INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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of 1934
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Rule 14a-6(e)(2))
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[ ] Soliciting Material Pursuant to 'SS' 240.14a-12
Venator Group, Inc.
----------------------------------------
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[VENATOR GROUP LOGO]
VENATOR GROUP, INC.
NOTICE OF 2001 ANNUAL MEETING
AND
PROXY STATEMENT
VENATOR GROUP, INC.
112 WEST 34TH STREET
NEW YORK, NEW YORK 10120
NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
DATE: June 14, 2001
TIME: 9:00 A.M., local time
PLACE: Venator Group, Inc., 112 West 34th Street, New York, New
York 10120
RECORD DATE: Shareholders of record on April 27, 2001 can vote at this
meeting.
ANNUAL REPORT: Our 2000 Annual Report, which is not part of the proxy
soliciting material, is enclosed.
ITEMS OF BUSINESS: (1) To elect four members to the Board of Directors to serve
for three-year terms, and one member to the Board of
Directors to serve for a two-year term.
(2) To ratify the appointment of KPMG LLP as our independent
auditors for the 2001 fiscal year.
(3) To reapprove the performance goals of the Long-Term
Incentive Compensation Plan.
(4) 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.
GARY M. BAHLER
Secretary
May 1, 2001
TABLE OF CONTENTS
PAGE
----
General
General Information..................................... 1
Admission to the Meeting................................ 1
Outstanding Voting Stock................................ 1
Vote Required........................................... 2
Method of Counting Votes................................ 2
Method and Cost of Proxy Solicitation................... 2
How to Vote Your Shares................................. 2
Confidential Voting..................................... 3
Revoking Your Proxy..................................... 3
Request Electronic Delivery of Proxy Documents.......... 3
Beneficial Ownership of the Company's Stock................. 4
Directors and Executive Officers........................ 4
Persons Owning More Than Five Percent of the Company's
Stock.................................................. 5
Section 16(a) Beneficial Ownership Reporting
Compliance............................................. 6
Board of Directors.......................................... 6
Organization and Powers................................. 6
Committees of the Board of Directors.................... 6
Audit Committee..................................... 6
Finance and Strategic Planning Committee............ 7
Compensation and Management Resources Committee..... 7
Executive Committee................................. 7
Nominating and Corporate Governance Committee....... 7
Retirement Plan Committee........................... 7
Directors Compensation and Benefits..................... 8
Directors and Officers Indemnification and Insurance.... 9
Transactions with Management and Others................. 9
Executive Compensation...................................... 10
Summary Compensation Table.............................. 10
Long-Term Incentive Plan -- Awards in Last Fiscal
Year................................................... 12
Option Grants in Last Fiscal Year....................... 13
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Options Values......................... 14
Retirement Plans........................................ 15
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements......................... 16
Compensation Committee Interlocks and Insider
Participation.......................................... 19
Compensation Committee's Report to Shareholders on
Executive Compensation................................. 19
Audit Committee Report.................................. 23
Performance Graphs...................................... 24
Proposal 1 -- Election of Directors......................... 26
Nominees for Directors.................................. 26
Directors Continuing in Office.......................... 27
Proposal 2 -- Ratification of the Appointment of Independent
Accountants............................................... 28
Proposal 3 -- Reapproval of Performance Goals of the
Long-Term Incentive Compensation Plan..................... 29
Deadlines for Nominations and Shareholder Proposals......... 31
Other Business.............................................. 31
Appendix A.................................................. A-1
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
2001 annual meeting of shareholders and for any adjournments or postponements of
this meeting. We are holding this annual meeting on June 14, 2001 at 9:00 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 May 3, 2001.
The enclosed proxy card shows the number of shares of Common Stock
registered in the name of each shareholder of record on April 27, 2001, 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 2001, and FOR the reapproval of the performance goals of the
Long-Term Incentive Compensation 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 2000 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. Seating at the
meeting will be limited. 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 27, 2001 are entitled to vote at
1
the annual meeting and any adjournments or postponements. Each share is entitled
to one vote. There were 138,838,548 shares of Common Stock outstanding on the
record date. Under our By-laws, the holders of a majority of the votes that
shareholders are entitled to cast at the meeting must be present in person or by
proxy to constitute a quorum for the transaction of business.
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, we have
retained Innisfree M&A Incorporated to assist us 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 14, 2001. 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
2
June 14, 2001. 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.
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 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.
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 (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.
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.
REQUEST ELECTRONIC DELIVERY OF PROXY DOCUMENTS
Shareholders may request that future proxy materials be sent to them via the
Internet. If you vote your shares via the Internet, follow the prompts to
request electronic delivery of future proxy materials. Please see your proxy
card for further information.
3
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 16, 2001, by each of the
directors and the named executive officers. The table also shows the beneficial
ownership of the Company's stock by all directors, 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 16, 2001 by
the exercise of options that have been granted under the Company's stock option
plans.
No 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 16, 2001.
Except as otherwise noted in a footnote below, each person has sole voting
and investment power with respect to the number of shares shown.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
STOCK OPTIONS
COMMON STOCK EXERCISABLE WITHIN TOTAL SHARES OF
BENEFICIALLY OWNED 60 DAYS OF COMMON STOCK
NAME EXCLUDING OPTIONS(a) 4/16/01 BENEFICIALLY OWNED
---- -------------------- ------- ------------------
J. Carter Bacot........................... 8,508 1,568 10,076
Purdy Crawford............................ 35,520(b) 1,568 37,088
Jeffrey L. Berk........................... 20,525 104,998 125,523
Philip H. Geier Jr........................ 19,258 1,568 20,826
Jarobin Gilbert Jr........................ 2,518 1,568 4,086
Bruce L. Hartman.......................... 30,339 109,166 139,505
Dale W. Hilpert........................... 3,781 983,333 987,114
Dennis M. Lee............................. 108 24,999 25,107
James E. Preston.......................... 41,975 1,568 43,543(c)
David Y. Schwartz......................... 6,919 1,568 8,487
Matthew D. Serra.......................... 362,319 166,666 528,985
Christopher A. Sinclair................... 7,620 1,568 9,188
Cheryl Turpin............................. 1,000 -0- 1,000
Dona D. Young............................. 2,000 -0- 2,000
All 17 directors and executive officers as
a group, including the named executive
officers................................ 640,938 1,701,868 2,342,857(d)
---------
(a) This column includes shares held in the Company's 401(k) Plan.
(b) Shares held by a private Canadian company of which Mr. Crawford is the sole
director and officer. Mr. Crawford and a family trust are the shareholders
of the private company, with Mr. Crawford holding voting control.
(c) Excludes 50 shares of Common Stock owned by Mr. Preston's stepchildren,
with respect to which Mr. Preston disclaims beneficial ownership.
(d) This figure represents approximately 1.7 percent of the shares of Common
Stock outstanding at the close of business on April 16, 2001. It includes
all of the shares referred to in the table and footnotes (a) and (c) above.
4
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.
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
Greenway Partners, L.P. ................................. 17,934,522(a) 13%(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
FMR Corp., Edward C. Johnson 3d, ........................ 15,748,938(b) 11.42%(b)
and Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
---------
(a) Reflects shares beneficially owned as of March 31, 2001, according to a
Form 4 Report filed with the SEC. As reported in such Form 4 and in
Amendment No. 11 to the Schedule 13D filed with the SEC, 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 shared voting and dispositive power with respect to 1,500,900
shares; Greenbelt Corp. holds sole voting and dispositive power with
respect to 11,001,322 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 17,102,222 shares.
