SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VF CORPORATION
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date filed:
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[VF CORPORATION LOGO]
VF CORPORATION
March 21, 2002
Dear Shareholder:
The Annual Meeting of Shareholders of VF Corporation will be held on
Tuesday, April 23, 2002, at the O.Henry Hotel, Caldwell Room, 626 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) ratify the selection of PricewaterhouseCoopers LLP as VF's independent
accountants for fiscal 2002; (iii) consider two shareholder proposals if
properly presented to the meeting; and (iv) 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 selection of PricewaterhouseCoopers LLP
as VF's independent accountants, and AGAINST the two shareholder proposals.
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]
VF CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 23, 2002
March 21, 2002
To the Shareholders of VF CORPORATION:
The Annual Meeting of Shareholders of VF Corporation will be held at the
O.Henry Hotel, Caldwell Room, 626 Green Valley Road, Greensboro, North Carolina,
on Tuesday, April 23, 2002, at 10:30 a.m., for the following purposes:
(1) to elect four directors to hold office until the 2005 Annual Meeting of
Shareholders;
(2) to ratify the selection of PricewaterhouseCoopers LLP as VF's
independent accountants for fiscal 2002;
(3) to consider two shareholder proposals if properly presented by the
proponents; and
(4) to transact such other business as may properly come before the meeting
and at any adjournments thereof.
A copy of VF's Annual Report for 2001 is enclosed for your information.
Only shareholders of record as of the close of business on March 5, 2002
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
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.
TABLE OF CONTENTS
PAGE
----
ABOUT THE MEETING........................................... 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......................................... 2
ITEM NO. 1 -- ELECTION OF DIRECTORS......................... 3
BOARD MEETINGS AND COMMITTEES............................... 6
EXECUTIVE COMPENSATION...................................... 8
COMPENSATION COMMITTEE REPORT............................. 8
SUMMARY COMPENSATION TABLE................................ 12
LONG-TERM INCENTIVE AWARDS................................ 13
FUTURE REMUNERATION....................................... 15
PERFORMANCE GRAPH........................................... 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 19
ITEM NO. 2 -- RATIFICATION OF SELECTION OF INDEPENDENT
ACCOUNTANTS............................................... 21
ITEM NO. 3 -- SHAREHOLDER PROPOSALS......................... 23
OTHER INFORMATION........................................... 28
VF CORPORATION
PROXY STATEMENT
FOR THE 2002 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's Annual
Meeting of Shareholders on April 23, 2002 and at any adjournment or adjournments
of the meeting (the "Meeting").
ABOUT 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") will act upon the matters described in the
foregoing notice of the Meeting, including the election of four directors,
ratification of the selection of PricewaterhouseCoopers LLP as VF's independent
accountants for fiscal 2002, and consideration of two shareholder proposals, if
properly presented by the proponents.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Only shareholders of record on March 5, 2002, the record date for the
Meeting, are entitled to receive notice of and vote at the Meeting.
WHAT ARE THE VOTING RIGHTS OF SHAREHOLDERS?
Each share of Common Stock is entitled to one vote and each share of Series
B Stock is entitled to two votes.
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'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'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: Visit the web site http://www.eproxyvote.com/vfc. To
vote your shares, you must use the control number printed on your
proxy/voting instruction card. The web site is available 24 hours a day,
seven days a week, and will be accessible UNTIL 11:59 p.m., Eastern
Daylight Time, on April 22, 2002;
2) BY TELEPHONE: Call toll-free 1-877-PRXVOTE (1-877-779-8683). To
vote your shares, you must use the control number printed on your
proxy/voting instruction
1
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.
IF YOU VOTE BY INTERNET OR TELEPHONE, YOU NEED
NOT RETURN YOUR PROXY/VOTING INSTRUCTION CARD.
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, there were 111,753,273 outstanding shares consisting
of 110,275,343 shares of Common Stock and 1,477,930 shares of Series B Stock.
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 selection of PricewaterhouseCoopers LLP as
VF's independent accountants for fiscal 2002, and AGAINST approval of each of
the shareholder proposals. 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?
The four nominees for election as directors who receive the greatest number
of votes will be elected directors. Approval of the ratification of the
selection of PricewaterhouseCoopers LLP as VF's independent accountants for
fiscal 2002 and approval of each shareholder proposal requires the affirmative
vote of a majority of the votes cast at the Meeting. Shares of Common Stock and
shares of Series B 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, ratification of the selection of
PricewaterhouseCoopers LLP as VF's independent accountants for fiscal 2002, or
the approval of either shareholder proposal.
OTHER INFORMATION
A copy of VF's Annual Report for the fiscal year ended December 29, 2001
accompanies this proxy statement. No material contained in the Annual Report is
to be considered a part of the proxy solicitation material.
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.
2
ITEM NO. 1
ELECTION OF DIRECTORS
VF's Board of Directors has nominated the four persons named below to serve
as directors until the 2005 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 is unable to
serve or will not 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 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 require that a
majority of its Board of Directors consist of directors who have never served as
employees of VF or its subsidiaries. Currently ten of eleven VF directors meet
this standard. Of the nominees for election as directors at the Meeting, only
Mr. McDonald has served as an employee of VF or its subsidiaries.
