<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Woolworth Corporation
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[WOOLWORTH CORPORATION LOGO]
April 28, 1998
Dear Shareholder:
We invite you to attend the 1998 annual meeting of shareholders of
Woolworth Corporation, which will be held on Thursday, June 11, 1998, at 8:30
A.M., at the Arsenal Mall, 485 Arsenal Street, Watertown, Massachusetts 02172.
We are pleased to be holding the annual meeting at the Arsenal Mall because it
will give shareholders the opportunity to see the prototype of our new Foot
Locker, Lady Foot Locker and Kids Foot Locker stores.
The matters to be considered and voted upon at the annual meeting are
described in the notice of the 1998 annual meeting of shareholders and proxy
statement that accompany this letter. One of the items that you are being asked
to vote on is management's proposal to change the name of the Company to Venator
Group, Inc. While the Woolworth name has served us well for many years, it no
longer represents who we are to customers. Because it is important that your
shares be voted at the annual meeting, whether or not you attend the meeting in
person, we urge you to complete, date and sign the enclosed proxy card and
promptly return it in the accompanying envelope. Although you have returned your
proxy card, if you attend the meeting and wish to vote your shares in person,
you may do so.
If you plan to attend the annual meeting, please mark the appropriate box
on the proxy card and return the completed card promptly so that we can mail an
admission card to you. If your shares are not registered in your own name and
you would like to attend the meeting, please ask the broker, trust, bank or
other nominee that holds the shares to provide you with evidence of your share
ownership, which will enable you to gain admission to the meeting. Please note
that attendance at the meeting will be limited to shareholders as of the record
date (or authorized representatives) having an admission card or evidence of
their share ownership, and guests of the Company.
Sincerely,
<TABLE>
<S> <C>
[/s/ Roger N. Farah] [/s/ Dale W. Hilpert]
ROGER N. FARAH DALE W. HILPERT
Chairman of the Board and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
PLEASE COMPLETE, DATE, SIGN AND MAIL YOUR PROXY
IN THE ACCOMPANYING RETURN ENVELOPE.
<PAGE> 3
WOOLWORTH CORPORATION
233 BROADWAY
NEW YORK, NEW YORK 10279
NOTICE OF
1998 ANNUAL MEETING
OF SHAREHOLDERS
To the Shareholders of Woolworth Corporation:
NOTICE IS HEREBY GIVEN that the 1998 annual meeting of shareholders of
Woolworth Corporation (the "Company") will be held at the Arsenal Mall, 485
Arsenal Street, Watertown, Massachusetts 02172, on Thursday, June 11, 1998, at
8:30 A.M., local time, for the following purposes:
1. To elect three directors in Class I, each for a three-year term
expiring at the annual meeting of shareholders in 2001; and one director in
Class III for a two-year term expiring in 2000;
2. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to change the name of the Company;
3. To ratify the appointment by the Board of Directors of KPMG Peat
Marwick LLP as independent accountants of the Company for the 1998 fiscal
year;
4. To approve the Woolworth Corporation 1998 Stock Option and Award
Plan;
5. To consider and act upon, if presented at the annual meeting, two
shareholder proposals, as described in the proxy statement; and
6. To transact such other business as may properly come before the
annual meeting and any adjournment thereof.
Each of the matters identified above is more fully described in the
accompanying proxy statement.
Shareholders of record on the books of the Company at the close of business
on April 23, 1998, are entitled to notice of, and to vote at, the 1998 annual
meeting.
<TABLE>
<S> <C>
By Order of the Board of Directors
GARY M. BAHLER
Secretary
</TABLE>
April 28, 1998
<PAGE> 4
WOOLWORTH CORPORATION
233 BROADWAY
NEW YORK, NEW YORK 10279
PROXY STATEMENT
This proxy statement is being furnished to shareholders of Woolworth
Corporation (the "Company"), a New York corporation, in connection with the
solicitation by the Company's Board of Directors of proxies to be voted at the
Company's annual meeting of shareholders to be held on June 11, 1998, and at any
adjournment thereof.
This proxy statement and the proxy card are first being mailed or otherwise
sent to shareholders on or about April 28, 1998.
SOLICITATION OF PROXIES
Proxies may be solicited, without additional compensation, by directors,
officers or employees of the Company by mail, telephone, in person or otherwise.
The Company has retained Innisfree M&A Incorporated to assist in the
solicitation of proxies for a fee of $12,500 plus out-of-pocket expenses. The
costs of the solicitation will be borne by the Company. In addition, the Company
will request banks, brokers and other custodians, nominees and fiduciaries to
forward proxy material to the beneficial owners of the Company's stock and
obtain voting instructions from the beneficial owners, and the Company will
reimburse those firms for their expenses in so doing.
A copy of the Company's 1997 Annual Report on Form 10-K for the fiscal year
ended January 31, 1998 ("1997") is being mailed together with this proxy
statement and proxy card to each shareholder of record.
OUTSTANDING VOTING STOCK AND RIGHTS
The only voting securities of the Company are the shares of Common Stock.
Shareholders of record on the books of the Company at the close of business on
April 23, 1998 are entitled to notice of, and to vote at, the annual meeting. On
that date, there were outstanding 135,251,929 shares of Common Stock, par value
$.01 per share ("Common Stock").
The accompanying proxy card is intended to permit a shareholder of record
to vote at the annual meeting, whether or not that shareholder attends the
meeting. The proxy card indicates on its face the number of shares of Common
Stock registered in the name of each shareholder of record on April 23, 1998,
including shares that may be held in the Company's 401(k) Plan.
If a shareholder's proxy card is duly executed and returned, the shares
represented thereby will be voted in accordance with the voting instructions
given on the proxy card by the shareholder. Shareholders may revoke their
proxies at any time prior to any vote at the annual meeting by written notice to
the Secretary of the Company at or before the meeting, by submission of a duly
executed proxy card bearing a later date, or by voting in person by ballot at
the meeting.
It is the policy of the Company that shareholders of Common Stock be
provided privacy in voting. Accordingly, all proxy cards, ballots and voting
tabulations which identify shareholders of Common Stock are
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held permanently confidential from the Company, except (i) as necessary to meet
any applicable legal requirements, (ii) when disclosure is expressly requested
by a shareholder or where a shareholder makes a written comment on a proxy card,
which will be treated by the Company as a request for disclosure, (iii) in a
contested proxy solicitation, or (iv) to allow independent election inspectors
to tabulate and certify the vote. The tabulators and inspectors of election are
independent and are not employees of the Company.
VOTES REQUIRED
Each share of Common Stock is entitled to one vote.
Each of the four nominees for director must be elected by a plurality of
the votes cast at the annual meeting by, or on behalf of, the holders of the
shares of Common Stock entitled to vote in the election. The affirmative vote of
a majority of all outstanding shares of Common Stock entitled to vote thereon is
required for the adoption of the proposal to amend the Certificate of
Incorporation. The affirmative vote of a majority of the votes cast at the
annual meeting by, or on behalf of, holders of the shares of Common Stock
entitled to vote thereon is required for the ratification of the appointment of
independent accountants, the approval of the Woolworth Corporation 1998 Stock
Option and Award Plan (the "1998 Award Plan") and the approval of the
shareholder proposals.
Under Securities and Exchange Commission ("SEC") rules, boxes and a
designated blank space are provided on the proxy card for shareholders to mark
if they wish to vote "for" or "against" or "abstain" from voting on one or more
of the proposals, or to withhold authority to vote for one or more of the
nominees for director. New York law and the Company's By-laws require the
presence of a quorum at the annual meeting. Votes withheld from director
nominees and abstentions are counted as present for purposes of determining a
quorum. Broker non-votes, which occur when brokers do not receive voting
instructions from their customers on non-routine matters and, consequently, have
no discretion to vote on those matters, are not counted for purposes of
determining a quorum.
Abstentions and broker non-votes are not counted in determining the votes
cast in connection with the ratification of the appointment of independent
accountants, the approval of the 1998 Award Plan and the approval of the
shareholder proposals. Votes withheld in connection with the election of one or
more of the nominees for director will not be counted as votes cast for those
individuals. Abstentions and broker non-votes are considered in determining the
number of votes required to attain a majority of the outstanding shares in
connection with the Company's proposal to amend the Certificate of
Incorporation. Because this proposal requires the affirmative vote of a majority
of all outstanding shares entitled to vote for approval, an abstention or broker
non-vote will have the same legal effect as a vote against such proposal.
The Company's Certificate of Incorporation and By-laws do not contain any
provisions with respect to the effect of abstentions or broker non-votes.
1. ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the members of the
Company's Board of Directors be divided into three classes serving staggered
three-year terms, each class to be as nearly equal in number as the other two.
The terms of Allan Z. Loren and the three directors who currently constitute
Class I expire at the 1998 annual meeting.
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Roger N. Farah, James E. Preston and Christopher A. Sinclair will be
considered for election as directors in Class I, each to hold office for a
three-year term expiring at the annual meeting in 2001. Allan Z. Loren is
standing for election as a director in Class III for a two-year term expiring at
the annual meeting in 2000. The seven remaining directors will continue in
office, in accordance with their previous elections, until the expiration of the
terms of their classes at the 1999 or 2000 annual meeting, as the case may be.
Unless authority to do so has been withheld, shares represented by the
enclosed proxy card, when the proxy card has been duly executed and returned,
will be voted at the annual meeting in favor of the election of Allan Z. Loren
as a director in Class III for a two-year term and in favor of the election of
Roger N. Farah, James E. Preston and Christopher A. Sinclair, each as a director
in Class I for a three-year term, or until their respective successors are
elected and qualify. Each nominee has been nominated by the Board of Directors
for election and has consented to serve for the specified term. All of the
nominees are presently serving as directors. Messrs. Farah, Preston and Sinclair
were each elected to serve for their present terms at the annual meeting in
1995. Mr. Loren was elected by the Board of Directors to serve for his present
term effective April 8, 1998.
If, prior to the annual meeting, any of the four nominees becomes unable to
serve as a director for any reason, the persons designated as proxies on the
enclosed proxy card will have full discretion to vote the shares represented by
proxies held by them for another person to serve as a director in place of that
nominee.
Biographical information follows for each of the four nominees and for each
of the seven other directors of the Company whose present terms as directors
will continue after the 1998 annual meeting. Any reference therein to a person's
tenure as a director or officer of the Company includes service as a director or
officer of F.W. Woolworth Co. for the period prior to August 7, 1989, the
effective date of a share exchange between the Company and F.W. Woolworth Co.
There are no family relationships among the directors or executive officers
of the Company.
NOMINEE FOR DIRECTOR
TERM EXPIRING IN 2000
<TABLE>
<S> <C>
[LOREN PHOTO] ALLAN Z. LOREN. Executive Vice President and Chief
Information Officer of American Express Company (travel and
financial services) since May 1994. He was President and
Chief Executive Officer of Galileo International (global
computer reservation system company) from 1993 to 1994. He
is a director of Reynolds & Reynolds Company. Mr. Loren, age
59 was elected a director of the Company effective April 8,
1998.
</TABLE>
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NOMINEES FOR DIRECTOR
TERMS EXPIRING IN 2001
<TABLE>
<S> <C>
[FARAH PHOTO] ROGER N. FARAH. The Company's Chairman of the Board and
Chief Executive Officer since December 1994. Mr. Farah was
President and Chief Operating Officer of R. H. Macy & Co.,
Inc. (retail merchants) from July 1994 to October 1994. He
was Chairman of the Board and Chief Executive Officer of
Federated Merchandising Services, a division of Federated
Department Stores, Inc. (retail merchants), from June 1991
to July 1994. He is a member of the Undergraduate Executive
Board of The Wharton School of the University of
Pennsylvania. Mr. Farah, age 45, has been a director of the
Company since 1994.
[PRESTON PHOTO] JAMES E. PRESTON. Chairman of the Board and Chief Executive
Officer of Avon Products, Inc. (manufacture and sale of
beauty and related products) since 1989. He is a director of
ARAMARK Corporation, Reader's Digest Association, the
Cosmetic, Toiletry and Fragrance Association, and American
Women's Economic Development Corporation; and a member of
the Advisory Board of the Salvation Army of Greater New
York. Mr. Preston, age 65, has been a director of the
Company since 1983.
[SINCLAIR PHOTO] CHRISTOPHER A. SINCLAIR. President and Chief Executive
Officer of Quality Food Centers, Inc. (supermarket chain)
from September 12, 1996 to March 1998. Mr. Sinclair was
Chairman and Chief Executive Officer of Pepsi-Cola Company,
a division of PepsiCo, Inc. ("PepsiCo") (beverages, snack
foods and restaurants) from April 1996 to July 1996;
President and Chief Executive Officer of PepsiCo Foods and
Beverages International, a division of PepsiCo, from 1993 to
April 1996; and President and Chief Executive Officer of
Pepsi-Cola International, a division of PepsiCo, from 1989
to 1993. He is a director of Mattel, Inc., Perdue Farms,
Inc., and Grupo Azucarero Mexico. He is also a director of
the Amos Tuck School of Business Administration at Dartmouth
College. Mr. Sinclair, age 47, has been a director of the
Company since 1995.
</TABLE>
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DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 1999
<TABLE>
<S> <C>
[BACOT PHOTO] J. CARTER BACOT. Chairman of the Board of The Bank of New
York Company, Inc. (bank holding company) and of The Bank of
New York, its wholly owned subsidiary, from 1982 to February
7, 1998; Chief Executive Officer of The Bank of New York
Company, Inc. and of The Bank of New York from 1982 to July
1, 1997. He is a trustee of Atlantic Mutual Insurance
Company and a director of its subsidiaries, Atlantic
Specialty Insurance Company and Centennial Insurance
Company; and a director of The Bank of New York Company,
Inc., Time Warner, Inc., Associates First Capital
Corporation, and Phoenix Home Life Mutual Insurance Company.
He is a Trustee of Hamilton College and the Vice Chairman of
United Way of New York City. Mr. Bacot, age 65, has been a
director of the Company since 1993.
[CRAWFORD PHOTO] PURDY CRAWFORD. Chairman of the Board of Imasco Limited
(Canada) (consumer products and services) since 1987 and its
Chief Executive Officer from 1987 to 1995. He is also
Chairman of the Board of CT Financial Services Inc. and
Canada Trustco Mortgage Company, both of which are financial
services companies and subsidiaries of Imasco Limited. Mr.
Crawford is a director of Avenor, Inc., Camco Inc., Canadian
National Railway Company, Inco Limited, Maple Leaf Foods
Ltd., Aeroquip-Vickers, Inc., Petro-Canada and Nova Scotia
Power Inc. He is Governor Emeritus of McGill University;
Chancellor of Mount Allison University; a member of the
Advisory Board of Oxford Frozen Foods Limited; and Honorary
Counsel to the Canadian law firm of Osler, Hoskin &
Harcourt. Mr. Crawford, age 66, has been a director of the
Company since 1995.
[GEIER PHOTO] PHILIP H. GEIER JR. Chairman of the Board and Chief
Executive Officer of Interpublic Group of Companies, Inc.
(advertising agencies and other marketing communication
services) since 1980. He is a director of Fiduciary Trust
Company International. He is also a member of the Board of
Overseers and Managers of Memorial Sloan Kettering Cancer
Center and of the Board of Trustees of the Whitney Museum of
American Art. Mr. Geier, age 63, has been a director of the
Company since 1994.
[HILPERT PHOTO] DALE W. HILPERT. The Company's President and Chief
Operating Officer since May 15, 1995. Mr. Hilpert was
Chairman and Chief Executive Officer of the Payless Shoe
Source division of The May Department Stores Company (retail
merchants) from 1985 to April 1995. Mr. Hilpert, age 55, has
been a director of the Company since 1995.
</TABLE>
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DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2000
<TABLE>
<S> <C>
[GILBERT PHOTO] JAROBIN GILBERT JR. President and Chief Executive Officer
of DBSS Group, Inc. (management, planning and trade
consulting services) since 1992; he was an independent
management consultant from 1990 to 1992. He is a director of
Whitman Corp.; Midas, Inc.; a member of the Supervisory
Board of F.W. Woolworth Co. GmbH ("FWW GmbH"), a wholly
owned subsidiary of the Company; a director of Valley Agency
for Youth, and a permanent member of the Council on Foreign
Relations. Mr. Gilbert, age 52, has been a director of the
Company since 1981.
[MACKIMM PHOTO] MARGARET P. MACKIMM. Senior Vice President-Communications
of Kraft Foods, Inc. (multinational marketer and processor
of food products) and its predecessor, Kraft, Inc. from 1986
to 1989. She is a director of Chicago Title and Trust
Company, Chicago Title Insurance Company, The World Press
Institute, and the Human Relations Foundation of Chicago.
Mrs. MacKimm, age 64, has been a director of the Company
since 1977.
[MACKOWSKI PHOTO] JOHN J. MACKOWSKI. Chairman of the Board and Chief
Executive Officer of Atlantic Mutual Insurance Company and
its subsidiary, Centennial Insurance Company (property,
liability and marine insurance) from 1985 to 1988; and
Chairman of the Board and Chief Executive Officer of
Atlantic Specialty Insurance Company (formerly Atlantic
Reinsurance Company) (issuer of reinsurance contracts), a
subsidiary of Atlantic Mutual Insurance Company, from 1986
to 1988. He is a director of Northern Trust Company of
Connecticut, and of Transatlantic Holdings, Inc. Mr.
Mackowski, age 72, has been a director of the Company since
1986.
