UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Foot Locker, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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NOTICE OF 20082009 ANNUAL MEETING
AND
PROXY STATEMENT
112 West 34th Street
New York, New York 10120
NOTICE OF 20082009 ANNUAL MEETING OF SHAREHOLDERS
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DATE: | May | |||
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 March | |||
ITEMS OF BUSINESS: | • | Elect | ||
| • | Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the | ||
| • | Approve an amendment to our By-Laws to reduce the | ||
| • | 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 as soon as possible in one of these ways: | |||
| • | Use the toll-free telephone number shown on the Notice of Internet Availability of Proxy Materials for the | ||
| • | Visit the web site shown on your Foot Locker Notice or on your proxy card to vote via the Internet; | ||
| • | If you received a printed copy of the proxy card, | ||
| • | Follow the instructions on your proxy materials if your shares are held in | ||
| Even if you plan to attend the annual meeting, we encourage you to vote in advance using one of these methods. | |||
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| GARY M. BAHLER Secretary
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April 11, 20089, 2009
TABLE OF CONTENTS Page 1 1 1 1 2 2 2 2 How does the Board of Directors recommend that I vote on the proposals? 2 2 2 What are the voting requirements to elect directors and approve the other proposals? 3 3 3 4 Are shares held in employee plans included on the proxy card? 4 4 5 5 Persons Owning More than Five Percent of the Company’s Stock 6 7 7 7 7 7 8 8 8 8 8 8 9 9 9 9 9 10 10 10 12 12 13 14 14 14 15 15 15 32 109 1819 1819 2831 29313332
Page 36 39 39 40 43 43 45 53 Proposal 2: Ratification of the Appointment of Independent Accountants Deadlines and Procedures for Nominations and Shareholder Proposals Option Exercises and Stock VestedGrants of Plan-Based Awards 3534 Employment AgreementsOutstanding Equity Awards at Fiscal Year-End 3638 37Potential Payments upon Termination or Change in ControlEmployment Agreements 4142 4347 4549 4751 4954 5156 5257 5358 5358 5358 5459 5560 5560 5560 5661 5762 5963 60A-164
112 West 34th Street
New York, New York 10120
PROXY STATEMENT
We are providing these proxy materials to you for the solicitation of proxies by the Board of Directors of Foot Locker, Inc. for the 20082009 Annual Meeting of Shareholders and for any adjournments or postponements of this meeting. We are holding this annual meeting on May 21, 200820, 2009 at 9:00 A.M., local time, at our corporate headquarters located at 112 West 34th Street, New York, New York 10120. In this proxy statement we refer to Foot Locker, Inc. as “Foot Locker,” “the Company,” “we,” “our,” or “us.”
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
To Be Held on May 21, 200820, 2009
The Company’s Proxy Statement and 20072008 Annual Report/Form 10-K are available at
www.proxyvote.com/ and
http://bnymellon.mobular.net/bnymellon/fl andhttp://ww3.ics.adp.com/streetlink/FL
We are pleased to be using again this year a new procedure approved by the Securities and Exchange Commission that allows companies to furnish their proxy materials to shareholders over the Internet instead of mailing full sets of the printed materials. We believe that this procedure will reduce costs, provide greater flexibility to our shareholders, and lessen the environmental impact of our Annual Meeting. On or about April 11, 2008,9, 2009, we started mailing to most of our shareholders in the United States a Notice of Internet Availability of Proxy Materials (the “Foot Locker Notice”). The Foot Locker Notice contains instructions on how to access and read our 20082009 Proxy Statement and our 20072008 Annual Report to Shareholders on the Internet and to vote online.If you received a Foot Locker Notice by mail, you will not receive paper copies of the proxy materials in the mail unless you request them.Instead, the Foot Locker Notice instructs you on how to access and read the Proxy Statement and Annual Report and how you may submit your proxy over the Internet. If you received a Foot Locker Notice by mail and would like to receive a printed copy of the materials, please follow the instructions on the Foot Locker Notice for requesting the materials, and we will promptly mail the materials to you.
We are mailing to shareholders, or making available to shareholders via the Internet, this Proxy Statement, form of proxy card, and our 20072008 Annual Report/Form10-K on or about April 11, 2008.9, 2009.
QUESTIONS AND ANSWERS ABOUT THIS ANNUAL MEETING AND VOTING
What is included in these proxy materials?
The proxy materials include our 20082009 Proxy Statement and 20072008 Annual Report/Form 10-K. If you received printed copies of these materials by mail, these materials also include the proxy card for this annual meeting.
May I obtain an additional copy of the Form 10-K?
Our Form 10-K for the 20072008 fiscal year ended February 2, 2008January 31, 2009 is included with the 20072008 Annual Report. You may obtain an additional copy of our 20072008 Form 10-K without charge by writing to our Investor Relations Department at Foot Locker, Inc., 112 West 34th Street, New York, New York 10120.
It is also available free of charge through our corporate web site at http://www.footlocker-inc.com/IR_index.htm.
What constitutes a quorum for the Annual Meeting? We will have a quorum and will be able to conduct the business of the Annual Meeting if the holders of a majority of the shares outstanding are present at the meeting, either in person or by proxy. We will count abstentions and broker non-votes, if any, as present and entitled to vote in determining whether we have a quorum. What is the record date for this meeting? The record date for this meeting is March Do I need a ticket to attend the Annual Meeting? You will need an admission ticket to attend the Annual Meeting. Attendance at the meeting will be limited to shareholders on March 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 have an admission ticket, you must show proof of your ownership of the Company’s Common Stock at the registration table at the door. What are shareholders voting on at this meeting? You are being asked to vote on the following items: • Proposal 1: Election of • Proposal 2: Ratification of the appointment of KPMG LLP as our independent registered public accountants for • Proposal 3: Approval of How does the Board of Directors recommend that I vote on the proposals? The Board recommends that you vote “FOR” each of the three proposals being voted on at the meeting. Could other matters be voted on at the Annual Meeting? We do not know of any other business that will be presented at the Who may vote at the Annual Meeting? The only voting securities of Foot Locker are our shares of Common Stock. Only shareholders of record on the books of the Company on March 28, 2008.27, 2009. If you were a Foot Locker shareholder on this date, you are entitled to vote on the items of business described in this proxy statement.28, 200827, 2009 (or their authorized representatives) having an admission ticket or proof of their share ownership, and guests of the Company. If you plan to attend the meeting, please indicate this when you are voting by telephone or Internet or check the box on your proxy card, and we will promptly mail an admission ticket to you. twothree directors in Class III and one director in Class II; 2008;2009; and the Foot Locker Annual Incentive Compensation Plan, as Amended and Restated.an amendment to our By-Laws.20082009 annual meeting. If any other matters are properly brought before the meeting for consideration, then the persons named as proxies will have the discretion to vote on those matters for you using their best judgment.28, 200827, 2009 are entitled to vote at the annual meeting and any adjournments or postponements. Each share is entitled to one vote. There were 154,774,002155,683,854 shares of Common Stock outstanding on March 28, 2008.27, 2009.2
What are the voting requirements to elect directors and to approve the other proposals? Directors must be elected by a plurality of the votes cast by shareholders. (Please see our policy described on Page 7 regarding resignations by directors who do not receive more “for” votes than 2 “withheld”
“withheld” votes.) The other proposals being voted on at this meeting require the favorable vote of a majority of the votes cast by shareholders to be approved. How will the votes be counted? Votes will be counted and certified by representatives of our transfer agent, BNY Mellon Shareowner Services, as inspectors of election. The inspectors of election are independent and are not employees of Foot Locker. We do not count abstentions and broker non-votes, if any, 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 them. 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. We maintain the confidentiality of our shareholders’ votes. All proxy cards, electronic voting, voting instructions, ballots and voting tabulations identifying shareholders are kept confidential from the Company, except: • as necessary to meet any applicable legal requirements, • when a shareholder requests disclosure or writes a comment on a proxy card, • in a contested proxy solicitation, and • to allow independent inspectors of election to tabulate and certify the vote. You may vote using any of the following methods: •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 printed on your Notice of Internet Availability of Proxy Materials (“Notice”), on your proxy card, or in the instructions that accompany your proxy materials, as applicable, and following the recorded instructions. You will need the control number printed on your Notice, on your proxy card, or in the instructions that accompany your proxy materials, as applicable. Telephone voting is available 24 hours a day and will be accessible until •Internet You can also choose to vote your shares by the Internet. You will need the control number printed on your Notice, on your proxy card, or in the instructions that accompany your proxy materials, as applicable. The web site for Internet voting is listed on your Notice, proxy card, or in the instructions that accompany your proxy materials. Internet voting is available 24 hours a day and will be accessible until • as necessary to meet any applicable legal requirements,• when a shareholder requests disclosure or writes a comment on a proxy card,• in a contested proxy solicitation, and• to allow independent inspectors of election to tabulate and certify the vote.9:00 A.M.11:59 P.M. Eastern Time on May 21, 2008.19, 2009. The telephone voting system has easy to follow instructions and allows you to confirm that the system has properly recorded your vote.If you vote by telephone, you do NOT need to return a proxy card or voting instruction form.If you are an owner in street name, please follow the instructions that accompany your proxy materials.9:00 A.M.11:59 P.M. Eastern Time on May 21, 2008.19, 2009. As with telephone voting, you will be able to confirm that the system3
has properly recorded your vote.If you vote via the Internet, you do NOT need to return a proxy card or voting instruction form. 3
•Mail If you are a holder of record and received printed copies of the materials by mail, you may choose to vote by mail. Simply mark your proxy card, date and sign it, and return it in the postage-paid envelope that we included with your materials. If you hold your shares through a bank or brokerage account, please complete and mail the voting instruction form in the envelope provided. •Ballot 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 a proxy card but do not give voting instructions, the shares represented by that proxy card will be voted as recommended by the Board of Directors. Can I change my mind after voting my shares? You may revoke your proxy at any time before it is used by (i) sending a written notice to the Company at its corporate headquarters, (ii) delivering a valid proxy card with a later date, (iii) providing a later dated vote by telephone or Internet, or (iv) voting by ballot at the Annual Meeting. Are shares held in employee plans included on the proxy card? If you hold shares of Foot Locker Common Stock through the Foot Locker 401(k) Plan or the Foot Locker Puerto Rico 1165(e) Plan, you received a proxy card showing the number of shares allocated to your plan account. Your proxy card will serve as a voting instruction card for the trustees of the plans, who will vote the shares. The trustees will vote only those shares for which voting instructions have been given. To allow sufficient time for voting by the trustees of these plans, your voting instructions must be received by May Who pays the cost of this proxy solicitation? We will pay for the cost of the solicitation of proxies, including the preparation, printing and mailing of the proxy materials. Proxies may be solicited, without additional compensation, by our directors, officers, or employees by mail, telephone, fax, in person, or otherwise. We will request banks, brokers and other custodians, nominees and fiduciaries to deliver proxy 416, 2008.15, 2009.materialmaterials to the beneficial owners of Foot Locker’s Common Stock and obtain their voting instructions, and we will reimburse those firms for their expenses under 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 $10,000 plus out-of-pocketout-of- pocket expenses.
BENEFICIAL OWNERSHIP OF THE COMPANY’S STOCK Directors and Executive Officers The following table shows the number of shares of Common Stock reported to us as beneficially owned by each of our directors and named executive officers as of March Matthew D. Serra beneficially owned Each person has sole voting and investment power for the number of shares shown unless otherwise noted.28, 2008.27, 2009. The table also shows beneficial ownership by all directors, named executive officers, and executive officers as a group on that date, including shares of Common Stock that they have a right to acquire within 60 days after March 28, 200827, 2009 by the exercise of stock options.1.171.26 percent of the total number of outstanding shares of Common Stock as of March 28, 2008.27, 2009. No other director, named executive officer, or executive officer beneficially owned one percent or more of the total number of outstanding shares as of that date.
Amount and Nature of Beneficial Ownership
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Amount and Nature of Beneficial Ownership | Amount and Nature of Beneficial Ownership | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Common Stock | Stock Options | RSUs and | Total Shares of | Common Stock | Stock Options | RSUs and | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Gary M. Bahler |
| 126,530 |
| 253,334 |
| — |
| 379,864 | 151,766 |
| 251,668 |
| — | 403,434 | ||||||||||||||||||||||||||||||||||||||||||
Nicholas DiPaolo |
| 12,826 | (c) |
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| 16,542 |
| 3,704 |
| 33,072 |
| 21,349 | (c) |
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| 16,542 |
| 6,869 |
| 44,760 | ||||||||||||||||||||||||||||||||||||
Alan D. Feldman |
| 11,065 |
| 6,314 |
| 3,704 |
| 21,083 |
| 22,801 |
| 6,314 |
| 6,869 |
| 35,984 | ||||||||||||||||||||||||||||||||||||||||
Jarobin Gilbert Jr. |
| 9,610 |
| 25,520 |
| 3,704 |
| 38,834 |
| 18,433 |
| 25,520 |
| 6,869 |
| 50,822 | ||||||||||||||||||||||||||||||||||||||||
Ronald J. Halls |
| 124,551 |
| 116,667 |
| — |
| 241,218 | 165,128 |
| 155,000 |
| — | 320,128 | ||||||||||||||||||||||||||||||||||||||||||
Robert W. McHugh |
| 146,472 |
| 165,666 |
| — |
| 312,138 | 160,163 |
| 175,666 |
| — |
| 335,829 | |||||||||||||||||||||||||||||||||||||||||
Matthew M. McKenna |
| 14,616 |
| 4,287 |
| 3,704 |
| 22,607 |
| 26,352 |
| 4,287 |
| 6,869 |
| 37,508 | ||||||||||||||||||||||||||||||||||||||||
Richard T. Mina |
| 237,619 | (d) |
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| 407,171 |
| — |
| 644,790 |
| 237,801 | (d) |
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| 395,171 |
| — |
| 632,972 | ||||||||||||||||||||||||||||||||||||
Laurie J. Petrucci | 117,062 |
| 146,147 |
| — | 263,229 | ||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Preston |
| 55,271 |
| 25,520 |
| 3,704 |
| 84,495 |
| 65,400 |
| 25,520 |
| 6,869 |
| 97,789 | ||||||||||||||||||||||||||||||||||||||||
David Y. Schwartz |
| 12,275 |
| 25,520 |
| 13,127 |
| 50,922 |
| 15,979 |
| 25,520 |
| 21,216 |
| 62,715 | ||||||||||||||||||||||||||||||||||||||||
Matthew D. Serra |
| 708,989 |
| 1,097,832 |
| — |
| 1,806,821 | 760,258 |
| 1,197,333 |
| — | 1,957,591 | ||||||||||||||||||||||||||||||||||||||||||
Christopher A. Sinclair |
| 20,223 |
| 25,520 |
| 3,704 |
| 49,447 | ||||||||||||||||||||||||||||||||||||||||||||||||
Cheryl Nido Turpin |
| 5,964 |
| 20,815 |
| 15,176 |
| 41,955 |
| 9,668 |
| 20,815 |
| 24,586 |
| 55,069 | ||||||||||||||||||||||||||||||||||||||||
Dona D. Young |
| 7,356 |
| 20,815 |
| 22,550 |
| 50,721 |
| 11,060 |
| 20,815 |
| 35,074 |
| 66,949 | ||||||||||||||||||||||||||||||||||||||||
All 20 directors and executive officers as a group, including the named executive officers |
| 1,828,120 |
| 2,974,852 |
| 73,077 |
| 4,876,049 | (e) |
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All 19 directors and executive | 2,123,146 |
| 3,126,167 |
| 115,221 | 5,364,534 | (e) |
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Notes to Beneficial Ownership Table
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(a) |
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Name
Number of Unvested
Shares of Restricted
Stock
M. Serra
210,000
R. McHugh
75,000
R. Halls
120,000
G. Bahler
75,000
L. Petrucci
75,000
5
(b) This column includes (i) the number of deferred stock units credited as of March (c) Includes 150 shares held by his spouse. (d) (e) This number represents approximately 28, 200827, 2009 to the account of the directors who elected to defer all or part of their annual retainer fee and (ii) directors’ unvested restricted stock units (“RSUs”). The deferred stock units and RSUs do not have current voting or investment power. Does not include 30,000 shares of common stock transferred to spouse under marital settlement agreement in whichInformation based on the last beneficial ownership report filed by Mr. Mina disclaims beneficial ownership.with the SEC on March 18, 2008. 3.153.45 percent of the shares of Common Stock outstanding at the close of business on March 28, 2008.27, 2009.5
Persons Owning More Than Five Percent of the Company’s Stock The following table provides information on shareholders who beneficially own more than five percent of our Common Stock according to reports filed with the Securities and Exchange Commission (“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. Name and Address Amount and Percent Mackenzie Financial Corporation Toronto, Ontario Sasco Capital, Inc. 10 Sasco Hill Road Fairfield, CT 06824 Harris Associates L.P. and Harris Associates Inc. Two North LaSalle Street, Suite 500 Chicago, IL 60602-3790 First Pacific Advisors, LLC, Robert L. Rodriguez, and J. Richard Atwood 11400 West Olympic Blvd., Suite 1200 Los Angeles, CA 90064 Notes to Table on Persons Owning More than Five Percent of the Company’s Stock (a) Reflects shares beneficially owned as of December 31, Reflects shares beneficially owned as of December 31, Reflects shares beneficially owned as of December 31, Reflects shares beneficially owned as of December 31,
of Beneficial Owner
Nature of
Beneficial Ownership
of ClassLazard Asset Management LLC15,579,327(a)10.08%(a)30 Rockefeller PlazaNew York, NY 10112 13,739,244(b12,813,116(a)) 8.90%(b8.27)%(a)150 Bloor180 Queen Street West Suite M111M5S 3B5M5V 3K1 8,901,342(c8,732,892(b)) 5.80%(c5.60)%(b) 8,393,500(d7,575,300(c)) 5.43%(d5.43)%(c)Lord, Abbett & Co. LLC8,228,326(e)5.33%(e)90 Hudson StreetJersey City, NJ 07302 7,787,100(f7,864,416(d)) 5.00%(f5.10)%(d) 20072008 according to an amended Schedule 13G filed with the SEC. As reported in this schedule, Lazard Asset Management LLC, an investment adviser, holds sole voting power with respect to 8,993,744 shares and sole dispositive power with respect to 15,579,327 shares.(b)Reflects shares beneficially owned as of December 31, 2007 accordingAmendment No. 1 to Schedule 13G filed with the SEC. As reported in this schedule, Mackenzie Financial Corporation, an investment adviser, holds sole voting and dispositive power with respect to 13,739,24412,813,116 shares.(c)(b) 20072008 according to Amendment No. 1 to Schedule 13G filed with the SEC. As reported in this schedule, Sasco Capital, Inc., an investment adviser, holds sole voting power with respect to 4,463,3503,985,500 shares and sole dispositive power with respect to 8,901,3428,732,892 shares.(d)(c) 2007,2008, according to Amendment No. 1 to Schedule 13G filed with the SEC by Harris Associates L.P. (“Harris”) and Harris Associates Inc. As reported in this schedule, Harris, an investment adviser, holds sharedsole voting power with respect to 8,393,500 shares, soleand dispositive power with respect to 1,293,500 shares, and shared dispositive power with respect to 7,100,0007,575,300 shares. Harris also serves as investment adviser to the Harris Associates Investment Trust (the “Trust”). The Trust owns 7,100,000 shares, which are included as shares over which Harris has shared voting and dispositive power.(e)(d) 2007,2008, according to Amendment No. 5 to Schedule 13G filed with the SEC. As reported in this schedule, Lord, Abbett & Co. LLC, an6
6investment adviser, holds sole voting power with respect to 7,845,626 shares and sole dispositive power with respect to 8,228,326 shares.(f)Reflects shares beneficially owned as of December 31, 2007, according1 to Schedule 13G filed with the SEC on behalf of First Pacific Advisors, LLC (“FPA”), an investment advisor, Robert L. Rodriguez and J. Richard Atwood, Managing Members of FPA. As reported in
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires that our directors and executive officers file with the Securities and Exchange Commission reports of ownership and changes in ownership of Foot Locker’s Common Stock. Based on our records and other information, we believe that during the CORPORATE GOVERNANCE INFORMATION Corporate Governance Guidelines The Board of Directors has adopted Corporate Governance Guidelines. The Board periodically reviews the guidelines and may revise them when appropriate. The Corporate Governance Guidelines are available on the corporate governance section of the Company’s corporate web site at http://www.footlocker-inc.com/IR_index.htm. You may also obtain a printed copy of the guidelines by writing to the Corporate Secretary at the Company’s headquarters. Policy on Voting for Directors Our Corporate Governance Guidelines provide that if a nominee for director in an uncontested election receives more votes “withheld” from his or her election than votes “for” election (a “Majority Withheld Vote”), then the director must offer his or her resignation for consideration by the Nominating and Corporate Governance Committee (the “Nominating Committee”). The Nominating Committee will evaluate the resignation, weighing the best interests of the Company and its shareholders, and make a recommendation to the Board of Directors on the action to be taken. For example, the Nominating Committee may recommend (i) accepting the resignation, (ii) maintaining the director but addressing what the Nominating Committee believes to be the underlying cause of the withheld votes, (iii) resolving that the director will not be re-nominated in the future for election, or (iv) rejecting the resignation. When making its determination, the Nominating Committee will consider all factors that it deems relevant, including (i) any stated reasons why shareholders withheld votes from the director, (ii) any alternatives for curing the underlying cause of the withheld votes, (iii) the director’s tenure, (iv) the director’s qualifications, (v) the director’s past and expected future contributions to the Board and to the Company, and (vi) the overall composition of the Board, including whether accepting the resignation would cause the Company to fail to meet any applicable Securities and Exchange Commission or New York Stock Exchange requirements. We will promptly disclose the Board’s decision on whether or not to accept the director’s resignation, including, if applicable, the reasons for rejecting the offered resignation. The Board of Directors has adopted Stock Ownership Guidelines. These guidelines cover the Board of Directors, the Chief Executive Officer, and Other Principal Officers, as follows: •this schedule, FPA, Mr. Rodriguez and Mr. Atwood hold shared voting power with respect to 2,699,4003,628,300 shares and shared dispositive power with respect to 7,787,100 shares.7,864,416 shares20072008 fiscal year, the directors and executive officers complied with all applicable SEC filing requirements.Board of Directors
Board of Directors.. Each non-employee director must beneficially own shares of our Common Stock having a value of at least three times the annual retainer fee paid to the non-employee directors.
•
Chief Executive Officer. The CEO must beneficially own shares of our Common Stock having a value of at least four times his annual base salary.
7•
• Other Principal Officers. Shares of restricted stock, restricted stock units, and deferred stock units are counted towards beneficial ownership. Stock options are disregarded in calculating beneficial ownership. 7•Other Principal OfficersChief Executive Officer.The CEO must beneficially own shares of our Common Stock having a value of at least four times his annual base salary.. Other Principal Officers of the Company must beneficially own shares of our Common Stock having a value of at least two times their individual annual base salaries. The category of Other Principal Officers includes all corporate officers at the senior vice president level or higher and the chief executive officers of our operating divisions.
The target date for full compliance with these guidelines is February 2011, which is five years after the effective date of these guidelines. Non-employee directors who are elected to the Board after February 2006, as well as employees who are elected or appointed after this date to positions covered by these guidelines, must be in compliance within five years after their initial election or appointment. The Board of Directors has adopted charters for the Audit Committee, the Compensation and Management Resources Committee, the Finance and Strategic Planning Committee, the Nominating and Corporate Governance Committee, and the Retirement Plan Committee. Copies of the charters for these committees are available on the corporate governance section of the Company’s corporate web site at http://www.footlocker-inc.com/IR_index.htm. You may also obtain printed copies of these charters by writing to the Corporate Secretary at the Company’s headquarters. The Board believes that a significant majority of the members of the Board should be independent, as determined by the Board based on the criteria established by The New York Stock Exchange. Each year, the Nominating Committee reviews any relationships between outside directors and the Company that may affect independence. Currently, one of the current James E. Preston has served as lead director since May 30, 2007. As lead director, Mr. Preston presides at executive sessions of the independent and non-management directors, reviews and provides input on the Board meeting agendas, and may perform other duties and responsibilities as the Board may determine. Executive Sessions of Non-Management Directors The Board of Directors holds regularly scheduled executive sessions of non-management directors. James E. Preston, as the lead director, presides at executive sessions of the independent and Board Members’ Attendance at Annual Meetings Although we do not have a policy on our Board members’ attendance at annual shareholders’ meetings, we encourage each director to attend these important meetings. The annual meeting is normally scheduled on the same day as a Board of Directors’ meeting. In We have an orientation program for new directors that is intended to educate a new director on the Company and the Board’s practices. At the orientation, the newly elected director generally meets with the Company’s Chief Executive Officer, the Chief Financial Officer, the General Counsel and Secretary, as well as with other senior financial officers of the Company, to review the business operations, financial matters, investor relations, corporate governance policies, and the composition of10nine members of the Board of Directors serves as an officer of the Company, and the remaining 9eight directors are independent under the criteria established by The New York Stock Exchange.non- managementnon-management directors.2007, 102008, 9 out of the 1210 directors who were then serving attended the annual shareholders’ meeting.8
the Board and its committees. Additionally, he or she has the opportunity to visit our stores at the Company’s New York headquarters, or elsewhere, with a senior division officer for an introduction to store operations. 8
Payment of Directors Fees in Stock The non-employee directors receive one-half of their annual retainer fees, including committee chair and lead director retainer fees, in shares of the Company’s Common Stock, with the balance payable in cash. Directors may elect to receive up to 100 percent of their fees in stock. The Board has established a policy in its Corporate Governance Guidelines that directors retire from the Board at the annual meeting of shareholders following the director’s 72nd birthday. As part of the Nominating Committee’s regular evaluation of the Company’s directors and the overall needs of the Board, the Nominating Committee may ask a director to remain on the Board for an additional period of time beyond age 72, or to stand for re-election after reaching age 72. However, a director may not remain on the Board beyond the date of the annual meeting of shareholders following his or her 75th birthday. As described on Page Change in a Director’s Principal Employment The Board has established a policy that any director whose principal employment changes is required to advise the Chair of the Nominating and Corporate Governance Committee of this change. If requested, the director will submit a letter of resignation to the Chair of the Committee, and the Committee would then meet to consider whether to accept or reject the letter of resignation. Communications with the Board of Directors The Board has established a procedure for shareholders and other interested parties to send communications to the non-management members of the Board of Directors. Shareholders and other interested parties who wish to communicate directly with the non-management directors of the Company should send a letter to: Board of Directors The Secretary will promptly send a copy of the communication to the lead director, who may direct the Secretary to send a copy of the communication to the other non-management directors and may determine whether a meeting of the non-management directors should be called to review the communication. A copy of the Procedures for Communications with the Board of Directors is available on the corporate governance section of the Company’s corporate web site at http://www.footlocker-inc.com/IR_index.htm. You may obtain a printed copy of the procedures by writing to the Corporate Secretary at the Company’s headquarters. The Board of Directors and all of its committees have authority to retain outside advisors and consultants that they consider necessary or appropriate in carrying out their respective responsibilities. The independent accountants are retained by the Audit Committee and report directly to the Audit Committee. In addition, the internal auditors are selected by the Audit Committee and are ultimately accountable to the Audit Committee. Similarly, consultants retained by the Compensation and Management Resources Committee to assist it in the evaluation of senior executives’ compensation report directly to that committee.53,58, the Board has waived the retirement policy for one director, James E. Preston, who currently serves as the lead director.
c/o Secretary, Foot Locker, Inc.