(b) Reflects shares beneficially owned as of December 31, 2000, according to a
statement on Schedule 13G filed with the SEC. As reported in the 13G,
Fidelity Management & Research Company ('Fidelity'), a wholly owned
subsidiary of FMR Corp. ('FMR') and an investment adviser, is the
beneficial owner of 13,672,248 shares. The ownership of Fidelity Growth
Company Fund, an investment company, amounted to 8,129,800 shares or 5.895
percent of the outstanding stock. Edward C. Johnson 3d, FMR, through its
control of Fidelity, and the funds each has sole power to dispose of the
13,672,248 shares owned by the funds. Fidelity Management Trust Company
('Trust Company'), a wholly owned subsidiary of FMR and a bank, is the
beneficial owner of 1,700,990 shares. Edward C. Johnson 3d and FMR, through
its control of the Trust Company, each has sole dispositive power over
1,700,990 shares and sole power to vote the shares.
(footnotes continued on next page)
5
(footnotes continued from previous page)
Approximately 49 percent of the voting stock of FMR is owned by
Mr. Johnson and members of his family. Mr. Johnson, Ms. Johnson and members
of their family form a controlling group with respect to FMR. Mr. Johnson
serves as Chairman and Ms. Johnson serves as a director of FMR. Fidelity
International Limited (Pembroke Hall, 42 Crowlane, Hamilton, Bermuda), an
investment adviser, beneficially owned 375,700 shares as of December 31,
2000 and has the sole power to vote and dispose of such 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 2000 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.
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 10 directors.
The Board held six meetings during 2000, and each director, other than Allan
Z. Loren, who resigned as a director effective February 3, 2001, attended at
least 75 percent of the aggregate total number of meetings of the Board and of
meetings held by all committees of which he or she was a member. The Board of
Directors is scheduled to hold six regular meetings in 2001.
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 2000, and the functions of the
committees are described below.
AUDIT COMMITTEE. The members of the committee are Purdy Crawford (Chair),
Jarobin Gilbert Jr. and David Y. Schwartz. The committee met five times during
2000.
The committee assists the Board in fulfilling its oversight responsibilities
in the following areas: (i) accounting policies and practices, (ii) financial
reporting process and the Company's public financial
6
reports, (iii) independent accountants, (iv) internal auditors, and
(v) compliance with legal and regulatory requirements. A copy of the committee's
charter is attached as Appendix A.
FINANCE AND STRATEGIC PLANNING COMMITTEE. The members of the committee are
Christopher A. Sinclair (Chair), J. Carter Bacot, James E. Preston and David Y.
Schwartz. The committee held two meetings during 2000.
The committee reviews the overall financial plans of the Company, including
capital expenditures, acquisitions and divestitures, and 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. The committee also reviews the Company's
strategic plans and hears reports of the Retirement Plan Committee with respect
to the performance of the Company's retirement plans.
COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE. The members of the
committee are James E. Preston (Chair), Purdy Crawford, Philip H. Geier Jr.,
Christopher A. Sinclair and Cheryl Turpin. The committee held two meetings
during 2000.
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 19). 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. The committee's responsibilities also include reviewing
executive development and management succession planning.
EXECUTIVE COMMITTEE. The current members of the committee are all of the
non-employee directors. Mr. Hilpert was a member and Chair of this committee
until his resignation on March 3, 2001. The committee did not meet during 2000.
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 CORPORATE GOVERNANCE COMMITTEE. The members of the committee
are Jarobin Gilbert Jr. (Chair), J. Carter Bacot, James E. Preston and Dona D.
Young. The committee held three meetings during 2000.
The committee oversees matters of corporate governance and makes
recommendations to the Board with respect to the size and composition of the
Board. 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 31.
RETIREMENT PLAN COMMITTEE. The members of the committee are the following
executive officers of the Company: Matthew D. Serra (Chair), Bruce L. Hartman
and Dennis M. Lee (through the date of his termination of employment). This
committee, which was established in August 2000, is the successor to the
Retirement Investment Committee and the Retirement Administration Committee. A
sub-committee of the Retirement Plan Committee held five meetings in 2000.
7
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
investment manager responsible for managing the funds of such trust. The
committee also has 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. We do not
pay separate fees 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.
Beginning in 2000, the non-employee directors receive an annual stock option
grant under the Directors Stock Option Plan for that number of shares having a
market value of $50,000 on the date of grant. The initial grant under the plan
was made on June 8, 2000, which was the date shareholders approved the Directors
Stock Option Plan. Thereafter, grants are to be made on the first business day
of each fiscal year. We granted an option to each non-employee director on
June 8, 2000 covering 4,705 shares of the Company's Common Stock at an exercise
price of $10.625 per share and an option on February 5, 2001 covering 4,273
shares at an exercise price of $11.70 per share. The per-share exercise price of
each stock option granted under this plan may not be less than the fair market
value of a share of Common Stock on the date of grant. Options granted under the
Directors Stock Option Plan vest in three substantially equal annual
installments beginning with the first anniversary of the date of grant. Vested
options may remain exercisable for one year following a director's termination
of service as a director. However, under no circumstances may an option remain
outstanding for more than ten years from its date of grant.
J. Carter Bacot was elected non-executive Chairman of the Board of the
Company effective March 4, 2001. We will pay Mr. Bacot an additional annual
retainer of $100,000 for his services in this capacity. Additionally, at the
time he was elected to this position, the Company granted a stock option to Mr.
Bacot for 17,000 shares of the Company's Common Stock. The option was granted at
the per-share exercise price of $11.905, which was the fair market value of a
share of the Company's Common Stock on the date of grant. The option will vest
on March 1, 2002 and will expire on December 31, 2005 unless it is exercised or
cancelled prior to that date.
The Directors' Retirement Plan was frozen as of December 31, 1995.
Consequently, only two of the current directors 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
8
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 $92,625
for the 12-month period ending September 12, 2001.
The Company has entered into indemnification agreements with its directors
and executive officers, as approved by shareholders at the 1987 annual meeting.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Venator Group and its subsidiaries have had transactions in the normal
course of business with various other corporations, including certain
corporations whose directors or officers are also directors of the Company. The
amounts involved in these transactions have not been material in relation to the
businesses of the Company or its subsidiaries, and it is believed that these
amounts have not been material in relation to the businesses of the other
corporations. In addition, it is believed that these transactions have been on
terms no less favorable to the Company than if they had been entered into with
disinterested parties. It is anticipated that transactions with such other
corporations will continue in the future. Purdy Crawford is Counsel to the
Canadian law firm of Osler, Hoskin & Harcourt, which provided legal services to
the Company in 2000. Mr. Crawford received no remuneration from the firm in
2000.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- ------------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTION/SARs PAYOUTS COMPENSATION
PRINCIPAL POSITION(a) YEAR ($) ($) ($) ($)(b) (#) ($) ($)
--------------------- ---- --- --- --- ------ --- --- ---
Dale W. Hilpert .............. 2000 950,000 1,246,875 0 0 0 475,071(c) 21,550(d)
Former Chairman of the Board 1999 883,712 0 0 957,500(e) 500,000 0 19,383(d)
and Chief Executive Officer 1998 825,000 0 0 0 100,000 835,835(f) 10,860(d)
Matthew D. Serra ............. 2000 850,000 1,115,625 0 568,750(h) 250,000 427,117(c) 1,700(d)
President and 1999 800,000 400,000(g) 0 280,000(h) 0 0 1,600(d)
Chief Executive Officer 1998 290,909 107,076 0 588,750(h) 250,000 0 1,000,000(i)
Jeffrey L. Berk .............. 2000 400,000 350,000 0 0 40,000 147,223(c) 0
Senior Vice President- 1999 332,500 400,000(j) 0 107,500(k) 25,000 0 0
Real Estate 1998 318,750 0 0 0 25,000 0 0
Dennis M. Lee ................ 2000 405,000 354,375 0 0 40,000 151,515(c) 3,681(d)
Senior Vice President-Human 1999 208,807 0 0 0 35,000 0 51,869(l)
Resources and Logistics
Bruce L. Hartman ............. 2000 437,500 382,813 0 0 40,000 207,200(c) 5,911(d)
Senior Vice President 1999 394,063 0 45,858(m) 161,250(k) 50,000 0 66,162(n)
and Chief Financial Officer 1998 318,750 0 0 0 25,000 0 0
---------
(a) The named executive officers held the following positions with the Company
during the periods covered in the above table:
D. W. Hilpert served as Chairman of the Board and Chief Executive Officer
from April 12, 2000 to March 3, 2001; President and Chief Executive
Officer from August 16, 1999 to April 11, 2000; and President and Chief
Operating Officer prior to August 16, 1999.