</TABLE>
BENEFICIAL OWNERSHIP OF THE COMPANY'S STOCK
The following table sets forth, as reported to the Company, the number of
shares of Common Stock beneficially owned as of April 9, 1998, by each of the
directors, nominees and named executive officers, and by all directors, nominees
and executive officers of the Company as a group on that date, and includes
shares of Common Stock which they have a right to acquire within 60 days after
that date by the exercise of options that have been granted under the Company's
stock option plans.
As of April 9, 1998, no director, nominee or executive officer beneficially
owned one percent or more of the total number of outstanding shares of Common
Stock. Such determination was made by dividing the number of shares owned,
pursuant to Rule 13d-3(d)(1) promulgated under Section 13(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), by the total number of shares of
Common Stock outstanding at the close of business on April 9, 1998.
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Except as otherwise noted in a footnote below, each director, nominee and
executive officer has sole voting and investment power with respect to the
number of shares of Common Stock set forth opposite his or her name in the
table.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP
------------------------ --------------------
<S> <C>
J. Carter Bacot............................................. 3,361
M. Jeffrey Branman.......................................... 80,079(a)
Purdy Crawford.............................................. 10,732
John E. DeWolf III.......................................... 30,000(b)
Roger N. Farah.............................................. 987,916(c)
Philip H. Geier Jr.......................................... 4,732
Jarobin Gilbert Jr.......................................... 879
John F. Gillespie........................................... 30,079(d)
Dale W. Hilpert............................................. 406,732(e)
Allan Z. Loren.............................................. 100
Margaret P. MacKimm......................................... 4,861
John J. Mackowski........................................... 4,726
James E. Preston............................................ 10,656(f)
Christopher A. Sinclair..................................... 2,832
All 18 directors, nominees and executive officers as a
group, including the named executive officers............. 1,743,290(g)
</TABLE>
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(a) Includes 75,000 shares of Common Stock that may be acquired by the exercise
of stock options and 79 shares of Common Stock held in the Company's 401(k)
Plan.
(b) Represents shares of Common Stock that may be acquired by the exercise of
stock options.
(c) Includes 800,000 shares of Common Stock that may be acquired by the
exercise of stock options and 66 shares of Common Stock held in the
Company's 401(k) Plan.
(d) Includes 30,000 shares of Common Stock that may be acquired by the exercise
of stock options and 79 shares of Common Stock held in the Company's 401(k)
Plan.
(e) Includes 399,999 shares of Common Stock that may be acquired by the
exercise of stock options and 510 shares of Common Stock held in the
Company's 401(k) Plan.
(f) Excludes 50 shares of Common Stock owned by Mr. Preston's stepchildren,
with respect to which Mr. Preston disclaims beneficial ownership.
(g) This figure represents approximately 1.29 percent of the shares of Common
Stock outstanding at the close of business on April 9, 1998. It includes
all of the shares referred to in footnotes (a) through (f) above, a total
of 154,997 shares of Common Stock that may be acquired within 60 days after
April 9, 1998 by three executive officers of the Company (excluding the
named executive officers) by the exercise of stock options, and 653 shares
of Common Stock held by three executive officers (excluding the named
executive officers) in the Company's 401(k) Plan.
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Following is information with respect to shareholders who beneficially own
more than 5 percent of a class of the Company's voting securities. This
information is derived from documents filed by those shareholders with the SEC.
To the best knowledge of the Company, there are no other shareholders who
beneficially own more than 5 percent of a class of the Company's voting
securities.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------- ----------------------------------------------------- -------------------- --------
<S> <C> <C> <C>
Common Stock The Capital Group Companies, Inc., 23,504,800(a) 17.4%
Capital Research and Management Company,
and Capital Guardian Trust Company
333 South Hope Street
Los Angeles, CA 90071
Common Stock Ark Asset Management Co., Inc. 8,901,800(b) 6.6%
One New York Plaza
New York, NY 10004
Common Stock Boston Partners Asset Management, L.P., 8,840,937(c) 6.6%
Boston Partners, Inc., and
Desmond John Heathwood
One Financial Center
Boston, MA 02111
</TABLE>
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(a) Reflects shares beneficially owned as of December 31, 1997, according to
Amendment No. 7 to a statement on Schedule 13G filed with the SEC. As
reported in this Amendment to the 13G, The Capital Group Companies, Inc.
("The Capital Group") is the parent holding company of a group of
investment management companies that hold investment power and, in some
cases, voting power over the securities reported in the 13G. The Capital
Group held sole voting power with respect to 10,215,600 shares and sole
dispositive power with respect to 23,504,800 shares. Capital Research and
Management Company, an investment adviser and a wholly owned subsidiary of
The Capital Group, is the beneficial owner of 11,327,600 shares. Capital
Guardian Trust Company, a bank and a wholly owned subsidiary of The Capital
Group, is the beneficial owner of 11,134,900 shares.
(b) Reflects shares beneficially owned as of December 31, 1997, according to a
statement on Schedule 13G filed with the SEC. As reported in the 13G, Ark
Asset Management Co., Inc. holds sole voting power with respect to
6,606,400 shares and sole dispositive power with respect to 8,901,800
shares.
(c) Reflects shares beneficially owned as of December 31, 1997, according to a
statement on Schedule 13G filed with the SEC. As reported in the 13G,
Boston Partners Asset Management, L.P. ("BPAM"), an investment adviser,
owns of record 8,840,937 shares. Boston Partners, Inc. is the sole general
partner of BPAM, and Mr. Heathwood is the principal stockholder of Boston
Partners, Inc. As such, they may be deemed to own beneficially all of the
shares owned of record by BPAM. The shareholders held shared voting and
dispositive power with respect to 8,840,937 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company's directors and
executive officers file with the SEC and the New York Stock Exchange reports of
ownership and changes in ownership of Common
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Stock and other equity securities of the Company. Directors and officers are
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on a review of the copies of those reports
furnished to the Company or written representations that no other reports were
required, the Company believes that during the 1997 fiscal year, its directors
and executive officers complied with all applicable SEC filing requirements.
BOARD OF DIRECTORS
ORGANIZATION AND POWERS
The Board of Directors has responsibility for establishing broad corporate
policies, reviewing significant developments affecting the Company, and
monitoring the general performance of the Company.
In 1998 the Board of Directors is scheduled to hold six regular meetings.
During 1997, the Board held seven meetings.
The Company's Certificate of Incorporation and By-laws provide for a Board
of Directors consisting of not less than 9, nor more than 17, directors, the
exact number to be determined, from time to time, by resolution adopted by a
majority of the entire Board. The size of the Board is presently fixed at 11
directors.
The Board has delegated certain duties to committees, which assist the
Board in carrying out its responsibilities. Each director serves on one or more
committees. During 1997, each incumbent director, other than Christopher A.
Sinclair, attended at least 75 percent of the aggregate total number of meetings
of the Board and of meetings held by all committees of which such director was a
member. Mr. Sinclair, who was unable to attend two Board meetings, attended 71
percent of the aggregate total number of meetings of the Board and the
committees of which he was a member.
COMMITTEES
There are currently six standing committees of the Board, described below.
Audit Committee. The members of the committee are: J. J. Mackowski
(Chairman), P. Crawford and J. Gilbert Jr. The committee met seven times during
1997. The committee evaluates and reviews such matters as the Company's systems
of internal accounting controls and the scope and results of the Company's
internal audit procedures. The committee also recommends to the Board the
appointment of the Company's independent accountants, reviews the scope and
results of their audit and approves their audit and non-audit fees. The
committee has direct channels of communication with the Company's independent
accountants and corporate assurance staff, including meeting with each of them,
both with and without the presence of Company management, to discuss and review
issues as appropriate. The committee also meets with the Company's financial
personnel and general counsel to review their various activities and findings.
While it is the responsibility of management to design and implement an
effective system of internal accounting controls, it is the responsibility of
the committee to ensure that management has done so. It is also the
responsibility of the committee to review periodically the adequacy, management
and effectiveness of the Company's management information systems.
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<PAGE> 13
Acquisitions and Finance Committee. The members of the committee are: J.
C. Bacot (Chairman), J. E. Preston and C. A. Sinclair. The committee held no
meetings in 1997. The committee considers proposals concerning mergers,
combinations, acquisitions, sales, or offers to purchase the Company's shares or
significant assets. In addition, the committee reviews certain proposed
acquisitions by the Company of shares or assets of third parties, and it
considers proposed debt or equity issues of the Company.
Compensation Committee. The members of the committee are: J. E. Preston
(Chairman), P. H. Geier Jr. and M. P. MacKimm. The committee met three times
during 1997. The committee establishes and approves compensation plans and goals
thereunder, salaries, incentives and other forms of compensation for the
Company's officers and for certain other executives of the Company and its major
subsidiaries and operating divisions. The committee administers the Annual
Incentive Compensation Plan (the "Annual Plan"), Long-Term Incentive
Compensation Plan (the "Long-Term Plan"), Supplemental Executive Retirement Plan
(the "SERP"), Executive Supplemental Retirement Plan, Voluntary Deferred
Compensation Plan, and may take certain actions with respect to the Trust (as
hereinafter defined). The committee also administers the 1994 Woolworth
Employees Stock Purchase Plan (the "1994 Purchase Plan"), administers and grants
options under the Woolworth Corporation 1995 Stock Option and Award Plan (the
"1995 Award Plan") and administers the 1986 Woolworth Stock Option Plan (the
"1986 Option Plan"). As a result of the Company's acquisition of Eastbay, Inc.
on January 30, 1997 and the Company's adoption and assumption of the Eastbay,
Inc. 1994 Stock Incentive Plan (the "Eastbay Plan"), the Committee also
administers the Eastbay Plan. Subject to the approval of the shareholders at the
1998 annual meeting of the 1998 Award Plan, the committee will also administer
and grant options under this plan. Members of the committee are not eligible to
participate in the 1994 Purchase Plan, to be granted options under the 1995
Award Plan or the 1998 Award Plan, or to participate in the Company's incentive
compensation plans.
Executive Committee. The members of the committee are the Chairman of the
Board and the directors who are not officers of the Company. The committee held
no meetings in 1997. Except for certain matters reserved to the Board, the
committee has all of the powers of the Board in the management of the business
of the Company during intervals between Board meetings.
Nominating and Organization Committee. The members of the committee are:
J. Gilbert Jr. (Chairman), J. C. Bacot and J. E. Preston. The committee met
three times in 1997. The committee makes recommendations to the Board with
respect to the size and composition of the Board and the Company's internal
organizational structure. In addition, the committee reviews the qualifications
of candidates, and makes recommendations to the Board with respect to nominees,
for election as directors. The committee also considers nominees recommended by
shareholders. The By-laws require that notice of nominations proposed by
shareholders be received by the Secretary of the Company, along with certain
other specified material, at least 75 days prior to the meeting of shareholders
at which directors are to be elected. Any shareholder who wishes to nominate a
candidate for election to the Board should obtain a copy of the relevant section
of the By-laws from the Secretary of the Company.
Retirement Investment Committee. The members of the committee are: M. P.
MacKimm (Chairman), P. Crawford and J. J. Mackowski. The committee met four
times in 1997. The committee has responsibility to supervise the investment of
the assets of the retirement plans of the Company and to appoint, review the
performance of and, if appropriate, replace, the trustee of the Company's
pension trust and the managers responsible for managing the funds of such trust.
10
<PAGE> 14
In addition, the Board has established a Retirement Administration
Committee, composed of certain officers of the Company, to which the Board has
delegated certain administrative responsibilities with regard to the retirement
plans of the Company.
DIRECTORS' COMPENSATION AND BENEFITS; INDEMNIFICATION ARRANGEMENTS
Directors who are not officers or employees of the Company each receive a
retainer of $40,000 per year. The committee chairmen each receive an additional
annual retainer of $3,000. No separate fees are paid for attendance at Board or
committee meetings. One-half of the annual retainer payable to non-employee
directors is required to be paid in shares of the Company's Common Stock under
the Directors' Stock Plan, with the balance payable in cash. Directors may elect
to receive up to 100 percent of their annual retainer in Common Stock. The
number of shares of Common Stock received under the plan is determined by
dividing the applicable retainer amount by the average price of a share of
Common Stock on the last business day preceding July 1 of each year. In
addition, directors are reimbursed for their reasonable expenses in attending
meetings of the Board and committees, including travel expenses to and from
meetings.
The Directors' Retirement Plan was frozen as of December 31, 1995.
Consequently, only those four directors who completed at least five years of
service as a director on that date, and who are not receiving, or entitled to
receive, a retirement benefit under any of the Company's or its subsidiaries'
other retirement plans or programs, are entitled to receive a retirement benefit
under this plan. Under the Directors' Retirement Plan, an annual retirement
benefit of $24,000 will be paid to any qualified director for the lesser of the
number of years of his or her service as a director or 10 years. Payment of
benefits under this plan generally begins on the later of any such director's
termination of service as a director or the attainment of age 65. Directors with
less than five years of service at December 31, 1995, and directors who are
elected after this date, are not eligible to participate in the Directors'
Retirement Plan.
At the Company's request, Jarobin Gilbert Jr. serves on the Supervisory
Board of FWW GmbH. In connection with this service, Mr. Gilbert receives an
annual fee of DM 15,000 (approximately U.S. $8,200) and reimbursement for
reasonable expenses in attending meetings of the Supervisory Board. In addition,
pursuant to a consulting arrangement with DBSS Group, Inc. ("DBSS"), of which
Mr. Gilbert is the President and Chief Executive Officer, the Company pays an
annual fee of $20,000 to DBSS for consulting services rendered by Mr. Gilbert
related to the Company's businesses in Germany. The Company paid DBSS the sum of
$20,000 during 1997.
The Company has purchased directors' and officers' liability and
corporation reimbursement insurance from National Union Fire Insurance Company
of Pittsburgh, Pa., The Great American Insurance Companies, Aetna Casualty &
Surety Co. and The Chubb Group of Insurance Companies. These policies insure the
Company and all of the Company's wholly owned subsidiaries. They also insure all
of the directors and officers of the Company and the covered subsidiaries. For
the 12-month period ending September 12, 1998, the total premium for these
policies is $557,995. Directors and officers of the Company, as well as all
other employees with fiduciary responsibilities under the Employee Retirement
Income Security Act of 1974, as amended, are insured under policies issued by
Federal Insurance Company and National Union Fire Insurance Company, which have
a total premium of $101,488 for the 12-month periods ending August 31, 1998 and
September 12, 1998, respectively.
11
<PAGE> 15
The litigation captioned In re Woolworth Corporation Securities Class
Action Litigation, which is discussed in the following section on Legal
Proceedings, was settled during 1997 for $20 million. In accordance with the
indemnification provisions of the Company's By-laws, the Company paid the
settlement amount, as well as legal fees and expenses totaling approximately
$2.25 million on behalf of certain of the Company's former officers named as
individual defendants in this action and related derivative litigation that was
dismissed. The settlement discharged the cumulative liability of all defendants.
It is not possible to allocate the amounts paid among the defendants since any
liability on the claims that were settled would have been joint and several. In
1997, the Company was reimbursed under the directors' and officers' liability
insurance policies in effect during the period ended September 12, 1994 for a
percentage of the amounts paid in settlement of the action and in legal fees and
expenses.
The Company has entered into indemnification agreements with its directors
and executive officers, as approved by shareholders at the 1987 annual meeting.
LEGAL PROCEEDINGS
In 1994, the Company and certain of its present and former directors and
officers were named as defendants in lawsuits brought by certain shareholders
claiming to represent classes of shareholders that purchased shares of the
Company's Common Stock during different periods between January 1992 and March
1994. These class action complaints purported to present claims under the
federal securities and other laws and sought unspecified damages based on
alleged misleading disclosures during the class periods. In 1994, 25 of these
actions, brought in the United States District Court for the Southern District
of New York, were consolidated under the caption In re Woolworth Corporation
Securities Class Action Litigation. On October 6, 1997, the court entered a
final judgment approving the settlement of the class action that provides for
the payment to the class of $20 million and dismissing the class action with
prejudice. The amount of the settlement, net of amounts to be paid by insurance
carriers under relevant insurance policies, had been reserved by the Company. In
the opinion of management, the settlement did not have a material adverse effect
on the financial position or results of operations of the Company.
On December 5, 1997, the federal derivative action pending in the United
States District Court for the Southern District of New York under the caption
Rosenbaum v. Sells et al. was dismissed with prejudice pursuant to a Stipulation
and Order of Dismissal submitted by the parties and so ordered by the court.
During 1994, the staff of the SEC initiated an inquiry related to the
matters that were reviewed by the Special Committee established by the Board of
Directors in 1994 as well as in connection with trading in the Company's
securities by certain directors and officers of the Company. The SEC staff has
advised that its inquiry should not be construed as an indication by the SEC or
its staff that any violations of law have occurred. In the opinion of
management, the result of the inquiry will not have a material adverse effect on
the financial position or results of operations of the Company.
The information in this section on Legal Proceedings is current as of April
17, 1998.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company and its subsidiaries have had transactions in the normal course
of their businesses with various other corporations, including certain
corporations whose directors or officers are also directors of the
12
<PAGE> 16
Company. The amounts involved in such transactions have not been material in
relation to the businesses of the Company or its subsidiaries, and it is
believed that such amounts have not been material in relation to the businesses
of such other corporations. In addition, it is believed that these transactions
have been on terms no less favorable to the Company than if they had been
entered into with disinterested parties. It is anticipated that transactions
with such other corporations will continue in the future.
