<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 1999
Commission file no. 1-10299
VENATOR GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
New York 13-3513936
- --------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
233 Broadway, New York, New York 10279-0003
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number: (212) 553-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Number of shares of Common Stock outstanding at May 28, 1999: 137,198,806
<PAGE> 2
VENATOR GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets................................... 1
Condensed Consolidated Statements
of Operations...................................................... 2
Condensed Consolidated Statements
of Comprehensive Income (Loss)..................................... 3
Condensed Consolidated Statements
of Cash Flows...................................................... 4
Notes to Condensed Consolidated
Financial Statements............................................... 5-7
Item 2. Management"s Discussion and Analysis of
Financial Condition and Results of Operations...................... 8-14
Part II. Other Information
Item 1. Legal Proceedings....................................................... 15
Item 6. Exhibits and Reports on Form 8-K........................................ 15
Signature............................................................... 16
Index to Exhibits....................................................... 17-19
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
VENATOR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
May 1, May 2, January 30,
1999 1998 1999
---- ---- ----
(Unaudited) (Unaudited) (Audited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ........................................... $ 13 $ 13 $ 193
Merchandise inventories ............................................. 889 880 837
Net assets of discontinued operations ............................... 101 628 97
Other current assets ................................................ 210 195 148
------- ------- -------
1,213 1,716 1,275
Property and equipment, net ............................................ 984 688 974
Deferred taxes ......................................................... 357 338 358
Intangible assets, net ................................................. 180 191 183
Other assets ........................................................... 82 91 86
------- ------- -------
$ 2,816 $ 3,024 $ 2,876
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt ..................................................... $ 274 $ 253 $ 250
Accounts payable .................................................... 276 284 245
Accrued liabilities ................................................. 227 227 296
Current portion of reserve for discontinued operations .............. 126 52 167
Current portion of long-term debt and obligations
under capital leases .............................................. 7 19 6
------- ------- -------
910 835 964
Long-term debt and obligations
under capital leases ................................................ 513 509 511
Reserve for discontinued operations .................................... 30 18 30
Other liabilities ...................................................... 328 379 333
Shareholders' equity
Common stock and paid-in capital .................................... 332 322 328
Retained earnings ................................................... 886 1,028 897
Accumulated other comprehensive loss ................................ (183) (67) (187)
------- ------- -------
Total shareholders' equity ............................................. 1,035 1,283 1,038
------- ------- -------
$ 2,816 $ 3,024 $ 2,876
======= ======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
-1-
<PAGE> 4
VENATOR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Thirteen weeks ended
--------------------
May 1, May 2,
1999 1998
------- -------
<S> <C> <C>
Sales ........................................................................ $ 1,079 $ 1,058
Costs and expenses
Cost of sales .............................................................. 791 748
Selling, general and administrative expenses ............................... 257 271
Depreciation and amortization .............................................. 45 34
Interest expense, net ...................................................... 11 10
Other income ............................................................... (6) (19)
------- -------
1,098 1,044
------- -------
Income (loss) from continuing operations
before income taxes ..................................................... (19) 14
Income tax expense (benefit) ................................................. (8) 6
------- -------
Income (loss) from continuing operations ..................................... (11) 8
Loss from discontinued operations, net of income
tax benefit of $9 million in 1998 ....................................... -- (13)
------- -------
Net loss ..................................................................... $ (11) $ (5)
======= =======
Basic earnings per share:
Income (loss) from continuing operations ................................ $ (0.08) $ 0.06
Loss from discontinued operations ....................................... -- (0.10)
------- -------
Net loss ................................................................ $ (0.08) $ (0.04)
======= =======
Weighted-average common shares outstanding ................................... 136.7 135.1
Diluted earnings per share:
Income (loss) from continuing operations ............................... $ (0.08) $ 0.06
Loss from discontinued operations ...................................... -- (0.10)
------- -------
Net loss ............................................................... $ (0.08) $ (0.04)
======= =======
Weighted-average common shares assuming dilution ............................. 136.7 136.4
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 5
VENATOR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
Thirteen weeks ended
--------------------
May 1, May 2,
1999 1998
---- ----
<S> <C> <C>
Net loss ................................................................................... $(11) $ (5)
Other comprehensive income, net of tax
Foreign currency translation adjustments arising during the period,
net of deferred tax expense of $3 and $7, respectively ............................... 4 12
---- ----
Comprehensive income (loss) ................................................................ $ (7) $ 7
==== ====
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 6
VENATOR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
Thirteen weeks ended
--------------------
May 1, May 2,
1999 1998
----- -----
<S> <C> <C>
From Operating Activities:
Net loss .................................................................................... $ (11) $ (5)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities of continuing operations:
Loss from discontinued operations, net of tax ............................................. -- 13
Depreciation and amortization ............................................................. 45 34
Gains on sales of assets and investments .................................................. (6) (19)
Deferred income taxes ..................................................................... (14) (9)
Change in assets and liabilities, net of acquisition:
Merchandise inventories ................................................................. (51) (117)
Accounts payable and other accruals ..................................................... (25) (12)
Other, net .............................................................................. (65) (77)
----- -----
Net cash used in operating activities of continuing operations .............................. (127) (192)
----- -----
From Investing Activities:
Proceeds from sales of assets and investments ............................................... 7 22
Capital expenditures ........................................................................ (54) (80)
Payments for business acquired, net of cash acquired ........................................ -- (29)
----- -----
Net cash used in investing activities of continuing operations .............................. (47) (87)
----- -----
From Financing Activities:
Increase in short-term debt ................................................................. 24 253
Reduction in long-term debt and capital lease obligations ................................... (2) --
Issuance of common stock .................................................................... 4 5
----- -----
Net cash provided by financing activities of continuing operations .......................... 26 258
----- -----
Net Cash used in Discontinued Operations ....................................................... (29) (50)
Effect of exchange rate fluctuations
on Cash and Cash Equivalents ................................................................ (3) 3
----- -----
Net change in Cash and Cash Equivalents ........................................................ (180) (68)
Cash and Cash Equivalents at beginning of year ................................................. 193 81
----- -----
Cash and Cash Equivalents at end of interim period ............................................. $ 13 $ 13
===== =====
Cash paid during the period:
Interest .................................................................................... $ 5 $ 2
Income taxes ................................................................................ $ 5 $ 3
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 7
VENATOR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Notes to Consolidated Financial
Statements contained in the Registrant's Form 10-K for the year ended January
30, 1999, as filed with the Securities and Exchange Commission (the "SEC") on
April 30, 1999. Certain items included in these statements are based on
management's estimates. In the opinion of management, all material adjustments,
which are of a normal recurring nature, necessary for a fair presentation of the
results for the interim periods have been included. The results for the thirteen
weeks ended May 1, 1999 are not necessarily indicative of the results expected
for the year.
Short-Term Debt
On March 19, 1999, the Registrant amended its revolving credit
agreement. In accordance with the amended agreement, the facility was reduced to
$400 million, with a further reduction to $300 million by February 15, 2000. If
certain assets are sold or debt or equity is issued, the revolving credit
agreement may be reduced earlier than February 2000 to $350 million. Under the
terms of the amended agreement, the Registrant is required to satisfy certain
financial and operating covenants, which include: maximum ratio of total debt to
earnings before interest, taxes, depreciation and amortization; minimum fixed
charge coverage ratio; minimum tangible net worth and limits on capital
expenditures. In addition, the Registrant is required to fund the repayment of
the $200 million 7.0 percent debentures, which are due in June 2000, by February
15, 2000. This facility is unsecured relating to the Registrant's inventory;
however, it does include collateralization of certain properties as defined in
the agreement. The amended agreement also restricts consolidations or mergers
with third parties, investments and acquisitions, payment of dividends and stock
repurchases, and requires borrowings under the agreement to be reduced to not
more than $50 million for a period of at least 15 consecutive days during the
fourth quarter of each year.
On May 11, 1999, the facility was reduced by $7 million to $393
million, as a result of the sale of certain assets.
Discontinued Operations
In the third quarter of 1998, the Registrant announced that it was
exiting its International General Merchandise segment and completed the sale of
its 357 store German general merchandise business for $563 million. The
Registrant recorded a net gain of $174 million before-tax, or $39 million
after-tax. The reserve balance of $40 million at May 1, 1999 represents the
costs associated with the disposal of the remaining business of the
International General Merchandise segment, which will be completed in 1999.
The Registrant also announced that it was exiting its Specialty
Footwear segment in 1998 and recorded a net charge to earnings of $234 million
before-tax, or $155 million after-tax for the loss on disposal of the segment.
Disposition activity of approximately $30 million charged to the reserve for the
period from January 30, 1999 to May 1, 1999 represented the payments for
leasehold and real estate disposition expenses, severance and benefit costs and
other related expenses. The remaining reserve balance of $91 million at May 1,
1999 primarily includes real estate disposition costs.
-5-
<PAGE> 8
In 1997, the Registrant announced that it was exiting its 400 store
Domestic General Merchandise segment and recorded a charge to earnings of $310
million before-tax, or $195 million after-tax, for the loss on disposal of
discontinued operations. Net disposition activity for the thirteen weeks ended
May 1, 1999 was approximately $10 million, which included payments for leasehold
and real estate disposition expenses, offset by gains from planned disposals of
real estate. The remaining reserve balance of $25 million at May 1, 1999
consists principally of real estate disposition costs.
Prior year financial statements have been restated to present the
operating results of these business segments as discontinued operations.
The following is a summary of the net assets of discontinued operations:
<TABLE>
<CAPTION>
(in millions) May 1, May 2, Jan. 30,
1999 1998 1999
---- ---- ----
<S> <C> <C> <C>
International General Merchandise
Assets .............................................................. $ 46 $815 $ 47
Liabilities ......................................................... 9 354 11
---- ---- ----
Net assets of discontinued operations ............................... $ 37 $461 $ 36
---- ---- ----
Specialty Footwear
Assets .............................................................. $ 58 $194 $ 63
Liabilities ......................................................... 8 38 17
---- ---- ----
Net assets of discontinued operations ............................... $ 50 $156 $ 46
---- ---- ----
Domestic General Merchandise
Assets .............................................................. $ 21 $ 21 $ 23
Liabilities ......................................................... 7 10 8
---- ---- ----
Net assets of discontinued operations ............................... $ 14 $ 11 $ 15
---- ---- ----
Total net assets of discontinued operations ......................... $101 $628 $ 97
==== ==== ====
</TABLE>
The assets of the discontinued operations consist primarily of
inventory and fixed assets. The liabilities of the International General
Merchandise segment at May 2, 1998 predominantly included amounts due to vendors
and pension liabilities. The decrease in net assets of International General
Merchandise discontinued operations at January 30, 1999 and May 1, 1999 reflects
the sale of the German general merchandise operations on October 22, 1998. The
liabilities of the Specialty Footwear and Domestic General Merchandise segments
primarily reflect amounts due to vendors.
Earnings Per Share
Basic earnings per share is computed as net earnings (loss) divided by
the weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur from common
shares issuable through stock-based compensation including stock options,
restricted stock awards and other convertible securities.
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<PAGE> 9
A reconciliation of weighted-average common shares outstanding to
weighted-average common shares assuming dilution follows:
<TABLE>
<CAPTION>
Thirteen weeks ended
--------------------
May 1, May 2,
(in millions) 1999 1998
------ ------
<S> <C> <C>
Weighted-average common shares outstanding ...................................... 136.7 135.1
Incremental common shares issuable .............................................. 1.3
------ ------
Weighted-average common shares assuming dilution ................................ 136.7 136.4
====== ======
</TABLE>
Incremental common shares were not included in the computation for the
quarter ended May 1, 1999 since their inclusion in periods when the Registrant
reported a loss from continuing operations would be antidilutive. Antidilutive
options were not included in the computation of diluted earnings per share and
would not have a material impact on diluted earnings per share.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss was comprised of foreign currency
translation adjustments of $140 million, $22 million, and $144 million, and
minimum pension liability adjustments of $43 million, $45 million, and $43
million, at May 1, 1999, May 2, 1998, and January 30, 1999, respectively.
