<PAGE> 1
[LOGO]
VF CORPORATION
March 10, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of VF Corporation, which will be held on Tuesday, April 15, 1997, at The Inn at
Reading, Park Road & Warren Street By-Pass, Wyomissing, Pennsylvania, commencing
at 10:30 a.m. Your Board of Directors and management look forward to greeting
personally those shareholders able to attend.
At the meeting, shareholders will be asked to elect four directors,
approve the 1996 Stock Compensation Plan, and consider such other matters as may
properly come before the meeting.
Your Board of Directors recommends a vote FOR the election of directors
and FOR the 1996 Stock Compensation Plan.
Regardless of the number of shares you own or whether you plan to
attend, it is important that your shares be represented and voted at the
meeting. You are requested to sign, date and mail the enclosed proxy promptly.
Your interest and participation in the affairs of the Corporation are
most appreciated.
Sincerely,
L. R. Pugh
Chairman of the Board
<PAGE> 2
[LOGO]
VF CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held
April 15, 1997
March 10, 1997
To the Shareholders of VF CORPORATION:
The Annual Meeting of Shareholders of VF Corporation will be held at The
Inn at Reading, Park Road & Warren Street By-Pass, Wyomissing, Pennsylvania, on
Tuesday, April 15, 1997, at 10:30 a.m., for the following purposes:
(1) to elect four directors in accordance with the By-Laws;
(2) to consider and vote upon the Corporation's 1996 Stock
Compensation Plan (see page 19 of the accompanying proxy
statement); and
(3) to transact such other business as may properly come before
the meeting and at any adjournments thereof.
A copy of the Annual Report for 1996 is enclosed for your information.
Only shareholders of record as of the close of business on February
24, 1997 will be entitled to vote at the meeting.
By Order of the Board of Directors
L. M. Tarnoski
Vice President-Secretary
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
PROXY STATEMENT
FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS OF VF CORPORATION
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of VF Corporation to be voted at the Annual
Meeting of Shareholders of the Corporation on April 15, 1997 and at any
adjournment or adjournments of the meeting (the "Meeting") for the purposes
described in the foregoing notice of the Meeting. Proxies which are validly
executed by shareholders and which are received by the Corporation prior to the
Meeting will be voted in accordance with the instructions contained thereon. If
no instructions are given, a proxy will be voted (1) for the election of the
four nominees proposed for election as directors and (2) for the approval of the
1996 Stock Compensation Plan.
The securities entitled to vote at the Meeting consist of shares of
Common Stock and Series B ESOP Convertible Preferred Stock ("Series B Stock") of
the Corporation. There were 65,907,284 outstanding shares at the close of
business on February 24, 1997, consisting of 64,025,769 shares of Common Stock
and 1,881,515 shares of Series B Stock. Each share is entitled to one vote. Only
holders of record at the close of business on February 24, 1997 will be entitled
to vote at the Meeting. The holders of a majority of the outstanding shares must
be present in person or by proxy at the Annual Meeting in order to constitute a
quorum for the transaction of business. A plurality of the shares present at the
Meeting in person or by proxy is required for the election of directors. The
affirmative vote of a majority of the shares present at the Meeting in person or
by proxy is required to approve the 1996 Stock Compensation Plan. Abstentions
and broker non-votes will be counted for the purpose of determining a quorum but
neither will be counted in the election of directors or for the approval of the
1996 Stock Compensation Plan.
A copy of the Corporation's Annual Report for the fiscal year ended
January 4, 1997 accompanies this proxy statement. No material contained in the
Annual Report is to be considered a part of the proxy solicitation material.
The mailing address of the Corporation's executive office is P.O. Box
1022, Reading, Pennsylvania 19603. The approximate date on which this proxy
statement and the form of proxy were first mailed or given to security holders
was March 10, 1997.
1
<PAGE> 4
ELECTION OF DIRECTORS
The four persons listed below have been nominated by the Board of
Directors to serve as directors. In accordance with the Corporation's tenure
policy, William E. Pike, who will retire as a director at the 1999 Annual
Meeting, is recommended for a two-year term. Three directors are recommended to
serve until the 2000 Annual Meeting. Also in accordance with the Corporation's
tenure policy, Roger S. Hillas will not be standing for reelection. The
Corporation acknowledges the outstanding service rendered by Mr. Hillas since
his election as a director in 1982.
It is the intention of the persons named in the accompanying form of
proxy to vote such proxy for the election as directors of the following
nominees. In the event that any nominee is unable to serve or will not serve as
a director, it is intended that the proxies solicited hereby will be voted for
such other person or persons as may be nominated by management. Vacancies in the
Board of Directors may be filled by the Board of Directors, and any director
chosen to fill a vacancy would hold office until the next election of the class
for which such director had been chosen.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Year in Which
Service as a
Name Principal Occupation Director Began
- -------------------------------------------------------------------------------
<S> <C> <C>
To Serve Until the
1999 Annual Meeting
William E. Pike, 68 ......... Former Executive Vice President,
J.P. Morgan & Co. Incorporated ....... 1972
To Serve Until the
2000 Annual Meeting
Robert J. Hurst, 51.......... Vice Chairman, Goldman, Sachs & Co. .. 1994
M. Rust Sharp, 56 ........... Of Counsel, Pepper, Hamilton &
Scheetz (Attorneys)................... 1984
L. Dudley Walker, 66 ........ Chairman of the Board,
Bassett-Walker, Inc. ................. 1984
- -------------------------------------------------------------------------------
</TABLE>
In 1960, Mr. Pike joined Morgan Guaranty Trust Company of New York,
with which the Corporation maintains banking relationships and certain
investment banking relationships with its affiliates. He served in several
positions with Morgan until February 1986, when he was elected Executive Vice
President of J.P. Morgan & Co. Incorporated, the parent company of Morgan
Guaranty. Mr. Pike retired from J.P. Morgan & Co. in 1989. He also serves as a
director of American States Insurance Company. Mr. Pike is a member of the
Executive, Finance, Nominating, and
2
<PAGE> 5
Organization and Compensation Committees of the Board of Directors. (Also see
Security Ownership of Certain Beneficial Owners and Management.)
Mr. Hurst is a Vice Chairman of Goldman, Sachs & Co. (an international
investment banking and securities firm), which he joined in 1974 and with which
the Corporation maintains investment banking relations. He became a general
partner in 1980 and head of the Investment Banking Division in 1990. Mr. Hurst
also serves as a director of USF&G Corporation. He is also President of the
Board of Trustees of The Jewish Museum, Trustee of the Whitney Museum of
American Art and a member of Wharton School Graduate Executive Board, the
Council of Foreign Relations and the Committee for Economic Development. He
serves as a member of the Finance and Nominating Committees of the Board of
Directors.
Mr. Sharp has been "Of Counsel" to Pepper, Hamilton & Scheetz, a
Philadelphia, Pennsylvania law firm, since December 1996. He was previously a
partner with the law firm of Clark, Ladner, Fortenbaugh & Young, a Philadelphia,
Pennsylvania law firm. Each of these law firms has provided legal services to
the Corporation. He is a director of Pennock Company, a national wholesale
florist. Mr. Sharp is a member of the Executive and Finance Committees of the
Board of Directors. (Also see Security Ownership of Certain Beneficial Owners
and Management.)
Mr. Walker served as President and Chief Executive Officer of
Bassett-Walker, Inc., a wholly-owned subsidiary of the Corporation, from 1960 to
1987; he has been a director of Bassett-Walker since 1952 and Chairman of its
Board since 1978. Mr. Walker also serves as a director of Crestar Financial
Corporation, a bank holding company, Crestar Bank and Hooker Furniture Corp. He
is a member of the Pension Advisory Committee of the Board of Directors.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Year in Which
Service as a
Name Principal Occupation Director Began
- ------------------------------------------------------------------------------------
<S> <C> <C>
Directors Whose Terms
Expire at the 1999
Annual Meeting
Ursula F. Fairbairn, 54 ..... Executive Vice President-Human
Resources & Quality, American
Express Company......................... 1994
Barbara S. Feigin, 59 ....... Executive Vice President,
Grey Advertising Inc.................... 1987
Mackey J. McDonald, 50....... President and Chief Executive Officer
of the Corporation ..................... 1993
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Year in Which
Service as a
Name Principal Occupation Director Began
- ------------------------------------------------------------------------------------
<S> <C> <C>
Lawrence R. Pugh, 64 ........ Chairman of the Board and Chairman
of the Executive Committee
of the Corporation..................... 1980
- ------------------------------------------------------------------------------------
</TABLE>
Mrs. Fairbairn joined American Express (a financial services company)
as Executive Vice President-Human Resources & Quality in December 1996. From
1990 until joining American Express, she served as Senior Vice President of
Human Resources of Union Pacific Corporation. From 1966 until joining Union
Pacific, she was employed at IBM, where she last served as IBM Director of
Education and Management Development. From 1973 to 1974, Mrs. Fairbairn served
as a White House Fellow and Executive Assistant to the Secretary of the
Treasury. Mrs. Fairbairn also serves as a director of General Signal Corp. She
is a member of the Organization and Compensation, and Pension Advisory
Committees of the Board of Directors.
Mrs. Feigin has served as Executive Vice President and a member of the
Agency Policy Council of Grey Advertising since 1983. She joined Grey in 1969,
was elected Vice President in 1972 and Senior Vice President in 1975. Mrs.
Feigin is past Chairman of the Advertising Research Foundation and serves on the
Board of Overseers of Whitman College. Mrs. Feigin also serves as a director of
Circuit City Stores, Inc. She is a member of the Audit, Nominating, and
Organization and Compensation Committees of the Board of Directors.
Mr. McDonald joined the Corporation's Lee subsidiary in February 1983
as Assistant Vice President - Product and Technical Services. In April 1984, he
was named Vice President Business Planning of Lee and from October 1984 until
December 1986, he served as President of the former Troutman subsidiary of the
Corporation. In December 1986, he was named Executive Vice President of the
Wrangler subsidiary, serving in that capacity until October 1988 when he was
named President of Wrangler. He was named a Group Vice President of the
Corporation in February 1991. In October 1993, Mr. McDonald was elected
President and a director of the Corporation. Effective January 1, 1996, Mr.
McDonald also assumed the position of Chief Executive Officer. He is a director
of First Union National Bank of North Carolina and Hershey Foods Corporation.
Mr. McDonald serves as a member of the Executive Committee and as an ex officio
member of all other committees of the Board except the Audit, Nominating, and
Organization and Compensation Committees.
Mr. Pugh joined the Corporation as President in February 1980. He
served as Chief Executive Officer from March 1982 until December 31, 1995, when
he relinquished the CEO position. Mr. Pugh retired as a salaried officer of the
Corporation on February 1, 1997. He continues to serve as Chairman of the Board,
a position he has held since 1983. Mr. Pugh is a director of The Black & Decker
Corporation, Mercantile Stores Company, Inc., Milliken & Company and UNUM
Corporation. Mr. Pugh is Chairman of the Executive Committee and serves as an ex
officio member of all other committees of the Board except the Audit,
Nominating, and Organization and Compensation Committees.
4
<PAGE> 7
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Year in Which
Service as a
Name Principal Occupation Director Began
- ------------------------------------------------------------------------------------
<S> <C> <C>
Directors Whose Terms
Expire at the 1998
Annual Meeting
Robert D. Buzzell, 63 ....... Distinguished Professor,
School of Business Administration -
George Mason University ................ 1983
Edward E. Crutchfield, 55 ....Chairman and Chief Executive
Officer, First Union Corporation ....... 1992
Leon C. Holt, Jr., 71 ....... Former Vice Chairman and Chief
Administrative Officer,
Air Products and Chemicals, Inc. ....... 1983
</TABLE>
Dr. Buzzell has served as a Distinguished Professor at the School of
Business Administration of George Mason University since September 1993. He
served on the faculty of the Harvard Graduate School of Business Administration
from 1961 to 1993. He was appointed Professor of Business Administration in 1967
and named to the Sebastian S. Kresge Professorship in 1980. Dr. Buzzell also
serves as a director of Interpractice Systems, Inc. and Harleysville Insurance
Companies. He is a member of the Organization and Compensation, and Pension
Advisory Committees of the Board of Directors.
Mr. Crutchfield joined First Union (a banking and financial services
company) in 1965 and served in various managerial positions until he was named
President of First Union National Bank in 1973. He was named Chief Executive
Officer of the Bank in 1978. Mr. Crutchfield was named President of First Union
Corporation in 1983, Chief Executive Officer in 1984 and Chairman in 1985. The
Corporation maintains banking relationships with First Union. Mr. Crutchfield
serves as a director of First Union Corporation, The Liberty Corporation,
Bernhardt Industries, Inc., the Charlotte-Mecklenburg Hospital Authority, and
the National Board of Directors for Communities and Schools. He is a trustee of
Davidson College, the Institute of Private Enterprise-The University of North
Carolina at Chapel Hill and the Independent College Fund of North Carolina and
serves as Chairman of Johnson C. Smith University's Campaign For The 90's. He is
a member of the Audit, Finance, and Organization and Compensation Committees of
the Board of Directors.
Mr. Holt joined Air Products and Chemicals, Inc. (an industrial gases
and chemicals company) in 1957. Prior to his election as Vice Chairman and Chief
5
<PAGE> 8
Administrative Officer in 1978, Mr. Holt served as Vice President and General
Counsel and as Vice President-Administration of that company. Mr. Holt retired
from Air Products and Chemicals in 1990. Mr. Holt is a trustee of the Allentown
Art Museum, the Committee for Economic Development, the Rider-Pool Foundation
and is a member of the Board of Advisors of the University of Pennsylvania
Institute for Law and Economics. He is a member of the Audit, Executive, and
Finance Committees of the Board of Directors.
