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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the Securities
Exchange Act of 1934
Filed by registrant [X]
Filed by a party other than registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
VENATOR GROUP, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of the filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[VENATOR GROUP LOGO]
April 27, 2000
Dear Shareholder:
It is a pleasure to invite you to attend the 2000 annual meeting of
shareholders of Venator Group, Inc. on Thursday, June 8, 2000, at 10:00 A.M.,
local time, at Tappan Hill, 81 Highland Avenue, Tarrytown, New York 10591.
The items to be considered and voted on at the meeting are described in the
notice of the 2000 annual meeting of shareholders and proxy statement
accompanying this letter.
Record holders may vote their shares by using a toll-free telephone number
or via the Internet. Please see the enclosed proxy card for instructions on
using these convenient methods. You may also vote your shares by completing the
enclosed proxy card and mailing it in the envelope provided or by voting in
person by ballot at the meeting.
Your vote is important regardless of the number of shares you own. We
encourage you to vote your shares as soon as possible.
Thank you for your continued support.
Sincerely,
<TABLE>
<S> <C>
/s/ Dale W. Hilpert
DALE W. HILPERT
Chairman of the Board and
Chief Executive Officer
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TABLE OF CONTENTS
<TABLE>
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PAGE
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GENERAL
Notice of Meeting........................................... 1
General Information......................................... 2
Admission to the Meeting.................................... 2
Outstanding Voting Stock.................................... 2
Vote Required............................................... 3
Method of Counting Votes.................................... 3
Method and Cost of Proxy Solicitation....................... 3
How to Vote Your Shares..................................... 3
Revoking Your Proxy......................................... 4
BENEFICIAL OWNERSHIP OF THE COMPANY'S STOCK................. 4
Directors and Executive Officers.......................... 4
Persons Owning More than Five Percent of the Company's
Stock.................................................. 6
Section 16(a) Beneficial Ownership Reporting Compliance... 7
CORPORATE GOVERNANCE........................................ 7
BOARD OF DIRECTORS.......................................... 8
Organization and Powers................................... 8
Committees of the Board of Directors...................... 9
Audit Committee........................................ 9
Acquisitions and Finance Committee..................... 9
Compensation Committee................................. 9
Executive Committee.................................... 9
Nominating and Organization Committee.................. 9
Retirement Investment Committee........................ 10
Directors Compensation and Benefits....................... 10
Directors and Officers Indemnification and Insurance...... 10
Transactions with Management and Others................... 11
EXECUTIVE COMPENSATION...................................... 12
Summary Compensation Table................................ 12
Long-Term Incentive Plan -- Awards in Last Fiscal Year.... 15
Option Grants in Last Fiscal Year......................... 17
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values................................. 18
Retirement Plans.......................................... 18
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements......................... 20
Compensation Committee Interlocks and Insider
Participation.......................................... 23
Compensation Committee's Report to Shareholder on
Executive Compensation................................. 23
Performance Graphs........................................ 27
PROPOSAL 1 -- ELECTION OF DIRECTORS......................... 28
Nominees for Directors.................................... 29
Directors Continuing in Office............................ 30
PROPOSAL 2 -- RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
ACCOUNTANTS............................................... 31
PROPOSAL 3 -- AMENDMENT OF 1998 STOCK OPTION AND AWARD
PLAN...................................................... 31
PROPOSAL 4 -- REAPPROVAL OF PERFORMANCE GOALS AND AMENDMENT
OF ANNUAL INCENTIVE COMPENSATION PLAN..................... 33
PROPOSAL 5 -- APPROVAL OF THE DIRECTORS STOCK OPTION PLAN... 35
DEADLINES FOR NOMINATIONS AND SHAREHOLDER PROPOSALS......... 38
OTHER BUSINESS.............................................. 38
APPENDIX A.................................................. A-1
APPENDIX B.................................................. B-1
APPENDIX C.................................................. C-1
</TABLE>
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VENATOR GROUP, INC.
112 WEST 34TH STREET
NEW YORK, NEW YORK 10120
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
<TABLE>
<S> <C>
DATE: June 8, 2000
TIME: 10:00 A.M., local time
PLACE: Tappan Hill, 81 Highland Avenue, Tarrytown, New York 10591
RECORD DATE: Shareholders of record on April 24, 2000 can vote at this
meeting.
ANNUAL REPORT: Our 1999 Annual Report, which is not part of the proxy
soliciting material, is enclosed.
ITEMS OF BUSINESS: (1) To elect three members to the Board of Directors to
serve for three-year terms, and one member to the Board of
Directors to serve for a one-year term.
(2) To ratify the appointment of KPMG LLP as our independent
auditors for the 2000 fiscal year.
(3) To approve amendments to the 1998 Stock Option and Award
Plan.
(4) To approve amendments to the Annual Incentive
Compensation Plan and to reapprove the plan's performance
goals.
(5) To approve the Venator Group Directors Stock Option
Plan.
(6) To transact such other business as may properly come
before the meeting and at any adjournment or postponement.
PROXY VOTING: Your vote is important to us. Please vote in one of these
ways:
(1) use the toll-free telephone number shown on your proxy
card,
(2) visit the web site listed on your proxy card to vote via
the Internet,
(3) follow the instructions on your proxy materials if your
shares are held in street name, or
(4) complete and promptly return your proxy card in the
enclosed postage-paid envelope.
Even if you plan to attend the annual meeting, we encourage
you to vote in advance using one of these methods.
</TABLE>
GARY M. BAHLER
Secretary
April 27, 2000
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VENATOR GROUP, INC.
112 WEST 34TH STREET
NEW YORK, NEW YORK 10120
PROXY STATEMENT
GENERAL INFORMATION
We are providing these proxy materials to you in connection with the
solicitation of proxies by the Board of Directors of Venator Group, Inc. for the
2000 annual meeting of shareholders and for any adjournments or postponements of
this meeting. We are holding this annual meeting on June 8, 2000 at 10:00 A.M.
In this proxy statement we refer to Venator Group, Inc. as "the Company," "we,"
or "us." We intend to mail this proxy statement and the proxy card to
shareholders beginning on or about April 27, 2000.
The enclosed proxy card shows the number of shares of Common Stock
registered in the name of each shareholder of record on April 24, 2000, the
record date for the annual meeting. Proxy cards also show, if applicable, the
number of shares held in the Company's 401(k) Plan.
Unless contrary instructions are marked on the proxy card, all shares
represented by valid proxies received through this solicitation (and not
revoked) will be voted FOR the election of directors named in this proxy
statement, FOR the ratification of the appointment of KPMG LLP as independent
accountants for 2000, FOR the amendments to the 1998 Stock Option and Award
Plan, FOR the re-approval of the performance goals and the amendment to the
Annual Incentive Compensation Plan; and FOR the approval of the Venator Group
Directors Stock Option Plan. If you specify a different choice on the proxy
card, your shares will be voted as specified.
You may obtain without charge a copy of the Company's 1999 Form 10-K,
excluding certain exhibits, by writing to our Investor Relations Department at
Venator Group, Inc., 112 West 34th Street, New York, New York 10120.
ADMISSION TO THE MEETING
Attendance at the meeting will be limited to shareholders as of the record
date (or their authorized representatives) having an admission ticket or
evidence of their share ownership, and guests of the Company. If you plan to
attend the meeting, please mark the appropriate box on your proxy card, and we
will mail an admission ticket to you. You may also request an admission ticket
if you are voting by telephone or via the Internet by responding to the
appropriate prompts offered in those methods.
If your shares are held in the name of a bank, broker, or other holder of
record and you plan to attend the meeting, you can obtain an admission ticket in
advance by providing proof of your ownership, such as a bank or brokerage
account statement, to the Corporate Secretary at Venator Group, Inc., 112 West
34th Street, New York, New York 10120. If you do not obtain an admission ticket,
you must show proof of your ownership of the Company's Common Stock at the
registration tables at the door.
OUTSTANDING VOTING STOCK
The only voting securities of Venator Group are the shares of Common Stock.
Only shareholders of record on the books of the Company at the close of business
on April 24, 2000 are entitled to vote at the annual meeting and any
adjournments or postponements. Each share is entitled to one vote. There were
137,578,699 shares of Common Stock outstanding on the record date. Under our
By-laws, the holders of a majority of the shares entitled to vote at the meeting
must be present in person or by proxy to constitute a quorum for the transaction
of business.
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VOTE REQUIRED
Directors must be elected by a plurality of the votes cast. The affirmative
vote of the holders of a majority of the votes cast at the meeting will be
required to approve each other proposal.
METHOD OF COUNTING VOTES
Votes will be counted and certified by independent inspectors of election.
New York law and our By-laws require the presence of a quorum at the annual
meeting. Under New York law, abstentions are not counted in determining the
votes cast for any proposal. Votes withheld for the election of one or more of
the nominees for director will not be counted as votes cast for those
individuals. Broker non-votes, which occur when brokers do not receive voting
instructions from their customers on non-routine matters and, consequently, have
no discretion to vote on those matters, are not counted as votes cast for any
proposal.
The Company's Certificate of Incorporation and By-laws do not contain any
provisions on the effect of abstentions or broker non-votes.
METHOD AND COST OF PROXY SOLICITATION
Proxies may be solicited, without additional compensation, by directors,
officers or employees of the Company by mail, telephone, facsimile, telegram, in
person or otherwise. We will bear the cost of the solicitation of proxies,
including the preparation, printing and mailing of the proxy materials. In
addition, we will request banks, brokers and other custodians, nominees and
fiduciaries to deliver proxy material to the beneficial owners of the Company's
stock and obtain their voting instructions. The Company will reimburse those
firms for their expenses in accordance with the rules of the Securities and
Exchange Commission and the New York Stock Exchange. In addition, the Company
has retained Innisfree M&A Incorporated to assist in the solicitation of proxies
for a fee of $12,500 plus out of pocket expenses.
HOW TO VOTE YOUR SHARES
VOTE BY TELEPHONE
You can vote your shares by telephone by calling the toll-free telephone
number on your proxy card. Telephone voting is available 24 hours a day and will
be accessible until 12:01 A.M. on June 8, 2000. The voice prompts allow you to
vote your shares and confirm that your instructions have been properly recorded.
Our telephone voting procedures are designed to authenticate shareholders by
using individual control numbers. If you vote by telephone, you can request an
admission ticket for the annual meeting. IF YOU VOTE BY TELEPHONE, YOU DO NOT
NEED TO RETURN YOUR PROXY CARD. IF YOU ARE LOCATED OUTSIDE THE U.S. AND CANADA,
PLEASE SEE YOUR PROXY CARD FOR ADDITIONAL INSTRUCTIONS. IF YOU ARE AN OWNER IN
STREET NAME, PLEASE FOLLOW THE INSTRUCTIONS THAT ACCOMPANY YOUR PROXY MATERIALS.
VOTE BY INTERNET
You can also choose to vote via the Internet. The web site for Internet
voting is listed on your proxy card. Internet voting is available 24 hours a day
and will be accessible until 12:01 A.M. on June 8, 2000. As with telephone
voting, you will be given the opportunity to confirm that your instructions have
been properly recorded, and you can also request an admission ticket for the
annual meeting. IF YOU VOTE VIA THE INTERNET, YOU DO NOT NEED TO RETURN YOUR
PROXY CARD. IF YOU ARE AN OWNER IN STREET NAME, PLEASE FOLLOW THE INSTRUCTIONS
THAT ACCOMPANY YOUR PROXY MATERIALS.
VOTE BY MAIL
If you choose to vote by mail, simply mark your proxy, date and sign it,
and return it in the postage-paid envelope provided.
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VOTING AT THE ANNUAL MEETING
You may also vote by ballot at the annual meeting if you decide to attend
in person. If your shares are held in the name of a bank, broker or other holder
of record, you must obtain a proxy, executed in your favor, from the holder of
record to be able to vote at the meeting.
All shares that have been properly voted -- whether by telephone, Internet
or mail, and not revoked -- will be voted at the annual meeting. If you sign and
return your proxy card but do not give voting instructions, the shares
represented by that proxy will be voted as recommended by the Board of
Directors.
VOTING ON OTHER MATTERS
If any other matters are properly presented at the annual meeting for
consideration, the persons named in the proxy will have the discretion to vote
on those matters for you. At the date this Proxy Statement went to press, we did
not know of any other matter to be raised at the annual meeting.
REVOKING YOUR PROXY
You may revoke your proxy at any time prior to its use by submitting to the
Company a written revocation, submitting a duly executed proxy bearing a later
date, or providing subsequent telephone or Internet voting instructions. In
addition, any shareholder who attends the meeting in person may vote by ballot
at the meeting, which would cancel any proxy previously given.
BENEFICIAL OWNERSHIP OF THE COMPANY'S STOCK
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth, as reported to the Company, the number of
shares of Common Stock beneficially owned as of April 12, 2000, by each of the
directors, the nominee for director, and the named executive officers. The table
also shows the beneficial ownership of the Company's stock by all directors, the
nominee for director, the named executive officers and the executive officers as
a group on that date, including shares of Common Stock that they have a right to
acquire within 60 days after April 12, 2000 by the exercise of options that have
been granted under the Company's stock option plans.
Other than Roger N. Farah, no director, nominee for director, named
executive officer or executive officer beneficially owned one percent or more of
the total number of outstanding shares of Common Stock as of April 12, 2000. Mr.
Farah beneficially owned 1.15 percent as of this date.
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Except as otherwise noted in a footnote below, each person has sole voting
and investment power with respect to the number of shares shown.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL
NAME OWNERSHIP
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<S> <C>
J. Carter Bacot............................................. 6,531
M. Jeffrey Branman.......................................... 204,911(a)
Purdy Crawford.............................................. 33,681
John E. DeWolf III.......................................... 83,524(b)
Roger N. Farah.............................................. 1,589,488(c)
S. Ronald Gaston............................................ 66,735(d)
Philip H. Geier Jr.......................................... 15,580
Jarobin Gilbert Jr.......................................... 4,049
Bruce L. Hartman............................................ 138,002(e)
Dale W. Hilpert............................................. 845,053(f)
Allan Z. Loren.............................................. 4,686
Margaret P. MacKimm......................................... 8,031
John J. Mackowski........................................... 10,896
James E. Preston............................................ 39,998(g)
David Y. Schwartz........................................... 4,000
Matthew D. Serra............................................ 294,959(h)
Christopher A. Sinclair..................................... 5,781
All 22 directors, nominee for director, and executive
officers as a group, including the named executive
officers.................................................. 3,780,190(i)
</TABLE>
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(a) Includes 158,332 shares that may be acquired by the exercise of stock
options through May 29, 2000 and 465 shares held in the Company's 401(k)
Plan.
(b) Includes 83,332 shares that may be acquired by the exercise of stock options
through May 29, 2000 and 192 shares held in the Company's 401(k) Plan.
(c) Includes 1,249,999 shares that may be acquired by the exercise of stock
options and 492 shares held in the Company's 401(k) Plan.
(d) Includes 26,666 shares that may be acquired by the exercise of stock options
and 69 shares held in the Company's 401(k) Plan.
(e) Includes 70,832 shares that may be acquired by the exercise of stock options
and 1,552 shares held in the Company's 401(k) Plan.
(f) Includes 616,666 shares that may be acquired by the exercise of stock
options and 3,274 shares held in the Company's 401(k) Plan.
(g) Excludes 50 shares of Common Stock owned by Mr. Preston's stepchildren, with
respect to which Mr. Preston disclaims beneficial ownership.
(h) Includes 83,333 shares that may be acquired by the exercise of stock options
and 229 shares held in the Company's 401(k) Plan.
(i) This figure represents approximately 2.75 percent of the shares of Common
Stock outstanding at the close of business on April 12, 2000. It includes
all of the shares referred to in footnotes (a) through (h) above, a total of
306,095 shares that may be acquired within 60 days after April 12, 2000 by
executive officers of the Company (excluding the named executive officers
and Mr. Serra) by the exercise of stock options, and 3,756 shares held by
executive officers (excluding the named executive officers and Mr. Serra) in
the Company's 401(k) Plan.
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PERSONS OWNING MORE THAN FIVE PERCENT OF THE COMPANY'S STOCK
Following is information regarding shareholders who beneficially own more
than five percent of the Company's Common Stock according to documents filed by
those shareholders with the SEC. To the best of our knowledge, there are no
other shareholders who beneficially own more than five percent of a class of the
Company's voting securities.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
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<S> <C> <C>
Greenway Partners, L.P. 19,034,522(a) 13.8%(a)
Greentree Partners, L.P.
Greenhut, L.L.C., Greenbelt Corp.,
Greensea Offshore, L.P.
Greenhouse Partners, L.P.,
Greenhut Overseas, L.L.C.,
Alfred D. Kingsley, and
Gary K. Duberstein
277 Park Avenue
New York, NY 10172
AXA Assurances I.A.R.D. Mutuelle 14,321,236(b) 10.4%(b)
and AXA Assurances Vie Mutuelle
21, rue de Chateaudun
75009 Paris, France
AXA Conseil Vie Assurance Mutuelle (b)
100-101 Terrasse Boieldieu
92042 Paris La Defense, France
AXA Courtage Assurance Mutuelle (b)
26, rue Louis le Grand
75002 Paris, France
AXA Financial, Inc. (b)
1290 Avenue of the Americas
New York, New York 10104
AXA (b)
9 Place Vendome
75001 Paris, France
Mellon Financial Corporation 9,167,400(c) 6.66%(c)
One Mellon Center
Pittsburgh, PA 15258
Sasco Capital, Inc. 8,087,392(d) 5.9%(d)
10 Sasco Hill Road
Fairfield, CT 06430
</TABLE>
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(a) Reflects shares beneficially owned as of March 13, 2000, according to
Amendment No. 10 to a statement on Schedule 13D filed with the SEC. As
reported, Greenway Partners L.P. holds sole voting and dispositive power
with respect to 2,350,000 shares; Greentree Partners L.P. holds sole voting
and dispositive power with respect to 1,500,900 shares; Greenhouse Partners,
L.P. holds shared voting and dispositive power with respect to 2,350,000
shares; Greenhut, L.L.C. holds sole voting and dispositive power with
respect to 1,500,900 shares; Greenbelt Corp. holds sole voting and
dispositive power with respect to 12,101,322 shares; Greensea Offshore, L.P.
holds sole voting and dispositive power with respect to 2,250,000 shares;
Greenhut Overseas, L.L.C. holds shared voting and dispositive power with
respect to 2,250,000 shares; Alfred D. Kingsley holds sole voting and
dispositive power with respect to 832,300 shares; Alfred D. Kingsley and
Gary K. Duberstein hold shared voting and dispositive power with respect to
18,202,222 shares.
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(b) Reflects shares beneficially owned as of March 31, 2000 according to
Amendment No. 4 to a statement on Schedule 13G filed with the SEC. As
reported, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA
Conseil Vie Assurance Mutuelle, AXA Courtage Assurance Mutuelle, AXA and AXA
Financial, Inc. hold sole voting power with respect to 523,476 shares; sole
dispositive power with respect to 14,321,236 shares; and shared voting power
with respect to 13,734,800 shares.
(c) Reflects shares beneficially owned as of December 31, 1999, according to
Amendment No. 1 to a statement on Schedule 13G filed with the SEC. Mellon
Financial Corporation, a parent holding company, reported that it holds sole
voting power with respect to 7,010,681 shares; sole dispositive power with
respect to 8,394,387 shares; shared voting power with respect to 321,641
shares and shared dispositive power with respect to 686,113 shares. All of
the shares are held by direct or indirect subsidiaries of Mellon Bank
Corporation in their various fiduciary capacities.
(d) Reflects shares beneficially owned as of December 31, 1999 according to
Amendment No. 2 to a statement on Schedule 13G filed with the SEC. Sasco
Capital, Inc. reported that it has sole voting power with respect to
4,299,800 shares and sole dispositive power with respect to 8,087,392
shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that the Company's directors, executive officers and beneficial owners
of more than 10 percent of the Company's Common Stock file with the SEC and the
New York Stock Exchange reports of ownership and changes in ownership of Common
Stock and other equity securities of the Company. These persons are required by
SEC rules to furnish us with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of those reports furnished to the Company or
written representations that no other reports were required, the Company
believes that during the 1999 fiscal year, the directors, executive officers and
beneficial owners of more than 10 percent of the Company's Common Stock complied
with all applicable SEC filing requirements.
CORPORATE GOVERNANCE
The following is a summary of our principal corporate governance practices
and policies.
INDEPENDENT BOARD OF DIRECTORS AND COMMITTEES
Only two of the 11 members of the Board of Directors also serve as officers
of the Company, and all of the committees of the Board (other than the Executive
Committee and the Retirement Administration Committee) are composed entirely of
outside directors. All members of the Compensation Committee are directors
meeting the criteria established for outside directors in the regulations under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and for non-employee directors under Section 16 of the Exchange
Act. The Audit Committee is composed entirely of non-employee directors. At
least once a year, the outside directors meet without the presence of
management.
PAYMENT OF DIRECTORS FEES IN STOCK
Under the Directors' Stock Plan, one-half of the annual fee payable to
directors for their Board service is paid in shares of Common Stock, with the
balance paid in cash. Directors may elect to receive up to 100 percent of their
fees in stock.
DIRECTOR RETIREMENT
Our retirement policy for directors is that no person may be nominated or
stand for election as a director after reaching age 72. The Company discontinued
the Directors Retirement Plan in 1995, and only four of the current directors,
who were then serving and had at least five years of service, will receive
payments under that plan. Mr. Mackowski and Mrs. MacKimm, who are retiring as
directors at this annual meeting, are eligible to receive benefits under the
Directors Retirement Plan. If a non-employee director changes his or her
principal business position or affiliation, including through retirement, the
Board of Directors reviews and considers the
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appropriateness of the individual's continued participation as a member of the
Board under those changed circumstances.
CONFIDENTIAL VOTING
The Company has a policy that our shareholders be provided privacy in
voting. All proxy cards, voting instructions, ballots and voting tabulations
identifying shareholders are held permanently confidential from the Company,
except as (i) as necessary to meet any applicable legal requirements, (ii) when
disclosure is expressly requested by a shareholder or where a shareholder makes
a written comment on a proxy card, (iii) in a contested proxy solicitation, or
(iv) to allow independent election inspectors to tabulate and certify the vote.
