<PAGE> 1
As filed with the Securities and Exchange Commission on July 30, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FRUIT OF THE LOOM, INC.
(Exact Name of Registrant as specified in its Charter)
DELAWARE 36-3361804
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5000 SEARS TOWER, 233 SOUTH WACKER DRIVE, CHICAGO, ILLINOIS 60606
(Address of principal executive offices including zip code)
FRUIT OF THE LOOM, INC. 1996 INCENTIVE COMPENSATION PLAN
(Full title of the plan)
HOWARD S. LANZNAR, GENERAL COUNSEL
FRUIT OF THE LOOM, INC.
5000 SEARS TOWER, 233 SOUTH WACKER DRIVE, CHICAGO, ILLINOIS 60606,
(312) 876-1724
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
HERBERT S. WANDER, ESQ.
KATTEN MUCHIN & ZAVIS
525 WEST MONROE, SUITE 1600, CHICAGO, ILLINOIS 60661-3693, (312) 902-5200
Approximate commencement date of the proposed sale to the public:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to a dividend or interest reinvestment plan, please check the
following box: [ ]
If any of the securities being registered on this Form are being
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [x]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered(1) Per Share Price(2) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock
($.01 par value) . . . . . . . . . 1,000,000 shares See Footnote 2 Below $25,382,219 $8,752.00
</TABLE>
(1) Includes an indeterminate number of shares of Common Stock that may be
issuable by reason of stock splits, stock dividends or similar transactions
in accordance with Rule 416 under the Securities Act of 1933.
(2) The amounts are based upon the exercise of options for 393,500 shares at
the price of $25.875 per share and the average of the high and low sales
prices of Fruit of the Loom, Inc. Class A Common Stock as reported on the
New York Stock Exchange on July 25, 1996 with respect to the exercise of
options for 606,500 shares and are used solely for the purpose of
calculating the registration fee pursuant to Rule 457(c) under the
Securities Act of 1933.
<PAGE> 2
PART I
INFORMATION REQUIRED IN PROSPECTUS
The information called for in Part I of Form S-8 is currently included
in the prospectus for the Fruit of the Loom, Inc. (the "Company") 1996
Incentive Compensation Plan and is not being filed with or included in this
Form S-8 (by incorporation by reference or otherwise) in accordance with the
rules and regulations of the Securities and Exchange Commission (the
"Commission").
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The Company's Annual Report on Form 10-K for the year ended December
31, 1995 and the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, which were previously filed by the Company with the Commission
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") are hereby
incorporated in this Registration Statement by reference and shall be deemed to
be a part hereof.
The description of the Company's Class A Common Stock which is
contained in Exhibit 3 in the Company's Form 10-Q for the quarter ended June
30, 1993 pursuant to Section 13 of the Exchange Act and all amendments thereto
and reports filed for the purpose of updating such description are incorporated
in this Registration Statement by reference and shall be deemed to be a part
hereof.
In addition, all documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold, or which
deregisters all such securities then remaining unsold, shall be deemed to be
incorporated in this Registration Statement by reference and to be a part
hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained therein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
The Company hereby undertakes to provide without charge to each person
who has received a copy of the prospectus to which this Registration Statement
relates, upon the written or oral request of any such person, a copy of any or
all the documents that have been or may be incorporated by reference into this
Registration Statement, other than exhibits to such documents (unless such
exhibits are incorporated therein by reference).
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
None.
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<PAGE> 3
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any persons, including directors and officers, who
are (or are threatened to be made) parties to any threatened, pending or
completed legal action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of their being directors or officers
of the Company. The indemnity may include expenses, attorneys' fees,
judgments, fines and amounts paid in settlement, provided such sums were
actually and reasonably incurred in connection with such action, suit or
proceeding and provided the director or officer acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests and, in the case of criminal proceedings, provided he had no
reasonable cause to believe that his conduct was unlawful. The corporation may
indemnify directors and officers in a derivative action (in which suit is
brought by a stockholder on behalf of the corporation) under the same
conditions, except that no indemnification is permitted without judicial
approval if the director or officer is adjudged liable to the corporation. If
the director or officer is successful on the merits or otherwise in defense of
any actions referred to above, the corporation must indemnify him against the
expenses and attorneys' fees he actually and reasonably incurred.
Under a policy of insurance, the Company is entitled to be reimbursed
for indemnity payments it is required or permitted to make to its directors or
officers.
Articles XII and XIII of the Company's Restated Certificate of
Incorporation provide that the Company shall indemnify certain of its former
and present directors and officers against certain liabilities and expenses
incurred as a result of their duties as such.
Reference is made to Section 7.8 of the Acquisition and Merger
Agreement, dated April 10, 1985, among Farley/Northwest Acquisition
Corporation, Farley Metals, Inc., Farley/Northwest Subsidiary Corporation and
Northwest Industries, Inc. ("Northwest") filed as an Exhibit to the
registration statement on Form S-4, Reg. No. 2-98435, of Farley/Northwest
Acquisition Corporation which provides that, from and after the New Board Date
(as therein defined), Northwest and any successor, including the Company,
shall: (a) maintain Northwest's directors' and officers' insurance policy on
the date thereof, or an equivalent policy with terms no less advantageous for
all present and former officers and directors of Northwest than those in effect
on the date thereof, for six years from and after the New Board Date to cover
acts or omissions of directors and officers of Northwest occurring prior to or
at the New Board Date and (b) maintain in effect any provisions of the By-laws
and Certificate of the Company relating to the rights to indemnification of
directors and officers of Northwest with respect to indemnification for acts
and omissions prior to or at the New Board Date.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1* Restated Certificate of Incorporation of the Company and
Certificate of Amendment of the Restated Certificate of
Incorporation of the Company (incorporated herein by
reference to Exhibit 3 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993).