DIRECTORS' COMPENSATION
Each director who is not a salaried officer or employee of the
Corporation or its subsidiaries is paid an annual stipend of $28,000, payable
monthly, plus a fee of $1,200 for each Board meeting attended. Each non-employee
director who serves on a committee is paid $1,000 for each meeting attended
which is held on a day when a meeting of the Board is not convened and $500 for
each meeting attended which is held on a day when a meeting of the Board is
convened. Each non-employee director serving as a chairman of a committee
receives an additional stipend of $200 for each committee meeting attended which
is held on a day when a meeting of the Board is not convened and $100 for each
committee meeting attended held on a day when a meeting of the Board is
convened. Commencing February 1, 1997, the Chairman of the Board receives an
additional annual stipend of $25,000, payable monthly. The Chairman of the Board
does not receive meeting fees. Travel and lodging expenses are reimbursed. No
director who is a salaried officer or employee of the Corporation or one of its
subsidiaries receives any compensation in addition to his regular salary for
attendance at meetings of the Board or any of its committees. Each non-employee
director may elect to defer all or part of his or her stipend and fees into (a)
the Corporation's Deferred Compensation Plan which credits deferrals at a rate
of return equivalent to a ten-year A-rated corporate bond or (b) effective March
1, 1997, equivalent units of the Corporation's Common Stock under the VF
Deferred Savings Plan for Non-Employee Directors. All Common Stock equivalent
units receive dividend equivalents. Deferred sums are payable to the participant
upon termination of service or such later date specified in advance by the
participant. Five directors have elected to defer compensation.
Under the 1991 Stock Option Plan (the "1991 Option Plan"), in December
of each year, each non-employee director is automatically granted a
non-qualified stock option to purchase shares of Common Stock and a
corresponding limited stock appreciation right. The limited stock appreciation
right is exercisable only in the event of a "Change in Control" of the
Corporation. The number of shares of Common Stock subject to each annual
non-qualified stock option is determined by a formula set forth in the 1991
Option Plan. Options granted to non-employee directors are exercisable six
months after the date of grant at an exercise price per share equal to the fair
market value of a share of Common Stock on the date of grant. On December 3,
1996, each non-employee director was granted a non-qualified option for 2,400
shares at an exercise price of $68.20 per share.
If the shareholders approve the 1996 Stock Compensation Plan, no
further grants will be made to directors under the 1991 Stock Option Plan. In
keeping with the Corporation's policy of aligning the interests of directors to
those of its shareholders, it
6
<PAGE> 9
is anticipated that annual grants will be made to directors under the 1996 Stock
Compensation Plan. (See Proposal 1 Approval of the 1996 Stock Compensation Plan
beginning on page 19.)
Each non-employee director is eligible to participate in the
Corporation's matching gift program for institutions of higher learning and
National Public Television and Radio up to an aggregate of $10,000 per year.
The Corporation has never provided pension, medical or life insurance
benefits to its non-employee directors.
BOARD MEETINGS AND COMMITTEES
During 1996, there were six meetings of the Board of Directors. All
members of the Board attended at least 75% of the total number of meetings of
the Board and all committees on which they served.
Consistent with what it perceives to be good principles of corporate
governance, the Corporation's historic practice has been to require that the
majority of its Board consists of directors who have never served as employees
of the Corporation, currently nine of twelve directors. The Board has Audit,
Executive, Finance, Nominating, Organization and Compensation, and Pension
Advisory Committees. The following committees of the Board have primary
responsibility for audit, nomination or compensation matters and consist solely
of non-employee directors.
AUDIT COMMITTEE: This committee has primary responsibility to review
accounting procedures and methods employed in connection with audit programs and
related management policies. Its duties include (1) selecting the independent
auditors for the Corporation, (2) reviewing the scope of the audit to be
conducted by them, (3) meeting with the independent auditors concerning the
results of their audit and (4) overseeing the scope and adequacy of the
Corporation's system of internal accounting controls. The Audit Committee is the
principal liaison between the Board of Directors and the independent auditors
for the Corporation. The members of the committee are Messrs. Hillas (Chairman),
Crutchfield, Holt and Mrs. Feigin. The committee held two meetings during 1996.
NOMINATING COMMITTEE: The responsibilities of this committee include
the screening of potential candidates for director and the recommendation of
candidates to the Board of Directors. The Corporation's By-Laws provide that a
shareholder may nominate a person for election as a director if written notice
of the shareholder's intent to nominate a person for election as a director at a
meeting is received by the Secretary of the Corporation (1) in the case of an
Annual Meeting, not less than 150 days prior to the date of the Annual Meeting
or (2) in the case of a special meeting at which directors are to be elected,
not later than seven days following the day on which notice of the meeting was
first mailed to shareholders. The notice must contain specified information
about the shareholder and the nominee, including such information as would be
required to be included in a proxy statement pursuant to the rules and
regulations
7
<PAGE> 10
established by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The committee will consider
suggestions from the Corporation's shareholders, which should be submitted to
the Secretary of the Corporation. The committee may refuse to take action on
such recommendation, in which case the shareholder proposing the nominee would
have to follow the formal procedures set forth in the By-Laws. The members of
the committee are Mrs. Feigin (Chairman), and Messrs. Hurst and Pike. During
1996, the committee held two meetings.
ORGANIZATION AND COMPENSATION COMMITTEE: It is the responsibility of
this committee to make a continuing review of the Corporation's compensation and
benefit programs, to consider its organizational structure, including management
development and succession, and to make recommendations to the Board regarding
such programs and structure. This committee also has responsibility for (1)
reviewing and recommending to the Board salary and incentive compensation for
the Corporation's Chief Executive Officer and other executive officers and (2)
reviewing and recommending to the Board of Directors short-term and long-term
incentive compensation programs and setting performance goals. The members of
the committee are Messrs. Pike (Chairman), Buzzell, Crutchfield and Mrs.
Fairbairn and Mrs. Feigin. The committee held three meetings during 1996.
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the 1934 Act, that might incorporate future filings, including this proxy
statement, in whole or in part, the following report and the Performance Graph
on page 16 shall not be incorporated by reference into any such filings.
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
PRINCIPLES OF EXECUTIVE COMPENSATION PROGRAM
The goal of the Corporation's Executive Compensation Program (the
"Program") is to attract, retain and motivate the Corporation's management team
to produce above average returns for shareholders.
The Program incorporates three compensation objectives. First, the
Program seeks to offer total compensation at levels that are competitive with
other large U.S. based companies with which the Corporation may compete for
executive talent. Based on advice received by the Corporation from its
independent compensation consultant, the Organization and Compensation Committee
of the Board (the "Compensation Committee") believes that the Towers Perrin
executive compensation database, which includes executive compensation data for
over 500 large U.S. based companies, fairly represents this group (the
"Corporation's Peer Group"). Second, the Program aims to provide incentives to
executives based on corporate and individual performance and to reward superior
performance with superior levels of compensation. Third, the Program seeks to
encourage maximization of long-term total shareholder return by providing
executives with long-term incentives tied to stock value which will create
similar interests among the shareholders and executives. The Corporation
balances each of
8
<PAGE> 11
the Program's objectives by establishing target compensation levels for
executive pay which are achieved through a combination of base salary, annual
incentive pay, restricted stock and stock options designed to create long-term
incentives.
It is the philosophy of the Corporation that a significant portion of
each executive's total compensation should be at-risk based on the financial
performance of the Corporation. The at-risk components of total compensation are
progressively greater for higher level positions. For 1996, the at-risk
components of the targeted compensation packages for those executive officers
named in this proxy statement who received bonus awards ranged from 55% to 72%.
COMPETITIVE COMPENSATION TARGETS
Total compensation targets, consisting of base salary and annual and
long-term incentive awards, are set annually for all management positions.
Information provided by the Corporation's independent compensation consultant
regarding the Corporation's Peer Group as well as companies within the S&P
Textile (Apparel Manufacturers) Index together with analysis of published survey
materials and relevant proxy statements form the Compensation Committee's basis
for establishing compensation targets.
In general, commensurate with each position's responsibility and
impact on results, total compensation for each of the Corporation's executive
officers is targeted to be at the 75th percentile of compensation paid to
executives in comparable positions within the Corporation's Peer Group. The 75th
percentile of total compensation is achieved through annual salary and cash
incentives and the value of long-term incentive awards (including stock options)
only if targeted performance goals established by the Compensation Committee
under the Corporation's Executive Incentive Compensation Plan ("EIC Plan") and
Discretionary Executive Bonus Plan ("DEB Plan") are met.
Under the EIC Plan, a performance goal based on the Corporation's
primary earnings per share, excluding the effects of extraordinary and
non-recurring items, is set each year by the Compensation Committee. Depending
upon the level of achievement of the performance goal, annual awards may range
from 0 to 150% of the target award for each EIC Plan participant. The maximum
individual award in any year is $1,500,000. The Committee may exercise
discretion to reduce awards generally or for any individual participant.
The purpose of the DEB Plan is to enable the Compensation Committee to
establish performance goals for senior members of management based on financial
measurements which may include but are not limited to the earnings per share
measurement provided for in the EIC Plan. Under the DEB Plan, the Board retains
the discretion to increase or decrease awards based on its evaluation of
individual performance and other factors it deems relevant.
Stock options are typically granted annually to provide executive
officers and other employees with a long-term incentive opportunity. The size of
each grant generally increases with the level of responsibility of the executive
officer. The grant to each executive officer named in this proxy statement also
depends upon
9
<PAGE> 12
the Compensation Committee's assessment of the individual's
performance. The Committee does not assign specific weighting to these factors.
SUMMARY OF ACTIONS TAKEN BY THE ORGANIZATION AND COMPENSATION COMMITTEE
1996 MERIT INCREASES
At its October 1995 meeting, the Compensation Committee approved merit
increase budgets for the Corporation and its subsidiaries based on competitive
data presented to the Committee on projected 1996 merit increase budgets for
comparable United States companies. The Corporation's overall 1996 merit
increase budget was 4%. At its February 1996 meeting, the Committee approved
salary increases to be effective as of January 1, 1996. The salary increase for
each executive officer was set based on the Committee's assessment of the
individual's performance and the individual's salary within his or her salary
grade as well as salary practices of comparable companies.
BONUS AWARDS
At its February 1996 meeting, the Compensation Committee fixed the EIC
Plan and DEB Plan performance targets for the Corporation and the targeted
bonuses for each participating executive. The dollar amount of each targeted
bonus was based upon a percentage of the midpoint of the salary range for the
executive's position. At its February 1997 meeting, the Committee granted EIC
Plan and DEB Plan awards to the named executive officers based on the
Corporation having substantially exceeded the EIC Plan and DEB Plan performance
targets for 1996 and a review and assessment by the Committee of the performance
of the named executive officers. In setting the EIC Plan and DEB Plan awards,
the Committee gave primary weight to the level of achievement of the respective
performance targets.
STOCK OPTION AND RESTRICTED STOCK AWARDS
At its December 1996 meeting, the Compensation Committee reviewed the
Corporation's philosophy with respect to stock option grants. In order to
instill an entrepreneurial spirit among its employees, it is the Corporation's
practice to grant options to a significant number of management-level employees.
In 1996, stock options were granted to 582 management-level employees. The stock
options awarded to executive officers named in this proxy statement were based
on the Committee's assessment of the individual's total compensation from a
competitive perspective within the guidelines established by the Corporation and
the executive's performance.
At its February 1996 meeting, the Compensation Committee fixed the
1996 performance objective under the Key Employee Restricted Stock Plan ("KERS
Plan"). Messrs. McDonald, Schamberger and MacFarlan were designated as
participants in this Plan. Restricted stock awarded under the KERS Plan is
intended to be a long-term retention incentive and is not a component of
targeted total compensation.
10
<PAGE> 13
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer's salary, bonus awards, stock option grant
and restricted stock award follow the policies described above.
Mr. McDonald's salary increase for 1996 was 28.4%, reflecting the
change in his responsibilities from Chief Operating Officer to Chief Executive
Officer, and was based on salary data provided by the Corporation's independent
compensation consultants, together with the projection of total targeted
compensation within the guidelines described above.
Mr. McDonald's incentive compensation and stock awards for 1996 were
based primarily upon the financial performance of the Corporation under Mr.
McDonald's leadership.
The Corporation achieved record sales and earnings for the fiscal
year. Net income for 1996 increased 90% to a record $299.5 million or $4.64 per
share from $157.3 million or $2.41 per share in 1995. Excluding the effects of
special charges of $155.9 million, equal to $1.61 per share, which were taken in
1995 as a result of actions intended to reduce administrative and manufacturing
costs, and to align inventories, net income and earnings per share in 1996 were
both up 15%. Sales in 1996 reached $5,137.2 million, up from $5,062.3 million in
1995.
The Compensation Committee concluded that Mr. McDonald is making key
contributions to the Corporation's continued success in an increasingly
competitive environment. Since assuming the position of Chief Executive Officer
on January 1, 1996, Mr. McDonald has initiated a strategic plan for the
Corporation that focuses on growth through increased investment in core brands,
cost reductions and a more balanced manufacturing base. As part of this plan,
Mr. McDonald has implemented major changes to the Corporation's organizational
structure to enhance efficiency.
The Compensation Committee awarded Mr. McDonald a total of $1,536,600
under the EIC Plan and DEB Plan based on the Plans' performance targets being
substantially exceeded.
The Compensation Committee also granted Mr. McDonald a stock option
for 75,000 shares of the Corporation's Common Stock. The grant was based on the
Committee's evaluation of Mr. McDonald's accomplishments in 1996 and his total
compensation, as compared with total compensation, including long-term incentive
compensation, of CEOs of corporations of comparable size. No specific weighting
was assigned to these factors.
The Compensation Committee awarded Mr. McDonald 5,000 shares of
restricted Common Stock pursuant to the 1995 KERS Plan based on achievement of
the Plan's 1996 performance objective, which was a targeted level of growth in
earnings per share. The shares will not vest unless Mr. McDonald remains an
employee of the Corporation until December 31, 2005.
11
<PAGE> 14
TAX DEDUCTIBILITY CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986, as amended,
limits the deductibility of compensation in excess of $1 million paid to the
executive officers named in this proxy statement, unless certain requirements
are met. The proposed 1996 Stock Compensation Plan (see Proposal 1 Approval of
the 1996 Stock Compensation Plan) is designed to meet these requirements as is
the Corporation's EIC Plan. It is the present intention of the Compensation
Committee to preserve the deductibility of compensation under Section 162(m) to
the extent the Committee believes that to do so is consistent with the best
interests of shareholders. Tax deductibility is only one consideration, and not
the most significant consideration, in determining the type and amount of
compensation. In connection with the DEB Plan, the Board of Directors maintains
discretion to increase as well as decrease awards based on the Board's
assessment of individual performance and other factors deemed relevant.
