SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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[ ] Confidential, For Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
FOOTSTAR, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[FOOTSTAR LOGO]
ONE CROSFIELD AVENUE, WEST NYACK, N.Y. 10994
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Footstar,
Inc., a Delaware corporation (the "Corporation"), will be held at the offices of
the Corporation, at One Crosfield Avenue, West Nyack, New York 10994, on
Tuesday, May 14, 2002, at 10:00 a.m. local time, for the following purposes:
1. To elect three directors to hold office for a term expiring in 2005;
2. To ratify the appointment of KPMG LLP as the Corporation's independent
auditors for fiscal 2002; and
3. To consider and transact such other business as may properly come
before the Annual Meeting or any postponement or adjournment.
Stockholders of record at the close of business on April 1, 2002 are
entitled to notice of and to vote at the Annual Meeting or at any postponement
or adjournment.
By order of the Board of Directors,
FOOTSTAR, INC.
Maureen Richards
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SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
Dated: March 29, 2002
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YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING,
PLEASE COMPLETE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING.
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[FOOTSTAR LOGO]
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 2002
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PROXY STATEMENT
This Proxy Statement is being furnished to the stockholders of Footstar,
Inc., a Delaware corporation ("Footstar" or the "Corporation"), in connection
with the solicitation of proxies by the Board of Directors of the Corporation
(the "Board") for use at the Annual Meeting of Stockholders of the Corporation
(the "Meeting") to be held on Tuesday, May 14, 2002, at 10:00 a.m. local time,
at the offices of the Corporation, One Crosfield Avenue, West Nyack, New York
10994, and at any postponement or adjournment of the Meeting. At the Meeting,
stockholders are being asked to consider and vote on (1) the election of three
directors, each to hold office for a term expiring in 2005 and (2) the
ratification of the appointment of KPMG LLP as the Corporation's independent
auditors for 2002.
This Proxy Statement, Notice of Meeting and accompanying proxy card are
first being mailed to stockholders on or about March 29, 2002.
GENERAL
The holders of shares of Common Stock of record at the close of business on
April 1, 2002 are entitled to vote such shares at the Meeting. On March 15,
2002, there were 20,109,042 shares of Common Stock outstanding. The presence in
person or by proxy of the holders of one-third of the shares outstanding on the
record date is necessary to constitute a quorum for the transaction of business.
Each stockholder is entitled to one vote, in person or by proxy, for each
share of Common Stock held as of the record date on each matter to be voted on
at the Meeting. Directors are elected by the affirmative vote of a plurality of
the votes cast at the Meeting. The proposal to ratify the appointment of the
auditors requires the affirmative vote of a majority of shares present in person
or represented by proxy at the Meeting and entitled to vote.
Proxies for shares marked "abstain" on a matter will be considered to be
represented at the Meeting, but will be considered to be voted only as to those
matters actually voted on. Abstentions will have no effect on the election of
directors but will have the effect as a vote against the ratification of the
appointment of auditors. Stockholders may adopt an amendment to the
Corporation's bylaws with the affirmative vote of at least 80% of the total
voting power of the Corporation's outstanding securities. Consequently, an
abstention or a broker non-vote on such a proposal would have the effect of a
negative vote. Broker non-votes occur when a broker returns a proxy but does not
have authority to vote on a particular proposal. The Company believes that
brokers will have discretionary authority on each of the proposals identified in
the Notice of Meeting.
Shares of Common Stock represented by a properly executed proxy received in
time for the Meeting will be voted as specified in the proxy, unless the proxy
has previously been revoked. UNLESS CONTRARY INSTRUCTIONS ARE GIVEN IN THE
PROXY, IT WILL BE VOTED BY THE PERSONS DESIGNATED IN THE PROXY FOR THE ELECTION
OF THE BOARD'S NOMINEES FOR DIRECTOR, FOR RATIFICATION OF THE APPOINTMENT OF
KPMG LLP AS THE CORPORATION'S INDEPENDENT AUDITORS FOR FISCAL 2002 AND, WITH
RESPECT TO ANY OTHER MATTERS PROPERLY SUBMITTED TO STOCKHOLDERS AT THE MEETING,
AS RECOMMENDED BY THE BOARD OR, IF NO SUCH RECOMMENDATION IS GIVEN, IN THEIR
DISCRETION.
A proxy may be revoked by filing with the Secretary of the Corporation,
prior to the voting of such proxy, either a written revocation of that proxy or
a new proxy bearing a later date. A proxy may also be revoked by voting in
person at the Meeting. The presence of a stockholder at the Meeting will not in
itself constitute revocation of a proxy.
This proxy solicitation is being made on behalf of the Corporation and the
expense of preparing, printing and mailing this Proxy Statement and proxy is
being paid by the Corporation. The Corporation has retained MacKenzie Partners,
Inc. to assist it in the solicitation of proxies for a fee of $10,000 plus
out-of-pocket expenses. In addition, solicitations may be made in person or by
mail, telephone, facsimile or e-mail by the directors, officers and regularly
engaged employees of the Corporation, without extra compensation. The
Corporation will reimburse banks, brokers and other custodians, nominees and
fiduciaries for their costs in sending proxy materials to the beneficial owners
of Common Stock.
MULTIPLE COPIES OF ANNUAL REPORT AND PROXY STATEMENT
Where more than one holder of the Corporation's Common Stock share the same
address, the Corporation may deliver only one Annual Report and one Proxy
Statement to that address unless the Corporation has received contrary
instructions from one or more of those shareholders. Similarly, brokers and
other intermediaries holding shares of the Corporation's Common Stock in "street
name" for more than one beneficial owner with the same address may deliver only
one Annual Report and one Proxy Statement to that address if they have received
consent from the beneficial owners of the stock.
The Corporation will deliver promptly upon written or oral request a
separate copy of the Annual Report and Proxy Statement to any shareholder,
including a beneficial owner of stock held in "street name," at a shared address
to which a single copy of either of those documents was delivered. To receive
additional copies of our Annual Report and Proxy Statement, you may call or
write to Investor Relations, Footstar, Inc., One Crosfield Avenue, West Nyack,
New York 10994, (845) 727-6675.
You may also contact Investor Relations at the address or telephone number
above if you are a shareholder of record of the Corporation and you wish to
receive a separate Annual Report and Proxy Statement in the future, or if you
are currently receiving multiple copies of our Annual Report and Proxy Statement
and want to request delivery of a single copy in the future. If your shares are
held in "street name" and you want to increase or decrease the number of copies
of our Annual Report and Proxy Statement delivered to your household in the
future, you should contact the broker or other intermediary who holds the shares
on your behalf.
2
1. ELECTION OF DIRECTORS
General. The Board of Directors currently consists of eight members divided
into three classes of approximately equal size. Directors are generally elected
for three-year terms on a staggered term basis, so that each year the term of
office of one class will expire and the terms of office of the other classes
will extend for additional periods of one and two years, respectively. This
year's nominees each have been nominated to serve for a three-year term expiring
in the year 2005. The Corporation has inquired of each nominee and determined
that each will serve if elected. In the event that any of the nominees should
become unavailable for election, the persons named in the accompanying proxy
intend to vote for such other person, if any, as the Board may designate as a
substitute nominee.
