SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION
Proxy Statement Pursuant to Section 14(a) OF THE SECURITIES
EXCHANGE ACT OFof the Securities
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VF CORPORATION
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(NameCorporation
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[VF CORPORATION LOGO]
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VF CORPORATION
March 21, 2002
20, 2003
Dear Shareholder:
The Annual Meeting of Shareholders of VF Corporation will be held on Tuesday, April 23, 2002,22, 2003, at the O.Henry Hotel, Caldwell Room, 626624 Green Valley Road, Greensboro, North Carolina, 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 (i) elect four directors; (ii) approve the amended and restated Executive Incentive Compensation Plan (the “EIC Plan Proposal”); (iii) ratify the selection of PricewaterhouseCoopers LLP as VF'sVF’s independent accountants for fiscal 2002; (iii)2003; (iv) consider twoa shareholder proposalsproposal if properly presented to the meeting; and (iv)(v) consider such other matters as may properly come before the meeting.
Your Board of Directors recommends a vote FOR the election of the persons nominated to serve as directors, FOR the EIC Plan Proposal, FOR the selection of PricewaterhouseCoopers LLP as VF'sVF’s independent accountants, and AGAINST the two shareholder proposals.proposal. 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 may vote in person at the Annual Meeting or you may vote your shares via the Internet, via a toll-free telephone number, or by signing, dating and mailing the enclosed proxy card in the postage-paid envelope provided, as explained on page 1 of the attached proxy statement.
Your interest and participation in the affairs of VF are most appreciated.
Sincerely,
/s/ Mackey J. McDonald
Mackey J. McDonald
Chairman, President and
Chief Executive Officer
[VF CORPORATION LOGO]
| Sincerely, | |
| /s/ Mackey J. McDonald | |
| Mackey J. McDonald | |
| Chairman, President and | |
| Chief Executive Officer |
VF CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 21, 2002
20, 2003
To the Shareholders of VF CORPORATION:
The Annual Meeting of Shareholders of VF Corporation will be held at the O.Henry Hotel, Caldwell Room, 626624 Green Valley Road, Greensboro, North Carolina, on Tuesday, April 23, 2002,22, 2003, at 10:30 a.m., for the following purposes:
(1) to elect four directors to hold office until the 20052006 Annual Meeting of Shareholders;
(2) to ratifyapprove the selection of PricewaterhouseCoopers LLP as VF's
independent accountants for fiscal 2002;
amended and restated Executive Incentive Compensation Plan;
| (3) | to ratify the selection of PricewaterhouseCoopers LLP as VF’s independent accountants for fiscal 2003; |
(4) to consider twoa shareholder proposalsproposal if properly presented by the proponents;proponent; and
(4)
| (5) | to transact such other business as may properly come before the meeting and |
A copy of VF'sVF’s Annual Report for 20012002 is enclosed for your information.
Only shareholders of record as of the close of business on March 5, 20024, 2003 are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Candace S. Cummings
Vice President -- Administration,
General Counsel and Secretary
| By Order of the Board of Directors | |
| Candace S. Cummings | |
| Vice President — Administration, | |
| General Counsel and Secretary |
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO VOTE YOUR SHARES VIA THE INTERNET,
OUR TOLL-FREE TELEPHONE NUMBER OR BY SIGNING, DATING AND
PROMPTLY RETURNING YOUR PROXY IN THE ENCLOSED ENVELOPE.
You are urged to vote your shares via the Internet, through
TABLE OF CONTENTS
| Page | |||||
ABOUT THE | 1 | ||||
What is the purpose of the Meeting? | 1 | ||||
Who is entitled to vote at the Meeting? | 1 | ||||
What are the voting rights of shareholders? | 1 | ||||
How do shareholders vote? | 1 | ||||
What constitutes a quorum? | 2 | ||||
What are the Board’s recommendations? | 2 | ||||
What vote is required to approve each item? | 2 | ||||
Other Information | 3 | ||||
ITEM NO. 1 | 4 | ||||
CORPORATE GOVERNANCE AT VF | 7 | ||||
Corporate Governance | 7 | ||||
Board of Directors | 7 | ||||
Board Committees and Their Responsibilities | 8 | ||||
Directors’ Compensation | 9 | ||||
EXECUTIVE | 11 | ||||
COMPENSATION COMMITTEE | 11 | ||||
SUMMARY COMPENSATION | 15 | ||||
LONG-TERM INCENTIVE | 16 | ||||
EQUITY COMPENSATION PLAN INFORMATION TABLE | 18 | ||||
FUTURE | 19 | ||||
PERFORMANCE | 22 | ||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND | 23 | ||||
ITEM NO. 2 | 25 | ||||
ITEM NO. 3 — RATIFICATION OF SELECTION OF INDEPENDENT | 28 | ||||
ITEM NO. | 30 | ||||
OTHER | 32 | ||||
VF CORPORATION
PROXY STATEMENT
FOR THE 2002 ANNUAL MEETING OF SHAREHOLDERS
For the 2003 Annual Meeting of Shareholders
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of VF Corporation to be voted at VF'sVF’s Annual Meeting of Shareholders on April 23, 200222, 2003 and at any adjournment or adjournments of the meeting (the "Meeting"“Meeting”).
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE MEETING?
What is the purpose of the Meeting?
At the Meeting, holders of VF Common Stock and Series B ESOP Convertible Preferred Stock ("(“Series B Stock"ESOP Stock”) will act upon the matters described in the foregoing notice of the Meeting, including the election of four directors, approval of the amended and restated Executive Incentive Compensation Plan (the “EIC Plan Proposal”), ratification of the selection of PricewaterhouseCoopers LLP as VF'sVF’s independent accountants for fiscal 2002,2003, and consideration of twoa shareholder proposals,proposal if properly presented by the proponents.
WHO IS ENTITLED TO VOTE AT THE MEETING?proponent.
Who is entitled to vote at the Meeting?
Only shareholders of record on March 5, 2002,4, 2003, the record date for the Meeting, are entitled to receive notice of and vote at the Meeting.
WHAT ARE THE VOTING RIGHTS OF SHAREHOLDERS?
What are the voting rights of shareholders?
Each share of Common Stock is entitled to one vote and each share of Series B ESOP Stock is entitled to two votes.
HOW DO SHAREHOLDERS VOTE?
How do shareholders vote?
Shareholders may vote at the Meeting in person or by proxy. Proxies validly delivered by shareholders (by Internet, telephone or mail as described below) and received by VF prior to the Meeting will be voted in accordance with the instructions contained therein. If a shareholder'sshareholder’s proxy card gives no instructions, it will be voted in accordance with the recommendation of the Board of Directors. A shareholder may change any vote by proxy before the proxy is exercised by filing with the Secretary of VF either a notice of revocation or a duly executed proxy bearing a later date or by attending the Meeting and voting in person. Shareholders who vote by telephone or the Internet may also change their votes by re-voting by telephone or the Internet within the time periods listed below. A shareholder'sshareholder’s latest vote, including via the Internet or telephone, is the one that is counted.
There are three ways to vote by proxy:
1) BY INTERNET:
| 1) BY INTERNET:Visit the web site http://www.eproxyvote.com/vfc. |
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card. Telephone voting is accessible 24 hours a day, seven days a week,
UNTIL 11:59 p.m., Eastern Daylight Time, on April 22, 2002; or
3) BY MAIL: Mark your proxy/voting instruction card, date and sign
it, and return it in the postage-paid envelope provided. If the envelope is
missing, please address your completed proxy/voting instruction card to VF
Corporation, c/o EquiServe Trust Company, N.A., P.O. Box 8923, Edison, New
Jersey 08818-8923.
| 2) BY TELEPHONE: Call toll-free 1-877-PRXVOTE (1-877-779-8683). Shareholders outside of the U.S. and Canada should call 1-201-536-8073. To vote your shares, you must use the control number printed on your proxy/voting instruction card. Telephone voting is accessible 24 hours a day, seven days a week, UNTIL 11:59 p.m., Eastern Daylight Time, on April 21, 2003; or | |
| 3) BY MAIL: Mark your proxy/ voting instruction card, date and sign it, and return it in the postage-paid (US only) envelope provided. If the envelope is missing, please address your completed proxy/voting instruction card to VF Corporation, c/o EquiServe Trust Company, N.A., P.O. Box 8923, Edison, New Jersey 08818-8923. |
IF YOU VOTE BY INTERNET OR TELEPHONE, YOU NEED
What constitutes a quorum?
Shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast must be present at the Meeting in person or by proxy to constitute a quorum for the transaction of business. At the close of business on March 5, 2002,4, 2003, there were 111,753,273109,906,566 outstanding shares consisting of 110,275,343108,753,867 shares of Common Stock and 1,477,9301,152,699 shares of Series B ESOP Stock. WHAT ARE THE BOARD'S RECOMMENDATIONS?Holders of these outstanding shares are entitled to cast 111,059,265 votes at the Meeting.
What are the Board’s recommendations?
The Board recommends a vote FOR the election of the four nominees proposed for election as directors, FOR the EIC Plan Proposal, FOR the selection of PricewaterhouseCoopers LLP as VF'sVF’s independent accountants for fiscal 2002,2003, and AGAINST approval of each of
the shareholder proposals.proposal. If any other matters are brought before the Meeting, the proxy holders will vote as recommended by the Board of Directors. If no recommendation is given, the proxy holders will vote in their discretion. WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?At the date of this proxy statement, we do not know of any other matter to come before the Meeting.
What vote is required to approve each item?
The four nominees for election as directors who receive the greatest number of votes will be elected directors. Approval of the EIC Plan Proposal, approval of the ratification of the selection of PricewaterhouseCoopers LLP as VF'sVF’s independent accountants for fiscal 20022003, and approval of eachthe shareholder proposal each requires the affirmative vote of a majority of the votes cast on such matter at the Meeting. Shares of Common Stock and shares of Series B ESOP Stock will vote together as a single class. Withheld votes, abstentions and broker non-votes will not be taken into account in determining the outcome of the election of directors, approval of the EIC Plan Proposal, ratification of the selection of PricewaterhouseCoopers LLP as VF'sVF’s independent accountants for fiscal 2002,2003, or
the approval of eitherthe shareholder proposal.
OTHER INFORMATION
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Other Information
A copy of VF'sVF’s Annual Report for the fiscal year ended December 29, 2001January 4, 2003 accompanies this proxy statement. No material contained in the Annual Report is to be considered a part of the proxy solicitation material.
VF's
VF’s mailing address is P.O. Box 21488, Greensboro, North Carolina 27420. This proxy statement and the form of proxy/voting instruction card were first mailed or given to security holders on approximately March 21, 2002.
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ITEM NO. 1
ELECTION OF DIRECTORS
VF's
VF’s Board of Directors has nominated the four persons named below to serve as directors until the 20052006 Annual Meeting. The persons named in the accompanying form of proxy/voting instruction card intend to vote such proxy for the election as directors of the following nominees. If any nominee isbecomes unable to
serve or will notunwilling to serve as a director, the proxy holders will vote for such other person or persons as may be nominated by the Board of Directors. The nominees named below have indicated that they are willing to serve if reelected to the VF Board. The Board of Directors may fill vacancies in the Board, 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. VF's historic practice has been to requireIt is the policy of VF that a substantial majority of the members of its Board of Directors consist of directors who have never served as
employees of VF or its subsidiaries.should be independent. Currently, ten of eleven VFVF’s 12 directors meet
this standard. Ofhave been determined by the nominees for election as directors atBoard to be independent in accordance with the Meeting, only
Mr. McDonald has served as an employeecurrent Listing Standards of VF or its subsidiaries.
the New York Stock Exchange, the principal securities exchange on which VF’s Common Stock is traded.
| Year in Which | ||||||
| Service as a | ||||||
| Name | Principal Occupation | Director Began | ||||
| To Serve Until the 2006 Annual Meeting | ||||||
| Robert J. Hurst, | Vice Chairman, The Goldman Sachs Group, Inc. | 1994 | ||||
| W. Alan McCollough, | Chairman, President and Chief Executive Officer, Circuit City Stores, | 2000 | ||||
| M. Rust Sharp, | Of Counsel to Heckscher, Teillon, Terrill & Sager (Attorneys) | 1984 | ||||
| Raymond G. Viault, 58 | Vice Chairman, General Mills, Inc. | 2002 | ||||
Mr. Hurst is Vice Chairman and a member of the Board of Directors of The Goldman Sachs Group, Inc., an international investment banking and securities firm. Mr. Hurst was Vice Chairman of The Goldman Sachs Group, L.P., the predecessor of The Goldman Sachs Group, Inc., and served as its Head or Co-Head of Investment Banking from December 1990 to November 1999. VF maintains investment banking relations with Goldman Sachs. Since mid-December 2001,Most recently, Mr. Hurst has also served as the Chief Executive Officer of the 9/11 United Services Group, a recently-formedan organization to coordinatethat coordinates leading non-profit organizations and human services agencies for victims of the 9/11 tragedy. He is a member of the Executive Finance, and Nominating and GovernanceFinance Committees of the Board of Directors.
Mr. McCollough has served as Chairman, President and Chief Executive Officer of Circuit City Stores, Inc. since June 2000.2002. In June 2000, he was elected to the company’s board of directors and added the title of Chief Executive Officer. From 1997 to June 2000, he was President and Chief Operating Officer of Circuit City. From 1995 to 1997, he
served as Senior Vice President of Merchandising for Circuit City. He is a
member of the Board of Directors of Circuit City. Mr. McCollough is a member of the Audit Compensation, and Pension AdvisoryNominating and Governance Committees of the Board of Directors.
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Mr. Sharp has been Of Counsel to Heckscher, Teillon, Terrill & Sager, a law firm located in West Conshohocken, Pennsylvania, since May 1999. He was Of Counsel to Pepper Hamilton LLP, a national law firm headquartered in Philadelphia, Pennsylvania, from December 1996 until May 1999. Mr. Sharp is a member of the Executive, Compensation and CompensationPension Advisory Committees of the Board of Directors. (Also see Security“Security Ownership of Certain Beneficial Owners and Management.”)