112 West 34th Street
New York, NY 101209
The Company has adopted a Code of Business Conduct for directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer. A copy of the Code of Business Conduct is available on the corporate governance section of the Company’s 9
corporate web site at http://www.footlocker-inc.com/IR_index.htm. Any waivers of the Code of Business Conduct for directors and executive officers must be approved by the Audit Committee. We intend to disclose promptly amendments to the Code of Business Conduct and any waivers of the Code for directors and executive officers on the corporate governance section of the Company’s corporate website at http://www.footlocker-inc.com/ 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 between 9 and 17 directors. The exact number of directors is determined from time to time by the entire Board. Our Board currently has The Board of Directors held A director is considered independent under the rules of the The New York Stock Exchange if he or she has no material or immaterial relationship to the Company that would impair his or her independence. In addition to the independence criteria established by The New York Stock Exchange, the Board of Directors has adopted categorical standards to assist it in making its independence determinations regarding individual members of the Board. These categorical standards are contained in the Corporate Governance Guidelines, which are posted on the Company’s corporate web site at http://www.footlocker-inc.com/ The Board of Directors has determined that the following categories of relationships are immaterial for purposes of determining whether a director is independent under the listing standards adopted by The New York Stock Exchange. 10. You may obtain a printed copy of the Code of Business Conduct by writing to the Corporate Secretary at the Company’s headquarters.IR_index.htmIR_index.htm..109 members. Christopher A. Sinclair advisedShareholders are being asked to approve at this annual meeting an amendment to our By-Laws that would reduce the Board that he would not be standing for election as a director at the 2008 Annual Meeting, so his term as a director will end at the 2008 Annual Meeting of Shareholders. The Board has fixed theminimum number of directors atfrom 9 effective May 21, 2008 when Mr. Sinclair’s term as a director ends.to 7 and reduce the maximum number of directors from 17 to 13. Detailed information on this proposal is provided beginning on Page 62.sixfive meetings during 2007.2008. All of our current directors attended at least 75 percent of the meetings of the Board and committees on which they served in 2007.2008.IR_index.htm.IR_index.htm.
Categorical Relationship Description Investment Relationships with the Company A director and any family member may own equities or other securities of the Company. Relationships with Other Business Entities A director and any family member may be a director, employee (other than an executive officer), or beneficial owner of less than 10 percent of the shares of a business entity with which the Company does business, provided that the aggregate amount involved in a fiscal year does not exceed the greater of $1,000,000 or 2 percent of either that entity’s or the Company’s annual consolidated gross revenue. Relationships with Not-for-Profit Entities A director and any family member may be a director or employee (other than an executive officer or the equivalent) of a not-for-profit organization to which the Company (including the Foot Locker Foundation) makes contributions, provided that the aggregate amount of the Company’s contributions in any fiscal year do not exceed the greater of $1,000,000 or 2 percent of the The Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, has determined that the following directors are independent under the rules of The New York Stock Exchange because they have no material or immaterial relationship to the Company that would impair their independence: Nicholas DiPaolo Alan D. Feldman Jarobin Gilbert Jr. Cheryl Nido Turpin Matthew M. McKenna Dona D. Young In making its decisions on independence, the Board of Directors considered the following relationships between the Company and organizations with which the current • Nicholas DiPaolo, Jarobin Gilbert Jr., Matthew M. McKenna, David Y. Schwartz, and Cheryl Nido Turpin not- for-profitnot-for-profit entity’s total annual receipts. David Y. SchwartzJames E. Preston Christopher A. SinclairDavid Y. Schwartz James E. PrestonPurdy Crawford and Philip H. Geier Jr.Christopher A. Sinclair served as directorsa director of the Company during 20072008 until their retirementthe end of his term on May 30, 2007.21, 2008. The Board determined, upon the recommendation of the Nominating and Corporate Governance Committee, that both Mr. Crawford and Mr. Geier wereSinclair was independent under the rules of The New York Stock Exchange through their retirementthe end of his term as a director because theyhe had no material or immaterial relationship to the Company that would impair theirhis independence.and retired members of our Board are affiliated: was an executive officer of PepsiCo, Inc. through December 31, 2007. Our direct-to-customers business had an internet marketing arrangement with a division of PepsiCo and a third party in 2007. We indirectly received from the PepsiCo division approximately $637,500 under this arrangement in 2007. In addition, we paid a division of PepsiCo approximately $80,000 in 2007 for products sold through our catalogs. The Board has determined that this relationship was immaterial and would not impair Mr. McKenna’s independence because the amounts involved are not material to either company and the transactions were conducted in the ordinary course of business.• and Dona D. Young are non-employee directors of companies with which Foot Locker does business. The Board has determined that Mr.11
Schwartz’s, Ms. Turpin’s, and Mrs. Young’seach of these relationships meetmeets the categorical standard for Relationships with Other Business Entities and are immaterial for determining independence.•
Dona D. Young was a non-employee director during 2008 of a company with which Foot Locker did business. The Board has determined that Mrs. Young’s relationship met the categorical standard for Relationships with Other Business Entities and was immaterial for determining independence.
•
Matthew M. McKenna is affiliated with a not-for-profit institution to which the Company made payments in 2008. The Board has determined that Mr. McKenna’s relationship meets the
11
• The Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, has determined that Matthew D. Serra is not independent because Mr. Serra is an executive officer of the Company. The Board of Directors has determined that all members of the Audit Committee, the Compensation and Management Resources Committee and the Nominating and Corporate Governance Committee are independent as defined under the listing standards of The New York Stock Exchange and the director independence standards adopted by the Board. Committees of the Board of Directors The Board has delegated certain duties to committees, which assist the Board in carrying out its responsibilities. There are six standing committees of the Board. Each director serves on at least two committees. The committee memberships, the number of meetings held during Audit Compensation Finance and Nominating Retirement Executive N. DiPaolo* J. Preston* J. Gilbert Jr.* J. Gilbert Jr.* M. Serra*** J. Gilbert Jr. A. Feldman N. DiPaolo J. Preston N. DiPaolo N. DiPaolo M. McKenna A. Feldman R. McHugh** J. Gilbert Jr. D. Schwartz C. Turpin M. McKenna L. Petrucci** J. Preston D. Young D. Young M. Serra** * Designates Committee Chair ** Designates Executive Officer of the Company *** Designates Committee Chair and Executive Officer of the Company The committee held This committee appoints the independent accountants and the internal auditors and is responsible for approving the independent accountants’ and internal auditors’ compensation. This committee also assists the Board in fulfilling its oversight responsibilities in the following areas: • accounting policies and practices, Purdy Crawford, who retired from the Board in May 2007, is counsel to the Toronto law firm of Osler, Hoskin & Harcourt LLP (“OH&H”), a firm that has provided legal services to the Company. Mr. Crawford advised the Company that, while OH&H provided him with an office and administrative support, the firm provided him with no remuneration in 2007. The Board has determined that Mr. Crawford was independent because he received no direct compensation from OH&H, he was not an employee, equity partner, or manager of OH&H, and he was not involved in the provision of services to the Company.•Philip H. Geier Jr., who retired from the Board in May 2007, is a member of the Board of Trustees of a not-for-profit organization to which the Company and the Foot Locker Foundation made contributions in 2007. The Board has determined that Mr. Geier’s relationship meets the categorical standard for Relationships with Not-for-Profit Entities and is not materialimmaterial for determining independence. 2007,2008, and the functions of the committees are described below.
Committee
and
Management
Resources
Committee
Strategic
Planning
Committee
and Corporate
Governance
Committee
Plan
Committee
Committee C. Sinclair*D. Schwartz* C. SinclairM. McKenna C. TurpinD. Schwartz D. YoungC. Turpin D. Schwartz C. SinclairD. Schwartz eightnine meetings in 2007.2008. The Audit Committee has a charter, which is available on the corporate governance section of our corporate web site at http://www.footlocker-inc.com/IR_index.htm.. The report of the Audit Committee appears on Page 56.61. 12
• the integrity of the Company’s financial statements, • compliance with legal and regulatory requirements, • the qualifications, independence, and performance of the independent accountants, and • the qualifications and performance of the internal audit function. The Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters. The Board of Directors has determined that the Company has at least one audit committee financial expert, as defined under the rules of the Securities Exchange Act of 1934, serving on the Audit Committee. David Y. Schwartz has been designated as the audit committee financial expert. Mr. Schwartz is independent under the rules of The New York Stock Exchange and the Securities Exchange Act of 1934. 12
Compensation and Management Resources Committee The Compensation and Management Resources Committee (the “Compensation Committee”) held four meetings in The Compensation Committee determines all compensation for the Company’s executive management group, which consists of the executive officers and corporate officers, and determines significant elements of the compensation of the chief executive officers of our operating divisions. Decisions regarding equity compensation for other employees are also the Compensation Committee’s responsibility. Decisions regarding non-equity compensation of the Company’s other associates are made by the Company’s management. The Compensation Committee also administers Foot Locker’s various compensation plans, including the incentive plans, the equity-based compensation plans, and the employees stock purchase The Compensation Committee normally holds two meetings each year to review and approve the executive compensation program, the Chief Executive Officer’s compensation, annual salaries and bonuses for the executive management group and division CEOs, and to grant equity awards. In addition, at another meeting during the year, the committee reviews directors’ compensation and makes recommendations to the Nominating and Corporate Governance Committee concerning the form and amount of directors’ compensation. Additional meetings of the Compensation Committee may be called during the year as necessary. The Compensation Committee has retained Mercer as its consultant on executive compensation matters and, with regard to executive and director compensation, Mercer reports directly to the Compensation Compensation Committee meeting agendas are developed by the committee chair in consultation with the Chief Executive Officer and the Corporate Secretary. Committee members may suggest agenda items by communicating with one of these individuals. Agendas and related materials are circulated to Committee members prior to meetings. The committee chair regularly reports on the committee’s meetings to the full Board. The Company’s CEO, Senior Vice President and General Counsel, Senior Vice The Compensation Committee has the authority to delegate authority and responsibilities as it considers appropriate. The committee has delegated to the Committee Chair the authority to approve2007.2008. The committee has a charter, which is available on the corporate governance section of the Company’s corporate web site at http://www.footlocker-inc.com/IR_index.htm. plan, and the deferred compensation plan. Committee members are not eligible to participate in any of these plans. This committee also reviews and makes recommendations to the Board of Directors concerning executive development and succession, including for the position of Chief Executive Officer.Committee.Committee and provides the Committee with information on general executive compensation trends, trends in the retail industry, and reports on Foot Locker’s executive compensation program. Mercer also advises the committee on non-employee director compensation matters, including payment levels and trends. In preparing its material for the committee, Mercer consults with the Company’s Chairman of the Board and Chief Executive Officer, Senior Vice President–President—Human Resources, Senior Vice President and General Counsel, and Vice President–President—Human Resources. Separately, the Company retains Mercer for outsourcing services related to the administration of our U.S. and Canadian pension plans. The Senior Vice President-Human Resources, working with the Chairman of the Board and Chief Executive Officer, prepares compensation recommendations to the committee, covering all elements of compensation for all corporate officers and heads of the Company’s operating divisions, other than the Chief Executive Officer himself, which are forwarded to the Chair of the Compensation Committee for his review. The Chair of the Compensation Committee also discusses these recommendations with the Chief Executive Officer. Based on input from the Chair of the Committee, the Senior Vice President-Human Resources then finalizes the compensation recommendations to review with the full committee.President–President—Human Resources, Vice President–President—Human Resources, and Vice President and Associate General Counsel generally attend all meetings of the committee. Mercer also attends meetings at which the Committee reviews the executive compensation program and non-employee director compensation.13
stock option grants between meetings of the committee. This authority is limited to executives who are not subject to Section 16 of the Securities Exchange Act of 1934 and is further limited to individual option awards of 25,000 shares or less. 13
The Company’s Corporate Human Resources Department and the Corporate Secretary’s staff support the Compensation Committee in performing its duties. Compensation Committee Interlocks and Insider Participation The Executive Committee did not meet in Finance and Strategic Planning Committee The Finance and Strategic Planning Committee held four meetings in Nominating and Corporate Governance Committee The Nominating and Corporate Governance Committee held The Nominating and Corporate Governance Committee may establish criteria for candidates for Board membership. These criteria may include area of expertise, diversity of experience, independence, commitment to representing the long-term interests of the Company’s stakeholders, and other relevant factors, taking into consideration the needs of the Board and the Company and the mix of expertise and experience among current directors. From time to time the committee may retain the services of a third party search firm to identify potential director candidates. The committee will consider nominees to the Board of Directors recommended by shareholders that comply with the provisions of the Company’s By-Laws and relevant law, regulation, and stock exchange rules. The procedures for shareholders to follow to propose a potential director candidate are described on Page After a potential nominee is identified, the Committee Chair will review his or her biographical information and discuss with the other members of the committee whether to request additional information about the individual or to schedule a meeting with the potential candidate. The committee’s screening process for director candidates is the same regardless of the source who identified the potential candidate. The committee’s determination on whether to proceed with a formalPurdy Crawford, Alan D. Feldman, Philip H. Geier Jr.,Matthew M. McKenna, James E. Preston, Christopher A. Sinclair and Cheryl Nido Turpin served on the Compensation and Management Resources Committee during 2007. Messrs. Crawford and Geier retired2008. Mr. Sinclair’s term as a director ended at the 20072008 annual shareholders’ meeting. None of the committee members was an officer or employee of the Company or any of its subsidiaries, and there were no interlocks with other companies within the meaning of the SEC’s proxy rules.2007.2008. Except for certain matters reserved to the Board, this committee has all of the powers of the Board in the management of the business of the Company during intervals between Board meetings.2007.2008. This committee reviews the overall strategic and financial plans of the Company, including capital expenditure plans, proposed debt or equity issues of the Company, and the Company’s capital structure. The committee also considers and makes recommendations to the Board of Directors concerning dividend payments and share repurchases, and reviews acquisition and divestiture proposals.threefour meetings in 2007.2008. This committee has responsibility for overseeing corporate governance matters affecting the Company, including developing and recommending criteria and policies relating to service and tenure of directors. The committee is responsible for collecting the names of potential nominees to the Board, reviewing the background and qualifications of potential candidates for Board membership, and making recommendations to the Board for the nomination and election of directors. The committee also reviews membership on the Board committees and makes recommendations on committee members and chairs. In addition, the committee reviews recommendations from the Compensation and Management Resources Committee and makes recommendations to the Board concerning the form and amount of directors’ compensation.59.63.14
evaluation of a potential candidate is based on the person’s experience and qualifications, as well as the current composition of the Board and its anticipated future needs. 14
The Retirement Plan Committee held four meetings in Policies and Procedures We individually inquire of each of our directors and executive officers about any transactions in which Foot Locker and any of these related persons or their immediate family members are participants. We also make inquiries within the Company’s records for information on any of these kinds of transactions. Once we gather the information, we then review all relationships and transactions in which Foot Locker and any of our directors, executive officers or their immediate family members are participants to determine, based on the facts and circumstances, whether the Company or the related persons have a direct or indirect material interest. The General Counsel’s office coordinates the related party review process. The Nominating and Corporate Governance Committee reviews any reported transactions involving directors and their immediate families in making its recommendation to the Board of Directors on the independence of the directors. The Company’s written policies and procedures for related party transactions are included within the Corporate Governance Guidelines and Foot Locker’s Code of Business Conduct. Related Person Transactions Foot Locker and its subsidiaries have had transactions in the normal course of business with various other organizations, including certain organizations whose directors or officers are also directors of Foot Locker. However, the amounts involved in these transactions have not been material in relation to our business, and it is believed that these amounts have not been material in relation to the businesses of the other organizations. 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 organizations will continue in the future. Mr. Serra’s son-in-law is employed as a buyer in the Company’s Foot Locker division, and the Company provided compensation and benefits to him in DIRECTORS’ COMPENSATION AND BENEFITS Non-employee directors are paid an annual retainer fee and meeting fees for attendance at each Board and committee meeting. The lead director and the committee chairs are paid an additional retainer fee for service in these capacities. We do not pay additional compensation to any director who is also an employee of the Company for service on the Board or any committee. The following table summarizes the fees paid to the non-employee directors. 152007.2008. This committee is responsible for supervising the investment of the assets of the Company’s United States retirement plans and appointing, reviewing the performance of and, if appropriate, replacing, the trustee of the Company’s pension trust and the investment manager responsible for managing the funds of the trust. The committee also has certain administrative responsibilities for our United States retirement plans.20072008 of approximately $143,000.$161,000.Summary
Annual Retainer
$100,000
The annual retainer is payable 50 percent in cash and 50 percent in shares of our Common Stock. Directors may elect to receive up to 100 percent of their annual retainer, including committee chair retainer, in stock.
We calculate the number of shares paid to the directors for their annual retainer by dividing their retainer fee by the closing price of a share of our stock on the last business day preceding the July 1 payment date.
Committee Chair Retainers
$20,000: Audit Committee
$10,000: Compensation and Management Resources Committee
$10,000: Finance and Strategic Planning Committee
$10,000: Nominating and Corporate Governance Committee
$10,000: Retirement Plan Committee
N/A: Executive Committee
The committee chair retainers are paid in the same form as the annual retainer.
Lead Director
$50,000 payable in the same form as the annual retainer.
Meeting Fees
$1,500 for attendance at each Board and committee meeting.
Stock Option GrantSummary of Directors’ Compensation
In 2007, the directors received a stock option award on the first business day of the fiscal year. The number of options granted was calculated by dividing $50,000 by the average of the high and low prices of a share of the Company’s Common Stock on the date of grant. The per-share exercise price of each stock option granted was equal to the fair market value of a share of Common Stock on the date of grant. The options fully vest one year following the date of grant. Vested options may be exercised for ten years from the date of grant; however, no option may be exercised more than one year following the termination of a person’s service as a director.
In fiscal 2008, the directors received a grant of 3,704 restricted stock units (“RSUs”) instead of a stock option grant. The number of RSUs granted was calculated by dividing $50,000 by the closing price of a share of our stock on the date of grant. The RSUs will vest in February 2009. Each RSU represents
Annual Retainer | $100,000 | |
The annual retainer is payable 50 percent in cash and 50 percent in shares of our Common Stock. Directors may elect to receive up to 100 percent of their annual retainer, including committee chair retainer, in stock. | ||
We calculate the number of shares paid to the directors for their annual retainer by dividing their retainer fee by the closing price of a share of our stock on the last business day preceding the July 1 payment date. | ||
Committee Chair Retainers | $20,000: Audit Committee | |
$10,000: Compensation and Management Resources Committee | ||
$10,000: Finance and Strategic Planning Committee | ||
$10,000: Nominating and Corporate Governance Committee | ||
$10,000: Retirement Plan Committee | ||
N/A: Executive Committee | ||
The committee chair retainers are paid in the same form as the annual retainer. | ||
Lead Director | $50,000 payable in the same form as the annual retainer. | |
Meeting Fees | $1,500 for attendance at each Board and committee meeting. | |
Restricted Stock Units | In fiscal 2008, the directors received a grant of 3,704 restricted stock units (“RSUs”). The number of RSUs granted was calculated by dividing $50,000 by the closing price of a share of our stock on the date of grant. The RSUs vested in February 2009, which was one year following the date of grant. Each RSU represented the right to receive one share of the Company’s common stock on the vesting date. | |
In fiscal 2009, the directors received a grant of 6,869 RSUs, calculated in the same manner as the 2008 grant. The RSUs granted in 2009 will vest one year following the date of grant in February 2010. | ||
Deferral Election
Non-employee directors may elect to receive all or a portion of the cash component of their annual retainer fee, including committee chair retainers, in the form of deferred stock units or to have these amounts placed in an interest account. Directors may also elect to receive all or part of the stock component of their annual retainer fee in the form of deferred stock units. The interest account is a hypothetical investment account bearing interest at the rate of 120 percent 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.
Miscellaneous
Directors and their immediate families are eligible to receive the same discount on purchases of merchandise from our stores, catalogs and Internet sites that is available to Company employees. The Company reimburses non-employee directors for their reasonable expenses in attending meetings of the Board and committees, including their transportation expenses to and from meetings, hotel accommodations, and meals.
Fiscal 20072008 Director Compensation
The amounts paid to each non-employee director for fiscal 2007,2008, including amounts deferred under the Company’s stock plans, and the optionsRSUs granted to each director are reported in the tables below.
16
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(a) | (b) | (c) | (d) | (e) | (f) | ||||||||||||||||||||||||||||||
Name | Fees Earned | Stock | Option | Change in | Total | ||||||||||||||||||||||||||||||
P. Crawford (4) |
| 7,513 |
| 49,987 |
| 10,680 |
| — |
| 68,180 | |||||||||||||||||||||||||
N. DiPaolo |
| 92,670 |
| 55,830 |
| 10,680 |
| — |
| 159,180 | |||||||||||||||||||||||||
A. Feldman |
| 13,503 |
| 99,997 |
| 10,680 |
| — |
| 124,180 | |||||||||||||||||||||||||
P. Geier Jr. (4) |
| 28,348 |
| 20,819 |
| 10,680 |
| — |
| 59,847 | |||||||||||||||||||||||||
J. Gilbert Jr. |
| 90,006 |
| 59,994 |
| 10,680 |
| 4,988 |
| 165,668 | |||||||||||||||||||||||||
M. McKenna |
| 24,003 |
| 99,997 |
| 10,680 |
| — |
| 134,680 | |||||||||||||||||||||||||
J. Preston |
| 89,686 |
| 69,564 |
| 10,680 |
| — |
| 169,930 | |||||||||||||||||||||||||
D. Schwartz |
| 77,000 |
| 54,331 | (5) |
|
| 10,680 |
| — |
| 142,011 | |||||||||||||||||||||||
C. Sinclair |
| 77,520 |
| 54,980 |
| 10,680 |
| — |
| 143,180 | |||||||||||||||||||||||||
C. Turpin |
| 18,583 |
| 106,938 | (6) |
|
| 10,680 |
| — |
| 136,201 | |||||||||||||||||||||||
D. Young |
| 24,000 |
| 108,663 | (5) |
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| 10,680 |
| — |
| 143,343 | |||||||||||||||||||||||
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(a) | (b) | (c) | (d) | (e) | (f) | ||||||||||||||||||||||||||||||
Name | Fees Earned | Stock | Option | Change in | Total | ||||||||||||||||||||||||||||||
N. DiPaolo |
| 93,003 |
| 110,001 |
| 89 |
| — |
| 203,093 | |||||||||||||||||||||||||
A. Feldman |
| 15,002 |
| 150,002 |
| 89 |
| — |
| 165,093 | |||||||||||||||||||||||||
J. Gilbert Jr |
| 94,503 |
| 110,001 |
| 89 |
| 5,987 |
| 210,580 | |||||||||||||||||||||||||
M. McKenna |
| 30,002 |
| 150,002 |
| 89 |
| — |
| 180,093 | |||||||||||||||||||||||||
J. Preston |
| 99,509 |
| 129,995 |
| 89 |
| — |
| 229,593 | |||||||||||||||||||||||||
D. Schwartz |
| 81,833 |
| 110,598 | (3) |
|
| 89 |
| — |
| 192,520 | |||||||||||||||||||||||
C. Sinclair (4) |
| 18,344 |
| 22,908 |
| 89 |
| — |
| 41,341 | |||||||||||||||||||||||||
C. Turpin. |
| 43,583 |
| 128,229 | (5) |
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| 89 |
| — |
| 171,901 | |||||||||||||||||||||||
D. Young |
| 28,167 |
| 165,145 | (3) |
|
| 89 |
| — |
| 193,401 | |||||||||||||||||||||||
Notes to Director Compensation Table
| ||||||||||||||||||||
(1) |
| Column (c) reflects the following three items: | ||||||||||||||||||
| • |
The fiscal 2008 compensation expense recognized by the Company for the portion of the annual retainer fees and committee chair retainer fees paid in shares of the Company’s common stock or deferred by the director, as shown in the table below. In 2008, we made the annual stock payment to each director on July 1. Under the terms of the 2007 Stock Incentive Plan, the stock payment was valued at the closing price of a share of the Company’s common stock on June 30, which was $12.45. The 2008 expense is equal to the number of shares received or deferred by the director multiplied by $12.45, the grant date fair value of the payment under FAS 123R. Directors who deferred the stock portion of their annual retainer were credited with deferred stock units on the annual payment date valued at $12.45 per unit.
Stock Portion of Retainer Fee
Name
Number of
Shares
Number of
Deferred
Stock Units
Expense
($)
N. DiPaolo
4,819
—
59,997
A. Feldman
8,032
—
99,998
J. Gilbert Jr.
4,819
—
59,997
M. McKenna
8,032
—
99,998
J. Preston
6,425
—
79,991
D. Schwartz
—
4,250.3349
52,917
C. Sinclair
1,840
—
22,908
C. Turpin
—
4,016.0643
50,000
D. Young
—
8,032.1285
100,000
• | The fiscal 2008 compensation expense
| |||||||||||||||||||
17
Deferred Stock Units
Director
05/04/0701/08
FMV:
$24.10512.25
05/02/08
FMV:
$13.21
07/02/0701/08
FMV:
$21.8012.48
08/03/0701/08
FMV:
$17.0615.10
11/02/0710/01/08
FMV:
$14.3516.15
10/31/08
FMV:
$14.62
01/08/0830/09
FMV:
$11.84
02/01/08FMV:$13.947.36
Total # of
Units
Credited in20072008
Total # of
Units
Held at02/02/0801/31/09
D. Schwartz
35.5843—
2,293.5779
67.345
80.6497106.9983
—
83.7449
2,560.9018
9,422.9817
C. Turpin
31.3817
4,587.1559
78.1814
93.627
527.8716
101.9537
5,420.1713
11,471.8275
D. Young
71.1686
4,587.1559
134.69
161.2994136.8905
—
167.4899142.7894
5,121.8038286.5488
18,845.96454,923.5619
14,346.5436
C. Turpin
510.2014
136.0564
500.8013
165.2479
386.9969
176.3392
353.8764
6,245.5835
17,717.4140
D. Young
—
213.9966
—
269.1267
—
280.7238
563.3548
9,359.3304
28,205.2949
| ||||||||||||||||||||
| ||||||||||||||||||||
• |
|
| ||||||||||||||||||
Restricted Stock Units
|
|
|
|
| ||||||||||
Name | Number of RSUs | Number of RSUs | ||||||||||||
N. DiPaolo |
| 3,704 |
| 3,704 | ||||||||||
A. Feldman |
| 3,704 |
| 3,704 | ||||||||||
J. Gilbert Jr. |
| 3,704 |
| 3,704 | ||||||||||
M. McKenna |
| 3,704 |
| 3,704 | ||||||||||
J. Preston |
| 3,704 |
| 3,704 | ||||||||||
D. Schwartz |
| 3,704 |
| 3,704 | ||||||||||
C. Sinclair |
| 3,704 |
| - 0 - | ||||||||||
C. Turpin |
| 3,704 |
| 3,704 | ||||||||||
D. Young |
| 3,704 |
| 3,704 | ||||||||||
| ||||||||||||||||||||
|
| No stock options were granted to the nonemployee directors in 2008. The | ||||||||||||||||||
17
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Name | Stock Options Granted | Exercise Price ($) | Grant Date Fair | Options | ||||||||||||||||||||||||