Accordingly, the DEB Plan does not meet the requirements of Section 162(m). In
granting awards, the Board will nevertheless take into consideration any
potential loss of deductibility. For compensation received in respect of 1996
performance, Mr. McDonald has elected to defer receipt of an amount of
compensation sufficient to eliminate any potential loss of deductibility.
William E. Pike, Chairman
Robert D. Buzzell Edward E. Crutchfield
Ursula F. Fairbairn Barbara S. Feigin
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid or
accrued for the years 1994 through 1996 by the Corporation to or for the benefit
of the named executive officers.
12
<PAGE> 15
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------------- ----------------------------------
OTHER RESTRICTED STOCK
ANNUAL STOCK OPTIONS/ LTIP All other
NAME AND COMPEN- AWARD(S) SARS PAYOUTS Compens-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($)(1) ($) $ ($) sation ($)(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M.J. McDonald(3) 1996 700,000 1,536,600 - 341,250(5) 75,000 0 10,000
President and 1995 545,000 350,000 - 0 70,000 0 10,000
Chief Executive 1994 525,000 700,000 78,860 253,125(6) 50,000 0 10,000
Officer
- --------------------------------------------------------------------------------------------------------------------------------
L.R. Pugh(4) 1996 825,800 - 102,675 0 0 0 10,000
Chairman of the 1995 790,000 400,00 118,458 0 70,000 0 10,000
Board 1994 760,000 1,000,000 118,000 0 90,000 0 10,000
- --------------------------------------------------------------------------------------------------------------------------------
J.P. Schamberger 1996 400,000 590,000 - 136,500(5) 22,000 0 10,000
vice President and 1995 359,333 256,000 150,371 0 22,000 0 10,000
Chairman-Jeanswear 1994 270,000 280,000 - 0 16,000 0 10,000
Coalition
- --------------------------------------------------------------------------------------------------------------------------------
D.G. MacFarlan 1996 350,000 520,000 - 136,500(5) 17,000 0 10,000
Vice President and 1995 316,250 200,000 - 0 17,000 0 10,000
Chairman-Knitwear, 1994 187,310 150,000 - 0 12,000 0 10,000
Playwear and Intimate
Apparel Coalitions
- --------------------------------------------------------------------------------------------------------------------------------
G.G. Johnson 1996 370,000 505,000 - 0 17,000 0 10,000
Vice President- 1995 356,000 110,000 - 0 15,000 0 10,000
Finance and 1994 343,000 340,000 - 0 16,000 0 10,000
Chief Financial
Officer
</TABLE>
(1) This column includes the incremental cost to the Corporation of providing
perquisites and other personal benefits not included under Salary or Bonus,
where the amount of such benefits exceeds the lesser of $50,000 or 10% of
the executive's Salary plus Bonus. Of the 1996 amount shown for Mr. Pugh,
$48,482 represents personal aircraft transportation cost and $38,414
represents social club membership dues.
(2) The amount in this column represents the matching contribution of the
Corporation under the Executive Deferred Savings Plan.
(3) Mr. McDonald served as President and Chief Operating Officer of the
Corporation in 1994 and 1995. He was named President and Chief Executive
Officer effective January 1, 1996.
(4) During the past year, Mr. Pugh served in an advisory capacity to Mr.
McDonald and senior management. Recognizing his changing role with the
Corporation, Mr. Pugh and the Board had agreed in 1995 that neither an
incentive bonus nor a stock option award should be made to him for 1996.
(5) Restricted stock awards, valued at $68.25 per share, were made on February
10, 1997, as follows: Mr. McDonald - 5,000 shares; Mr. Schamberger - 2,000
shares; and Mr. MacFarlan - 2,000 shares. Dividends paid on restricted stock
are reinvested in additional shares.
(6) At fiscal year-end, Mr. McDonald held 5,253 restricted shares, having an
aggregate value of $347,355, based on the closing price of the Corporation's
Common Stock on January 3, 1997.
13
<PAGE> 16
STOCK OPTIONS
The following table sets forth for the executive officers named in this
proxy statement information regarding the grant of stock options by the
Corporation in the 1996 fiscal year and their potential realizable values.
Thirty-five percent (35%) of each of these options was granted under the 1991
Stock Option Plan. The balance of each of these options was granted under the
1996 Stock Compensation Plan, subject to shareholder approval. (See Proposal 1 -
Approval of the 1996 Stock Compensation Plan.) No stock appreciation rights have
been granted to employees under the 1991 Stock Option Plan or the 1996 Stock
Compensation Plan other than limited stock appreciation rights which become
exercisable only upon a Change in Control.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN THE 1996 FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------------------------------------------------------------------------------------------------
% OF
NO. OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE 5% 10%
GRANTED IN FISCAL PRICE Expiration (Price = (Price =
(#) YEAR ($/Sh) Date $112.39) $178.97)
NAME
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
All shareholders N/A N/A $69.00 N/A 2.7 billion(1) $6.8 billion(1)
- ----------------------------------------------------------------------------------------------------------------
M.J. McDonald 75,000 7.8% 69.00 12/2006 $3,254,250 $8,247,750
L.R. Pugh -- -- -- -- -- --
J.P Schamberger 22,000 2.3% 69.00 12/2006 954,580 2,419,340
D.G. MacFarlan 17,000 1.7% 69.00 12/2006 737,630 1,869,490
G.G. Johnson 17,000 1.7% 69.00 12/2006 737,630 1,869,490
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The aggregate value of the 63,907,874 outstanding shares of Common Stock of
the Corporation on January 3, 1997, at the closing price of $66.125, was
approximately $4.2 billion. If the Common Stock appreciates at a compound
rate of 5% per year over the ten-year option term, the aggregate value of
all such shares would be approximately $6.9 billion, an increase of $2.7
billion for all shareholders. Similarly, if the Common Stock appreciates at
a compound rate of 10% per year over the ten-year option term, the aggregate
value of all such shares would be approximately $11.0 billion, an increase
of $6.8 billion for all shareholders. The purpose of providing this
information is to indicate the total potential shareholder gain over the
term of the options compared to the potential gain shown for the options.
The following table sets forth for each of the named executive
officers information regarding stock options exercised by such officers during
the 1996 fiscal year, together with the number and value of stock options held
at 1996 fiscal year-end, each on an aggregated basis.
14
<PAGE> 17
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN THE 1996 FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
- --------------------------------------------------------------------------------------------------
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END(1)
NUMBER OF
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
M.J. McDonald 5,000 $ 98,125 253,000/75,000 $4,810,575/$-0-
L.R. Pugh 140,000 $3,273,913 376,800/ -0- $6,540,280/$-0-
J.P. Schamberger -0- -- 68,000/22,000 $ 870,100/$-0-
D.G. MacFarlan -0- -- 43,500/17,000 $ 696,237/$-0-
G.G. Johnson 27,000 $ 512,562 71,000/17,000 $ 860,475/$-0-
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Market value of underlying securities at fiscal year-end ($66.125), minus
the exercise price.
FUTURE REMUNERATION
PENSION PLAN
The Corporation maintains and contributes to the VF Corporation
Pension Plan (the "Pension Plan"), a defined benefit plan which covers all of
the Corporation's domestic employees, including the named executive officers.
The following table reflects estimated annual benefits which would be
payable, without regard to any limitation imposed by the Internal Revenue Code
or the Employee Retirement Income Security Act of 1974 ("ERISA"), under the
Pension Plan upon retirement of individuals in the specified remuneration and
years of service classifications.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
ASSUMED AVERAGE
ANNUAL COMPENSATION ESTIMATED ANNUAL BENEFITS BASED ON SERVICE OF:
- -------------------------------------------------------------------------------------------------------
10 YEARS 15 YEARS 20 YEARS 26 YEARS OR MORE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 $ 34,092 $ 51,144 $ 68,184 $ 85,224
400,000 70,092 105,144 140,184 175,224
600,000 106,092 159,144 212,184 265,224
800,000 142,092 213,144 284,184 355,224
1,100,000 196,092 294,144 392,184 490,224
1,250,000 223,092 334,644 446,184 557,724
1,500,000 268,092 402,144 536,184 670,224
2,000,000 358,092 537,144 716,184 895,224
- -------------------------------------------------------------------------------------------------------
</TABLE>
Benefits which are not payable under the Pension Plan because of
certain Code and/or ERISA limitations are provided pursuant to the Corporation's
Supplemental Executive Retirement Plan (see page 13). The amounts in the table
have been
15
<PAGE> 18
computed on a straight life annuity basis and include entitlements
from the Pension Plan and the Supplemental Executive Retirement Plan, as
applicable.
Each of the named executive officers has credited years of service
under the Pension Plan as follows: Mr. McDonald - 14 years; Mr. Pugh - 17 years;
Mr. Schamberger - 24 years; Mr. MacFarlan - 18 years; and Mr. Johnson - 8 years.
The Pension Plan provides that if it is "Overfunded" upon the
occurrence of a "Change in Control" of the Corporation (as those terms are
defined in the Pension Plan), certain Pension Plan assets in excess of those
needed to meet expected benefit entitlements are to be used fully and
irrevocably to vest each participant's accrued benefit and provide increases in
accrued benefits for active participants, retired participants, surviving
spouses and beneficiaries and terminated vested participants. The Pension Plan
is considered "Overfunded" to the extent that the fair market value of Pension
Plan assets exceeds Pension Plan liabilities (primarily the actuarial present
value of Pension Plan benefit entitlements).
Had there been a Change in Control as of the end of the Corporation's
1996 fiscal year, the named executive officers would have estimated annual
benefits vested (excluding any allocation of excess pension assets to
participants) under the Pension Plan (without regard to Code and/or ERISA
limitations) in approximately the following amounts: Mr. McDonald - $250,000;
Mr. Pugh - $393,500; Mr. Schamberger - $122,000; Mr. MacFarlan - $74,500; and
Mr. Johnson - $88,000.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Supplemental Executive Retirement Plan (the "SERP") is an
unfunded, non-qualified plan for eligible participants designed (i) to restore
benefits lost under the Pension Plan due to (a) the maximum legal limit of
pension benefits imposed under ERISA and the Code and (b) an election to defer
compensation under the Corporation's Deferred Compensation Plan and/or Executive
Deferred Savings Plan and (ii) to supplement the Pension Plan benefits of those
senior executives whose tenure may be relatively short by virtue of having
joined the Corporation in mid-career or who lost pension benefits with former
employers as a result of an early separation from service.
Eligibility to receive a supplemental benefit under the SERP is
discretionary with the Board of Directors, and the form of benefit is to be
determined on an individual basis by the Compensation Committee of the Board of
Directors.
At the end of the Corporation's 1996 fiscal year, the Supplemental
Annual Benefit Determinations approved by the Compensation Committee and the
Board of Directors provide benefits to the named executive officers as follows:
(1) Mr. Pugh's combined retirement income from the Pension Plan and
the SERP was fixed by the Board of Directors at 58% of his final average
compensation. "Final average compensation" is defined as the average of the
highest three years of salary and bonus compensation received by Mr. Pugh during
the ten-year period immediately preceding retirement. Upon his retirement on
February 1, 1997, Mr. Pugh
16
<PAGE> 19
received a lump sum payment of $5.7 million of the actuarial equivalent of the
accrued benefit he was entitled to receive under the SERP.
(2) Each of Mr. McDonald and Mr. Johnson's combined retirement income
from the Pension Plan and the SERP will be an amount equal to his Pension Plan
benefit calculated (a) as if he had 25 credited years of service under the
Pension Plan, (b) without regard to any limitation imposed by the Code or ERISA,
(c) without regard to his participation in the Deferred Compensation Plan or the
Executive Deferred Savings Plan and (d) on the basis of the average of the
highest three years of his salary and bonus compensation during the five-year
period immediately preceding retirement.
(3) Each of Mr. Schamberger and Mr. MacFarlan's combined retirement
income from the Pension Plan and the SERP will be an amount equal to his Pension
Plan benefit calculated (a) without regard to the annual compensation limitation
imposed by the Code and (b) without regard to his participation in the Deferred
Compensation Plan or the Executive Deferred Savings Plan.
SERP benefits will become funded upon a "Change in Control" of the
Corporation, as defined in the Change in Control Agreements described below. In
this regard, the Corporation has established a trust with UMB Bank, N.A., as
Trustee (the "SERP Trust"). The SERP Trust may be funded by the Corporation at
any time to secure payment of certain SERP benefits not otherwise paid by the
Corporation. Upon a Change in Control, the Corporation is required to fund the
SERP Trust, which becomes irrevocable.
Had there been a Change in Control as of February 24, 1997, the
estimated annual benefits vested under the SERP and payable beginning at age 65
for each of the named executive officers were as follows: Mr. McDonald -
$611,000; Mr. Pugh -0-; Mr. Schamberger - $98,000; Mr. MacFarlan - $60,500; and
Mr. Johnson - $300,500. As Mr. Pugh retired as of February 1, 1997, he is no
longer a party to a Change in Control Agreement.
CHANGE IN CONTROL AGREEMENTS
The Corporation has entered into Change in Control Agreements with
certain executives of the Corporation (the "Agreements"). The Agreements provide
severance benefits to the designated executives in the event their employment is
terminated within a specified period after a "Change in Control" of the
Corporation, as such term is defined in the Agreements.
The Agreements generally have a term of three years with automatic
annual extensions. The Agreements may be terminated, subject to the limitations
outlined below, by the Corporation upon notice to the executive and are
automatically terminated if the executive's employment with the Corporation
ceases. The Corporation may not terminate the Agreements (a) if it has knowledge
that any third person has taken steps or has announced an intention to take
steps reasonably calculated to effect a Change in Control or (b) within a
specified period of time after a Change in Control
17
<PAGE> 20
occurs. Severance benefits include the lump sum payment of amounts ranging from
1.99 to 2.99 times the average annual compensation for the five taxable years
ending prior to the date on which a Change in Control of the Corporation
occurred.
There are no limitations on the total payments to be made to an
executive upon a Change in Control to prevent such payments from constituting
excess "parachute payments" (as that term is defined in the Code). Executives
also receive additional payments under the Agreements to reimburse them for any
increased taxes, penalties and interest resulting from severance payments under
the Agreements by reason of such payments being treated as excess parachute
payments.