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YEAR IN WHICH
SERVICE AS A
NAME PRINCIPAL OCCUPATION DIRECTOR BEGAN
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To Serve Until the
2005 Annual Meeting
Juan Ernesto de Bedout, 57......... President Latin American Operations,
Kimberly-Clark Corporation.......... 2000
Ursula F. Fairbairn, 59............ Executive Vice President -- Human
Resources & Quality,
American Express Company............ 1994
Barbara S. Feigin, 64.............. Consultant.......................... 1987
Mackey J. McDonald, 55............. Chairman of the Board, President,
and Chief Executive Officer of VF... 1993
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Mr. de Bedout is President of Latin American Operations for Kimberly-Clark
Corporation, responsible for business units in Central and South America as well
as the Caribbean. He joined Kimberly-Clark in 1981 as Managing Director of
Colombiana Kimberly in Medellin, Colombia. Thereafter, he managed
Kimberly-Clark's Central American companies and was subsequently named General
Manager and Vice President for the region before being elected to his current
role in 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, 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 Audit, Executive, and Compensation
Committees of the Board of Directors. (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.
3
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.
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 was elected Chairman of the Board
of Directors in 1998. He is a director of Wachovia Corporation and Hershey Foods
Corporation. Mr. McDonald is Chairman of the Executive Committee and serves as
an ex officio member of all other committees of the Board, except the Audit,
Nominating and Governance, and Compensation Committees of the Board of
Directors.
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YEAR IN WHICH
SERVICE AS A
NAME PRINCIPAL OCCUPATION DIRECTOR BEGAN
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Directors Whose Terms
Expire at the 2004
Annual Meeting
Robert D. Buzzell, 68.............. Distinguished Visiting Professor,
Georgetown University, and Professor
Emeritus, Harvard Business School... 1983
Edward E. Crutchfield, 60.......... Former Chairman and Chief Executive
Officer, First Union Corporation.... 1992
George Fellows, 59................. Consultant to JPMorgan Partners..... 1997
Daniel R. Hesse, 48................ Chairman, President and Chief
Executive Officer, TeraBeam
Corporation......................... 1999
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Dr. Buzzell has served as Distinguished Visiting Professor at Georgetown
University since 1998 and Professor Emeritus of Harvard Business School since
1993. Dr. Buzzell served 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, and served as a director of First Union
Corporation until March 2001. He is a member of the Executive and Finance
Committees of the Board of Directors.
Mr. Fellows has served as a Consultant to JPMorgan Partners, a private
equity firm, since 2001. 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.
Mr. Hesse has served as the Chairman, President and Chief Executive Officer
of TeraBeam Corporation, a telecommunications company, since March 2000.
Previously,
4
Mr. Hesse was President and Chief Executive Officer of AT&T Wireless Services.
He also served as an Executive Vice President of AT&T. Mr. Hesse is a director
of McLeodUSA Incorporated, a telecommunications company. He is a member of the
Finance and Compensation Committees of the Board of Directors.
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YEAR IN WHICH
SERVICE AS A
NAME PRINCIPAL OCCUPATION DIRECTOR BEGAN
- -------------------------------------------------------------------------------------------
Directors Whose Terms
Expire at the 2003
Annual Meeting
Robert J. Hurst, 56................ Vice Chairman, The Goldman Sachs
Group, Inc. ........................ 1994
W. Alan McCollough, 52............. President and Chief Executive
Officer, Circuit City Stores, Inc... 2000
M. Rust Sharp, 61.................. Of Counsel to Heckscher, Teillon,
Terrill & Sager (Attorneys)......... 1984
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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, Mr.
Hurst has also served as the Chief Executive Officer of the 9/11 United Services
Group, a recently-formed organization to coordinate 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 Governance Committees of
the Board of Directors.
Mr. McCollough has served as President and Chief Executive Officer of
Circuit City Stores, Inc. since June 2000. 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 Advisory Committees of the Board of
Directors.
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 and Compensation Committees of the Board of Directors.
(Also see Security Ownership of Certain Beneficial Owners and Management.)
DIRECTORS' COMPENSATION
Each director other than Mr. McDonald receives an annual stipend of
$28,000, payable in equal monthly installments, plus a fee of $1,200 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. Each
director serving as chairman of a committee 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. 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. VF does not
provide pension, medical or life insurance benefits to its non-employee
directors.
Under the VF 1996 Stock Compensation Plan, 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). 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 10 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's disability or
retirement or 12 months after the director's death.
Each director is eligible to participate in VF'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 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
plan for the Chairman 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 PROGRAM
The goals of VF's Executive Compensation Program (the "Program") are to
attract and retain highly competent executives, to provide incentives for
achieving and exceeding VF's short-term and long-term financial goals and to
align the financial objectives of VF's executives with those of its
shareholders.
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,
aligning interests of shareholders and executives. VF balances each of the
Program'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 philosophy is that a significant portion of each executive's total
compensation should be at-risk based on VF's financial performance. The at-risk
components of total compensation are progressively greater for higher level
positions. For 2001, 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
Total compensation targets, consisting of base salary, annual incentive
awards and long-term incentive awards, are set annually for designated
management positions. Information provided by Towers Perrin, VF's independent
compensation consultant, regarding its executive compensation database, which
includes executive compensation data for over 500 large U.S. based companies
(the "Comparison Group"), as well as information about companies within the S &
P Textiles (Apparel) Super Index, was utilized by the Compensation Committee
(the "Committee") to establish compensation targets for 2001. 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's
Comparison Group based on targeted performance goals established by the
Committee.
Base Salary: Base salaries are set annually by the Committee. In
determining individual salaries, the Committee considers individual
contribution, scope of job responsibilities, VF's salary budget, labor market
conditions and current compensation, as compared to market practice, based on
guidance provided by VF's independent compensation consultant.
