be chosen from among the
following: (i) return on equity (measured as earnings from continuing operations
before extraordinary items and the cumulative effect of changes in accounting
principles divided by stockholders' equity at the beginning of the fiscal
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year); (ii) return on capital (measured as earnings from continuing operations
before extraordinary items and the cumulative effect of changes in accounting
principles divided by total invested capital at the beginning of the fiscal
year); (iii) increase in earnings per share (measured over the prior fiscal year
in primary earnings per share from continuing operations before extraordinary
items and the cumulative effect of changes in accounting principles, exclusive
of the effect of the gain to the Company in 1993 from the retirement and
redemption of approximately $72,900,000 of Acme Boot Company, Inc. securities
held by the Company); and (iv) cash flow (measured as earnings from continuing
operations before extraordinary items and the cumulative effect of changes in
accounting principles plus depreciation and amortization).
Each Plan Year, the Committee, in its sole discretion, may select among the
performance measures specified in this Section 8.4. However, in the case of
Participants under Article 8 who are not Named Executive Officers, the Committee
may approve performance measures that are not specified in this Section 8.4
without obtaining stockholder approval of such measures.
8.5 Award Opportunities. Prior to April 1, 1994 for the 1994 Plan Year and
prior to the beginning of each succeeding Plan Year, the Committee shall
establish an Award Opportunity for each Participant. The Award Opportunity shall
be a function of one or more performance measures and goals selected by the
Committee, in its sole discretion, and shall reflect the Participant's job
responsibilities and opportunity and authority to influence overall financial
results.
8.6 Final Award Determinations. At the end of each Plan Year, the
Compensation Committee shall certify the extent to which the performance goals
have been achieved. Subsequently, the Final Award shall be computed for each
Participant as determined by the Committee according to the established
performance measures and goals and the requirements of this Plan. Final Award
amounts may vary above or below the Target Incentive Award, based on the level
of achievement of the established corporate, regional, local and/or individual
performance goals. Subject to the terms of the Plan, with respect to Named
Executive Officers, the Final Award determination shall be solely a function of
the degree to which the established performance measures and goals have been
achieved; provided, however, that the Committee, in its sole discretion, may
adjust such Final Award determinations downward.
8.7 Performance Threshold. The Committee may establish minimum levels of
performance which must be achieved during a Plan Year before any Final Awards
shall be paid to Participants. Such minimum levels of performance may be
expressed in terms of corporate, regional, local or individual performance
measures or any combination thereof.
8.8 Maximum Awards. The Committee may establish guidelines governing the
maximum Final Awards that may be earned by Participants (either in the
aggregate, by employee class or among individual Participants) during each Plan
Year. The guidelines may be expressed as a percentage of corporate-wide,
regional, local or individual goals or financial measures or such other measures
as the Committee shall, from time to time, determine; provided, however, that no
Named Executive Officer may be paid more than three million five hundred
thousand dollars ($3,500,000) under this Article 8 with respect to Award
Opportunities granted in any single Plan Year.
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8.9 Payment of Final Awards. Final Award payments shall be paid in cash, in
one lump sum, within seventy-five (75) calendar days after the end of each Plan
Year.
No Participant or any other party claiming an interest in amounts earned
under the Plan shall have any interest whatsoever in any specific asset of the
Company. To the extent that any party acquires a right to receive payments under
the Plan, such right shall be equivalent to that of an unsecured general
creditor of the Company.
8.10 Termination of Employment Due to Death, Disability or Retirement or at
the Request of the Company Without Cause. In the event a Participant's
employment is terminated by reason of death, Disability or Retirement or at the
request of the Company without Cause, the Final Award determination made
pursuant to Section 8.6 hereof shall be prorated. The prorated payout shall be
determined by the Committee, in its sole discretion, and shall be based upon the
length of time that the Participant was included in the Plan during the Plan
Year.
The Final Award determined pursuant to this Section 8.10 shall be paid in
cash, in one lump sum, within seventy-five (75) calendar days following the end
of the Plan Year in which employment termination occurs.
