Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
FOOT LOCKER, INC.
..................................................................
(Name of Registrant as Specified In Its Charter)
..................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
[Foot Locker, Inc. Logo]
NOTICE OF 2002 ANNUAL MEETING
AND
PROXY STATEMENT
[Foot Locker, Inc. Logo]
112 WEST 34TH STREET
NEW YORK, NEW YORK 10120
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
DATE: June 19, 2002
TIME: 9:00 A.M., local time
PLACE: Foot Locker, Inc., 112 West 34th Street, New York, New York
10120
RECORD DATE: Shareholders of record on May 1, 2002 can vote at this
meeting.
ANNUAL REPORT: Our 2001 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.
(2) To ratify the appointment of KPMG LLP as our independent
auditors for the 2002 fiscal year.
(3) To approve the Foot Locker 2002 Directors Stock 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 7, 2002
TABLE OF CONTENTS
PAGE
----
General
General Information..................................... 1
Admission to the Meeting................................ 1
Outstanding Voting Stock................................ 2
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
Multiple Shareholders Sharing the Same Address.......... 4
Beneficial Ownership of the Company's Stock................. 4
Directors and Executive Officers........................ 4
Persons Owning More Than Five Percent of the Company's
Stock.................................................. 5
Section 16(a) Beneficial Ownership Reporting
Compliance............................................. 7
Board of Directors.......................................... 7
Organization and Powers................................. 7
Committees of the Board of Directors.................... 7
Audit Committee..................................... 7
Finance and Strategic Planning Committee............ 8
Compensation and Management Resources Committee..... 8
Executive Committee................................. 8
Nominating and Corporate Governance Committee....... 8
Retirement Plan Committee........................... 8
Directors Compensation and Benefits..................... 9
Directors and Officers Indemnification and Insurance.... 10
Transactions with Management and Others................. 10
Executive Compensation...................................... 11
Summary Compensation Table.............................. 11
Long-Term Incentive Plan -- Awards in Last Fiscal
Year................................................... 14
Option Grants in Last Fiscal Year....................... 15
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values.......................... 16
Retirement Plans........................................ 16
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements......................... 18
Compensation Committee Interlocks and Insider
Participation.......................................... 21
Compensation Committee's Report to Shareholders on
Executive Compensation................................. 21
Performance Graph....................................... 24
Audit Committee Report...................................... 25
Equity Compensation Plan Information........................ 26
Proposal 1 -- Election of Directors......................... 27
Nominees for Directors.................................. 27
Directors Continuing in Office.......................... 28
Proposal 2 -- Ratification of the Appointment of Independent
Accountants............................................... 29
Proposal 3 -- Approval of the Foot Locker 2002 Directors
Stock Plan................................................ 30
Deadlines for Nominations and Shareholder Proposals......... 33
Other Business.............................................. 33
Appendix A.................................................. A-1
[Foot Locker, Inc. Logo]
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 Foot Locker, Inc. for the
2002 annual meeting of shareholders and for any adjournments or postponements of
this meeting. We are holding this annual meeting on June 19, 2002 at 9:00 A.M.
In this proxy statement we refer to Foot Locker, Inc. as 'Foot Locker,' 'the
Company,' 'we,' or 'us.' We intend to mail this proxy statement and the proxy
card to shareholders beginning on or about May 9, 2002.
The enclosed proxy card shows the number of shares of Common Stock
registered in the name of each shareholder of record on May 1, 2002, 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 2002 and FOR the approval of the Foot Locker 2002 Directors
Stock 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 2001 Form 10-K,
excluding certain exhibits, by writing to our Investor Relations Department at
Foot Locker, 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 Foot Locker, 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.
1
OUTSTANDING VOTING STOCK
The only voting securities of Foot Locker are the shares of Common Stock.
Only shareholders of record on the books of the Company at the close of business
on May 1, 2002 are entitled to vote at the annual meeting and any adjournments
or postponements. Each share is entitled to one vote. There were 140,357,815
shares of Common Stock outstanding on the record date.
VOTE REQUIRED
Directors must be elected by a plurality of the votes cast. The affirmative
vote 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 that a majority of the votes that
shareholders are entitled to cast be present either in person or by proxy to
constitute a quorum for the transaction of business. Under New York law,
abstentions and broker non-votes 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 occur when brokers or other entities holding shares for an owner in
street name do not receive voting instructions from the owner on non-routine
matters and, consequently, have no discretion to vote on those matters. If a
proposal is routine under the rules of the New York Stock Exchange, then the
brokers or other entities may vote the shares held by them even though they have
not received instructions from the owner.
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
Common 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
If you are located within the United States or Canada, 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 19, 2002. 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. Your control
2
number is printed on your proxy card. IF YOU VOTE BY TELEPHONE, 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 INTERNET
You can also choose to vote via the Internet. The web site for Internet
voting is listed on your proxy card. Internet voting is available 24 hours a day
and will be accessible until 12:01 A.M. on June 19, 2002. As with telephone
voting, you will be given the opportunity to confirm that your instructions have
been properly recorded. 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
Foot Locker 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
3
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.
MULTIPLE SHAREHOLDERS SHARING THE SAME ADDRESS
If you and other residents at your mailing address hold your shares of stock
in street name through a broker or bank, your broker or bank may have sent you a
notice that your household will receive only one annual report and proxy
statement for each company in which you hold stock through that broker or bank.
This practice of sending only one copy of annual reports and proxy statements is
known as 'householding' and is designed to reduce printing and postage costs. If
you did not respond that you did not want to participate in householding, you
were deemed to have consented to the process. Your broker or bank will send one
copy of our annual report and proxy statement to your address. You may revoke
your consent to householding at any time by sending your name, the name of your
brokerage firm or bank, and your account number to ADP, Householding Department,
51 Mercedes Way, Edgewood, New York 11717 (800-542-1061). The revocation of your
consent to householding will be effective 30 days following its receipt. In any
event, if you did not receive an individual copy of this proxy statement or our
2001 annual report and you would like to receive separate copies, we will send
copies to you promptly upon your request. Please address your request to the
Corporate Secretary, Foot Locker, Inc., 112 West 34th Street, New York, New York
10120, or call the Company at 212-720-4477. Shareholders who hold their shares
in street name who are receiving multiple copies of our annual report and proxy
statement, can elect to household by marking the appropriate box on the voting
instruction form provided to them.
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 15, 2002, 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 15, 2002 by
the exercise of stock options.
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 15, 2002.
Except as otherwise noted in a footnote below, each person has sole voting
and investment power with respect to the number of shares shown.
4
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
COMMON STOCK STOCK OPTIONS
BENEFICIALLY OWNED EXERCISABLE WITHIN TOTAL SHARES OF
EXCLUDING 60 DAYS AFTER COMMON STOCK
NAME STOCK OPTIONS(a) 4/15/02 BENEFICIALLY OWNED
---- ---------------- ------- ------------------
J. Carter Bacot............................ 19,835 21,560 41,395
Gary M. Bahler............................. 46,817 169,699 216,516
Jeffrey L. Berk............................ 20,525 142,499 163,024
Purdy Crawford............................. 36,920(b) 4,560 41,480
Nicholas DiPaolo........................... 2,250(c) -0- 2,250
Philip H. Geier Jr......................... 21,863 4,560 26,423
Jarobin Gilbert Jr......................... 1,418 4,560 5,978
Bruce L. Hartman........................... 92,314 104,999 197,313
Dale W. Hilpert............................ -0- 600,000 600,000
James E. Preston........................... 43,375 4,560 47,935(d)
David Y. Schwartz.......................... 9,524 4,560 14,084
Matthew D. Serra........................... 362,401 666,666 1,029,067
Christopher A. Sinclair.................... 8,996 4,560 13,556
Terry L. Talley............................ 10,665 115,000 125,665
Cheryl N. Turpin........................... 2,302 1,424 3,726
Dona D. Young.............................. 4,605 1,424 6,029
All 19 directors and executive officers as
a group, including the named executive
officers................................. 715,206 1,980,628 2,695,884(e)
---------
(a) This column includes shares held in the Company's 401(k) Plan.
(b) 35,520 shares are 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) Includes 150 shares held by spouse.
(d) Excludes 50 shares of Common Stock owned by Mr. Preston's stepchildren,
with respect to which Mr. Preston disclaims beneficial ownership.
(e) This figure represents approximately 1.9 percent of the shares of Common
Stock outstanding at the close of business on April 15, 2002. It includes
all of the shares referred to in the table and footnote (d) above.
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.
5
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
Greenway Partners, L.P. ................................ 13,044,748(a) 9.3%(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
909 Third Avenue
New York, NY 10022
FMR Corp., Edward C. Johnson 3d ......................... 11,416,669(b) 8.084%(b)
and Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
---------
(a) Reflects shares beneficially owned as of February 11, 2002, according to
Amendment No. 15 to the Schedule 13D filed with the SEC. As reported in
this schedule, Greenway Partners L.P. holds sole voting and dispositive
power with respect to 1,521,500 shares; Greentree Partners L.P. holds sole
voting and dispositive power with respect to 1,340,900 shares; Greenhouse
Partners, L.P. holds shared voting and dispositive power with respect to
1,521,500 shares; Greenhut, L.L.C. holds shared voting and dispositive
power with respect to 1,340,900 shares; Greenbelt Corp. holds sole voting
and dispositive power with respect to 8,190,448 shares; Greensea Offshore,
L.P. holds sole voting and dispositive power with respect to 1,159,600
shares; Greenhut Overseas, L.L.C. holds shared voting and dispositive power
with respect to 1,159,600 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
12,212,448 shares.
(b) Reflects shares beneficially owned as of December 31, 2001, according to
Amendment No. 2 to the Schedule 13G filed with the SEC. As reported in this
schedule, Fidelity Management & Research Company ('Fidelity'), a wholly
owned subsidiary of FMR Corp. ('FMR') and an investment adviser, is the
beneficial owner of 9,939,289 shares. Edward C. Johnson 3d, FMR, through
its control of Fidelity, and the funds each has sole power to dispose of
the 9,939,289 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 1,071,100 shares. Edward C. Johnson 3d and FMR, through
its control of the Trust Company, each has sole dispositive power over
1,071,100 shares, sole power to vote or direct the voting of 1,039,300
shares, and no power to vote or direct the voting of 31,800 shares. FMR's
beneficial ownership also includes 80 shares beneficially owned through
Strategic Advisers, Inc., a wholly owned subsidiary of FMR and an
investment adviser providing investment advisory services to individuals.
Strategic Advisers does not have sole power to vote or direct the voting of
these shares, but it has sole dispositive power over such shares.
Approximately 49 percent of the voting stock of FMR is owned by
Mr. Johnson and members of his
(footnotes continued on next page)
6
(footnotes continued from previous page)
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 406,200 shares as of
December 31, 2001 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 2001 fiscal year, the directors, executive officers and
beneficial owners of more than 10 percent of the Company's Common Stock during
2001 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 Foot Locker, and
monitoring the general performance of the Company. Our By-laws provide for a
Board of Directors consisting of not less than 9 nor more than 17 directors, the
exact number to be determined, from time to time, by resolution adopted by a
majority of the entire Board. The size of the Board is fixed at 11 directors.
