Investor
Presentation
June
2008
The
Bottom Line
n Since Footstar’s
emergence from bankruptcy, the Board has delivered
exceptional value to shareholders as evidenced by the 120% increase
in stock price (including distributions paid).
exceptional value to shareholders as evidenced by the 120% increase
in stock price (including distributions paid).
n The Footstar Board
is committed to executing a prompt liquidation and
wind down of Footstar.
wind down of Footstar.
n Outpoint has not
offered a plan that is different from the Board’s plan
to liquidate and return money to stockholders. In fact, Outpoint has in
the past been all over the map with other proposals.
to liquidate and return money to stockholders. In fact, Outpoint has in
the past been all over the map with other proposals.
n Outpoint’s own
statements, and the ideas that it has floated, suggest a
lack of understanding of the Company which, the Footstar Board
believes, will hinder and not help the prompt and efficient execution of
the liquidation process.
lack of understanding of the Company which, the Footstar Board
believes, will hinder and not help the prompt and efficient execution of
the liquidation process.
Returning Value
to
Shareholders
Shareholders
n Kmart licensed
footwear departments comprise substantially all sales and profits under an
agreement
scheduled to expire December 31, 2008.
scheduled to expire December 31, 2008.
n February 2006: The
new Board convened and commenced management of business with an eye on
the
likelihood of liquidation at the expiration of the Kmart agreement.
likelihood of liquidation at the expiration of the Kmart agreement.
n February 2006 -
February 2007: The
Board explored the extension of the Kmart agreement and other
value enhancing opportunities including the potential sale of the Company.
value enhancing opportunities including the potential sale of the Company.
n February 2007: The
Board determined the best course of action was to continue to operate under
the
Kmart agreement through the end of 2008 and immediately (and before ever receiving a letter or call from
Outpoint) evaluate significant cash distributions, culminating in the March, 2007 declaration of a $5.00 per
share distribution to stockholders, which was paid on April 30, 2007.
Kmart agreement through the end of 2008 and immediately (and before ever receiving a letter or call from
Outpoint) evaluate significant cash distributions, culminating in the March, 2007 declaration of a $5.00 per
share distribution to stockholders, which was paid on April 30, 2007.
n Pre-April 2008: The
Board has consistently focused on preparing for the expiration of the Kmart
agreement
and maximize return to shareholders.
and maximize return to shareholders.
n April
2008:
n Footstar sells
substantially all intellectual property to Kmart for $13 million, realizing
significant value for these
assets and enabling the Board to conclude that it had sufficient cash on hand to fund operations for the
remainder of 2008 and to return $1.00 per share to stockholders in a special distribution.
assets and enabling the Board to conclude that it had sufficient cash on hand to fund operations for the
remainder of 2008 and to return $1.00 per share to stockholders in a special distribution.
n Sale of other
assets and resolution of liabilities and reduction of expenses also
underway.
Returning Value
to
Shareholders
Shareholders
n May 2008: Footstar
adopts and announces a Plan of Liquidation
providing for the orderly liquidation of the Company.
providing for the orderly liquidation of the Company.
n The Plan provides
for a series of cash distributions to stockholders
generated from cash on hand, the sale of assets and the wind
down of the business.
generated from cash on hand, the sale of assets and the wind
down of the business.
n The Plan formalizes
a process that the Board has been in the
process of implementing prior to the Plan’s formal adoption.
process of implementing prior to the Plan’s formal adoption.
n 2009: A Plan of
Dissolution (providing for the dissolution of the
corporate entity) will be submitted to stockholders after the
expiration of the Kmart agreement.
corporate entity) will be submitted to stockholders after the
expiration of the Kmart agreement.
n The Footstar Board
and management are taking all the
appropriate steps to wind down the business and maximize
value for shareholders.
appropriate steps to wind down the business and maximize
value for shareholders.
Record
of Maximizing
Shareholder Value
Shareholder Value
n The Footstar Board
of Directors has consistently acted to maximize
shareholder value and return cash to stockholders.
shareholder value and return cash to stockholders.
n $6.00 of
distributions per share since 2007.
n 120% increase in
stock price (including distributions paid) since Footstar
emerged from bankruptcy in 2006.
emerged from bankruptcy in 2006.
n Sale of
intellectual property for $13 million.
n Systematically
reducing costs and expenses (including multiple major
reductions in work force) and prudently managing the business.
reductions in work force) and prudently managing the business.
n Resolution of
outstanding contingent liabilities including claims related to
Adidas and an environmental site in Dover New Hampshire.
Adidas and an environmental site in Dover New Hampshire.
n Such settlements
will facilitate cash distributions to shareholders by freeing up
cash that Footstar would have been required to otherwise hold back following the
wind down of the Company until such claims were resolved.
cash that Footstar would have been required to otherwise hold back following the
wind down of the Company until such claims were resolved.
n Substantial
anticipated severance savings due to the Board getting Kmart to
agree to hire substantially all of our 1000+ store and district managers
upon termination of the Kmart agreement at the end of 2008.
agree to hire substantially all of our 1000+ store and district managers
upon termination of the Kmart agreement at the end of 2008.
Footstar’s Nominees
are the
Right Choice
Right Choice
n Adam
Finerman
n Partner with the
law firm of Olshan Grundman Frome Rosenzweig &
Wolosky LLP.