The tabulators and inspectors of election are independent and are not employees
of the Company.
SHAREHOLDER RIGHTS PLAN
The Company has had a Shareholder Rights Plan since 1988 and, in 1998, the
Board of Directors adopted a new Rights Plan along the lines of the original
Plan.
The Board adopted certain amendments last year to the Rights Plan that
would make the Rights Plan inapplicable to certain kinds of offers to purchase
all of the Company's Common Stock that meet the criteria specified for
"qualifying offers." In general, the requirements for a qualifying offer are as
follows:
- The person making the offer to purchase the stock (the "Offeror") has
provided firm written financial commitments from responsible financial
institutions for any cash portion of the purchase price and the opinion
of a nationally recognized investment bank with respect to the value of
any securities portion of the purchase price.
- The offer to purchase the Company's Common Stock remains open for at
least 120 days.
- The Offeror makes an irrevocable written commitment (1) to purchase those
shares that were not acquired through the original offer for the same
price paid for the shares that were acquired through the original offer,
(2) that the Offeror will not materially amend the offer except to
increase the offering price, and (3) that the Offeror will not make any
offer for the Company's stock for six months after the commencement of
the original offer.
- After the consummation of the transaction, the Offeror owns at least 80
percent of the outstanding Common Stock.
In addition, the Independent Directors, defined in the Rights Plan as
directors who are not current or former officers of the Company, holders of five
percent or more of the Company's shares, or the persons making the tender offer,
have the discretion to shorten the time periods related to the qualifying offer
provisions.
BOARD OF DIRECTORS
ORGANIZATION AND POWERS
The Board of Directors has responsibility for establishing broad corporate
policies, reviewing significant developments affecting Venator Group, and
monitoring the general performance of the Company. Our By-laws provide for a
Board of Directors consisting of not less than 9 nor more than 17 directors, the
exact number to be determined, from time to time, by resolution adopted by a
majority of the entire Board. The size of the Board is fixed at 11 directors.
Immediately upon Mrs. MacKimm's and Mr. Mackowski's retirement from the Board
and upon the election of Mr. Schwartz to the Board, the size of the Board will
be fixed at 10 directors.
In 2000 the Board of Directors is scheduled to hold six regular meetings.
During 1999 the Board held 12 meetings, and each director, other than Philip H.
Geier Jr., attended at least 75 percent of the aggregate total
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number of meetings of the Board and of meetings held by all committees of which
he or she was a member. Mr. Geier attended 73 percent of the meetings of the
Board and committees of which he was a member.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has delegated certain duties to committees, which assist the
Board in carrying out its responsibilities. Each director serves on at least two
committees. There are six standing committees of the Board. The committee
memberships, the number of meetings held during 1999, and the functions of the
committees are described below.
AUDIT COMMITTEE. The members of the committee are John J. Mackowski
(Chairman), Purdy Crawford, Jarobin Gilbert Jr. and Allan Z. Loren. The
committee met six times during 1999.
The committee evaluates and reviews such matters as the Company's systems
of internal accounting controls and the scope and results of the Company's
internal audit procedures. The committee also recommends to the Board the
appointment of the Company's independent accountants, reviews the scope and
results of their audit and approves their audit and non-audit fees. The
committee has direct channels of communication with the Company's independent
accountants and internal audit staff, including meeting with them, both with and
without the presence of Company management, to discuss and review issues as
appropriate. The committee also meets with the Company's financial personnel and
general counsel to review their various activities and findings. While it is the
responsibility of management to design and implement an effective system of
internal accounting controls, it is the responsibility of the committee to
ensure that management has done so. It is also the responsibility of the
committee to review periodically the adequacy, management and effectiveness of
the Company's information systems.
ACQUISITIONS AND FINANCE COMMITTEE. The members of the committee are J.
Carter Bacot (Chairman), James E. Preston and Christopher A. Sinclair. The
committee held three meetings during 1999.
The committee reviews certain proposed acquisitions by the Company of
shares or assets of third parties, and it considers proposed debt or equity
issues of the Company. In addition, the committee considers proposals concerning
mergers, combinations, acquisitions, sales, or offers to purchase the Company's
shares or significant assets.
COMPENSATION COMMITTEE. The members of the committee are James E. Preston
(Chairman), Philip H. Geier Jr. and Margaret P. MacKimm. The committee met three
times during 1999.
The committee establishes and approves compensation plans and goals,
salaries, incentives and other forms of compensation for the Company's officers
and for certain other executives of the Company and its major subsidiaries and
operating divisions. The committee administers the Annual Incentive Compensation
Plan, the Long-Term Incentive Compensation Plan, the Supplemental Executive
Retirement Plan, the Executive Supplemental Retirement Plan, the Voluntary
Deferred Compensation Plan, and may take certain actions with respect to the
Trust (as defined on Page 22). The committee also administers the 1994 Venator
Group Employees Stock Purchase Plan, administers and grants options under the
1995 Stock Option and Award Plan and the 1998 Stock Option and Award Plan and
administers the 1986 Stock Option Plan and the Eastbay, Inc. 1994 Stock
Incentive Plan. Members of the committee are not eligible to participate in any
of these plans.
EXECUTIVE COMMITTEE. The current members of the committee are Mr. Hilpert
(Chairman) and all of the non-employee directors. Mr. Farah was a member and
Chairman of this committee until his resignation on April 12, 2000. The
committee did not meet during 1999.
Except for certain matters reserved to the Board, the committee has all of
the powers of the Board in the management of the business of the Company during
intervals between Board meetings.
NOMINATING AND ORGANIZATION COMMITTEE. The members of the committee are
Jarobin Gilbert Jr. (Chairman), J. Carter Bacot and James E. Preston. The
committee held one meeting during 1999.
9
<PAGE> 13
The committee makes recommendations to the Board with respect to the size
and composition of the Board and the Company's internal organizational
structure. In addition, the committee reviews the qualifications of candidates,
and makes recommendations to the Board with respect to nominees, for election as
directors. The committee may also consider nominees recommended by shareholders
in accordance with the procedures described on Page 38.
RETIREMENT INVESTMENT COMMITTEE. The members of the committee are Margaret
P. MacKimm (Chairman), Purdy Crawford and John J. Mackowski. The committee met
three times during 1999.
The committee has responsibility to supervise the investment of the assets
of the retirement plans of the Company and to appoint, review the performance of
and, if appropriate, replace, the trustee of the Company's pension trust and the
managers responsible for managing the funds of such trust.
In addition, the Board has established a Retirement Administration
Committee, composed of certain officers of the Company, to which the Board has
delegated certain administrative responsibilities with regard to the retirement
plans of the Company.
DIRECTORS COMPENSATION AND BENEFITS
Our non-employee directors receive an annual retainer of $40,000. The
committee chairmen receive an additional annual retainer of $3,000. No separate
fees are paid for attendance at Board or committee meetings. One-half of the
annual retainer is paid in shares of the Company's Common Stock under the
Directors' Stock Plan, with the balance paid in cash. Directors may elect to
receive up to 100 percent of their annual retainer in shares of stock. The
number of shares is determined by dividing the applicable retainer amount by the
average price of a share of stock on the last business day preceding July 1 of
each year. The Company also reimburses non-employee directors for their
reasonable expenses in attending meetings of the Board and committees, including
travel expenses to and from meetings.
At this annual meeting we are seeking shareholder approval of the Directors
Stock Option Plan, which provides for an initial grant to the non-employee
directors of an option to purchase that number of shares of the Company's Common
Stock having a market value of $50,000 on the date shareholders approve the plan
and, thereafter, an annual stock option grant on the first business day of each
fiscal year for that number of shares having a market value of $50,000 on the
date of grant.
The Directors' Retirement Plan was frozen as of December 31, 1995.
Consequently, only four of the current directors, including the two directors
who are retiring at this annual meeting, are entitled to receive a retirement
benefit under this plan because they had completed at least five years of
service as a director on the date the plan was frozen and they are not entitled
to receive a retirement benefit under any of the Company's other retirement
plans or programs. Under the Directors' Retirement Plan, an annual retirement
benefit of $24,000 will be paid to a qualified director for the lesser of the
number of years of his or her service as a director or 10 years. Payment of
benefits under this plan generally begins on the later of the director's
termination of service as a director or the attainment of age 65. Directors with
less than five years of service at December 31, 1995 and directors who are
elected after this date are not eligible to participate in the Directors'
Retirement Plan.
DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE
We have purchased directors and officers liability and corporation
reimbursement insurance from National Union Fire Insurance Company of
Pittsburgh, Pa., The Great American Insurance Companies, The Chubb Group of
Insurance Companies and Executive Risk Indemnity, Inc. These policies insure the
Company and all of the Company's wholly owned subsidiaries. They also insure all
of the directors and officers of the Company and the covered subsidiaries. The
policies were written for a term of 36 months, from September 12, 1998 until
September 12, 2001. The total annual premium for these policies is $419,903.
Directors and officers of the Company, as well as all other employees with
fiduciary responsibilities under the Employee Retirement Income Security Act of
1974, as amended, are insured under policies issued by Federal Insurance Company
and National Union Fire Insurance Company, which have a total premium of $97,500
for the 12-month period ending September 12, 2000.
10
<PAGE> 14
The Company has entered into indemnification agreements with its directors
and executive officers, as approved by shareholders at the 1987 annual meeting.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Venator Group and its subsidiaries have had transactions in the normal
course of business with various other corporations, including certain
corporations whose directors or officers are also directors of the Company. The
amounts involved in these transactions have not been material in relation to the
businesses of the Company or its subsidiaries, and it is believed that these
amounts have not been material in relation to the businesses of the other
corporations. In addition, it is believed that these transactions have been on
terms no less favorable to the Company than if they had been entered into with
disinterested parties. It is anticipated that transactions with such other
corporations will continue in the future.
Purdy Crawford is Counsel to the Canadian law firm of Osler, Hoskin &
Harcourt, which provided legal services to the Company in 1999. Mr. Crawford
received no remuneration from the firm in 1999.
David Y. Schwartz provided consulting services to the Company during 1999,
and the Company paid him $34,892 for those services.
11
<PAGE> 15
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ---------------------------- ---------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION STOCK OPTION/SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION(A) YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------------------ ---- --------- ------- ------------ ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dale W. Hilpert(b)............ 1999 883,712 0 0 957,500(c)(d) 500,000 0 19,383(e)
Chairman of the Board 1998 825,000 0 0 0 100,000 835,835(f) 10,860(e)
and Chief Executive Officer 1997 806,250 377,406 0 0 100,000 0 9,718(e)
Roger N. Farah (g)............ 1999 749,999 0 2,583(h) 2,870,313(i)(d) 675,000 0 5,033(e)
Former Chairman of the Board 1998 1,500,000 0 3,884(h) 0 0 1,671,670(f) 6,032(e)
and Chief Executive Officer 1997 1,500,000 702,150 3,886(h) 0 0 0 5,610(e)
M. Jeffrey Branman(j)......... 1999 440,000 0 0 215,000(l)(d) 50,000 0 2,302,912(m)(e)
Former Senior Vice President- 1998 435,000 200,000(k) 0 0 150,000 431,158(f) 2,595(e)
Corporate Development 1997 415,000 394,262(k) 0 0 75,000 0 3,113(e)
John E. DeWolf III(j)......... 1999 420,000 500,000(n) 0 215,000(l)(d) 50,000 0 422,930(o)(e)
Former Senior Vice President- 1998 406,250 0 0 0 50,000 374,805(f) 2,959(p)
Real Estate 1997 361,250 169,101 0 0 30,000 0 1,343(p)
Ronald Gaston(q).............. 1999 400,000 100,000(r) 4,807(s) 215,000(l)(d) 50,000 0 7,765(e)(t)
Senior Vice President 1998 68,254 50,000(r) 0 0 30,000 0 50,000(u)
and Chief Information Officer
Bruce Hartman(v).............. 1999 394,063 0 45,858(s) 161,250(l)(d) 50,000 0 66,162(w)
Senior Vice President 1998 318,750 0 0 0 25,000 0 0
and Chief Financial Officer 1997 300,000 126,390 23,290(s) 0 25,000 0 42,602(x)
</TABLE>
- ---------------
(a) Includes the two persons who served as Chief Executive Officer of the
Company during the 1999 fiscal year and the four other most highly
compensated individuals who were executive officers of Venator Group at the
end of fiscal 1999, as measured by salary and annual bonus.
(b) Elected Chairman of the Board and Chief Executive Officer on April 12, 2000.
He served as President and Chief Executive Officer from August 16, 1999 to
April 11, 2000, and President and Chief Operating Officer prior to August
16, 1999.
(c) The Company granted to Mr. Hilpert 100,000 shares of restricted stock on
February 1, 1999 and 60,000 shares on November 10, 1999. All of the shares
will vest on February 1, 2004 if Mr. Hilpert remains employed by the Company
until that date. The shares will vest earlier, on March 15, 2002, if certain
performance goals are attained. Mr. Hilpert has the right to vote the shares
of restricted stock and to receive and retain all regular cash dividends
payable after the grant dates to record holders of Common Stock. The value
of the restricted stock award was calculated by multiplying the closing
price of the Company's Common Stock on the New York Stock Exchange on
February 1, 1999 ($5.375) by 100,000 and by multiplying the closing price on
November 10, 1999 ($7.00) by 60,000.
(d) At January 29, 2000 the named executive officers held the following shares
of restricted stock, having the values stated below, based upon a $5.9375
closing price of the Company's Common Stock as reported on the New York
Stock Exchange on January 28, 2000, the last business day prior to the end
of the fiscal year. The restrictions applicable to these shares are
described in notes (c), (i) and (l). Mr. Farah's restricted stock at
year-end includes 40,000 shares remaining from his January 9, 1995 award of
200,000
12
<PAGE> 16
shares of restricted stock (160,000 shares having previously vested over the
period of January 31, 1996 through January 31, 1999). The remaining 40,000
shares vested on January 31, 2000.
<TABLE>
<CAPTION>
NAME # OF SHARES OF RESTRICTED STOCK $ VALUE
- ---- ------------------------------- ---------
<S> <C> <C>
D. W. Hilpert................... 160,000 950,000
R. N. Farah..................... 315,000 1,870,313
M. J. Branman................... 40,000 237,500
J. E. DeWolf III................ 40,000 237,500
B. L. Hartman................... 30,000 178,125
S. R. Gaston.................... 40,000 237,500
</TABLE>
(e) Includes the dollar value of the premium paid by the Company for a term life
insurance policy for the benefit of the named executive and the dollar value
of the Company's matching contribution under the 401(k) Plan made to the
named executive's account in shares of Common Stock. The dollar values of
amounts reported for 1999 are stated below. The shares of Common Stock for
the matching contribution were valued at $7.00 per share, which represents
the closing price of a share of Common Stock on December 31, 1999, the last
day of the plan year.
<TABLE>
<CAPTION>
EMPLOYER MATCHING
CONTRIBUTION UNDER
NAME LIFE INSURANCE PREMIUM 401(K) PLAN
- ---- ---------------------- ------------------
<S> <C> <C>
D. W. Hilpert.................. $18,000 $1,383
R. N. Farah.................... $ 3,650 $1,383
M. J. Branman.................. $ 1,528 $1,384
J. E. DeWolf III............... $ 1,538 $1,392
S. R. Gaston................... $ 3,112 $ 483
</TABLE>
(f) This payout was made for the 1996-1998 Performance Period. Fifty percent of
the total payout listed was made in cash and fifty percent was made in
shares of the Company's Common Stock. The amounts shown in the table reflect
the total of the cash payment and the value of the shares received on the
payment date. In accordance with the provisions of the Long-Term Incentive
Compensation Plan, the average of the daily closing prices of a share of the
Company's Common Stock in the 60-day period immediately preceding the
payment date of April 16, 1999 ($5.91228 per share) was used to determine
the stock portion of the payout. If the payouts had been made fully in cash,
the cash payment would have been: $1,365,600 for Mr. Farah; $682,800 for Mr.
Hilpert; $352,216 for Mr. Branman; and $306,181 for Mr. DeWolf.
(g) Served as Chairman of the Board through April 11, 2000 and as Chief
Executive Officer through August 15, 1999.
(h) Tax gross-up payment related to use of company car.
(i) The Company granted to Mr. Farah 275,000 shares of restricted stock on April
26, 1999. The shares would vest over a three-year period beginning January
31, 2000 in increments of 91,666 shares, 91,667 shares and 91,667 shares on
the three vesting dates. Mr. Farah has the right to vote the restricted
stock and to receive and retain all regular cash dividends payable after
April 1999 to record holders of Common Stock. The value of the restricted
stock award was calculated by multiplying the closing price of the Company's
Common Stock on the New York Stock Exchange on April 26, 1999 ($10.4375) by
275,000. Following the termination of Mr. Farah's employment on April 12,
2000, he forfeited 91,667 shares from this grant.
(j) Resigned as an officer of the Company on January 29, 2000 at the end of the
1999 fiscal year.
(k) Includes $200,000 paid as a discretionary bonus under the terms of Mr.
Branman's employment.
(l) On February 1, 1999 the Company granted shares of restricted stock to the
following named executive officers. The shares would vest on February 1,
2004 if the executive remained employed by the Company until that date.
These shares will vest earlier, on March 15, 2002, if certain performance
goals are attained. Upon grant, the executive has the right to vote the
shares of restricted stock and to receive and retain all regular cash
dividends payable after the grant date to record holders of Common Stock.
The value of the restricted stock award was calculated by multiplying the
closing price of the Company's
13
<PAGE> 17
Common Stock on the New York Stock Exchange on February 1, 1999 ($5.375) by
the number of shares granted to the individual:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
M. J. Branman........................ 40,000
J. E. DeWolf III..................... 40,000
S. R. Gaston......................... 40,000
B. L. Hartman........................ 30,000
</TABLE>
Since Messrs. Branman's and DeWolf's employment terminated on February 29,
2000, they forfeited the shares of restricted stock granted to them during
1999. Mr. Gaston will forfeit the shares granted to him in 1999 upon the
termination of his employment on May 2, 2000.
(m) The Company entered into a termination agreement with Mr. Branman in
connection with his termination of employment. The total amount payable
under this agreement is $2,300,000, which represents the severance benefit
and an amount in lieu of a special incentive bonus to which he would have
been entitled under the terms of his employment. A total of $1,870,000 of
this amount has been paid; the remaining $430,000 is payable on February 28,
2001.
(n) Discretionary bonus in connection with certain real estate projects
completed in 1999.
(o) The Company entered into a termination agreement with Mr. DeWolf in
connection with his termination of employment. The total severance benefit
paid to him under this agreement was $420,000.
(p) Dollar value of premium paid by the Company for term life insurance policy
for the benefit of the named executive.
(q) Elected to this position effective November 30, 1998. Mr. Gaston has
resigned from his position effective May 2, 2000.
(r) Guaranteed bonus paid pursuant to terms of employment.
(s) Tax gross-up payment related to relocation.
(t) Amount includes reimbursement of relocation expenses of $4,170.
(u) Sign-on bonus.
(v) Elected Senior Vice President and Chief Financial Officer effective February
27, 1999. He was Vice President-Corporate Shared Services from August 12,
1998 to February 26, 1999 and Vice President and Controller from November
18, 1996 to August 11, 1998.
(w) Amount includes reimbursement for relocation expenses of $64,778 and $1,384
representing the Company's matching contribution under the 401(k) Plan made
to Mr. Hartman's account in shares of Common Stock. The shares of Common
Stock for the matching contribution were valued at $7.00 per share, which
represents the closing price of a share of Common Stock on December 31,
1999, the last day of the plan year.
(x) Reimbursement for relocation expenses.
14
<PAGE> 18
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR (a)
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERIOD NON-STOCK PRICE-BASED PLAN
SHARES, UNITS UNTIL -----------------------------------
NAME OR OTHER RIGHTS PAYOUT THRESHOLD TARGET MAXIMUM
- ---- --------------- ----------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
D. W. Hilpert................. 825,000 1999-2001 $189,750 $742,500 $1,485,000
825,000 1999-2000 123,750 495,000 990,000
825,000 1999 66,000 247,500 495,000
R. N. Farah(b)................ 1,000,000 1999-2001 N/A N/A N/A
1,000,000 1999-2000 230,000 900,000 1,800,000
1,000,000 1999 110,000 450,000 900,000
M. J. Branman(c).............. 440,000 1999-2001 N/A N/A N/A
440,000 1999-2000 N/A N/A N/A
440,000 1999 35,200 132,000 264,000
J. E. DeWolf III(c)........... 420,000 1999-2001 N/A N/A N/A
420,000 1999-2000 N/A N/A N/A
420,000 1999 33,600 126,000 252,000
S. R. Gaston(c)............... 400,000 1999-2001 N/A N/A N/A
400,000 1999-2000 N/A N/A N/A
400,000 1999 32,000 120,000 240,000
B. L. Hartman................. 400,000 1999-2001 92,000 360,000 720,000
400,000 1999-2000 60,000 240,000 480,000
400,000 1999 32,000 120,000 240,000
</TABLE>
- ---------------
(a) The named executive officers, excluding M.J. Branman and J. E. DeWolf III,
participate in the Long-Term Incentive Compensation Plan (the "Long-Term
Plan"). M. J. Branman and J. E. DeWolf III participated in this plan while
they were officers of the Company. Mr. Gaston will cease to participate in
this plan upon the termination of employment on May 2, 2000. Individual
target awards under the Long-Term Plan, are expressed as a percentage of the
participant's annual base salary. In 1999 the Compensation Committee
approved awards to the participants for the performance periods of
1999-2001, 1999-2000 and 1999. The amounts shown in the table above under
the column headed "Number of Shares, Units or Other Rights" represent the
annual rate of base salary for 1999 for each of the named executive
officers. The amounts shown in the columns headed "Threshold," "Target," and
"Maximum" represent the following percentages of the named executive
officers' annual base salaries in the first year of the applicable
Performance Period and represent the amount that would be paid to him at the
end of the applicable Performance Period if the Company achieves the
established goals. No payments were made to the named executive officers
under the Long-Term Plan for the 1999 Performance Period since the Company
did not meet the performance goals for this period.
