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").
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
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.
(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.
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
(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) 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.
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") 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
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.
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.
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
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
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; 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.
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 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.
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
Post Office Box 272
(b) If to the Company:
Post Office Box 272
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.
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]
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.
/s/ John F. Ward (SEAL)
John F. Ward
/s/ Jean H. Anderson
John C. Adams
John C. Adams
Chairman of the Board, President and Chief Executive Officer
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).
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] =
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").
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 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.
2.3 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
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 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
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.
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.
By:/s/ John C. Adams -------------------------------------- John C. Adams Chairman of the Board, President and Chief Executive Officer
/s/ John F. Ward ---------------------------------------- JOHN F. WARD
EMPLOYMENT AGREEMENT (SEE EXHIBIT 10.1)
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").
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.
(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 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.
(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 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 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.
(c) This Trust Agreement
shall be governed by and construed in accordance with the laws of
(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.
K. Roger Holliday, Treasurer
WACHOVIA BANK, N.A., TRUSTEE
Joe O. Long, Senior Vice President
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).
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 ] =
This Amendment, made and
effective on the 1st day of November , 1999, by and
between RUSSELL CORPORATION, an
WHEREAS, the Company and the Executive entered into that certain Employment Agreement dated as of March 31, 1998, whereby the Executive was employed as the President, Chief Executive Officer and Chainnan of the Board of the Company (the "Agreement"); and
WHEREAS, the Company and the Executive desire to amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows:
1. Article 3.4 of the Agreement shall be amended to read as follows:
"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 to which Executive is entitled to participate at the time of such termination."
2. Article 5 of the Agreement shall be amended by deleting the third (3d) sentence thereof in its entirety and replacing it with the following language:
"Such options granted pursuant to Option Agreements dated on or after February 24, 1999 shall have a term often years and one-fourth of the total options given in any year shall vest in each of the four years following the grant of the options, but options granted pursuant to Option Agreements dated prior to such date shall have the term and vesting schedule specified in such Option Agreements."
3. Except as specifically amended herein, this Amendment shall not be interpreted to amend or modify the Agreement in any way, and the Company and the Executive hereby ratify and affirm all provisions of the Agreement as of the date hereof.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year above written.
Its: EXECUTIVE VICE PRESIDENT/CFO
Attest: /s /
John F. Ward