<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended April 5, 1998 Commission file number 0-1790
RUSSELL CORPORATION
(Exact name of registrant as specified in its charter)
Alabama 63-0180720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
755 Lee Street, Alexander City, Alabama 35011
(Address of principal executive office) (Zip Code)
(256) 500-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of each of the issuer's classes of common
stock.
<TABLE>
<CAPTION>
Class Outstanding at May 15, 1998
----- ---------------------------
<S> <C>
Common Stock, Par Value $.01 Per Share 36,325,695 shares
(Excludes Treasury)
</TABLE>
<PAGE> 2
EXPLANATORY NOTE
This Form 10-Q/A is being filed for the sole purpose of adding Exhibit
10.1, Employment Agreement, dated March 31, 1998, by and between Russell
Corporation (the "Company") and John F. Ward, and Exhibit 10.2, Executive
Deferred Compensation and Buyout Plan, dated March 31, 1998, by and between the
Company and John F. Ward, to the Company's Quarterly Report on Form 10-Q for the
quarter ended April 5, 1998, which was filed on May 20, 1998 (wherein such
Employment Agreement and Executive Deferred Compensation and Buyout Plan were
discussed).
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits -
10.1 Employment Agreement, dated March 31, 1998, by and
between the Company and John F. Ward.
10.2 Executive Deferred Compensation and Buyout Plan, dated
March 31, 1998, by and between the Company and John F.
Ward.
11 Computation of Earnings Per Share (filed as an Exhibit
to the Company's Quarterly Report on Form 10-Q for the
quarter ended April 5, 1998, which was filed on May 20,
1998).
b) Reports on Form 8-K - there were no reports on Form 8-K filed for the
period ended April 5, 1998.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RUSSELL CORPORATION
-------------------------
(Registrant)
Date: August 24, 1998 /s/ ERIC N. HOYLE
-------------------------
Eric N. Hoyle
Chief Financial Officer
(For the Registrant and as
Principal Financial Officer)
3
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and entered
into and to become effective on the 31st day of March, 1998 (the "Effective
Date"), by and between RUSSELL CORPORATION, an Alabama Corporation (the
"Company"), and JOHN F. WARD (the "Executive").
RECITALS:
The Company and its affiliates are engaged in the knit
products industry. The Executive is experienced in, and knowledgeable
concerning, the knit products industry. The Company desires to employ the
Executive as President, Chief Executive Officer and Chairman of the Board, and
the Executive desires to be employed by the Company in that capacity.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations herein and the compensation the Company agrees herein to pay the
Executive, and of other good and valuable consideration, the receipt of which is
hereby acknowledged, the Company and the Executive agree as follows:
ARTICLE 1. EMPLOYMENT OF EXECUTIVE. Subject to the terms and
conditions set forth in this Agreement, the Company hereby employs the Executive
and the Executive hereby accepts such employment for the period stated in
ARTICLE 3 of this Agreement.
ARTICLE 2. POSITION, RESPONSIBILITIES AND DUTIES.
2.1 Position and Responsibilities. During the Term (as defined
in Section 3.1), the Executive shall serve as President, Chief
Executive Officer and Chairman of the Board of Directors (pursuant to
Section 2.3) of the Company on the conditions herein provided. The
Executive shall provide such executive services in the management of
the Company's business not inconsistent with his position and the
provisions of Section 2.2 as shall be assigned to him from time to time
by the Board of Directors of the Company (the "Board").
2.2 Duties. During the Term and except for illness, reasonable
vacation periods, and reasonable leaves of absence, the Executive shall
devote his full business time, attention, skill, energies and efforts
to the faithful performance of his duties hereunder and to the business
and affairs of the Company and any subsidiary or affiliate of the
Company, such duties being those customary to executives at the same
level in companies of similar size. The Executive shall work to
maximize shareholder value while being sensitive to the impact on
employees and communities. To maximize shareholder value, significant
changes will need to be made, potentially including but not limited to
relocation or closing of manufacturing facilities or other operations,
restructuring, closing or selling poor return
<PAGE> 2
businesses, establishment of nationally competitive compensation plans
and replacement of management, contractors and consultants as
necessary. Notwithstanding the foregoing, the duties of the Executive
shall not be expanded or diminished without the Executive's prior
approval.
2.3 Title.
(a) As soon as possible following the execution of this
Agreement, the Board shall appoint the Executive to the Board of
Directors of Russell and elect the Executive to the position of
Chairman of the Board of Directors to take effect no later than June 1,
1998. The Board's intention to elect the Executive to the position of
Chairman as of such date will be announced simultaneously with the
announcement of his employment as President and Chief Executive
Officer.
(b) The Executive shall hold the office of President for such
time after the Effective Date that he feels necessary. At any time
after the Effective Date, the Executive may, in his best judgment,
relinquish the title of President for the purpose of hiring a new
President and Chief Operating Officer of the Company.
ARTICLE 3. TERM.
3.1 Term of Employment. The term of the Executive's employment
under this Agreement shall commence on the Effective Date and shall
continue until the earliest to occur of the following dates (the
"Termination Date"): (i) March 31, 2001; (ii) the date of death of the
Executive; (iii) the date coinciding with the end of one hundred eighty
(180) days of continuous "Total Disability" of the Executive (as
defined in Section 7.4); (iv) the date of termination For Cause (as
defined in Section 3.2); or (v) the date the Executive terminates his
employment for Good Reason (as defined in Section 3.3) determined
pursuant to Section 3.5.
3.2 Termination for Cause; Automatic Termination. The Company
shall at all times have the right to discharge the Executive For Cause.
For purposes of this Agreement, "For Cause" shall be limited to: (i)
conviction of a felony other than those felonies involving the use of
an automobile in violation of any vehicle statute; (ii) a material
breach of a provision of this Agreement by the Executive, which breach
is not cured within thirty (30) days after notice has been given by the
Company to the Executive, as provided in Section 3.5; or (iii) the
Final Determination of any action the effect of which is to permanently
enjoin the Executive from fulfilling his duties under this Agreement.
"Final Determination" as used herein shall mean the exhaustion of all
available remedies and appeals by the Executive or the Executive's
refusal to pursue such remedies and appeals.
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3.3 Good Reason. Subject to the requirements of
Section 3.5 of this Agreement, the Executive may terminate his
employment at any time for Good Reason (as defined in this
Section 3.3). If the Executive desires to terminate his
employment for Good Reason, he shall give notice to the Company
as provided in Section 3.5. For purposes of this Section 3.3,
"Good Reason" shall mean the Executive's resignation from the
Company's employment for any of the following reasons:
(a) Failure by the Board to reelect or
reappoint the Executive as President (subject to Section
2.3), Chief Executive Officer and Chairman of the Board
of the Company and the Executive then elects to leave
the Company's employment within six (6) months of such
failure to so reelect or reappoint the Executive;
(b) A material modification by the Board of
the duties, functions and responsibilities of the
Executive as President (subject to 2.3) or Chief
Executive Officer without his consent given within six
(6) months prior to such modification;
(c) The failure of the Board to approve the
Designated Metro Area within thirty (30) days of when
the Executive makes his recommendation as to such
Designated Metro Area to the Board, as provided for in
Section 12.2;
(d) If the Company shall experience a Change
of Control (defined in this Section 3.3(d)) the
Executive shall have a period of two (2) years from the
date the Change of Control becomes effective in which to
terminate this Employment Agreement. Change in Control
of the Company shall be deemed to have occurred as of
the first day that any one or more of the following
conditions shall have been satisfied:
(i) Any person (other than those Persons in
control of the Company as of the
Effective Date, or other than a trustee
or other fiduciary holding securities
under an employee benefit plan of the
Company, or a corporation owned directly
or indirectly by the stockholders of the
Company in substantially the same
proportions as their ownership of stock
of the Company), becomes the Beneficial
Owner, directly or indirectly, of
securities of the Company representing
thirty percent (30%) or more of the
combined voting power of the Company's
then outstanding securities; or
(ii) During any period of two (2) consecutive
years (not including any period prior to
the Effective Date), individuals who at
the beginning of such period constitute
the Board (and any new Director, whose
election by the Company's stockholders
was approved by a vote of at least
two-thirds (2/3) of the Directors then
still in office who either were
Directors at the beginning of the period
or whose election or nomination for
election was so approved (a "Continuing
Director")), cease for any reason to
constitute a majority thereof; or
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<PAGE> 4
(iii) The stockholders of the Company approve:
(A) a plan of complete liquidation of
the Company; or (B) an agreement for the
sale or disposition of all or
substantially all of the Company's
assets; or (C) a merger, consolidation,
or reorganization of the Company with or
involving any other corporation other
than a merger, consolidation, or
reorganization that would result in the
voting securities of the Company
outstanding immediately prior thereto
continuing to represent (either by
remaining outstanding or by being
converted into voting securities of the
surviving entity), at least fifty
percent (50%) of the combined voting
power of the voting securities of the
Company (or such surviving entity)
outstanding immediately after such
merger, consolidation, or
reorganization.
