Description
If you used As Specified Below to manually define a Processing Extent value, the extent will have no projection information, which is required by this tool. You must change the Extent environment.
Solution
To change the Environment Processing Extent, go to the Geoprocessing tab, click Environments (you can also access the Environments button at the bottom of the tool dialog box), and expand Processing Extent. Change the Extent option so it is defined by one of the feature layers in the map, the Union of Inputs value, or the Intersection of Inputs value.