<TABLE>
<CAPTION>
PERFORMANCE PERIOD THRESHOLD TARGET MAXIMUM
------------------ --------- ------ -------
<S> <C> <C> <C> <C>
D. W. Hilpert............................. 1999-2001 23% 90% 180%
1999-2000 15% 60% 120%
1999 8% 30% 60%
R. N. Farah(b)............................ 1999-2001 N/A N/A N/A
1999-2000 23% 90% 180%
1999 11% 45% 90%
M. J. Branman(c).......................... 1999-2001 N/A N/A N/A
1999-2000 N/A N/A N/A
1999 8% 30% 60%
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
PERFORMANCE PERIOD THRESHOLD TARGET MAXIMUM
------------------ --------- ------ -------
<S> <C> <C> <C> <C>
J. E. DeWolf III(c)....................... 1999-2001 N/A N/A N/A
1999-2000 N/A N/A N/A
1999 8% 30% 60%
S. R. Gaston(c)........................... 1999-2001 N/A N/A N/A
1999-2000 N/A N/A N/A
1999 8% 30% 60%
B. L. Hartman............................. 1999-2001 23% 90% 180%
1999-2000 15% 60% 120%
1999 8% 30% 60%
</TABLE>
Any payout under the Long-Term Plan is calculated based upon the Company's
performance in the applicable Performance Period and measured against the
performance criteria set for the participant at the beginning of the
applicable Performance Period by the Compensation Committee. These
performance goals are based on one or more of the following criteria: (i)
the attainment of certain target levels of, or percentage increase in,
consolidated net income; or (ii) the attainment of certain levels of, or a
specified increase in, return on invested capital. In addition, to the
extent permitted by Section 162(m) of the Internal Revenue Code (if
applicable), the Compensation Committee has the authority to incorporate
provisions in the performance goals allowing for adjustments in recognition
of unusual or non-recurring events affecting the Company or the Company's
financial statements, or in response to changes in applicable laws,
regulations or accounting principles. Unless otherwise determined by the
Compensation Committee, payment in connection with awards under this plan
will be made only if and to the extent performance goals for the Performance
Period are attained and generally only if the participant remains employed
by the Company throughout the Performance Period. The Compensation Committee
may award, after completion of the Performance Period, a pro-rata payment to
any participant whose employment terminated during the Performance Period.
Upon a Change in Control, as defined in the Long-Term Plan, the Compensation
Committee may, to the extent permitted under Section 162(m) of the Internal
Revenue Code (if applicable), pay out an amount equal to or less than a
pro-rata portion (through the date of the Change in Control) of the
individual target award based on the actual performance results achieved
from the beginning of the Performance Period to the date of the Change in
Control and the performance results that would have been achieved had the
performance goals been met for the balance of the Performance Period.
Payment to a participant under the Long-Term Plan for each Performance
Period will be made, at the discretion of the Compensation Committee, either
in cash or in shares of Common Stock. If payment is made in shares of Common
Stock, the number of shares to be paid to the participant will be determined
by dividing the achieved percentage of a participant's annual base salary by
the fair market value, as defined in the Long-Term Plan, of the Common Stock
on the date of payment. The amount of any payout for the Performance Period
may not exceed the lesser of 300 percent of the participant's annual base
salary or $5,000,000.
(b) As a result of the termination of Mr. Farah's employment, he is eligible to
receive a payment under the Long-Term Plan for the 1999-2000 Performance
Period, if any, prorated to his termination date. He is not eligible to
receive any payment for the 1999-2001 Performance Period.
(c) Although the Compensation Committee granted awards to M. J. Branman, J. E.
DeWolf III and S. R. Gaston under the Long-Term Plan for the 1999-2001 and
1999-2000 Performance Periods, they are not eligible to receive any payments
under this plan for these Performance Periods as a result of the termination
of their employment.
16
<PAGE> 20
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(A)
-------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE VALUE($)(B)
- ---- ---------- -------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
D. W. Hilpert................... 150,000 4.01 4.5313 02/10/09 279,490
350,000(c) 9.36 6.9688 11/10/09 1,044,634
R. N. Farah..................... 500,000 13.37 4.5313 04/11/02(d) 931,634
175,000 4.68 8.0313 04/11/02(d) 577,955
M. J. Branman................... 50,000 1.34 4.5313 05/29/00(e) 93,164
J. E. DeWolf III................ 50,000 1.34 4.5313 05/29/00(e) 93,164
S. R. Gaston.................... 50,000 1.34 4.5313 08/02/00(f) 93,164
B. L. Hartman................... 35,000 .94 4.5313 02/10/09 62,215
15,000 .40 4.5938 03/10/09 28,335
</TABLE>
- ---------------
(a) During 1999 the Compensation Committee granted stock options to the named
executive officers under the 1998 Stock Option and Award Plan (the "1998
Award Plan"). Roger N. Farah also received a grant under the 1995 Stock
Option and Award Plan (the "1995 Award Plan") for 500,000 shares.
The per-share exercise price of each stock option may not be less than the
fair market value of a share of Common Stock on the date of grant. In
general, no portion of any stock option may be exercised until the first
anniversary of its date of grant. The options granted during 1999 will
become exercisable in three equal annual installments, beginning on the
first anniversary of the date of grant. If a participant retires, becomes
disabled, or dies while employed by the Company or one of its subsidiaries,
all unexercised options that are then immediately exercisable, plus those
options that would have become exercisable on the next succeeding
anniversary of the date of grant of each option, will remain (or become)
immediately exercisable as of that date. Moreover, upon the occurrence of a
"Change in Control," as defined in the 1995 Award Plan and the 1998 Award
Plan, all outstanding options will become immediately exercisable as of that
date.
In general, options may remain exercisable for up to three years following a
participant's retirement or termination due to disability, and for up to one
year for any other termination of employment for reasons other than cause.
However, under no circumstances may an option remain outstanding for more
than ten years from its date of grant.
(b) Values were calculated as of the date of grant using a Black-Scholes option
pricing model. The values shown in the table are theoretical and do not
necessarily reflect the actual values that the named executive officers may
ultimately realize. Any actual value to the officer will depend on the
extent to which the market value of the Company's Common Stock at a future
date exceeds the option exercise price. In addition to the fair market value
of the Common Stock on the date of grant and the exercise price, which are
identical, the following assumptions were used to calculate the values shown
in the table: a weighted-average risk-free interest rate of 5.31 percent; a
stock price volatility factor of 45 percent; a two year weighted-average
expected award life and a zero dividend yield. The assumptions and
calculations used for the model are consistent with the assumptions for
reporting stock option valuations in the Company's 1999 Annual Report.
(c) 117,744 shares of this total stock option grant were granted subject to
shareholder approval of an amendment to the 1998 Award Plan eliminating the
individual award limitation.
(d) In connection with the termination of Mr. Farah's employment, the vested
portion of his 1999 option grants (449,999 shares) will expire on April 11,
2002. A total of 225,001 shares from his 1999 grants were cancelled as of
April 12, 2000.
(e) M. J. Branman and J. E. DeWolf III resigned as officers of the Company on
January 29, 2000 and their employment terminated on February 29, 2000. Under
the 1998 Award Plan, the vested portion of each of
17
<PAGE> 21
their grants (16,666 shares) will expire on May 29, 2000. The shares from
each of Mr. Branman's and Mr. DeWolf's 1999 option grant that had not vested
as of February 29, 2000 (33,334 shares) were cancelled on that date.
(f) In connection with the termination of Mr. Gaston's employment on May 2,
2000, the vested portion of his option (16,666 shares) will expire on August
2, 2000. The unvested portion of the grant (33,334 shares) will be cancelled
as of his termination date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY-END(#) FY-END($)(A)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. W. Hilpert........ 0 N/A 499,999 600,001 0 243,750
R. N. Farah.......... 0 N/A 800,000 675,000 0 812,500
M. J. Branman........ 0 N/A 141,666 208,334 0 81,250
J. E. DeWolf III..... 0 N/A 66,666 93,334 0 81,250
S. R. Gaston......... 0 N/A 10,000 70,000 0 81,250
B. L. Hartman........ 0 N/A 37,499 75,001 0 80,313
</TABLE>
- ---------------
(a) The fair market value (the average of the high and low prices of the
Company's Common Stock) on Friday, January 28, 2000, the last business day
of 1999, was $6.1563.
RETIREMENT PLANS
The Company maintains the Venator Group Retirement Plan (the "Retirement
Plan"), a defined benefit plan with a cash balance formula, which covers
associates of the Company and substantially all of its United States
subsidiaries. All qualified associates at least 21 years of age are covered by
the Retirement Plan, and plan participants become fully vested in their benefits
under this plan upon completion of five years of service or upon attainment of
age 65 while actively employed.
Under the cash balance formula, each participant has an account, for record
keeping purposes only, to which credits are allocated annually based upon a
percentage of the participant's W-2 Compensation, as defined in the Retirement
Plan. This percentage is determined by the participant's years of service with
the Company as of the beginning of each calendar year. The following table shows
the percentage used to determine credits at the years of service indicated.
<TABLE>
<CAPTION>
PERCENT OF W-2
PERCENT OF ALL COMPENSATION
YEARS OF SERVICE W-2 COMPENSATION OVER $22,000
- ---------------- ---------------- + --------------
<S> <C> <C> <C>
Less than 6................................................. 1.10 0.55
6-10........................................................ 1.50 0.75
11-15....................................................... 2.00 1.00
16-20....................................................... 2.70 1.35
21-25....................................................... 3.70 1.85
26-30....................................................... 4.90 2.45
31-35....................................................... 6.60 3.30
More than 35................................................ 8.90 4.45
</TABLE>
In addition, all balances in the participants' accounts earn interest at
the fixed rate of six percent, which is credited annually. At retirement or
other termination of employment, an amount equal to the vested balance then
credited to the account under the Retirement Plan is payable to the participant
in the form of a qualified joint and survivor annuity (if the participant is
married) or a life annuity (if the participant is not married).
18
<PAGE> 22
The participant may elect to waive the annuity form of benefit described above
and receive benefits under the Retirement Plan upon retirement in an optional
annuity form or an immediate or deferred lump sum, or, upon other termination of
employment, in a lump sum. Participants may elect one of the optional forms of
benefit with respect to the accrued benefit as of December 31, 1995 if the
individual participated in the Retirement Plan as of that date.
The Internal Revenue Code limits annual retirement benefits that may be
paid to, and compensation that may be taken into account in the determination of
benefits for, any person under a qualified retirement plan such as the
Retirement Plan. Accordingly, for any person covered by the Retirement Plan
whose annual retirement benefit, calculated in accordance with the terms of this
plan, exceeds the limitations of the Internal Revenue Code, the Company has
adopted the Venator Group Excess Cash Balance Plan (the "Excess Plan"). The
Excess Plan is an unfunded, nonqualified benefit plan, under which the
individual is paid the difference between the Internal Revenue Code limitations
and the retirement benefit to which he or she would otherwise be entitled under
the Retirement Plan.
In addition, the Supplemental Executive Retirement Plan (the "SERP"), which
is an unfunded, nonqualified benefit plan, provides for payment by the Company
of supplemental retirement, death and disability benefits to certain executive
officers and certain other key employees of the Company and its subsidiaries.
The named executive officers, excluding R.N. Farah, M. J. Branman and J. E.
DeWolf III, and four of the other executive officers of the Company currently
participate in the SERP. S. R. Gaston will cease to participate in the SERP upon
the termination of his employment on May 2, 2000. Under the SERP the
Compensation Committee of the Board of Directors sets an annual targeted
incentive award for each participant consisting of a percentage of salary and
bonus based on the Company's performance against target. Achievement of the
target causes an eight percent credit to a participant's account. The applicable
percentage decreases proportionately to the percentage of the Company's
performance below target, but not below 4 percent, and increases proportionately
to the percentage of the Company's performance above target, but not above 12
percent. Participants' accounts accrue simple interest at the rate of 6 percent
annually.
The table below provides the estimated annual benefit for each of the named
executive officers stated as a single life annuity (except for R.N. Farah, whose
actual retirement benefit is stated as a 50 percent joint and survivor annuity)
under the Retirement Plan, the Excess Plan, and where applicable, the SERP.
Except for Messrs. Farah, Branman, DeWolf, and Gaston, the projections contained
in the table assume each person's continued employment with the Company to his
normal retirement date and that compensation earned during each year after 1999
to the individual's normal retirement date remains the same as compensation
earned by him during 1999. The projections in the table below are based upon the
accrued benefit as of December 31, 1995 or a single life annuity determined by
converting the account balance projected to normal retirement date using a 6.00
percent interest rate at normal retirement age based on the average rate as
published in Federal statistical release H.15 (519) for 30-year U.S. Treasury
Bills for December 1999. The applicable interest rate is the rate specified in
Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code.
<TABLE>
<CAPTION>
TOTAL ANNUAL BENEFIT TOTAL ANNUAL BENEFIT
FOR YEARS 1-3 FOR YEARS 4 AND SUBSEQUENT
NAMED EXECUTIVE OFFICER FOLLOWING RETIREMENT(A) FOLLOWING RETIREMENT(A)
- ----------------------- ----------------------- --------------------------
<S> <C> <C>
D.W. Hilpert..................................... $456,365 $33,112
M. J. Branman (b)................................ N/A N/A
J. E. DeWolf III (b)............................. N/A N/A
S. R. Gaston (b)................................. N/A N/A
B. L. Hartman.................................... $537,674 $48,061
</TABLE>
<TABLE>
<CAPTION>
TOTAL ANNUAL BENEFIT
NAMED EXECUTIVE OFFICER FOLLOWING RETIREMENT
- ----------------------- --------------------
<S> <C>
R. N. Farah(c)............................................. $ 9,289
</TABLE>
- ---------------
(a) The amounts stated for years 1-3 following retirement include the SERP
benefits, payable as a lump sum spread over a three-year period. The SERP
projections include a four percent credit to the participants' accounts for
2000 and assume an annual eight percent credit going forward. Beginning with
the fourth
19
<PAGE> 23
year following retirement, the individuals' annual benefits will not include
any SERP payments and, therefore, their annual benefits for those years will
be reduced accordingly.
(b) Not eligible to receive a benefit under the Retirement Plan or the SERP as a
result of the termination of his employment.
(c) Not eligible to receive a benefit under the SERP as a result of the
termination of his employment.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
We have employment agreements with Mr. Hilpert and Mr. Hartman. Mr. Farah's
employment agreement, described below, was terminated as of April 12, 2000. Mr.
Gaston's agreement will be terminated effective May 2, 2000. Mr. Branman and Mr.
DeWolf had severance agreements while they were employed by the Company.
D. W. HILPERT
We entered into an employment agreement with Mr. Hilpert in his position as
President and Chief Executive Officer, effective August 16, 1999 (the "August
1999 Agreement"), for a term ending on August 31, 2004. This agreement remains
in effect following Mr. Hilpert's election as Chairman of the Board and Chief
Executive Officer on April 12, 2000. The August 1999 Agreement supersedes the
agreement we entered into in April 1999 with Mr. Hilpert as President and Chief
Operating Officer. During the term of the August 1999 Agreement, Mr. Hilpert
will receive a base salary of not less than $950,000 per year. In addition, Mr.
Hilpert participates in the Annual Plan and the Long-Term Plan. His payout at
target under the Annual Plan is 75 percent of base salary.
Under the terms of the August 1999 Agreement, the Compensation Committee
granted 60,000 shares of restricted stock to Mr. Hilpert. The shares will vest
on February 1, 2004 if Mr. Hilpert is employed by the Company until that date.
The shares will vest earlier, on March 15, 2002, if the Company attains certain
performance targets established by the Compensation Committee.
In the event Mr. Hilpert's employment is terminated by him for good reason
or by the Company without cause, he would be entitled to payments of any unpaid
base salary for the period prior to termination, any declared but unpaid
bonuses, and amounts due under any employee benefit or incentive plan.
Thereafter, for a period ending on the earliest of (a) the later of August 31,
2004 or two years from his termination date (b) his death, or (c) his violation
of any post-employment requirements, the Company will pay to Mr. Hilpert his
annual base salary in effect immediately prior to his termination.
Mr. Hilpert would receive in a lump sum the same payments described above
following a Change in Control if (a) he terminates his employment within the
30-day period following the Change in Control, (b) we terminate his employment
without cause, or (c) he terminates his employment for good reason during the
two-year period following the Change in Control. If the sum of the payments to
be made to Mr. Hilpert in such circumstances is less than three times his
then-current base salary plus annual bonus at target in the year of termination,
then the Company will pay the difference to Mr. Hilpert. In the event he becomes
entitled to the payments in this paragraph and the payments are determined to
constitute payments under Section 280G(b)(2) of the Internal Revenue Code and
subject to an excise tax under Section 4999 of the Internal Revenue Code, the
Company will pay him a gross-up payment for the excise and related income taxes
incurred in connection with the gross-up payment. Also, Mr. Hilpert's restricted
stock would immediately vest upon a Change in Control.
Finally, if Mr. Hilpert's employment is terminated (a) by him for good
reason, (b) by the Company without cause, (c) following a Change in Control, or
(d) on August 31, 2004 if we do not have an employment agreement extending Mr.
Hilpert's employment, and the amount of retirement benefits to which he is then
entitled under the Retirement Plan, the Excess Plan, and the SERP is less than
$1,300,000, the Company will increase the amount in his SERP account so that
this total is reached. This provision compensates Mr. Hilpert for the benefit he
would have received under his previous employer's supplementary plan.
20
<PAGE> 24
R. N. FARAH
APRIL 2000 AGREEMENT -- The Company entered into an agreement with Mr.
Farah on April 12, 2000 (the "April 2000 Agreement") in connection with his
resignation as Chairman of the Board, which terminated his August 1999
Agreement. Under the April 2000 Agreement, the Company paid Mr. Farah his base
salary through April 12, 2000. Under the terms of this agreement, he is entitled
to receive any payouts under the Annual Plan for the 2000 fiscal year and under
the Long-Term Plan for the 1999-2000 performance period, prorated to his
termination date. The portions of Mr. Farah's 1999 stock option grants that were
scheduled to vest on April 14, 2000, February 10, 2001 and April 14, 2001 were
vested on April 12, 2000. The remaining unvested shares from Mr. Farah's 1999
option grants were cancelled as of his termination date. Mr. Farah has until
April 11, 2002 to exercise his vested 1999 options and until July 11, 2000 to
exercise his vested options from his 1994 stock option grant. In addition, the
portion of Mr. Farah's 1999 restricted stock award that was scheduled to vest on
January 31, 2001 vested on April 12, 2000. Mr. Farah forfeited the remainder of
his 1999 restricted stock award.
AUGUST 1999 AGREEMENT -- Mr. Farah resigned as Chief Executive Officer of
the Company on August 15, 1999, and we entered into a new employment agreement
with him as Chairman of the Board effective as of August 16, 1999 (the "August
1999 Agreement"). This agreement superseded Mr. Farah's April 1999 Agreement,
which is described below. The August 1999 Agreement terminated on April 12, 2000
when Mr. Farah resigned as Chairman of the Board. During the term of the August
1999 Agreement, the Company paid Mr. Farah an annual base salary of $250,000.
Mr. Farah would continue to participate in the Annual Plan through the 2000
fiscal year, with a payout at target of 100 percent of base salary. He would
also continue to participate in the Long-Term Plan for the 1999 and 1999-2000
performance periods.
Under the August 1999 Agreement if either the Company or Mr. Farah
terminated his employment following a Change in Control, as defined in the
August 1999 Agreement, he would be entitled to payments of any unpaid base
salary for the period prior to termination, any declared but unpaid bonuses and
amounts due under any employee benefit or incentive plans. He also would be
entitled to the rights provided under any employee benefit or incentive plans.
Additionally, the forfeiture period of the restricted stock would terminate and
the shares of restricted stock granted to him in 1999 would immediately vest.
The Company would also pay Mr. Farah an amount equal to three times his base
salary plus bonus under the Annual Plan at target in the year of his termination
following a Change in Control. If Mr. Farah became entitled to the payments in
this paragraph following a Change in Control and the payments were determined to
be payments under Section 280G(b)(2) of the Internal Revenue Code and subject to
an excise tax under Section 4999 of the Internal Revenue Code, then we would pay
Mr. Farah a gross-up payment for the excise and related income taxes incurred in
connection with the gross-up payment.
APRIL 1999 AGREEMENT -- In April 1999 we entered into an employment
agreement (the "April 1999 Agreement") with Mr. Farah as Chairman of the Board
and Chief Executive Officer, which superseded his original employment agreement
from 1994. The April 1999 Agreement was terminated by mutual agreement at the
time Mr. Farah and the Company entered into the August 1999 Agreement described
above. The April 1999 Agreement reconfigured his compensation package by
significantly reducing Mr. Farah's base salary and increasing the amount of his
compensation tied to the performance of the Company and the price of our stock.
Mr. Farah received an annual base salary of $1 million under the April 1999
Agreement, which was a $500,000 reduction from the salary he received under his
original agreement. Mr. Farah also participated in the Annual Plan and the
Long-Term Plan, with a payout under the Annual Plan of 100 percent of his base
salary.
The April 1999 Agreement provided that Mr. Farah would receive an annual
stock option grant to purchase that number of shares of the Company's stock
having a market value of $5 million on the date of grant. This agreement also
provided for a one-time grant to Mr. Farah of 275,000 shares of restricted
stock, vesting over a period of three years beginning January 31, 2000, tied to
Mr. Farah's continued employment.
21
<PAGE> 25
B. L. HARTMAN
We also have an employment agreement with Mr. Hartman in his position as
Senior Vice President and Chief Financial Officer of the Company, for a term
beginning on January 1, 2000 and ending on December 31, 2001. The term of this
agreement will automatically be extended for an additional one-year period
unless we give Mr. Hartman notice that the Company does not intend to extend his
agreement.
