Foot Locker (FL)

PROPOSAL 3:
APPROVAL OF THE FOOT LOCKER
ANNUAL INCENTIVE COMPENSATION PLAN, AS AMENDED AND RESTATED

The Foot Locker Annual Incentive Compensation Plan was amended and restated (the “Restated Annual Plan”) on March 26, 2008 by the Compensation and Management Resources Committee, subject to our shareholders’ approval at the 2008 annual meeting as to Covered Employees. The Restated Annual Plan is designed to comply 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 paid 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.