P. Crawford(4) |
| 2,208 |
| 22.635 |
| 10,768 |
| 23,312 | ||||||||||||||||||||
N. DiPaolo |
| 2,208 |
| 22.635 |
| 10,768 |
| 16,542 | ||||||||||||||||||||
A. Feldman |
| 2,208 |
| 22.635 |
| 10,768 |
| 6,314 | ||||||||||||||||||||
P. Geier Jr.(4) |
| 2,208 |
| 22.635 |
| 10,768 |
| 23,312 | ||||||||||||||||||||
J. Gilbert Jr. |
| 2,208 |
| 22.635 |
| 10,768 |
| 25,520 | ||||||||||||||||||||
M. McKenna |
| 2,208 |
| 22.635 |
| 10,768 |
| 4,287 | ||||||||||||||||||||
J. Preston |
| 2,208 |
| 22.635 |
| 10,768 |
| 25,520 | ||||||||||||||||||||
D. Schwartz |
| 2,208 |
| 22.635 |
| 10,768 |
| 25,520 | ||||||||||||||||||||
C. Sinclair |
| 2,208 |
| 22.635 |
| 10,768 |
| 25,520 | ||||||||||||||||||||
C. Turpin |
| 2,208 |
| 22.635 |
| 10,768 |
| 20,815 | ||||||||||||||||||||
D. Young |
| 2,208 |
| 22.635 |
| 10,768 |
| 20,815 | ||||||||||||||||||||
N. DiPaolo
16,542
A. Feldman
6,314
J. Gilbert Jr.
25,520
M. McKenna
4,287
J. Preston
25,520
D. Schwartz
25,520
C. Sinclair
8,336
C. Turpin
20,815
D. Young
20,815
| ||||||||||||||||||||
|
| |||||||||||||||||||
|
| Stock payment deferred in the form of stock units issued under Foot Locker’s stock plan. | ||||||||||||||||||
| ||||||||||||||||||||
| Term as a director ended on May 21, 2008. | |||||||||||||||||||
(5) |
| Stock payment and portion of cash payment for fiscal | ||||||||||||||||||
18
Directors’ Retirement Plan The Directors’ Retirement Plan was frozen as of December 31, 1995. Consequently, only Jarobin Gilbert Jr. and James E. Preston are entitled to receive a benefit under this plan when their service as directors ends because they had completed at least five years of service as directors on December 31, 1995. Messrs. Gilbert and Preston will receive an annual retirement benefit of $24,000 for a period of 10 years after they leave the Board or until their death, if sooner. Directors and Officers Indemnification and Insurance We have purchased directors and officers liability and corporation reimbursement insurance from a group of insurers comprising ACE American Insurance Co., Zurich American Insurance Co., St. Paul Mercury Insurance, RLI Insurance Co., Federal Insurance Co., The Company has entered into indemnification agreements with its directors and officers, as approved by shareholders at the 1987 annual meeting. Richard Mina, a former executive officer of the Company, requested indemnification with regard to an investigation being conducted by the Company. In February 2009, the Board of Directors authorized the indemnification of Mr. Mina for this investigation, subject to the provisions of the indemnification agreement. To date, the Company has paid fees and expenses of $27,199 for indemnification of Mr. Mina. Compensation Discussion and Analysis This is a discussion and analysis of our compensation program as it applies to the executive officers named in the Summary Compensation Table on Page AIG Cat Excess Liability International, Allied World Assurance Company,Axis Insurance Co., Navigators Insurance Co., XL Bermuda Ltd., and XL Bermuda Ltd.Valiant Insurance Co. 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 1312 months, from SeptemberOctober 12, 20072008 until October 12, 2008.2009. The total annual premium for these policies, including fees, is $1,558,182.$1,471,250. 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 a group of insurers comprising Arch Insurance Co., St. Paul Mercury Insurance Co., Continental Casualty Co. and RLI Insurance Co., which have a total premium, including fees, of $483,168$455,052 for the 13-month12-month period ending October 12, 2008.2009.29.32.18
Summary This performance resulted in the payment of annual bonuses to the named executive officers discussed below. We also took • We increased the annual base • 19In 2007,While we reported a net loss on a GAAP basis of $79 million for 2008, our income from continuing operations, before non-cash impairment charges and store closing expenses, was $106 million, a 71 percent improvement over the comparable income from continuing operations in 2007. (Income from continuing operations before non-cash impairment charges and store closing expenses is a non-GAAP financial measure. Our Form 10-K for the 2008 fiscal year, which is available on our website www.footlocker-inc.com, contains a schedule reconciling these amounts with our GAAP income.)the followingcertain other actions with regard to 2008 compensation for our named executive officers:officers. salariessalary of twoone of the named executive officers (Mr. MinaHalls) by $100,000—$50,000 at the time of annual salary reviews and Mr. McHugh) by $25,000 each.an additional $50,000 later in the year when he assumed additional responsibilities. The base salaries of the other named executive officers remained unchanged from 2006.2007. AsWe paid an annual bonus to Matthew D. Serra, our Chief Executive Officer, of $1,728,300, or 115 percent of his base salary, compared to a target pay-out of 125 percent of base salary. We paid annual bonuses for 2008 to the Company did not achievesenior vice presidents of 72 percent of base salary, compared to a target pay-out of 75 percent of base salary. These pay-outs were made at a level slightly below target bonus, and were the result of the Company’s pre-tax income and return-on-
invested-capital performance in 2008 compared to performance targets • We paid an annual bonus to Mr. Halls of $312,700, or 44 percent of base salary, compared to a target of 75 percent of base salary. This pay-out was made at a level between threshold and target bonus, and was the result of the divisional profit of the divisions for which Mr. Halls had responsibility in 2008 compared to performance targets established by the Compensation • As the Company did not achieve the performance targets established by the Compensation Committee in • For 2008, as we did in 2007, we provided for an increased • We made stock option awards to • We made restricted stock awards to Objectives of our compensation program The objectives of our compensation program are to attract, motivate, and retain talented retail industry executives in order to maintain and enhance the Company’s performance and its return to shareholders. The Compensation and Management Resources Committee, currently composed of four independent directors, oversees the compensation program. What is our compensation program designed to reward and not reward? We have designed our compensation program to align the financial interests of our executives, including the named executive officers, with those of our shareholders. For that reason, it is designed to reward the overall effort and contribution of our executives as measured by the Company’s performance in relation to targets established by the Compensation Committee, more than individual performance. Key concepts underlying our program are: • Executive compensation should be balanced between annual and long-term compensation and between cash and equity-based compensation (stock options and restricted stock). • The compensation program should 20 for 2007 established by the Compensation and Management Resources Committee (“for that year.Committee”) underCommittee. Mr. Mina’s employment with the Annual Incentive Compensation Plan, we didCompany terminated prior to the end of 2008, and he was therefore not payeligible to receive an annual bonuses to any of our named executive officers.bonus payment. 20052006 under the Long-Term Incentive Compensation Plan for the 2005-20072006-2008 performance period, we did not pay long-term bonuses to any of our named executive officers. the target pay-out under the annual bonus plan for all of the named executive officers, other than the Chief Executive Officer, from 50 percent toof 75 percent of base salary. The Chief Executive Officer’s target pay-out remained 125 percent of base salary. eachfive of the named executive officers—48,500100,000 shares to the Chief Executive Officer; 30,000Officer, and 25,000 shares to each of the President—U.S.A.International and the President—International; and 20,000 shares to each of the twothree senior vice presidents. These options were priced at fair market value on the date of grant ($23.4211.66 per share) and. With regard to all of the executive officers other than Mr. Serra, these options vest in three equal installments on the first, second, and third anniversary of the grant date, subject to continued employment with us through each date. The options granted to Mr. Serra vest in two equal installments on the first anniversary of the grant date and on January 30, 2010, the final day of the term of his current employment contract, provided he continues to be employed by us on that date. In light of the 2007 performance of the U.S. retail store operations, for which he had responsibility, we did not make a stock option grant to Mr. Mina in 2008. eachfive of the named executive officers—100,00050,000 shares to the Chief Executive Officer; 40,000 shares to the President—U.S.A. and 20,000 shares to the President—International (who had received a restricted stock grant in late 2006 at the time of his promotion to that position);International; and 40,00010,000 shares to each of the senior vice presidents. With regard to all of the named executive officers other than Mr. Serra, the restrictions on these shares lapse if the executive continues to be employed by us for three years from the date of grant. The restrictions on Mr. Serra’s shares lapse on January 30, 2010, the final day of the term of his current employment contract, provided he continues to be employed by us on that date. We did not make a restricted stock grant to Mr. Mina in 2008. rewardalign the interests of executives with those of the Company’s shareholders by rewarding both efforts to increase the Company’s share price and the achievement of performance factors that contribute to the Company’s long-term health and growth (even if not immediately translated into increases in share price).
• A substantial portion of the compensation of our executives, whether paid out currently or on a long-term basis, should be dependent on the Company’s performance. performance or the performance of its stock.19
• More-senior executives should have a greater portion of their compensation at risk, whether through performance-based bonus programs or through stock price appreciation. Elements of compensation The elements of compensation for the named executive officers are: • base salary • performance-based annual cash bonus • performance-based long-term bonus, payable in cash or stock • long-term equity-based compensation consisting of stock options and restricted stock • retirement and other benefits • perquisites Why do we pay each element of compensation and how do we determine the amount for each element of compensation, or the formula that determines the amount? We establish benchmarks for base salary and total compensation for each named executive officer based upon a study conducted by Mercer, a nationally recognized compensation consultant that, for executive compensation purposes, reports directly to our Compensation Committee. These benchmarks are based upon compensation for comparable positions at national retail companies with annual sales of $1 billion to $10$11 billion. The Compensation Committee, with the advice of Mercer, has determined that these companies are the appropriate peer group for executive compensation purposes based upon the nature of their business, their revenues, and the pool from which they recruit their executives. The 2018 companies included in the study that the Compensation Committee reviewed in setting 20072008 compensation for the named executive officers were:
|
|
|
Abercrombie & Fitch Co. |
| |
AnnTaylor Stores Corp. |
| |
Brown Shoe Company, Inc. |
| |
|
| |
Dillards Inc. |
| |
Family Dollar Stores, Inc. | Finish Line Inc. | |
Genesco Inc. | Limited Brands Inc. | |
| RadioShack Corp. | |
| Saks Inc. | |
Talbots Inc. | Timberland Co. |
Two companies that were included in the peer group in 2006—Reebok International Limited2007—Claires Stores Inc. and Sports Authority Inc.Dollar General Corp.—ceased to be publicly traded companies and were not included in the peer group in 2007.2008. No companies were added to the peer group. The nameupper dollar limit of PayLess ShoeSource,revenues of peer group companies was increased from $10 billion to $11 billion as the revenues of peer company Limited Brands Inc. has subsequently been changed to Collective Brands, Inc.had risen above the $10 billion level.
The goal of the Compensation Committee is for the total compensation of each named executive officer to approximate the 75th percentile of comparable peer group compensation if the Company achieves its performance targets, with an opportunity to exceed that for outstanding performance, and with compensation falling closer to the median if the Company does not achieve its performance targets. The Compensation Committee established this goal based upon the Company’s size in relation to the other companies in the peer group and the relative complexity of our business, which includes multiple retail divisions, a direct-to-customer business, and a significant international business with operations in 21 countries.
2021
Base Salaries We pay base salaries to provide our named executive officers with current, regular compensation that is appropriate to their position, experience, and responsibilities. We benchmark base salaries for each named executive officer, other than the Chief Executive Officer, at approximately the 75th percentile of the peer companies included in the annual Mercer Performance-Based Annual Cash Bonus We pay performance-based annual cash bonuses to our named executive officers under the Annual Incentive Compensation Plan (“Annual Bonus Plan”) in order to provide incentive for them to work toward the Company’s achievement of annual performance goals established by the Compensation Committee. Target payments under the Annual Bonus Plan for named executive officers were set for study, and the base salaries of the named executive officers, other than the Chief Executive Officer, approximate this benchmark.study. The Compensation Committee has benchmarked the Chief Executive Officer’s base salary at the 90th percentile of the peer companies in light of his experience, length of service, and other opportunities that are available to him in the retail sector. We pay higher base salaries to those named executive officers with greater overall responsibility.20072008 as follows:
|
|
|
|
|
Target | Annual Bonus Range | |||
Chief Executive Officer | 125% of Base Salary |
| ||
Other Named Executive Officers | 75% of Base Salary | 18.75% to 131.25% of Base Salary |
If the Company does not achieve threshold performance, as was the case in 2007, then no annual bonus is paid. Executives who do not receive a “meets expectations” rating or higher in their annual performance review are normally ineligible to receive an annual bonus payment for that year.
In 2007, the Compensation Committee increased the target payment under the Annual Bonus Plan for the named executive officers other than the Chief Executive Officer to 75 percent of base salary from 50 percent after having reviewed the likely status of pay-outs under the Company’s incentive plans, including the Long-Term Plan, for 2007 and considering the need to provide appropriate financial incentive to the Company’s senior executive group. This also resulted in an increase in both threshold and maximum payment levels for this group. For the same reasons, the Compensation Committee continued to set the target payment under the Annual Bonus Plan at 75 percent of base salary for these named executive officers in 2008. The Chief Executive Officer’s payment levels werehave remained unchanged from the prior year.in each of those years. The Compensation Committee expects to review the appropriate target payment under the Annual Bonus Plan each year.
Our Annual Bonus Plan allows the Compensation Committee, in establishing performance targets under the plan, to choose one or more performance measures from a list of nine factors that have been approved by our shareholders. For 2007,2008, for the named executive officers other than Mr. Halls, the Compensation Committee established a performance target under the Annual Bonus Plan based upon the Company’s achievement of prescribed levels of pre-tax income and return-on-invested-capital. Seventy percent of a participant’s award is based upon the pre-tax income target and 30 percent on the return-on-invested-capitalreturn-on- invested-capital target. All bonus targets and calculations are based on pre-tax income fromthe results of continuing operations. The Annual Bonus Plan targets for 20072008 were as follows:
|
|
|
|
|
|
|
| Threshold | Target | Maximum | |||
Pre-tax income | $141.4 million | $157.1 million | $188.5 million | |||
Return-on-invested-capital | 4.6% | 4.8% | 5.3% |
|
|
|
|
|
|
|
| Threshold | Target | Maximum | |||
Pre-tax income | $359.1 million | $399 million | $478.8 million | |||
Return-on-invested-capital | 7.8% | 8.4% | 9.6% |
Thus,For example, if the Company had achieved pre-tax income of $399$157.1 million and return-on-invested-capital of 8.44.8 percent in 2007,2008, the Chief Executive Officer would have received an annual bonus of 125
22
percent of his In 2008, the Company achieved Actual Target Maximum Pre-tax income $150.6 million $157.1 million $188.5 million Return-on-invested-capital 5.2% 4.8% 5.3% This resulted in base salary and the other named executive officers (other than Mr. Halls) would have received annual bonuses of 75 percent of base salary. Bonus pay-outs are calculated on the basis of straight-line interpolation between the threshold, target, and maximum points. Asneither the threshold level of pre-tax income norfrom continuing operations slightly below the thresholdtarget level, of return-on-invested-capitaland return-on-invested capital from continuing operations slightly below the maximum level, as follows: 2007, we did not pay bonusesannual bonus payments to corporate participants in the Annual Bonus Plan for 2007.Messrs. Serra, McHugh and Bahler, and Ms. Petrucci at a level slightly below target.21
Mr. Halls’s target under the Annual Bonus Plan for As Mr. Mina was not employed by us on the bonus payment date, he was ineligible to receive an annual bonus payment. Division profit is a non-GAAP financial measure. It reflects income from continuing operations before income taxes, corporate expense, non-operating income, and net interest expense. A reconciliation of division profit to income from continuing operations is contained in the segment information footnote to our financial statements. One of the performance measures we use in determining annual bonuses, return-on-invested-capital ROIC = Average Invested Capital Operating Profit after Taxes (Numerator)= Average Invested Capital (Denominator)= Pre-tax income Average total assets +/- interest expense/income - average cash, cash equivalents, and short-term investments + implied interest portion of operating lease payments - average year-end inventory +/- Unusual/non-recurring items + 13-month average inventory = Earnings before interest and taxes (EBIT) + average estimated asset base of capitalized operating leases - Estimated income tax expense = Average Invested Capital = Operating Profit after Taxes Certain items used in the calculation of ROIC, such as the implied interest portion of operating lease payments, certain unusual or non-recurring items, average estimated asset base of capitalized operating leases, and 13-month average inventory, while calculated from the financial records of the Company, cannot be calculated from our audited financial statements. Prior to the Compensation Committee determining whether bonus targets have been achieved, the Company’s independent registered public accounting firm, at the request, and for the restricted use, of the Compensation Committee, reviews the bonus calculations. 2320072008 was based upon the achievement by the operating divisions for which he hashad responsibility at the beginning of the year of a prescribed level of division profit. (Mr. Halls’s responsibilities were expanded during the course of 2008; however, his annual bonus for 2008 was based only on the results of the divisions for which he had responsibility for the entire year. Beginning in 2009, Mr. Halls’s performance target under the Annual Bonus Plan will be the same as that for all other named executive officers.)(ROIC)(“ROIC”), is also a non-GAAP financial measure. For purposes of calculating the annual bonus, we define ROIC as follows:ROIC = Operating Profit after Taxes
The performance targets established by the Compensation Committee are based upon the business plan and budget reviewed and approved each year by the Finance and Strategic Planning Committee and the Board of Directors. In the case of Mr. Halls’s bonus target for 2008, the target slightly exceeded the combined divisional profits contained in the annual business plan and budget for the businesses for which he had responsibility. We believe that these targets are reasonably demanding, and that bonus pay-outs are correlated to Company performance, as evidenced by our pay-out history over the past five years. During that time, we have paid an annual bonus to corporate officers between threshold and target Performance-Based Long-Term Bonus We pay performance-based long-term bonuses to our named executive officers under our Long-Term Incentive Compensation Plan (“Long-Term Plan”) in order to provide incentive for them to work toward the Company’s achievement of performance goals established by the Compensation Committee for each three-year performance period. While bonuses under the Long-Term Plan may be paid in either cash or stock, in recent years, we have made these payments in cash. For many years, target payments under the Long-Term Plan for senior corporate officers have been at the following levels:once,twice, between target and maximum twice,once, and we have paid no annual bonus twice.
|
|
|
Target | Range of Payments | |
90% of Initial Base Salary | 22.5% to 180% of Initial Base Salary | |
22
If the Company does not achieve threshold performance, as was the case for the Pay-out levels are based on an executive’s rate of base salary payable in the first year of the three-year performance period. For example, if an executive’s base salary is set at $500,000 at the time executive salaries are reviewed in the first year of the performance period, that executive’s target pay-out under the Long-Term Plan would be $450,000. In addition, we adjust on a pro rata basis, the rate of base salary on which pay-out levels are based for salary increases during the performance period related to promotions. Our Long-Term Plan allows the Compensation Committee, in establishing performance targets under the plan, to choose one or both of consolidated net income or return-on-invested-capital, factors approved by our shareholders. In These performance targets are based upon the business plan and budget for the three-year period reviewed and approved by the Finance and Strategic Planning Committee and the Board of Directors. We believe that these targets are reasonably demanding, and that bonus pay-outs are correlated to Company performance, as evidenced by our pay-out history over the last five years. During that time, we have paid long-term bonuses between threshold and target once, between target and maximum In Threshold Target Maximum Three-year average return-on-invested-capital 8.9 % 10.5 % 12.1 % 2005-20072006-2008 performance period, then no long-term bonus is paid.2007,2008, the Committee established a performance target for the 2007-20092008-2010 performance period under the long-term plan based upon return-on-invested capital. Off of the planned invested capital base, the Company must achieve 80 percent of target after-tax income before a threshold-level bonus is paid, and the maximum pay-out level is reached if after-tax income reaches 120 percent of target. It should be noted that the actual invested capital base will also fluctuate, and the final pay-out for the performance period will also depend upon the invested capital base achieved during the period. Return-on-invested-capital is calculated using the same methodology as is used for the Annual Bonus Plan, as described on Page 22,23, except that, in addition, long-term bonus expense is excluded from the operating profit calculation.three times,twice, and there has been no pay-out once.twice.2005,2006, the Compensation Committee established the following return-on-invested-capital target for the 2005-20072006-2008 performance period under the Long-Term Plan:
24
|
|
|
|
|
|
| |||||||||||||||
| Threshold | Target | Maximum | ||||||||||||||||||
Three-year average return-on-invested-capital |
| 9.2 | % |
|
| 10.9 | % |
|
| 12.5 | % |
| |||||||||
As the Company did not achieve the threshold level of return-on-invested capital for the performance period, we did not pay long-term bonuses to the participants in the Long-Term Plan, including the named executive officers, for the We do not have a formal policy with regard to the adjustment or recovery of bonus payments if it is determined, at a future date, that the relevant performance measures upon which the payments are based are restated or adjusted. We have not had this situation arise, and if it were to arise, we would expect to make an evaluation at that time based upon the circumstances and the role of each individual executive in the events that gave rise to the restatement or adjustment. In preparing our financial statements for 2008, we discovered an error in the calculation of income tax expense for 2007, which resulted in a restatement of our results for 2007, pursuant to Staff Accounting Bulletin 108, that decreased our 2007 net income by approximately $6 million. As we did not pay the named executive officers annual bonuses for 2007 or long-term bonuses for the 2005-2007 performance period, this misstatement of 2007 income did not affect the amount of any bonuses paid to the named executive officers. Items Disregarded for Annual and Long-Term Bonus Calculations Under normal circumstances, the Compensation Committee has no discretion to increase annual or long-term bonus payments, which are formula-driven based upon 2005-20072006-2008 performance period.companyCompany performance, and our program for the named executive officers does not provide for discretionary adjustments based upon individual performance. The Compensation Committee has not adjusted, either upward or downward, any of the annual or long-term bonus payments to the named executive officers shown in the summary compensation table from pay-outs calculated based upon the applicable formula. The Committee has limited authority when determining bonus payments, consistent with Section 162(m) of the Internal Revenue Code, to disregard certain events that it determines to be unusual or non-recurring. When establishing the targets, the Committee normally specifies certain items that it considers to be unusual or non-recurring, and these events, if they occur, are automatically excluded when calculating payments. For example, in recent years targets have excluded the effect of acquisitions or dispositions, any non-cash impairment charges, under Financial Accounting Standard No. 144, and changes in accounting and tax rules.23In 2008, in addition to disregarding tax regulatory changes, results of the CCS business acquired during the year, and results of disposed operations, we excluded the following items in calculation of annual bonus pay-outs:
Item Pre-Tax Amount After-Tax Amount Goodwill and other intangible asset impairments $ 169 $ 123 Impairment of Northern Group note 15 15 Impairment of money market fund investment 3 3 Impairment of U.S. store long-lived assets 67 41 Long-Term Equity-Based Awards A.Stock Options We make stock option awards to our named executive officers in order to Stock option awards of the same size are normally made each year to 25
(in millions)
(in millions) strengthenmore closely align the tie between an officer’s compensation opportunity and the shareholders’ interest in increasing the valueinterests of our common stock. Until the organizational meetingnamed executive officers with those of the Board of Directors following the 2007 Annual Meeting, equity-basedour shareholders. Equity-based awards including stock option awards, were the responsibility of the Compensation Committee’s Stock Option Plan Subcommittee, which was composed entirely of independent directors. Since then, equity-based awards have beenare the responsibility of the Compensation Committee, which is also composed entirely of independent directors. The annual stock option and restricted stock awards for 2007 were made in March 2007 and were made by the Stock Option Plan Subcommittee. For ease of understanding, in the discussion that follows, we will refer to the Compensation Committee having certain responsibilities or taking certain actions with regard to equity-based awards. Prior to May 30, 2007, however, those responsibilities were vested in, and actions taken by, the Subcommittee.executivesnamed executive officers holding comparable positions.positions, with larger awards being made to those with greater responsibility. The Compensation Committee awards stock options with exercise prices equal to the fair market value of our stock on the date of grant. Since the approval ofUnder the 2007 Stock Incentive Plan by shareholders at the 2007 Annual Meeting, all future stock awards will be made under that plan. Under the 2007 Plan, fair market value is defined as the
closing price B.Restricted Stock Awards We make restricted stock awards to our named executive officers in order to In recent years, the Compensation Committee has made annual grants of restricted stock to the Company’s C.Stock Ownership Guidelines We have adopted stock ownership guidelines for our directors and senior executives, including the named executive officers. on the grant date. Awards made prior to the date of the 2007 Annual Meeting, including the annual stock option awards for 2007, were made under prior plans, which defined fair market value of the shares as the average of the high and low prices of our stock on the New York Stock Exchange on the grant date. The Compensation Committee has not granted options with an exercise price of less than the fair market value on the grant date, as defined in the relevant plans.date. Options normally vest at the rate of one-third of the total grant per year over the first three years of the ten-year option term, subject to accelerated vesting in certain circumstances. The Compensation Committee does not normally consider an executive’s gains from prior stock awards in making new awards.strengthenmore closely align the tie between an officer’s compensation opportunity and the shareholders’ interest in increasing the valueinterests of our common stock,named executive officers with those of our shareholders, to provide our executives with an opportunity to increase their equity ownership, and to ensure the retention of key executives.three most-senior executives—the Chief Executive Officer,Officer. In 2008, the President-U.S.A., and the President-International. With regardCommittee also made restricted stock awards to other executives, includingfour of the other named executive officers, it has madeofficers. In making these grants, from time to time to individually selected executives in order to recognize outstandingthe Committee considers an executive’s past performance, to recognize an executive’s expected ability to contribute to the Company’s performance in the future, or for retention.retention, and the desire to provide equity-based compensation through both stock options and restricted stock. When making restricted stock awards for retention purposes, the Compensation Committee considers an executive’s prior awards and their vesting schedule. The restrictions on restricted stock normally lapse a specified period following the grant date (normally three years). The holders of restricted stock receive dividends on their restricted shares at the time the dividends are paid.In 2007, after reviewing the vesting schedule of prior awards held by the named executive officers, the Subcommittee made grants of restricted stock to all of the named executive officers.TheseThe target date for compliance with these guidelines is February 2011. The guidelines require that the Chief Executive Officer own shares having a value at least equal to four times his base salary and that the other named executive officers own shares having a value at least equal to two times base salary. In determining whether an executive meets the guidelines, we consider owned shares and restricted stock, but we do not consider stock options. As of24
the end of 2007, all of the named executive officers met these stock ownership guidelines. In light of the decline in our share price in 2008, however, all of the named executive officers subject to the guidelines at year-end had fallen below the prescribed ownership level. As of March 27, 2009, all of the named executive officers subject to the guidelines were in compliance with the guidelines. When the guidelines were adopted in 2006, executives were given five years, until February 2011, to meet the ownership levels. We do not permit our executive officers to take short or long positions in our shares; however, we do not otherwise have a formal policy with regard to executive officers hedging their economic interest in Retirement and Other Benefits A.Retirement Plan and Excess Cash Balance Plan All United States-based associates of the Company who meet the eligibility requirements are participants in the Foot Locker Retirement Plan. The Retirement Plan and the method of calculating benefits payable under it are described on Page 26companyCompany stock or options. To our knowledge, none of the named executive officers hedged their position in our shares or options during 2007,2008, although some of the named executive officers may hold their shares in accounts that permit margin loans to the executive.49.54. All of the named executive officers are participants in the Retirement Plan. The Internal Revenue Code limits the amount of compensation that may be taken into consideration in determining an individual’s retirement benefits. Therefore, those participants in the Retirement Plan, including the named executive officers, whose compensation exceeds the Internal Revenue ServiceCode limits are also participants in the Excess Cash Balance Plan, described on Page 49,54, which pays the difference between the amount a participant receives from the Retirement Plan and the amount the participant would have received were it not for the Internal Revenue ServiceCode limits.
B.401(k) Plan The Company maintains a 401(k) Plan for its eligible U.S. associates, and all of the named executive officers participate in it. The Plan permits participants to contribute the lesser of 40 percent of eligible compensation or the limit prescribed by the Internal Revenue C.Supplemental Executive Retirement Plan The Company maintains a Supplemental Executive Retirement Plan, described on Page Based upon the Company’s performance in The Retirement Plan takes into account only base salary and annual bonus in determining pension benefits. Credits to our Supplemental Executive Retirement Plan are based only on base salary and annual bonus. Therefore, stock awards have no effect on the calculation of pension payments.ServiceCode to the 401(k) Plan on a before-tax basis.Thebasis. The Company will match 25 percent of the first 4 percent of pay that is contributed to the 401(k) Plan, and the Summary Compensation Table on Page 2932 includes, in All Other Compensation, the amount of the company-matchCompany match for each of the named executive officers. The companyCompany match is made in shares of Company stock, valued on the last trading day of the plan year.50,55, for certain senior officers of the Company and other key employees, including the named executive officers. The Supplemental Plan is an unfunded plan administered by the Compensation Committee, which sets an annual targetedtarget incentive award for each participant consisting of a percentage of salary and annual bonus based on the company’sCompany’s performance against target. Contributions may range from 4 percent to 12 percent of salary and annual bonus, depending on the company’sCompany’s performance against the established target, with an 8 percent contribution being made for target performance. The target established by the Compensation Committee under the Supplemental Plan is normally the same as the target performance under the annual bonus plan. Participant accounts accrue simple interest at the rate of 6 percent annually. The Supplemental Plan also provides for the continuation of medical insurance benefits to vested participants following their retirement.2007,2008, a credit of 47.65 percent of 20072008 base salary and annual bonus was made to the Supplemental Plan for each of the named executive officers. As of the end of 2007,2008, the account balances of the named executive officers ranged from $50,341$122,306 for Mr. McHugh to $2,256,933$2,639,252 for Mr. Serra. Under the terms of the Supplemental Plan, executives are vested in their account balances based upon a combination of age and service, and ofservice. Of the named executive officers, Messrs. Serra, Mina, and Bahler are currently vested.vested, and Mr. Mina was vested at the time of the termination of his employment.25
Perquisites We provide the named executive officers with certain perquisites, which the Compensation Committee believes are reasonable and consistent with its overall objective of attracting and retaining talented retail industry executives. The Company provides the named executive officers with an automobile allowance, financial planning, medical expense reimbursement, annual physical, supplemental long-term disability insurance, and life insurance. In addition, the Company provides Mr. Serra with a driver and reimburses Mr. Halls for a limited amount of travel expenses of his spouse when she accompanies him on business trips. Given Mr. Halls’s responsibility for our international businesses and the amount of time he spends traveling outside the United States on We generally do not gross up executives for the income tax liability they incur due to the perquisites they receive. Given Mr. Halls’s extensive international travel obligations, as an exception to our general policy, through the end of 2008, we grossed up Mr. Halls for his income tax liability related to spousal travel. We have discontinued this as of the beginning of 2009. How does each element of compensation fit into our overall compensation objectives? How does each element affect our decisions regarding other elements? As stated at the beginning of this discussion and analysis, the objectives of our compensation program are to attract, motivate, and retain talented retail industry executives in order to maintain and enhance the Company’s performance and its return to shareholders. 27companyCompany business, we consider this to be a reasonable perquisite uniquely applicable to his situation and responsibilities.