However, in no event shall a "Change in
Control" be deemed to have occurred,
with respect to a Participant, if the
Participant is part of a purchasing
group which consummates the
Change-in-Control transaction. A
Participant shall be deemed "part of a
purchasing group" for purposes of the
preceding sentence if the Participant is
an equity participant in the purchasing
company or group (except for: (i)
passive ownership of less than three
percent (3%) of the stock of the
purchasing company; or (ii) ownership of
equity participation in the purchasing
company or group which is otherwise not
significant, as determined prior to the
Change in Control by a majority of the
nonemployed continuing Directors).
(e) The Executive's resignation from the
Company's employment on account of any material breach of a
provision of this Agreement by the Company, which breach is
not cured within thirty (30) days after notice has been
given to the Company by the Executive as provided in Section
3.5. Without limiting the generality of the foregoing
sentence, the Company shall be in material breach of its
obligations hereunder if, for example, the Company shall not
permit the Executive to exercise such responsibilities as
are consistent with the Executive's position as described in
Section 2.2 herein and are of such a nature as are usually
associated with such officers of other public corporations
of approximately equal size, or the Executive shall at any
time be required to report to anyone other than directly to
the Board, or the Company causes the Executive to locate his
residence in conflict with ARTICLE 12 herein, or the Company
shall fail to make a payment when due to the Executive.
Notwithstanding the foregoing, if the Executive desires to
terminate his employment for Good Reason as defined in this
Section 3.3(e), he shall give notice to the Company as
provided in Section 3.5 and the Company shall have thirty
(30)
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<PAGE> 5
days after notice has been given to it in which to cure the
reason for the Executive's desire to terminate his employment
for Good Reason. If the reason for the Executive's desire to
terminate his employment for Good Reason as defined in this
Section 3.3(e) is timely cured by the Company, the Executive's
notice shall become null and void.
3.4 Retirement. Any termination of employment by either
the Company or the Executive, after April 1, 2001, shall be treated as
retirement of the Executive for the purpose of all Russell plans and
benefits.
3.5 Notice of Termination. Any termination by the
Executive for Good Reason or by the Company For Cause shall be
communicated by Notice of Termination to the Company. For purposes
hereof, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision relied upon in this
Agreement, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) sets
forth the Termination Date. If the Executive's employment is terminated
by reason of one of the events described in Section 3.2 (other than
3.2(i)), 3.3(c), 3.3(d) or 3.3(e), the Termination Date shall be not
less than thirty (30) days nor more than forty-five (45) days after the
receipt of the Notice of Termination by the Company. If the Executive's
employment is terminated by reason of one of the events described in
subparagraphs (a) or (b) of Section 3.3, the Termination Date shall be
not more than fifteen (15) days after the receipt of the Notice of
Termination by the Company.
ARTICLE 4. COMPENSATION.
4.1 Base Salary. For all services rendered by the
Executive during the Term, the Company shall pay the Executive as
compensation a base annual salary (the "Base Salary"), payable in
appropriate installments to conform with regular payroll dates for
salaried personnel of the Company. On the Effective Date, the annual
rate of the Executive's Base Salary shall be $650,000 (the "Annual Base
Salary Rate"). The Executive's Annual Base Salary Rate shall be
increased annually in the sole discretion of the Board. The timing of
the annual increase shall coincide with increases of other top
executives, in accordance with Company policy.
4.2 Bonus. In addition to the Base Salary provided for in
Section 4.1 and the other benefits provided for in this Agreement, the
Executive shall be eligible, upon the achievement of certain goals
established by the Board, to receive an annual bonus of at least 100%
of his base salary for the year for which the bonus is to be paid,
provided that the bonus for the 9 month period in 1998 beginning on the
Effective Date shall be at least $350,000, to be paid within 60 days
after the end of the year.
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<PAGE> 6
ARTICLE 5. STOCK OPTIONS. In addition to the Base Salary and
bonus provided to the Executive pursuant to Article 4, the Executive shall
receive a minimum of 75,000 options for the purchase of Russell Corporation
common stock annually, which amount may be increased at the Board's discretion
based on the Executive's performance. The exercise price for these options shall
equal the average of the high and low of the stock price on the day the grant is
made. Such options shall have a term of ten years and one-third of the total
options given in any year shall vest in each of the three years following the
grant of the options. Provided, however, that in 1998 the Executive shall be
granted 125,000 options on the Effective Date for the purchase of Russell
Corporation common stock (the "1998 Options"). The exercise price for the 1998
Options shall be the average price of the stock on the Effective Date. If the
Executive's employment is terminated for any reason other than For Cause, all
options granted under this Article 5 shall immediately become vested and shall
be exercisable at the Executive's option for a period of three (3) years from
the date of termination; if the Executive's employment is terminated For Cause,
all options granted under this Article 5 that are not vested as of the
Termination Date shall lapse and be forfeited to the Company.
Provided, however, that if the Russell shareholders do not approve the
necessary amendment to the Russell Stock Option Plan at their April, 1998
meeting allowing an increase in the number of options that may be granted
annually to any one employee any options previously granted hereunder in excess
of the limit shall lapse and be forfeited to the Company and the Executive shall
receive: (i) 50,000 shares of restricted stock of Russell and cash in the amount
of $1,282,727 for the value of 50,000 options (determined pursuant to Exhibit
A), in lieu of his 1998 Options; and (ii) 50,000 shares of restricted stock in
lieu of the 75,000 stock options to be granted in all subsequent years under
this Article 5.
ARTICLE 6. SUPPLEMENTAL BENEFITS
6.1 Special Health Care Benefit. In addition to the other
benefits provided for in this Agreement (including participation by the
Executive and his spouse during the term of employment in the Company
Plan (defined herein)) and thereafter following the expiration of the
term for any reason, the Executive (or his spouse if the Executive
predeceases his spouse before he attains the age of 65) shall be
entitled for the period commencing on the Termination Date and ending
on the earlier of (i) the date of death for the survivor of the
Executive and his spouse or (ii) the Executive and his spouse attaining
the age of 65 (the "Coverage Period") to participate in any group
health plan or program (whether insured or self-insured, or any
combination thereof) provided by the Company for the benefit of its
active employees (the "Company Plan"). The Company, consistent with
sound business practices, shall use its best efforts to provide the
Executive with coverage for the Executive and his spouse under the
Company Plan during the Coverage Period (and any period thereafter to
the extent required by applicable state and federal law), including, if
necessary, amending the applicable provisions of the Company Plan and
negotiating the addition of any necessary riders to any group health
insurance contract. In the event the Company is unable for whatever
reason to provide the Executive and his spouse with coverage under the
Company Plan, the Company shall provide the Executive with an
individual policy of health insurance providing coverage for the
Executive and his spouse (the "Individual Policy")
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during the Coverage Period. The coverage to be provided to the
Executive pursuant to this ARTICLE 6 (whether under the Company Plan or
the Individual Policy) shall consist of coverage which, as of the time
the coverage is being provided, is identical (or, with respect to an
Individual Policy, substantially identical) to the coverage provided
under the Company Plan to active employees and their dependents.