The Bank of New York ("BONY"), of which J. C. Bacot is a director and the
former Chairman of the Board, provides various banking and trust services to the
Company and certain of its subsidiaries. These services include acting as the
trustee and custodian for the pension trust under The Woolworth Retirement Plan,
as amended (the "Retirement Plan"); acting as trustee in connection with the
Company's 8 1/2% debentures due 2022 and medium-term notes maturing between 1997
and 2002; acting as an issuing bank under various letters of credit; providing
financial planning services under the Company's financial planning program for
certain management employees; and acting as trustee of the Trust (as hereinafter
described). BONY is the Administrative Agent of the Company's existing long-term
revolving credit facility. In addition, the Company leases space to BONY. Rental
income received from BONY was approximately $554,000 in 1997.
The Company has entered into a consulting arrangement with DBSS Group,
Inc., of which Jarobin Gilbert Jr. is President and Chief Executive Officer.
Under this arrangement, Mr. Gilbert provides consulting services to the Company
related to the Company's businesses in Germany. The Company paid to DBSS Group,
Inc. fees of $20,000 during 1997.
Purdy Crawford is Honorary Counsel to the Canadian law firm of Osler,
Hoskin & Harcourt, which provided legal services to the Company in 1997. Mr.
Crawford received no remuneration from the firm in 1997.
13
<PAGE> 17
EXECUTIVE COMPENSATION
The following Summary Compensation Table provides certain compensation
information for the Company's Chief Executive Officer during 1997 and the four
other most highly compensated executive officers of the Company at January 31,
1998, for services rendered in all capacities during 1997 and the fiscal years
ended January 25, 1997 ("1996") and January 27, 1996 ("1995").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(A)
AWARDS
ANNUAL COMPENSATION ---------------
--------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTION/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
--------------------------- ---- --------- ------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Roger N. Farah(b)............. 1997 1,500,000 702,150 3,886(c) 0 5,610(d)
Chairman of the Board and 1996 1,500,000 780,900 3,372(c) 0 5,688(d)
Chief Executive Officer 1995 1,500,000 500,000(e) 3,133(c) 0 5,012(f)
M. Jeffrey Branman(g)......... 1997 415,000 394,262(h) 0 75,000 3,113(d)
Senior Vice President- 1996 365,079 390,060(h) 0 75,000 1,513(f)
Corporate Development
John E. DeWolf III(g)......... 1997 361,250 169,101 0 30,000 1,343(f)
Senior Vice President- 1996 319,444 166,303 28,242(i) 30,000 254,620(j)
Real Estate
John F. Gillespie(g).......... 1997 336,250 157,399 0 30,000 3,208(d)
Senior Vice President- 1996 270,833 140,996 0 30,000 176,608(k)
Human Resources
Dale W. Hilpert(l)............ 1997 806,250 377,406 0 100,000 9,718(d)
President and Chief 1996 750,000 390,450 0 100,000 8,506(d)
Operating Officer 1995 535,326 250,000(e) 84,266(i) 300,000 645,376(m)
</TABLE>
- ---------------
(a) There were no payouts under the Long-Term Plan to any of the named
executive officers during 1997, 1996, or 1995.
(b) On January 9, 1995, the Company granted to Mr. Farah 200,000 shares of
Common Stock (the "Restricted Stock"), which are subject to a Restricted
Stock Agreement. The shares vest over a five-year period beginning January
31, 1996 through January 31, 2000, in increments of 40,000 shares on each
vesting date. Mr. Farah has the right to vote the Restricted Stock and to
receive and retain all regular cash dividends payable after January 1995 to
holders of Common Stock of record. At January 31, 1998, Mr. Farah held
200,000 shares of Restricted Stock having a value of $4,350,000, based upon
a $21.75 closing price of the Company's Common Stock as reported on the New
York Stock Exchange on January 30, 1998, the last business day prior to the
end of the fiscal year.
(c) Tax gross-up payment related to commuting use of company car.
14
<PAGE> 18
(d) Includes the dollar value of the premium paid by the Company for a term
life insurance policy for the benefit of the named executive and the dollar
value of the Company's matching contribution under the 401(k) Plan made to
the named executive's account in shares of Common Stock. The dollar values
of amounts reported for 1997 are as follows. The shares of Common Stock for
the matching contribution were valued at $20.375 per share, which
represents the closing price of a share of Common Stock on December 31,
1997, the last day of the plan year.
<TABLE>
<CAPTION>
EMPLOYER MATCHING
CONTRIBUTION UNDER
NAME LIFE INSURANCE PREMIUM 401(K) PLAN
---- ---------------------- ------------------
<S> <C> <C>
R. N. Farah...................... $5,012 $ 598
D. W. Hilpert.................... $9,120 $ 598
M. J. Branman.................... $1,513 $1,600
J. F. Gillespie.................. $1,608 $1,600
</TABLE>
(e) Guaranteed bonus paid pursuant to employment agreement.
(f) Dollar value of premium paid by the Company for term life insurance policy
for the benefit of the named executive.
(g) Elected to this position in March 1996.
(h) Includes $200,000 paid as a discretionary bonus under the terms of Mr.
Branman's employment.
(i) Tax gross-up payment related to relocation.
(j) Amount includes a sign-on bonus of $200,000 and reimbursement for
relocation expenses of $54,620.
(k) Amount includes a sign-on bonus of $175,000 and payment of premium of
$1,608 for term life insurance policy for the benefit of Mr. Gillespie.
(l) Mr. Hilpert was elected President and Chief Operating Officer effective May
15, 1995.
(m) Amount includes a sign-on bonus of $551,641; reimbursement for relocation
expenses of $85,905; and payment of premium of $7,830 for term life
insurance policy for the benefit of Mr. Hilpert.
The following table provides information on Long-Term Plan awards made in
1997:
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR(A)
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERIOD NON-STOCK PRICE-BASED PLAN
SHARES, UNITS UNTIL -------------------------------------
NAME OR OTHER RIGHTS PAYOUT THRESHOLD TARGET MAXIMUM
---- --------------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
R. N. Farah.................... 1,500,000 1997-99 $450,000 $1,800,000 $3,000,000
M. J. Branman.................. 415,000 1997-99 124,500 498,000 830,000
J. E. DeWolf III............... 361,250 1997-99 108,375 433,500 722,500
J. F. Gillespie................ 336,250 1997-99 100,875 403,500 672,500
D. W. Hilpert.................. 806,250 1997-99 241,875 967,500 1,612,500
</TABLE>
- ---------------
(a) The named executive officers and six other executive officers and key
employees of the Company participate in the Long-Term Plan. Under the
Long-Term Plan, individual target awards are expressed as
15
<PAGE> 19
a percentage of the participant's annual base salary. The amounts shown in
the table above under the column headed "Number of Shares, Units or Other
Rights" represent the annual rate of base salary for 1997 for each of the
named executive officers. The amounts shown in the columns headed
"Threshold," "Target" and "Maximum" represent 30 percent, 120 percent and
200 percent, respectively, of the named executive officer's annual base
salary in the first year of the Performance Period and represent the amount
that would be paid to him at the end of the Performance Period if the
established performance goals are attained.
Any payout under the Long-Term Plan is calculated based upon the Company's
performance in the Performance Period and measured against the performance
criteria set for the participant at the beginning of the Performance Period
by the Compensation Committee. These performance goals are based on one or
more of the following criteria: (i) the attainment of certain target levels
of, or percentage increase in, consolidated net income; or (ii) the
attainment of certain levels of, or a specified increase in, return on
invested capital. In addition, to the extent permitted by Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code") (if applicable),
the Compensation Committee has the authority to incorporate provisions in
the performance goals allowing for adjustments in recognition of unusual or
non-recurring events affecting the Company or the Company's financial
statements, or in response to changes in applicable laws, regulations or
accounting principles. Unless otherwise determined by the Compensation
Committee, payment in connection with such awards shall be made only if and
to the extent performance goals for the Performance Period are attained and
generally only if the participant remains employed by the Company throughout
the Performance Period. The Compensation Committee may award, after
completion of the Performance Period, a pro-rata payment to any participant
whose employment terminated during the Performance Period.
Upon a Change in Control, as defined in the Long-Term Plan, the Compensation
Committee may, to the extent permitted under Section 162(m) of the Code (if
applicable), pay out an amount equal to or less than a pro-rata portion
(through the date of the Change in Control) of the individual target award
based on the actual performance results achieved from the beginning of the
Performance Period to the date of the Change in Control and the performance
results that would have been achieved had the performance goals been met for
the balance of the Performance Period.
Payment to a participant under the Long-Term Plan for each Performance
Period will be made, at the discretion of the Compensation Committee, either
in cash or in shares of Common Stock under the 1995 Award Plan. If payment
is made in shares of Common Stock, the number of shares to be paid to the
participant will be determined by dividing the achieved percentage of a
participant's annual base salary by the fair market value of the Common
Stock on the date of payment. The amount of any payout for the performance
period may not exceed the lesser of 300 percent of the participant's annual
base salary or $5,000,000.
16
<PAGE> 20
OPTION GRANTS IN LAST FISCAL YEAR
The table that follows provides information regarding grants of stock
options made to the named executive officers under the 1995 Award Plan during
1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(A)
----------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE PRESENT VALUE($)(B)
---- ---------- -------------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
R. N. Farah....................... 0 N/A N/A N/A N/A
M. J. Branman..................... 75,000 3.4 22.1875 04/09/07 561,808
J. E. DeWolf III.................. 30,000 1.4 22.1875 04/09/07 224,723
J. F. Gillespie................... 30,000 1.4 22.1875 04/09/07 224,723
D. W. Hilpert..................... 100,000 4.5 22.1875 04/09/07 749,078
</TABLE>
- ---------------
(a) Stock options were granted on April 9, 1997 to the named executive officers,
except Mr. Farah.
The per-share exercise price of each stock option may not be less than the
fair market value of a share of Common Stock on the date of grant. In
general, no portion of any stock option may be exercised until the first
anniversary of its date of grant. The options granted during 1997 to the
named executive officers will become exercisable in three equal annual
installments, beginning April 9, 1998. In the event of an option holder's
retirement, disability, or death while employed by the Company or one of its
subsidiaries, all unexercised options that are then immediately exercisable
plus those options that would have become exercisable had the option holder
not retired, become disabled, or died until after the next succeeding
anniversary of the date of grant of each such option, shall remain or
become, as the case may be, immediately exercisable as of such date.
Moreover, upon the occurrence of a "Change in Control," as defined in the
1995 Award Plan, all outstanding options shall become immediately
exercisable in full, as of such date.
Options may remain exercisable for up to three years following an option
holder's retirement or termination due to disability, and for up to one year
for any other termination of employment for reasons other than cause.
However, under no circumstances may an option remain outstanding for more
than ten years from its date of grant.
(b) Values were calculated as of the date of grant using a Black-Scholes option
pricing model. The values shown in the table are theoretical and do not
necessarily reflect the actual values that the named executive officers may
ultimately realize. Any actual value to the officer will depend on the
extent to which the market value of the Company's Common Stock at a future
date exceeds the option exercise price. In addition to the fair market value
of the Common Stock on the date of grant and the exercise price, which are
identical, the following assumptions were used to calculate the values shown
in the table: a weighted-average risk-free interest rate of 6.44 percent; a
stock price volatility factor of 30 percent; a two year weighted-average
expected award life and a zero dividend yield. The assumptions and
calculations used for the model are consistent with the assumptions for
reporting stock option valuations in the Company's 1997 Annual Report on
Form 10-K.
17
<PAGE> 21
The following table provides information on the value of the named
executive officers' unexercised stock options at January 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(A)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. N. Farah................... 0 N/A 800,000 0 6,525,040 0
M. J. Branman................. 0 N/A 25,000 125,000 150,783 301,565
J. E. DeWolf III.............. 0 N/A 10,000 50,000 60,313 120,626
J. F. Gillespie............... 0 N/A 10,000 50,000 60,313 120,626
D. W. Hilpert................. 0 N/A 333,333 166,667 1,972,931 402,089
</TABLE>
- ---------------
(a) The fair market value (the average of the high and low prices of the
Company's Common Stock) on Friday, January 30, 1998, the last business day
of 1997, was $21.7813.
RETIREMENT PLANS
The Company maintains The Woolworth Retirement Plan (the "Retirement
Plan"), a defined benefit plan with a cash balance formula, which covers
associates of the Company and substantially all of its United States
subsidiaries. All qualified employees at least 21 years of age are covered by
the Retirement Plan, and plan participants become fully vested in their benefits
under this plan upon completion of five years of service or upon attainment of
age 65 while actively employed.
Under the cash balance formula, each participant has an account, for record
keeping purposes only, to which credits are allocated annually based upon a
percentage of the participant's W-2 Compensation, as defined in the Retirement
Plan. This percentage is determined by the participant's years of service with
the Company as of the beginning of each calendar year. The following table shows
the percentage used to determine credits at the years of service indicated.
<TABLE>
<CAPTION>
PERCENT OF W-2
PERCENT OF ALL COMPENSATION
YEARS OF SERVICE W-2 COMPENSATION OVER $22,000
---------------- ---------------- + -------------------------
<S> <C> <C> <C>
Less than 6................................ 1.10 0.55
6-10....................................... 1.50 0.75
11-15...................................... 2.00 1.00
16-20...................................... 2.70 1.35
21-25...................................... 3.70 1.85
26-30...................................... 4.90 2.45
31-35...................................... 6.60 3.30
More than 35............................... 8.90 4.45
</TABLE>
18
<PAGE> 22
In addition, all balances in the participants' accounts earn interest at
the fixed rate of six percent, which is credited annually. At retirement or
other termination of employment, an amount equal to the vested balance then
credited to the account under the Retirement Plan is payable to the participant
in the form of a qualified joint and survivor annuity (if the participant is
married) or a life annuity (if the participant is not married). The participant
may elect to waive the annuity form of benefit described above and receive
benefits under the Retirement Plan in an optional annuity form or an immediate
or deferred lump sum. Participants may elect one of the optional forms of
benefit with respect to the accrued benefit as of December 31, 1995 if the
individual participated in the Retirement Plan as of such date.
The Code limits annual retirement benefits that may be paid to, and
compensation that may be taken into account in the determination of benefits
for, any person under a qualified retirement plan such as the Retirement Plan.
Accordingly, for any person covered by the Retirement Plan whose annual
retirement benefit, calculated in accordance with the terms of such plan,
exceeds the Code limitations, the Company has adopted the Woolworth Corporation
Excess Cash Balance Plan (the "Excess Plan"), an unfunded, nonqualified benefit
plan, under which the individual is paid the difference between the Code
limitations and the retirement benefit to which he or she would otherwise be
entitled under the Retirement Plan.
In addition, the SERP, which is an unfunded, nonqualified benefit plan,
provides for payment by the Company of supplemental retirement, death and
disability benefits to certain executive officers and certain other key
employees of the Company and its subsidiaries. The named executive officers and
one of the other executive officers of the Company are participants in the SERP.
Under the SERP, the Compensation Committee of the Board of Directors sets an
annual targeted incentive award for each participant consisting of a percentage
of salary and bonus based on the Company's performance against target.
Achievement of target results in an eight percent credit to a participant's
account. The applicable percentage decreases proportionately to the percentage
of the Company's performance below target, but not below four percent, and
increases proportionately to the percentage of the Company's performance above
target, but not above 12 percent. Participants' accounts accrue simple interest
at the rate of six percent annually.
The table below provides the estimated annual benefit for each of the
individuals named in the Summary Compensation Table stated as a single life
annuity under the Retirement Plan, the Excess Plan, and the SERP. The
projections contained in the table assume each such person's continued
employment with the Company to his normal retirement date and that compensation
earned during each year after 1997 to the individual's normal retirement date
remains the same as compensation earned by him during 1997. The projections in
the table below are based upon the greater of the accrued benefit as of December
31, 1995 or a single life annuity determined by converting the account balance
projected to normal retirement date using a 6.55 percent interest rate at normal
retirement age based on the average rate as published in Federal statistical
19
<PAGE> 23
release H.15 (519) for 30-year U.S. Treasury Bills for December 1995. The
applicable interest rate is the rate specified in sec.417(e)(3)(A)(ii)(II) of
the Code.
<TABLE>
<CAPTION>
TOTAL ANNUAL BENEFIT TOTAL ANNUAL BENEFIT
FOR YEARS 1-3 FOR YEARS 4 AND SUBSEQUENT
NAMED EXECUTIVE OFFICER FOLLOWING RETIREMENT(A) FOLLOWING RETIREMENT(A)
----------------------- ----------------------- --------------------------
<S> <C> <C>
R. N. Farah.............................. $2,781,828 $229,997
M. J. Branman............................ 1,239,557 99,524
J. E. DeWolf III......................... 784,641 62,237
J. F. Gillespie.......................... 369,078 23,384
D. W. Hilpert............................ 570,384 36,033
</TABLE>
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(a) The amounts stated for years 1-3 following retirement include the SERP
benefits, payable as a lump sum spread over a three-year period. The SERP
projections include a 7.49 percent credit to the participants' accounts for
1997 and assume an annual 8 percent credit going forward. Beginning with the
fourth year following retirement, the individuals' annual benefits will not
include any SERP payments and, therefore, their annual benefits for those
years will be reduced accordingly.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company presently has employment agreements with R. N. Farah and D. W.
Hilpert. In addition, the Company also has severance agreements with M. J.
Branman, J. E. DeWolf III and J. F. Gillespie.
R. N. Farah
At the time of Mr. Farah's election as Chairman of the Board and Chief
Executive Officer in December 1994, the Company entered into an employment
agreement with him. During the contract term, Mr. Farah will receive a base
salary of not less than $1,500,000 per year. The term of the employment
agreement is through January 31, 2000. In addition, Mr. Farah participates in
the Annual Plan and the Long-Term Plan. His payout at budget under the Annual
Plan is 50 percent of base salary.