• Base salaries fit into these compensation objectives by attracting and retaining talented retail company executives by paying them base salaries commensurate with their position, experience and responsibilities. • The performance-based annual and long-term cash bonus plans are designed to reward executives for enhancing the • Long-term equity-based awards (stock options and restricted stock) are designed to reward executives for increasing our return to our shareholders through increases in our stock price, and restricted stock awards may, in addition, serve to help retain key executives. Base salaries of named executive officers rarely change materially from year-to-year unless there has been a change in responsibility or other special factors apply. As discussed above, the Compensation Committee continued for 2008 the increased Compensation Plans and Risk We believe that our compensation program encourages our named executive officers to take energetic action to improve the Company’s performance without encouraging them to take undue risk. The cash incentive elements of the program—annual bonus and long-term bonus—are paid based upon performance as compared to the Company’s annual and three-year business plans, which are prepared each year by the Company’s management and reviewed and approved by the Finance and Strategic Planning Committee and the Board of Directors. While in some years these business plans have proven to be aggressive—as shown in hindsight when the plans are not achieved and bonuses are not paid—our history suggests that, on balance, they are reasonably achievable under normal business conditions. This encourages management to manage the business well without pressuring them to take undue risks in order to obtain a bonus payment. Our equity-based compensation for the named executive officers is designed with a similar goal in mind. Equity grants are relatively modest in relation to overall compensation. Stock options normally vest ratably over a three-year period and have a 10-year term, reducing the risk that an executive will take short-term action to inflate the price of the Company’s stock for a brief period. Restricted stock awards normally vest after three years of continued service, and do not depend upon achieving a pre-set performance goal. In addition, there are certain other factors related to our compensation programs for the named executive officers that we believe help reduce the likelihood that compensation opportunity will encourage our executives to take undue risk: • As the bonus targets are based on the business plan, any significant deviation from the plan undertaken by management during the course of the year must be reviewed and approved by the Board of Directors. • As a retail company, we believe that one of the larger risks we run is to encourage management to achieve profit without taking into account the capital used, particularly working capital invested in inventory. We have therefore designed our bonus plans for senior management, including the named executive officers, to take into account return-on-invested-capital as well as pre-tax profit in determining whether a bonus will be paid. • We have designed our plans so that executives who receive a “Not Meeting Expectations” or “Unsatisfactory” rating under the Company’s annual performance appraisal process are not eligible to receive a bonus payment. This helps prevent an individual executive from taking any action inconsistent with the business plan or otherwise exposing the Company to undue risk. 28 company’sCompany’s performance through the achievement of performance targets. the annual bonus target payment for the named executive officers other than Mr. Serra for 2007.Serra. Long-term bonus target payments, as a percentage of base salary, have been consistent based upon position during the prior three-year period. Mr. Serra’s target bonus payments were the subject of negotiation between him and the companyCompany and are specified in his employment agreement. In determining total compensation, stock options are valued by the Committee’s outside compensation consultant using the Black-Scholes model. Restricted stock awards are valued based upon the share price at the time of grant.
• Finally, cash incentive payments and equity grants are not outsized in relation to base salary. At target, the Chief Executive Officer has the opportunity to earn 125 percent of his base salary in annual bonus and 90 percent of his base salary in long-term bonus. Comparable percentages for the other named executive officers are 75 percent and 90 percent. Compensation Committee Procedure The Compensation Committee At the first meeting, held in February, the Committee reviewed a report from its outside compensation consultant on the Based upon the material reviewed and the discussion of the Committee at this meeting, our Sr. Vice President—Human Resources, working with our Chairman of the Board and Chief Executive Officer, then prepared compensation recommendations to the Committee, covering all elements of compensation, for all corporate officers and heads of our operating divisions, other than the Chief Executive Officer heldnormally holds two scheduled meetings in 2007 for the purpose of considering executive compensation. In 2008, as discussed below, the Committee held three meetings for this purpose.company’sCompany’s executive compensation program, general executive compensation trends, trends in the retail industry, and specific background information on each senior management position.himself. The Sr. Vice President—Human Resources and the Sr. Vice President and General Counsel then met withhimself, which were forwarded to the Chair of the Compensation Committee to review these recommendations. Thefor his review. There were also discussions between the Chairman of the Board and Chief Executive Officer participated in a portionand the Chair of this meeting.the Compensation Committee with regard to these proposals. Based upon input from the Chair of the Compensation Committee, the Human Resources Department then finalized these recommendations including a recommendation for compensation for the Chairman of the Board and Chief Executive Officer, and prepared material for review by the Compensation Committee.26
The Compensation Committee At this meeting the Except in the case of promotions or other unusual circumstances, the Compensation Committee considers stock awards only at this meeting, which is normally held within a few weeks following the issuance of the Company’s full-year earnings release for the prior year. It is also at this meeting that the Compensation Committee determined whether performance targets under the Annual Bonus Plan for the prior year and under the Long-Term Incentive Compensation Plan that ended in the prior year had been In In 2008, the Compensation Committee held a third meeting, in the fall, attended by its outside compensation consultant, to discuss possible changes to the executive compensation program to take effect in 2009. After consideration, the Committee decided not to make any changes to the program. 29 and the Stock Option Plan Subcommittee then held a second regularly scheduled meeting in late March to consider these recommendations and set compensation for the company’sCompany’s executives. At this meeting, the Committee reviewed a tally sheet that set out all elements of proposed compensation for each of the company’sCompany’s senior executives, including the named executive officers, in order to assist in its evaluation of the compensation proposals for 2007. 2008.Compensation Committee also reviewed separate tally sheetsdiscussed among themselves (with the Sr. Vice President, General Counsel and Secretary also present) compensation for a representative sample of senior executives, including twothe Chairman of the named executive officers, that summarized payments thatBoard and Chief Executive Officer for 2008, and decided to make the executives would receive if their employment withstock option and restricted stock awards to him shown in the Company were terminated under various circumstances in order to confirm the Committee’s understanding of the Company’s severance arrangements with its senior executives.table on Page 34.achieved;achieved, determined the amount of annual and long-term bonus pay-outs;pay-outs, adjusted base salaries for the upcoming year, and established targets under the Annual and Long-Term Plans for the upcoming year and three-year performance period.2007,2008, the SubcommitteeCommittee made all stock option and restricted stock awards to the named executive officers at its regularly scheduled meeting in March 2007.March. The Compensation Committee has delegated authority to its Chair to approve stock option awards of up to 25,000 shares to any single individual other than a corporate officer. The Chair generally uses this authority to approve stock option grants made during the course of the year in connection with promotions or new hires. In 2007,2008, the Chair used this authority to approve grants of options to fourthree executives, none of whom was a named executive officer, to purchase a total of 68,00022,000 shares. Those options are priced at fair market value on the date the Chair signs the approval. Neither the Compensation Committee nor its Chair has delegated authority to management to make stock option or restricted stock awards.
The Compensation Committee directly retains Mercer as its consultant on executive compensation matters. In addition to advising the Committee, other consultants and employees within Mercer provide U.S. and Canadian pension administration services to the Executive Employment Agreements As more fully described on Pages Our employment agreements with the named executive officers provide for severance payments to the executive if we terminate the executive’s employment without cause or if we give the executive good reason to terminate employment. These payments to the named executive officers, calculated as if termination of employment occurred at the end of our last fiscal year, are set out in the tables on Pages The named executive officers other than Mr. Serra, whose arrangements are discussed in the next paragraph, receive an enhanced severance payment if the executive’s employment is terminated without cause or if the executive terminates employment for good reason within two years following a company,Company, and in 20072008 fees paid to Mercer for advising the Committee represented approximately 915 percent of total fees paid by the Company to Mercer. In preparing its material for the Compensation Committee, Mercer consults with the Company’s Chairman of the Board and Chief Executive Officer, Sr. Vice President—Human Resources, Sr. Vice President and General Counsel, and Vice President—Human Resources.3639 to 38,42, we have employment agreements with each of our named executive officers. In this discussion and analysis, as well as elsewhere in this proxy statement, we refer to employment agreements we had in place with our named executive officers during 2007, which continue to be in place on the date of this proxy statement. During the course of 2008, we expectentered into a new agreement with Mr. Serra, our Chief Executive Officer, solely to entermake changes to comply with Internal Revenue Code Section 409A. In 2008, we also entered into new or amended agreements with ourthe other named executive officers in order to make changes required to comply with Internal Revenue Code SectionsSection 409A and Section 162(m), to make certain provisions consistent in our executive employment agreements, and to make other changes.3943 to 48.53.change inchange-in- control. For an executive to receive the enhanced severance payment, two events must occur: first, employment must be terminated for one of the specified reasons, and second, this termination must27
occur within two years following a change-in-control. We believe that these provisions, which we have had in place for a number of years, provide appropriate protection to our executives, comparable to that available at peer companies, and, with regard to the enhanced severance following a change-in-control, protect us from losing key executives during a period when a change-in-control may be threatened or pending. Mr. Serra’s employment agreement also provides for an enhanced severance payment if his employment is terminated without cause or if he terminates his employment for good reason within two years following a None of the named executive officers, other than Mr. Serra, is entitled to a gross-up payment upon a change-in-control. As noted above, Mr. Serra’s employment agreement has not been materially modified and the gross-up provision included in Mr. Serra’s employment agreement has remained unchanged. Accounting and Tax Considerations While we review both the accounting and tax effects of various components of compensation, these effects are not a significant factor in the Compensation Committee’s allocation of compensation among the different components. In general, it is our position that compensation paid to executive officers 30change in control.Inchange-in-control. In addition, his agreement provides that, following a change-in-control, there is a 30-day period during which Mr. Serra may elect to terminate his employment and receive this enhanced severance payment. We believe that this payment mechanism, which has been in Mr. Serra’s employment agreement since he became our Chief Executive Officer, is comparable to that provided to many chief executive officers of public companies and benefits us, if a potential change-in-control were to arise, by allowing him to focus fully on the best interests of our Company and shareholders while a change-in-control is pending without being distracted by concerns about his personal situation.Mr. Serra, Mr. Halls, and Mr. MinaAll of the named executive officers have agreed in their employment contracts not to compete with the Company for two years following the termination of employment and not to hire companyCompany employees during that same period. Mr. Bahler and Mr. McHugh have agreed to the same restriction for a one-year period. This restriction does not apply following a change-in-control.
should be fully deductible for U.S. tax purposes, and we have structured our bonus and option programs so that payments made under them are deductible. In certain instances, however, we believe that it is in the The Compensation and Management Resources Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on that review and discussion, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. James E. Preston,Chaircompany’sCompany’s best interests, and that of its shareholders, to have the flexibility to pay compensation that is not deductible under the limitations of Section 162(m) of the Internal Revenue Code in order to provide a compensation package consistent with our program and objectives. The portion of Mr. Serra’s base salary that exceeds $1,000,000, the value of restricted stock awards made to him, and potentially a portion of the value of restricted stock awards made to one or more of the other named executive officers, are not expected to be deductible.
Alan D. FeldmanChristopher A. SinclairMatthew M. McKenna
Cheryl Nido Turpin2831
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(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
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Name and Principal Position(1) | Year | Salary | Bonus | Stock | Option | Non-Equity | Change | All Other | Total |
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Matthew Serra |
| 2007 |
| 1,500,000 |
| — |
| 1,613,477 |
| 444,589 |
| — |
| 227,515 |
| 75,717 |
| 3,861,298 |
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Chairman, President |
| 2006 |
| 1,500,000 |
| — |
| 1,637,369 |
| 679,752 |
| 1,547,582 |
| 225,627 |
| 82,573 |
| 5,672,903 |
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and CEO |
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Robert McHugh |
| 2007 |
| 518,750 |
| — |
| 517,331 |
| 116,289 |
| — |
| 34,348 |
| 20,211 |
| 1,206,929 |
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Senior VP and CFO |
| 2006 |
| 500,000 |
| — |
| 480,033 |
| 146,012 |
| 272,839 |
| 34,550 |
| 23,447 |
| 1,456,881 |
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Richard Mina |
| 2007 |
| 868,750 |
| — |
| 1,140,060 |
| 251,060 |
| — |
| 137,457 |
| 49,370 |
| 2,446,697 |
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President and CEO– |
| 2006 |
| 837,500 |
| — |
| 1,342,247 |
| 365,167 |
| 609,418 |
| 127,945 |
| 49,453 |
| 3,331,730 |
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Foot Locker, Inc.– |
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USA |
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Ronald Halls |
| 2007 |
| 650,000 |
| — |
| 537,128 |
| 278,443 |
| — |
| 50,217 |
| 292,142 |
| 1,807,930 |
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President and CEO– |
| 2006 |
| 528,409 |
| 250,000 |
| 215,406 |
| 226,254 |
| 141,252 |
| 47,111 |
| 29,119 |
| 1,437,551 |
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Foot Locker, Inc.– |
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International |
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Gary Bahler |
| 2007 |
| 524,975 |
| — |
| 302,531 |
| 138,485 |
| — |
| 92,659 |
| 36,080 |
| 1,094,730 |
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Senior VP, General |
| 2006 |
| 517,400 |
| — |
| 270,925 |
| 177,051 |
| 380,724 |
| 86,081 |
| 32,604 |
| 1,464,785 |
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Counsel and Secretary |
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Name and Principal Position(1) | Year | Salary | Bonus | Stock | Option | Non-Equity | Change | All Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Matthew Serra |
| 2008 |
| 1,500,000 |
| — |
| 1,129,402 |
| 341,212 |
| 1,728,339 |
| 417,593 |
| 245,964 |
| 5,362,510 | |||||||||||||||||||||||||||||||||||||||||||||
Chairman, President |
| 2007 |
| 1,500,000 |
| — |
| 1,613,477 |
| 444,589 |
| — |
| 227,515 |
| 75,717 |
| 3,861,298 | |||||||||||||||||||||||||||||||||||||||||||||
and CEO |
| 2006 |
| 1,500,000 |
| — |
| 1,637,369 |
| 679,752 |
| 1,547,582 |
| 225,627 |
| 82,573 |
| 5,672,903 | |||||||||||||||||||||||||||||||||||||||||||||
Robert McHugh |
| 2008 |
| 525,000 |
| — |
| 523,656 |
| 85,832 |
| 376,464 |
| 82,615 |
| 300,653 |
| 1,894,220 | |||||||||||||||||||||||||||||||||||||||||||||
Senior VP and CFO |
| 2007 |
| 518,750 |
| — |
| 517,331 |
| 116,289 |
| — |
| 34,348 |
| 20,211 |
| 1,206,929 | |||||||||||||||||||||||||||||||||||||||||||||
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| 2006 |
| 500,000 |
| — |
| 480,033 |
| 146,012 |
| 272,839 |
| 34,550 |
| 23,447 |
| 1,456,881 | |||||||||||||||||||||||||||||||||||||||||||||
Ronald Halls |
| 2008 |
| 704,167 |
| — |
| 627,928 |
| 167,251 |
| 312,675 |
| 102,678 |
| 533,847 |
| 2,448,546 | |||||||||||||||||||||||||||||||||||||||||||||
President and CEO– |
| 2007 |
| 650,000 |
| — |
| 537,128 |
| 278,443 |
| — |
| 50,217 |
| 292,142 |
| 1,807,930 | |||||||||||||||||||||||||||||||||||||||||||||
Foot Locker, Inc.– |
| 2006 |
| 528,409 |
| 250,000 |
| 215,406 |
| 226,254 |
| 141,252 |
| 47,111 |
| 29,119 |
| 1,437,551 | |||||||||||||||||||||||||||||||||||||||||||||
International |
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Gary Bahler |
| 2008 |
| 524,975 |
| — |
| 344,856 |
| 95,441 |
| 376,446 |
| 147,421 |
| 327,999 |
| 1,817,138 | |||||||||||||||||||||||||||||||||||||||||||||
Senior VP, General |
| 2007 |
| 524,975 |
| — |
| 302,531 |
| 138,485 |
| — |
| 92,659 |
| 36,080 |
| 1,094,730 | |||||||||||||||||||||||||||||||||||||||||||||
Counsel and |
| 2006 |
| 517,400 |
| — |
| 270,925 |
| 177,051 |
| 380,724 |
| 86,081 |
| 32,604 |
| 1,464,785 | |||||||||||||||||||||||||||||||||||||||||||||
Secretary |
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Laurie Petrucci |
| 2008 |
| 468,573 |
| — |
| 344,656 |
| 95,441 |
| 336,002 |
| 84,802 |
| 319,743 |
| 1,649,217 | |||||||||||||||||||||||||||||||||||||||||||||
Senior VP–Human |
| 2007 |
| 468,573 |
| — |
| 302,531 |
| 138,485 |
| — |
| 43,853 |
| 37,368 |
| 990,810 | |||||||||||||||||||||||||||||||||||||||||||||
Resources |
| 2006 |
| 461,942 |
| — |
| 270,925 |
| 177,051 |
| 340,156 |
| 42,390 |
| 26,821 |
| 1,319,285 | |||||||||||||||||||||||||||||||||||||||||||||
Former Executive Officer |
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Richard Mina |
| 2008 |
| 656,250 |
| — |
| 595,767 |
| 108,879 |
| — | 129,770 |
| 1,924,861 | 3,415,527 | |||||||||||||||||||||||||||||||||||||||||||||||
Former President & |
| 2007 |
| 868,750 |
| — |
| 1,140,060 |
| 251,060 |
| — |
| 137,457 |
| 49,370 |
| 2,446,697 | |||||||||||||||||||||||||||||||||||||||||||||
CEO–Foot Locker, |
| 2006 |
| 837,500 |
| — |
| 1,342,247 |
| 365,167 |
| 609,418 |
| 127,945 |
| 49,453 |
| 3,331,730 | |||||||||||||||||||||||||||||||||||||||||||||
Inc.–USA |
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Notes to Summary Compensation Table
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(1) |
| Ronald Halls has served as President and Chief Executive Officer of Foot Locker, Inc.—International since October 9, 2006. Previously, he was President and Chief Executive Officer of the Company’s Champs Sports division. | ||||||||||||||||||
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Richard Mina served as President and Chief Executive Officer of Foot Locker, Inc.—USA from February 2003 until September 30, 2008. | ||||||||||||||||||||
(2) |
| Guaranteed retention bonus paid to executive for 2006. | ||||||||||||||||||
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(3) |
| The amounts in this column represent the compensation expense recognized for financial statement reporting purposes for the designated fiscal years for the restricted stock awards granted in those years, as well as in prior years, in accordance with FAS 123R. As provided under the SEC’s rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions and include expected dividend payments at the same rate as paid on our shares of Common Stock. For more information on the valuation of the restricted stock awards, please refer to Notes 25, 23, and 22, respectively, of the Company’s financial statements in our Forms 10-K filed with the SEC for 2008, 2007 and 2006. The amounts shown in the table reflect the Company’s accounting expense for these awards and do not necessarily reflect the actual value that may be recognized by the named executives. A total of 90,000 shares of unvested restricted stock granted in 2006 and 2007 to Mr. Mina were forfeited in 2008 in connection with the termination of his employment. | ||||||||||||||||||
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(4) |
| The amounts in this column represent the compensation expense recognized for financial statement reporting purposes for the designated fiscal years for the stock options granted to each of the named executives in those fiscal years, as well as in prior fiscal years, in accordance with FAS 123R. As provided under the SEC’s rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the grants covered in this table, please refer to Notes 25, 23 and 22, respectively, of the Company’s financial statements in our Forms 10-K filed with the SEC for 2008, 2007 and 2006. Please also refer to the Grants of Plan-Based Awards Table on Page | ||||||||||||||||||
32
options granted in (5) For 2008, this column includes payments made under the Annual Incentive Compensation Plan (the “Annual Bonus Plan”). For 2006, the amounts include payments made under the Annual Bonus Plan and the Long-Term Incentive Compensation Plan for the 2004-2006 Performance Period. (6) Amounts shown in column (h) represent the annual change in pension value during each of our last 2007.2008. The amounts shown in the table reflect the Company’s accounting expense for these awards and do not necessarily reflect the actual value that may be recognized by the named executives. twothree fiscal years for each of the executives. Please see Page 5156 for more information on 20072008 pension benefits.29
This column includes perquisites and other compensation, and the amounts attributable to the executives for • The amount shown in the table for Mr. Serra’s auto allowance includes the incremental cost to the Company of providing him with the personal use of a driver, who is a full time employee of the Company and who also performs other regular duties for the Company. • The amount shown below in the table under Tax Gross-Ups represents the tax gross up amounts paid to Mr. Halls related to his wife’s travel expenses. Beginning in 2009, we no longer provide a tax gross up to Mr. Halls for this benefit. • The amounts shown in the table under the 401(k) Match column represent the dollar value of the Company’s matching contribution under the Foot Locker 401(k) Plan made to the named executive’s account in shares of Common Stock. The shares of stock for the • The amounts shown for each individual under the column Accrual for Post-Termination Medical reflect the amounts accrued in 2008 for the actuarial present value of the future cost of providing this benefit to these individuals. • The amounts shown in this column for Mr. Mina include the perquisites attributable to him for 2008 prior to the termination of his employment. In addition, this column includes post-termination medical benefits and unpaid severance and other benefits in connection with the termination of his employment, assuming that Mr. Mina would be entitled to such benefits. No post-termination benefits have been paid to him as of April 9, 2009. Additional information on termination payments for Mr. Mina is provided on Page 53 under the heading Potential Payments upon Termination or Change in Control.(6)(7) 20072008 are shown in the table below. We valued these perquisites at the incremental cost to the Company of providing the personal benefits to the executives, which represents the actual cost attributable to providing these personal benefits. Please note:20072008 matching contribution were valued at $13.66$7.34 per share.
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Name | Auto | Financial | Medical | Supp. LTD | Relocation | Spousal | Tax | Universal | Executive | 401(k) | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
M. Serra |
| 55,126 |
| 5,000 |
| 13,341 |
| — |
| — |
| — |
| — |
| — |
| — |
| 2,250 |
| 75,717 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. McHugh |
| 8,750 |
| 5,033 |
| 3,708 |
| — |
| — |
| — |
| — |
| — |
| 470 |
| 2,250 |
| 20,211 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. Mina |
| 30,000 |
| 5,000 |
| 5,000 |
| 2,641 |
| — |
| — |
| — |
| 3,624 |
| 855 |
| 2,250 |
| 49,370 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. Halls |
| 28,878 |
| — |
| 3,288 |
| — |
| 58,800 |
| 91,499 |
| 107,676 |
| — |
| 918 |
| 1,083 |
| 292,142 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
G. Bahler |
| 13,353 |
| 7,500 |
| 4,984 |
| 5,565 |
| — |
| — |
| — |
| 2,428 |
| — |
| 2,250 |
| 36,080 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Name | Auto | Financial | Medical | Supp. LTD | Accrual | Spousal | Tax | Universal | Emp. | 401(k) | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
M. Serra |
| 61,540 |
| — |
| 13,605 |
| — |
| 164,597 |
| — |
| — |
| — |
| 3,922 |
| 2,300 |
| 245,964 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. McHugh |
| 9,393 |
| — |
| 5,394 |
| — |
| 283,566 |
| — |
| — |
| — |
| — |
| 2,300 |
| 300,653 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. Halls |
| 30,084 |
| — |
| 3,412 |
| — |
| 261,898 |
| 123,736 |
| 112,417 |
| — |
| — |
| 2,300 |
| 533,847 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
G. Bahler |
| 15,210 |
| 7,500 |
| 3,786 |
| 5,565 |
| 291,020 |
| — |
| — |
| 2,618 |
| — |
| 2,300 |
| 327,999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
L. Petrucci |
| 22,500 |
| 9,168 |
| 4,366 |
| — |
| 279,104 |
| — |
| — |
| 2,305 |
| — |
| 2,300 |
| 319,743 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Name | Auto | Vacation | Executive | Medical | Supp. LTD | Universal | Accrual | Accrued | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Former Executive Officer |
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R. Mina |
| 28,191 |
| 16,827 |
| 855 |
| 5,000 |
| 2,641 |
| 3,526 |
| 348,372 |
| 1,519,449 |
| 1,924,861 | |||||||||||||||||||||||||||||||||||||||||||||
The followingGrants of Plan-Based Awards Tableshows the awards made to the named executive officers in 20072008 under the Annual Bonus Plan and the Long-Term Bonus Plan, as well as the restricted stock and stock option awards under the Company’s stock option and award plans.
3033
(a) (b) Estimated Future Payouts Estimated Future Payouts (i) (j) (k) (l) (m) (b) Estimated Future Payouts Estimated Future Payouts (i) (j) (k) (l) (c) (d) (e) (f) (g) (h) (c) (d) (e) (f) (g) (h) Name Grant Threshold Target Maximum Threshold Target Maximum All All Exercise Closing Grant Grant Threshold Target Maximum Threshold Target Maximum All All Exercise Grant M. Serra 03/28/07(1) 468,750 1,875,000 3,000,000 03/26/08(1) 468,750 1,875,000 3,000,000 03/28/07(2) 337,500 1,350,000 2,700,000 03/26/08(2) 337,500 1,350,000 2,700,000 03/28/07(3) 100,000 2,342,000 03/26/08(3) 50,000 583,000 03/28/07(4) 48,500 23.42 23.40 272,153 03/26/08(4) 100,000 11.66 241,430 R. McHugh 03/28/07(1) 98,438 393,750 689,063 03/26/08(1) 98,438 393,750 689,063 03/28/07(2) 118,125 472,500 945,000 03/26/08(2) 118,125 472,500 945,000 03/28/07(3) 40,000 936,800 03/26/08(3) 10,000 116,600 03/28/07(4) 20,000 23.42 23.40 112,228 03/26/08(4) 25,000 11.66 61,828 R. Mina 03/28/07(1) 164,063 656,250 1,148,438 03/28/07(2) 196,875 787,500 1,575,000 03/28/07(3) 40,000 936,800 03/28/07(4) 30,000 23.42 23.40 168,342 R. Halls 03/28/07(1) 121,875 487,500 853,125 03/26/08(1) 131,250 525,000 918,750 03/28/07(2) 146,250 585,000 1,170,000 03/26/08(2) 157,500 630,000 1,260,000 03/28/07(3) 20,000 468,400 03/26/08(3) 20,000 233,200 03/28/07(4) 30,000 23.42 23.40 168,342 03/26/08(4) 25,000 11.66 61,828 G. Bahler 03/28/07(1) 98,438 393,750 689,063 03/26/08(1) 98,438 393,750 689,063 03/28/07(2) 118,125 472,500 945,000 03/26/08(2) 118,125 472,500 945,000 03/28/07(3) 40,000 936,800 03/26/08(3) 10,000 116,600 03/28/07(4) 20,000 23.42 23.40 112,228 03/26/08(4) 25,000 11.66 61,828 L. Petrucci 03/26/08(1) 87,863 351,450 615,038 03/26/08(2) 105,435 421,740 843,480 03/26/08(3) 10,000 116,600 03/26/08(4) 25,000 11.66 61,828 Former Executive Officer Former Executive Officer R. Mina 03/26/08(1) 164,063 656,250 1,148,438 03/26/08(2) 196,875 787,500 1,575,000 Notes to Grants of Plan-Based Awards Table (1) Annual Bonus Awards Amounts shown reflect the payment levels at threshold, target, and maximum performance for the (2) Long-Term Bonus Awards Amounts shown reflect the estimated payment levels at threshold, target, and maximum performance for the three-year performance period of 34
Under Non-Equity Incentive
Plan Awards
Under Equity Incentive
Plan Awards
Under Non-Equity Incentive
Plan Awards
Under Equity Incentive
Plan Awards
Date
($)
($)
($)
(#)
(#)
(#)
Other
Stock
Awards:
Number of
Shares
of Stock
or Units
(#)
Other
Option
Awards:
Number of
Securities
Under-
lying
Options
(#)
or Base
Price of
Option
Awards
($/Sh)(5)
Market
Price
on Date
of Grant
($/Sh)(5)
Date
Fair
Value of
Stock
and
Option
Awards(6)
Date
($)
($)
($)
(#)
(#)
(#)
Other
Stock
Awards:
Number of
Shares
of Stock
or Units
(#)
Other
Option
Awards:
Number of
Securities
Under-
lying
Options
(#)
or Base
Price of
Option
Awards
($/Sh)
Date
Fair
Value of
Stock
and
Option
Awards(5) 20072008 fiscal year under the Company’s Annual Bonus Plan and reflect the potential amounts that would be paid at the end of the period if the applicable performance goals were achieved. The estimated bonus payouts under the Annual Bonus Plan are based on a percentage of the executive’s base salary. For Mr. Serra, the threshold, target, and maximum amounts represent 31.25 percent, 125 percent, and 200 percent, respectively, of his annual base salary. For Messrs. McHugh, Mina, Halls, and Bahler,the other named executive officers shown in the table, the threshold, target, and maximum amounts represent 18.75 percent, 75 percent, and 131.25 percent, respectively, of each executive’s annual base salary. No payments were madeAmounts actually paid to the named executives under this plan for 2008 are shown in the Summary Compensation Table on Page 32. Although Mr. Mina participated in the Annual Bonus Plan for 2007in 2008, he was not eligible to receive a payment under the plan because his employment terminated prior to the performance goals were not achieved.completion of the plan year. 2007-20092008-2010 under the Company’s Long-Term Bonus Plan and reflect the potential amounts that would be paid at the end of the performance period if the applicable performance goals are achieved. For each executive, the amounts shown under threshold, target, and maximum represent 22.5 percent, 90 percent, and 180 percent, respectively, of each executive’s annual base salary as of May 1 in the first year of the performance period. No amounts are paid to the executives under the Long-Term Bonus Plan unless the performance goals for the three-year performance period are achieved. Although Mr. Mina participated in the Long-Term Bonus Plan, his award for the 2008-2010 performance period was cancelled upon the termination of his employment.