Notwithstanding the foregoing, the Company shall coordinate coverage
for the Executive under this ARTICLE 6 with any applicable federal or
state government programs (e.g., Medicare or Medicaid) when the
Executive is eligible to begin receiving benefits under such program.
Any premiums required to be paid for coverage of the Executive under
such government programs shall be paid by the Executive.
6.2 Life Insurance. The Company shall maintain the
Metropolitan Universal Life Insurance Policy on the life of the
Executive currently maintained by his prior employer. The Company shall
fund the life insurance policy to provide for a benefit equal to
$1,209,000 until January 1, 1999. Thereafter, the policy shall be
maintained to provide a benefit equal to $1,209,000. The premium for
1997 was $13,724.
6.3 Corporate Automobile. An automobile of appropriate
value shall be provided by the Company. All operating expenses of the
automobile shall be paid by the Company.
6.4 Corporate Aircraft. The Executive shall have the use
of corporate aircraft for his business and personal transportation at
his discretion and at no cost to him, including reasonable access for
his spouse. Applicable income taxes attributable to the Executive's
personal use of the aircraft shall be paid by the Executive.
6.5 Club Memberships. The Company shall make available
country club access for the Executive and his family near each
corporate headquarters of the Company.
6.6 Office Closing. The Executive currently conducts
business in an office located in Winston-Salem, North Carolina. As of
the Effective Date, the Company shall assume responsibility for, and
all expenses of, closing the Executive's Winston-Salem office, at a
cost not to exceed $25,000.
6.7 Immediate Eligibility. Any delay in eligibility and
any waiting period normally associated with the receipt of any of the
benefits provided for by this Agreement shall be waived and the
Executive (and his spouse where applicable) shall be eligible to
receive benefits as of the Effective Date as if such delays and waiting
periods have been satisfied. Notwithstanding the foregoing, this
Section 6.7 shall not apply to the any qualified retirement plans of
Russell if waiving the eligibility requirements or any associated
waiting periods would cause a violation under ERISA.
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ARTICLE 7. DISABILITY BENEFITS.
7.1 Commencement of Total Disability. If the Executive
suffers a "Total Disability" (as defined in Section 7.4), he shall be
deemed totally disabled ("Totally Disabled") for purposes of this
Agreement as of the date such Total Disability commenced.
7.2 Benefits Payable Upon Total Disability. In the event
of the Total Disability of the Executive, the Company shall continue to
pay the Executive his Base Salary during the Disability Period (as
defined in this Section 7.2); provided, however, that if the Term shall
otherwise expire during the Disability Period pursuant to the
provisions of ARTICLE 3, the Company shall cease paying the Executive
his Base Salary under this Section 7.2 as of the Termination Date, and
the remaining provisions of this Agreement shall apply. In the event
that the Executive's Total Disability continues for a period of one
hundred eighty (180) days (measured from the date the Executive became
Totally Disabled), the Term shall automatically expire, as provided in
subparagraph (iii) of Section 3.1, at the end of such one hundred
eighty day period (the "Disability Period").
7.3 Cessation of Disability. Notwithstanding the
provisions of Section 7.2, if prior to the end of the Disability
Period, the Executive's Total Disability shall have ceased under the
definition of Total Disability set forth in Section 7.4 and he shall
have commenced to perform his regular duties hereunder, the following
special provisions shall apply: (i) this Agreement shall continue in
full force and effect (except as otherwise provided in ARTICLE 3); and
(ii) the Executive shall be entitled to resume his employment under
this Agreement and to receive thereafter compensation in accordance
with ARTICLE 4 as though he had not been Totally Disabled; provided,
however, that unless the Executive shall perform his regular duties
hereunder for a continuous period of at least sixty (60) days following
a period of Total Disability before he again becomes Totally Disabled,
he shall not be entitled to start a new Disability Period, but instead
must continue under the remaining portion of the original Disability
Period. In this event, the resumption of the original Disability Period
shall commence on the date such Total Disability resumed.
7.4 Definition of Total Disability. For purposes of this
Agreement, "Total Disability" shall mean the permanent and total
inability, by reason of physical or mental infirmity, or both, of the
Executive to perform his regular and customary duties with the Company
in a satisfactory manner shall be considered Total Disability. The
determination of the existence or nonexistence of Total Disability
shall be made by the Board, pursuant to a medical examination by a
medical doctor licensed to practice medicine in the state of the
Executive's principal residence approved by the Board.
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ARTICLE 8. REIMBURSEMENT OF EXPENSES, OFFICE AND SECRETARIAL
ASSISTANCE. The Company recognizes that the Executive will incur, from time to
time, expenses for the benefit of the Company and in furtherance of the
Company's business, including, but not limited to, expenses for entertainment,
travel and other business expenses. In the event of the termination of the
Executive's employment for any reason, the Company shall reimburse the Executive
(or in the event of death, his personal representative) for expenses incurred by
the Executive on behalf of the Company prior to the Termination Date to the
extent such expenses have not been previously reimbursed by the Company.
ARTICLE 9. OTHER EMPLOYEE BENEFITS. The Executive shall be
entitled to participate in any and all retirement, health, disability, life
insurance, long-term disability insurance, long-term incentive plans,
nonqualified deferred compensation and tax-qualified retirement plans or any
other plans or benefits offered by the Company to its executives generally, if
and to the extent the Executive is eligible to participate in accordance with
the terms and provisions of any such plan or benefit program. Notwithstanding
the foregoing, all vesting periods under all Russell benefit plans shall be
waived (except where waiving such period would violate ERISA) and the Executive,
upon termination of employment for any reason before the age of retirement under
those plans, shall be considered to have attained the minimum retirement age
provided in those plans. Nothing in this ARTICLE 9 is intended, or shall be
construed, to require the Company to institute any particular plan, program or
benefit.
ARTICLE 10. VACATION. The Executive shall be entitled to a
minimum four (4) weeks of paid vacation during each Employment Year.
ARTICLE 11. TERMINATION COMPENSATION.
11.1 Monthly Compensation. Upon the expiration of the Term for
any reason, the Executive shall be entitled to continue to receive his
Base Salary through the last day of the month in which the Termination
Date occurs (the "Termination Month").
11.2 Compensation Continuance. In addition to the compensation
provided for in Section 11.1, upon the termination of the Executive's
employment by the Executive for Good Reason or by the Company in
violation of the terms of this Agreement, the Executive (or in the
event of his subsequent death, his designated beneficiary) shall
receive 100% of the maximum bonus for which he was eligible in the year
of termination and he shall continue to receive from the last day of
the Termination Month through March 31, 2001 (the "Compensation
Continuance Period") the Base Salary (as increased each year) that he
would have received pursuant to Section 4.1 during the Compensation
Continuance Period as if the Term had not expired. During the
Compensation Continuance Period, the Executive shall continue to
participate in all employee benefit plans or programs of the Company
(as described in ARTICLE 9), except where doing so would violate ERISA.
ARTICLE 12. RELOCATION.
12.1 Housing in Alexander City. The Company shall provide
first class housing for the Executive, fully furnished, in or near
Alexander City, Alabama for approximately one year from the Effective
Date.
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12.2 Corporate Headquarters. Upon approval of the board, the
Company shall as soon as possible following the effective date, provide
for dual headquarters in Alexander City, Alabama and a southeastern
city designated by the executive (the "Designated Metro Area"). It is
acknowledged that resolving and establishing this dual headquarters in
the Designated Metro Area is critical for the hiring and retainment of
"world class" employees; and that hiring these employees and
implementing many other steps necessary for the improvement of the
company's performance will most likely be delayed until the resolution
of the Designated Metro Area. Resolving the Designated Metro Area will
be of the highest priority for the Executive and the Board of
Directors. A special board of directors meeting will be called by phone
or in person to resolve this issue if there is not a regularly
scheduled board of directors meeting within two weeks of when the
executive is ready to make his recommendation. It is contemplated that
the Executive Headquarters of the Company shall be moved to the
Designated Metro Area within one year of the Effective Date unless
mutually agreed otherwise. Determination will be made by the Executive
when and how many other persons or departments of the Company will
relocate to the Designated Metro Area. Executive Headquarters, for the
purposes of this Section 12.2, shall mean the location of the primary
offices of the Executive and other employees or groups of employees as
the Executive shall deem necessary along with the appropriate support
staff, but shall not necessarily mean the Executive Headquarters for
legal purposes.
