EXHIBIT 10.3
AS OF JUNE 25, 2003
FOOT LOCKER ANNUAL INCENTIVE COMPENSATION PLAN,
AS AMENDED AND RESTATED
The Board of Directors of Foot Locker, Inc. ("Foot Locker") has amended
and restated the Foot Locker Annual Incentive Compensation Plan (the "Plan") as
of June 25, 2003 on the recommendation of the Compensation and Management
Resources Committee, subject to shareholder approval at the 2003 annual meeting
of shareholders. The plan was previously amended and restated effective as of
January 1, 1994 and then subsequently amended and restated with respect to
Covered Employees as of January 1, 1996.
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;
and
(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.
(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.
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
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(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, provided, however, that the Committee may, in its
sole discretion, make an "Interim Payment" to any participant (other than a
Covered Employee). Such Interim Payment shall be equal to the amount of the
payment the participant would have received, pursuant to Sections 6 and 7
hereof, at the completion of the Plan Year during which such Interim Payment is
made (the "Interim Year") multiplied by a fraction, the numerator of which is
the number of completed months between the commencement of the Interim Year and
the date of the Interim Payment and the denominator of which is 12, and shall be
calculated based upon (a) the actual performance results achieved relative to
the Plan's performance goals with respect to the period from the commencement of
the Interim Year to the date of the Interim Payment and (b) the performance
results that would have been achieved had the Plan's budget goal been met for
the balance of such Interim Year. Following the close of the Interim Year, the
Committee shall make a "Final Payment" to each participant who received an
Interim Payment in an amount equal to the difference, if any, between the amount
of the Interim Payment and the amount of the payment that would have been made
pursuant to Sections 6 and 7 hereof, absent such Interim Payment.
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.
Except to the extent provided for in Section 5 hereof with respect to Interim
Payments, payment shall be made only if and to the extent the performance goals
with respect to the Plan Year are attained.
(b) At the beginning of each Plan Year (or, with respect to
Covered Employees, within the time period prescribed by Section 162(m) of the
Code), the Committee shall establish all performance goals and the Individual
Target Awards for such Plan Year and 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.
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(c) Notwithstanding anything to the contrary contained in this
Plan, (1) the performance goals in respect of awards granted to participants who
are Covered Employees, shall be based on one or more of the following criteria:
(i) the attainment of certain target levels of, or percentage increase in,
pre-tax profit; (ii) 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); (iii) 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); (iv) the
achievement of a certain level of, reduction of, or other specified objectives
with regard to limiting the level of increase in, all or a portion of, 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; (v) 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); (vi) the attainment of certain target levels of, or a specified
percentage increase in, revenues, net income, or earnings before (A) interest,
(B) taxes, (C) depreciation and/or (D) amortization, of Foot Locker (or a
subsidiary, division, or other operational unit of Foot Locker); (vii) the
attainment of certain target levels of, or a specified increase in, return on
invested capital or return on investment; (viii) the attainment of certain
target levels of, or a percentage increase in, after-tax or pre-tax return on
shareholders' equity of Foot Locker (or any subsidiary, division or other
operational unit of Foot Locker); and (ix) 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.
Subject to Section 5 hereof, all payments earned by participants under
this Plan will be paid within a reasonable period after performance goal
achievements for the Plan Year have been finalized, reviewed, approved, and to
the extent required by Section 162(m) of the Code, certified by the Committee,
except as may otherwise be agreed by a participant and Foot Locker in a written
agreement executed prior to the beginning of the fiscal year to which it relates
in accordance with any deferred compensation program (a "Deferred Compensation
Program") applicable to such participant. 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. Any award deferred by a Covered Employee shall not increase (between
the date on which the award is credited to any Deferred Compensation Program
applicable to such Covered Employee and the payment date) by a measuring factor
for each fiscal year greater than either (x) one hundred and twenty percent
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(120%) of the applicable federal long-term rate, compounded annually, and as set
as of the first day of the calendar year; or (y) a hypothetical investment in
such shares of Foot Locker Common Stock, par value $0.01 per share (as
determined under such Deferred Compensation Program), as irrevocably elected by
the Covered Employee in the deferral agreement. The participant shall have no
right to receive payment of any deferred amount until he or she has a right to
receive such amounts under the terms of the applicable Deferred Compensation
Program.
8. MISCELLANEOUS PROVISIONS.
(a) A participant's rights and interests under the Plan may not be
sold, assigned, transferred, pledged or alienated.
(b) In the case of a participant's death, payment, if any, under
the Plan shall be made to his or her designated beneficiary, or in the event no
beneficiary is designated or surviving, to the participant's estate.
(c) Neither this Plan nor any action taken hereunder shall be
construed as giving any employee any right to be retained in the employ of 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) The Plan is designed and intended to comply with Section
162(m) of the Code with regard to awards made to Covered Employees, and all
provisions hereof shall be limited, construed and interpreted in a manner so to
comply.
(f) The Board or the Committee may at any time and from time to
time alter, amend, suspend or terminate the Plan in whole or in part; provided,
that, no amendment which requires shareholder approval in order for the Plan to
continue to comply with the exception for performance based compensation under
Section 162(m) of the Code shall be effective unless the same shall be approved
by the requisite vote of the shareholders of 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.
(g) The Plan shall be binding on Foot Locker and its successors by
operation of law.
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