Exhibit 10.1

 

 

EMPLOYMENT AGREEMENT

 

 

THIS AGREEMENT made October 5, 2006, between FOOT LOCKER, INC., a New York
corporation with its principal office at 112 West 34 Street, New York, New York
10120 (the “Company”) and Matthew D. Serra (the “Executive”).

 

WHEREAS, the Executive presently serves as the Chairman of the Board, President
and Chief Executive Officer of the Company, pursuant to the provisions of the
Employment Agreement between the Company and the Executive dated February 9,
2005 (the “2005 Agreement”); and

 

WHEREAS, the Company desires to continue to employ Executive as its Chairman of
the Board, President and Chief Executive Officer, and Executive is willing to
serve in such capacity; and

 

WHEREAS, the Company and Executive desire to set forth the terms and conditions
of such employment;

 

NOW, THEREFORE, in consideration of these premises and of the mutual covenants
and agreements herein contained, the Company and Executive hereby agree as
follows:

 

 

1.

Employment and Term. The Company hereby agrees to employ Executive, and
Executive hereby agrees to serve, as its Chairman of the Board, President and
Chief Executive Officer, subject to the terms and conditions set forth herein.
The term of this agreement shall commence on October 1, 2006 (the “Commencement
Date”) and shall end on January 30, 2010 (the “Employment Period”), unless
further extended or sooner terminated as hereinafter provided.

     

 

2.

Position and Duties. Executive shall continue to serve as the Chairman of the
Board, President and Chief Executive Officer of the Company, reporting only to
the Board of Directors (the “Board”). Executive shall have such
responsibilities, duties and authority as are commensurate with his status as
Chairman of the Board, President and Chief Executive Officer as may from time to
time be determined or directed by the Board. Executive shall devote
substantially all of his working time and efforts to the business and affairs of
the Company and its respective subsidiaries and affiliates; provided, however,
that the Executive may serve on the boards of directors of other for-profit
corporations, if such service does not conflict with his duties hereunder or his
fiduciary duty to the Company. It is further understood and agreed that nothing
herein shall prevent the Executive from managing his passive personal
investments (subject to applicable Company policies on permissible investments),
and (subject to applicable Company policies) participating in charitable and
civic endeavors, so long as such activities do not interfere in more than a de
minimis manner with the Executive’s performance of his duties hereunder.

 

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3.

Place of Performance. In connection with his employment by the Company,
Executive shall be based at the principal executive offices of the Company in
the New York metropolitan area, or such other place in the United States to
which the Company may hereafter relocate its principal executive offices. In the
event of such relocation outside of the New York metropolitan area, the Company
will pay the reasonable costs of the relocation of the principal residence of
Executive, and provide such other relocation assistance as the Company then
provides to its comparably situated senior executive employees.

        4. Compensation. As full compensation for the services of Executive
hereunder, and subject to all of the provisions hereof         (a) During the
Employment Period, the Company shall pay Executive a base salary at such rate
per year as may be fixed by the Compensation and Management Resources Committee
of the Board of Directors (the “Compensation Committee”) from time to time, but
in no event at a rate of less than $1,500,000 per year, to be paid in
substantially equal monthly installments, in accordance with the normal payroll
practices of the Company (the “Base Salary”).         (b) During the Employment
Period, Executive shall be entitled to participate in all bonus, incentive, and
equity plans that are maintained by the Company from time to time during the
Employment Period for its comparably situated senior executive employees in
accordance with the terms of such plans at the time of participation. The
Company may, during the Employment Period, amend or terminate any such plan, to
the extent permitted by the respective plan, if such termination or amendment
occurs pursuant to a program applicable to all comparably situated executives of
the Company and does not result in a proportionally greater reduction in the
rights or benefits of Executive as compared with any other comparably situated
executives of the Company. During each year of the Employment Period, the annual
bonus payable to Executive at target shall be 125 percent of Executive's
then-current Base Salary. The bonus payable to Executive at target under the
Long-Term Incentive Compensation Plan (the “LTIP”) for any three-year
performance period shall be 90 percent of Executive’s Base Salary at the
beginning of such performance period. Provided Executive is employed by the
Company through the Employment Period, (i) the annual bonus payable to Executive
for the fiscal year ending January 30, 2010, and the long-term bonus payable to
him for the performance period then-ending shall be paid to Executive, in
accordance with the terms of the applicable plan and his award thereunder even
though Executive does not continue to be employed by the Company on the payment
dates of such bonuses and (ii) Executive shall be entitled to receive pro rata
payments under the LTIP for the 2008-2010 and the 2009-2011 performance periods
at the same time and in the same manner as such payments are made to other
participants in the LTIP, but in no event shall such payments be made later than
April 15, 2011. Notwithstanding anything herein to the contrary, to the

