SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
FOOTSTAR
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(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)(4) 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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pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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[ ] 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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2) Form, Schedule or Registration Statement No.:
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<PAGE>
[FOOTSTAR LOGO]
933 MACARTHUR BOULEVARD, MAHWAH, N.J. 07430
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Footstar,
Inc., a Delaware corporation (the "Corporation"), will be held at the offices of
the Corporation's headquarters at 933 MacArthur Boulevard, Mahwah, New Jersey
07430, on Tuesday, May 12, 1998, at 10:00 A.M. local time, for the following
purposes:
1. To elect two directors to hold office for a term expiring in 2001;
2. To ratify the appointment of KPMG Peat Marwick LLP as the
Corporation's auditors; and
3. To consider and transact such other business as may properly come
before the Annual Meeting or any postponements or adjournments thereof.
Stockholders of record at the close of business on April 1, 1998 are
entitled to notice of and to vote at the Annual Meeting or at any postponements
or adjournments thereof.
By order of the Board of Directors.
FOOTSTAR, INC.
MAUREEN RICHARDS
Vice President and Secretary
Dated: April 7, 1998
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE
COMPLETE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
[FOOTSTAR LOGO]
---------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 1998
-------------------
PROXY STATEMENT
This Proxy Statement is being furnished to the stockholders of Footstar,
Inc., a Delaware corporation ("Footstar" or the "Corporation"), in connection
with the solicitation of proxies by the Board of Directors of the Corporation
(the "Board") for use at the Annual Meeting of Stockholders of the Corporation
to be held on Tuesday, May 12, 1998, at 10:00 A.M. local time, at the offices of
the Corporation, 933 MacArthur Boulevard, Mahwah, New Jersey 07430, and at any
and all postponements or adjournments thereof (the "Meeting"). At the Meeting,
stockholders are being asked to consider and vote on (1) the election of two
directors to hold office for a term expiring in 2001 and (2) the ratification of
the appointment of KPMG Peat Marwick LLP as the Corporation's auditors.
This Proxy Statement, Notice of Meeting and accompanying proxy card are
first being mailed to stockholders on or about April 7, 1998.
GENERAL
The holders of shares of Common Stock of record at the close of business on
April 1, 1998 are entitled to vote such shares at the Meeting. The presence in
person or by proxy of the holders of a majority of the shares outstanding on the
record date is necessary to constitute a quorum for the transaction of business.
Each stockholder is entitled to one vote, in person or by proxy, for each
share of Common Stock held as of the record date on each matter to be voted on
at the Meeting. Directors are elected by the affirmative vote of a plurality of
the votes cast at the Meeting. The proposal to ratify the appointment of the
auditors requires the affirmative vote of a majority of shares present in person
or represented by proxy at the Meeting and entitled to vote.
Proxies for shares marked "abstain" on a matter will be considered to be
represented at the Meeting, but not voted for such purposes. Broker non-votes,
that is, shares registered in the names of brokers or other "street name"
nominees for which proxies are voted on some but not all matters, will be
considered to be represented at the Meeting but will be considered to be voted
only as to those matters actually voted on.
Shares of Common Stock represented by a proxy received in time for the
Meeting and properly executed will be voted as specified in the proxy, unless
the proxy has previously been revoked. UNLESS CONTRARY INSTRUCTIONS ARE GIVEN IN
THE PROXY, IT WILL BE VOTED BY THE PERSONS DESIGNATED IN THE PROXY FOR THE
ELECTION OF THE BOARD'S NOMINEES FOR DIRECTOR, FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE CORPORATION'S AUDITORS AND, WITH
RESPECT TO ANY OTHER MATTERS PROPERLY SUBMITTED TO STOCKHOLDERS AT THE MEETING,
AS RECOMMENDED BY THE BOARD OR, IF NO SUCH RECOMMENDATION IS GIVEN, IN THEIR
DISCRETION.
A proxy may be revoked by filing with the Secretary of the Corporation,
prior to the exercise of such proxy, either a written revocation of that proxy
or a new proxy bearing a later date. A proxy may also be revoked by filing a
written notice of revocation with the Secretary of the Meeting prior to the
voting of the proxy. The presence of a stockholder at the Meeting will not in
itself constitute revocation of a proxy.
This proxy solicitation is being made on behalf of the Corporation and the
expense of preparing, printing and mailing this Proxy Statement and proxy is
being paid by the Corporation. The Corporation has retained Morrow &
<PAGE>
Co. to assist it in the solicitation of proxies for a fee of $4,500 plus
out-of-pocket expenses. In addition, solicitations may be made in person or by
mail, telephone, telegraph or telefax, by the directors, officers and regularly
engaged employees of the Corporation, without extra compensation. The
Corporation will reimburse banks, brokers and other custodians, nominees and
fiduciaries for their costs in sending proxy materials to the beneficial owners
of Common Stock.
PROPOSAL 1
ELECTION OF DIRECTORS
General. The Board of Directors currently consists of seven members and is
divided into three classes of approximately equal size. Directors are generally
elected for three-year terms on a staggered term basis, so that the term of
office of one class will expire each year and the terms of office of the other
classes will extend for additional periods of one and two years, respectively.
This year's nominees each have been nominated to serve for a three-year term
expiring in the year 2001. The Corporation has inquired of each nominee and
determined that he will serve if elected.
The names of the nominees for election, the directors whose terms extend
beyond the Meeting and certain information about each of them are set forth in
the tables below. The Board of Directors recommends that stockholders vote "FOR"
the Corporation's nominees for director.
TABLE I--NOMINEES FOR ELECTION AT THE 1998 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME, AGE AND DIRECTOR TERM
POSITION WITH FOOTSTAR PRINCIPAL OCCUPATION DURING PAST FIVE YEARS SINCE EXPIRING
- ---------------------- ------------------------------------------- ----- --------
<S> <C> <C> <C>
Robert A. Davies, III, 62 .............. President, Chief Executive Officer and -- 2001
Director of Church & Dwight Co., Inc.;
from 1990 to 1995, President of the Arm &
Hammer division of Church & Dwight.