(3) Restricted Stock Awards Amounts shown in the table under column (i) represent the number of shares of restricted stock awarded to the executive on the grant date. Mr. Serra’sThe restricted stock was granted under the 2003 Stock Option and Award Plan, and the restricted stock awards for the other executives were granted under the 19982007 Stock Option and AwardIncentive Plan. The shares of restricted stock granted to Mr. Serra in 2008 will vest on January 30, 2010 and the shares awarded on this date to the other executives will vest on March 26, 2011, provided that the executives remain employed by the Company from the date of grant through the applicable vesting dates of the awards. The executives have the right to receive all regular cash dividends payable after the date of grant to all record holders of our Common Stock. The grant date fair value of the restricted stock awards shown in column (l) includes expected dividend payments on the shares. Mr. Mina forfeited 90,000 shares of unvested restricted stock in connection with the termination of his employment in October 2008.31
(4) Stock Option Grants
Serra in 2007 will vest on January 30, 2010 and the shares awarded on this date to the other executives will vest on March 15, 2010, provided that the executives remain employed by the Company from the date of grant through the applicable vesting dates of the awards. The executives have the right to receive all regular cash dividends payable after the date of grant to all record holders of our Common Stock. The grant date fair value of the restricted stock awards shown in column (m) includes expected dividend payments on the shares.
(4)
Stock Option Grants
The amounts in column (j) reflect the number of stock options granted in 2007 under the Company’s stock option and award plans. Mr. Serra’s stock option award was granted under the 2003 Stock Option and Award Plan, and the stock options for the other executives were granted under the 1998 Stock Option and Award Plan. The exercise price reflected in column (k) is equal to the fair market value of a share of the Company’s Common Stock on the grant date. The exercise price was calculated under the terms of the applicable option and award plans by averaging the high and low prices of a share of our Common Stock on the grant date. In general, no portion of any stock option may be exercised until the first anniversary of its date of grant. The options granted in 2007 become exercisable in three installments, beginning on the first annual anniversary of the date of grant.
Vested options may be exercised for ten years following the date of grant, unless the option is cancelled or exercised sooner than this. If the executive retires, becomes disabled, or dies while employed by the Company or one of its subsidiaries, all unexercised options that are then exercisable, plus those options that would have become exercisable on the next anniversary of the grant date, will remain (or become) exercisable as of that date. Moreover, upon the occurrence of a Change in Control, 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.
(5)
As stated in Note 4 above, the exercise price reflected in column (k) is equal to the fair market value of a share of the Company’s Common Stock on the grant date, and was calculated under the terms of the applicable option and award plans by averaging the high and low prices of a share of our Common Stock on the grant date. The price stated in column (l) is the closing price of a share of the Company’s stock on the date of grant.
(6)
Grant Date Fair Value
The amounts shown in column (m) reflect the grant date fair value of the full restricted stock and stock option awards granted in 2007, calculated in accordance with FAS 123R. As provided under the SEC’s rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions and include expected dividend payments on shares of restricted stock at the same rate as paid on our shares of Common Stock. For option awards, that number is calculated by multiplying the Black-Scholes value by the number of options granted. The Black-Scholes value for the options granted in 2007 to the named executives was $5.61. For information on the valuation assumptions with respect to the 2007 grants, please refer to Note 23 of the Company’s financial statements in our Form 10-K for the 2007 fiscal year as filed with the SEC.
For restricted stock awards, the fair value is calculated by multiplying the average of the high and low prices of our Common Stock on The New York Stock Exchange on the award date by the number of shares granted. The average of the high and low prices of our Common Stock on the date of grant was $23.42.
The amounts in column (j) reflect the number of stock options granted in 2008 under the Company’s stock option and award plans. The stock options were granted under the 2007 Stock Incentive Plan. The exercise price reflected in column (k) is equal to the closing price of a share of the Company’s Common Stock on the grant date. In general, no portion of any stock option may be exercised until the first anniversary of its date of grant. For Mr. Serra, the options granted in 2008 vest in two installments, on March 26, 2009 and on January 30, 2010. The options granted in 2008 to the other named executive officers become exercisable in three installments, beginning on the first annual anniversary of the date of grant.
Vested options may be exercised for ten years following the date of grant, unless the option is cancelled or exercised sooner than this. If the executive retires, becomes disabled, or dies while employed by the Company or one of its subsidiaries, all unexercised options that are then exercisable, plus those options that would have become exercisable on the next anniversary of the grant date, will remain (or become) exercisable as of that date. Moreover, upon the occurrence of a Change in Control, 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.
(5)
Grant Date Fair Value
The amounts shown in column (l) reflect the grant date fair value of the full restricted stock and stock option awards granted in 2008, calculated in accordance with FAS 123R. As provided under the SEC’s rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions and include expected dividend payments on shares of restricted stock at the same rate as paid on our shares of Common Stock. For option awards, that number is calculated by multiplying the Black-Scholes value by the number of options granted. The Black-Scholes value for the options granted in 2008 to Matthew Serra was $2.41, and the Black-Scholes value for the options granted in 2008 to the other named executive officers was $2.47. For information on the valuation assumptions with respect to the 2008 grants, please refer to Note 25 of the Company’s financial statements in our Form 10-K for the 2008 fiscal year as filed with the SEC.
For restricted stock awards, the fair value is calculated by multiplying the closing price of our Common Stock on The New York Stock Exchange on the award date by the number of shares granted. The closing price of our Common Stock on the date of grant was $11.66.
Salary.The annual base salaries paid to our named executives in 20072008 are set forth in the Summary Compensation Table. For 2007,2008, their salaries represented the following percentages of their total compensation: Mr. Serra (38.8%(28%), Mr. McHugh (43.0%,) Mr. Mina (35.5%(27.7%), Mr. Halls (36.0%(28.8%), Mr. Bahler (28.9%), Ms. Petrucci (28.4%), and Mr. Bahler (48.0%Mina (19.2%). Information on the named executives’ employment agreements appears beginning on Page 36.39.
The following table,Outstanding Equity Awards at Fiscal Year-Endshows the number of outstanding stock options, both vested and unvested, and the number of unvested shares of restricted stock held by the named executives at the end of the 20072008 fiscal year.
3235
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (a) Option Awards Stock Awards (b) (c) (d) (e) (f) (g) (h) (i) (j) Name Number of Number of Equity Option Option Number Market Equity Equity Incentive M. Serra 500,000 0 — 11.905 02/12/2011 — — — — 200,000 0 — 16.02 04/18/2012 — — — — 100,000 0 — 16.19 09/11/2013 — — — — 100,000 0 — 25.365 02/18/2014 — — — — 115,000 0 — 27.01 02/09/2015 — — — — 66,666 33,334 — 23.92 03/22/2016 — — — — 16,166 32,334 — 23.42 03/28/2017 — — — — 0 100,000 — 11.66 03/26/2018 — — — — — — — — — 18,834 138,618 — — — — — — — 100,000 736,000 — — — — — — — 50,000 368,000 — — R. McHugh 4,000 0 — 7.1875 01/03/2010 — — — — 20,000 0 — 11.3125 04/12/2010 — — — — 20,000 0 — 12.985 04/11/2011 — — — — 20,000 0 — 16.02 04/18/2012 — — — — 20,000 0 — 10.245 04/16/2013 — — — — 20,000 0 — 25.385 04/01/2014 — — — — 20,000 0 — 28.155 03/23/2015 — — — — 30,000 0 — 21.48 11/21/2015 — — — — 6,666 13,334 — 23.42 03/28/2017 — — — — 0 25,000 — 11.66 03/26/2018 — — — — — — — — — 40,000 294,400 — — — — — — — 10,000 73,600 — — R. Halls 10,000 0 — 16.02 04/18/2012 — — — — 16,667 0 — 10.065 02/02/2013 — — — — 20,000 0 — 25.385 04/01/2014 — — — — 30,000 0 — 28.155 03/23/2015 — — — — 20,000 10,000 — 23.92 03/22/2016 — — — — 20,000 10,000 — 24.755 10/12/2016 — — — — 10,000 20,000 — 23.42 03/28/2017 — — — — 0 25,000 — 11.66 03/26/2018 — — — — — — — — — 20,000 147,200 — — — — — — — 30,000 220,800 — — — — — — — 20,000 147,200 — — — — — — — 20,000 147,200 — — G. Bahler 20,002 0 — 11.3125 04/12/2010 — — — — 47,500 0 — 12.985 04/11/2011 — — — — 47,500 0 — 16.02 04/18/2012 — — — — 33,000 0 — 10.245 04/16/2013 — — — — 32,000 0 — 25.385 04/01/2014 — — — — 25,000 0 — 28.155 03/23/2015 — — — — 16,666 8,334 — 23.92 03/22/2016 — — — — 6,666 13,334 — 23.42 03/28/2017 — — — — 0 25,000 — 11.66 03/26/2018 — — — — — — — — — 40,000 294,400 — — — — — — — 10,000 73,600 — — L. Petrucci 15,834 0 — 16.02 04/18/2012 — — — — 26,667 0 — 10.245 04/16/2013 — — — — 32,000 0 — 25.385 04/01/2014 — — — — 25,000 0 — 28.155 03/23/2015 — — — — 16,666 8,334 — 23.92 03/22/2016 — — — — 6,666 13,334 — 23.42 03/28/2017 — — — — 0 25,000 — 11.66 03/26/2018 — — — — — — — — — 40,000 294,400 — — — — — — — 10,000 73,600 — — R. Mina 21,838 0 — 11.3125 10/31/2009 — — — — 50,000 0 — 12.985 10/31/2009 — — — — 50,000 0 — 16.02 10/31/2009 — — — — 100,000 0 — 10.065 10/31/2009 — — — — 80,000 0 — 25.385 10/31/2009 — — — — 50,000 0 — 28.155 10/31/2009 — — — — 33,333 0 — 23.92 10/31/2009 — — — — 10,000 0 — 23.42 10/31/2009 — — — —
Securities
Underlying
Unexercised
Options
(#)
Exercisable(1)
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Exercise
Price
($)
Expiration
Date
of Shares
or Units
of Stock
That Have
Not
Vested
(#)(2)
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)(3)
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)
Plan Awards:
Market or
Payout
Value of
Unearned
Shares, Units
or Other Rights
That Have
Not Vested
($)
|
|
|
|
|
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|
|
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| |||||||||||||||||||||||||||||||||||||||||||||
(a) | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Number | Number | Equity | Option | Option | Number | Market | Equity | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
M. Serra |
| 500,000 |
| 0 |
| — |
| 11.905 |
| 02/12/2011 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
|
| 200,000 |
| 0 |
| — |
| 16.02 |
| 04/18/2012 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 100,000 |
| 0 |
| — |
| 16.19 |
| 09/11/2013 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 100,000 |
| 0 |
| — |
| 25.365 |
| 02/18/2014 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 115,000 |
| 0 |
| — |
| 27.01 |
| 02/09/2015 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 33,333 |
| 66,667 |
| — |
| 23.92 |
| 03/22/2016 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 0 |
| 48,500 |
| — |
| 23.42 |
| 03/28/2017 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| 18,833 |
| 262,532 |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| — |
| — |
| — |
| — |
| — |
| 18,834 |
| 262,546 |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| 100,000 |
| 1,394,000 |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
R. McHugh |
| 10,000 |
| 0 |
| — |
| 25.2813 |
| 04/08/2008 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
|
| 5,000 |
| 0 |
| — |
| 4.5313 |
| 02/10/2009 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 4,000 |
| 0 |
| — |
| 7.1875 |
| 01/03/2010 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 20,000 |
| 0 |
| — |
| 11.3125 |
| 04/12/2010 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 20,000 |
| 0 |
| — |
| 12.985 |
| 04/11/2011 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 20,000 |
| 0 |
| — |
| 16.02 |
| 04/18/2012 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 20,000 |
| 0 |
| — |
| 10.245 |
| 04/16/2013 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 20,000 |
| 0 |
| — |
| 25.385 |
| 04/01/2014 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 13,333 |
| 6,667 |
| — |
| 28.155 |
| 03/23/2015 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 20,000 |
| 10,000 |
| — |
| 21.48 |
| 11/21/2015 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 0 |
| 20,000 |
| — |
| 23.42 |
| 03/28/2017 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| 30,000 |
| 418,200 |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| — |
| — |
| — |
| — |
| — |
| 40,000 |
| 557,600 |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
R. Mina |
| 12,000 |
| 0 |
| — |
| 25.2813 |
| 04/08/2008 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
|
| 21,838(4 | ) |
|
| 0 |
| — |
| 11.3125 |
| 04/12/2010 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||
| 50,000(4 | ) |
|
| 0 |
| — |
| 12.985 |
| 04/11/2011 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||
|
| 50,000(4 | ) |
|
| 0 |
| — |
| 16.02 |
| 04/18/2012 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||
| 100,000(4 | ) |
|
| 0 |
| — |
| 10.065 |
| 02/02/2013 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||
|
| 80,000 |
| 0 |
| — |
| 25.385 |
| 04/01/2014 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 33,333 |
| 16,667 |
| — |
| 28.155 |
| 03/23/2015 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 16,666 |
| 33,334 |
| — |
| 23.92 |
| 03/22/2016 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 0 |
| 30,000 |
| — |
| 23.42 |
| 03/28/2017 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| 40,000 |
| 557,600 |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| — |
| — |
| — |
| — |
| — |
| 50,000 |
| 697,000 |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| 40,000 |
| 557,600 |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
R. Halls |
| 10,000 |
| 0 |
| — |
| 16.02 |
| 04/18/2012 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
|
| 16,667 |
| 0 |
| — |
| 10.065 |
| 02/02/2013 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 20,000 |
| 0 |
| — |
| 25.385 |
| 04/01/2014 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 20,000 |
| 10,000 |
| — |
| 28.155 |
| 03/23/2015 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 10,000 |
| 20,000 |
| — |
| 23.92 |
| 03/22/2016 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 10,000 |
| 20,000 |
| — |
| 24.755 |
| 10/12/2016 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 0 |
| 30,000 |
| — |
| 23.42 |
| 03/28/2017 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| 20,000 |
| 278,800 |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| — |
| — |
| — |
| — |
| — |
| 30,000 |
| 418,200 |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| 20,000 |
| 278,800 |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
G. Bahler |
| 25,000 |
| 0 |
| — |
| 25.2813 |
| 04/08/2008 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
|
| 20,002 |
| 0 |
| — |
| 11.3125 |
| 04/12/2010 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 47,500 |
| 0 |
| — |
| 12.985 |
| 04/11/2011 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 47,500 |
| 0 |
| — |
| 16.02 |
| 04/18/2012 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 33,000 |
| 0 |
| — |
| 10.245 |
| 04/16/2013 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 32,000 |
| 0 |
| — |
| 25.385 |
| 04/01/2014 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 16,666 |
| 8,334 |
| — |
| 28.155 |
| 03/23/2015 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 8,333 |
| 16,667 |
| — |
| 23.92 |
| 03/22/2016 |
| — |
| — |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
| 0 |
| 20,000 |
| — |
| 23.42 |
| 03/28/2017 |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| 40,000 |
| 557,600 |
| — |
| — | |||||||||||||||||||||||||||||||||||||||||||||
3336
Notes to Table on Outstanding Equity Awards at Fiscal Year End (1) TheVesting Schedulesfor the options shown in columns (b) and (c) are as follows:
Name
Total Number of
Securities Underlying
Unexercised Options
Date of Grant
Vesting Date for 1/3
of Total Grant
Vesting Date for 1/3
of Total Grant
Vesting Date for 1/3
of Total Grant
M. Serra
500,000
02/12/2001
02/12/2002
02/12/2003
02/12/2004
200,000
04/18/2002
04/18/2003
04/18/2004
04/18/2005
100,000
09/11/2003
09/11/2004
09/11/2005
09/11/2006
100,000
02/18/2004
02/18/2005
02/18/2006
02/18/2007
115,000
02/09/2005
02/09/2006
02/09/2007
02/01/2008
100,000
03/22/2006
03/22/2007
03/22/2008
03/22/2009
48,500
03/28/2007
03/28/2008
03/28/2009
01/30/2010
R. McHugh
10,000100,000
04/08/199803/26/2008
04/08/199903/26/2009
*
04/08/2000
04/08/2001
5,00001/30/2010
*
02/10/1999
02/10/2000
02/10/2001
02/10/2002—
R. McHugh
4,000
01/03/2000
01/03/2001
01/03/2002
01/03/2003
20,000
04/12/2000
04/12/2001
04/12/2002
04/12/2003
20,000
04/11/2001
04/11/2002
04/11/2003
04/11/2004
20,000
04/18/2002
04/18/2003
04/18/2004
04/18/2005
20,000
04/16/2003
04/16/2004
04/16/2005
04/16/2006
20,000
04/01/2004
04/01/2005
04/01/2006
04/01/2007
20,000
03/23/2005
03/23/2006
03/23/2007
03/23/2008
30,000
11/21/2005
11/21/2006
11/21/2007
11/21/2008
20,000
03/28/2007
03/28/2008
03/28/2009
03/28/2010
25,000
03/26/2008
03/26/2009
03/26/2010
03/26/2011
R. Halls
10,000
04/18/2002
04/18/2003
04/18/2004
04/18/2005
16,667
02/02/2003
02/02/2004
02/02/2005
02/02/2006
20,000
04/01/2004
04/01/2005
04/01/2006
04/01/2007
20,00030,000
03/23/2005
03/23/2006
03/23/2007
03/23/2008
30,000
11/21/2005
11/21/2006
11/21/2007
11/21/2008
20,000
03/28/2007
03/28/2008
03/28/2009
03/28/2010
R. Mina
12,000
04/08/1998
04/08/1999
04/08/2000
04/08/2001
21,838
04/12/2000
04/12/2001
04/12/2002
04/12/2003
50,000
04/11/2001
04/11/2002
04/11/2003
04/11/2004
50,000
04/18/2002
04/18/2003
04/18/2004
04/18/2005
100,000
02/02/2003
02/02/2004
02/02/2005
02/02/2006
80,000
04/01/2004
04/01/2005
04/01/2006
04/01/2007
50,000
03/23/2005
03/23/2006
03/23/2007
03/23/2008
50,000
03/22/2006
03/22/2007
03/22/2008
03/22/2009
30,000
10/12/2006
10/12/2007
10/12/2008
10/12/2009
30,000
03/28/2007
03/28/2008
03/28/2009
03/28/2010
R. Halls
10,000
04/18/2002
04/18/2003
04/18/2004
04/18/2005
16,667
02/02/2003
02/02/2004
02/02/2005
02/02/2006
20,000
04/01/2004
04/01/2005
04/01/2006
04/01/2007
30,000
03/23/2005
03/23/2006
03/23/2007
03/23/2008
30,000
03/22/2006
03/22/2007
03/22/2008
03/22/2009
30,000
10/12/2006
10/12/2007
10/12/2008
10/12/2009
30,000
03/28/2007
03/28/2008
03/28/2009
03/28/2010
G. Bahler
25,000
04/08/1998
04/08/1999
04/08/2000
04/08/2001
20,002
04/12/2000
04/12/2001
04/12/2002
04/12/2003
47,500
04/11/2001
04/11/2002
04/11/2003
04/11/2004
47,500
04/18/2002
04/18/2003
04/18/2004
04/18/2005
33,000
04/16/2003
04/16/2004
04/16/2005
04/16/2006
32,000
04/01/2004
04/01/2005
04/01/2006
04/01/2007
25,000
03/23/2005
03/23/2006
03/23/2007
03/23/2008
25,000
03/22/2006
03/22/2007
03/22/26/2008
03/22/2009
20,000
03/28/2007
03/28/2008
03/28/26/2009
03/28/26/2010
03/26/2011
*Option granted with 2-year vesting schedule
Name | Total Number of | Date of Grant | Vesting Date for 1/3 | Vesting Date for 1/3 | Vesting Date for 1/3 | ||||||||||||||||||||||||||||||
G. Bahler | 20,002 | 04/12/2000 | 04/12/2001 | 04/12/2002 | 04/12/2003 | ||||||||||||||||||||||||||||||
47,500 | 04/11/2001 | 04/11/2002 | 04/11/2003 | 04/11/2004 | |||||||||||||||||||||||||||||||
47,500 | 04/18/2002 | 04/18/2003 | 04/18/2004 | 04/18/2005 | |||||||||||||||||||||||||||||||
33,000 | 04/16/2003 | 04/16/2004 | 04/16/2005 | 04/16/2006 | |||||||||||||||||||||||||||||||
32,000 | 04/01/2004 | 04/01/2005 | 04/01/2006 | 04/01/2007 | |||||||||||||||||||||||||||||||
25,000 | 03/23/2005 | 03/23/2006 | 03/23/2007 | 03/23/2008 | |||||||||||||||||||||||||||||||
25,000 | 03/22/2006 | 03/22/2007 | 03/22/2008 | 03/22/2009 | |||||||||||||||||||||||||||||||
20,000 | 03/28/2007 | 03/28/2008 | 03/28/2009 | 03/28/2010 | |||||||||||||||||||||||||||||||
25,000 | 03/26/2008 | 03/26/2009 | 03/26/2010 | 03/26/2011 | |||||||||||||||||||||||||||||||
L. Petrucci | 15,834 | 04/18/2002 | 04/18/2003 | 04/18/2004 | 04/18/2005 | ||||||||||||||||||||||||||||||
26,667 | 04/16/2003 | 04/16/2004 | 04/16/2005 | 04/16/2006 | |||||||||||||||||||||||||||||||
32,000 | 04/01/2004 | 04/01/2005 | 04/01/2006 | 04/01/2007 | |||||||||||||||||||||||||||||||
25,000 | 03/23/2005 | 03/23/2006 | 03/23/2007 | 03/23/2008 | |||||||||||||||||||||||||||||||
25,000 | 03/22/2006 | 03/22/2007 | 03/22/2008 | 03/22/2009 | |||||||||||||||||||||||||||||||
20,000 | 03/28/2007 | 03/28/2008 | 03/28/2009 | 03/28/2010 | |||||||||||||||||||||||||||||||
25,000 | 03/26/2008 | 03/26/2009 | 03/26/2010 | 03/26/2011 | |||||||||||||||||||||||||||||||
Former Executive Officer | |||||||||||||||||||||||||||||||||||
R. Mina | 21,838 | 04/12/2000 | 04/12/2001 | 04/12/2002 | 04/12/2003 | ||||||||||||||||||||||||||||||
50,000 | 04/11/2001 | 04/11/2002 | 04/11/2003 | 04/11/2004 | |||||||||||||||||||||||||||||||
50,000 | 04/18/2002 | 04/18/2003 | 04/18/2004 | 04/18/2005 | |||||||||||||||||||||||||||||||
100,000 | 02/02/2003 | 02/02/2004 | 02/02/2005 | 02/02/2006 | |||||||||||||||||||||||||||||||
80,000 | 04/01/2004 | 04/01/2005 | 04/01/2006 | 04/01/2007 | |||||||||||||||||||||||||||||||
50,000 | 03/23/2005 | 03/23/2006 | 03/23/2007 | 03/23/2008 | |||||||||||||||||||||||||||||||
33,333 | 03/22/2006 | 03/22/2007 | 03/22/2008 | * | |||||||||||||||||||||||||||||||
10,000 | 03/28/2007 | 03/28/2008 | * | * | |||||||||||||||||||||||||||||||
*Unvested portion of option grant cancelled upon termination of employment.
37
(2) The vesting dates for the restricted stock awards shown in column (g) are as follows:
Name
Date of Grant
Number of Shares
Vesting Date
M. Serra
03/22/2006
18,833
03/15/2008
03/22/2006
18,834
03/15/2009
03/28/2007
100,000
01/30/2010
R. McHugh
11/21/200503/26/2008
30,00050,000
11/01/30/20082010
R. McHugh
03/28/2007
40,000
03/15/2010
R. Mina
03/23/200526/2008
40,00010,000
03/15/2008
03/22/2006
50,000
03/15/2009
03/28/2007
40,000
03/15/201026/2011
R. Halls
03/22/2006
20,000
03/15/2009
10/12/2006
30,000
10/12/2009
03/28/2007
20,000
03/15/2010
03/26/2008
20,000
03/26/2011
G. Bahler
03/28/2007
40,000
03/15/2010
03/26/2008
10,000
03/26/2011
L. Petrucci
03/28/2007
40,000
03/15/2010
03/26/2008
10,000
03/26/2011
34
(3) Value calculated by multiplying the number of unvested shares by the closing price of The following table,Option Exercises and Stock Vested, provides information on the stock options exercised by the named executives during OPTION EXERCISES AND STOCK VESTED $13.94$7.36 on February 1, 2008,January 30, 2009, which was the last business day of the 20072008 fiscal year.(4)Executive has agreed to transfer the economic benefit of 50 percent of this stock option to his spouse under a matrimonial settlement agreement.20072008 and shares of restricted stock that vested during the year.