M. D. Serra was elected President and Chief Executive Officer effective
March 4, 2001; he served as President and Chief Operating Officer from
April 12, 2000 to March 3, 2001 and as Chief Operating Officer from
February 9, 2000 to April 11, 2000. He joined the Company in September
1998 as President and Chief Executive Officer of Foot Locker Worldwide.
J. L. Berk was elected Senior Vice President -- Real Estate effective
February 9, 2000. He was President -- North America of Venator Group
Realty prior to February 9, 2000.
D. M. Lee joined the Company in July 1999 as Senior Vice President --
Human Resources. He was elected Senior Vice President -- Human Resources
and Logistics effective August 9, 2000. His employment will terminate
effective May 23, 2001.
B. L. Hartman was 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.
(footnotes continued on next page)
10
(footnotes continued from previous page)
(b) At February 3, 2001 the named executive officers held the following shares
of restricted stock, having the values stated below, based upon a $12.08
closing price of the Company's Common Stock as reported on the New York
Stock Exchange on February 2, 2001, the last business day prior to the end
of the fiscal year.
# OF SHARES OF
NAME RESTRICTED STOCK $ VALUE
---- ---------------- -------
D. W. Hilpert...................................... 160,000 1,932,800
M. D. Serra........................................ 176,000 2,126,080
J. L. Berk......................................... 20,000 241,600
B. L. Hartman...................................... 30,000 362,400
(c) This payout was made for the 1999 - 2000 Performance Period.
(d) Includes, where applicable, 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 2000 are stated below. The
shares of Common Stock for the matching contribution in 2000 were valued at
$15.815 per share, which represents the closing price of a share of Common
Stock on December 29, 2000, the last trading day of the plan year.
EMPLOYER MATCHING
LIFE INSURANCE CONTRIBUTION UNDER
NAME PREMIUM 401(k) PLAN
---- ------- -----------
D. W. Hilpert.......................... $19,850 $1,700
M. D. Serra............................ $ 0 $1,700
D. M. Lee.............................. $ 1,981 $1,700
B. L. Hartman.......................... $ 4,211 $1,700
(e) The Company granted to Mr. Hilpert 100,000 shares of restricted stock on
February 1, 1999 and 60,000 shares on November 10, 1999. Mr. Hilpert
forfeited all of these shares as a result of his resignation on March 3,
2001. We calculated the value of the restricted stock award 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.
(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 amount shown in the table
reflects the total of the cash payment and the value of the shares received
on the payment date. We calculated the value of the stock portion of the
payout ($5.91228 per share) in accordance with the terms of the Long-Term
Incentive Compensation Plan.
(g) Guaranteed bonus paid pursuant to terms of employment.
(h) The Company granted to Mr. Serra 100,000 shares of restricted stock on
February 9, 2000, 40,000 shares on November 10, 1999, and 60,000 shares on
September 21, 1998. A total of 24,000 shares from his September 21, 1998
grant have vested, with an additional 12,000 shares from this grant
(footnotes continued on next page)
11
(footnotes continued from previous page)
scheduled to vest on September 21, 2001 if Mr. Serra remains employed by
the Company on the vesting date. All of the remaining shares from these
grants (164,000 shares) will vest on February 1, 2002 provided that Mr.
Serra remains employed by the Company on that date. Mr. Serra 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. We calculated the values of the restricted stock awards by
multiplying the closing price of the Company's Common Stock on the New York
Stock Exchange on the individual grant dates by the total number of shares
of restricted stock awarded on that date. The closing prices on the grant
dates were: February 9, 2000 ($5.6875), November 10, 1999 ($7.00) and
September 21, 1998 ($9.8125).
(i) Sign-on bonus.
(j) Discretionary bonus paid in connection with certain real estate projects
completed in 1999.
(k) On February 1, 1999 the Company granted shares of restricted stock to the
following named executive officers. The shares will vest on February 1,
2004 if the executive remains 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 named executive's 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 the number of shares granted
to him:
NUMBER OF
NAME SHARES
---- ------
J. L. Berk............................................... 20,000
B. L. Hartman............................................ 30,000
(l) Amount includes sign on bonus of $50,000 and $1,869 representing the dollar
value of the premium paid by the Company for a term life insurance policy
for the benefit of the named executive.
(m) Tax gross-up payment related to relocation.
(n) 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.
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR(a)
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERIOD NON-STOCK PRICE-BASED PLAN
SHARES, UNITS UNTIL ---------------------------------
NAME OR OTHER RIGHTS PAYOUT THRESHOLD TARGET MAXIMUM
---- --------------- ------ --------- ------ -------
D. W. Hilpert...................... 950,000 2000 - 2002 N/A N/A N/A
M. D. Serra........................ 850,000 2000 - 2002 $243,750 $975,000 $1,950,000
J. L. Berk......................... 400,000 2000 - 2002 90,000 360,000 720,000
B. L. Hartman...................... 450,000 2000 - 2002 101,250 405,000 810,000
D. M. Lee.......................... 415,000 2000 - 2002 N/A N/A N/A
(footnote on next page)
12
(footnote from previous page)
(a) The named executive officers, excluding D. W. Hilpert, participate in the
Long-Term Incentive Compensation Plan (the 'Long-Term Plan'). Mr. Lee will
cease to participate in this plan upon the termination of his employment on
May 23, 2001. D. W. Hilpert participated in this plan while he was an
officer of the Company. Individual target awards under the Long-Term Plan
are expressed as a percentage of the participant's annual base salary. In
2000 the Compensation and Management Resources Committee (the 'Compensation
Committee') approved awards to the participants for the performance period
of 2000 - 2002. 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 2000 for each of the named executive officers. The amounts shown
in the columns headed 'Threshold,' 'Target,' and 'Maximum' represent 22.5
percent, 90 percent and 180 percent, respectively, of each of the named
executive officers', other than M. D. Serra's, annual base salaries in the
first year of the 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. The amounts shown in the table for M.D.
Serra reflect 22.5 percent, 90 percent and 180 percent of his base salary in
the first year of the Performance Period and, as a result of his promotion
to Chief Executive Officer in 2001, his base salary of $1.2 million in the
second and third years of the Performance Period, representing the amount
that would be paid to him at the end of the Performance Period if the
Company achieves the established goals. Mr. Hilpert and Mr. Lee are not
entitled to payments under the plan since they did not remain in the employ
of the Company at all times during the Performance Period.