In addition, the Agreements also provide for funding of the severance
benefits payable upon a Change in Control. In this regard, the Corporation has
established a Trust with UMB Bank, N.A., as Trustee (the "CIC Trust"). Upon a
Change in Control, the Corporation will fund the CIC Trust in an amount equal to
the severance benefits payable under the Agreements. The CIC Trust secures
payment to the executives of severance benefits payable under the Agreements to
the extent not paid by the Corporation. (Also see Future Remuneration -
Supplemental Executive Retirement Plan.)
Had there been a Change in Control as of February 24, 1997,
approximate payments under the Agreements upon severance of the named executive
officers would have been as follows: Mr. McDonald - $3,854,700; Mr. Pugh -0-;
Mr. Schamberger - $1,864,400; Mr. MacFarlan - $1,448,900; and Mr. Johnson -
$2,074,200.
Under the terms of the Agreements, the executives also would be
entitled to supplemental benefits, such as accelerated rights to exercise stock
options, accelerated lapse of restrictions on restricted stock, lump sum
payments under the Corporation's SERP, continued life and medical insurance for
specified periods after termination, entitlements under retirement plans and a
lump sum payment upon attaining retirement age. Upon a Change in Control, the
Corporation also will pay all reasonable legal fees and related expenses
incurred by the executives as a result of the termination of their employment or
in obtaining or enforcing any right or benefit provided by the Agreements.
DEFERRED SAVINGS PLANS
The Corporation maintains an Executive Deferred Savings Plan (the "EDS
Plan"), which is an unfunded, non-qualified deferred compensation arrangement
for a select group of management and highly compensated employees of the
Corporation and certain of its subsidiaries.
The EDS Plan permits an eligible employee to defer the receipt of a
specified portion of his or her compensation until the date of retirement,
disability, death or termination of employment. The Corporation matches 50% of
the first $20,000 deferred annually by each participant. Upon a "Change of
Control" of the Corporation, certain matching contributions become fully vested
and the Corporation is required to fully fund the amount accrued for each
employee.
18
<PAGE> 21
Until 1992, the named executive officers, as well as other salaried
employees were eligible to participate in the Corporation's Tax-Advantaged
Savings Plan (the "TAS Plan"). Thereafter, the named executive officers, as well
as certain other highly compensated employees, became ineligible to participate
further in the TAS Plan and instead became eligible to participate in the EDS
Plan effective February 1, 1992. Although the named executive officers may no
longer make contributions to the TAS Plan and the Corporation is no longer
making contributions to the TAS Plan on their behalf, they retain their existing
benefits and continue to be participants thereunder.
In January 1990, the TAS Plan was amended to include an Employee Stock
Ownership Plan component and the ESOP trustee borrowed $65 million from the
Corporation for the purpose of acquiring for the ESOP 2,105,263 shares of Series
B Stock from the Corporation. Shares of Series B Stock are allocated to TAS Plan
participants' accounts as the loan balance is amortized.
The named executive officers participate in the leveraged ESOP feature
of the TAS Plan. The TAS Plan provides that upon a "Change in Control" of the
Corporation, the Corporation immediately will make a contribution to the TAS
Plan in an amount sufficient to repay the balance of all outstanding
"Acquisition Loans", and unallocated shares of Series B Stock shall be allocated
to participants' accounts in proportion to their compensation. At December 31,
1996, 1,026,659 shares were unallocated under the ESOP.
PERFORMANCE GRAPH
The following graph compares the Corporation's performance, as
measured by the change in price of its Common Stock, plus reinvested dividends,
with the Standard & Poor's ("S&P") 500 stock index and the S&P Textile (Apparel
Manufacturers) stock index for the five years ended December 31, 1996.
19
<PAGE> 22
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VFC 100 138 122 132 147 193
- -------------------------------------------------------------------------------
S&P 500 100 108 118 120 165 203
- -------------------------------------------------------------------------------
S&P Textile 100 106 80 79 89 122
================================================================================
</TABLE>
Over a five-year period, the Corporation's total return of 93% compares with
103% and 22% for the S&P 500 and S&P Textile (Apparel Manufacturers) Indices,
respectively.
20
<PAGE> 23
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
Shown below are persons known by the Corporation to have voting power
and/or dispositive power over more than 5% of its Common Stock and Series B
Stock, except as otherwise indicated in the footnotes below, as well as certain
other information, all as of February 24, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
BENEFICIAL OWNER AMOUNT OF PERCENT
AND NATURE OF OWNERSHIP BENEFICIAL OWNERSHIP(1) OF CLASS
- --------------------------------------------------------------------------------
Common Stock
<S> <C> <C>
William E. Pike, M. Rust Sharp
and PNC Bank, N.A., P.O. Box
7648, Philadelphia, PA 19101, as Trustees
under Deeds of Trust dated August 21,
1951(2)(3)(4) .......................... 6,972,668 shares 10.9%
William E. Pike, M. Rust Sharp
and PNC Bank, N.A., P.O. Box
7648, Philadelphia, PA 19101, as Trustees
under the Will of John E. Barbey,
deceased(2)(3)(4) ...................... 4,488,976 shares 7.0%
----------------- -----
Total .............. 11,461,644 shares 17.9%
Sanford C. Bernstein & Co., Inc.
One State Street Plaza
New York, NY 10004(5).................. 4,591,820 shares 7.2%
Series B ESOP Convertible Preferred Stock
UMB Bank, N.A.,
P.O. Box 419226, Kansas City,
MO 64179, as Trustee of the Corporation's
Tax-Advantaged Savings Plan for
Salaried Employees...................... 1,881,515 shares 100%
- --------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 24
(1) None of the shares in this column is known to be a share with respect to
which any of the listed owners has the right to acquire beneficial
ownership, as specified in Rule 13d-3(d)(1) under the 1934 Act.
(2) Messrs. Pike and Sharp are directors of the Corporation.
(3) Present life tenants and remaindermen under the Will are various. All
present life tenants and all or most future life tenants and/or remaindermen
under the Deeds of Trust are, or will be, descendants of John E. Barbey. No
individual life tenant or remainderman may, within 60 days, attain
beneficial ownership, as specified in Rule 13d-3(d)(1) under the 1934 Act,
which exceeds 5% of the outstanding shares.
(4) Including shares in the above table, PNC Bank, N.A. held a total of
11,546,304 shares (18.1%) of the class outstanding of the Corporation's
Common Stock in various trust and agency accounts on December 31, 1996. As
to all such shares, the Bank had sole voting power over 78,879 shares,
shared voting power over 11,464,911 shares, sole dispositive power over
19,044 shares and shared dispositive power over 11,487,525 shares. Including
shares held by PNC Bank, N.A., its holding company parent, PNC Bank Corp,
held a total of 88,869 shares with sole voting power, 11,464,911 shares with
shared voting power, 20,334 shares with sole dispositive power and
11,487,525 shares with shared dispositive power.
(5) The information in the above table concerning Sanford C. Bernstein & Co.,
Inc., a registered investment advisor/broker dealer, was obtained from a
Schedule 13G filed with the Securities and Exchange Commission on January
30, 1997. At December 31, 1996, Sanford C. Bernstein & Co., Inc. had sole
voting power over 2,593,153 shares, shared voting power over 519,190 shares
and sole dispositive power over 4,591,820 shares.
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table reflects, as of February 24, 1997, the total
beneficial ownership of Common Stock of the Corporation by each director and
named executive officer, and by all directors and executive officers as a group.
Each named individual and all members of the group exercise sole voting and
dispositive power, except as indicated in the footnotes. Share ownership of
Messrs. Pike and Sharp includes 11,461,644 shares reported under Certain
Beneficial Owners, as to which they share voting and dispositive power with PNC
Bank, N.A. as Trustees (see page 17). Other than Messrs. Pike and Sharp, the
percentage of shares owned beneficially by each named person does not exceed 1%
of the Common Stock outstanding.
22
<PAGE> 25
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership Total
------------------------- Shares
Shares Option Shares Beneficially
Name Owned(1) Exercisable(2) Owned
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert D. Buzzell .................. 800 7,800 8,600
Edward E. Crutchfield .............. 6,117(3) 4,200 10,317
Ursula F. Fairbairn ................ 835 3,900 4,735
Barbara S. Feigin .................. 1,900 7,800 9,700
Roger S. Hillas .................... 3,538 7,800 11,338
Leon C. Holt, Jr. .................. 6,600(4) 5,700 12,300
Robert J. Hurst .................... 1,400 3,900 5,300
Mackey J. McDonald ................. 21,590(5) 253,000 274,590
William E. Pike .................... 11,464,244 9,300 11,473,544
Lawrence R. Pugh ................... 12,618 376,800 389,418
M. Rust Sharp ...................... 11,462,644 9,300 11,471,944
L. Dudley Walker ................... 27,500 7,800 35,300
John P. Schamberger ................ 9,543(6) 68,000 77,543
Daniel G. MacFarlan ................ 7,480(6) 43,500 50,980
Gerard G. Johnson .................. 10,000 71,000 81,000
All Directors and Executive Officers
as a Group (20 persons) ......... 11,601,164 1,036,700 12,637,864
- --------------------------------------------------------------------------------
</TABLE>
(1) Shares owned include shares held in trusts in connection with employee
benefit plans, as to which the following participants share voting power but
have no present dispositive power: Mr. McDonald - 2,057 shares; Mr.
MacFarlan - 2,488 shares; and all executive officers as a group - 8,895
shares. Does not include shares of Series B Stock held in trust in
connection with an employee benefit plan, as to which participants also
share voting power but have no present dispositive power (and no power to
direct conversion into Common Stock), as follows: Mr. McDonald - 198 shares;
Mr. Pugh - 198 shares; Mr. Schamberger - 303 shares; Mr. MacFarlan - 264
shares; Mr. Johnson - 198 shares; and all executive officers as a group -
2,228 shares. Shares owned also include shares held in a trust in connection
with an employee benefit plan, as to which the following participants have
dispositive power but no voting power: Mr. McDonald - 27 shares; Mr.
MacFarlan - 2,992 shares; and all executive officers as a group - 3,019
shares.
(2) All shares in the column "Option Shares Exercisable" are subject to options
under the 1982 Stock Option Plan and/or the 1991 Stock Option Plan.
(3) Includes 1,000 shares held in a trust of which Mr. Crutchfield is Trustee
and holds voting and dispositive power with respect to these shares.
(4) Includes 2,000 shares held by the Holt Family Foundation, of which Mr. Holt
is a Trustee. Mr. Holt shares voting and dispositive power with respect to
these shares.
(5) Includes 10,253 shares of restricted stock over which Mr. McDonald holds
voting power but not dispositive power.
(6) Includes 2,000 shares of restricted stock over which the officer holds
voting power but not dispositive power.
23
<PAGE> 26
PROPOSAL 1
APPROVAL OF THE 1996 STOCK COMPENSATION PLAN
The Board of Directors of the Corporation has adopted, subject to
shareholder approval, the 1996 Stock Compensation Plan (the "1996 Plan"),
effective December 3, 1996.
The Corporation's Board of Directors believes that attracting,
motivating, and retaining employees and directors of superior ability is
essential to the Corporation's growth and success. The Board believes that the
long-term success of the Corporation is enhanced by a compensation program which
includes long-term incentives relating to stock ownership, because such
incentives more closely align the interests of employees and directors with
those of the Corporation's shareholders by relating compensation to increases in
shareholder value. Accordingly, stock options have been and are expected to
continue to be a key element of compensation for executives, other employees and
directors, and restricted stock can serve as an important element of such
compensation as well.
The 1996 Plan provides for grants of stock options, limited stock
appreciation rights ("LSARs") and restricted stock as awards to employees and
directors. The 1996 Plan is intended to replace the 1991 Stock Option Plan (the
"1991 Plan") and 1995 Key Employee Restricted Stock Plan (the "1995 Plan"). If
the 1996 Plan is approved by the Corporation's shareholders, authority to make
further grants under the 1991 and 1995 Plans will terminate, although previously
granted awards under those Plans will remain outstanding in accordance with
their terms.
The following is a brief description of the material features of the
1996 Plan. Such description is qualified in its entirety by reference to the
full text of the 1996 Plan, a copy of which is attached as Exhibit A to this
proxy statement.
ADMINISTRATION. The 1996 Plan generally will be administered by the
Compensation Committee. The Board may, however, itself perform the functions of
the committee or may appoint a different committee to administer the 1996 Plan.
Only directors who are not employees of the Corporation or its subsidiaries may
serve on the committee administering the 1996 Plan (the "Committee"). If any
member of the Committee does not qualify as a "Non-Employee Director" under Rule
16b-3 of the Securities Exchange Act of 1934, as amended ("Rule 16b-3") or an
"outside director" under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Committee may function through a subcommittee composed
solely of two or more qualifying members, or the nonqualifying member of the
Committee may abstain or recuse himself or herself from actions that would be
affected by his or her nonqualifying status.
24
<PAGE> 27
Subject to the terms and conditions of the 1996 Plan, the Committee or
the Board has discretionary authority to determine the employees and directors
to whom, and the times at which, awards may be granted, the number of shares to
be subject to each award and the terms, conditions and limitations of each
award. This includes, among other things, authority to determine the times at
which options will be exercisable, the time restricted stock will vest and
become nonforfeitable and the performance conditions, if any, that will attach
to restricted stock awards. Committee members shall not be personally liable in
connection with any action, determination or interpretation taken or made in
good faith under the 1996 Plan.
In contrast to past plans, the 1996 Plan does not specify the type,
timing, and amount of awards to be granted to non-employee directors. Under the
1996 Plan, the Board or Committee would be authorized to grant options, LSARs or
restricted stock to non-employee directors in its discretion. The Board expects
that, in general, it will determine the type, timing, and amount of such awards
to non-employee directors as part of the overall policies for compensating
non-employee directors which may from time to time be adopted by the Board.
