SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] 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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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[ ] Fees paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
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statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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FOOTSTAR
933 MACARTHUR BOULEVARD, MAHWAH, NEW JERSEY 07430
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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 933 MacArthur Boulevard, Mahwah, New Jersey 07430, on
Tuesday, May 1, 2001, at 10:00 a.m. local time, for the following purposes:
1. To elect two directors to hold office for a term expiring in
2004;
2. To ratify the appointment of KPMG LLP as the Corporation's
independent auditors for fiscal 2001; 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 March 15, 2001 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.
/s/ MAUREEN RICHARDS
--------------------
MAUREEN RICHARDS
Vice President, General Counsel
and Corporate Secretary
Dated: March 30, 2001
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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
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 1, 2001
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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 1, 2001, at 10:00 a.m. local time, at
the offices of the Corporation, 933 MacArthur Boulevard, Mahwah, New Jersey
07430, 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 two
directors, each to hold office for a term expiring in 2004 and (2) the
ratification of the appointment of KPMG LLP as the Corporation's independent
auditors for 2001.
This Proxy Statement, Notice of Meeting and accompanying proxy card are
first being mailed to stockholders on or about March 30, 2001.
GENERAL
The holders of shares of Common Stock of record at the close of business on
March 15, 2001 are entitled to vote such shares at the Meeting. On March 15,
2001, there were 19,874,208 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. Therefore, abstentions will be disregarded and will
have no effect on the election of directors but will have the effect of a vote
against the ratification of the appointment of auditors. Broker non-votes occur
when shares registered in the names of brokers or other "street name" nominees
for which proxies are voted on some but not all matters and as to which
non-voted matters the broker does not have discretionary authority. The Company
believes that brokers will have discretionary authority as to each of the
proposals submitted.
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 2001 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 Morrow & Co. to
assist it in the solicitation of proxies for a fee of $4,500 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. 933 MacArthur Blvd., Mahwah, New
Jersey 07430, (201) 760-4008.
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
PROPOSAL 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 2004. The Corporation has inquired of each nominee and determined he
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 2001 ANNUAL MEETING
CURRENT
DIRECTOR TERM
NAME AND AGE PRINCIPAL OCCUPATION AND BACKGROUND SINCE EXPIRING
------------ ----------------------------------- ------ --------
Robert A. Davies, III, 65 Chairman and Chief Executive Officer of 1998 2001
Church & Dwight Co., Inc. since February
2001. President, Chief Executive Officer
and Director of Church & Dwight Co. Inc.
from October 1995 to January 2001.
Terry R. Lautenbach, 62 Former Senior Vice President of IBM 1996 2001
Corporation. Mr. Lautenbach is also a
director of CVS Corporation, Air Products
and Chemicals, Inc. and Varian Medical
Systems, Inc.
TABLE II--DIRECTORS WHOSE TERMS CONTINUE BEYOND THIS ANNUAL MEETING
CURRENT
DIRECTOR TERM
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS SINCE EXPIRING
------------ ------------------------------------------- ------ --------
George S. Day, 63 Geoffrey T. Boisi Professor of Marketing and 1996 2002
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.
Stanley P. Goldstein, 66 Former Chairman and Chief Executive Officer of 1996 2003
CVS Corporation and former Chief Executive
Officer of Melville Corporation (CVS's
predecessor). Mr. Goldstein serves as a director
of Linens 'n Things, Inc. and CVS Corporation.
3
TABLE II--DIRECTORS WHOSE TERMS CONTINUE BEYOND THIS ANNUAL MEETING (CONTINUED)
CURRENT
DIRECTOR TERM
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS SINCE EXPIRING
------------ ------------------------------------------- ------ --------
Bettye Martin Musham, 68 Chairwoman and Chief Executive Officer of Gear 1996 2002
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, 68 Former Chairman and Chief Executive Officer of 1996 2002
Wells Rich Greene BDDP. Mr. Olshan also serves
as a director of Charming Shoppes and as a
Trustee of the Central Park Conservancy.
J.M. Robinson, 55 Chairman of the Board, Chief Executive Officer 1996 2003
and President of the Corporation. Prior to
October 1996, Mr. Robinson was President and
Chief Executive Officer of the Meldisco
Division of Melville 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., 65 Chairman of Financial Investments Corporation, 2000 2003
a private equity investment firm, since February
2001. Chairman of the Board of Wallace
Computer Services, Inc. from January 2000
through November 2000. Prior to 1994, 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 nine
meetings during 2000. The Board has an Audit Committee, a Corporate Governance
Committee and a Compensation Committee. Each director attended at least 75% of
the meeting of the Board of Directors and of the committees of which he or she
wasa member.