Reclassifications
Certain balances in prior periods have been reclassified to conform
with the presentation adopted in the current period. As discussed above, all
financial statements have been restated to reflect the discontinuance of the
Specialty Footwear and International General Merchandise segments in the third
quarter of 1998.
Legal Proceedings
The only legal proceedings pending against the Registrant or its
consolidated subsidiaries consist of ordinary, routine litigation, including
administrative proceedings, incident to the businesses of the Registrant, as
well as litigation incident to the sale and disposition of businesses that have
occurred in the past several years. Management does not believe that the outcome
of such proceedings will have a material effect on the Registrant's consolidated
financial position or results of operations.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which is effective for
fiscal quarters of fiscal years beginning after June 15, 1999. On May 19, 1999,
the FASB issued an exposure draft to propose the delay of the effective date for
SFAS No. 133 by one year. As a result, the Registrant may not be required to
adopt the statement until 2001. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
Registrant is in the process of evaluating SFAS No. 133 to determine its impact
on the consolidated financial statements.
-7-
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
As discussed more fully in the footnotes to the Condensed Consolidated
Financial Statements, the Registrant discontinued its Specialty Footwear and its
International General Merchandise segments in the third quarter of 1998.
Accordingly, prior year financial statements have been restated to present these
business segments as discontinued operations.
RESULTS OF OPERATIONS
Sales of $1,079 million in the first quarter of 1999 increased 2.0
percent from sales of $1,058 million in the first quarter of 1998, reflecting
the impact of 143 net additional stores. Comparable-store sales were flat for
the quarter. Excluding the effect of foreign currency fluctuations and sales
from disposed operations, sales increased 2.7 percent for the first quarter of
1999.
Gross margin declined by 260 basis points to 26.7 percent in the first
quarter of 1999 as compared to 29.3 percent in the corresponding prior-year
period. This decline principally reflects increased occupancy costs in the
Global Athletic Group as a result of 159 net additional stores in the first
quarter of 1999 as compared to 1998, and also aggressive markdown activity in
the Northern Group in order to position inventories properly.
Selling, general and administrative expenses ("SG&A") of $257 million
for the thirteen weeks ended May 1, 1999 declined by 180 basis points to 23.8
percent of sales, as compared with the corresponding prior-year period. The
decline reflects the Registrant's successful cost cutting initiatives at both
the corporate and divisional levels. Corporate expense, included in SG&A, was
reduced to $17 million in the first quarter of 1999, an $8 million decrease from
the first quarter of 1998. The Registrant expects to reduce its 1999 corporate
and divisional operating expenses by $100 million, compared to 1998, and to
further cut corporate costs to one percent of sales by 2001.
Depreciation and amortization increased by $11 million to $45 million
for the thirteen weeks ended May 1, 1999. The increase reflects depreciation and
amortization of assets included in the 1998 capital expenditure program, which
concentrated on new store openings and remodeling of existing facilities, and
also included management information systems.
Interest expense, net of interest income, increased $1 million for the
first quarter of 1999 as compared with the corresponding prior-year period,
reflecting the incremental interest expense attributable to higher interest
rates and short-term borrowing levels during 1999, offset by $3 million of
interest income related to income tax refunds.
Corporate income, included in other income, totaled $6 million for the
first quarter of 1999, which reflects the recognition of $5 million of the
deferred gain recorded on the 1998 sale of the corporate headquarters and gains
of approximately $1 million related to the disposal of other real estate assets.
This compares to other income of $19 million recorded in the first quarter of
1998 for the sale of the Registrant's Garden Centers nursery business.
During the first quarter of 1999, the effective tax rate was increased
to 39.0 percent as compared with 37.0 percent for the corresponding prior-year
period. The increase reflects the impact of non-deductible items, such as
goodwill amortization, at lower earnings levels, as well as higher proportional
foreign earnings, which are taxed at higher rates.
The Registrant reported a net loss for the thirteen weeks ended May 1,
1999 of $11 million or $0.08 per diluted share, compared to a net loss of $5
million, or $0.04 per diluted share for the corresponding prior-year period,
which includes a $13 million, or $0.10 per share loss from discontinued
operations.
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<PAGE> 11
STORE COUNT
The following table summarizes store count:
<TABLE>
<CAPTION>
At Jan. 30, At May 1, At May 2,
1999 Opened Closed 1999 1998
---- ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Global Athletic Group ................. 3,925 43 69 3,899 3,740
Northern Group ........................ 940 8 9 939 850
All Other ............................. 1,137 5 31 1,111 1,216
----- ----- ----- ----- -----
Total .............................. 6,002 56 109 5,949 5,806
----- ----- ----- ----- -----
</TABLE>
Of the 56 stores opened, 15 stores represent the conversion of Kinney
and Footquarters stores from the Registrant's discontinued Specialty Footwear
segment. During the thirteen weeks ended May 1, 1999, the Registrant remodeled
or relocated 61 stores. Additionally, a new athletic outlet chain was launched
utilizing 28 Footquarters locations and 51 existing Foot Locker and Champs
Sports outlet stores, which are included in the Global Athletic Group.
SALES
The following table summarizes sales by segment and geographic area,
after reclassification for disposed operations. Disposed operations represents
those businesses sold or closed other than the discontinued segments and are
therefore included in continuing operations.
<TABLE>
<CAPTION>
Thirteen weeks ended
--------------------
(in millions) May 1, May 2,
1999 1998
---- ----
<S> <C> <C>
By Segment:
Global Athletic Group ................. $ 931 $ 907
Northern Group ........................ 69 74
All Other ............................. 79 73
Disposed operations ................... -- 4
------ ------
Total sales .............................. $1,079 $1,058
====== ======
By Geographic Area:
United States ......................... $ 929 $ 913
Canada ................................ 70 78
Other International ................... 80 63
Disposed operations ................... -- 4
------ ------
Total sales .............................. $1,079 $1,058
====== ======
</TABLE>
Global Athletic Group sales increased by 2.6 percent for the first
quarter of 1999 as compared with the corresponding prior-year period. The
increase was primarily attributable to sales from 159 net additional stores,
offset by below plan sales performance in the Champs Sports format.
Comparable-store sales decreased by 0.3 percent for the quarter, reflecting an
improvement over fourth quarter 1998 trends. Sales for the quarter were impacted
by continued weak sales of branded and licensed apparel, offset by increased
sales in remodeled stores and from high-end performance athletic footwear,
primarily running.
Excluding the impact of foreign currency fluctuations, Northern Group
sales decreased by 4.9 percent for the first quarter of 1999. The sales from 89
net additional stores in 1999, compared to 1998 was more than offset by a
comparable-store sales decline of 9.6 percent for the quarter.
The increase in sales of the All Other category was driven by the
continued double-digit growth in the Afterthoughts jewelry format.
-9-
<PAGE> 12
OPERATING RESULTS
Operating results reflect income (loss) from continuing operations
before income taxes, excluding corporate expense, corporate income and interest
expense, net. The following table summarizes operating profit by segment and
geographic area, after reclassification for disposed operations.
<TABLE>
<CAPTION>
Thirteen weeks ended
--------------------
(in millions) May 1, May 2,
1999 1998
---- ----
<S> <C> <C>
By Segment:
Global Athletic Group ................... $ 19 $ 46
Northern Group .......................... (16) (9)
All Other ............................... 1 (6)
Disposed operations ..................... (1) 18
---- ----
Total operating profit ..................... $ 3 $ 49
==== ====
By Geographic Area:
United States ........................... $ 9 $ 38
Canada .................................. (7) (6)
Other International ..................... 2 (1)
Disposed operations ..................... (1) 18
---- ----
Total operating profit ..................... $ 3 $ 49
==== ====
</TABLE>
The Global Athletic Group reported an operating profit of $19 million
for the thirteen weeks ended May 1, 1999 as compared with $46 million for the
prior-year period ended May 2, 1998. This decline principally reflects increased
occupancy and other costs associated with the 159 net additional stores as well
as the additional depreciation and amortization of remodeled stores in 1999 as
compared to 1998. The decline also reflects increased markdowns in most formats,
offset, in part, by reduced promotional markdown activity in Europe in the first
quarter of 1999 compared to 1998.
The Northern Group reported an operating loss of $16 million for the
first quarter of 1999, compared to an operating loss of $9 million in the first
quarter of 1998, as a result of the decline in sales and continued markdown
activity in order to clear excess inventory.
Operating results for formats included in the All Other category
improved by $7 million for the thirteen weeks ended May 1, 1999 as compared with
the corresponding prior year period, predominantly related to the Afterthoughts
format.
Disposed operations for the first quarter of 1998 include a $19 million
gain on the sale of the Garden Centers nursery business offset by the costs
associated with the shutdown of the U.S. Randy River operations.
SEASONALITY
The Registrant's businesses are seasonal in nature. Historically, the
greatest proportion of sales and net income is generated in the fourth quarter
and the lowest proportions of sales and net income are generated in the first
and second quarters, reflecting seasonal buying patterns. As a result of these
seasonal sales patterns, inventory generally increases in the third quarter in
anticipation of the strong fourth quarter sales.
-10-
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's primary sources of working capital have been cash
flows from operations, borrowings under the revolving credit agreement,
financing real estate with operating leases and proceeds from the sale of
non-strategic assets. The principal use of cash has been to finance inventory
requirements, which are generally at their peak during the third and fourth
quarters, capital expenditures related to store openings and remodelings, and
management information systems, and to fund other general working capital
requirements.
Operating activities of continuing operations reduced cash by $127
million for the thirteen weeks ended May 1, 1999, as compared with $192 million
in the corresponding prior-year period. These amounts reflect the net loss
reported by the Registrant in those periods, adjusted for non-cash items and
working capital changes. The decline in cash used for merchandise inventories in
1999 reflects the additional inventory purchases in 1998 related to the opening
of new larger-size athletic formats, coupled with a concerted effort in 1999 to
maximize inventories per square foot. Merchandise inventories were $889 million
at May 1, 1999, essentially unchanged from $880 million at May 2, 1998, however,
as a percentage of square footage, inventories declined by 16 percent. Included
in the cash flow from operations for both periods is the cash outlay for
occupancy costs on May 1 due to the timing of each quarter end.
Net cash used in investing activities of continuing operations was $47
million and $87 million for the first quarter of 1999 and 1998, respectively.
Capital expenditures were $54 million for the thirteen weeks ended May 1, 1999,
primarily related to store remodelings as compared with $80 million for the
corresponding prior-year period. Planned capital expenditures of $175 million
for 1999 include expenditures for 350 new and remodeled stores, management
information systems, logistics and other support facilities. In the first
quarter of 1998, cash used for the acquisition of Athletic Fitters of $29
million, was offset by $22 million cash proceeds received from the sale of the
Garden Centers nursery business.
Financing activities for the Registrant's continuing operations
contributed $26 million in cash for the thirteen weeks ended May 1, 1999, and
$258 million in cash for the corresponding prior-year period. Outstanding
borrowings under the Registrant's revolving credit agreement were $274 million
and $253 million at May 1, 1999 and May 2, 1998, respectively and have been
classified as short-term debt. The Registrant expects to incur incremental
interest expense in 1999 compared to 1998, reflecting anticipated higher
interest rates and fees during 1999. Management believes current domestic and
international credit facilities and cash provided by operations will be adequate
to finance its working capital requirements and support the development of its
short-term and long-term strategies. The Registrant expects to fund the
repayment of its $200 million 7.0 percent debentures through future financing
and/or asset sales.
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<PAGE> 14
YEAR 2000 READINESS DISCLOSURE
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits, rather than four, to define the applicable year.
Mistaking "00" for the year 1900 could result in miscalculations and errors and
cause significant business interruptions for the Registrant, as well as for the
government and most other companies. The Registrant has instituted a plan to
assess its state of readiness for Y2K, to remediate those systems that are
non-compliant and to assure that material third parties will be Y2K compliant.