The names of the nominees for election, the directors whose terms extend
beyond the Meeting and certain information about each of them are set forth in
the tables below. All nominees are current directors of the Corporation. The
Board of Directors recommends that stockholders vote "FOR" the Corporation's
nominees for director.
TABLE I--NOMINEES FOR ELECTION AT THE 2002 ANNUAL MEETING
CURRENT
PRINCIPAL OCCUPATION DIRECTOR TERM
NAME AND AGE AND BACKGROUND SINCE EXPIRING
------------ -------------------- -------- --------
George S. Day, 64........... Geoffrey T. Boisi Professor of 1996 2002
Marketing and Director of
Huntsman Center for Global
Competition and Innovation at
The Wharton School, University
of Pennsylvania; consultant to
corporations including AT&T,
Eastman Kodak, General Electric,
Nortel Networks and IBM
Corporation.
Bettye Martin Musham, 69 .. Chairwoman and Chief Executive 1996 2002
Officer of Gear Holdings, Inc.,
which she co-founded in 1977.
Ms. Musham also serves as a
director of Brunswick
Corporation, Wallace Computer
Services, Inc., Peace Links and
the World Service Council of the
YMCA of the USA.
Kenneth S. Olshan, 69 ..... Former Chairman and Chief 1996 2002
Executive Officer of Wells Rich
Greene BDDP. Mr. Olshan also
serves as a director of Charming
Shoppes and as a Trustee of the
Central Park Conservancy.
3
TABLE II--DIRECTORS WHOSE TERMS CONTINUE BEYOND THIS ANNUAL MEETING
CURRENT
PRINCIPAL OCCUPATION DIRECTOR TERM
NAME AND AGE AND BACKGROUND SINCE EXPIRING
------------ -------------------- -------- --------
Robert A. Davies, III, 66 .. Chairman and Chief Executive 1998 2004
Officer of Church & Dwight Co.,
Inc. since February 2001.
President, Chief Executive
Officer and Director of Church &
Dwight Co., Inc. from October
1995 to January 2001.
Stanley P. Goldstein, 67 ... Former Chairman and Chief 1996 2003
Executive Officer of CVS
Corporation and former Chief
Executive Officer of Melville
Corporation (CVS's predecessor).
Mr. Goldstein serves as director
of Linens 'n Things, Inc. and
CVS Corporation.
Terry R. Lautenbach, 63 .... Former Senior Vice President of 1996 2004
IBM Corporation. Mr. Lautenbach
is also a director of CVS
Corporation, Air Products and
Chemicals, Inc. and Varian
Medical Systems, Inc.
J.M. Robinson, 56 .......... Chairman of the Board, Chief 1996 2003
Executive Officer and President
of the Corporation. Mr. Robinson
is a member of the Board of
Visitors of the University of
Memphis, the Board of Trustees
of Connecticut Public
Broadcasting, Inc. and the
Advisory Council of the National
Wildlife Federation.
Neele E. Stearns, Jr., 66 .. Chairman of Financial Investments 2000 2003
Corporation, a private equity
investment firm, since February
2001. Chairman of the Board of
Wallace Computer Services, Inc.
from January 2000 through
November 2000. Former President
and Chief Executive Officer of
CC Industries, Inc., a
diversified holding company. Mr.
Stearns also serves as a
director of Maytag Corporation
and Wallace Computer Services,
Inc.
Committees of the Board of Directors. The Board of Directors held seven
meetings during 2001. The Board has an Audit Committee, a Corporate Governance
Committee and a Compensation Committee. Each director attended at least 75% of
the meetings of the Board of Directors and of the committees of which he or she
was a member.
The Audit Committee held four meetings during 2001. The Audit Committee has
oversight responsibilities with respect to the Corporation's financial
reporting, the system of internal controls and the audit process. The duties of
the Audit Committee, among others, are (i) to consider the adequacy of the
accounting and internal control systems, (ii) to oversee the audit function,
(iii) to review quarterly and annual consolidated financial statements, (iv) to
institute, direct and supervise special investigations, (v) to recommend to the
Board the appointment of independent auditors, (vi) to review any non-audit
services provided by the independent auditors, (vii) to review the Corporation's
Code of Conduct, including its conflict of interest policy and compliance
procedures and (viii) to report to the Board from time to time and make such
recommendations and observations as it sees fit.
4
The members of the Audit Committee are:
Neele E. Stearns, Jr., Chair
George S. Day
Robert A. Davies, III
Kenneth S. Olshan
The Corporate Governance Committee held two meetings during 2001. The
duties of the Corporate Governance Committee are (i) to nominate, in concert
with the Chairman of the Board of Directors, any new director for election to
the Board, (ii) to report annually to the Board an assessment of the Board's
performance, (iii) to review with the Board the criteria the Committee believes
appropriate for Board membership and (iv) to recommend to the Board guidelines
on corporate governance. In addition, the Board of Directors meets in Executive
Session (without any member of management present, including the Chief Executive
Officer) at the end of each regular meeting of the Board and at least once
annually to discuss the performance of the Chief Executive Officer of the
Corporation. The Corporation's bylaws establish an advance written notice
procedure for stockholders seeking to nominate candidates for election as
directors at any annual meeting of stockholders. See "Stockholder Proposals and
Nominations for the 2003 Annual Meeting," on page 18 of this Proxy Statement.
The members of the Corporate Governance Committee are:
Kenneth S. Olshan, Chair
Stanley P. Goldstein
Bettye Martin Musham
The Compensation Committee held two meetings during 2001. The duties of the
Compensation Committee are (i) to establish policies governing, and to
implement, administer and interpret all aspects of, compensation of all officers
and other key executives of the Corporation and its subsidiaries whose annual
base salaries are $200,000 or greater, and other employees designated by the
Committee as key executives of the Corporation and its subsidiaries, (ii) to
have the same responsibilities with respect to compensation of non-employee
directors, except that certain determinations and actions which are
non-ministerial are subject to approval of the full Board and (iii) in
connection with the foregoing, to establish and administer compensation and
benefit policies, plans and programs other than health and welfare plans
generally available to employees of the Corporation and its subsidiaries.
The members of the Compensation Committee are:
Terry R. Lautenbach, Chair
George S. Day
Stanley P. Goldstein
Bettye Martin Musham
5
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as to beneficial
ownership of the outstanding Common Stock of the Corporation as of March 15,
2002, by each person known to the Corporation to own beneficially more than 5%
of the outstanding Common Stock, by each director and nominee for director of
the Corporation, by each of the current executive officers listed in the Summary
Compensation Table and by all directors and executive officers of the
Corporation as a group. To the Corporation's knowledge, except as otherwise
indicated, all persons listed below have sole voting and investment power with
respect to such shares.