The Audit Committee held three meetings during 2000. 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 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.
The members of the Audit Committee are:
George S. Day, Chair
Robert A. Davies, III
Kenneth S. Olshan
Neele E. Stearns, Jr.
4
The Corporate Governance Committee held one meeting during 2000. 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. 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 2002 Meeting," on page 16 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 three meetings during 2000. 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,
2001, 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
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) PERCENT OF CLASS
------------------------ ---------------------- ----------------
Directors and Named Officers:
J.M. Robinson ................................................. 511,152(2) 2.53%
Maureen Richards .............................................. 47,965(2) *
Robert D. Ravener, Jr. ........................................ 46,271(2) *
Robert A. Davies, III ......................................... 10,088(3) *
George S. Day ................................................. 14,099(3) *
Stanley P. Goldstein .......................................... 60,960(3)(4) *
Terry R. Lautenbach ........................................... 19,126(3) *
Bettye Martin Musham .......................................... 11,947(3) *
Kenneth S. Olshan ............................................. 15,136(3) *
Neele E. Stearns, Jr. ......................................... 3,400(3) *
All executive officers and directors as a group (10 persons) 740,144(2)(3)(4) 3.66%
5% Stockholders:
ESL Partners, L.P.,
ESL Limited,
ESL Investors, L.L.C.
ESL Institutional Partners, L.P.
(collectively, "ESL")(5)
One Lafayette Place
Greenwich, CT 06830 ......................................... 3,592,300 18.08%
FMR Corp.
Edward C. Johnson, 3d and
Abigail P. Johnson(6)
82 Devonshire Street
Boston, MA 02109 ............................................ 1,991,400 10.07%
David J. Greene and Company, LLC(7)
599 Lexington Avenue
New York, NY 10022 .......................................... 2,002,019 10.16%
Sasco Capital, Inc.(8)
10 Sasco Hill Road
Fairfield, CT 06430 ......................................... 1,558,139 7.84%
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* 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, 132,999, 28,571 and 21,310, shares for Mr. Robinson,
Ms. Richards and Mr. Ravener, 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 amounts shown also include the following stock options which are
currently exercisable or exercisable within 60 days: Mr. Robinson, 325,107;
Ms. Richards, 16,430; and Mr. Ravener, 22,910.
6
(3) Of the shares shown, 7,888, 7,499, 10,326, 11,509, 5,371, 13,036 and 1,000
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 within 60 days: Mr. Davies, 1,200,
Dr. Day, 1,600, Mr. Goldstein, 1,200, Mr. Lautenbach, 1,600, Ms. Musham,
1,600, Mr. Olshan, 1,600, and Mr. Stearns, 400.
(4) Of the shares shown, 5,758 shares are owned by Mr. Goldstein's wife. Mr.
Goldstein disclaims beneficial ownership of such shares.
(5) ESL filed a Schedule 13G dated December 28, 2000 disclosing beneficial
ownership with respect to 3,592,300 shares of Common Stock. Of such Common
Stock, ESL Partners, L.P. has sole voting and sole investment power with
respect to 2,450,975 shares, ESL Limited has sole voting and sole
investment power with respect to 438,414 shares, ESL Institutional
Partners, L.P. has sole voting and sole investment power with respect to
85,601 shares, and ESL Investors, L.L.C. has sole voting and investment
power with respect to 617,310 shares.
(6) FMR Corp., Edward C. Johnson, 3d and Abigail P. Johnson (collectively,
"FMR") filed a Schedule 13G dated February 14, 2001 disclosing beneficial
ownership of 1,991,400 shares of Common Stock. Of such Common Stock, FMR
has sole voting power with respect to no shares and sole investment power
with respect to 1,991,400 shares.
(7) David J. Greene and Company, LLC filed a Schedule 13G dated February 14,
2001 disclosing beneficial ownership of 2,002,019 shares of Common Stock.
Of such Common Stock, David J. Greene and Company, LLC has sole voting and
sole investment power with respect to 107,238 shares, shared voting power
with respect to 979,410 shares and shared investment power with respect to
1,894,781 shares.