State of Readiness
The Registrant has assessed all mainframe, operating and application
systems (including point of sale) for Y2K readiness, giving the highest priority
to those information technology applications (IT) systems that are considered
critical to its business operations. Those applications considered most critical
to the Registrant"s business operations have been remediated. In-house
certification testing of all application systems is currently in progress. Code
changes have been made to the merchandising and logistics legacy systems,
remediation is complete, and testing is in progress. The necessary enhancements
to the point of sale equipment are substantially complete. Approximately 2,300
stores have been upgraded with the Y2K remediated release of store systems
software and it is expected that this release will be in all stores by the end
of June. In July, the Registrant will perform a test of its Y2K compliant (and
recently upgraded) operating software on an isolated processor. Thereafter,
through the fall, the Registrant will complete its testing of application
software using this upgraded operating system infrastructure. The plan calls for
certification to be complete by the end of the third quarter.
Apart from the Y2K issue, the Registrant has developed and installed
throughout its businesses beginning in 1997 an information computer system
("ECLIPSE"), which will be installed in most divisions for the finance and human
resources functions during 1999. The ECLIPSE project was undertaken for business
reasons unrelated to Y2K. However, the installation of ECLIPSE eliminates the
need to reprogram or replace certain existing software for Y2K compliance.
The Registrant has compiled a comprehensive inventory of its non-IT
systems, which include those systems containing embedded chip technology
commonly found in buildings and equipment connected with a building"s
infrastructure. Management has established the priority of systems identified as
non-compliant and ongoing testing and implementation of any changes required for
the non-IT systems will be performed throughout 1999. Investigations of the
embedded chip systems indicate that Y2K will not affect systems such as heating,
ventilation and security in most store locations.
Material Third Parties
The Registrant purchased approximately 44 percent of its 1998
merchandise from one major vendor. As a result, the Registrant's ability to
operate could be materially affected by the non-compliance of this key supplier.
Management has determined through several meetings and interviews that the
vendor's Y2K readiness program is substantially complete. Electronic Data
Interchange software was successfully tested with this vendor and management
intends to develop joint contingency plans for distribution and order entry.
Management has issued questionnaires to its approximately 20 key vendors to
determine their state of readiness. The Registrant's efforts to obtain written
certifications have not been successful, for the most part, and management will
continue its efforts to assess the vendors' Y2K readiness through other means.
The level of compliance of the Registrant's major providers of banking services,
transportation, telecommunications and utilities is being ascertained and the
related risks evaluated.
-12-
<PAGE> 15
Y2K Costs
The Registrant is utilizing both internal and external resources to
address the Y2K issue. Internal resources reflect the reallocation of IT
personnel to the Y2K project from other IT projects. In the opinion of
management, the deferral of such other projects will not have a significant
adverse affect on continuing operations. The total direct cost, excluding
ECLIPSE, to remediate the Y2K issue is estimated to be approximately $5 million,
of which $3 million was spent in 1998 and a further $0.2 million in the first
quarter of 1999. All costs, excluding ECLIPSE, are being expensed as incurred
and are funded through operating cash flows. The Registrant's Y2K costs are
based on management's best estimates and may be updated, as additional
information becomes available. Management does not expect the total Y2K
remediation costs to be significant to its results of operations or financial
condition.
Contingency Plan/Risks
The Registrant is in the process of developing contingency plans for
those areas that might be affected by Y2K. Although the full consequences are
unknown, the failure of either the Registrant's critical systems or those of its
material third party suppliers to be Y2K compliant would result in the
interruption of the Registrant's business, which could have a significant
adverse effect on its results of operations or financial condition. If the
distribution channels were to be disrupted, alternative methods of delivering
merchandise to both the Registrant's stores and its customers will be in place.
However, if any business interruptions occur in January 2000, and they are
promptly corrected, management expects it would not significantly impact the
Registrant's results of operations or financial position. Typically, at that
time of year, after the holiday season, there is lower customer demand and
borrowing requirements are not at their peak. In addition, successful inventory
and working capital management, along with contingency plans for store
operations, will help mitigate the risks associated with the Y2K issue. However,
some business disruptions may occur even with defensive contingency plans.
IMPACT OF EUROPEAN MONETARY UNION
The European Union is comprised of fifteen member states, eleven of
which adopted a common currency, the "euro," effective January 1, 1999. From
that date until January 1, 2002, the transition period, the national currencies
will remain legal tender in the participating countries as denominations of the
euro. Monetary, capital, foreign exchange and interbank markets have converted
to the euro and non-cash transactions will be possible in euros. On January 1,
2002, euro bank notes and coins will be issued and the former national
currencies will be withdrawn from circulation no later than July 1, 2002.
The Registrant has reviewed the impact of the euro conversion on its
information systems, accounting systems, vendor payments and human resources.
Modifications required to be made to the point of sale hardware and software
will be facilitated by the Y2K remediation.
The adoption of a single European currency will lead to greater product
pricing transparency and a more competitive environment. The Registrant will
display the euro equivalent price of merchandise as a customer service during
the transition period, as will many retailers until the official euro conversion
in 2002. The euro conversion is not expected to have a significant effect on the
Registrant's results of operations or financial condition.
-13-
<PAGE> 16
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements within the meaning of the
federal securities laws. All statements, other than statements of historical
facts, which address activities, events or developments that the Registrant
expects or anticipates will or may occur in the future, including such things as
future capital expenditures, expansion, strategic plans, growth of the
Registrant's business and operations, Y2K and euro related actions and other
such matters are forward-looking statements. These forward-looking statements
are based on many assumptions and factors including effects of currency
fluctuations, consumer preferences and economic conditions worldwide and the
ability of the Registrant to implement, in a timely manner, the programs and
actions related to the Y2K and euro issues. Any changes in such assumptions or
factors could produce significantly different results.
-14-
<PAGE> 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The only legal proceedings pending against the Registrant or its
consolidated subsidiaries consist of ordinary, routine litigation,
including administrative proceedings, incident to the businesses of the
Registrant, as well as litigation incident to the sale and disposition
of businesses that have occurred in the past several years. Management
does not believe that the outcome of such proceedings will have a
material effect on the Registrant's consolidated financial position or
results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
An index of the exhibits that are required by this item, and which are
furnished in accordance with Item 601 of Regulation S-K, appears on
pages 18 through 20. The exhibits which are in this report immediately
follow the index.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K dated February 17, 1999 (date
of earliest event reported) reporting that Bruce L. Hartman had been
named Senior Vice President and Chief Financial Officer, and would
replace Reid Johnson, who had resigned, effective February 26, 1999.
The Registrant filed a report on Form 8-K dated March 10, 1999 (date of
earliest event reported) reporting sales and earnings for the fourth
quarter and year ended January 30, 1999.
-15-
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VENATOR GROUP, INC.
-------------------
(Registrant)
Date: June 4, 1999
/s/ Bruce Hartman
-------------------
BRUCE HARTMAN
Senior Vice President
and Chief Financial Officer
-16-
<PAGE> 19
VENATOR GROUP, INC.
INDEX OF EXHIBITS REQUIRED BY ITEM 6(a) OF FORM 10-Q
AND FURNISHED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K
<TABLE>
<CAPTION>
Exhibit No. in Item 601
of Regulation S-K Description
- ----------------------- ------------
<S> <C>
1 *
2 *
3(i)(a) Certificate of Incorporation of the
Registrant, as filed by the Department of
State of the State of New York on April 7,
1989 (incorporated herein by reference to
Exhibit 3(i)(a) to the Quarterly Report on
Form 10-Q for the quarterly period ended
July 26, 1997, filed by the Registrant with
the SEC on September 4, 1997 (the "July 26,
1997 Form 10-Q")).
3(i)(b) Certificates of Amendment of the Certificate
of Incorporation of the Registrant, as filed
by the Department of State of the State of
New York on (a) July 20, 1989 (b) July 24,
1990 (c) July 9, 1997 (incorporated herein
by reference to Exhibit 3(i)(b) to the July
26, 1997 Form 10-Q) and (d) June 11, 1998
(incorporated herein by reference to Exhibit
4.2(a) of the Registration Statement on Form
S-8 (Registration No. 333-62425) previously
filed with the SEC).
3(ii) By-laws of the Registrant, as amended
(incorporated herein by reference to Exhibit
4.2 of the Registration Statement on Form
S-8 (Registration No. 333-62425) previously
filed with the SEC).
4.1 The rights of holders of the Registrant's
equity securities are defined in the
Registrant's Certificate of Incorporation,
as amended (incorporated herein by reference
to Exhibits 3(i)(a) and 3(i)(b) to the July
26, 1997 Form 10-Q and Exhibit 4.2(a) to the
Registration Statement on Form S-8
(Registration No. 333-62425) previously
filed with the SEC).
4.2 Rights Agreement dated as of March 11, 1998,
between Venator Group, Inc. and First
Chicago Trust Company of New York, as Rights
Agent (incorporated herein by reference to
Exhibit 4 to the Form 8-K dated March 11,
1998).
4.2(a) Amendment No.1 to Rights Agreement.
</TABLE>
-17-
<PAGE> 20
<TABLE>
<CAPTION>
Exhibit No. in Item 601
of Regulation S-K Description
- ----------------------- ------------
<S> <C>
4.3 Indenture dated as of October 10, 1991
(incorporated herein by reference to
Exhibit 4.1 to the Registration Statement
on Form S-3 (Registration No. 33-43334)
previously filed with the SEC).
4.4 Forms of Medium-Term Notes (Fixed Rate and
Floating Rate) (incorporated herein by
reference to Exhibits 4.4 and 4.5 to the
Registration Statement on Form S-3
(Registration No. 33-43334) previously
filed with the SEC).
4.5 Form of 8 % Debentures due 2022
(incorporated herein by reference to
Exhibit 4 to the Registrant's Form 8-K
dated January 16, 1992).
4.6 Purchase Agreement dated June 1, 1995 and
Form of 7% Notes due 2000 (incorporated
herein by reference to Exhibits 1 and 4,
respectively, to the Registrant's Form 8-K
dated June 7, 1995).
4.7 Distribution Agreement dated July 13, 1995
and Forms of Fixed Rate and Floating Rate
Notes (incorporated herein by reference to
Exhibits 1, 4.1 and 4.2, respectively, to
the Registrant's Form 8-K dated July 13,
1995).
5 *
8 *
9 *
10.1 Form of Executive Severance Benefit
Agreement.
10.2 Form of Senior Executive Severance
Agreement, amended as of April 29, 1999.
10.3 Amendment to Supplemental Agreement with
M. Jeffrey Branman dated May 5, 1999.
11 *
12 Computation of Ratio of Earnings to Fixed
Charges.
13 *
15 Letter re: Unaudited Interim Financial
Statements.
</TABLE>
-18-
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit No. in Item 601
of Regulation S-K Description
- ----------------------- ------------
<S> <C>
16 *
17 *
18 *
19 *
20 *
21 *
22 *
23 *
24 *
25 *
26 *
27.1 Financial Data Schedule - May 1, 1999
(which is submitted electronically to the
SEC for information only and not filed).
27.2 Restated Financial Data Schedule - May 2,
1998 (which is submitted electronically
to the SEC for information only and not
filed).
99 Independent Accountants'Review Report.
</TABLE>
- ----------
* Not applicable
-19-
<PAGE> 22
Exhibits filed with this Form 10-Q:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.2(a) Amendment No.1 to Rights Agreement
10.1 Form of Executive Severance Benefit Agreement
10.2 Form of Senior Executive Severance Agreement,
amended as of April 29, 1999
10.3 Amendment to Supplemental Agreement with M. Jeffrey Branman
dated May 5, 1999
12 Computation of Ratio of Earnings to Fixed Charges
15 Letter re: Unaudited Interim Financial Statements
27.1 Financial Data Schedule - May 1, 1999
27.2 Restated Financial Data Schedule - May 2, 1998
99 Independent Accountants' Review Report
</TABLE>
<PAGE> 1
EXHIBIT 4.2(a)
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
This AMENDMENT NO. 1, dated as of May 28, 1999, is between VENATOR
GROUP, INC., a New York corporation (the "Company"), and FIRST CHICAGO TRUST
COMPANY OF NEW YORK, as Rights Agent (the "Bank").