SHARES SUBJECT TO THE 1996 PLAN AND PER-PERSON LIMITATIONS. Under the
1996 Plan, the total number of shares of the Corporation's Common Stock that may
be issued pursuant to all awards is 3,000,000 (subject to adjustment),
constituting approximately 4.7% of the outstanding class, plus any shares
available now or which become available in the future under the 1991 and 1995
Plans. The number of such shares of restricted stock to be awarded either as
service awards or performance awards may not exceed 600,000 (subject to
adjustment). At February 24, 1997, only 689,600 shares were available under the
1991 and 1995 Plans. Shares subject to an award (or to an award outstanding
under the 1991 or 1995 Plans) that is canceled, forfeited, or expires or
terminates without delivery of shares will also be available for awards under
the 1996 Plan, except that shares to which an LSAR relates will be counted
against the 1996 Plan limits when an LSAR is settled in cash, and shares issued
as restricted stock will be counted against the 1996 Plan limits when restricted
stock is settled by crediting of stock units. Shares issued under the 1996 Plan
may be either authorized and unissued shares or shares controlled by the
Corporation. On February 24, 1997, the last reported sale price of Common Stock
in New York Stock Exchange Composite Transactions was $69.75 per share.
The 1996 Plan imposes "per-person" limitations on the amount of awards
to employees, to comply with Code Section 162(m). Under the Plan, no single
participant may be granted during any calendar year options to purchase more
than 125,000 shares (less any non-tandem LSARs) or more than 5,000 shares of
restricted stock (subject to adjustment, as described below).
25
<PAGE> 28
ADJUSTMENTS AND EXTRAORDINARY CORPORATE EVENTS. The Committee or Board
is authorized to adjust the number and kind of shares subject to the aggregate
share limitations and annual per-person limitations under the 1996 Plan and
subject to outstanding awards and make other appropriate adjustments in the
event that shares of Common Stock are increased, decreased, or exchanged for a
different number or kind of securities, or if additional, new or different
securities are distributed with respect to outstanding Common Stock as a result
of certain extraordinary corporate transactions, in order to preserve the
intended benefits or potential benefits to participants. In the event of a
merger, consolidation, or reorganization of the Corporation in which the
interests of shareholders do not continue in a surviving corporation
substantially unchanged, a dissolution or liquidation or sale of substantially
all assets of the Corporation, or a change in control (as defined in Section 2.4
of the 1996 Plan) of the Corporation, the Committee or Board serving before the
event may accelerate the exercisability of, lapse of restrictions on, or
settlement date of awards, grant LSARs to option holders, pay cash to
participants in settlement of outstanding options or stock units, grant new
awards or make other adjustments or amendments, including providing for
substitution of new awards by a successor employer. See "Other Terms of Awards".
ELIGIBILITY. Employees of the Corporation and its subsidiaries and
non-employee directors of the Corporation are eligible to be granted awards
under the 1996 Plan. The Board expects that, as was the case with the 1991 Plan
it replaces, participation in the 1996 Plan will be broad. See "Initial Awards".
STOCK OPTIONS. The Committee or the Board is authorized to grant stock
options, including both Incentive Stock Options (ISOs) which can result in
potentially favorable tax treatment to participants and non-qualified stock
options (i.e., options not qualifying as ISOs). The exercise price per share
subject to an option will in each case be not less than 100% of the fair market
value of a share on the date of grant. The maximum term of each option, the
times at which each option will be exercisable, and provisions requiring
forfeiture of unexercised options at or following termination of employment
generally will be fixed by the Committee or the Board, except no ISO may have a
term exceeding ten years. Options may be exercised by payment of the exercise
price in cash or shares having a fair market value equal to the exercise price,
as the Committee or Board may determine from time to time, and the Committee or
Board may establish procedures for broker assisted cashless exercises. ISOs are
subject to certain additional limitations in order to qualify for favorable tax
treatment.
LSARS. The Committee or the Board is authorized to grant LSARs. An
LSAR is a limited stock appreciation right, payable in cash and exercisable only
upon the occurrence of a change in control (as defined), which entitles the
participant to receive for each LSAR the excess of a defined "market price" of a
share over the exercise price per share of a stock option to which the LSAR
relates. The term "market price" means the greater of (i) the highest price per
share paid in connection with the change in control and (ii) the highest trading
price per share during the 60 days before the change in control. LSARs may or
may not be in tandem with the related stock option; if in
26
<PAGE> 29
tandem, the exercise of the LSAR will result in the cancellation of the stock
option; if not in tandem, the related stock option will remain outstanding even
though the LSAR has been exercised. The term of each LSAR and related forfeiture
provisions will be the same as the option to which the LSAR relates; the
exercise or cancellation of an option will result in the cancellation of any
unexercised LSAR to which the option relates.
RESTRICTED STOCK. The Committee or Board is authorized to grant
restricted stock. Restricted stock is a grant of shares which may not be sold or
disposed of and which may be forfeited in the event of certain kinds of
termination of employment or service as a director, prior to the end of the
restricted period specified by the Committee or Board. The restricted period for
restricted stock may not be less than one year, except in the event of
accelerated lapse of restrictions upon a change in control or in connection with
certain other extraordinary corporate events. A participant granted restricted
stock generally has all of the rights of a shareholder of the Corporation,
including the right to vote the shares and to receive dividends and
distributions, except that dividends and distributions are automatically deemed
reinvested in additional shares of restricted stock.
PERFORMANCE AWARDS. The Committee or Board may condition the grant of
restricted stock on the attainment of performance objectives. In such case, not
later than 90 days after the beginning of a fiscal year, the Committee or Board
shall establish a performance award target for that year and specify the
performance objective which will be a condition to the grant of the performance
award. The performance objective will relate to one or more specified annual
corporate, business group or divisional levels of performance, as specified by
the Committee or Board, relating to the following business criteria: earnings
per share, net earnings, pretax earnings, operating income, net sales, market
share, balance sheet measurements, cash return on assets, book value,
shareholder return or return on average common equity. In establishing required
performance levels, the Committee or Board may disregard or offset the effect of
extraordinary or nonrecurring accounting items and changes in required
accounting standards. Performance awards may also be authorized as to which the
grant is subject to performance based on any of the business criteria specified
above as compared to comparable performance of specified peer companies. The
Committee or Board retains the discretion to reduce the amount of a performance
award that is granted and to impose service requirements which must be met in
addition to any required performance objectives.
OTHER TERMS OF AWARDS. The Committee or Board may permit participants
to defer payments relating to awards, including deferrals intended to defer
taxation. In addition, the Committee or Board may permit participants to convert
restricted stock into stock units as of the date restrictions on the restricted
stock would otherwise lapse. A stock unit is a bookkeeping measure equal in
value to a share, which will be payable at a specified settlement date by the
Corporation in cash or by delivery of an actual share. Stock units generally
will be credited with dividend equivalents which will be deemed reinvested in
additional stock units. Payments under the 1996 Plan are subject to deduction to
satisfy withholding taxes, and participants may be required to separately pay
withholding taxes relating to receipt of shares under the 1996 Plan. The
Committee or Board may permit participants to direct the Corporation to withhold
27
<PAGE> 30
shares from any award or deliver previously acquired shares to satisfy
withholding obligations. Awards granted under the 1996 Plan generally are
nontransferable except pursuant to the laws of descent and distribution, except
that the Committee or Board may permit transfers of non-qualified stock options
for estate planning purposes. Awards under the 1996 Plan are generally granted
without a requirement that the participant pay consideration in the form of cash
or property for the grant (as distinguished from the exercise).
AMENDMENT AND TERMINATION OF THE 1996 PLAN. The Board may amend,
suspend or terminate the 1996 Plan at any time, but may not, without shareholder
approval, amend the 1996 Plan to increase the number of shares reserved under
the 1996 Plan or reduce the exercise price for options that may be granted under
the 1996 Plan. The 1996 Plan does not otherwise specify a termination date,
although ISOs cannot be granted more than ten years after the adoption of the
1996 Plan.
INITIAL AWARDS. Subject to shareholder approval of the 1996 Plan, the
Committee made initial grants of non-qualified stock options under the 1996 Plan
to 582 employees on December 3, 1996. Each such option has an exercise price of
$69.00 per share, representing 100% of the fair market value (as defined in the
1996 Plan) of a share at the date of grant. Each such option generally will
become exercisable on December 3, 1997. Each such option expires ten years after
the date of grant or earlier at or following termination of the participant's
employment in specified circumstances.
The following table sets forth the number of options which would have
been granted in 1996 to named executive officers and specified groups of
executive officers and employees under the 1996 Plan. If the 1996 Plan had been
fully effective, no options would have been granted under the 1991 Plan.
28
<PAGE> 31
NEW PLAN BENEFITS
1996 STOCK COMPENSATION PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK
NAME AND POSITION UNDERLYING OPTIONS
----------------- --------------------------------
<S> <C>
M.J. McDonald 75,000
President and
Chief Executive
Officer
L.R. Pugh -0-
Chairman of
the Board
J.P. Schamberger 22,000
Vice President and
Chairman-Jeanswear
Coalition
D.G. MacFarlan 17,000
Vice President and
Chairman-Knitwear,
Playwear & Intimate
Apparel Coalitions
G.G. Johnson 17,000
Vice President-
Finance and Chief
Financial Officer
All Executive Officers as
a Group (10 in number) 177,500
All Non-Executive
Directors as a
Group (10 in number) 24,000
Non-Executive Officer
Employee Group
(including current
officers who are not
executive officers) 778,800
</TABLE>
29
<PAGE> 32
None of the options granted under the 1996 Plan will be exercisable
unless the shareholders approve the 1996 Plan. In the event that shareholders do
not approve the 1996 Plan, the initial grants of options under the 1996 Plan
will be canceled (see Stock Option grants).
FEDERAL INCOME TAX IMPLICATIONS OF THE 1996 PLAN. The following is a
brief description of the Federal income tax consequences generally arising with
respect to awards under the 1996 Plan.
The grant of an option or LSAR will create no tax consequences for the
participant or the Corporation. A participant will not have taxable income upon
exercising an option that is an ISO, except that the alternative minimum tax may
apply. Upon exercise of an option other than an ISO, the participant generally
must recognize ordinary income equal to the fair market value of the shares
acquired on the date of exercise minus the exercise price. Upon exercise of an
LSAR, the participant generally must recognize ordinary income equal to the cash
received.
The Corporation generally will be entitled to a tax deduction equal to
the amount recognized as ordinary income by the participant in connection with
an option or LSAR. The Corporation generally is not entitled to a tax deduction
relating to amounts that represent a capital gain to a participant. Accordingly,
the Corporation will not be entitled to any tax deduction with respect to an ISO
if the participant holds the shares for the ISO holding periods prior to
disposition of the shares.
Because restricted stock granted under the 1996 Plan is restricted as
to transferability and subject to a substantial risk of forfeiture for a period
of time after grant, a participant generally will not be subject to taxation at
the time of such grant. The participant generally must recognize ordinary income
equal to the fair market value of the shares at the time the restricted stock
becomes transferable or not subject to a substantial risk of forfeiture. In
connection with restricted stock or stock units, the Corporation generally will
be entitled to a deduction in an amount equal to the ordinary income recognized
by the participant (except as limited under Code Section 162(m), discussed
below), in the year in which the participant recognizes such income.
Code Section 162(m) generally disallows a public company's tax
deduction for compensation to certain executive officers, defined as "covered
employees", in excess of $1 million in any tax year. Compensation that qualifies
as "performance based compensation" is excluded from the $1 million
deductibility cap, and therefore remains fully deductible even if it exceeds $1
million. As discussed above, the Corporation intends that options granted and
performance based restricted stock granted under the 1996 Plan qualify as such
"performance based compensation", so that such awards will not be subject to the
$1 million deductibility cap of Code Section 162(m). A number of requirements
must be met in order for particular compensation to so qualify, however, so
there can be no assurance that such compensation under the 1996 Plan will be
fully deductible under all circumstances. In addition, other awards under the
1996 Plan, including restricted stock not subject to performance conditions (and
possibly LSARs), will not so qualify, so that compensation paid to persons who
are covered employees in
30
<PAGE> 33
connection with such awards, to the extent such compensation and other
compensation subject to Section 162(m)'s deductibility cap in a given year
exceeds $1 million, will be subject to Section 162(m)'s deductibility cap. See
"Organization and Compensation Committee Report."
The foregoing general discussion is intended for the information of
shareholders considering their vote with respect to the 1996 Plan and not as tax
guidance to participants in the 1996 Plan. This discussion does not address the
effects of other federal taxes (including possible "golden parachute" excise
taxes) or taxes imposed under state, local, or foreign tax laws.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE 1996 PLAN.
OTHER INFORMATION
OTHER MATTERS
The Board of Directors does not know of any other matter which is
intended to be brought before the Meeting, but if any other matter is presented,
the persons named in the enclosed proxy intend to vote the same according to
their best judgment.
The enclosed proxy may be revoked by a later-dated proxy, by giving
notice to the Secretary of the Corporation in writing prior to the Meeting or by
personal notification at the Meeting prior to the voting.
CHANGE IN ACCOUNTANTS
On July 18, 1995, the Corporation engaged Coopers & Lybrand L.L.P. as
its new independent accountants to audit the Corporation's financial statements,
replacing Ernst & Young LLP ("E&Y"). This action was approved by the Audit
Committee of the Corporation's Board of Directors on July 17, 1995.
E&Y's report on the Corporation's financial statements for fiscal
years 1993 and 1994 did not contain any adverse opinion, disclaimer of opinion
or qualification or modification as to uncertainty, audit scope or accounting
principles.
During fiscal years 1993 and 1994 and the interim period subsequent to
fiscal year 1994, there were no disagreements between the Corporation and E&Y on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of E&Y, would have caused it to make a reference to the subject
matter of the disagreements in connection with its report.
During fiscal years 1993 and 1994 and the interim period subsequent to
fiscal year 1994, E&Y did not advise the Corporation that (1) the internal
controls necessary for the Corporation to develop reliable financial statements
did not exist or (2) information had come to E&Y's attention that led it to no
longer be able to rely on
31
<PAGE> 34
management's representations or that made E&Y unwilling to be associated with
the financial statements prepared by the Corporation's management or (3) there
was a need to expand significantly the scope of its audit, or that information
had come to E&Y's attention during such period that, if further investigated,
may materially impact the fairness or reliability of either a previously issued
audit report or the underlying financial statements, or the financial statements
issued or to be issued covering the fiscal periods subsequent to fiscal year
1994 (including information that may prevent it from rendering an unqualified
audit report on those financial statements), or cause E&Y to be unwilling to
rely on management's representations or be associated with the Corporation's
financial statements, and due to E&Y's dismissal, or for any other reason, E&Y
did not so expand the scope of its audit or conduct such further investigations,
or (4) information has come to E&Y's attention that it has concluded materially
impacts the fairness or reliability of either a previously issued audit report
or the underlying financial statements, or the financial statements issued or to
be issued covering the fiscal periods subsequent to fiscal year 1994 (including
information that unless resolved to E&Y's satisfaction would prevent it from
rendering an unqualified audit report on those financial statements) and due to
E&Y's dismissal, or for any other reason, the issue had not been resolved to
E&Y's satisfaction prior to its dismissal.