The principal features of the Long-Term Plan are described beginning on
Page 29.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(a)
----------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE VALUE($)(b)
---- ---------- -------------- --------- ---- -----------
D. W. Hilpert.......................... 0 N/A N/A N/A N/A
M. D. Serra............................ 250,000 11.57 5.75 2/9/10 703,950
J. L. Berk............................. 35,000 1.62 5.75 2/9/10 98,108
5,000 .23 11.3125 4/12/10 27,575
D. M. Lee.............................. 40,000 1.85 11.3125 4/12/10(c) 220,593
B. L. Hartman.......................... 40,000 1.85 11.3125 4/12/10 220,593
---------
(a) During 2000 the Compensation Committee granted stock options to the named
executive officers under the 1995 Stock Option and Award Plan (the '1995
Award Plan') and the 1998 Stock Option and Award Plan (the '1998 Award
Plan').
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 2000 will become
exercisable in three substantially equal annual installments, beginning on
the first
(footnotes continued on next page)
13
(footnotes continued from previous page)
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 6.43 percent; a
stock price volatility factor of 55 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 2000 Annual Report.
(c) In connection with the termination of Mr. Lee's employment effective
May 23, 2001, the vested portion of his option will expire prior to
April 12, 2010. The unvested portion of the grant will be cancelled as of
his termination date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
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
---- ----------- -------- ----------- ------------- ----------- -------------
D. W. Hilpert............. 0 N/A 733,332 366,668 1,002,071 2,004,154
M. D. Serra............... 0 N/A 166,666 333,334 437,498 1,843,752
J. L. Berk................ 0 N/A 74,999 65,001 64,320 360,835
D. M. Lee................. 0 N/A 11,666 63,334 24,425 86,354
B. L. Hartman............. 0 N/A 70,832 81,668 128,327 294,170
---------
(a) The fair market value (the average of the high and low prices of the
Company's Common Stock) on Friday, February 2, 2001, the last business day
of 2000, was $12.25.
14
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
normal retirement age 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.
PERCENT OF W-2
PERCENT OF ALL COMPENSATION
YEARS OF SERVICE W-2 COMPENSATION OVER $22,000
---------------- ---------------- + ------------
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
In addition, all balances in the participants' accounts earn interest at the
fixed rate of six percent, which is credited annually. At retirement or other
termination of employment, an amount equal to the vested balance then credited
to the account under the Retirement Plan is payable to the participant in the
form of a qualified joint and survivor annuity (if the participant is married)
or a life annuity (if the participant is not married). The participant may elect
to waive the annuity form of benefit described above and receive benefits under
the Retirement Plan 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 D. W. Hilpert, and one of the other
executive
15
officers of the Company currently participate in the SERP. D.M. Lee will cease
to participate in the SERP upon the termination of his employment on May 23,
2001. Under the SERP the Compensation Committee 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 8 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 D. W. Hilpert,
whose actual retirement benefit is stated as a lump sum) under the Retirement
Plan, the Excess Plan, and where applicable, the SERP. Except for Mr. Hilpert
and Mr. Lee, 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 2000 to the individual's normal
retirement date remains the same as compensation earned by him during 2000. The
projections in the table below are based upon 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 2000. The applicable interest rate is the rate specified in
Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code.
TOTAL ANNUAL BENEFIT TOTAL ANNUAL BENEFIT
FOR YEARS 1-3 FOR YEARS 4 AND SUBSEQUENT
NAMED EXECUTIVE OFFICER FOLLOWING RETIREMENT(a) FOLLOWING RETIREMENT(a)
----------------------- ----------------------- -----------------------
M. D. Serra..................... $324,598 $26,850
J. L. Berk...................... 507,844 43,443
B. L. Hartman................... 482,433 36,722
D. M. Lee(b).................... N/A N/A
TOTAL RETIREMENT
NAMED EXECUTIVE OFFICER BENEFIT
----------------------- -------
D. W. Hilpert(c)................ $116,373
---------
(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 12 percent credit to the participants' accounts for
2000 and assume an annual 8 percent credit going forward. Beginning with the
fourth year following retirement, the individuals' annual benefits will not
include any SERP payments and, therefore, their annual benefits for those
years will be reduced accordingly.
(b) Not eligible to receive a benefit under the Retirement Plan or the SERP as a
result of his resignation from the Company.
(c) Not eligible to receive a benefit under the SERP as a result of his
resignation from the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
We have employment agreements with the named executive officers except for
Mr. Hilpert. Mr. Hilpert's employment agreement, described below, ended as of
March 3, 2001 when he resigned his positions with the Company.
16
M. D. SERRA
We entered into an employment agreement with Mr. Serra in his position as
President and Chief Executive Officer on February 12, 2001, which supersedes the
agreement we had with him in his previous position of President and Chief
Operating Officer. The term of Mr. Serra's agreement commenced on March 4, 2001.
The initial term ends on January 31, 2004; however, beginning on January 31,
2003, and on every January 31 thereafter, the term of the agreement will
automatically be extended for one year unless either party notifies the other
that the term shall not be extended. Mr. Serra will receive a base salary of not
less than $1.2 million per year, and his annual bonus at target during each year
of his employment term is 75 percent of his base salary. Mr. Serra also
participates in the Long-Term Plan.
Under the terms of his agreement, the Compensation Committee granted Mr.
Serra a stock option for 500,000 shares. He is not eligible for additional stock
option grants during his employment period. The Committee also granted to Mr.
Serra 150,000 shares of restricted stock as of March 4, 2001, which will fully
vest on January 31, 2004 if he is continuously employed by the Company on that
date.
If Mr. Serra's employment is terminated for any reason other than death,
disability or cause, or if the Company materially breaches the terms of his
employment agreement, we will pay him his base salary until the earliest of (i)
the end of the employment period, (ii) his death or (iii) his breach of any
post-employment requirements. The Company would also pay him the annual bonus
that he otherwise would have earned if his employment had not ended, prorated to
his termination date, and the bonus under the Long-Term Plan that he otherwise
would have earned under that plan for the performance period that ends on the
last day of the fiscal year in which his employment ends, prorated to his
termination date. Further, Mr. Serra's restricted stock would fully vest.
Following a Change in Control, Mr. Serra would receive in a lump sum the
same payments described above 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. Serra under these circumstances is less than 1.5 times his base
salary and annual bonus at target, then the Company will pay the difference to
him. Also, Mr. Serra's restricted stock and stock options would fully vest in
this event. If Mr. Serra 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.
D. W. HILPERT
We had an employment agreement with Mr. Hilpert effective August 16, 1999,
for a term ending on August 31, 2004. This agreement ended as of March 3, 2001
at the time of Mr. Hilpert's resignation from the Company. During the term of
his agreement, Mr. Hilpert received a base salary of not less than $950,000 per
year and participated in the Annual Incentive Compensation Plan (the 'Annual
Plan') and the Long-Term Plan. His payout at target under the Annual Plan was 75
percent of base salary.
Under the terms of his agreement, the Compensation Committee granted 60,000
shares of restricted stock to Mr. Hilpert. The shares would have vested on
February 1, 2004 if Mr. Hilpert had remained employed by the Company until that
date. The shares would have vested earlier, on March 15,
17
2002, if the Company attained certain performance targets established by the
Compensation Committee. Mr. Hilpert forfeited these shares of restricted stock
as a result of his resignation from the Company.
In the event Mr. Hilpert's employment had been terminated by him for good
reason or by the Company without cause, he would have been 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 would have paid to Mr. Hilpert
his annual base salary in effect immediately prior to his termination.