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| ||||||||||||||||||||
(a) | Option Awards | Stock Awards | ||||||||||||||||||||||||||
(b) | (c) | (d) | (e) | |||||||||||||||||||||||||
Name | Number of Shares | Value Realized | Number of Shares | Value Realized | ||||||||||||||||||||||||
M. Serra |
| — |
| — |
| 88,833 |
| 1,668,806 | ||||||||||||||||||||
R. McHugh |
| — |
| — |
| 30,000 |
| 661,800 | ||||||||||||||||||||
R. Mina |
| 12,000 |
| 24,289 |
| 75,000 |
| 1,654,500 | ||||||||||||||||||||
R. Halls |
| — |
| — |
| — |
| — | ||||||||||||||||||||
G. Bahler |
| 25,000 |
| 7,434 |
| 30,000 |
| 661,800 | ||||||||||||||||||||
35
(a)
Option Awards
Stock Awards
(b)
(c)
(d)
(e)
Name
Number of Shares
Acquired on Exercise(#)
Value Realized
on Exercise($)
Number of Shares
Acquired on Vesting(#)
Value Realized
on Vesting($)
M. Serra
—
—
18,833
206,786
R. McHugh
5,000
12,194
30,000
200,400
R. Halls
—
—
—
—
G. Bahler
—
—
—
—
L. Petrucci
—
—
—
—
Former Executive Officer
R. Mina
—
—
40,000
439,200
38
We have employment agreements with each of the named executive officers, excluding Richard Mina, and we describe the material terms of each of these agreements below. Information on potential payments and benefits on termination of the agreements is described under the section “Potential Payments upon Termination or Change in • • • Base Salary and • Benefit Plans and — Company-paid life insurance in the amount of his annual base salary; — Long-term disability insurance coverage of $25,000 per month; — Annual out-of-pocket medical expense reimbursement of up to $20,000; — Financial planning expenses of up to $7,500 annually; — Reimbursement of dues and membership fees of one private club of up to $20,000 annually; — Automobile expense allowance of up to $40,000 annually and the services of a driver; Although Mr. Serra is eligible for these perquisites under his agreement, he chose not to receive some of these benefits in 2008. • Non-Compete • Certain Defined Terms in the Agreement: “Cause” means Mr. Serra: — willfully and continuously fails to perform his duties; — willfully takes part in misconduct that significantly harms the Company; — willfully breaches his employment agreement and does not correct the breach; or — is convicted of a felony (other than a traffic violation). “Change in Control” means any of the following: — a person or group makes a tender offer to purchase at least 20 percent of the Company’s outstanding stock; — the Company merges with another company or sells all (or substantially all) of its assets. This event would exclude, for example, mergers (or similar transactions) in which no one becomes the beneficial owner of more than 20 percent of the stock outstanding; — the acquisition of 20 percent or more of the outstanding stock. (The Board may, however, increase this threshold up to 40 percent); 39 — shareholder approval of a plan of liquidation, dissolution, or sale of substantially all of the assets of the Company; or — during any period of two consecutive years, the directors at the start of the period, plus any new director whose election or nomination for election was approved by at least two-thirds of the directors then remaining on the Board who either were directors at the beginning of the period or whose election or nomination was approved in this manner, do not comprise at least a majority of the Board. “ — Mr. Serra is incapacitated due to physical or mental illness and, as a result, has not performed his duties on a full-time basis for six months and does not return to perform his duties after the Company gives him notice. “Good Reason” means, following a Change in Control, — a material demotion or reduction in Mr. Serra’s authority or responsibility (except temporarily because of illness or other absence); — a decrease in his base salary rate; — a reduction in his annual bonus classification level; — failure to continue the benefit plans and programs that apply to him, or the reduction of his benefits, without providing substitute comparable plans, programs and benefits; — failure by a successor company to confirm in writing that it will assume the Company’s obligations under the agreement; or — the Company breaches a material provision of the agreement and does not correct the breach. • Position/Term/Base Control”Control,” beginning on Page 39.43. PositionPosition.. We have anentered into a new agreement in December 2008 with Mr. Serra in his position as Chairman of the Board, President and Chief Executive Officer. This agreement contains substantially the same terms and conditions as the agreement entered into with Mr. Serra in 2006, except for changes made to comply with Section 409A of the Internal Revenue Code. TermTerm.. The term of this agreement began on October 1, 2006 and ends on January 30, 2010. BonusBonus.. We pay Mr. Serra an annual base salary of not less than $1.5 million during the term of the agreement. Mr. Serra’s annual bonus at target is 125 percent of his base salary, and his bonus at target under the long-term bonus plan for any three-year performance period is 90 percent of his base salary at the beginning of the performance period. If Mr. Serra remains employed by Foot Locker through the end of his contract term, he will be eligible for a pro-rata payout under the Long-Term Bonus Plan for the 2008-2010 and 2009-2011 performance periods, provided the performance goals are met. PerquisitesPerquisites.. Mr. Serra is entitled to participate in all bonus, incentive, and equity plans offered to senior executives. He is also eligible to participate in all pension, welfare, and fringe benefit plans and perquisites offered to senior executives. The benefits and perquisites available to Mr. Serra include: Although Mr. Serra is eligible for these perquisites under his agreement, he chose not to receive some of these benefits in 2007. ProvisionProvision.. Mr. Serra’s agreement provides that he may not compete with Foot Locker or solicit our employees for two years following the termination of his employment agreement. 36— Disability”Disability” means: —a material demotion or reduction in Mr. Serra’s authority or responsibility (except temporarily because of illness or other absence);—a decrease in his base salary rate;—a reduction in his annual bonus classification level;—failure to continue the benefit plans and programs that apply to him, or the reduction of his benefits, without providing substitute comparable plans, programs and benefits;—failure by a successor company to confirm in writing that it will assume the Company’s obligations under the agreement; or—the Company breaches a material provision of the agreement and does not correct the breach.Richard Mina,Robert W. McHugh, Ronald J. Halls, Gary M. Bahler, Robert W. McHughand Laurie J. Petrucci SalarySalary.. We have employment agreements with these executives in their current positions, as follows:
Name
Position
Term of Agreement
20072008 Base Salary Rate
R. Mina
President and CEO,Foot Locker, Inc.–U.S.A.
May 1, 2009
$875,000
R. Halls
President and CEO,Foot Locker, Inc.–International
May 1, 2009
$650,000
G. Bahler
Senior VP, General Counseland Secretary
December 31, 2008
$525,000
R. McHugh
Senior VP and CFO
December 31, 20081/1/2009–1/31/2010
$525,000
R. Halls
President and CEO, Foot Locker, Inc.–International
5/1/2008–1/31/2010
$750,000
G. Bahler
Senior VP, General Counsel and Secretary
1/1/2009–1/31/2010
$525,000
L. Petrucci
Senior VP–Human Resources
1/1/2009–1/31/2010
$468,600
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• |
| Benefit Plans and | ||||||||||||||||||
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• |
| Spousal | ||||||||||||||||||
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• |
| Non-Compete | ||||||||||||||||||
3740
• Certain Defined Terms in the Agreement: “Cause” means the executive’s: — refusal or willful failure to substantially perform his duties; — dishonesty, willful misconduct, or fraud with regard to the Company’s business or assets; — willful breach of his employment agreement and he does not correct the breach; or — conviction of a felony (other than a traffic violation) or any crime involving moral turpitude.
—
refusal or willful failure to substantially perform his duties;
—
dishonesty, willful misconduct, or fraud with regard to the Company’s business or assets;
—
willful breach of his employment agreement and he does not correct the breach; or
—
conviction of a felony (other than a traffic violation) or any crime involving moral turpitude.
“Change in Control” means any of the following:
| ||||||||||||||||||||
— |
| |||||||||||||||||||
| the Company merges with another company or sells all (or substantially all) of its assets. This event excludes, for example, mergers (or similar transactions) in which no one becomes the beneficial owner of more than | |||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
— |
| the acquisition of | ||||||||||||||||||
— | during any period of two consecutive years, the directors at the start of the period, plus any new director whose election or nomination for election was approved by at least two-thirds of the directors then remaining on the Board who either were directors at the beginning of the period or whose election or nomination was approved in this manner, do not comprise at least a majority of the Board. | |||||||||||||||||||
“Disability”Disability” means:
| ||||||||||||||||||||
— | The executive is incapacitated due to physical or mental illness and, as a result, has not performed his duties on a full-time basis for six months, and does not return to perform his duties after the Company gives him notice. | |||||||||||||||||||
“Good Reason” means:
Prior to a Change in Control,
|
— |
a reduction in base salary, other than an across-the-board reduction in senior executive salaries over a three-year period and the reduction is less than 20% of the executive’s salary from the beginning of the three-year period;
—
material change in the executive’s authority or responsibilities, except temporarily as a result of illness or other absence;
—
a reduction in base salary, other than an across-the-board reduction in senior executive salaries over a three-year period and the reduction is less than 20% of the executive’s salary from the beginning of the three-year period;
—
material change in the executive’s authority or responsibilities, except temporarily as a result of illness or other absence;
Following a Change in Control,
| ||||||||||||||||||||
— | any reduction in base salary; | |||||||||||||||||||
— | failure to continue the benefit plans and programs that apply to the executive, or the reduction of his benefits, without providing substitute comparable plans and benefits; | |||||||||||||||||||
— | a material demotion or reduction in executive’s authority or responsibility (except temporarily because of illness or other absence); | |||||||||||||||||||
At any time,
| ||||||||||||||||||||
— | a reduction in the executive’s annual bonus classification level, other than in connection with a redesign that affects all other employees in the executive’s bonus level; | |||||||||||||||||||
— | failure by a successor to the Company to confirm in writing that it will assume the Company’s obligations under the agreement; | |||||||||||||||||||
— | failure by the Company to renew the agreement. | |||||||||||||||||||
3841
We had an employment agreement with Mr. Mina as President and Chief Executive Officer of Foot Locker, Inc.–U.S.A. substantially in the same form as the agreements described above for the named executive officers other than Mr. Serra. Mr. Mina’s service as President and CEO of Foot Locker, Inc.–U.S.A. ended on September 30, 2008, and his employment with the Company was terminated on October 31, 2008. Certain obligations under this agreement continue post-termination, such as Mr. Mina’s non-competition obligation. Name Position Term of Agreement 2008 Base Salary Rate R. Mina President and CEO, Foot Locker, Inc.–U.S.A. 5/1/2008—1/31/2010 $875,000 42
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL The executives’ employment agreements and certain of the plans and programs that executives participate in require the Company to pay compensation to the executives if their employment terminates in certain circumstances. The estimated amount of compensation and benefits that would be payable to the named executives following termination of their employment, Reason for Severance Accelerated SERP Benefit under Excess Cash Balance Plan Continuation of Health Benefits Outplacement Tax Gross-Up Total Severance Accelerated SERP Benefit under Excess Cash Balance Plan Continuation of Health Benefits Outplacement Tax Gross-Up Total By Company Severance: Restricted $2,256,933 $383,799 $7,500 $25,000 — $7,592,310 $3,228,339 Restricted $2,639,252 $453,204 $164,597 $25,000 — $7,753,010 Or Stock Options: Stock Options: By Executive (1) (2) (3) (4) (5) (6) (1) (2) (3) (4) (5) (6) Executive — — $2,256,933 $383,799 $7,500 — — $2,648,232 — — td,639,252 $453,204 td64,597 — — $3,257,053 (3) (4) (5) Executive (3) (4) (5) Termination Severance: Restricted $2,256,933 $383,799 $7,500 $25,000 — $9,654,810 $5,062,500 Restricted $2,639,252 $453,204 $164,597 $25,000 — $9,587,171 Stock Options: Stock Options: (7) (8) (2)(9) (3) (4) (5) (6) (10) (8) (2)(9) (3) (4) (5) (6) (10) Disability — Restricted $2,256,933 $383,799 $7,500 — — $4,567,310 — Restricted $2,639,252 $453,204 $164,597 — — $4,499,671 Stock Options: Stock Options: (11)(9) (12) (4) (5) (11)(9) (12) (4) (5) Death — Restricted $2,256,933 $383,799 — — — $4,559,810 — Restricted $2,639,252 $453,204 — — — $4,335,074 Stock Options: Stock Options: (11)(9) (12) (4) (11)(9) (12) (4) Cause — — — $383,799 — — — $383,799 — — — $453,204 — — — $453,204 (4) (4) Notes to Table on Matthew D. Serra (1) The severance amount for various reasonsincluding amounts already vested, is stated in the tables below. TheExcept for Richard Mina, whose information appears on Page 53, the information in the tables assumes a termination date of February 2, 2008.January 31, 2009.
Termination
Payment
Vesting of
Restricted
Stock and
Options
Benefit
Services
Payment
Payment
and
Annual
Bonus
Vesting of
Restricted
Stock and
Options
Benefit
Services
Payment
Without
Cause
$3,000,000
Stock:
$1,919,078
Stock:
$1,242,618
No acceleration
of vesting
No acceleration
of vesting
if Company
Breaches
Employment
Agreement
Resigns
Before End
of Term
Resigns
Before End
of Term
following
Change in
Control
$5,062,500
Stock:
$1,919,078
Stock:
$1,242,618
Accelerated
vesting of
115,167 shares:
$0 value
Accelerated
vesting of
165,668 shares:
$0 value
Stock:
$1,919,078
Stock:
$1,242,618
Accelerated
vesting of
49,499 shares:
$0 value
Accelerated
vesting of
99,501 shares:
$0 value
Stock:
$1,919,078
Stock:
$1,242,618
Accelerated
vesting of
49,499 shares:
$0 value
Accelerated
vesting of
99,501 shares:
$0 value equalsequals:—
43
continuation would be made six months following termination, and the remaining payments would then be made on a monthly —$1,728,339, which reflects Mr. Serra’s annual bonus of $1,728,339 for 2008, which would be payable at the are made to other participants in the plan.basis. Sincebasis; plusperformance goalstime the bonus payments for the 2007 fiscalplan year were not met, no bonus would be payable.39
(2) This amount is the value of (3) This amount is the total benefit payable under the Supplemental Executive Retirement Plan (“SERP”). The payments would be made quarterly over a three-year period. The first two quarterly payments would be made six months following the executive’s termination date, with the remaining payments made quarterly during the remainder of the three-year period. (4) Benefit payable as of (5) Mr. Serra would be entitled under the SERP to the continuation of medical and dental insurance benefits following termination. The benefits would be substantially the same as those benefits to which senior executives are entitled under Foot Locker’s medical and dental plans for active employees. Mr. Serra would be required to pay the insurance premium applicable to actively employed senior executives, including any subsequent increases in the premiums. The continuation of benefits would terminate if Mr. Serra engages in competition during the one-year period following termination or becomes a participant in a new employer’s health plan. The amount shown in the table represents the (6) This amount reflects the approximate cost of one year of outplacement services. (7) This covers (i) termination by the Executive within the 30-day period occurring three months after a Change in Control and (ii) by the Company without Cause or by Executive for Good Reason during the two-year period following a Change in Control. (8) This amount equals 1.5 times Executive’s annual base salary plus annual bonus at target, which is the minimum amount payable to (9) The fair market value of a share of the Company’s stock on (10) If Mr. Serra receives payments or benefits following a Change in Control that are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, we would pay him a gross-up payment to put him in the same after-tax position he would have been in had no excise tax been imposed. Based on current estimates, no excise tax would be payable by executive; therefore, there would be no tax gross-up payment. This provision has been in Mr. Serra’s employment agreement since he joined the Company in 1998. (11) The Compensation and Management Resources Committee may, but is not obligated to, accelerate the vesting of some or all of executive’s restricted stock. The number shown in the table assumes approval of the accelerated vesting of (12) SERP benefit payable in a lump sum following the determination of disability or the date of death. 137,667168,834 shares of restricted stock that would vest on termination. The shares were valued at $13.94.$7.36. February 2, 2008January 31, 2009 in a lump sum under the Foot Locker Excess Cash Balance Plan.Plan six months following the executive’s termination date. No information is provided with respect to the benefit under the Foot Locker Retirement Plan because that plan is available generally to all salaried employees and does not discriminate in terms of scope, terms, or operation in favor of the executive officers. estimated annual cost ofamount accrued by the Company’s portion of the premiumsCompany for an individual policy covering the executive.Mr. Serra’s post-termination medical and dental benefits. himthe executive for termination following a Change-in-Control. Payment would be made as provided in Note 1 above for the $1,500,000 in remaining salary payments and the $1,728,339 annual bonus payment. For the excess amount of $1,834,161, payment would be made in a lump sum six months following the executive’s termination date. February 2, 2008January 31, 2009 was less than the exercise price of each of the unvested options that would be accelerated, so the intrinsic value of the option on that date was $0. 137,667168,834 shares of restricted stock, valued at $13.94.$7.36. 4044
RICHARD MINA
Reason for Termination
SeverancePaymentROBERT W. MCHUGH
Accelerated Vesting of Restricted Stock and Options
SERPBenefit
Benefit under Excess Cash Balance Plan
Continuation of Health Benefits
OutplacementServices
Tax Gross-UpPayment
Total
By CompanyWithout Cause
Severance:$1,649,042
RestrictedStock:No accelerationof vesting
$914,620
$427,030
$15,000
—
—
$3,005,692
Stock Options:No accelerationof vesting
(1)
(2)
(3)
(4)
By Executivefor GoodReason
Severance:$1,649,042
RestrictedStock:No accelerationof vesting
$914,620
$427,030
$15,000
—
—
$3,005,692
Stock Options:Acceleratedvesting of43,334 shares:$0 value
(1)
(5)
(2)
(3)
(4)
ExecutiveResignsBefore Endof Term
—
—
$914,620
$427,030
$15,000
—
—
$1,356,650
(2)
(3)
(4)
TerminationfollowingChange inControl
Severance:$3,062,500
RestrictedStock:$1,812,200
$914,620
$427,030
$15,000
—
—
$6,231,350
Stock Options:Acceleratedvesting of80,001 shares:$0 value
(6)
(7)(5)
(2)
(3)
(4)
(8)
Disability
—
RestrictedStock:$1,812,200
$914,620
$427,030
$15,000
—
—
$3,168,850
Stock Options:Acceleratedvesting of43,334 shares:$0 value
(9)(5)
(10)
(3)
(4)
Death
—
RestrictedStock:$1,812,200
$914,620
$427,030
—
—
—
$3,153,850
Stock Options:Acceleratedvesting of43,334 shares:$0 value
(9)(5)
(10)
(3)
Cause
—
—
—
$427,030
—
—
—
$427,030
(3)
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Reason for | Severance | Accelerated | SERP | Benefit under | Continuation | Outplacement | Tax Gross-Up | Total | ||||||||
| ||||||||||||||||
By Company | $525,000 | Restricted | — | $75,810 | $8,100 | — | — | $608,910 | ||||||||
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By Executive | $525,000 | Restricted | — | $75,810 | $8,100 | — | — | $608,910 | ||||||||
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Executive | — | — | — | $75,810 | — | — | — | $75,810 | ||||||||
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|
|
|
|
|
|
| ||
| ||||||||||||||||
Termination | $1,575,000 | Restricted | — | $75,810 | $8,100 | — | — | $2,026,910 | ||||||||
|
|
| Stock Options: |
|
|
|
|
|
|
|
|
|
|
| ||
| (5) | (6)(4) |
|
| (2) | (3) |
|
| (7) |
|
| |||||
| ||||||||||||||||
Disability | — | Restricted | $122,306 | $75,810 | $8,100 | — | — | $574,216 | ||||||||
|
|
| Stock Options: |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| (8)(4) | (9) | (2) |
|
|
|
|
|
|
|
| |||
| ||||||||||||||||
Death | — | Restricted | $122,306 | $75,810 | — | — | — | $566,116 | ||||||||
|
|
| Stock Options: |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| (8)(4) | (9) | (2) |
|
|
|
|
|
|
|
| |||
| ||||||||||||||||
Cause | — | — | — | $75,810 | — | — | — | $75,810 | ||||||||
|
|
|
|
|
| (2) |
|
|
|
|
|
|
|
| ||
Notes to Table on Richard Mina
|
| |||||||||||||||||||
|
| |||||||||||||||||||
41
(3)Benefit payable as of February 2, 2008 in a lump sum under the Foot Locker Excess Cash Balance Plan. No information is provided with respect to the benefit under the Foot Locker Retirement Plan because that plan is available generally to all salaried employees and does not discriminate in terms of scope, terms, or operation in favor of the executive officers.(4)Mr. Mina would be entitled under the SERP to the continuation of medical and dental insurance benefits following termination. The benefits would be substantially the same as those benefits to which senior executives are entitled under Foot Locker’s medical and dental plans for active employees. Mr. Mina would be required to pay the insurance premium applicable to actively employed senior executives, including any subsequent increases in the premiums. The continuation of benefits would terminate if Mr. Mina engages in competition during the one-year period following termination or becomes a participant in a new employer’s health plan. The amount shown in the table represents the estimated annual cost of the Company’s portion of the premiums for an individual policy covering the executive and his covered dependent.(5)The fair market value of a share of the Company’s stock on February 2, 2008 was less than the exercise price of each of the unvested options that would be accelerated, so the intrinsic value of the option on that date was $0.(6)The severance amount equals 104 weeks’ salary plus two times annual bonus at target.(7)This amount represents the value of 130,000 shares of restricted stock that would vest on termination. The shares were valued at $13.94.(8)If the payments or benefits received by the executive following a Change in Control are subject to the excise tax under Section 4999 of the Internal Revenue Code, then the Company would automatically reduce Mr. Mina’s payments and benefits to an amount equal to $1 less than the amount that would subject him to the excise tax, as long as the reduced amount would result in a greater benefit to him compared to the unreduced amount on a net after-tax basis.(9)The Compensation and Management Resources Committee may, but is not obligated to, accelerate the vesting of some or all of executive’s restricted stock. The number shown in the table assumes approval of the accelerated vesting of 130,000 shares of restricted stock, valued at $13.94.(10)SERP benefit payable in a lump sum following the determination of disability or the date of death.42
Reason for Severance Accelerated SERP Benefit under Continuation Outplacement Tax Gross-Up Total By Company Severance: Restricted — $70,959 $7,800 — — $728,759 Stock Options: (1) (2) (3) By Executive Severance: Restricted — $70,959 $7,800 — — $728,759 Stock Options: (1) (4) (2) (3) Executive — — — $70,959 — — — $70,959 (2) Termination Severance: Restricted — $70,959 $7,800 — — $3,329,559 Stock Options: (5) (6)(4) (2) (3) (7) Disability — Restricted $244,000 $70,959 — — — $1,290,759 Stock Options: (8)(4) (9) (2) Death — Restricted $244,000 $70,959 — — — $1,290,759 Stock Options: (8)(4) (9) (2) Cause — — — $70,959 — — — $70,959 (2) (1) The severance amount equals 52 weeks’ (2) Benefit payable as of RONALD J. HALLS
Termination
Payment
Vesting of
Restricted
Stock and
Options
Benefit
Excess Cash
Balance Plan
of Health
Benefits
Services
Payment
Without
Cause
$650,000
Stock:
No acceleration
of vesting
No acceleration
of vesting
for Good
Reason
$650,000
Stock:
No acceleration
of vesting
Accelerated
vesting of
40,000 shares:
$0 value
Resigns
Before End
of Term
following
Change in
Control
$2,275,000
Stock:
$975,800
Accelerated
vesting of
80,000 shares:
$0 value
Stock:
$975,800
Accelerated
vesting of
40,000 shares:
$0 value
Stock:
$975,800
Accelerated
vesting of
40,000 shares:
$0 value Notes to Table on Ronald J. HallsRobert W. McHugh salary.salary and would be payable six months following termination. February 2, 2008January 31, 2009 in a lump sum under the Foot Locker Excess Cash Balance Plan.Plan six months following the executive’s termination date. No information is provided with respect to the benefit under the Foot Locker Retirement Plan because that plan is available generally to all salaried employees and does not discriminate in terms of scope, terms, or operation in favor of the executive officers.4345
(3) (4) The fair market value of a share of the Company’s stock on (5) The severance amount equals (6) This amount represents the value of (7) If the payments or benefits received by the executive following a Change in Control are subject to the excise tax under Section 4999 of the Internal Revenue, (8) The Compensation and Management Resources Committee may, but is not obligated to, accelerate the vesting of some or all of executive’s restricted stock. The number shown in the table assumes approval of the accelerated vesting of (9) SERP benefit payable in a lump sum following determination of disability or the date of death. ThisThe amount in the table reflects the estimated cost to the Company of payments to Mr. HallsMcHugh to reimburse him for the difference between the cost of the COBRA continuation coverage premium and the amount he would have paid for medical and dental coverage as an active associate for 18 months following his termination. February 2, 2008January 31, 2009 was less than the exercise price of each of the unvested options that would be accelerated, so the intrinsic value of the option on that date was $0. 104 weeks’ salary plus twothree times the executive’s annual bonus at target.salary. 70,00050,000 shares of restricted stock that would vest on termination. The shares were valued at $13.94.$7.36. Code, then the Company would automatically reduce Mr. Halls’McHugh’s payments and benefits to an amount equal to $1 less than the amount that would subject him to the excise tax, as long as the reduced amount would result in a greater benefit to him compared to the unreduced amount on a net after-tax basis. 70,00050,000 shares of restricted stock, valued at $13.94.$7.36. 4446
Reason for Severance Accelerated SERP Benefit under Continuation Outplacement Tax Gross-Up Total By Company $750,000 Restricted — $86,862 $8,100 — — $844,962 Stock Options: (1) (2) (3) By Executive $750,000 Restricted — $86,862 $8,100 — — $844,962 Stock Options: (1) (4) (2) (3) Executive — — — $86,862 — — — $86,862 (2) Termination $2,250,000 Restricted — $86,862 $8,100 — — $3,007,362 Stock Options: (5) (6)(4) (2) (3) (7) Disability — Restricted $336,408 $86,862 $8,100 — — $1,093,770 Stock Options: (8)(4) (9) (2) Death — Restricted $336,408 $86,862 — — — $1,085,670 Stock Options: (8)(4) (9) (2) Cause — — — $86,862 — — — $86,862 (2) Notes to Table on Ronald J. Halls (1) The severance amount equals 52 weeks’ salary and would be payable six months following termination. (2) Benefit payable as of January 31, 2009 in a lump sum under the Foot Locker Excess Cash Balance Plan six months following the executive’s termination date. No information is provided with respect to the benefit under the Foot Locker Retirement Plan because that plan is available generally to all salaried employees and does not discriminate in terms of scope, terms, or operation in favor of the executive officers. 47
Termination
Payment
Vesting of
Restricted
Stock and
Options
Benefit
Excess Cash
Balance Plan
of Health
Benefits
Services
Payment
Without
Cause
Stock:
No acceleration
of vesting
No acceleration
of vesting
for Good
Reason
Stock:
No acceleration
of vesting
Accelerated
vesting of
38,333 shares:
$0 value
Resigns
Before End
of Term
following
Change in
Control
Stock:
$662,400
Accelerated
vesting of
65,000 shares:
$0 value
Stock:
$662,400
Accelerated
vesting of
38,333 shares:
$0 value
Stock:
$662,400
Accelerated
vesting of
38,333 shares:
$0 value
(3) This amount reflects the estimated cost to the Company of payments to Mr. Halls to reimburse him for the difference between the cost of the COBRA continuation coverage premium and the amount he would have paid for medical and dental coverage as an active associate for 18 months following his termination. (4) The fair market value of a share of the Company’s stock on January 31, 2009 was less than the exercise price of each of the unvested options that would be accelerated, so the intrinsic value of the option on that date was $0. (5) The severance amount equals three times the executive’s annual salary. (6) This amount represents the value of 90,000 shares of restricted stock that would vest on termination. The shares were valued at $7.36. (7) If the payments or benefits received by the executive following a Change in Control are subject to the excise tax under Section 4999 of the Internal Revenue Code, then the Company would automatically reduce Mr. Halls’s payments and benefits to an amount equal to $1 less than the amount that would subject him to the excise tax, as long as the reduced amount would result in a greater benefit to him compared to the unreduced amount on a net after-tax basis. (8) The Compensation and Management Resources Committee may, but is not obligated to, accelerate the vesting of some or all of executive’s restricted stock. The number shown in the table assumes approval of the accelerated vesting of 90,000 shares of restricted stock, valued at $7.36. (9) SERP benefit payable in a lump sum following determination of disability or the date of death. 48
Reason for Severance Accelerated SERP Benefit under Continuation Outplacement Tax Gross-Up Total Severance Accelerated SERP Benefit under Continuation Outplacement Tax Gross-Up Total By Company Severance: Restricted $587,555 $250,203 $15,000 — — $1,806,830 $848,077 Restricted $691,748 $289,032 $291,020 — — $2,119,877 Stock Options: Stock Options: (1) (2) (3) (4) (1) (2) (3) (4) By Executive Severance: Restricted $587,555 $250,203 $15,000 — — $1,806,830 $848,077 Restricted $691,748 $289,032 $291,020 — — $2,119,877 Stock Options: Stock Options: (1) (5) (2) (3) (4) (1) (5) (2) (3) (4) Executive — — $587,555 $250,203 $15,000 — — $852,758 — — $691,748 $289,032 $291,020 — — $1,271,800 (2) (3) (4) (2) (3) (4) Termination Severance: Restricted $587,555 $250,203 $15,000 — — $3,247,858 $1,575,000 Restricted $691,748 $289,032 $291,020 — — $3,214,800 Stock Options: Stock Options: (6) (7)(5) (2) (3) (4) (8) (6) (7)(5) (2) (3) (4) (8) Disability — Restricted $587,555 $250,203 $15,000 — — $1,410,358 — Restricted $691,748 $289,032 $291,020 — — $1,639,800 Stock Options: Stock Options: (9)(5) (10) (3) (4) (9)(5) (10) (3) (4) Death — Restricted $587,555 $250,203 — — — $1,395,358 — Restricted $691,748 $289,032 — — — $1,348,780 Stock Options: Stock Options: (9)(5) (10) (3) (9)(5) (10) (3) Cause — — — $250,203 — — — $250,203 — — — $289,032 — — — $289,032 (3) (3) Notes to Table on Gary M. Bahler (1) The severance amount equals (2) This amount is the total benefit payable under the Supplemental Executive Retirement Plan (“SERP”). The payments would be made quarterly over a three-year period. The first two quarterly payments would be made six months following the executive’s termination date, with the remaining payments made quarterly during the remainder of the three-year period.