WHEREAS, the Company (formerly known as Woolworth Corporation) and the
Rights Agent, entered into a Rights Agreement dated as of March 11, 1998 (the
"Rights Agreement");
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company
desires to amend the Rights Agreement as set forth below;
NOW, THEREFORE, the Rights Agreement is hereby amended as follows:
1. AMENDMENT OF SECTION 1.
1. Section 1 of the Rights Agreement is amended by deleting
the second sentence contained in the definition of "Acquiring Person"
and substituting in lieu thereof the following:
"Acquiring Person" shall not include any Person who becomes an
Interested Shareholder (an "Interested Shareholder") within
the meaning of Section 912 of the NYBCL (i) solely as a result
of a reduction in the number of shares of Common Stock
outstanding due to the repurchase of Common Stock by the
Company, unless and until such time as such Person or any
Affiliate or Associate of such Person shall purchase or
otherwise become (as a result of actions taken by such Person
or its Affiliates or Associates) the Beneficial Owner of
additional shares of Common Stock constituting 1% or more of
the then outstanding shares of Common Stock other than
pursuant to a Qualifying Offer, or (ii) pursuant to a
Qualifying Offer;
<PAGE> 2
2. Section 1 of the Rights Agreement is amended by adding
thereto, following the definition of "Final Expiration Date" and prior
to the definition of "Person", the following:
"Independent Director" shall mean any member of the
Board of Directors of the Company who (i) is not, and
has not within the last ten years been, an officer or
employee of the Company, (ii) is not the Beneficial
Owner of 5% or more of the Common Stock or an
Affiliate or Associate of any such Beneficial Owner,
and (iii) is not the Person (or an Affiliate or
Associate thereof) who has made the tender offer
which is the subject of Section 11(a)(ii) hereunder.
3. Section 1 of the Rights Agreement is amended by deleting
the definition of "Qualified Offer" and substituting in lieu thereof,
the following:
"Qualifying Offer" shall mean a tender offer as
described in Section 11(a)(ii).
4. Section 1 of the Rights Agreement is amended by deleting
the words "other than pursuant to a Qualified Offer" from the end of
the sentence defining "Stock Acquisition Date."
2. AMENDMENT OF SECTION 11(a)(ii).
Section 11(a)(ii) of the Rights Agreement is amended by
deleting such section in its entirety and substituting in lieu thereof the
following:
(ii) In the event any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan), alone or
together with any of its Affiliates and Associates, shall, at
any time after the Rights Dividend Declaration Date, become an
Interested Shareholder, unless the
2
<PAGE> 3
event causing the Person to become an Interested Shareholder
is a transaction set forth in Section 13(a) hereof, or is an
acquisition of shares of Common Stock pursuant to a tender
offer for all outstanding shares of Common Stock which meets
all of the following requirements:
(1) on or prior to the date such offer is commenced
within the meaning of Rule 14d-2(a) of the General
Rules and Regulations under the Exchange Act, such
Person has, and has provided the Company, (a) with
respect to any cash portion of the offer, firm
written commitments from responsible financial
institutions, which have been accepted by such Person
or one of its Affiliates, to provide, subject only to
customary terms and conditions (which shall in no
event include conditions requiring access by such
financial institutions to non-public information to
be provided by the Company, conditions based on the
accuracy of any information concerning the Company
other than such as would be the subject of
representations and warranties in a public financing
by the Company, or conditions requiring the Company
to make any representations, warranties or covenants
in connection with such financing) funds for such
offer which, when added to the amount of cash and
cash equivalents which such Person or group then has
available and has irrevocably committed in writing to
the Company to utilize for purposes of the offer if
consummated, and to keep available for such purposes
until the offer is consummated or withdrawn, will be
sufficient to pay for the cash portion of the
consideration payable for all shares outstanding on a
fully diluted basis and all related expenses and/or,
as the case may be, (b) with respect to any
securities portion of the offer, the opinion of a
nationally recognized investment bank, ranking in the
top ten United States domestic mergers and
acquisitions advisors for the most recent year,
jointly chosen by the Person and the Independent
Directors, and which investment bank has not provided
services for either the Company or such Person (with
costs for the services of such investment bank to be
paid by such Person), that the value of the
securities offered as consideration in the offer for
each share of Common Stock receiving such securities
is, at the time of the expiration of the offer, equal
to or greater than the cash offered as consideration
in the offer for each share of Common Stock not
receiving securities;
3
<PAGE> 4
(2) after the consummation of such offer, such
Person, alone or together with any of its Affiliates
and Associates, owns at least 80% of the then
outstanding shares of Common Stock;
(3) such offer must remain open for at least 120
days; provided, that (x) if there is any increase in
the price of such offer, such offer must remain open
for at least 20 Business Days after the last such
increase, and (y) such offer must remain open for at
least 20 Business Days after the date that any bona
fide alternative offer is made which, in the opinion
of one or more investment banking firms designated by
the Company, provides for consideration per share in
excess of that provided for in such offer; provided
further, however, that such offer need not remain
open, as a result of this clause (3), beyond (i) the
time which any other offer satisfying the criteria
for a Qualifying Offer is then required to be kept
open under this clause (3), or (ii) the announcement
prior to the then scheduled expiration date, of any
other offer with respect to which the Board of
Directors has agreed to redeem the Rights immediately
prior to acceptance for payment of shares thereunder
(unless such offer is terminated prior to its
expiration without any shares having been purchased
thereunder); and
(4) prior to or on the date such offer is commenced
within the meaning of Rule 14d-2(a) of the Rules and
Regulations under the Exchange Act, such Person makes
an irrevocable written commitment to the Company and
in the offer to purchase relating to the offer:
(a) to consummate promptly upon completion
of such offer a transaction whereby all shares of
Common Stock not purchased in such offer will be
acquired at the same price per share paid pursuant to
the offer, and otherwise not to purchase any shares
of Common Stock following completion of the offer;
(b) that such Person or group will not
materially amend such offer, except to increase the
price offered; and
(c) that neither such Person nor any of its
Affiliates or Associates will make any offer for any
equity securities of the Company for six months after
commencement of the original offer if the original
offer does not result in the
4
<PAGE> 5
tender of the number of shares required to be
purchased pursuant to clause (2) above, unless
another tender offer for all outstanding shares of
Common Stock is commenced (a) at a price per share in
excess of that provided for in such original offer,
(b) on terms satisfying clauses (1) and (4) of this
Section 11(a)(ii) (in which event, any new offer by
such Person or by any of its Affiliates or Associates
must be at a price no less than that provided in such
original offer) or (c) with the approval of the Board
of Directors of the Company (in which event, any new
offer by such Person or by any of its Affiliates or
Associates must be at a price no less than that
provided for in such approved offer),
an offer meeting the requirements set forth above being
referred to herein as a "Qualifying Offer"; provided, however,
that if such Person shall have become an Interested
Shareholder solely as a result of a reduction in the number of
shares of Common Stock outstanding due to a repurchase of
shares of Common Stock by the Company, then such Person shall
not be deemed an Interested Shareholder and this Section 11(a)
(ii) shall not apply unless and until such Person shall
purchase or otherwise become (as a result of actions taken by
such Person or any of its Affiliates or Associates) the
Beneficial Owner of additional shares of Common Stock
constituting 1% or more of the then outstanding shares of
Common Stock other than pursuant to a Qualifying Offer, then,
promptly following the occurrence of such event, proper
provision shall be made so that each holder of a Right (except
as provided below and in Section 7(e) hereof) shall thereafter
have the right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this
Agreement, in lieu of a number of one two-hundredths of a
share of Preferred Stock, such number of shares of Common
Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number
of one two-hundredths of a share of Preferred Stock for which
a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by 50% of the
Current Market Price (determined pursuant to Section 11(d)
hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
The Independent Directors shall be permitted, by action of a
majority thereof, to shorten any time frame established
pursuant to this Section 11(a)(ii).
5
<PAGE> 6
3. AMENDMENT OF SECTION 13(d).
Section 13(d) of the Rights Agreement is amended by deleting
such section in its entirety and substituting in lieu thereof the following:
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described
in subparagraphs (x) and (y) of Section 13(a) hereof if (i) such
transaction is consummated with a person or persons who acquired such
shares of Common Stock pursuant to a Qualifying Offer (or a wholly
owned subsidiary of any such Person or Persons), (ii) the price per
share of Common Stock offered in such transaction is not less than the
price per share of Common Stock paid to all holders of shares of Common
Stock whose shares were purchased pursuant to such Qualifying Offer and
(iii) the form of consideration being offered to the remaining holders
of shares of Common Stock pursuant to such transaction is the same as
the form of consideration paid pursuant to such Qualifying Offer. Upon
consummation of any such transaction contemplated by this Section
13(d), all Rights hereunder shall expire."
4. EFFECTIVENESS.
This Amendment No. 1 shall be deemed effective as of May 28, 1999 as if
executed by both parties hereto on such date. Except as amended hereby, the
Rights Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
5. MISCELLANEOUS.
This Amendment No. 1 shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts to
be made and performed entirely within such state. This Amendment No. 1 may be
executed in any number of counterparts, each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument. If any term, provision, covenant or
restriction of this Amendment No. 1 is held by a court of competent jurisdiction
or other authority to be invalid, illegal, or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Amendment No. 1 shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed as of the date and year first above written.
VENATOR GROUP, INC.
By: /s/ Gary M. Bahler
----------------------------------------
Name: Gary M. Bahler
Title: Senior Vice President,
General Counsel and Secretary
FIRST CHICAGO TRUST COMPANY OF NEW
YORK, as Rights Agent
By: /s/ Charles D. Keryc
----------------------------------------
Name: Charles D. Keryc
Title: Vice President
7
<PAGE> 1
EXHIBIT 10.1
EXECUTIVE SEVERANCE BENEFIT AGREEMENT
THIS AGREEMENT made as of [Date] by and between VENATOR GROUP, INC., a
New York corporation with its principal office at 233 Broadway, New York, New
York 10279 (the "Company") and [Executive], residing at [Address] (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the establishment and maintenance of
a sound and vital management of the Company is essential to the protection and
enhancement of the interests of the Company and its shareholders; and
WHEREAS, the Company wishes to offer a form of protection to the
Executive, as one of a select group of officers and key employees of the Company
and its Affiliates, in the event the Executive's employment with the Control
Group terminates; and
WHEREAS, the Company also recognizes that the possibility of a Change
in Control of the Company, with the attendant uncertainties and risks, might
result in the departure or distraction of the Executive to the detriment of the
Company; and
WHEREAS, the Company wishes to induce the Executive to remain with the
Control Group, and to reinforce and encourage the Executive's continued
attention and dedication, when faced with the possibility of a Change in Control
of the Company; and
WHEREAS, this Agreement amends and supersedes any employment agreement,
severance plan, policy and/or practice of the Company in effect for the
Executive.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
<PAGE> 2
1. Definitions. The following terms shall have the meanings set forth
in this section as follows:
(a) "Affiliate" shall mean the Company and any entity affiliated with
the Company within the meaning of Code Section 414(b) with respect to a
controlled group of corporations, Code Section 414(c) with respect to trades or
businesses under common control with the Company, Code Section 414(m) with
respect to affiliated service groups and any other entity required to be
aggregated with the Company under Section 414(o) of the Code. No entity shall be
treated as an Affiliate for any period during which it is not part of the
controlled group, under common control or otherwise required to be aggregated
under Code Section 414.
(b) "Beneficiary" shall mean the individual designated by the
Executive, on a form acceptable by the Committee, to receive benefits payable
under this Agreement in the event of the Executive's death. If no Beneficiary is
designated, the Executive's Beneficiary shall be his or her spouse, or if the
Executive is not survived by a spouse, the Executive's estate.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Bonus" shall mean an amount equal to the target bonus expected to
be earned by the Executive under the Company's Annual Incentive Compensation
Plan or such other annual bonus plan or program that may then be applicable to
the Executive in a fiscal year, if the applicable target performance goal is
satisfied.