Mr. Viault is Vice Chairman of General Mills, Inc. with responsibility for General Mills’ Meals, Baking Products, Pillsbury USA and Bakeries and Foodservice businesses. Mr. Viault joined General Mills as Vice Chairman in 1996. Mr. Viault also serves as a director of General Mills and of Newell Rubbermaid Inc., a consumer products company. He is a member of the Audit and Nominating and Governance Committees of the Board of Directors.
| Year in Which | ||||||
| Service as a | ||||||
| Name | Principal Occupation | Director Began | ||||
| Directors Whose Terms Expire at the 2005 Annual Meeting | ||||||
| Juan Ernesto de Bedout, 58 | President Latin American Operations, Kimberly-Clark Corporation | 2000 | ||||
| Ursula F. Fairbairn, 60 | Executive Vice President — Human Resources & Quality, American Express Company | 1994 | ||||
| Barbara S. Feigin, 65 | Consultant | 1987 | ||||
| Mackey J. McDonald, 56 | Chairman of the Board, President, and Chief Executive Officer of VF | 1993 | ||||
Mr. de Bedout has served as President of Latin American Operations for Kimberly-Clark Corporation, responsible for business units in Central and South America as well as the Caribbean, since 1998. He is a member of the Audit and Finance Committees of the Board of Directors.
Mrs. Fairbairn has served as Executive Vice President — Human Resources & Quality of American Express Company, a financial services company, since 1996. Mrs. Fairbairn also serves as a director of Air Products and Chemicals, Inc. and Sunoco, Inc. She is a member of the Executive and Compensation Committees of the Board of Directors and was a member of the Audit Committee until the Committee was reconstituted in February 2003 (Also see “Security Ownership of Certain Beneficial Owners and Management.”)
Mrs. Feigin has been a Consultant specializing in strategic marketing and branding since 1999. She served as Executive Vice President and Worldwide Director of Strategic Services of Grey Advertising Inc. from 1983 until her retirement from that position in 1999. Mrs. Feigin also serves as a director of Circuit City Stores, Inc. She is a member of the Nominating and Governance and Pension Advisory Committees of the Board of Directors.
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Mr. McDonald joined VF’s Lee division in 1983. He served in various managerial positions with VF’s subsidiaries until 1991 when he was named a VF Group Vice President. Mr. McDonald was elected President and a director of VF in 1993 and Chief Executive Officer in 1996. He has served as Chairman, President, and Chief Executive Officer of VF since 1998. He is a director of Wachovia Corporation, Hershey Foods Corporation, and, since November 2002, Tyco International Ltd. Mr. McDonald is Chairman of the Executive Committee and serves as anex officiomember of all other committees of the Board, except the Audit, Nominating and Governance and Compensation Committees of the Board of Directors.
| Year in Which | ||||||
| Service as a | ||||||
| Name | Principal Occupation | Director Began | ||||
| Directors Whose Terms Expire at the 2004 Annual Meeting | ||||||
| Robert D. Buzzell, 69 | Professor Emeritus, Harvard Business School | 1983 | ||||
| Edward E. Crutchfield, 61 | Retired; Former Chairman and Chief Executive Officer, First Union Corporation | 1992 | ||||
| George Fellows, 60 | Consultant to JPMorgan Partners | 1997 | ||||
| Daniel R. Hesse, 49 | Chairman, President and Chief Executive Officer, Terabeam Corporation | 1999 | ||||
Dr. Buzzell has been Professor Emeritus of Harvard Business School since 1993. He served as Distinguished Visiting Professor at Georgetown University from 1998 to 2001 and as a Distinguished Professor at the School of Business Administration of George Mason University from 1993 to 1998. Dr. Buzzell also serves as a director of Harleysville Group, Inc., a property and casualty insurance holding company. He is a member of the Finance and Pension Advisory Committees of the Board of Directors.
Mr. Crutchfield served as the Chairman and Chief Executive Officer of First Union Corporation, a banking and financial services company, from 1985 until his retirement in 2000. Mr. Crutchfield serves as a director of The Liberty Corp., a television broadcasting company. He is a member of the Executive, Compensation and Finance Committees of the Board of Directors.
Mr. Fellows has served as a Consultant to JPMorgan Partners and other private equity firms since 2000. He also serves as a member of The Listed Company Advisory Committee of the New York Stock Exchange. Previously, Mr. Fellows served as President and Chief Executive Officer of Revlon, Inc. and of Revlon Consumer Products Corporation from 1997 through 1999. He is a member of the Audit and Nominating and Governance Committees of the Board of Directors.
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Mr. Hesse has served as the Chairman, President and Chief Executive Officer of Terabeam Corporation, a telecommunications company, since March 2000. Previously, Mr. Hesse was President and Chief Executive Officer of AT&T Wireless Services. He also served as an Executive Vice President of AT&T. He is a member of the Finance and Compensation Committees of the Board of Directors.
CORPORATE GOVERNANCE AT VF
As provided by the Pennsylvania Business Corporation Law and VF’s By-Laws, VF’s business is managed under the direction of its Board of Directors. Members of the Board are kept informed of VF’s business through discussions with the Chairman, President and CEO and other officers, by reviewing materials provided to them and by participating in meetings of the Board and its committees. In addition, to promote open discussion among the non-employee directors, those directors meet in regularly scheduled executive sessions without management present.
Corporate Governance
VF’s Board of Directors has a long-standing commitment to sound and effective corporate governance practices. A foundation of VF’s corporate governance is the Board’s policy that a substantial majority of the members of the Board should be independent. This policy is included in the Board’s written Corporate Governance Principles, which, in addition to director independence, address a number of other important governance issues such as qualifications for Board membership; mandatory retirement for Board members at age 70; a requirement that directors submit their resignation for consideration upon a substantial change in principal occupation or business affiliation; Board leadership; committee responsibilities; authority of the Board to engage outside independent advisors as they deem appropriate; succession planning for the chief executive officer; and annual Board self-evaluation. In addition, the Board of Directors has for many years had in place formal charters setting forth the powers and responsibilities of each of its committees.
Management has reviewed internally and with the Board of Directors the provisions of the Sarbanes-Oxley Act of 2002, the related rules of the Securities and Exchange Commission and the proposed New York Stock Exchange Listing Standards regarding corporate governance policies and procedures. We believe that the Board’s Corporate Governance Principles and committee charters meet current requirements and substantially meet the proposed requirements. The Board of Directors intends to amend, to the extent necessary, its governance documents once final rules have been adopted.
Board of Directors
In accordance with VF’s By-Laws, the Board of Directors has set the number of directors at 12. Eleven of VF’s directors are non-employee directors. The Board believes that ten of VF’s 12 directors are “independent” directors, both as defined in the current Listing Standards of the New York Stock Exchange and under the standards of “independence” that would apply upon adoption of proposed amendments to the New York Stock Exchange Listing Standards.
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During 2002, VF’s Board of Directors held six meetings. Each member of the Board attended at least 75% of the total number of meetings of the Board and all committees on which he or she served.
Board Committees and Their Responsibilities
The Board has Executive, Audit, Finance, Nominating and Governance, Compensation and Pension Advisory Committees. The three Board committees listed below have primary responsibility for audit, nominating and governance and compensation matters. The Board has determined that each of the members of these committees is independent (as independence is defined in the current Listing Standards of the New York Stock Exchange). Each committee is governed by a written charter approved by the Board of Directors. Each committee is required to perform an annual self-evaluation and each committee may engage outside independent advisors as the committee deems appropriate.
Audit Committee:The Audit Committee’s charter was most recently approved by the Board of Directors in 2003. (See Appendix A to this proxy statement.) DIRECTORS' COMPENSATIONThe Audit Committee’s primary responsibility is to assist the Board in its responsibility to oversee management’s conduct of VF’s financial reporting process. Its duties include (1) selecting, subject to shareholder approval, the independent auditors for VF, (2) reviewing the scope of the audit to be conducted by the independent auditors, (3) meeting with the independent auditors concerning the results of their audit and the selection and disclosure of critical accounting policies, (4) reviewing with management and the independent auditor our annual and quarterly statements prior to filing them with the Securities and Exchange Commission, (5) overseeing the scope and adequacy of VF’s system of internal accounting controls and (6) preparing a report to shareholders annually for inclusion in the annual proxy statement. The Audit Committee is the principal liaison between the Board of Directors and the independent auditors for VF. As of the date of this proxy statement, the members of the committee are Messrs. Fellows (Chairman), de Bedout, McCollough and Viault. The committee held three meetings during 2002. The Board of Directors has determined that Messrs. Fellows, McCollough and Viault qualify as “audit committee financial experts” in accordance with the definition of “audit committee financial expert” set forth in the Instruction to Regulation S-K, Item 401(h)(1), of the Securities and Exchange Commission. Messrs. Fellows, McCollough and Viault acquired those attributes through actively overseeing a principal financial officer or principal accounting officer of a public company. Each of them has experience overseeing or assessing the performance of companies with respect to the evaluation of financial statements in their roles as chairman and chief executive officer or vice chairman of a public company. In addition to his service as vice chairman of General Mills, Mr. Viault acted as chief financial officer of General Mills for two years and currently serves on the audit committee of another public company. Mr. Fellows has served as chairman of the VF Audit Committee since 1998 and Mr. McCollough has served on the Committee since 2000.
Nominating and Governance Committee:The responsibilities of this committee include (1) screening potential candidates for director and recommending candidates to the Board of Directors, (2) recommending to the Board a succession plan for the Chairman of the Board and Chief Executive Officer, and (3) reviewing and recommending to the Board
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Compensation Committee:It is the responsibility of this committee to review VF’s compensation and benefit programs, to consider VF’s organizational structure, including management development and succession, except for the Chairman of the Board and Chief Executive Officer, 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 VF’s Chief Executive Officer and other executive officers, (2) setting performance goals under VF’s incentive compensation programs and (3) preparing a report to shareholders annually for inclusion in the annual proxy statement. The members of the committee are Mrs. Fairbairn (Chairman) and Messrs. Crutchfield, Hesse and Sharp. The committee held two meetings during 2002.
Directors’ Compensation
Each director other than Mr. McDonald receives an annual stipend of $28,000,$35,000, payable in equal monthlyquarterly installments, plus a fee of $1,200$1,000 for each Board meeting attended. Each director who serves on a committee is paid $1,000 for each meeting attended that is held on
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a day when a meeting of the Board is not convened and $500 for each meeting
attended that is held on a day when a meeting of the Board is convened.attended. Each director serving as chairman of a committee also receives an additional stipend of $200 for each committee meeting attended that 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.$5,000 per year. Each director is also paid $1,000 per day for special assignments in connection with Board or committee activity as designated by the Chairman of the Board. Travel and lodging expenses are reimbursed. Mr. McDonald, the only director who is also an employee of VF, does not receive any compensation in addition to his regular salary for attendance at meetings of the Board or any of its committees. Each director may elect to defer all or part of his or her stipend and fees into equivalent units of VF Common Stock under the VF Deferred Savings Plan for Non-Employee Directors. All Common Stock equivalent units receive dividend equivalents. Deferred sums, including Common Stock equivalent units, are payable in cash to the participant upon termination of service or such later date specified in advance by the participant. Seven directors elected to defer compensation in 2001.2002. VF does not provide pension, medical or life insurance benefits to its non-employee directors.
Under the VF 1996 Stock Compensation Plan,
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In order to link compensation of directors to VF’s stock performance, each director is eligible to receive grants of non-qualified stock options to purchase shares of Common Stock and restricted awards (restricted stock or restricted stock units). under VF’s 1996 Stock Compensation Plan. Currently, stock options are granted to non-employee directors at a rate of 4,800 per year. Such options have an exercise price equal to fair market value at the date of grant, have a stated term of 10ten years and become exercisable one year after the date of grant. Options are exercisable only so long as the optionee remains a director of VF except that, subject to earlier expiration of the option term, options remain exercisable for 36 months after the director'sdirector’s disability or retirement or 12 months after the director'sdirector’s death.
Each director is eligible to participate in VF'sVF’s matching gift program for institutions of higher learning and National Public Television and Radio up to an aggregate of $10,000 per year.
BOARD MEETINGS AND COMMITTEES
During 2001, there were eight meetings
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EXECUTIVE COMPENSATION
The Compensation Committee (the “Committee”) reports as follows with respect to compensation of the Board of Directors. Each
member of the Board attended at least 75% of the total number of meetings of the
Board and all committees on which he or she served.
The Board has Audit, Executive, Finance, Nominating and Governance,
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: The Audit Committee is governed by a written charter most
recently approved by the Board of Directors in 2000. Each of the members of the
Audit Committee is independent (as defined by the listing standards of the New
York Stock Exchange, the principal securities exchange on which VF Common Stock
is listed for trading). The Audit Committee's primary responsibility is to
review accounting procedures and methods employed in connection with audit
programs and related management policies. Its duties
6
include (1) selecting and recommending to the Board of Directors the independent
auditors for VF, (2) reviewing the scope of the audit to be conducted by the
independent auditors, (3) meeting with the independent auditors concerning the
results of their audit and the selection and disclosure of critical accounting
policies and (4) overseeing the scope and adequacy of VF's system of internal
accounting controls. The Audit Committee is the principal liaison between the
Board of Directors and the independent auditors for VF. The members of the
committee are Messrs. Fellows (Chairman), de Bedout, and McCollough and Mrs.
Fairbairn. The committee held three meetings during 2001.
NOMINATING AND GOVERNANCE COMMITTEE: The responsibilities of this committee
include (1) screening potential candidates for director and recommending
candidates to the Board of Directors, (2) recommending to the Board a succession
planexecutive officers for the Chairmanfiscal year ended January 4, 2003:
Principles of the Board and Chief Executive Officer, and (3)
reviewing and recommending to the Board governance policies and principles for
VF. VF's bylaws 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 is received by the Secretary of VF (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 established by the Securities and Exchange Commission under the 1934
Act. The committee will consider suggestions from VF shareholders, which should
be submitted to the Secretary of VF. 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 bylaws. The members of the
committee are Mrs. Feigin (Chairman), and Messrs. Fellows and Hurst. The
committee held six meetings during 2001.
COMPENSATION COMMITTEE: It is the responsibility of this committee to
review VF's compensation and benefit programs, to consider VF's organizational
structure, including management development and succession, except for the
Chairman of the Board and Chief Executive Officer, 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 VF's Chief Executive Officer and other executive
officers and (2) setting performance goals under VF's incentive compensation
programs. The members of the committee are Mrs. Fairbairn (Chairman) and Messrs.
Hesse, McCollough and Sharp. The committee held three meetings during 2001.
7
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
PRINCIPLES OF EXECUTIVE COMPENSATION PROGRAMCompensation Program
The goals of VF'sVF’s Executive Compensation Program (the "Program"“Program”) are to attract and retain highly competent executives, to provide incentives for achieving and exceeding VF'sVF’s short-term and long-term financial goals and to align the financial objectives of VF'sVF’s executives with those of its shareholders.shareholders, both in the short and long term.