 

 

 

 

 

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    extent required under Section 409A of the Internal Revenue Code of 1986, as
amended, and the regulations issued or to be issued thereunder (“Section 409A”),
if the payment date of any bonus amount described in the foregoing sentence is
on or before the six-month anniversary of the date of termination of the
Executive’s employment (the “Termination Date”), such payment shall be made on
the first business day following such six-month anniversary date. The pro rata
payments described in clause (ii) above shall be calculated by multiplying the
applicable bonus amount achieved for the 2008-2010 and the 2009-2011 performance
periods by a fraction, the numerator of which is the number of years Executive
was employed during the applicable performance period and the denominator of
which is three.      

 

(c)

During the Employment Period, Executive shall be eligible to participate in all
pension, welfare, and fringe benefit plans, as well as perquisites, maintained
by the Company from time to time for its comparably situated senior executive
employees in accordance with their respective terms as in effect from time to
time. These shall include (i) Company-paid life insurance in the amount of
Executive’s annual Base Salary, (ii) long-term disability insurance coverage of
$25,000 per month; (iii) annual out-of-pocket medical expense reimbursement of
up to $20,000 per year; (iv) reimbursement of financial planning expense of up
to $7,500 per year; (v) participation in the Supplemental Executive Retirement
Plan (prorated for any partial plan year included in the Employment Period);
(vi) eligibility to participate in the Deferred Compensation Plan; and (vii)
annual reimbursement of dues and membership fees of one private club of up to
$20,000 per year.

 

 

(d)

During the Employment Period, Executive shall be entitled to receive
reimbursement for all reasonable and customary expenses incurred by him in
performing services hereunder, including all travel and living expenses while
away from home on business at the request of the Company, provided such expenses
are incurred and accounted for in accordance with the Company's applicable
policies and procedures.

 

 

(e)

Executive shall be entitled to 20 vacation days in each calendar year. Unused
vacation shall be forfeited.

 

 

(f)

During the Employment Period, Executive shall be eligible to receive stock
option grants as may be determined from time to time by the Compensation
Committee and subject to the provisions of the applicable stock option and award
plan of the Company. To the extent permissible under the terms of such
applicable plan, all stock options currently held by Executive or that may be
granted to Executive during the Employment Period shall become immediately
exercisable upon a Change in Control (as defined in Attachment A hereto).

 

 

(g)

During the Employment Period, Executive shall be eligible to receive restricted
stock grants as may be determined from time to time by the Compensation
Committee and subject to the provisions of the applicable stock option and award
plan of the

 

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    Company. To the extent permissible under the terms of such applicable plan,
all restricted stock currently held by Executive or that may be granted to
Executive during the Employment Period shall become immediately vested upon a
Change in Control. Upon the execution of this agreement, the Restricted Stock
Agreement between Executive and the Company dated March 22, 2006 shall be
amended as set forth in Attachment B hereto.      

 

(h)

The Company shall reimburse Executive the reasonable legal fees (based on hourly
rates) and disbursements incurred by him in connection with negotiating and
preparing this employment agreement, provided that in no event shall the amount
of such reimbursement exceed $15,000.

 

 

(i)

The Company shall reimburse Executive the costs associated with an automobile of
a type to be reasonably agreed upon by the Company and Executive, such costs to
include monthly lease payments, garaging, insurance, fuel, and maintenance;
provided, however, that the total amount of such payments shall not exceed
$40,000 per year, and the Company, at its sole expense, shall provide Executive
with the services of a full-time driver.

        5. Termination.         (a) The Employment Period shall terminate upon
the earliest of the following:           (i)          the death of Executive;  
        (ii)          if, as a result of the incapacity of Executive due to
physical or mental illness, Executive shall have been absent from his duties
hereunder on a full time basis for 180 days, and within 30 days after written
notice of termination is given (which may occur before or after the end of such
180 day period) he shall not have returned to the performance of his duties
hereunder on a full time basis; or           (iii)        if the Company
terminates the employment of Executive hereunder for Cause. For purposes of this
agreement, the Company shall have "Cause" to terminate the employment of
Executive hereunder upon (A) his willful and continued failure to substantially
perform his duties hereunder (other than any such failure resulting from his
incapacity due to physical or mental illness), (B) his willful engagement in
misconduct that is materially injurious to the Company, monetarily or otherwise,
(C) the willful breach by the Executive of any material provision of this
agreement, which breach is not cured within 10 business days from the date of
the Company’s notice of the occurrence of such breach to the Executive, or (D)
the Executive’s being convicted of a felony (other than a traffic violation).