If the Company terminates Mr. Hartman's employment without cause or does
not extend the term of his agreement beyond its then current termination date,
or if he terminates his employment for good reason, the Company will pay his
base salary to him through the termination date and a severance benefit of not
less than 52 weeks' salary. If Mr. Hartman's employment is terminated for good
reason or without cause within 24 months of a Change in Control, he would be
entitled to a severance benefit of not less than 104 weeks' salary plus two
times his annual bonus at target. The Company would pay Mr. Hartman his
severance benefit in two installments -- 50 percent upon termination and 50
percent one year following his termination. Prior to a Change in Control, he
would forfeit the second installment of his severance benefit if he engages in
competition during the one-year period following his termination date. If,
however, a Change in Control occurs before Mr. Hartman receives the remaining 50
percent of his severance benefit, he would be entitled to receive this payment
within 10 days following the Change in Control.
The Company has an employment agreement with Mr. Gaston as Senior Vice
President and Chief Information Officer under substantially the same terms as
Mr. Hartman's agreement. Mr. Gaston's agreement terminates on May 2, 2000 the
effective date of his resignation from the Company.
M. J. BRANMAN AND J. E. DEWOLF III
The Company had severance agreements with Mr. Branman and Mr. DeWolf during
1999, which provided for severance payments if their employment were terminated
by the Company without cause or by them for good reason. The Company entered
into agreements with Mr. Branman and Mr. DeWolf in connection with the
termination of their employment at the end of the 1999 fiscal year, which
terminated their prior severance agreements. The termination agreement with Mr.
Branman provided for a total severance payment of $2,300,000, which represents
the severance benefit and an amount in lieu of a special incentive bonus to
which he would have been entitled under the terms of his employment. The
termination agreement with Mr. DeWolf provided for a total severance payment of
$420,000, which represents the severance benefit to which he would have been
entitled if the Company terminated his employment without cause. In addition, we
entered into a consulting agreement with Mr. DeWolf effective March 1, 2000
through June 30, 2000 under which he provides real estate consulting services to
the Company for a fee of $40,000 per month. Mr. DeWolf is also entitled to a
contingent payment of $140,000 related to the completion of the sale of certain
specified property.
TRUST AGREEMENT
The Company has established a trust (the "Trust") in connection with
certain of its benefit plans, arrangements, and agreements, including certain of
those described above, and other benefit plans, agreements or arrangements that
subsequently may be covered (collectively, the "Benefit Obligations"). Under the
Trust agreement, in the event of a Change in Control of the Company (as defined
in the Trust agreement), the trustee would pay to the persons entitled to the
Benefit Obligations, out of funds held in the Trust, the amounts to which they
may become entitled under the Benefit Obligations. Upon the occurrence of a
Potential Change in Control of the Company (as defined in the Trust agreement),
the Company is required to fund the Trust with an amount sufficient to pay the
total amount of the Benefit Obligations. Following the occurrence, and during
the pendency, of a Potential Change in Control, the trustee is required to make
payments of Benefit Obligations to the extent these payments are not made by the
Company.
22
<PAGE> 26
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999 the following individuals (none of whom had been an officer or
employee of the Company or any of its subsidiaries) served on the Compensation
Committee: Philip H. Geier Jr., Margaret P. MacKimm and James E. Preston. There
were no interlocks with other companies within the meaning of the SEC's proxy
rules.
COMPENSATION COMMITTEE'S REPORT TO SHAREHOLDERS
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
composed of the directors listed below, has responsibility for all compensation
matters involving the Company's executive officers and for significant elements
of the compensation of the chief executive officers of its business units. None
of the members of the Committee are officers or employees of the Company or any
of its subsidiaries. This is our report on the Company's executive compensation
in 1999.
Compensation Policy. It is the policy of the Company to design and
maintain a compensation policy that will enable the Company to attract,
motivate, and retain executive officers and the chief executive officers of its
operating units by providing a fully competitive total compensation opportunity.
This policy, developed under the oversight and with the approval of the
Committee, provides for (i) competitive base salaries, which reflect the
responsibilities of the position held and performance in the position; (ii)
annual incentive opportunities payable in cash, which are based on the Company's
achievement of previously specified performance goals; (iii) long-term incentive
opportunities, payable in stock or cash, which are based on the Company's
achievement of previously specified performance goals; and (iv) long-term
stock-based incentive opportunities, which are designed to strengthen the
mutuality of interest between participating associates and the shareholders. The
Committee strives to balance short- and long-term incentive objectives and to
employ prudent judgment in establishing performance criteria, evaluating
performance, and determining actual incentive payment levels. For senior level
management associates the compensation policy provides that a greater percentage
of total compensation will be at risk, dependent upon the Company's performance
in relation to targets established under incentive compensation plans, or, in
the case of stock options, increases in the price of the Company's Common Stock.
Compensation Program. In order to implement this compensation policy, the
Company, under the oversight and with the approval of the Committee, has
established a compensation program for senior executive officers and the chief
executive officers of its business units consisting of four components: base
salary, participation in the Annual Plan, participation in the Long-Term Plan,
and grants under the Award Plans. These individuals, along with other associates
of the Company, also have the opportunity to participate in the employee stock
purchase program. The Company has a substantially similar compensation program
for its other officers and senior management employees.
A performance evaluation of each member of management is conducted by the
Company's management at the beginning of each year, based upon goals,
responsibilities, and other performance criteria established at the beginning of
the prior year. Similarly, the outside directors meet privately each year to
evaluate the performance of the Chief Executive Officer. Salary recommendations
are then made based upon the results of these performance reviews. With regard
to executive officers (other than the Chief Executive Officer) and the chief
executive officers of the Company's business units, management makes these
salary recommendations to the Committee. The Committee then reviews the base
salaries of these individuals and determines the changes, if any, that should be
made to their base salaries based upon the officer's performance and the need to
maintain a competitive position with other national retail companies.
At the beginning of each year, the Committee also establishes the
performance goals under the Annual Plan for that year and under the Long-Term
Plan for the performance period then beginning. The performance goals under the
Annual Plan for 1999 were based on a combination of pre-tax earnings and
percentage return on invested capital, with targets for executive officers being
equal to the budgeted pre-tax earnings and percentage return on invested capital
set in the Company's operating budget for the year. The
23
<PAGE> 27
chief executive officers of the business units participate in annual bonus plans
with goals tied to operating results of their respective units. Payments under
the Long-Term Plan are based on a combination of cumulative net income and
percentage return on invested capital of the Company during the performance
period, in relation to targets established by the Committee. In 1999, in order
to provide continued incentive to the key executives who participate in the
Long-Term Plan, the Committee established performance goals for three
performance periods beginning in 1999 and ending in each of 1999, 2000, and
2001.
Each year the Committee considers granting options to purchase Common Stock
to key employees, including executive officers. Stock option grants are intended
to provide additional incentive for superior performance by officers and key
employees who have the most impact on the management and success of the
Company's businesses. Stock options granted by the Committee in 1999 vest in
three equal annual installments beginning on the first anniversary of the date
of grant. Approximately 400 employees participate.
As part of a program designed to retain key executives in a difficult
business environment and drive superior performance over the ensuing three-year
period, in 1999 the Committee also granted restricted stock to the executive
officers, the chief executive officers of the business units, and certain other
key executives of the Company. The restrictions on the stock lapse after five
years (assuming continued employment of the executive with the Company) or after
three years if certain performance targets established by the Committee are met.
In determining the number of options and shares of restricted stock to be
granted to executive officers, the Committee considered several factors,
including the position held by the individual, his or her performance, the
number of options granted to these individuals in previous years, the financial
results of the Company for the prior year, the price of a share of Common Stock,
and the need to retain key executives during the period when the Company was
completing its turnaround.
The performance of the Company's continuing operations in 1999 did not meet
the performance targets established by the Committee under the Annual Plan or
the Long-Term Plan, and therefore no payments were made to the executive
officers under those plans.
Chief Executive Officer's Compensation. When Dale W. Hilpert became Chief
Executive Officer of the Company in August 1999, the Company entered into a new
employment agreement with him. The terms of that agreement are summarized on
Page 20. As a result of Mr. Hilpert's new position, the Committee adjusted his
base salary and the percentage of base salary payable under the Annual Plan, at
target. Additional stock options and restricted stock were also granted.
In approving the new compensation arrangements with Mr. Hilpert, the
Committee considered the compensation of chief executive officers of other
companies in the retail and athletic footwear and apparel industries and the
benefits to the Company and its shareholders that were expected to result from
providing Mr. Hilpert with a meaningful compensation opportunity tied to the
performance of the Company and the price of its Common Stock.
Roger N. Farah served as the Company's Chief Executive Officer until August
1999. Prior to April 1999, Mr. Farah's compensation package was unchanged from
the employment agreement negotiated by the Company and Mr. Farah at the time he
joined the Company in 1994 (the "1994 Agreement"). The 1994 Agreement provided
for a base salary of $1,500,000 per year, and a bonus at target under the Annual
Plan of 50 percent of base salary. Two hundred thousand shares of restricted
stock were granted to Mr. Farah in 1994 subject to a restriction related to his
continued employment, to vest at 20 percent per year at the end of the first
through fifth years of employment. As of January 31, 2000, the restrictions have
lapsed on all of these shares.
In April 1999 the Company and Mr. Farah entered into a new employment
agreement, the terms of which are summarized on Page 21, for a term ending
January 31, 2003 (the "1999 Agreement"). In the 1999 Agreement, the Company and
Mr. Farah agreed to reconfigure his compensation package to reduce significantly
his base salary and to increase the amount of his compensation that was "at
risk" based upon the performance of the Company (through increased "at target"
pay-outs under the Annual Plan and the Long-
24
<PAGE> 28
Term Plan) and the price of the Company's Common Stock (through a restricted
stock grant and on-going stock option grants).
When Mr. Farah resigned as Chief Executive Officer of the Company in August
1999, the Company and Mr. Farah entered into a new employment agreement in
connection with his services as Chairman of the Board of the Company, the terms
of which are summarized on Page 21, and the 1999 Agreement was terminated.
As noted, Mr. Farah's compensation arrangements prior to April 1999 were
unchanged from those negotiated by the Company and Mr. Farah at the time he
joined the Company in 1994. In approving the compensation arrangements for Mr.
Farah contained in the 1999 Agreement, the Committee considered his prior
compensation arrangements, the compensation of chief executive officers of other
companies in the retail and athletic footwear and apparel industries, and the
benefits to the Company and its shareholders that were expected to result from
providing Mr. Farah with a meaningful incentive compensation opportunity tied to
the performance of the Company and the price of its Common Stock.
Based upon the Company's performance in 1999 compared to targets
established under the Annual Plan, as discussed above, no payments were made to
Mr. Farah or Mr. Hilpert under the Annual Plan for 1999 or under the Long-Term
Plan for the performance periods ended in 1999.
One Million Dollar Pay Deductibility Cap. Under Section 162(m) of the
Code, public companies are precluded from receiving a federal tax deduction on
compensation paid to certain executive officers in excess of $1 million per year
unless certain requirements are met. It is generally the Committee's view that
the compensation plans and programs of the Company should be designed and
administered in a manner that ensures the tax deductibility by the Company of
compensation paid to its executives. As a consequence, the Annual Plan, the
Long-Term Plan, and the 1995 and 1998 Stock Option and Award Plans are
structured so that cash compensation paid and stock options granted under those
plans qualify for an exemption from the $1 million pay deductibility limit. At
this year's annual meeting, the Company is again seeking shareholder approval of
the performance goals of the Annual Plan so that the Plan continues to qualify
under Section 162(m) of the Internal Revenue Code. The Committee recognizes,
however, that situations may arise when it is in the best interests of the
Company and its shareholders to pay compensation to an executive that cannot be
deducted for tax purposes. Most of the compensation related to the restricted
stock grants made to Mr. Hilpert, and potentially some portion of the restricted
stock grants made to certain other officers, are not expected to be deductible.
It was the view of the Committee that the benefits of securing the services of
Mr. Hilpert and these officers outweigh the Company's inability to obtain a tax
deduction for those elements of compensation.
25
<PAGE> 29
2000 Annual Meeting. At the recommendation of the Compensation Committee,
the Board of Directors has approved three changes to compensation programs and
is submitting these for shareholder approval at this year's annual meeting.
First, we are seeking to increase the number of authorized shares under the 1998
Award Plan. The Committee believes that, particularly in this period, stock
options are a significant tool for recruiting and motivating key associates and
are a prime means of aligning the interests of these associates with those of
the shareholders. The Committee has also recommended an amendment to the 1998
Award Plan that will eliminate the annual cap on the number of options that can
be granted to any one individual (while retaining a cap on the overall number of
options that can be granted to an individual). In administering the stock option
plans, the Committee has found the individual annual cap to be ineffective in
certain limited recruitment or promotion situations, such as this year's
promotion of Mr. Hilpert to the Chief Executive Officer's position, while
providing no benefit to shareholders that is not provided through the overall
cap. Finally, the Committee has recommended an amendment increasing the
percentage of salary (but not the dollar limitation) that may be paid to an
executive under the Annual Plan. As with the cap under the stock option plan,
the Committee has found, in administering the Annual Plan, that this restriction
has limited its ability to design effective compensation packages -- in
particular in creating a compensation package for Mr. Hilpert where more of his
compensation would be at risk, dependent upon the performance of the Company,
and less would be in the form of base salary.
James E. Preston, Chairman
Philip H. Geier Jr.
Margaret P. MacKimm
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<PAGE> 30
PERFORMANCE GRAPHS
The following performance graph compares the cumulative total shareholder
return on the Company's Common Stock against the cumulative total return of the
S&P 500 Index and the S&P Retail Stores Composite Index from January 29, 1995
through January 29, 2000. The graph assumes an investment of $100 in the
Company's Common Stock and in each index on January 29, 1995, and that all
dividends were reinvested.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
VENATOR GROUP S&P 500 S&P RETAIL
------------- ------- ----------
<S> <C> <C> <C>
Jan 95 100.00 100.00 100.00
Jan 96 69.60 132.70 102.80
Jan 97 127.20 164.23 122.44
Jan 98 138.40 209.50 183.31
Jan 99 32.80 272.04 297.40
Jan 00 38.00 289.16 292.51
</TABLE>
27
<PAGE> 31
The next graph compares the cumulative total shareholder return on the
Company's Common Stock against the Russell 2000 Index and a selected peer group
from September 27, 1996 (the date on which all peer group members were publicly
held) through January 29, 2000. The peer group consists of The Finish Line,
Inc., Footstar, Inc. (whose business includes operations outside of athletic
footwear and apparel retailing) and The Sports Authority, Inc. Just For Feet,
Inc., which was previously included in this graph, was omitted since its stock
is no longer publicly traded. The Company believes that this selected group
reflects the Company's peers as retailers in the athletic footwear and apparel
industry.
<TABLE>
<CAPTION>
VENATOR GROUP RUSSELL 2000 PEER
------------- ------------ ----
<S> <C> <C> <C>
Sept 96 100.00 100.00 100.00
Jan 97 96.36 106.00 83.74
Jan 98 104.85 125.03 67.96
Jan 99 24.85 123.65 48.23
Jan 00 28.79 146.05 41.47
</TABLE>
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the members of the
Board of Directors be divided into three classes serving staggered three-year
terms, each class to be as nearly equal in number as the other two. The terms of
Matthew D. Serra and the four directors who constitute Class III expire at the
2000 annual meeting upon the election and qualification of their successors.
John J. Mackowski and Margaret P. MacKimm are retiring as directors and are
not standing for re-election following the expiration of their terms at the 2000
annual meeting. Jarobin Gilbert Jr., Allan Z. Loren, and David Y. Schwartz will
be considered for election as directors in Class III, each to hold office for a
three-year term expiring at the annual meeting in 2003. Matthew D. Serra will be
considered for election as a director in Class I, to hold office for a one-year
term expiring at the annual meeting in 2001. The six remaining directors will
continue in office, in accordance with their previous elections, until the
expiration of the terms of their classes at the 2001 or 2002 annual meeting.
Each nominee has been nominated by the Board of Directors for election and has
consented to serve for the specified term. Messrs. Gilbert, Loren and Serra are
presently serving as directors. Mr. Gilbert and Mr. Loren were elected to serve
for their present terms at the annual meetings in 1997 and 1998, respectively.
Mr. Serra was elected to the Board on April 12, 2000. Mr. Schwartz is not
presently serving as a director.
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<PAGE> 32
If, prior to the annual meeting, any of the four nominees becomes unable to
serve as a director for any reason, the persons designated as proxies on the
enclosed proxy card will have full discretion to vote the shares represented by
proxies held by them for another person to serve as a director in place of that
nominee.
Biographical information follows for the four nominees and for each of the
six other directors of the Company whose present terms as directors will
continue after the 2000 annual meeting. Any reference to a person's tenure as a
director of the Company includes service as a director of F.W. Woolworth Co. for
the period prior to the 1989 share exchange between the Company and F.W.
Woolworth Co.
There are no family relationships among the directors or executive officers
of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
TO THE BOARD OF DIRECTORS OF THE NOMINEES IDENTIFIED FOR ELECTION.
NOMINEE FOR DIRECTOR
TERM EXPIRING IN 2001
<TABLE>
<S> <C>
[SERRA PHOTO] MATTHEW D. SERRA. Age 55. Director since April 12, 2000.
The Company's President since April 12, 2000 and Chief
Operating Officer since February 9, 2000. He was President
and Chief Executive Officer of the Company's Foot Locker
Worldwide division from September 21, 1998 to February 8,
2000. Mr. Serra previously served as Chairman and Chief
Executive Officer of Sterns, a division of Federated
Department Stores, Inc., from March 1993 to September 1998.
</TABLE>
NOMINEES FOR DIRECTORS
TERMS EXPIRING IN 2003
<TABLE>
<S> <C>
[GILBERT PHOTO] JAROBIN GILBERT JR. Age 53. Director since 1981. President
and Chief Executive Officer of DBSS Group, Inc. (management,
planning and trade consulting services) since 1992. He is a
director of Whitman Corp. and Midas, Inc. He is a trustee of
Atlantic Mutual Insurance Company and a director of its
subsidiaries, Atlantic Specialty Insurance Company and
Centennial Insurance Company. Mr. Gilbert is also a director
of Valley Agency for Youth and a permanent member of the
Council on Foreign Relations.
[LOREN PHOTO] ALLAN Z. LOREN. Age 61. Director since 1998. Executive Vice
President and Chief Information Officer of American Express
Company (travel and financial services) from May 1994 to
April 2000. He is a director of Reynolds & Reynolds Company
and Hershey Foods Corp.
[SCHWARTZ PHOTO] DAVID Y. SCHWARTZ. Age 59. Mr. Schwartz is not currently
serving as a director. Independent business adviser and
consultant since July 1997. He was a partner with Arthur
Andersen LLP (public accounting firm) from 1972 until he
retired in 1997. Mr. Schwartz is a director of Walgreen Co.
</TABLE>
29
<PAGE> 33
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2001
<TABLE>
<S> <C>
[PRESTON PHOTO] JAMES E. PRESTON. Age 67. Director since 1983. Chairman of
the Board of Avon Products, Inc. (manufacture and sale of
beauty and related products) from 1989 to May 6, 1999, and
Chief Executive Officer of Avon Products, Inc. from 1989 to
June 1998. He is a director of ARAMARK Corporation, Reader's
Digest Association, Outpost.com, Project Hope, The Edna
McConnell Clarke Foundation, The New Milford Hospital, and
the Kent Land Trust.
[SINCLAIR PHOTO] CHRISTOPHER A. SINCLAIR. Age 49. Director since 1995.
Chairman of the Board of Caribiner International (business
communications) since May 5, 1999 and Chief Executive
Officer from December 22, 1998 to present. He was President
of Caribiner International from December 22, 1998 to May 4,
1999. Mr. Sinclair was President and Chief Executive Officer
of Quality Food Centers, Inc. (supermarket chain) from
September 12, 1996 to March 1998. He was Chairman and Chief
Executive Officer of Pepsi-Cola Company, a division of
PepsiCo, Inc. ("PepsiCo") (beverages, snack foods and
restaurants) from April 1996 to July 1996; and President and
Chief Executive Officer of PepsiCo Foods and Beverages
International, a division of PepsiCo, from 1993 to April
1996. He is a director of Caribiner International, Mattel,
Inc. and the Amos Tuck School of Business Administration at
Dartmouth College.
</TABLE>
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2002
<TABLE>
<S> <C>
[BACOT PHOTO] J. CARTER BACOT. Age 67. Director since 1993. Chairman of
the Board of The Bank of New York Company, Inc. (bank
holding company) and of The Bank of New York, its wholly
owned subsidiary, from 1982 to February 7, 1998; Chief
Executive Officer of The Bank of New York Company, Inc. and
of The Bank of New York from 1982 to July 1, 1997. He is a
trustee of Atlantic Mutual Insurance Company and a director
of its subsidiaries, Atlantic Specialty Insurance Company
and Centennial Insurance Company; and a director of The Bank
of New York Company, Inc., Time Warner, Inc., Associates
First Capital Corporation, Phoenix Home Life Mutual
Insurance Company and United Way of New York City. He is
also a Trustee of Hamilton College.
[CRAWFORD PHOTO] PURDY CRAWFORD. Age 68. Director since 1995. Chairman of
the Board of AT&T Canada (telecommunications) since June
1999. Chairman of the Board of Imasco Limited (Canada)
(consumer products and services) from 1987 to February 2000
and its Chief Executive Officer from 1987 to 1995. Mr.
Crawford is a director of Camco, Inc., Canadian National
Railway Company, Inco Limited, Maple Leaf Foods Ltd., Petro-
Canada and Nova Scotia Power Inc. He is Governor Emeritus of
McGill University; Chancellor of Mount Allison University; a
member of the Advisory Board of Oxford Frozen Foods Limited;
and Counsel to the Canadian law firm of Osler, Hoskin &
Harcourt.
</TABLE>
30
<PAGE> 34
<TABLE>
<S> <C>
[GEIER PHOTO] PHILIP H. GEIER JR. Age 65. Director since 1994. Chairman
of the Board and Chief Executive Officer of Interpublic
Group of Companies, Inc. (advertising agencies and other
marketing communication services) since 1980. He is a
director of Fiduciary Trust Company International, AEA
Investors, Inc. and the International Tennis Hall of Fame.