Annual Incentives: Under the VF Executive Incentive Compensation Plan ("EIC
Plan"), a performance goal based on VF's basic earnings per share, excluding the
effects of
8
extraordinary and non-recurring items, is set each year by the Committee. The
Committee establishes a fixed percentage of the mid-point of each executive's
salary grade as the executive's targeted annual incentive opportunity under the
EIC Plan. Depending upon the level of achievement of the performance goal,
annual cash awards may range from 0% to 150% of the targeted incentive
opportunity for each EIC Plan participant. The maximum individual award in any
year is $1,500,000. The Committee may exercise discretion to reduce awards under
the EIC Plan generally or for any individual participant. While it is the policy
of the Committee to provide opportunities for annual incentive compensation for
achievement of preestablished performance goals based primarily on financial
measures, the Committee also retains discretion to pay bonuses reflecting its
subjective assessment of the valuable accomplishments of VF's executive officers
which, in the Committee's view, cannot always be anticipated in advance or
reflected in such preestablished goals.
Long-Term Incentives: Long-term incentives consist of
performance-contingent Common Stock units and stock options.
Under VF's Mid-Term Incentive Plan (drawn from the VF 1996 Stock
Compensation Plan) performance-contingent Common Stock units are earned if VF'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, 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 10 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 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 to each executive officer named in this proxy statement also
depend upon the Committee's assessment of the individual's performance. The
Committee does not assign specific weighting to these factors.
9
SUMMARY OF ACTIONS TAKEN BY THE COMPENSATION COMMITTEE
2001 BASE SALARY INCREASES
At its February 2001 meeting, the Committee approved salary increases to be
effective as of January 1, 2001. The base salary increase for each executive
officer was based on (i) the Committee's adjustment of the executive's salary
grade range, if appropriate, based on market guidance provided by VF's
independent compensation consultant, (ii) the Committee's assessment of the
individual's salary within his or her salary grade based on the individual's
performance and (iii) VF's overall merit increase budget for 2001 of
approximately 4.5% for salaries of senior employees after adjustment for salary
range changes.
ANNUAL INCENTIVE AWARDS
At its February 2001 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's position.
At its February 2002 meeting, the Committee granted EIC Plan awards to the named
executive officers based on the achievement of 85% of the EIC Plan performance
target for 2001, excluding the effects of extraordinary and non-recurring items,
resulting in a potential pay-out of approximately 40% 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
At its February 2001 meeting, the Committee reviewed VF's philosophy with
respect to stock option grants. In order to instill an entrepreneurial spirit
among its employees, it is VF's practice to grant options to a significant
number of management-level employees. In 2001, stock options were granted to 603
management-level employees. The stock options awarded to the named executive
officers were based on the Committee's assessment of the individual's total
compensation from a competitive perspective, within the guidelines established
by VF, and the executive'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 because the performance levels set by the Plan
were not met for that performance period.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer's base salary, annual incentive awards, and
long-term incentive awards follow the policies described above.
Mr. McDonald's salary increase for 2001 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's assessment of his
performance, in line with
10
VF's merit increase budget. Mr. McDonald was granted options for 300,000 shares
of VF Common Stock based on compensation data provided by VF's independent
compensation consultant, together with the projection of total targeted
compensation within the guidelines described above, and the Committee's
assessment of Mr. McDonald's performance.
Mr. McDonald's EIC Plan award of $392,500 for 2001 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. Mr. McDonald received a
supplemental award of $137,900 based on the Board's assessment of VF's progress
during the year under Mr. McDonald's leadership of major strategic initiatives,
including reducing inventories by more than $200 million, more than double VF's
targeted reduction of $100 million, contributing to exceptionally strong cash
flow from operations in 2001 of $685 million, the second highest level in VF's
history. VF also reduced costs, strengthened sourcing capabilities and realigned
capacity with current demand. In addition, the integration of The North Face,
Eastpak and JanSport businesses was initiated contributing to a strong
improvement in the profitability of these businesses.
TAX DEDUCTIBILITY CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
deductibility of compensation in excess of $1 million paid to the executive
officers named in this proxy statement, unless certain requirements are met.
Stock options and certain performance-based awards under the 1996 Stock
Compensation Plan are designed to meet these requirements as are annual bonuses
under VF's EIC Plan. It is the present intention of the Compensation Committee
to preserve the deductibility of compensation under Section 162(m) to the extent
the Committee believes that to do so is consistent with the best interests of
shareholders; however, tax deductibility is only one consideration in
determining the type and amount of compensation. The Board of Directors
maintains discretion to grant awards based on the Board's assessment of
individual performance and other relevant factors. Such discretionary awards,
including a portion of the supplemental award made to Mr. McDonald for 2001, may
not meet the requirements for full deductibility of Section 162(m). In granting
any such awards the Board takes into consideration any potential loss of
deductibility.
Ursula F. Fairbairn, Chairman
Daniel R. Hesse
W. Alan McCollough
M. Rust Sharp
11
The following table sets forth a summary of the compensation paid or
accrued for the years 1999 through 2001 by VF to or for the benefit of the named
executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
----------------------------------------------------------------------------------------------------------------
STOCK
OPTIONS/ LTIP ALL OTHER
NAME AND SARS PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#) ($) SATION($)(2)
----------------------------------------------------------------------------------------------------------------
M.J. McDonald 2001 $960,000 $530,400 300,000 $ -- $12,500
Chairman, President and 2000 834,000 878,000 150,000 211,000 30,000
Chief Executive Officer 1999 800,000 555,000 150,000 200,000 10,000
----------------------------------------------------------------------------------------------------------------
T.L. Lay 2001 495,000 194,600 104,000 -- 12,500
Vice President - Global 2000 473,200 350,000 104,000 69,000 10,000
Processes and Chairman - 1999 375,000 180,000 26,000 66,000 10,000
International Jeanswear Coalition
----------------------------------------------------------------------------------------------------------------
J.P. Schamberger 2001 495,000 194,600 104,000 -- 12,500
Vice President and Chairman - 2000 473,000 350,000 104,000 84,000 10,000
North & South America Jeanswear & 1999 455,000 220,000 44,000 79,000 10,000
Playwear Coalitions
----------------------------------------------------------------------------------------------------------------
R.K. Shearer 2001 360,000 161,500 84,000 -- 12,500
Vice President and Chief Financial Officer 2000 300,000 290,000 34,000 69,000 13,000
and Chairman - Outdoor Coalition 1999 278,000 180,000 34,000 66,000 22,000
----------------------------------------------------------------------------------------------------------------
E.C. Wiseman(3) 2001 345,000 161,500 84,000 -- 12,500
Vice President and Chairman - 2000 342,500 178,700 13,000 32,000 10,000
Global Intimate Apparel Coalition
(1) The target number and aggregate value of performance-contingent Common Stock
units earnable by the named executive officers at December 29, 2001 were as
follows: Mr. McDonald -- 16,125, $623,393; Mr. Lay -- 5,916, $228,713; Mr.