The Board held ten meetings during 2001, and each director, other than Dale
W. Hilpert, who resigned as a director effective March 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 2002.
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 one
committee. There are six standing committees of the Board. The committee
memberships, the number of meetings held during 2001, and the functions of the
committees are described below.
AUDIT COMMITTEE. The members of the committee are Purdy Crawford (Chair),
Nicholas DiPaolo, Jarobin Gilbert Jr., David Y. Schwartz and Dona D. Young. The
Board of Directors has approved a written charter governing the committee. The
committee met four times during 2001.
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
7
reports, (iii) independent accountants, (iv) internal auditors, and
(v) compliance with legal and regulatory requirements.
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 2001.
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 N. Turpin. The committee held two meetings
during 2001.
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 20). The committee also administers the 1994 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. 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 members of the committee are J. Carter Bacot
(Chair), Purdy Crawford, Jarobin Gilbert Jr., James E. Preston, Matthew D. Serra
and Christopher A. Sinclair. The committee did not meet during 2001.
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, Cheryl N.
Turpin and Dona D. Young. The committee held one meeting during 2001.
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 33.
RETIREMENT PLAN COMMITTEE. The members of the committee are the following
executive officers of the Company: Matthew D. Serra (Chair), Bruce L. Hartman
and Laurie J. Petrucci. The committee held four meetings in 2001.
8
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
NONEMPLOYEE DIRECTORS
Our nonemployee 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 nonemployee directors for their
reasonable expenses in attending meetings of the Board and committees, including
travel expenses to and from meetings. Directors and their immediate families are
eligible to receive discounts on purchases of merchandise from our stores,
catalogs and Internet sites.
The nonemployee 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. Grants are to be made on the first business day of
each fiscal year. 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. During 2001 we granted an option to each
nonemployee director who was a director on February 5, 2001 covering 4,273
shares at an exercise price of $11.70 per share. Eight of the nonemployee
directors on February 4, 2002 received a stock option grant under this plan for
2002 covering 3,357 shares at an exercise price of $14.89 per share.
At this meeting you are being asked to approve the Foot Locker 2002
Directors Stock Plan, which will replace the Directors Stock Plan and the
Directors Stock Option Plan. The two directors who did not receive an option
grant under the Directors Stock Option Plan for the 2002 fiscal year were
granted an option on February 4, 2002, subject to shareholder approval, under
the Foot Locker 2002 Directors Stock Plan for the same number of shares at the
same exercise price as the options granted on this date under the Directors
Stock Option Plan.
A description of the Foot Locker 2002 Directors Stock Plan being submitted
for approval begins on Page 30.
NON-EXECUTIVE CHAIRMAN OF THE BOARD
J. Carter Bacot was elected non-executive Chairman of the Board of the
Company effective March 4, 2001. We paid Mr. Bacot an additional annual cash
retainer of $100,000 for his services in this capacity during the 2001 fiscal
year. 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
9
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 vested on March 1, 2002 and will expire on December 31, 2005 unless
it is exercised or cancelled prior to that date. For 2002, we will pay Mr. Bacot
the same additional annual cash retainer for his services as non-executive
Chairman of the Board. He also received a stock option grant for 2002 covering
15,000 shares of Common Stock at the per-share exercise price of $14.89, which
equaled the fair market value on the date of grant. The option will vest on
March 1, 2003 and will expire on December 31, 2006 unless it is exercised or
cancelled prior to that date.
DIRECTORS RETIREMENT PLAN
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 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 ACE, Royal Insurance Company of America, Twin City
Fire Insurance (The Hartford), Royal Insurance and Liberty Mutual. 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 12 months, from
September 12, 2001 until September 12, 2002. The total annual premium for these
policies is $484,000. 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 Royal Insurance Company of America, which have a
total premium of $92,625 for the 12-month period ending September 12, 2002.
The Company has entered into indemnification agreements with its directors
and executive officers, as approved by shareholders at the 1987 annual meeting.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Foot Locker and its subsidiaries have had transactions in the normal course
of business with various other corporations, including certain corporations
whose directors or officers are also directors of the Company. The amounts
involved in these transactions have not been material in relation to the
businesses of the Company or its subsidiaries, and it is believed that these
amounts have not been material in relation to the businesses of the other
corporations. In addition, it is believed that these transactions have been on
terms no less favorable to the Company than if they had been entered into with
disinterested parties. It is anticipated that transactions with such other
corporations will continue in the future. Purdy Crawford is Counsel to the
Canadian law firm of Osler, Hoskin & Harcourt LLP, which provided legal services
to the Company in 2001. Mr. Crawford has advised the Company that he received no
remuneration from the firm in 2001.
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------- ------------------------- -------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION STOCK OPTION/SARs PAYOUTS COMPENSATION
PRINCIPAL POSITION(a) YEAR ($) ($) ($) ($)(b) (#) ($) ($)
--------------------- ---- --- --- --- ------ --- --- ---
Matthew D. Serra ........ 2001 1,172,727 1,178,640 0 1,590,000(c) 500,000 820,517(d) 1,700(f)
President and Chief 2000 850,000 1,115,625 0 568,750(c) 250,000 427,117(e) 1,700(f)
Executive Officer 1999 800,000 400,000(g) 0 280,000(c) 0 0 1,600(f)
Dale W. Hilpert ......... 2001 86,364 0 0 0 0 0 0
Former Chairman of the 2000 950,000 1,246,875 0 0 0 475,071(e) 21,550(f)
Board and Chief 1999 883,712 0 0 957,500(h) 500,000 0 19,383(f)
Executive Officer
Bruce L. Hartman ........ 2001 487,500 326,639 0 825,000(i) 47,500 348,800(d) 6,791(f)
Executive Vice President 2000 437,500 382,813 0 0 40,000 207,200(e) 5,911(f)
and Chief Financial 1999 394,063 0 45,858(j) 161,250(k) 50,000 0 66,162(l)
Officer
Jeffrey L. Berk ......... 2001 407,500 273,037 0 0 47,500 281,287(d) 0
Senior Vice President 2000 400,000 350,000 0 0 40,000 147,223(e) 0
-- Real Estate 1999 332,500 400,000(m) 0 107,500(k) 25,000 0 0
Gary M. Bahler .......... 2001 387,500 259,636 0 0 47,500 261,600(d) 3,610(f)
Senior Vice President, 2000 337,500 295,313 0 0 40,000 155,400(e) 3,249(f)
General Counsel and 1999 292,500 0 0 161,250(k) 35,000 0 2,628(f)
Secretary
Terry L. Talley ......... 2001 330,758 434,117(n) 0 0 30,000 34,701(d) 1,700(f)
Senior Vice President 2000 303,750 265,781 0 0 15,000 0 1,700(f)
and Chief Information 1999 300,000 248,354(o) 0 53,750(k) 25,000 0 1,600(f)
Officer
---------
(a) The named executive officers held the following positions with the Company
during the periods covered in the above table:
M. D. Serra has served as President and Chief Executive Officer since 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 was President and Chief Executive Officer of Foot
Locker Worldwide prior to February 9, 2000.
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.
B. L. Hartman was elected Executive Vice President and Chief Financial
Officer on April 18, 2002; he previously served as Senior Vice President
and Chief Financial Officer from February 27, 1999 to April 17, 2002. He
was Vice President -- Corporate Shared Services from August 12, 1998 to
February 26, 1999.
J. L. Berk has served as Senior Vice President -- Real Estate since
February 9, 2000. He was President -- North America of Foot Locker Realty
prior to February 9, 2000.
(footnotes continued on next page)
11
(footnotes continued from previous page)
G. M. Bahler has served as Senior Vice President since August 12, 1998;
General Counsel since February 1, 1993; and Secretary since February 1,
1990.
T. L. Talley has served as Senior Vice President and Chief Information
Officer since October 1, 2001. He served as Managing Director of the
Northern Group in Canada, a former operating division of the Company, from
March 2001 to September 30, 2001. He was Senior Vice President and Chief
Financial Officer of Foot Locker Worldwide from January 1999 to March 2001.
(b) At February 2, 2002 the named executive officers held the following shares
of restricted stock, having the values stated below, based upon a $15.17
closing price of the Company's Common Stock as reported on the New York
Stock Exchange on February 1, 2002, the last business day prior to the end
of the fiscal year.
# OF SHARES OF
NAME RESTRICTED STOCK $ VALUE
---- ---------------- -------
M. D. Serra........................................ 150,000 2,275,500
B. L. Hartman...................................... 90,000 1,365,300
J. L. Berk......................................... 20,000 303,400
G. M. Bahler....................................... 30,000 455,100
T. L. Talley....................................... 10,000 151,700
(c) The Company granted to M. D. Serra 150,000 shares of restricted stock on
March 4, 2001; 100,000 shares on February 9, 2000; and 40,000 shares on
November 10, 1999. All of the shares granted to Mr. Serra prior to 2001
vested as of February 1, 2002. All of the shares granted to Mr. Serra on
March 4, 2001 will vest on January 31, 2004 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 date of grant 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 those dates. The closing prices on the grant
dates, or the last business day prior to the grant date, were: March 2,
2001 ($10.60), February 9, 2000 ($5.6875) and November 10, 1999 ($7.00).
(d) This payout was made for the 1999 - 2001 Performance Period.
(e) This payout was made for the 1999 - 2000 Performance Period.
(f) Includes, where applicable, the dollar value of the premium paid by the
Company for a flexible universal 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 value of amounts reported for 2001 are
stated below. The shares of Common Stock for the matching contribution in
2001 were valued at $15.65 per share, which represents the closing price of
a share of Common Stock on December 31, 2001, the last trading day of the
plan year.
(footnotes continued on next page)
12
(footnotes continued from previous page)
EMPLOYER MATCHING
LIFE INSURANCE CONTRIBUTION UNDER
NAME PREMIUM 401(K) PLAN
---- ------- -----------
M. D. Serra............................ $ 0 $1,700
B. L. Hartman.......................... $5,091 $1,700
G. M. Bahler........................... $1,910 $1,700
T. L. Talley........................... $ 0 $1,700
(g) Guaranteed bonus paid pursuant to terms of employment.
(h) The Company granted to D. W. 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 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 those dates. The closing prices on the grant
dates were: February 1, 1999 ($5.375) and November 10, 1999 ($7.00).
(i) The Company granted to B. L. Hartman 60,000 shares of restricted stock on
May 1, 2001. The shares will vest on January 31, 2004 provided that Mr.
Hartman remains employed by the Company on that date. Mr. Hartman 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 value of the restricted stock award by
multiplying the closing price of the Company's Common Stock on the New York
Stock Exchange on the date of grant by the total number of shares of
restricted stock awarded. The closing price on May 1, 2001 was $13.75.
(j) Tax gross-up payment related to relocation.