 

 

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(b)

If the Company shall terminate the employment of Executive pursuant to the
provisions of paragraph (a) above, it shall have no further liability or
obligation hereunder except (i) to pay promptly to Executive his then-current
Base Salary through the Termination Date, and (ii) Executive shall receive
benefits, if any, and have the rights afforded by the Company, under its
then-existing policies, to employees whose employment is terminated for death,
disability, or cause, as the case may be, or under the specific terms of any
welfare, fringe benefit, or incentive plan.

 

 

(c)

If the employment of Executive is terminated by the Company during the
Employment Period for any reason other than those set forth in Section 5(a) or
if the Company breaches any material provision of this agreement, which breach
is not corrected within 30 days following written notice to the Company, and
Executive thereupon elects to terminate his employment hereunder, any restricted
stock held by Executive prior to the Termination Date that is not vested as of
the Termination Date shall become fully vested as of the Termination Date and
the Company shall make the following payments and provide the following benefits
to Executive: Until the earliest of (i) January 30, 2010, (ii) his death, or
(iii) his breach of the provisions of Section 8 hereof, (A) the Company shall
make payments to Executive, no less frequently than monthly, calculated at his
then-applicable annual rate of Base Salary (the “Clause A Payments”); (B) the
Company shall pay to Executive, with respect to the fiscal year in which such
termination occurs, the annual bonus that Executive would otherwise have earned
under the annual bonus plan applicable to Executive if such termination had not
occurred, prorated as of the Termination Date (without duplication of the annual
bonus provided for in clause (i) of Section 4(b) of this agreement) (the “Clause
B” Payment”); (C) with respect to the performance period under the Long-Term
Incentive Compensation Plan that ends on the last day of the fiscal year in
which the employment of Executive is terminated, the Company shall pay to
Executive the payment under the Long-Term Incentive Compensation Plan that
Executive would otherwise have earned with respect to such performance period if
such termination had not occurred, prorated as of the Termination Date (without
duplication of the long-term bonus provided for in clause (ii) of Section 4(b)
of this agreement) (the “Clause C Payment”); and (D) the Company shall provide
Executive for a period of one year following the Termination Date, at no cost to
Executive, with out-placement at a level commensurate with that provided by the
Company to other comparably situated executives (the “Clause D Services”). The
Clause A Payments shall commence on the Termination Date or, to the extent
required by Section 409A, the last business day of the month in which falls the
six-month anniversary of the Termination Date (unless such business day is such
anniversary date, in which case the Clause A Payments shall commence on the next
succeeding business day), provided, however, that the first such payment shall
equal the sum of all Clause A Payments that would have been made from the

 

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    Termination Date to the date of such first payment were it not for the
six-month payment delay contained in this sentence; the Clause B Payment shall
be paid at the same time as other annual bonuses for the fiscal year in which
the Termination Date occurs are paid (but in no event later than two and
one-half months following the end of the fiscal year in which the employment of
Executive is terminated); and the Clause C Payment shall be paid at the same
time and in the same manner as payments under the Long-Term Incentive
Compensation Plan are made for the performance period that ends on the last day
of the fiscal year in which the Termination Date occurs (but in no event later
than two and one-half months following the end of the fiscal year in which the
employment of Executive is terminated). Notwithstanding anything herein to the
contrary, to the extent required under Section 409A, if the date specified for
the Clause B Payment or the Clause C Payment is on or before the six-month
anniversary of the Termination Date, such payment shall be made on the first
business day following such six-month anniversary date. Further, to the extent
required under Section 409A, the Executive shall be required to pay the cost of
the Clause D Services for the period commencing on the Termination Date through
the six-month anniversary of the Termination Date, and as soon as practicable
following such six-month anniversary, the Company shall reimburse Executive for
all such payments. Executive shall not be required to mitigate the amount of any
payment provided for in this paragraph (c) by seeking other employment, nor
shall any amounts to be received by Executive hereunder be reduced by any other
compensation earned.      