II-2
<PAGE> 4
3.2* By-Laws of the Company (incorporated herein by reference
to Exhibit 4(b) to the Company's Registration Statement on
Form S-2, Reg. No. 33-8303.
4 Fruit of the Loom, Inc. 1996 Incentive Compensation Plan.
5 Opinion of Katten Muchin & Zavis as to the legality of
securities offered under the Fruit of the Loom, Inc. 1996
Incentive Compensation Plan.
23.1 Consent of Independent Auditors, Ernst & Young LLP.
23.2 Consent of Counsel (contained in the Opinion of Katten
Muchin & Zavis in Exhibit 5 hereto).
24 Power of Attorney (included on signature page of this
Registration Statement).
- ------------------
* Incorporated herein by reference.
ITEM 9. UNDERTAKINGS.
1. The Company hereby undertakes:
(a) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act");
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually, or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement;
Provided, however, that paragraphs (a)(i) and (a)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in a periodic report filed
by the Company pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in the Registration Statement.
(b) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
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<PAGE> 5
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
2. The Company hereby undertakes that, for the purposes of
determining any liability under the Securities Act, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company and subsidiary companies pursuant to the provisions described in
Item 6 above, or otherwise, the Company has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by the Company is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
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<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, and State of Illinois on this 30th day of
July, 1996.
FRUIT OF THE LOOM, INC.
By: /s/ LARRY K. SWITZER
---------------------------------
Larry K. Switzer
Senior Executive Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Larry K. Switzer and Howard S. Lanznar, and each of them his true and
lawful attorney-in-fact and agent, with full power of substitution, to sign on
his behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this Registration Statement on Form S-8 and to
file the same, with all exhibits thereto and any other documents in connection
therewith, with the Commission under the Securities Act, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as each might or could do in
person, hereby ratifying and confirming each act that said attorneys-in-fact
and agents may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities
indicated on July 30, 1996.
SIGNATURE TITLE
/s/ WILLIAM FARLEY Chairman of the Board, Chief Executive Officer
- ---------------------------- and Director (Principal Executive Officer)
William Farley
/s/ LARRY K. SWITZER Senior Executive Vice President and Chief
- ---------------------------- Financial Officer (Principal Financial and
Larry K. Switzer Accounting Officer)
/s/ JOHN B. HOLLAND Director
- ----------------------------
John B. Holland
/s/ DENNIS S. BOOKSHESTER Director
- ----------------------------
Dennis S. Bookshester
/s/ LEE W. JENNINGS Director
- ----------------------------
Lee W. Jennings
/s/ HENRY A. JOHNSON Director
- ----------------------------
Henry A. Johnson
/s/ RICHARD C. LAPPIN Director
- ----------------------------
Richard C. Lappin
/s/ A. LORNE WEIL Director
- ----------------------------
A. Lorne Weil
/s/ SIR BRIAN G. WOLFSON Director
- ----------------------------
Sir Brian Wolfson
/s/ OMAR Z. AL ASKARI Director
- ----------------------------
Omar Z. Al Askari
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<PAGE> 1
EXHIBIT 4
FRUIT OF THE LOOM, INC.
1996 INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of this 1996 Incentive Compensation Plan (the
"Plan") is to assist Fruit of the Loom, Inc., a Delaware corporation (the
"Company"), and its subsidiaries in attracting, retaining, and rewarding high
quality employees, other than executive officers, and certain other persons who
provide services to the Company, enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the mutuality of
interests between such persons and the Company's stockholders, and providing
such persons with performance incentives to expend their maximum efforts in the
creation of long-term stockholder value.
2. DEFINITIONS. For purposes of the Plan, the following terms shall
be defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(b) hereof to receive a cash payment, unless
otherwise determined by the Committee, after the end of a specified fiscal
year.
(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another award,
Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trust entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Change in Control" means a Change in Control as defined with
related terms in Section 9 of the Plan.
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
<PAGE> 2
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan.
(j) "Corporate Transaction" means a transaction as defined in Section
9(b) of the Plan.
(k) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the end
of a specified deferral period.
(l) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g), to receive cash, Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of shares
of Stock, or other periodic payments.
(m) "Effective Date" means February 21, 1996, the effective date of
the Plan.
(n) "Eligible Person" means any employee of the Company or any
subsidiary or consultant or other person who provides substantial services to
the Company or any subsidiary, provided that no person who is an Executive
Officer of the Company or a member of the Compensation Committee or other
committee that administers the 1995 Plan or any successor plan shall be shall
be an Eligible Person.
(o) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.
(q) "Fair Market Value" means the fair market value of Stock, Awards,
or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee,
the Fair Market Value of Stock as of any given date shall be the closing sale
price per share reported on a consolidated basis for stock listed on the
principal stock exchange or market on which Stock is traded on the date as of
which such value is being determined or, if there is no sale on that date, then
on the last previous day on which a sale was reported.
(r) "Incumbent Board" means the Board as defined in Section 9(b) of
the Plan.
(s) "Limited SAR" means a right granted to a Participant under Section
6(c) thereof.
(t) "1995 Plan" means the Company's 1995 Executive Incentive
Compensation Plan.
(u) "Option" means a right, granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
<PAGE> 3
(v) "Other Stock Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(w) "Participant" means a person who has been granted an Award under
the Plan, including a person who is no longer an Eligible Person.
(x) "Performance Award" means a right, granted to a Participant under
Section 8 hereof, to receive Awards based upon performance criteria specified
by the Committee.
(y) "Person" will have the meaning assigned in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, and includes a
"group" as defined in Section 13(d) thereof.
(z) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.