(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. This
award of restricted stock would have vested earlier, on March 15, 2002, if
certain performance goals were attained. However, the goals were not
achieved and the shares did not vest on an accelerated basis. 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
---- ------
B. L. Hartman............................................ 30,000
J. L. Berk............................................... 20,000
G. M. Bahler............................................. 30,000
T. L. Talley............................................. 10,000
(l) Amount includes reimbursement for relocation expenses of $64,778 and $1,384
representing the Company's matching contribution under the 401(k) Plan made
to Mr. Hartman's account in shares of Common Stock. The shares of Common
Stock for the matching contribution were valued at
(footnotes continued on next page)
13
(footnotes continued from previous page)
$7.00 per share, which represents the closing price of a share of Common
Stock on December 31, 1999, the last trading day of the plan year.
(m) Discretionary bonus paid in connection with certain real estate projects
completed in 1999.
(n) Amount includes discretionary bonus of $212,500.
(o) Discretionary bonus payment.
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR(a)
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERIOD NON-STOCK PRICE-BASED PLAN
SHARES, UNITS UNTIL -------------------------------------
NAME OR OTHER RIGHTS(#) PAYOUT THRESHOLD($) TARGET($) MAXIMUM($)
---- ------------------ ------ ------------ --------- ----------
M. D. Serra................... 1,200,000 2001 - 2003 270,000 1,080,000 2,160,000
D. W. Hilpert................. N/A N/A N/A N/A N/A
B. L. Hartman................. 500,000 2001 - 2003 112,500 450,000 900,000
J. L. Berk.................... 410,000 2001 - 2003 92,250 369,000 738,000
G. M. Bahler.................. 400,000 2001 - 2003 90,000 360,000 720,000
T. L. Talley.................. 350,000 2001 - 2003 61,512 246,047 492,093
---------
(a) The named executive officers, excluding D. W. Hilpert, participate in the
Long-Term Incentive Compensation Plan (the 'Long-Term Plan'). Mr. 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 2001 the Compensation and Management
Resources Committee (the 'Compensation Committee') approved awards to the
participants for the performance period of 2001 - 2003. 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 2001 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 T. L. Talley'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 for Mr. Talley are pro rated to reflect
his becoming a participant in this plan effective October 1, 2001.
Unless otherwise determined by the Compensation Committee, any payment in
connection with awards under this plan will be made only if and to the
extent performance goals for the Performance Period are attained and only if
the participant remains employed by the Company throughout the Performance
Period; provided that if the performance goals are met, the Compensation
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 Compensation Committee, in its sole discretion, but only to the extent
permitted under Section 162(m) of the Internal Revenue Code (if applicable),
may 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
(footnote continued on next page)
14
(footnote continued from previous page)
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 Compensation Committee, in
shares of Common Stock or cash. If payment is made in shares of stock, the
number of shares to be paid to the participant will be determined by
dividing the achieved percentage of a participant's Annual Base Salary by
the fair market value, as defined in the Long-Term Plan, of the Common Stock
on the date of payment. The amount of any payout for the Performance Period
may not exceed the lesser of 300 percent of that employee's Annual Base
Salary or $5,000,000.
Any payout under the Long-Term Plan is calculated based upon the Company's
performance in the applicable Performance Period and measured against the
performance criteria set for the participant at the beginning of the
applicable Performance Period by the Compensation Committee. These
performance goals are based on one or more of the following criteria: (i)
the attainment of certain target levels of, or percentage increase in,
consolidated net income; or (ii) the attainment of certain levels of, or a
specified increase in, return on invested capital. In addition, to the
extent permitted by Section 162(m) of the Internal Revenue Code (if
applicable), the Compensation Committee has the authority to incorporate
provisions in the performance goals allowing for adjustments in recognition
of unusual or non-recurring events affecting the Company or the Company's
financial statements, or in response to changes in applicable laws,
regulations or accounting principles.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(a)
----------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE VALUE($)(b)
---- ---------- -------------- --------- ---- -----------
M. D. Serra............................ 500,000 21.93 11.905 2/12/11 2,488,734
D. W. Hilpert.......................... 0 N/A N/A N/A N/A
B. L. Hartman.......................... 47,500 2.08 12.985 4/11/11 258,157
J. L. Berk............................. 47,500 2.08 12.985 4/11/11 258,157
G. M. Bahler........................... 47,500 2.08 12.985 4/11/11 258,157
T. L. Talley........................... 30,000 1.32 12.985 4/11/11 163,046
---------
(a) During 2001 the Compensation Committee granted stock options to the named
executive officers under 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 2001 become
exercisable in three substantially equal installments, beginning on the
first annual anniversary of the date of grant. If a participant retires,
becomes disabled, or dies while employed by the Company or
(footnotes continued on next page)
15
(footnotes continued from previous page)
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 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.
Options are also outstanding under the 1995 Stock Option and Award Plan (the
'1995 Award Plan'). The terms of the 1995 Award Plan are substantially the
same as the terms of the 1998 Award Plan.
(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 4.17 percent; a
stock price volatility factor of 48 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 used in the Company's 2001 Annual Report.
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
---- ----------- ----------- ----------- ------------- ----------- -------------
M. D. Serra............. 0 N/A 500,000 500,000 3,793,750 1,685,000
D. W. Hilpert(b)........ 383,333 2,828,974 600,000 0 0 0
B. L. Hartman........... 0 N/A 109,166 90,834 410,327 393,196
J. L. Berk.............. 0 N/A 104,998 82,502 296,775 433,780
G. M. Bahler............ 10,000 118,587 133,866 85,834 196,078 339,790
T. L. Talley............ 0 N/A 91,666 48,334 198,867 197,863
---------
(a) The fair market value (the average of the high and low prices of the
Company's Common Stock) on Friday, February 1, 2002, the last business day
of 2001, was $15.275.
(b) Options exercised following Mr. Hilpert's resignation from the Company.
RETIREMENT PLANS
The Company maintains the Foot Locker 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
16
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 6 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 Foot Locker 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 two of the other
executive officers of the Company currently participate in the SERP. 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
17
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 paid in 2001 is stated as a lump sum) under the
Retirement Plan, the Excess Plan, and where applicable, the SERP. Except for
Mr. Hilpert, 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 2001 to the individual's normal
retirement date remains the same as compensation earned by him during 2001. 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 2001. 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..................... $477,061 $45,805
B. L. Hartman................... 594,726 68,163
J. L. Berk...................... 587,535 76,634
G. M. Bahler.................... 493,129 131,101
T. L. Talley.................... 88,827 17,096
TOTAL LUMP SUM
NAMED EXECUTIVE OFFICER BENEFIT
----------------------- -------
D. W. Hilpert(b)................ $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 10.72 percent credit to the participants' accounts for
2001 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 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.
M. D. SERRA
We have an employment agreement with Mr. Serra in his position as President
and Chief Executive Officer for a term ending on January 31, 2004. 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 will not be less than 75 percent of his base
salary. Mr. Serra also participates in the Long-Term Plan.
18
Under the terms of his agreement, the Compensation Committee granted
Mr. Serra a stock option for 500,000 shares in 2001. The Committee also granted
to Mr. Serra 150,000 shares of restricted stock in 2001, which will fully vest
on January 31, 2004 if he has been continuously employed by the Company until
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, pro rated
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, pro rated 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 in the paragraph 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, which 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. Mr. Hilpert forfeited these shares of restricted stock in 2001 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 in
the paragraph 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
19
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.
G. M. BAHLER, J. L. BERK, B. L. HARTMAN, AND T. L. TALLEY
We also have employment agreements with Bruce L. Hartman in his position as
Executive Vice President, and with Gary M. Bahler, Jeffrey L. Berk, and Terry L.
Talley in their positions as Senior Vice Presidents of the Company. The terms of
the agreements for B. L. Hartman, G. M. Bahler, and J. L. Berk began January 1,
2002 and end on December 31, 2002. The term of the agreement for T. L. Talley
began on October 1, 2001 and ends on December 31, 2002. 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
equal to the sum of two weeks' salary plus 1/26 of his annual bonus at target
multiplied by his years of service, but not less than 52 weeks' salary. If the
executive's employment is terminated by him for good reason or by the Company
without cause within 24 months following a Change in Control, as defined in his
employment agreement, he would be entitled to a severance benefit calculated
using the formula described in the preceding sentence, except that the
executive's minimum severance benefit may not be less than 104 weeks' salary
plus two times his annual bonus at target.
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
20
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 2001 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., James
E. Preston, Christopher Sinclair and Cheryl N. 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 2001. Mr. Crawford has advised the
Company that he received no remuneration from the firm in 2001. 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
2001.
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) 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
21
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. Salary recommendations are then made to the Committee based upon
the results of these performance reviews for the Company's executive officers
and the chief executive officers and chief operating officers of the Company's
business units. 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 2001 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 participates in annual bonus plans with goals tied to operating
results of their respective units. Payments under the Long-Term Plan are based
on the Company's achievement, during the relevant performance period, of
financial and operational targets established by the Committee at the beginning
of the period. For the 2001-2003 performance period, this target is a specified
average return on invested capital. For earlier periods, the target is a
combination of average return on invested capital and cumulative net income.
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 granted by the Committee in 2001 vest in three
equal annual installments beginning on the first anniversary of the date of
grant. Approximately 200 associates participate. Also, from time to time, the
Committee has granted restricted stock to certain key executives of the Company
for retention purposes, including a grant of restricted stock to Mr. Serra in
2001 in connection with his promotion to the position of President and Chief
Executive Officer.
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 2001
and essentially met the targets established by the Committee under the Long-Term
Plan, for the 1999 - 2001 performance period, and payments were made to the
executive officers under those plans, including the payments shown in the
Summary Compensation Table on Page 11.
22
Chief Executive Officer's Compensation. In 2001, the Company entered into a
new employment agreement with Matthew D. Serra in connection with his promotion
to the position of President and Chief Executive Officer. The terms of that
agreement are summarized on Page 18. The components of Mr. Serra'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. Serra'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, Mr. Serra's
then-existing arrangements as the Company's President and Chief Operating
Officer, and the benefits to the Company and its shareholders that were expected
to result from providing Mr. Serra with a meaningful compensation opportunity
tied to the performance of the Company and the price of its Common Stock.
Payments were made to Mr. Serra under the Annual Plan for 2001 and the
Long-Term Plan for the 1999 - 2001 performance period as shown in the table on
Page 11 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.
Prior to his resignation in March 2001, Dale W. Hilpert served as the
Company's Chief Executive Officer. The Committee had approved the employment
arrangements with Mr. Hilpert, described on Page 19, and these arrangements are
consistent with the compensation policy and program described in this report. In
light of his resignation, no payments were made to Mr. Hilpert under the Annual
Plan for 2001 or the Long-Term Plan for the 1999 - 2001 performance period.