During fiscal years 1993 and 1994 and the interim period subsequent to
fiscal 1994, neither the Corporation nor anyone on its behalf consulted Coopers
& Lybrand L.L.P. regarding either the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Corporation's financial statements, and
neither a written report nor oral advice was provided to the Corporation by
Coopers & Lybrand L.L.P.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
directors and certain officers of the Corporation, as well as persons who own
more than 10% of a registered class of the Corporation's equity securities
("Reporting Persons"), to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange Commission and the New York
Stock Exchange. The Corporation believes that during the preceding year all
Reporting Persons timely complied with all filing requirements applicable to
them.
EXPENSES OF SOLICITATION
The cost of this proxy solicitation will be borne by the Corporation.
In addition to the use of mail, proxies may be solicited in person or by
telephone by employees of the Corporation without additional compensation. The
Corporation has engaged D. F. King & Co., Inc. to solicit proxies in connection
with the proxy statement, and employees of that company are expected to solicit
proxies in person, by telephone and by mail. The anticipated cost to the
Corporation of such solicitation is approximately $10,000. The Corporation will
reimburse brokers and other persons holding stock in their names or in the names
of nominees for their expenses incurred in sending proxy material to principals
and obtaining their proxies.
32
<PAGE> 35
1998 SHAREHOLDER PROPOSALS
In order for shareholder proposals for the 1998 Annual Meeting of
Shareholders to be eligible for inclusion in the Corporation's proxy statement,
they must be received by the Corporation at its principal office in Wyomissing,
Pennsylvania, on or before November 10, 1997.
By Order of the Board of Directors
L. M. Tarnoski
Vice President-Secretary
Dated: March 10, 1997
33
<PAGE> 36
EXHIBIT A
V.F. CORPORATION
1996 STOCK COMPENSATION PLAN
ARTICLE I
PURPOSE
1.1 PURPOSE. The purpose of the V.F. Corporation 1996 Stock
Compensation Plan (this "Plan") is to strengthen the ability of V.F. Corporation
(the "Company") to attract, motivate, and retain employees and directors of
superior ability and to more closely align the interests of such employees and
directors with those of the Company's shareholders by relating compensation to
increases in shareholder value.
ARTICLE II
GENERAL DEFINITIONS
2.1 "AGREEMENT" The written instrument evidencing the grant to a
Participant of an Award. Each Participant may be issued one or more Agreements
from time to time, evidencing one or more Awards.
2.2 "AWARD" Any award granted under this Plan.
2.3 "BOARD" The Board of Directors of the Company.
2.4 "CHANGE IN CONTROL" A change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of regulation
14A, as in effect on the Effective Date hereof, promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without
limitation, such a Change in Control shall be deemed to have occurred if (i) any
"Person" (as such term is
1
<PAGE> 37
used in Section 13(d) and Section 14(d) of the Exchange Act), except for (A)
those certain trustees under Deeds of Trust dated August 21, 1951 and under the
Will of John E. Barbey, deceased (a "Trust" or the "Trustee"), and (B) any
employee benefit plan of the Company or any Subsidiary, or any entity holding
voting securities of the Company for or pursuant to the terms of any such plan
(a "Benefit Plan" or the "Benefit Plans"), is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities; (ii)
there occurs a contested proxy solicitation of the Company's shareholders that
results in the contesting party obtaining the ability to vote securities
representing 30% or more of the combined voting power of the Company's then
outstanding securities; (iii) there occurs a sale, exchange, transfer or other
disposition of substantially all of the assets of the Company to another entity,
except to an entity controlled directly or indirectly by the Company, or a
merger, consolidation or other reorganization of the Company in which the
Company is not the surviving entity, or a plan of liquidation or dissolution of
the Company other than pursuant to bankruptcy or insolvency laws is adopted; or
(iv) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to have occurred for purposes of this Plan (x) in the event of a sale, exchange,
transfer or other disposition of substantially all of the assets of the Company
to, or a merger, consolidation or other reorganization involving the Company and
officers of the Company, or any entity in which such officers have, directly or
indirectly, at least a 5% equity or ownership interest or (y) in a transaction
otherwise commonly referred to as a "management leveraged buyout".
2
<PAGE> 38
Clause (i) above to the contrary notwithstanding, a Change in Control
shall not be deemed to have occurred if a Person becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities solely as
the result of an acquisition by the Company or any Subsidiary of voting
securities of the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 20% or more of the combined voting power of the Company's then outstanding
securities; provided, however, that if a Person becomes the beneficial owner of
20% or more of the combined voting power of the Company's then outstanding
securities by reason of share purchases by the Company or any Subsidiary and
shall, after such share purchases by the Company or a Subsidiary, become the
beneficial owner, directly or indirectly, of any additional voting securities of
the Company, then a Change in Control of the Company shall be deemed to have
occurred with respect to such Person under clause (i). Notwithstanding the
foregoing, in no event shall a Change in Control of the Company be deemed to
occur under clause (i) with respect to any Trust or Benefit Plan.
Clauses (i) and (ii) to the contrary notwithstanding, the Board may,
by resolution adopted by at least two-thirds of the directors who were in office
at the date a Change in Control occurred, declare that a Change in Control
described in clause (i) or (ii) has become ineffective for purposes of this Plan
if the following conditions then exist: (x) the declaration is made within 120
days of the Change in Control; and (y) no person, except for (A) the Trusts, and
(B) the Benefit Plans, either is the beneficial owner, directly or indirectly,
of securities of the Company representing 10% or more of the combined voting
power of the Company's outstanding securities or has the ability or power to
vote securities representing 10% or more of the combined voting power of the
Company's then outstanding securities. If such a declaration shall be properly
made, the Change in Control shall be ineffective ab initio.
3
<PAGE> 39
2.5 "CODE" The Internal Revenue Code of 1986, as amended, and
applicable regulations and rulings issued thereunder.
2.6 "COMMITTEE" The Committee, appointed by the Board, to administer
the Plan in accordance with the provisions in Article IV.
2.7 "COMMON STOCK" The common stock of the Company as described in the
Company's Articles of Incorporation, or such other stock as shall be substituted
therefor.
2.8 "COMPANY" V.F. Corporation, or any successor to the Company.
2.9 "DATE OF GRANT" The date on which the granting of an Award is
authorized by the Committee, unless another date is specified by the Committee
or by a provision in this Plan applicable to the Award.
2.10 "DIRECTOR" A member of the Board who is not an Employee.
2.11 "DISPOSITION" Any sale, transfer, encumbrance, gift, donation,
assignment, pledge, hypothecation, or other disposition, whether similar or
dissimilar to those previously enumerated, whether voluntary or involuntary, and
whether during the Participant's lifetime or upon or after his or her death,
including, but not limited to, any disposition by operation of law, by court
order, by judicial process, or by foreclosure, levy, or attachment.
2.12 "EMPLOYEE" Any employee of the Company or a Subsidiary.
2.13 "EXCHANGE ACT" The Securities Exchange Act of 1934, as amended,
and applicable regulations and rulings issued thereunder.
4
<PAGE> 40
2.14 "FAIR MARKET VALUE" The average of the reported high and low
sales price of the Common Stock (rounded up to the nearest one-tenth of a
dollar) on the date on which Fair Market Value is to be determined (or if there
was no reported sale on such date, the next preceding date on which any reported
sale occurred) on the principal exchange or in such other principal market on
which the Common Stock is trading.
2.15 "INCENTIVE STOCK OPTION" A Stock Option intended to satisfy the
requirements of Section 422(b) of the Code.
2.16 "LIMITED STOCK APPRECIATION RIGHT" OR "LIMITED RIGHT" The rights
specified in Article VIII.
2.17 "NON-QUALIFIED STOCK OPTION" A Stock Option other than an
Incentive Stock Option.
2.18 "PARTICIPANT" An Employee or Director selected by the Committee
to receive an Award.
2.19 "PERFORMANCE OBJECTIVE" A performance objective established
pursuant to Section 9.3 hereof.
2.20 "RESTRICTED STOCK" Common Stock which is subject to restrictions
and awarded to Participants under Article IX of this Plan and any Common Stock
purchased with distributions made on the Restricted Stock.
2.21 "RETIREMENT" Employment separation and commencement of pension
benefits under the V.F. Corporation Pension Plan (or any successor plan thereto)
on account of early, normal or late retirement thereunder.
5
<PAGE> 41
2.22 "RULE 16b-3" Rule 16b-3 under the Exchange Act or any successor
thereto.
2.23 "SECURITIES ACT" The Securities Act of 1933, as amended, and
applicable regulations and rulings issued thereunder.
2.24 "STOCK OPTION" An award of a right to purchase Common Stock
pursuant to Article VII.
2.25 "SUBSIDIARY" A "subsidiary corporation" as defined in Section
424(f) of the Code that is a subsidiary of the Company.
ARTICLE III
SHARES OF COMMON STOCK SUBJECT TO THE PLAN
3.1 COMMON STOCK AUTHORIZED. Subject to the provisions of this Article
and Article XI, the total aggregate number of shares of Common Stock that may be
issued, pursuant to Awards, shall not exceed 3,000,000 shares (plus additional
shares, if any, which, as of the effective date of this Plan or thereafter, are
available or become available for award under the Company's 1991 Stock Option
Plan and the 1995 Key Employee Restricted Stock Plan); provided, however, that
in no event shall the number of shares of Restricted Stock to be awarded either
as Service Awards or Performance Awards under this Plan exceed 600,000.
3.2 LIMITATION OF SHARES. For purposes of the limitations specified in
Section 3.1, the following principles apply: (a) a decrease in the number of
shares which thereafter may be issued or transferred for purpose of Section 3.1
shall result from (i) the delivery of shares of Common Stock upon exercise of a
Stock Option or payment of cash in settlement of a Limited Stock Appreciation
Right in any manner, and (ii) the
6
<PAGE> 42
expiration of all applicable restrictions on Restricted Stock or the conversion
of Restricted Stock to stock units under Section 9.5; (b) shares of Common Stock
with respect to which Stock Options and Limited Stock Appreciation Rights
expire, are canceled without being exercised, or are otherwise terminated may be
regranted under this Plan; and (c) if any shares of Common Stock related to an
Award are not issued or, for any reason, cease to be issuable or are forfeited,
such shares of Common Stock shall no longer be charged against the limitation
provided for in Section 3.1 and shall be available again for grant of Awards.
3.3 SHARES AVAILABLE. At the discretion of the Board or the Committee,
the shares of Common Stock to be delivered under this Plan shall be made
available either from authorized and unissued shares of Common Stock or shares
of Common Stock controlled by the Company, or both; provided, however, that
absent such determination by the Board or the Committee to the contrary, in
whole or in part, the shares shall consist of the Company's authorized but
unissued Common Stock.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.1 COMMITTEE. The Plan generally shall be administered by the
Organization and Compensation Committee of the Board, or such other Board
committee as may be designated by the Board to administer the Plan, subject to
this Article IV. The Committee shall consist of two or more Directors. The
members of the Committee shall serve at the pleasure of the Board, which shall
have the power, at any time and from time to time, to remove members from the
Committee or to add members thereto. Vacancies on the Committee, however caused,
shall be filled by action of the Board. In appointing members of the Committee,
the Board may consider whether a member is or will qualify as a "Non-Employee
Director" within the meaning of Rule 16b-3(b)(3) under the Exchange Act and an
"outside director" within the meaning of
7
<PAGE> 43
Treasury Regulation 1.62-27(e)(3) under Code Section 162(m), but such members
are not required to so qualify at the time of appointment or during their term
of service on the Committee. At any time that a member of the Committee does not
so qualify, any action of the Committee relating to an award granted or to be
granted to a Participant who is then subject to Section 16 of the Exchange Act
in respect of the Company, or relating to an award intended by the Committee to
constitute "performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder, may be taken either (i) by a subcommittee,
designated by the Committee, composed solely of two or more Directors who so
qualify as a "Non-Employee Director" or "outside director" (whichever may
apply), or (ii) by the Committee but with each such member who does not so
qualify as a "Non-Employee Director" or "outside director" (whichever may apply)
abstaining or recusing himself or herself from such action, provided that at
least two Directors serving on the Committee remain qualified to act. Such
action, authorized by such a subcommittee or by the Committee upon the
abstention or recusal of such non-qualified member(s), shall be the action of
the Committee for purposes of the Plan. The foregoing notwithstanding, the Board
may perform any function of the Committee under the Plan, including transactions
with respect to Directors. In any case in which the Board is performing a
function of the Committee under the Plan, each reference to the Committee herein
shall be deemed to refer to the Board, except where the context otherwise
requires.
4.2 POWERS. The Committee has discretionary authority to determine the
Employees and Directors to whom, and the time or times at which, Awards shall be
granted. The Committee also has authority to determine the amount of shares of
Common Stock that shall be subject to each Award and the terms, conditions, and
limitations of each Award, subject to the express provisions of this Plan. The
Committee shall have the discretion to interpret this Plan and to make all other
determinations necessary for Plan administration. The Committee has authority to
prescribe, amend and rescind any rules and regulations relating to this Plan,
subject to the express provisions of this Plan. All Committee interpretations,
determinations, and
8
<PAGE> 44
actions shall be in the sole discretion of the Committee and shall be binding on
all parties. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any Agreement in the manner and
to the extent it shall deem expedient to carry it into effect, and it shall be
the sole and final judge of such expediency.
4.3 AGREEMENTS. Awards shall be evidenced by an Agreement and may
include any terms and conditions not inconsistent with this Plan, as the
Committee may determine.
4.4 NO LIABILITY. No member of the Board, the Committee or any of its
delegates shall be liable for any action or determination made in good faith
with respect to this Plan, any Award or any Agreement.