12.3 Relocation Expenses. The Company shall pay all relocation
expenses, including any necessary tax gross up, for any relocation to
either of the corporate headquarters of the Company made by the
Executive within two years from the date of employment. It is
understood by the Company, that the Executive plans to maintain a
residence in Winston-Salem, North Carolina and the decision as to where
to locate his other residence shall be left to the Executive's sole
discretion, provided it is near one of the corporate headquarters
described in Section 12.2.
ARTICLE 13. POST-TERMINATION OBLIGATIONS. All payments and
benefits to the Executive under this Agreement shall be subject to the
Executive's compliance with the following provisions during the Term and
following the termination of the Executive's employment:
13.1 Assistance in Litigation. The Executive shall, upon
reasonable notice, furnish such information and assistance to the
Company as may reasonably be required by the Company in connection with
any litigation in which it is, or may become, a party, and which arises
out of facts and circumstances known to the Executive. The Company
shall promptly reimburse the Executive for his out-of-pocket expenses
incurred in connection with the fulfillment of his obligations under
this Section 13.1.
13.2 Confidential Information. The Executive shall not
disclose or reveal to any unauthorized person any trade secret or other
confidential information relating to the Company, its subsidiaries or
affiliates, or to any businesses operated by them, and the Executive
confirms that such information constitutes the exclusive property of
the Company;
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provided, however, that the foregoing shall not prohibit the Executive
from disclosing such information to the extent necessary or desirable
in connection with obtaining financing for the Company (or furnishing
such information under any agreements, documents or instruments under
which such financing may have been obtained) or otherwise disclosing
such information to third parties or governmental agencies in
furtherance of the interests of the Company; or as may be required by
law.
13.3 Noncompetition. The Executive shall not: (i) during the
Compensation Continuation Period, without the prior written consent of
the Company, engage directly or indirectly, as a licensee, owner,
manager, consultant, officer, employee, director, investor or
otherwise, in any business in material competition with the Company; or
(ii) usurp for his own benefit any corporate opportunity under
consideration by the Company during his employment, unless the Company
shall have finally decided not to take advantage of such corporate
opportunity. The restrictions of part (i) of this Section 13.3 shall
not apply to a passive investment by the Executive constituting
ownership of less than five percent (5%) of the equity of any entity
engaged in any business described in part (i) of this Section 13.3. The
Executive acknowledges that the possible restrictions on his activities
which may occur as a result of his performance of his obligations under
this Section 13.3 are required for the reasonable protection of the
Company.
13.4 Failure to Comply. In the event that the Executive shall
fail to comply with any provision of this ARTICLE 13, and such failure
shall continue for thirty (30) days following delivery of notice
thereof by the Company to the Executive, all rights hereunder of the
Executive and any person claiming under or through him shall thereupon
terminate and no person shall be entitled thereafter to receive any
payments or benefits hereunder (except for benefits under employee
benefit plans or programs as provided in ARTICLES 6 and 9 which have
been earned or otherwise fixed or determined to be payable prior to
such termination).
ARTICLE 14. ADDITIONAL PAYMENTS BY COMPANY. In the event that
any amount required to be paid or distributed to the Executive pursuant to this
Agreement shall constitute a parachute payment within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the
aggregate of such parachute payments and any other amounts otherwise required to
be paid or distributed to the Executive by the Company shall cause the Executive
to be subject to the excise tax on excess parachute payments under Section 4999
of the Code (the "Excise Tax"), or any successor or similar provision thereof,
the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount the Executive shall receive after the payment
of any Excise Tax, shall equal the amount which he would have received if the
Excise Tax had not been imposed.
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<PAGE> 12
ARTICLE 15. PROFESSIONAL FEES. The Company shall be
responsible for paying all professional fees incurred by the Executive in
connection with his employment with the Company in an amount not to exceed
$100,000 (not including fees charged by Hewitt Associates LLC), without approval
of Russell. Additionally, in the event that the Executive incurs any
professional fees in protecting or enforcing his rights under this Agreement or
under any employee benefit plans or programs sponsored by the Company in which
the Executive is a participant, the Company shall reimburse the Executive for
such reasonable professional fees and for any other reasonable expenses related
thereto. Such reimbursement shall be made within thirty (30) days following
final resolution of the dispute or occurrence giving rise to such fees and
expenses.
ARTICLE 16. BENEFICIARY. The Executive shall name one or more
primary beneficiaries and one or more contingent beneficiaries, who shall be
entitled to receive any amounts payable following the death of the Executive
under ARTICLE 11, which beneficiary or beneficiaries shall be subject to change
from time to time by notice in writing to the Board. A beneficiary may be a
trust, an individual or the Executive's estate. If the Executive fails to
designate a beneficiary, primary or contingent, then and in such event, such
benefit shall be paid to the surviving spouse of the Executive or, if he shall
leave no surviving spouse, then to the Executive's estate. If a named
beneficiary entitled to receive any death benefit is not living or in existence
at the death of the Executive or dies prior to asserting a written claim for any
such death benefit, then and in any such event, such death benefit shall be paid
to the other primary beneficiary or beneficiaries named by the Executive who
shall then be living or in existence, if any, otherwise to the contingent
beneficiary or beneficiaries named by the Executive who shall then be living or
in existence, if any; but if there are no primary or contingent beneficiaries
then living or in existence, such benefit shall be paid to the surviving spouse
of the Executive or, if he shall leave no surviving spouse, then to the
Executive's estate. If a named beneficiary is receiving or is entitled to
receive payments of any such death benefit and dies before receiving all of the
payments due him, any remaining benefits shall be paid to the other primary
beneficiary or beneficiaries named by the Executive who shall then be living or
in existence, if any, otherwise to the contingent beneficiary or beneficiaries
named by the Executive who shall then be living or in existence, if any; but if
there are no primary or contingent beneficiaries then living or in existence,
the balance shall be paid to the estate of the beneficiary who was last
receiving the payments.
ARTICLE 17. INDEMNIFICATION. The Company shall indemnify the
Executive during his employment and thereafter to the maximum extent permitted
by applicable law for any and all liability of the Executive arising out of, or
in connection with, his employment by the Company or membership on the Board;
provided, that in no event shall such indemnity of the Executive at any time
during the period of his employment by the Company be less than the maximum
indemnity provided by the Company at any time during such period to any other
officer or director under an indemnification insurance policy or the bylaws or
charter of the Company or by agreement.
ARTICLE 18. SOURCE OF PAYMENTS; NO TRUST. The obligations of
the Company to make payments hereunder shall constitute a liability of the
Company to the Executive. Such payments shall be from the general funds of the
Company, and the Company shall not be required to establish or maintain any
special or separate fund, except as specifically provided for in this Agreement,
or otherwise to segregate assets to assure that such payments shall be made, and
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<PAGE> 13
neither the Executive nor his designated beneficiary shall have any interest in
any particular asset of the Company by reason of its obligations hereunder.
Nothing contained in this Agreement shall create or be construed as creating a
trust of any kind or any other fiduciary relationship between the Company and
the Executive or any other person. To the extent that any person acquires a
right to receive payments from the Company hereunder, such right shall be no
greater than the right of an unsecured creditor of the Company.
ARTICLE 19. SEVERABILITY. All agreements and covenants
contained herein are severable, and in the event any of them shall be held to be
invalid by any competent court, this Agreement shall be interpreted as if such
invalid agreements or covenants were not contained herein.
ARTICLE 20. ASSIGNMENT PROHIBITED. This Agreement is personal
to each of the parties hereto, and neither party may assign nor delegate any of
his or its rights or obligations hereunder without first obtaining the written
consent of the other party; provided, however, that nothing in this ARTICLE 20
shall preclude (i) the Executive from designating a beneficiary to receive any
benefit payable under this Agreement upon his death or (ii) the executors,
administrators, or other legal representatives of the Executive or his estate
from assigning any rights under this Agreement to the person or persons entitled
thereto.