(aa) "Stock" means the Company's Class A Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(bb) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
3. ADMINISTRATION.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select Eligible
Persons to become Participants, grant Awards, determine the type, number, and
other terms and conditions of, and all other matters relating to, Awards,
prescribe Award agreements (which need not be identical for each Participant)
and rules and regulations for the administration of the Plan, construe and
interpret the Plan and Award agreements and correct defects, supply omissions,
or reconcile inconsistencies therein, and to make all other decisions and
determinations as the Committee may deem necessary or advisable for the
administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee may
delegate to officers or managers of the Company or any subsidiary, or
committees thereof, the authority, subject to such terms as the Committee shall
determine, to perform such functions as the Committee may determine, to the
extent permitted under applicable law. The Committee also may appoint agents
to assist it in administering the Plan. Any action of the Committee or its
delegatee shall be final, conclusive and binding on all persons, including the
Company, its subsidiaries, Participants, Beneficiaries, transferees under
Section 10(b) hereof or other persons claiming rights from or through a
Participant, and stockholders, except that action by any delegatee shall be
subject to oversight by the Committee. The express grant of any specific
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power to the Committee, and the taking of any action by the Committee, shall
not be construed as limiting any power or authority of the Committee.
(c) Limitation of Liability. The Committee, each member thereof, and
each delegatee or member of a committee which acts as a delegatee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any executive officer, other officer or employee of
the Company or a subsidiary, the Company's independent auditors, consultants or
any other agents assisting in the administration of the Plan, and the
Committee, each member thereof, each delegatee or member of a committee which
acts as a delegatee, and any officer or employee of the Company or a subsidiary
acting at the direction or on behalf of the Committee or delegatee shall not be
personally liable for any action or determination taken or made in good faith
with respect to the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action or
determination.
4. STOCK SUBJECT TO PLAN.
(a) Overall Number of Shares Available for Delivery. Subject to
adjustment as provided in Section 10(c) hereof, the total number of shares of
Stock reserved and available for delivery in connection with Awards under the
Plan shall be 1,000,000.
(b) Application of Limitation to Grants of Awards. For purposes of
the Plan, the counting of shares of Stock delivered shall be consistent with
the manner in which shares are so counted under the 1995 Plan. No Award may be
granted if the number of shares of Stock to be delivered in connection with
such Award or, in the case of an Award relating to shares of Stock but
settleable only in cash (such as cash-only SARs), the number of shares to which
such Award relates, exceeds the number of shares of Stock remaining available
under the Plan minus the number of shares of Stock relating to then-outstanding
cash-only Awards. The Committee may adopt reasonable counting procedures to
ensure appropriate counting, avoid double counting (as, for example, in the
case of tandem or substitute awards) and make adjustments if the number of
shares of Stock actually delivered differs from the number of shares previously
counted in connection with an Award.
(c) Source of Shares Delivered Under the Plan. Any shares of Stock
delivered under the Plan may consist, in whole or in part, of authorized and
unissued shares or treasury shares, except as otherwise provided in this
Section 4(c). If, at the time shares of Stock are to be delivered under the
Plan to a Participant (including upon exercise of an Option), the shares are
listed on the New York Stock Exchange and such Participant is a "director" or
"officer" of the Company within the meaning of Sections 312.03 and 703.09 of
the Listed Company Manual of the New York Stock Exchange, such that the
Participant's acquisition of shares originally issued by the Company would be
subject to the requirement of stockholder approval under then-applicable
Exchange rules, the shares to be distributed to such Participant shall consist
only of either shares issued under the 1995, if so specified by the committee
then administering the 1995 Plan, or treasury shares then held by the Company.
The Company shall use its best efforts to obtain and have available, at any
time that the such treasury shares are required to be distributed
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in connection with an Award, a sufficient number of treasury shares, not
reserved for other uses, to be able to make prompt delivery in connection with
any such Award.
5. ELIGIBILITY. Awards may be granted under the Plan only to Eligible
Persons.
6. SPECIFIC TERMS OF AWARDS.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section
10(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment by the
Participant and terms permitting a Participant to make elections relating to
his or her Award. The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of an Award
that is not mandatory under the Plan. Except in cases in which the Committee
is authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must by paid to satisfy the requirements of
the Delaware General Corporation Law, no consideration other than services may
be required for the grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee,
provided that such exercise price shall be not less than the Fair
Market Value of a share of Stock on the date of grant of such Option
except as provided under Section 7(a) hereof.
(ii) Time and Method of Exercise. The Committee shall
determine the time or times at which or the circumstances under which
an Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements),
the methods by which such exercise price may be paid or deemed to be
paid, the form of such payment, including, without limitation, cash,
Stock, other Awards or awards granted under other plans of the Company
or any subsidiary, or other property (including notes or other
contractual obligations of Participants to make payment on a deferred
basis), and the methods by or forms in which Stock will be delivered
or deemed to be delivered to Participants.
(iii) Non-Qualified Stock Options. All options granted under
the plan shall be non-qualified stock options, and shall not be
incentive stock options as defined under Section 422 of the Code.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SAR's to Participants on the following terms and conditions:
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(i) Right to Payment. A SAR shall confer on the Participant
to whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of Stock on the date
of exercise (or, in the case of a "Limited SAR," the Fair Market Value
determined by reference to the Change in Control Price, as defined
under Section 9(c) hereof), over (B) the grant price of the SAR as
determined by the Committee, provided that such grant price shall be
not less than the Fair Market Value of a share of Stock on the date of
grant of such SAR except as provided under Section 7(a) hereof.