ARTICLE V
ELIGIBILITY
5.1 PARTICIPATION. Participants shall be selected by the Committee
from the Employees and Directors. Such designation may be by individual or by
class.
5.2 INCENTIVE STOCK OPTION ELIGIBILITY. A Director shall not be
eligible for the grant of an Incentive Stock Option. In addition, no Employee
shall be eligible for the grant of an Incentive Stock Option who owns (within
the meaning of Section 422(b) of the Code), or would own immediately before the
grant of such Incentive Stock Option, directly or indirectly, stock possessing
more than 10 percent of the total combined voting power of all classes of stock
of the Company or any Subsidiary.
5.3 LIMIT ON AWARDS. Awards granted to any Employee shall not exceed
in the aggregate during any calendar year (a) 125,000 Stock Options (with or
without tandem Limited Rights and inclusive of any Limited Rights granted
pursuant to Section
9
<PAGE> 45
11.2) and (b) 5,000 shares of Restricted Stock (subject in each case to
adjustment as provided in Article XI).
ARTICLE VI
FORMS OF AWARDS
6.1 AWARD ELIGIBILITY. The forms of Awards under this Plan are Stock
Options as described in Article VII, Limited Stock Appreciation Rights as
described in Article VIII, and Restricted Stock as described in Article IX. The
Committee may, in its discretion, permit holders of Awards under this Plan to
surrender outstanding Awards in order to exercise or realize the rights under
other Awards, or in exchange for the grant of new Awards or require holders of
Awards to surrender outstanding Awards as a condition precedent to the grant of
new Awards.
ARTICLE VII
STOCK OPTIONS
7.1 EXERCISE PRICE. The exercise price of Common Stock under each
Stock Option shall be not less than 100 percent of the Fair Market Value of the
Common Stock on the Date of Grant.
7.2 TERM. Stock Options may be exercised as determined by the
Committee, provided that Incentive Stock Options may in no event be exercised
later than 10 years from the Date of Grant or granted later than 10 years from
the date of adoption of this Plan. During the Participant's lifetime, only the
Participant may exercise an Incentive Stock Option. The Committee may amend the
terms of an Incentive Stock Option at any time to include provisions that have
the effect of changing such Incentive Stock Option to a Non-qualified Stock
Option, or vice versa (to the extent any such change is permitted by applicable
law).
10
<PAGE> 46
7.3 METHOD OF EXERCISE. Upon the exercise of a Stock Option, the
exercise price shall be payable in full in cash or an equivalent acceptable to
the Committee. No fractional shares shall be issued pursuant to the exercise of
a Stock Option, and no payment shall be made in lieu of fractional shares. At
the discretion of the Committee and provided such payment can be effected
without causing the Participant to incur liability under Section 16(b) of the
Exchange Act, the exercise price may be paid by assigning and delivering to the
Company shares of Common Stock or a combination of cash and such shares equal in
value to the exercise price. Any shares so assigned and delivered to the Company
in payment or partial payment of the exercise price shall be valued at the
closing market price of the Common Stock on the principal exchange or in such
other principal market on which the Common Stock is trading on the exercise
date. In addition, at the request of the Participant and to the extent permitted
by applicable law, the Company in its discretion may selectively approve
arrangements with a brokerage firm under which such brokerage firm, on behalf of
the Participant, shall pay to the Company the exercise price of the Stock
Options being exercised, and the Company, pursuant to an irrevocable notice from
the Participant, shall promptly deliver the shares being purchased to such firm.
7.4 LIMITATION OF INCENTIVE STOCK OPTIONS. With respect to Incentive
Stock Options, the aggregate Fair Market Value (determined at the Date of Grant)
of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year (under
all stock option plans of the Company and its Subsidiaries) shall not exceed
$100,000, or such other amount as may be prescribed under the Code. If any Stock
Option intended to be an Incentive Stock Option fails to so qualify, including
under the requirement set forth in this Section 7.4, such Stock Option shall be
deemed to be a Non-qualified Stock Option and shall be exercisable in accordance
with the Plan and the Stock Option's terms.
11
<PAGE> 47
ARTICLE VIII
LIMITED STOCK APPRECIATION RIGHTS
8.1 GRANT. The grant of Limited Stock Appreciation Rights under this
Plan shall be subject to the terms and conditions of this Article VIII and shall
contain such additional terms and conditions, not inconsistent with the express
provisions of this Plan, as the Committee shall deem desirable. A Limited Right
is a stock appreciation right which is effective only upon a Change in Control
(as defined in Section 2.4) and is payable only in cash. The amount of payment
to which any grantee of such a Limited Right shall be entitled upon exercise
shall be equal to the difference between the exercise price per share of any
Common Stock covered by a Stock Option in connection with, whether or not in
tandem, such Limited Right and the "Market Price" of a share of Common Stock.
For purposes of this Section 8.1, the term "Market Price" shall mean the greater
of (i) the highest price per share of Common Stock paid in connection with the
Change in Control and (ii) the highest price per share of Common Stock reflected
in the NYSE Transactions Report during the sixty day period prior to the Change
in Control. If the Limited Rights are exercised, the tandem Stock Options shall
cease to be exercisable to the extent of the Common Stock with respect to which
such Limited Rights are exercised.
ARTICLE IX
RESTRICTED STOCK
9.1 TYPES OF AWARD. The Committee, in its discretion, is authorized to
grant Awards of Restricted Stock either as Service Awards or Performance Awards.
As used herein, the term "Service Award" refers to any Award of Restricted Stock
described in Section 9.2 and the term "Performance Award" refers to any Award of
Restricted Stock described in Section 9.3. Restricted Stock shall be
nontransferable until such time as all of the restrictions underlying the Award
have been satisfied.
12
<PAGE> 48
9.2 SERVICE AWARD. The Committee may grant shares of Restricted Stock
to a Participant subject to the Participant's continuous, uninterrupted service
with the Company or a Subsidiary for a period (which shall not be less than one
year) specified by the Committee.
9.3 PERFORMANCE AWARD. The Committee may grant Restricted Stock to a
Participant upon the attainment of a Performance Objective as follows: No later
than ninety (90) days after the commencement of each fiscal year of the Company,
the Committee, in its sole discretion, may establish (a) a Performance Award
target for a Participant for such fiscal year and (b) with respect to such
Participant one or more Performance Objectives to be satisfied prior to the
Participant's becoming entitled to a Performance Award for such fiscal year. Any
Performance Objective shall be comprised of specified annual corporate, business
group or divisional levels of one or more of the following performance criteria:
earnings per share; net earnings; pretax earnings; operating income; net sales;
market share; balance sheet measurements; cash return on assets; book value;
shareholder return, or return on average common equity. In establishing the
level of Performance Objective to be attained, the Committee may disregard or
offset the effect of such factors as extraordinary and/or nonrecurring items as
determined by the Company's outside accountants in accordance with generally
accepted accounting principles and changes in accounting standards as may be
required by the Financial Accounting Standards Board. Performance Awards may
also be granted in the sole discretion of the Committee, when the Company's
performance, as measured by one or more of the criteria enumerated in this
Section 9.3, as compared to peer companies, equals or exceeds an objective
target established by the Committee not later than ninety (90) days after the
commencement of the fiscal year for which the Award is to be granted. No
Performance Award shall be made to a Participant for a fiscal year prior to
written certification by the Committee of attainment of the Performance
Objective(s) applicable to such Participant. Notwithstanding attainment of the
applicable Performance Objective or any provisions of this Plan to the contrary,
the Committee shall have the power, in its sole discretion, to (a) exercise
13
<PAGE> 49
negative discretion to reduce the Performance Award to a Participant for any
fiscal year to zero or such other amount as it shall determine and (b) impose
service requirements which must be fulfilled by the Participant subsequent to
the attainment of the Performance Objective.
9.4 DELIVERY. If a Participant, with respect to a Service Award,
continuously remains in the employ of the Company or a Subsidiary for the period
specified by the Committee, or, with respect to a Performance Award, fulfills
the requirements of the Performance Objective and any service requirements as
may be imposed by the Committee, the shares awarded to such Participant shall be
delivered to such Participant without any restrictions promptly after the
applicable event. The foregoing notwithstanding, the Committee may determine
that the restricted period shall be deemed to end or have ended on an
accelerated basis at the time of the Participant's death while employed or
serving as a director or upon the Participant's termination of employment or
service due to disability or following a Change in Control.
9.5 SHAREHOLDER RIGHTS. Except as otherwise provided in this Plan,
each Participant shall have, with respect to all shares of Restricted Stock, all
the rights of a shareholder of the Company, including the right to vote the
Restricted Stock; provided, however, that all distributions payable with respect
to the Restricted Stock shall be retained by the Company and reinvested in
additional shares of Common Stock to be issued in the name of the Participant.
Any shares of Common Stock acquired as a result of reinvestment of such
distributions shall also be Restricted Stock subject to the terms and conditions
of this Plan.
9.6 DEFERRAL OF RECEIPT. The Committee may, in its sole discretion,
permit Participants to convert their Restricted Stock into an equivalent number
of stock units as of the date on which all applicable restrictions pertaining to
the Restricted Stock would either lapse or be deemed satisfied (the "Vesting
Date"). Any such request for conversion must (a) be made by the Participant at
least six months prior to the Vesting
14
<PAGE> 50
Date and (b) specify a deferral date which is no earlier than the earlier of (i)
the Participant's termination of employment or (ii) the first anniversary of the
Vesting Date. A "stock unit" shall equal in value one share of Common Stock and
shall be payable by the Company in cash or by delivery of a share, as determined
by the Committee. Until paid to a Participant, all stock units shall represent
unfunded and unsecured obligations of the Company with respect to which a
Participant would have rights no greater than those of a general creditor. Stock
units may also be increased by the crediting of dividend equivalents, whereby
each stock unit is credited with an amount equal to, and at the time of, the
dividend paid on one share of Common Stock and the aggregate amount of such
deemed dividends is treated as reinvested in shares of Common Stock at Fair
Market Value.
ARTICLE X
FORFEITURE AND EXPIRATION OF AWARDS
10.1 TERMINATION OF EMPLOYMENT OR SERVICE. Subject to the express
provisions of this Plan and the terms of any applicable Agreement, the
Committee, in its discretion, may provide for the forfeiture or continuation of
any Award for such period and upon such terms and conditions as are determined
by the Committee in the event that a Participant ceases to be an Employee or
Director. In the absence of Committee action or except as otherwise provided in
an Agreement, the following rules shall apply:
(a) with respect to Stock Options granted to Employees, in the event
of Retirement, the Stock Options shall continue to vest according to the
original schedule, but no Stock Options may be exercised after the expiration of
the earlier of the remaining term of such Stock Options or 36 months (12 months
in the case of Incentive Stock Options) following the date of Retirement; in the
event of permanent and total disability, the Stock Options shall continue to
vest according to the original schedule, but no Stock Options may be exercised
after the expiration of the earlier of the remaining term of such Stock Option
or 12 months following the date of permanent and
15
<PAGE> 51
total disability; in the event of death, Stock Options held at the time of death
by the Participant may be exercised by the estate or beneficiary of such
Participant until the expiration of the earlier of the remaining term of such
Stock Options or three years from the date of death; in the event of the
Participant's voluntary separation of employment, the Stock Options shall
terminate and be forfeited as of the date of separation of employment; in the
event of the Participant's involuntary separation of employment, the Stock
Option shall be exercisable until the end of the period of the Participant's
receipt of installments of severance pay, if any, from the Company; in the event
of an involuntary separation of employment without severance pay or if severance
pay is paid in a lump sum, the Stock Options shall not be exercisable after the
date of separation of employment;
(b) with respect to Limited Rights granted to Employees, in the event
of Retirement or permanent and total disability, the Limited Rights shall
continue in effect for six months following separation of service, and such
Limited Rights may be exercised during such six month period; in the event of
the Participant's death or voluntary separation of service, the Limited Rights
shall terminate as of the date of separation from employment; provided that
Limited Rights pursuant to Section 8.1 may be exercised in accordance with their
terms by the holder thereof who separated from employment following a Change in
Control, without respect to the separation of employment of such holder; and
(c) with respect to Restricted Stock granted to Employees, in the
event of a Participant's voluntary or involuntary separation before the
expiration of the employment period specified by the Committee, with respect to
Service Awards, or before the fulfillment of the Performance Objective and any
other restriction imposed by the Committee, with respect to Performance Awards,
the shares of Restricted Stock shall be returned to the Company and shall be
deemed to have been forfeited by the Participant as of the date of such
separation.
10.2 LEAVE OF ABSENCE. With respect to an Award, the Committee may, in its
sole discretion, determine that any Participant who is on leave of absence for
any
16
<PAGE> 52
reason shall be considered to still be in the employ of the Company, provided
that rights to such Award during a leave of absence shall be limited to the
extent to which such rights were earned or vested when such leave of absence
began.
ARTICLE XI
ADJUSTMENT PROVISIONS
11.1 SHARE ADJUSTMENTS. If the number of outstanding shares of Common
Stock is increased, decreased, or exchanged for a different number or kind of
shares or other securities, or if additional, new, or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, through merger, consolidation, sale of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other distribution with
respect to such shares of Common Stock or other securities, an appropriate
adjustment in order to preserve the benefits or potential benefits intended to
be made available to the Participants may be made, in the discretion of the
Committee, in all or any of the following (i) the maximum number and kind of
shares provided in Section 3.1 and the number of Awards that may be granted to
an employee in the specified period under Section 5.3; (ii) the number and kind
of shares or other securities subject to then outstanding Awards; and (iii) the
price for each share or other unit of any other securities subject to then
outstanding Awards. The Committee may also make any other adjustments, or take
such action as the Committee, in its discretion, deems appropriate in order to
preserve the benefits or potential benefits intended to be made available to the
Participants. Any fractional share resulting from such adjustment may be
eliminated.