Mr. Davies also serves as a director of DSLT,
Inc. (previously known as Diamond Crystal
Salt, Inc.)
Terry R. Lautenbach, 59 ................ A retired Senior Vice President of IBM 1996 2001
Corporation. Mr. Lautenbach is also a
director of CVS Corporation, Air Products
Corp., Varian Associates, Inc., and a Trustee
of Loomis-Sayles Mutual Funds.
</TABLE>
TABLE II--DIRECTORS WHOSE TERMS CONTINUE BEYOND THIS ANNUAL MEETING
<TABLE>
<CAPTION>
NAME, AGE AND DIRECTOR TERM
POSITION WITH FOOTSTAR PRINCIPAL OCCUPATION DURING PAST FIVE YEARS SINCE EXPIRING
- ---------------------- ------------------------------------------- ----- --------
<S> <C> <C> <C>
George S. Day, 60 ...................... Geoffrey G. Boisi Professor of Marketing 1996 1999
and Director of Huntsman Center for Global
Competition and Innovation at The Wharton
School, University of Pennsylvania; consultant
to corporations including AT&T, Eastman
Kodak, General Electric, Northern Telecom
and IBM Corporation.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND DIRECTOR TERM
POSITION WITH FOOTSTAR PRINCIPAL OCCUPATION DURING PAST FIVE YEARS SINCE EXPIRING
- ---------------------- ------------------------------------------- ----- --------
<S> <C> <C> <C>
Stanley P. Goldstein, 63 ............... Chairman of CVS Corporation and prior 1996 2000
thereto, Chairman and Chief Executive
Officer of CVS and Melville Corporation (CVS's
predecessor). Mr. Goldstein also serves as
a director of Bell Atlantic Corporation and
Linens 'n Things, Inc.
Bettye Martin Musham, 65 ............... President and Chief Executive Officer of 1996 1999
Gear Holdings, Inc., which she co-founded
in 1977. Ms. Martin Musham also serves as a
director of Brunswick Corporation, Consolidated
Communications, Inc., Peace Links and the
World Service Council of the YMCA of
the USA.
Kenneth S. Olshan, 65 .................. Chairman and Chief Executive Officer of Wells 1996 1999
Rich Greene BDDP until October 1995.
Mr. Olshan also serves as a director of
Saatchi & Saatchi PLC, and WellGen, Inc.
and as a Trustee of the Central Park Conservancy.
J.M. Robinson, 52 ....................... Chairman of the Board, Chief Executive Officer 1996 2000
and President of the Corporation. Prior to October
1996, Mr. Robinson was President and Chief
Executive Officer of the Meldisco Division of
Melville Corporation.
</TABLE>
Committees of the Board of Directors. The Board of Directors held seven
meetings in 1997. The Board has an Audit Committee, a Corporate Governance
Committee and a Compensation Committee. The Directors serving on all of these
committees are independent, non-employee directors.
The Audit Committee held five meetings during 1997. The main purpose of the
Audit Committee is the oversight of the financial reporting process, the system
of internal controls and the audit process. The duties of the Audit Committee,
among others, are (i) to consider the adequacy of the accounting and internal
control systems, (ii) to oversee the audit function, (iii) to review annual
consolidated financial statements, (iv) to institute, direct and supervise
special investigations, (v) to recommend to the Board the appointment of
independent auditors, (vi) to review non-audit services provided by the
independent auditors, (vii) to review the Corporation's Code of Conduct,
including its conflict of interest policy and compliance procedures, and (viii)
to report to the Board from time to time and make such recommendations and
observations as it sees fit.
The members of the Audit Committee are:
George S. Day, Chair
Kenneth S. Olshan
M. Cabell Woodward, Jr.(1)
- ----------
(1) Mr. Woodward will be retiring from the Board of Directors as of May 12,
1998.
3
<PAGE>
The Corporate Governance Committee held two meetings during 1997. The
duties of the Corporate Governance Committee are (i) to nominate, in concert
with the Chairman of the Board of Directors, any new director for election to
the Board, (ii) to report annually to the Board an assessment of the Board's
performance, (iii) to review with the Board the criteria it believes appropriate
for Board membership and (iv) to recommend to the Board guidelines on corporate
governance. The Corporation's Bylaws establish an advance written notice
procedure for stockholders seeking to nominate candidates for election as
directors at any Annual Meeting of Stockholders. See "Stockholder Proposals and
Nominations for the 1999 Meeting," on page 13 of this proxy statement.
Alternatively, the Corporate Governance Committee will consider nominating
persons recommended to the Committee by stockholders; the Committee, however,
does not have any formal procedure to be followed by stockholders in submitting
such recommendations.
The members of the Corporate Governance Committee are:
Kenneth S. Olshan, Chair
Stanley P. Goldstein
Bettye Martin Musham
The Compensation Committee held four meetings during 1997. The duties of
the Compensation Committee are (i) to establish policies governing, and to
implement, administer and interpret all aspects of, compensation of all officers
and other key executives of the Corporation and its subsidiaries whose base
salaries are $150,000 or greater, and other employees designated by the
Committee as key executives of the Corporation and its subsidiaries, (ii) to
have the same responsibilities with respect to compensation of non-employee
directors, except that determinations and actions which are non-ministerial are
subject to approval of the full Board and (iii) in connection with the
foregoing, to establish and administer the Corporation's compensation and
benefit policies, plans and programs other than health and welfare plans
generally available to employees.