ARTICLE 21. NO ATTACHMENT. Except as otherwise provided in
this Agreement or required by applicable law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
ARTICLE 22. HEADINGS. The headings of articles, paragraphs
and sections herein are included solely for convenience of reference and shall
not control the meaning or interpretation of any of the provisions of this
Agreement.
ARTICLE 23. GOVERNING LAW. The parties intend that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder shall be construed in accordance with and under and pursuant to the
laws of the State of Alabama and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with, or by reason
of this Agreement, the laws of the State of Alabama shall be applicable and
shall govern to the exclusion of the law of any other forum, without regard to
the jurisdiction in which any action or special proceeding may be instituted.
ARTICLE 24. BINDING EFFECT. This Agreement shall be binding
upon, and inure to the benefit of, the Executive and his heirs, executors,
administrators and legal representatives and the Company and its permitted
successors and assigns.
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<PAGE> 14
ARTICLE 25. COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
ARTICLE 26. NOTICES. All notices, requests and other
communications to any party under this Agreement shall be in writing (including
telefacsimile transmission or similar writing) and shall be given to such party
at its address or telefacsimile number set forth below or such other address or
telefacsimile number as such party may hereafter specify for the purpose by
notice to the other party:
(a) If to the Executive:
John F. Ward
Russell Corporation
755 Lee Street
Post Office Box 272
Alexander City, Alabama 35011
(b) If to the Company:
Russell Corporation
755 Lee Street
Post Office Box 272
Alexander City, Alabama 35011
Each such notice, request or other communication shall be effective (i) if given
by mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (ii) if given by any other
means, when delivered at the address specified in this ARTICLE 26.
ARTICLE 27. MODIFICATION OF AGREEMENT. No waiver or
modification of this Agreement or of any covenant, condition, or limitation
herein contained shall be valid unless in writing and duly executed by the party
to be charged therewith. No evidence of any waiver or modification shall be
offered or received in evidence at any proceeding, arbitration, or litigation
between the parties hereto arising out of or affecting this Agreement, or the
rights or obligations of the parties hereunder, unless such waiver or
modification is in writing, duly executed as aforesaid. The parties further
agree that the provisions of this ARTICLE 27 may not be waived except as herein
set forth.
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<PAGE> 15
ARTICLE 28. TAXES. To the extent required by applicable law,
the Company shall deduct and withhold all necessary Social Security taxes and
all necessary federal and state withholding taxes and any other similar sums
required by law to be withheld from any payments made pursuant to the terms of
this Agreement.
ARTICLE 29. RECITALS. The Recitals to this Agreement are
incorporated herein and shall constitute an integral part of this Agreement.
ARTICLE 30. EFFECT OF PRIOR AGREEMENTS. This Agreement
supersedes and replaces any prior employment agreement, understanding or
arrangement (whether written or oral) between the Company and the Executive.
Each of the parties hereto has relied on his or its own judgment in entering
into this Agreement.
[Remainder of page intentionally left blank]
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
EXECUTIVE
/s/ John F. Ward (SEAL)
------------------------------------------
John F. Ward
WITNESS:
/s/ Jean H. Anderson
- ---------------------------
RUSSELL CORPORATION
By:/s/ John C. Adams
---------------------------------------
John C. Adams
Chairman of the Board, President and
Chief Executive Officer
Attest:
- ---------------------------
Secretary/Asst. Secretary
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<PAGE> 17
EXHIBIT A (EXAMPLE)
ARTICLE 5 - EMPLOYMENT AGREEMENT
LET A = 50,000 OPTIONS TO PURCHASE RUSSELL COMMON STOCK
B = PRICE/SHARE OF RUSSELL COMMON STOCK
FV = FUTURE VALUE, ASSUMING 10% GROWTH (COMPOUNDED
ANNUALLY) FOR 10 YEARS; FACTORS = 2.593742
PV = PRESENT VALUE, ASSUMING A DISCOUNT RATE OF 5.3081%
(EQUIVALENT TO A PRE-TAX RATE OF 10%, GIVEN
A MARGINAL TAX RATE OF 46.919%) FOR 10 YEARS;
FACTOR = .596187.
ASSUME A MARGINAL TAX RATE OF 46.919% FOR ALL YEARS (37.719% FEDERAL,
7.75% STATE, 1.45% MEDICARE).
FORMULA:
PV [FV(A x B) - (A x B)]
EXAMPLES (RUSSELL PRICE = $27/SHARE):
.596187 [2.593742 (50,000 X 27.00) - (50,000 X 27.00)] =
.596187 [3,501,552 - 1,350,000] =
$1,282,727
==========
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<PAGE> 1
EXHIBIT 10.2
EXECUTIVE DEFERRED COMPENSATION
AND BUYOUT PLAN
THIS AGREEMENT, made and to become effective this 31st day of
March, 1998 (the "Effective Date") by and between RUSSELL CORPORATION
("Russell"), an Alabama corporation with its principal office at Alexander City,
Alabama and JOHN F. WARD, (the "Executive").
RECITALS:
Russell and the Executive have executed an Employment
Agreement dated as of the date of this Agreement, incorporated herein and
attached hereto as Appendix A (the "Employment Agreement"). Pursuant to the
terms of the Employment Agreement, the Executive shall be employed by Russell
for a term of three (3) years. The Executive is currently under an agreement
with his previous employer, Sara Lee Corporation ("Sara Lee"). By accepting
employment with Russell, the Executive will lose certain benefits and
opportunities under his agreements with Sara Lee. It is the wish of both Russell
and the Executive that the Executive be compensated for such lost benefits and
opportunities or that they be replaced with comparable benefits and
opportunities. Capitalized terms not otherwise defined herein shall have the
meanings given to them in the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations herein and the compensation that Russell agrees herein to pay the
Executive, and of other good and valuable consideration, the receipt of which is
hereby acknowledged, Russell and the Executive agree as follows:
ARTICLE I. RABBI TRUST. A Rabbi Trust, entitled the "Russell
Corporation Non-Qualified deferred Compensation Trust," shall be maintained for
the benefit of the Executive (the "Trust"). The Trust shall be irrevocable and
contain the amounts contributed pursuant to this Agreement and any interest or
income generated by such amounts. The Trust shall earn interest at a variable
rate (adjusted annually on the anniversary of the Effective Date) equal to the
Merrill Lynch Corporate Bond Rate published in The Wall Street Journal. In the
event of a Default Termination, as defined in Article VI, the funds in the Trust
shall be distributed in accordance with Article VI. After April 1, 2001 the
funds in the Trust shall be distributed to the Executive in a lump sum upon the
termination of the Executive's employment. The Trust Agreement shall be
substantially in the form of Appendix B to this Agreement with no substantive
changes which are not acceptable to the Executive and his professional advisors.
<PAGE> 2
ARTICLE II. STOCK OPTIONS.
2.1 Vested Stock Options. The Executive currently owns
124,109 options to purchase Sara Lee stock. Of these options, 109,775
are currently fully vested. It is understood that the Executive will
exercise these vested options. It is agreed that the exercise of these
options, however, does not fully compensate the Executive for the
opportunity lost by exercising the options. To compensate the Executive
for the lost opportunities created by the exercise of the Sara Lee
options, the Executive shall be granted 249,489 options to purchase
Russell stock effective as of the Effective Date (computed by
multiplying the 109,775 Sara Lee options by 56.666 (the Average of the
High and Low price for Sara Lee common stock for January 1,1998 through
January 31, 1998 (the "Sara Lee January Average")) divided by 24.933
(the Average of the High and Low price for Russell Corporation common
stock for January 1, 1998 through January 31, 1998 (the "Russell
January Average") (the "Conversion Ratio")). Subject to the provisions
of Article VI hereof, these Russell stock options shall be immediately
vested and exercisable any time within 54 months from the Effective
Date at a price determined by taking the average of the high and low
price for Russell common stock on the Effective Date as reported in The
Wall Street Journal.