(e) "Cause" shall mean (with regard to the Executive's termination of
employment with the Control Group): (i) the refusal or willful failure by the
Executive to substantially perform his or her duties, (ii) with regard to the
Control Group or any of their assets or businesses, the Executive's dishonesty,
willful misconduct, misappropriation, breach of fiduciary duty or fraud, or
(iii) the Executive's conviction of a felony (other than a traffic violation) or
any other crime involving, in the sole discretion of the Committee, moral
turpitude.
(f) "Change in Control" shall have the meaning set forth in Appendix A
attached hereto.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended and
as hereafter amended from time to time.
2
<PAGE> 3
(h) "Committee" shall mean the Compensation Committee of the Board or
an administrative committee appointed by the Compensation Committee.
(i) "Competition" shall mean the (i) participating, directly or
indirectly, as an individual proprietor, stockholder, officer, employee,
director, joint venturer, investor, lender, or in any capacity whatsoever
(within the United States of America, or in any country where any of the
Executive's former employing members of the Control Group does business) in a
business in competition with any business conducted by any member of the Control
Group for which the Executive worked at any time, provided, however, that such
participation shall not include (A) the mere ownership of not more than 1
percent of the total outstanding stock of a publicly held company; (B) the
performance of services for any enterprise to the extent such services are not
performed, directly or indirectly, for a business in which any of the Employee's
employing members of the Control Group is engaged; or (C) any activity engaged
in with the prior written approval of the Board or the Committee; or (ii)
intentional recruiting, soliciting or inducing, of any employee or employees of
the Control Group to terminate their employment with, or otherwise cease their
relationship with the former employing members of the Control Group where such
employee or employees do in fact so terminate their employment.
(j) "Control Group" shall mean the Company and its Affiliates.
(k) "Good Reason" shall mean (with respect to an Executive's
termination of employment with the Control Group): (i) any material demotion of
the Executive or any material reduction in the Executive's authority or
responsibility, except in each case in connection with the termination of the
Executive's employment for Cause or disability or as a result of the Executive's
death, or temporarily as a result of the Executive's illness or other absence;
(ii) prior to a Change in Control, a reduction in the Executive's rate of base
salary as payable from time to time, other than a reduction that occurs in
connection with, and in the same percentage as, an across-the-board reduction
over any three-year period in the base salaries of all executives of the Company
of a similar level and where the reduction is less than 20 percent of the
Executive's base salary measured from the beginning of such three-year period;
(iii) on or after a Change in Control, any reduction in the Executive's rate of
base salary as payable from time to time; (iv) a reduction in the Executive's
annual bonus classification level other than in connection with a redesign of
the applicable bonus plan that affects all employees at the Executive's bonus
level; (v) a failure of the Company to continue in effect the benefits
applicable to, or the Company's reduction of the benefits applicable to, the
Executive under any benefit plan or arrangement (including without limitation,
any pension, life insurance, health or disability plan) in which the Executive
participates as of the date of the Change in Control without implementation of a
substitute plan(s) providing materially similar benefits in the aggregate to
those discontinued or reduced, except for a discontinuance of, or reduction
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<PAGE> 4
under, any such plan or arrangement that is legally required and/or
generally applies to all executives of the Company of a similar level, provided
that in either such event the Company provides similar benefits (or the economic
effect thereof) to the Executive in any manner determined by the Company; or
(vi) failure of any successor to the Company to assume in writing the
obligations hereunder.
(l) "Salary" shall mean an Executive's base monthly cash compensation
rate for services paid to the Executive by the Company or an Affiliate at the
time of his or her termination of employment from the Control Group. Salary
shall not include commissions, bonuses, overtime pay, incentive compensation,
benefits paid under any qualified plan, any group medical, dental or other
welfare benefit plan, noncash compensation or any other additional compensation
but shall include amounts reduced pursuant to an Executive's salary reduction
agreement under Sections 125 or 401(k) of the Code (if any) or a nonqualified
elective deferred compensation arrangement to the extent that in each such case
the reduction is to base salary.
(m) "Severance Benefit" shall mean (i) in the case of the Executive's
termination of employment that does not occur within the 24 month period
following a Change in Control, two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 26 weeks; or (ii) in the
case of an Executive's termination of employment within the 24 month period
following a Change in Control, two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 52 weeks. The Executive's
prorated Bonus for one week shall equal the Executive's Bonus divided by 52.
(n) "Severance Period" shall mean (i) in the case of the Executive's
termination of employment that does not occur within the 24 month period
following a Change in Control, two weeks multiplied by the Executive's Years of
Service, with a minimum of 26 weeks; or (ii) in the case of an Executive's
termination of employment within the 24 month period following a Change in
Control, two weeks multiplied by the Executive's Years of Service, with a
minimum of 52 weeks.
(o) "Year of Service" shall mean each 12 consecutive month period
commencing on the Executive's date of hire by the Company or an Affiliate and
each anniversary thereof in which the Executive is paid by the Company or an
Affiliate for the performance of full-time services as an Executive. For
purposes of this section, full-time services shall mean that the Employee is
employed for at least 30 hours per week. A Year of Service shall include any
period during which an Employee is not working due to disability, leave of
absence or layoff so long as he or she is being paid by the Employer (other than
through any employee benefit plan). A Year of Service also shall include service
in any branch of the armed forces of the United States by any person who is an
Executive on the date such service commenced, but only to the extent required by
applicable law.
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2. Term. The initial term of this Agreement shall end on December 31 of
the year following the year in which this Agreement is entered into. On December
31 of each year, the term shall be automatically renewed for an additional one
year so that the term shall then be for two years, unless the Committee notifies
the Executive prior to any December 31 that the term shall not be renewed.
Notwithstanding anything in this Agreement to the contrary, if the Company
becomes obligated to make any payment to the Executive pursuant to the terms
hereof at or prior to the expiration of this Agreement, then this Agreement
shall remain in effect until all of the Company's obligations hereunder are
fulfilled.
3. Benefits Upon Termination. In the event the Executive's employment
with the Control Group is terminated without Cause or the Executive terminates
employment with the Control Group within 60 days after the occurrence of a Good
Reason event with regard to the Executive, the Executive shall be entitled to a
Severance Benefit as set forth below.
(a) The Executive shall receive 50 percent of his or her Severance
Benefit in the form of a lump sum cash payment as soon as administratively
feasible following his or her termination of employment with the Control Group,
provided, however, that interest shall be payable beginning on the tenth day
following such termination of employment at the prime rate of interest as stated
in The Wall Street Journal.
(b) The Executive shall receive the remaining 50 percent of his or her
Severance Benefit in the form of a lump sum cash payment as soon as
administratively feasible after the 90th day following the date of the
Executive's termination of employment with the Control Group, subject to (c)
below, provided, however, that interest shall be payable beginning on the tenth
day following such termination of employment at the prime rate of interest as
stated in The Wall Street Journal. Notwithstanding the foregoing, if a Change in
Control occurs prior to the Executive's receipt of the remaining 50 percent of
his or her Severance Benefit, the Executive shall receive such remaining 50
percent within 10 days following the Change in Control (and, if not paid within
such 10 day period, with interest payable beginning on the tenth day following
the Change in Control at the prime rate of interest as stated in The Wall Street
Journal).
(c) The Executive shall only be entitled to the portion of his or her
Severance Benefit described in (b) above if the Executive does not engage in
Competition during the 90 day period following his or her termination of
employment with the Control Group and if the Executive has not materially
violated the provisions of Section 14 hereof. If the Executive does engage in
Competition or violates the provisions of Section 14 during such one year
period, the portion of the Executive's Severance Benefit described in (b) above
shall be forfeited. If the restriction set forth in this subsection is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
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(d) Notwithstanding anything to the contrary contained herein, if the
Executive's employment with the Control Group is terminated as described in the
introductory paragraph to this Section 3 following a Change in Control, (i) the
Executive shall receive 100 percent of his or her Severance Benefit in the form
of a lump sum cash payment within 10 days following his or her termination of
employment with the Control Group (and, if not paid within such 10 day period,
with interest payable beginning on the tenth day following such termination of
employment at the prime rate of interest as stated in The Wall Street Journal),
and (ii) the restriction on competition contained in Section 3(c) shall not
apply.
(e) The Executive shall continue, to the extent permitted under legal
and underwriting requirements (if any), to participate during his or her
Severance Period in any group medical, dental or life insurance plan he or she
participated in prior to his or her termination of employment, under
substantially similar terms and conditions as an active Employee; provided
participation in such group medical, dental and life insurance benefits shall
correspondingly cease at such time as the Executive becomes eligible for a
future employer's medical, dental and/or life insurance coverage (or would
become eligible if the Executive did not waive coverage). Notwithstanding the
foregoing, the Executive may not continue to participate in such plans on a
pre-tax or tax-favored basis. Notwithstanding anything else herein, the
Executive shall not be entitled to any benefits during the Severance Period
other than the benefits provided in Section 3 herein and, without limiting the
generality of the foregoing, the Executive specifically shall not be entitled to
continue to participate in any group disability or voluntary accidental death or
dismemberment insurance plan he or she participated in prior to his or her
termination of employment. Without limiting the generality of the foregoing, the
Executive shall not accrue additional benefits under any pension plan of the
Employer (whether or not qualified under Section 401(a) of the Code) during the
Severance Period, provided, however, that payment of any Severance Benefit shall
be included in the Executive's earnings for purposes of calculating the
Executive's benefit under the Venator Group Retirement Plan, Venator Group
401(k) Plan, and Venator Group Excess Cash Balance Plan.
(f) In the event of the Executive's death after becoming eligible for
the portion of the Severance Benefit described in (a) above and prior to payment
of such amount, such portion of the Severance Benefit shall be paid to the
Executive's Beneficiary. In addition to the foregoing, in the event of the
Executive's death prior to payment of the portion of the Severance Benefit
described in (b) above, such amount shall be paid to the Executive's
Beneficiary, but only to the extent that the Executive satisfied the provisions
set forth in (c) above for the period following the Executive's termination of
employment with the Control Group and prior to his or her death.
(g) Notwithstanding anything else herein, to the extent the Executive
would be subject to the excise tax under Section 4999 of the Code on the amounts
in (a) or (b) above and such other amounts or benefits he or she received from
the Company and its
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Affiliates required to be included in the calculation of parachute payments for
purposes of Sections 280G and 4999 of the Code, the amounts provided under this
Agreement shall be automatically reduced to an amount one dollar less than that,
when combined with such other amounts and benefits required to be so included,
would subject the Executive to the excise tax under Section 4999 of the Code,
if, and only if, the reduced amount received by the Executive, would be greater
than the unreduced amount to be received by the Executive minus the excise tax
payable under Section 4999 of the Code on such amount and the other amounts and
benefits received by the Executive and required to be included in the
calculation of a parachute payment for purposes of Sections 280G and 4999 of the
Code.
4. No Duty to Mitigate/Set-off. The Company agrees that if the
Executive's employment with the Company is terminated during the term of this
Agreement, the Executive shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, except to the extent provided for in
Section 3(c), the amount of the Severance Benefit provided for in this Agreement
shall not be reduced by any compensation earned by the Executive or benefit
provided to the Executive as the result of employment by another employer or
otherwise. Except as otherwise provided herein, the Company's obligations to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive. The Executive shall
retain any and all rights under all pension plans, welfare plans, equity plans
and other plans, including other severance plans, under which the Executive
would otherwise be entitled to benefits.
5. Funding. Severance Benefits shall be funded out of the general
assets of the Company as and when they are payable under this Agreement. The
Executive shall be solely a general creditor of the Company. If the Company
decides to establish any advance accrued reserve on its books against the future
expense of benefits payable hereunder, or if the Company is required to fund a
trust under this Agreement, such reserve or trust shall not under any
circumstances be deemed to be an asset of this Agreement.