 

(d)

Notwithstanding anything herein to the contrary, in the event of a Change in
Control, as defined in Attachment A hereto, the Executive shall have the right
to terminate the Employment Period by written notice given within the 30 day
period following three months after such Change in Control. The Employment
Period shall cease upon the giving of such notice. In such event, or in the
event that the Company shall terminate the Executive’s employment without Cause
or the Executive shall terminate his employment for Good Reason during the two
year period after the Change in Control, the amount payable to Executive under
paragraph (c) (A) through (D) above shall be not less than 1.5 times the sum of
his Base Salary and annual bonus at target. In such circumstances, the amounts
payable to Executive pursuant to paragraph (c) (A) through (D) above shall be
paid to him at the times specified in paragraph (c), and any amounts payable to
Executive pursuant to this paragraph (d) in excess of the amounts specified in
paragraph (c)(A) through (D) (the “Excess Amounts”) shall be paid in a lump sum
within 10 days following the Termination Date, unless the Excess Amounts are
subject to Section 409A. In the event that the Excess Amounts are subject to
Section 409A, to the extent that payment of such amounts satisfy the short-term
deferral rules set forth in Proposed Treasury Regulation Section 1.409A-1(b)(4)
(or the final regulations under Section 409A when issued), the Excess Amounts
shall be paid in a lump sum within 10 days following the Termination Date. For
purposes of this paragraph, the short-term deferral period shall be measured

 

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    commencing upon the Change in Control. If payment of the Excess Amounts is
made after the short-term deferral period, such amounts shall be paid on the
first business day following the six-month anniversary of the Termination Date.
For purposes of this paragraph, (i) “Change in Control” shall have the meaning
specified in Attachment A hereto and (ii) “Good Reason” shall mean (A) any
material demotion of Executive or any material reduction in Executive’s
authority or responsibility, except in each case in connection with the
termination of Executive’s employment for Cause or disability or as a result of
Executive’s death, or temporarily as a result of Executive’s illness or other
absence; (B) any reduction in Executive’s rate of Base Salary as payable from
time to time; (C) a reduction in Executive’s annual bonus classification level;
(D) a failure of the Company to continue in effect the benefits applicable to,
or the Company’s reduction of the benefits applicable to, Executive under any
benefit plan or arrangement (including without limitation, any pension, life
insurance, health or disability plan) in which Executive participates as of the
date of the Change in Control without implementation of a substitute plan(s)
providing materially similar benefits in the aggregate to those discontinued or
reduced, except for a discontinuance of, or reduction under, any such plan or
arrangement that is legally required or generally applies to all executives of
the Company of a similar level, provided that in either such event the Company
provides similar benefits (or the economic effect thereof) to Executive in any
manner determined by the Company; or (E) failure of any successor to the Company
to assume in writing the obligations hereunder, or (F) a breach of any other
material provision of this agreement, which breach is not corrected within 30
days following written notice to the Company.      

 

6.

Gross-up. (a) In the event that Executive shall become entitled to the payments
and/or benefits provided by Section 5 or any other amounts (whether pursuant to
the terms of this agreement or any other plan, arrangement or agreement with (i)
the Company, (ii) any person whose actions result in a change of ownership
covered by Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the “Code”) or (iii) any person affiliated with the Company or such person) as
a result of a Change in Control as defined in Attachment A (collectively the
"Company Payments"), and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (and any similar tax that may
hereafter be imposed), the Company shall pay to Executive at the time specified
in paragraph (d) below an additional amount (the "Gross-up Payment") such that
the net amount (of the Company Payments and the Gross-up Payment) retained by
Executive, after deduction of any Excise Tax on the Company Payments and any
federal, state and local income tax and Excise Tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any federal, state
or local income tax on the Company Payments, shall be equal to the Company
Payments.

 

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(b)

For purposes of determining whether any of the Company Payments and Gross-up
Payments (collectively the "Total Payments") will be subject to the Excise Tax
and the amount of such Excise Tax, (a) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code, and
all "parachute payments" in excess of the "base amount" (as defined under
Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax,
unless and except to the extent that, in the opinion of the Company's
independent certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by
such accountants (the "Accountants") such Total Payments (in whole or in part)
either do not constitute "parachute payments," represent reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(2) of the
Code in excess of the "base amount" or are otherwise not subject to the Excise
Tax, and (b) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with the principles
of Section 280G of the Code.