The members of the Compensation Committee are:
Bettye Martin Musham, Chair
George S. Day
Terry R. Lautenbach
4
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as to beneficial
ownership of the outstanding Common Stock of the Corporation as of April 1,
1998, by each person known to the Corporation to own beneficially more than 5%
of the outstanding Common Stock, by each director and nominee for director of
the Corporation, by each of the named executive officers listed in the Summary
Compensation Table (the "Named Officers"), and by all Named Officers and
directors of the Corporation as a group. To the Corporation's knowledge, except
as otherwise indicated, all persons listed below have sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT OF CLASS*
------------------------ ---------------------- ----------------
<S> <C> <C>
Directors and Named Officers:
J.M. Robinson ............................................................. 171,220(2) *
Carlos E. Alberini ........................................................ 60,203(2) *
Maureen Richards .......................................................... 23,486(2) *
Donald V. Roach ........................................................... 15,219(2) *
Robert A. Davies, III ..................................................... -- --
George S. Day ............................................................. 6,095(3) *
Stanley P. Goldstein ...................................................... 52,291(4) *
Terry R. Lautenbach ....................................................... 10,417(3) *
Bettye Martin Musham ...................................................... 2,347(3) *
Kenneth S. Olshan ......................................................... 4,691(3) *
All Named Officers and
Directors as a group (10 persons) ....................................... 345,969(2,3,4) 1.24%
5% Stockholders:
FMR Corporation,
Edward C. Johnson, 3d and
Abigail P. Johnson (5)
82 Devonshire Street
Boston, MA 02109 ......................................................... 3,392,978 12.17%
Franklin Resources, Inc. (6)
777 Mariners Island Blvd .................................................
San Mateo, CA 94403-777 .................................................. 1,789,100 6.42%
Sasco Capital, Inc. (7)
10 Sasco Hill Road
Fairfield, CT 06430 ...................................................... 2,762,185 9.91%
</TABLE>
- ----------
NOTES:
* Less than one percent (1%); percentages shown are based on 27,872,207
shares outstanding which is the number of shares outstanding as of January
3, 1998.
(1) Beneficially owned shares include shares over which the named person
exercises either sole or shared voting power or sole or shared investment
power. It also includes shares owned (i) by a spouse, minor children or by
relatives sharing the same home, (ii) by entities owned or controlled by
the named person, and (iii) by other persons if the named person has the
right to acquire such shares within 60 days by the exercise of any right or
option. Unless otherwise noted, all shares are owned of record and
beneficially by the named person.
(2) Of the shares shown, 68,674, 30,788, 16,483 and 12,628 for Mr. Robinson,
Mr. Alberini, Ms. Richards and Mr. Roach, respectively, are not owned of
record but constitute restricted or deferred shares under the Corporation's
Deferred Compensation Plan. A majority of such shares are subject to
forfeiture if the executive does not continue to be employed by the
Corporation for five years from the date of grant. The amounts shown also
include the following currently exercisable stock options: Mr. Robinson,
54,000; Mr. Alberini, 22,000; Ms. Richards, 6,000; Mr. Roach, 1,400.
5
<PAGE>
(3) Of the shares shown 2,695, 2,458, 4,000, 2,347 and 4,691 for Messrs. Day,
Goldstein, Lautenbach, Ms. Musham and Mr. Olshan, respectively, are not
owned of record but constitute deferred shares. Each director has the right
to receive these shares either at the later of ceasing to be a director or
attaining the age of 65 or if voluntarily deferred, until the time elected.
(4) Of the shares shown, 5,758 shares are owned by Mr. Goldstein's wife. Mr.
Goldstein disclaims beneficial ownership of such shares.
(5) FMR Corp., Edward C. Johnson, 3d and Abigail P. Johnson (collectively,
"FMR") filed on February 18, 1998 a statement with the Securities and
Exchange Commission (the "SEC" or the "Commission") on Schedule 13G under
the Securities Exchange Act of 1934 (the "Exchange Act"), disclosing
beneficial ownership of 3,392,978 shares of Common Stock. Of such amount
FMR has sole voting power with respect to 229,551 shares.
(6) Franklin Resources, Inc. filed a statement with the SEC dated February 3,
1998 on Schedule 13G under the Exchange Act disclosing beneficial ownership
of 1,789,100 shares of Common Stock.
(7) Sasco Capital Incorporated filed a statement with the SEC dated January 30,
1998 on Schedule 13G under the Exchange Act, disclosing beneficial
ownership of 2,762,185 shares of Common Stock and sole voting power with
respect to 1,645,779 of such shares.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table summarizes all compensation
awarded to, earned by or paid to the four named key-policy making officers of
the Corporation (the "Named Officers") for all services rendered to the
Corporation and its subsidiaries during the Corporation's fiscal year ended
January 3, 1998 and the partial fiscal year ended December 28, 1996, the year
Footstar began operation as an independent, publicly-held company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------
ANNUAL COMPENSATION AWARDS
--------------------------------------- -----------------------
(A) (B) (C) (D) (E) (F) (G)
OTHER RESTRICTED/ NUMBER OF
ANNUAL DEFERRED SECURITIES
FISCAL COMPENSATION STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) AWARD(S)($) OPTIONS/SARS (#)
- --------------------------- ------ ---------- --------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J.M. Robinson, Chairman of 1997 637,500 250,250 457,025(2) 644,588(3) 150,000
the Board, Chief Executive 1996 600,000(1) 480,000 720,000(4) 120,000
Officer and President
Carlos E. Alberini, Senior 1997 335,000 104,720 167,820(2) 231,500(3) 50,000
Vice President and Chief 1996 160,000(1) 102,400 371,200(4) 60,000
Financial Officer
Maureen Richards, Vice 1997 210,500 57,673 61,185(2) 81,853(3)
President, General Counsel 1996 100,000(1) 56,000 228,000(4) 30,000
and Corporate Secretary
Donald V. Roach, 1997 206,249 47,933 45,265(2) 60,998(3) 15,000
Vice President and 1996 100,000(1) 48,000 172,731(4) 7,000
Corporate Controller
</TABLE>
(A) (H)
ALL OTHER
COMPEN-
NAME AND PRINCIPAL POSITION SATION ($)(5)
- --------------------------- -------------
J.M. Robinson, Chairman of 5,550
the Board, Chief Executive 5,400
Officer and President
Carlos E. Alberini, Senior 12,300
Vice President and Chief 9,475
Financial Officer
Maureen Richards, Vice 5,550
President, General Counsel 5,400
and Corporate Secretary
Donald V. Roach, 8,847
Vice President and 7,550
Corporate Controller
- ----------
(1) These 1996 figures represent payments for the period beginning on January
1, 1996 and ending on December 31, 1996 for Mr. Robinson, and for the
period beginning on July 1, 1996 and ending on December 31, 1996 for the
other Named Officers. The annualized 1996 base salaries of Mr. Robinson,
Mr. Alberini, Ms. Richards and Mr. Roach were $600,000, $320,000, $200,000
and $200,000, respectively.