6. Administration. This Agreement shall be administered by the
Committee. The Committee (or its delegate) shall have the exclusive right,
power, and authority, in its sole and absolute discretion, to administer, apply
and interpret the Agreement and to decide all matters arising in connection with
the operation or administration of the Agreement. Without limiting the
generality of the foregoing, the Committee shall have the sole and absolute
discretionary authority: (a) to take all actions and make all decisions with
respect to the eligibility for, and the amount of, benefits payable under the
Agreement; (b) to formulate, interpret and apply rules, regulations and policies
necessary to administer the Agreement in accordance with its terms; (c) to
decide questions, including legal or factual questions, relating to the
calculation and payment of benefits under the Agreement; (d) to resolve and/or
clarify any ambiguities, inconsistencies and omissions arising under the
Agreement; (e) to decide for purposes of paying benefits hereunder, whether,
based on the
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<PAGE> 8
terms of this Agreement, a termination of employment is for Good Reason or for
Cause; and (f) except as specifically provided to the contrary herein, to
process and approve or deny benefit claims and rule on any benefit exclusions.
All determinations made by the Committee (or any delegate) with respect to any
matter arising under the Agreement shall be final, binding and conclusive on all
parties.
Decisions of the Committee shall be made by a majority of its members
attending a meeting at which a quorum is present (which meeting may be held
telephonically), or by written action in accordance with applicable law. All
decisions of the Committee on any question concerning the interpretation and
administration of the Agreement shall be final, conclusive and binding upon all
parties.
No member of the Committee and no officer, director or employee of the
Company or any other Affiliate shall be liable for any action or inaction with
respect to his or her functions under this Agreement unless such action or
inaction is adjudged to be due to gross negligence, willful misconduct or fraud.
Further, no such person shall be personally liable merely by virtue of any
instrument executed by him or her or on his or her behalf in connection with
this Agreement.
The Company shall indemnify, to the full extent permitted by law and
its Certificate of Incorporation and By-laws (but only to the extent not covered
by insurance) its officers and directors (and any employee involved in carrying
out the functions of the Company under the Agreement) and each member of the
Committee against any expenses, including amounts paid in settlement of a
liability, which are reasonably incurred in connection with any legal action to
which such person is a party by reason of his or her duties or responsibilities
with respect to the Agreement, except with regard to matters as to which he or
she shall be adjudged in such action to be liable for gross negligence, willful
misconduct or fraud in the performance of his or her duties.
7. Claims Procedures. Any claim by the Executive or Beneficiary
("Claimant") with respect to participation, contributions, benefits or other
aspects of the operation of the Agreement shall be made in writing to the
Secretary of the Company or such other person designated by the Committee from
time to time for such purpose. If the designated person receiving a claim
believes, following consultation with the Chairman of the Committee, that the
claim should be denied, he or she shall notify the Claimant in writing of the
denial of the claim within 90 days after his or her receipt thereof (this period
may be extended an additional 90 days in special circumstances and, in such
event, the Claimant shall be notified in writing of the extension). Such notice
shall (a) set forth the specific reason or reasons for the denial making
reference to the pertinent provisions of the Agreement on which the denial is
based, (b) describe any additional material or information necessary to perfect
the claim, and explain why such material or information, if any, is necessary,
and (c) inform the Claimant of his or her right pursuant to this section to
request review of the decision.
A Claimant may appeal the denial of a claim by submitting a written
request for review to the Committee, within 60 days after the date on which such
denial is received.
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Such period may be extended by the Committee for good cause shown. The claim
will then be reviewed by the Committee. A Claimant or his or her duly authorized
representative may discuss any issues relevant to the claim, may review
pertinent documents and may submit issues and comments in writing. If the
Committee deems it appropriate, it may hold a hearing as to a claim. If a
hearing is held, the Claimant shall be entitled to be represented by counsel.
The Committee shall decide whether or not to grant the claim within 60 days
after receipt of the request for review, but this period may be extended by the
Committee for up to an additional 60 days in special circumstances. Written
notice of any such special circumstances shall be sent to the Claimant. Any
claim not decided upon in the required time period shall be deemed denied. All
interpretations, determinations and decisions of the Committee with respect to
any claim shall be made in its sole discretion based on the Agreement and other
relevant documents and shall be final, conclusive and binding on all persons.
8. Incompetency; Payments to Minors. In the event that the Committee
finds that a Participant is unable to care for his or her affairs because of
illness or accident, then benefits payable hereunder, unless claim has been made
therefor by a duly appointed guardian, committee, or other legal representative,
may be paid in such manner as the Committee shall determine, and the application
thereof shall be a complete discharge of all liability for any payments or
benefits to which such Participant was or would have been otherwise entitled
under this Agreement. Any payments to a minor pursuant to this Agreement may be
paid by the Committee in its sole and absolute discretion (a) directly to such
minor; (b) to the legal or natural guardian of such minor; or (c) to any other
person, whether or not appointed guardian of the minor, who shall have the care
and custody of such minor. The receipt by such individual shall be a complete
discharge of all liability under the Agreement therefore.
9. Withholding. The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
may have to withhold federal, state or local income or other taxes incurred by
reason of payments pursuant to this Agreement. In lieu thereof, the Employer
shall have the right to withhold the amount of such taxes from any other sums
due or to become due from the Employer to the Executive upon such terms and
conditions as the Committee may prescribe.
10. Assignment and Alienation. Except as provided herein, the benefits
payable under this Agreement shall not be subject to alienation, transfer,
assignment, garnishment, execution or levy of any kind, and any attempt to cause
any benefits to be so subjected shall not be recognized.
11. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. This Agreement shall inure
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to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder if the Executive had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's Beneficiary, or the
executors, personal representatives or administrators of the Executive's estate.
12. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. All references to sections of the Code or any other law
shall be deemed also to refer to any successor provisions to such sections and
laws.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Confidentiality. The Executive shall not at any time during the
term of this Agreement, or thereafter, communicate or disclose to any
unauthorized person, or use for the Executive's own account, without the prior
written consent of the Board, any proprietary processes, or other confidential
information of the Company or any subsidiary concerning their business or
affairs, accounts or customers, it being understood, however, that the
obligations of this section shall not apply to the extent that the aforesaid
matters (a) are disclosed in circumstances in which the Executive is legally
required to do so, or (b) become generally known to and available for use by the
public other than by the Executive's wrongful act or omission.
15. Severability. If any provisions of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
16. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in New York, New York, or in such
other city in which the Executive is then located, in accordance with the rules
of the American Arbitration Association then in effect. The determination of the
arbitrators, which shall be based upon a de novo interpretation of this
Agreement, shall be final and binding and judgment may be entered on the
arbitrators' award in any court having jurisdiction. The Company shall pay all
costs of the American Arbitration Association and the arbitrator.
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17. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any of its
subsidiary companies and for which the Executive may qualify.
18. Governing Law. This Agreement shall be construed, interpreted, and
governed by the Employee Retirement Income Security Act of 1974, as amended. To
the extent not so governed, it shall be governed by the laws of the State of New
York (without reference to rules relating to conflicts of law).
19. Top-hat Plan. This Agreement is intended to be a "top-hat" welfare
plan within the meaning of Department of Labor Regulation Section 2520.104-24.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive's hand has hereunto been set as of the date first set
forth above.
VENATOR GROUP, INC.
By:_____________________
________________________
________________________
[Executive]
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APPENDIX A
Change in Control
A Change in Control shall mean any 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
Securities Exchange Act of 1934 (a "Person") (other than the Company or its
Affiliates) for shares of common stock of the Company pursuant to which
purchases are made of securities representing at least twenty percent (20%) of
the total combined voting power of the Company's then issued and outstanding
voting securities; (B) the merger or consolidation of the Company with, or the
sale or disposition of all or substantially all of the assets of the Company to,
any Person other than (a) a merger or consolidation which would result in the
voting securities of the Company 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 the Company 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 the Company (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 Securities Exchange Act of 1934), 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 Securities Exchange Act of 1934), in the aggregate, of
securities of the Company representing twenty percent (20%) or more of the total
combined voting power of the Company's then issued and outstanding voting
securities by any Person acting in concert as of the date of this Agreement;
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 the
Company of any plan or proposal for the complete liquidation or dissolution of
the Company or for the sale of all or substantially all of the assets of the
Company; 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 the Company's
stockholders was approved by a vote of at least two-thirds ( ) 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.
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EXHIBIT 10.2
AGREEMENT
THIS AGREEMENT made as of [Date] by and between VENATOR GROUP, INC., a
New York corporation with its principal office at 233 Broadway, New York, New
York 10279 (the "Company") and [Executive], residing at [Address] (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the establishment and maintenance of
a sound and vital management of the Company is essential to the protection and
enhancement of the interests of the Company and its shareholders; and
WHEREAS, the Company wishes to offer a form of protection to the
Executive, as one of a select group of officers and key employees of the Company
and its Affiliates, in the event the Executive's employment with the Control
Group terminates; and
WHEREAS, the Company also recognizes that the possibility of a Change
in Control of the Company, with the attendant uncertainties and risks, might
result in the departure or distraction of the Executive to the detriment of the
Company; and
WHEREAS, the Company wishes to induce the Executive to remain with the
Control Group, and to reinforce and encourage the Executive's continued
attention and dedication, when faced with the possibility of a Change in Control
of the Company; and
WHEREAS, this Agreement amends and supersedes any employment agreement,
severance plan, policy and/or practice of the Company in effect for the
Executive.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
<PAGE> 2
15. Definitions. The following terms shall have the meanings set forth
in this section as follows:
(a) "Affiliate" shall mean the Company and any entity affiliated with
the Company within the meaning of Code Section 414(b) with respect to a
controlled group of corporations, Code Section 414(c) with respect to trades or
businesses under common control with the Company, Code Section 414(m) with
respect to affiliated service groups and any other entity required to be
aggregated with the Company under Section 414(o) of the Code. No entity shall be
treated as an Affiliate for any period during which it is not part of the
controlled group, under common control or otherwise required to be aggregated
under Code Section 414.
(b) "Beneficiary" shall mean the individual designated by the
Executive, on a form acceptable by the Committee, to receive benefits payable
under this Agreement in the event of the Executive's death. If no Beneficiary is
designated, the Executive's Beneficiary shall be his or her spouse, or if the
Executive is not survived by a spouse, the Executive's estate.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Bonus" shall mean an amount equal to the target bonus expected to
be earned by the Executive under the Company's Annual Incentive Compensation
Plan or such other annual bonus plan or program that may then be applicable to
the Executive in a fiscal year, if the applicable target performance goal is
satisfied.
(e) "Cause" shall mean (with regard to the Executive's termination of
employment with the Control Group): (i) the refusal or willful failure by the
Executive to substantially perform his or her duties, (ii) with regard to the
Control Group or any of their assets or businesses, the Executive's dishonesty,
willful misconduct, misappropriation, breach of fiduciary duty or fraud, or
(iii) the Executive's conviction of a felony (other than a traffic violation) or
any other crime involving, in the sole discretion of the Committee, moral
turpitude.
(f) "Change in Control" shall have the meaning set forth in Appendix A
attached hereto.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended and
as hereafter amended from time to time.
(h) "Committee" shall mean the Compensation Committee of the Board or
an administrative committee appointed by the Compensation Committee.
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(i) "Competition" shall mean the (i) participating, directly or
indirectly, as an individual proprietor, stockholder, officer, employee,
director, joint venturer, investor, lender, or in any capacity whatsoever
(within the United States of America, or in any country where any of the
Executive's former employing members of the Control Group does business) in a
business in competition with any business conducted by any member of the Control
Group for which the Executive worked at any time, provided, however, that such
participation shall not include (A) the mere ownership of not more than 1
percent of the total outstanding stock of a publicly held company; (B) the
performance of services for any enterprise to the extent such services are not
performed, directly or indirectly, for a business in which any of the Employee's
employing members of the Control Group is engaged; or (C) any activity engaged
in with the prior written approval of the Board or the Committee; or (ii)
intentional recruiting, soliciting or inducing, of any employee or employees of
the Control Group to terminate their employment with, or otherwise cease their
relationship with the former employing members of the Control Group where such
employee or employees do in fact so terminate their employment.
(j) "Control Group" shall mean the Company and its Affiliates.