 

 

(c)

For purposes of determining the amount of the Gross-up Payment, Executive shall
be deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation in the
state and locality of Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes if
paid in such year. In the event that the Excise tax is subsequently determined
by the Accountants to be less than the amount taken into account hereunder at
the time the Gross-up payment is made, Executive shall repay to the Company, at
the time that the amount of such reduction in Excise Tax is finally determined,
the portion of the prior Gross-up Payment attributable to such reduction (plus
the portion of the Gross-up Payment attributable to the Excise tax and federal
and state and local income tax imposed on the portion of the Gross-up Payment
being repaid by Executive if such repayment results in a reduction in Excise Tax
or a federal and state and local income tax deduction), plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of the Gross-up
Payment to be refunded to the Company has been paid to any federal, state or
local tax authority, repayment thereof (and related amounts) shall not be
required until actual refund or credit of such portion has been made to
Executive, and interest payable to the Company shall not be required until
actual refund or credit of such portion has been made to Executive, and interest
payable to the Company shall not exceed the interest received or credited to
Executive by such tax authority for the period it held such portion. Executive
and the Company shall mutually agree upon the course of action to be pursued
(and the method of allocating the expense thereof) if Executive's claim for
refund or credit is denied.

 

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      In the event that the Excise Tax is later determined by the Accountants or
the Internal Revenue Service to exceed the amount taken into account hereunder
at the time the Gross-up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-up
Payment), the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest or penalties payable with respect to such excess)
at the time that the amount of such excess is finally determined.        

 

 

(d)

The Gross-up Payment or portion thereof provided for in paragraph (c) above
shall be paid not later than the thirtieth day following an event occurring
which subjects Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to Executive on such day an
estimate, as determined in good faith by the Accountants, of the minimum amount
of such payments and the Company shall pay the remainder of such payments or the
Executive shall reimburse the Company for the amount of any over-payment
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code), subject to further payments pursuant to paragraph (c) hereof, as soon as
the amount thereof can reasonably be determined, but in no event later than the
ninetieth day after the occurrence of the event subjecting Executive to the
Excise Tax.

            (e) The Company shall be responsible for all charges of the
Accountants.           7.   Indemnification. The Company agrees that the
Executive shall be entitled to the benefits of the indemnity provisions set
forth in the Certificate of Incorporation and the By-laws from time to time in
accordance with their terms both during his employment and thereafter with
regard to his actions as an officer or director of the Company. In addition, the
Company agrees to continue in effect for the benefit of the Executive during the
Employment Period directors’ and officers’ liability insurance of the type and
in the amount currently maintained by the Company to the extent such insurance
is available at a premium cost which the Company considers reasonable and,
thereafter, with regard to his prior activities as an officer or director, such
insurance as is maintained for active directors and officers.           8.  
Confidential Information and Non-Competition.             (a) Executive agrees
that during the Employment Period and thereafter he shall not disclose, at any
time, to any person, or use for his own account, nonpublic information of any
kind concerning the Company or any of its subsidiaries or affiliates, including,
but not limited to, nonpublic information concerning finances, financial plans,
accounting methods, strategic plans, operations, personnel, organizational
structure, methods of distribution, suppliers, customers, client relationships,
marketing strategies, store lists, real estate strategies, or the like

 

 

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("Confidential Information"). During such period, Executive shall not, without
the prior written consent of the Company, unless compelled pursuant to the order
of a court or other body having jurisdiction over such matter and unless
required by lawful process or subpoena, communicate or divulge any Confidential
Information to anyone other than the Company and those designated by the
Company. Executive agrees that during the Employment Period he will not breach
his obligations to comply with the provisions of the Code of Business Conduct of
the Company, as in effect on the date hereof and as may be amended from time to
time.