Schamberger -- 5,916, $228,713; Mr. Shearer -- 4,913, $189,937; and Mr.
Wiseman -- 4,913, $189,937. Also, at fiscal year-end, Mr. McDonald held
45,020 shares of restricted stock, having an aggregate value of $1,740,473,
and Mr. Schamberger held 13,259 restricted shares, having an aggregate value
of $512,593, based on the closing price of VF Common Stock on December 29,
2001.
(2) The amount in this column for 2001 represents VF's matching contribution
under the Executive Deferred Savings Plan.
(3) Mr. Wiseman was elected to his current position in October 2000.
12
LONG-TERM INCENTIVE AWARDS
STOCK OPTIONS
This table sets forth for the named executive officers information
regarding the grant of stock options by VF in the 2001 fiscal year and their
potential realizable values. No stock appreciation rights have been granted to
employees other than limited stock appreciation rights, which become exercisable
only upon a Change in Control. All stock options were granted under VF's 1996
Stock Compensation Plan, as amended, which is a shareholder-approved plan. This
Plan is VF's only plan under which stock options and other equity awards are
made. As of December 29, 2001, 7,439,269 shares remained available for future
grants under this Plan.
- --------------------------------------------------------------------------------
OPTIONS GRANTED IN THE 2001 FISCAL YEAR
- --------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM(2)
- -------------------------------------------------------------------------------------------------------------------
NO. OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5% 10%
- -------------------------------------------------------------------------------------------------------------------
M.J. McDonald 150,000 6.3% $35.40 2/2011 $3,339,000 $8,463,000
150,000 6.3% $38.50 4/2011 3,631,500 9,204,000
T.L. Lay 104,000 4.4% $35.40 2/2011 2,315,000 5,867,700
J.P. Schamberger 104,000 4.4% $35.40 2/2011 2,315,000 5,867,700
R.K. Shearer 84,000 3.5% $35.40 2/2011 1,869,800 4,739,300
E.C. Wiseman 84,000 3.5% $35.40 2/2011 1,869,800 4,739,300
(1) Except as otherwise indicated, all of the options were non-qualified stock
options granted in February 2001. 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, 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
The following table sets forth for each of the named executive officers
information regarding stock options exercised by them during the 2001 fiscal
year, together with the number and value of stock options held at 2001 fiscal
year end, each on an aggregate basis.
- -----------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN THE 2001 FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
- -----------------------------------------------------------------------------------------------------
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END(1)
------------------ ---------------------
NUMBER OF (#) ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------
M.J. McDonald 156,000 $2,125,200 840,000/300,000 $5,736,400/$ 513,000
T.L. Lay 47,000 692,600 137,000/164,000 850,600/ 1,086,600
J.P. Schamberger 76,000 1,074,700 176,000/164,000 731,300/ 1,086,600
R.K. Shearer 11,000 157,600 107,000/ 84,000 642,300/ 273,800
E.C. Wiseman -- -- 53,800/ 84,000 295,700/ 273,800
- -----------------------------------------------------------------------------------------------------
(1) Market value of underlying shares at fiscal year-end based on the
fiscal year-end market price of $38.66 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 2001 for the three-year performance period of 2001 through 2003
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'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 PLANS(1, 2)
- ----------------------------------------------------------------------------------------------
NAME THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ----------------------------------------------------------------------------------------------
M.J. McDonald 4,574 9,147 18,294
T.L. Lay 1,486 2,971 5,942
J.P. Schamberger 1,486 2,971 5,942
R.K. Shearer 1,238 2,475 4,950
E.C. Wiseman 1,238 2,475 4,950
- ----------------------------------------------------------------------------------------------
(1) The actual number of shares, if any, 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 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.
FUTURE REMUNERATION
PENSION PLAN
VF maintains and contributes to the VF Corporation Pension Plan (the
"Pension Plan"), a defined benefit plan that covers all of VF's domestic
employees, including the named executive officers.
The following table reflects estimated annual benefits that would be
payable, without regard to any limitation imposed by the Internal Revenue Code
or the Employee Retirement Income Security Act of 1974 ("ERISA"), under the
Pension Plan upon retirement of individuals in the specified remuneration and
years of service classifications. Benefits under the Pension Plan are determined
based on average salary and bonus compensation from January 1, 1999, with no
less than five years immediately preceding retirement included in the average.