One Million Dollar Pay Deductibility Cap. Under Section 162(m) of the Code,
public companies are precluded from receiving a federal tax deduction on
compensation paid to certain executive officers in excess of $1 million per year
unless certain requirements are met. It is generally the Committee's view that
the compensation plans and programs of the Company should be designed and
administered in a manner that ensures the tax deductibility by the Company of
compensation paid to its executives. As a consequence, the Annual Plan, the
Long-Term Plan, and the 1995 and 1998 Stock Option and Award Plans are
structured so that cash compensation paid and stock options granted under those
plans qualify for an exemption from the $1 million pay deductibility limit. 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 N. Turpin
23
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the Russell 2000 Index and a selected peer group
from January 24, 1997 through February 1, 2002. 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]
JANUARY JANUARY JANUARY JANUARY JANUARY FEBRUARY
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------
Foot Locker............................ 100.00 106.1 25.0 29.3 63.2 74.0
Russell 2000........................... 100.00 116.8 116.0 134.8 138.1 130.4
Peer................................... 100.00 81.0 55.7 47.2 72.5 73.2
24
AUDIT COMMITTEE REPORT
In accordance with its charter adopted by the Board of Directors, 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.
The Audit Committee consists of five 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
('KPMG'), the Company's independent auditors, the audited financial statements
for the 2001 fiscal year, which ended February 2, 2002. 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 its 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 Foot Locker's Annual Report on Form 10-K for the 2001 fiscal year.
Purdy Crawford, Chairman
Nicholas DiPaolo
Jarobin Gilbert Jr.
David Y. Schwartz
Dona D. Young
25
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of February 2, 2002 for
compensation plans under which equity securities may be issued.
(a) (b) (c)
--------------------------------------------------------------------------------------------------------
PLAN CATEGORY NUMBER OF SECURITIES WEIGHTED-AVERAGE NUMBER OF SECURITIES
TO BE ISSUED UPON EXERCISE PRICE OF REMAINING AVAILABLE
EXERCISE OF OUTSTANDING OPTIONS, FOR FUTURE ISSUANCE
OUTSTANDING OPTIONS, WARRANTS AND RIGHTS UNDER EQUITY
WARRANTS AND RIGHTS COMPENSATION PLANS
(EXCLUDING SECURITIES
REFLECTED IN
COLUMN (a))
----------------------------------------------------------------------------------------------------------
Equity Compensation Plans Approved
by Security Holders............... 7,557,448 $14.6259 14,296,417 (1)(2)
Equity Compensation Plans Not
Approved by Security Holders (3).. 17,000 $11.905 0
Total............................... 7,574,448 $14.6320 14,296,417
---------
(1) Includes securities available for future issuance under shareholder approved
compensation plans other than upon the exercise of an option, warrant or
right, as follows: 6,746,147 shares under the 1994 Employees Stock Purchase
Plan (the 'Stock Purchase Plan') and 160,782 shares under the Directors
Stock Plan. Participating employees under the Stock Purchase Plan may
contribute up to 10 percent of their annual compensation to acquire shares
of the Company's Common Stock at 85 percent of the lower market price on one
of two specified dates in each plan year. The Directors Stock Plan provides
for the payment of annual retainer fees to our nonemployee directors in
shares of the Company's Common Stock. Directors are required to receive 50
percent of their annual retainer fees in the form of stock under the
Directors Stock Plan and may elect to receive up to 100 percent of their
fees in stock under this plan.
(2) The 1995 Stock Option and Award Plan (the '1995 Award Plan') and the 1998
Stock Option and Award Plan (the '1998 Award Plan'), which were previously
approved by shareholders, contain limitations within their respective total
number of authorized shares on the number of shares that may be awarded to
participants in the form of restricted stock or Other Stock-Based Awards,
and these shares are included in the total number disclosed in column (c).
The 1995 Award Plan limits the number of shares that may be awarded as
restricted stock to 1,500,000 shares, of which 980,000 shares remain
available for issuance. Similarly, the 1998 Award Plan limits the number of
shares that may be awarded in the form of restricted stock and Other
Stock-Based Awards to 3,000,000 shares, of which 2,278,435 shares remain
available for issuance. Payouts under the Long-Term Incentive Compensation
Plan may, at the discretion of the Compensation Committee, be made in shares
of Common Stock, and these shares would be issued as Other Stock-Based
Awards under the 1995 Award Plan or the 1998 Award Plan.
(3) Reflects the nonstatutory stock option granted on February 12, 2001 to J. C.
Bacot, as the non-executive Chairman of the Board, covering 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 vested on March 1,
2002 and will expire on December 31, 2005 unless it is exercised or
cancelled prior to that date. Shares for this option grant are to be made
available exclusively from treasury shares.
26
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
Nicholas DiPaolo, and the three directors who constitute Class II, expire at the
2002 annual meeting upon the election and qualification of their successors.
J. Carter Bacot, Purdy Crawford, Nicholas DiPaolo and Philip H. Geier Jr.
will be considered for election as directors in Class II, each to hold office
for a three-year term expiring at the annual meeting in 2005. The seven
remaining directors will continue in office, in accordance with their previous
elections, until the expiration of the terms of their classes at the 2003 or
2004 annual meeting. Each nominee has been nominated by the Board of Directors
for election and has consented to serve for the specified term. Mr. DiPaolo was
elected to the Board effective January 16, 2002. Messrs. Bacot, Crawford and
Geier were elected to serve for their present terms at the 1999 annual meeting.
If, prior to the annual meeting, any of the four nominees becomes unable to
serve as a director for any reason, the persons designated as proxies on the
enclosed proxy card will have full discretion to vote the shares represented by
proxies held by them for another person to serve as a director in place of that
nominee.
Biographical information follows for the four nominees and for each of the
seven other directors of the Company whose present terms as directors will
continue after the 2002 annual meeting. 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.
NOMINEES FOR DIRECTORS
TERMS EXPIRING IN 2005
J. CARTER BACOT. Age 69. Director since 1993. Mr. Bacot has served as the
non-executive 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) 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 The Phoenix Companies, Inc. He is also a
Trustee of Hamilton College.
PURDY CRAWFORD. Age 70. 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, Emera Inc. (formerly Nova Scotia Power Inc.), Seamark Asset
Management Ltd. and Ganong Bros. Ltd. He is Chancellor Emeritus 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 LLP.
NICHOLAS DIPAOLO. Age 60. Director since January 16, 2002. Vice Chairman and
Chief Operating Officer of Bernard Chaus, Inc. (apparel designer and
manufacturer) since November 1, 2000. He was Chairman
27
of the Board, President and Chief Executive Officer of Salant Corporation
(diversified apparel company) from January 1991 until his retirement in 1997.
Mr. DiPaolo is a director of Bernard Chaus, Inc. and JPS Industries.
PHILIP H. GEIER JR. Age 67. 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, Cross Air Ltd. and AEA
Investors, Inc. 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, the Board of Trustees of the Whitney Museum of American Art,
and the Vice Chairman of Save the Children.
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2004
JAMES E. PRESTON. Age 69. Director since 1983. Chairman of the Board of Avon
Products, Inc. (manufacture and sale of beauty and related products) from 1989
to May 6, 1999, and Chief Executive Officer of Avon Products, Inc. from 1989 to
June 1998. He is a director of ARAMARK Corporation, Reader's Digest Association,
Project Hope, The Edna McConnell Clarke Foundation, The New Milford Hospital,
and the Kent Land Trust.
MATTHEW D. SERRA. Age 57. 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 51. 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. He served as President and Chief Executive Officer of Cutter
Capital LLC, an affiliate of Manticore Group, LLC, 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 is a
director of Mattel, Inc. and Merisant, Inc. Mr. Sinclair is also a member of the
Board of Overseers of the Amos Tuck School of Business Administration at
Dartmouth College.
DONA D. YOUNG. Age 48. Director since 2001. President of The Phoenix Companies,
Inc. (provider of wealth management products and services to individuals and
institutions) since 2000 and its Chief Operating Officer since February 2001.
She has been President of Phoenix Life Insurance Company since February 2000 and
its Chief Operating Officer since February 2001. Mrs. Young 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. Mrs. Young is a director of The Phoenix Companies, Inc., Sonoco Products
Company and Wachovia Corporation. She is also a director of Hartford Hospital
and The Children's Fund and a director/trustee of Phoenix Edge Series Fund.
28
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2003
JAROBIN GILBERT JR. Age 56. 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 61. 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. and TruServ Corporation.
CHERYL N. TURPIN. Age 54. Director since 2001. President and Chief Executive
Officer of the Limited Stores (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.
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 3, 2002, subject to ratification by the shareholders at the
2002 annual meeting. A resolution for ratification will be presented at the
annual meeting.
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.
AUDIT AND NON-AUDIT FEES
The following table presents fees for professional audit services rendered
by KPMG for the audit of Foot Locker's annual financial statements for 2001, as
well as fees billed for other services provided by KPMG during 2001.
Audit Fees (Excluding Audit Related).................... $1,556,000
Financial Information Systems
Design and Implementation Fees........................ 0
All Other Fees:
Audit Related Services(1)........................... 921,278
Other Non-Audit Services(2)......................... 826,512
----------
Total All Other Fees.................................... $1,747,790
----------
----------
---------
(1) Audit Related Services consisted principally of audits related to the
divestiture of certain businesses, audits of financial statements of certain
employee benefit plans, statutory audits, reviews of registration statements
and issuance of consents.
(2) Other Non-Audit Services consisted of U.S. and international tax planning
and compliance services.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 2.
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PROPOSAL 3
APPROVAL OF THE FOOT LOCKER 2002 DIRECTORS STOCK PLAN
The Board of Directors has adopted, subject to shareholder approval, the
Foot Locker 2002 Directors Stock Plan (the '2002 Directors Plan'), which is
intended to replace the Directors Stock Plan and the Directors Stock Option Plan
in effect for the Company's Nonemployee Directors. The 2002 Directors Plan
combines the stock payment and stock option grant provisions of the directors'
plans now in effect and adds a voluntary deferral feature by which directors may
choose to defer their annual retainer fees.
The following is a summary of the material terms of the 2002 Directors Plan
and is qualified in its entirety by the complete text of the 2002 Directors
Plan, which is attached as Appendix A. The capitalized terms used but not
defined in this summary have the meanings given to them in the 2002 Directors
Plan.
PURPOSE
The 2002 Directors Plan is intended to promote the achievement of long-term
objectives of the Company by closely aligning the interests of Nonemployee
Directors with the interests of Foot Locker's shareholders and to retain and
attract Nonemployee Directors of outstanding competence.
ADMINISTRATION
This plan will be administered and interpreted by the Board of Directors or
a duly authorized committee.
ELIGIBILITY
Directors of the Company who are not employees of the Company or any of our
subsidiaries or affiliates ('Nonemployee Directors') are eligible to participate
in the 2002 Directors Plan. There are currently ten Nonemployee Directors on the
Board.
SHARES SUBJECT TO THE PLAN
The maximum number of shares of the Company's Common Stock, including the
number of shares of stock with respect to stock option grants and deferred stock
units, that may be issued under the 2002 Directors Plan is 500,000, subject to
adjustment in the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, spin-off or a
similar corporate transaction that affects the Common Stock. A total of 250,000
shares were originally authorized to be issued under the current Directors Stock
Plan, and a total of 100,000 shares were originally authorized to be granted as
stock options under the current Directors Stock Option Plan. There are 160,762
shares remaining available for issuance under the Directors Stock Plan and 1,752
shares remaining available for issuance under the Directors Stock Option Plan.