Mr. Hilpert would have received in a lump sum the same payments described
above following a Change in Control if (a) he had terminated his employment
within the 30-day period following the Change in Control, (b) we had terminated
his employment without cause, or (c) he had terminated 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 had been less than
three times his then-current base salary plus annual bonus at target in the year
of termination, then the Company would have paid him the difference. In the
event he had become entitled to the payments in this paragraph and the payments
were 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 would have paid 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 have immediately vested upon a Change in
Control.
Finally, if Mr. Hilpert's employment had been 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 did not have an employment agreement extending Mr.
Hilpert's employment, and the amount of retirement benefits to which he was then
entitled under the Retirement Plan, the Excess Plan, and the SERP was less than
$1,300,000, the Company would have increased the amount in his SERP account to
reach this total. This provision was intended to compensate Mr. Hilpert for the
benefit he would have received under his previous employer's supplementary plan.
No payments were made to Mr. Hilpert as a result of his resignation from the
Company on March 3, 2001.
J. L. BERK, B. L. HARTMAN AND D. M. LEE
We also have employment agreements with each of Jeffrey L. Berk and Bruce L.
Hartman in his position as Senior Vice President of the Company for a term
beginning on January 1, 2000 and ending on December 31, 2001. The terms of each
of the agreements will automatically be extended for additional one-year periods
unless we give the executive notice that the Company does not intend to extend
his agreement.
If the Company terminates the executive's employment without cause or does
not extend the term of his agreement beyond the then-current termination date,
or if the executive 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 the executive's employment is terminated
18
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.
We have an employment agreement with Dennis M. Lee in his position as Senior
Vice President of the Company under the same terms described above for
Messrs. Berk and Hartman. Mr. Lee's agreement, however, will terminate on
May 23, 2001, the effective date of his termination of employment with the
Company.
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000 the following individuals (none of whom had been an officer or
employee of the Company or any of its subsidiaries) served on the Compensation
and Management Resources Committee: Purdy Crawford, Philip H. Geier Jr.,
Margaret P. MacKimm, James E. Preston, Christopher Sinclair and Cheryl Turpin.
There were no interlocks with other companies within the meaning of the SEC's
proxy rules. Mr. Crawford is Counsel to the Canadian law firm of Osler, Hoskin &
Harcourt LLP, which provided legal services to the Company during 2000. Mr.
Crawford received no remuneration from the firm in 2000. Mr. Crawford does not
participate in decisions regarding awards under the Company's 1995 Award Plan or
the 1998 Award Plan to executives covered by Section 16(a) of the Securities
Exchange Act of 1934.
COMPENSATION COMMITTEE'S REPORT TO SHAREHOLDERS
ON EXECUTIVE COMPENSATION
The Compensation and Management Resources 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 and chief operating 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
2000.
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 senior management 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)
19
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 achievement of previously specified
performance goals; (iii) long-term incentive opportunities, payable in stock or
cash, which are based on the 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
executives 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 performance of the Company or the relevant operating unit 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 senior
management 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.
An evaluation of the performance in the preceding year of each member of
management, other than the Chief Executive Officer, 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 and chief operating 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 individual
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 2000 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. Senior management of the
operating units participate in annual bonus plans with goals tied to operating
results of their respective units. Payments under the Long-Term Plan are based
on a combination of cumulative net income and percentage return on invested
capital of the Company during the performance period, in relation to targets
established by the Committee.
Each year the Committee considers granting options to purchase Common Stock
to key employees, including executive officers. Stock option grants are intended
to provide additional incentive for superior performance by officers and key
employees who have the most impact on the management and success of the
Company's businesses, and to strengthen the tie between a key employee's
compensation opportunity and the shareholders' interest in increasing the price
of Common Stock. Stock options
20
granted by the Committee in 2000 vest in three equal annual installments
beginning on the first anniversary of the date of grant. Approximately 300
associates participate.
From time to time the Committee has granted restricted stock to certain key
executives of the Company. The only grant of restricted stock made in 2000 was
to Mr. Serra, in connection with the amendment of his employment agreement at
the time of his promotion to President and Chief Operating Officer. At the same
time, the Committee also approved certain amendments to Mr. Serra's 1998 and
1999 restricted stock agreements. All of the shares of restricted stock granted
to Mr. Serra vest based upon Mr. Serra's continued employment with the Company
through the relevant vesting dates.
In determining the number of options to be granted to executive officers,
the Committee considered a number of factors, including the position held by the
individual, his or her performance, the number of options granted to these
individuals in previous years, the financial results of the Company for the
prior year, and the price of a share of Common Stock.
The performance of the Company's continuing operations exceeded the
performance targets established by the Committee under the Annual Plan for 2000
and essentially met the performance targets established by the Committee under
the Long-Term Plan for the 1999 - 2000 performance period, and payments were
made to the executive officers under those plans, including the payments shown
in the Summary Compensation Table on Page 10.
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 17. The components of Mr. Hilpert's compensation package are the same as
those of other executive officers of the Company: base salary, annual cash
incentive, long-term incentive payable in cash or stock, and long-term
stock-based incentives comprised of stock options and restricted stock.
In approving Mr. Hilpert's compensation arrangements, the Committee
considered the compensation arrangements 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.
Payments were made to Mr. Hilpert under the Annual Plan for 2000 and the
Long-Term Plan for the 1999 - 2000 performance period as shown in the table on
Page 10 based upon the performance of the Company's on-going operations compared
to targets established by the Committee at the beginning of the relevant
performance periods.
Following the end of the fiscal year, Mr. Hilpert resigned as Chief
Executive Officer and Mr. Serra was elected to that position. The Committee
approved the employment arrangements with Mr. Serra, described on Page 17, and
these arrangements are consistent with the compensation policy and program
described in this report.
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
21
for an exemption from the $1 million pay deductibility limit. Consistent with
this view, the Company is asking shareholders, at this year's annual meeting, to
reapprove the performance goals of the Long-Term Plan. 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. The portion of Mr. Serra's base salary as Chief
Executive Officer that exceeds $1 million per year, the portion of any payout
under the Long-Term Plan that represents his interim participation awards, the
compensation related to his restricted stock grants, 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. Serra and these officers outweigh the Company's
inability to obtain a tax deduction for those elements of compensation.
James E. Preston, Chairman
Purdy Crawford
Philip H. Geier Jr.
Christopher A. Sinclair
Cheryl Turpin
22
AUDIT COMMITTEE REPORT
In accordance with its charter adopted by the Board of Directors on June 7,
2000, the Audit Committee assists the Board in fulfilling its oversight
responsibilities in the areas of the Company's accounting policies and
practices, financial reporting, independent accountants and internal auditors. A
copy of the Audit Committee Charter is attached to this Proxy Statement as
Appendix A.
The Audit Committee consists of three independent members, as independence
is defined under the rules of the New York Stock Exchange.
The Audit Committee reviewed and discussed with management and KPMG LLP, the
Company's independent auditors, the audited financial statements for the 2000
fiscal year, which ended February 3, 2001. The Committee also discussed with
KPMG the matters required to be discussed by Statement on Auditing Standards
No. 61, as amended, 'Communication with Audit Committees' and, with and without
management present, discussed and reviewed the results of KPMG's examination of
the financial statements.
The Audit Committee obtained from KPMG the written disclosures and the
letter required by Independence Standards Board Standard No. 1 'Independence
Discussions with Audit Committees' and has discussed with KPMG any relationships
that may affect their objectivity and independence and satisfied itself as to
the independent auditors' independence. The Audit Committee has considered
whether the non-audit services provided by KPMG to the Company are compatible
with maintaining KPMG's independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in Venator Group's Annual Report on Form 10-K for the 2000 fiscal year.
Purdy Crawford, Chairman
Jarobin Gilbert Jr.