(ii) Other Terms. The Committee shall determine at the date
of grant or thereafter, the time or times at which and the
circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future
service requirements), the method of exercise, method of settlement,
form of consideration payable in settlement, method by or forms in
which Stock will be delivered or deemed to be delivered to
Participants, whether or not a SAR shall be in tandem or in
combination with any other Award, and any other terms and conditions
of any SAR. Limited SARs that may only be exercised in connection
with a Change in Control or other event as specified by the Committee
may be granted on such terms, not inconsistent with this Section 6(c),
as the Committee may determine. SARs and Limited SARs may be either
freestanding or in tandem with other Awards.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject
to such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or
otherwise, as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the
Plan and any Award agreement relating to the Restricted Stock, a
Participant granted Restricted Stock shall have all of the rights of a
stockholder, including the right to vote the Restricted Stock and the
right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee). During
the restricted period applicable to the Restricted Stock, subject to
Section 10(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined or otherwise encumbered
by the Participant.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company;
provided that the Committee may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock
will be waived in whole or in part in the event of
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<PAGE> 7
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Restricted
Stock.
(iii) Certificates for Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee may require
such certificates to bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted
Stock, that the Company retain physical possession of the
certificates, or that the Participant deliver a stock power to the
Company, endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an
Award of Restricted Stock, the Committee may require that any cash
dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under the Plan. Unless otherwise
determined by the Committee, Stock distributed in connection with a
Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to
the same extent as the Restricted Stock with respect to which such
Stock or other property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant Deferred
Stock to Participants, which are rights to receive Stock, cash, or a
combination thereof at the end of a specified deferral period, subject to the
following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of
Deferred Stock will occur upon expiration of the deferral period
specified for such Deferred Stock by the Committee (or, if permitted
by the Committee, as elected by the Participant). In addition,
Deferred Stock shall be subject to such restrictions (which may
include a risk of forfeiture) as the Committee may impose, if any,
which restrictions may lapse at the expiration of the deferral period
or at earlier specified times (including based on achievement of
performance goals and/or future service requirements), separately or
in combination, in installments or otherwise, as the Committee may
determine. Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of shares of
Stock covered by the Deferred Stock, or a combination thereof, as
determined by the Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment during the applicable
deferral period or portion thereof to which forfeiture conditions
apply (as provided in the Award agreement evidencing the Deferred
Stock), all Deferred Stock that is at that time subject to deferral
(other than a deferral at the election of the Participant) shall be
forfeited; provided that the Committee may provide, by rule or
regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating
to Deferred Stock will be waived in whole or in part in the event of
terminations resulting from specified
7
<PAGE> 8
causes, and the Committee may in other cases waive in whole or in part
the forfeiture of Deferred Stock.
(iii) Dividend Equivalents. Unless otherwise determined by
the Committee at date of grant, Dividend Equivalents on the specified
number of shares of Stock covered by an Award of Deferred Stock will
be either (A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends, or (B) deferred
with respect to such Deferred Stock and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other
Awards, or other investment vehicles, as the Committee shall determine
or permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of Company obligations to pay cash or deliver other property under other plans
or compensatory arrangements. Stock or Awards granted hereunder shall be
subject to such other terms as shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to dividends paid
with respect to a specified number of shares of Stock, or other periodic
payments. Dividend Equivalents may be awarded on a free-standing basis or in
connection with another Award. The Committee may provide that Dividend
Equivalents will be paid or distributed when accrued or will be deemed to have
been reinvested in additional Stock, Awards, or other investment vehicles, and
subject to such restrictions on transferability and risks of forfeiture, as the
Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without limitation,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into Stock, purchase rights for Stock, Awards with value and
payment contingent upon performance of the Company or any other factors
designated by the Committee, and Awards valued by reference to the book value
of Stock or the value of securities of or the performance of specified
subsidiaries. The Committee shall determine the terms and conditions of such
Awards. Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section 6(h) shall be purchased for such consideration, paid
for at such times, by such methods, and in such forms, including, without
limitation, cash, Stock, other Awards, or other property, as the Committee
shall determine. Cash awards, as an element of or supplement to any other
Award under the Plan, may also be granted pursuant to this Section 6(h).
8
<PAGE> 9
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Company,
any subsidiary, or any business entity to be acquired by the Company or a
subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award or award, the Committee shall require the surrender
of such other Award or award in consideration for the grant of the new Award.
In addition, Awards may be granted in lieu of cash compensation, including in
lieu of cash amounts payable under other plans of the Company or any
subsidiary, in which the value of Stock subject to the Award is equivalent in
value to the cash compensation (for example, Deferred Stock or Restricted
Stock), or in which the exercise price, grant price or purchase price of the
Award in the nature of a right that may be exercised is equal to the Fair
Market Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price "discounted"
by the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee.
(c) Form and Timing of Payment Under Awards; Deferrals. Subject to
the terms of the Plan and any applicable Award agreement, payments to be made
by the Company or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Stock, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on a deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the discretion of
the Committee or upon occurrence of one or more specified events (in addition
to a Change in Control). Installment or deferred payments may be required by
the Committee (subject to Section 10(e) of the Plan) or permitted at the
election of the Participant. Payments may include, without limitation,
provisions for the payment or crediting of reasonable interest on installment
or deferred payments or the grant or crediting of Dividend Equivalents or other
amounts in respect of installment or deferred payments denominated in Stock.
8. PERFORMANCE AWARDS.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee.
The Committee may use such business criteria and other measures of performance
as it may deem appropriate in establishing any performance conditions,
9
<PAGE> 10
and may exercise its discretion to reduce or increase the amounts payable under
any Award subject to performance conditions.
(b) Annual Incentive Awards. The Committee may grant Annual Incentive
Awards to Eligible Persons, which Awards shall represent a conditional right to
receive a payment in cash, unless otherwise determined by the Committee, after
the end of a specified fiscal year, in accordance with this Section 8(b).