NUMBER OF
COMMON SHARES PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) OF CLASS
------------------------ ---------------------- --------
Directors and Named Officers:
J.M. Robinson ......................................... 673,321(2) 3.27%
Stephen R. Wilson ..................................... 15,501(2) *
Maureen Richards ...................................... 66,434(2) *
Robert D. Ravener, Jr. ................................ 62,932(2) *
Mark G. Morrison ...................................... 8,223(2) *
Robert A. Davies, III ................................. 13,172(3) *
George S. Day ......................................... 17,216(3) *
Stanley P. Goldstein .................................. 63,931(3)(4) *
Terry R. Lautenbach ................................... 22,250(3) *
Bettye Martin Musham .................................. 14,347(3) *
Kenneth S. Olshan ..................................... 18,284(3) *
Neele E. Stearns, Jr. ................................. 5,800(3) *
All current executive officers and directors
as a group 981,411(2)(3)(4) 4.75%
5% Stockholders:
ESL Partners, L.P. (5) ................................ 3,005,800 14.75%
One Lafayette Place
Greenwich, CT 06830
FMR Corp.(6) .......................................... 2,753,300 13.69%
82 Devonshire Street
Boston, MA 02109
David J. Greene and Company, LLC (7) .................. 1,947,556 9.68%
599 Lexington Avenue
New York, NY 10022
Artisan Partners Limited Partnership (8) .............. 1,296,137 6.45%
1000 North Water Street #1770
Milwaukee, WI 53202
Mellon Financial Corporation (9) ...................... 1,003,632 5.0%
One Mellon Center
Pittsburgh, PA 15258
----------
* Less than one percent (1%).
(1) Beneficially owned shares include shares over which the named person
exercises either sole or shared voting power or sole or shared investment
power. It also includes shares owned by a spouse, minor children or by
relatives sharing the same home or by entities owned or controlled by the
named person.
(2) Of the shares shown, 97,517, 11,287, 16,919, 22,394 and 8,223 shares for
Mr. Robinson, Mr. Wilson, Ms. Richards, Mr. Ravener and Mr. Morrison,
respectively, constitute restricted or deferred shares under the
Corporation's Deferred Compensation Plan. A majority of such shares are
subject to forfeiture if the executive does not continue to be employed by
the Corporation for five years from the date of grant. The
6
amounts shown also include the following stock options which are currently
exercisable or exercisable within 60 days: Mr. Robinson, 479,159; Mr.
Wilson, 3,999; Ms. Richards, 34,203; Mr. Ravener, 37,763; and Mr. Morrison,
0.
(3) Of the shares shown, 10,572, 9,216, 12,897, 14,233, 6,347, 15,784 and 2,000
shares for Messrs. Davies, Day, Goldstein, Lautenbach, Ms. Musham, Mr.
Olshan and Mr. Stearns, respectively, constitute deferred shares. Each
director has the right to receive these shares either at the later of
ceasing to be a director or attaining age 65, or if voluntarily deferred,
until the time elected. The amounts shown also include the following stock
options which are currently exercisable or exercisable within 60 days: Mr.
Davies, 1,600; Dr. Day, 2,000; Mr. Goldstein, 1,600; Mr. Lautenbach, 2,000;
Ms. Musham, 2,000; Mr. Olshan, 2,000; and Mr. Stearns, 800.
(4) Of the shares shown, 5,758 shares are owned by Mr. Goldstein's wife. Mr.
Goldstein disclaims beneficial ownership of such shares.
(5) Pursuant to an amended Schedule 13D filed on January 2, 2002 by ESL
Partners, L.P., ESL Limited, ESL Institutional Partners, L.P. and ESL
Investors, L.L.C., ESL Partners, L.P. has sole voting and investment power
with respect to 2,019,925 shares, ESL Limited has sole voting and
investment power with respect to 438,414 shares, ESL Institutional
Partners, L.P. has sole voting and investment power with respect to 73,189
shares, and ESL Investors, L.L.C. has sole voting and investment power with
respect to 474,272 shares.
(6) Pursuant to an amended Schedule 13G filed on February 14, 2002 by FMR
Corp., Edward C. Johnson, 3d and Abigail P. Johnson (collectively, "FMR"),
FMR has sole investment power with respect to 2,753,000 shares.
(7) Pursuant to an amended Schedule 13G filed on February 14, 2002 by David J.
Greene and Company, LLC ("Greene"), Greene has sole voting and investment
power with respect to 82,959 shares, shared voting power with respect to
980,748 shares and shared investment power with respect to 1,864,597
shares.
(8) Pursuant to a Schedule 13G filed on February 13, 2002 by Artisan Partners
Limited Partnership, Artisan Investment Corporation, Andrew A. Ziegler and
Carlene Murphy Ziegler (collectively, "Artisan"), Artisan has shared voting
and investment power with respect to 1,296,137 shares.
(9) Pursuant to a Schedule 13G filed on January 24, 2002 by Mellon Financial
Corporation ("Mellon"), Mellon has sole voting power with respect to
832,317 shares, sole investment power with respect to 999,535 shares,
shared voting power with respect to 100,639 shares and shared investment
power with respect to 2,920 shares.
7
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table summarizes all
compensation awarded to, earned by or paid to the named key-policy making
officers of the Corporation during fiscal 2001 (the "Named Officers") for all
services rendered to the Corporation and its subsidiaries during the
Corporation's last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------------------------- -------
RESTRICTED/
DEFERRED SECURITIES LTIP OTHER
FISCAL STOCK UNDERLYING PAYOUTS COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARD(S)($) OPTIONS(#) ($)(1) TION($)(5)
--------------------------- ------ --------- --------- ------------ ----------- -------- -----------
J.M. Robinson, Chairman of the 2001 787,500 15,000 167,328(2) 150,000 161,804 6,100
Board, Chief Executive Officer 2000 737,500 720,750 393,281(3) 200,000 123,000 7,528
and President 1999 700,000 635,000 330,525(4) 105,271 92,400 6,856
Maureen Richards, Senior Vice 2001 269,750 2,750 27,770(2) 14,000 27,835 6,100
President, General Counsel and 2000 249,750 135,636 51,353(3) 17,600 26,035 7,528
Corporate Secretary 1999 234,000 143,000 73,178(4) 17,275 19,553 6,856
Robert D. Ravener, Jr., Former 2001 272,000 0 28,292(2) 14,000 28,324 11,968
Vice President and Chief 2000 243,750 162,432 86,332(3) 21,000 25,420 3,978
Personnel Officer 1999 228,250 107,184 209,251(4) 24,275 19,058 3,456
Stephen R. Wilson, Executive 2001 273,333 92,250 293,524(2) 20,000 29,060 1,340
Vice President, Chief
Financial Officer
Mark G. Morrison, Senior Vice 2001 108,333 43,333 246,684(2) 20,000 10,995 600
President, Human Resources
------------
(1) The amounts in this column include one-half of the award pursuant to the
Career Equity Program (the Corporation's long term bonus plan described
below in the "Compensation Committee Report on Executive Compensation")
payable in cash for the cycles ended December 29, 2001, December 30, 2000
and January 2, 1999.