He is also a member of the Board of Overseers and Managers
of Memorial Sloan Kettering Cancer Center, the Board of
Overseers of Columbia Business School, and the Board of
Trustees of the Whitney Museum of American Art.
[HILPERT PHOTO] DALE W. HILPERT. Age 57. Director since 1995. The Company's
Chairman of the Board and Chief Executive Officer since
April 12, 2000. He was President and Chief Executive Officer
of the Company from August 16, 1999 to April 11, 2000, and
President and Chief Operating Officer of the Company from
May 15, 1995 to August 15, 1999. Mr. Hilpert was Chairman
and Chief Executive Officer of the Payless Shoe Source
division of The May Department Stores Company (retail
merchants) from 1985 to April 1995.
</TABLE>
PROPOSAL 2. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors has
appointed KPMG LLP ("KPMG") as independent accountants of the Company for the
fiscal year that began January 30, 2000, subject to ratification by the
shareholders at the 2000 annual meeting. A resolution for ratification will be
presented at the annual meeting.
KPMG has no interest, financial or otherwise, direct or indirect, in the
Company other than as independent accountants.
Representatives of KPMG are expected to be present at the annual meeting
and will have an opportunity to make a statement and respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 2.
PROPOSAL 3. APPROVAL OF AMENDMENTS TO THE 1998 STOCK OPTION AND AWARD PLAN
The Board of Directors of the Company has adopted amendments to the 1998
Award Plan, subject to shareholder approval at the 2000 annual meeting. The
amendments would increase by 6,000,000 shares the total number of shares
authorized to be issued under this plan and would remove the limit on the number
of shares that may be granted to a participant in each year. The amendments
would also increase the number of shares that may be issued as restricted stock
and other stock-based awards from 1.5 million shares to 3 million shares.
Approximately 400 employees participate in the 1998 Award Plan.
The material provisions of the 1998 Award Plan are described on Page 17.
The complete text of the 1998 Award Plan, as proposed to be amended, is attached
as Appendix A.
SUMMARY OF THE PROPOSED AMENDMENTS.
In June 1998 shareholders approved the 1998 Award Plan, which authorized
the grant of awards in the form of stock options, stock appreciation rights,
restricted stock, and other stock-based awards. There are currently 6,000,000
shares authorized under this Plan. As of April 12, 2000, prior to the option
grants made on that date, there were outstanding awards covering 4,385,559
shares, and only 1,562,980 shares remained available as of this date for awards
under this plan. Therefore, additional shares are needed so that the Company is
able to continue its stock option and stock award incentive programs for key
executives. We
31
<PAGE> 35
believe that these programs provide participants with additional incentive to
contribute to the success of the Company and help the Company maintain a
competitive compensation program that allows the Company to recruit and retain
the best qualified individuals. The plan approved by shareholders in 1998
provided that no more than 1.5 million shares, or 25 percent of the total
authorized shares, would be available for awards of restricted stock. The number
of shares that would be available for awards of restricted stock and other
stock-based awards under the 1998 Award Plan, as amended, would be increased to
3 million shares, or 25 percent of the total authorized shares.
The amendments to the 1998 Award Plan would remove the provision that
limited the number of shares that may be awarded to a participant in any one
year to 600,000 shares. On November 10, 1999 the Compensation Committee granted
a stock option to Mr. Hilpert for a total of 350,000 shares under the 1998 Award
Plan in connection with his assumption of the position of Chief Executive
Officer. Since the number of shares in this stock option grant exceeded the
individual share limitation by 117,744 shares, the Committee granted the portion
of Mr. Hilpert's option covering 117,744 shares subject to shareholder approval
of an amendment to the 1998 Award Plan removing this limitation. If shareholders
do not approve the amendment of the 1998 Award Plan, Mr. Hilpert's option for
117,744 shares would be cancelled.
In addition, the 1998 Award Plan provides that no participant may receive
awards which in the aggregate exceed 10 percent of the total number of shares
authorized under the plan. This limitation is not being amended; however, if
shareholders approve the amendment to the 1998 Award Plan, the effect will be to
increase the 10 percent aggregate award limitation from 600,000 shares to 1.2
million shares.
1999 GRANTS AND AWARDS
The Compensation Committee granted the stock options and awarded the
restricted stock to the named executive officers shown in the tables on Pages 12
and 17 during 1999. The Company did not grant any stock options to the
non-employee directors during 1999. The Company granted stock options,
restricted stock, and other stock based awards during 1999 under the 1998 Award
Plan to the executive officers as a group, including the named executive
officers, covering 2,045,232 shares, and to all employees as a group covering
4,667,232 shares. The fair market value of a share of the Company's Common Stock
on April 20, 2000 was $11.00.
2000 GRANTS AND AWARDS
On April 12, 2000 the Compensation Committee granted stock options under
the 1998 Award Plan to certain officers and key employees of the Company and its
subsidiaries, as follows:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
NAME AND POSITION OPTIONS GRANTED
----------------- ---------------
<S> <C>
Named Executive Officers.................................... 40,000
All Current Executive Officers as a Group
(Including the Named Executive Officers).................. 160,000
All Current Non-Executive Directors......................... N/A
All Employees as a Group.................................... 1,300,000
</TABLE>
The per-share exercise price of the options granted on April 12, 2000 is
$11.3125, which is the fair market value of a share of Common Stock on April 12,
2000. Any benefit to the grantees will be based on the spread between the fair
market value on the exercise date and $11.3125. Since it is not possible to
determine when the options will be exercised by the grantees, benefits, if any,
under the 1998 Award Plan are not determinable.
32
<PAGE> 36
U.S. FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
A participant does not realize taxable income, and no tax deduction is
available to the Company, upon either the grant or exercise of an incentive
stock option ("ISO"). If a Participant holds the shares acquired upon the
exercise of an ISO for more than one year after the option exercise and more
than two years after the date of the option grant (the "Holding Period"), the
difference between the option price and the amount realized upon the sale of the
shares will be treated as long-term capital gain or loss and no deduction will
be available to the Company. If the shares are sold before the expiration of the
Holding Period, the Participant will realize ordinary income and the Company
will be entitled to a deduction for the portion of the gain, if any, equal to
the difference between the option price and the lesser of the fair market value
of the shares on the date of exercise or the amount realized on the disposition.
Any further gain or loss will be taxable as long-term or short-term capital gain
or loss depending upon the holding period before disposition.
A participant does not realize taxable income, and no deduction is
available to the Company, upon the grant of a nonstatutory option. When an
option is exercised, the excess of the fair market value of the shares on the
date of exercise over the exercise price of the option will be taxable to the
participant and deductible by the Company. The tax basis of shares acquired will
be the fair market value of the shares on the exercise date. For shares held for
more than one year following the exercise date, the participant will realize
long-term capital gain or loss upon disposition.
The Company believes that compensation received by participants on the
exercise of nonstatutory options or the disposition of shares acquired upon the
exercise of any ISOs will be considered performance-based compensation and thus
not subject to the $1 million limit of Section 162(m) of the Internal Revenue
Code.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
PROPOSAL 4. REAPPROVAL OF THE PERFORMANCE GOALS AND APPROVAL OF
AMENDMENT OF THE ANNUAL INCENTIVE COMPENSATION PLAN
Under Section 162(m) of the Internal Revenue Code, the Company cannot
deduct certain compensation in excess of $1 million paid to the named executive
officers of the Company. Certain compensation, including compensation paid based
on the achievement of preestablished performance goals, is excluded from this
deduction limit if the material terms under which the compensation is to be
paid, including the performance goals to be used, are approved by shareholders.
Shareholders approved the Annual Plan, amended and restated as of January 28,
1996, at the 1996 annual meeting, which satisfied these requirements. Section
162(m) requires that shareholders reapprove the performance goals under the plan
every five years.
MATERIAL FEATURES OF THE ANNUAL PLAN
The following is a summary of the principal features of the Annual Plan and
is qualified in its entirety by the complete text of the Annual Plan, as
proposed to be amended, which is attached as Appendix B. Capitalized terms used
but not defined in the following summary shall have the meanings contained in
the Annual Plan.
The purposes of the Annual Plan are to reinforce corporate, organizational,
and business development goals; to promote the achievement of year-to-year
financial and other business objectives; to reward the performance of individual
officers and other employees in fulfilling their personal responsibilities for
year-to-year achievements; and to serve as a qualified performance-based
compensation program under Section 162(m) of the Internal Revenue Code with
regard to Covered Employees.
The Annual Plan is administered by a Committee, composed of two or more
members of the Compensation Committee of the Board, each of whom is an "outside
director" under Section 162(m) of the Internal Revenue Code. The Committee has
the authority to grant awards, determine performance criteria,
33
<PAGE> 37
certify attainment of performance goals, construe and interpret the Annual Plan
and make all other determinations deemed necessary or advisable for the
administration of the Annual Plan.
Participation in the Annual Plan is limited to those officers and other key
employees of the Company as selected by the Committee. In determining the
persons to whom awards shall be granted, the Committee takes into account such
factors as the Committee deems appropriate to accomplish the purposes of the
Annual Plan.
Annual Plan awards relate to a period coinciding with the Company's fiscal
year (the "Performance Period"). The individual target award for each
participant is expressed as a percentage of Annual Base Salary. Unless otherwise
determined by the Committee, payment for such awards shall be made only if and
to the extent performance goals for the Performance Period are attained and, in
the case of Participants who are executive officers of the Company ("Covered
Employees"), generally only if the participant remains employed by the Company
throughout the fiscal year. The Committee, in its sole discretion, may make an
Interim Payment to any participant other than a Covered Employee who terminates
employment prior to the end of the Performance Period. Payment to Covered
Employees may be made only after attainment of the performance goals has been
certified by the Committee.
Notwithstanding the foregoing, pursuant to a written agreement executed
prior to the beginning of the relevant Plan Year in accordance with any deferred
compensation program applicable to a participant (a "Deferred Compensation
Program"), the participant may elect to defer receipt of payments earned under
the Annual Plan. Any award deferred by a Covered Employee shall not increase
(between the date on which the award is credited to any Deferred Compensation
Program applicable to such Covered Employee and the payment date) by a measuring
factor for each year greater than either (x) one hundred and twenty percent
(120%) of the applicable federal long-term rate, compounded annually, and as set
as of the first day of the calendar year; or (y) a hypothetical investment in
shares of the Company's Common Stock (as determined under such Deferred
Compensation Program), as irrevocably elected by the Covered Employee in the
deferral agreement. The participant shall have no right to receive payment of
any deferred amount until he or she has a right to receive such amounts under
the terms of the applicable Deferred Compensation Program. In no event shall
payment for a fiscal year be made to a Covered Employee under the Annual Plan,
as amended, in an amount which exceeds $1.5 million.
The Committee may at any time and from time to time alter, amend, suspend
or terminate the Annual Plan in whole or in part; provided, however, that no
amendment which requires shareholder approval in order for the Annual Plan to
continue to comply with Section 162(m) of the Internal Revenue Code shall be
effective unless it is approved by the required vote of the shareholders of the
Company. Notwithstanding the foregoing, no amendment shall affect adversely any
of the rights of any participant, without such participant's consent, under an
award previously granted under the Annual Plan.
Since performance goal criteria may vary from year to year, benefits under
the Annual Plan are not determinable. The Annual Plan is designed to provide
payments only if the performance goals established by the Committee have been
met and the attainment of such performance goals has been certified by the
Committee. For example, since the targets established by the Committee for 1999
were not achieved, no awards were paid for 1999 under the Annual Plan.
REAPPROVAL OF PERFORMANCE GOALS
The Annual Plan provides that the Compensation Committee generally has the
authority to determine the performance goals that will be in effect for a
performance period. The Committee also has the authority to incorporate
provisions in the performance goals allowing for adjustments in recognition of
unusual or non-recurring events affecting the Company or our financial
statements or in response to changes in applicable laws, regulations or
accounting principles. The Committee has the authority to determine the
performance goals of the executive officers ("Covered Employees") solely to the
extent permitted by Section 162(m) of the Internal Revenue Code.
34
<PAGE> 38
The performance goals for the Covered Employees will be determined by the
Compensation Committee based on one or more of the following criteria:
- the attainment of certain target levels of, or percentage increase in,
- pretax profit;
- after-tax profits of the Company (or a subsidiary, division, or other
operational unit of the Company);
- after-tax or pre-tax return on shareholders' equity of the Company (or
any subsidiary, division or other operational unit of the Company);
- the attainment of certain target levels of, or a specified increase in,
- operational cash flow of the Company (or a subsidiary, division, or
other operational unit of the Company);
- return on invested capital or return on investment;
- the achievement of a certain level of, reduction of, or other specified
objectives with regard to limiting the level of increase in, all or a
portion of, the Company's bank debt or other long-term or short-term
public or private debt or other similar financial obligations of the
Company, if any, which may be calculated net of such cash balances and/or
other offsets and adjustments as may be established by the Compensation
Committee;
- the attainment of a specified percentage increase in earnings per share
or earnings per share from continuing operations of the Company (or a
subsidiary, division or other operational unit of the Company);
- the attainment of certain target levels of, or a specified percentage
increase in, revenues, net income, or earnings before interest, taxes,
depreciation and/or amortization of the Company (or a subsidiary,
division or other operational unit of the Company);
- the attainment of a certain target level of, or a reduction in, selling,
general and administrative expense as a percentage of revenue of the
Company (or any subsidiary, division or other operational unit of the
Company).
AMENDMENT OF PLAN
The Board of Directors adopted an amendment to the provision in the Annual
Plan that limited the maximum payment in a fiscal year to a Covered Employee to
the lesser of 100 percent of that employee's Annual Base Salary or $1.5 million.
In his position as Chairman of the Board and Chief Executive Officer, Mr.
Hilpert's payout at target under the Annual Plan is 75 percent of his base
salary. However, if the Company exceeds the performance goals set out in the
plan, Mr. Hilpert's (and other Covered Employees') potential payout could exceed
100 percent of base salary. Therefore, in order to allow for a payout that could
exceed 100 percent of base salary if the Company exceeds its performance goals,
the Compensation Committee amended the plan, subject to shareholder approval, to
remove the cap calculated as a percentage of salary. The provision of the plan
that limits the maximum payment to a Covered Employee in a fiscal year under the
plan to a maximum of $1.5 million will remain in place.
We are seeking shareholder approval of the performance goals originally
approved by shareholders in 1996 and the above amendment to the plan regarding
the maximum payment limitation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 4.
PROPOSAL 5. APPROVAL OF THE VENATOR GROUP DIRECTORS STOCK OPTION PLAN
The Board of Directors has adopted, subject to shareholder approval, the
Venator Group Directors Stock Option Plan (the "Directors Option Plan"),
effective upon shareholder approval at the 2000 annual meeting. The following is
a summary of the material terms of the Directors Option Plan and is qualified in
its entirety
35
<PAGE> 39
by the complete text of the Directors Option Plan, which is attached as Appendix
C. The capitalized terms used in this summary but not defined in this summary
have the meanings given to them in the Directors Option Plan.
PURPOSE
The purpose of the Directors Option Plan is to promote the interests of the
Company and our shareholders by increasing the proprietary interest of
non-employee directors in the growth and performance of the Company.
ELIGIBILITY
Directors of the Company who are not employees of the Company or our
subsidiaries or affiliates ("Eligible Directors") are eligible to participate in
the Directors Option Plan. There are currently nine Eligible Directors on the
Board, although it is not intended that the two retiring directors will
participate in this plan. David Y. Schwartz would become an Eligible Director
upon his election to the Board.
TYPES OF AWARDS UNDER THE DIRECTORS OPTION PLAN
Effective on the date the Company's shareholders approve the Directors
Option Plan and on the first business day of each fiscal year of the Company
commencing thereafter, each Eligible Director will be granted an option under
the plan to purchase that number of shares of Common Stock having a market value
of $50,000 on the date of grant, at a per share exercise price equal to the fair
market value of a share of the Company's Common Stock on such date. All options
granted under the plan will be nonstatutory options not intended to qualify
under Section 422 of the Internal Revenue Code. Each stock option granted will:
- vest in three equal annual installments, beginning with the first
anniversary of the date of grant; and
- expire on the earlier of the tenth anniversary of the date of grant or
one year from the date on which the participant ceases to be an Eligible
Director. The exercise price per share of Common Stock shall be 100
percent of the fair market value on the date the option is granted. The
exercise price of options must be paid in cash.
NUMBER OF AUTHORIZED SHARES
The maximum number of shares of Common Stock that may be granted under the
Directors Option Plan is 100,000. Shares of Common Stock subject to options that
are forfeited, terminated or cancelled will again be available for awards. The
shares of Common Stock to be delivered upon exercise under the Directors Option
Plan will be made available from the authorized but unissued shares of Common
Stock or from treasury shares. The number and class of shares available under
the Directors Option Plan and/or subject to outstanding options may be adjusted
by the Board of Directors to prevent dilution or enlargement of rights if
various changes in the capitalization occur.
ADMINISTRATION OF THE DIRECTORS OPTION PLAN
The Directors Option Plan will be administered by the Board of Directors.
Subject to the provisions of the Directors Option Plan, the Board will be
authorized to interpret the Directors Option Plan, to establish, amend and
rescind any rules and regulations relating to the plan and to make all other
determinations necessary or advisable for its administration; provided however,
that the Board will not have discretion with respect to the selection of
directors to receive options, the number of shares of Common Stock subject to
any such options, the purchase price or the timing or term of grants of options.
The determinations of the Board in the administration of the Directors Option
Plan shall be final and conclusive. The Secretary of the Company shall be
authorized to implement the Directors Option Plan in accordance with its terms
and to take such actions of a ministerial nature as shall be necessary to
effectuate the intent and purposes of the plan. The
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<PAGE> 40
validity, construction and effect of the Directors Option Plan and any rules and
regulations relating to it shall be determined in accordance with the laws of
the State of New York.
TRANSFERABILITY
The options granted under the Directors Option Plan may not be assigned or
transferred, except by will or the laws of descent and distribution
TERM OF PLAN
No option may be granted under the Directors Option Plan after June 8,
2010.
AMENDMENTS
The Directors Option Plan may be amended by the Company's Board of
Directors, as it shall deem advisable or to conform to any change in any
applicable law or regulation; provided, that the Company's Board of Directors
may not, except in certain limited circumstances, without the approval of the
shareholders:
- increase the number of shares of Common Stock that may be purchased
pursuant to options, either individually or in the aggregate;
- change the requirement that options granted be priced at fair market
value;
- modify in any manner the class of individuals who constitute Eligible
Directors; or
- materially increase benefits to the participants in the plan.
AWARDS
No options have been granted under the Directors Option Plan to date.
Subject to shareholder approval of the Directors Option Plan, the following
table sets forth the number of securities underlying the options that would be
granted during fiscal 2000 under the plan, effective on the date of the 2000
annual meeting, assuming eight Eligible Directors on that date and a fair market
value per share on that date of $10.00. The exercise price of the options will
be equal to the fair market value on the date of grant. Each option will vest in
three equal annual installments, beginning with the first anniversary of the
date of grant.
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<PAGE> 41
2000 NON-EMPLOYEE DIRECTORS STOCK PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING OPTIONS
NAME AND POSITION GRANTED
----------------- --------------------
<S> <C>
Non-Employee Director Group................................. 40,000 Shares
(assuming 8 eligible non-employee directors and a fair
market value per share of $10.00)
</TABLE>
Any benefit to the non-employee directors would be based on the spread
between the fair market value on the exercise date and the exercise price. Since
it is not possible to determine when the options will be exercised, benefits, if
any, are not determinable.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
An Eligible Director does not realize taxable income, and no deduction is
available to the Company, upon the grant of a nonstatutory option. When an
option is exercised, the excess of the fair market value of the shares on the
date of exercise over the exercise price of the option will be taxable to the
participant and deductible by the Company. The tax basis of shares acquired will
be the fair market value of the shares on the exercise date. For shares held for
more than one year following the exercise date, the participant will realize
long-term capital gain or loss upon disposition.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 5.
DEADLINES FOR NOMINATIONS AND SHAREHOLDER PROPOSALS
The Company's By-laws require that notice of nominations to the Board of
Directors proposed by shareholders be received by the Secretary of the Company,
along with certain other specified material, at least 75 days prior to the
meeting of shareholders at which directors are to be elected. Any shareholder
who wishes to nominate a candidate for election to the Board should obtain a
copy of the relevant section of the By-laws from the Secretary of the Company.
Proposals of shareholders intended to be presented pursuant to Rule 14a-8
under the Exchange Act at the 2001 annual meeting must be received by the
Secretary of the Company no later than December 28, 2000 in order to be
considered for inclusion in the 2001 proxy statement. In order for proposals of
shareholders made outside of Rule 14a-8 to be considered "timely" within the
meaning of Rule 14a-4(c) under the Exchange Act, such proposals must be received
by the Secretary of the Company no later than March 13, 2001. All proposals
should be addressed to the Secretary, Venator Group, Inc., 112 West 34th Street,
New York, New York 10120.
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented at
the 2000 annual meeting. If other matters properly come before the meeting,
including matters which may have been proposed for inclusion in the Company's
proxy materials but were omitted pursuant to the rules of the SEC, the persons
named as proxies will exercise their discretionary authority to vote on such
matters in accordance with their best judgment.
By Order of the Board of Directors
GARY M. BAHLER
Secretary
April 27, 2000
------------------------------------
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APPENDIX A
VENATOR GROUP 1998 STOCK OPTION AND AWARD PLAN, AS AMENDED
1. PURPOSE.
The purpose of the Venator Group 1998 Stock Option and Award Plan (the
"Plan") is to align the interests of officers and other employees of Venator
Group, Inc. and its subsidiaries (collectively, the "Company") with those of the
shareholders of Venator Group, Inc. ("Venator Group"); to reinforce corporate,
organizational and business-development goals; to promote the achievement of
year-to-year and long-range financial and other business objectives; and to
reward the performance of individual officers and other employees in fulfilling
their personal responsibilities for long-range achievements.