Pursuant to the employment agreement, in 1994 Mr. Farah was granted an
option to purchase 800,000 shares of Common Stock, and the Company issued
200,000 shares of restricted stock to him. The shares of restricted stock are
subject to a restriction related to Mr. Farah's continued employment with the
Company, and vest at 20 percent per year at the end of the first through fifth
years of employment.
In the event Mr. Farah's employment is terminated by him for good reason or
by the Company without cause, then Mr. Farah would be entitled to payments of
any unpaid base salary for the period prior to termination, any declared but
unpaid bonuses and amounts due under any employee benefit or incentive plan, and
one additional year's worth of restricted stock would then immediately vest.
Thereafter, for a period ending on the earliest of (a) January 31, 2000, (b)
three years from the end of the employment period, (c) his death, or (d) the
violation of any post-employment contract requirements, Mr. Farah would be
entitled to receive payments equal to his annual base salary immediately prior
to termination. In the event of termination following a Change in Control, as
defined in the agreement, Mr. Farah would receive the payments described above
for a period not to extend beyond January 31, 2000. Further, all of Mr. Farah's
unvested shares of restricted stock, as well as all unvested stock options,
would immediately vest.
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<PAGE> 24
D. W. Hilpert
The Company has entered into an employment agreement with D. W. Hilpert as
President and Chief Operating Officer for a three-year term from May 1, 1997 to
April 30, 2000. Pursuant to the terms of this agreement, Mr. Hilpert receives an
annual base salary of not less than $825,000. Mr. Hilpert participates in the
Annual Plan and the Long-Term Plan.
In the event that Mr. Hilpert's employment is terminated by him for good
reason or by the Company without cause, (or if the Company does not extend the
term of the employment agreement after April 30, 2000 under substantially
similar terms and conditions), Mr. Hilpert would be entitled to payments of any
unpaid base salary for the period prior to termination, any declared but unpaid
bonuses, and amounts due under any employee benefit or incentive plan.
Thereafter, for a period ending on the earliest of (a) the later of April 30,
2000 or one year from the termination date, (b) his death, or (c) the violation
of any post-employment contract requirements, Mr. Hilpert would be entitled to
receive payments equal to his annual base salary immediately prior to such
termination.
In the event of termination following a Change in Control, as defined in
the agreement, Mr. Hilpert would receive the payments described above. Also,
subject to the Compensation Committee's approval (if required), any unvested
portion of the stock option granted to Mr. Hilpert when he joined the Company in
1995 would fully vest. Further, Mr. Hilpert may become entitled to an additional
payment, payable in two equal lump sum installments upon termination of
employment and on the first anniversary of his termination of employment. This
additional payment is equal to the difference, if any, between the amount the
Company would expect to pay Mr. Hilpert if his employment were terminated by the
Company without cause or by Mr. Hilpert for good reason and an amount equal to
Mr. Hilpert's base salary for 78 weeks plus 150 percent of his annual bonus at
target. This provision provides Mr. Hilpert, upon a change in control, with a
payment comparable to that provided to other senior executives of the Company
under the provisions of the Senior Executive Severance Agreements, described
below.
Further, if Mr. Hilpert's employment is terminated by him for good reason
or by the Company without cause, or if Mr. Hilpert's employment with the Company
is not extended beyond April 30, 2000, and the amount of retirement benefits Mr.
Hilpert is then entitled to under the Retirement Plan, the Excess Plan, and the
SERP is less than $1,300,000, the Company will increase the amount in his SERP
account so that this total is reached. This provision compensates Mr. Hilpert
for the benefit he would have received under his previous employer's
supplementary plan.
M. J. Branman, J. E. DeWolf III and J. F. Gillespie
The Company has entered into Senior Executive Severance Agreements with M.
J. Branman, J. E. DeWolf III, J. F. Gillespie and one other executive officer,
which provide for severance payments if their employment is terminated by the
Company without cause or by them for good reason. In the event such officer's
employment is terminated within 12 months following a Change in Control, he will
receive two weeks' salary plus annual prorated bonus for each year of service,
with a minimum of 78 weeks. If such termination does not occur within 12 months
following a Change in Control, he will be entitled to receive two weeks' salary
plus annual prorated bonus for each year of service, with a minimum of 26 weeks.
With respect to Messrs. DeWolf and Gillespie, the payment specified in the
preceding sentence may not be less than their
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<PAGE> 25
annual base salary. With respect to Mr. Branman, if the total severance benefit
he would be entitled to is less than the sum of the following amounts in the
year of termination: (i) his annual base salary, (ii) his expected annual bonus
at target and (iii) $200,000, then he would be entitled to receive additional
payments from the Company in the amount of the difference.
The Company has established a trust (the "Trust") in connection with
certain of its benefit plans, arrangements, and agreements, including certain of
those described above, and other benefit plans, agreements or arrangements that
may, at the request of the Company, hereafter be covered (collectively, the
"Benefit Obligations"). Under the Trust agreement, in the event of a Change in
Control of the Company (as defined therein), the trustee would pay to the
persons entitled to the Benefit Obligations, out of funds held in the Trust, the
amounts to which such persons may become entitled under the Benefit Obligations.
Upon the occurrence of a Potential Change in Control of the Company (as defined
in the Trust agreement), the Company is required to fund the Trust with an
amount sufficient to pay the total amount of the Benefit Obligations. Following
the occurrence, and during the pendency, of a Potential Change in Control, the
trustee is required to make payments of Benefit Obligations, to the extent such
payments are not made by the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the following individuals (none of whom had been an officer or
employee of the Company or any of its subsidiaries) served on the Compensation
Committee: P. H. Geier, Jr., M. P. MacKimm and J. E. Preston. There were no
interlocks with other companies within the meaning of the SEC's proxy rules.
COMPENSATION COMMITTEE'S REPORT TO SHAREHOLDERS
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
composed of the directors listed below, none of whom are officers or employees
of the Company or any of its subsidiaries, has responsibility for all
compensation matters involving the Company's executive officers and for
significant elements of the compensation of the chief executive officers of its
operating units.
Compensation Policy. It is the policy of the Committee to design and
maintain a compensation policy that will enable the Company to attract,
motivate, and retain executive officers and the chief executive officers of its
operating units by providing a fully competitive total compensation opportunity.
This policy provides for (i) competitive base salaries, which reflect the
responsibilities of the position held and performance in the position; (ii)
annual incentive opportunities payable in cash, which are based on the Company's
achievement of previously specified performance goals; (iii) long-term incentive
opportunities, payable in stock or cash, which are based on the Company's
achievement of previously specified performance goals; and (iv) long-term
stock-based incentive opportunities, which are designed to strengthen the
mutuality of interest between participating associates and the shareholders. The
Committee strives to balance short- and long-term incentive objectives and to
employ prudent judgment in establishing performance criteria, evaluating
performance, and
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<PAGE> 26
determining actual incentive payment levels. For senior level management
associates the compensation policy provides that a greater percentage of total
compensation will be at risk, dependent upon the Company's performance in
relation to targets established under incentive compensation plans, or, in the
case of stock options, increases in the price of the Company's Common Stock.
Compensation Program. The Committee has established a total compensation
program for senior executive officers (the Chairman of the Board and Chief
Executive Officer, President and Chief Operating Officer, and Senior Vice
Presidents) and the chief executive officers of its operating businesses
consisting of five components: base salary, participation in the Annual Plan,
participation in the Long-Term Plan, stock option grants, and the opportunity to
participate in the employee stock purchase program. We note that the Company's
shareholders, at annual meetings in prior years, have approved the Annual Plan,
the Long-Term Plan, the 1995 Award Plan, and the 1994 Stock Purchase Plan. With
the exception of participation in the Long-Term Plan, the Company has a
substantially similar compensation program for its other executive officers and
management employees. At the 1998 Annual Meeting, shareholders are being asked
to approve the 1998 Award Plan. The Committee has carefully considered the need
for, and the benefits to shareholders that it expects to result from, the 1998
Award Plan, and recommends adoption to shareholders.
A performance evaluation of each management associate is conducted at the
beginning of each year, based upon goals, responsibilities, and other
performance criteria established at the beginning of the prior year. Salary
recommendations are then made based upon the results of this performance review.
With regard to executive officers and the chief executive officers of the
Company's operating units, management makes these salary recommendations to the
Committee. The Committee then reviews the base salaries of these individuals and
determines the changes, if any, that should be made to those base salaries based
upon the officer's performance and to maintain a competitive position with other
national retail companies.
At the beginning of each year, the Committee also establishes the
performance goals under the Annual Plan for that year and under the Long-Term
Plan for the three-year performance period then beginning. Payments under the
Annual Plan for 1997 were based on a combination of the pre-tax earnings and
percentage return on invested capital of the Company in relation to targets
established by the Committee. In 1997, these targets for executive officers were
equal to the pre-tax earnings and percentage return on invested capital set in
the Company's operating budget for the year. Approximately 800 key management
employees, including executive officers, are participants in the Annual Plan.
The chief executive officers of the operating units participate in annual bonus
plans with goals tied to operating results of their respective units. Payments
under the Long-Term Plan are based on a combination of cumulative net income and
percentage return on invested capital of the Company during the three-year
performance period, in relation to targets established by the Committee.
Each year the Committee considers granting options to purchase Common Stock
to key employees, including executive officers. Stock option grants are intended
to provide additional incentive for superior performance by officers and key
employees who have the most impact on the management and success of the
Company's businesses. Stock options granted by the Committee in 1997 vest in
three equal annual installments beginning on the first anniversary of the date
of grant. Approximately 300 employees participate. Also, qualified executive
officers and other employees may purchase shares of Common Stock under the 1994
Stock Purchase Plan.
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<PAGE> 27
The performance of the Company's continuing operations in 1997 was somewhat
below the pre-tax earnings performance target and slightly above the return on
invested capital performance target established by the Committee under the
Annual Plan, and payments were made to the executive officers under that plan,
including the payments to the named executive officers shown in the table on
page 14. There was no performance period under the Long-Term Plan ending in
1997, and therefore no payments were made under that plan.
During the three-year period 1996-1998, while the Company implements its
turn-around plan, its compensation program places greater emphasis on the
granting of stock options to its executive officers, the chief executive
officers of its operating units, and certain other senior management associates
as a means of better aligning the interests of the Company's managers with those
of its shareholders through the opportunity to have equity participation of a
size and nature significant to the individual. In determining the number of
options to be granted to executive officers, the Committee considered a number
of factors, including the position held by the individual, his or her
performance, the number of options granted in previous years, and the financial
results of the Company for the prior year. In 1997, the Committee granted to the
named executive officers the stock options shown in the table on page 17.
Chief Executive Officer's Compensation. Pursuant to the provisions of an
employment agreement negotiated with Mr. Farah at the time of his recruitment to
become Chairman of the Board and Chief Executive Officer of the Company in 1994,
and approved by the Committee, Mr. Farah receives a base salary of $1,500,000
per year. The term of the employment agreement is through January 31, 2000. In
addition, Mr. Farah participates in the Annual Plan and the Long-Term Plan. His
payment under the Annual Plan if the bonus targets are achieved would be 50
percent of base salary and his payment under the Long-Term Plan at the end of
the 1996-98 performance period, if the bonus targets are achieved, would be 163
percent of base salary, and at the end of the 1997-99 performance period, if the
bonus targets are achieved, would be 120 percent of base salary. In 1997, based
upon the performance of the Company's continuing operations in relation to the
pre-tax profit and return on invested capital targets established by the
Committee for the year, he earned an annual bonus of $702,150, which represents
46.8 percent of his base salary.
At the time he joined the Company, Mr. Farah received an option to purchase
800,000 shares of Common Stock, under the provisions of the 1986 Option Plan, at
$13.625 per share, the fair market value on the date of grant. No further stock
option grant has been made to him since that time. In addition, as provided for
in his employment agreement, the Company issued 200,000 shares of restricted
stock to him in January 1995. The shares are subject to a restriction related to
his continued employment in the position of Chairman of the Board and Chief
Executive Officer, and vest at 20 percent per year at the end of the first
through fifth years of employment. As of January 31, 1998, the restrictions have
lapsed on 120,000 of these shares. In 1997, Mr. Farah purchased 1,223 shares of
Common Stock at $17.37 per share under the Stock Purchase Plan, which was the
maximum number of shares he was permitted to purchase under the terms of that
plan.
It is generally the Committee's view that the compensation plans and
programs of the Company should be designed and administered in a manner that
ensures the tax deductibility by the Company of compensation paid to its
executives. Nevertheless, the Committee recognizes that situations may arise
when it is in the best interests of the Company and its shareholders to pay
compensation to an executive that cannot be deducted for tax purposes. Pursuant
to the provisions of Section 162(m) of the Code, the portion of Mr. Farah's base
salary
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<PAGE> 28
that exceeds $1,000,000 and most of the compensation related to the restricted
stock grant made to him are not deductible. It was the view of the Committee
that the benefits of securing Mr. Farah's services outweighed the Company's
inability to obtain a tax deduction for that portion of his compensation.
Mr. Farah's compensation arrangements with the Company in 1997 were
unchanged from those negotiated by the Company and Mr. Farah at the time he
joined the Company in December 1994. In approving these compensation
arrangements at that time, the Committee considered that the elements of Mr.
Farah's compensation package were the result of negotiation between the Company
and Mr. Farah, following a search that identified Mr. Farah as the best
candidate for the Chief Executive Officer's position.
James E. Preston, Chairman
Philip H. Geier Jr.
Margaret P. MacKimm
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<PAGE> 29
PERFORMANCE GRAPH
The performance graph which follows compares the cumulative total
shareholder return on the Company's Common Stock against the cumulative total
return of the S&P 500 Index and the S&P Retail Stores Composite Index from
January 31, 1993 through January 31, 1998. The graph assumes an investment of
$100 in the Company's Common Stock and in each index on January 31, 1993, and
that all dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period S&P Retail
(Fiscal Year Covered) Woolworth S&P 500 Composite
<S> <C> <C> <C>
Jan-93 100.00 100.00 100.00
Jan-94 91.16 111.86 95.18
Jan-95 58.42 112.48 88.04
Jan-96 42.14 155.85 94.95
Jan-97 76.31 196.87 113.49
Jan-98 81.46 249.80 168.28
</TABLE>
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<PAGE> 30
2. APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
On March 11, 1998, the Board of Directors approved, and recommended for
adoption by shareholders at this annual meeting, an amendment to Article First
of the Company's Certificate of Incorporation to change the name of the Company
to Venator Group, Inc. For the reasons described below, the Board of Directors
believes that it would be in the best interests of the Company and its
shareholders to change the name of the Company. To accomplish this name change,
it is necessary to amend the applicable provision of the Company's Certificate
of Incorporation.
REASONS FOR AMENDMENT
Important and positive changes have occurred at the Company over the past
several years. The closing of the domestic Woolworth general merchandise
business in 1997, as well as the closing and divestiture of other non-strategic
or underperforming businesses over the past several years, has provided the
Company with a unique opportunity to change its name. While the Woolworth name
served the Company well for many years, it does not reflect the Company as it
exists today and the direction in which it is moving. The Board of Directors
believes that changing the name of the Company is a fundamental component of its
repositioning. After careful consideration, the Board believes that "Venator
Group, Inc." better reflects the new mix of the Company's portfolio of
businesses and its position as a leading global retailer of merchandise designed
for active lifestyles.
The change of the Company's name will not affect in any way the validity of
currently outstanding stock certificates. Shareholders will not be required to
surrender or exchange any stock certificates that they currently hold. The
Company's ticker symbol on the New York Stock Exchange will continue to be "Z."
The Board of Directors believes that the adoption of the proposed amendment
to the Certificate of Incorporation is in the best interests of the Company and
the shareholders. Accordingly, the Board is proposing that Article First of the
Certificate of Incorporation be amended to change the name of the Company to
"Venator Group, Inc."
The full text of Article First of the Certificate of Incorporation, as
proposed to be amended, is as follows:
"FIRST. The name of the corporation is 'Venator Group, Inc.' (hereinafter
called the 'Corporation')."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 2.
3. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, on the recommendation of the Audit Committee, has
appointed KPMG Peat Marwick LLP ("KPMG") as independent accountants of the
Company for the fiscal year that began February 1, 1998, subject to ratification
by the shareholders at the 1998 annual meeting. A resolution for such
ratification will be presented at the 1998 annual meeting.
KPMG has no interest, financial or otherwise, direct or indirect, in the
Company other than as independent accountants.
Representatives of KPMG are expected to be present at the 1998 annual
meeting and will have an opportunity to make a statement and respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 3.
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<PAGE> 31
4. APPROVAL OF THE 1998 AWARD PLAN
The Board of Directors of the Company has adopted the 1998 Award Plan,
subject to approval by the Company's shareholders at the 1998 annual meeting.
The 1998 Award Plan is substantially similar to the Company's current option and
award plan, the 1995 Award Plan, which shareholders approved in 1995. Options
may continue to be granted under the 1995 Plan until March 8, 2005. As of
January 31, 1998, there were 1,896,129 shares available for grant under the 1995
Award Plan. It is expected that approximately 400 employees will be eligible to
receive awards under the 1998 Award Plan. The Board believes that the 1998 Award
Plan will benefit shareholders by allowing the Company to attract and retain key
employees who have the ability to enhance the value of the Company and by
aligning the interests of key employees with those of the shareholders through
increased stock ownership and the ability to tie a significant portion of the
total compensation of key managers to the value of the Company's Common Stock.
The Board therefore recommends approval of the 1998 Award Plan.
During the three-year period from 1996 to 1998, while the Company
implements its turn-around plan, the Compensation Committee determined that it
was appropriate to place greater emphasis on the granting of stock options to
key management employees as a means of better aligning the interests of the
Company's key managers with those of its shareholders. The Company does not
expect that stock options will form as significant a part of the compensation
packages of its key managers after the end of 1998.