8.11 Termination of Employment for Other Reasons. In the event a
Participant's employment is terminated for any reason other than those reasons
described in Section 8.10 hereof, all of the Participant's rights to a Final
Award for the Plan Year then in progress shall be forfeited. However, the
Committee, in its sole discretion, may pay a prorated Final Award for the
portion of the Plan Year that the Participant was employed by the Company,
computed as determined by the Committee.
ARTICLE 9. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company and shall be effective only when filed by the
Participant, in writing, with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of beneficiary or beneficiaries other
than the spouse.
ARTICLE 10. DEFERRALS
The Committee may permit a Participant to defer such Participant's receipt
of the payment of cash or the delivery of Shares that would otherwise be due to
such Participant by virtue of the exercise of an Option, the satisfaction of any
requirements or goals with respect to Performance Shares or the payout of any
Final Award earned under Article 8 hereof. If any such deferral election is
required or permitted, the Committee shall, in its sole discretion, establish
rules and procedures for such payment deferrals.
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ARTICLE 11. RIGHTS OF EMPLOYEES
11.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
For purposes of the Plan, transfer of employment of a Participant between
the Company and any one of its Subsidiaries (or between Subsidiaries) shall not
be deemed a termination of employment.
11.2 Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
ARTICLE 12. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of Article 17 hereof:
<TABLE>
<S> <C>
<FN>
(a) Any and all Options granted hereunder shall become immediately exercisable;
(b) The target payout opportunity attainable under all outstanding Performance Shares and Annual Incentive
Awards shall be deemed to have been fully earned for the entire performance period(s) as of the
effective date of the Change in Control, and there shall be paid out in cash to Participants within
thirty (30) days following the effective date of the Change in Control a pro rata portion of such target
payout opportunity based on the number of complete and partial calendar months within the performance
period which had elapsed as of such effective date; provided, however, that there shall not be an
accelerated payout with respect to Performance Shares which were granted less than six (6) months prior
to the effective date of the Change in Control;
(c) Subject to Article 13 hereof, the Committee shall have the authority to make any modifications to the
Awards as determined by the Committee to be appropriate before the effective date of the Change in
Control.
</TABLE>
ARTICLE 13. AMENDMENT, MODIFICATION AND TERMINATION
13.1 Amendment, Modification and Termination. The Board may, at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, that no amendment which requires stockholder approval in
order for the Plan to continue to comply with Rule 16b-3 under the Exchange Act,
including any successor to such Rule, shall be effective unless such amendment
shall be approved by the requisite vote of stockholders.
Notwithstanding any other provisions of the Plan, the Committee shall not
have the authority to cancel Awards outstanding and grant replacement Awards
therefor.
13.2 Awards Previously Granted. No termination, amendment or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
13.3 Compliance With Code Section 162(m). At all times when the Committee
determines that compliance with Code Section 162(m) is desired, all Awards
granted under this Plan shall
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comply with the requirements of Code Section 162(m); provided, however, that in
the event the Committee determines that such compliance is not desired with
respect to any Award or Awards available for grant under the Plan, then
compliance with Code Section 162(m) will not be required. In addition, in the
event that changes are made to Code Section 162(m) to permit greater flexibility
with respect to any Award or Awards available under the Plan, the Committee may,
subject to this Article 13, make any adjustments it deems appropriate.
ARTICLE 14. WITHHOLDING
14.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of this Plan.
14.2 Share Withholding. With respect to withholding required upon the
exercise of Options, or upon any other taxable event arising as a result of
Awards granted hereunder which are to be paid in the form of Shares,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All elections shall be irrevocable, made in writing, signed by the Participant,
and elections by Insiders shall additionally comply with the applicable
requirements set forth in (a) or (b) of this Section 14.2.
<TABLE>
<S> <C>
<FN>
(a) Awards Having Exercise Timing Within Insider's Discretion. The Insider must either:
(i) Deliver written notice of the stock withholding election to the Committee at least six (6) months
prior to the date specified by the Insider on which the exercise of the Award is to occur; or
(ii) Make the stock withholding election in connection with an exercise of an Award which occurs during
a Window Period.