2. DEFINITIONS.
The following terms, as used herein, shall have the following meanings:
(a) "Award" shall mean any Option, Restricted Stock, SAR or Other
Stock-Based Award granted pursuant to the Plan.
(b) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document between Venator Group and a Participant evidencing an
Award.
(c) "Board" shall mean the Board of Directors of Venator Group.
(d) "Cause" shall mean, with respect to a Participant's Termination of
Employment, (i) in the case where there is no employment agreement between the
Company and the Participant, or where there is an employment agreement, but such
agreement does not define cause (or words of like import), termination due to a
Participant's dishonesty, fraud, material insubordination or refusal to perform
for any reason other than illness or incapacity or materially unsatisfactory
performance of his or her duties for the Company, or (ii) in the case where
there is an employment agreement between the Company and the Participant,
termination that is or would be deemed to be for cause (or words of like import)
as defined under such employment agreement.
(e) "Change in Control" shall mean the occurrence of an event described in
Section 9(f) hereof.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean a committee or subcommittee of the Board
appointed from time to time by the Board, which committee or subcommittee shall
be intended to consist of two (2) or more non-employee directors, each of whom
shall be an "non-employee director" as defined in Rule 16b-3 and an "outside
director" as defined under Section 162(m) of the Code. Notwithstanding the
foregoing, if and to the extent that no Committee exists which has the authority
to administer the Plan, the functions of the Committee shall be exercised by the
Board. If for any reason the appointed Committee does not meet the requirements
of Rule 16b-3 or Section 162(m) of the Code, such noncompliance with the
requirements of Rule 16b-3 or Section 162(m) of the Code shall not affect the
validity of the awards, grants, interpretations or other actions of the
Committee.
(h) "Company" shall mean, collectively, Venator Group and all of its
subsidiaries now held or hereafter acquired.
(i) "Disability" shall mean a disability which would qualify as such under
Venator Group's Long-Term Disability Plan.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" of a share of Stock shall mean, as of any date, the
average of the high and low prices of a share of such Stock as reported for such
date on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if
Stock was not traded on the New York Stock Exchange on such date, the "Fair
Market Value" of a share of Stock as of such date shall be the average of the
high and low prices of a share of
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such Stock as reported on said Composite Tape on the next preceding date on
which such trades were reported on said Composite Tape.
(l) "Good Reason" shall mean, with respect to a Participant's Termination
of Employment, (1) in the case where there is no employment agreement between
the Company and the Participant, or where there is an employment agreement, but
such agreement does not define good reason (or words of like import), a
voluntary termination due to "good reason," as the Committee, in its sole
discretion, decides to treat as a Good Reason termination; or (2) in the case
where there is an employment agreement between the Company and the Participant,
a termination due to "good reason" (or words of like import), as specifically
provided in such employment agreement.
(m) "Incentive Stock Option" shall mean an Option that meets the
requirements of Section 422 of the Code, or any successor provision, and that is
designated by the Committee as an Incentive Stock Option.
(n) "Nonqualified Stock Option" shall mean an Option other than an
Incentive Stock Option.
(o) "Other Stock-Based Award" shall mean an award, granted pursuant to this
Plan, that is valued in whole or in part by reference to, or is payable in or
otherwise based on Stock.
(p) "Option" shall mean the right, granted pursuant to this Plan, of a
holder to purchase shares of Stock under the Stock Option and SAR Program at a
price and upon the terms to be specified by the Committee.
(q) "Participant" shall mean an officer or other employee of the Company
who is, pursuant to Section 4 of the Plan, selected to participate herein.
(r) "Plan" shall mean the Venator Group 1998 Stock Option and Award Plan.
(s) "Plan Year" shall mean Venator Group's fiscal year.
(t) "Restricted Stock" shall mean any shares of Stock issued to a
Participant, without payment to the Company to the extent permitted by
applicable law, pursuant to Section 7(a) of the Plan.
(u) "Restriction Period" shall have the meaning set forth in Section
7(b)(4).
(v) "Retirement" shall mean a Participant's Termination of Employment
without Cause from the Company who (i) has retired from the employ of the
Company and is entitled to a distribution from the Venator Group Retirement
Plan, any successor plan thereto or any other tax-qualified, tax-registered or
tax-favored retirement plan or scheme sponsored or maintained by any member of
the Company or, (ii) if a Participant is not covered by such plan, has attained
at least his or her 65th birthday.
(w) "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the Exchange
Act as then in effect or any successor provisions.
(x) "Section 162(m) of the Code" shall mean the exception for
performance-based compensation under Section 162(m) of the Code and any Treasury
regulations thereunder.
(y) "Stock" shall mean shares of common stock, par value $.01 per share, of
Venator Group.
(z) "SAR" shall mean a tandem or freestanding stock appreciation right,
granted to a Participant under Section 6(a)(7) or 6(b), as the case may be, to
be paid in an amount measured by the appreciation in the Fair Market Value of
Stock from the date of grant to the date of exercise of the right.
(aa) "Stock Option and SAR Program" shall mean the program set forth in
Section 6 hereof.
(bb) "Ten Percent Shareholder" shall mean a Participant who, at the time an
Incentive Stock Option is to be granted to such Participant, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or a parent corporation or subsidiary corporation within the meaning of Code
Sections 424(e) or 424(f), respectively.
(cc) "Termination of Employment" shall mean (1) a termination of service
for reasons other than a military or personal leave of absence granted by the
Company or a transfer of a Participant from or among the
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Company and a parent corporation or subsidiary corporation, as defined under
Code Sections 424(e) or 424(f), respectively; or (2) when a subsidiary, which is
employing a Participant, ceases to be a subsidiary corporation, as defined under
Section 424(f) of the Code.
(dd) "Transfer" or "Transferred" or "Transferable" shall mean anticipate,
alienate, attach, sell, assign, pledge, encumber, charge, hypothecate or
otherwise transfer.
(ee) "Venator Group" shall mean Venator Group, Inc., a New York
corporation.
3. ADMINISTRATION.
(a) The Committee. The Plan shall be administered and interpreted by the
Committee. The Committee shall have the authority in its sole discretion,
subject to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to
grant Awards; to determine the persons to whom and the time or times at which
Awards shall be granted; to determine the type and number of Awards to be
granted and the number of shares of Stock to which an Award may relate; to
determine the terms, conditions, restrictions and performance criteria, not
inconsistent with the terms of this Plan, relating to any Award (including, but
not limited to, the share price, any restriction or limitation, any vesting
schedule or acceleration thereof, or any forfeiture or waiver thereof, based on
such factors, if any, as the Committee shall determine in its sole discretion);
to determine whether, to what extent and under what circumstances grants of
Awards are to operate on a tandem basis and/or in conjunction with or apart from
other awards made by the Company outside this Plan; to determine whether, to
what extent and under what circumstances an Award may be settled, cancelled,
forfeited, exchanged or surrendered (provided that in no event shall the
foregoing be construed to permit the repricing of an Option (whether by
amendment, cancellation and regrant or otherwise) to a lower exercise price); to
make adjustments in recognition of unusual or non-recurring events affecting the
Company or the financial statements of the Company, or in response to changes in
applicable laws, regulations, or accounting principles; to construe and
interpret the Plan and any Award; to determine whether to require, as a
condition of the granting of any Award, a Participant to not sell or otherwise
dispose of Stock acquired pursuant to the exercise of an Option or Award for a
period of time as determined by the Committee, in its sole discretion, following
the date of the acquisition of such Option or Award; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and
provisions of Award Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
Subject to Section 9(e) hereof, the Committee shall have the authority to
adopt, alter and repeal such administrative rules, guidelines and practices
governing this Plan and perform all acts, including the delegation of its
administrative responsibilities, as it shall, from time to time, deem advisable;
to construe and interpret the terms and provisions of this Plan and any Award
issued under this Plan (and any agreements relating thereto); and to otherwise
supervise the administration of this Plan. The Committee may correct any defect,
supply any omission or reconcile any inconsistency in this Plan or in any
agreement relating thereto in the manner and to the extent it shall deem
necessary to carry this Plan into effect but only to the extent any such action
would be permitted under the applicable provisions of both Rule 16b-3 and
Section 162(m) of the Code. The Committee may adopt special guidelines for
persons who are residing in, or subject to taxes of, countries other than the
United States to comply with applicable tax and securities laws.
The Committee may appoint a chairperson and a secretary and may make such
rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
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including the Company, the Participant (or any person claiming any rights under
the Plan from or through any Participant) and any shareholder.
The Company, the Board or the Committee may consult with legal counsel, who
may be counsel for the Company or other counsel, with respect to its obligations
or duties hereunder, or with respect to any action or proceeding or any question
of law, and shall not be liable with respect to any action taken or omitted by
it in good faith pursuant to the advice of such counsel.
(b) Designation of Consultants/Liability.
The Committee may designate employees of the Company and professional
advisors to assist the Committee in the administration of this Plan and may
grant authority to employees to execute agreements or other documents on behalf
of the Committee.
The Committee may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of this Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
or Board in the engagement of any such counsel, consultant or agent shall be
paid by the Company. The Committee, its members and any person designated
pursuant to Section 3(b) shall not be liable for any action or determination
made in good faith with respect to this Plan. To the maximum extent permitted by
applicable law, no officer of the Company or member or former member of the
Committee shall be liable for any action or determination made in good faith
with respect to this Plan or any Award granted hereunder. To the maximum extent
permitted by applicable law and the Certificate of Incorporation and By-Laws of
the Company and to the extent not covered by insurance, each officer and member
or former member of the Committee or of the Board shall be indemnified and held
harmless by the Company against any cost or expense (including reasonable fees
of counsel reasonably acceptable to the Company) or liability (including any sum
paid in settlement of a claim with the approval of the Company), and advanced
amounts necessary to pay the foregoing at the earliest time and to the fullest
extent permitted, arising out of any act or omission to act in connection with
the Plan, except to the extent arising out of such officer's, member's or former
member's own fraud or bad faith. Such indemnification shall be in addition to
any rights of indemnification the officers, directors or members of former
officers, directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or Subsidiary.
Notwithstanding anything else herein, this indemnification will not apply to the
actions or determinations made by an individual with regard to Awards granted to
him or her under this Plan.
4. ELIGIBILITY.
Awards may be granted to officers and other employees of the Company in the
sole discretion of the Committee. In determining the persons to whom Awards
shall be granted and the type of Award, the Committee shall take into account
such factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan.
5. STOCK SUBJECT TO THE PLAN; LIMITATION ON GRANTS.
(a) The maximum number of shares of Stock reserved for issuance pursuant to
the Plan or with respect to which Awards may be granted shall be twelve million
(12,000,000) shares, subject to adjustment as provided herein, except that the
number of such shares reserved for issuance as Restricted Stock and Other
Stock-Based Awards shall be three million (3,000,000) shares. Such shares may,
in whole or in part, be authorized but unissued shares or shares that shall have
been or may be reacquired by the Company in the open market, in private
transactions or otherwise. If any shares subject to an Award are forfeited,
cancelled, exchanged or surrendered, or if an Award otherwise terminates or
expires without a distribution of shares to the Participant, the shares of Stock
with respect to such Award shall, to the extent of any such forfeiture,
cancellation, exchange, surrender, termination or expiration, again be available
for Awards under the Plan; provided that, to the extent required for the Plan to
comply with Rule 16b-3 promulgated under the Exchange Act, in the case of
forfeiture, cancellation, exchange or surrender of shares of Restricted Stock,
the number of shares with respect to such Awards shall not be available for
Awards hereunder unless dividends paid on such
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shares are also forfeited, cancelled, exchanged or surrendered. Upon the
exercise of any Award granted in tandem with any other Awards, such related
Awards shall be cancelled to the extent of the number of shares of Stock as to
which the Award is exercised and, notwithstanding the foregoing, such number of
shares shall no longer be available for Awards under the Plan. Notwithstanding
any provision of this Plan to the contrary, if authorized but previously
unissued shares of Stock are issued under this Plan, such shares shall not be
issued for a consideration which is less than par value.
(b) During the term of this Plan, no Participant can receive Options,
Restricted Stock, Other Stock-Based Awards and freestanding SARs, relating to
shares of Stock which in the aggregate exceed ten percent (10%) of the total
number of shares of Stock authorized pursuant to the Plan, as adjusted pursuant
to the terms hereof.
(c) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the shareholders of Venator
Group to make or authorize any adjustment, recapitalization, reorganization or
other change in Venator Group's capital structure or its business, any merger or
consolidation of the Company or any part thereof, any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting Stock, the
dissolution or liquidation of the Company or any part thereof, any sale or
transfer of all or part of its assets or business or any other corporate act or
proceeding.
(d) In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Stock or other property),
recapitalization, Stock split, reverse Stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange,
reclassification of any capital stock, issuance of warrants or options to
purchase Stock or securities convertible into Stock, or other similar corporate
transaction or event, affects the Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of Participants under
the Plan, then the Committee shall make such equitable changes or adjustments as
it deems necessary or appropriate to any or all of (i) the number and kind of
shares of Stock which may thereafter be issued in connection with Awards, (ii)
the number and kind of shares of Stock issued or issuable in respect of
outstanding Awards, and (iii) the exercise price, grant price or purchase price
relating to any Award; provided that, with respect to Incentive Stock Options,
such adjustment shall be made in accordance with Section 424 of the Code.
(e) Fractional shares of Stock resulting from any adjustment in Options and
other Awards pursuant to this Section shall be aggregated until, and eliminated
at, the time of exercise by rounding-down for fractions less than one-half
( 1/2) and rounding-up for fractions equal to or greater than one-half ( 1/2).
No cash settlements shall be made with respect to fractional shares of Stock
eliminated by rounding. Notice of any adjustment shall be given by the Committee
to each Participant whose Option or other Award has been adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Plan.
(f) In the event of a merger or consolidation in which Venator Group is not
the surviving entity or in the event of any transaction that results in the
acquisition of substantially all of Venator Group's outstanding Stock by a
single person or entity or by a group of persons and/or entities acting in
concert, or in the event of the sale or transfer of all of Venator Group's
assets (all of the foregoing being referred to as "Acquisition Events"), then
the Committee may, in its sole discretion, terminate all outstanding Options
and/or any Award, effective as of the date of the Acquisition Event, by
delivering notice of termination to each Participant at least twenty (20) days
prior to the date of consummation of the Acquisition Event; provided, that
during the period from the date on which such notice of termination is delivered
to the consummation of the Acquisition Event, each Participant shall have the
right to exercise in full all of his or her Options and Awards that are then
outstanding (without regard to any limitations on exercisability otherwise
contained in the Option or Award Agreements) but contingent on occurrence of the
Acquisition Event, and, provided that, if the Acquisition Event does not take
place within a specified period after giving such notice for any reason
whatsoever, the notice and exercise shall be null and void.
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6. STOCK OPTION AND SAR PROGRAM.
Each Option or freestanding SAR granted pursuant to this Section 6 shall be
evidenced by an Award Agreement, in such form and containing such terms and
conditions as the Committee shall from time to time approve, which Award
Agreement shall comply with and be subject to the following terms and
conditions, as applicable:
(a) Stock Options
(1) Number of Shares. Each Award Agreement shall state the number of
shares of Stock to which the Option relates.
(2) Type of Option. Each Award Agreement shall specifically state
that the Option constitutes an Incentive Stock Option or a Nonqualified
Stock Option. To the extent that any Option does not qualify as an
Incentive Stock Option (whether because of its provisions or the time or
manner of exercise or otherwise), such Option or portion thereof which does
not qualify, shall constitute a separate Nonqualified Stock Option.
(3) Option Price. Except as set forth in Section 6(a)(8)(B) herein
relating to Incentive Stock Options granted to a Ten Percent Shareholder,
each Award Agreement shall state the Option price, which shall not be less
than one hundred percent (100%) of the Fair Market Value of the shares of
Stock covered by the Option on the date of grant. The Option price shall be
subject to adjustment as provided in Section 5 hereof. The date as of which
the Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted.
(4) Method and Time of Payment. The Option price shall be paid in
full, at the time of exercise, in cash or in shares of Stock having a Fair
Market Value equal to such Option price or in a combination of cash and
Stock or, in the sole discretion of the Committee, through a cashless
exercise procedure. Options may contain provisions permitting the use of
shares of Stock to exercise and settle an Option ("Stock Swaps"). With
respect to Stock Swaps, shares of Stock shall be valued at Fair Market
Value on the date of exercise and shall have the same remaining time period
as the shares of Stock that were swapped.
(5) Term and Exercisability of Options. Each Award Agreement shall
provide that each Option shall become exercisable as to fifty percent (50%)
of the Stock covered by the Option on the first anniversary of the date the
Option was granted and as to an additional fifty percent (50%) of the Stock
covered by the Option on the second anniversary of the date the Option was
granted, unless the Committee prescribes an exercise schedule of longer
duration; provided, that, the Committee shall have the authority to
accelerate the exercisability of any outstanding Option at such time and
under such circumstances as it, in its sole discretion, deems appropriate.
The exercise period shall be ten (10) years from the date of the grant of
the Option or such shorter period as is determined by the Committee. The
exercise period shall be subject to earlier termination as provided in
Section 6(a)(6) hereof. An Option may be exercised, as to any or all full
shares of Stock as to which the Option has become exercisable, by written
notice delivered in person or by mail to the Secretary of Venator Group,
specifying the number of shares of Stock with respect to which the Option
is being exercised. For purposes of the preceding sentence, the date of
exercise will be deemed to be the date upon which the Secretary of Venator
Group receives such notification.
(6) Termination. Upon a Participant's Termination of Employment by
the Company, Options granted to such Participant prior to such termination
shall remain exercisable following the effective date of such termination
as follows:
(i) Cause. If a Participant's Termination of Employment is for
Cause, all Options granted to such Participant shall be cancelled as of
the effective date of such termination.
(ii) Retirement, Termination of Employment for Good Reason or
Disability. Upon a Participant's Retirement, Termination of Employment
for Good Reason or Disability, all Options granted
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to such Participant that are "deemed exercisable" (as defined in the
following sentence) on the effective date of such Participant's
Retirement, Termination of Employment for Good Reason or Disability
shall remain exercisable for a period of three (3) years following such
effective date (or for such longer period as may be prescribed by the
Committee, but in no event beyond the expiration date of such Option).
Those Options that are "deemed exercisable" on and after the effective
date of a Participant's Retirement, Termination of Employment for Good
Reason or Disability, as provided above, shall consist of all
unexercised Options (or portions thereof) that are immediately
exercisable on such date plus those Options (or portions thereof) that
would have become exercisable had such Participant not retired or had
his employment not terminated until after the next succeeding
anniversary of the date of grant of each such Option;
(iii) Other Terminations of Employment. If a Participant's
Termination of Employment by the Company is for any reason other than
those described in subsections (i) or (ii) above, his "deemed
exercisable" Options, which, for purposes of this subsection, shall mean
all Options (or portions thereof) granted to such Participant that are
immediately exercisable on the effective date of such Termination of
Employment shall remain exercisable as follows: (A) if such Participant
has ten (10) or more years of service with the Company, such period of
service to be determined as of such effective date of termination, for a
period of one year from the effective date of such Termination of
Employment (or for such longer period as may be prescribed by the
Committee, but in no event beyond the expiration date of such Option),
or (B) if a Participant has less than ten (10) years of service with the
Company, for a period of three (3) months from the effective date of
such Termination of Employment (or for such longer period as may be
prescribed by the Committee, but in no event beyond the expiration date
of such Option).
(iv) Death.
(A) If a Participant dies during the applicable Option exercise
period following the effective date of his Retirement, Disability or
other Termination of Employment, as described in subsections (ii) or
(iii) above, his executors, administrators, legatees or distributees
shall have a period expiring on the date one year from the date of
his death (or for such longer period as may be prescribed by the
Committee, but in no event beyond the expiration date of such Option)
within which to exercise his "deemed exercisable" Options, as
described in such applicable subsection.
(B) If a Participant dies while employed by the Company, his
executors, administrators, legatees or distributees shall have a
period expiring on the date one year from the date of his death (or
for such longer period as may be prescribed by the Committee, but in
no event beyond the expiration date of such Option) within which to
exercise his "deemed exercisable" Options, which shall consist of all
unexercised Options (or portions thereof) that are immediately
exercisable on such date of death plus those Options (or portions
thereof) that would have become exercisable had such Participant not
died until after the next succeeding anniversary of the date of grant
of each such Option.
(v) Buyout and Settlement Provisions. The Committee may at any
time on behalf of the Company offer to buy out an Option previously
granted, based on such terms and conditions as the Committee shall
establish and communicate to the Participant at the time that such offer
is made.
(7) Tandem Stock Appreciation Rights. The Committee shall have
authority to grant a tandem SAR to the grantee of any Option under the Plan
with respect to all or some of the shares of Stock covered by such related
Option. A tandem SAR shall, except as provided in this paragraph (7), be
subject to the same terms and conditions as the related Option. Each tandem
SAR granted pursuant to the Plan shall be reflected in the Award Agreement
relating to the related Option.
(A) Time of Grant. A tandem SAR may be granted either at the
time of grant, or at any time thereafter during the term of the
Option; provided, however that tandem SARs related to Incentive Stock
Options may only be granted at the time of grant of the related
Option.
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(B) Payment. A tandem SAR shall entitle the holder thereof,
upon exercise of the tandem SAR or any portion thereof, to receive
payment of an amount computed pursuant to paragraph (D) below.
(C) Exercise. A tandem SAR shall be exercisable at such time or
times and only to the extent that the related Option is exercisable,
and will not be Transferable except to the extent the related Option
may be Transferable. A tandem SAR granted in connection with an
Incentive Stock Option shall be exercisable only if the Fair Market
Value of a share of Stock on the date of exercise exceeds the
purchase price specified in the related Incentive Stock Option. Upon
the exercise of a tandem SAR, the related Option or part thereof to
which such SAR relates, shall be deemed to have been exercised for
the purpose of the limitations set forth in Section (a) of the Plan
on the number of shares of Stock to be issued under the Plan.