(2) These amounts include the following "match" by the Corporation in deferred
shares as a result of the voluntary deferral of a certain portion of the
2001 annual incentive bonuses payable to each of the Named Officers: Mr.
Robinson 215 shares valued at $5,612; Mr. Wilson 1,325 shares valued at
$34,583; and Mr. Morrison 415 shares valued at $10,832. The annual
incentive payouts to Mr. Morrison and Mr. Wilson were guaranteed for 2001.
The amounts shown also include the following deferred shares awarded as
part of the Corporation's Career Equity Plan, 50% of which vest in five
years and the remaining 50% of which vest at retirement: Mr. Robinson 6,196
shares valued at $161,716; Mr. Wilson 1,110 shares valued at $28,971; Ms.
Richards 1,064 shares valued at $27,770; Mr. Ravener 1,084 shares valued at
$28,292; and Mr. Morrison 418 shares valued at $10,910. The amount shown
for Mr. Morrison also includes the value of shares of the Corporation's
Common Stock underlying 6,560 restricted stock units, approximately two-
thirds of which vest one year from the date of grant contingent upon
continued employment, and the balance of which vest three years from the
date of grant contingent upon continued employment. The amount shown for
Mr. Wilson also includes the value of shares of the Corporation's Common
Stock underlying 6,202 restricted stock units that vest five years from the
date of grant contingent upon continued employment.
(3) These amounts include the following "match" by the Corporation in deferred
shares as a result of the voluntary deferral of a certain portion of the
2000 annual incentive bonuses payable to each of the Named Officers: Mr.
Robinson 5,879 shares; Ms. Richards 551 shares; and Mr. Ravener 1,325
shares. The amounts shown also include the following deferred shares
awarded as part of the Corporation's
8
Career Equity Plan, 50% of which vest in five years and the remaining 50%
of which vest at retirement: Mr. Robinson 2,675 shares; Ms. Richards 566
shares; and Mr. Ravener 553 shares. At December 29, 2001, the value of the
deferred shares referred to in this footnote was: Mr. Robinson, $261,752,
Ms. Richards, $34,180 and Mr. Ravener, $57,467.
(4) These amounts include the following "match" by the Corporation in deferred
shares as a result of the voluntary deferral of 75% of the 1999 annual
incentive bonuses payable to each of the Named Officers: Mr. Robinson
10,013 shares; Ms. Richards 2,255 shares; and Mr. Ravener 1,690 shares. The
amounts shown also include the following deferred shares awarded as part of
the Corporation's Career Equity Plan, 50% of which vest in five years and
the remaining 50% of which vest at retirement: Mr. Robinson 3,885 shares;
Ms. Richards 822 shares; and Mr. Ravener 801 shares. The amount shown for
Mr. Ravener also includes the value of shares of the Corporation's Common
Stock underlying restricted stock units of 5,963 shares granted in 1999.
These restricted stock units vest in five years from the date of grant
contingent upon continued employment. At December 29, 2001, the value of
the deferred shares and restricted stock units referred to in this footnote
was: Mr. Robinson $425,279, Ms. Richards $94,156, and Mr. Ravener $258,692.
(5) The amounts disclosed represent the Corporation's contributions under the
Corporation's 401(k) profit sharing plan as well as $6,018 for Mr. Ravener
representing imputed interest and tax gross-up on a non-interest bearing
loan.
Option Grants in Last Fiscal Year. The table below shows information
regarding grants of stock options made to the Named Officers during fiscal 2001.
OPTION GRANTS IN LAST YEAR
INDIVIDUAL GRANTS
----------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS GRANT DATE
UNDERLYING GRANTED TO EXERCISE OR PRESENT
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION VALUE
GRANTED (#)(1) FISCAL YEAR ($/SH) DATE ($)(2)
-------------- ------------ ----------- ---------- ---------
J.M. Robinson ........... 150,000 23.6 46.175 2/26/2011 3,483,000
Stephen R. Wilson ....... 20,000 3.1 37.08 5/7/2011 373,200
Maureen Richards ........ 14,000 2.2 46.175 2/26/2011 325,080
Robert D. Ravener, Jr. .. 14,000 2.2 46.175 2/26/2011 325,080
Mark G. Morrison ........ 20,000 3.1 34.29 8/1/2011 343,200
----------
(1) Each option vests at the rate of 20% per year beginning on the first
anniversary of the date of grant.
(2) The hypothetical present values on grant date are calculated under the
modified Black-Scholes Model, which is a mathematical formula used to value
options traded on stock exchanges. This formula considers a number of
factors in hypothesizing an option's present value. Factors used to value
options granted include the stock's expected volatility rate (45%), risk
free rate of return (4.8%), dividend yield (0%), projected time of exercise
(6 years) and projected risk of forfeiture and non-marketability for the
vesting period (0% per annum).
9
Option Exercises and Year-end Option Holdings. The following table shows
information regarding option exercises during 2001 as well as fiscal 2001 year-
end option holdings for each of the Named Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
SHARES NUMBER OF SECURITIES IN-THE-MONEY
ACQUIRED VALUE UNDERLYING UNEXERCISED OPTIONS AT
ON EXERCISE REALIZED OPTIONS AT FY-END (#) FY-END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
J.M. Robinson ........... -- -- 349,106/421,165 1,732,814/1,762,849
Stephen R. Wilson ....... -- -- 0/20,000 0/0
Maureen Richards ........ -- -- 22,429/42,446 125,639/181,041
Robert D. Ravener, Jr. .. -- -- 22,909/51,366 90,019/227,976
Mark G. Morrison ........ -- -- 0/20,000 0/0
Supplemental Retirement Plan. The following table indicates the approximate
amount of annual retirement income that would be payable under the Supplemental
Retirement Plan for Select Senior Management of Footstar (the "Supplemental
Retirement Plan"), including to each of the Named Officers, based on various
assumptions as to compensation and years of service, assuming benefits are
computed under a straight life annuity formula and retirement at age 60. The
annual benefit will be reduced by the annualized value of any retirement or
deferred profit sharing benefit paid or payable under any other plan maintained
by the Corporation (excluding benefits attributable to contributions made by
participants), and without offset for social security or other benefits.
