On March 23, 2010, Ken C. Hicks, Chairman of the Board, President and Chief Executive Officer of Foot Locker, Inc. (the Company), and the Company signed a letter (the March 23, 2010 Letter) confirming Mr. Hicks election to irrevocably waive his entitlement to the cash annual bonus for the Companys 2009 fiscal year referred to in Section 4(b) of Mr. Hicks employment agreement dated June 25, 2009 (the Employment Agreement). Except with regard to Mr. Hicks waiver of such bonus under his Employment Agreement, the terms of Mr. Hicks Employment Agreement remain in full force and effect. A copy of the March 23, 2010 Letter is attached hereto as Exhibit 10.1, and the description herein of such letter is qualified in its entirety by reference to the March 23, 2010 Letter.
(2) Establishment of Performance Goals.
(i) On March 23, 2010, the Compensation and Management Resources Committee (the Compensation Committee) of the Board of Directors of the Company established the performance goals for the 2010 fiscal year under the Annual Bonus Plan. The goals for the executives are based on the Companys pre-tax income. Under the Annual Bonus Plan, the amount that would be paid to the executives if the performance goals are met is based on a percentage of their annual base salaries earned for the plan year. The percentage of annual base salary payable at threshold, target, and maximum for each of the executives included as named executive officers in the Companys 2010 proxy statement is stated in the table below:
(ii) On March 23, 2010, the Compensation Committee established long-term incentive compensation performance goals for the 2010-2011 performance period based on a combination of the Companys two-year average after-tax income and return-on-invested capital. Provided the performance goals are achieved, the payout structure of the executives long-term awards is as follows: (a) 50 percent of the award would be payable in cash under the Long-Term Incentive Compensation Plan, (b) 50 percent of the award would be payable
in restricted stock units under the 2007 Stock Incentive Plan, subject to shareholder approval of an amendment and restatement of such plan at the 2010 annual meeting of shareholders, and (c) both the cash portion and the restricted stock unit portion of the payout would be subject to a time-based, one-year holding period following the end of the performance period before payout to the executives.
Individual long-term target awards are expressed as a percentage of the rate of the executives annual base salary in the first year of the performance period. The percentages shown in the table below represent the percent of 2010 annual base salary rates that would be paid to each of the named executive officers, in cash and restricted stock units as described in the foregoing paragraph, only if the established goals are achieved.
The threshold, target, and maximum number of restricted stock units for each executive was calculated on March 23, 2010 on the basis of that days closing stock price. The actual number of restricted stock units awarded will be based on the Companys performance compared to targets. The value of the restricted stock units received by an executive will depend upon the Companys stock price on the payment date.
(3) Stock Option Awards. On March 23, 2010, the Compensation Committee granted nonstatutory stock options to the following named executive officers under the 2007 Stock Incentive Plan. The options will vest in three equal installments, on March 23, 2011, March 23, 2012, and March 23, 2013. The options were granted at an exercise price of $15.10 per share, which was 100 percent of the fair market value (closing price) of a share of the Companys Common Stock on the date of grant.
(4) Annual Base Salaries. On March 23, 2010, the Compensation Committee approved the annual base salaries, effective as of May 1, 2010, of the following executive officers of the Company who will be included as Named Executive Officers in the Companys 2010 proxy statement. As the Companys salary increases generally become effective on May 1 of each year, the annual base salary rate shown in the table may be higher than the actual salary earned by the executive for the year. The actual salary earned for the year is the amount that will be reflected in the Summary Compensation Table in the Companys proxy statement for the relevant year:
Item 9.01. Financial
Statements and Exhibits
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.