(i) Annual Incentive Award Pool. The Committee may establish
an Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool
shall be based upon the achievement of a performance goal or goals
specified by the Committee. The Committee may specify the amount of
the Annual Incentive Award pool as a percentage of any of such
business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. The Committee shall
determine the Eligible Persons who will potentially receive Annual
Incentive Awards for a given fiscal year, either out of an Annual
Incentive Award pool established for that fiscal year or as individual
Annual Incentive Awards. The amount potentially payable shall be
based upon the achievement of a performance goal or goals based on
such criteria as shall be established by the Committee.
(iii) Payout of Annual Incentive Awards. After the end of
each fiscal year, the Committee shall determine the amount, if any, of
(A) the Annual Incentive Award pool, and the maximum amount of
potential Annual Incentive Award payable to each Participant in the
Annual Incentive Award pool, or (B) the amount of potential Annual
Incentive Award otherwise payable to each Participant. The Committee
may, in its discretion, determine that the amount payable to any
Participant as a final Annual Incentive Award shall be increased or
reduced from the amount of his or her potential Annual Incentive
Award, including a determination to make no final Award whatsoever.
The Committee shall specify the circumstances in which an Annual
Incentive Award shall be forfeited in the event of termination of
employment by the Participant prior to the end of a fiscal year or the
payout of such Annual Incentive Award, and other terms relating to
such Annual Incentive Award in accordance with the Plan.
9. CHANGE IN CONTROL.
(a) Effect of "Change in Control." In the event of a "Change in
Control," as defined in Section 9(b), the following provisions shall apply:
(i) Any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and
vested as of the time of the Change in Control
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<PAGE> 11
and shall remain exercisable and vested for the balance of the stated
term of such Award without regard to any termination of employment by
the Participant, subject only to the restrictions set forth in Section
10(a) hereof;
(ii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan shall
lapse and such Awards shall be deemed fully vested as of the time of
the Change in Control, except to the extent of any waiver by the
Participant and subject to the restrictions set forth in Section 10(a)
hereof; and
(iii) With respect to any outstanding Award subject to
achievement of performance goals and conditions under the Plan, such
performance goals and other conditions will be deemed to be met if and
to the extent so provided by the Committee in the Award agreement
relating to such Award.
(b) Definition of "Change in Control." A "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,
however, that such acquisition of Beneficial Ownership would result in
the Person's Beneficially Owning 25% or more of the Company Common
Stock Outstanding or 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 25% or more of the Company Common Stock
Outstanding or 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, 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 9(b) 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); provided, however,
that any merger, consolidation, sale, disposition or other similar
transaction to or with William Farley or entities controlled by him
shall not constitute a Corporate Transaction; 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 9(b), that any
individual who becomes a member of the Board subsequent to the
Effective Date whose election, or
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<PAGE> 12
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 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.
Notwithstanding the provisions set forth in subparagraphs (i) and (ii)
of this Section 9(b), the following shall not constitute a Change in Control
for purposes of the Plan: (1) any acquisition by or consummation of a Corporate
Transaction with any subsidiary of the Company 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 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.
(c) Definition of "Change in Control Price." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of cash
and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any transaction triggering the Change in
Control under Section 9(b)(ii) hereof or any liquidation of shares following a
sale of substantially all assets of the Company, or (ii) the highest Fair
Market Value per share at any time during the 60-day period preceding and
60-day period following the Change in Control.
10. GENERAL PROVISIONS.
(a) Compliance With Legal and Other Requirements. The Company may, to
the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award
until completion of such registration or qualification of such Stock or other
required action under any federal or state law, rule, or regulation, listing or
other required action with respect to any stock exchange or automated quotation
system upon which the Stock or other Company securities are listed or quoted,
or compliance with any other obligation of the Company, as the Committee may
consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject
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<PAGE> 13
to such other conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. In addition, the Committee is authorized to modify Awards that
are then held by a Participant who has become or is expected to become subject
to Section 16 of the Exchange Act with respect to the Company to limit the risk
to such Participant of incurring liability under Section 16(b) while
substantially maintaining the value of the Award to such Participant.
(b) Limits on Transferability; Beneficiaries. No Award or other right
or interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Company or a subsidiary), or assigned
or transferred by such Participant otherwise than by will or the laws of
descent and distribution or to a Beneficiary upon the death of a Participant,
and such Awards or rights that may be exercisable shall be exercised during the
lifetime of the Participant only by the Participant or his or her guardian or
legal representative, except that Awards and other rights may be transferred to
one or more Beneficiaries or other transferees during the lifetime of the
Participant in connection with the Participant's estate planning, and may be
exercised by such transferees in accordance with the terms of such Award, but
only if and to the extent such transfers are then consistent with the
registration of the offer and sale of Stock on Form S-8 or a successor
registration form of the Securities and Exchange Commission or such other form
of registration statement as has in fact been filed in connection with the
Plan, and permitted by the Committee (subject to any terms and conditions which
the Committee may impose thereon). A Beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan and any Award agreement
applicable to such Participant, except as otherwise determined by the
Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the rights of Participants under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Stock which may be delivered in connection
with Awards granted thereafter, (ii) the number and kind of shares of Stock
subject to or deliverable in respect of outstanding Awards, and (iii) the
exercise price, grant price, or purchase price relating to any Award and/or
make provision for payment of cash or other property in respect of any
outstanding Award. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual
Incentive Awards and any Annual Incentive Award pool or performance goals
relating thereto) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence, as well as
acquisitions and dispositions of businesses and assets) affecting the Company,
any subsidiary, or any business unit, or the financial statements of the
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<PAGE> 14
Company or any subsidiary, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations, or business
conditions or in view of the Committee's assessment of the business strategy of
the Company, any subsidiary or business unit thereof, performance of comparable
organizations, economic and business conditions, personal performance of a
Participant, and any other circumstances deemed relevant.