If shareholders approve the 2002 Directors Plan, no further issuances, awards or
grants will be made from either of the current plans for directors.
PAYMENT OF ANNUAL RETAINER IN STOCK
MANDATORY PORTION. Each Nonemployee Director will receive a whole number of
shares of Common Stock equal in value to 50 percent of his or her annual
retainer fee, including committee chairman retainer fees ('Annual Retainer'),
payable for services as a director in lieu of payment in
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cash. The shares will be issued on July 1, or the next business day if this date
is not a business day, of the applicable calendar year (the 'Stock Payment
Date').
ELECTIVE PORTION. A Nonemployee Director may elect to receive a whole number
of shares of Common Stock equal to up to 100 percent of his or her Annual
Retainer. Elections must be made in increments of 5 percent and must be made in
writing no later than December 31 of the year preceding the applicable calendar
year. Elections will be irrevocable for the applicable calendar year.
VALUATION OF SHARES. Each share of Common Stock will be valued at the
average of the high and low prices of a share of Common Stock on the Composite
Tape for New York Stock Exchange-Listed Stocks, as reported by The Wall Street
Journal on the last business day prior to the Stock Payment Date. The value of
fractional shares will be paid in cash.
ANNUAL GRANT OF STOCK OPTION
TERMS. Subject to shareholder approval, beginning with the 2002 fiscal year,
each Nonemployee Director will be granted an Option on the first business day of
each fiscal year to purchase that number of shares of Common Stock having a
market value of $50,000 on the Date of Grant. With respect to the 2002 fiscal
year, any Nonemployee Director who received a stock option grant under the
Directors Stock Option Plan for the 2002 fiscal year shall not receive an Option
under the 2002 Directors Plan for such fiscal year. All Options granted under
this plan will be nonstatutory options not intended to qualify under
Section 422 of the Internal Revenue Code. Options granted under this Plan will
have the following additional terms:
--for Options granted in the 2002 fiscal year, the Options will vest in three
substantially equal annual installments, beginning with the first
anniversary of the Date of Grant; Options granted beginning with the 2003
fiscal year will fully vest one year following the Date of Grant;
--the Options will expire on the earlier of the tenth anniversary of the Date
of Grant or one year from the date on which the director ceases to be a
Nonemployee Director; and
--the exercise price per share shall be 100 percent of the Fair Market Value
of a share of common stock on the Date of Grant and may be paid at the time
of exercise in cash (including a broker assisted transaction), by tendering
shares of common stock owned by the director for a period of at least six
months (or other period necessary to avoid a charge against the Company's
earnings) and valued at the Fair Market Value on the exercise date, or on
such other terms and conditions as may be acceptable to the Board.
TRANSFERABILITY. The Options may not be assigned or transferred, except by
will or the laws of descent and distribution.
2002 OPTION GRANTS AND STOCK PAYMENTS
Subject to shareholder approval of the 2002 Directors Plan, effective
February 4, 2002 the Board of Directors granted Options under this plan to two
Nonemployee Directors who did not otherwise receive a stock option grant for the
2002 fiscal year under the Directors Stock Option Plan previously approved by
shareholders (the 'Prior Option Plan'). The two directors each received an
Option covering 3,357 shares at an exercise price of $14.89 per share, which was
the Fair Market Value of a share of common stock on the Date of Grant. The eight
other Nonemployee Directors each received a stock option grant under the Prior
Option Plan covering the same number of shares and at the same exercise price.
No other Options have been granted under the 2002 Directors Plan, and no stock
issuances have been
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made under this plan. If shareholders do not approve the 2002 Directors Plan,
the Options granted under this plan would be cancelled.
NUMBER OF SECURITIES
UNDERLYING
NAME AND POSITION OPTIONS GRANTED
----------------- ---------------
All Current Non-Executive Directors........... 6,714
Any benefit to the grantees will be based on the spread between the Fair
Market Value on the exercise date and $14.89. Since it is not possible to
determine when the Options will be exercised by the Nonemployee Directors, the
benefits, if any, are not determinable. Additionally, because the number of
shares to be issued to each Nonemployee Director in payment of his or her Annual
Retainer is a function of the Fair Market Value on the Stock Payment Date, the
actual number of shares to be issued in 2002 to the Nonemployee Directors is not
determinable.
CHANGE IN CONTROL
In the event of a Change in Control, all outstanding Options not already
exercisable would become immediately exercisable.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
A Nonemployee Director does not realize taxable income, and no deduction is
available to the Company, upon the grant of a nonstatutory option. When an
Option is exercised, the excess of the fair market value of the shares on the
exercise date over the exercise price of the Option will be taxable to the
director as ordinary income and deductible by the Company. The tax basis of
shares acquired will be the fair market value of the shares on the exercise
date. For shares held for more than one year following the exercise date, the
director will realize long-term capital gain or loss upon disposition.
VOLUNTARY DEFERRAL OF ANNUAL RETAINER
DEFERRAL ELECTION. During the term of the 2002 Directors Plan, a Nonemployee
Director may elect to receive all or a portion of the cash component of his or
her Annual Retainer in the form of Deferred Stock Units or to have such amounts
placed in an Interest Account. He or she may also elect to receive all or part
of the stock component of his or her Annual Retainer in the form of Deferred
Stock Units. The Interest Account is a hypothetical investment account bearing
interest at the rate of one hundred and twenty percent (120%) of the applicable
federal long-term rate, compounded annually, and set as of the first day of each
Plan Year. A Stock Unit is an accounting equivalent of one share of the
Company's common stock. A deferral election is irrevocable and is valid only for
the Plan Year following the election.
NUMBER OF STOCK UNITS. The number of Deferred Stock Units to be granted in
connection with a deferral election shall equal the portion of the Annual
Retainer being deferred into Stock Units divided by the Fair Market Value of a
share of common stock on the scheduled payment date of the amount deferred. The
value of each Deferred Stock Unit shall change in direct relationship to changes
in the value of a share of Stock as determined by a Valuation. In the event Foot
Locker pays dividends on its Common Stock, then dividend equivalents would be
earned on Deferred Stock Units acquired by the Nonemployee Directors under the
Plan.
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DISTRIBUTION. The distribution of amounts deferred by the Nonemployee
Director shall occur as soon as administratively feasible following his or her
termination of service as a director. The Nonemployee Director will receive a
cash lump sum distribution equal to any balance of the deferred Annual Retainer
allocated to his or her Interest Account, as calculated on the Valuation Date,
and a lump sum distribution in shares of common stock equal to the value of his
or her Deferred Stock Unit Account, based on the Fair Market Value on the
Valuation Date. Alternatively, the Nonemployee Director may elect to receive his
or her distribution in up to three annual installments, with the annual
installment amount frozen as of the first distribution date.
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 2003 annual meeting must be received by the Secretary of
the Company no later than January 7, 2003 in order to be considered for
inclusion in the 2003 proxy statement. The Company's By-laws require that
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 annual meeting. Assuming that our 2003 annual meeting is held on
schedule, we must receive this notice no earlier than February 19, 2003 and no
later than March 21, 2003. 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 2002 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 7, 2002
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APPENDIX A
FOOT LOCKER 2002 DIRECTORS STOCK PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.1 ESTABLISHMENT OF THE PLAN. Foot Locker, Inc. (the 'Company') hereby
establishes a compensation plan for Nonemployee Directors of the Company to be
known as the Foot Locker 2002 Directors Stock (the 'Plan'), as set forth in this
document. The Plan provides for (i) the issuance of Shares to Nonemployee
Directors in payment of part or all of their annual retainer fee, (ii) the grant
of an annual stock option to Nonemployee Directors and (iii) the voluntary
deferral of the payment of the Nonemployee Director's Annual Retainer, subject
to the terms and conditions set forth herein.
1.2 REPLACEMENT PLAN. The Plan is intended to replace the Foot Locker
Directors Stock Plan and the Foot Locker Directors Stock Option Plan in effect
prior to the Effective Date (the 'Prior Plans'). The Prior Plans will continue
to apply only with respect to stock issuances and stock options granted prior to
the Effective Date under such plans. Upon approval of the Plan by shareholders,
no further stock issuances, grants or awards shall be made to Nonemployee
Directors under the Prior Plans.
1.3 SHAREHOLDER APPROVAL REQUIREMENT. The Plan (and any grants of Options
made prior to shareholder approval) shall be subject to the requisite approval
of the shareholders of the Company at the 2002 annual meeting of shareholders.
In the absence of such shareholder approval, any such Options granted prior to
such approval shall be null and void.
1.4 TERM OF PLAN. The Plan shall take effect as of January 1, 2002 and shall
remain in effect until January 1, 2012, unless sooner terminated by the Board.
ARTICLE II
PURPOSE
2.1 PURPOSE. The Plan is intended to increase the proprietary interest of
Nonemployee Directors of the Company, to promote the achievement of long-term
objectives of the Company by closely aligning the interests of Nonemployee
Directors with the interests of the Company's shareholders, and to retain and
attract Nonemployee Directors of outstanding competence.
ARTICLE III
DEFINITIONS
3.1 DEFINITIONS. The following terms, as used herein, shall have the
following meanings:
(1) 'ACCOUNT' means the total of the Interest Account and the Deferred
Stock Unit Account to which a Participant's deferred Annual Retainer shall
be credited. A separate Account shall be established with respect to the
deferred Annual Retainer for each Plan Year.
(2) 'ADMINISTRATOR' shall mean the Board or a duly authorized committee
thereof or any employee or other person designated under Article V of the
Plan to assist in the administration of the Plan.
(3) 'ANNUAL RETAINER' shall mean the annual retainer payable for
services on the Board as a Nonemployee Director, including the annual
retainer payable to a Nonemployee Director for
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service as a committee chair. Annual Retainer shall not include expense
reimbursements, amounts realized upon the exercise of Options, or any other
amount paid to a Nonemployee Director.
(4) 'BENEFICIARY' shall mean the individual designated by the
Participant, on a form acceptable to the Administrator, to receive benefits
payable under this Plan in the event of the Participant's death. If no
Beneficiary designation is in effect at the time of a Participant's death,
or if no designated Beneficiary survives the Participant, or if such
designation conflicts with law, the payment of the amount, if any, payable
under the Plan upon his or her death shall be made to the Participant's
estate. Upon the acceptance by the Administrator of a new Beneficiary
designation, all Beneficiary designations previously filed shall be
canceled. The Administrator shall be entitled to rely on the last
Beneficiary designation filed by the Participant and accepted by the
Administrator prior to the Participant's death. Notwithstanding the
foregoing, no Beneficiary designation, or change or revocation thereof,
shall be effective unless received by the Administrator prior to the
Participant's death.
(5) 'BOARD' shall mean the Board of Directors of the Company.
(6) 'CHANGE IN CONTROL' shall mean the occurrence of an event described
in Section 7.5 hereof.
(7) 'CODE' shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(8) 'COMPANY' shall mean Foot Locker, Inc., a New York corporation or
any successor corporation by merger, consolidation or transfer of assets
substantially as a whole.
(9) 'DATE OF GRANT' shall mean the date on which an Option is granted to
a Nonemployee Director.