- -----------------------------------------------------------------------
ASSUMED AVERAGE
ANNUAL COMPENSATION ESTIMATED ANNUAL BENEFITS BASED ON SERVICE OF:
- -----------------------------------------------------------------------
10 YEARS 15 YEARS 20 YEARS 25 YEARS OR MORE
- -----------------------------------------------------------------------
$ 600,000 $106,000 $159,000 $212,000 $ 265,000
800,000 142,000 213,000 284,000 355,000
1,100,000 196,000 294,000 392,000 490,000
1,250,000 223,000 334,000 446,000 557,000
1,500,000 268,000 402,000 536,000 670,000
2,000,000 358,000 537,000 716,000 895,000
2,250,000 403,000 605,000 806,000 1,007,000
2,500,000 448,000 672,000 896,000 1,120,000
2,750,000 493,000 739,000 986,000 1,232,000
- --------------------------------------------------------------------------------
Benefits that are not payable under the Pension Plan because of certain
Code and/or ERISA limitations are provided pursuant to VF's Supplemental
Executive Retirement Plan (see below). The amounts in the table have been
computed on a straight life annuity basis and include entitlements from the
Pension Plan and the Supplemental Executive Retirement Plan, as applicable.
Each of the named executive officers has credited years of service under
the Pension Plan as follows: Mr. McDonald -- 19 years; Mr. Lay -- 28 years; Mr.
Schamberger -- 29 years; Mr. Shearer -- 15 years; and Mr. Wiseman -- 6 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
15
each participant's accrued benefit and provide increases in accrued benefits for
active participants, retired participants, surviving spouses and beneficiaries
and terminated vested participants. The Pension Plan is considered "Overfunded"
to the extent that the fair market value of Pension Plan assets exceeds Pension
Plan liabilities (primarily the actuarial present value of Pension Plan benefit
entitlements).
Had there been a Change in Control as of the end of VF's 2001 fiscal year,
the named executive officers would have estimated annual benefits vested
(excluding any allocation of excess pension assets to participants) under the
Pension Plan (without regard to Code and/or ERISA limitations) in approximately
the following amounts: Mr. McDonald -- $640,000; Mr. Lay -- $228,100; Mr.
Schamberger -- $271,000; Mr. Shearer -- $129,000; and Mr. Wiseman -- $47,700.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Supplemental Executive Retirement Plan (the "SERP") is an unfunded,
non-qualified plan for eligible participants designed (i) to restore benefits
lost under the Pension Plan due to (a) the maximum legal limit of pension
benefits imposed under ERISA and the Code and (b) an election to defer
compensation under VF'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, the combined retirement income from
the Pension Plan and the SERP for each of the named executive officers 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-year period immediately
preceding retirement. In addition, Mr. McDonald's combined retirement income
from the Pension Plan and the SERP is calculated as if he had 25 credited years
of service.
SERP benefits will become funded upon a "Change in 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"). 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, the estimated
annual benefits vested under the SERP and payable beginning at age 65 for each
of the named executive officers would have been as follows: Mr.
McDonald -- $962,700; Mr. Lay -- $245,200; Mr. Schamberger -- $298,800; Mr.
Shearer -- $141,800; and Mr. Wiseman -- $52,400.
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
employment is terminated within a specified period after a "Change in 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'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'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" (as that term is
defined in the Code). Executives also receive additional payments under the
Agreements to reimburse them for any increased taxes, penalties and interest
resulting from severance payments under the Agreements by reason of such
payments being treated as excess parachute payments.
Had there been a Change in Control as of March 5, 2002, 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; Mr.
Lay -- $2,266,500; Mr. Schamberger -- $2,928,400; Mr. Shearer -- $1,781,900; and
Mr. Wiseman -- $1,346,400.
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"), 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, 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.
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on VF
Common Stock with that of the Standard & Poor's ("S&P") 500 stock index and the
S&P Textiles (Apparel) Super Index ("Textiles Super") for the five years ended
December 31, 2001. The graph assumes that $100 was invested on January 1, 1997,
in each of VF Common Stock, the S&P 500, and the Textiles Super indices, and
that all dividends were reinvested.
COMPARISON OF FIVE-YEAR TOTAL RETURN OF
VF COMMON STOCK, S&P 500 INDEX, AND TEXTILES SUPER
VF COMMON STOCK CLOSING PRICE ON DECEMBER 31, 2001 WAS $39.01
[TOTAL SHAREHOLDER RETURNS LINE GRAPH]
VF CORP S&P 500 INDEX TEXTILES SUPER
------- ------------- --------------
1996 100.00 100.00 100.00
1997 140.35 133.36 109.16
1998 143.98 171.48 92.12
1999 94.32 207.56 74.23
2000 117.82 188.66 81.92
2001 130.28 166.24 88.57
OVER A FIVE-YEAR PERIOD, VF'S TOTAL RETURN OF 30.28% COMPARES WITH 66.24%
AND (11.43)% FOR THE S&P 500 AND THE TEXTILES SUPER INDICES, RESPECTIVELY.
18
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
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 Stock, as well as
certain other information, all as of March 5, 2002, except as otherwise
indicated in the footnotes below.