(k) "Good Reason" shall mean (with respect to an Executive's
termination of employment with the Control Group): (i) any material demotion of
the Executive or any material reduction in the Executive's authority or
responsibility, except in each case in connection with the termination of the
Executive's employment for Cause or disability or as a result of the Executive's
death, or temporarily as a result of the Executive's illness or other absence;
(ii) prior to a Change in Control, a reduction in the Executive's rate of base
salary as payable from time to time, other than a reduction that occurs in
connection with, and in the same percentage as, an across-the-board reduction
over any three-year period in the base salaries of all executives of the Company
of a similar level and where the reduction is less than 20 percent of the
Executive's base salary measured from the beginning of such three-year period;
(iii) on or after a Change in Control, any reduction in the Executive's rate of
base salary as payable from time to time; (iv) a reduction in the Executive's
annual bonus classification level other than in connection with a redesign of
the applicable bonus plan that affects all employees at the Executive's bonus
level; (v) a failure of the Company to continue in effect the benefits
applicable to, or the Company's reduction of the benefits applicable to, the
Executive under any benefit plan or arrangement (including without limitation,
any pension, life insurance, health or disability plan) in which the Executive
participates as of the date of the Change in Control without implementation of a
substitute plan(s) providing materially similar benefits in the aggregate to
those discontinued or reduced, except for a discontinuance of, or reduction
under, any such plan or arrangement that is legally required and/or generally
applies to all executives of the Company of a similar level, provided that in
either such event the Company provides similar benefits (or the economic effect
thereof) to the Executive in any manner determined by the Company; or (vi)
failure of any successor to the Company to assume in writing the obligations
hereunder.
3
<PAGE> 4
(l) "Salary" shall mean an Executive's base monthly cash compensation
rate for services paid to the Executive by the Company or an Affiliate at the
time of his or her termination of employment from the Control Group. Salary
shall not include commissions, bonuses, overtime pay, incentive compensation,
benefits paid under any qualified plan, any group medical, dental or other
welfare benefit plan, noncash compensation or any other additional compensation
but shall include amounts reduced pursuant to an Executive's salary reduction
agreement under Sections 125 or 401(k) of the Code (if any) or a nonqualified
elective deferred compensation arrangement to the extent that in each such case
the reduction is to base salary.
(m) "Severance Benefit" shall mean (i) in the case of the Executive's
termination of employment that does not occur within the 24 month period
following a Change in Control, two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 26 weeks; or (ii) in the
case of an Executive's termination of employment within the 24 month period
following a Change in Control, two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 104 weeks. The
Executive's prorated Bonus for one week shall equal the Executive's Bonus
divided by 52. In no event, however, shall the Severance Benefit payable to an
Executive hereunder be less than 12 months' Salary.
(n) "Severance Period" shall mean (i) in the case of the Executive's
termination of employment that does not occur within the 24 month period
following a Change in Control, two weeks multiplied by the Executive's Years of
Service, with a minimum of 52 weeks; or (ii) in the case of an Executive's
termination of employment within the 24 month period following a Change in
Control, two weeks multiplied by the Executive's Years of Service, with a
minimum of 104 weeks.
(o) "Year of Service" shall mean each 12 consecutive month period
commencing on the Executive's date of hire by the Company or an Affiliate and
each anniversary thereof in which the Executive is paid by the Company or an
Affiliate for the performance of full-time services as an Executive. For
purposes of this section, full-time services shall mean that the Employee is
employed for at least 30 hours per week. A Year of Service shall include any
period during which an Employee is not working due to disability, leave of
absence or layoff so long as he or she is being paid by the Employer (other than
through any employee benefit plan). A Year of Service also shall include service
in any branch of the armed forces of the United States by any person who is an
Executive on the date such service commenced, but only to the extent required by
applicable law.
16. Term. The initial term of this Agreement shall end on December 31
of the year following the year in which this Agreement is entered into. On
December 31 of each year, the term shall be automatically renewed for an
additional one year so that the term shall then be for two years, unless the
Committee notifies the Executive prior to any December 31 that the term shall
not be renewed. Notwithstanding anything in this Agreement to the contrary, if
the Company becomes obligated to make any payment to the Executive pursuant to
the terms hereof at or prior to the expiration of this Agreement, then this
Agreement shall remain in effect until all of the Company's
4
<PAGE> 5
obligations hereunder are fulfilled.
17. Benefits Upon Termination. In the event the Executive's employment
with the Control Group is terminated without Cause or the Executive terminates
employment with the Control Group within 60 days after the occurrence of a Good
Reason event with regard to the Executive, the Executive shall be entitled to a
Severance Benefit as set forth below.
(a) The Executive shall receive 50 percent of his or her Severance
Benefit in the form of a lump sum cash payment as soon as administratively
feasible following his or her termination of employment with the Control Group,
provided, however, that interest shall be payable beginning on the tenth day
following such termination of employment at the prime rate of interest as stated
in The Wall Street Journal.
(b) The Executive shall receive the remaining 50 percent of his or her
Severance Benefit in the form of a lump sum cash payment as soon as
administratively feasible following the one year anniversary of the Executive's
termination of employment with the Control Group, subject to (c) below,
provided, however, that interest shall be payable beginning on the tenth day
following such termination of employment at the prime rate of interest as stated
in The Wall Street Journal. Notwithstanding the foregoing, if a Change in
Control occurs prior to the Executive's receipt of the remaining 50 percent of
his or her Severance Benefit, the Executive shall receive such remaining 50
percent within 10 days following the Change in Control (and, if not paid within
such 10 day period, with interest payable beginning on the tenth day following
the Change in Control at the prime rate of interest as stated in The Wall Street
Journal).
(c) The Executive shall only be entitled to the portion of his or her
Severance Benefit described in (b) above if the Executive does not engage in
Competition during the one year period following his or her termination of
employment with the Control Group and if the Executive has not materially
violated the provisions of Section 14 hereof. If the Executive does engage in
Competition or violates the provisions of Section 14 during such one year
period, the portion of the Executive's Severance Benefit described in (b) above
shall be forfeited. If the restriction set forth in this subsection is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
(d) Notwithstanding anything to the contrary contained herein, if the
Executive's employment with the Control Group is terminated as described in the
introductory paragraph to this Section 3 following a Change in Control, (i) the
Executive shall receive 100 percent of his or her Severance Benefit in the form
of a lump sum cash payment within 10 days following his or her termination of
employment with the Control Group (and, if not paid within such 10 day period,
with interest payable beginning on the tenth day following such termination of
employment at the prime rate of interest as stated in The Wall Street Journal),
and (ii) the restriction on competition contained in Section 3(c) shall not
apply.
5
<PAGE> 6
(e) The Executive shall continue, to the extent permitted under legal
and underwriting requirements (if any), to participate during his or her
Severance Period in any group medical, dental or life insurance plan he or she
participated in prior to his or her termination of employment, under
substantially similar terms and conditions as an active Employee; provided
participation in such group medical, dental and life insurance benefits shall
correspondingly cease at such time as the Executive becomes eligible for a
future employer's medical, dental and/or life insurance coverage (or would
become eligible if the Executive did not waive coverage). Notwithstanding the
foregoing, the Executive may not continue to participate in such plans on a
pre-tax or tax-favored basis. Notwithstanding anything else herein, the
Executive shall not be entitled to any benefits during the Severance Period
other than the benefits provided in Section 3 herein and, without limiting the
generality of the foregoing, the Executive specifically shall not be entitled to
continue to participate in any group disability or voluntary accidental death or
dismemberment insurance plan he or she participated in prior to his or her
termination of employment. Without limiting the generality of the foregoing, the
Executive shall not accrue additional benefits under any pension plan of the
Employer (whether or not qualified under Section 401(a) of the Code) during the
Severance Period, provided, however, that payment of any Severance Benefit shall
be included in the Executive's earnings for purposes of calculating the
Executive's benefit under the Venator Group Retirement Plan, Venator Group
401(k) Plan, and Venator Group Excess Cash Balance Plan.
(f) In the event of the Executive's death after becoming eligible for
the portion of the Severance Benefit described in (a) above and prior to payment
of such amount, such portion of the Severance Benefit shall be paid to the
Executive's Beneficiary. In addition to the foregoing, in the event of the
Executive's death prior to payment of the portion of the Severance Benefit
described in (b) above, such amount shall be paid to the Executive's
Beneficiary, but only to the extent that the Executive satisfied the provisions
set forth in (c) above for the period following the Executive's termination of
employment with the Control Group and prior to his or her death.
(g) Notwithstanding anything else herein, to the extent the Executive
would be subject to the excise tax under Section 4999 of the Code on the amounts
in (a) or (b) above and such other amounts or benefits he or she received from
the Company and its Affiliates required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code, the
amounts provided under this Agreement shall be automatically reduced to an
amount one dollar less than that, when combined with such other amounts and
benefits required to be so included, would subject the Executive to the excise
tax under Section 4999 of the Code, if, and only if, the reduced amount received
by the Executive, would be greater than the unreduced amount to be received by
the Executive minus the excise tax payable under Section 4999 of the Code on
such amount and the other amounts and benefits received by the Executive and
required to be included in the calculation of a parachute payment for purposes
of Sections 280G and 4999 of the Code.
18. No Duty to Mitigate/Set-off. The Company agrees that if the
Executive's employment with the Company is terminated during the term of this
Agreement, the Executive shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, except to the extent provided for in
Section
6
<PAGE> 7
3(c), the amount of the Severance Benefit provided for in this Agreement shall
not be reduced by any compensation earned by the Executive or benefit provided
to the Executive as the result of employment by another employer or otherwise.
Except as otherwise provided herein, the Company's obligations to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive. The Executive shall retain any and
all rights under all pension plans, welfare plans, equity plans and other plans,
including other severance plans, under which the Executive would otherwise be
entitled to benefits.
19. Funding. Severance Benefits shall be funded out of the general
assets of the Company as and when they are payable under this Agreement. The
Executive shall be solely a general creditor of the Company. If the Company
decides to establish any advance accrued reserve on its books against the future
expense of benefits payable hereunder, or if the Company is required to fund a
trust under this Agreement, such reserve or trust shall not under any
circumstances be deemed to be an asset of this Agreement.
20. Administration. This Agreement shall be administered by the
Committee. The Committee (or its delegate) shall have the exclusive right,
power, and authority, in its sole and absolute discretion, to administer, apply
and interpret the Agreement and to decide all matters arising in connection with
the operation or administration of the Agreement. Without limiting the
generality of the foregoing, the Committee shall have the sole and absolute
discretionary authority: (a) to take all actions and make all decisions with
respect to the eligibility for, and the amount of, benefits payable under the
Agreement; (b) to formulate, interpret and apply rules, regulations and policies
necessary to administer the Agreement in accordance with its terms; (c) to
decide questions, including legal or factual questions, relating to the
calculation and payment of benefits under the Agreement; (d) to resolve and/or
clarify any ambiguities, inconsistencies and omissions arising under the
Agreement; (e) to decide for purposes of paying benefits hereunder, whether,
based on the terms of this Agreement, a termination of employment is for Good
Reason or for Cause; and (f) except as specifically provided to the contrary
herein, to process and approve or deny benefit claims and rule on any benefit
exclusions. All determinations made by the Committee (or any delegate) with
respect to any matter arising under the Agreement shall be final, binding and
conclusive on all parties.
Decisions of the Committee shall be made by a majority of its members
attending a meeting at which a quorum is present (which meeting may be held
telephonically), or by written action in accordance with applicable law. All
decisions of the Committee on any question concerning the interpretation and
administration of the Agreement shall be final, conclusive and binding upon all
parties.
No member of the Committee and no officer, director or employee of the
Company or any other Affiliate shall be liable for any action or inaction with
respect to his or her functions under this Agreement unless such action or
inaction is adjudged to be due to gross negligence, willful misconduct or fraud.
Further, no such person shall be personally liable merely by virtue of any
instrument executed by him or her or on his or her behalf in connection with
this Agreement.