(10) 'DEFERRAL AGREEMENT' means an agreement entered into between a
Nonemployee Director and the Company to authorize the Company to reduce the
amount of the Nonemployee Director's Annual Retainer and credit the amount
of such reduction to the Plan. A Deferral Agreement shall contain such
provisions, consistent with the provisions of the Plan, as may be
established from time to time by the Company or the Board, including without
limitation:
(a) the dollar amount of the cash component and the stock component
of the Annual Retainer to be deferred or the amount to be deferred in
whole percentages;
(b) the amount of Deferred Annual Retainer to be credited to the
Interest Account and to the Deferred Stock Unit Account; and
(c) any provisions which may be advisable to comply with applicable
laws, regulations, rulings, or guidelines of any government authority.
A Deferral Agreement may, to the extent permitted by the Board and by
applicable law, be made by paper or electronic means.
(11) 'DEFERRAL PERIOD' shall mean, with regard to the Participant's
Deferred Annual Retainer for each Plan Year in which a Deferral Agreement is
in effect, the period commencing upon the effective date of a deferral
election and ending on date of the Participant's Termination.
(12) 'DEFERRED ANNUAL RETAINER' shall mean the amount of Annual Retainer
deferred by a Nonemployee Director pursuant to Article IX.
(13) 'DEFERRED STOCK UNIT ACCOUNT' shall mean an account established and
maintained by the Company for each Participant who receives Stock Units
under the Plan.
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(14) 'DISTRIBUTION DATE' shall mean the date of Termination of a
Participant, or as soon as administratively feasible following such
Termination, to commence payment of the amount credited to a Participant's
Account.
(15) 'EXCHANGE ACT' shall mean the Securities Exchange Act of 1934, as
amended.
(16) 'EFFECTIVE DATE' shall mean January 1, 2002.
(17) 'FAIR MARKET VALUE' of a share of Stock shall mean, as of any date,
the average of the high and low prices of a share of Stock as reported for
such date on the Composite Tape for New York Stock Exchange-Listed Stocks by
The Wall Street Journal, or, if the Stock was not traded on the New York
Stock Exchange on such date, the Fair Market Value of a share of Stock as of
such date shall be the average of the high and low prices of a share of such
Stock as reported on said Composite Tape on the immediately preceding date
on which such trades were reported on said Composite Tape.
(18) 'INTEREST ACCOUNT' shall mean a hypothetical investment account
bearing interest at the rate of one hundred and twenty percent (120%) of the
applicable federal long-term rate, compounded annually, and set as of the
first day of each Plan Year.
(19) 'NONEMPLOYEE DIRECTOR' shall mean a member of the Board who is not
an employee of the Company or any subsidiary or affiliate of the Company.
(20) 'OPTION' shall mean the right, granted pursuant to this Plan, of a
Participant to purchase shares of Stock at the Fair Market Value on the Date
of Grant.
(21) 'OPTION AGREEMENT' shall mean any written agreement, contract, or
other instrument or document between the Company and a Nonemployee Director
evidencing an Option.
(22) 'PARTICIPANT' shall mean a Nonemployee Director of the Company who
is eligible to participate herein.
(23) 'PLAN' shall mean the Foot Locker 2002 Directors Stock Plan.
(24) 'PLAN YEAR' shall mean the calendar year.
(25) 'RULE 16b-3' shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
(26) 'STOCK' shall mean shares of the Company's common stock, par value
$0.01 per share.
(27) 'STOCK PAYMENT DATE' shall mean July 1 (or if such date is not a
business day, the next succeeding business day) in any calendar year.
(28) 'STOCK UNIT' shall mean an accounting equivalent of one share of
Stock.
(29) 'TERMINATION' shall mean a Participant's termination for any
reason, including retirement and death, of service as a director on the
Board.
(30) 'TRANSFER' or 'TRANSFERRED' or 'TRANSFERABLE' shall mean
anticipate, alienate, attach, sell, assign, pledge, encumber, charge,
hypothecate or otherwise transfer.
(31) 'VALUATION' shall mean an evaluation of the worth of a Deferred
Stock Unit based on changes in the Fair Market Value of the Stock, as
determined by the Board or the Administrator pursuant to the Plan.
(32) 'VALUATION DATE' shall mean the day of any Plan Year on which a
Participant's Deferral Period ends.
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ARTICLE IV
SECTION 16 OF THE EXCHANGE ACT
4.1 SECTION 16. All elections and transactions under the Plan by persons
subject to Section 16 of the Exchange Act involving shares of Stock are intended
to comply with all exemptive conditions under Rule 16b-3.
ARTICLE V
ADMINISTRATION
5.1 THE BOARD. The Plan shall be administered by the Board or a duly
authorized committee thereof. The Board may delegate to one or more of its
members or to one or more agents such administrative duties as it may deem
advisable.
5.2 ADMINISTRATIVE DUTIES.
(a) The Board, or a duly authorized committee thereof, shall have full
authority to administer the Plan, subject to its provisions; to interpret
the Plan and to decide any questions and settle all controversies and
disputes that may arise in connection with the Plan; to establish, amend and
rescind rules for carrying out the Plan; and to make all other
determinations and to take all such steps in connection with the Plan as the
Board, or a duly authorized committee thereof, in its sole discretion, deems
necessary or desirable. If so designated by the Board, or a duly authorized
committee thereof, the Corporate Secretary and other employees of the
Company shall assist in the administration of the Plan, and shall be
authorized to prescribe the form or forms of instruments evidencing
elections, Options, Deferral Agreements, and any other instruments required
under the Plan and to change such forms from time to time.
(b) The Board, or a duly authorized committee thereof, may employ such
legal counsel, service providers, consultants and agents, including any
committee of the Board, and any officer or employee of the Company as it may
deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel, service provider, or consultant and
any computation received from any such service provider, consultant, or
agent. The Board, any duly authorized committee thereof, the members of the
Board and employees of the Company designated hereunder shall not be liable
for any action or determination made in good faith with respect to the Plan.
To the maximum extent permitted by applicable law and the Company's
Certificate of Incorporation and By-Laws, the Board, any duly authorized
committee thereof, the members of the Board, and employees of the Company
designated hereunder shall be indemnified and held harmless by the Company
against any cost or expense (including counsel fees) or liability (including
any sum paid in settlement of a claim with the approval of the Company)
arising out of any act or omission to act in connection with the Plan unless
arising out of such person's own fraud or bad faith. Such indemnification
shall be in addition to any rights of indemnification the person may have as
a director, officer or employee or under the Certificate of Incorporation
and the By-Laws of the Company and any indemnification agreement between the
Company and such person. Expenses incurred by the Board or the Administrator
in the engagement of any such counsel, service provider, consultant or agent
shall be paid by the Company.
(c) All determinations by the Board, or a duly authorized committee
thereof, with respect to the administration of the Plan shall be in the sole
discretion of the Board, or a duly authorized committee thereof, based on
the Plan document and other relevant documents, and all such
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determinations shall be final and binding upon all interested parties,
including the Participant, his or her executor, administrator or other
personal representative or Beneficiary, and the Company.
5.3 COSTS AND EXPENSES. All costs and expenses involved in administering the
Plan shall be borne by the Company.
ARTICLE VI
SHARES; ADJUSTMENT UPON CERTAIN EVENTS
6.1 SHARES RESERVED. Shares of Stock which may be issued under the Plan may
be either authorized and unissued shares or issued shares which have been
acquired by the Company, provided that the total amount of Stock which may be
issued under the Plan, including the number of shares of Stock with respect to
which Options may be granted and the number of Stock Units allocated under the
Plan, shall not exceed 500,000 shares, subject to adjustment as provided herein.
If any Option granted under the Plan shall be terminated for any reason without
having been exercised, the Shares subject to, but not delivered under, such
Option shall again be available for issuance under the Plan.
6.2 ADJUSTMENTS UPON CERTAIN EVENTS.
(a) CAPITAL STRUCTURE. The existence of the Plan and any of its
provisions shall not affect in any way the right or power of the Board or
the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Stock, or any other corporate act or proceeding.
(b) ADJUSTMENTS. In the event of (i) any such change in the capital
structure or business of the Company by reason of any stock dividend or
distribution, stock split or reverse stock split, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, distribution with respect to its outstanding Stock or capital stock
other than Stock, sale or transfer of all or part of its assets or business,
reclassification of its capital stock, or any similar change affecting the
Company's capital structure or business and (ii) the Board determines an
adjustment is appropriate under the Plan, then the aggregate number and kind
of shares which thereafter may be issued under this Plan, the number and
kind of shares to be issued upon exercise of an outstanding Option granted
under this Plan and the purchase price thereof, and the number of Stock
Units held in the Deferred Stock Unit Account shall be appropriately
adjusted consistent with such change in such manner as the Board may deem
equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, Participants under the Plan or as otherwise
necessary to reflect the change, and any such adjustment determined by the
Board shall be binding and conclusive on the Company and all Participants
and employees and their respective heirs, executors, administrators,
successors and assigns.
(c) FRACTIONAL SHARES. Fractional shares of Stock resulting from any
adjustment pursuant to Section 6.2(b) shall be eliminated by rounding-down
for fractions less than one-half ( 1/2) and rounding-up for fractions equal
to or greater than one-half ( 1/2). With respect to adjustments upon certain
events as provided under Section 6.2, no cash settlements shall be made with
respect to fractional shares eliminated hereunder by rounding. Notice of any
adjustment shall be given by the Board to each Participant whose Option or
Deferred Stock Unit Account has been adjusted and such adjustment (whether
or not such notice is given) shall be effective and binding for all purposes
of the Plan.
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(d) ACQUISITION EVENTS. If the Company shall not be the surviving
corporation in any merger or consolidation, or if the Company is to be
dissolved or liquidated, then, unless the surviving corporation assumes the
Options or substitutes new stock options which are determined by the Board
in its sole discretion to be substantially similar in nature and equivalent
in terms and value for Options then outstanding, upon the effective date of
such merger, consolidation, liquidation or dissolution, any unexercised
Options shall expire without additional compensation to the holder thereof;
provided, that the Board, or a duly authorized committee thereof, or the
Secretary of the Company at the request of the Board shall deliver notice to
each Nonemployee Director at least twenty days prior to the date of
consummation of such merger, consolidation, dissolution or liquidation which
would result in the expiration of the Options and during the period from the
date on which such notice of termination is delivered to the consummation of
the merger, consolidation, dissolution or liquidation, such Nonemployee
Director shall have the right to exercise in full effective as of such
consummation all Options that are then outstanding (without regard to
limitations on exercise otherwise contained in the Options and whether or
not such Options are then vested) but contingent on occurrence of the
merger, consolidation, dissolution or liquidation, and, provided that, if
the contemplated transaction does not take place within a ninety-day period
after giving such notice for any reason whatsoever, the notice, accelerated
vesting and exercise shall be null and void and, if and when appropriate,
new notice shall be given as aforesaid.