- ------------------------------------------------------------------------------------------------
BENEFICIAL OWNER AMOUNT OF PERCENT
AND NATURE OF OWNERSHIP BENEFICIAL OWNERSHIP(1) 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, 1951(2,3,4).......................... 13,945,336 shares 12.65%
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, deceased(2,3,4).......................... 8,977,952 shares 8.14%
-----------------
Total........................................ 22,923,288 shares 20.79%
AXA Financial, Inc. 1290 Avenue of the Americas New York,
New York 10104(5)........................................... 13,300,134 shares 12.06%
Capital Group International, Inc. 11100 Santa Monica
Boulevard Los Angeles, CA 90025(6).......................... 9,290,350 shares 8.42%
Dodge & Cox One Sansome St., 35th Floor San Francisco, CA
94104(7).................................................... 8,842,460 shares 8.02%
Series B ESOP Convertible Preferred Stock
Fidelity Management Trust Company, 82 Devonshire Street,
H11D, Boston, MA 02109-3614, as Trustee of VF's
Tax-Advantaged Savings Plan for Salaried Employees.......... 1,477,930 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 23,027,186 shares (20.88% of the class outstanding) of the VF
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
number 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, 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 OWNED(1,2,3,4)
- --------------------------------------------------------------------------------------------
Directors:
Robert D. Buzzell....................................... 29,800
Edward E. Crutchfield................................... 42,634
Juan Ernesto de Bedout.................................. 7,704
Ursula F. Fairbairn..................................... 22,962,907
Barbara S. Feigin....................................... 48,706
George Fellows.......................................... 20,200
Daniel R. Hesse......................................... 12,360
Robert J. Hurst......................................... 45,603
W. Alan McCollough...................................... 5,864
M. Rust Sharp........................................... 22,959,843
Named Executive Officers:
Mackey J. McDonald...................................... 1,052,638(5)
Terry L. Lay............................................ 157,736
John P. Schamberger..................................... 283,524(6)
Robert K. Shearer....................................... 157,451
Eric C. Wiseman......................................... 92,432
All Directors and Executive Officers as a Group (19
persons)................................................ 25,364,610
- --------------------------------------------------------------------------------------------
(1) Shares owned include shares held in trusts as of December 31, 2001 in
connection with employee benefit plans, as to which the following
participants share voting power but have no present dispositive power: Mr.
McDonald -- 38,025 shares; Mr. Lay -- 1,321 shares; and all directors and
executive officers as a group -- 67,349 shares. Does not include shares of
Series B Stock held in trust in connection with an employee benefit plan, as
to which participants also share voting power but have no present
dispositive power (and no power to
20
direct conversion into Common Stock), as follows: Mr. McDonald -- 239
shares; Mr. Lay -- 340 shares; Mr. Schamberger -- 366 shares; Mr.
Shearer -- 406 shares; 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 to 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 officers as a group -- 4,747 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 -- 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 are deemed to beneficially own
20.82% 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% 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 -- 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 power with
respect to the shares deliverable in settlement of these units.
(5) Mr. McDonald is also a Director. Shares owned include 45,020 shares of
restricted stock over which Mr. McDonald holds voting power but not
dispositive power.
(6) Includes 13,259 shares of restricted stock over which Mr. Schamberger holds
voting power but not dispositive power.
ITEM NO. 2
RATIFICATION OF THE SELECTION
OF INDEPENDENT ACCOUNTANTS
SELECTION OF INDEPENDENT ACCOUNTANTS. Upon the recommendation of the Audit
Committee and subject to shareholder approval, the Board of Directors has
retained PricewaterhouseCoopers LLP as VF's independent accountants for the
fiscal year ending January 4, 2003. 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's independent accountants, the Audit Committee considered whether the
provision of non-audit services by PricewaterhouseCoopers LLP was compatible
with maintaining PricewaterhouseCoopers LLP'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
shareholders do not ratify the selection of PricewaterhouseCoopers LLP, the
Board of Directors will reconsider the selection of independent accountants.
THE VF BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP.
21
PROFESSIONAL FEES OF PRICEWATERHOUSECOOPERS LLP. The following summarizes
the estimated fees of PricewaterhouseCoopers LLP for services rendered to VF
during 2001:
Audit Fees: The aggregate fees billed or to be billed for professional
services rendered for the audit of VF's consolidated financial statements for
the fiscal year ended December 29, 2001 and the reviews of the financial
statements included in VF's Forms 10-Q for that fiscal year were $741,000.
Financial Information Systems Design and Implementation
Fees: PricewaterhouseCoopers LLP did not provide financial information systems
design or implementation services to VF during 2001.
All Other Fees: All other fees paid or payable by VF for services other
than audit services rendered during 2001 by PricewaterhouseCoopers LLP are
estimated at $2.4 million. The foregoing services consisted primarily of certain
services that VF considers to be audit-related: statutory audits 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 reports as follows with
respect to the audit of VF's consolidated financial statements for the fiscal
year ended December 29, 2001 (the "2001 Financial Statements"). At the meeting
of the Audit Committee held in February 2002, the Audit Committee (i) reviewed
and discussed with management the 2001 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
2001 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 2001 Financial Statements as audited by
PricewaterhouseCoopers LLP be included in VF's Annual Report on Form 10-K for
the fiscal year ended December 29, 2001 to be filed with the Securities and
Exchange Commission.
George Fellows, Chairman
Juan Ernesto de Bedout
Ursula F. Fairbairn
W. Alan McCollough
22
ITEM NO. 3
SHAREHOLDER PROPOSALS
VF has been notified that two shareholders intend to present proposals for
consideration at the Meeting. The address of each of the proponents identified
below 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
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 adopt 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
audits for public corporations avoid business relationships that might
compromise their independence or raise the perception of compromised
judgment. At the heart of the challenge to auditor independence is the
growing level of business and financial relationships developing
between audit firms and their clients. Release 33-7919 identifies
these growing business relationships that threaten auditor
independence:
"Accounting firms have woven an increasingly complex web of
business and financial relationships with their audit clients.
The nature of the non-audit services that accounting firms
provide to their audit clients has
23
changed, and the revenues from these services have dramatically
increased.
"The growth of non-audit revenues represents a trend that has
been accelerating dramatically in the last several years, with
non-audit fees for consulting or advisory services exceeding audit
fees at many companies. Our Company is in the category of companies
that pays its audit firm more for non-audit advisory services than it
does for audit services. The Company's most recent proxy statement
indicated that PricewaterhouseCoopers LLP billed $989,000 for audit
services, while billing an estimated $5.1 million for non-audit
services rendered.