David Y. Schwartz
23
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 28, 1996
through February 3, 2001. The graph assumes an investment of $100 in the
Company's Common Stock and in each index on January 28, 1996, and that all
dividends were reinvested.
[PERFORMANCE GRAPH]
BASE PERIOD
JANUARY JANUARY JANUARY JANUARY JANUARY JANUARY
COMPANY/INDEX 1996 1997 1998 1999 2000 2001
----------------------------------------- ------ ------ ------ ------ ------ ------
Venator Group............................ 100.00 177.78 182.78 41.11 52.78 107.38
S&P 500.................................. 100.00 123.07 157.24 203.56 218.81 217.09
S&P Retail Index......................... 100.00 118.38 177.71 284.55 284.84 295.51
24
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 February 3, 2001. 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. The Company
believes that this selected group reflects the Company's peers as retailers in
the athletic footwear and apparel industry.
[PERFORMANCE GRAPH]
BASE PERIOD
SEPTEMBER JANUARY JANUARY JANUARY JANUARY JANUARY
COMPANY/INDEX 1996 1997 1998 1999 2000 2001
----------------------------------------- ------ ------ ------ ------ ------ ------
Venator Group............................ 100.00 96.36 104.85 24.85 28.79 58.57
Russell 2000............................. 100.00 106.00 125.03 123.65 146.05 145.14
Peer Group............................... 100.00 83.74 67.96 48.23 41.47 63.21
25
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
Cheryl Turpin and Dona D. Young, and the three directors who constitute
Class I, expire at the 2001 annual meeting upon the election and qualification
of their successors.
James E. Preston, Matthew D. Serra, Christopher A. Sinclair and Dona D.
Young will be considered for election as directors in Class I, each to hold
office for a three-year term expiring at the annual meeting in 2004. Cheryl
Turpin will be considered for election as a director in Class III, to hold
office for a two-year term expiring at the annual meeting in 2003. The five
remaining directors will continue in office, in accordance with their previous
elections, until the expiration of the terms of their classes at the 2002 or
2003 annual meeting. Each nominee has been nominated by the Board of Directors
for election and has consented to serve for the specified term. Mr. Preston and
Mr. Sinclair were elected to serve for their present terms at the 1998 annual
meeting. Mr. Serra was elected to serve for his present term at the 2000 annual
meeting. Ms. Turpin and Ms. Young were elected to the Board effective January 1,
2001.
If, prior to the annual meeting, any of the five 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 five nominees and for each of the
five other directors of the Company whose present terms as directors will
continue after the 2001 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 2003
CHERYL TURPIN. Age 53. Director since January 1, 2001. President and Chief
Executive Officer of The Limited Stores, Inc. (retail merchants) from June 1994
to August 1997. She was President and Chief Executive Officer of Lane Bryant, a
subsidiary of The Limited, Inc., from January 1990 to June 1994. Ms. Turpin is a
member of the Board of Trustees of the Columbus School for Girls.
NOMINEES FOR DIRECTORS
TERMS EXPIRING IN 2004
JAMES E. PRESTON. Age 68. 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,
26
Reader's Digest Association, Project Hope, The Edna McConnell Clarke Foundation,
The New Milford Hospital, and the Kent Land Trust.
MATTHEW D. SERRA. Age 56. Director since 2000. The Company's President since
April 12, 2000 and Chief Executive Officer since March 4, 2001. He was the
Company's Chief Operating Officer from February 9, 2000 to March 3, 2001, and
President and Chief Executive Officer of the Company's Foot Locker Worldwide
division from September 21, 1998 to February 8, 2000. Prior to joining the
Company, Mr. Serra served as Chairman and Chief Executive Officer of Stern's, a
division of Federated Department Stores, Inc., from March 1993 to September
1998.
CHRISTOPHER A. SINCLAIR. Age 50. Director since 1995. Managing Director of
Manticore Group, LLC (venture capital and advisory firm) since February 1, 2001,
and Operating Partner of Pegasus Capital Advisors (private equity firm) since
June 1, 2000. He was Chairman of the Board of Caribiner International (business
communications) from May 5, 1999 to May 30, 2000, Chief Executive Officer from
December 22, 1998 to May 30, 2000, and President from December 22, 1998 to
May 4, 1999. Prior to joining Caribiner International, he served as President
and Chief Executive Officer of Cutter Capital LLC (venture capital and real
estate investment firm) from March 1998 to December 1998. From September 1996 to
March 1998, Mr. Sinclair served as President and Chief Executive Officer of
Quality Foods, Inc. (supermarket chain). He also served in various senior
management positions with PepsiCo, Inc., including Chairman and Chief Executive
Officer of Pepsi-Cola Company from April 1996 to July 1996 and President and
Chief Executive Officer of PepsiCo. Foods & Beverages International from 1993 to
1996. He is a director of Mattel, Inc., Merisant, Inc., and the Amos Tuck School
of Business Administration at Dartmouth College.
DONA D. YOUNG. Age 47. Director since January 1, 2001. President since February
2000 and Chief Operating Officer since February 2001 of Phoenix Home Life Mutual
Insurance Company (insurance company). She joined Phoenix Home Life Mutual
Insurance Company in 1980 and served in various management and legal positions,
including Executive Vice President and General Counsel from 1995 to 2000. Ms.
Young is a director of Phoenix Home Life Insurance Company, Sonoco Products
Company and Wachovia Corporation. She is also a director of Hartford Hospital
and The Children's Fund.
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2003
JAROBIN GILBERT JR. Age 55. 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 PepsiAmericas, Inc. and Midas, Inc. He is a
trustee of Atlantic Mutual Insurance Company. Mr. Gilbert is also a director of
Harlem Partnership, Inc. and a permanent member of the Council on Foreign
Relations.
DAVID Y. SCHWARTZ. Age 60. Director since 2000. 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.
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2002
J. CARTER BACOT. Age 68. Director since 1993. Chairman of the Board of the
Company since March 4, 2001. He was Chairman of the Board of The Bank of New
York Company, Inc. (bank holding company)
27
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., and Phoenix Home Life Mutual Insurance
Company. He is also a Trustee of Hamilton College.
PURDY CRAWFORD. Age 69. 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 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.
PHILIP H. GEIER JR. Age 66. Director since 1994. Chairman of the Board and Chief
Executive Officer of Interpublic Group of Companies, Inc. (advertising agencies
and other marketing communication services) from 1980 to January 1, 2001. 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.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors has
appointed KPMG LLP as independent accountants of the Company for the fiscal year
that began February 4, 2001, subject to ratification by the shareholders at the
2001 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.
INDEPENDENT ACCOUNTANTS' FEES
The aggregate fees billed by KPMG for (1) auditing the Company's annual
financial statements for the 2000 fiscal year and performing reviews of the
financial statements included in our Forms 10-Q for 2000, (2) providing
information systems design and implementation services, and (3) all other
services rendered during the 2000 fiscal year, are as follows:
AUDIT FEES $1,703,000
FINANCIAL INFORMATION SYSTEMS
DESIGN AND IMPLEMENTATION FEES $ 0
ALL OTHER FEES $1,269,000
28
The principal components of 'All Other Fees' are fees billed by KPMG for
services related to audits of the Company's pension and employee benefit plans,
statutory audits, special services related to the divestiture of certain
businesses, and tax related services.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 2.
PROPOSAL 3
REAPPROVAL OF THE PERFORMANCE GOALS OF THE LONG-TERM
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 pre-established 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 Long-Term 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 LONG-TERM PLAN
The following is a summary of the principal features of the Long-Term Plan
and is qualified in its entirety by the complete text of the Long-Term Plan.