(D) Amount Payable. Upon the exercise of a tandem SAR, the
Participant shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a share of
Stock on the date of exercise of such SAR over the price of the
Option, by (ii) the number of shares of Stock as to which such tandem
SAR is being exercised. Notwithstanding the foregoing, the Committee
may limit in any manner the amount payable with respect to any tandem
SAR by including such a limit at the time it is granted.
(E) Treatment of Related Options and Tandem SARs Upon
Exercise. Upon the exercise of a tandem SAR, the related Option
shall be cancelled to the extent of the number of shares of Stock as
to which the tandem SAR is exercised and upon the exercise of an
Option granted in connection with a tandem SAR, the tandem SAR shall
be cancelled to the extent of the number of shares of Stock as to
which the Option is exercised.
(F) Method of Exercise. Tandem SARs shall be exercised by a
Participant only by a written notice delivered in person or by mail
to the Secretary of Venator Group, specifying the number of shares of
Stock with respect to which the tandem SAR is being exercised. If
requested by the Committee, the Participant shall deliver the Award
Agreement evidencing the tandem SAR and the related Option to the
Secretary of Venator Group, who shall endorse thereon a notation of
such exercise and return such Award Agreement to the Participant. For
purposes of this paragraph (F), the date of exercise will be deemed
to be the date upon which the Secretary of Venator Group receives
such notification.
(G) Form of Payment. Payment of the amount determined under
paragraph (D) above may be made solely in whole shares of Stock in a
number determined based upon their Fair Market Value on the date of
exercise of the tandem SAR or, alternatively, at the sole discretion
of the Committee, solely in cash, or in a combination of cash and
shares of Stock as the Committee deems advisable.
(H) Limited SARs. The Committee may, in its sole discretion,
grant tandem SARs or freestanding SARs either as general SARs or as
limited SARs. Limited SARs may be exercised only upon the occurrence
of a Change in Control or such other event as the Committee may, in
its sole discretion, designate at the time of grant or thereafter.
(8) Incentive Stock Options. Options granted as Incentive Stock Options
shall be subject to the following special terms and conditions, in addition to
the general terms and conditions specified in this Section 6.
(A) Value of Shares. The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted) of
the shares of Stock with respect to which Incentive Stock Options
granted under this Plan and all other Plans of the Company become
exercisable for the first time by each Participant during any
calendar year shall not exceed one hundred thousand dollars
($100,000). To the extent that such aggregate Fair Market Value
exceeds such one hundred thousand dollars ($100,000) limitation, such
Options shall be treated as Options which are not Incentive Stock
Options and shall be treated as Nonqualified Stock Options.
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(B) Ten Percent Shareholder. In the case of an Incentive Stock
Option granted to a Ten Percent Shareholder, (x) the Option Price
shall not be less than one hundred ten percent (110%) of the Fair
Market Value of the shares of Stock on the date of grant of such
Incentive Stock Option, and (y) the exercise period shall not exceed
five (5) years from the date of grant of such Incentive Stock Option.
(C) Exercise Following Termination of Employment. If an
Eligible Employee does not remain employed by the Company, any parent
corporation or subsidiary corporation (within the meaning of Code
Sections 424(e) and 424(f), respectively) at all times from the time
the Option is granted until three (3) months prior to the date of
exercise (or such other period as required by applicable law), such
Option shall be treated as a Nonqualified Stock Option.
(D) Should either (A), (B) or (C) above not be necessary in
order for the Options to qualify as Incentive Stock Options, or
should any additional provisions be required, the Committee may amend
the Plan accordingly, without the necessity of obtaining the approval
of the shareholders of Venator Group.
(b) Freestanding Stock Appreciation Rights. The Committee shall have
authority to grant a freestanding SAR which is not related to any Option.
Freestanding SARs shall be subject to the following terms and conditions:
(1) Number of Shares. Each Award Agreement relating to freestanding
SARs shall state the number of shares of Stock to which the freestanding
SARs relate.
(2) Exercise Price. Each Award Agreement shall state the exercise
price, which shall not be less than one hundred percent (100%) of the Fair
Market Value of the shares of Stock (to which the freestanding SARs relate)
on the date of grant. The exercise price shall be subject to adjustment as
provided in Section 5 hereof.
(3) Term and Exercisability of Freestanding SARs. Each Award
Agreement shall provide the exercise schedule for the freestanding SAR as
determined by the Committee, provided, that, the Committee shall have the
authority to accelerate the exercisability of any freestanding SAR at such
time and under such circumstances as it, in its sole discretion, deems
appropriate. The exercise period shall be ten (10) years from the date of
the grant of the freestanding SAR or such shorter period as is determined
by the Committee. The exercise period shall be subject to earlier
termination as provided in paragraph (b)(7) hereof. A freestanding SAR may
be exercised, as to any or all full shares of Stock as to which the
freestanding SAR has become exercisable, by written notice delivered in
person or by mail to the Secretary of Venator Group, specifying the number
of shares of Stock with respect to which the freestanding SAR is being
exercised. For purposes of the preceding sentence, the date of exercise
will be deemed to be the date upon which the Secretary of Venator Group
receives such notification.
(4) Payment. A freestanding SAR shall entitle the holder thereof,
upon exercise of the freestanding SAR or any portion thereof, to receive
payment of an amount computed pursuant to paragraph (5) below.
(5) Amount Payable. Upon the exercise of a freestanding SAR, the
Participant shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a share of Stock on
the date of exercise of such SAR over the exercise price of such SAR, by
(ii) the number of shares of Stock as to which such freestanding SAR is
being exercised. Notwithstanding the foregoing, the Committee may limit in
any manner the amount payable with respect to any freestanding SAR by
including such a limit at the time it is granted.
(6) Form of Payment. Payment of the amount determined under paragraph
(5) above may be made solely in whole shares of Stock in a number
determined based upon their Fair Market Value on the date of exercise of
the freestanding SAR or, alternatively, at the sole discretion of the
Committee, solely in cash, or in a combination of cash and shares of Stock
as the Committee deems advisable.
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(7) The terms and conditions set forth in Section 6(a)(6) hereof,
relating to exercisability of Options in the event of Termination of
Employment with the Company, shall apply equally with respect to the
exercisability of freestanding SARs following Termination of Employment.
7. RESTRICTED STOCK.
Awards granted pursuant to this Section 7 shall be evidenced by an Award
Agreement in such form as the Committee shall from time to time approve and the
terms and conditions of such Awards shall be set forth therein. Shares of
Restricted Stock may be issued either alone or in addition to other Awards
granted under the Plan.
(a) Restricted Stock. The Committee shall determine the eligible persons
to whom, and the time or times at which, grants of Restricted Stock will be
made, the number of shares to be awarded, the price (if any) to be paid by the
recipient, the time or times within which such Awards may be subject to
forfeiture, the vesting schedule and rights to acceleration thereof, and all
other terms and conditions of the Awards. The Committee may condition the grant
of Restricted Stock upon the attainment of specified performance goals or such
other factors as the Committee may determine, in its sole discretion.
(b) Awards and Certificates. The prospective Participant selected to
receive Restricted Stock shall not have any rights with respect to such Award,
unless and until such Participant has delivered a fully executed copy of the
Award Agreement to the Company and has otherwise complied with the applicable
terms and conditions of such Award. Further, such Award shall be subject to the
following conditions:
(1) Purchase Price. Subject to the last sentence of Section 5(a), the
purchase price for shares of Restricted Stock may be less than their par
value and may be zero, to the extent permitted by applicable law.
(2) Acceptance. Awards of Restricted Stock must be accepted within a
period of sixty (60) days (or such shorter period as the Committee may
specify at grant) after the Award date, by executing a Restricted Stock
Award Agreement and by paying whatever price (if any) the Committee has
designated thereunder.
(3) Certificates/Legend. Upon an Award of Restricted Stock, the
Committee may, in its sole discretion, decide to either have the Company or
other escrow agent appointed by the Committee hold the share certificates
representing such shares of Restricted Stock in escrow or issue share
certificates to the Participant. Regardless of whether the certificates are
held in escrow or are given to Participants, each certificate shall be
registered in the name of such Participant, and shall bear an appropriate
legend referring to the terms, conditions and restrictions applicable to
such Award, substantially in the following form:
"The anticipation, alienation, attachment, sale, transfer,
assignment, pledge, encumbrance or charge of the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Venator Group (the
"Company") 1998 Stock Option and Award Plan and an Agreement
entered into between the registered owner and the Company
dated . Copies of such Plan and Agreement are on
file at the principal office of the Company."
(4) Restrictions. During a period set by the Committee commencing
with the date of an Award of Restricted Stock (the "Restriction Period"),
shares of Restricted Stock may not be sold, assigned, Transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws of
descent and distribution, as set forth in the Award Agreement and such
Award Agreement shall set forth a vesting schedule and any events which
would accelerate vesting of the shares of Restricted Stock. Any attempt to
dispose of any such shares of Stock in contravention of such restrictions
shall be null and void and without effect. Notwithstanding the foregoing,
no vesting limitation shall apply, and the Participant's interest in such
shares shall be fully vested, in the event of a Change in Control which
occurs prior to the expiration of the vesting period set forth in the Award
Agreement. Within these limits, based on service, performance and/or such
other factors or criteria as the Committee may determine in its sole
discretion,
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the Committee may provide for the lapse of such restrictions in
installments in whole or in part, or may accelerate the vesting of all or
any part of any Restricted Stock Award and/or waive the deferral
limitations for all or any part of such Award (including, without
limitation, any deferral of dividends).
(5) Forfeiture. Subject to such exceptions as may be determined by
the Committee, if the Participant's continuous employment with the Company
shall terminate for any reason prior to the expiration of the Restriction
Period of an Award, or to the extent any goals for the Restriction Period
are not met, any shares of Stock remaining subject to restrictions shall
thereupon be forfeited by the Participant and Transferred to, and
reacquired by, Venator Group at no cost to Venator Group.
(6) Ownership. Except to the extent otherwise set forth in the Award
Agreement, during the Restriction Period the Participant shall possess all
incidents of ownership of such shares, subject to Section 7(b)(4),
including the right to receive dividends with respect to such shares and to
vote such shares and, subject to and conditioned upon the full vesting of
shares of Restricted Stock, the right to tender such shares. The Committee,
in its sole discretion, as determined at the time of the Award, may permit
or require the payment of dividends to be deferred.
(7) Lapse of Restrictions. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, the certificates for such shares shall be delivered to
the Participant. All legends shall be removed from said certificates at the
time of delivery to the Participant.
8. OTHER STOCK-BASED AWARDS.
(a) Other Awards. Other Awards of Stock and other Awards that are valued
in whole or in part by reference to, or are payable in or otherwise based on,
Stock ("Other Stock-Based Awards"), including, without limitation, Awards valued
by reference to performance of a subsidiary, may be granted either alone or in
addition to or in tandem with Stock Options, SARs or Restricted Stock.
Subject to the provisions of the Plan, the Committee shall have authority
to determine the persons to whom and the time or times at which such Awards
shall be made, the number of shares of Stock to be awarded pursuant to such
Awards, and all other conditions of the Awards. The Committee may also provide
for the grant of Stock under such Awards upon the completion of a specified
performance goal or period.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to this
Section 8 shall be subject to the following terms and conditions:
(1) Dividends. Unless otherwise determined by the Committee at the
time of Award, subject to the provisions of the Award Agreement and this
Plan, the recipient of an Award under this Section shall be entitled to
receive, currently or on a deferred basis, dividends or dividend
equivalents with respect to the number of shares of Stock covered by the
Award, as determined at the time of the Award by the Committee, in its sole
discretion.
(2) Vesting. Any Award under this Section and any Stock covered by
any such Award shall vest or be forfeited to the extent so provided in the
Award Agreement, as determined by the Committee, in its sole discretion.
(3) Waiver of Limitation. In the event of the Participant's
Retirement, Termination of Employment for Good Reason, Disability or death,
or in cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the limitations imposed
hereunder (if any) with respect to any or all of an Award under this
Section 8.
(4) Price. Stock issued on a bonus basis under this Section 8 may be
issued for no cash consideration; Stock purchased pursuant to a purchase
right awarded under this Section shall be priced as determined by the
Committee.
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9. GENERAL PROVISIONS.
(a) Compliance with Legal Requirements. The Plan and the granting and
exercising of Awards, and the other obligations of the Company under the Plan
and any Award Agreement or other agreement shall be subject to all applicable
federal and state laws, rules and regulations, and to such approvals by any
regulatory or governmental agency as may be required. The Company, in its
discretion, may postpone the issuance or delivery of Stock under any Award as
the Company may consider appropriate, and may require any Participant to make
such representations and furnish such information as it may consider appropriate
in connection with the issuance or delivery of Stock in compliance with
applicable laws, rules and regulations.
(b) Nontransferability. No Award shall be Transferred by the Participant
otherwise than by will or by the laws of descent and distribution. All Awards
shall be exercisable, during the Participant's lifetime, only by the
Participant. No Award shall, except as otherwise specifically provided by law or
herein, be Transferred in any manner, and any attempt to Transfer any such Award
shall be void, and no such Award shall in any manner be used for the payment of,
subject to, or otherwise encumbered by or hypothecated for the debts, contracts,
liabilities, engagements or torts of any person who shall be entitled to such
Award, nor shall it be subject to attachment or legal process for or against
such person. Notwithstanding the foregoing, the Committee may determine at the
time of grant or thereafter, that an Award, other than an Incentive Stock
Option, that is otherwise not Transferable pursuant to this Section 9(b) is
Transferable in whole or part and in such circumstances, and under such
conditions, as specified by the Committee.
(c) No Right To Continued Employment. Nothing in the Plan or in any Award
granted or any Award Agreement or other agreement entered into pursuant hereto
shall confer upon any Participant the right to continue in the employ of the
Company or to be entitled to any remuneration or benefits not set forth in the
Plan or such Award Agreement or other agreement or to interfere with or limit in
any way the right of the Company to terminate such Participant's employment.
(d) Withholding Taxes. Where a Participant or other person is entitled to
receive shares of Stock pursuant to the exercise of an Option or is otherwise
entitled to receive shares of Stock or cash pursuant to an Award hereunder, the
Company shall have the right to require the Participant or such other person to
pay to the Company the amount of any taxes which the Company may be required to
withhold before delivery to such Participant or other person of cash or a
certificate or certificates representing such shares.
Upon the disposition of shares of Stock acquired pursuant to the exercise
of an Incentive Stock Option, the Company shall have the right to require the
payment of the amount of any taxes which are required by law to be withheld with
respect to such disposition.
Unless otherwise prohibited by the Committee or by applicable law, a
Participant may satisfy any such withholding tax obligation by any of the
following methods, or by a combination of such methods: (a) tendering a cash
payment; (b) authorizing the Company to withhold from the shares of Stock or
cash otherwise payable to such Participant (1) one or more of such shares having
an aggregate Fair Market Value, determined as of the date the withholding tax
obligation arises, less than or equal to the amount of the total withholding tax
obligation or (2) cash in an amount less than or equal to the amount of the
total withholding tax obligation; or (c) delivering to the Company previously
acquired shares of Stock (none of which shares may be subject to any claim,
lien, security interest, community property right or other right of spouses or
present or former family members, pledge, option, voting agreement or other
restriction or encumbrance of any nature whatsoever) having an aggregate Fair
Market Value, determined as of the date the withholding tax obligation arises,
less than or equal to the amount of the total withholding tax obligation. A
Participant's election to pay his or her withholding tax obligation (in whole or
in part) by the method described in (b)(1) above is irrevocable once it is made.
(e) Amendment and Termination of the Plan. Notwithstanding any other
provision of this Plan, the Board or the Committee may at any time and from time
to time alter, amend, suspend, or terminate the Plan in whole or in part;
provided that, no amendment which requires shareholder approval under applicable
New York law or in order for the Plan to continue to comply with Rule 16b-3 or
Section 162(m) of the Code shall be effective unless the same shall be approved
by the requisite vote of the shareholders of the Company.
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Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any Participant, without such Participant's consent, under any Award
theretofore granted under the Plan. The power to grant Options under the Plan
will automatically terminate ten years after the adoption of the Plan by the
shareholders. If the Plan is terminated, any unexercised Option shall continue
to be exercisable in accordance with its terms and the terms of the Plan in
effect immediately prior to such termination.
(f) Change in Control. Notwithstanding any other provision of the Plan to
the contrary, if, while any Awards remain outstanding under the Plan, a "Change
in Control" of Venator Group (as defined in this Section 9(f)) shall occur, (1)
all Options and freestanding SARs granted under the Plan that are outstanding at
the time of such Change in Control shall become immediately exercisable in full,
without regard to the years that have elapsed from the date of grant; (2) unless
the Committee determines otherwise at the time of grant pursuant to an Award
Agreement or other arrangement or plan granting such Award, all restrictions
with respect to shares of Restricted Stock shall lapse, and such shares shall be
fully vested and nonforfeitable; and (3) unless the Committee determines
otherwise at the time of grant pursuant to an Award Agreement or other
arrangement or plan granting such Award, with respect to Other Stock-Based
Awards, any performance periods or goals outstanding at the time of a Change in
Control shall be deemed to have been attained or any restrictions outstanding at
the time of a Change in Control shall lapse.
For purposes of this paragraph 9(f), a Change in Control of Venator Group
shall occur upon the happening of the earliest to occur of the following:
(i) (A) the making of a tender or exchange offer by any person or
entity or group of associated persons or entities (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") (other than
Venator Group or its subsidiaries) for shares of Stock pursuant to which
purchases are made of securities representing at least twenty percent (20%)
of the total combined voting power of Venator Group's then issued and
outstanding voting securities; (B) the merger or consolidation of Venator
Group with, or the sale or disposition of all or substantially all of the
assets of Venator Group to, any Person other than (a) a merger or
consolidation which would result in the voting securities of Venator Group
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 Venator Group 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 Venator Group (or similar transaction) in which no Person is or becomes
the beneficial owner, directly or indirectly (as determined under Rule
13d-3 promulgated under the Exchange Act), of securities representing more
than the amounts set forth in (C) below; (C) the acquisition of direct or
indirect beneficial ownership (as determined under Rule 13d-3 promulgated
under the Exchange Act), in the aggregate, of securities of Venator Group
representing twenty percent (20%) or more of the total combined voting
power of Venator Group's then issued and outstanding voting securities by
any Person acting in concert as of the date of the Plan; provided, however,
that the Board may at any time and from time to time and in the sole
discretion of the Board, as the case may be, increase the voting security
ownership percentage threshold of this item (C) to an amount not exceeding
forty percent (40%); or (D) the approval by the shareholders of Venator
Group of any plan or proposal for the complete liquidation or dissolution
of Venator Group or for the sale of all or substantially all of the assets
of Venator Group; 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 Venator Group's shareholders was approved by
a vote of at least two-thirds ( 2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any reason
to constitute at least a majority thereof.
(g) Participant Rights. No Participant shall have any claim to be granted
any Award under the Plan, and there is no obligation for uniformity of treatment
for Participants. Except as provided specifically herein, a Participant or a
transferee of an Award shall have no rights as a shareholder with respect to any
shares covered by any Award until the date of the issuance of a Stock
certificate to him for such shares.
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(h) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
(i) No Fractional Shares. Except with respect to fractional shares
resulting from any adjustment in Awards pursuant to Section 5, no fractional
shares of Stock shall be issued or delivered pursuant to the Plan or any Award.
(j) Legend. The Committee may require each person purchasing shares
pursuant to a Stock Option or other Award under the Plan to represent to and
agree with the Company in writing that the Participant is acquiring the shares
without a view to distribution thereof. In addition to any legend required by
this Plan, the certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on Transfer.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed or any national securities association system upon whose system the
Stock is then quoted, any applicable Federal or state securities law, and any
applicable corporate law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such restrictions.
(k) Other Plans. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
(l) Listing and Other Conditions.
(1) As long as the Stock is listed on a national securities exchange
or system sponsored by a national securities association, the issue of any
shares of Stock pursuant to an Option or other Award shall be conditioned
upon such shares being listed on such exchange or system. The Company shall
have no obligation to issue such shares unless and until such shares are so
listed, and the right to exercise any Option or other Award with respect to
such shares shall be suspended until such listing has been effected.
(2) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Stock pursuant to an Option or other
Award is or may in the circumstances be unlawful or result in the
imposition of excise taxes under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain
any qualification or registration under the Securities Act of 1933, as
amended, or otherwise with respect to shares of Stock or Awards, and the
right to exercise any Option or other Award shall be suspended until, in
the opinion of said counsel, such sale or delivery shall be lawful or will
not result in the imposition of excise taxes.
(3) Upon termination of any period of suspension under this Section,
any Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such
suspension and as to shares which would otherwise have become available
during the period of such suspension, but no such suspension shall extend
the term of any Option.
(m) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of New York without
giving effect to the conflict of laws principles thereof.
(n) Effective Date. The Plan shall take effect upon its adoption by the
Board, but the Plan (and any grants of Awards made prior to the shareholder
approval mentioned herein) shall be subject to the requisite approval of the
shareholders of the Company. In the absence of such approval, such Awards shall
be null and void.
(o) Death/Beneficiary. The Committee may in its sole discretion require
the transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will
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(in the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the Transfer of an Option. The
Committee may also require that the agreement of the transferee to be bound by
all of the terms and conditions of the Plan. A Participant may file with the
Committee a written designation of a beneficiary on such form as may be
prescribed by the Committee and may, from time to time, amend or revoke such
designation. If no designated beneficiary survives the Participant, the executor
or administrator of the Participant's estate shall be deemed to be the grantee's
beneficiary.
(p) Interpretation. The Plan is designed and intended to comply with Rule
16b-3 promulgated under the Exchange Act and, to the extent applicable, with
Section 162(m) of the Code, and all provisions hereof shall be construed in a
manner to so comply.
(q) Severability of Provisions. If any provision of the Plan shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions hereof, and the Plan shall be construed and enforced as if
such provisions had not been included.
(r) Headings and Captions. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.