The following plan summary is not intended to be complete and is qualified
in its entirety by the complete text of the 1998 Award Plan that is set forth in
Appendix A to this proxy statement. In the summary, defined terms are
capitalized and have the meanings assigned to them in the text of the 1998 Award
Plan, if not otherwise defined in this proxy statement.
SUMMARY OF THE 1998 AWARD PLAN
SHARES SUBJECT TO PLAN
The maximum number of shares of the Company's Common Stock reserved for
Award grants under the 1998 Award Plan is 6,000,000, subject to adjustment as
described below. The number of shares reserved for issuance as Restricted Stock
cannot exceed 1,500,000 shares. In the event of a stock split, stock dividend,
spin-off or other relevant change affecting the Common Stock, adjustments may be
made to the number of shares available for Award grants and to the number of
shares and price under outstanding grants made before the event. Such shares may
be either authorized and unissued shares or issued shares acquired and held in
the treasury of the Company.
ADMINISTRATION
The 1998 Award Plan will be administered and interpreted by the
Compensation Committee of the Board or a subcommittee thereof (the "Committee"),
which is composed of two or more non-employee directors,
28
<PAGE> 32
each of whom is an "outside director" within the meaning of Section 162(m) of
the Code and a "non-employee director" as defined in Section 16(b) of the
Exchange Act. The Committee will select persons to receive grants from among the
eligible employees, determine the types of grants and number of shares to be
awarded to grantees, and set the terms, conditions, and provisions of the grants
consistent with the terms of the 1998 Award Plan. The Committee may establish
rules for the administration of the 1998 Award Plan.
ELIGIBLE EMPLOYEES
The Committee may grant Awards to officers and other employees of the
Company (including its subsidiaries).
AWARDS UNDER THE 1998 AWARD PLAN
An Award made under the 1998 Award Plan may be made in the form of an
Option, Tandem or Freestanding Stock Appreciation Right, Restricted Stock, or
Other Stock-Based Award.
During the term of this Plan, no Participant may receive a total number of
Awards relating to more than 600,000 shares of Common Stock, subject to
adjustment. To the extent that shares of Common Stock for which Options or Stock
Appreciation Rights are permitted to be granted to an individual during a fiscal
year of the Company are not covered by a grant of an Option or a Stock
Appreciation Right in the Company's fiscal year, such shares of Common Stock
shall be available for grant or issuance to the Participant in any subsequent
fiscal year during the term of the 1998 Award Plan.
STOCK OPTIONS
Options granted under the 1998 Award Plan may be either incentive stock
options under the provisions of Section 422 of the Code ("ISOs") or options not
subject to the provisions of Section 422 of the Code ("Nonstatutory Options").
The exercise price per share of Common Stock covered by an Option shall be
determined by the Committee at the time the Option is granted; provided,
however, that the exercise price shall not be less than 100 percent (110 percent
in the case of any ISO that is granted to a Ten Percent Shareholder) of the Fair
Market Value of a share of Common Stock on the date of grant of the Option.
In general, each Option shall become exercisable following the date of
grant of the Option as follows: no portion of the Option may be exercised until
the first anniversary of the date of grant; from the first anniversary of the
date of grant to the second anniversary of the date of grant, up to, but not
more than, one-half of the Option may be exercised; and, from and after the
second anniversary of the date of grant until the earlier of the expiration or
cancellation of the Option, all or any portion of the Option may be exercised.
Notwithstanding this provision, the Committee has the right to establish a
longer exercise schedule.
Each Option shall expire 10 years from the date of grant of such Option (or
five years in the case of any ISO that is granted to any person who owns more
than 10 percent of the Company's voting stock) unless the Committee shall
determine an earlier expiration date.
The payment of the exercise price of any Option may be made (a) in cash,
(b) by delivering shares of Common Stock having a Fair Market Value equal to the
Option price or in a combination of cash and Common Stock or, (c) in the sole
discretion of the Committee, through a cashless exercise procedure.
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<PAGE> 33
U.S. FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
No taxable income is realized by a Participant and no tax deduction is
available to the Company upon either the grant or exercise of an ISO, although a
Participant will realize alternative minimum taxable income upon exercise of an
ISO. If a Participant holds the shares acquired upon the exercise of an ISO for
more than one year after the Option exercise and more than two years after the
date of the Option grant ("holding period"), the difference between the Option
price and the amount realized upon the sale of the shares will be treated as
long-term capital gain or loss and no deduction will be available to the
Company. If the shares are transferred before the expiration of the holding
period, the Participant will realize ordinary income and the Company will be
entitled to a deduction on a portion of the gain, if any, equal to the
difference between the Option price and the lesser of the Fair Market Value of
the shares on the date of exercise or the amount realized on the disposition.
Any further gain or loss will be taxable as long-term or short-term capital gain
or loss depending upon the holding period before disposition. If the Common
Stock is held for more than 18 months after the date of exercise, the
Participant will generally be taxed at a maximum rate of 20 percent. Common
Stock held for more than one year but less than 18 months will generally be
taxed at a maximum rate of 28 percent.
No taxable income is realized by the Participant upon the grant of a
Nonstatutory Option, and no deduction is then available to the Company. Upon
exercise of the Option, the excess of the Fair Market Value of the shares on the
date of exercise over the Option price will be taxable to the Participant and
deductible by the Company. The tax basis of shares acquired will be the Fair
Market Value on the date of exercise. For shares held for more than one year
following exercise of the Option, the Participant will realize long-term capital
gain or loss upon disposition.
Compensation received by Participants on the exercise of Nonstatutory
Options or the disposition of shares acquired upon the exercise of any ISOs will
be considered performance-based compensation that is not subject to the
$1,000,000 limit of Section 162(m) of the Code.
STOCK APPRECIATION RIGHTS
The 1998 Award Plan authorizes the Committee to grant stock appreciation
rights ("SARs") to Participants. Each SAR may relate to and be associated with a
specific Option or may be freestanding. In the case of an SAR that is related to
an Option, such SAR may be granted either at the time of the grant of such
Option or, if related to a Nonstatutory Option, at any time thereafter. An SAR
related to an option is subject to the same terms and conditions as the related
Option and is exercisable only to the extent the related Option is exercisable.
Upon the exercise of an SAR, the Participant shall be entitled to receive an
amount equal to (i) the excess of the (x) Fair Market Value of a share of Common
Stock on the date of exercise of the SAR over (y) the price specified in the SAR
on the date of grant or, in the case of an SAR related to an Option, the Option
price of the related Option times (ii) the number of shares of stock as to which
such SAR is being exercised. Any payment with respect to an SAR will be made in
Common Stock determined on the basis of the Fair Market Value on the date of
exercise of the SAR or, alternatively, at the discretion of the Committee,
solely in cash, or in a combination of cash and Common Stock. On the exercise of
an SAR related to an Option, the related Option, or portion thereof in respect
of which such SAR is exercised, terminates.
30
<PAGE> 34
RESTRICTED STOCK
The 1998 Award Plan authorizes the Committee to make Awards of Restricted
Stock. The Committee shall determine the terms and conditions of Restricted
Stock Awards including the Restriction Period. The Participant may not sell,
assign, transfer or otherwise dispose of, except by will or the laws of descent
and distribution, shares of Restricted Stock during the Restriction Period. The
Committee may make the lapse of such restrictions contingent on the achievement
of performance goals. Except as otherwise provided by the Award Agreement or the
1998 Award Plan, during the Restriction Period the Participant shall possess all
incidents of ownership of the shares, including the right to receive dividends
with respect to the shares and to vote the shares.
OTHER STOCK-BASED AWARDS
The 1998 Award Plan authorizes the Committee to grant Other Awards of Stock
and Other Awards that are valued in whole or in part by reference to, or payable
on or otherwise based on Common Stock ("Other Stock-Based Awards). The Committee
may determine the terms and conditions of the Other Stock-Based Awards. The
Committee may also provide for the grant of Common Stock under such Awards upon
the completion of a specified performance goal or period.
TRANSFERABILITY
In general, no Award may be Transferred by the participant other than by
will or by the laws of descent and distribution. However, the Committee may
determine at the time of grant or thereafter that an Award, other than an ISO,
is Transferable in whole or in part under circumstances and conditions specified
by the Committee.
CHANGE OF CONTROL
To preserve all of a Participant's rights in the event of a Change of
Control, the following shall occur, unless the Committee expressly provides
otherwise in the Award Agreement: (i) all outstanding Options and freestanding
SARs not already exercisable shall become immediately exercisable; (ii) any
Restriction Periods on Restricted Stock shall immediately lapse; and (iii) with
respect to Other Stock-Based Awards, any outstanding performance periods or
goals shall be deemed to have been attained or any outstanding restrictions
shall lapse.
AMENDMENTS
The Board or the Committee may amend the 1998 Award Plan provided that no
amendment which requires shareholder approval under applicable New York law or
in order for the Plan to continue to comply with Rule 16b-3 of the Exchange Act
or Section 162(m) of the Code shall be effective unless it is approved by the
requisite vote of shareholders. Certain amendments which may result in an
increase in cost to the Company may not require a vote of shareholders pursuant
to New York law or Rule 16b-3 of the Exchange Act. No amendment shall adversely
affect any of the rights of any Participant under any Award without the
Participant's consent.
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1998 GRANTS
Subject to shareholder approval of the 1998 Award Plan, on April 8, 1998,
the Committee granted Options under this plan to certain executive officers of
the Company, as follows:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NAME AND POSITION UNDERLYING OPTIONS GRANTED
----------------- --------------------------
<S> <C>
Named Executive Officers.......................... 0
All Current Executive Officers as a Group......... 21,000 Shares
All Current Non-Executive Directors............... N/A
All Employees as a Group.......................... 21,000 Shares
</TABLE>
The per-share exercise price of the Options granted on April 8, 1998 is
$25.2813, which reflects the Fair Market Value of a share of Common Stock on the
date of grant. Any benefit to the grantees will be based on the spread between
the Fair Market Value on the exercise date and $25.2813. The Committee may grant
additional Options or other Awards under the 1998 Award Plan, subject to
shareholder approval of this plan. Since it is not possible to determine when
the Options will be exercised by the grantees, benefits, if any, under the 1998
Award Plan are not determinable.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 4.
SHAREHOLDER PROPOSALS
5. SHAREHOLDER PROPOSAL ON GERMAN OPERATIONS
The Board of Directors has been informed that Greenway Partners, L.P., 277
Park Avenue, New York, New York 10172, beneficial owner of 1,375,700 shares,
intends to present the following proposal for consideration and action at the
annual meeting:
"RESOLVED, shareholders hereby recommend that the Woolworth general
merchandise business in Germany be sold and the proceeds used for a stock
buyback."
THE SHAREHOLDER'S REASONS
"As one of the largest shareholders of Woolworth, we believe that the
company is on the right path. The Company's future lies in its power as a nimble
specialty retailer built around its core competence in action footwear and
apparel. We applaud the difficult decision it made to close its domestic general
merchandise business and believe the same should be done for Germany.
"We believe a buyer can and should be found for the German general
merchandise business, which has annual sales of approximately $1.5 billion from
some 400 stores. Adding to the value of its German operations, Woolworth either
owns the store sites or has rights equivalent to ownership. Woolworth might
consider structuring a transaction whereby it sells the German retail
operations, but retains ownership of the valuable real estate and thereby
collects ongoing rent. Despite the continuing economic problems in Germany, some
major retailers may be enticed into what is still the largest economy in Europe.
Wal-Mart stores announced it
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was entering the German retail market with its acquisition of a warehouse chain.
Also, Kingfisher, PLC, which purchased Woolworth's operations in the United
Kingdom, has expressed an interest in expanding in European markets.
"Woolworth's present operations in total are generating substantial cash
flow. We believe there is already enough available cash flow to reinstate a
dividend -- as we suggested at last year's annual meeting -- and/or to buyback
shares. Additional cash proceeds from the sale of the German operations would
create resources for an even larger stock buyback.
"In dealing with Germany, Woolworth management should evaluate their
experience with the U.S. general merchandise group. Although they made a gallant
effort to save the "five & dimes," their time had passed. We hope that
management will act quickly to find an attractive transaction for the German
general merchandise business, which may be a stronger asset in other
hands -- and move on.
"Eliminating the distraction of operating Woolworth Germany will provide
management more time to focus upon and build the real strengths of the Company.
With over 3,300 athletic group stores in North America, Europe, Asia and
Australia, the Company is the largest retailer of athletic footwear and apparel
in the United States and an emerging power globally. Along with the Northern
Group of specialty stores, this is where the profits have been and where
management should be especially focused. Changing fashions require retailers to
be nimble. When tastes change rapidly from "white" shoes to "brown" -- even if
only temporarily -- Foot Locker stores must be able to respond with the right
inventory mix.
"Consistent with the proxy rules, our proposal is couched as a
recommendation and its passage cannot compel action. However, a substantial
shareholder vote in favor should be regarded as a mandate to sell the German
operations and use the proceeds for a stock buyback. SEND THAT MESSAGE BY VOTING
'FOR' PROPOSAL 5."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 5.
The Board of Directors is unanimously opposed to this shareholder proposal
for the following reasons:
- The maximization of shareholder value is the central focus of the Board
of Directors and management. Since the commencement of the Company's turn-around
in 1995, the Board of Directors and management have made it clear that they
would, on an on-going basis, evaluate the Company's portfolio of businesses to
make certain that the Company is maximizing the use of its capital and its
return to shareholders. The work of one of the Company's four Senior Vice
Presidents is devoted entirely to evaluating and executing acquisition and
divestiture transactions. In the past three years, the Company has sold or
closed 19 businesses representing 1,200 stores, including the closing of
Woolworth U.S. in 1997. A specific shareholder proposal concerning one of the
Company's operations is not necessary to encourage the Board or management to
evaluate that operation's place in the Company's portfolio of businesses -- that
evaluation is an ongoing part of the way we run our business.
- Any decision to dispose of a business is best left to the Company's
Board of Directors and management. Such a decision must be evaluated in terms of
many factors -- the Company's long-term business and financial plan, the
short-and long-term prospects of the business, economic conditions in the
relevant country, management's ability to take actions in the near-term that
will increase the long-term value of the business, the existence of potential
purchasers, other uses the Company may have for the assets of the
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<PAGE> 37
business, and other projects requiring management's time and attention that may
be of a higher priority. Further, if the Board of Directors and management were
to determine that a disposition of Woolworth Germany were appropriate, a
shareholder proposal of this nature, if approved, has the potential to harm the
Company's ability to dispose of its German general merchandise operations by
encouraging potential purchasers to think that the Board and management are
under pressure from shareholders to sell the business, which would directly
lower the price offered. This could force the Company to abandon a sale or to
accept a price that is less than the maximum price that might otherwise be
achieved. The Board of Directors and management are best able to weigh these
considerations and arrive at a conclusion that is in the best interests of the
shareholders.
- As the Company has stated on many occasions, the Board of Directors
regularly considers avenues of returning value to shareholders -- whether in
considering business plans that are expected to increase the share price (such
as the Company's recently announced capital plan), re-instituting the dividend,
or buying back stock. The Company recently announced the reactivation of its
existing stock repurchase program with the intention of buying each year
approximately 1,000,000 shares of the Company's outstanding Common Stock to
cover shares needed for various employee benefit plans. A stock repurchase is an
issue regularly evaluated by the Board, and is a program that the
Company -- under the proper circumstances -- has the ability to undertake
regardless of having on hand proceeds from the sale of any one business.
FOR ALL OF THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
PROPOSAL 5.
6. SHAREHOLDER PROPOSAL ON RIGHTS PLAN
The Board of Directors has been informed that the Southern Regional Joint
Board of the Union of Needletrades, Industrial and Textile Employees, 2100 L
Street, N.W., Washington, D.C. 20037, beneficial owner of 58 shares, intends to
present the following proposal for consideration and action at the annual
meeting.
"Resolved: The shareholders of Woolworth Corporation ("Company") hereby
request that the Board of Directors allow the Preferred Share Purchase Rights to
expire on April 14, 1998 (the current expiration date), and agree not to reissue
or extend these rights, or create a new rights plan unless such action by the
Board is approved by the affirmative vote of a majority of the outstanding
shares at a meeting of shareholders held as soon as is practicable."
THE SHAREHOLDER'S REASONS
"In April of 1988, the Company's Board of Directors authorized the
distribution of preferred stock purchase rights ("right" or "rights"). These
rights are a type of corporate anti-takeover device commonly known as a poison
pill. The recent sluggish performance of Woolworth's most important profit
center, the athletic footwear operations, underscores the need to strengthen
accountability to shareholders at this time. We do not believe that our company
should renew or extend its management and board-entrenching poison pill purchase
rights without shareholder approval.
"Under the rights' terms, one-half of a preferred stock purchase right was
declared for each common share outstanding. Each right entitles shareholders to
purchase, under certain conditions, one one-hundredth
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<PAGE> 38
of a share of the Company's Series B Participating Preferred Stock at an
exercise price of $200. The rights generally will be exercisable only if a
person or group acquires or announces a tender offer for 20% or more of the
Company's outstanding voting stock.
"We believe the terms of the Series B Participating Preferred Stock
Purchase Rights are designed to discourage or thwart an unwanted takeover of our
Company. While management and the Board of Directors should have appropriate
tools to ensure that all shareholders benefit from any proposal to buy the
Company, we do not believe the future possibility of a takeover justifies the
unilateral implementation of such a poison-pill type device. We believe
shareholders should have the right to vote on the necessity of such a powerful
tool that could be used to entrench existing management.
"Rights plans like ours have become increasingly unpopular in recent years.