Capitalized terms used but not defined in the following summary shall have the
meanings contained in the Long-Term Plan.
The purposes of the Long-Term 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; to serve as a qualified
performance-based compensation program under Section 162(m) of the Internal
Revenue Code with regard to Covered Employees; and to award shares of Common
Stock after attainment of pre-established performance goals and completion of
the Performance Period. Further, the Committee may, in its sole discretion,
grant an award to a participant who commenced employment during a Performance
Period that is not required to satisfy the requirements for the exception for
performance-based compensation under Section 162(m) of the Internal Revenue
Code.
The Long-Term 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, certify
attainment of performance goals, construe and interpret the Long-Term Plan and
make all other determinations deemed necessary or advisable for the
administration of the Long-Term Plan.
Participation in the Long-Term Plan is limited to those officers and other
key employees of the Company, its subsidiaries and divisions, 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 Long-Term Plan.
Long-Term Plan awards relate to a period of three consecutive Plan Years or
such other period as determined by the Committee, beginning with the Plan Year
in which the award is made (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
29
made only if and to the extent performance goals for the Performance Period are
attained and only if the participant remains employed by the Company throughout
the Performance Period; provided that if the performance goals are met, the
Committee may, in its sole discretion, award, after completion of the
Performance Period, a pro rata payment to any participant whose employment
terminated during the Performance Period. Further, upon a Change in Control, the
Committee may, in its sole discretion, but only to the extent permitted under
Section 162(m) of the Internal Revenue Code (if applicable), make a payment
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 shall be made, in the discretion of the Committee, in shares of Common
Stock or cash. If payment is made in shares of stock, the number of shares
awarded is determined by dividing the achieved percentage of a participant's
Annual Base Salary by the Fair Market Value of the Common Stock on the date of
payment. 'Fair Market Value' of the Common Stock on the date of payment, as
defined in the Long-Term Plan, is 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. In no event shall payment for a Performance Period be made to
a Covered Employee in an amount which exceeds the lesser of (i) 300% of that
employee's Annual Base Salary or (ii) $5,000,000. Awards of Common Stock made
pursuant to the Long-Term Plan are Other Stock-Based Awards, and are issued
under, and subject to, the provisions of the Company's Stock Option and Award
Plans.
The Committee may at any time and from time to time alter, amend, suspend or
terminate the Long-Term Plan in whole or in part; provided, however, that no
amendment which requires shareholder approval in order for the Long-Term 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 Long-Term Plan.
Since performance goal criteria may vary from year to year, benefits under
the Long-Term Plan are not determinable. Information on payouts to the named
executive officers for prior Performance Periods is provided in the Summary
Compensation Table on Page 10. The Long-Term 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.
REAPPROVAL OF PERFORMANCE GOALS
The Long-Term Plan provides that the 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 the extent permitted by Section
162(m) of the Internal Revenue Code (if applicable) 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 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,
Consolidated Net Income or
the attainment of certain levels of, or a specified increase in, return on
invested capital.
30
We are seeking shareholder approval of these performance goals that shareholders
originally approved in 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
DEADLINES FOR NOMINATIONS AND SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented pursuant to Rule 14a-8 under
the Exchange Act at the 2002 annual meeting must be received by the Secretary of
the Company no later than January 1, 2002 in order to be considered for
inclusion in the 2002 proxy statement. Under the Company's By-laws, amended
effective July 1, 2001, shareholders must follow certain procedures to nominate
a person for election to the Board of Directors or to introduce an item of
business at an annual meeting. Shareholders must submit the proposed nominee or
item of business by delivering a notice to the Secretary of the Company located
at 112 West 34th Street, New York, New York 10120. We must receive notice of a
shareholder's intention to introduce a nomination or proposed item of business
for an annual meeting not less than 90 days nor more than 120 days before the
first anniversary of the prior year's meeting. Assuming that our 2002 annual
meeting is held on schedule, we must receive this notice no earlier than
February 14, 2002 and no later than March 16, 2002. However, if we hold the
annual meeting on a date that is not within 30 days before or after such
anniversary date, we must receive the notice no later than ten days after the
earlier of the date we first provide notice of the meeting to shareholders or
announce it publicly.
Notice of a proposed nomination must include certain information about the
shareholder and the nominee, as well as a written consent of the proposed
nominee to serve if 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. Notice of a proposed item of business
must include a description of and the reasons for bringing the proposed business
to the meeting, any material interest of the shareholder in the business and
certain other information about the shareholder.
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented at
the 2001 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
May 1, 2001
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APPENDIX A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
PURPOSE AND AUTHORITY OF COMMITTEE
The Audit Committee of the Board of Directors shall assist the Board in
fulfilling its oversight responsibilities with regard to the Company in the
following areas: (i) accounting policies and practices, (ii) financial reporting
process and the financial reports provided by the Company to the public,
(iii) independent accountants, (iv) internal auditors, and (v) compliance with
legal and regulatory requirements.
The power and authority of the committee is subject to the provisions of the
Business Corporation Law of the State of New York, the Company's Certificate of
Incorporation and its By-laws.
MEMBERSHIP
The committee shall consist of at least three directors appointed by the
Board as provided for in the By-laws of the Company. The members of the
Committee shall meet the independence and experience requirements of the New
York Stock Exchange, including the requirements set forth herein, as such
requirements may be promulgated from time to time.
INDEPENDENCE. The committee shall be comprised of directors who have no
relationship to the Company that may interfere with the exercise of their
independence from management and the Company. In addition, the following
conditions regarding the independence of committee members shall apply to every
member of the Audit Committee:
No director who is an employee of the Company or any of its subsidiaries or
affiliates may serve on the Audit Committee until three years after the
termination of his or her employment.
A director who is a partner, controlling shareholder or executive officer
of an organization that has a business relationship with the Company or who
has a direct business relationship with the Company (e.g., as a consultant)
may serve on the committee only if the Board of Directors determines in its
business judgment that the relationship does not interfere with the
director's exercise of independent judgment.
A director who is employed as an executive of another corporation where any
of the Company's executives serves on that corporation's compensation
committee may not serve on the Audit Committee.
EXPERTISE OF COMMITTEE MEMBERS. Each member of the Audit Committee shall be
financially literate or must become financially literate within a reasonable
period of time after his or her appointment to the committee. At least one
member of the committee shall have accounting or related financial management
expertise. The Board of Directors shall interpret the qualifications of
financial literacy and financial management expertise in its business judgment
and shall determine whether a director meets these qualifications.
MEETINGS
The committee shall meet in accordance with a schedule established each year
by the Board of Directors, and at other times that the committee may determine.
The committee shall meet at least annually with the Company's Chief Financial
Officer, Chief Accounting Officer, internal auditors, and
A-1
General Counsel in separate executive sessions. Meeting agendas are developed by
the committee chairman in consultation with the Company's management and the
Secretary. Committee members who would like to suggest agenda items should
communicate with one of these individuals. Agendas shall be circulated to
committee members prior to committee meetings.
RESPONSIBILITIES AND DUTIES
The Company's management is responsible for preparing the Company's
financial statements and the independent accountants are responsible for
auditing those financial statements. The Committee is responsible for overseeing
the conduct of those activities by the Company's management and the independent
accountants. The Company's independent accountants are ultimately accountable to
the Board of Directors and the Audit Committee, as representatives of the
Company's shareholders.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Audit Committee are not full-time employees of the Company and
are not, and do not represent themselves to be, accountants or auditors by
profession or experts in the fields of accounting or auditing. As such, it is
not the duty or responsibility of the Audit Committee or its members to conduct
'field work' or other types of auditing or accounting reviews or procedures.