6
<PAGE>
(2) The amounts disclosed consist of the cash portion of a special bonus paid
in April, 1997 as follows: Mr. Robinson, $250,000; Mr. Alberini $75,000;
Ms. Richards, $12,500; and Mr. Roach, $7,500. The amounts in this column
also include the one-half portion of the Career Equity Program (the
Corporation's long term bonus plan described below in the "Compensation
Committee's Report on Executive Compensation") award payable in cash for
the cycle ended January 3, 1998 as follows: Mr. Robinson, $207,025; Mr.
Alberini, $92,820; Ms. Richards, $48,685; and Mr. Roach, $37,765.
(3) These amounts include the following "match" by the Corporation in deferred
shares (based on the fair market value of the Corporation's Common Stock on
February 24, 1998 of $29.47, the date of such deferrals) of the voluntary
deferral of 50% of the 1997 annual incentive bonuses payable to each of the
Named Officers: Mr. Robinson 2,123 shares valued at $62,562; Mr. Alberini
888 shares valued at $26,180; Ms. Richards 489 shares valued at $14,418;
Mr. Roach 407 shares valued at $11,983. The amounts shown also include the
following deferred shares (based on the fair market value of the
Corporation's Common Stock of $29.47 on February 24, 1998, the deferral
date) awarded as part of the Corporation's Career Equity Plan, 50% of which
vests in five years and the remaining 50% of which vests at retirement: Mr.
Robinson 7,025 shares valued at $207,025; Mr. Alberini 3,150 shares valued
at $92,820; Ms. Richards 1,652 shares valued at $48,685; and Mr. Roach
1,282 shares valued at $37,765. The amounts shown also include the
following mandatory deferral and "match" of special bonuses paid in 1997
(based on the fair market value of $28.94 of the Corporation's Common Stock
on April 1, 1997; the deferral date): Mr. Robinson 12,960 shares valued at
$375,000; Mr. Alberini 3,888 shares valued at $112,500; Ms. Richards 648
shares valued at $18,750 and Mr. Roach 389 shares valued at $11,250.
(4) The amounts shown represent the value of shares of Footstar common stock
underlying restricted stock units and deferred shares granted in 1996, in
each case as valued as of the date of grant. On October 12, 1996, Mr.
Robinson, Mr. Alberini, Ms. Richards and Mr. Roach were granted 28,409,
15,152, 9,470 and 7,102 shares of restricted stock units, respectively,
with grant date values of $600,000, $320,000, $200,000 and $150,000,
respectively. At January 3, 1998, each such officer continued to hold such
restricted stock units which had year end market values of $763,492,
$407,210, $254,506 and $214,462, respectively. These shares of restricted
stock units are entitled to any dividends paid on the Corporation's Common
Stock (the Corporation does not currently pay dividends). The amounts shown
also include the following "match" by the Corporation in deferred shares
(based on the fair market value of the Corporation's Common Stock on March
3, 1997, the date of such deferrals) of 1996 annual incentive bonuses
deferred by each of the Named Officers: Mr. Robinson 4,637 shares valued at
$120,000; Mr. Alberini 1,978 shares valued at $51,200; Ms. Richards 1,082
shares valued at $28,000 and Mr. Roach 878 shares valued at $22,731. At
January 3, 1998, the value of these deferred share contributions were
$124,619 for Mr. Robinson, $53,158 for Mr. Alberini, $29,079 for Ms.
Richards and $23,596 for Mr. Roach. These deferred shares generally vest in
five (5) years from the date of grant contingent upon continued employment
with the Corporation.
(5) The amounts disclosed include the Corporation's contributions under the
Corporation's 401(k) Profit Sharing Plan as well as $6,750 and $3,375 for
Mr. Alberini and $3,374 and $1,687 for Mr. Roach each in 1997 and 1996,
respectively, representing interest (calculated at 6.75% annually) which
these executives might otherwise have had to pay on non-interest bearing
loans granted by the Corporation. See "Certain Transactions with Related
Parties" for additional information regarding Mr. Alberini's loan.
Option Grants in Last Fiscal Year. The table below shows information
regarding grants of stock options made to the Named Officers during fiscal 1997.
The amounts shown for each of the Named Officers as potential realizable values
are based on arbitrarily assumed annualized rates of stock price appreciation of
five percent and ten percent over the full ten year term of the options, which
would result in Common Stock prices of approximately $50 and $80, respectively.