ARTICLE VII
ANNUAL STOCK OPTION GRANT
7.1 ANNUAL STOCK OPTION GRANT. Each Nonemployee Director on the first
business day of a fiscal year of the Company beginning with the 2002 fiscal
year, shall automatically be granted on such a day an Option to purchase that
number of shares of Stock having a market value of $50,000 on the Date of Grant.
Such market value shall be determined by dividing $50,000 by the Fair Market
Value on the Date of Grant. With respect to the 2002 fiscal year, any
Nonemployee Director who receives a stock option grant under the Directors Stock
Option Plan for such fiscal year shall not receive an Option under the Plan for
such fiscal year.
7.2 NONQUALIFIED OPTIONS. The Options granted will be nonqualified stock
options not intended to qualify under Section 422 of the Code and shall have the
following terms and conditions:
(a) PRICE. The purchase price per share deliverable upon the exercise of
each Option shall be 100 percent of the Fair Market Value per Share on the
date the Option is granted.
(b) PAYMENT. Shares of Stock purchased pursuant to the exercise of the
Option shall be paid for at the time of exercise as follows: (i) in cash,
including a cashless exercise through a broker, (ii) by payment in full or
part in the form of shares of Stock owned by the Participant for a period of
at least six months (or such other period necessary to avoid a charge
against the Company's earnings), provided that such shares are held free and
clear of any liens and encumbrances, based on the Fair Market Value on the
exercise date; or (iii) on such other terms and conditions as may be
acceptable to the Board of Directors.
(c) EXERCISABILITY AND TERM OF OPTIONS. Options granted for the 2002
fiscal year shall become exercisable in three substantially equal
installments commencing on the first annual anniversary of the Date of
Grant, provided that the holder of such Option is a Nonemployee Director on
each such anniversary. For Options granted beginning with the 2003 fiscal
year, Options shall fully vest
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one year following the Date of Grant, provided that the holder of such
Option is a Nonemployee Director on such date. Options shall be exercisable
until the earlier of ten years from the Date of Grant or the expiration of
the one-year period from the date of Termination as provided in
Section 7.2(d).
(d) TERMINATION OF SERVICE AS A NONEMPLOYEE DIRECTOR. Upon Termination,
all outstanding Options held by such Participant, to the extent then
exercisable, shall be exercisable in whole or in part for a period of one
year from the date of Termination. If a Nonemployee Director's Termination
is by reason of death, all Options, to the extent exercisable, shall remain
exercisable by the Nonemployee Director's estate or by the person given
authority to exercise such Options by his or her will or by operation of
law, for a period of one year following the Nonemployee Director's date of
death. In no event, however, shall any Option be exercisable beyond ten
years from its Date of Grant.
(e) NONTRANSFERABILITY OF OPTIONS. No Option may be assigned, alienated,
pledged, attached, sold or otherwise Transferred or encumbered by a
Participant other than by will or the laws of descent and distribution, and
during the lifetime of the Participant to whom an Option is granted, it may
be exercised only by the Participant or by the Participant's guardian or
legal representative.
7.3 OPTION AGREEMENT. Each Option granted hereunder shall be evidenced by an
Option Agreement with the Company that shall contain the terms and provisions
set forth herein and shall otherwise be consistent with the provisions of the
Plan.
7.4 NO RIGHTS OF SHAREHOLDERS. Neither a Participant nor a Participant's
legal representative shall be, or have any of the rights and privileges of, a
shareholder of the Company with respect to any shares of Stock covered by any
Options granted unless and until the shares have been issued and the Participant
shall have become the beneficial owner of the shares, and no adjustments shall
be made for dividends in cash or other property, distributions or other rights
in respect of any such shares, except as otherwise provided herein.
7.5 CHANGE IN CONTROL. Notwithstanding any other provision of the Plan to
the contrary, if, while any Options remain outstanding under the Plan, a 'Change
in Control' of the Company (as defined below) shall occur, all Options granted
under the Plan that are outstanding at the time of such Change in Control shall
become immediately exercisable in full, without regard to the years that have
elapsed from the Date of Grant. For purposes of this Section 7.5, a Change in
Control of the Company shall occur upon the happening of the earliest to occur
of the following:
(i) (A) the making of a tender or exchange offer by any person or entity
or group of associated persons or entities (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a 'Person') (other than the
Company or its subsidiaries) for shares of Stock pursuant to which purchases
are made of securities representing at least twenty percent (20%) of the
total combined voting power of the Company's then issued and outstanding
voting securities; (B) the merger or consolidation of the Company with, or
the sale or disposition of all or substantially all of the assets of the
Company to, any Person other than (a) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity) fifty
percent (50%) or more of the combined voting power of the voting securities
of the Company or such surviving or parent entity outstanding immediately
after such merger or consolidation; or (b) a merger or capitalization
effected to implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the beneficial owner, directly
or
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indirectly (as determined under Rule 13d-3 promulgated under the Exchange
Act), of securities representing more than the amounts set forth in (C)
below; (C) the acquisition of direct or indirect beneficial ownership (as
determined under Rule 13d-3 promulgated under the Exchange Act), in the
aggregate, of securities of the Company representing twenty percent (20%) or
more of the total combined voting power of the Company's then issued and
outstanding voting securities by any Person acting in concert as of the date
of the Plan; provided, however, that the Board may at any time and from time
to time and in the sole discretion of the Board, as the case may be,
increase the voting security ownership percentage threshold of this
item (C) to an amount not exceeding forty percent (40%); or (D) the approval
by the Company's shareholders of any plan or proposal for the complete
liquidation or dissolution of the Company or for the sale of all or
substantially all of the assets of the Company; or (ii) during any period of
not more than two (2) consecutive years, individuals who at the beginning of
such period constitute the Board, and any new director (other than a
director designated by a person who has entered into agreement with the
Company to effect a transaction described in clause (i)) whose election by
the Board or nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof.
ARTICLE VIII
PAYMENT OF ANNUAL RETAINER IN STOCK
8.1 MANDATORY PORTION. For each calendar year commencing with the calendar
year beginning January 1, 2002, each Nonemployee Director who is a director of
the Company on or before the date of an annual meeting of shareholders in any
calendar year shall receive a whole number of shares of Stock equal in value to
50 percent of his or her Annual Retainer payable for services as a director
during such calendar year in lieu of payment of such percentage of such
director's Annual Retainer in cash. Such shares shall be issued to each such
Nonemployee Director on the Stock Payment Date. Each such share of Stock shall
be valued at the Fair Market Value on the last business day preceding the Stock
Payment Date. Notwithstanding any other provision herein, the value of
fractional shares shall be paid to the Nonemployee Director in cash.
8.2 ELECTIVE PORTION. For each calendar year commencing with the calendar
year beginning January 1, 2002, each person who will be a Nonemployee Director
on January 1 of such year may elect to receive, in addition to the mandatory
stock portion of his or her Annual Retainer provided under Section 8.1, a whole
number of shares of Stock equal in value (based on the Fair Market Value on the
Stock Payment Date) of up to the remaining 50 percent of his or her Annual
Retainer in lieu of payment of such percentage in cash so that, if such election
is exercised in full, 100 percent of his or her Annual Retainer would be paid in
shares of Stock. Such election may be made in incremental amounts of five
percent of the total Annual Retainer. Such shares shall be delivered to each
Nonemployee Director on the Stock Payment Date. Notwithstanding any other
provision herein, the value of fractional shares shall be paid to the
Nonemployee Director in cash. Any such election shall be irrevocable and shall
be made in writing no later than December 31 of the year preceding such year.
Any such elections made by Nonemployee Directors under any prior plan of the
Company for the calendar beginning January 1, 2002 shall remain in effect under
the Plan.
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ARTICLE IX
DEFERRAL OF ANNUAL RETAINER
9.1 DEFERRAL ELECTION. During the term of the Plan, a Nonemployee Director
may elect to defer all or any specified portion of the cash component of his or
Annual Retainer in the form of Deferred Stock Units or to have such amounts
placed in an Interest Account. During the term of the Plan, a Nonemployee
Director may also elect to defer all or part of the stock component of his or
her Annual Retainer in the form of Deferred Stock Units. A Nonemployee
Director's election to defer his or her Annual Retainer hereunder pursuant to a
Deferral Agreement is irrevocable and is valid only for the Plan Year following
the election. If no new Deferral Agreement is timely executed and delivered with
respect to any subsequent Plan Year, the Annual Retainer earned in such Plan
Year shall not be deferred under the Plan. Once a Participant designates the
allocation of his or her Deferred Annual Retainer, the Participant may not
change the allocation.
9.2 TIMING AND MANNER OF DEFERRAL. Any election to defer all or a portion of
the Annual Retainer, as provided in this Article IX, shall be made by the
Participant in writing on a Deferral Agreement and provided to the Secretary of
the Company on or before the December 31 preceding the Plan Year in which the
Annual Retainer is earned, and shall apply on a pro rata basis with respect to
the entire amount of Annual Retainer earned for such Plan Year, whenever
payable. Any such election made by December 31 shall become effective on the
following January 1.
9.3 BOOK ENTRY OF DEFERRED FEES. The amount of the Annual Retainer that is
deferred shall be credited as a book entry to an Account in the name of the
Participant not later than the date such amount would otherwise be payable to
the Participant.
9.4 VESTING.
(a) INTEREST ACCOUNT. A Participant's Interest Account shall be fully
vested at all times. Each Interest Account shall be the record of the cash
amounts of the Annual Retainer deferred by the Participant, together with
interest thereon, is maintained solely for accounting purposes, and shall
not require a segregation of any Company assets.
(b) DEFERRED STOCK UNITS. A Participant's Deferred Stock Unit Account
shall be fully vested at all times.
9.5 DEFERRED STOCK UNITS.
(a) NUMBER. The number of Deferred Stock Units to be granted in
connection with an election pursuant to Section 9.1 shall equal the portion
of the Annual Retainer being deferred into Stock Units divided by the Fair
Market Value on the scheduled payment date of the amount deferred or, in the
case of the stock portion of the Annual Retainer, the Stock Payment Date.
(b) DEFERRED STOCK UNIT ACCOUNT. A Deferred Stock Unit Account shall be
established and maintained by the Company for each Participant who elects to
defer his or her Annual Retainer in the form of Deferred Stock Units under
the Plan. As the value of each Deferred Stock Unit changes pursuant to
Section 9.5, the Participant's Deferred Stock Unit Account shall be adjusted
accordingly. Each Deferred Stock Unit Account shall be the record of the
Deferred Stock Units acquired by the Participant granted to the Participant
on each applicable acquisition date, is maintained solely for accounting
purposes, and shall not require a segregation of any Company assets.
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(c) VALUE. Each Deferred Stock Unit shall have an initial value that is
equal to the Fair Market Value determined in accordance with Section 9.5(a).
Subsequent to such date of acquisition, the value of each Deferred Stock
Unit shall change in direct relationship to changes in the value of a share
of Stock as determined pursuant to a Valuation.
(d) DIVIDEND EQUIVALENTS. In the event the Company pays dividends on the
Stock, dividend equivalents shall be earned on Deferred Stock Units acquired
under the Plan. Such dividend equivalents shall be converted into an
equivalent amount of Deferred Stock Units based upon the Valuation of a
Deferred Stock Unit on the date the dividend equivalents are converted into
Deferred Stock Units. The converted Deferred Stock Units will be fully
vested upon conversion.