In 1997, a majority of shareholders at Bausch & Lomb, Wellman, Columbia/HCA
Healthcare and Fleming Companies, among others, voted in favor of proposals
asking management to redeem or repeal poison pills.
"The effects of poison pill rights plans on the trading value of companies'
stock have been researched extensively. A 1986 study by the U.S. Securities and
Exchange Commission's Office of the Chief Economist on the economics of rights
plans stated, 'the stock-returns evidence suggest that the effect of poison
pills to deter prospective hostile takeover bids outweighs the beneficial
effects that might come from increased bargaining leverage of the target
management.'
"In light of the debatable economic benefit of our preferred share rights
and the undeniably undemocratic way in which they were assigned to shareholders,
we believe these rights should lapse and not be extended, renewed or issued
again without a shareholder vote.
"We urge shareholders to vote FOR this resolution."
THE BOARD OF DIRECTORS' RECOMMENDATION
The Board of Directors recommends a vote AGAINST Proposal 6 because,
contrary to the proponent's assertions, (i) rights plans such as the Company's
Rights Agreement maximize shareholder value; (ii) the Rights Agreement protects
shareholders and the Company from abusive takeover tactics; and (iii) under New
York law the Company's Board of Directors has authority to adopt a rights plan
such as the Rights Agreement.
Independent studies show, in contrast to the proponent's assertion, that
plans such as the Rights Agreement preserve and maximize shareholder value. The
study relied upon by the proponent, done 12 years ago, is flawed in that, with
respect to rights plans that did not involve actual control contests, it focused
only on a two-day period following announcement of the adoption of such plans.
As opposed to the study relied on by the proponent, a more recent study has
concluded, with regard to takeovers that occurred between 1992 and 1996, that
(i) shareholder rights plans did not reduce the likelihood that a company would
be the target of a takeover, nor did it increase the likelihood of the
withdrawal or defeat of a takeover bid and (ii) premiums paid to acquire
companies with shareholder rights plans were greater than those paid to
companies not having plans.
The Rights Agreement is designed to ensure that, if there is a sale of the
Company, the Board of Directors will have the opportunity to effect a
transaction on the optimal terms. If the Board determines that
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<PAGE> 39
an unsolicited offer is fair, and on terms that reflect full value, and that are
otherwise in the best interests of the shareholders, the Board can redeem the
Rights issued to shareholders pursuant to the provisions of the Rights Agreement
(the "Rights") and permit the offer to proceed.
The Board of Directors adopted a Rights Agreement in 1988 that expired in
April 1998. On March 11, 1998, the Board of Directors, after giving careful
consideration to the arguments expressed in proponent's resolution, adopted a
new Rights Agreement, which expires in April 2008. In doing so, for the reasons
set forth above, the Board of Directors believes that it was acting in the best
interests of the Company's shareholders. A description of the Rights Agreement
and how it functions is contained on page F-24 of the Company's 1997 Annual
Report on Form 10-K. As stated above, the Board's purpose in adopting the Rights
Agreement was specifically designed to protect the Company and its shareholders
from potentially abusive takeover tactics. The Rights Agreement is not intended
to prevent or deter an offer to acquire the Company at a price and on terms that
would be in the best interests of all shareholders. Under New York corporate
law, the adoption of the Rights Agreement is clearly a matter within the
authority of the Board of Directors. The Board recognizes its obligation to
fulfill its fiduciary duties and exercise its business judgment in deciding
whether to redeem the Rights in the face of a specific offer.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 6.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
All proposals of shareholders which are the proper subject for inclusion in
the proxy statement that will be sent to shareholders in connection with the
1999 annual meeting must be received by the Secretary of the Company no later
than January 5, 1999. All such proposals should be addressed to: Secretary,
Woolworth Corporation, 233 Broadway, New York, New York 10279.
OTHER BUSINESS
The Board of Directors knows of no other business which will be presented
at the 1998 annual meeting. If other matters properly come before the meeting,
including matters which may have been proposed for inclusion in the Company's
proxy materials but were omitted pursuant to the rules of the SEC, the persons
named as proxies will vote on such matters in accordance with their best
judgment.
<TABLE>
<S> <C>
By Order of the Board of Directors
GARY M. BAHLER
Secretary
</TABLE>
April 28, 1998
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APPENDIX A
WOOLWORTH CORPORATION
1998 STOCK OPTION AND AWARD PLAN
1. PURPOSE.
The purpose of the Woolworth Corporation 1998 Stock Option and Award Plan
(the "Plan") is to align the interests of officers and other employees of
Woolworth Corporation and its subsidiaries (collectively, the "Company") with
those of the shareholders of Woolworth Corporation ("Woolworth"); to reinforce
corporate, organizational and business-development goals; to promote the
achievement of year-to-year and long-range financial and other business
objectives; and to reward the performance of individual officers and other
employees in fulfilling their personal responsibilities for long-range
achievements.
2. DEFINITIONS.
The following terms, as used herein, shall have the following meanings:
(a) "Award" shall mean any Option, Restricted Stock, SAR or Other
Stock-Based Award granted pursuant to the Plan.
(b) "Award Agreement" shall mean any written agreement, contract, or
other instrument or document between Woolworth and a Participant evidencing
an Award.
(c) "Board" shall mean the Board of Directors of Woolworth.
(d) "Cause" shall mean, with respect to a Participant's Termination of
Employment, (i) in the case where there is no employment agreement between
the Company and the Participant, or where there is an employment agreement,
but such agreement does not define cause (or words of like import),
termination due to a Participant's dishonesty, fraud, material
insubordination or refusal to perform for any reason other than illness or
incapacity or materially unsatisfactory performance of his or her duties
for the Company, or (ii) in the case where there is an employment agreement
between the Company and the Participant, termination that is or would be
deemed to be for cause (or words of like import) as defined under such
employment agreement.
(e) "Change in Control" shall mean the occurrence of an event
described in Section 9(f) hereof.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean a committee or subcommittee of the Board
appointed from time to time by the Board, which committee or subcommittee
shall be intended to consist of two (2) or more non-employee directors,
each of whom shall be a "non-employee director" as defined in Rule 16b-3
and an "outside director" as defined under Section 162(m) of the Code.
Notwithstanding the foregoing, if and to the extent that no Committee
exists which has the authority to administer the Plan, the functions of the
Committee shall be exercised by the Board. If for any reason the appointed
Committee does not meet the requirements of Rule 16b-3 or Section 162(m) of
the Code, such noncompliance with the
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requirements of Rule 16b-3 or Section 162(m) of the Code shall not affect
the validity of the awards, grants, interpretations or other actions of the
Committee.
(h) "Company" shall mean, collectively, Woolworth and all of its
subsidiaries now held or hereafter acquired.
(i) "Disability" shall mean a disability which would qualify as such
under Woolworth's Long-Term Disability Plan.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" of a share of Stock shall mean, as of any
date, the average of the high and low prices of a share of such Stock as
reported for such date on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if Stock was not traded on the New York Stock
Exchange on such date, the "Fair Market Value" of a share of Stock as of
such date shall be the average of the high and low prices of a share of
such Stock as reported on said Composite Tape on the next preceding date on
which such trades were reported on said Composite Tape.
(l) "Good Reason" shall mean, with respect to a Participant's
Termination of Employment, (1) in the case where there is no employment
agreement between the Company and the Participant, or where there is an
employment agreement, but such agreement does not define good reason (or
words of like import), a voluntary termination due to "good reason," as the
Committee, in its sole discretion, decides to treat as a Good Reason
termination; or (2) in the case where there is an employment agreement
between the Company and the Participant, a termination due to "good reason"
(or words of like import), as specifically provided in such employment
agreement.
(m) "Incentive Stock Option" shall mean an Option that meets the
requirements of Section 422 of the Code, or any successor provision, and
that is designated by the Committee as an Incentive Stock Option.
(n) "Nonqualified Stock Option" shall mean an Option other than an
Incentive Stock Option.
(o) "Other Stock-Based Award" shall mean an award, granted pursuant to
this Plan, that is valued in whole or in part by reference to, or is
payable in or otherwise based on Stock.
(p) "Option" shall mean the right, granted pursuant to this Plan, of a
holder to purchase shares of Stock under the Stock Option and SAR Program
at a price and upon the terms to be specified by the Committee.
(q) "Participant" shall mean an officer or other employee of the
Company who is, pursuant to Section 4 of the Plan, selected to participate
herein.
(r) "Plan" shall mean the Woolworth Corporation 1998 Stock Option and
Award Plan.
(s) "Plan Year" shall mean Woolworth's fiscal year.
(t) "Restricted Stock" shall mean any shares of Stock issued to a
Participant, without payment to the Company to the extent permitted by
applicable law, pursuant to Section 7(a) of the Plan.
(u) "Restriction Period" shall have the meaning set forth in Section
7(b)(4).
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(v) "Retirement" shall mean a Participant's Termination of Employment
without Cause from the Company who (i) has retired from the employ of the
Company and is entitled to a distribution from The Woolworth Retirement
Plan, any successor plan thereto or any other tax-qualified, tax-registered
or tax-favored retirement plan or scheme sponsored or maintained by any
member of the Company or, (ii) if a Participant is not covered by such
plan, has attained at least his or her 65th birthday.
(w) "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
(x) "Section 162(m) of the Code" shall mean the exception for
performance-based compensation under Section 162(m) of the Code and any
Treasury regulations thereunder.
(y) "Stock" shall mean shares of common stock, par value $.01 per
share, of Woolworth.
(z) "SAR" shall mean a tandem or freestanding stock appreciation
right, granted to a Participant under Section 6(a)(7) or 6(b), as the case
may be, to be paid an amount measured by the appreciation in the Fair
Market Value of Stock from the date of grant to the date of exercise of the
right.
(aa) "Stock Option and SAR Program" shall mean the program set forth
in Section 6 hereof.
(bb) "Ten Percent Shareholder" shall mean a Participant who, at the
time an Incentive Stock Option is to be granted to such Participant, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or a parent corporation or subsidiary corporation
within the meaning of Code Sections 424(e) or 424(f), respectively.
(cc) "Termination of Employment" shall mean (1) a termination of
service for reasons other than a military or personal leave of absence
granted by the Company or a transfer of a Participant from or among the
Company and a parent corporation or subsidiary corporation, as defined
under Code Sections 424(e) or 424(f), respectively; or (2) when a
subsidiary, which is employing a Participant, ceases to be a subsidiary
corporation, as defined under Section 424(f) of the Code.
(dd) "Transfer" or "Transferred" or "Transferable" shall mean
anticipate, alienate, attach, sell, assign, pledge, encumber, charge,
hypothecate or otherwise transfer.
(ee) "Woolworth" shall mean Woolworth Corporation, a New York
corporation.
3. ADMINISTRATION.
(a) The Committee. The Plan shall be administered and interpreted by the
Committee. The Committee shall have the authority in its sole discretion,
subject to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to
grant Awards; to determine the persons to whom and the time or times at which
Awards shall be granted; to determine the type and number of Awards to be
granted and the number of shares of Stock to which an Award may relate; to
determine the terms, conditions, restrictions and performance criteria, not
inconsistent with the terms of this Plan, relating to any Award (including, but
not limited to, the share price, any restriction or limitation, any vesting
schedule or acceleration thereof, or any forfeiture or waiver thereof,
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based on such factors, if any, as the Committee shall determine in its sole
discretion); to determine whether, to what extent and under what circumstances
grants of Awards are to operate on a tandem basis and/or in conjunction with or
apart from other awards made by the Company outside this Plan; to determine
whether, to what extent and under what circumstances an Award may be settled,
cancelled, forfeited, exchanged or surrendered (provided that in no event shall
the foregoing be construed to permit the repricing of an Option (whether by
amendment, cancellation and regrant or otherwise) to a lower exercise price); to
make adjustments in recognition of unusual or non-recurring events affecting the
Company or the financial statements of the Company, or in response to changes in
applicable laws, regulations, or accounting principles; to construe and
interpret the Plan and any Award; to determine whether to require, as a
condition of the granting of any Award, a Participant to not sell or otherwise
dispose of Stock acquired pursuant to the exercise of an Option or Award for a
period of time as determined by the Committee, in its sole discretion, following
the date of the acquisition of such Option or Award; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and
provisions of Award Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
Subject to Section 9(e) hereof, the Committee shall have the authority to
adopt, alter and repeal such administrative rules, guidelines and practices
governing this Plan and perform all acts, including the delegation of its
administrative responsibilities, as it shall, from time to time, deem advisable;
to construe and interpret the terms and provisions of this Plan and any Award
issued under this Plan (and any agreements relating thereto); and to otherwise
supervise the administration of this Plan. The Committee may correct any defect,
supply any omission or reconcile any inconsistency in this Plan or in any
agreement relating thereto in the manner and to the extent it shall deem
necessary to carry this Plan into effect but only to the extent any such action
would be permitted under the applicable provisions of both Rule 16b-3 and
Section 162(m) of the Code. The Committee may adopt special guidelines for
persons who are residing in, or subject to taxes of, countries other than the
United States to comply with applicable tax and securities laws.
The Committee may appoint a chairperson and a secretary and may make such
rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, the Participant (or any person claiming any rights under
the Plan from or through any Participant) and any shareholder.
The Company, the Board or the Committee may consult with legal counsel, who
may be counsel for the Company or other counsel, with respect to its obligations
or duties hereunder, or with respect to any action or proceeding or any question
of law, and shall not be liable with respect to any action taken or omitted by
it in good faith pursuant to the advice of such counsel.
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(b) Designation of Consultants/Liability.
The Committee may designate employees of the Company and professional
advisors to assist the Committee in the administration of this Plan and may
grant authority to employees to execute agreements or other documents on behalf
of the Committee.
The Committee may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of this Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
or Board in the engagement of any such counsel, consultant or agent shall be
paid by the Company. The Committee, its members and any person designated
pursuant to Section 3(b) shall not be liable for any action or determination
made in good faith with respect to this Plan. To the maximum extent permitted by
applicable law, no officer of the Company or member or former member of the
Committee shall be liable for any action or determination made in good faith
with respect to this Plan or any Award granted hereunder. To the maximum extent
permitted by applicable law and the Certificate of Incorporation and By-Laws of
the Company and to the extent not covered by insurance, each officer and member
or former member of the Committee or of the Board shall be indemnified and held
harmless by the Company against any cost or expense (including reasonable fees
of counsel reasonably acceptable to the Company) or liability (including any sum
paid in settlement of a claim with the approval of the Company), and advanced
amounts necessary to pay the foregoing at the earliest time and to the fullest
extent permitted, arising out of any act or omission to act in connection with
this Plan, except to the extent arising out of such officer's, member's or
former member's own fraud or bad faith. Such indemnification shall be in
addition to any rights of indemnification the officers, directors or members or
former officers, directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or Subsidiary.
Notwithstanding anything else herein, this indemnification will not apply to the
actions or determinations made by an individual with regard to Awards granted to
him or her under this Plan.
4. ELIGIBILITY.
Awards may be granted to officers and other employees of the Company in the
sole discretion of the Committee. In determining the persons to whom Awards
shall be granted and the type of Award, the Committee shall take into account
such factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan.
5. STOCK SUBJECT TO THE PLAN; LIMITATION ON GRANTS.
(a) The maximum number of shares of Stock reserved for issuance pursuant to
the Plan or with respect to which Awards may be granted shall be six million
(6,000,000) shares, subject to adjustment as provided herein, except that the
number of such shares reserved for issuance as Restricted Stock shall be one
million five hundred thousand (1,500,000) shares. Such shares may, in whole or
in part, be authorized but unissued shares or shares that shall have been or may
be reacquired by the Company in the open market, in private transactions or
otherwise. If any shares subject to an Award are forfeited, cancelled, exchanged
or surrendered, or if an Award otherwise terminates or expires without a
distribution of shares to the Participant, the shares of Stock with respect to
such Award shall, to the extent of any such forfeiture, cancellation, exchange,
surrender, termination or expiration, again be available for Awards under the
Plan; provided that, to the extent required
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for the Plan to comply with Rule 16b-3 promulgated under the Exchange Act, in
the case of forfeiture, cancellation, exchange or surrender of shares of
Restricted Stock, the number of shares with respect to such Awards shall not be
available for Awards hereunder unless dividends paid on such shares are also
forfeited, cancelled, exchanged or surrendered. Upon the exercise of any Award
granted in tandem with any other Awards, such related Awards shall be cancelled
to the extent of the number of shares of Stock as to which the Award is
exercised and, notwithstanding the foregoing, such number of shares shall no
longer be available for Awards under the Plan. Notwithstanding any provision of
this Plan to the contrary, if authorized but previously unissued shares of Stock
are issued under this Plan, such shares shall not be issued for a consideration
which is less than par value.
(b) During the term of this Plan, no Participant can receive Options,
Restricted Stock, Other Stock-Based Awards and freestanding SARs, relating to
shares of Stock which in the aggregate exceed ten percent (10%) of the total
number of shares of Stock authorized pursuant to the Plan, as adjusted pursuant
to the terms hereof.
(c) Subject to the aggregate limitation in Section 5(b), the maximum number
of shares of Stock subject to each different type of Award which may be granted
under this Plan to each Participant is six hundred thousand (600,000) shares
(subject to adjustment as provided herein) for each Plan Year during the entire
term of the Plan. To the extent that shares of Stock for which Options or Stock
Appreciation Rights are permitted to be granted to a Participant during a Plan
Year are not covered by a grant of an Option or a Stock Appreciation Right to an
Eligible Employee issued in such Plan Year, such shares of Stock shall
automatically increase the number of shares available for grant of Awards to
such Eligible Employee in the subsequent Plan Year during the term of the Plan.