Wolosky LLP.
n Extensive practice
in the areas of corporate law and corporate finance.
n Counsels corporate
clients and activist shareholders on corporate
governance practices and related matters, SEC reporting requirements and
other public company obligations.
governance practices and related matters, SEC reporting requirements and
other public company obligations.
n Provides valuable
guidance on the legal implications of the Board’s actions
and will be of particular assistance as the Company embarks upon its wind
down and dissolution process.
and will be of particular assistance as the Company embarks upon its wind
down and dissolution process.
n Gerald
Kelly
n 40 years of
business experience.
n Has held senior
positions with Sears, Roebuck & Company, Payless
Shoesource, Inc. and UAL Corporation, the parent of United Airlines.
Shoesource, Inc. and UAL Corporation, the parent of United Airlines.
n Extensive
experience with retail companies and his retail company
judgment and expertise continues to be of high value to the Company and
the other Board members.
judgment and expertise continues to be of high value to the Company and
the other Board members.
Footstar’s Nominees
are the
Right Choice
Right Choice
n Adam Finerman and
Gerald Kelly are members of the effective and productive
Board that has maximized shareholder value and shareholder distributions.
Board that has maximized shareholder value and shareholder distributions.
n The existing Board
has extensive hands-on experience liquidating retail
companies.
companies.
n Each of the Board’s
nominees has made, and will continue to make, important
contributions to our business and brings specific skills and experience that
benefit the Board.
contributions to our business and brings specific skills and experience that
benefit the Board.
Outpoint’s Nominees
are the
Wrong Choice
Wrong Choice
n Grayson and Prensky
do not have relevant experience.
n Mr. Grayson has no
apparent retail operating experience or experience as a
director of a public company.
director of a public company.
n Mr. Prensky has no
apparent retail operating experience.
n Outpoint has been
all over the map.
n In March 2007,
Grayson privately urged the Company to consider
continuing operations after the Kmart agreement expired, including by
becoming a 'licensing' company--even though that would have been a
movement into a new, unproven area that could have jeopardized
shareholder value.
continuing operations after the Kmart agreement expired, including by
becoming a 'licensing' company--even though that would have been a
movement into a new, unproven area that could have jeopardized
shareholder value.
n Now, Grayson
publicly claims he is worried the Company won't liquidate and
return cash to stockholders, even though the Board has announced a plan
of liquidation, sold assets, reduced expenses and already returned $6 per
share to stockholders.
return cash to stockholders, even though the Board has announced a plan
of liquidation, sold assets, reduced expenses and already returned $6 per
share to stockholders.
n Recently, Grayson
privately urged the Company to pay a $3 distribution for
2008, but now he publicly criticizes the fact the Company paid the $1
distribution.
2008, but now he publicly criticizes the fact the Company paid the $1
distribution.
Outpoint’s Nominees
are the
Wrong Choice
Wrong Choice
n Grayson's criticism
of the $6 per share in distributions to stockholders shows a
lack of understanding of financial basics and of retail company operations.
lack of understanding of financial basics and of retail company operations.
n He claims that the
$5 distribution put the Company in a ‘dangerous financial position’
of having to borrow money to buy inventory. WRONG! Footstar's outside investment
banker advised the Board on the size of the distribution, and Footstar was never in a
'dangerous financial position' by paying its stockholders the $5 distribution. Maybe
Outpoint is not truly serious about liquidating the Company and returning
cash to shareholders.
of having to borrow money to buy inventory. WRONG! Footstar's outside investment
banker advised the Board on the size of the distribution, and Footstar was never in a
'dangerous financial position' by paying its stockholders the $5 distribution. Maybe
Outpoint is not truly serious about liquidating the Company and returning
cash to shareholders.
n He claims the
Company had to reduce the size of its credit facility to pay the $1
distribution being paid on June 3, 2008. WRONG! Footstar had initiated discussions to
reduce its credit line months prior to the declaration of the distribution in order to
extend the term of the facility from November 30 to December 31 and to reduce the
fees payable by the Company, since the borrowing level under the asset based facility
was already capped based on levels of inventory which would continue to be lower as
a result of the pending expiration of the Kmart agreement.
distribution being paid on June 3, 2008. WRONG! Footstar had initiated discussions to
reduce its credit line months prior to the declaration of the distribution in order to
extend the term of the facility from November 30 to December 31 and to reduce the
fees payable by the Company, since the borrowing level under the asset based facility
was already capped based on levels of inventory which would continue to be lower as
a result of the pending expiration of the Kmart agreement.
The
Current Board is the Best
Choice
Choice
n The Footstar Board
is dedicated to implementing the Company’s previously announced
liquidation and dissolution and has the expertise and commitment necessary to execute the
strategy.
liquidation and dissolution and has the expertise and commitment necessary to execute the
strategy.
n Since Footstar’s
emergence from bankruptcy, the Board has delivered exceptional value to
shareholders as evidenced by the 120% increase in stock value (including distributions
paid).
shareholders as evidenced by the 120% increase in stock value (including distributions
paid).
n The Footstar Board
has a proven track record of delivering value to shareholders through
cash distributions and judicious management of the wind down process.
cash distributions and judicious management of the wind down process.
n There is no benefit
or reason to replace two key members of the Board at this critical time
with inexperienced and unproven nominees.
with inexperienced and unproven nominees.
Don’t
jeopardize the Board’s winning track record
of
delivering substantial value to shareholders.
Please
VOTE for the Footstar nominees on the WHITE proxy card
TODAY.