(8) Sasco Capital, Inc. filed a Schedule 13G dated February 12, 2001 disclosing
beneficial ownership of 1,558,139 shares of Common Stock. Of such Common
Stock, Sasco Capital, Inc. has shared voting and investment power with
respect to no shares and sole voting power with respect to 739,145 shares
and sole investment power with respect to 1,558,139 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 and to one former executive officer whose employment terminated
during fiscal 2000 (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
----------------------------------- ---------------------------------
RESTRICTED/ NUMBER OF
LTIP DEFERRED SECURITIES ALL OTHER
FISCAL PAYOUTS STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(2) AWARD(S)($) OPTIONS (#) SATION ($)(6)
--------------------------- ----- ---------- ---------- ------- ------------- ----------- --------------
J.M. Robinson, Chairman of 2000 737,500 720,750 123,000 393,281(3) 200,000 7,528
the Board, Chief Executive 1999 700,000 635,000 92,400 330,525(4) 105,271 6,856
Officer and President 1998 688,500 248,500 67,375 129,500(5) 45,000 5,800
Maureen Richards, Vice 2000 249,750 135,636 26,035 51,353(3) 17,600 7,528
President, General Counsel 1999 234,000 143,000 19,553 73,178(4) 17,275 6,856
and Corporate Secretary 1998 222,500 55,912 15,469 29,447(5) 10,000 5,800
Robert D. Ravener, Jr., 2000 243,750 162,432 25,420 86,332(3) 21,000 3,978
Vice President and 1999 228,250 107,184 19,058 209,251(4) 24,275 3,456
Chief Personnel Officer(1) 1998 170,000 77,000 15,125 109,375(5) 15,000 0
Carlos E. Alberini, Former 2000 397,500 0 0 0 28,000 6,750
Senior Vice President and 1999 373,500 300,000 37,422 149,922(4) 23,975 13,406
Chief Financial Officer 1998 355,500 102,240 29,700 55,260(5) 15,000 12,550
---------
(1) Employment commenced in March 1998 and effective January 2001 was named
Senior Vice President of the Corporation's newly formed Footstar Retailing
Services division.
(2) 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 30, 2000, January 1, 2000 and
January 2, 1999.
(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 valued at $270,281; Ms. Richards 551 shares valued at
$25,318; and Mr. Ravener 1,325 shares valued at $60,912. The amounts shown
also include the following deferred shares awarded as part of the
Corporation's Career Equity Plan, 50% of which vests in five years and the
remaining 50% of which vests at retirement: Mr. Robinson 2,675 shares
valued at $123,000; Ms. Richards 566 shares valued at $26,035; and Mr.
Ravener 553 shares valued at $25,420.
(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; Mr. Ravener 1,690 shares; and Mr.
Alberini 4,731 shares. The amounts shown also include the following
deferred shares awarded as part of the Corporation's Career Equity Plan,
50% of which vests in five years and the remaining 50% of which vests at
retirement: Mr. Robinson 3,885 shares; Ms. Richards 822 shares; Mr. Ravener
801 shares; and Mr. Alberini 1,574 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 January 2, 2001, the value of the deferred
shares referred to in this footnote was: Mr. Robinson $681,871, Ms.
Richards $150,965, and Mr. Ravener $414,774. Mr. Alberini's deferred shares
were forfeited.
(5) These amounts include the following "match" by the Corporation in deferred
shares of the voluntary deferral of 50% of the 1998 annual incentive
bonuses payable to each of the Named Officers: Mr. Robinson 2,470 shares;
Ms. Richards 556 shares; Mr. Ravener 765 shares; and Mr. Alberini 1,016
shares. The amounts shown also
8
include the following deferred shares awarded as part of the Corporation's
Career Equity Plan, 50% of which vests in five years and the remaining 50%
of which vests at retirement: Mr. Robinson 2,678 shares; Ms. Richards 615
shares; Mr. Ravener 601 shares; and Mr. Alberini 1,181 shares. The amount
shown for Mr. Ravener also includes the value of shares of the
Corporation's Common Stock underlying restricted stock units of 2,051
shares granted in 1998 with a value as of January 2, 2001 of $100,627.