These potential realizable values are based solely on arbitrarily assumed rates
of appreciation specified in applicable SEC regulations. The Corporation is not
aware of any model or formula which will determine with reasonable accuracy a
present value for stock options. The actual before-tax amount, if any, realized
upon the exercise of stock options will depend upon the excess, if any, of the
market price of the Corporation's Common Stock
7
<PAGE>
over the exercise price per share of Common Stock of the stock option at the
time the stock option is exercised. There is no assurance that the hypothetical
present values of the stock options reflected in this table will be realized.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM ($)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ----------- ---------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
J.M. Robinson ............... 150,000 38 30.50 03/11/2007 2,877,193 7,291,372
Carlos E. Alberini .......... 50,000 13 30.50 03/11/2007 959,064 2,430,457
Maureen Richards ............ -- -- -- -- -- --
Donald V. Roach ............. 15,000 4 30.94 12/01/2007 298,470 746,256
</TABLE>
- ----------
(1) Each option granted vests at the rate of 20% per year over a five year
period beginning on the first anniversary of the date of grant.
Option Exercises And Year-End Option Holdings. The following table shows
information regarding option exercises during 1997 as well as 1997 year-end
option holdings for each of the Named Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ON EXERCISE REALIZED OPTIONS/SARS AT FY-END (#) OPTIONS/SARS AT FY-END
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
J.M. Robinson ............... -- -- 54,000/216,000 138,120/552,480
Carlos E. Alberini .......... -- -- 22,000/88,000 69,060/276,240
Maureen Richards ............ -- -- 6,000/24,000 34,530/138,120
Donald V. Roach ............. -- -- 1,400/20,600 8,057/32,228
</TABLE>
Supplemental Retirement Plan. The following table indicates the approximate
amount of annual retirement income that would be payable under the Supplemental
Retirement Plan for Select Senior Management of Footstar (the "Supplemental
Retirement Plan"), including to each of the Named Officers, based on various
assumptions as to compensation and years of service, assuming benefits are
computed under a straight life annuity formula and retirement at age 60. The
annual benefit will be reduced by the annualized value of any retirement or
deferred profit sharing benefit paid or payable under any other plan maintained
by the Corporation (excluding benefits attributable to contributions made by
participants), and without offset for social security or other benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS BASED ON SERVICE OF
--------------------------------------------------------------------
COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS
- ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 200,000 .................................. $ 40,000 $ 60,000 $ 80,000 $100,000
$ 400,000 .................................. $ 80,000 $120,000 $160,000 $200,000
$ 800,000 .................................. $160,000 $240,000 $320,000 $400,000
$1,000,000 .................................. $200,000 $300,000 $400,000 $500,000
$1,200,000 .................................. $240,000 $360,000 $480,000 $600,000
</TABLE>
The Supplemental Retirement Plan is designed to provide competitive
retirement benefits to selected executives with at least ten years of credited
service. The normal retirement benefit commencing at age 60 is equal to 2% of
the
<PAGE>
highest average three consecutive years' base salary plus target annual bonus
for the executive in the preceding ten years, multiplied by the number of years
of credited service with the Corporation (to a maximum of 25 years). In the case
of retirement on or after age 55 but before age 60, a reduced benefit is
provided. Except in the event of a change in control (as defined in the
Supplemental Retirement Plan) or as provided in the Employment Agreements
referred to below, no benefits are payable to an eligible executive who
terminates employment prior to age 55 or prior to completing ten years of
credited service. Benefits are generally payable in annual installments for the
life of the executive, but other forms of payment of equivalent actuarial value
may be elected.
Compensation which may potentially be used to determine benefits for each
of the Named Officers covered by the Supplemental Retirement Plan for 1997
equals the respective amounts shown in the Salary column of the Summary
Compensation Table, plus the target amount of the Named Officer's annual
incentive bonus. The amounts shown in the 1997 Bonus column of the Summary
Compensation Table for the Named Officers are 33% lower than those target
amounts. As of January 3, 1998, the estimated credited years of service under
the Supplemental Retirement Plan for Messrs. Robinson, Alberini, Roach and Ms.
Richards were 16, 1, 1 and 1 year(s), respectively. If a covered executive is
terminated without cause or voluntarily terminates his or her employment for
good reason (as each such term is defined in the Supplemental Retirement Plan)
contemporaneously with or within two years following a change in control,
benefits will be payable in a lump sum equal to the actuarial equivalent of the
annual retirement benefit which would have been payable under the Supplemental
Retirement Plan had the executive remained employed by the Corporation until the
date when he or she would attain 10 years of service (or such later date as the
executive would attain age 60), multiplied by a fraction in which the numerator
is the executive's actual years of credited service (but not more than 10) and
the denominator is 10 (thus reducing the benefit proportionately to the extent
the executive's actual years of credited service are less than 10).
Employment Agreements and Change in Control Agreements. The Corporation has
entered into employment agreements (each referred to in this section
individually as an "Employment Agreement" and collectively as the "Employment
Agreements"), with Messrs. Robinson, Alberini, Roach and Ms. Richards, relating
to their employment with the Corporation. The following briefly summarizes the
principal terms of the Employment Agreements and the Change in Control
Agreement.
The period of employment under the Employment Agreements extends initially
for three years (five years in the case of Mr. Robinson), subject to automatic
one-year extensions at the end of the initial term unless either party gives
notice of non-renewal at least 180 days prior to expiration of the term. The
Employment Agreements generally provide for payment of an annual base salary
that will be reviewed each year, but may not be decreased from the amount in
effect in the previous year. The Employment Agreements also generally provide
for (i) continued payment of base salary, incentive compensation, and other
benefits for 36 months in the case of Mr. Robinson and for 18 months in the case
of the other Named Officers (or 24 months in the case of a change in control) in
the event the executive's employment is terminated other than a termination by
the Corporation for "cause" or voluntarily by the executive without "good
reason"; (ii) non-competition for a period of 18 months (36 months for Mr.
Robinson) subsequent to termination for any reason other than by the executive
for "good reason" or by the Corporation without "cause" following a "change in
control"; (iii) other restrictive covenants including non-disclosure,
non-solicitation of employees and availability for litigation support; (iv)
participation in certain benefit plans and programs (including pension benefits,
disability and life insurance, and medical benefits); (v) annual and long-term
incentive compensation opportunities; and (vi) deferred compensation
arrangements. Mr. Robinson's Employment Agreement provides that his target
annual incentive and long-term incentive opportunities may not be less than 50%
and 35%, respectively, of his base salary.