            (b) Executive recognizes that Confidential Information has been
developed by the Company and its affiliates at substantial cost and constitutes
valuable and unique property of the Company. Executive acknowledges that the
foregoing makes it reasonably necessary for the protection of the Company's
interests, in view of the position Executive has held with the Company, that
Executive not compete with the Company or its affiliates during the Employment
Period and for a reasonable and limited period thereafter. Therefore, Executive
agrees that during the term of this agreement and for a period of two years
thereafter, Executive shall not engage in Competition. As used herein,
"Competition" shall mean (i) participating, directly or indirectly, as an
individual proprietor, stockholder, officer, employee, director, joint venturer,
investor, lender, consultant, or in any capacity whatsoever (within the United
States of America, or in any country where the Company or any of its
subsidiaries or affiliates does business) in (A) a business in competition with
the retail, catalog, or on-line sale of athletic footwear, athletic apparel, and
sporting goods conducted by the Company or any of its subsidiaries or affiliates
(the “Athletic Business”) or (B) a business that in the prior fiscal year
supplied product to the Company or any of its subsidiaries or affiliates for the
Athletic Business having a value of $20 million or more at cost to the Company
or any of its subsidiaries or affiliates; provided, however, that (X) such
participation shall not include the mere ownership of not more than 1 percent of
the total outstanding stock of a publicly traded company and (Y) a department
store or general or merchandise store shall not be a business in competition
with any business conducted by the Company; or (ii) the intentional recruiting,
soliciting or inducing of any employee or employees of the Company or any of its
subsidiaries or affiliates to terminate their employment with, or otherwise
cease their relationship with, the Company or any of its subsidiaries or
affiliates where such employee or employees do in fact so terminate their
employment.             (c) Executive agrees (i) that his services are special
and extraordinary, (ii) that a violation of his commitment not to disclose
Confidential Information or otherwise to engage in acts of Competition would
immediately and irreparably harm the Company, and (iii) that such harm would be
incapable of adequate remediation by money damages. Accordingly, Executive
agrees that this paragraph 8 may be enforced by injunction, and that he will
interpose no objection or defense to such enforcement. Enforcement by injunction
shall not bar the Company from any other legal or equitable remedies to which it
may be entitled for such violation. If any restriction set forth with regard to
Competition is found by any court of competent jurisdiction to

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be unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it is the
intention of the parties that the court should interpret and enforce such
restriction to its fullest lawful extent.

        9. 2005 Agreement. The 2005 Agreement is hereby terminated, effective as
of September 30, 2006, without further obligation of either party to the other,
and shall thereafter be of no force and effect. Notwithstanding the foregoing,
the parties acknowledge that they are parties to Restricted Stock Agreements
dated February 9, 2005 and March 22, 2006; Stock Option Agreements dated
February 12, 2001, April 18, 2002, September 11, 2003, February 18, 2004,
February 17, 2005, and March 23, 2006; and an Indemnification Agreement dated
February 9, 2000, which agreements shall remain in full force and effect in
accordance with their terms.         10. Assignment. This agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, heirs, and permitted assigns. This agreement is personal to
Executive and neither this agreement nor any rights hereunder may be assigned by
him. No rights or obligations of the Company under this agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or pursuant to a sale of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company, as contained in this agreement, either contractually or
as a matter of law.         11. Arbitration. Any controversy or claim arising
out of or relating to this agreement, or the breach thereof, shall be settled by
arbitration in the City of New York, in accordance with the rules of the
American Arbitration Association (the "AAA"); provided, however, that this
Section shall not apply to Section 8 herein. The decision of the arbitrator(s)
shall be final and binding on the parties hereto and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. The costs assessed by the AAA for arbitration shall be borne equally by
both parties.         12. Notice. Any notice to either party hereunder shall be
in writing, and shall be deemed to be sufficiently given to or served on such
party, for all purposes, if the same shall be personally delivered to such
party, or sent to such party by registered mail, postage prepaid, in the case of
Executive, at his principal residence address as shown in the records of the
Company, and in the case of the Company, to the General Counsel, Foot Locker,
Inc., 112 West 34 Street, New York, New York 10120. Either party hereto may
change the address to which notices are to be sent to such party hereunder by
written notice of such new address given to the other party hereto. Notices
shall      

 

 

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be deemed given when received if delivered personally or three (3) days after
mailing if mailed as aforesaid.

        13. Applicable Law. This agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York applicable to
contracts between residents of such state to be performed therein.         14.
Internal Revenue Code Section 409A. It is intended that the payments provided
under this agreement comply with Section 409A. It is also intended that the term
“termination of employment” as used herein shall constitute a separation from
service within the meaning of Section 409A. The parties hereto recognize that
certain provisions of this agreement may be affected by Section 409A and they
therefore agree to negotiate in good faith to amend the contract with respect to
any changes necessary or advisable to comply with Section 409A. The parties
further agree that there is no guarantee as to the tax consequences of payments
provided for hereunder.         15. Miscellaneous.      