The Program incorporates three compensation objectives. First, the Program seeks to offer total compensation that is competitive with other large U.S.-based companies with which VF may compete for executive talent. Second, the Program aims to provide annual incentives to executives based on corporate and individual performance and to reward superior performance with superior levels of compensation. Third, the Program seeks to maximize long-term total shareholder return by providing executives with incentives tied to stock value, thus aligning interests of shareholders and executives. VF balances each of the Program'sProgram’s objectives by establishing target compensation levels for executive pay that are achieved through a combination of base salary, annual incentives and long-term incentives consisting of performance-contingent Common Stock units and stock options.
VF's
VF’s philosophy is that a significant portion of each executive'sexecutive’s total compensation should be at-risk based on VF'sVF’s financial performance. The at-risk components of total compensation are progressively greater for higher level positions. For 2001,2002, the at-risk components of the targeted cash compensation and performance-contingent Common Stock unit packages for executive officers named in this proxy statement ranged from 60% to 70%.
COMPETITIVE COMPENSATION TARGETS
Competitive Compensation Targets
Total compensation targets, consisting of base salary, annual incentive awards and long-term incentive awards, are set annually for designated management positions. InformationThe Committee used information provided by Towers Perrin, VF's independentVF’s outside compensation consultant, regarding its executive compensation database, which includes executive compensation data for over 500 large U.S. based companies (the "Comparison Group"“Comparison Group”), as well as information about companies within the S&P Apparel, Accessories & P Textiles (Apparel) SuperLuxury Goods Index was utilized by the Compensation Committee
(the "Committee") to establish compensation targets for 2001.2002. In general, VF targets total compensation for each VF executive officer at the 75th percentile of compensation paid to executives in comparable positions within VF'sVF’s Comparison Group based on targeted performance goals established by the Committee.
Base Salary: Base Salary ranges and individual salaries for senior executives are setreviewed annually by the Committee. In determining individual salaries, the Committee considers individual
contribution,the scope of job responsibilities, VF'sindividual contribution, VF’s salary budget, labor market conditions and current compensation, as compared to market practice, based on guidance provided by VF's independentVF’s outside compensation consultant.
11
Annual Incentives:Under the VF Executive Incentive Compensation Plan ("(“EIC Plan"Plan”), as in effect through 2002, a performance goal based on VF's basicVF’s earnings per share, excluding the effects of
8
executive'sexecutive’s salary grade as the executive'sexecutive’s targeted annual incentive opportunity under the EIC Plan. Depending upon the level of achievement of the performance goal, annual cash awards mayfor 2002 could range from 0% to 150% of the targeted incentive opportunity for each EIC Plan participant. The maximum individual award in any
year2002 is $1,500,000. The Committee may exercise discretion to reduce awards under the EIC Plan generally or for any individual participant. The EIC Plan is proposed to be amended and restated. (See Item 2 — Approval of Amended and Restated Executive Incentive Compensation Plan.) While it is the policy of the Committee to provide opportunities for annual incentive compensation for achievement of preestablishedpre-established performance goals based primarily on financial measures, the Committee also retains discretion to pay bonuses apart from the EIC Plan reflecting its subjective assessment of the valuable accomplishments of VF'sVF’s executive officers which, in the Committee'sCommittee’s view, cannot always be anticipated in advance or reflected in such preestablishedpre-established goals.
Long-Term Incentives:Long-term incentives consist of performance-contingent Common Stock units and stock options.
Under VF'sVF’s Mid-Term Incentive Plan (drawn from(implemented under the VF 1996 Stock Compensation Plan), performance-contingent Common Stock units are earned if VF'sVF’s average total shareholder return (Common Stock price change plus dividend yield) for a three-year performance period compares favorably to that of a performance peer group, or alternatively, if a specified increase in earnings per share is achieved in the last year of the performance period. For the three-year performance period ended December 31, 2001,2002, the performance peer group consisted of 18 companies significantly engaged in the apparel industry. Depending on the level of achievement of the performance goal, each participant may earn from 0% to 200% of the number of performance-contingent Common Stock units, plus dividend equivalents, targeted by the Committee. Awards are paid in shares of VF Common Stock. At the election of a participant, receipt of awards may be deferred until retirement or until dates specified by the participant.
Stock options are typically granted annually under the VF 1996 Stock Compensation Plan. Non-qualified stock options have a stated term of 10ten years and become exercisable not less than one year after the date of grant. Options are exercisable only so long as the option holder remains an employee of VF or its subsidiaries, except that, subject to earlier expiration of the option term, and to the specific terms and definitions contained in the Stock Compensation Plan, options generally remain exercisable during the period severance payments (if any) are made in the case of involuntary termination of employment; for 36 months after death or retirement under the VF Pension Plan; and for 12 months after termination of employment due to disability. The Committee determines a value of options granted to executive officers as a component of the total targeted compensation. This value is based on an accepted valuation methodology.
The size of individual grants of performance-contingent Common Stock units and options generally increase with the level of responsibility of the executive officer. The grants
12
Summary of Actions Taken by the Compensation Committee
2002 Base Salary Increases
At its February 20012002 meeting, the Committee approved salary increases to be effective as of January 1, 2001.2002. The base salary increase for each executive officer was based on (i) the Committee'sCommittee’s adjustment of the executive'sexecutive’s salary grade range, if appropriate, based on market guidance provided by VF's
independentVF’s outside compensation consultant, (ii) the Committee'sCommittee’s assessment of the individual'sindividual’s salary within his or her salary grade based on the individual'sindividual’s performance and (iii) VF'sVF’s overall merit increase budget for 20012002 of approximately 4.5%3% for salaries of senior employees after adjustment for salary range changes.
ANNUAL INCENTIVE AWARDS
Annual Incentive Awards
At its February 20012002 meeting, the Committee established the EIC Plan performance target and the targeted annual incentive awards for each participating executive. The dollar amount of each targeted award was based upon a percentage of the mid-point of the salary range for the executive'sexecutive’s position. At its February 20022003 meeting, the Committee granted EIC Plan awards to the named executive officers based on the achievement of 85%107% of the EIC Plan performance target for 2001,2002, excluding the effects of extraordinary and non-recurring items, resulting in a potential pay-out of approximately 40%150% of the targeted awards.
The full Board, upon recommendation of the Committee, also awarded supplemental
bonuses to the named executive officers equivalent to approximately 10% of the
targeted awards based on the Committee's assessment of their personal
achievements during 2001. Total cash bonuses awarded to the named executive
officers for 2001 were 40% less than the cash bonuses awarded for 2000.
LONG-TERM INCENTIVE AWARDS
Long-Term Incentive Awards
At its February 20012002 meeting, the Committee reviewed VF'sVF’s philosophy with respect to stock option grants. In order to instill an entrepreneurial spirit among its employees, it is VF'sVF’s practice to grant options to a significant number of management-level employees. In 2001,2002, stock options were granted to 603563 management-level employees. The stock options awarded to the named executive officers were based on the Committee'sCommittee’s assessment of the individual'sindividual’s total compensation from a competitive perspective, within the guidelines established by VF,the Committee, and the executive'sexecutive’s performance.
Performance-contingent Common Stock units under the Mid-Term Incentive Plan were not awarded to the 31 Plan participants for the three-year performance period ended December 31, 2001 because2002 based on the level of achievement of the performance levelstarget set by the Plan
were not met for that performance period. COMPENSATION OF THE CHIEF EXECUTIVE OFFICERThe performance for the three-year period placed VF at the 49th percentile of the applicable peer group. Based on this performance, executive officer participants became entitled to 95% of the target number of Common Stock units potentially earnable under the Plan for the 2000-2002 performance period.
Compensation of the Chief Executive Officer
The Chief Executive Officer'sOfficer’s base salary, annual incentive awards and long-term incentive awards follow the policies described above.
13
Mr. McDonald'sMcDonald’s salary increase for 20012002 resulted from an adjustment to his
salary range based on market guidance provided by VF's independent compensation
consultant and a merit increase, based on the Committee'sCommittee’s assessment of his performance, in line with 10
VF'sVF’s merit increase budget. Mr. McDonald was granted options for 300,000350,000 shares of VF Common Stock based on compensation data provided by VF's independentVF’s outside compensation consultant, together with the projection of total targeted compensation within the guidelines described above, and the Committee'sCommittee’s assessment of Mr. McDonald'sMcDonald’s performance.
Mr. McDonald'sMcDonald’s EIC Plan award of $392,500$1,455,000 for 20012002 was granted based on the level of achievement of the EIC Plan performance target for 2001, excluding the
effects of extraordinary and non-recurring items.2002. Mr. McDonald received a
supplementalMcDonald’s award of $137,900was based on the Board'sCommittee’s assessment of VF'sVF’s progress during the year under Mr. McDonald'sMcDonald’s leadership ofrelating to major strategic initiatives, including reducinga 30% increase in earnings per share (excluding charges related to VF’s strategic repositioning program, discontinued operations and the effects of a change in accounting policy relating to goodwill), the achievement of a return on capital of 17%, a significant increase in the visibility of key brands with an 11% increase in advertisement investment, and a strong improvement in profitability with margins near record levels. VF also reduced inventories by more than $200$36 million more than double VF's
targeted reduction of $100 million, contributing toand achieved exceptionally strong cash flow from operations in 2001 of $685 million,operations. Also, during 2002, VF successfully exited its Jantzen and Private Label Knitwear businesses.
Mr. McDonald earned 9,142 performance-contingent Common Stock units for the second highest level in VF's
history. VF also reduced costs, strengthened sourcing capabilities and realigned
capacity with current demand. In addition,2000-2002 performance period under the integration ofMid-Term Incentive Plan. The North Face,
Eastpak and JanSport businesses was initiated contributing to a strong
improvement in the profitability of these businesses.
TAX DEDUCTIBILITY CONSIDERATIONSbasis for this payout is described above.
Tax Deductibility Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the deductibility of compensation in excess of $1 million paid to the executive officers named in this proxy statement, unless certain requirements are met. Stock options and certain performance-based awards under the 1996 Stock Compensation Plan are designed to meet these requirements as are annual bonuses under VF'sVF’s EIC Plan. It is the present intention of the Compensation Committee to preserve the deductibility of compensation under Section 162(m) to the extent the Committee believes that to do so is consistent with the best interests of shareholders; however, tax deductibility is only one consideration in determining the type and amount of compensation. The Board of Directors maintains discretion to grant awards based on the Board'sBoard’s assessment of individual performance and other relevant factors. Such discretionary awards
including a portion of the supplemental award made to Mr. McDonald for 2001, may not meet the requirements for full deductibility of Section 162(m). In granting any such awards the Board takes into consideration any potential loss of deductibility.
Ursula F. Fairbairn, Chairman
14
The following table sets forth a summary of the compensation paid or accrued for the years 19992000 through 20012002 by VF to or for the benefit of the named executive officers.
| Long-Term | ||||||||||||||||||||||||
| Compensation | ||||||||||||||||||||||||
| Annual Compensation | Awards1 | |||||||||||||||||||||||
| Stock | ||||||||||||||||||||||||
| Options/ | LTIP | All Other | ||||||||||||||||||||||
| Name and | SARS | Payouts | Compen- | |||||||||||||||||||||
| Principal Position | Year | Salary($) | Bonus($) | (#) | ($) | sation($)2 | ||||||||||||||||||
| Mackey J. McDonald | 2002 | $ | 990,000 | $ | 1,455,000 | 350,000 | $ | 310,800 | $ | 12,500 | ||||||||||||||
| Chairman, President and | 2001 | 960,000 | 530,400 | 300,000 | — | 12,500 | ||||||||||||||||||
| Chief Executive Officer | 2000 | 834,000 | 878,000 | 150,000 | 211,000 | 30,000 | ||||||||||||||||||
| Terry L. Lay | 2002 | 510,000 | 522,700 | 100,000 | 114,100 | 12,500 | ||||||||||||||||||
| Vice President and Chairman – | 2001 | 495,000 | 194,600 | 104,000 | — | 12,500 | ||||||||||||||||||
| Outdoor and International Jeanswear Coalitions | 2000 | 473,200 | 350,000 | 104,000 | 69,000 | 10,000 | ||||||||||||||||||
| John P. Schamberger | 2002 | 510,000 | 522,700 | 100,000 | 114,100 | 12,500 | ||||||||||||||||||
| Vice President and Chairman – | 2001 | 495,000 | 194,600 | 104,000 | — | 12,500 | ||||||||||||||||||
| North & South America Jeanswear and | 2000 | 473,000 | 350,000 | 104,000 | 84,000 | 10,000 | ||||||||||||||||||
| Playwear Coalitions | ||||||||||||||||||||||||
| Robert K. Shearer | 2002 | 392,500 | 433,600 | 80,000 | 94,700 | 12,500 | ||||||||||||||||||
| Vice President – Finance & Global | 2001 | 360,000 | 161,500 | 84,000 | — | 12,500 | ||||||||||||||||||
| Processes and Chief Financial Officer | 2000 | 300,000 | 290,000 | 34,000 | 69,000 | 13,000 | ||||||||||||||||||
| Eric C. Wiseman | 2002 | 370,000 | 433,400 | 80,000 | 94,700 | 12,500 | ||||||||||||||||||
| Vice President and Chairman – | 2001 | 345,000 | 167,500 | 84,000 | — | 12,500 | ||||||||||||||||||
| Global Intimate Apparel Coalition | 2000 | 342,500 | 178,700 | 13,000 | 32,000 | 10,000 | ||||||||||||||||||
| 1 | The target number and aggregate value of performance-contingent Common Stock units earnable by the named executive officers at January 4, 2003 were as follows: Mr. McDonald |
| 2 | The amount in this column for 2002 represents VF’s matching contribution under the Executive |
15
LONG-TERM INCENTIVE AWARDS
STOCK OPTIONS
Stock Options
This table sets forth for the named executive officers information regarding the grant of stock options by VF in the 20012002 fiscal year and their potential realizable values. No stock appreciation rights have been granted to employees other than limited stock appreciation rights, which become exercisable only upon a Change in Control. All stock options were granted under VF'sVF’s 1996 Stock Compensation Plan, as amended, which is a shareholder-approved plan. This Plan is VF'sVF’s only plan under which stock options and other equity awards are made. As of December 29, 2001, 7,439,269 shares remained available for future
grants under this Plan.