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS BASED ON
YEARS OF SERVICE AND COMPENSATION
-----------------------------------------------
10 15 20 25
YEARS YEARS YEARS YEARS
-------- -------- -------- --------
$ 200,000 ...... $ 40,000 $ 60,000 $ 80,000 $100,000
400,000 ...... 80,000 120,000 160,000 200,000
800,000 ...... 160,000 240,000 320,000 400,000
1,000,000 ...... 200,000 300,000 400,000 500,000
1,200,000 ...... 240,000 360,000 480,000 600,000
1,400,000 ...... 280,000 420,000 560,000 700,000
1,600,000 ...... 320,000 480,000 640,000 800,000
1,800,000 ...... 360,000 540,000 720,000 900,000
The Supplemental Retirement Plan is designed to provide competitive
retirement benefits to selected executives with at least ten years of credited
service. The normal retirement benefit commencing at age 60 is equal to 2% of
the highest average three consecutive years' base salary plus target annual
bonus for the executive in the preceding ten years, multiplied by the number of
years of credited service with the Corporation (to a maximum of 25 years). In
the case of retirement on or after age 55 but before age 60, a reduced benefit
is provided. Except in the event of a "change in control" (as defined in the
Supplemental Retirement Plan) or as provided in the Employment Agreements
referred to below, no benefits are payable to an eligible executive who
terminates employment prior to age 55 or prior to completing ten years of
credited service. Benefits are generally payable in annual installments for the
life of the executive, but other forms of payment of equivalent actuarial value
may be elected.
Compensation which may potentially be used to determine benefits for each
of the Named Officers covered by the Supplemental Retirement Plan for 2001
equals the respective amounts shown in the Salary column of the Summary
Compensation Table, plus the target amount of the Named Officer's annual
incentive
10
bonus. As of January 1, 2002, the credited years of service under the
Supplemental Retirement Plan for Mr. Robinson, Mr. Wilson, Ms. Richards, Mr.
Ravener and Mr. Morrison were 20, 0, 5, 4 and 0 years, respectively. If a
covered executive is terminated without "cause" or voluntarily terminates his or
her employment for "good reason" (as each such term is defined in the
Supplemental Retirement Plan) contemporaneously with or within two years
following a "change in control," benefits will be payable in a lump sum equal to
the actuarial equivalent of the annual retirement benefit which would have been
payable under the Supplemental Retirement Plan had the executive remained
employed by the Corporation until the date when he or she would attain 10 years
of service (or such later date as the executive would attain age 60), multiplied
by a fraction in which the numerator is the executive's actual years of credited
service (but not more than 10) and the denominator is 10 (thus reducing the
benefit proportionately to the extent the executive's actual years of credited
service are less than 10).
Employment Agreements. The Corporation has employment agreements
("Employment Agreements" or singularly "Employment Agreement") with Mr.
Robinson, Ms. Richards and Mr. Ravener. The following briefly summarizes the
principal terms of the Employment Agreements.
The period of employment under the Employment Agreements extends initially
for three years (five years in the case of Mr. Robinson), subject to automatic
one-year extensions at the end of the initial term unless either party gives
notice of non-renewal at least 180 days prior to expiration of the term. The
Employment Agreements generally provide for payment of an annual base salary
that will be reviewed each year, but may not be decreased from the amount in
effect in the previous year. The Employment Agreements also generally provide
for (i) continued payment of base salary, incentive compensation, and other
benefits for 36 months in the case of Mr. Robinson's Employment Agreement and
for 18 months in the case of the other Employment Agreements (or 24 months in
the case of a "change in control") in the event the executive's employment is
terminated other than a termination by the Corporation for "cause" or
voluntarily by the executive without "good reason"; (ii) non-competition for a
period of 18 months (36 months for Mr. Robinson) subsequent to termination for
any reason other than by the executive for "good reason" or by the Corporation
without "cause" in each case prior to a "change in control"; (iii) other
restrictive covenants including non- disclosure, non-solicitation of employees
and availability for litigation support; (iv) participation in certain benefit
plans and programs (including pension benefits, disability and life insurance,
and medical benefits); (v) annual and long-term incentive compensation
opportunities; and (vi) deferred compensation arrangements. Mr. Robinson had
target annual incentive and long-term incentive opportunities for fiscal 2001 of
75% and 50%, respectively, of his annual base salary.
A "change in control" is defined generally as (i) any person acquiring
beneficial ownership of or becoming the beneficial owner of 25% or more of the
outstanding Common Stock or the combined voting power of the Corporation's
outstanding voting securities; (ii) the reorganization, merger, consolidation,
complete liquidation or dissolution of the Corporation, sale or disposition of
all or substantially all of the assets of the Corporation or similar corporate
transaction or the issuance of shares of stock of the Corporation in connection
with any of the foregoing; or (iii) members of the Board serving as of April 1,
2002, together with members first elected thereafter (excluding certain
directors elected as a result of an actual or threatened solicitation of proxies
or consents, including by reason of any agreement intended to avoid or settle
any such proxy contest) with the approval of a majority of the original members
and new members previously so approved, ceasing to constitute a majority of the
Board. "Good reason" or a "constructive termination without cause" is defined
generally as demotion, reduction in compensation, unapproved relocation in the
case of Mr. Robinson (or other executives following a "change in control") or
material breach of the Employment Agreement by the Corporation. "Cause" is
defined generally as a breach of the restrictive covenants referred to above,
certain felony convictions, or willful acts or gross negligence that are
materially damaging to the Corporation.
If payments under the Employment Agreements following a "change in control"
are subject to the "golden parachute" excise tax, the Corporation will make an
additional "gross-up" payment sufficient to ensure that the net after-tax amount
retained by the executive (taking into account all taxes, including those on the
gross-up payment) is the same as would have been the case had such excise tax
not applied.
11
The Employment Agreements obligate the Corporation to indemnify the
executives to the fullest extent permitted by law, including the advancement of
expenses, and provide that the Corporation generally will reimburse an executive
for expenses incurred in seeking enforcement of the Employment Agreement, unless
the executive's assertion of rights was in bad faith or frivolous. The
Employment Agreement with Mr. Robinson relates to his employment as Chairman and
Chief Executive Officer and his agreement to serve as a director. The Employment
Agreements with Ms. Richards and Mr. Ravener relate to their employment as
senior executives of the Corporation. Mr. Wilson and Mr. Morrison are expected
to have similar agreements.
Director Compensation. Directors who are not receiving compensation as
officers or employees of the Corporation or of any affiliate ("non-employee
directors") are paid an annual retainer of $10,000 and a $1,000 fee for
attendance at each meeting of the Board or any committee of the Board and a
$2,500 fee for serving as a committee chair. Non-employee directors are also
eligible to participate in the 1996 Non-Employee Director Stock Plan (the "1996
Director Plan"). Under the 1996 Director Plan, each non-employee director
receives a one-time non-qualified option to purchase 2,000 shares of Common
Stock at an exercise price equal to the fair market value of Common Stock on the
grant date. Each option becomes exercisable in 20% increments beginning one year
from the date of grant, and thereafter remains exercisable until the option
expires.
The 1996 Director Plan also provides for automatic grants of 2,000 stock
units ("Stock Units") to each person whom, at the close of business on the date
of each annual meeting of the Corporation's stockholders, is a non-employee
director. Each Stock Unit represents the right to receive one share of Common
Stock at the end of a specified period. Fifty percent of such Stock Units vest
six months and a day after the grant date, provided the non-employee director
has not ceased to serve as a director for any reason other than death,
disability, or retirement at or after attaining age 65, except that payment of
such Stock Units will be accelerated in the event of a "change in control". The
remaining fifty percent of such Stock Units become payable upon the later of
ceasing to be a director or attaining age 65, provided that delivery of such
Stock Units is accelerated in the event of death, disability, or a "change in
control".