    (a) This agreement represents the entire understanding of the parties
hereto, supersedes any prior understandings or agreements between the parties,
and the terms and provisions of this agreement may not be modified or amended
except in a writing signed by both parties.             (b) No waiver by either
party of any breach by the other party of any condition or provision contained
in this agreement to be fulfilled or performed by such other party shall be
deemed a waiver of a similar or dissimilar condition or provision at the same or
any prior or subsequent time. Except to the extent otherwise specifically
provided herein, any waiver must be in writing and signed by you or an
authorized officer of the Company, as the case may be.        

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
agreement as of the day and year first above written.

 

 

    FOOT LOCKER, INC.      

 

By:

/s/ James E. Preston____

    James E. Preston     Chair     Compensation and Management       Resources
Committee           /s/ Matthew D. Serra____     Matthew D. Serra

 

 

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Attachment A

Change in Control

 

 

A Change in Control shall mean any of the following:

 

(i) (A) the making of a tender or exchange offer by any person or entity or
group of associated persons or entities (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934) (a "Person") (other than the
Company or its Affiliates) for shares of common stock pursuant to which
purchases are made of securities representing at least twenty percent (20%) of
the total combined voting power of the Company's then issued and outstanding
voting securities; (B) the merger or consolidation of the Company with, or the
sale or disposition of all or substantially all of the assets of the Company to,
any Person other than (a) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or parent entity) fifty percent (50%) or
more of the combined voting power of the voting securities of the Company or
such surviving or parent entity outstanding immediately after such merger or
consolidation; or (b) a merger or capitalization effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the beneficial owner, directly or indirectly (as determined under
Rule 13d-3 promulgated under the Securities Exchange Act of 1934), of securities
representing more than the amounts set forth in (C) below; (C) the acquisition
of direct or indirect beneficial ownership (as determined under Rule 13d-3
promulgated under the Securities Exchange Act of 1934), in the aggregate, of
securities of the Company representing twenty percent (20%) or more of the total
combined voting power of the Company's then issued and outstanding voting
securities by any Person acting in concert as of the date of this Agreement;
provided, however, that the Board may at any time and from time to time and in
the sole discretion of the Board, as the case may be, increase the voting
security ownership percentage threshold of this item (C) to an amount not
exceeding forty percent (40%); or (D) the approval by the shareholders of the
Company of any plan or proposal for the complete liquidation or dissolution of
the Company or for the sale of all or substantially all of the assets of the
Company; or (ii) during any period of not more than two (2) consecutive years,
individuals who at the beginning of such period constitute the Board, any new
director (other than a director designated by a person who has entered into
agreement with the Company to effect a transaction described in clause (i))
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof.

 

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ATTACHMENT B

 

AMENDMENT OF RESTRICTED STOCK AGREEMENT

This amendment made October ___, 2006 between FOOT LOCKER, INC., a New York
corporation (the "Company"), and Matthew D. Serra (the "Executive").

WHEREAS, the Company and the Executive are parties to a Restricted Stock
Agreement dated March 22, 2006 (the "Restricted Stock Agreement") pursuant to
which the Company granted the Executive 56,500 shares of restricted stock; and

WHEREAS, the parties desire to amend the Restricted Stock Agreement as provided
herein.

NOW, THEREFORE, the Company and the Executive hereby agree as follows:

1. Section 3.3(a) of the Restricted Stock Agreement is hereby amended to amend
the last sentence (“In the event...Restricted Stock.”) of such section to read,
in its entirety, as follows:

  “In the event that, on or after February 2, 2008, Executive, as a result of
incapacity due to physical or mental illness, is absent from his duties on a
full-time basis for more than seven and less than 181 days (the “Short-Term
Disability Period”) and during the Short-Term Disability Period Executive
retires from the Company, then any unvested portion(s) of the Restricted Stock
shall immediately vest and cease to be Restricted Stock.”

2. Capitalized terms used herein that are defined in the Restricted Stock
Agreement shall have the meanings provided for in the Restricted Stock
Agreement, unless otherwise defined herein.

3. All provisions of the Restricted Stock Agreement not expressly amended hereby
shall remain unmodified and unamended hereby and the entire Restricted Stock
Agreement, as amended hereby, shall continue in full force and effect in
accordance with the terms of the Restricted Stock Agreement.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
amendment on the day and year first above written.

           

 

  FOOT LOCKER, INC.  

 

 

  By: _________________________________________          
_________________________________________     Matthew D. Serra            

                  

 

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