7
<PAGE> 8
The Company shall indemnify, to the full extent permitted by law and
its Certificate of Incorporation and By-laws (but only to the extent not covered
by insurance) its officers and directors (and any employee involved in carrying
out the functions of the Company under the Agreement) and each member of the
Committee against any expenses, including amounts paid in settlement of a
liability, which are reasonably incurred in connection with any legal action to
which such person is a party by reason of his or her duties or responsibilities
with respect to the Agreement, except with regard to matters as to which he or
she shall be adjudged in such action to be liable for gross negligence, willful
misconduct or fraud in the performance of his or her duties.
21. Claims Procedures. Any claim by the Executive or Beneficiary
("Claimant") with respect to participation, contributions, benefits or other
aspects of the operation of the Agreement shall be made in writing to the
Secretary of the Company or such other person designated by the Committee from
time to time for such purpose. If the designated person receiving a claim
believes, following consultation with the Chairman of the Committee, that the
claim should be denied, he or she shall notify the Claimant in writing of the
denial of the claim within 90 days after his or her receipt thereof (this period
may be extended an additional 90 days in special circumstances and, in such
event, the Claimant shall be notified in writing of the extension). Such notice
shall (a) set forth the specific reason or reasons for the denial making
reference to the pertinent provisions of the Agreement on which the denial is
based, (b) describe any additional material or information necessary to perfect
the claim, and explain why such material or information, if any, is necessary,
and (c) inform the Claimant of his or her right pursuant to this section to
request review of the decision.
A Claimant may appeal the denial of a claim by submitting a written
request for review to the Committee, within 60 days after the date on which such
denial is received. Such period may be extended by the Committee for good cause
shown. The claim will then be reviewed by the Committee. A Claimant or his or
her duly authorized representative may discuss any issues relevant to the claim,
may review pertinent documents and may submit issues and comments in writing. If
the Committee deems it appropriate, it may hold a hearing as to a claim. If a
hearing is held, the Claimant shall be entitled to be represented by counsel.
The Committee shall decide whether or not to grant the claim within 60 days
after receipt of the request for review, but this period may be extended by the
Committee for up to an additional 60 days in special circumstances. Written
notice of any such special circumstances shall be sent to the Claimant. Any
claim not decided upon in the required time period shall be deemed denied. All
interpretations, determinations and decisions of the Committee with respect to
any claim shall be made in its sole discretion based on the Agreement and other
relevant documents and shall be final, conclusive and binding on all persons.
22. Incompetency; Payments to Minors. In the event that the Committee
finds that a Participant is unable to care for his or her affairs because of
illness or accident, then benefits payable hereunder, unless claim has been made
therefor by a duly appointed guardian, committee, or other legal representative,
may be paid in such manner as the Committee shall determine, and the application
thereof shall be a complete discharge of all liability for any payments or
benefits to which such Participant was or would have been otherwise entitled
under this Agreement. Any payments to a minor pursuant to this Agreement may be
paid by the Committee in its sole and absolute discretion
8
<PAGE> 9
(a) directly to such minor; (b) to the legal or natural guardian of such minor;
or (c) to any other person, whether or not appointed guardian of the minor, who
shall have the care and custody of such minor. The receipt by such individual
shall be a complete discharge of all liability under the Agreement therefor.
23. Withholding. The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
may have to withhold federal, state or local income or other taxes incurred by
reason of payments pursuant to this Agreement. In lieu thereof, the Employer
shall have the right to withhold the amount of such taxes from any other sums
due or to become due from the Employer to the Executive upon such terms and
conditions as the Committee may prescribe.
24. Assignment and Alienation. Except as provided herein, the benefits
payable under this Agreement shall not be subject to alienation, transfer,
assignment, garnishment, execution or levy of any kind, and any attempt to cause
any benefits to be so subjected shall not be recognized.
25. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder if the Executive had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's Beneficiary, or the
executors, personal representatives or administrators of the Executive's estate.
26. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. All references to sections of the Code or any other law
shall be deemed also to refer to any successor provisions to such sections and
laws.
27. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
28. Confidentiality. The Executive shall not at any time during the
term of this Agreement, or thereafter, communicate or disclose to any
unauthorized person, or use for the Executive's own account, without the prior
written consent of the Board, any proprietary processes, or other confidential
information of the Company or any subsidiary concerning their business or
affairs,
9
<PAGE> 10
accounts or customers, it being understood, however, that the obligations of
this section shall not apply to the extent that the aforesaid matters (a) are
disclosed in circumstances in which the Executive is legally required to do so,
or (b) become generally known to and available for use by the public other than
by the Executive's wrongful act or omission.
15. Severability. If any provisions of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
16. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in New York, New York, or in such
other city in which the Executive is then located, in accordance with the rules
of the American Arbitration Association then in effect. The determination of the
arbitrators, which shall be based upon a de novo interpretation of this
Agreement, shall be final and binding and judgment may be entered on the
arbitrators' award in any court having jurisdiction. The Company shall pay all
costs of the American Arbitration Association and the arbitrator.
17. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any of its
subsidiary companies and for which the Executive may qualify.
18. Governing Law. This Agreement shall be construed, interpreted, and
governed by the Employee Retirement Income Security Act of 1974, as amended. To
the extent not so governed, it shall be governed by the laws of the State of New
York (without reference to rules relating to conflicts of law).
19. Top-hat Plan. This Agreement is intended to be a "top-hat" welfare
plan within the meaning of Department of Labor Regulation Section 2520.104-24.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive's hand has hereunto been set as of the date first set
forth above.
VENATOR GROUP, INC.
By:_____________________
________________________
________________________
[Executive]
10
<PAGE> 11
APPENDIX A
Change in Control
A Change in Control shall mean any 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
Securities Exchange Act of 1934 (a "Person") (other than the Company or its
Affiliates) for shares of common stock of the Company pursuant to which
purchases are made of securities representing at least twenty percent (20%) of
the total combined voting power of the Company's then issued and outstanding
voting securities; (B) the merger or consolidation of the Company with, or the
sale or disposition of all or substantially all of the assets of the Company to,
any Person other than (a) a merger or consolidation which would result in the
voting securities of the Company 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 the Company 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 the Company (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 Securities Exchange Act of 1934), 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 Securities Exchange Act of 1934), in the aggregate, of
securities of the Company representing twenty percent (20%) or more of the total
combined voting power of the Company's then issued and outstanding voting
securities by any Person acting in concert as of the date of this Agreement;
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 the
Company of any plan or proposal for the complete liquidation or dissolution of
the Company or for the sale of all or substantially all of the assets of the
Company; 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 the Company's
stockholders was approved by a vote of at least two-thirds ( ) 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.
11
<PAGE> 1
EXHIBIT 10.3
May 5, 1999
Mr. M. Jeffrey Branman
229 South Mountain Avenue
Montclair, New Jersey 07047
Dear Mr. Branman:
This letter supersedes the letter agreement, dated February 19, 1999, between
Venator Group, Inc., formerly Woolworth Corporation, ("Venator"), a New York
corporation, and you.
This letter amends the supplemental agreement dated April 24, 1997 (the
"Supplemental Agreement") between Venator and you as follows.
1. The reference in the first paragraph of the Supplemental
Agreement to the Senior Executive Severance Agreement dated
April 24, 1997 is hereby amended to refer to the Senior
Executive Severance Agreement dated as of May 5, 1999.
2. Paragraph 5 of the Supplemental Agreement is hereby amended to
read in its entirety as follows: "Clause (iv) of Section 1(k)
of the Agreement shall not apply to the discretionary
bonus based on individual performance standards provided for
under the terms of your employment."
All provisions of the Supplemental Agreement not expressly amended hereby shall
remain unmodified and unamended and the entire Supplemental Agreement, as
amended hereby, shall continue in full force and effect in accordance with the
terms of the Supplemental Agreement.
VENATOR GROUP, INC.
By: /s/ John F. Gillespie
-------------------------
Senior Vice President -
Human Resources
ACCEPTED AND AGREED:
/s/ M. Jeffrey Branman
- ----------------------
M. Jeffrey Branman
Date: June 3, 1999
- ----------------------
<PAGE> 1
EXHIBIT 12
VENATOR GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
($ in millions)
<TABLE>
<CAPTION>
13-weeks ended Fiscal Years Ended
------------------- ------------------------------------------------------
May 1, May 2, Jan. 30, Jan. 31, Jan. 25, Jan.27, Jan. 28,
1999 1998 1999 1998 1997 1996 1995
------ ------ -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET EARNINGS
Income (loss) from continuing
operations, after-tax ............... $(11) 8 3 213 209 29 23
Income tax expense (benefit) .......... (8) 6 (42) 120 139 34 41
Interest expense, excluding capitalized
interest ............................ 15 11 57 36 53 91 85
Portion of rents deemed representative
of the interest factor (1/3) ......... 45 41 180 163 162 157 150
---- --- ---- --- --- --- ---
$ 41 66 198 532 563 311 299
==== === ==== === === === ===
FIXED CHARGES
Gross interest expense ................ $ 16 12 64 36 53 91 85
Portion of rents deemed representative
of the interest factor (1/3) ......... 45 41 180 163 162 157 150
---- --- ---- --- --- --- ---
$ 61 53 244 199 215 248 235
==== === ==== === === === ===
RATIO OF EARNINGS TO FIXED CHARGES .... 0.7 1.2 0.8 2.7 2.6 1.3 1.3
---- --- ---- --- --- --- ---
</TABLE>
Earnings were not adequate to cover fixed charges by $20 for the first quarter
ended May 1, 1999 and by $46 million for the fiscal year ended January 30, 1999.
<PAGE> 1
EXHIBIT 15
Accountants' Acknowledgment
Venator Group, Inc.
New York, New York
Board of Directors:
Re: Registration Statements Numbers 33-10783, 33-91888, 33-91886, 33-97832,
333-07215, 333-21131 and 333-62425 on Form S-8 and Numbers 33-43334 and
33-86300 on Form S-3
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated May 19, 1999 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
/s/ KPMG LLP
New York, New York
June 4, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 1, 1999 AND
THE CONSOLIDATED BALANCE SHEET AS OF MAY 1, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> MAY-01-1999
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 889
<CURRENT-ASSETS> 1,213
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,816
<CURRENT-LIABILITIES> 910
<BONDS> 513
0
0
<COMMON> 0
<OTHER-SE> 1,035
<TOTAL-LIABILITY-AND-EQUITY> 2,816
<SALES> 1,079
<TOTAL-REVENUES> 1,079
<CGS> 791
<TOTAL-COSTS> 791
<OTHER-EXPENSES> 39
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> (19)
<INCOME-TAX> (8)
<INCOME-CONTINUING> (11)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 2, 1998 AND
THE CONSOLIDATED BALANCE SHEET AS OF MAY 2, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> MAY-02-1998
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 880
<CURRENT-ASSETS> 1,716
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,024
<CURRENT-LIABILITIES> 835
<BONDS> 509
0
0
<COMMON> 0
<OTHER-SE> 1,283
<TOTAL-LIABILITY-AND-EQUITY> 3,024
<SALES> 1,058
<TOTAL-REVENUES> 1,058
<CGS> 748
<TOTAL-COSTS> 748
<OTHER-EXPENSES> 15
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 14
<INCOME-TAX> 6
<INCOME-CONTINUING> 8
<DISCONTINUED> (13)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
<PAGE> 1
EXHIBIT 99
Independent Accountants' Review Report
The Board of Directors and Shareholders
Venator Group, Inc.:
We have reviewed the accompanying condensed consolidated balance sheets of
Venator Group, Inc. and subsidiaries as of May 1, 1999 and May 2, 1998, and the
related condensed consolidated statements of operations, comprehensive income
(loss), and cash flows for the thirteen week periods ended May 1, 1999 and May
2, 1998. These condensed consolidated financial statements are the
responsibility of Venator Group, Inc. management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Venator Group, Inc. and
subsidiaries as of January 30, 1999, and the related consolidated statements of
operations, comprehensive income (loss), shareholders' equity, and cash flows
for the year then ended (not presented herein); and in our report dated March
10, 1999, except for note 23 which is as of March 19, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of January 30, 1999, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ KPMG LLP
New York, New York
May 19, 1999