These restricted stock units vest in five years from the date of grant
contingent upon continued employment with the Corporation. At January 2,
2001, the value of the deferred shares referenced in this footnote was
$252,594 for Mr. Robinson, $57,452 for Ms. Richards, and $167,647 for Mr.
Ravener. Mr. Alberini's deferred shares were forfeited.
(6) The amounts disclosed represent the Corporation's contributions under the
Corporation's 401(k) profit sharing plan as well as $6,750 for Mr. Alberini
in each of 2000, 1999 and 1998 representing interest (calculated at 6.75%
annually) which might otherwise have had to been paid on a non-interest
bearing loan.
Option Grants in Last Fiscal Year. The table below shows information
regarding grants of stock options made to the Named Officers during fiscal 2000.
The amounts shown as potential realizable values are based on arbitrarily
assumed annualized rates of stock price appreciation of 5% and 10% over the full
ten year term of the options.
OPTION GRANTS IN LAST YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
NUMBER OF TOTAL PRICE APPRECIATION FOR
SECURITIES OPTIONS -------------------------
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM ($)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
---- -------------- ------------ ----------- ---------- ---------- -----------
J.M. Robinson ................. 200,000 25.9 21.75 03/10/10 2,735,692 6,932,780
Maureen Richards .............. 17,600 2.3 21.75 03/10/10 240,741 610,085
Robert D. Ravener, Jr. ........ 21,000 2.7 21.75 03/10/10 287,248 727,942
Carlos E. Alberini (2) ........ 28,000 3.6 21.75 -- 0 0
(1) Each option vests at the rate of 20% per year over a five-year period
beginning on the first anniversary of the date of grant.
(2) These options were forfeited.
Option Exercises and Year-End Option Holdings. The following table shows
information regarding option exercises during 2000 as well as fiscal 2000
year-end option holdings for each of the Named Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
SHARES NUMBER OF SECURITIES IN-THE-MONEY
ACQUIRED VALUE UNDERLYING UNEXERCISED OPTIONS AT
ON EXERCISE REALIZED OPTIONS AT FY-END (#) FY-END($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ -------- ------------------------- -------------------------
J.M. Robinson ................ -- -- 225,053/395,218 5,266,494/9,900,541
Maureen Richards ............. 24,000 597,000 7,455/43,420 155,107/1,101,610
Robert D. Ravener, Jr. ....... -- -- 10,855/49,420 195,828/1,171,965
Carlos E. Alberini ........... 88,794 1,640,000 0/0 0/0
9
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 YEARS 15 YEARS 20 YEARS 25 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 ............................. 320,000 480,000 620,000 800,000
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 2000
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 bonus. As of January 1, 2001, the credited years of service under the
Supplemental Retirement Plan for Messrs. Robinson, Ravener, and Ms. Richards
were 19, 3, and 4 years, respectively. Mr. Alberini forfeited any right to
participate in such plan. 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 Messrs.
Robinson, Ravener and Ms. Richards. 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 and for 18
10
months in the case of the other Named Officers (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"
following 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 2000 of 60% and 40%, respectively,
of his annual base salary.
A "change in control" is defined as (i) any person acquiring beneficial
ownership 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 (iii) members of the
Board serving at the effective date of the 1996 Incentive Compensation Plan,
together with members first elected thereafter (excluding certain directors
elected as a result of an actual or threatened election 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" is
defined generally as demotion, reduction in compensation, unapproved relocation
in the case of Mr. Robinson (or other Named Officers following a "change in
control"), material breach of the Employment Agreement by the Corporation, or,
in the case of Mr. Robinson, failure to extend the term of the Employment
Agreement to his 60th birthday. "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.
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.
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 on each of the
first five anniversaries following 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 shall be 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.
11
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
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 12 specialty retailers
with revenues ranging from approximately $1.24 billion to $4.63 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 12
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 2000 by $50,000 (7.1%) to $750,000.
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 60% 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.
12
Bonuses payable to the Chief Executive Officer and other Named Officers
were based on preestablished goals for the Corporation's earnings before Federal
income taxes and economic profit. The Chief Executive Officer's annual incentive
award for 2000 was 134% of his target award due to the Corporation's performance
in meeting these objectives. In addition, the Chief Executive Officer and Mr.
Ravener were awarded a one-time special bonus of $120,000 and $30,000
respectively, 75% of which was mandatorily deferred for five years under the
Company's STEP program, in connection with the execution of 2000 performance
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 preestablished 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 40% and 80% 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 31, 2000, the Career Equity Award for the
Named Officers (including the Chief Executive Officer) and other participants
was 82% of the targeted award due to the Corporation's performance against the
preestablished long-term goals.