(d) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the shareholders of
Woolworth to make or authorize any adjustment, recapitalization, reorganization
or other change in Woolworth's capital structure or its business, any merger or
consolidation of the Company or any part thereof, any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting Stock, the
dissolution or liquidation of the Company or any part thereof, any sale or
transfer of all or part of its assets or business or any other corporate act or
proceeding.
(e) In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Stock or other property),
recapitalization, Stock split, reverse Stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange,
reclassification of any capital stock, issuance of warrants or options to
purchase Stock or securities convertible into Stock, or other similar corporate
transaction or event, affects the Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of Participants under
the Plan, then the Committee shall make such equitable changes or adjustments as
it deems necessary or appropriate to any or all of (i) the number and kind of
shares of Stock which may thereafter be issued in connection with Awards, (ii)
the number and kind of shares of Stock issued or issuable in respect of
outstanding Awards, and (iii) the exercise price, grant price or purchase price
relating to any Award; provided that, with respect to Incentive Stock Options,
such adjustment shall be made in accordance with Section 424 of the Code.
(f) Fractional shares of Stock resulting from any adjustment in Options and
other Awards pursuant to this Section shall be aggregated until, and eliminated
at, the time of exercise by rounding-down for fractions
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less than one-half ( 1/2) and rounding-up for fractions equal to or greater than
one-half ( 1/2). No cash settlements shall be made with respect to fractional
shares of Stock eliminated by rounding. Notice of any adjustment shall be given
by the Committee to each Participant whose Option or other Award has been
adjusted and such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of the Plan.
(g) In the event of a merger or consolidation in which Woolworth is not the
surviving entity or in the event of any transaction that results in the
acquisition of substantially all of Woolworth's outstanding Stock by a single
person or entity or by a group of persons and/or entities acting in concert, or
in the event of the sale or transfer of all of Woolworth's assets (all of the
foregoing being referred to as "Acquisition Events"), then the Committee may, in
its sole discretion, terminate all outstanding Options and/or any Award,
effective as of the date of the Acquisition Event, by delivering notice of
termination to each Participant at least twenty (20) days prior to the date of
consummation of the Acquisition Event; provided, that during the period from the
date on which such notice of termination is delivered to the consummation of the
Acquisition Event, each Participant shall have the right to exercise in full all
of his or her Options and Awards that are then outstanding (without regard to
any limitations on exercisability otherwise contained in the Option or Award
Agreements) but contingent on occurrence of the Acquisition Event, and, provided
that, if the Acquisition Event does not take place within a specified period
after giving such notice for any reason whatsoever, the notice and exercise
shall be null and void.
6. STOCK OPTION AND SAR PROGRAM.
Each Option or freestanding SAR granted pursuant to this Section 6 shall be
evidenced by an Award Agreement, in such form and containing such terms and
conditions as the Committee shall from time to time approve, which Award
Agreement shall comply with and be subject to the following terms and
conditions, as applicable:
(a) Stock Options
(1) Number of Shares. Each Award Agreement shall state the number of
shares of Stock to which the Option relates.
(2) Type of Option. Each Award Agreement shall specifically state that the
Option constitutes an Incentive Stock Option or a Nonqualified Stock Option. To
the extent that any Option does not qualify as an Incentive Stock Option
(whether because of its provisions or the time or manner of exercise or
otherwise), such Option or portion thereof which does not qualify, shall
constitute a separate Nonqualified Stock Option.
(3) Option Price. Except as set forth in Section 6(a)(8)(B) herein
relating to Incentive Stock Options granted to a Ten Percent Shareholder, each
Award Agreement shall state the Option price, which shall not be less than one
hundred percent (100%) of the Fair Market Value of the shares of Stock covered
by the Option on the date of grant. The Option price shall be subject to
adjustment as provided in Section 5 hereof. The date as of which the Committee
adopts a resolution expressly granting an Option shall be considered the day on
which such Option is granted.
(4) Method and Time of Payment. The Option price shall be paid in full, at
the time of exercise, in cash or in shares of Stock having a Fair Market Value
equal to such Option price or in a combination of cash
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and Stock or, in the sole discretion of the Committee, through a cashless
exercise procedure. Options may contain provisions permitting the use of shares
of Stock to exercise and settle an Option ("Stock Swaps"). With respect to Stock
Swaps, shares of Stock shall be valued at Fair Market Value on the date of
exercise and shall have the same remaining time period as the shares of Stock
that were swapped.
(5) Term and Exercisability of Options. Each Award Agreement shall provide
that each Option shall become exercisable as to fifty percent (50%) of the Stock
covered by the Option on the first anniversary of the date the Option was
granted and as to an additional fifty percent (50%) of the Stock covered by the
Option on the second anniversary of the date the Option was granted, unless the
Committee prescribes an exercise schedule of longer duration; provided, that,
the Committee shall have the authority to accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it, in its sole
discretion, deems appropriate. The exercise period shall be ten (10) years from
the date of the grant of the Option or such shorter period as is determined by
the Committee. The exercise period shall be subject to earlier termination as
provided in Section 6(a)(6) hereof. An Option may be exercised, as to any or all
full shares of Stock as to which the Option has become exercisable, by written
notice delivered in person or by mail to the Secretary of Woolworth, specifying
the number of shares of Stock with respect to which the Option is being
exercised. For purposes of the preceding sentence, the date of exercise will be
deemed to be the date upon which the Secretary of Woolworth receives such
notification.
(6) Termination. Upon a Participant's Termination of Employment by the
Company, Options granted to such Participant prior to such termination shall
remain exercisable following the effective date of such termination as follows:
(i) Cause. If a Participant's Termination of Employment is for Cause,
all Options granted to such Participant shall be cancelled as of the
effective date of such termination.
(ii) Retirement, Termination of Employment for Good Reason or
Disability. Upon a Participant's Retirement, Termination of Employment for
Good Reason or Disability, all Options granted to such Participant that are
"deemed exercisable" (as defined in the following sentence) on the
effective date of such Participant's Retirement, Termination of Employment
for Good Reason or Disability shall remain exercisable for a period of
three (3) years following such effective date (or for such longer period as
may be prescribed by the Committee, but in no event beyond the expiration
date of such Option). Those Options that are "deemed exercisable" on and
after the effective date of a Participant's Retirement, Termination of
Employment for Good Reason or Disability, as provided above, shall consist
of all unexercised Options (or portions thereof) that are immediately
exercisable on such date plus those Options (or portions thereof) that
would have become exercisable had such Participant not retired or had his
employment not terminated until after the next succeeding anniversary of
the date of grant of each such Option;
(iii) Other Terminations of Employment. If a Participant's
Termination of Employment by the Company is for any reason other than those
described in subsections (i) or (ii) above, his "deemed exercisable"
Options, which, for purposes of this subsection, shall mean all Options (or
portions thereof) granted to such Participant that are immediately
exercisable on the effective date of such Termination of Employment shall
remain exercisable as follows: (A) if such Participant has ten (10) or more
years of service with the Company, such period of service to be determined
as of such effective date of
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termination, for a period of one year from the effective date of such
Termination of Employment (or for such longer period as may be prescribed
by the Committee, but in no event beyond the expiration date of such
Option), or (B) if a Participant has less than ten (10) years of service
with the Company, for a period of three (3) months from the effective date
of such Termination of Employment (or for such longer period as may be
prescribed by the Committee, but in no event beyond the expiration date of
such Option).
(iv) Death.
(A) If a Participant dies during the applicable Option exercise
period following the effective date of his Retirement, Disability or
other Termination of Employment, as described in subsections (ii) or
(iii) above, his executors, administrators, legatees or distributees
shall have a period expiring on the date one year from the date of his
death (or for such longer period as may be prescribed by the Committee,
but in no event beyond the expiration date of such Option) within which
to exercise his "deemed exercisable" Options, as described in such
applicable subsection.
(B) If a Participant dies while employed by the Company, his
executors, administrators, legatees or distributees shall have a period
expiring on the date one year from the date of his death (or for such
longer period as may be prescribed by the Committee, but in no event
beyond the expiration date of such Option) within which to exercise his
"deemed exercisable" Options, which shall consist of all unexercised
Options (or portions thereof) that are immediately exercisable on such
date of death plus those Options (or portions thereof) that would have
become exercisable had such Participant not died until after the next
succeeding anniversary of the date of grant of each such Option.
(v) Buyout and Settlement Provisions. The Committee may at any time
on behalf of the Company offer to buy out an Option previously granted,
based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
(7) Tandem Stock Appreciation Rights. The Committee shall have authority
to grant a tandem SAR to the grantee of any Option under the Plan with respect
to all or some of the shares of Stock covered by such related Option. A tandem
SAR shall, except as provided in this paragraph (7), be subject to the same
terms and conditions as the related Option. Each tandem SAR granted pursuant to
the Plan shall be reflected in the Award Agreement relating to the related
Option.
(A) Time of Grant. A tandem SAR may be granted either at the time of
grant, or at any time thereafter during the term of the Option; provided,
however that tandem SARs related to Incentive Stock Options may only be
granted at the time of grant of the related Option.
(B) Payment. A tandem SAR shall entitle the holder thereof, upon
exercise of the tandem SAR or any portion thereof, to receive payment of an
amount computed pursuant to paragraph (D) below.
(C) Exercise. A tandem SAR shall be exercisable at such time or times
and only to the extent that the related Option is exercisable, and will not
be Transferable except to the extent the related Option may be
Transferable. A tandem SAR granted in connection with an Incentive Stock
Option shall be exercisable only if the Fair Market Value of a share of
Stock on the date of exercise exceeds the purchase price specified in the
related Incentive Stock Option. Upon the exercise of a tandem SAR, the
related
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Option or part thereof to which such SAR relates, shall be deemed to have
been exercised for the purpose of the limitations set forth in Section (a)
of the Plan on the number of shares of Stock to be issued under the Plan.
(D) Amount Payable. Upon the exercise of a tandem SAR, the
Participant shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a share of Stock on
the date of exercise of such SAR over the price of the Option, by (ii) the
number of shares of Stock as to which such tandem SAR is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the
amount payable with respect to any tandem SAR by including such a limit at
the time it is granted.
(E) Treatment of Related Options and Tandem SARs Upon Exercise. Upon
the exercise of a tandem SAR, the related Option shall be cancelled to the
extent of the number of shares of Stock as to which the tandem SAR is
exercised and upon the exercise of an Option granted in connection with a
tandem SAR, the tandem SAR shall be cancelled to the extent of the number
of shares of Stock as to which the Option is exercised.
(F) Method of Exercise. Tandem SARs shall be exercised by a
Participant only by a written notice delivered in person or by mail to the
Secretary of Woolworth, specifying the number of shares of Stock with
respect to which the tandem SAR is being exercised. If requested by the
Committee, the Participant shall deliver the Award Agreement evidencing the
tandem SAR and the related Option to the Secretary of Woolworth, who shall
endorse thereon a notation of such exercise and return such Award Agreement
to the Participant. For purposes of this paragraph (F), the date of
exercise will be deemed to be the date upon which the Secretary of
Woolworth receives such notification.
(G) Form of Payment. Payment of the amount determined under paragraph
(D) above may be made solely in whole shares of Stock in a number
determined based upon their Fair Market Value on the date of exercise of
the tandem SAR or, alternatively, at the sole discretion of the Committee,
solely in cash, or in a combination of cash and shares of Stock as the
Committee deems advisable.
(H) Limited SARs. The Committee may, in its sole discretion, grant
tandem SARs or freestanding SARs either as general SARs or as limited SARs.
Limited SARs may be exercised only upon the occurrence of a Change in
Control or such other event as the Committee may, in its sole discretion,
designate at the time of grant or thereafter.
(8) Incentive Stock Options. Options granted as Incentive Stock Options
shall be subject to the following special terms and conditions, in addition to
the general terms and conditions specified in this Section 6.
(A) Value of Shares. The aggregate Fair Market Value (determined as
of the date the Incentive Stock Option is granted) of the shares of Stock
with respect to which Incentive Stock Options granted under this Plan and
all other Plans of the Company become exercisable for the first time by
each Participant during any calendar year shall not exceed one hundred
thousand dollars ($100,000). To the extent that such aggregate Fair Market
Value exceeds such one hundred thousand dollars ($100,000) limitation, such
Options shall be treated as Options which are not Incentive Stock Options
and shall be treated as Nonqualified Stock Options.
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(B) Ten Percent Shareholder. In the case of an Incentive Stock Option
granted to a Ten Percent Shareholder, (x) the Option Price shall not be
less than one hundred ten percent (110%) of the Fair Market Value of the
shares of Stock on the date of grant of such Incentive Stock Option, and
(y) the exercise period shall not exceed five (5) years from the date of
grant of such Incentive Stock Option.
(C) Exercise Following Termination of Employment. If an Eligible
Employee does not remain employed by the Company, any parent corporation or
subsidiary corporation (within the meaning of Code Sections 424(e) and
424(f), respectively) at all times from the time the Option is granted
until three (3) months prior to the date of exercise (or such other period
as required by applicable law), such Option shall be treated as a
Nonqualified Stock Option.
(D) Should either (A), (B) or (C) above not be necessary in order for
the Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Committee may amend the Plan accordingly,
without the necessity of obtaining the approval of the shareholders of
Woolworth.
(b) Freestanding Stock Appreciation Rights. The Committee shall have
authority to grant a freestanding SAR which is not related to any Option.
Freestanding SARs shall be subject to the following terms and conditions:
(1) Number of Shares. Each Award Agreement relating to freestanding
SARs shall state the number of shares of Stock to which the freestanding
SARs relate.
(2) Exercise Price. Each Award Agreement shall state the exercise
price, which shall not be less than one hundred percent (100%) of the Fair
Market Value of the shares of Stock (to which the freestanding SARs relate)
on the date of grant. The exercise price shall be subject to adjustment as
provided in Section 5 hereof.
(3) Term and Exercisability of Freestanding SARs. Each Award
Agreement shall provide the exercise schedule for the freestanding SAR as
determined by the Committee, provided, that, the Committee shall have the
authority to accelerate the exercisability of any freestanding SAR at such
time and under such circumstances as it, in its sole discretion, deems
appropriate. The exercise period shall be ten (10) years from the date of
the grant of the freestanding SAR or such shorter period as is determined
by the Committee. The exercise period shall be subject to earlier
termination as provided in paragraph (b)(7) hereof. A freestanding SAR may
be exercised, as to any or all full shares of Stock as to which the
freestanding SAR has become exercisable, by written notice delivered in
person or by mail to the Secretary of Woolworth, specifying the number of
shares of Stock with respect to which the freestanding SAR is being
exercised. For purposes of the preceding sentence, the date of exercise
will be deemed to be the date upon which the Secretary of Woolworth
receives such notification.
(4) Payment. A freestanding SAR shall entitle the holder thereof,
upon exercise of the freestanding SAR or any portion thereof, to receive
payment of an amount computed pursuant to paragraph (5) below.
(5) Amount Payable. Upon the exercise of a freestanding SAR, the
Participant shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a share of Stock on
the date of exercise of such SAR over the exercise price of such SAR, by
(ii) the number of shares of Stock as to which such freestanding SAR is
being exercised. Notwithstanding the foregoing, the
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Committee may limit in any manner the amount payable with respect to any
freestanding SAR by including such a limit at the time it is granted.
(6) Form of Payment. Payment of the amount determined under paragraph
(5) above may be made solely in whole shares of Stock in a number
determined based upon their Fair Market Value on the date of exercise of
the freestanding SAR or, alternatively, at the sole discretion of the
Committee, solely in cash, or in a combination of cash and shares of Stock
as the Committee deems advisable.
(7) The terms and conditions set forth in Section 6(a)(6) hereof,
relating to exercisability of Options in the event of Termination of
Employment with the Company, shall apply equally with respect to the
exercisability of freestanding SARs following Termination of Employment.
7. RESTRICTED STOCK.
Awards granted pursuant to this Section 7 shall be evidenced by an Award
Agreement in such form as the Committee shall from time to time approve and the
terms and conditions of such Awards shall be set forth therein. Shares of
Restricted Stock may be issued either alone or in addition to other Awards
granted under the Plan.
(a) Restricted Stock. The Committee shall determine the eligible
persons to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares to be awarded, the price (if any) to be
paid by the recipient, the time or times within which such Awards may be
subject to forfeiture, the vesting schedule and rights to acceleration
thereof, and all other terms and conditions of the Awards. The Committee
may condition the grant of Restricted Stock upon the attainment of
specified performance goals or such other factors as the Committee may
determine, in its sole discretion.
(b) Awards and Certificates. The prospective Participant selected to
receive Restricted Stock shall not have any rights with respect to such
Award, unless and until such Participant has delivered a fully executed
copy of the Award Agreement to the Company and has otherwise complied with
the applicable terms and conditions of such Award. Further, such Award
shall be subject to the following conditions:
(1) Purchase Price. Subject to the last sentence of Section 5(a),
the purchase price for shares of Restricted Stock may be less than their
par value and may be zero, to the extent permitted by applicable law.
(2) Acceptance. Awards of Restricted Stock must be accepted within
a period of sixty (60) days (or such shorter period as the Committee may
specify at grant) after the Award date, by executing a Restricted Stock
Award Agreement and by paying whatever price (if any) the Committee has
designated thereunder.