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APPENDIX B
AS AMENDED THROUGH JANUARY 30, 2000
VENATOR GROUP
ANNUAL INCENTIVE COMPENSATION PLAN
(SHORT-TERM PLAN)
Effective as of February 1, 1983, the Board of Directors of F.W. Woolworth
Co. adopted an Annual Incentive Compensation Plan (the "Prior Plan") for certain
employees of F.W. Woolworth Co. Effective as of August 7, 1989, Venator Group,
Inc. ("Venator Group") adopted the Prior Plan, as amended. For "Covered
Employees" (as defined below), the Prior Plan was amended and restated effective
as of January 1, 1994 (the "1994 Plan") and was approved by the shareholders at
the 1994 annual meeting. For all other employees, the 1994 Plan was amended and
restated effective as of January 1, 1994. For Covered Employees, the 1994 Plan
was further amended and restated as of January 28, 1996 (the "1996 Plan"), and
was approved by the shareholders at the 1996 annual meeting. For all other
employees, the 1996 Plan was further amended and restated as of January 28,
1996. The Board of Directors further amended the 1996 Plan effective January
30, 2000 (the "Plan"), subject to shareholder approval at the 2000 annual
meeting.
The purposes of the Plan are:
(a) to reinforce corporate organizational and business development
goals.
(b) to promote the achievement of year-to-year and long-range
financial and other business objectives such as high quality of service and
product, improved productivity and efficiencies for the benefit of our
customers' satisfaction and to assure a reasonable return to Venator
Group's shareholders.
(c) to reward the performance of officers and key employees in
fulfilling their personal responsibilities for annual achievements.
(d) to serve as a qualified performance-based compensation program
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") or any successor section and the Treasury regulations promulgated
thereunder ("Section 162(m) of the Code").
1. DEFINITIONS.
The following terms, as used herein, shall have the following meanings:
(a) "Annual Base Salary" with respect to any Plan Year shall mean the
total amount paid by Venator Group and its subsidiaries to a participant
during such Plan Year without reduction for any amounts withheld pursuant
to participation in a qualified "cafeteria plan" under Section 125 of the
Code or in a cash or deferred arrangement under Section 401(k) of the Code.
Annual Base Salary shall not include any amount paid or accruing to a
participant under the Venator Group Long-Term Incentive Compensation Plan
or any other incentive compensation or bonus payment or extraordinary
remuneration, expense allowances, imputed income or any other amounts
deemed to be indirect compensation, severance pay and any contributions
made by Venator Group to this or any other plan maintained by Venator Group
or any other amounts which, in the opinion of the Committee, are not
considered to be Annual Base Salary for purposes of the Plan.
(b) "Board shall mean the Board of Directors of Venator Group.
(c) "Committee" shall mean two or more members of the Compensation
Committee of the Board, each of whom is an "outside director" within the
meaning of Section 162(m) of the Code.
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(d) "Covered Employee" shall mean an officer or key employee of
Venator Group who is designated as an executive officer for purposes of
Rule 3b-7 of the Securities Exchange Act of 1934 for the relevant Plan
Year.
(e) "Individual Target Award" shall mean the targeted performance
award for a Plan Year specified by the Committee as provided in Section 5
herein.
(f) "Plan Year" shall mean Venator Group's fiscal year during which
the Plan is in effect.
2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee. No member of the Committee
while serving as such shall be eligible for participation in the Plan. The
Committee shall have exclusive and final authority in all determinations and
decisions affecting the Plan and its participants. The Committee shall also have
the sole authority to interpret the Plan, to establish and revise rules and
regulations relating to the Plan, to delegate such responsibilities or duties as
it deems desirable, and to make any other determination that it believes
necessary or advisable for the administration of the Plan including, but not
limited to: (i) approving the designation of eligible participants; (ii) setting
the performance criteria within the Plan guidelines; and (iii) certifying
attainment of performance goals and other material terms. The Committee shall
have the authority in its sole discretion, subject to and not inconsistent with
the express provisions of the Plan, to incorporate provisions in the performance
goals allowing for adjustments in recognition of unusual or non-recurring events
affecting Venator Group or the financial statements of Venator Group, or in
response to changes in applicable laws, regulations, or accounting principles;
provided that the Committee shall have such authority with regard to the
performance goals of Covered Employees solely to the extent permitted by Section
162(m) of the Code. To the extent any provision of the Plan creates
impermissible discretion under Section 162(m) of the Code or would otherwise
violate Section 162(m) of the Code with regard to the performance goals of
Covered Employees, such provision shall have no force or effect.
3. PARTICIPATION.
Participation in the Plan is limited to officers or key employees of
Venator Group. Individual participants shall be those employees selected in the
sole discretion of the Committee (in the case of Covered Employees) or its
designee (in the case of all other officers and key employees). In determining
the persons to whom awards shall be granted, the Committee shall take into
account such factors as the Committee shall deem appropriate in connection with
accomplishing the purposes of the Plan. The Committee may from time to time
designate additional participants who satisfy the criteria for participation as
set forth herein and shall determine when an officer or key employee of Venator
Group ceases to be a participant in the Plan.
4. RIGHT TO PAYMENT.
Unless otherwise determined by the Committee in its sole discretion, a
participant shall have no right to receive payment under this Plan unless the
participant remains in the employ of Venator Group at all times during the
applicable Plan Year, provided, however, that the Committee may, in its sole
discretion, make an "Interim Payment" to any participant (other than a Covered
Employee). Such Interim Payment shall be equal to the amount of the payment the
participant would have received, pursuant to Sections 5 and 6 hereof, at the
completion of the Plan Year during which such Interim Payment is made (the
"Interim Year") and shall be the sum of: (a) the actual performance results
achieved relative to the Plan's performance goals with respect to the period
from the commencement of the Interim Year to the date of the Interim Payment,
and (b) the performance results that would have been achieved had the Plan's
budget goal been met for the balance of such Interim Year, multiplied by a
fraction, the numerator of which is the number of completed months between the
commencement of the Interim Year and the date of the Interim Payment and the
denominator of which is 12. Following the close of the Interim Year, the
Committee shall make a "Final Payment" to each participant who received an
Interim Payment in an amount equal to the difference, if any, between the amount
of the Interim Payment and the amount of the payment that would have been made
pursuant to Sections 5 and 6 hereof, absent such Interim Payment.
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5. PAYMENT.
(a) Payment under this Plan to a participant will be made in cash in an
amount equal to the achieved percentage of such participant's Annual Base Salary
as determined by the Committee for each Plan Year. Such percentage shall be
based on the participant's achievement of his or her Individual Target Award.
Except to the extent provided for in Section 4 hereof with respect to Interim
Payments, payment shall be made only if and to the extent the performance goals
with respect to the Plan Year are attained.
(b) At the beginning of each Plan Year (or, with respect to Covered
Employees, within the time period prescribed by Section 162(m) of the Code), the
Committee shall establish all performance goals and the Individual Target Awards
for such Plan Year and Venator Group shall inform each participant of the
Committee's determination with respect to such participant for such Plan Year.
Individual Target Awards shall be expressed as a percentage of such
participant's Annual Base Salary. At the time the performance goals are
established, the Committee shall prescribe a formula to determine the
percentages of the Individual Target Award which may be payable based upon the
degree of attainment of the performance goals during the Plan Year.
(c) Notwithstanding anything to the contrary contained in this Plan, (1)
the performance goals in respect of awards granted to participants who are
Covered Employees, shall be based on one or more of the following criteria: (i)
the attainment of certain target levels of, or percentage increase in, pre-tax
profit of Venator Group (or a subsidiary, division, or other operational unit of
Venator Group); (ii) the attainment of certain target levels of, or a percentage
increase in, after-tax profits of Venator Group (or a subsidiary, division, or
other operational unit of Venator Group); (iii) the attainment of certain target
levels of, or a specified increase in, operational cash flow of Venator Group
(or a subsidiary, division, or other operational unit of Venator Group); (iv)
the achievement of a certain level of, reduction of, or other specified
objectives with regard to limiting the level of increase in, all or a portion
of, Venator Group's bank debt or other long-term or short-term public or private
debt or other similar financial obligations of Venator Group, if any, which may
be calculated net of such cash balances and/or other offsets and adjustments as
may be established by the Committee; (v) the attainment of a specified
percentage increase in earnings per share or earnings per share from continuing
operations of Venator Group (or a subsidiary, division or other operational unit
of Venator Group); (vi) the attainment of certain target levels of, or a
specified percentage increase in, revenues, net income, or earnings before (A)
interest, (B) taxes, (C) depreciation and/or (D) amortization, of Venator Group
(or a subsidiary, division, or other operational unit of Venator Group); (vii)
the attainment of certain target levels of, or a specified increase in, return
on invested capital or return on investment; (viii) the attainment of certain
target levels of, or a percentage increase in, after-tax or pre-tax return on
shareholders' equity of Venator Group (or any subsidiary, division or other
operational unit of Venator Group); and (ix) the attainment of a certain target
level of, or reduction in, selling, general and administrative expense as a
percentage of revenue of Venator Group (or any subsidiary, division or other
operational unit of Venator Group) and (2) in no event shall payment in respect
of an award granted for a performance period be made to a participant who is a
Covered Employee as of the end of such Plan Year in an amount which exceeds
$1.5 million. Subject to Section 2 of the Plan regarding certain adjustments,
in connection with the establishment of the performance goals, the criteria
listed above for Venator Group (or any subsidiary, division or other operational
unit of Venator Group) shall be determined in accordance with generally accepted
accounting principles consistently applied by Venator Group, but before
consideration of payments to be made pursuant to this Plan and pursuant to the
Venator Group Long-Term Incentive Compensation Plan.
6. TIME OF PAYMENT.
Subject to Section 4 hereof, all payments earned by participants under this
Plan will be paid within a reasonable period after performance goal achievements
for the Plan Year have been finalized, reviewed, approved, and to the extent
required by Section 162(m) of the Code, certified by the Committee, except as
may otherwise be agreed by a participant and Venator Group in a written
agreement executed prior to the beginning of the fiscal year to which it relates
in accordance with any deferred compensation program (a "Deferred Compensation
Program") applicable to such participant. Venator Group's independent
accountants
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shall examine as of the close of the Plan Year and communicate the results of
such examination to the Committee as to the appropriateness of the proposed
payments under the Plan. Any award deferred by a Covered Employee shall not
increase (between the date on which the award is credited to any Deferred
Compensation Program applicable to such Covered Employee and the payment date)
by a measuring factor for each fiscal year greater than either (x) one hundred
and twenty percent (120%) of the applicable federal long-term rate, compounded
annually, and as set as of the first day of the calendar year; or (y) a
hypothetical investment in such shares of Venator Group Common Stock, par value
$0.01 per share (as determined under such Deferred Compensation Program), as
irrevocably elected by the Covered Employee in the deferral agreement. The
participant shall have no right to receive payment of any deferred amount until
he or she has a right to receive such amounts under the terms of the applicable
Deferred Compensation Program.
7. MISCELLANEOUS PROVISIONS.
(a) A participant's rights and interests under the Plan may not be sold,
assigned, transferred, pledged or alienated.
(b) In the case of a participant's death, payment, if any, under the Plan
shall be made to his or her designated beneficiary, or in the event no
beneficiary is designated or surviving, to the participant's estate.
(c) Neither this Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of Venator Group.
(d) Venator Group 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
made pursuant to the Plan.
(e) The Plan is designed and intended to comply with Section 162(m) of the
Code with regard to awards made to Covered Employees, and all provisions hereof
shall be limited, construed and interpreted in a manner so to comply.
(f) The Board or the Committee may at any time and from time to time alter,
amend, suspend or terminate the Plan in whole or in part; provided, that, no
amendment which requires shareholder approval in order for the Plan to continue
to comply with the exception for performance based compensation under Section
162(m) of the Code shall be effective unless the same shall be approved by the
requisite vote of the shareholders of Venator Group as determined under Section
162(m) of the Code. Notwithstanding the foregoing, no amendment shall affect
adversely any of the rights of any participant, without such participant's
consent, under the award theretofore granted under the Plan.
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APPENDIX C
VENATOR GROUP DIRECTORS STOCK OPTION PLAN
1. PURPOSE
The purpose of the Venator Group Directors Stock Option Plan (the "Plan")
is to promote the interests of Venator Group, Inc. (the "Company") and its
shareholders by increasing the proprietary interest of non-employee directors in
the growth and performance of the Company by granting such directors options to
purchase shares of common stock.
2. ADMINISTRATION
The Plan shall be administered by the Company's Board of Directors (the
"Board"). Subject to the provisions of the Plan, the Board shall be authorized
to interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan and to make all other determinations necessary
or advisable for the administration of the Plan; provided, however, that the
Board shall have no discretion with respect to the selection of directors to
receive options, the number of shares subject to any such options, the purchase
price thereunder or the timing of grants of options under the Plan. The
determinations of the Board in the administration of the Plan, as described
herein, shall be final and conclusive. The Secretary of the Company shall be
authorized to implement the Plan in accordance with its terms and to take such
actions of a ministerial nature as shall be necessary to effectuate the intent
and purpose thereof. The validity, construction and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of New York.
3. ELIGIBILITY
The class of individuals eligible to receive grants of options shall be
directors of the Company who are not employees of the Company or its affiliates
("Eligible Directors"). Any holder of an option hereunder shall hereinafter be
referred to as a "Participant."
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 6, an aggregate of 100,000
shares of the Company's Common Stock, $.01 per share ("Shares") shall be
available for issuance under the Plan. The Shares deliverable upon the exercise
of options may be made available from authorized but unissued Shares or treasury
Shares. If any option granted under the Plan shall be terminated for any reason
without having been exercised, the Shares subject to, but not delivered under,
such option shall be available for issuance under the Plan.
5. GRANT, TERMS AND CONDITIONS OF OPTIONS
(a) Subject to shareholder approval of the Plan, each Eligible Director on
the date of such approval will be granted on such date an option to purchase
that number of shares having a market value of $50,000 on the date of grant.
Such market value shall be determined by dividing 50,000 by the Fair Market
Value of a Share on the date of grant. "Fair Market Value" shall mean the
average of the high and low prices of a Share as reported for such date on the
Composite Tape for New York Stock Exchange-Listed Stocks, or, if Shares were not
traded on the New York Stock Exchange on such date, the "Fair Market Value" of a
Share as of such date shall be the average of the high and low prices of a Share
as reported on said Composite Tape on the next preceding date on which such
trades were reported on said Composite Tape.
(b) Each Eligible Director on the first business day of a fiscal year of
the Company beginning thereafter, will be granted on such a day an option to
purchase that number of shares having a market value of $50,000 on the date of
grant. Such market value shall be determined by dividing 50,000 by the Fair
Market Value on the date of grant.
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(c) The options granted will be nonstatutory stock options not intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and shall have the following terms and conditions:
(i) Price. The purchase price per Share deliverable upon the exercise
of each option shall be 100 percent of the Fair Market Value per Share on
the date the option is granted.
(ii) Payment. Options may be exercised only upon the cash payment of
the purchase price thereof in full.
(iii) Exercisability and Term of Options. Options shall become
exercisable in three equal annual installments commencing on the first
anniversary of the date of grant, provided the holder of such Option is an
Eligible Director on such anniversary, and shall be exercisable until the
earlier of ten years from the date of grant or the expiration of the
one-year period from the date upon which the Participant ceases to be a
Director, provided that in no event shall the options be exercisable beyond
the period provided for in paragraph (iv) below.
(iv) Termination of Service as Eligible Director. Upon termination of
a Participant's service as a director of the Company for any reason, all
outstanding options held by such Eligible Director, to the extent then
exercisable, shall be exercisable in whole or in part for a period of one
year from the date upon which the Participant ceases to be a Director,
provided that in no event shall the options be exercisable beyond the
period provided for in paragraph (iii) above.
(v) Nontransferability of Options. No option may be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered
by a Participant otherwise than by will or the laws of descent and
distribution, and during the lifetime of the Participant to whom an option
is granted it may be exercised only by the Participant or by the
Participant's guardian or legal representative.
(vi) Option Agreement. Each option granted hereunder shall be
evidenced by an agreement with the Company which shall contain the terms
and provisions set forth herein and shall otherwise be consistent with the
provisions of the Plan.
6. ADJUSTMENT OF AND CHANGES IN SHARES
In the event of a stock split, stock dividend, extraordinary cash dividend,
subdivision or combination of the Shares or other change in corporate structure
affecting the Shares, the number of Shares authorized by the Plan shall be
increased or decreased proportionately, as the case may be, and the number of
Shares subject to any outstanding option shall be increased or decreased
proportionately, as the case may be, with appropriate corresponding adjustment
in the purchase price per Share thereunder.
7. NO RIGHTS OF SHAREHOLDERS
Neither a Participant nor a Participant's legal representative shall be, or
have any of the rights and privileges of, a shareholder of the Company in
respect of any Shares that may be purchased under any option, in whole or in
part, unless and until certificates for such Shares shall have been issued.
8. PLAN AMENDMENTS
The Plan may be amended by the Board as it shall deem advisable or to
conform to any change in any law or regulation applicable thereto; provided,
that the Board may not, without the authorization and approval of shareholders
of the Company:
- increase the number of Shares which may be purchased pursuant to options
hereunder, either individually or in the aggregate, except as permitted
by Section 6,
- change the requirement of Section 5(b) that option grants be priced at
Fair Market Value, except as permitted by Section 6,
- modify in any respect the class of individuals who constitute Eligible
Directors or
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- materially increase the benefits accruing the Participants hereunder.
9. LISTING AND REGISTRATION
Each Share shall be subject to the requirement that if at any time the
Board shall determine, in its discretion, that the listing, registration or
qualification of the Shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Shares, no such Shares may be disposed of unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any condition not acceptable to the Board.
10. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective on the date the Company's shareholders
approve the Plan. The Plan shall terminate on the day following the 2010 annual
shareholders meeting unless the Plan is extended or terminated at an earlier
date or is terminated by exhaustion of the Shares available for issuance
hereunder.
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P R O X Y
VENATOR GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING TO BE HELD ON JUNE 8, 2000
Gary M. Bahler, Dale W. Hilpert, Bruce L. Hartman, or any of them, each with
power of substitution, are hereby authorized to vote the shares of the
undersigned at the Annual Meeting of Shareholders of Venator Group, Inc., to be
held on June 8, 2000, at 10:00 A.M., local time, at Tappan Hill, 81 Highland
Avenue, Tarrytown, New York 10591, and at any adjournment or postponement
thereof, upon the matters set forth in the Venator Group, Inc. Proxy Statement
and upon such other matters as may properly come before the Annual Meeting,
voting as specified on the reverse side of this card with respect to the
matters set forth in the Proxy Statement, and voting in the discretion of the
above-named persons on such other matters as may properly come before the
Annual Meeting.
Proposal 1. - Election of Directors. (Address Changes)
Nominees for Terms Expiring at the Annual
Meeting in 2003: _____________________________
Jarobin Gilbert Jr., Allan Z. Loren and
David Y. Schwartz _____________________________
Nominee for Term Expiring at the Annual
Meeting in 2001: _____________________________
Matthew D. Serra
_____________________________
PLEASE SIGN AND DATE THE REVERSE SIDE OF
THIS PROXY CARD AND PROMPTLY RETURN IT IN
THE ENCLOSED ENVELOPE.
YOU MAY SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE REVERSE
SIDE, BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE WITH THE
BOARD OF DIRECTORS' RECOMMENDATIONS. THE PERSONS NAMED ABOVE AS PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
-------------
| SEE REVERSE |
| SIDE |
-------------
<PAGE> 65
------ Please mark your
| X | votes as in this
------ example
DIRECTORS RECOMMEND A VOTE "FOR"
PROPOSALS 1, 2, 3, 4 AND 5
FOR WITHHELD
1. ELECTION OF ------- -------- Nominees: 01 Jarobin Gilbert Jr.
DIRECTORS | | | | 02 Allan Z. Loren
(see reverse | | | | 03 David Y. Schwartz
side) ------- -------- 04 Matthew D. Serra
FOR, except vote withheld from the
following nominees(s):
___________________________________________
FOR AGAINST ABSTAIN
2. APPOINTMENT OF INDEPENDENT ACCOUNTANTS. ------- -------- ---------
| | | | | |
------- -------- ---------
3. AMENDMENT OF 1998 STOCK OPTION ------- -------- ---------
AND AWARD PLAN. | | | | | |
------- -------- ---------
4. REAPPROVAL OF PERFORMANCE GOALS AND ------- -------- ---------
AMENDMENT OF ANNUAL INCENTIVE | | | | | |
COMPENSATION PLAN. ------- -------- ---------
5. APPROVAL OF DIRECTORS STOCK ------- -------- ---------
OPTION PLAN. | | | | | |
------- -------- ---------
I plan to attend meeting. -------
| |
-------
THIS PROXY WHEN PROPERLY EXECUTED
WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, 3, 4 AND 5.
SIGNATURE(S) _______________________________________ DATE ______________, 2000
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
give full title as such. If signing on behalf of a corporation, sign the full
corporate name by authorized officer. The signer hereby revokes all proxies
heretofore given by the signer to vote at the 2000 Annual Meeting of
Shareholders of Venator Group, Inc. and any adjournment or postponement
thereof.
______________________________________________________________________________
* FOLD AND DETACH HERE *
You may also vote the shares held in your account by telephone or via the
Internet. Your electronic vote authorizes the named proxies in the same manner
as if you marked, signed, dated and returned the proxy card. IF YOU CHOOSE TO
VOTE BY TELEPHONE OR VIA THE INTERNET, THERE IS NO NEED FOR YOU TO MAIL BACK
YOUR PROXY CARD.
To vote electronically, please use the following directions:
* HAVE YOUR PROXY CARD AND SOCIAL SECURITY NUMBER AVAILABLE.
* BE READY TO ENTER THE PIN NUMBER PRINTED ON THIS CARD JUST BELOW THE
PERFORATION.
Proxy Vote-By-Phone
* DIAL 1-877-PRX-VOTE (1-877-779-8683) 24 HOURS A DAY, 7 DAYS A WEEK.
Proxy Vote-By-Internet
* LOG ON TO THE INTERNET AND GO TO THE WEB SITE
http://www.eproxyvote.com/z
Both voting systems preserve the confidentiality of your vote and will
confirm your voting instructions with you. You may also change your selections
on any or all of the proposals to be voted.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