Stock Options. Stock options are granted to the Corporation's executive
officers and over 100 other key employees to further align their interests with
those of the stockholders. Stock options are granted at an 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 2000, the Chief Executive Officer was granted 195,403
non-qualified stock options and 4,597 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. All compensation paid by the Corporation in
2000 qualified for full tax deductibility and it is anticipated that all
compensation to be paid in 2001 will also be fully deductible.
Compensation Committee:
Terry R. Lautenbach, Chair
George S. Day
Stanley P. Goldstein
Bettye Martin Musham
13
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is comprised entirely of
independent outside directors. Its primary function is to oversee the Company's
system of internal controls, financial reporting practices and audit function to
ensure their quality, integrity and objectivity. The Board of Directors has
adopted and approved a written charter for the Audit Committee attached as
Exhibit A.
For fiscal 2000, the Audit Committee reviewed the overall audit scope,
plans and results of the audit engagement. The Committee also met separately,
without management present, with the independent auditors to discuss the year's
audit. In addition, the 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 the written disclosures and confirmation from the independent auditors
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committee, of the Independence Standards Board, and has
discussed with the auditors the auditors' independence.
Based on the foregoing review and discussions, 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 2000.
Audit Committee:
George S. Day, Chair
Robert A. Davies, III
Kenneth S. Olshan
Neele E. Stearns, Jr.
14
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 of time beginning on October
14, 1996, the date when Footstar's Common Stock was first traded on the New York
Stock Exchange, through December 29, 2000.
[GRAPH OMITTED]
10/14/96 12/28/96 1/3/98 1/2/99 1/1/00 12/29/00
-------- -------- ------ ------ ------ --------
Footstar, Inc. FTS 100.0 124.4 131.1 122.0 148.8 241.5
S&P Small Cap 600 SML 100.0 103.9 130.6 128.0 142.7 156.9
S&P SM Retail-Specialty SMRESP 100.0 96.5 122.0 132.2 122.2 115.8
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 was a payee with
respect to $100,000 of a relocation loan received by Mr. Alberini. The loan
bears no interest and has been fully repaid by Mr. Alberini.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Exchange Act 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.
15
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
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 2001 fiscal year. KPMG LLP served as independent auditors for the
Corporation for the 2000 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 2000 were as follows:
Audit Fees ...............................................$462,000
Financial Information Systems Design and
Implementation Fees ....................................$ 0
All Other Fees
(For services including acquisition matters, due
diligence and statutory audits) ........................$988,000
The Audit Committee has considered whether the provision of the services
covered under the captions "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" above is compatible with maintaining
the Auditors' independence.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE
2002 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Corporation's
2002 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 30, 2001.
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 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.
ANNUAL REPORT
A COPY OF THE CORPORATION'S ANNUAL REPORT WAS MAILED TO ALL STOCKHOLDERS OF
RECORD ON OR ABOUT MARCH 30, 2001. STOCKHOLDERS, UPON WRITTEN REQUEST TO THE
INVESTOR RELATIONS DEPARTMENT OF THE CORPORATION, 933 MACARTHUR BOULEVARD, NEW
JERSEY 07430, 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 2000
FISCAL YEAR.
16
OTHER MATTERS
As of the date of this Proxy Statement, the Corporation knows of no
business that will be presented for consideration at the Meeting other than the
items referred to above. 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.
17
EXHIBIT A
FOOTSTAR, INC.
AUDIT COMMITTEE CHARTER
Purpose
The board of directors has oversight responsibilities with respect to all
material aspects of the Company's financial reporting, system of internal
controls and audit process. Through this charter, the adequacy of which shall be
reviewed by the board annually, the board delegates certain duties and
responsibilities, as set forth below, to the Audit Committee (the "Committee")
to assist the board in fulfilling its responsibilities.
To discharge its oversight responsibilities effectively, the Committee will
maintain open lines of communication with the chief financial officer, chief
internal auditor and with the Company's independent auditors.
The board recognizes that an informed and vigilant Committee represents an
effective influence for ensuring adequate internal controls and fair and
complete financial reporting. The members of the Committee are expected to
discharge their duties with the same good faith, diligence, care and skill
exercised in performing their duties as directors of the Company.