2.2 Options That Will Not Vest Before Effective Date. The
Executive currently holds 14,334 options to purchase Sara Lee stock
that will not vest before the Effective Date. To fully compensate the
Executive for these options which will be lost, the Executive shall
receive:
(a) An amount to be placed in the Trust on the
Effective Date equal to $418,925.48 (calculated by subtracting
$393,329.96, the aggregate option price from the aggregate
market value of Sara Lee stock, computed using the Sara Lee
January Average).
(b) In order to compensate the Executive for the
opportunities lost through the forfeiture of the Sara Lee
stock options described in this Section 2.2, such options will
be replaced with options to purchase shares of Russell common
stock. The number of shares of Russell stock subject to
options to be received under this Section 2.2(b) shall be
32,577 (computed by multiplying 14,334 by the Conversion
Ratio). Subject to the provisions of Article VI hereof, such
options shall be effective as of the Effective Date,
immediately vested and exercisable any time within 54 months
from the Effective Date at a price determined by taking the
average of the high and low price for Russell common stock on
the Effective Date as reported in The Wall Street Journal.
2
<PAGE> 3
2.3 Notwithstanding the foregoing , if the Russell
shareholders fail to approve an amendment increasing the number of
options which may be granted annually to any one employee so that the
provisions of this Article 2 cannot be given full effect, any options
previously granted under this Article 2 in excess of this amount shall
lapse and be forfeited and in lieu of any grant of stock options
required by this Article 2 that would exceed the maximum amount that
can be granted under the Russell Stock Option Plan (the "Russell
Plan"), the Executive shall receive $3,841,510, an amount equal to the
agreed value of the options that would otherwise be granted to the
Executive under this Article 2, as determined pursuant to Exhibit A.
ARTICLE III. RESTRICTED STOCK. The Executive currently has the
right to receive 35,260 shares of Sara Lee restricted stock which will be
forfeited upon the Executive's commencement of employment with Russell. Russell
shall compensate the Executive for the value of such stock in cash. The amount
of such compensation shall be $1,998,043.16 (calculated by multiplying 35,260 by
the Sara Lee January Average) to be placed in the Trust by Russell on the
Effective Date. The amount received under this Article 3, shall be increased to
compensate the Executive for any dividends Sara Lee pays to its retired
employees who hold restricted stock under the 1989 plan at the time the
restrictions lapse.
ARTICLE IV. COMPENSATION. The Executive shall lose $302,350
in the form of the remainder of his Sara Lee compensation for 1998 which he
would have received given only the passage of time if he had not accepted
employment with Russell. This amount shall be provided to the Executive in
12,127 shares of Russell common stock (valued by using the January Average for
Russell Stock and rounded up to the nearest whole share). Two-thirds (2/3) of
the shares of Russell Stock received under this Article IV shall be restricted
from resale and bear a restriction stating that sale of the shares may be only
in accordance with this Agreement. One-third of the stock shall become
unrestricted upon each of the next two anniversaries of the Effective Date.
ARTICLE V. RETIREMENT PLANS.
5.1 SERP. The Executive is a participant in Sara Lee's defined
benefit retirement plans for executives including qualified plans and a
Supplemental Executive Retirement Plan ("SERP"). A portion of the SERP
benefit has been funded using a grantor revocable trust ("Secular
Trust") at Northern Trust in Chicago with Northern Trust as Trustee and
the Executive as grantor. Russell shall compensate the Executive
$1,880,000 (the preliminary estimate of what would have been the
required SERP balance on January 1, 1999 less the current balance in
the account increased by the amount of all applicable income and other
payroll taxes (the "Preliminary Estimate")). As soon as practicable
after September 21, 1998, the final amount due to the Executive under
this Section 5.1 (the "Final Amount") shall be determined. Any amount
by which the Final Amount exceeds the Preliminary Estimate shall be
paid to the Executive by Russell. Any amount by which the Preliminary
Estimate shall exceed the Final Amount shall be paid to Russell by the
Executive.
3
<PAGE> 4
5.2 Estate Builder Program. The Executive currently
participates in the Sara Lee Estate Builder Program (the "Program").
The Program is a Sara Lee deferral program under which deferred amounts
earn interest at a rate well above market. The Executive will be
penalized under this Program for accepting employment with Russell. To
compensate the Executive for this lost benefit, Russell shall make a
cash payment to the Trust of $50,611.
5.3 ESOP. The Executive shall be compensated for the amount of
incremental credit he would have received under his Employee Stock
Ownership Plan at Sara Lee as if he had not accepted employment with
Russell. The value of the addition that would have been made to the
Sara Lee ESOP between the Effective Date and January 1, 1999 shall be
paid into the Trust. This value, not to exceed $50,000 unless approved
by the Russell Compensation Committee, shall be determined no later
than September 30, 1999 and deposited in the Trust as soon as the final
amounts are calculated.
ARTICLE VI. TERMINATION. The Executive shall receive all
compensation and benefits provided for under this agreement unless his
employment is terminated before April 1, 2001 in a Default Termination. A
Default Termination shall mean a termination either by Russell For Cause (as
defined in the Employment Agreement) or by the Executive for any reason other
than: Good Reason, Death or Total Disability, as those terms are defined in the
Employment Agreement. In the event of a Default Termination, certain
compensation and benefits provided for under this Agreement shall be forfeited
as follows:
(a) Upon the event of a Default Termination, the Executive
shall receive a lump sum payment from the Trust. The amount of this
payment shall be calculated by multiplying the total amount in the
Trust on the day of the Default Termination (the "Default Date") by a
fraction, the numerator of which shall be the number of days from the
Effective Date to the Default Date (including both the Effective Date
and the Default Date) and the denominator of which shall be 1,095. The
Executive shall also receive in the same proportion provided for above
any amount to be placed in the Trust under this Agreement that has not
been placed in the Trust as of the Default Date.
(b) Any stock received under Article 4 that is still
restricted on the date of the Default Termination shall be forfeited by
the Executive.
(c) Upon a Default Termination the Executive shall forfeit and
surrender to Russell a number of the options granted to him under
Article 2 hereof equal to the total number of options granted to him
under Article 2 hereof multiplied by a fraction, the numerator of which
shall be the number of days between the Default Date and March 31, 2001
(including both the Default Date and March 31) and the denominator of
which shall be 1,095. If the number of options required to be forfeited
by the Executive under the immediately preceding sentence exceeds the
number of options granted to the Executive under Article 2 hereof that
have not been exercised by the Executive (such excess being hereinafter
referred to as the "Excess Options"), then the Executive shall pay to
Russell within ten (10) days of the Default Date an amount of cash
equal to the Spread. The "Spread" means an amount equal to (x) the
average of the high and low price on the date of acquisition of each
share of Russell stock acquired by the Executive pursuant to the
exercise of any Options granted to the Executive under Article 2
hereof, (y) minus the amount paid by the Executive for such share of
Russell stock pursuant to the exercise of such options, (z) multiplied
by a fraction, the numerator of which shall be the number of Russell
shares that have been acquired upon the exercise of the Excess Options,
and the denominator of which shall be the total number of
4
<PAGE> 5
Russell shares previously acquired by the Executive pursuant to the
exercise of options granted to him under Article 2 hereof. For purposes
hereof, the Executive shall be deemed to have been granted a number of
options under Article 2 hereof equal to the total number of shares of
Russell stock that can be acquired pursuant to the exercise of such
options.
ARTICLE VII. REDUCTION OF BENEFITS. The Executive and Russell
acknowledge and agree that the amounts required to be paid to or for the benefit
of the Executive hereunder, including the stock options provided for in Section
2.2 hereof received in exchange for the Sara Lee stock options that will not
have vested before the Effective Date (the "Stock Options"), are being paid in
the belief that the Executive will forfeit certain benefits and opportunities
under his agreements with Sara Lee by reason of his accepting employment with
Russell. If, contrary to such belief, any such benefit or opportunity for which
the Executive is being compensated or which are being replaced hereunder is not
lost or forfeited as a result of his accepting employment with Russell, and such
benefit is actually received by the Executive from Sara Lee then appropriate
adjustments shall be made to the amounts previously paid, or to the amounts
required to be paid, to the Executive hereunder, including any appropriate
adjustment to the Stock Options, and, if so required as a result of any such
adjustment, the Executive shall reimburse Russell for any excess amounts
previously paid to him.