Termination
Payment
Vesting of
Restricted
Stock and
Options
Benefit
Excess Cash
Balance Plan
of Health
Benefits
Services
Payment
Payment
Vesting of
Restricted
Stock and
Options
Benefit
Excess Cash
Balance Plan
of Health
Benefits
Services
Payment
Without
Cause
$954,072
Stock:
No acceleration
of vesting
Stock:
No acceleration
of vesting
No acceleration
of vesting
No acceleration
of vesting
for Good
Reason
$954,072
Stock:
No acceleration
of vesting
Stock:
No acceleration
of vesting
Accelerated
vesting of
23,334 shares:
$0 value
Accelerated
vesting of
23,334 shares:
$0 value
Resigns
Before End
of Term
following
Change in
Control
$1,837,500
Stock:
$557,600
Stock:
$368,000
Accelerated
vesting of
45,001 shares:
$0 value
Accelerated
vesting of
46,668 shares:
$0 value
Stock:
$557,600
Stock:
$368,000
Accelerated
vesting of
23,334 shares:
$0 value
Accelerated
vesting of
23,334 shares:
$0 value
Stock:
$557,600
Stock:
$368,000
Accelerated
vesting of
23,334 shares:
$0 value
Accelerated
vesting of
23,334 shares:
$0 value two weeks’three times weekly salary plus portion of annual bonus at target multiplied by executive’s 2728 years of service.service and would be payable six months following termination. 4549
(3) Benefit payable as of (4) Mr. Bahler would be entitled under the SERP to the continuation of medical and dental insurance benefits following termination. The benefits would be substantially the same as those benefits to which senior executives are entitled under Foot Locker’s medical and dental plans for active employees. Mr. Bahler would be required to pay the insurance premium applicable to actively employed senior executives, including any subsequent increases in the premiums. The amount shown in the table represents the (5) The fair market value of a share of the Company’s stock on (6) The severance amount equals (7) This amount represents the value of (8) If the payments or benefits received by the executive following a Change in Control are subject to the excise tax under Section 4999 of the Internal Revenue, then the Company would automatically reduce Mr. Bahler’s payments and benefits to an amount equal to $1 less than the amount that would subject him to the excise tax, as long as the reduced amount would result in a greater benefit to him compared to the unreduced amount on a net after-tax basis. (9) The Compensation and Management Resources Committee may, but is not obligated to, accelerate the vesting of some or all of executive’s restricted stock. The number shown in the table assumes approval of the accelerated vesting of (10) SERP benefit payable in a lump sum following the determination of disability or the date of death. February 2, 2008January 31, 2009 in a lump sum under the Foot Locker Excess Cash Balance Plan.Plan six months following executive’s termination date. No information is provided with respect to the benefit under the Foot Locker Retirement Plan because that plan is available generally to all salaried employees and does not discriminate in terms of scope, terms, or operation in favor of the executive officers. estimated annual cost ofamount accrued by the Company’s portion of the premiumsCompany for an individual policy covering the executiveMr. Bahler’s post-termination medical and his covered dependent.dental benefits. February 2, 2008January 31, 2009 was less than the exercise price of each of the unvested options that would be accelerated, so the intrinsic value of the option on that date was $0. 104 weeks’ salary plus twothree times the executive’s annual bonus at target.salary. 40,00050,000 shares of restricted stock that would vest on termination. The shares were valued at $13.94.$7.36. 40,00050,000 shares of restricted stock, valued at $13.94.$7.36. 4650
Reason for Severance Accelerated SERP Benefit under Continuation Outplacement Tax Gross-Up Total Severance Accelerated SERP Benefit under Continuation Outplacement Tax Gross-Up Total By Company Severance: Restricted — $59,997 $7,800 — — $592,797 $468,600 Restricted — $65,171 $5,603 — — $539,374 Stock Options: Stock Options: (1) (2) (3) (1) (2) (3) By Executive Severance: Restricted — $59,997 $7,800 — — $592,797 $468,600 Restricted — $65,171 $5,603 — — $539,374 Stock Options: Stock Options: (1) (4) (2) (3) (1) (4) (2) (3) Executive — — — $59,997 — — — $59,997 — — — $65,171 — — — $65,171 (2) (2) (3) Termination Severance: Restricted — $59,997 $7,800 — — $2,881,097 $1,405,800 Restricted — $65,171 $5,603 — — $1,844,574 Stock Options: Stock Options: (5) (6)(4) (2) (3) (7) (5) (6)(4) (2) (3) (7) Disability — Restricted $50,341 $59,997 — — — $1,086,138 — Restricted $436,698 $65,171 $5,603 — — $875,472 Stock Options: Stock Options: (8)(4) (9) (2) (8)(4) (9) (2) (3) Death — Restricted $50,341 $59,997 — — — $1,086,138 — Restricted $436,698 $65,171 — — — $869,869 Stock Options: Stock Options: (8)(4) (9) (2) (8)(4) (9) (2) Cause — — — $59,997 — — — $59,997 — — — $65,171 — — — $65,171 (2) (2) Notes to Table on (1) The severance amount equals 52 weeks’ (2) Benefit payable as of ROBERT W. MCHUGHLAURIE J. PETRUCCI
Termination
Payment
Vesting of
Restricted
Stock and
Options
Benefit
Excess Cash
Balance Plan
of Health
Benefits
Services
Payment
Payment
Vesting of
Restricted
Stock and
Options
Benefit
Excess Cash
Balance Plan
of Health
Benefits
Services
Payment
Without
Cause
$525,000
Stock:
No acceleration
of vesting
Stock:
No acceleration
of vesting
No acceleration
of vesting
No acceleration
of vesting
for Good
Reason
$525,000
Stock:
No acceleration
of vesting
Stock:
No acceleration
of vesting
Accelerated
vesting of
23,333 shares:
$0 value
Accelerated
vesting of
23,334 shares:
$0 value
Resigns
Before End
of Term
following
Change in
Control
$1,837,500
Stock:
$975,800
Stock:
$368,000
Accelerated
vesting of
36,667 shares:
$0 value
Accelerated
vesting of
46,668 shares:
$0 value
Stock:
$975,800
Stock:
$368,000
Accelerated
vesting of
23,333 shares:
$0 value
Accelerated
vesting of
23,334 shares:
$0 value
Stock:
$975,800
Stock:
$368,000
Accelerated
vesting of
23,333 shares:
$0 value
Accelerated
vesting of
23,334 shares:
$0 value Robert W. McHughLaurie J. Petrucci salary.salary and would be payable six months following termination. February 2, 2008January 31, 2009 in a lump sum under the Foot Locker Excess Cash Balance Plan.Plan six months following the executive’s termination date. No information is provided with respect to the benefit under the Foot Locker Retirement Plan because that plan is available generally to all salaried employees and does not discriminate in terms of scope, terms, or operation in favor of the executive officers.4751
(3) (4) The fair market value of a share of the Company’s stock on (5) The severance amount equals (6) This amount represents the value of (7) If the payments or benefits received by the executive following a Change in Control are subject to the excise tax under Section 4999 of the Internal Revenue, then the Company would automatically reduce (8) The Compensation and Management Resources Committee may, but is not obligated to, accelerate the vesting of some or all of executive’s restricted stock. The number shown in the table assumes approval of the accelerated vesting of (9) SERP benefit payable in a lump sum following determination of disability or the date of death. TheThis amount in the table reflects the estimated cost to the Company of payments to Mr. McHughMs. Petrucci to reimburse himher for the difference between the cost of the COBRA continuation coverage premium and the amount heshe would have paid for medical and dental coverage as an active associate for 18 months following hisher termination. February 2, 2008January 31, 2009 was less than the exercise price of each of the unvested options that would be accelerated, so the intrinsic value of the option on that date was $0. 104 weeks’ salary plus twothree times the executive’s annual bonus at target.salary. 70,00050,000 shares of restricted stock that would vest on termination. The shares were valued at $13.94.$7.36. Mr. McHugh’sMs. Petrucci’s payments and benefits to an amount equal to $1 less than the amount that would subject himher to the excise tax, as long as the reduced amount would result in a greater benefit to himher compared to the unreduced amount on a net after-tax basis. 70,00050,000 shares of restricted stock, valued at $13.94.$7.36. 4852
On September 30, 2008, we notified Mr. Mina that the Company was terminating his employment without Cause as of October 31, 2008. Subsequently, the Audit Committee retained counsel to conduct an investigation into an anonymous allegation communicated to the Company with regard to Mr. Mina. Mr. Mina subsequently brought an action against the Company in connection with the termination of his employment. As of the date of this proxy statement, no severance benefit, payments under the SERP, or payment under the Excess Cash Balance Plan have been made to Mr. Mina. In addition, as of the date of this proxy statement, no final determination has been made with regard to the status of his termination. The amounts shown in the table reflect the amount of the payments that the Company anticipates that it would make to Mr. Mina as a consequence of the termination of his employment without Cause. Mr. Mina forfeited all of his unvested restricted stock on his termination date, and there was no acceleration of the vesting of any of his unvested stock options. He is not entitled to any tax gross-up payment. Reason for Severance SERP Benefit under Continuation Continuation of Outplacement Insurance Total By Company $1,463,942 $914,620 $527,391 $348,372 $30,000 $20,000 $5,507 $3,309,832 (1) (2) (3) (4) (5) (6) Notes to Table on Richard Mina (1) The severance amount equals three weeks’ salary multiplied by Mr. Mina’s 29 years of service. (2) This amount is the total benefit payable under the Supplemental Executive Retirement Plan (“SERP”). The payments would be made quarterly over a three-year period. The first two quarterly payments would be made six months following Mr. Mina’s termination date, with the remaining payments made quarterly during the remainder of the three-year period. (3) Benefit payable in a lump sum under the Foot Locker Excess Cash Balance Plan six months following the Mr. Mina’s termination date. No information is provided with respect to the benefit under the Foot Locker Retirement Plan because that plan is available generally to all salaried employees and does not discriminate in terms of scope, terms, or operation in favor of the executive officers. (4) For a termination without Cause, Mr. Mina would be entitled under the SERP to the continuation of medical and dental insurance benefits. The benefits would be substantially the same as those benefits to which senior executives are entitled under Foot Locker’s medical and dental plans for active employees. Mr. Mina would be required to pay the insurance premium applicable to actively employed senior executives, including any subsequent increases in the premiums. The amount shown in the table represents the amount accrued by the Company for post-termination medical and dental benefits. (5) The amount shown in the table represents the maximum reimbursement Mr. Mina is eligible to receive for the continuation of his automobile expense reimbursement. (6) The Company paid the annual premiums through December 2008 on a long-term disability insurance policy and through July 2009 on a universal life insurance policy for Mr. Mina. 53
Termination
Payment
Benefit
Excess Cash
Balance Plan
of Health
Benefits
Automobile
Expense
Reimbursement
Services
Premiums
Without
Cause
Foot Locker Retirement Plan The Foot Locker Retirement Plan (the “Retirement Plan”) is a defined benefit plan with a cash balance formula, which covers eligible employees of the Company and substantially all of our United States subsidiaries. All qualified employees who are at least 21 years old with one year of service are covered by the Retirement Plan. Plan participants become fully vested in their benefits under this plan generally upon completion of 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. Years of Percent of All + Percent of W-2 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 and receive benefits under the 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. Additional optional forms of payment are available to participants who were participating in the Retirement Plan as of December 31, 1995. Foot Locker Excess Cash Balance Plan The Internal Revenue Code limits annual retirement benefits that may be paid to, and the compensation that may be taken into account in calculating benefits for, any person under a qualified retirement plan such as the Foot Locker Retirement Plan. Accordingly, for any person covered by the Retirement Plan whose annual retirement benefit, calculated in accordance with the terms of the Retirement 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. Early Retirement Eligibility The Foot Locker Retirement Plan provides for a reduced benefit payment to a participant who retires after reaching early retirement age but prior to normal retirement age. Early retirement age is defined under the Retirement Plan and Excess Plan as age 55 with at least 5 years of vesting service. fivethree years of service or upon reaching normal retirement age (age 65) while actively employed.
Service
W-2 Compensation
Compensation
Over $22,000 Mr.Messrs. Serra, Bahler and Mr. BahlerHalls are the only named executive officers currently eligible for early retirement under these plans.4954
Foot Locker Supplemental Executive Retirement Plan In addition, the Foot Locker 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 who participate in this plan. The named executive officers, excluding Richard T. Mina, and A participant is eligible to receive a benefit under the SERP only if his or her age plus years of service at retirement equals at least 65. Currently, Messrs. Serra The SERP provides for the continuation of medical and dental insurance benefits if an executive’s age plus years of service total at least 65 when his employment terminates. The benefits would be substantially the same as those benefits to which senior executives are entitled under Foot Locker’s medical and dental plans for active employees. The terminated executive would be required to pay the insurance premium applicable to actively employed senior executives, including any increases in the premiums, and the Company would pay the difference between the actual premium rate and the active employee rate. Payment of Retirement Benefits The table below provides the present value of the accumulated benefit payable to each of the named executives and the years of service credited to each of them under the Foot Locker Retirement Plan, the Excess Plan, and the SERP determined using interest rate and mortality rate assumptions consistent with those used in our fourthree other executive officers of the Company currently participate in the SERP. The Compensation and Management Resources Committee sets an annual targeted incentive award under the SERP 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 for that year. The applicable percentage for the year increases or decreases proportionately to the percentage of the Company’s performance in relation to the target, but may not be less than 4 percent or more than 12 percent in any year. Participants’ accounts accrue simple interest at the rate of 6 percent annually.Mina, and Bahler have age plus years of service totaling at least 65. Mr. Mina had age plus years of service exceeding 65 at the time of his termination of employment. If a participant’s employment terminates due to death or disability, he (or his estate) would be entitled to payment of his SERP balance. A participant’s SERP benefit is paid in 12 quarterly installments following retirement, with the first two quarters payable six months following retirement. Upon death or disability, a participant’s SERP benefit is paid in a lump sum.20072008 financial statements. With regard to Mr. Mina, the SERP amount assumes that Mr. Mina is eligible for the SERP benefit and reflects his account balance at February 1, 2008 with no interest or pay credit for 2008.5055
(a) (b) (c) (d) (e) (b) (c) (d) (e) Name Plan Number of Years Present Value of Payments During Plan Number of Years Present Value of Payments During M. Serra Retirement Plan 8 34,680 0 Retirement Plan 9 41,737 0 Excess Plan 8 381,431 Excess Plan 9 450,300 SERP 10 2,073,543 SERP 11 2,415,210 2,489,654 2,907,247 R. McHugh Retirement Plan 9 39,239 0 Retirement Plan 10 44,118 0 Excess Plan 9 58,846 SERP 3 46,139 144,224 R. Mina Retirement Plan 26 150,588 0 Excess Plan 26 419,366 Excess Plan 10 71,460 SERP 9 840,302 SERP 4 111,261 1,410,256 226,839 R. Halls Retirement Plan 6 26,451 0 Retirement Plan 7 31,890 0 Excess Plan 6 69,930 Excess Plan 7 83,453 SERP 5 223,925 SERP 6 307,641 320,306 422,984 G. Bahler Retirement Plan 26 203,054 0 Retirement Plan 27 224,935 0 Excess Plan 26 246,921 Excess Plan 27 279,245 SERP 10 539,812 SERP 11 633,027 989,787 1,137,207 L. Petrucci Retirement Plan 10 40,920 0 Excess Plan 10 61,412 SERP 8 397,755 500,087 Former Executive Officer Former Executive Officer R. Mina Retirement Plan 27 178,209 0 Excess Plan 27 524,837 SERP 9 836,980 1,540,026 Notes to Pension Benefits Table (1) In general, the present value of accumulated benefits was determined using the same measurement date
Name
Credited Service
(#)(1)
Accumulated Benefit
($)(1)
Last Fiscal Year
($)
Name
Credited Service
(#)(1)
Accumulated Benefit
($)(1)
Last Fiscal Year
($) (February 2, 2008)(January 31, 2009) and assumptions used for financial reporting purposes. Expected retirement age for the Retirement Plan and the Excess Plan is equal to normal retirement age as defined by the plans. For the SERP, the age at which Participants become eligible for retirement under the plan is used as the expected retirement age. The following are the key assumptions that were used in calculating the values in the table:•
FAS 87 Discount rate of 6.1 percent.6.5 percent for the Retirement Plan and the SERP;
FAS 87 Discount rate of 6.4 percent for the Excess Plan.
•
Retirement age is assumed to be 65 for the Retirement Plan and the Excess Plan; for the SERP the retirement age is assumed to be when age plus years of service equal 65.
•
417(e) interest rate of 6 percent.
•
Form of payment for the Retirement Plan and the Excess Plan is a lump sum; the form of payment for the SERP is 12 quarterly installments.
•
Mr. Mina’s SERP amount reflects no credited service for fiscal year 2008.
The years of service for the SERP reflect the number of years that the executive has been approved by the Compensation Committee as a participant in that plan. Mr. Serra’s years of service under the Retirement Plan and the Excess Plan are less than the number of years of credited
56
service under the SERP because of the requirement that an employee must complete a year of eligibility service before becoming eligible for participation in these plans.51
Trust Agreement for Certain Benefit Plans The Company has established a trust for certain benefit plans, arrangements, and agreements, including the Supplemental Executive Retirement Plan, the Foot Locker Excess Cash Balance Plan, the executive employment agreements, and other benefit plans, agreements or arrangements that may be covered at a later date (collectively, the “Benefit Obligations”). Under the trust agreement, if there is 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 the amounts to which they may become entitled under the Benefit Obligations. Upon the occurrence of a Potential Change in Control of the Company as defined in the trust agreement, the Company is required to fund the trust with an amount sufficient to pay the total amount of the Benefit Obligations. Following the occurrence, and during the pendency, of a Potential Change in Control, the trustee would be required to make payments of Benefit Obligations to the extent these payments are not made by the Company. EQUITY COMPENSATION PLAN INFORMATION The following table provides information as of February 2, 2008January 31, 2009 for compensation plans under which equity securities may be issued.
(a) (b) (c) Plan Category Number of Securities Weighted-Average Number of Securities Equity Compensation Plans Approved by Security Holders 5,977,311 $ 19.5738 8,362,542 (1)(2) Equity Compensation Plans Not Approved by Security Holders 0 0 0 Total 5,977,311 $ 19.5738 8,362,642
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
Exercise Price of
Outstanding Options,
Warrants and Rights
Remaining Available
For Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in
Column(a))
|
|
|
|
|
|
| |||||||||||||||
| (a) | (b) | (c) | ||||||||||||||||||
| |||||||||||||||||||||
Plan Category | Number of Securities | Weighted-Average | Number of Securities | ||||||||||||||||||
| |||||||||||||||||||||
Equity Compensation Plans Approved by Security Holders |
| 6,079,819 |
| $ |
| 18.6431 |
| 7,352,414 | (1)(2) |
| |||||||||||
Equity Compensation Plans Not Approved by Security Holders |
| 0 |
| 0 |
| 0 | |||||||||||||||
Total |
| 6,079,819 |
| $ |
| 18.6431 |
| 7,352,414 | |||||||||||||
Notes to Equity Compensation Plan Table
| ||||||||||||||||||||
(1) |
| Includes | ||||||||||||||||||
Participating employees under the 2003 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.
| ||||||||||||||||||||
(2) |
| |||||||||||||||||||
52
Payouts under the Long-Term Incentive Compensation Plan may be made in cash or shares of Common Stock. If shares are used, they would be issued as Other Stock-Based Awards under the 2007 Stock Incentive Plan.
57
ITEMS TO BE VOTED ON BY SHAREHOLDERS PROPOSAL 1: Our Certificate of Incorporation provides that the Board of Directors be divided into three classes serving staggered three-year Under the retirement policy for directors, which is described on Page 9,Mr. Preston would be required to retire from the Board following the Biographical information follows for the
ELECTION OF DIRECTORSterms.terms, each class to be as nearly equal in number as the other two. The terms of the threefour directors constituting Class IIIII expire at the 2008 annual meeting. Christopher A. Sinclair, who is a director in Class II, advised the Company that he would not be standing for election at this meeting, so that his tenure as a director will end at the 20082009 annual meeting.Nicholas DiPaoloAlan D. Feldman, Jarobin Gilbert Jr., and Matthew M. McKennaDavid Y. Schwartz will be considered for election as directors in Class II,III, to serve for three-year terms expiring at the annual meeting in 2011. Both2012. In order to make the classes equal in number, Cheryl Nido Turpin, who has been a director of the nominees haveCompany since 2001, will be considered for election as a director in Class II, to hold office for a two-year term expiring at the annual meeting in 2011. Each nominee has been nominated by the Board of Directors for election and havehas consented to serve. Mr. DiPaolo wasAll of the nominees were elected to hisserve for their present term at the 2005 annual meeting, and Mr. McKenna was elected to his present termterms at the 2006 annual meeting. The sevenfive remaining directors will continue in office until the expiration of their terms at the 20092010 or 20102011 annual meeting. If, prior to the annual meeting, any nominee is not able to serve, then the persons designated as proxies for this meeting (Gary M. Bahler, Robert W. McHugh and Matthew D. Serra) will have full discretion to vote for another person to serve as a director in place of that nominee.20082009 Annual Meeting because he will havehas reached age 75. Last year, the Nominating and Corporate Governance Committee asked that Mr. Preston, stand for election at the 2007 Annual Meeting, and hewho was elected to a three-year term ending in 2010. Mr. Preston2010, currently serves as the lead director. ThisLast year, on the recommendation of the Nominating and Corporate Governance Committee, the Board hasof Directors waived the retirement policy for Mr. Preston and provided that the Board would review the waiver prior to the 2009 annual meeting of shareholders. This year, the Board reviewed the waiver for Mr. Preston and, upon the recommendation of the Nominating and Corporate Governance Committee, approved a continuation of the waiver so that heMr. Preston may continue to serve on the Board and as lead director. The Board will review this waiver for Mr. Preston prior to the 2009 annual meeting of shareholders. Mr. Preston did not participate in the deliberations or decisions of either the Board or the committee on this matter.twofour nominees and for each of the sevenfive other directors of the Company whose terms will continue after the 20082009 annual meeting. The ages shown are as of April 11, 2008.9, 2009. 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 of the twofour identified
nominees to the Board of Directors.
Nominee for Director
Term Expiring in 2011
Cheryl Nido Turpin.Age 61. Director since 2001. President and Chief Executive Officer of the Limited Stores (retail merchants), a division of Limited Brands, Inc., from June 1994 to August 1997. Ms. Turpin is a director of The Warnaco Group, Inc.
Nominees for Director
Terms Expiring in 2012
Alan D. Feldman.Age 57. Director since 2005. Chairman, President and Chief Executive Officer of Midas, Inc. (automotive repair and maintenance services) since May 1, 2006. He was President and Chief Executive Officer of Midas from January 13, 2003 to April 30, 2006. He was an independent consultant from March 2002 to January 2003. He is a director of Midas, Inc. and John Bean Technologies Corporation.
Jarobin Gilbert Jr.Age 63. 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 non-executive Chairman of the Board of Directors of the
58
Atlantic Mutual Companies. Mr. Gilbert is also a director of Harlem Partnership, Inc. and a permanent member of the Council on Foreign Relations. David Y. Schwartz.Age 68. Director since 2000. Independent business adviser and consultant, principally in the retail, distribution and service industries, since July 1997. He was a partner with Arthur Andersen LLP from 1972 until he retired from that public accounting firm in 1997. Mr. Schwartz is a director of Walgreen Co., Stage Stores, Inc., and True Value Company. Directors Continuing in Office James E. Preston.Age 75. 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 Chairman and Chief Executive Officer of Avon Products, Inc. from 1989 to June 1998. Matthew D. Serra.Age 64. Director since 2000. The Company’s Chairman of the Board since February 1, 2004, 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. Dona D. Young.Age 55. Director since 2001. Chairman of the Board, President and Chief Executive Officer of The Phoenix Companies, Inc. (provider of wealth management products and services to individuals and institutions) to April 15, 2009. Mrs. Young has held the positions of Chairman of the Board since April 1, 2003, President since February 2000, and Chief Executive Officer since January 1, 2003. Mrs. Young is also Chairman of the Board since April 1, 2003 and Chief Executive Officer since January 1, 2003 of Phoenix Life Insurance Company. She is a director of The Phoenix Companies, Inc. until April 15, 2009. Directors Continuing in Office Nicholas DiPaolo.Age Matthew M. McKenna.Age
Terms Expiring in 2010
Terms Expiring in 201166.67. Director since 2002. Vice Chairman of Bernard Chaus, Inc. (apparel designer and manufacturer) from November 1, 2000 to June 23, 2005; Chief Operating Officer of Bernard Chaus from November 1, 2000 to October 18, 2004. Mr. DiPaolo is a director of JPS Industries and R.G. Barry Corporation.57.58. Director since 2006. President and Chief Executive Officer of Keep America Beautiful, Inc. (non-profit community improvement and educational organization) since January 1, 2008. He was Senior Vice President of Finance of PepsiCo, Inc. (global snack and beverage company) from August 6, 2001 through December 31, 2007. He is a director of PepsiAmericas, Inc. Mr. McKenna is also a member of the Duke University Library Advisory Board and serves on the board of the Manhattan Theater Club. He is also an adjunct professor at Fordham University School of Business School and Fordham University School of Law School in New York.5359
Directors Continuing in OfficeTerms Expiring in 2009Alan D. Feldman. Age 56. Director since 2005. Chairman, President and Chief Executive Officer of Midas, Inc. (automotive repair and maintenance services) since May 1, 2006. He was President and Chief Executive Officer of Midas from January 13, 2003 to April 30, 2006. He was an independent consultant from March 2002 to January 2003. He is a director of Midas, Inc.Jarobin Gilbert Jr. Age 62. 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 Chairman of the Board of Trustees 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 67. Director since 2000. Independent business adviser and consultant, principally in the retail, distribution and service industries, since July 1997. He was a partner with Arthur Andersen LLP from 1972 until he retired from that public accounting firm in 1997. Mr. Schwartz is a director of Walgreen Co., Stage Stores, Inc., and True Value Company.Cheryl Nido Turpin. Age 60. Director since 2001. President and Chief Executive Officer of the Limited Stores (retail merchants), a division of Limited Brands, Inc., from June 1994 to August 1997. Ms. Turpin is a director of The Warnaco Group, Inc.Directors Continuing in OfficeTerms Expiring in 2010James E. Preston. Age 74. 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 Chairman and Chief Executive Officer of Avon Products, Inc. from 1989 to June 1998.Matthew D. Serra. Age 63. Director since 2000. The Company’s Chairman of the Board since February 1, 2004, 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.Dona D. Young. Age 54. Director since 2001. Chairman of the Board, President and Chief Executive Officer of The Phoenix Companies, Inc. (provider of wealth management products and services to individuals and institutions). Mrs. Young has held the positions of Chairman of the Board since April 1, 2003, President since February 2000, and Chief Executive Officer since January 1, 2003. She served as Chief Operating Officer from February 2001 to December 31, 2002. Mrs. Young is also Chairman of the Board since April 1, 2003 and Chief Executive Officer since January 1, 2003 of Phoenix Life Insurance Company. She previously served as President of Phoenix Life Insurance Company from February 2000 to March 31, 2003 and Chief Operating Officer from February 2001 to December 31, 2002. Mrs. Young joined Phoenix Home Life Mutual Insurance Company in 1980. She is a director of The Phoenix Companies, Inc. and Wachovia Corporation.54
PROPOSAL 2: The Audit Committee of the Board of Directors has appointed KPMG LLP as our independent registered public accountants for the 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.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS20082009 fiscal year. We are asking shareholders at this meeting to ratify this appointment of KPMG LLP for 2008.2009.