Organization
The Committee shall be composed of at least three non-employee, independent
directors with no relationships with the Company that may interfere with the
exercise of their independence from management and the Company.
The Committee shall have a chairperson appointed by the board of directors.
The Committee shall appoint a secretary who shall keep a record of the
Committee's proceedings.
The Committee shall meet sufficiently often to review the financial
statements, the activities and reports of the internal auditor and the
independent auditor and other matters requiring consideration by the Committee.
The Committee chairperson may call other meetings as necessary.
The Committee shall have the power to adopt its own operating rules and
procedures and to call upon assistance from officers and employees of the
Company and to have access to other advisers at its discretion.
Relationship with Auditors
The external auditors, in their capacity as independent public accountants,
are ultimately accountable to the board of directors and the Committee as
representatives of shareholders.
The Committee shall annually review the performance of the external and
internal auditors, and obtain a written statement from the external auditors
delineating all their relations with the Company consistent with the American
Institute of Certified Public Accountant's Independent Standards Board Standard
1. The Committee is also responsible for discussing with the auditors any
relationships or services that may affect auditor objectivity or independence,
and for recommending appropriate action to the full board for ensuring
independence.
Roles, Responsibilities and Duties
(i) Consider the adequacy of the accounting and internal control systems.
(ii) Oversee the audit function, both independent and internal, including,
but not limited to, the performance, independence and fee arrangements of the
independent auditors.
(iii) Review quarterly and annual consolidated financial statements and
major regulatory filings and discuss with the independent auditors the quality
and acceptability of the Company's accounting principles.
(iv) Institute, direct and supervise special investigations.
(v) Recommend to the board the appointment of independent auditors.
(vi) Review non-audit services provided by the independent auditors.
(vii) Review the Company's Code of Conduct including its conflict of
interest and compliance procedures.
(viii) Review and assess the Company's processes for management of risk and
for compliance with legal, ethical and regulatory requirements (including the
adequacy of controls and contingency plans for dealing with areas of significant
risk exposure).
(ix) Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements and understand their impact on the
financial statements.
(x) Review the policies and procedures in effect for the review of
officer's expenses and perquisites.
(xi) Review the findings of any examinations by regulatory agencies, such
as the Securities and Exchange Commission and the Internal Revenue Service.
(xii) Recommend to the full board the criteria for and an implementation
plan for a strategic audit.
(xiii) Perform such other oversight functions as requested by the full
board and also make such recommendations and observations as the Committee sees
fit.
(xiv) Report its activities to the full board following each meeting of the
Committee to keep the board informed of Committee activities and findings on a
current basis.
FOOTSTAR
PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 1, 2001
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints KENNETH S. OLSHAN and GEORGE S. DAY 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, 933 MacArthur Boulevard, Mahwah, New Jersey,
on Tuesday, May 1, 2001, 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.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED ON THE REVERSE SIDE)
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
Please mark
your votes as [ X ]
|------------------------------------------------------------------------------------| indicated in
| | this example
| |
|------------------------------------------------------------------------------------|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW AND FOR THE RATIFICATION.
1. ELECTION OF DIRECTORS FOR A TERM TO EXPIRE IN 2004 2. RATIFICATION OF APPOINTMENT OF
KPMG LLP, AS DESCRIBED IN THE
FOR all the nominees WITHHOLD PROXY STATEMENT
listed to the right AUTHORITY ROBERT A. DAVIES, III,
(except as marked to vote for all nominees TERRY R. LAUTENBACH FOR AGAINST ABSTAIN
to the contrary) listed to the right (INSTRUCTION: To withhold authority |----| |----| |----|
to vote for any individual | | | | | |
|----| |----| nominee, write that nominee's name |----| |----| |----|
| | | | in the space provided below.)
|----| |----| 3. In their discretion, upon other
matters as may properly come
before the Annual Meeting.
_______________________________________
|---------------------------------------------------------------------------| Dated: ______________________, 2001
| |
| |
| | ___________________________________
| | Signature
| |
| | ___________________________________
| | Signature
| |
| | (Please sign exactly as your
| | name appears. When signing as
| | executor, administrator,
| | guardian, trustee or attorney,
| | 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
PLEASE COMPLETE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE. below the signature. If the
shares are held in joint
names, all joint owners should
sign.)
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