ARTICLE VIII. GENERAL PROVISIONS.
8.1 Governing Law. This Agreement shall be interpreted
under the laws of the State of North Carolina.
8.2 Nonassignability. Benefits under this Agreement shall
not be subject to anticipation or assignment by any person entitled
thereto.
8.3 Binding Agreement. This Agreement shall be binding
and inured to the benefit of the Executive, his executors,
administrators, heirs and next of kin, and Russell, its successors and
assigns.
8.4 Merger or Consolidation. Russell shall not
consolidate or merge into or with another corporation or entity, or
transfer all or substantially all of its assets to another corporation,
partnership, trust or other entity unless such entity shall assume the
rights, obligations and liabilities of Russell under the agreement and
upon such assumption, shall become obligated to perform the terms and
conditions of the agreement.
8.5 Waiver. No term or condition of this Agreement shall
be deemed to have been waived, nor shall there be any estoppel against
the enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver, and any such waiver
shall operate only as to the specific term or condition waived and
shall not constitute a waiver of such term or condition for the future
or as to any act other than that specifically waived.
8.6 Amendment; Termination. This Agreement may not be
amended or terminated except by an instrument in writing signed by the
parties hereto.
5
<PAGE> 6
8.7 Recitals. The recitals to this Agreement shall become
part of this Agreement.
8.8 Funding. This Agreement is intended to be an unfunded
plan of deferred compensation maintained for a highly compensated
management employee. The obligations of Russell to make payments
hereunder shall constitute a general unsecured obligation of Russell to
the Executive. To the extent that any person acquires a right to
receive payments from the Trust or Russell hereunder, such right shall
be no greater than the right of an unsecured creditor of Russell.
IN WITNESS WHEREOF, this Agreement has been executed by and in
behalf of the parties hereto on the day and year first above written.
RUSSELL CORPORATION
By:/s/ John C. Adams
--------------------------------------
John C. Adams
Chairman of the Board, President and
Chief Executive Officer
/s/ John F. Ward
----------------------------------------
JOHN F. WARD
6
<PAGE> 7
APPENDIX A
EMPLOYMENT AGREEMENT (SEE EXHIBIT 10.1)
<PAGE> 8
APPENDIX B
RUSSELL CORPORATION
NON-QUALIFIED DEFERRED COMPENSATION TRUST
THIS TRUST AGREEMENT, made as of the___ day of ____, 1998, by
and between Russell Corporation (the "Company") and ________________
("Trustee").
RECITALS:
WHEREAS, the Company has entered into an Executive Deferred
Compensation and Buyout Plan (the "Plan") with John F. Ward (the "Executive"),
that creates a nonqualified deferred compensation plan; and
WHEREAS, the Company wishes to establish a Rabbi Trust in
accordance with Revenue Procedures 92-64 and 92-65 (hereinafter called the
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's creditors in the event of the Company's
insolvency, as herein defined, until paid to the Executive and/or his
beneficiaries in such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the status of the
Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of the Company to make
contributions to the Trust as required by the Plan to provide itself with a
source of funds to assist it in meeting its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
(a) The Company hereby establishes the Trust with the
Trustee, consisting of such assets as may be contributed to the Trust
from time to time. The Trustee hereby agrees and consents to serve as
Trustee of the Trust and accepts the Trust on the terms and subject to
the provisions set forth herein and agrees to discharge and perform
fully and faithfully all of the duties and obligations imposed upon it
under the Trust. Upon the execution of this Trust Agreement, the
Company hereby deposits with the Trustee in trust $_________, which
amount shall become the principal of the Trust to be held, administered
and disposed of by Trustee as provided in this Trust Agreement.
<PAGE> 9
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
the Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1A of the Internal Revenue Code of 1986, as
amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of the Company and
shall be used exclusively for the uses and purposes of the Executive
and general creditors as herein set forth. The Executive and his
beneficiaries shall have no preferred claim on, or any beneficial
interest in, any asset of the Trust. Any rights created under the Plan
and this Trust Agreement shall be mere unsecured contractual rights of
the Executive and his beneficiaries against the Company. Any assets
held by the Trust will be subject to the claims of the Company's
general creditors under federal and state law in the event of
insolvency, as defined in Section 3(a) herein.
Section 2. Payments to the Executive and his Beneficiaries.
(a) Except as otherwise provided herein, Trustee shall
make payments to the Executive and his beneficiaries in accordance with
the provisions of the Plan and Section 2(b) of this Trust Agreement.
The Trustee shall make provision for the reporting and withholding of
any federal, state or local taxes that may be required to be withheld
with respect to the payment of benefits pursuant to the terms of the
Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld
and paid by the Company.
(b) Except for a claim for benefits under the Plan
involving a question of whether a termination of the Executive's
employment by the Company prior to April 1, 2001 was a Default
Termination (defined in the Plan, such a claim herein a "Termination
Claim"), all other claims by the Executive or his beneficiaries for
benefits under the Plan shall be directed and determined by the
Trustee's designee selected from among Jean G. Ward, Murray C. Greason,
Jr., Donald R. Saunders or Franklin R. Ward. All claims shall be in
writing. A Termination Claim shall be decided by a majority of the
Trustee, Murray C. Greason, Jr. (or if he is not available to serve,
another senior partner of Womble Carlyle Sandridge & Rice, PLLC) and
Herschel M. Bloom (or if he is not available to serve, the Chairman of
the Compensation Committee of the Board of Directors of the Company),
herein the "Termination Panel". Any denial by the Trustee's designee or
the Termination Panel of a claim for benefits under the Plan shall be
delivered to the claimant in writing and shall set forth the specific
reasons for the denial, the specific provisions of the Plan relied
upon, a description of any additional materials or information
necessary to perfect the claim and an explanation of why such material
or information is necessary, and appropriate information
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as to the steps to be taken if the claimant wishes to submit the claim
for review. The Trustee's designee or the Termination Panel shall
further allow the claimant to request a review of a denied claim upon
written application to the Trustee's designee or the Termination Panel
within sixty (60) days after notification by the Trustee's designee or
the Termination Panel that the claim has been denied. In connection
with such a review, the claimant (or his or her duly authorized
representative) may review pertinent documents and submit issues and
comments in writing. Within sixty (60) days after receipt of a written
request for review, the Trustee's designee or the Termination Panel
shall provide the claimant a written decision on review, which shall be
written in a manner calculated to be understood by the claimant and
shall set forth specific reasons for the decision and specific
references to pertinent plan provisions on which the decision is based.
(c) The Company may make payment of benefits directly to
the Executive or his beneficiaries as they become due under the terms
of the Plan. The Company shall notify Trustee of its decision to make
payment of benefits directly prior to the time amounts are payable to
the Executive or his beneficiaries and provide evidence to the Trustee
that such benefits have been paid. In addition, if the principal of the
Trust, and any earnings thereon, are not sufficient to make payments of
benefits in accordance with the terms of the Plan, the Company shall
make the balance of each such payment as it falls due. The Trustee
shall notify the Company if principal and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust
Beneficiaries when Company is Insolvent.
(a) The Trustee shall cease payment of benefits to the
Executive and his beneficiaries if the Company is insolvent. The
Company shall be considered "insolvent" for purposes of this Trust
Agreement if (i) the Company is unable to pay its debts as they become
due, or (ii) the Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
(b) At all times during the continuation of this Trust,
as provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to the claims of general creditors of the
Company under federal and state law as set forth below.
(1) The Board of Directors and the Chief
Executive Officer of the Company shall have the duty to inform
the Trustee in writing of the Company's insolvency. If the
person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become insolvent,
the Trustee shall determine whether the Company is insolvent
and, pending such determination, the Trustee shall discontinue
payment of benefits to the Executive or his beneficiaries.
