Foot Locker (FL)

Chief Executive Officer's Compensation

      The compensation reported for 2005 for Mr. Serra, the Company's Chairman of the Board and Chief Executive Officer, was based on the same policies, described above, that apply to all of the Company's executive officers.

      • Mr. Serra's base salary of $1,500,000, unchanged from his base salary in 2004, was established based upon his responsibilities, his performance, and salaries for comparable positions.

      • Neither Mr. Serra nor the other corporate officers received an annual bonus payment for 2005, as the Company's pre-tax income and return-on-invested capital results for 2005 did not meet the threshold established by the Committee at the beginning of the year for a payment under the annual

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plan. This compares to an annual bonus payment of $1,662,000 to Mr. Serra in 2004 when the Company slightly exceeded its pre-tax income and return-on-invested-capital plan for the year.

      • Mr. Serra's long-term bonus payment of $1,617,120 was calculated in the same manner as that of other participants in the Long-Term Incentive Compensation Plan, and was the result of the Company exceeding its return-on-invested-capital plan for 2003-2005. This compares to a long-term bonus payment of $2,117,700 in 2004, when the Company significantly exceeded its return-on-invested-capital plan for the performance period.

      • The stock option grant of 115,000 shares at $27.01 per share, the fair market value on the date of grant, made to Mr. Serra in February 2005 reflected Mr. Serra's performance, responsibilities and his ability, through his efforts, to improve the value of the Company's Common Stock. Consistent with stock option grants made to other executives, this grant vests in three equal annual installments. The value of the stock option grant is wholly dependent on increases in the price of the Company's Common Stock over the price on the date of grant.

      • The restricted stock grant of 105,000 shares made to Mr. Serra in February 2005 reflected Mr. Serra's performance, responsibilities, the Company's desire to retain his services, and his ability, through his efforts, to improve the value of the Company's Common Stock. A portion of the value that Mr. Serra is expected to receive on the vesting of the restricted shares is dependent on increases in the price of the Company's Common Stock.

      Consistent with the Company's executive compensation policies, the great majority of Mr. Serra's compensation is at risk, dependent upon the Company's performance or the share price of its Common Stock.

      In determining Mr. Serra's compensation, the Committee considered appropriate compensation for an executive of Mr. Serra's background and experience, Mr. Serra's performance as the Company's Chief Executive Officer, the benefits to the Company and its shareholders that are expected to result from retaining his services as the Company's Chief Executive Officer and providing him with a meaningful compensation opportunity tied to the performance of the Company and the price of its Common Stock, and the compensation of chief executive officers of other companies in the retail and athletic footwear and apparel industries. This Committee, acting jointly with the Nominating and Corporate Governance Committee, annually reviews Mr. Serra's performance as the Company's Chief Executive Officer and the results of this review are one factor in determining Mr. Serra's compensation.

Chief Executive Officer's Compensation

      The compensation reported for 2004 for Mr. Serra, the Company's Chairman of the Board and Chief Executive Officer, was based on the same policies, described above, that apply to all of the Company's executive officers.

      • Mr. Serra's base salary of $1,500,000, unchanged from his base salary in 2003, was established based upon his responsibilities, his performance, and salaries for comparable positions.

      • His annual bonus payment of $1,662,000 was calculated in the same manner as that of other participants in the Annual Incentive Compensation Plan, and was the result of the Company slightly exceeding its pre-tax income and return-on-invested-capital plan for 2004.

      • His long-term bonus payment of $2,117,700 was calculated in the same manner as that of other participants in the Long-term Incentive Compensation Plan, and was the result of the Company significantly exceeding its return-on-invested-capital plan for 2002-2004.

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      • The stock option grant of 100,000 shares at $25.365 per share, the fair market value on the date of grant, made to Mr. Serra in February 2004 reflected Mr. Serra's performance, responsibilities and his ability, through his efforts, to improve the value of the Company's Common Stock. Consistent with stock option grants made to other executives, this grant vests in three equal annual installments. The value of the stock option grant is wholly dependent on increases in the price of the Company's Common Stock over the price on the date of grant.

      • The restricted stock grant of 75,000 shares made to Mr. Serra in February 2004 reflected Mr. Serra's performance, responsibilities, the Company's desire to retain his services, and his ability, through his efforts, to improve the value of the Company's Common Stock. A portion of the value that Mr. Serra is expected to receive on the vesting of the restricted shares is dependent on increases in the price of the Company's Common Stock.

      Consistent with the Company's executive compensation policies, the great majority of Mr. Serra's compensation is at risk, dependent upon the Company's performance or the share price of its Common Stock. Over 70 percent of Mr. Serra's cash compensation for 2004 was paid through quantitative performance-based plans.

      In February 2005 the Committee approved a new employment agreement with Mr. Serra, the terms of which are described on Page 20 of the proxy statement. This agreement, which is for an initial term of three years with renewal provisions thereafter based upon the mutual agreement of the Company and Mr. Serra, provides for a compensation package that is consistent with the executive compensation policies discussed in this report and Mr. Serra's current compensation arrangements.

      In determining Mr. Serra's compensation, the Committee considered appropriate compensation for an executive of Mr. Serra's background and experience, Mr. Serra's performance as the Company's Chief Executive Officer, the benefits to the Company and its shareholders that are expected to result from retaining his services as the Company's Chief Executive Officer and providing him with a meaningful compensation opportunity tied to the performance of the Company and the price of its Common Stock, and the compensation of chief executive officers of other companies in the retail and athletic footwear and apparel industries. This Committee, acting jointly with the Nominating and Corporate Governance Committee, annually reviews Mr. Serra's performance as the Company's Chief Executive Officer and the results of this review are one factor in determining Mr. Serra's compensation.