The 1996 Director Plan permits a non-employee director to elect to defer
receipt of all or a portion of the shares otherwise deliverable in connection
with Stock Units. The 1996 Director Plan also permits a non-employee director to
elect to defer receipt of fees otherwise payable in cash, with such deferred
amounts deemed invested in Stock Units.
In 2000, the Board of Directors approved voluntary stock ownership
guidelines for all independent directors providing for ownership of Common Stock
of the Corporation in an amount equal to at least five times their annual
retainer and fees, to be achieved over a five-year period.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised of four
independent, non-employee directors. This Committee is responsible for
establishing, implementing, administering and monitoring the Corporation's
compensation strategy, policies and plans.
Compensation Strategy. The Corporation's compensation strategy is based
upon the premise that all of its associates are important to its success, with
senior executives setting the direction of the business and having overall
responsibility for its results. Because the Corporation operates in a highly
competitive and difficult economic environment for retailers, the Committee has
adopted compensation policies and plans intended to
o attract and retain high caliber individuals,
o provide compensation opportunities that are fair and competitive with
comparable organizations, as well as effective and tax efficient,
o reward the creativity of its key executives in maximizing business
opportunities, and
12
o provide incentives to motivate key management based on achievement of
both short and long term business objectives, strategic progress and
the creation of stockholder value.
The Corporation's executive compensation program was designed to be aligned
with the Corporation's competitive marketplace and short- and long-term
performance objectives. The compensation practices at 9 specialty retailers with
revenues ranging from approximately $1.24 billion to $4.7 billion were
identified as comparable corporations with which the Corporation competes for
talent. The companies that comprise this group are different than the companies
comprising the peer group index referred to in the performance graph of this
Proxy Statement. In the view of the Compensation Committee, this group of 9
specialty retailers that were selected is more representative for compensation
review purposes.
The Committee has implemented a compensation program that is comprised of
annual and longer-term financial incentives. Base salaries are positioned at
approximately the 50th to 60th percentile and remuneration at approximately the
65th percentile of the peer group at target but with the opportunity for
increased yields for superior results. Actual total remuneration levels may
range well below or above target in any one year and over a period of years
based on performance against annual and long-term business objectives and total
return to stockholders. The primary components of the compensation program are
base salary, annual incentive awards, a career equity program and stock options.
Base Salaries. The Committee reviews base salaries annually and considers
increases based on corporate profitability, competitive salaries, position
responsibility levels and individual qualifications and performance. In making
pay decisions for key management including the Named Officers (other than the
Chief Executive Officer), the Committee also takes into consideration the views
and recommendations of the Chief Executive Officer. The Chief Executive
Officer's base salary increased in April 2001 by $50,000 (6.7%) to $800,000.
Annual Incentive Awards. The Corporation's annual incentive program
provides for cash bonuses based on performance relative to predetermined
objectives approved by the Committee each year. As an added retention feature
and to further align the interests of management and stockholders, executive
officers and other members of management may elect to defer receipt of up to 75%
of their cash bonuses for five years in deferred shares of Common Stock and
receive partial matching grants which vest upon completion of five years of
continued employment, subject to accelerated vesting in certain events (the
"STEP Program").
Incentive awards at target performance range from 75% of base salary for
the Chief Executive Officer and scale down depending on position
responsibilities. Larger awards are permitted if performance exceeds
predetermined objectives. Smaller or no awards are made if performance falls
below such objectives.
Bonuses payable to the Chief Executive Officer and other Named Officers
were based on pre-established goals for the Corporation's earnings before
federal income taxes and economic profit. The Chief Executive Officer's annual
incentive award for 2001 was 2.5% of his target award due to the Corporation's
performance in meeting these objectives.
Career Equity Program. As part of its long-term incentive compensation
arrangements, the Committee has implemented a Career Equity Program for
executive officers and other key members of management. Three-year cycles begin
each year. The value of such awards are determined by pre-established goals set
by the Committee based on the Corporation's cumulative net income and return on
average equity during each cycle. The target and maximum awards for the Chief
Executive Officer were set at 50% and 100% of base salary, respectively. Award
payments are made in equal combinations of current cash and deferred shares of
the Corporation's Common Stock, with one-half of the deferred shares vesting
after five years of continued employment and one-half vesting at retirement,
subject to accelerated vesting in certain events.
For the cycle ending December 29, 2001, the Career Equity Award for the
Named Officers (including the Chief Executive Officer) and other participants
was 80.88% of the targeted award due to the Corporation's performance against
the pre-established long-term goals.
Stock Options. Stock options are granted to the Corporation's executive
officers and over 190 other key employees to further align their interests with
those of the stockholders. Stock options are granted at an
13
exercise price equal to the fair market value of the Corporation's Common Stock
and are exercisable in five equal annual installments based on continued
employment during the five-year period following the grant date, subject to
accelerated vesting in certain events. In 2001, the Chief Executive Officer was
granted 147,835 non-qualified stock options and 2,165 incentive stock options.
Grants are determined based on the executive officer's position, multiple of
base compensation, individual performance and fair market value of the
Corporation's Common Stock on the grant date.
Stock Ownership Guidelines. In order to encourage management to have an
ownership stake in the Corporation, the Compensation Committee adopted voluntary
stock ownership guidelines for the Chief Executive Officer and other key
managers including the Named Officers. The Committee believes that executive
stock ownership provides a meaningful link to stockholder interests and
signifies a personal commitment from the management team to the Corporation's
long term success. These guidelines provide that over a five year period the
Chief Executive Officer should attain an ownership interest in the Corporation's
Common Stock of five times base salary and that the other key managers
(including the Named Officers) attain an ownership interest of one to three
times base salary.
Compliance With Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code generally disallows a tax deduction to public companies
for compensation over $1 million paid to the Chief Executive Officer and the
other four most highly compensated individuals who are executive officers as of
the end of the year. Qualifying performance-based compensation is not subject to
the deduction limit if certain requirements are met. It is the Committee's
policy to preserve corporate tax deductions by qualifying compensation paid over
$1 million to the named executive officers. However, the Committee has retained
the flexibility to approve compensation arrangements that it deems to be in the
best interests of the Corporation and its stockholders that may not always
qualify for full tax deductibility. The Corporation believes that all
compensation paid by the Corporation in 2001 qualified for full tax
deductibility and it is anticipated that all compensation to be paid in 2002
will also be fully deductible.
Compensation Committee:
Terry R. Lautenbach, Chair
George S. Day
Stanley P. Goldstein
Bettye Martin Musham
14
REPORT OF THE AUDIT COMMITTEE
A principal function of the Audit Committee is to provide oversight of the
Company's system of internal controls, financial reporting practices and audit
function to ensure their quality, integrity and objectivity.