(3) Certificates/Legend. Upon an Award of Restricted Stock, the
Committee may, in its sole discretion, decide to either have the Company
or other escrow agent appointed by the Committee hold the share
certificates representing such shares of Restricted Stock in escrow or
issue share certificates to the Participant. Regardless of whether the
certificates are held in escrow or are given to Participants, each
certificate shall be registered in the name of such Participant, and
shall bear an
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appropriate legend referring to the terms, conditions and restrictions
applicable to such Award, substantially in the following form:
"The anticipation, alienation, attachment, sale, transfer,
assignment, pledge, encumbrance or charge of the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Woolworth Corporation (the "Company") 1998 Stock
Option and Award Plan and an Agreement entered into between the
registered owner and the Company dated . Copies of such
Plan and Agreement are on file at the principal office of the
Company."
(4) Restrictions. During a period set by the Committee commencing
with the date of an Award of Restricted Stock (the "Restriction
Period"), shares of Restricted Stock may not be sold, assigned,
Transferred, pledged, hypothecated or otherwise disposed of, except by
will or the laws of descent and distribution, as set forth in the Award
Agreement and such Award Agreement shall set forth a vesting schedule
and any events which would accelerate vesting of the shares of
Restricted Stock. Any attempt to dispose of any such shares of Stock in
contravention of such restrictions shall be null and void and without
effect. Notwithstanding the foregoing, no vesting limitation shall
apply, and the Participant's interest in such shares shall be fully
vested, in the event of a Change in Control which occurs prior to the
expiration of the vesting period set forth in the Award Agreement.
Within these limits, based on service, performance and/or such other
factors or criteria as the Committee may determine in its sole
discretion, the Committee may provide for the lapse of such restrictions
in installments in whole or in part, or may accelerate the vesting of
all or any part of any Restricted Stock Award and/or waive the deferral
limitations for all or any part of such Award (including, without
limitation, any deferral of dividends).
(5) Forfeiture. Subject to such exceptions as may be determined by
the Committee, if the Participant's continuous employment with the
Company shall terminate for any reason prior to the expiration of the
Restriction Period of an Award, or to the extent any goals for the
Restriction Period are not met, any shares of Stock remaining subject to
restrictions shall thereupon be forfeited by the Participant and
Transferred to, and reacquired by, Woolworth at no cost to Woolworth.
(6) Ownership. Except to the extent otherwise set forth in the
Award Agreement, during the Restriction Period the Participant shall
possess all incidents of ownership of such shares, subject to Section
7(b)(4), including the right to receive dividends with respect to such
shares and to vote such shares. The Committee, in its sole discretion,
as determined at the time of the Award, may permit or require the
payment of dividends to be deferred.
(7) Lapse of Restrictions. If and when the Restriction Period
expires without a prior forfeiture of the Restricted Stock subject to
such Restriction Period, the certificates for such shares shall be
delivered to the Participant. All legends shall be removed from said
certificates at the time of delivery to the Participant.
8. OTHER STOCK-BASED AWARDS.
(a) Other Awards. Other Awards of Stock and other Awards that are valued
in whole or in part by reference to, or are payable in or otherwise based on,
Stock ("Other Stock-Based Awards"), including,
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without limitation, Awards valued by reference to performance of a subsidiary,
may be granted either alone or in addition to or in tandem with Stock Options,
SARs or Restricted Stock.
Subject to the provisions of the Plan, the Committee shall have authority
to determine the persons to whom and the time or times at which such Awards
shall be made, the number of shares of Stock to be awarded pursuant to such
Awards, and all other conditions of the Awards. The Committee may also provide
for the grant of Stock under such Awards upon the completion of a specified
performance goal or period.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to this
Section 8 shall be subject to the following terms and conditions:
(1) Dividends. Unless otherwise determined by the Committee at the
time of Award, subject to the provisions of the Award Agreement and this
Plan, the recipient of an Award under this Section shall be entitled to
receive, currently or on a deferred basis, dividends or dividend
equivalents with respect to the number of shares of Stock covered by the
Award, as determined at the time of the Award by the Committee, in its sole
discretion.
(2) Vesting. Any Award under this Section and any Stock covered by
any such Award shall vest or be forfeited to the extent so provided in the
Award Agreement, as determined by the Committee, in its sole discretion.
(3) Waiver of Limitation. In the event of the Participant's
Retirement, Termination of Employment for Good Reason, Disability or death,
or in cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the limitations imposed
hereunder (if any) with respect to any or all of an Award under this
Section 8.
(4) Price. Stock issued on a bonus basis under this Section 8 may be
issued for no cash consideration; Stock purchased pursuant to a purchase
right awarded under this Section shall be priced as determined by the
Committee.
9. GENERAL PROVISIONS.
(a) Compliance with Legal Requirements. The Plan and the granting and
exercising of Awards, and the other obligations of the Company under the Plan
and any Award Agreement or other agreement shall be subject to all applicable
federal and state laws, rules and regulations, and to such approvals by any
regulatory or governmental agency as may be required. The Company, in its
discretion, may postpone the issuance or delivery of Stock under any Award as
the Company may consider appropriate, and may require any Participant to make
such representations and furnish such information as it may consider appropriate
in connection with the issuance or delivery of Stock in compliance with
applicable laws, rules and regulations.
(b) Nontransferability. No Award shall be Transferred by the Participant
otherwise than by will or by the laws of descent and distribution. All Awards
shall be exercisable, during the Participant's lifetime, only by the
Participant. No Award shall, except as otherwise specifically provided by law or
herein, be Transferred in any manner, and any attempt to Transfer any such Award
shall be void, and no such Award shall in any manner be used for the payment of,
subject to, or otherwise encumbered by or hypothecated for the debts, contracts,
liabilities, engagements or torts of any person who shall be entitled to such
Award, nor shall it be subject to attachment or legal process for or against
such person. Notwithstanding the foregoing, the
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Committee may determine at the time of grant or thereafter, that an Award, other
than an Incentive Stock Option, that is otherwise not Transferable pursuant to
this Section 9(b) is Transferable in whole or part and in such circumstances,
and under such conditions, as specified by the Committee.
(c) No Right To Continued Employment. Nothing in the Plan or in any Award
granted or any Award Agreement or other agreement entered into pursuant hereto
shall confer upon any Participant the right to continue in the employ of the
Company or to be entitled to any remuneration or benefits not set forth in the
Plan or such Award Agreement or other agreement or to interfere with or limit in
any way the right of the Company to terminate such Participant's employment.
(d) Withholding Taxes. Where a Participant or other person is entitled to
receive shares of Stock pursuant to the exercise of an Option or is otherwise
entitled to receive shares of Stock or cash pursuant to an Award hereunder, the
Company shall have the right to require the Participant or such other person to
pay to the Company the amount of any taxes which the Company may be required to
withhold before delivery to such Participant or other person of cash or a
certificate or certificates representing such shares.
Upon the disposition of shares of Stock acquired pursuant to the exercise
of an Incentive Stock Option, the Company shall have the right to require the
payment of the amount of any taxes which are required by law to be withheld with
respect to such disposition.
Unless otherwise prohibited by the Committee or by applicable law, a
Participant may satisfy any such withholding tax obligation by any of the
following methods, or by a combination of such methods: (a) tendering a cash
payment; (b) authorizing the Company to withhold from the shares of Stock or
cash otherwise payable to such Participant (1) one or more of such shares having
an aggregate Fair Market Value, determined as of the date the withholding tax
obligation arises, less than or equal to the amount of the total withholding tax
obligation or (2) cash in an amount less than or equal to the amount of the
total withholding tax obligation; or (c) delivering to the Company previously
acquired shares of Stock (none of which shares may be subject to any claim,
lien, security interest, community property right or other right of spouses or
present or former family members, pledge, option, voting agreement or other
restriction or encumbrance of any nature whatsoever) having an aggregate Fair
Market Value, determined as of the date the withholding tax obligation arises,
less than or equal to the amount of the total withholding tax obligation. A
Participant's election to pay his or her withholding tax obligation (in whole or
in part) by the method described in (b)(1) above is irrevocable once it is made.
(e) Amendment and Termination of the Plan. Notwithstanding any other
provision of this Plan, the Board or the Committee may at any time and from time
to time alter, amend, suspend, or terminate the Plan in whole or in part;
provided that, no amendment which requires shareholder approval under applicable
New York law or in order for the Plan to continue to comply with Rule 16b-3 or
Section 162(m) of the Code shall be effective unless the same shall be approved
by the requisite vote of the shareholders of the Company. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of any
Participant, without such Participant's consent, under any Award theretofore
granted under the Plan. The power to grant Options under the Plan will
automatically terminate ten years after the adoption of the Plan by the
shareholders. If the Plan is terminated, any unexercised Option shall continue
to be exercisable in accordance with its terms and the terms of the Plan in
effect immediately prior to such termination.
A-15
<PAGE> 55
(f) Change in Control. Notwithstanding any other provision of the Plan to
the contrary, if, while any Awards remain outstanding under the Plan, a "Change
in Control" of Woolworth (as defined in this Section 9(f)) shall occur, (1) all
Options and freestanding SARs granted under the Plan that are outstanding at the
time of such Change in Control shall become immediately exercisable in full,
without regard to the years that have elapsed from the date of grant; (2) unless
the Committee determines otherwise at the time of grant pursuant to an Award
Agreement or other arrangement or plan granting such Award, all restrictions
with respect to shares of Restricted Stock shall lapse, and such shares shall be
fully vested and nonforfeitable; and (3) unless the Committee determines
otherwise at the time of grant pursuant to an Award Agreement or other
arrangement or plan granting such Award, with respect to Other Stock-Based
Awards, any performance periods or goals outstanding at the time of a Change in
Control shall be deemed to have been attained or any restrictions outstanding at
the time of a Change in Control shall lapse.
For purposes of this paragraph 9(f), a Change in Control of Woolworth shall
occur upon the happening of the earliest to occur of the following:
(i) (A) the making of a tender or exchange offer by any person or
entity or group of associated persons or entities (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") (other than
Woolworth or its subsidiaries) for shares of Stock pursuant to which
purchases are made of securities representing at least twenty percent (20%)
of the total combined voting power of Woolworth's then issued and
outstanding voting securities; (B) the merger or consolidation of Woolworth
with, or the sale or disposition of all or substantially all of the assets
of Woolworth to, any Person other than (a) a merger or consolidation which
would result in the voting securities of Woolworth outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving or parent
entity) fifty percent (50%) or more of the combined voting power of the
voting securities of Woolworth or such surviving or parent entity
outstanding immediately after such merger or consolidation; or (b) a merger
or capitalization effected to implement a recapitalization of Woolworth (or
similar transaction) in which no Person is or becomes the beneficial owner,
directly or indirectly (as determined under Rule 13d-3 promulgated under
the Exchange Act), of securities representing more than the amounts set
forth in (C) below; (C) the acquisition of direct or indirect beneficial
ownership (as determined under Rule 13d-3 promulgated under the Exchange
Act), in the aggregate, of securities of Woolworth representing twenty
percent (20%) or more of the total combined voting power of Woolworth's
then issued and outstanding voting securities by any Person acting in
concert as of the date of the Plan; provided, however, that the Board may
at any time and from time to time and in the sole discretion of the Board,
as the case may be, increase the voting security ownership percentage
threshold of this item (C) to an amount not exceeding forty percent (40%);
or (D) the approval by the shareholders of Woolworth of any plan or
proposal for the complete liquidation or dissolution of Woolworth or for
the sale of all or substantially all of the assets of Woolworth; or (ii)
during any period of not more than two (2) consecutive years, individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered into
agreement with the Company to effect a transaction described in clause (i))
whose election by the Board or nomination for election by Woolworth's
shareholders was approved by a vote of at least two-thirds ( 2/3) of the
directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously
so approved, cease for any reason to constitute at least a majority
thereof.
A-16
<PAGE> 56
(g) Participant Rights. No Participant shall have any claim to be granted
any Award under the Plan, and there is no obligation for uniformity of treatment
for Participants. Except as provided specifically herein, a Participant or a
transferee of an Award shall have no rights as a shareholder with respect to any
shares covered by any Award until the date of the issuance of a Stock
certificate to him for such shares.
(h) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
(i) No Fractional Shares. Except with respect to fractional shares
resulting from any adjustment in Awards pursuant to Section 5, no fractional
shares of Stock shall be issued or delivered pursuant to the Plan or any Award.
(j) Legend. The Committee may require each person purchasing shares
pursuant to a Stock Option or other Award under the Plan to represent to and
agree with the Company in writing that the Participant is acquiring the shares
without a view to distribution thereof. In addition to any legend required by
this Plan, the certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on Transfer.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed or any national securities association system upon whose system the
Stock is then quoted, any applicable Federal or state securities law, and any
applicable corporate law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such restrictions.
(k) Other Plans. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
(l) Listing and Other Conditions.
(1) As long as the Stock is listed on a national securities exchange
or system sponsored by a national securities association, the issue of any
shares of Stock pursuant to an Option or other Award shall be conditioned
upon such shares being listed on such exchange or system. The Company shall
have no obligation to issue such shares unless and until such shares are so
listed, and the right to exercise any Option or other Award with respect to
such shares shall be suspended until such listing has been effected.
(2) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Stock pursuant to an Option or other
Award is or may in the circumstances be unlawful or result in the
imposition of excise taxes under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain
any qualification or registration under the Securities Act of 1933, as
amended, or otherwise with respect to shares of Stock or Awards, and the
right to exercise any Option or other Award shall be suspended until, in
the opinion of said counsel, such sale or delivery shall be lawful or will
not result in the imposition of excise taxes.
A-17
<PAGE> 57
(3) Upon termination of any period of suspension under this Section,
any Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such
suspension and as to shares which would otherwise have become available
during the period of such suspension, but no such suspension shall extend
the term of any Option.
(m) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of New York without
giving effect to the conflict of laws principles thereof.
(n) Effective Date. The Plan shall take effect upon its adoption by the
Board, but the Plan (and any grants of Awards made prior to the shareholder
approval mentioned herein) shall be subject to the requisite approval of the
shareholders of the Company. In the absence of such approval, such Awards shall
be null and void.
(o) Death/Beneficiary. The Committee may in its sole discretion require
the transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the Transfer of an Option. The
Committee may also require that the agreement of the transferee to be bound by
all of the terms and conditions of the Plan. A Participant may file with the
Committee a written designation of a beneficiary on such form as may be
prescribed by the Committee and may, from time to time, amend or revoke such
designation. If no designated beneficiary survives the Participant, the executor
or administrator of the Participant's estate shall be deemed to be the grantee's
beneficiary.
(p) Interpretation. The Plan is designed and intended to comply with Rule
16b-3 promulgated under the Exchange Act and, to the extent applicable, with
Section 162(m) of the Code, and all provisions hereof shall be construed in a
manner to so comply.
(q) Severability of Provisions. If any provision of the Plan shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions hereof, and the Plan shall be construed and enforced as if
such provisions had not been included.
(r) Headings and Captions. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.
A-18
<PAGE> 58
PROXY
WOOLWORTH CORPORATION
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR
THE ANNUAL MEETING TO BE HELD ON JUNE 11, 1998.
Gary M. Bahler, Dale W. Hilpert, Reid Johnson, or any of them, each with power
of substitution, are hereby authorized to vote the shares of the undersigned at
the Annual Meeting of Shareholders of Woolworth Corporation, to be held on June
11, 1998, at 8:30 A.M., local time, at the Arsenal Mall, 485 Arsenal Street,
Watertown, Massachusetts 02172, and at any adjournment thereof, upon the
matters set forth in the Proxy Statement dated April 28, 1998 and upon such
other matters as may properly come before the Annual Meeting, voting as
specified on the reverse side of this card with respect to the matters set
forth in the Proxy Statement, and voting in the discretion of the above-named
persons on such other matters as may properly come before the Annual Meeting,
including matters which may have been proposed for inclusion in the Company's
proxy materials but were omitted pursuant to the rules of the Securities and
Exchange Commission.
Proposal 1 -- Election of Directors.
Nominee for Term Expiring at the Annual Meeting in 2000: Allan Z. Loren
Nominees for Terms Expiring at the Annual Meeting in 2001: Roger N. Farah,
James E. Preston and Christopher A. Sinclair.
PLEASE COMPLETE, DATE AND SIGN THE REVERSE SIDE OF THIS PROXY CARD AND PROMPTLY
RETURN IT IN THE ENCLOSED ENVELOPE.
YOU MAY SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE REVERSE
SIDE, BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE WITH THE
BOARD OF DIRECTORS' RECOMMENDATIONS. THE PERSONS NAMED ABOVE AS PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE
<PAGE> 59
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE. 1541
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,
2, 3 AND 4, AND AGAINST PROPOSALS 5 AND 6.
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE "FOR"
- --------------------------------------------------------------------------------
FOR WITHHELD
1. ELECTION OF DIRECTORS (see reverse side). [ ] [ ]
FOR, except vote withheld from the following nominee(s):
-----------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. APPROVAL OF AMENDMENT TO THE CERTIFICATE
OF INCORPORATION [ ] [ ] [ ]
3. APPOINTMENT OF INDEPENDENT ACCOUNTANTS [ ] [ ] [ ]
4. APPROVAL OF WOOLWORTH CORPORATION 1998
STOCK OPTION AND AWARD PLAN [ ] [ ] [ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE "AGAINST"
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
5. SHAREHOLDER'S PROPOSAL ON GERMAN OPERATIONS [ ] [ ] [ ]
6. SHAREHOLDER'S PROPOSAL ON RIGHTS PLAN [ ] [ ] [ ]
- --------------------------------------------------------------------------------
I plan to attend meeting [ ]
SIGNATURE(S) DATE
----------------------------------------------- --------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, give
full title as such. If signing on behalf of a corporation, sign the full
corporate name by authorized officer. The signer hereby revokes all proxies
heretofore given by the signer to vote at the 1998 Annual Meeting of
Shareholders of Woolworth Corporation and any adjournment thereof.