The Board of Directors recommends that shareholders vote FOR Proposal 2.
The following table shows the fees we paid to KPMG for the audit of Foot Locker’s annual financial statements for 20072008 and 2006,2007, as well as the fees billed for other services KPMG provided during these two fiscal years.
|
|
|
|
| ||||||||||
Category | 2007 | 2006 | ||||||||||||
Audit Fees (1) |
| $ |
| 2,780,000 |
| $ |
| 2,586,000 | ||||||
Audit-Related Fees (2) |
| 198,000 |
| 131,000 | ||||||||||
Tax Fees (3) |
| 4,000 |
| 63,000 | ||||||||||
All Other Fees |
| 0 |
| 0 | ||||||||||
|
|
|
|
| ||||||||||
Total |
| $ |
| 2,982,000 |
| $ |
| 2,780,000 | ||||||
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
Category | 2008 | 2007 | ||||||||||||
Audit Fees (1) |
| $ |
| 3,005,000 |
| $ |
| 2,780,000 | ||||||
Audit-Related Fees (2) |
| 346,000 |
| 198,000 | ||||||||||
Tax Fees (3) |
| 4,000 |
| 4,000 | ||||||||||
All Other Fees (4) |
| 225,000 |
| 0 | ||||||||||
|
|
|
|
| ||||||||||
Total |
| $ |
| 3,580,000 |
| $ |
| 2,982,000 | ||||||
|
|
|
|
| ||||||||||
Notes to Audit and Non-Audit Fees Table
| ||||||||||||||||||||
(1) |
| Audit fees consisted of professional services provided in connection with the audit of our annual financial statements, reviews of financial statements included in our Form 10-Qs, reviews of registration statements and issuances of consents, as well as work generally only the independent auditor can reasonably be expected to provide, such as statutory audits. | ||||||||||||||||||
| ||||||||||||||||||||
(2) |
| Audit-related fees consisted principally of audits of financial statements of certain employee benefit plans. | ||||||||||||||||||
| ||||||||||||||||||||
(3) |
| Tax fees consisted principally of assistance with matters related to tax compliance. | ||||||||||||||||||
(4) | All other fees consisted of due diligence services related to an acquisition in 2008. | |||||||||||||||||||
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has a policy that all audit and non-audit services to be provided by our independent accountants, including services for our subsidiaries and affiliates, are to be approved in advance by the Audit Committee, regardless of the estimated cost for providing such services. Between meetings of the Committee, the Audit Committee has delegated this authority to the Chair of the Committee. In practice, these fees are normally approved by the Committee Chair and reviewed with the Audit Committee at a subsequent meeting. Management reviews with the Audit Committee at regularly scheduled meetings the total amount and nature of the audit and non-audit services provided by the independent accountants, including services for our subsidiaries and affiliates, since the Committee’s last meeting. None of the services pre-approved by the Audit Committee or the Chair of the Committee during 20072008 utilized thede minimisexception to pre-approval contained in the applicable rules of the Securities and Exchange Commission.
5560
In accordance with the 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 and financial reporting. The Committee has responsibility for appointing the independent accountants and internal auditors. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Audit Committee consists of five independent directors, as independence is defined under the rules of The New York Stock Exchange. All of the Committee members meet the expertise requirements under the rules of The New York Stock Exchange. The Audit Committee held The Audit Committee reviewed and discussed with management and KPMG the audited financial statements for the The Audit Committee obtained from KPMG the written disclosures and the letter required by 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 Nicholas DiPaolo,Chair Jarobin Gilbert Jr. Matthew M. McKenna Dona D. Youngeightnine meetings in 2007.2008. At its meetings during 2007,2008, the Committee discussed with management, KPMG LLP, the Company’s independent registered public accountants, and the Company’s internal auditors the assessment of the Company’s internal control over financial reporting. The Committee also discussed with KPMG its attestation report and opinion on the Company’s internal control over financial reporting contained in the Company’s 20072008 Annual Report on Form 10-K.20072008 fiscal year, which ended February 2, 2008.January 31, 2009. The Committee also discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61, as amended “Communication with(AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committees” and,Committee, both with and without management present, discussed and reviewed the results of KPMG’s examination of the financial statements and the overall quality of the Company’s financial reporting.Independence Standardsapplicable requirements of the Public Company Accounting Oversight Board Standard No. 1 “Independence Discussionsregarding the independent accountant’s communications with the Audit Committees”Committee concerning independence, and has discussed with KPMG its independence and any relationships that may affect its objectivity. The Audit Committee also considered whether the non-audit services provided by KPMG to the Company are compatible with maintaining KPMG’s independence. The Committee has satisfied itself that KPMG is independent.20072008 fiscal year.
David Y. SchwartzNicholas DiPaolo,ChairJarobin Gilbert Jr.Matthew M. McKennaDavid Y. SchwartzDona D. Young5661
PROPOSAL 3:
APPROVAL OF AMENDMENT TO THE FOOT LOCKERANNUAL INCENTIVE COMPENSATION PLAN, AS AMENDED AND RESTATEDBY-LAWSThe Foot Locker Annual Incentive Compensation Plan was amended and restated (the “Restated Annual Plan”) on March 26,On November 19, 2008, by the Compensation and Management Resources Committee,Board of Directors approved, subject to our shareholders’shareholder approval at the 20082009 annual meeting, asan amendment to Covered Employees. The Restated Annual Plan is designedArticle II, Section 1 of the Company’s By-Laws to complyreduce the number of directors from a range of 9 to 17 persons to a range of 7 to 13 persons, with the requirements of Section 162(m) of the Internal Revenue Code. Under Section 162(m), the Company cannot deduct certain compensation in excess of $1 million paidexact number within this range to the named executive officers of the Company (each, a “Covered Employee”). Certain compensation, including compensation paid based on the achievement of pre-established performance goals, is excluded from this deduction limit if the material terms under which the compensation is to be paid, including the performance goals to be used, are approved by shareholders.We are asking shareholders to approve the Restated Annual Plan, including the performance goals under the plan. Except for the addition of a goal related to division profit, the goals are unchanged from 2003 when shareholders last approved the performance goals. We are also making certain changes to the plan principally to comply with Internal Revenue Code Sections 409A and 162(m). A complete copy of the Restated Annual Plan is attached to this proxy statement as Appendix A.2008 AmendmentsWe have specified in the Restated Annual Plan that any payments under the plan must be made within two and one-half months following the end of the fiscal year. Payment will only be made if the performance goals for the performance period are met.We have added to the performance goals the attainment of certain target levels of, or percentage increase in, division profit. This is the only change to the performance goals since shareholders approved the performance goals in 2003.We have eliminated the provisions permitting interim payments to participants and eliminated the provisions relating to participants’ deferral of awards under the plan.Material Features of the Restated Annual PlanThe following is only a summary of the principal features of the Restated Annual Plan. This summary is qualified in its entirety by the complete text of the plan. Capitalized terms used in this summary but that are not defined here have the meanings contained in the Restated Annual Plan.Purpose of the Plan. The purposes of the Restated Annual Plan are to reinforce corporate, organizational, and business development goals; to promote the achievement of year-to-year financial and other business objectives; to reward the performance of individual officers and other employees in fulfilling their personal responsibilities for year-to-year achievements; and to serve as a qualified performance-based compensation program under Section 162(m) of the Internal Revenue Code with regard to the Company’s Chief Executive Officer and the four other most highly compensated executive officers employed at the end of the fiscal year (“Covered Employees”).Administration. The Restated Annual Plan is administered by the Compensation and Management Resources Committee (“Compensation Committee”). Each member of this committee is an “outside director” under Section 162(m) of the Internal Revenue Code. The Committee has the authority to grant awards, determine performance criteria, certify attainment of performance goals, construe and interpret the Restated Annual Plan and make all other determinations deemed necessary or advisable for the administration of this plan.Participation. Participation in the Restated Annual Plan is limited to those officers and other key employees of the Company, its subsidiaries and divisions, as selected by the Compensation Committee. In determining the persons to whom awards shall be granted, the Compensation Committee takes into account such factors as it considers appropriate to accomplish the purposes of the Restated Annual Plan.Awards. Awards under the Restated Annual Plan relate to a period coinciding with the Company’s fiscal year (the “Performance Period”). The individual target award for each participant is expressed as57
Reasons for Amendment The Board of Directors strongly believes that a smaller board is more effective in facilitating communications and decision making, which is particularly important in maintaining a highly functional board. A board of directors consisting of between 7 and 13 persons would be consistent with the way the Board has operated since 1997, where the exact number of directors on We currently have nine members on our Board of Directors. The Board believes that a reduction in the board size would also avoid the potential situation of having to quickly fill any unexpected vacancies in order to meet the existing minimum size requirements. Given the importance of recruiting qualified, independent directors to serve as directors of your company, we believe that it is prudent to conduct an organized search for a replacement when vacancies occur in order to preserve the high quality of the Board and maintain its diversity of experience. Reducing the range of the minimum and maximum number of directors would provide added flexibility in determining the appropriate size of the Board from time to time. The Board of Directors believes that the adoption of the proposed amendment to the By-Laws is in the best interests of the Company and our shareholders. Article II, Section 1 of the By-Laws is a shareholder-approved by-law, and we would continue to be required to seek our shareholders’ approval for any future amendments to this by-law. The full text of Article II, Section 1 of the By-Laws, as proposed to be amended, is as follows: “SECTION 1. The number of directors constituting the entire Board of Directors shall be not less than 7 or more than 13, the exact number of directors to be determined from time to time by resolution adopted by a majority of the a percentage of Annual Base Salary. Payment for the awards is made only if the performance goals for the Performance Period are achieved and certified by the Compensation Committee and generally only if the participant remains employed by the Company through the Payment Date.Limit on Payment. Payment to a Covered Employee may not exceed $3 million for any fiscal year.Performance Goals. The Restated Annual Plan provides that the Compensation Committee generally has the authority to determine the performance goals that will be in effect for a Performance Period. The Committee also has the authority to incorporate provisions in the performance goals allowing for adjustments in recognition of unusual or non-recurring events affecting the Company or our financial statements or in response to changes in applicable laws, regulations or accounting principles. The committee has the authority to determine the performance goals for the Covered Employees solely to the extent permitted by Section 162(m) of the Internal Revenue Code.The performance goals for the Covered Employees will be determined by the Compensation Committee basedentire Board of Directors. The number of directors is currently fixed at nine. Shareholders approved an amendment to the By-Laws in 1997 setting the range of directors at between 9 and 17 persons. For the reasons described below, the Board believes that it would be in the best interests of the Company and its shareholders to reduce the minimum and maximum number of directors at this time.onethe Board during this time ranged from a minimum of 9 persons to a maximum of 12 persons. It would also be consistent with the continuing trend towards smaller boards, with the average board size of major corporations decreasing over the past ten years.following criteria:entire Board of Directors. At each annual meeting of shareholders, directors shall be elected to hold office by a plurality of the votes cast.”
The Board of Directors recommends a vote FOR Proposal 3.
62
DEADLINES AND PROCEDURES FOR NOMINATIONS AND Deadlines and Procedures •
SHAREHOLDER PROPOSALS attaining certain target levels of, or percentage increase in,(a)
pre-tax profit;
(b)
division profit;
(c)
after-tax profits of Foot Locker (or a subsidiary, division, or other operational unit of Foot Locker);
(d)
after-tax or pre-tax return on shareholders’ equity of Foot Locker (or any subsidiary, division or other operational unit of Foot Locker);
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operational cash flow of Foot Locker (or a subsidiary, division, or other operational unit of Foot Locker);
(b)
return on invested capital or return on investment;
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Amendment or Termination of Plan. The Committee may amend, suspend, or terminate the Restated Annual Plan, or any part of it, but no amendment that requires shareholder approval in order for the plan to continue to comply with Section 162(m) of the Internal Revenue Code will be effective unless it is approved by the required vote of our shareholders. Also, no amendment may adversely affect the rights of any participant without the participant’s consent under any awards previously granted under the plan.
Benefits Not Determinable. Because performance goal criteria may vary from year to year, benefits under the Restated Annual Plan are not determinable. The Restated Annual Plan is designed to provide payments only if the performance goals established by the Compensation Committee have been met and the attainment of the goals has been certified by the Committee. The Company did not make any payments under this plan for the 2007 fiscal year because the performance goals were not met.
The Board of Directors recommends a vote FOR Proposal 3.
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Under SEC DEADLINES AND PROCEDURES FOR NOMINATIONS ANDSHAREHOLDER PROPOSALSDeadlinesrules,Rule 14a-8, if a shareholder would like us to include a proposal in our proxy statement and form of proxy for the 20092010 Annual Meeting of Shareholders, our Corporate Secretary must receive the proposal at our corporate headquarters at 112 West 34th Street, New York, New York 10120 by December 12, 200810, 2009 in order to be considered for inclusion in the 20092010 proxy statement.•
Under
Other Proposals
For any shareholder proposal that is not submitted under SEC Rule 14a-8, including nominations for directors, our By-laws shareholdersdescribe the procedures that 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.be followed. Under these procedures, 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. For 2009,2010, we must receive this notice no earlier than January 21, 200920, 2010 and no later than February 20, 2009,19, 2010, assuming that our 20092010 annual meeting is held on schedule. However, if we hold the annual meeting on a date that is not within 30 days before or after the first anniversary of the prior year’s annual meeting, then 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.
Procedures
Our By-laws provide that shareholders who wish to submit aProposals for nomination for director must deliver a noticedirectors and other items of business should be addressed to the Corporate Secretary, of the Company at 112 West 34th Street, New York, New York 10120 not less than 90 days nor more than 120 days before the first anniversary of the prior year’s annual meeting. We publish these dates each year in our proxy statement. For the 2009 annual meeting, these dates are set out in the preceding paragraph. The noticeand must contain the following information regardingspecified in the proposed nominee:Company’s By-Laws, which are available on the corporate governance section of our corporate website athttp://www.footlocker-inc.com/IR_index.htm or may be obtained from the Corporate Secretary.
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In addition, the shareholder who is making the nomination must include in the notice his or her name, address, and the number of shares of the Company’s Common Stock that he or she beneficially owns.
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.
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| By Order of the Board of Directors | |
| GARY M. BAHLER | |
| Secretary |
April 11, 20089, 2009
5963
LOCATION OF THE Our corporate headquarters is the site of the BY SUBWAY Take any of these subway lines: the A, B, C, D, E, F, N, Q, R, V, W or the Number 1, 2, or 3 trains to 34th Street. The A, C, E, 1, 2, and 3 trains stop at 34th BY CAR OR TAXI Take the Lincoln Tunnel into New York City, following the signs for 34th Street. Turn left onto West 34th Street. Our building is on the south side of 34th Street between 7th Avenue and Broadway.20082009 ANNUAL MEETING OF SHAREHOLDERS OF
FOOT LOCKER, INC.20082009 Annual Meeting of Shareholders. We are located at 112 West 34th Street, New York City, New York.Street-PennStreet–Penn Station. The B, D, F, N, Q, R, V, and W trains stop at 34th Street–Herald Square. Our building is on the south side of 34th Street between 7th Avenue and Broadway.6064
Appendix AFOOT LOCKER ANNUAL INCENTIVE COMPENSATION PLAN,AS AMENDED AND RESTATEDThe Compensation and Management Resources Committee of the Board of Directors of Foot Locker, Inc. (“Foot Locker”) has amended the Foot Locker Annual Incentive Compensation Plan (the “Plan”) as of March 26, 2008, subject to shareholder approval at the 2008 annual meeting of shareholders. The Plan was previously amended and restated effective as of June 25, 2003.1.Purpose of the Plan.The purposes of the Plan are:(a) to reinforce corporate organizational and business development goals.(b) to promote the achievement of year-to-year and long-range financial and other business objectives such as high quality of service and product, improved productivity and efficiencies for the benefit of our customers’ satisfaction and to assure a reasonable return to Foot Locker’s shareholders.(c) to reward the performance of officers and key employees in fulfilling their personal responsibilities for annual achievements.(d) to serve as a qualified performance-based compensation program under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) or any successor section and the Treasury regulations promulgated thereunder (“Section 162(m) of the Code”).2.Definitions.The following terms, as used herein, shall have the following meanings:(a) “Annual Base Salary” with respect to any Plan Year shall mean the total amount paid by Foot Locker and its subsidiaries to a participant during such Plan Year without reduction for any amounts withheld pursuant to participation in a qualified “cafeteria plan” under Section 125 of the Code, a qualified transportation arrangement under Section 132(f)(4) of the Code, or a cash or deferred arrangement under Section 401(k) of the Code. Annual Base Salary shall not include any amount paid or accruing to a participant under the Foot Locker Long-Term Incentive Compensation Plan or any other incentive compensation or bonus payment or extraordinary remuneration, expense allowances, imputed income or any other amounts deemed to be indirect compensation, severance pay and any contributions made by Foot Locker to this or any other plan maintained by Foot Locker or any other amounts which, in the opinion of the Committee, are not considered to be Annual Base Salary for purposes of the Plan.(b) “Board” shall mean the Board of Directors of Foot Locker.(c) “Committee” shall mean two or more members of the Compensation and Management Resources Committee of the Board, each of whom is an “outside director” within the meaning of Section 162(m) of the Code.(d) “Covered Employee” shall mean an officer or key employee of Foot Locker who is designated as an executive officer for purposes of Rule 3b-7 of the Securities Exchange Act of 1934 for the relevant Plan Year.(e) “Payment Date” shall mean the date selected by the Committee for payments under the Plan to be made following the finalization, review and approval of performance goal achievements for the Plan Year, which date shall be within two and one-half months following the end of the Plan Year.(f) “Individual Target Award” shall mean the targeted performance award for a Plan Year specified by the Committee as provided in Section 6 herein.(g) “Plan Year” shall mean Foot Locker’s fiscal year during which the Plan is in effect.A-1
3.Administration of the Plan.The Plan shall be administered by the Committee. No member of the Committee while serving as such shall be eligible for participation in the Plan. The Committee shall have exclusive and final authority in all determinations and decisions affecting the Plan and its participants. The Committee shall also have the sole authority to interpret the Plan, to establish and revise rules and regulations relating to the Plan, to delegate such responsibilities or duties as it deems desirable, and to make any other determination that it believes necessary or advisable for the administration of the Plan including, but not limited to: (i) approving the designation of eligible participants; (ii) setting the performance criteria within the Plan guidelines; and (iii) certifying attainment of performance goals and other material terms. The Committee shall have the authority in its sole discretion, subject to and not inconsistent with the express provisions of the Plan, to incorporate provisions in the performance goals allowing for adjustments in recognition of unusual or non-recurring events affecting Foot Locker or the financial statements of Foot Locker, or in response to changes in applicable laws, regulations, or accounting principles; provided that the Committee shall have such authority with regard to the performance goals of Covered Employees solely to the extent permitted by Section 162(m) of the Code. To the extent any provision of the Plan creates impermissible discretion under Section 162(m) of the Code or would otherwise violate Section 162(m) of the Code with regard to the performance goals of Covered Employees, such provision shall have no force or effect.4.Participation.Participation in the Plan is limited to officers or key employees of Foot Locker. Individual participants shall be those employees selected in the sole discretion of the Committee (in the case of Covered Employees) or its designee (in the case of all other officers and key employees). In determining the persons to whom awards shall be granted, the Committee shall take into account such factors as the Committee shall deem appropriate in connection with accomplishing the purposes of the Plan. The Committee may from time to time designate additional participants who satisfy the criteria for participation as set forth herein and shall determine when an officer or key employee of Foot Locker ceases to be a participant in the Plan.5.Right to Payment.Unless otherwise determined by the Committee in its sole discretion, a participant shall have no right to receive payment under this Plan unless the participant remains in the employ of Foot Locker at all times through and including the Payment Date.6.Payment.(a) Payment under this Plan to a participant will be made in cash in an amount equal to the achieved percentage of such participant’s Annual Base Salary as determined by the Committee for each Plan Year. Such percentage shall be based on the participant’s achievement of his or her Individual Target Award. Payment shall be made only if and to the extent the performance goals with respect to the Plan Year are attained.(b) At the beginning of each Plan Year (or, with respect to Covered Employees, within the time period prescribed by Section 162(m) of the Code), the Committee shall establish all performance goals and the Individual Target Awards for such Plan Year and Foot Locker shall inform each participant of the Committee’s determination with respect to such participant for such Plan Year. Individual Target Awards shall be expressed as a percentage of such participant’s Annual Base Salary. At the time the performance goals are established, the Committee shall prescribe a formula to determine the percentages of the Individual Target Award which may be payable based upon the degree of attainment of the performance goals during the Plan Year.(c) Notwithstanding anything to the contrary contained in this Plan,A-2
(1) the performance goals in respect of awards granted to participants who are Covered Employees, shall be based on one or more of the following criteria:(i) the attainment of certain target levels of, or percentage increase in, pre-tax profit;(ii) the attainment of certain target levels of, or percentage increase in, division profit;(iii) the attainment of certain target levels of, or a percentage increase in, after-tax profits of Foot Locker (or a subsidiary, division, or other operational unit of Foot Locker);(iv) the attainment of certain target levels of, or a specified increase in, operational cash flow of Foot Locker (or a subsidiary, division, or other operational unit of Foot Locker);(v) the achievement of a certain level of, reduction of, or other specified objectives with regard to limiting the level of increase in, all or a portion of, Foot Locker’s bank debt or other long- term or short-term public or private debt or other similar financial obligations of Foot Locker, if any, which may be calculated net of such cash balances and/or other offsets and adjustments as may be established by the Committee;(vi) the attainment of a specified percentage increase in earnings per share or earnings per share from continuing operations of Foot Locker (or a subsidiary, division or other operational unit of Foot Locker);(vii) the attainment of certain target levels of, or a specified percentage increase in, revenues, net income, or earnings before (A) interest, (B) taxes, (C) depreciation and/or (D) amortization, of Foot Locker (or a subsidiary, division, or other operational unit of Foot Locker);(viii) the attainment of certain target levels of, or a specified increase in, return on invested capital or return on investment;(ix) the attainment of certain target levels of, or a percentage increase in, after-tax or pre-tax return on shareholders’ equity of Foot Locker (or any subsidiary, division or other operational unit of Foot Locker); and(x) the attainment of a certain target level of, or reduction in, selling, general and administrative expense as a percentage of revenue of Foot Locker (or any subsidiary, division or other operational unit of Foot Locker), and(2) in no event shall payment in respect of an award granted for a performance period be made to a participant who is a Covered Employee as of the end of such Plan Year in an amount which exceeds $3 million. Subject to Section 3 of the Plan regarding certain adjustments, in connection with the establishment of the performance goals, the criteria listed above for Foot Locker (or any subsidiary, division or other operational unit of Foot Locker) shall be determined in accordance with generally accepted accounting principles consistently applied by Foot Locker, but before consideration of payments to be made pursuant to this Plan and pursuant to the Foot Locker Long-Term Incentive Compensation Plan.7.Time of Payment.All payments earned by participants under this Plan will be paid after performance goal achievements for the Plan Year have been finalized, reviewed, approved, and to the extent required by Section 162(m) of the Code, certified by the Committee, but in no event later than two and one-half months following the end of the applicable Plan Year. Foot Locker’s independent accountants shall, as of the close of the Plan Year, determine whether the performance goals have been achieved and communicate the results of such determination to the Committee.8.Miscellaneous Provisions.(a) A participant’s rights and interests under the Plan may not be sold, assigned, transferred, pledged or alienated.A-3
(b) In the case of a participant’s death, payment, if any, under the Plan shall be made to his or her designated beneficiary, or in the event no beneficiary is designated or surviving, to the participant’s estate.(c) Neither this Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of Foot Locker.(d) Foot Locker shall have the right to make such provisions as it deems necessary or appropriate to satisfy any obligations it may have to withhold federal, state or local income or other taxes incurred by reason of payments made pursuant to the Plan.(e) While Foot Locker does not guarantee any particular tax treatment, the Plan is designed and intended to comply with the short-term deferral rules under Section 409A of the Code and the applicable regulations thereunder and shall be limited, construed and interpreted with such intent. All amounts payable under the Plan shall be payable within the short-term deferral period in accordance with Section 409A and regulations issued thereunder.(f) The Plan is designed and intended to comply with Section 162(m) of the Code with regard to awards made to Covered Employees, and all provisions hereof shall be limited, construed and interpreted in a manner so to comply.(g) The Board or the Committee may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part; provided, that, no amendment which requires shareholder approval in order for the Plan to continue to comply with the exception for performance based compensation under Section 162(m) of the Code shall be effective unless the same shall be approved by the requisite vote of the shareholders of Foot Locker as determined under Section 162(m) of the Code. Notwithstanding the foregoing, no amendment shall affect adversely any of the rights of any participant, without such participant’s consent, under the award theretofore granted under the Plan.(h) The Plan shall be binding on Foot Locker and its successors by operation of law.A-4
YOUR VOTE IS IMPORTANT
PLEASE VOTE YOUR PROXY
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Gary M. Bahler, Robert W. McHugh, Mathew 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 | ||||||
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. THE PERSONS NAMED ABOVE AS PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR VOTE BY TELEPHONE OR INTERNET. YOU MAY SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. | ||||||
EMPLOYEE PLANS | ||||||
IF YOU ARE A PARTICIPANT IN THE FOOT LOCKER 401(k) PLAN OR THE FOOT LOCKER PUERTO RICO 1165(e) PLAN, THIS PROXY CARD COVERS THOSE SHARES ALLOCATED TO YOUR PLAN ACCOUNT. BY SIGNING AND RETURNING THIS PROXY CARD (OR VOTING BY TELEPHONE OR THE INTERNET), YOU WILL AUTHORIZE THE PLAN TRUSTEES TO VOTE THOSE SHARES ALLOCATED TO YOUR ACCOUNT AS YOU HAVE DIRECTED. | ||||||
(Continued and to be marked, dated and signed, on the other side) | ||||||
BNY MELLON SHAREOWNER SERVICES | ||
Address Change/Comments | P.O. BOX 3550 | |
(Mark the corresponding box on the reverse side) | SOUTH HACKENSACK, NJ 07606-9250 | |
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You can now access yourBNY Mellon Shareowner Servicesaccount online. | ||
Access your BNY Mellon Shareowner Services shareholder/stockholder account online via Investor ServiceDirect®(ISD). | ||
The transfer agent for Foot Locker, Inc., now makes it easy and convenient to get current information on your shareholder account. | ||
· | View account status | · | View payment history for dividends | |
· | View certificate history | · | Make address changes | |
· | View book-entry information | · | Obtain a duplicate 1099 tax form | |
· | Establish/change your PIN |
DIRECTORS RECOMMEND A VOTE “FOR” PROPOSALS 1, 2 AND 3.
Visit us on the web at http://www.bnymellon.com/shareowner/isd |
For Technical Assistance Call 1-877-978-7778 between 9am-7pm |
Monday-Friday Eastern Time |
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ChooseMLinkSMfor fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect®atwww.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment. |
47608/48484
Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
Please mark | x |
1. | ELECTION OF DIRECTORS. | DIRECTORS RECOMMEND A VOTE “FOR” PROPOSALS 1, 2 AND 3. | |||||
FOR all nominees |
| WITHHOLD AUTHORITY | ||||||||
| to vote for all nominees listed below | EXCEPTIONS* | |||||||||
o |  o | o | | |||||||
NOMINEES FOR 3-YEAR TERMS: | ||||||||||
01 Alan D. Feldman, 02 Jarobin Gilbert Jr. and 03 David Y. Schwartz | ||||||||||
NOMINEE FOR 2-YEAR TERM: | ||||||||||
04 Cheryl Nido Turpin | ||||||||||
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*Exceptions | ||||||||||
FOR | AGAINST | ABSTAIN | |||||
2. | RATIFICATION OF APPOINTMENT OF INDEPENDENT | | | | |||
| REGISTERED PUBLIC ACCOUNTANTS. | o | o | o | ||||
FOR | AGAINST | ABSTAIN | |||||
3. | APPROVAL OF | | o | o | o | ||
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. | |||||||
I plan to attend meeting | o | ||||||
Mark Here for Address | o |
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING, Internet and telephone voting
47608/48484 |