The Board has determined that all members of the Audit Committee are
"independent" within the meaning of and as required by the listing standards of
the New York Stock Exchange.
The Audit Committee operates pursuant to the Audit Committee Charter, which
was attached as an exhibit to the Company's Proxy Statement for the 2001 Annual
Meeting. Consistent with the Audit Committee Charter, management is responsible
for the preparation, presentation and the integrity of the Company's financial
statements. Accordingly, management is responsible for maintaining appropriate
accounting records and financial reporting in accordance with principles,
policies, internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. The independent
accountants are responsible for planning and carrying out proper annual audits
and quarterly reviews of the Company's financial statements. The independent
accountants express an opinion as to the conformity of the annual financial
statements with accounting principles generally accepted in the United States of
America and also provide review reports regarding the Company's interim
financial statements.
The Audit Committee has the authority and responsibility to recommend to
the full Board of Directors the selection, evaluation, and, where appropriate,
replacement of the independent accountants.
For fiscal 2001, in performing its oversight function, the Audit Committee
reviewed the overall audit scope, plans and results of the audit engagement. The
Audit Committee also met separately, without management present, with the
independent auditors to discuss the year's audit. In addition, the Audit
Committee reviewed and discussed the Company's annual financial statements with
management before issuance.
The Audit Committee has discussed with the independent auditors the matters
required to be discussed by SAS 61, Communication With Audit Committees, of the
Auditing Standards Board of the American Institute of Certified Public
Accountants, to the extent applicable. The Audit Committee has also received and
reviewed written disclosures and confirmation from the independent auditors
required by Independence Standards Board Standard No. 1, Independence
Discussions With Audit Committee, and has discussed with the auditors their
independence.
In performing their oversight responsibility, members of the Audit
Committee rely on information, opinions, reports or statements, including
financial statements and other financial data, prepared or presented by officers
or employees of the Company, the independent accountants or other persons with
professional or expert competence. Accordingly, the Audit Committee's oversight
does not provide an independent basis to determine that management has
maintained appropriate accounting records and financial reporting in accordance
with principles, policies, internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations.
Furthermore, the Audit Committee's considerations and discussions referred to
above do not assure that the audit of the Company's financial statements by the
independent accountants has been carried out in accordance with auditing
standards generally accepted in the United States of America, that the financial
statements are presented in accordance with accounting principles generally
accepted in the United States of America or that the Company's independent
accountants are in fact independent.
The Committee has considered whether the provision of non-audit services by
the independent accountants to the Company is compatible with maintaining the
independent accountants' independence and has discussed with them their
independence.
Based on the foregoing reports, reviews and discussions, and subject to the
limitations of the responsibilities of the Audit Committee (certain of which are
referred to above and in the Audit Committee
15
Charter), the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the fiscal year 2001.
Audit Committee
Neele E. Stearns, Jr., Chair
George S. Day
Robert A. Davies, III
Kenneth S. Olshan
16
Performance Graph. The following graph shows cumulative total stockholder
returns for the Corporation, assuming reinvestment of any dividends, compared
with the Standard & Poor's ("S&P") SmallCap 600 Stock Index and the S&P SmallCap
Retail Specialty Index. The graph covers the period from December 28, 1996
through December 28, 2001.
[LINE GRAPH OMITTED]
TICKER 11/28/96 01/03/98 01/02/99 01/01/00 12/29/00 12/28/01
------ -------- -------- -------- -------- -------- --------
Footstar, Inc. FTS 100.0 105.4 98.0 119.6 194.1 120.0
S&P SmallCap 600 SML 100.0 125.7 123.2 137.3 151.0 161.0
S&P SC Retail-Specialty SMRESP 100.0 126.3 136.9 126.7 120.0 168.6
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee of the Board of Directors is comprised of four outside
independent directors, Terry R. Lautenbach (Chair), George S. Day, Stanley P.
Goldstein and Bettye Martin Musham.
Certain Transactions With Related Parties. The Corporation is a payee with
respect to a $101,322 loan received by Mr. Ravener. The loan bears no interest
and will be forgiven at the end of three years from date of grant if Mr. Ravener
is still employed by the Corporation.
Section 16(A) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934 requires the Corporation's officers and
directors to file with the SEC reports regarding ownership of the Corporation's
Common Stock, and to furnish the Corporation with copies of all such filings.
Based on a review of these filings, the Corporation believes that all filings
were timely made, except a Form 5 which was inadvertently filed late on behalf
of Mr. Ravener.
17
2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Based on the recommendation of the Audit Committee, the Board of Directors
has selected KPMG LLP as the Corporation's independent auditors to make an
examination of the accounts of the Corporation for the 2002 fiscal year. KPMG
LLP served as independent auditors for the Corporation for the 2001 fiscal year
and prior. Representatives of KPMG LLP are expected to be present at the Meeting
and will be available to respond to appropriate questions and to make such
statements as they may desire.
The fees billed for services rendered for the Corporation by KPMG LLP for
fiscal 2001 were as follows:
Audit Fees ................................ $672,000
Financial Information Systems Design and
Implementation Fees ..................... $ 0
All Other Fees:
Audit related fees(1).................... $149,000
Other non-audit services(2).............. $221,000
--------
Total All Other Fees ...................... $370,000
========
----------
(1) Audit related fees consist of statutory audits, audit of financial
statements of an employee benefit plan and accounting and reporting
consultation.
(2) Other non-audit services consisted of tax compliance and tax advisory
services.
The Audit Committee has considered whether the provision of the services
covered under "All Other Fees" above is compatible with maintaining the
auditor's independence.
The Company's practice is not to have its independent auditing firm provide
financial information systems design and implementation consulting services.
Instead, these services are provided by other accounting or consulting firms. In
fact, the Corporation's independent auditors, KPMG LLP, no longer perform these
traditional consulting services as their consulting business was sold through an
initial public offering in February 2001. KPMG LLP does not have a continuing
interest in the consulting business and is a totally separate and independent
organization. Accordingly, the Corporation has not engaged KPMG LLP nor its
former consulting business to perform any such services during fiscal 2001.
Other non-audit consulting services may, from time to time, be provided by the
independent auditing firm or other accounting and consulting firms. To the
extent these other consulting services are provided by the Company's independent
auditing firm, they are monitored to ensure that the nature and extent of those
services do not interfere with the independence of the auditors. These non-audit
services consisted principally of tax compliance and advisory services. In
addition, all significant non-audit services provided by the independent
auditing firm are approved in advance by the Audit Committee, and the level of
non- audit service fees overall is monitored by the Audit Committee. The
independence of the auditing firm also is considered annually by the full Board
of Directors.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE
2003 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Corporation's
2003 Annual Meeting of Stockholders must be received by the Secretary of the
Corporation, for inclusion in the Corporation's proxy statement, notice of
meeting and proxy, not later than November 29, 2002.