- --------------------------------------------------------------------------------
OPTIONS GRANTED IN THE 2001 FISCAL YEAR
- --------------------------------------------------------------------------------
Options generally become exercisable on
the anniversary of the date of grant. An option for 150,000 shares was
granted to Mr. McDonald in February 2001 and a second option for 150,000
shares was granted in April 2001. Mr. McDonald's options become exercisable
as follows: 100,000 shares in 2002; 100,000 shares in 2003; and 100,000
shares in 2004. The options granted to Messrs. Schamberger and Lay become
exercisable as follows: 44,000 shares in 2002; 30,000 shares in 2004; and
30,000 shares in 2005. The options granted to Messrs. Shearer and Wiseman
become exercisable as follows: 34,000 shares in 2002; 25,000 shares in 2003;
and 25,000 shares in 2004. Options generally become fully exercisable upon a
Change in Control. All options have a ten-year term but,Granted in the event of
certain terminations of the optionee's employment, the option will expire on
an accelerated basis, as follows: 36 months after retirement or death; 12
months after termination due to disability; at the end of the period
severance payments are made (if any) in the case of involuntary termination;
and at the time of any voluntary termination.
(2) The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates as set by the Securities and Exchange Commission and
are not intended to forecast future price appreciation of VF Common Stock.
It is important to note that options have value to recipients, including the
named executive officers, only if the stock price appreciates beyond the
exercise price shown in the table during the effective option period.
13
| Potential Realizable Value at | ||||||||||||||||||||||||||
| Assumed Annual Rates of | ||||||||||||||||||||||||||
| Stock Price Appreciation for | ||||||||||||||||||||||||||
| Individual Grants1 | Option Term2 | |||||||||||||||||||||||||
| No. of | % of Total | |||||||||||||||||||||||||
| Securities | Options | Exercise | ||||||||||||||||||||||||
| Underlying | Granted to | or Base | ||||||||||||||||||||||||
| Options | Employees in | Price | Expiration | |||||||||||||||||||||||
| Name | Granted(#) | Fiscal Year | ($/Sh) | Date | 5% | 10% | ||||||||||||||||||||
| M.J. McDonald | 350,000 | 14.3% | $ | 40.90 | 2/2012 | $9,002,000 | $22,813,000 | |||||||||||||||||||
| T.L. Lay | 100,000 | 4.1% | $ | 40.90 | 2/2012 | 2,572,000 | 6,518,000 | |||||||||||||||||||
| J.P. Schamberger | 100,000 | 4.1% | $ | 40.90 | 2/2012 | 2,572,000 | 6,518,000 | |||||||||||||||||||
| R.K. Shearer | 80,000 | 3.3% | $ | 40.90 | 2/2012 | 2,057,600 | 5,214,400 | |||||||||||||||||||
| E.C. Wiseman | 80,000 | 3.3% | $ | 40.90 | 2/2012 | 2,057,600 | 5,214,400 | |||||||||||||||||||
| 1 | All of the options were non-qualified stock options granted in February 2002. Each option becomes exercisable in thirds on the first, second and third anniversaries of the date of grant, respectively. Options generally become fully exercisable upon a Change in Control. All options have a ten-year term but, in the event of certain terminations of the optionee’s employment, the option will expire on an accelerated basis, as follows: 36 months after retirement or death; 12 months after termination due to disability; at the end of the period severance payments are made (if any) in the case of involuntary termination; and at the time of any voluntary termination. |
| 2 | The dollar gains under these columns result from calculations assuming 5% and 10% growth rates as set by the Securities and Exchange Commission and are not intended to forecast future price appreciation of VF Common Stock. It is important to note that options have no value to recipients, including the named executive officers unless the stock price appreciates beyond the exercise price shown in the table during the effective option period. |
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The following table sets forth for each of the named executive officers information regarding stock options exercised by them during the 20012002 fiscal year, together with the number and value of stock options held at 20012002 fiscal year end, each on an aggregate basis.
| Aggregated Option Exercises in the 2002 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-End1 | |||||||||||||||||
| Number of | (#) | ($) | ||||||||||||||||
| Shares Acquired | Value | Exercisable/ | Exercisable/ | |||||||||||||||
| Name | on Exercise(#) | Realized($) | Unexercisable | Unexercisable | ||||||||||||||
| M.J. McDonald | — | $ | — | 940,000/550,000 | $5,236,800/ | $ 98,500 | ||||||||||||
| T.L. Lay | 60,000 | 928,672 | 151,000/190,000 | 490,660/ | 453,300 | |||||||||||||
| J.P. Schamberger | — | — | 250,000/190,000 | 1,039,540/ | 453,300 | |||||||||||||
| R.K. Shearer | — | — | 141,000/130,000 | 631,880/ | 98,500 | |||||||||||||
| E.C. Wiseman | — | — | 87,800/130,000 | 325,536/ | 98,500 | |||||||||||||
| 1 | Market value of underlying shares at fiscal year-end based on the fiscal year-end market price of $37.37 per share, minus the exercise price. |
Performance-Contingent Common Stock Units
This table gives information concerning the awards to the named executive officers made in 20012002 for the three-year performance period of 20012002 through 20032004 under the Mid-Term Incentive Plan, a subplan under the VF 1996 Stock Compensation Plan. Under this Plan, the executives were awarded performance-contingent Common Stock units, which gave them the opportunity to earn shares of VF Common Stock. Actual payout of these shares is determined by a non-discretionary formula that compares VF'sVF’s average total shareholder return (change in Common Stock price plus reinvestment of dividends) over the performance period to that of a peer group of companies significantly engaged in the apparel industry, or alternatively, a portion of the shares is earnable if a specified increase in earnings per share is achieved in the last year of the performance period.
| Long-Term Incentive Plans — Awards in Last Fiscal Year | ||||||||||||
| Estimated Future Payout Under | ||||||||||||
| Non-Stock Price-Based Plans1, 2 | ||||||||||||
| Name | Threshold(#) | Target(#) | Maximum(#) | |||||||||
| M.J. McDonald | 3,377 | 6,753 | 13,506 | |||||||||
| T.L. Lay | 1,239 | 2,478 | 4,956 | |||||||||
| J.P. Schamberger | 1,239 | 2,478 | 4,956 | |||||||||
| R.K. Shearer | 1,029 | 2,058 | 4,116 | |||||||||
| E.C. Wiseman | 1,029 | 2,058 | 4,116 | |||||||||
| 1 |
17
| performance peer group, the minimum shares that will be earned is shown in the “Threshold” column. The “Target” number of shares shown will be earned if VF’s performance equals the 50th percentile of the performance range of the peer group, and the “Maximum” number of shares shown will be earned if VF’s performance equals the 90th percentile of the performance range of the peer group. Varying amounts between the threshold and target and between target and maximum may be earned for performance at levels between the 40th and 50th or between the 50th and 90th percentiles. |
EQUITY COMPENSATION PLAN INFORMATION TABLE
The following table provides information as of January 4, 2003 regarding the number of shares if any,of VF Common Stock that will be paid out at the
end of the applicable period cannot be determined because the shares
earned by the named executive officers will be based on VF's future
performance and the future performance of the peer group.
(2) If VF's performance is below the 40th percentile of the range
relative to the performance peer group, then no shares will be
earned unless VF's earnings per share in the last year of the
performance period increase by a targeted percentage, in which event
the "Threshold" number of shares may be earned. To the extent that
VF's performance exceeds the 40th percentile of the performance
range of the
14
performance peer group, the minimum shares that will be earned is
shown in the "Threshold" column. The "Target" number of shares shown
will be earned if VF's performance equals the 50th percentile of the
performance rangeissued under VF’s equity compensation plans.
| (a) | (b) | (c) | |||||||||||
| Number of securities | |||||||||||||
| Number of | remaining available | ||||||||||||
| securities to be | for future issuance | ||||||||||||
| issued upon | Weighted-average | under equity | |||||||||||
| exercise of | exercise price | compensation plans | |||||||||||
| outstanding | of outstanding | (excluding securities | |||||||||||
| options, warrants | options, warrants | reflected in | |||||||||||
| Plan Category1 | and rights2 | and rights2 | column (a))3 | ||||||||||
| Equity compensation plans approved by shareholders | 10,100,394 | $ | 37.70 | 5,029,036 | |||||||||
| Equity compensation plans not approved by shareholders | — | — | — | ||||||||||
| Total | 10,100,394 | $ | 37.70 | 5,029,036 | |||||||||
| 1 | The table does not include information regarding the following VF plans: |
| • | Employee Stock Ownership Plan. As of January 4, 2003, there were 1,195,199 shares of Series B ESOP Stock outstanding, all of which were allocated to the accounts of participants in this Plan. Each share of Series B ESOP Stock is convertible into 1.6 shares of VF Common Stock. |
| • | Executive Deferred Savings Plan and Deferred Savings Plan for Non-Employee Directors. These plans permit the deferral of salary, bonus and director compensation into, among other things, stock equivalent accounts. Deferrals in a stock equivalent account are valued as if deferrals were invested in VF Common Stock as of the deferral date, and are paid out only in cash. VF maintains a rabbi trust that holds shares that approximately correspond in number to the stock equivalents, and provides pass-through voting rights with respect to those stock equivalents. Stock equivalents are credited with dividend equivalents. As of January 4, 2003, there were 266,146 stock equivalents outstanding in the stock equivalent accounts under these plans. |
| 2 | Includes 250,274 restricted stock units that were outstanding on January 4, 2003 under VF’s Mid-term Incentive Compensation Plan, a subplan under the 1996 Stock Compensation Plan. Under this Plan, participants are awarded performance-contingent Common Stock units, which gives them the opportunity to earn shares of VF Common Stock. The number of restricted stock units included in the table assumes a maximum payout of shares. Actual payout of these shares is determined by a non-discretionary formula that compares VF’s average total shareholder return (change in Common Stock price plus reinvestment of dividends) over the performance period to that of a peer group of companies significantly engaged in the apparel industry, or alternatively, a portion of the shares is earnable if a specified increase in earnings per share is achieved in the last year of the performance period. Also includes 56,430 restricted stock units that have been awarded to participants but that participants have elected to defer. Restricted stock unit awards do not have an exercise price because their value is dependent upon the achievement of the specified performance criteria and may be settled only for shares of Common Stock on a one-for-one basis. Accordingly, the restricted stock units have been disregarded for purposes of computing the weighted-average exercise price. Had these restricted stock units been included in the calculation, the weighted-average exercise price reflected in column (b) would have been $36.56. |
| 3 | Of the shares remaining available for future issuance, a total of 720,690 shares may be issued as restricted stock under VF’s 1996 Stock Compensation Plan, VF’s only plan under which restricted stock awards may be granted. This Plan also authorizes the grant of options and other types of equity awards, so that shares will not necessarily be issued as restricted stock. |
18
FUTURE REMUNERATION
Pension Plan and the "Maximum" number of
shares shown will be earned if VF's performance equals the 90th
percentile of the performance range of the peer group. Varying
amounts between the threshold and target and between target and
maximum may be earned for performance at levels between the 40th and
50th or between the 50th and 90th percentiles.
FUTURE REMUNERATION
PENSION PLANSupplemental Executive Retirement Plan
The Supplemental Executive Retirement Plan (the "SERP"(“SERP”) is an unfunded, non-qualified plan for eligible participants primarily designed (i) to restore benefits lost under the Pension Plan due to (a) the maximum legal limit of pension benefits imposed under ERISAthe Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code (the “Code”) and (b) an election to defer compensation under VF'sVF’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 VF in mid-career or who lost pension benefits with former employers as a result of an early separation from service. At the end of VF's 2001 fiscal year, theThe combined retirement income from the Pension Plan and the SERP for each of the named executive officers, upon retirement at age 65, would be an amount equal to his Pension Plan benefit calculated (i) without regard to any limitation imposed by the Code or ERISA, (ii) without regard to his participation in the Deferred Compensation Plan or the Executive Deferred Savings Plan, and (iii) on the basis of the average of the highest three years of his salary and bonus compensation during the five-yearten-year period immediately preceding retirement. In addition, Mr. McDonald's combined retirement income
from
The following table reflects estimated annual benefits that would be payable under the Pension Plan and the SERP is calculated as if he had 25upon retirement at age 65 of individuals in the specified remuneration and years of service classifications. The amounts in the table have been computed on a straight life annuity basis.
| Assumed Average | ||||||||||||||||||
| Annual Compensation | Estimated Annual Benefits Based on Service of: | |||||||||||||||||
| 10 years | 15 years | 20 years | 25 years or more | |||||||||||||||
| $ | 600,000 | $ | 105,000 | $ | 158,000 | $ | 211,000 | $ | 264,000 | |||||||||
| 800,000 | 141,000 | 212,000 | 283,000 | 354,000 | ||||||||||||||
| 1,100,000 | 195,000 | 293,000 | 391,000 | 489,000 | ||||||||||||||
| 1,250,000 | 222,000 | 334,000 | 445,000 | 556,000 | ||||||||||||||
| 1,500,000 | 267,000 | 401,000 | 535,000 | 669,000 | ||||||||||||||
| 2,000,000 | 357,000 | 536,000 | 715,000 | 894,000 | ||||||||||||||
| 2,250,000 | 402,000 | 604,000 | 805,000 | 1,006,000 | ||||||||||||||
| 2,500,000 | 447,000 | 671,000 | 895,000 | 1,119,000 | ||||||||||||||
| 2,750,000 | 492,000 | 739,000 | 985,000 | 1,231,000 | ||||||||||||||
| 3,000,000 | 537,000 | 806,000 | 1,075,000 | 1,344,000 | ||||||||||||||
19
Each of the named executive officers has credited years of service.service under the Pension Plan as follows: Mr. McDonald — 20 years; Mr. Lay — 29 years; Mr. Schamberger — 31 years; Mr. Shearer — 16 years; and Mr. Wiseman — 7 years.
The Pension Plan provides that if it is “Overfunded” upon the occurrence of a “Change in Control” of VF (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). SERP benefits will become funded upon a "Change“Change in Control"Control” of VF, as defined in the Change in Control Agreements described below. In this regard, VF has established a trust with Wachovia Corporation, as Trustee (the "SERP
Trust"“SERP Trust”). VF may fund the SERP Trust at any time to secure payment of certain SERP benefits not otherwise paid by VF. Upon a Change in Control, VF is required to fund the SERP Trust, which becomes irrevocable.
Had there been a Change in Control as of March 5, 2002,4, 2003, the combined estimated annual benefits vested under the Pension Plan and the SERP and payable beginning at age 65 for each of the named executive officers would have been as follows: Mr. McDonald -- $962,700;— $863,600; Mr. Lay -- $245,200;— $403,900; Mr. Schamberger -- $298,800;— $328,300; Mr. Shearer -- $141,800;— $174,400; and Mr. Wiseman -- $52,400.