A "change in control" is defined as (i) any person acquiring beneficial
ownership of 25% or more of the outstanding Common Stock or the combined voting
power of the Corporation's outstanding voting securities; (ii) the
reorganization, merger, consolidation, complete liquidation or dissolution of
the Corporation, sale or disposition of all or substantially all of the assets
of the Corporation, or similar corporate transaction; or (iii) members of the
Board serving at the effective date of the 1996 Incentive Compensation Plan,
together with members first elected thereafter (excluding certain directors
elected as a result of an actual or threatened election contest) with the
approval of a majority of the original members and new members previously so
approved, ceasing to constitute a majority of the Board. "Good reason" is
defined generally as demotion, reduction in compensation, unapproved relocation
in the case of Mr. Robinson (or other Named Officers following a change in
control), material breach of the Employment
9
<PAGE>
Agreement by the Corporation, or, in the case of Mr. Robinson, failure to extend
the term of the Employment Agreement to his 60th birthday. "Cause" is defined
generally as a breach of the restrictive covenants referred to in clause (iii)
of the preceding paragraph, certain felony convictions, or willful acts or gross
negligence that are materially damaging to the Corporation.
If payments under the Employment Agreements or the Change in Control
Agreement following a change in control are subject to the "golden parachute"
excise tax, the Corporation will make an additional "gross-up" payment
sufficient to ensure that the net after-tax amount retained by the executive
(taking into account all taxes, including those on the gross-up payment) is the
same as would have been the case had such excise tax not applied.
The Employment Agreements obligate the Corporation to indemnify the
executives to the fullest extent permitted by law, including the advancement of
expenses, and provide that the Corporation generally will reimburse an executive
for expenses incurred in seeking enforcement of the Employment Agreement, unless
the executive's assertion of rights was in bad faith or frivolous. The
Employment Agreement with Mr. Robinson relates to his employment as Chairman and
Chief Executive Officer and his agreement to serve as a Director. The Employment
Agreements with Mr. Alberini, Ms. Richards and Mr. Roach relate to their
employment as senior executives of the Corporation.
Director Compensation. Directors who are not receiving compensation as
officers or employees of the Corporation or of any affiliate ("non-employee
directors") are paid an annual retainer of $10,000 and a $1,000 fee for
attendance at each meeting of the Board or any committee of the Board and a
$2,500 fee for serving as a committee chair. Non-employee directors are also
eligible to participate in the 1996 Non-Employee Director Stock Plan (the "1996
Director Plan"). Under the 1996 Director Plan, each non-employee director
receives a one-time non-qualified option to purchase 2,000 shares of Common
Stock at an exercise price equal to the fair market value of Common Stock on the
grant date. Each option becomes exercisable in 20% increments on each of the
first five anniversaries of the date of grant, and thereafter remains
exercisable until the option expires.
The 1996 Director Plan also provides for automatic grants of 2,000 stock
units ("Stock Units") to each person who, at the close of business on the date
of each annual meeting of the Corporation's stockholders, is a non-employee
director. Each Stock Unit represents the right to receive one share of Common
Stock at the end of a specified period. Fifty percent of such Stock Units vest
six months and a day after the grant date, provided the non-employee director
has not ceased to serve as a director for any reason other than death,
disability, or retirement at or after attaining age 65, except that payment of
such Stock Units will be accelerated in the event of a change in control. The
remaining fifty percent of such Stock Units vest upon the later of ceasing to be
a director or attaining age 65, provided that vesting of such Stock Units shall
be accelerated in the event of death, disability, or a change in control.
The 1996 Director Plan permits a non-employee director to elect to defer
receipt of all or a portion of the shares otherwise deliverable in connection
with Stock Units. The 1996 Director Plan also permits a non-employee director to
elect to defer receipt of fees otherwise payable in cash, with such deferred
amounts deemed invested in Stock Units.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE OFFICERS
The Compensation Committee of the Board of Directors is comprised of three
independent, non-employee directors. This Committee is responsible for
establishing, implementing, administering and monitoring the Corporation's
compensation strategy, policies and plans.
Compensation Strategy. The Corporation's compensation strategy is based
upon the premise that all of its associates are important to its success, with
senior executives setting the direction of the business and having overall
responsibility for its results. Because the Corporation operates in a highly
competitive and difficult economic environment for retailers, the Committee has
adopted compensation policies and plans intended to
o attract and retain high caliber individuals,
o provide compensation opportunities that are fair and competitive with
comparable organizations, as well as effective and tax efficient,
10
<PAGE>
o reward the creativity of its key executives in maximizing business
opportunities, and
o provide incentives to motivate key management based on achievement of
both short and long term business objectives, strategic progress and
the creation of stockholder value.
To facilitate the Corporation's transition to a independent, publicly
traded corporation following its spinoff from Melville Corporation in October,
1996, leading executive compensation consultants were retained to design an
executive compensation program which was aligned with the Corporation's
competitive marketplace and short and long term performance objectives. The
compensation practices at 14 specialty retailers with revenues ranging from
approximately $400 million to $3.8 billion were identified as comparable
corporations with which the Corporation competes for talent. The companies that
comprise this group are substantially different than the companies included in
the S&P Retail Stores Composite referred to in the performance graph of this
proxy statement. In the view of the Compensation Committee, the group of 14
specialty retailers that were selected is more representative for compensation
review purposes.
The Committee has implemented a compensation program that is comprised of
annual and longer term financial incentives. Base salaries are positioned at
approximately the 50th to 60th percentile and remuneration at approximately the
65th percentile of the peer group at target but with the opportunity for
increased yields for superior results. Actual total remuneration levels may
range well below or above target in any one year and over a period of years
based on performance against annual and long term business objectives and total
return to stockholders. The primary components of the compensation program are
base salary, annual incentive awards, a career equity program and stock options.