"We believe that this financial "web of business and financial
relationships" may at a minimum create the perception of a conflict of
interest that could result in a lack of owner and investor confidence
in the integrity of the Company's financial statements. As long-term
shareowners, we believe that the best means of addressing this issue
is to prohibit any audit firm retained by our Company to perform audit
services from receiving payment for any non-audit services performed
by the firm. We urge your support for this resolution designed to
protect the integrity of the Company's auditing and financial
reporting processes."
THE VF BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
Obtaining proper assurance that our outside auditors are independent is one
of the most important functions of the Audit Committee of our Board of
Directors. The Board and the Audit Committee have taken specific steps to
protect the independence of our outside auditors. However, to help VF achieve
its mission, VF, with Audit Committee oversight, needs to maintain flexibility
to select accounting professionals to assist the Company, including in some
cases asking our independent auditors to provide services that do not fit within
the Securities and Exchange Commission's ("SEC") narrow definition of "audit
services." As described below, audit-related services that do not fit within the
SEC's definition of "audit services" include, among other things, statutory
audits of international subsidiaries, "comfort letters" related to sales of
securities, compliance letters for lenders and consultation on accounting
treatment of proposed transactions.
The strict rule proposed by the IBEW Trust would bar VF from obtaining any
non-audit services from our independent auditors. The IBEW Trust argues that the
"growth" of non-audit fees, particularly the payment of non-audit fees that
exceed the amount of the audit fees in any given year, poses a threat to the
independence of our auditors. We certainly agree that preserving auditor
independence is fundamentally important. But we do not agree that paying for
non-audit services in any amount or of any kind jeopardizes the independence of
our independent auditors.
In fact, the IBEW Trust's strict rule would hurt VF. In some cases we are
required to obtain non-audit services from our independent auditors. For
example, when we sell securities, underwriters require our auditors to furnish
comfort letters, and the SEC requires that our registration statements include
our audited financial statements. Our auditors must perform substantial work in
order to consent to our use of their audit opinion on our financial
24
statements or to issue comfort letters in these circumstances. Also, we have a
credit agreement that requires us each year to deliver to our lending group a
compliance statement from our independent auditors confirming, among other
things, certain financial calculations. None of these services are within the
definition of "audit services" used by the SEC and referred to in the IBEW
Trust's proposal.
There are still other cases when it makes good sense to ask our outside
auditors to provide non-audit services. Our independent auditors apply extensive
or limited procedures to the financial statements of our international
subsidiaries in connection with the audit of the financial statements of VF.
Many of these international subsidiaries are required to file statutory audit
reports with governmental authorities. Since our outside auditors are already
familiar with our companies' books and records, it is cost effective to engage
them for these audits, which are considered to be "non-audit" services by the
SEC. Application of accounting rules requires judgment; it is not a
black-and-white exercise. By consulting with the same independent accounting
firm that will audit our financial statements while we are planning and
negotiating transactions, we gain assurance that we will apply the proper
accounting treatment when the transaction occurs. Similarly, tax services are
generally provided by a company's audit firm because business issues almost
always have both tax and accounting ramifications. Again, the IBEW Trust's
proposal would prohibit us from engaging our independent auditors to perform
these functions.
Even the fees we pay our independent auditors to attend our Annual Meeting
of Shareholders and be available to answer questions are not considered audit
fees by the SEC, and could not be paid under the IBEW Trust's proposal.
Because the Board and the Audit Committee recognize the importance of
auditor independence, they have already taken a number of steps to ensure the
independence of our auditors, including the following:
- THE BOARD HAS ADOPTED A CHARTER FOR THE AUDIT COMMITTEE REQUIRING THE
COMMITTEE TO REVIEW AND CONFIRM THE INDEPENDENCE OF THE OUTSIDE AUDITORS.
- THE AUDIT COMMITTEE IS COMPOSED ENTIRELY OF INDEPENDENT DIRECTORS.
- THE AUDIT COMMITTEE ANNUALLY MEETS WITH THE INDEPENDENT AUDITORS FOR THE
SPECIFIC PURPOSE OF REVIEWING THEIR INDEPENDENCE.
- THE AUDIT COMMITTEE HAS ADOPTED A POLICY TO PROHIBIT THE RETENTION OF OUR
INDEPENDENT AUDITORS FOR CERTAIN FUNCTIONS, specifically (i) design and
implementation of financial information systems and (ii) performance of
internal auditing functions or services augmenting the internal audit.
- THE AUDIT COMMITTEE HAS ADOPTED A POLICY TO REQUIRE AUDIT COMMITTEE
PRE-CLEARANCE OF SUBSTANTIAL NON-AUDIT ENGAGEMENTS OF OUR INDEPENDENT
AUDITORS BY MANAGEMENT. Specifically, the Audit Committee Chairman must
approve any engagement expected to generate fees of $250,000 or more, and
the full Audit Committee must approve any assignment expected to generate
fees exceeding $1 million.
When the SEC recently strengthened the rules on auditor independence, it
rejected calls to prohibit all non-audit services by an independent auditor. The
SEC concluded that the risk
25
to auditor independence posed by use of independent auditors for non-audit
services was not best addressed by the black-and-white rule proposed by the IBEW
Trust barring all non-audit services.
In light of recent events described in the press, there are a number of
public and private initiatives to further strengthen the independence
requirements to which outside auditors are subject. Your Board and Audit
Committee will be monitoring these developments closely.
In the meantime, the best approach to the issue of auditor independence is
the one being taken by VF's Board, namely to charge the Audit Committee with
primary responsibility to obtain proper assurance of our outside auditors'
independence from VF. The Audit Committee can make the judgments required to
enable VF to obtain the accounting and professional help it needs, without
jeopardizing the independence of our outside auditors.
THE VF BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
SHAREHOLDER PROPOSAL 2
VF has been notified that Amalgamated Bank LongView Collective Investment
Fund, beneficial owner of 33,443 shares of VF Common Stock, will have the
following resolution presented at the Meeting:
"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.