CHANGE IN CONTROL AND OTHER ARRANGEMENTS— $80,000.
Change in Control and Other Arrangements
VF has entered into Change in Control Agreements with certain of its executives. These Agreements provide severance benefits to the designated executives in the event their 16
"Change“Change in Control"Control” of VF, 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 VF upon notice to the executive and are automatically terminated if the executive'sexecutive’s employment with VF ceases. VF may not terminate the Agreements (i) 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 (ii) within a specified period of time after a Change in Control occurs. Severance benefits payable to the named executive officers include the lump sum payment of an amount equal to 2.99 times the executive'sexecutive’s average annual compensation for the five taxable years ending prior to the date on which a Change in Control of VF occurred.
There are no limitations on the total payments to be made to an executive in the event of termination of employment upon a Change in Control to prevent such payments from constituting excess "parachute payments"“parachute payments” (as that term is defined in the Code). Executives also receive additional payments under the Agreements to reimburse them for any increased golden parachute excise taxes, other increased taxes, penalties and interest
20
Had there been a Change in Control as of March 5, 2002,4, 2003, approximate payments under the Agreements upon severance of the named executive officers would have been as follows (excluding applicable reimbursements for increased taxes, penalties and interest, if any): Mr. McDonald -- $5,722,100;— $7,418,100; Mr. Lay -- $2,266,500;— $3,476,100; Mr. Schamberger -- $2,928,400;— $3,654,400; Mr. Shearer -- $1,781,900;— $2,174,700; and Mr. Wiseman -- $1,346,400.— $1,782,300.
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 and restricted stock units, lump sum payments under the VF 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, VF 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.
VF maintains an Executive Deferred Savings Plan (the "EDS Plan"“EDS Plan”), which is an unfunded, non-qualified deferred compensation arrangement for a select group of management and highly compensated employees of VF 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. In 2001,2002, VF matched 50% of the first $25,000 deferred by each participant. Upon a Change in Control of VF, matching contributions become fully vested and VF is required to fully fund the amount accrued for each employee.
The named executive officers, other than Mr. Wiseman, participate in the
leveraged Employee Stock Ownership Plan (the "ESOP") feature of the VF
Tax-Advantaged Savings Plan for Salaried Employees (the "TAS Plan"). The TAS
Plan provides that upon a Change in Control of VF, VF immediately will make a
contribution to the TAS Plan in an amount
17
sufficient to repay the balance of all outstanding "Acquisition Loans" used by
the ESOP to purchase Series B Stock, and unallocated shares of Series B Stock
will be allocated to participants' accounts in proportion to their compensation.
At December 31, 2001, 57,591 shares were unallocated under the ESOP.
21
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on VF Common Stock with that of the Standard & Poor's ("Poor’s (“S&P"&P”) 500 stock indexStock Index and the S&P Textiles (Apparel) Super1500 Apparel, Accessories & Luxury Goods Index ("Textiles Super"(“S&P Apparel Index”) for the five years ended December 31, 2001.2002. The graph assumes that $100 was invested on January 1, 1997,1998, in each of VF Common Stock, the S&P 500 Stock Index and the Textiles Super indices,S&P Apparel Index, and that all dividends were reinvested. COMPARISON OF FIVE-YEAR TOTAL RETURN OFLast year VF COMMON STOCK,compared its performance to the S&P 500 INDEX, AND TEXTILES SUPERStock Index and the S&P Textiles (Apparel) Super Index. Standard & Poors has discontinued the S&P Textiles (Apparel) Super Index and generally replaced it with the S&P Apparel Index. Accordingly, VF COMMON STOCK CLOSING PRICE ON DECEMBER 31, 2001 WAS $39.01
[TOTAL SHAREHOLDER RETURNS LINE GRAPH]
Comparison of Five-Year Total Return of
TOTAL SHAREHOLDER RETURNS
22
SECURITY OWNERSHIP OF CERTAIN
Certain Beneficial Owners
Shown below are persons known by VF to have voting power and/or dispositive power over more than 5% of its Common Stock or Series B ESOP Stock, as well as certain other information, all as of March 5, 2002,4, 2003, except as otherwise indicated in the footnotes below.
| Beneficial Owner | Amount of | Percent | |||||||
| and Nature of Ownership | Beneficial Ownership1 | of Class | |||||||
| Common Stock | |||||||||
| Ursula F. Fairbairn, M. Rust Sharp and PNC Bank, N.A., P.O. Box 7648, Philadelphia, PA 19101, as Trustees under Deeds of Trust dated August 21, | 13,945,336 shares | 12.82% | |||||||
| Ursula F. Fairbairn, M. Rust Sharp and PNC Bank, N.A., P.O. Box 7648, Philadelphia, PA 19101, as Trustees under the Will of John E. Barbey, | 8,977,952 shares | 8.26% | |||||||
| Total | 22,923,288 shares | 21.08% | |||||||
| AXA Financial, Inc. 1290 Avenue of the Americas New York, New York | 11,714,800 shares | 10.80% | |||||||
| Barclays Global Investors, NA, 45 Fremont Street, San Francisco, CA | 5,822,387 shares | 5.36% | |||||||
| Dodge & Cox One Sansome St., 35th Floor San Francisco, CA | 7,979,399 shares | 7.30% | |||||||
| Series B ESOP Convertible Preferred Stock | |||||||||
| Fidelity Management Trust Company, 82 Devonshire Street, H11D, Boston, MA 02109-3614, as Trustee of | 1,152,699 shares | 100% | |||||||
| 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 | Mrs. Fairbairn and Mr. Sharp are directors of VF. |
| 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. and its affiliates held a total of 23,011,685 shares (21.18% of the class outstanding) of the VF Common Stock in various trust and agency accounts on December 31, 2002. As to all such shares, the Bank and its affiliates had sole voting power over 80,897 shares, shared voting power over 22,930,788 shares, sole dispositive power over 20,466 shares and shared dispositive power over 22,971,088 shares. |
| 5 | AXA Conseil Vie Assurance Mutuelle (“Conseil”), AXA Assurances I.A.R.D. Mutuelle (“IARD”), AXA Assurances Vie Mutuelle (“Vie”) and AXA Courtage Assurance Mutuelle (“Courtage”), as a group (collectively, the “Mutuelles AXA”), together with AXA and with AXA Financial, Inc. (“AXA Financial”), filed a joint Amendment No. 3 to Schedule 13G with the SEC on February 12, 2003. That Schedule 13G/A shows that, at December 31, 2002, Mutuelles AXA, AXA, and AXA Financial as a group may be deemed to beneficially own the number of |
23
| shares reported in the table above, including sole power to vote 5,889,072 shares, shared power to vote 1,290,983 shares, sole power to dispose of 11,712,100 shares, and shared power to dispose of 2,700 shares. Of these shares, 11,708,600 are beneficially owned through Alliance Capital Management, L.P., a subsidiary of AXA Financial that operates independently from AXA Financial. AXA owns AXA Financial, and Mutuelles AXA as a group controls AXA. Addresses of these entities are as follows: Conseil, IARD, and Vie, 370, rue Saint Honore, 75001 Paris, France; Courtage, 26, rue Louis le Grand, 75002 Paris, France; and AXA, 25 avenue Matignon, 75008 Paris, France. | |
| 6 | The information in the above table concerning Barclays Global Investors, NA. (“Barclays”) was obtained from a Schedule 13G filed with the Securities and Exchange Commission on February 12, 2003, reporting beneficial ownership at December 31, 2002. Barclays filed the Schedule 13G together with several apparently affiliated companies, indicating that each of the filing entities is a bank, and reporting sole voting power and sole dispositive power over 5,814,587 shares. |
| 7 | The information in the above table concerning Dodge & Cox was obtained from a Schedule 13G filed with the Securities and Exchange Commission on February 13, 2003, reporting beneficial ownership at December 31, 2002. Dodge & Cox reported that it had sole voting power over 7,293,549 shares, shared voting power over 198,900 shares and sole dispositive power over 7,979,399 shares. |
Common Stock in various trust and agency accounts on December 31, 2001. As
to all such shares, the Bank and its affiliates had sole voting power over
91,664 shares, shared voting power over 22,931,522 shares, sole dispositive
power over 24,209 shares and shared dispositive power over 22,971,222
shares.
(5) AXA Conseil Vie Assurance Mutuelle ("Conseil"), AXA Assurances I.A.R.D.
Mutuelle ("IARD"), AXA Assurances Vie Mutuelle ("Vie") and AXA Courtage
Assurance Mutuelle ("Courtage"), as a group (collectively, the "Mutuelles
AXA"), together with AXA and with AXA Financial, Inc. ("AXA Financial"),
filed a joint Amendment No. 2 to Schedule 13G with the SEC on February 12,
2002. That Schedule 13G/A shows that, at December 31, 2001, Mutuelles AXA,
AXA, and AXA Financial as a group may be deemed to beneficially own the
numberOwnership of 19
shares reported in the table above, including sole power to vote 6,609,341
shares, shared power to vote 1,598,117 shares, sole power to dispose of
13,267,534 shares, and shared power to dispose of 32,600 shares. Of these
shares, 13,266,734 are beneficially owned through Alliance Capital
Management L.P., a subsidiary of AXA Financial that operates independently
from AXA Financial. AXA owns AXA Financial, and Mutuelles AXA as a group
controls AXA. Addresses of these entities are as follows: Conseil, IARD, and
Vie, 370, rue Saint Honore, 75001 Paris, France; Courtage, 26, rue Louis le
Grand, 75002 Paris, France; and AXA, 25 avenue Matignon, 75008 Paris,
France.
(6) The information in the above table concerning Capital Group International,
Inc., the parent company of a group of management companies, was obtained
from a Schedule 13G filed with the Securities and Exchange Commission on
February 11, 2002, reporting beneficial ownership at December 31, 2001.
Capital Group International, Inc. reported that it had sole voting power
over 8,396,020 shares and sole dispositive power over 9,290,350 shares.
(7) The information in the above table concerning Dodge & Cox was obtained from
a Schedule 13G filed with the Securities and Exchange Commission on February
8, 2002, reporting beneficial ownership at December 31, 2001. Dodge & Cox
reported that it had sole voting power over 8,252,260 shares, shared voting
power over 121,200 shares and sole dispositive power over 8,842,460 shares.
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table reflects, as of March 5, 2002,4, 2003, the total beneficial ownership of VF Common Stock by each director and nominee for director, and each named executive officer, on March 5, 2002, 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 Mrs. Fairbairn and Mr. Sharp includes 22,923,288 shares reported above under Certain Beneficial Owners, as to which they share voting and dispositive power with PNC Bank, N.A., as Trustees.
| Total Shares | |||||||
| Name of Beneficial Owner | Beneficially Owned1,2,3,4 | ||||||
| Directors: | |||||||
| Robert D. | 34,600 | ||||||
| Edward E. | 31,000 | ||||||
| Juan Ernesto de | 13,656 | ||||||
| Ursula F. | 22,969,037 | ||||||
| Barbara S. | 49,605 | ||||||
| George | 25,000 | ||||||
| Daniel R. | 18,306 | ||||||
| Robert J. | 55,748 | ||||||
| W. Alan | 11,915 | ||||||
| M. Rust | 22,965,251 | ||||||
| Raymond G. Viault | 483 | ||||||
| Named Executive Officers: | |||||||
| Mackey J. | 1,281,238 | 5 | |||||
| Terry L. | 224,586 | ||||||
| John P. | 350,673 | 6 | |||||
| Robert K. | 212,032 | ||||||
| Eric C. | 146,973 | ||||||
| All Directors and Executive Officers as a Group | 25,956,460 | ||||||
| 1 | Shares owned include shares held in trusts as of December 31, 2002 in connection with employee benefit plans, as to which the following participants share voting power but have no present dispositive power: |
24
| Mr. McDonald — 39,365 shares; Mr. Lay — 1,355 shares; Mr. Wiseman — 3,499 shares; and all directors and executive officers as a group — 69,453 shares. Does not include shares of Series B ESOP 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 — 391 shares; Mr. Lay — 556 shares; Mr. Schamberger — 598 shares; Mr. Shearer — 663 shares; and all directors and executive officers as a group — 3,066 shares. Shares owned also include shares held as of December 31, 2002 in trust in connection with employee benefit plans, as to which the following participants have no dispositive power and shared voting power: Mr. McDonald — 1,248 shares; Mr. Lay — 1,149 shares; Mr. Shearer — 386 shares; and all directors and executive officers as a group — 4,936 shares. Shares owned also include shares held in a trust in connection with the VF Deferred Savings Plan for Non-Employee Directors as to which the following directors have shared voting power but do not have dispositive power: Mr.��de Bedout — 2,056 shares; Mrs. Fairbairn — 7,223 shares; Mrs. Feigin — 5,605 shares; Mr. Hesse — 3,906 shares; Mr. Hurst — 10,448 shares; Mr. McCollough — 2,315 shares; Mr. Sharp — 3,363 shares; Mr. Viault — 483 shares; and all directors and executive officers as a group — 35,399. | |
| 2 | Shares owned also include the following number of stock options that are exercisable as of March 4, 2003, or within 60 days thereafter: Mr. McDonald — 1,156,667; Mr. Lay — 214,334; Mr. Schamberger — 313,334; Mr. Shearer — 192,667; Mr. Wiseman — 139,467; Mr. Buzzell 28,800; Mr. Crutchfield — 24,000; Mr. de Bedout — 9,600; Mrs. Fairbairn — 36,600; Mrs. Feigin — 40,200; Mr. Fellows — 24,000; Mr. Hesse — 14,400; Mr. Hurst — 36,600; Mr. McCollough — 9,600; Mr. Sharp — 36,600; and all directors and executive officers as a group — 2,723,536. |
| 3 | Other than Mrs. Fairbairn and Mr. Sharp, who are deemed to beneficially own 21.12% of the Common Stock outstanding, the percentage of shares owned beneficially by each named person does not exceed 1% of the Common Stock outstanding. The percentage of shares owned beneficially by all directors and executive officers as a group was 23.88% of the Common Stock outstanding. |
| 4 | Shares owned include units of VF Common Stock equivalents that are deferred under the VF Stock Compensation Plan, as follows: Mr. McDonald — 22,503; Mr. Lay — 7,748; Mr. Schamberger — 8,661; Mr. Shearer — 7,179; Mr. Wiseman — 2,785; and all directors and executive officers as a group — 66,023 shares. These units are fully vested and will be paid out in shares of Common Stock upon expiration of the deferral period, including upon certain types of termination of service. Holders of these units do not have current voting or dispositive power with respect to the shares deliverable in settlement of these units. |
| 5 | Mr. McDonald is also a Director. Shares owned include 46,124 shares of restricted stock over which Mr. McDonald holds voting power but not dispositive power. |
| 6 | Includes 13,580 shares of restricted stock over which Mr. Schamberger holds voting power but not dispositive power. |
ITEM NO. 2
Shareholder approval of the Executive Incentive Compensation Plan, as amended and restated February 11, 2003 (the “Amended EIC Plan”), will be sought at the Annual Meeting. Shareholder approval will enable VF to claim a tax deduction for all incentive awards earned and paid under the Amended EIC Plan without limitation under Section 162(m) of the Internal Revenue Code (“Code Section 162(m)”).