Base Salaries. The Committee reviews base salaries annually and considers
increases based on corporate profitability, competitive salaries, position
responsibility levels and individual qualifications and performance. In making
pay decisions for key management including the Named Officers (other than the
Chief Executive Officer), the Committee also takes into consideration the views
and recommendations of the Chief Executive Officer. As a result of its review
and strategy, the Compensation Committee increased the base salary of the Chief
Executive Officer in 1997 to $650,000. The salaries of the other Named Officers
were increased to reflect alignment to the 50th percentile of the peer group, as
described above.
Annual Incentive Awards. The Corporation's annual incentive program
provides for cash bonuses based on performance relative to predetermined
objectives approved by the Committee each year. As an added retention feature
and to further align the interests of management and stockholders, executive
officers and other members of key management may elect to defer receipt of up to
50% of their cash bonuses for five years in deferred shares of Common Stock and
receive partial matching grants which vest upon completion of five years of
continued employment, subject to accelerated vesting in certain events (the
"STEP Program").
Incentive awards at target performance range from 50% of base salary for
the Chief Executive Officer and scale down depending on position
responsibilities. Larger awards, up to a maximum of 200% of normal awards, are
permitted if performance exceeds predetermined objectives. Smaller or no awards
are made if performance falls below such objectives.
Bonuses payable to the Chief Executive Officer and other Named Officers
were based on the Corporation's earnings before Federal income taxes. The Chief
Executive Officer's annual incentive award for 1997 was 77% of his normal award
due to the Corporation's below target performance in meeting profit objectives.
In addition, the Chief Executive Officer (and a select group of employees
including the Named Officers) was awarded a special one-time bonus on April 1,
1997 of $500,000 one-half of which was mandatorily deferred under the Company's
STEP program, in connection with the extraordinary savings achieved in
discontinuing the Thom McAn business segment.
Career Equity Program. As part of its long term incentive compensation
arrangements, the Committee has implemented a Career Equity Program for
executive officers and other key members of management. Three-year cycles begin
each year with two shortened start-up cycles which began on October 1, 1996 with
periods ending on December 31, 1997 and December 31, 1998, respectively. The
value of such awards are determined by pre-established goals set by the
Committee based on the Corporation's cumulative net income and return on average
equity during each cycle. The target and maximum awards for the Chief Executive
Officer have been set at 35% and
11
<PAGE>
70% of base salary, respectively. Award payments are made in equal combinations
of current cash and deferred shares of the Corporation's Common Stock, with
one-half of the deferred shares vesting after five years of continued employment
and one-half vesting at retirement, subject to accelerated vesting in certain
events.
For the shortened cycle ending December 31, 1997, the Career Equity Award
for the Named Officers (including the Chief Executive Officer) and other
participants was 182% of the targeted award based on the Corporation's
outstanding performance in excess of pre-established goals.
Stock Options. Stock options are granted to the Corporation's executive
officers and over 100 other key employees to further align their interests with
those of stockholders. Stock options are granted at an exercise price equal to
the fair market value of the Corporation's Common Stock and are exercisable in
five equal annual installments based on continued employment during the
five-year period following the grant date, subject to accelerated vesting in
certain events. These awards provide value to participants only when and to the
extent that the fair market value of the Corporation's Common Stock appreciates
over the fair market value on the date of grant. In 1997 as part of the special
bonus in connection with the Thom McAn winddown, the Chief Executive Officer was
granted an option to purchase 150,000 shares.
Stock Ownership Guidelines In order to encourage management to have an
ownership stake in the Corporation, in 1997 the Compensation Committee added
voluntary stock ownership guidelines to the overall executive compensation
program for the Chief Executive Officer and other key managers including the
Named Officers. The Committee believes that executive stock ownership provides a
meaningful link to stockholder interests and signifies a personal commitment
from a management team to a company's long term success. These guidelines
provide that over the next five years the Chief Executive Officer should attain
an ownership interest in the Corporation's Common Stock of five times base
salary and that the other key managers (including the Named Officers) attain an
ownership interest of one to three times base salary.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code (the "Code") generally disallows a tax deduction to public
companies for compensation over $1 million paid to the Chief Executive Officer
and the other four most highly compensated individuals who are executive
officers as of the end of the year. Qualifying performance-based compensation is
not subject to the deduction limit if certain requirements are met. It is the
Committee's policy to preserve corporate tax deductions by qualifying
compensation paid over $1 million to named executive officers. However, the
Committee has retained the flexibility to approve compensation arrangements that
it deems to be in the best interests of the Corporation and its stockholders
that may not always qualify for full tax deductibility. All compensation paid by
the Corporation in 1997 qualified for full tax deductibility and it is
anticipated that all compensation to be paid in 1998 will also be fully
deductible.
Compensation Committee:
Bettye Martin Musham, Chair
George S. Day
Terry R. Lautenbach
12
<PAGE>
PERFORMANCE GRAPH. The following graph provides an indicator of cumulative
total stockholder returns, assuming reinvestment of any dividends ("Total
Return") for the Corporation as compared with the Standard & Poor's 500 Stock
Index and the Standard & Poor's Retail Stores Composite Index. The graph covers
the period of time beginning on October 14, 1996, the date when Footstar's
Common Stock was first traded on the New York Stock Exchange, through January 3,
1998.
---GRAPHICAL REPRESENTATION OF DATA TABLE BELOW---
<TABLE>
<CAPTION>
COMPOUND
ANNUAL
10/14/96 12/28/96 1/3/98 RETURN RATE
-------- -------- ------ -----------
<S> <C> <C> <C> <C>
Footstar, Inc. .................... $100.0 124.4 131.1 24.9%
S&P 500 ........................... 100.0 108.0 141.7 33.1%
S&P Retail Stores Composite ....... 100.0 97.3 136.6 29.1%
</TABLE>
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee of the Board of Directors is comprised of three outside
independent directors, Bettye Martin Musham (Chair), George S. Day and Terry R.
