<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
WOLVERINE WORLD WIDE, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[X] Fee 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 fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
WOLVERINE LOGO
9341 COURTLAND DRIVE, N.E.
ROCKFORD, MICHIGAN 49351
NOTICE OF ANNUAL MEETING
To our Stockholders:
The annual meeting of stockholders of Wolverine World Wide, Inc. will be
held at the Amway Grand Plaza Hotel, 187 Monroe Avenue, N.W., Grand Rapids,
Michigan, on Wednesday, April 17, 1996, at 10 a.m. local time, for the following
purposes:
(1) Election of two directors for three-year terms expiring in 1999.
(2) Approval of an amendment to the Certificate of Incorporation to
increase the number of authorized shares of Common Stock.
(3) Ratification of the Board of Directors' appointment of Ernst & Young
LLP as independent auditors for the current fiscal year.
(4) Transaction of such other business as may properly come before the
meeting.
Stockholders of record at the close of business March 1, 1996, are entitled
to notice of and to vote at the meeting or any adjournment of the meeting. A
list of stockholders entitled to receive notice of and vote at the annual
meeting of stockholders will be available for examination by Wolverine
stockholders at the offices of Warner Norcross & Judd LLP, 900 Old Kent
Building, 111 Lyon Street, N.W., Grand Rapids, Michigan 49503, during ordinary
business hours for the ten-day period before the meeting.
A copy of the Annual Report to Stockholders for the year ended December 30,
1995, is enclosed with this Notice. The following Proxy Statement and enclosed
Proxy are being furnished to stockholders on and after March 15, 1996.
By Order of the Board of Directors
Blake W. Krueger
Blake W. Krueger, General Counsel and
Secretary
March 15, 1996
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY.
<PAGE> 3
WOLVERINE WORLD WIDE, INC.
9341 COURTLAND DRIVE, N.E.
ROCKFORD, MICHIGAN 49351
ANNUAL MEETING OF STOCKHOLDERS
APRIL 17, 1996
PROXY STATEMENT
This Proxy Statement and the enclosed Proxy are being furnished to holders
of Common Stock, $1.00 par value, of Wolverine World Wide, Inc. ("Wolverine" or
the "Company") on and after March 15, 1996, in connection with the solicitation
by the Wolverine Board of Directors of proxies for use at the annual meeting of
stockholders to be held on April 17, 1996, and at any adjournment of that
meeting. The annual meeting will be held at the Amway Grand Plaza Hotel, 187
Monroe Avenue, N.W., Grand Rapids, Michigan, at 10 a.m. local time.
The purpose of the annual meeting is to consider and vote upon: (i) the
election of two directors for three-year terms expiring in 1999; (ii) approval
of an amendment to the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock; and (iii) ratification of the
appointment of Ernst & Young LLP as independent auditors for the Company for the
current fiscal year. If a proxy in the enclosed form is properly executed and
returned to Wolverine, the shares represented by the proxy will be voted at the
annual meeting and any adjournment of that meeting. If a stockholder specifies a
choice, the proxy will be voted as specified. If no choice is specified, the
shares represented by the proxy will be voted for the election of all nominees
named in this Proxy Statement, for approval of the amendment to the Company's
Certificate of Incorporation, for ratification of the appointment of Ernst &
Young LLP as independent auditors for the Company for its current fiscal year,
and in accordance with the judgment of the persons named as proxies with respect
to any other matter that may come before the meeting or any adjournment. For
purposes of determining the presence or absence of a quorum for the transaction
of business at the meeting, all shares for which a proxy or vote is received,
including abstentions and shares represented by a broker vote on any matter,
will be counted as present and represented at the meeting.
A proxy may be revoked at any time before it is exercised by written notice
delivered to the Secretary of the Company or by attending and voting at the
annual meeting.
ELECTION OF DIRECTORS
In accordance with the recommendation of the Governance Committee, the
Board of Directors has nominated the following two nominees for election as
directors for three-year terms expiring at the 1999 annual meeting:
Daniel T. Carroll
Phillip D. Matthews
1
<PAGE> 4
A plurality of the shares present in person or represented by proxy and
entitled to vote on the election of directors is required to elect directors.
For purposes of counting votes on the election of directors, abstentions, broker
non-votes and other shares not voted will not be counted as shares voted, and
the number of shares of which a plurality is required will be reduced by the
number of shares not voted.