General.The Board of Directors originally adopted, and the shareholders of VF approved, the current EIC Plan in 1994. The Board of Directors regards the EIC Plan as an important means by which VF can link executive pay to performance. By providing for competitive levels of incentive compensation in a program that is fully tax deductible to VF, the EIC Plan serves as a useful tool for attracting and retaining members of our management team. In 1999, shareholders reapproved certain terms relating to the performance goals, in order to extend the Plan’s qualification under Code Section 162(m).
The EIC Plan provides the opportunity to the most senior members of VF’s management team to earn annual incentive awards. Persons designated by the Board of Directors from time to time as “executive officers” pursuant to Rule 16a-1(f) of the Securities Exchange Act of 1934, currently nine in number, are eligible for participation in the EIC Plan.
25
Description of the EIC Plan.The EIC Plan authorizes the Compensation Committee of the Board to establish annual performance goals and related terms. These must be established during the first 90 days of the year. The Amended EIC Plan permits the Committee to measure performance using a variety of business criteria, in addition to the earnings per share standard used under the current EIC Plan. For each participant, a target annual incentive is specified, which is a cash amount that may be earned if a targeted level of performance is achieved. Under the current EIC Plan, the Committee specifies a range of amounts that may be earned, from 0% to a maximum of 150% of the target incentive award, based on the level of achievement of the performance goal. The Amended EIC Plan permits the Committee to specify above-target and below-target payouts more flexibly, without requiring a specific range in relation to the target incentive award.
The Amended EIC Plan introduces other flexible terms not in the current EIC Plan, including:
| • | The business criteria that can be used in setting performance goals can relate to corporate, business group or divisional performance with respect to earnings per share (as in the current EIC Plan); net earnings; pretax earnings; profit before taxes; operating income; net sales; market share; balance sheet measurements; cash return on assets; return on capital; book value; shareholder return; or return on average common equity. | |
| • | The performance period can be varied by the Committee to meet unusual circumstances, such as the hiring of an executive part way through a year. | |
| • | For participants whose compensation is not subject to loss of tax deductibility under Code Section 162(m), the Committee retains discretion to adjust incentive awards upward or downward in determining the final award amount. For other participants, only downward adjustments are permitted. |
A participant may potentially earn incentive awards up to his or her “annual limit” in any calendar year. The annual limit under the Amended EIC Plan is $3.0 million plus the amount of the participant’s unused annual limit as of the close of the previous calendar year. A participant uses up his or her annual limit in a given year based on the maximum potential amount of the incentive award authorized by the Committee, even if the actual amount earned is less than the maximum. The annual per-person limit under the current EIC Plan is $1.5 million. For the preceding five years, the highest EIC Plan award paid to any of the executive officers named in the Summary Compensation Table other than the Chief Executive Officer was $522,700 and the range of awards paid to the Chief Executive Officer was $530,400 to $1,455,000.
Upon completion of a performance year, the Committee must determine the level of attainment of the pre-set performance goals and that other material requirements have been met before any incentive award may be paid out. If a participant’s employment terminates before the payout of an incentive award, the Committee will determine the amount of the award, if any, that may be paid.
26
The Amended EIC Plan may be amended, modified, suspended or terminated by the Committee, but certain fundamental changes must also be approved by the Board. In addition, an amendment or modification must be approved by shareholders if such approval is required to preserve the qualification of the Plan under Code Section 162(m). Under this standard, however, amendments that might broaden eligibility or increase the cost of the Plan to the Company would not necessarily require shareholder approval.
Discussion of Code Section 162(m).Under Code Section 162(m), the allowable deduction for compensation paid or accrued with respect to the executive officers named in the Summary Compensation Table and serving as such on the final day of the fiscal year, defined as ”covered employees,” is limited to $1 million per year. Certain types of compensation are exempted from this deductibility limitation, however, including performance-based compensation. “Performance-based compensation” is compensation paid (1) upon the attainment of an objective performance goal or goals; (2) upon approval by the compensation committee or its equivalent, which committee must be composed of outside directors; and (3) pursuant to a plan as to which participants also share voting power butshareholders have no present
dispositive power (and no power to
20
direct conversion into Common Stock), as follows: Mr. McDonald -- 239
shares; Mr. Lay -- 340 shares; Mr. Schamberger -- 366 shares; Mr.
Shearer -- 406 shares;approved certain material terms, specifically the eligibility, per-person limits, and all executive officers as a group -- 1,876
shares. Shares owned also include shares held as of December 31, 2001 in
trust in connection with employee benefit plans, as tothe business criteria upon which the following
participants have no dispositive power and shared voting power: Mr.
McDonald -- 1,207 shares; Mr. Lay -- 1,108 shares; Mr. Shearer -- 363
shares; and all executive officersperformance goals are based. VF intends that awards under the Amended EIC Plan qualify as a group -- 4,747 shares. Shares owned
also include shares held in a trust in connection with“performance-based compensation” so that these awards will not be subject to the VF Deferred
Savings$1 million deductibility limitation. Accordingly, shareholder approval of the Amended EIC Plan for Non-Employee Directors as to which the following directors
have shared voting power but do not have dispositive power: Mr. de
Bedout -- 904 shares; Mrs. Fairbairn -- 5,939 shares; Mrs. Feigin -- 5,306
shares; Mr. Hesse -- 2,760 shares; Mr. Hurst -- 9,003 shares; Mr.
McCollough -- 1,064 shares; and Mr. Sharp -- 2,755 shares.
(2) Shares owned also include the following number of stock options that are
exercisable as of March 5, 2002, or within 60 days thereafter: Mr.
McDonald -- 940,000; Mr. Lay -- 151,000; Mr. Schamberger -- 250,000; Mr.
Shearer -- 141,000; Mr. Wiseman -- 87,800; Mr. Buzzell -- 28,200; Mr.
Crutchfield -- 19,200; Mr. de Bedout -- 4,800; Mrs. Fairbairn -- 31,800;
Mrs. Feigin -- 39,600; Mr. Fellows -- 19,200; Mr. Hesse -- 9,600; Mr.
Hurst -- 31,800; Mr. McCollough -- 4,800; and Mr. Sharp -- 31,800.
(3) Other than Mrs. Fairbairn and Mr. Sharp, who arewill be deemed to beneficially own
20.82%include approval of the Common Stock outstanding,Plan’s terms relating to eligibility, annual limitations on incentive awards, and the percentage of shares owned
beneficially by each named person does not exceed 1%business criteria upon which performance goals may be based.
New Plan Benefits Under the Amended EIC Plan.Awards under the Amended EIC Plan will be granted in the discretion of the Common Stock
outstanding. The percentageCommittee. Except as described below, the recipients and other terms of shares owned beneficially by all directors
and executive officers as a group was 23% ofsuch awards cannot be determined at this time. Information regarding the Common Stock outstanding.
(4) Shares owned include units of VF Common Stock equivalents that are deferred
under the VF Stock Compensation Plan, as follows: Mr. McDonald -- 13,040;
Mr. Lay -- 4,288; Mr. Schamberger -- 5,179; Mr. Shearer -- 4,288; and all
executive officers as a group -- 35,563 shares. These units are fully vested
and will be paid out in shares of Common Stock upon expiration of the
deferral period, including upon certain types of termination of service.
Holders of these units do not have current voting or dispositive powerCompany’s recent practices with respect to annual incentive awards under the shares deliverablecurrent EIC Plan is presented in settlementthe “Summary Compensation Table” and the “Executive Compensation — Compensation Committee Report” elsewhere in this proxy statement.
Incentive awards authorized for 2003 will be payable under the terms of these units.
(5) Mr. McDonaldthe Amended EIC Plan. Such awards will be payable at target levels for 2003 performance if a corporate performance goal relating to earnings per share is alsoachieved, and above target levels if a Director. Shares owned include 45,020 sharescorporate performance goals relating to earnings per share and net sales growth are achieved. No amount will be payable if a specified “threshold” performance level is not reached, and the award is payable at a designated maximum rate if performance substantially
27
| New Plan Benefits | ||||||||||||
| Executive Incentive Compensation Plan, as Amended and Restated | ||||||||||||
| Payout for Performance | ||||||||||||
| at Specified Level | ||||||||||||
| Name and Position | Threshold | Target | Maximum | |||||||||
| Mackey J. McDonald | $ | 530,000 | $ | 1,060,000 | $ | 2,120,000 | ||||||
| Chairman, President and Chief Executive Officer | ||||||||||||
| Terry L. Lay | 194,500 | 389,000 | 778,000 | |||||||||
| Vice President and Chairman – | ||||||||||||
| Outdoor and International Jeanswear Coalitions | ||||||||||||
| John P. Schamberger | 194,500 | 389,000 | 778,000 | |||||||||
| Vice President and Chairman – | ||||||||||||
| North & South America Jeanswear and Playwear Coalitions | ||||||||||||
| Robert K. Shearer | 161,500 | 323,000 | 646,000 | |||||||||
| Vice President – Finance & Global Processes | ||||||||||||
| and Chief Financial Officer | ||||||||||||
| Eric C. Wiseman | 161,500 | 323,000 | 646,000 | |||||||||
| Vice President and Chairman – | ||||||||||||
| Global Intimate Apparel Coalition | ||||||||||||
| All Executive Officers as a Group | $ | 1,715,000 | $ | 3,430,000 | $ | 6,860,000 | ||||||
In the event shareholders disapprove this proposal, incentive awards will not dispositive power.
(6) Includes 13,259 sharesbe granted or paid out under the Amended EIC Plan to the extent required under Treasury Regulation 1.162-27(e)(4) in order to meet the shareholder approval requirements of restricted stock over which Mr. Schamberger holds
voting power but not dispositive power.
that Regulation.
The Board of Directors unanimously recommends a vote
ITEM NO. 2
3
Selection of the Audit
Committee and subjectIndependent Accountants.Subject to shareholder approval, the Board of DirectorsAudit Committee has retained PricewaterhouseCoopers LLP as VF'sVF’s independent accountants for the fiscal year ending January 3, 2004. PricewaterhouseCoopers LLP served as VF’s independent accountants for the fiscal year ending January 4, 2003. In connection with its decision to retain PricewaterhouseCoopers LLP served as VF's
independent accountants for the fiscal year ending December 29, 2001. In
recommending to the Board that PricewaterhouseCoopers LLP be retained as the
Company'sVF’s independent accountants, the Audit Committee considered whether the provision of non-audit services by PricewaterhouseCoopers LLP was compatible with maintaining PricewaterhouseCoopers LLP'sLLP’s independence and concluded that it was. A representative of PricewaterhouseCoopers LLP will be present at the meeting. The representative will be given an opportunity to make a statement if he or she desires to do so and to respond to appropriate questions. If
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The VF BOARD OF DIRECTORS RECOMMENDS A VOTE Board of Directors recommends a voteFOR RATIFICATION OF THE SELECTION OF
PRICEWATERHOUSECOOPERS ratification of the selection of PricewaterhouseCoopers LLP.
21
PROFESSIONAL FEES OF PRICEWATERHOUSECOOPERS
Professional Fees of PricewaterhouseCoopers LLP.The following summarizes the estimated fees of PricewaterhouseCoopers LLP for services rendered to VF during 2001:
the fiscal year ended December 29, 2001 and the fiscal year ended January 4, 2003.
Audit Fees:The aggregate fees billed or to be billed for professional services rendered for the audit of VF'sVF’s consolidated financial statements and for services that are normally provided by VF’s principal independent accountants in connection with statutory and regulatory filings or engagements were $1,352,000 for the fiscal year ended December 29, 2001 and $1,433,000 for the reviewsfiscal year ended January 4, 2003.
Audit-Related Fees:The aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of VF’s financial statements included in VF's Forms 10-Qand are not reported above under the caption “Audit Fees” were $190,000 for that fiscal year2001 and $371,000 for 2002.
Tax Fees:The aggregate fees billed for professional services for tax compliance, tax advice, and tax planning were $741,000.
Financial Information Systems Design$1,288,000 for 2001 and Implementation
Fees: PricewaterhouseCoopers LLP did not provide financial information systems
design or implementation services to VF during 2001.
$1,790,000 for 2002.
All Other Fees:All other fees paid or payable by VF for services other than auditthe services reported under “Audit Fees”, “Audit-Related Fees” and “Tax Fees” rendered during 2001 by PricewaterhouseCoopers LLP are
estimated at $2.4 million.were $325,000 in 2001 and $-0- in 2002. The foregoing services in 2001 consisted primarily of certain
services that VF considers to be audit-related: statutory auditsbusiness integration support.
Report of foreign
subsidiaries ($640,000); and certain services that VF does not consider to be
audit-related: corporate tax planning and compliance ($560,000); tax compliance
for expatriate employees ($680,000); assistance with reorganization of VF's
domestic Intimate Apparel businesses ($325,000); and other management advisory
services ($180,000).
REPORT OF THE AUDIT COMMITTEE. the Audit Committee.The Audit Committee reports as follows with respect to the audit of VF'sVF’s consolidated financial statements for the fiscal year ended December 29, 2001January 4, 2003 (the "2001“2002 Financial Statements"Statements”). At the meeting of the Audit Committee held in February 2002,2003, the Audit Committee (i) reviewed and discussed with management the 20012002 Financial Statements; (ii) discussed with PricewaterhouseCoopers LLP the matters required to be discussed by the Statement of Auditing Standards No. 61 (Communication with Audit Committees) which include, among other items, matters related to the conduct of the audit of the 20012002 Financial Statements; and (iii) received from PricewaterhouseCoopers LLP disclosures regarding their independence required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and discussed with PricewaterhouseCoopers LLP their independence from VF. Based on the foregoing review and discussions, the Audit Committee recommended to the Board of Directors that the 20012002 Financial Statements as audited by PricewaterhouseCoopers LLP be included in VF'sVF’s Annual Report on Form 10-K for the fiscal year ended December 29, 2001January 4, 2003 to be filed with the Securities and Exchange Commission.