Lautenbach.
Certain Transactions With Related Parties. The Corporation is a payee with
respect to $100,000 of a relocation loan received by Mr. Alberini. The loan
bears no interest and is to be forgiven if Mr. Alberini remains employed by the
Corporation through May 2000 or is terminated by the Corporation prior to such
time.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the
Corporation's independent auditors to make an examination of the accounts of the
Corporation for the 1998 fiscal year. KPMG Peat Marwick LLP served as
independent auditors for the Corporation for the 1997 fiscal year and prior.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting and will be available to respond to appropriate questions and to make
such statements as they may desire.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE 1999 MEETING
Any proposal of a stockholder intended to be presented at the Corporation's
1999 Annual Meeting of Stockholders, must be received by the Secretary of the
Corporation, for inclusion in the Corporation's proxy statement, notice of
meeting and proxy relating thereto not later than December 8, 1998.
13
<PAGE>
The Corporation's Bylaws establish an advance written notice procedure for
stockholders seeking to nominate candidates for election as directors at any
annual meeting of stockholders, or to bring business before an annual meeting of
stockholders of the Corporation. The Bylaws provide that only persons who are
nominated by, or at the direction of, the Board, or by a stockholder who has
given timely written notice to the Secretary of the Corporation prior to the
meeting at which directors are to be elected, will be eligible for election as
directors of the Corporation. The Bylaws also provide that at any meeting of
stockholders only such business may be conducted as has been brought before the
meeting by, or at the direction of, the Board or, in the case of an annual
meeting of stockholders, by a stockholder who has given timely written notice to
the Secretary of the Corporation of such shareholder's intention to bring such
business before such meeting. Under the Bylaws, for any such shareholder notice
to be timely, such notice must be received by the Corporation in writing not
less than 60 days nor more than 90 days prior to the meeting, or in the event
that less than 70 days' notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, to be timely, notice by the
stockholder must be received not later than the close of business on the 10th
day following the day on which such notice of the date of the meeting or such
public disclosure was made. Under the Bylaws, a stockholder's notice must also
contain certain information specified in the Bylaws.
ANNUAL REPORT
A COPY OF THE CORPORATION'S ANNUAL REPORT WAS MAILED TO ALL STOCKHOLDERS OF
RECORD ON OR ABOUT APRIL 7, 1998. STOCKHOLDERS, UPON WRITTEN REQUEST TO THE
INVESTOR RELATIONS DEPARTMENT OF THE CORPORATION, 933 MACARTHUR BOULEVARD,
MAHWAH, NEW JERSEY 07430, MAY RECEIVE, WITHOUT CHARGE, A COPY OF THE
CORPORATION'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES, REQUIRED TO BE FILED WITH THE COMMISSION FOR THE
1997 FISCAL YEAR.
OTHER MATTERS
As of the date of this Proxy Statement, the Corporation knows of no
business that will be presented for consideration at the Meeting other than the
items referred to above. PROXIES IN THE ENCLOSED FORM WILL BE VOTED IN RESPECT
OF ANY OTHER BUSINESS THAT IS PROPERLY BROUGHT BEFORE THE MEETING AS RECOMMENDED
BY THE BOARD OF DIRECTORS OR, IF NO SUCH RECOMMENDATION IS GIVEN, IN THE
DISCRETION OF THE PROXY HOLDERS.
14
<PAGE>
APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 13 contains a description in tabular form of a graph entitled
"Performance Graph" which represents the comparison of the cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the Standard & Poor's 500 Index and the Standard & Poor's Retail
Stores Composite Index for the period of each of the years commencing October
14, 1996 and ending January 3, 1998, which graph is contained in the paper
format of this Proxy Statement being sent to Stockholders.
<PAGE>
[FOOTSTAR LOGO]
PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 12, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.M. ROBINSON and KENNETH S. OLSHAN and
each of them, as Proxy, each with full power of substitution, to vote all of the
stock of Footstar, Inc. ("Footstar" or the "Corporation") standing in the
undersigned's name at the Annual Meeting of Stockholders of Footstar, to be held
at the Corporation's headquarters, 933 MacArthur Boulevard, Mahwah, New Jersey
on Tuesday, May 12, 1998 at 10:00 a.m., and at any adjournments or postponements
thereof. The undersigned hereby revokes any and all proxies heretofore given
with respect to such meeting.
This proxy will be voted as specified hereon. If no choice is specified,
the proxy will be voted FOR the nominees for Director listed hereon, and FOR
ratification of the appointment of KPMG Peat Marwick LLP as the Corporation's
auditors (the "Ratification"), all as described in the accompanying Proxy
Statement.
(CONTINUED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
PLEASE MARK [X]
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR
LISTED BELOW AND FOR THE RATIFICATION.
1. ELECTION OF DIRECTORS FOR A TERM TO EXPIRE IN THE YEAR 2001
FOR the nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the right
[ ] [ ]
ROBERT A. DAVIES, III, TERRY R. LAUTENBACH
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
- ----------------------------------------------------------------
2. RATIFICATION OF APPOINTMENT OF KPMG PEAT MARWICK LLP, AS DESCRIBED IN THE
PROXY STATEMENT
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, upon other matters as may properly come before the
meeting.
Dated: ___________________________________, 1998
________________________________________________
Signature
________________________________________________
Signature
(Please sign exactly as your name appears. When signing as executor,
administrator, guardian, trustee or attorney, please give your title as such. If
signer is a corporation, please sign the full corporate name and then an
authorized officer should sign his or her name and print his or her name and
title below the signature. If the shares are held in joint names, all joint
owners should sign.)
PLEASE COMPLETE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