Each member of the Audit Committee shall be entitled to rely on (i) the
integrity of those persons and organizations within and outside the Company that
it receives information from and (ii) the accuracy of the financial and other
information provided to the Audit Committee by such persons or organizations
absent actual knowledge to the contrary (which shall be promptly reported to the
Board of Directors).
The Audit Committee shall have authority over, and shall be responsible for,
the following matters:
ACCOUNTING POLICIES
review major changes to the Company's auditing and accounting policies and
practices as suggested by the independent accountants, management, or the
internal auditors;
review with the independent accountants, the internal auditors and
management the extent to which changes or improvements in financial or
accounting practices, as previously approved by the committee, have been
implemented;
FINANCIAL REPORTING PROCESS AND FINANCIAL STATEMENTS
in consultation with the independent accountants and the internal auditors,
review the integrity of the organization's financial reporting process,
both internal and external;
review and discuss with management the Company's audited financial
statements and discuss with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61, as may
be modified or supplemented;
review the Company's proxy statement, Annual Report to Shareholders, and
Annual Report on Form 10-K, including any certification, report, opinion,
or review rendered thereon by the independent accountants;
following completion of the annual audit, review with each of management,
the independent accountants, and the internal auditors any significant
difficulties encountered during the course of the audit (including any
restrictions on the scope of work or access to required information), any
issues that arose during the course of the audit concerning the Company's
internal accounting controls, and any issues that arose concerning the
completeness or accuracy of the financial statements;
A-2
review any significant disagreement among management and the independent
accountants or the internal auditors in connection with the preparation of
the financial statements;
through the Chairman or the committee as a whole, review with management
and the independent accountants, prior to the filing thereof, the Company's
interim financial results to be included on Form 10-Q;
periodically review the Company's information technology systems that
support the financial reporting process;
INDEPENDENT ACCOUNTANTS
together with the Board of Directors, select, evaluate and, where
appropriate, replace the independent accountants;
periodically review the formal written statement and letter required by
Independence Standards Board Standard No. 1, as may be modified or
supplemented, delineating all relationships between the independent
accountants and the Company, and actively engage in a dialogue with the
independent accountants with respect to any disclosed relationships or
services and their impact on the objectivity or independence of the
independent accountants;
review the scope and results of the independent accountants' audit, and
approve their audit and non-audit fees;
consider the independent accountants' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting;
INTERNAL AUDITORS
review the activities, organization, resources, and qualifications of the
internal auditors (whether employees of the Company or employees of a third
party providing such services on an out-sourced basis);
review the annual internal audit plan and, if an out-sourced internal audit
staff is used, approve their fee;
review a summary of the significant reports to management prepared by the
internal auditors and management's responses;
LEGAL AND REGULATORY REQUIREMENTS
review with the Company's General Counsel legal compliance matters and any
legal matter that could have a significant impact on the organization's
financial statements;
review and reassess the adequacy of the committee's charter on an annual
basis; and
review and monitor the Company's Code of Business Conduct.
RESOURCES AND AUTHORITY OF THE AUDIT COMMITTEE
The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to engage, at the
expense of the Company, outside auditors, legal counsel, and other experts or
consultants.
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YOUR VOTE IS IMPORTANT
PLEASE VOTE YOUR PROXY
[VENATOR GROUP LOGO]
[Logo] Printed on recycled paper
APPENDIX I
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 14,2001
J.Carter Bacot, Gary M.Bahler, 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
14, 2001, at 9:00 A.M., local time, at Venator Group, Inc., 112 West 34th
Street, New York, New York 10120, 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)
Nominee for Term Expiring at the Annual Meeting in 2003: _____________________________________
Cheryl Turpin
Nominees for Terms Expiring at the Annual Meeting in 2004: ______________________________________
James E.Preston, Matthew D.Serra, Christopher A.Sinclair,
and Dona D.Young. ______________________________________
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. SEE REVERSE
THE PERSONS NAMED ABOVE AS PROXIES CANNOT VOTE YOUR SHARES SIDE
UNLESS YOU SIGN AND RETURN THIS CARD. --------------
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FOLD AND DETACH HERE
HOW TO RECEIVE YOUR ANNUAL REPORT AND PROXY STATEMENT ON-LINE
You may choose to receive future annual reports and proxy statements of
Venator Group, Inc.on-line via the Internet by submitting your consent to
on-line access to the Company.By choosing the option of electronic delivery, you
will help us reduce printing and postage costs for this material.
If you are a registered shareholder and you wish to consent to Internet
delivery of future annual reports and proxy statements, please follow the
instructions below.Please note that costs associated with electronic delivery,
such as online time, will be borne by you.
o Log on to the Internet and go to the web site:
http://www.econsent.com/z. (If you are voting your shares this year
using the Internet, you can link to this web site directly from the
web site where you vote your shares.)
o You will be asked to consent to Internet delivery of annual meeting
materials and provide your taxpayer I.D.number (U.S.social security
number),e-mail address and account number. Your account number is the
10-digit hyphenated number located above your name on the proxy card.
You will not need to provide an account number if you only hold shares
through the Venator Group 401(k) Plan.
If you are not a registered shareholder and you wish to consent to Internet
delivery of future annual reports and proxy statements, please contact the bank,
broker or other holder of record through which you hold your shares and inquire
about the availability of this option for you.
If you consent to electronic delivery, your account will be so noted and, when
Venator Group's 2001 Annual Report and Proxy Statement for the 2002 Annual
Meeting become available, you will be notified by e-mail on how to access the
materials on the Internet.If you do elect to receive your Venator Group
materials via the Internet, you can still request paper copies by contacting the
Secretary of Venator Group, Inc., 112 West 34th Street, New York, NY 10120.
Your consent to electronic access will remain in effect unless you revoke
it.You may change or revoke your consent at any time by going to the above
website and following the applicable instructions or by calling First Chicago
Trust Company of New York, a division of EquiServe, at 1-800-519-3111.
------- Please mark your 1541
X votes as in this
------- example.
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
AND 3.
--------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE "FOR" PROPOSALS 1, 2, AND 3.
--------------------------------------------------------------------------------
FOR WITHHELD Nominees: 01.Cheryl Turpin
1.ELECTION OF ----- ----- 02.James E.Preston
DIRECTORS 03.Matthew D.Serra
(see reverse side) ----- ----- 04.Christopher A.Sinclair
05.Dona D.Young
FOR, except vote withheld from the following
nominee(s):
FOR AGAINST ABSTAIN
2. APPOINTMENT OF ----- ----- -----
INDEPENDENT
ACCOUNTANTS. ----- ----- -----
3. REAPPROVAL OF ----- ----- -----
PERFORMANCE GOALS OF
THE LONG-TERM INCENTIVE ----- ----- -----
COMPENSATION PLAN.
I plan to attend meeting. -----
-----
SIGNATURE(S) __________________________________________ DATE _____________, 2001
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 2001
Annual Meeting of Shareholders of Venator Group, Inc.and any adjournment
or postponement thereof.
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FOLD AND DETACH HERE
VOTE BY TELEPHONE OR INTERNET
Remember, you may 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:
o Have your proxy card and social security number available.
o Be ready to enter the PIN number printed on this card just below the
perforation.
Proxy Vote-By-Phone
o Dial 1-877-PRX-VOTE (1-877-779-8683) 24 hours a day,7 days a week.
o Outside of the U.S.and Canada call 201-536-8073.
Proxy Vote-By-Internet
o 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.
STATEMENT OF DIFFERENCES
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The section symbol shall be expressed as................................. 'SS'