The Corporation's bylaws establish an advance written notice procedure for
stockholders seeking to nominate candidates for election as directors at any
annual meeting of stockholders, or to bring business before an annual meeting of
stockholders of the Corporation. The bylaws provide that only persons who are
nominated by, or at the direction of, the Board, or by a stockholder who has
given timely written notice to the Secretary of the Corporation prior to the
meeting at which directors are to be elected, will be eligible for election as
directors of the Corporation. The bylaws also provide that at any meeting of
stockholders only such business may be conducted as has been brought before the
meeting by, or at the direction of, the Board or, in
18
the case of an annual meeting of stockholders, by a stockholder who has given
timely written notice to the Secretary of the Corporation of such shareholder's
intention to bring such business before such meeting. Under the bylaws, for any
such shareholder notice to be timely, such notice must be received by the
Corporation in writing not less than 90 days nor more than 100 days prior to the
meeting, or in the event that less than 100 days' notice or prior public
disclosure of the date of the annual meeting is given or made to stockholders,
to be timely, notice by the stockholder must be received not later than the
close of business on the 10th day following the day on which such notice of the
date of the meeting or such public disclosure was made. Under the bylaws, a
stockholder's notice must also contain certain information specified in the
bylaws.
OTHER INFORMATION
In accordance with its bylaws, the Corporation will bring before the
meeting only business that has been referred to in the Notice of Meeting and
this Proxy Statement. The Corporation has received correspondence from
Providence Investors, LLC ("Providence") which claims to be the beneficial owner
of 1,000 shares of Common Stock stating that it intends to present at the
Meeting a non-binding stockholder resolution requesting redemption of the rights
issued under the Corporation's shareholder rights plan ("Rights Plan"). In the
same communication, Providence also stated its intention to present a proposal
to amend Section 10 of our bylaws to make it a mandatory qualification for
directors to stand for reelection that they had not failed to approve the
redemption of rights issued under the Rights Plan within 300 days after a
majority vote of the holders of Common Stock requesting such redemption or
elimination. At the date of this Proxy Statement, Providence has not indicated
whether it intends to solicit proxies from stockholders to vote for these
proposals. The Corporation's Board voted to enact this Rights Plan to protect
the interest of stockholders. Accordingly, if the proposals are brought before
the Meeting or any adjournment thereof, it is intended that the persons named in
the proxy will use their discretionary authority to vote against such proposals.
If the proposal to amend our bylaws is brought before the Meeting, the Board
reserves its right to take any and all actions which it believes are appropriate
and in the best interests of the Corporation and the stockholders. If any other
business should properly come before the Meeting or any adjournment thereof, the
persons named in the proxy will vote on such matters as recommended by the Board
or, if no recommendation is given, according to their best judgment.
In the same communication, Providence also stated an intention at the
Meeting to nominate three individuals in opposition to the three nominees of the
Board of Directors. According to information provided by Providence, for which
the Corporation disclaims any responsibility, these individuals are: Chris
Riedel, 55, private investor, 213 Forrester Road, Los Gatos, CA 95032; Herbert
Denton, 54, President of Providence Capital, 730 Fifth Avenue, Suite 2101, New
York, NY 10019; and Lawrence Schafran, 63, interim President and Chief Executive
Officer of Banyan Strategic Realty Trust, 2625 Butterfield Road, Oak Brook, IL
60523. At the date of this Proxy Statement, Providence has not indicated whether
it intends to solicit proxies from stockholders for the election of its proposed
nominees. The Corporation reserves its rights to determine whether the
Providence communication with respect to its proposed nominees complies with our
bylaws.
PROXIES IN THE ENCLOSED FORM WILL BE VOTED IN RESPECT OF ANY OTHER BUSINESS
THAT IS PROPERLY BROUGHT BEFORE THE MEETING AS RECOMMENDED BY THE BOARD OF
DIRECTORS OR, IF NO SUCH RECOMMENDATION IS GIVEN, IN THE DISCRETION OF THE PROXY
HOLDERS.
19
ANNUAL REPORT
A COPY OF THE CORPORATION'S ANNUAL REPORT WAS MAILED TO ALL STOCKHOLDERS OF
RECORD BEGINNING ON OR ABOUT MARCH 29, 2002. STOCKHOLDERS, UPON WRITTEN REQUEST
TO INVESTOR RELATIONS, FOOTSTAR, INC., ONE CROSFIELD AVENUE, WEST NYACK, NEW
YORK 10994, MAY RECEIVE, WITHOUT CHARGE, A COPY OF THE CORPORATION'S ANNUAL
REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULES AND LIST OF EXHIBITS, REQUIRED TO BE FILED WITH THE SEC FOR THE 2001
FISCAL YEAR.
20
[LOGO]
PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 14, 2002
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned having received notice of the meeting and the Corporation's
Proxy Statement therefor, hereby appoints J.M. ROBINSON, ROBERT A. DAVIES, III
and TERRY R. LAUTENBACH and each of them, as Proxy, each with full power of
substitution, to vote all of the stock of Footstar, Inc. ("Footstar" or the
"Corporation") standing in the undersigned's name at the Annual Meeting of
Stockholders of Footstar, to be held at the Corporation's headquarters, One
Crosfield Avenue, West Nyack, New York 10994, on Tuesday, May 14, 2002, at 10:00
a.m. and at any adjournment or postponement thereof. The undersigned hereby
revokes any and all proxies heretofore given with respect to such meeting.
This proxy will be voted as specified hereon. If no choice is specified,
the proxy will be voted FOR the nominees for Director listed hereon, and FOR
ratification of the appointment of KPMG LLP as the Corporation's auditors (the
"Ratification"), all as described in the accompanying Proxy Statement. In their
discretion, the named proxies are authorized to vote upon such other matters as
may properly come before the Annual Meeting.
(CONTINUED ON REVERSE SIDE)
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Please mark X
your votes as
indicated in
this example
The Board of Directors recommends a vote FOR the nominees for Director
listed below and FOR ratification of the auditors.
1. Election of directors for a term to expire in 2005: George S. Day, Bettye
Martin Musham, Kenneth S. Olshan
FOR all WITHHOLD (Instruction: To withhold authority to vote
the AUTHORITY for any individual nominee, write that
nominees to vote nominee's name in the space provided below.)
listed for all
(except as nominees
marked to listed -------------------------------------------
the [ ]
contrary)
[ ]
2. RATIFICATION OF
APPOINTMENT
OF KPMG LLP, AS DESCRIBED
IN THE PROXY STATEMENT.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting.
Dated: ___________________, 2002
--------------------------------
Signature
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Signature
(Please sign exactly as your name appears.
When signing as executor, administrator,
guardian, trustee, attorney or other fiduciary
please give your title as such. If signer is a
corporation, please sign the full corporate
name and then an authorized officer should
sign his or her name and print his or her name
and title below the signature. If the shares
are held in joint names, all joint owners
should sign. If a partnership, please sign in
partnership name, by authorized person.)
PLEASE COMPLETE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE.
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