"The evidence indicates that shareholders are fed up with
classified boards. In 2001 shareholders voted on declassification
proposals at 40 companies, and these proposals received an average of
53.2% of the "yes-and-no" vote. Companies where shareholders urged
this reform include Airborne Freight (75.4% "yes"),
26
Baker Hughes (76%), Federated Department Stores (71%), Goodyear Tire &
Rubber (62.4%), Baxter International (62.2%), Lucent Technologies (54.2%)
and Merck (51.3%). Shareholder proposals received a similar level of
support in 2000. A bylaw proposal at Kmart that year received 73% of the
"yes" votes, but fell short of the supermajority of outstanding shares
needed for adoption.
"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.
"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 YES for this proposal."
THE VF BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
VF has had a classified board of directors for over thirty years. Since
1969, VF's bylaws 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 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 bylaw provision
establishing the classified board of directors was approved by VF's shareholders
at VF'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
the Company through devices that are not in the best interests of all
shareholders and will encourage potential seekers of control of the Company to
negotiate their proposals with the Board. The existence of a classified Board
will also deter frivolous attempts at gaining control or influencing the
direction of the Company that, even if unlikely to be successful, can be
disruptive to the conduct of the Company's business. Classification provides the
Board with an adequate opportunity to fulfill its duties to the Company'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's
performance and to influence the Board's composition.
The Investor Responsibility Research Center recently reported that over 60%
of corporations included in the S&P 500 currently have classified boards.
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 bylaws that provide for a classified Board.
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 AGAINST THIS PROPOSAL.
OTHER INFORMATION
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, VF had not received notice of any matter to
be presented at the Meeting other than as described in this proxy statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires directors and certain officers of
VF, as well as persons who own more than 10% of a registered class of VF's
equity securities ("Reporting Persons"), to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission and the New York Stock Exchange. VF believes
28
that during the preceding year all Reporting Persons timely complied with all
filing requirements applicable to them.
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, and employees of that company are
expected to solicit proxies in person, by telephone and by mail. The anticipated
cost to VF of such solicitation is approximately $10,000, plus expenses. VF will
reimburse brokers and other persons holding stock in their names or in the names
of nominees for their expenses incurred in sending proxy material to principals
and obtaining their proxies.
2003 SHAREHOLDER PROPOSALS
In order for shareholder proposals for the 2003 Annual Meeting of
Shareholders to be eligible for inclusion in VF's proxy statement, VF must
receive them at its principal office in Greensboro, North Carolina on or before
November 22, 2002. In order for shareholder proposals that are not intended to
be included in VF's proxy statement but which are to be presented at the 2003
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.
By Order of the Board of Directors
Candace S. Cummings
Vice President -- Administration,
General Counsel and Secretary
Dated: March 21, 2002
29
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 the VF Corporation Common Stock Fund, and in
accordance with the Committee's procedures permitting each such participant the
right to request that the VF shares held by the trustee of the grantor trust
relating to the Plan and credited to the participant's Plan account at the
record date be voted in a specific manner, I hereby request that my VF shares so
credited be voted, in person or by proxy, in the manner shown below:
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE FOR THE
ELECTION OF DIRECTORS.
Nominees: For a 3-year term:
Juan Ernesto de Bedout, Ursula F. Fairbairn, Barbara S. Feigin,
and Mackey J. McDonald
[ ] VOTE FOR all nominees listed above, [ ] VOTE WITHHELD
except vote withheld from individual from all nominees
nominees as follows:
------------------------------
------------------------------
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS VF'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING JANUARY 4, 2003.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE FOR
RATIFICATION OF THE SELECTION OF THE INDEPENDENT ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SHAREHOLDER PROPOSAL 1
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE AGAINST
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.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SHAREHOLDER PROPOSAL 2
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE AGAINST
SHAREHOLDER PROPOSAL 2 REQUESTING DECLASSIFICATION OF THE BOARD OF DIRECTORS FOR
THE PURPOSE OF DIRECTOR ELECTIONS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I understand that if I return this form properly signed but do not
otherwise specify my choices, this will be deemed to be a request to vote FOR
the Election of Directors; FOR ratification of the selection of
PricewaterhouseCoopers LLP as VF's independent accountants for the fiscal year
ending January 4, 2003; AGAINST 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; and AGAINST Shareholder Proposal 2
requesting declassification 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
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(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
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- Fold and Detach -
Voting Instructions for the VF Corporation Tax-Advantaged Savings Plan
for Salaried Employees (the "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, 2002 under the Salaried 401(k), at the Annual Meeting
of Shareholders of VF Corporation to be held on April 23, 2002, 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 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, 2002 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,
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.
Voting Request for the VF Executive Deferred Savings Plan (the "EDSP"):
This card constitutes a voting request to the VF Corporation Pension Plan
Committee (the "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's EDSP account as of March 5, 2002, at the
Annual Meeting of Shareholders to be held on April 23, 2002, 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 as in this
example.
Shares subject to this proxy/voting instruction card will be voted in the manner
indicated below, when the card is properly executed and returned. If no
indication is made, such shares will be voted FOR the election of all nominees
as Directors, 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.
The Board of Directors recommends a vote FOR all nominees, FOR the independent
accountants,and AGAINST both shareholder proposals.
FOR WITHHELD
1. Election of Directors. [ ] [ ]
FOR,except vote withheld from the following nominee(s):
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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 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) exactly as printed hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
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SIGNATURE(S) DATE
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- 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 one of the new 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). Outside
of the U.S. and Canada, shareholders should call 1-201-536-8073.
Your telephone or Internet vote authorizes the proxies named on the above
proxy/voting instruction card in 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.