Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
On August 19, 2022, Foot Locker, Inc. (the "Company"), issued a press release
announcing that, as part of a planned succession process, Richard A. Johnson
will step down as President and Chief Executive Officer of the Company,
effective September 1, 2022. Mary N. Dillon, 61, former Executive Chair and
Chief Executive Officer of Ulta Beauty, Inc., has been appointed President and
Chief Executive Officer and a member of the Company's Board of Directors (the
"Board") and the Executive Committee of the Board, each effective September 1,
2022. A copy of the press release is furnished as Exhibit 99.1, which is
incorporated herein by reference.
Ms. Dillon served as Executive Chair of the Board of Directors of Ulta Beauty,
Inc. from June 2021 through June 2022. She previously served as Chief Executive
Officer and a member of the Board of Directors of Ulta from July 2013 through
June 2021. Prior to Ulta, she served as President and Chief Executive Officer
and a member of the Board of Directors of United States Cellular Corporation
from 2010 through 2013; and Global Chief Marketing Officer and Executive Vice
President of McDonald's Corporation from 2005 through 2010. Previously, Ms.
Dillon held several positions of increasing responsibility at PepsiCo
Corporation, including as President of the Quaker Foods division from 2004
through 2005 and as Vice President of Marketing for Gatorade and Quaker Foods
from 2002 through 2004. Ms. Dillon also currently serves on the Board of
Directors of each of Starbucks Corporation and KKR & Co. Inc. and previously
served on the Board of Directors of Target Corporation. Ms. Dillon has no family
relationship with any of the Company's directors or executive officers. Ms.
Dillon has no direct or indirect material interest in any related party
transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
On August 17, 2022, the Company entered into a letter agreement (the "letter
agreement") with Mr. Johnson regarding the transition of his services until his
retirement from the Company on a date to be mutually agreed between the
Company's Non-Executive Chair and Mr. Johnson, which will be no earlier than
April 1, 2023 and no later than April 15, 2023 (the "retirement date"). The
letter agreement provides that he will serve as Executive Chairman of the Board
from September 1, 2022 until January 31, 2023 and will serve as Senior Advisor
to the Company thereafter through the retirement date. Pursuant to the letter
agreement, Mr. Johnson will remain eligible for a bonus under the Company's
annual bonus plan for the 2022 fiscal year. During his term as Senior Advisor,
Mr. Johnson's annual base salary will be reduced to fifty percent (50%) of his
base salary in effect as of August 19, 2022. In addition, Mr. Johnson will no
longer be eligible receive annual equity awards or to participate in the annual
bonus plan for the 2023 fiscal year. Except as modified by the letter agreement,
the provisions of Mr. Johnson's previously-disclosed employment agreement remain
materially unchanged. The foregoing description of the letter agreement is a
summary of certain terms only and is qualified in its entirety by the full text
of the letter agreement filed as Exhibit 10.1 hereto, which is incorporated
herein by reference.
In connection with the Ms. Dillon's appointment by the Board, the Company
entered into an employment agreement with Ms. Dillon, dated August 16, 2022 (the
"Employment Agreement"), which provides for an employment term commencing August
19, 2022 through January 31, 2026 (or the last day of the Company's 2025 fiscal
year if such date does not fall on January 31, 2026), and her appointment as
President and Chief Executive Officer of the Company, effective September 1,
2022. The employment term will automatically be extended for additional one-year
terms unless either party provides 180 days' notice of non-renewal. Ms. Dillon
will receive a base salary of not less than $1,300,000 annually and will be
entitled to participate in all bonus, incentive, and equity plans maintained by
the Company for senior executives. Ms. Dillon's annual bonus opportunity at
target under the Company's annual bonus plan will be 200% of her then-current
base salary, prorated with regard to the 2022 fiscal year. Within 30 days of her
commencement of employment with the Company, Ms. Dillon will also be provided
with a cash sign-on bonus equal to $250,000.
The Employment Agreement provides that Ms. Dillon will be granted certain
employment inducement awards, effective August 24, 2022, as follows: (i) a
restricted stock unit award (RSUs) with a grant date fair value equal to
$2,000,000 (which will vest on the third anniversary of her commencement date),
(ii) a transformation grant of performance share units (PSUs) with a grant date
fair value equal to $5,000,000 (which will vest based on three years of
continued employment and the achievement of performance metrics as determined by
the Human Capital and Compensation Committee), and (iii) an annual $8,000,000
grant, pro-rated in respect of the Company's current fiscal year, consisting of
PSUs (60%), RSUs (20%), and non-qualified stock options (20%) generally
consistent with the terms applicable to other senior executives of the
Company. These awards will be granted outside of the Company's
2007 Stock Incentive Plan, as amended and restated, without shareholder approval
as "employment inducement awards" under the NYSE Listed Company Manual Rule
303A.08.
If Ms. Dillon's employment is terminated by the Company (other than for Cause,
death, or disability) or if Ms. Dillon resigns with Good Reason (each as defined
in the Employment Agreement), then she would be entitled to the following
severance payments and benefits, subject to her execution and non-revocation of
a general release of claims: (i) two years' base salary continuation? (ii) a pro
rated bonus under the Company's annual bonus plan for the fiscal year in which
the termination occurs, based on actual performance against the applicable
performance goals, and (iii) appropriate outplacement services for one year
following termination. In addition, any outstanding equity awards held by Ms.
Dillon at the time of termination will be treated in accordance with the terms
of the applicable plans and award agreements, provided, however, that with
regard to equity awards granted to Ms. Dillon through March 2027 (i) if Ms.
Dillon's employment terminates with the consent of the Board on or after the end
of the Company's fiscal year ending on or about January 31, 2027, Ms. Dillon
would become vested in 50% of her then outstanding equity awards, and (ii) if
Ms. Dillon's employment terminates with the consent of the Board on or after the
end of the Company's fiscal year ending on or about January 31, 2028, Ms. Dillon
would become vested in 100% of her then outstanding equity awards. If the
Company terminates Ms. Dillon's employment without Cause or if she terminates
her employment with Good Reason during the two-year period following a Change in
Control (as defined in the Employment Agreement), rather than the severance
payments provided for above, she would be entitled to an amount equal to two
times the sum of her base salary and target bonus under the Company's annual
bonus plan, payable in a single lump sum within 10 days of such termination of
employment. The foregoing description of the Employment Agreement is a summary
of certain terms only and is qualified in its entirety by the full text of the
Employment Agreement filed as Exhibit 10.2 hereto, which is incorporated herein
by reference.
As employees and executive officers of the Company, neither Mr. Johnson nor Ms.
Dillon will receive any additional compensation for service on the Board or
Board committees.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Letter Agreement, by and between Foot Locker, Inc. and Richard A.
Johnson, dated August 17, 2022.
10.2 Employment Agreement, by and between Foot Locker, Inc. and Mary N.
Dillon, dated August 16, 2022.
99.1 Press Release, dated August 19, 2022, issued by Foot Locker, Inc.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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