(d) Taxes. The Company and any subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to a
Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants; provided that, without the consent of an affected Participant, no
such Board action may materially and adversely affect the rights of such
Participant under any previously granted and outstanding Award. The Committee
may waive any conditions or rights under, or amend, alter, suspend, discontinue
or terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee action may materially and
adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution
of Stock having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.
(f) Limitation on Rights Conferred Under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible Person
or Participant the right to continue as an Eligible Person or Participant or in
the employ of the Company or a subsidiary, (ii) interfering in any way with the
right of the Company or a subsidiary to terminate any Eligible Person's or
Participant's employment at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant has validly exercised an Option or is otherwise duly issued or
transferred shares of Stock in accordance with the terms of the Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not
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<PAGE> 15
yet made to a Participant or obligation to deliver Stock pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided that the Committee may authorize the creation of trusts and deposit
therein cash, Stock, other Awards or other property, or make other arrangements
to meet the Company's obligations under the Plan. Such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan unless
the Committee otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to dispose of trust
assets and reinvest the proceeds in alternative investments, subject to such
terms and conditions as the Committee may specify and in accordance with
applicable law.
(h) Nonexclusivity of the Plan. The adoption of the Plan by the Board
shall not be construed as creating any limitations on the power of the Board or
a committee thereof to adopt such other incentive arrangements as it may deem
desirable.
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee shall determine whether cash, other Awards, or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
(j) Governing Law. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the Delaware General Corporation Law, to the
extent applicable, other laws (including those governing contracts) of the
State of Illinois, without giving effect to principles of conflicts of laws,
and applicable federal law.
(k) Plan Effective Date and Termination. The Plan shall become
effective on the Effective Date. Subject to earlier termination by action of
the Board in accordance with Section 10(e) hereof, no Award may be newly
granted under the Plan more than ten years after the Effective Date, and the
Plan will terminate thereafter at such time that the Company has no further
obligations or rights in respect of Awards granted under the Plan.
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<PAGE> 16
FRUIT OF THE LOOM, INC.
1996 INCENTIVE COMPENSATION PLAN
STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered as of the _____ day of ____________, 199__
by and between FRUIT OF THE LOOM, INC. (the "Company"), and _______________
("Optionee").
The Option (as defined below) evidenced by this Stock Option Agreement (this
"Agreement") is granted under the Fruit of the Loom, Inc. 1996 Incentive
Compensation Plan (the "1996 ICP"). Optionee is employed by the Company as a
senior executive of the Company, in which capacity Optionee will provide
services to the Company and/or its direct or indirect subsidiaries
("Employment"). By affording Optionee an opportunity to purchase shares of its
Stock under the Option granted hereby, the Company desires to carry out the
stated purposes of the 1996 ICP.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and Optionee agree as follows:
1. Grant of Option; Consideration. Subject to the terms and conditions of
the 1996 ICP and this Agreement, the Company hereby confirms the grant to
Optionee, on the date set forth in the first paragraph of this Agreement (the
"Date of Grant"), of the option to purchase an aggregate of _________ shares of
the Company's Class A Common Stock (the "Shares"), at the purchase price of
$________________________ per share (the "Option"). The Option is hereby
designated a nonqualified stock option, and is not an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
The grant of the Option by the Company to Optionee and all other terms and
conditions of this Agreement are subject to applicable laws, regulations,
conditions and obligations of the Company under the 1996 ICP.
2. Incorporation of 1996 ICP by Reference; Definitions. The Option has been
granted to Optionee under the 1996 ICP, a copy of which is attached hereto.
All of the terms, conditions, and other provisions of the 1996 ICP are hereby
incorporated by reference into this Agreement. Capitalized terms used in this
Agreement but not defined herein shall have the same meanings as in the 1996
ICP or as follows:
(i) "Approved Early Retirement" means Optionee's retirement prior
to age 65 approved in advance by the Committee;
(ii) "Cause" means Optionee's gross misconduct (as defined herein)
or willful and material breach of this Agreement. For
purposes of this definition, "gross
<PAGE> 17
misconduct" shall mean (A) a felony conviction in a
court of law under applicable federal or state laws which
results in material damage to the Company or any of its
subsidiaries or materially impairs the value of Optionee's
services to the Company, or (B) willfully engaging in one or
more acts, or willfully omitting to act in accordance with
duties of Employment, which is demonstrably and materially
damaging to the Company or any of its subsidiaries, including
acts and omissions that constitute gross negligence in the
performance of Optionee's duties of Employment. For purposes
of this Agreement, an act or failure to act on Optionee's part
shall be considered "willful" if it was done or omitted to be
done by him not in good faith, and shall not include any act
or failure to act resulting from any act or failure to act
resulting from any incapacity of Optionee.
(iii) "Disability" means the failure of Optionee to render and
perform the services required of him as a result of his
Employment, for a total of 180 days or more during any
consecutive 12 month period, because of any physical or mental
incapacity or disability as determined by a physician or
physicians selected by the Company, unless, within 30 days
after Optionee has received written notice form the Company of
a proposed termination due to such absence, Optionee shall
have returned to the full performance of his duties of
Employment and shall have presented to the Company a written
certificate of Optionee's good health prepared by a physician
selected by Company.
(iv) "Good Reason" means the occurrence of a Change in Control (as
defined in Section 9(b) of the 1996 ICP) and following which
there occurs, without Optionee's prior written consent: (A) a
material change, adverse to Optionee, in Optionee's positions,
titles, or offices, status, nature of responsibilities, or
authority within the Company in effect prior to a Change in
Control, except in connection with the termination of
Optionee's employment for Cause, Disability, or Normal
Retirement or Approved Early Retirement, as a result of
Optionee's death, or as a result of action by Optionee, (B) an
assignment of any duties to Optionee which are inconsistent
with his duties, status, responsibilities, and authorities in
effect prior to a Change in Control, (C) a decrease in annual
base salary or other compensation opportunities and maximums
or benefits provided to Optionee immediately prior to the
Change in Control, and (D) any attempt by the Company to
terminate Optionee for Cause which does not result in a valid
termination for Cause, except in the case that valid grounds
for termination for Cause exist but are corrected as permitted
under this Section 2;
(v) "Normal Retirement" means Optionee's retirement at or after
age 65.