(b) Awards Having a Fixed Exercise/Payout Schedule Which is Outside Insider's Control. The Insider must
either:
(i) Deliver written notice of the stock withholding election to the Committee at least six (6) months
prior to the date on which the taxable event (e.g., exercise or payout) relating to the Award is
scheduled to occur; or
(ii) Make the stock withholding election during a Window Period which occurs prior to the scheduled
taxable event relating to the Award (for this purpose, an election may be made prior to such a
Window Period, provided that it becomes effective during a Window Period occurring prior to the
applicable taxable event).
</TABLE>
ARTICLE 15. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or
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her in satisfaction of any judgment in any such action, suit or proceeding
against him or her, provided he or she shall give the Company an opportunity, at
its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
ARTICLE 16. SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 17. LEGAL CONSTRUCTION
17.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
17.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
17.3 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
Notwithstanding any other provision set forth in the Plan, if required by
the then-current Section 16 of the Exchange Act, any "derivative security" or
"equity security" offered pursuant to the Plan to any Insider may not be sold or
transferred for at least six (6) months after the date of grant of such Award.
The terms "equity security" and "derivative security" shall have the meanings
ascribed to them in the then-current Rule 16(a) under the Exchange Act.
17.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
17.5 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Delaware.
A-16
<PAGE>
PROXY SOLICITATION
------------------
FRUIT OF THE LOOM, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 1994
The undersigned hereby appoints WILLIAM FARLEY and RICHARD C. LAPPIN as
proxies, each with power of substitution, and hereby authorizes them to
represent the undersigned and to vote, as designated below, all the shares of
CLASS A COMMON STOCK held of record by the undersigned on March 23, 1994 at the
Annual Meeting of Stockholders of Fruit of the Loom, Inc. to be held on May 17,
1994, or at any adjournments thereof, upon the matters set forth in the Notice
of Annual Meeting of Stockholders and Proxy Statement, receipt of which is
hereby acknowledged.
(Continued and to be signed on reverse side.)
<PAGE>
Please Mark Your
Choice Like This /X/
1. ELECTION OF DIRECTORS -- NOTE: HOLDERS OF CLASS A COMMON STOCK VOTE IN
SECTIONS A AND B BELOW.
<TABLE>
<S> <C> <C>
A. Directors elected by holders of Class A FOR WITHHOLD AUTHORITY
Common Stock voting as a separate class: (except as marked below) for nominees listed
Omar Z. Al Askari, Dennis S. Bookshester,
Lee W. Jennings / / / /
(To withhold authority to vote for an
individual nominee, write that nominee's
name on the space provided to the right) -------------------------
B. Directors elected by holders of Class A FOR WITHHOLD AUTHORITY
Common Stock and holders of Class B (except as marked below) for nominees listed
Common Stock voting together as a single
class: William Farley, John B. Holland, / / / /
Henry A. Johnson, Richard C. Lappin,
A. Lorne Weil, Sir Brian G. Wolfson
(To withhold authority to vote for an
individual nominee, write that nominee's
name on the space provided to the right) -------------------------
</TABLE>
2. APPROVAL OF THE FRUIT OF FOR AGAINST ABSTAIN
THE LOOM, INC. EXECUTIVE
INCENTIVE COMPENSATION PLAN. / / / / / /
3. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENTS THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS NAKE, THE PROXY WILL
BE VOTED "FOR" THE NOMINEES AS LISTED ABOVE AND "FOR"
THE PROPOSAL TO APPROVE THE FRUIT OF THE LOOM, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN.
Signature(s) ___________________________________________ Date _________________
Note: Please date your proxy and sign exactly as the name appears on your stock
certificate. All joint owners of stock should sign above. Sign your full title
when signing as an executor, administrator, personal representative, trustee,
etc. Please return your proxy in the enclosed postage paid envelope.