11.2 CORPORATE CHANGES. Subject to Article XIII, upon (i) the
dissolution or liquidation of the Company; (ii) a reorganization, merger, or
consolidation (other than a merger or consolidation effecting a reincorporation
of the Company in another state or
17
<PAGE> 53
any other merger or consolidation in which the shareholders of the surviving
Company and their proportionate interests therein immediately after the merger
or consolidation are substantially identical to the shareholders of the Company
and their proportionate interests therein immediately prior to the merger or
consolidation) of the Company with one or more corporations, following which the
Company is not the surviving Company (or survives only as a subsidiary of
another Company in a transaction in which the shareholders of the parent of the
Company and their proportionate interests therein immediately after the
transaction are not substantially identical to the shareholders of the Company
and their proportionate interests therein immediately prior to the transaction);
(iii) the sale of all or substantially all of the assets of the Company; or (iv)
the occurrence of a Change in Control, subject to the terms of any applicable
Agreement, the Committee serving prior to the date of the applicable event may,
to the extent permitted in Section 3.1 of this Plan, in its discretion and
without obtaining shareholder approval, take any one or more of the following
actions with respect to any Participant:
(a) accelerate the exercise dates of any or all outstanding Awards;
(b) grant Limited Rights to holders of outstanding Stock Options;
(c) eliminate any and all restrictions with respect to outstanding
Restricted Stock;
(d) pay cash to any or all holders of Stock Options in exchange for
the cancellation of their outstanding Stock Options and cash out all outstanding
stock units;
(e) grant new Awards to any Participants; or
(f) make any other adjustments or amendments to outstanding Awards or
determine that there shall be substitution of new Awards by such successor
employer Company or a parent or subsidiary company thereof, with appropriate
adjustments as to the number and kind of shares or units subject to such awards
and prices.
11.3 BINDING DETERMINATION. Adjustments under Sections 11.1 and 11.2
shall be made by the Committee, and its determination as to what adjustments
shall be made and the extent thereof shall be final, binding, and conclusive.
18
<PAGE> 54
ARTICLE XII
GENERAL PROVISIONS
12.1 NO RIGHT TO EMPLOYMENT. Nothing in this Plan or in any instrument
executed pursuant to this Plan shall confer upon any Participant any right to
continue in the employ of the Company or a Subsidiary or affect the Company's or
a Subsidiary's right to terminate the employment of any Participant at any time
with or without cause or any right to continue to serve as a Director of the
Company or affect any party's right to remove such Participant as a Director.
12.2 SECURITIES REQUIREMENTS. The Company shall not be obligated to
issue or transfer shares of Common Stock pursuant to an Award unless all
applicable requirements imposed by federal and state laws, regulatory agencies,
and securities exchanges upon which the Common Stock may be listed have been
fully complied with. As a condition precedent to the issuance of shares pursuant
to the grant or exercise of an Award, the Company may require the Participant to
take any reasonable action to meet such requirements.
12.3 NO RIGHT TO STOCK. No Participant and no beneficiary or other
person claiming under or through such Participant shall have any right, title,
or interest in any shares of Common Stock allocated or reserved under this Plan
or subject to any Award except as to such shares of Common Stock, if any, that
have been issued or transferred to such Participant.
12.4 WITHHOLDING. The Company or a Subsidiary, as appropriate, shall
have the right to deduct from all Awards paid in cash any federal, state, or
local taxes as required by law to be withheld with respect to such cash
payments. In the case of Awards paid in Common Stock, the Participant or other
person receiving such Common Stock may be required to pay to the Company or a
Subsidiary, as appropriate, the amount of any such taxes which the Company or
Subsidiary is required to withhold with
19
<PAGE> 55
respect to such Common Stock. Also, at the discretion of the Committee and
provided such withholding can be effected without causing the Participant to
incur liability under Section 16(b) of the Exchange Act, the Participant may (i)
direct the Company or Subsidiary to withhold from the shares of Common Stock to
be issued or transferred to the Participant the number of shares necessary to
satisfy the Company's or Subsidiary's obligation to withhold taxes, such
determination to be based on the shares' Fair Market Value as of the date on
which tax withholding is to be made, (ii) deliver sufficient shares of Common
Stock (based upon the Fair Market Value at the date of withholding) to satisfy
the withholding obligations, or (iii) deliver sufficient cash to satisfy the
withholding obligations. Participants who elect to use such a stock withholding
feature must make the election at the time and in the manner prescribed by the
Committee.
12.5 NO DISPOSITION. No Award under this Plan may be the subject of
any Disposition (excluding shares of Common Stock with respect to which all
restrictions have lapsed), other than by will or the laws of descent or
distribution. Any attempted Disposition in violation of this provision shall be
void and ineffective for all purposes. Notwithstanding the foregoing, the
Committee may, in its sole discretion, permit a Participant to transfer a
Non-qualified Stock Option (and any related limited right) to (a) a member or
members of the Participant's immediate family, (b) a trust, the beneficiaries of
which consist exclusively of members of the Participant's immediate family, (c)
a partnership, the partners of which consist exclusively of members of the
Participant's immediate family, or (d) any similar entity created for exclusive
benefit of members of the Participant's immediate family.
12.6 SEVERABILITY; CONSTRUCTION. If any provision of this Plan is held
to be illegal or invalid for any reason, then the illegality or invalidity shall
not affect the remaining provisions hereof, but such provision shall be fully
severable and this Plan shall be construed and enforced as if the illegal or
invalid provision had never been
20
<PAGE> 56
included herein. Headings and subheadings are for convenience only and not to be
conclusive with respect to construction of this Plan.
12.7 GOVERNING LAW. All questions arising with respect to the
provisions of this Plan shall be determined by application of the laws of the
Commonwealth of Pennsylvania, except as may be required by applicable federal
law.
12.8 OTHER DEFERRALS. The Committee may permit selected Participants
to elect to defer payment of Awards in accordance with procedures established by
the Committee including, without limitation, procedures intended to defer
taxation on such deferrals until receipt (including procedures designed to avoid
incurrence of liability under Section 16(b) of the Exchange Act). Any deferred
payment, whether elected by the Participant or specified by an Agreement or by
the Committee, may require forfeiture in accordance with stated events, as
determined by the Committee.
ARTICLE XIII
AMENDMENT AND TERMINATION
13.1 AMENDMENTS; SUSPENSION; TERMINATION. The Board may at any time
amend, suspend (and if suspended, may reinstate) or terminate this Plan;
provided, however, that after the shareholders have approved this Plan in
accordance with Section 14.1, the Board may not, without approval of the
shareholders of the Company, amend this Plan so as to (a) increase the number of
shares of Common Stock subject to this Plan except as permitted in Article XI or
(b) reduce the exercise price for shares of Common Stock covered by Stock
Options granted hereunder below the applicable price specified in Article VII of
this Plan; and provided further, that the Board may not modify, impair or cancel
any outstanding Award in a manner that materially and adversely affects a
Participant without the consent of such Participant.
21
<PAGE> 57
ARTICLE XIV
DATE OF PLAN ADOPTION
14.1 DATE OF PLAN ADOPTION. This Plan has been adopted by the Board
effective December 3, 1996, subject to shareholder approval. Options may be
granted under the Plan prior to such shareholder approval, but if the requisite
shareholder approval is not obtained, then the Plan shall become null and void
ab initio and of no further force or effect and such Awards shall be canceled.
This Plan shall continue in effect with respect to Awards granted before
termination of this Plan and until such Awards have been settled, terminated or
forfeited.
22
<PAGE> 58
VF CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints M.J. McDonald and L.R. Pugh, and each
of them, proxies of the undersigned, with power of substitution, to represent
and vote, as directed on the reverse side of this card, all shares of Common
Stock of VF Corporation held of record by the undersigned on February 24, 1997,
at the Annual Meeting of Shareholders of VF Corporation to be held on April 15,
1997, and at any adjournments thereof, and, in their discretion, upon such other
matters not specified as may come before said meeting.
ELECTION OF DIRECTORS Change of Address and Comments
-------------------------------------
Nominees: -------------------------------------
For a 2-year term: William E. Pike -------------------------------------
-------------------------------------
For a 3-year term: Robert J. Hurst -------------------------------------
M. Rust Sharp -------------------------------------
L. Dudley Walker (If you have written in the above
space, please mark the corresponding
box on the reverse side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND SEE REVERSE
RETURN THIS CARD. SIDE
<PAGE> 59
PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS
AND FOR APPROVAL OF THE 1996 STOCK COMPENSATION PLAN.
- -------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES AND FOR PROPOSAL 1
- -------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors. 2. PROPOSAL 1 -- [ ] [ ] [ ]
Approval of the 1996
FOR WITHHELD Stock Compensation
[ ] [ ] Plan.
FOR, except vote withheld from
the following nominee(s):
______________________________ Change of Address/
Comments on Reverse Side
PLEASE SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE REQUIRED IF MAILED IN THE UNITED
STATES.
NOTE: Please sign name(s) exactly as
printed hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give full
title as such.
---------------------------------------
---------------------------------------
SIGNATURE(S) DATE
<PAGE> 60
VOTING REQUEST
TO: VF CORPORATION PENSION PLAN COMMITTEE (THE "COMMITTEE"), ADMINISTRATOR
OF THE VF EXECUTIVE DEFERRED SAVINGS PLAN (THE "PLAN")
As a participant in the Plan with certain Basic and/or Matching
Deferrals being credited with gains and losses as if invested in the VF
Corporation Stock Fund, and in accordance with the Committee's procedures
permitting each such participant the right to request that the VF shares held by
the trustee of the grantor trust relating to the Plan and credited to the
participant's Plan account at the record date be voted in a specific manner, I
hereby request that my VF shares so credited be voted, in person or by proxy, in
the manner shown below:
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE FOR THE
ELECTION OF DIRECTORS.
Nominees: Robert J. Hurst, William E. Pike, M. Rust Sharp and L. Dudley Walker
VOTE FOR all nominees listed VOTE WITHHELD
[ ] above, except vote withheld from [ ] from all nominees
individual nominees as follows: follows (if any):
--------------------------
--------------------------
PROPOSAL 1 - APPROVAL OF 1996 STOCK COMPENSATION PLAN
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE FOR
APPROVAL OF THE 1996 STOCK COMPENSATION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I understand that if I return this form properly signed but do not
otherwise specify my choices, this will be deemed to be a request to vote FOR
the Election of Directors and FOR the 1996 Stock Compensation Plan. I further
understand that this Committee, pursuant to its discretionary powers under the
Plan, may reject this request and direct the trustee to vote the shares in a
contrary manner.
Signature of Participant:
- -----------------------------
Dated: __________________, 1997
PLEASE SIGN, DATE AND RETURN
THESE INSTRUCTIONS PROMPTLY
IMPORTANT: Please sign and date IN THE ENCLOSED ENVELOPE. NO
these instructions exactly as your POSTAGE REQUIRED IF MAILED IN
name appears hereon. THE UNITED STATES.
<PAGE> 61
[VF LOGO]
March 10, 1997
To All Participants in the Tax-Advantaged Savings Plan:
The Annual Meeting of Shareholders of VF Corporation will be held in
Wyomissing, Pennsylvania on April 15, 1997. As a participant in the VF
Tax-Advantaged Savings Plan for Salaried Employees (the "Plan"), you have a
right to vote, through the Plan's Trustee, all shares standing to your credit in
the Trust on February 24, 1997, the record date for voting at this year's Annual
Meeting of Shareholders.
Enclosed with this letter is the 1996 Annual Report of VF Corporation;
the Proxy Statement, which describes the matters to be voted upon at the Annual
Meeting; a Voting Instruction Card, which will permit you to vote the shares
allocated to your account in the Plan; and a stamped, pre-addressed return
envelope. You may exercise your right to vote by specifying your choices on the
enclosed Voting Instruction Card and by signing and forwarding the Card to the
Trustee in the enclosed envelope. The return envelope needs no postage if mailed
in the United States. Your vote will be tabulated by UMB Bank, N.A., Trustee for
the Plan, and voted by the Trustee, thereby preserving the confidentiality of
your vote.
Any shares of VF Corporation stock held by you as a shareholder apart
from the Tax-Advantaged Savings Plan should be voted by execution of a proxy.
If your Voting Instruction Card is not returned timely to the Trustee,
the shares allocated to your account will be voted by the Trustee in the same
proportion as the shares with respect to which such instructions are received
from other participants in the Plan.
By Order of the Board of Directors
L. M. Tarnoski
Vice President-Secretary
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO SIGN, DATE AND PROMPTLY
RETURN YOUR INSTRUCTIONS IN THE ENCLOSED ENVELOPE.
<PAGE> 62
[FRONT]
VOTING INSTRUCTION CARD
VF CORPORATION
INSTRUCTIONS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VF
CORPORATION FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO: UMB Bank, N.A.,
Trustee for the VF Corporation Tax-Advantaged Savings Plan for
Salaried Employees (the "Plan")
The undersigned hereby instructs the Trustee to vote, in person or by
proxy, the Common and/or Series B ESOP Convertible Preferred Stock held by it
and credited to my account under the Plan at the 1997 Annual Meeting of
Shareholders of VF Corporation to be held on April 15, 1997, and at any
adjournments thereof.
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE FOR THE
ELECTION OF DIRECTORS.
Nominees:
For a 2-year term: William E. Pike
For a 3-year term: Robert J. Hurst, M. Rust Sharp and L. Dudley Walker
VOTE FOR all nominees listed VOTE WITHHELD from all
above, except vote withheld nominees.
from individual nominees as
follows (if any):
------------------------------
------------------------------
PROPOSAL 1 - APPROVAL OF THE 1996 STOCK COMPENSATION PLAN
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE FOR
APPROVAL OF THE 1996 STOCK COMPENSATION PLAN.
FOR AGAINST ABSTAIN
(Continued and to be signed on reverse)
<PAGE> 63
(Continued from the other side)
These instructions when properly executed and received timely by the
Trustee will be followed by the Trustee in voting the shares of Common and/or
Series B ESOP Convertible Preferred Stock held by it and credited to the account
of the undersigned participant. If you return this card properly signed but do
not otherwise specify your choices, shares will be voted FOR the Election of
Directors and FOR approval of the 1996 Stock Compensation Plan. If you do not
return this card timely, your shares will be voted by the Trustee in the same
proportion as the shares with respect to which such instructions are received
from other participants in the Plan.
Signature of Participant:
- --------------------------------
Dated: _____________________, 1997
IMPORTANT: Please sign and date these
instructions exactly as your name appears
hereon.
PLEASE SIGN, DATE AND RETURN THESE
INSTRUCTIONS PROMPTLY IN THE ENCLOSED
ENVELOPE. NO POSTAGE REQUIRED IF
MAILED IN THE UNITED STATES.