If there is any conflict between the provisions of this Agreement and the
provisions of the 1996 ICP, the provisions of the 1996 ICP shall govern.
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<PAGE> 18
3. Vesting and Exercisability. The Option shall be exercisable
only at such times and to the extent that the Option has vested and become
exercisable prior to forfeiture, surrender, or expiration of the Option, as
specified in this Agreement. The Option shall vest and become cumulatively
exercisable as to one-third of the total number of Shares subject to the Option
on each of the first three anniversaries of the Date of Grant if Optionee's
Employment has not terminated prior to such anniversary, provided, however,
that the Option will become fully vested and fully exercisable in the event of
a Change in Control (as defined in Section 9(b) of the 1996 ICP) at a time that
Optionee's Employment has not previously terminated, termination of Optionee's
Employment due to Disability (as defined in Section 2 hereof), death or Normal
Retirement or Approved Early Retirement (as defined in Section 2 hereof).
Notwithstanding the foregoing, the Option will not vest or be exercisable prior
to one year after Date of Grant unless there shall have occurred a Change in
Control (as defined in Section 9(b) of the 1996 ICP); and provided further, the
Committee may, in its sole discretion, at any time, upon written notice to
Optionee, accelerate the vesting and exercisability of all or any portion of
the Option.
4. Option Expiration. The Option will expire at the close of
business on the date that is the earliest of (i) ten years after the Date of
Grant, (ii) three years after Optionee's termination of Employment due to death
or Disability (as defined in Section 2 hereof), (iii) two years after
termination of Optionee's Employment by the Company without Cause (as defined
in Section 2 hereof) and prior to a Change in Control (as defined in Section
9(b) of the 1996 ICP), (iv) immediately upon termination of Optionee's
Employment by the Company for Cause (as defined in Section 2 hereof), (v) six
months and one day after voluntary termination of Employment by the Optionee
other than for Good Reason (as defined in Section 2 hereof), and (vi) ten years
after the Date of Grant in the event of termination due to Normal Retirement or
Approved Early Retirement (as defined in Section 2 hereof), termination by the
Company other than for Cause subsequent to a Change in Control, or termination
by the Optionee for Good Reason (as defined in Section 2 hereof). The Option
shall be exercisable following termination of Optionee's Employment only to the
extent of the unexercised portion of the Option that became vested and
exercisable, under Section 3 hereof, prior to or at the time of such
termination of Employment, except as otherwise provided in subsection (iii)(B)
under Section 3 in the event of termination of Optionee's Employment by the
Company without Cause.
5. Method of Option Exercise. The Option may be exercised, in
whole or in part, by any person then entitled to exercise the Option by
delivery of a written notice of such person's intent to exercise the Option to
the Secretary of the Company at the Company's principal office located at Suite
5000, 233 South Wacker Drive, Chicago, Illinois 60606 (or such other office as
the Committee may direct). Each such notice shall (i) state such person's
election to exercise the Option and the number of Shares in respect of which
the Option is being exercised, (ii) be signed by the person exercising the
Option, (iii) if the Option is being exercised by any person other than the
Optionee, be accompanied by proof, reasonably satisfactory to the Company's
Secretary, of the right of such person to exercise the Option, and (iv) be
accompanied by full payment of the applicable purchase price, (A) which may, in
whole or in part, include Common Stock acquired by the Optionee at least six
months prior to exercise,
-3-
<PAGE> 19
properly endorsed and delivered to the Company (by actual or constructive
delivery) with a Fair Market Value equal to the purchase price of the Shares in
respect of which the Option is being exercised and payment in such form is
being made; provided, however, that the Compensation Committee may, in its
discretion, waive the six-month requirement relating to surrendered shares in
appropriate cases, or (v) which may, in whole or part, include such other form
of payment acceptable to the Committee. An Option shall not have been duly
exercised unless all the applicable provisions of this Section 5, including
payment of the purchase price in full, shall have been complied with and, for
all purposes of this Agreement, the date of the exercise of the Option with
respect to any particular Shares shall be the date on which all such applicable
provisions shall have been complied with in full. Subject to deferral under
Section 7(c) of the 1996 ICP, the certificate or certificates for the Shares as
to which the Option shall have been so exercised shall be registered in the
name of the person so exercising the Option, or a designated nominee, and shall
be delivered to or upon the written order of the person or persons exercising
the Option as promptly as practicable after the Option has been duly exercised.
Such delivery shall be made at the principal office of the Company, at such
other place as the Company shall have designated by notice or, if agreed to by
the Company, as may be directed by the person exercising the Option.
6. Limited SAR in Tandem With Option. In the event of a Change
in Control of the Company (as defined in Section 9(b) of the 1996 ICP),
Optionee will be entitled, at any time during period beginning on the date of
such Change in Control and extending until the earlier of the expiration of the
Option or one year after such Change in Control, to surrender any or all of the
unexercised portion of the Option to the Company and receive, in payment
therefor, a cash amount equal the product of (i) the Change in Control Price
(as defined in Section 9(c) of the 1996 ICP) minus the purchase price per share
times (ii) the number of Shares subject to the Option or part thereof being
surrendered. The right set forth in this Section 6, which shall be deemed a
Limited Stock Appreciation Right granted under the 1996 ICP, may be exercised
by the Optionee by giving written notice to the Company in the manner described
in Section 5 hereof. Payment shall be made by the Company within five business
days following such exercise.