George Fellows, Chairman
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ITEM NO. 3
4
SHAREHOLDER PROPOSALSPROPOSAL
VF has been notified that two shareholders intend to present proposals for
considerationAmalgamated Bank LongView Collective Investment Fund, beneficial owner of 36,769 shares of VF Common Stock, will have the following resolution presented at the Meeting. The address of each of the proponents identified
belowproponent will be furnished by the Secretary of VF to any person, orally or in writing, as requested, promptly following receipt of any oral or written request.
SHAREHOLDER PROPOSAL 1
| “RESOLVED: That the shareholders of VF Corporation (“VF” or the “Company”) urge their Board of Directors to take necessary steps, in compliance with state law, to declassify the Board for the purpose of director elections. The Board’s declassification shall be completed in a manner that does not affect the unexpired terms of directors previously elected. |
“SUPPORTING STATEMENT
| “VF’s board is divided into three classes of directors serving staggered three-year terms. This means an individual director faces election only once every three years, and shareholders only vote on roughly a third of the board each year. | ||
| “We believe that annual elections can pave the way for improved board sensitivity to important shareholder issues. In particular, it can help speed diversification of the Company’s board and introduce new perspectives. | ||
| “In addition, a declassified board allows the company to respond quickly to changes by giving the board the ability to appoint more qualified candidates each year. A declassified board can thus help give VF the responsiveness it needs to adapt to the current economic environment. We believe too that increased accountability will help the Company focus on long-term shareholder value while maintaining important relationships with VF customers, suppliers and employees. | ||
| “Last year VF shareholders voted to adopt this proposal, which received 55 percent of the yes-and-no-votes. Despite that expression of shareholder sentiment, the board of directors has refused to take steps to implement the proposal. | ||
| “The evidence indicates that shareholders are fed up with classified boards. In 2002 shareholders at VF and more than 30 other companies voted in favor of resolutions recommending that all directors run for election each year. The average level of support for these declassification proposals was 62% of the yes-and-no vote, according to the Investor Responsibility Research Center. | ||
| “At Lone Star Steakhouse & Saloon, the board refused to implement a declassification proposal that received a 70% “yes” vote at the 2000 annual meeting. An independent board candidate cited this lack of responsiveness to shareholders as one basis for his candidacy, and in June 2001 he succeeded in ousting Lone Star’s chairman and CEO from the board of directors. In November 2001 Lone Star board voted to implement the shareholder declassification proposal. |
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| “By adopting annual elections, VF can demonstrate its commitment to fuller accountability to shareholders, accountability that honors shareholder concerns for good corporate governance. | ||
| “We urge our fellow shareholders to vote FOR this proposal.” |
The VF has been notified that the Trust for the International Brotherhood of
Electrical Workers' Pension Benefit Fund ("IBEW Trust"), beneficial owner of
4,062 shares of VF Common Stock, will have the following resolution presented at
the meeting:
"RESOLVED: That the shareholders of VF Corporation ("Company")
request that the Board of Directors adoptrecommends a policy stating that the
public accounting firm retained by our Company to provide audit
services, or any affiliated company, should not also be retained to
provide non-audit services to our Company.
"SUPPORTING STATEMENT
"The role of independent auditors in ensuring the integrity of
the financial statements of public corporations is fundamentally
important to the efficient and effective operation of the financial
markets. The U.S. Securities and Exchange Commission recently stated:
"Independent auditors have an important public trust.
Investors must be able to rely on issuers' financial statements.
It is the auditor's opinion that furnishes investors with
critical assurance that the financial statements have been
subjected to a rigorous examination by an objective, impartial,
and skilled professional, and that investors, therefore, can
rely on them. If investors do not believe that an auditor is
independent of a company, they will derive little confidence
from the auditor's opinion and will be far less likely to invest
in that public company's securities. (Securities and Exchange
Commission, "Final Rule: Revision of the Commission's Audit
Independence Requirements," Release 33-7919 (Feb. 5, 2001)
("Release 33-7919").)
"It is critically important to the integrity of the auditing
process and the confidence of investors that those firms performing
auditsvote
VF has had a classified board of directors for over thirty years. Since 1969, VF's bylawsVF’s By-Laws have provided that the Board be divided into three classes of directors, of substantially equal size, with staggered terms of office. In a letter to shareholders dated March 14, 1969, M.O. Lee, then Chairman of the Board, noted that a classified board would "provide“provide continuity of service by Directors, assure familiarity with the continuing affairs of the Company, and provide a stable, harmonious and effective Board operating in the best interests of the Company and the Shareholders as a whole."” The bylawby-law provision establishing the classified board of directors was approved by VF'sVF’s shareholders at VF'sVF’s annual meeting held in 1990 with holders of 63% of the outstanding shares entitled to vote at the meeting (77% of the shares voted at the meeting) voting in favor of the classified board proposal. Your Board continues to believe that the stability of the classified board structure has helped guide VF through many years of growth and success in a very competitive industry by allowing the Board and management to concentrate their efforts on maximizing shareholder value.
The Board of Directors also believes that classification gives the Board a greater continuity of experience since a majority of directors at any given time will have experience with the business affairs and operations of the Company. This enables the directors to build on past experience and plan for a reasonable period into the future, permitting more effective long-term strategic planning in use of Company resources. The annual election of one-third of the Board also helps to prevent abrupt changes in corporate policies that might result if the entire Board were elected each year.
The Board further believes that by requiring at least two meetings of shareholders to replace a majority of the Board, a classified Board will deter attempts to acquire control of
27
Company'sCompany’s business. Classification provides the Board with an adequate opportunity to fulfill its duties to the Company'sCompany’s shareholders to review any takeover proposal, study appropriate alternatives and achieve the best results for all shareholders.
Directors elected for staggered terms are not any less accountable or responsive to shareholders than they would be if all were elected annually. The same standards of performance apply to all directors regardless of the term of service. Shareholders always retain the ability to propose and elect nominees for the class of directors to be elected each year. Therefore, shareholders enjoy a significant opportunity to express their views regarding the Board'sBoard’s performance and to influence the Board'sBoard’s composition.
31
The Investor Responsibility Research Center recently reported that over 60%62% of corporations included in the S&P 500 Index currently have classified boards.
This proposal was submitted to shareholders by the same proponent last year. Last year’s proposal did not receive the favorable vote of a majority of our outstanding voting power, although it did receive a majority of the yes-and-no votes cast at the meeting.
Following last year’s Annual Meeting, your Board of Directors, which includes a substantial majority of independent directors, undertook a new review of the issue of a classified board. After carefully considering the possible benefits and detriments of a classified board, your Board concluded that, for the reasons stated above, it continues to be in the best interest of all shareholders to maintain the classified board structure.
Approval of this proposal would require the affirmative vote of a majority of the shares represented in person or by proxy at the Meeting and entitled to vote. However, approval of this proposal would not automatically eliminate the classified Board, as this proposal is only a recommendation to the Board. Eliminating classification would require action by the Board to amend the provisions of VF bylawsBy-Laws that provide for a classified Board.
FOR THE REASONS STATED ABOVE, THE
For the reasons stated above, the VF BOARD OF DIRECTORS BELIEVES THAT
DECLASSIFICATION OF THE BOARD IS DETRIMENTAL TO THE INTERESTS OF VF'S
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE Board of Directors continues to believe that declassification of the Board is detrimental to the interests of VF’s shareholders
OTHER INFORMATION
OTHER MATTERS
Other Matters
The Board of Directors does not know of any other matter that is intended to be brought before the Meeting, but if any other matter is presented, the persons named in the enclosed proxy will be authorized to vote on behalf of the shareholders in their discretion and intend to vote the same according to their best judgment. At February 7, 2002,5, 2003, VF had not received notice of any matter to be presented at the Meeting other than as described in this proxy statement.
SECTION
Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 Act requires directors and certain officers of VF, as well as persons who own more than 10% of a registered class of VF'sVF’s equity securities ("(“Reporting Persons"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. VF believes 28
EXPENSES OF SOLICITATION
Expenses of Solicitation
VF will bear the cost of this proxy solicitation. In addition to the use of mail, proxies may be solicited in person or by telephone by VF employees without additional compensation. VF has engaged D.F. King & Co., Inc. to solicit proxies in connection with the proxy statement,
32
2004 Shareholder Proposals
In order for shareholder proposals for the 20032004 Annual Meeting of Shareholders to be eligible for inclusion in VF'sVF’s proxy statement, VF must receive them at its principal office in Greensboro, North Carolina on or before November 22, 2002.21, 2003. In order for shareholder proposals that are not intended to be included in VF'sVF’s proxy statement but which are to be presented at the 20032004 Annual Meeting of Shareholders to be timely, VF must receive notice of such at its principal office in Greensboro, North Carolina on or before February 5,
2003.
4, 2004.
| By Order of the Board of Directors | |
| Candace S. Cummings | |
| Vice President — Administration, | |
| General Counsel and Secretary |
33
Appendix A
V.F. CORPORATION
(As Amended February 11, 2003)
I. PURPOSE
The purpose of the Audit Committee (the “Committee”) of the Board of Directors Candace S. Cummings
Vice President -- Administration,
General Counsel(the “Board”) of V.F. Corporation (“VF”) is to assist the Board in its responsibility to oversee management’s conduct of VF’s financial reporting process including (A) overseeing (1) the integrity of VF’s financial statements, (2) VF’s compliance with legal and Secretary
Dated: March 21, 2002
29
VOTING REQUEST
TO: VF CORPORATION PENSION PLAN COMMITTEE (THE "COMMITTEE"regulatory requirements, (3) VF’s independent auditor’s qualifications and independence, (4) the performance of VF’s internal audit function and independent auditors and (5) the effectiveness of VF’s internal control process and (B) preparing the report that is required by the rules of the Securities and Exchange Commission (“SEC”) ADMINISTRATOR OF THE VF DEFERRED SAVINGS PLAN FOR NON-EMPLOYEE DIRECTORS
(THE "PLAN")
As a participantto be prepared by the audit committee and included in VF’s annual proxy statement.
II. STRUCTURE
The Board shall annually designate the members of the Committee and its Chairman. The Committee shall be composed of not less than three nor more than six members of the Board. The Board may fill any vacancies on the Committee. All members of the Committee shall, in the Planjudgment of the Board, be independent in accordance with certain Deferrals being creditedthe rules and regulations of the SEC and the New York Stock Exchange Listing Standards. Each member shall in the judgment of the Board be financially literate or shall at the time of appointment undertake training for that purpose. At least one member of the Audit Committee shall in the judgment of the Board meet the requirements of “audit committee financial expert” in accordance with gainsthe rules and lossesregulations of the SEC and at least one member (who may also serve as if investedthe audit committee financial expert) shall in the judgment of the Board have accounting or related financial management expertise in accordance with the New York Stock Exchange Listing Standards. No action of the Committee shall be invalid or deemed beyond the authority of the Committee because of a failure of any member to meet the requirements of this paragraph. The Secretary of VF or the Secretary’s designee will serve as the Secretary of the Committee.
III. MEETINGS
The Committee shall meet at least four times a year, or more frequently as circumstances dictate, and at such times and places as determined by the Committee. The Committee shall meet regularly in executive session without management present. The Committee shall meet at least quarterly in separate executive sessions with management and the General Auditor and at least annually in a separate executive session with the independent auditor to discuss any matters that any of them believe should be discussed privately. The Committee shall review with the independent auditor any problems or difficulties and management’s response.
34
A meeting of the Committee may be called by any member of the Committee. A majority of the members of the Committee shall constitute a quorum at any meeting. In the absence of its Chairman, the Committee may appoint any other member of the Committee to preside at its meetings. The members of the Committee shall not have the authority to appoint another director to act in the place of an absent or disqualified member of the Committee.
A written agenda shall be prepared, when possible, for each meeting and distributed to Committee members before the meeting, together with any relevant background materials. Minutes of each meeting shall be prepared and distributed to the Committee. The Committee shall report on each of its proceedings to the Board at the next regular meeting of the Board.
IV. RESPONSIBILITIES AND DUTIES
The Committee shall have the following basic duties and such other duties as shall be specifically assigned to the Committee by the Board and assumed by the Committee:
| A. | Review of Financial Reports and Press Releases |
| 1. The Committee shall discuss with management and the independent auditor the audited financial statements to be included in VF’s Annual Report on Form 10-K (or the Annual Report to Shareholders if distributed prior to the filing of Form 10-K), including VF’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) and review and consider with the independent auditor the matters required to be discussed by Statement of Auditing Standards (“SAS”) No. 61 (as it may be modified or supplemented). | |
| 2. The Committee, or at least its chairman, shall review with management and the independent auditor interim financial results to be included in VF’s quarterly reports to be filed with the Securities and Exchange Commission, MD&A and the matters required to be discussed by SAS No. 71 (as it may be modified or supplemented); this review will occur prior to VF’s filing of any Form 10-Q. | |
| 3. The Committee shall discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies. The Committee need not discuss these items in advance of each earnings release or in each instance in which VF may provide earnings guidance. | |
| 4. The Committee shall discuss policies with respect to risk assessment and risk management. |
| B. | Independent Auditor |
| 1. The Committee shall have the sole authority to retain (subject, if applicable, to shareholder ratification) and terminate VF’s independent auditor and set its fees. | |
| 2. The Committee shall review with the independent auditor the scope of the prospective audit, the estimated fees therefor and such other matters pertaining to such audit as the Audit Committee may deem appropriate. |
35
| 3. The Committee shall pre-approve all audit and permitted non-audit services to be performed by the independent auditor; or delegate the authority to pre-approve such services to one or more members of the Audit Committee, who shall report any decision to pre-approve any services to the full Audit Committee at its regularly scheduled meetings. | |
| 4. The Committee shall, at least annually, receive and review a report by VF’s independent auditor describing: (a) the firm’s internal quality-control procedures; (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (c) (to assess the auditor’s independence) all relationships between the independent auditor and VF. | |
| 5. The Committee shall obtain the independent auditor’s assurance that the audit was conducted in a manner consistent with the Securities Exchange Act of 1934, as amended, and other provisions of applicable law. | |
| 6. The Committee shall set clear hiring policies for employees or former employees of the independent auditor. |
| C. | Internal Audit |
| 1. The Committee shall review the appointment and replacement of VF’s General Auditor; and review any issues that arise regarding the performance of VF’s internal audit function. | |
| 2. The Committee shall receive and review a report, at least annually, from the General Auditor on VF’s internal controls based on the internal auditing performed and any matters significant to VF contained in these reports. | |
| 3. The Committee shall review the Internal Audit Department’s annual plan, interim activities, and organizational structure, as needed. |
| D. | Financial Reporting, Accounting Principles and Internal Control Matters |
| 1. The Committee shall advise management, including the Internal Audit Department, and the independent auditor that they are expected to provide the Committee with a timely analysis of significant financial reporting, accounting, or internal control matters. | |
| 2. The Committee shall make or cause to be made, from time to time, such other examinations or reviews as the Audit Committee may deem advisable with respect to the adequacy of the systems of internal controls and accounting practices of VF and its subsidiaries and with respect to current accounting trends and developments, and take such action with respect thereto as may be deemed appropriate. | |
| 3. The Committee shall review the status of compliance with laws, regulations, and internal procedures, contingent liabilities and risks that may be material to VF, the scope |
36
| and status of systems designed to assure VF compliance with laws, regulations and internal procedures, through receiving reports from management, legal counsel and other third parties as determined by the Audit Committee on such matters, as well as major legislative and regulatory developments which could materially impact VF’s contingent liabilities and risks. | |
| 4. The Committee shall establish and maintain procedures for the confidential and anonymous receipt, retention and treatment of complaints regarding VF’s accounting, internal controls or auditing matters. |
| E. | Annual Evaluation |
The Committee shall annually evaluate its performance.