(e) AMOUNT OF PAYOUT. Subject to Section 9.6(b), the payout of the
amount in the Participant's Deferred Stock Unit Account shall be made in a
lump sum in Stock. The number of shares of Stock to be so distributed to the
Participant shall equal the number of Stock Units then in his or her
Deferred Stock Unit Account.
9.6 DISTRIBUTION.
(a) Upon the first business day of the month coincident with or next
following the end of the Deferral Period (or as soon as administratively
feasible thereafter), the Participant shall receive a cash lump sum
distribution equal to any balance of the deferred Annual Retainer allocated
to his or her Interest Account, as calculated on the Valuation Date, plus a
distribution in shares of Stock equal to the value of the balance of the
deferred Annual Retainer allocated to his or her Deferred Stock Unit
Account, based on the Fair Market Value on the Valuation Date.
(b) The Participant may elect to receive the distribution from his or
her Account as provided above in up to three annual installments, beginning
on the Distribution Date (or as soon as administratively feasible
thereafter). The amount of each installment payment, including the number of
shares to be distributed with respect to the Deferred Stock Unit Account,
shall be frozen as of the Distribution Date of the first installment
payment, so that the Participant's balance in his or her Account shall not
be subject to increase or decrease.
9.7 DEATH. If a Participant dies prior to receiving the total amount of his
or her Account, the unpaid portion of his or her Account shall be paid to the
Participant's Beneficiary upon the first business day of the month coincident
with or next following the Participant's death (or as soon as administratively
feasible thereafter). If the Administrator is in doubt as to the right of any
person to receive any amount, the Administrator may retain such amount, without
liability for any interest thereon, until the rights thereto are determined, or
the Administrator may pay such amount into any court of appropriate
jurisdiction, and such payment shall be a complete discharge of the liability of
the Plan, the Administrator and the Company therefor.
9.8 NO TRANSFER OF DEFERRED ANNUAL RETAINER. A Participant shall have no
right to transfer all or any portion of his or her Deferred Annual Retainer
between the Interest Account and the Deferred Stock Unit Account.
9.9 EMPLOYEE DIRECTORS. If a Participant becomes an employee of the Company
but remains a director, he or she may not make any future deferrals under the
Plan and the Participant's Deferral Agreement shall terminate. Amounts already
deferred under the Plan shall continue to be deferred until the end of such
Participant's Deferral Period.
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9.10 PLAN PROVISIONS CONTROL. A Participant shall not be entitled to, and
the Company shall not be obligated to pay to such Participant, the whole or any
part of the amounts deferred under the Plan, except as provided in the Plan.
9.11 CESSATION OF FUTURE DEFERRALS. The Board may direct at any time that
Participants shall no longer be permitted to make future deferrals of Annual
Retainer Fees under the Plan.
ARTICLE X
MISCELLANEOUS
10.1 RIGHTS OF PARTICIPANTS; NO FUNDING OBLIGATION. Nothing contained in the
Plan and no action taken pursuant to the Plan shall create or be construed to
create a trust of any kind, or a fiduciary relationship, among the Company, the
Administrator and any Participant, the executor, administrator or other personal
representative or Beneficiary of such Participant, or any other persons. Funds
allocated to a Deferred Stock Unit Account or an Interest Account established by
the Company in connection with the Plan shall continue to be a part of the
general funds of the Company, and no individual or entity other than the Company
shall have any interest in such funds until paid to a Participant, his or her
executor, administrator or other personal representative or Beneficiary. If and
to the extent that any Participant or his or her executor, administrator, or
other personal representative or Beneficiary, as the case may be, acquires a
right to receive any payment from the Company pursuant to the Plan, such right
shall be no greater than the right of an unsecured general creditor of the
Company. The Company may, in its sole discretion, establish a 'rabbi trust' to
pay amounts payable hereunder. If the Company decides to establish any accrued
reserve on its books against the future expense of benefits payable hereunder,
or if the Company establishes a rabbi trust under this Plan, such reserve or
trust shall not under any circumstances be deemed to be an asset of the Plan.
10.2 NONTRANSFERABILITY OF RIGHTS UNDER THE PLAN. No amounts payable or
other rights under the Plan shall be sold, Transferred, assigned, pledged or
otherwise disposed of or encumbered by a Participant, except as provided herein.
10.3 MINORS AND INCOMPETENTS.
(a) In the event that the Administrator determines that a Participant is
unable to care for his or her affairs because of illness or accident, then
benefits payable hereunder, unless a claim has been made therefor by a duly
appointed guardian, committee, or other legal representative, may be paid in
such manner as the Administrator shall determine, and the application
thereof shall be a complete discharge of all liability for any payments or
benefits to which such Participant was or would have been otherwise entitled
under the Plan.
(b) Any payments to a minor from this Plan may be paid by the
Administrator in its sole and absolute discretion directly to such minor; to
the legal or natural guardian of such minor; or to any other person, whether
or not the appointed guardian of the minor, who shall have the care and
custody of such minor. The receipt by such individual shall be a complete
discharge of all liability under the Plan therefor.
10.4 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder of the Company with respect to a Deferred Stock Unit Account, except
the right to have dividends paid on the Stock, if any, credited to his or her
Deferred Stock Unit Account and adjustment made to the hypothetical shares of
Stock under Section 6.2.
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10.5 NO RIGHTS OF CONTINUED DIRECTORSHIP. Nothing in the Plan or other
document describing or referring to the Plan shall be deemed to impose any
obligations on the Company to retain any Participant as a director or impose any
obligation on the part of any Participant to remain as a director of the
Company. The Plan is not an agreement of employment and it shall not grant a
Participant any rights of employment.
10.6 PLAN AMENDMENT, DISCONTINUANCE OR TERMINATION. The Board may at any
time and from time to time alter, amend, suspend, or terminate the Plan in whole
or in part; provided, however, no amendment which requires shareholder approval
under applicable New York law shall be effective unless the same shall be
approved by the requisite vote of the shareholders of the Company.
Notwithstanding anything contained herein, upon termination of the Plan, the
Company may distribute to each Participant the balance in his or her Account as
of such termination date. Except as set forth above, no amendment to or
discontinuance or termination of the Plan shall, without the written consent of
the Participant, adversely affect any rights of such Participant with respect to
amounts previously credited to the Participant under the Plan.
10.7 NOTICES. Each Participant shall be responsible for furnishing the
Administrator with the current and proper address for the mailing of notices and
the delivery of agreements and payments to him or her. Any notice required or
permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any item mailed to such address is returned as undeliverable to
the addressee, mailing will be suspended until the Participant furnishes the
proper address.
10.8 SEVERABILITY. If any provision of the Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof, and the Plan shall be construed and enforced as if such
provisions had not been included.
10.9 ENTIRE AGREEMENT. The Plan, along with the Participant's elections and
Option Agreements, constitutes the entire agreement between the Company and the
Participant pertaining to the subject matter herein and supersedes any other
plan or agreement, whether written or oral, pertaining to the subject matter
herein. No agreements or representations, other than as set forth herein or in
such elections or Option Agreements, have been made by the Company with respect
to the subject matter herein.
10.10 HEADINGS AND CAPTIONS. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.
10.11 GENDER AND NUMBER. Wherever used in this Plan, the masculine shall be
deemed to include the feminine and the singular shall be deemed to include the
plural, unless the context clearly indicates otherwise.
10.12 GOVERNING LAW. This Plan shall be construed and enforced according to
the laws of the State of New York without giving effect to its conflicts of laws
principles.
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YOUR VOTE IS IMPORTANT
PLEASE VOTE YOUR PROXY
[Foot Locker, Inc. Logo]
[Logo] Printed on recycled paper
APPENDIX I
FOOT LOCKER, INC.
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING TO BE HELD ON JUNE 19, 2002
Gary M. Bahler, Bruce L. Hartman, Matthew D. Serra, 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 Foot Locker, Inc., to be
held on June 19, 2002, at 9:00 A.M., local time, at Foot Locker, Inc., 112 West
34th Street, New York, New York 10120, and at any adjournment or postponement
thereof, upon the matters set forth in the Foot Locker, 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
Nominees for terms expiring at the Annual Meeting in 2005:
J. Carter Bacot, Purdy Crawford, Nicholas DiPaolo, and Philip H. Geier Jr.
IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET, 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.
FOOT LOCKER, INC.
(Address Changes) P.O. BOX 11078
NEW YORK, N.Y. 10203-0078
--------------------------
--------------------------
--------------------------
--------------------------
SEE REVERSE
SIDE
APPENDIX 1
Two Alternate Ways to Vote Your Proxy
FOOT LOCKER, INC. VOTE BY TELEPHONE OR INTERNET
24 Hours a Day - 7 Days a Week
You may also vote the shares held in your account by telephone or via the
Internet. Your electronic vote authorizes the named proxies in the same manner
as if you marked, signed, dated and returned the proxy card. IF YOU CHOOSE TO
VOTE BY TELEPHONE OR VIA THE INTERNET, YOU DO NOT NEED TO MAIL BACK YOUR PROXY
CARD.
To vote electronically, please Proxy Vote-By-Phone Proxy Vote-By-Internet
use the following directions:
DIAL 1-866-388-1532 24 HOURS A LOG ON TO THE INTERNET AND
HAVE YOUR PROXY CARD AND DAY, 7 DAYS A WEEK. GO TO THE WEB SITE
SOCIAL SECURITY NUMBER OR OR http://www.proxyvotenow.com/zfl
AVAILABLE.
BE READY TO ENTER THE PIN
NUMBER PRINTED ON THIS CARD
JUST BELOW THE PERFORATION.
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.
CONTROL NUMBER FOR
TELEPHONE OR INTERNET VOTING
1-866-388-1532 YOUR VOTE IS IMPORTANT. THANK YOU
CALL TOLL-FREE TO VOTE FOR VOTING.
DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET
Mark, Sign, Date and Return [x]
the Proxy Card Promptly
Using the Enclosed Envelope. Votes must be indicated
(x) in Black or Blue ink.
DIRECTORS RECOMMEND A VOTE "FOR" PROPOSALS 1, 2, AND 3.
1. ELECTION OF DIRECTORS.
(see reverse side)
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees: 01 J. Carter Bacot, 02 Purdy Crawford, 03 Nicholas DiPaolo, 04 Philip
H. Geier Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below).
*Exceptions __________________________________________________________________
FOR AGAINST ABSTAIN
2. APPOINTMENT OF INDEPENDENT ACCOUNTANTS. [ ] [ ] [ ]
3. APPROVAL OF FOOT LOCKER 2002 DIRECTORS
STOCK PLAN. [ ] [ ] [ ]
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.
To change your address, please mark this box. [ ]
I plan to attend meeting. [ ]
S C A N L I N E
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 2002 Annual Meeting of
Shareholders of Foot Locker, Inc. and any adjournment or postponement thereof.
Date Share Owner sign here / Title Co-Owner sign here / Title
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