7. No Rights as Stockholder. The Optionee shall have no rights
as a stockholder with respect to Shares covered by the Option until the date
the Option is duly exercised in respect of such Shares.
8. Requirements of Law. The obligations of the Company are
subject to Section 10(a) of the 1996 ICP.
9. Nontransferability. The Option is not transferable, except to
the extent as may be permitted under Section 10(b) of the 1996 ICP, and the
Optionee's rights relating to the Option are otherwise limited under Section
10(b) of the 1996 ICP.
10. Adjustments. The number and kind of Shares which may be
purchased upon exercise of the Option, the purchase price thereof, and the
closing price per share upon which
-4-
<PAGE> 20
accelerated vesting and exercisability is contingent as specified in Section
3(i) and (ii) hereof, are subject to adjustment by the Committee in accordance
with Section 10(c) of the 1996 ICP.
11. Withholding. Optionee may elect to have the Company withhold,
from the Shares purchased upon exercise of the Option, or to surrender to the
Company from Shares acquired by the Optionee at least six months prior to the
exercise of the Option, Shares having a Fair Market Value at the date of
exercise equal to all or part of the amount of withholding taxes relating to
such exercise, and to remit the Fair Market Value of such Shares to the taxing
authorities; provided, however, that the Committee may, in its discretion,
waive the six-month requirement relating to surrendered Shares in appropriate
cases.
12. Miscellaneous. This Agreement shall be binding upon the
heirs, executors, administrators, and successors of the parties. This
Agreement, together with the Employment Agreement, constitutes the entire
agreement between the parties with respect to the Option, and supersedes any
prior agreements or documents with respect to the Option. No amendment,
alteration, suspension, discontinuation, or termination of this Agreement which
may impose any additional obligation upon the Company or materially and
adversely affect the rights of Optionee with respect to the Option shall be
valid unless in each instance such amendment, alteration, suspension,
discontinuation, or termination is expressed in a written instrument duly
executed in the name and on behalf of the Company and by Optionee or a person
entitled to exercise the rights of Optionee under this Agreement.
AGREEMENT TO PARTICIPATE. By signing a copy of this Agreement and returning it
to the Secretary of the Company, I acknowledge that I have read the 1996 ICP
and this Agreement and that I fully understand all of my rights under the 1996
ICP and this Agreement, as well as all of the terms and conditions which may
limit my eligibility to exercise this Option.
________________________________________
Optionee's Signature
________________________________________
Address
________________________________________
Date
________________________________________
Social Security Number
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<PAGE> 1
EXHIBIT 5
KATTEN MUCHIN & ZAVIS
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
(312) 902-5200
July 29, 1996
Fruit of the Loom, Inc.
5000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Ladies and Gentlemen:
We have acted as counsel for Fruit of the Loom, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing
of a Registration Statement on Form S-8 (the "Registration Statement") for the
registration for sale under the Securities Act of 1933, as amended, of
1,000,000 shares of the Company's Class A Common Stock, $.01 par value (the
"Class A Common Stock"), which may be issued pursuant to the Fruit of the Loom,
Inc. 1996 Incentive Compensation Plan (the "Plan").
In connection with this opinion, we have examined and relied upon
originals or copies, certified or otherwise identified to our satisfaction, the
following:
1. The Registration Statement;
2. The Restated Certificate of Incorporation, as amended, of the Company;
3. The By-Laws of the Company;
4. Resolutions duly adopted by the Board of Directors of the Company
relating to the adoption of the Plan;
5. The Plan;
6. Certificates of public officials, certificates of officers,
representatives and agents of the Company, and we have assumed that
all of the representations contained therein are accurate and
complete; and
<PAGE> 2
7. Such other instruments, documents, statements and records of the
Company and others as we have deemed relevant and necessary to
examine and rely upon for the purpose of this opinion.
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the
genuineness of all signatures, the authenticity of the documents submitted to
us as originals and the conformity to authentic original documents of all
documents submitted to us as certified, conformed or reproduced copies. We
have further assumed that all natural persons involved in the transactions
contemplated by the Registration Statement (the "Offering") have sufficient
legal capacity to enter into and perform their respective obligations and to
carry out their roles in the Offering.
Based upon the foregoing, we are of the opinion that the 1,000,000
shares of Class A Common Stock issuable under the Plan, when issued and
delivered by the Company in accordance with the terms of the Plan, will be
validly issued, fully paid and nonassessable securities of the Company.
Our opinion expressed above is limited to the laws of the United States
of America and the General Corporation Law of the State of Delaware, and we do
not express any opinion herein concerning any other law. In addition, we
express no opinion herein concerning any statutes, ordinances, administrative
decisions, rules or regulations of any county, town, municipality or special
political subdivision, (whether created or enabled through legislative action
at the federal, state or regional level). This opinion is given as of the date
hereof and we assume no obligation to advise you of changes that may hereafter
be brought to our attention. This opinion is solely for the information of the
addressee hereof and is not to be quoted in whole or in part or otherwise
referred to, nor is it to be filed with any governmental agency or any other
person without our prior written consent. In connection therewith, we hereby
consent to the use of this opinion for filing as Exhibit 5 to the Registration
Statement. This opinion is rendered solely for the purposes of the Offering
and should not be relied upon for any other purpose.
Very truly yours,
/s/ KATTEN MUCHIN & ZAVIS
KATTEN MUCHIN & ZAVIS
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the Fruit of the Loom, Inc. 1996 Incentive
Compensation Plan and the related Prospectus for the registration of 1,000,000
shares of Fruit of the Loom, Inc. Class A Common Stock, $.01 par value, of our
report dated February 14, 1996, with respect to the consolidated financial
statements and schedule of Fruit of the Loom, Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
Chicago, Illinois
July 24, 1996