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(2) Unless the Trustee has actual knowledge of
the Company's insolvency, or has received notice from the
Company or a person claiming to be a creditor alleging that
the Company is insolvent, the Trustee shall have no duty to
inquire whether the Company is insolvent. The Trustee may in
all events rely on such evidence concerning the Company's
insolvency as may be furnished to the Trustee and that
provides the Trustee with a reasonable basis for making a
determination concerning the Company's insolvency.
(3) If at any time the Trustee determines that
the Company is insolvent, the Trustee shall discontinue
payments to the Executive or his beneficiaries and shall hold
the assets of the Trust for the benefit of the Company's
general creditors. Nothing in this Trust Agreement shall in
any way diminish any rights of the Executive or his
beneficiaries to pursue his rights (or their rights) as
general creditors of the Company with respect to benefits due
under the Plan or otherwise.
(4) The Trustee shall resume the payment of
benefits to the Executive or his beneficiaries in accordance
with Section 2 of this Trust Agreement only after the Trustee
has determined that the Company is not insolvent (or is no
longer insolvent).
(c) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust pursuant to
Section 3(a) hereof and subsequently resumes such payments, the first
payment following such discontinuance shall include the aggregate
amount of all payments due to the Executive or his beneficiaries under
the terms of the Plan for the period of such discontinuance, less the
aggregate amount of any payments made to the Executive or his
beneficiaries by the Company in lieu of payments provided for hereunder
during any such period of discontinuance.
Section 4. Investment Authority. The Trustee shall be
responsible for investing and reinvesting the assets of the Trust. In no event
may the Trustee invest in securities (including stock or rights to acquire
stock) or obligations issued by the Company, other than a deminimus amount held
in common investment vehicles in which the Trustee invests. All rights
associated with assets of the Trust shall be exercised by the Trustee or the
person designated by the Trustee, and shall in no event be exercisable by or
rest with the Executive.
Section 5. Disposition of Income.
(a) During the term of this Trust, all income received by
the Trust, net of expenses and taxes, shall be accumulated and
reinvested.
(b) If, at the end of each fiscal year of the Trust (as
defined in Section 11(d)) or at the date the Trust terminates, as the
case may be, the Trust has not earned interest at a rate at least equal
to the Merrill Lynch Corporate Bond Rate ("Index Rate") published in
the Wall Street Journal, and adjusted annually calculated on a
cumulative and aggregate basis for the period from the Effective Date
(defined in the Plan) or such later date as a particular contribution
to the Trust shall be required to be made by the Plan (with respect to
the amount
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of that particular contribution) through the end of such fiscal year of
the Trust (or the termination date, as the case may be), the Company
shall make an irrevocable contribution to the Trust for the amount by
which the interest earned by the Trust for that trust year falls below
what would have been earned by the Trust under the Index Rate.
Section 6. Resignation and Removal of Trustee.
(a) The Trustee may resign at any time by written notice
to the Company, which shall be effective ten days after receipt of such
notice unless the Company and Trustee agree otherwise.
(b) The Trustee may be removed at any time by the Company
by providing 30 days written notice to the Trustee, or upon shorter
notice if agreed to by Trustee.
(c) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed
within thirty (30) days after receipt of notice of resignation, removal
or transfer, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor
shall be appointed, in accordance with Section 7 hereof, by the
effective date of resignation or removal under paragraph(s) (a) or (b)
of this section. If no such appointment has been made, the Trustee may
apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of the Trustee in
connection with the proceeding shall be allowed as administrative
expenses of the Trust.
Section 7. Appointment of Successor. If the Trustee resigns
(or is removed) in accordance with Section 6(a) or (b) hereof, the Company may
appoint any third party approved by the Executive (which approval shall not be
unreasonably withheld), such as a bank, trust department or other party that may
be granted corporate trustee powers under state law, as a successor to replace
the Trustee upon resignation or removal. The appointment shall be effective when
accepted in writing by the new Trustee, who shall have all of the rights and
powers of the former Trustee, including ownership rights in the Trust assets.
The former Trustee shall execute any instrument necessary or reasonably
requested by the Company or the successor Trustee to evidence the transfer.
Section 8. Accounting by Trustee. The Trustee shall keep
accurate and detailed records of all investments, receipts, disbursements and
all other transactions required to be made, including such specific records as
shall be agreed upon in writing between the Company, the Executive and the
Trustee. Within sixty (60) days following the close of each calendar year and
within sixty (60) days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company and the Executive a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including
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<PAGE> 13
a description of all securities and investments purchased and sold with the cost
or net proceeds of such purchases or sales (accrued interest paid or receivable
being separately), and showing all cash, securities and other property held in
the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 9. Responsibility of Trustee.
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims,
provided, however, that the Trustee shall incur no liability to any
person for any action taken pursuant to a direction, request or
approval given by the Company which is contemplated by, and in
conformity with, the terms of the Plan(s) or this Trust and is given in
writing by the Company and approved in writing by the Executive (which
approval shall not be unreasonably withheld). In the event of a dispute
between the Company and a party, the Trustee may apply to a court of
competent jurisdiction to resolve the dispute.
(b) The Trustee shall have, without exclusion, all powers
conferred on the Trustee by applicable law, unless expressly provided
otherwise herein, provided, however, that if an insurance policy is
held as an asset of the Trust, the Trustee shall have no power to name
a beneficiary of the policy other than the Trust, to assign the policy
(as distinct from conversion of the policy to a different form) other
than to a successor Trustee, or to loan to any person the proceeds of
any borrowing against such policy.
Section 10. Amendment or Termination.
(a) This Trust Agreement may be amended only by a written
instrument executed by Trustee and the Company.
(b) The Trust shall not terminate until the date on which
the Executive and his beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan. Upon termination of the Trust any
assets remaining in the Trust shall be returned to the Company.
Section 11. Miscellaneous.
(a) Any provision of this Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
(b) Benefits payable to the Executive and his
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered
or subjected to attachment, garnishment, levy, execution or other legal
or equitable process.
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(c) This Trust Agreement shall be governed by and
construed in accordance with the laws of North Carolina.
(d) The fiscal year of the Trust shall be the twelve
month period ending on December 31 of each year.
(e) The Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original.
(f) The recitals to this Trust Agreement shall become
part of this Trust Agreement.
IN WITNESS WHEREOF, the Trust has been duly executed by the
parties hereto on the day and year first above written.
RUSSELL CORPORATION
By:
--------------------------------------
K. Roger Holliday, Treasurer
ATTEST:
- -------------------------
Secretary
[Corporate Seal]
WACHOVIA BANK, N.A., TRUSTEE
By:
---------------------------------------
Joe O. Long, Senior Vice President
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EXHIBIT A
ARTICLE 2.3 - EXECUTIVE DEFERRED COMPENSATION AND BUYOUT PLAN
LET A = 124.109 OPTIONS TO PURCHASE SARA LEE COMMON STOCK
B = PRICE/SHARE OF SARA LEE COMMON STOCK
FV = FUTURE VALUE, ASSUMING 13% GROWTH (COMPOUNDED
ANNUALLY) FOR 4.5 YEARS; FACTOR = 1.733217
PV = PRESENT VALUE, ASSUMING A DISCOUNT RATE OF 6.9005%
(EQUIVALENT TO A PRE-TAX RATE OF 13%, GIVEN
A MARGINAL TAX RATE OF 46.919%) FOR 4.5
YEARS; FACTOR = .740613.
ASSUME A MARGINAL TAX RATE OF 46.919% FOR ALL YEARS (37.719% FEDERAL, 7.75%
STATE, 1.45% MEDICARE).
FORMULA:
PV[FV(A x B) - (A x B)]
EXAMPLE (SARA LEE PRICE = $57/SHARE):
.740613 [ 1.733217(124,109 x 57.00) - (124,109 x 57.00) ] =
.740613 [ 12,261,146 - 7,074,213 ] =
$3,841,510
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