V. RESOURCES AND AUTHORITY
The Committee may authorize or conduct investigations into any matters within the scope of its responsibilities. The Committee shall have the authority to call before it management and other employees of VF involved in financial or internal control matters. Further, the Committee shall have the power (without seeking Board approval) to engage such financial and internal control experts, including independent public accountants other than VF’s independent auditor, counsel, including counsel other than VF’s regular counsel, and other consultants as it deems reasonably necessary to assist it in carrying out its responsibilities.
VI. LIMIT ON AUTHORITY
In accordance with the Corporation’s By-Laws and the Pennsylvania Business Corporation Law of 1988, as amended, the Committee shall not have any power or authority as to the following:
| 1. The submission to shareholders of any action requiring approval of shareholders under the Pennsylvania Business Corporation Law of 1988, as amended; | |
| 2. The creation or filling of vacancies in the Board; | |
| 3. The adoption, amendment or repeal of the By-Laws; | |
| 4. The amendment or repeal of any resolution of the Board that by its terms is amendable or repealable only the Board; or | |
| 5. The action on matters committed by the By-Laws or resolution of the Board to another committee of the Board. |
VII. REVIEW OF CHARTER
The Committee shall periodically review the provisions of this Charter and recommend at that time, or at any other time, any changes to the Board.
37
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
VF encourages you to vote by Internet or telephone, which eliminates the need to mail back your proxy/voting instruction card. To vote by Internet or telephone you need to follow the steps below:
| • | Have your proxy card and social security number available; | ||
| • | Be ready to enter the control number indicated below. |
Voter Control Number
Your vote is important. Please vote immediately.
Vote-by-Internet  | Vote-by-Telephone  | |||
| 1. Log on to the Internet and go to http://www.eproxyvote.com/vfc. | 1. Call toll-free 1-877-PRX-VOTE (1-877-779-8683) Outside of the U.S. and Canada call 1-201-536-8073 | |||
| OR | ||||
| 2. Enter your Voter Control Number listed above and follow the easy steps outlined on the secured website. | 2. Enter your Voter Control Number listed above and follow the easy recorded instructions. |
YOUR INTERNET OR TELEPHONE VOTE MUST BE RECEIVED BY 11:59 P.M.,
EASTERN DAYLIGHT TIME, ON APRIL 21, 2003.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
| 0570 | ||||
| x Please mark votes as in this example. |
The Board of Directors adoptrecommends a policy to prohibit VF from engaging its independent
accountants to provide non-audit services;vote FOR Items 1, 2, and 3 and AGAINST Shareholder Proposal 2
requesting declassificationItem 4.
1. Election of the Board of Directors for the purpose of
director elections.
Signature of Participant:
--------------------------------
Dated: , 2002
----------------------
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.
PROXY SOLICITATION/VOTING INSTRUCTION CARD
VF CORPORATION
Proxy Solicited on Behalf of the Board of Directors for
Annual Meeting on April 23, 2002
P
R
O
X
Y
The undersigned hereby appoints M.J. McDonald and C.S. Cummings, and each of
them acting individually, proxies of the undersigned, with full 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 March 5, 2002, at the Annual Meeting of Shareholders of VF
Corporation to be held on April 23, 2002, and at any adjournments thereof, and,
in their discretion, upon such other matters not specified as may come before
said meeting. The undersigned hereby revokes any prior proxies.
ELECTION OF DIRECTORS
Nominees:
For a 3-year term: 01 Juan Ernesto de Bedout
02 Ursula F. Fairbairn
03 Barbara S. Feigin
04 Mackey J. McDonald
Change of Address and Comments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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 boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations.
UNLESS YOU VOTE BY TELEPHONE, INTERNET, OR BY SIGNING AND RETURNING THIS CARD,
THE PROXIES CANNOT VOTE YOUR SHARES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- --------------------------------------------------------------------------------
- Fold and Detach -
Directors.
| FOR | WITHHELD | FOR | AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN | |||||||||||||||||||||
| FOR ALL NOMINEES | o | o | WITHHELD FROM ALL NOMINEES | 2. | Approval of the Executive Incentive Compensation Plan, as amended and restated February 11, 2003. | o | o | o | 4. | Shareholder Proposal requesting declassification of the Board of Directors for the purpose of director elections. | o | o | o | |||||||||||||||
| 3. | Ratification of the selection of PricewaterhouseCoopers LLP as VF’s independent accountants for the fiscal year ending January 3, 2004. | o | o | o | ||||||||||||||||||||||||
| o | For all nominees except as written above | |||||||||||||||||||||||||||
| Change of address/comments | o | |||||||||||||||||||||||||||
| I will attend the meeting | o | |||||||||||||||||||||||||||
| TO VOTE BY MAIL, 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: | Date: | Signature: | Date: | |||||||||||
Voting Instructions for the VF Corporation Tax-Advantaged Savings Plan for
Salaried Employees (the "Salaried“Salaried 401(k)"”):
This card constitutes voting instructions to Fidelity Management Trust Company, the Trustee for the Salaried 401(k), to vote in person or by proxy any shares of Common Stock and Series B ESOP Convertible Preferred Stock allocated to the undersigned as of March 5, 20024, 2003 under the Salaried 401(k), at the Annual Meeting of Shareholders of VF Corporation to be held on April 23, 2002,22, 2003, and at any adjournments thereof, and also constitutes voting instructions to the Trustee for a proportionate number of shares of Common Stock and Series B ESOP Convertible Preferred Stock in the Salaried 401(k) for which no instruction card has been received from other participants. If you do not return this card, the Trustee will vote any shares allocated to you in the same proportion as the shares for which instructions were received from other participants in the Salaried 401(k).
Voting Instructions for the VF Corporation Tax-Advantaged Savings Plan for
Hourly Employees (the "Hourly“Hourly 401(k)") and/or The Blue Bell Savings,
Profit Sharing and Retirement Plan (the "Blue Bell 401(k)"”):
This card also constitutes voting instructions to Fidelity Management Trust Company, the Trustee for the Hourly 401(k) and for the Blue Bell 401(k), to vote in person or by proxy any shares of Common Stock allocated to the undersigned as of March 5, 20024, 2003 under the Hourly 401(k) and/or the Blue Bell 401(k), at the Annual Meeting of Shareholders of VF Corporation to be held on April 23, 2002,22, 2003, and at any adjournments thereof, and also constitutes voting instructions to the Trustee for a proportionate number of shares of Common Stock in the Hourly 401(k) and/or the Blue Bell 401(k), as the case may be, for which no instruction card has been received from other participants. If you do not return this card, the Trustee will vote any shares allocated to you in either plan in the same proportion as the shares for which instructions were received from other participants in such plan.
the Hourly 401(k).
Voting Request for the VF Executive Deferred Savings Plan (the "EDSP"“EDSP”):
This card also constitutes a voting request to the VF Corporation Pension Plan Committee (the "Committee"“Committee”), Administrator of the EDSP, to vote the VF Corporation shares held by the trustee of the grantor trust relating to the EDSP and credited to the participant'sparticipant’s EDSP account as of March 5, 2002,4, 2003, at the Annual Meeting of Shareholders of VF Corporation to be held on April 23, 2002,22, 2003, and at any adjournments thereof, with the understanding that the Committee, pursuant to its discretionary powers under the EDSP, may reject this request and direct that the shares be voted in a contrary manner.
SEE REVERSE SIDE
[X] Please mark your 0570
votes
DETACH HERE
PROXY SOLICITATION/VOTING INSTRUCTION CARD
VF CORPORATION
| P | Proxy Solicited on Behalf of the Board of Directors | |
| R | for Annual Meeting on April 22, 2003 | |
| O | ||
| X Y | The undersigned hereby appoints M.J. McDonald and C.S. Cummings, and each of them acting individually, proxies of the undersigned, with full 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 March 4, 2003, at the Annual Meeting of Shareholders of VF Corporation to be held on April 22, 2003, and at any adjournments thereof, and, in their discretion, upon such other matters not specified as may come before said meeting. The undersigned hereby revokes any prior proxies. | |
| Election of Directors, Nominees for a 3-year term: | ||
| (01) Robert J. Hurst, (02) W. Alan McCullough, (03) M. Rust Sharp, (04) Raymond G. Viault | ||
| You are encouraged to specify your choice by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. | ||
| UNLESS YOU VOTE BY TELEPHONE, INTERNET, OR BY SIGNING AND RETURNING THIS CARD,THE PROXIES CANNOT VOTE YOUR SHARES. | ||
| PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. | ||
| HAS YOUR ADDRESS CHANGED? | DO YOU HAVE ANY COMMENTS? | ||
VOTING REQUEST
| To: | VF Corporation Pension Plan Committee (the “Committee”) | |
| Administrator of the VF Deferred Savings Plan for Non-Employee Directors (the “Plan”) |
As a participant in the Plan with certain Deferrals being credited with gains and losses as if invested in this
example.
Shares subjectthe VF Corporation Common Stock Fund, and in accordance with the Committee’s procedures permitting each such participant the right to this proxy/voting instruction card willrequest 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 indicated below, whenshown below:
ELECTION OF DIRECTORS
The Board of Directors of the card is properly executed and returned. If no
indication is made, such shares will be votedCorporation recommends a vote FOR the election of all nominees as Directors.
| Nominees: | For a 3-year term: Robert J. Hurst, W. Alan McCollough, M. Rust Sharp and Raymond G. Viault |
| o | VOTE FORall nominees listed above, except vote withheld from individual nominees as follows: | o | VOTE WITHHELD from all nominees | |||
APPROVAL OF THE EXECUTIVE INCENTIVE COMPENSATION PLAN, AS AMENDED AND RESTATED FEBRUARY 11, 2003.
The Board of Directors of the Corporation recommends a vote FOR approval of the amended and restated Executive Incentive Compensation Plan.
| FOR | AGAINST | ABSTAIN | ||
| o | o | o |
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS VF’S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JANUARY 3, 2004.
The Board of Directors of the Corporation recommends a vote FOR ratification of the selection of the independent accountants,
and AGAINST both shareholder proposals. For participants in the VF Corporation
employee benefit plans: This card will be treated as voting instructions to the
plan trustees or administrator, as explained on the detachable portion of the
card.
accountants.
| FOR | AGAINST | ABSTAIN | ||
| o | o | o |
SHAREHOLDER PROPOSAL
The Board of Directors of the Corporation recommends a vote FOR all nominees, FORAGAINST the independent
accountants,and AGAINST both shareholder proposals.
FOR WITHHELD
1. Election of Directors. [ ] [ ]
FOR,except vote withheld from the following nominee(s):
-------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of the [ ] [ ] [ ]
selection of
PricewaterhouseCoopers LLP
as VF 's independent
accountants for the fiscal
year ending January 4, 2003.
3. Shareholder Proposal 1 [ ] [ ] [ ]
requesting that the Board
of Directors adopt a policy
to prohibit VF from
engaging its independent
accountants to provide
non-audit services.
4. Shareholder Proposal 2 [ ] [ ] [ ] requesting declassification of the Board of Directors for the purpose of director elections.
Change
| FOR | AGAINST | ABSTAIN | ||
| o | o | o |
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 voteFOR the election of address/comments [ ]
I will attend the meeting. [ ]
TO VOTE BY MAIL,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) exactlyall nominees 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
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE IF YOU ARE RETURNIGN YOUR VOTED PROXY/ -
VOTING INSTRUCTION CARD BY MAIL
[VF LOGO]
Dear Shareholder:
VF Corporation encourages you to take advantage of oneDirectors;FORapproval of the newExecutive Incentive Compensation Plan, as amended and convenient ways to vote your shares. You can vote shares 24 hours a day, 7 days
a week, using either a touch-tone telephone or through the Internet. To vote
your shares by telephone or the Internet, you must use the control number
printed in the box above, just below the perforation. The control number must be
used to access the system. YOUR INTERNET OR TELEPHONE VOTE MUST BE RECEIVED BY
11:59 P.M., EASTERN DAYLIGHT TIME, ON APRIL 22, 2002.
1. To vote on the Internet, go to the web site
http://www.eproxyvote.com/vfc.
2. To vote over the telephone, dial 1-877-PRXVOTE (1-877-779-8683). Outsiderestated February 11, 2003;FOR ratification of the U.S.selection of PricewaterhouseCoopers LLP as VF’s independent accountants for the fiscal year ending January 3, 2004; and Canada, shareholders should call 1-201-536-8073.
Your telephone or Internet vote authorizes AGAINSTthe proxies named onShareholder Proposal requesting declassification of the above
proxy/voting instruction card inBoard of Directors for the same manner as if you had marked, signed,
dated, and returned the proxy/voting instruction card. IF YOU CHOOSE TO VOTE
TELEPHONICALLY OR THROUGH THE INTERNET, THERE IS NO NEED TO MAIL BACK YOUR
PROXY/VOTING INSTRUCTION CARD.
Your vote is important. Thank you for voting.