Both nominees are presently directors of the Company whose terms will
expire at the meeting. The proposed nominees are willing to be elected and to
serve. In the event that either nominee is unable to serve or is otherwise
unavailable for election, which is not contemplated, the incumbent Wolverine
Board of Directors may or may not select a substitute nominee. If a substitute
nominee is selected, all proxies will be voted for the substitute nominee
designated by the Board of Directors. If a substitute nominee is not selected,
all proxies will be voted for the remaining nominee. Proxies will not be voted
for a greater number of persons than the number of nominees named above.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR ELECTION OF ALL NOMINEES AS DIRECTORS
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
The Board of Directors proposes to amend the Fourth Article of the
Company's Certificate of Incorporation to increase the Company's authorized
capital stock from 27,000,000 shares, of which 25,000,000 are shares of common
stock, $1.00 par value per share ("Common Stock"), to 42,000,000 shares, of
which 40,000,000 would be shares of Common Stock. The purpose of the amendment
is to provide additional shares for possible future issuance.
As of March 1, 1996, there were 18,377,912 authorized shares of Common
Stock issued and outstanding, excluding 547,913 shares of treasury stock. If all
outstanding stock options were exercised, there would be approximately
19,525,670 shares of Common Stock issued and outstanding.
The Board of Directors believes that it is advisable to have additional
authorized shares of Common Stock available for possible future stock splits and
dividends, public or private offerings of Common Stock or securities convertible
into Common Stock, employee benefit plans, equity-based acquisitions and other
corporate purposes that might be proposed. For example, the Company currently
does not have enough authorized capital stock for the Board of Directors to
declare a three-for-two stock split. The Company previously declared two
separate three-for-two stock splits effective May 15, 1995, and April 14, 1994,
and issued 1,737,500 shares of Common Stock in a follow-on public offering on
November 20, 1995. Authorized but unissued shares of Common Stock, or funds
raised in a public or private offering of shares, may also be used for
acquisition opportunities. Except for shares to be issued under the Company's
stock plans, the Company does not have any present plans to issue additional
shares of Common Stock.
All of the additional shares resulting from the increase in the Company's
authorized Common Stock would be of the same class, with the same dividend,
voting and liquidation rights, as the shares of Common Stock presently
outstanding. The Company's authorized capital also includes, and will continue
to include without increase, 2,000,000 shares of preferred stock, none of which
is currently outstanding. Stockholders have no preemptive rights to acquire
shares issued by the Company under its Certificate of Incorporation, and
stockholders would not acquire any such rights with respect to such additional
shares under the proposed amendment to the Company's Certificate of
Incorporation. Under some circumstances, the issuance of additional shares of
Common Stock could dilute the voting rights, equity and earnings per share of
existing stockholders.
2
<PAGE> 5
If the proposed amendment is adopted, the newly authorized shares would be
unreserved and available for issuance. No further stockholder authorization
would be required prior to the issuance of such shares by the Company.
This increase in authorized but unissued Common Stock could be considered
an anti-takeover measure because the additional authorized but unissued shares
of Common Stock could be used by the Board of Directors to make a change in
control of the Company more difficult. The Board of Directors' purpose in
recommending this proposal is not as an anti-takeover measure, but for the
reasons discussed above.
The first paragraph of the Fourth Article of the Company's Certificate of
Incorporation, as amended, would read as follows:
FOURTH: The total number of shares that the corporation shall
have authority to issue and have outstanding is Forty-two Million
(42,000,000) shares, of which Two Million (2,000,000) shares shall be
Preferred Stock, par value One Dollar ($1.00) per share, and Forty
Million (40,000,000) shares shall be Common Stock, par value One
Dollar ($1.00) per share.
The affirmative vote of holders of a majority of shares entitled to vote at
the annual meeting of stockholders is required to approve the proposed amendment
to the Company's Certificate of Incorporation. For the purpose of counting votes
on this proposal, abstentions, broker non-votes and other shares not voted have
the same effect as a vote against the proposal. The New York Stock Exchange has
advised the Company that this proposal is deemed to be a routine matter.
Therefore, shares of Common Stock held by New York Stock Exchange member
organizations, or their nominees, may be voted without specific instructions
from the beneficial owners of such shares.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION
VOTING SECURITIES
Holders of record of Common Stock, at the close of business on March 1,
1996, will be entitled to notice of and to vote at the annual meeting and any
adjournment of the meeting. As of March 1, 1996, there were 18,377,912 shares of
Common Stock outstanding (excluding 547,913 shares of treasury stock), each
having one vote on each matter presented for stockholder action. Shares cannot
be voted unless the stockholder is present at the meeting or represented by
proxy.
3
<PAGE> 6
OWNERSHIP OF COMMON STOCK
The following table sets forth information as to each entity known to the
Company to have been the beneficial owner of more than 5% of the Company's
outstanding shares of Common Stock as of March 1, 1996:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP OF COMMON STOCK
-----------------------------------
SOLE VOTING AND SHARED VOTING OR
NAME AND ADDRESS DISPOSITIVE DISPOSITIVE PERCENT
OF BENEFICIAL OWNER POWER POWER OF CLASS
- --------------------------------------------------- --------------- ---------------- --------
<S> <C> <C> <C>
The Kaufmann Fund, Inc. 1,250,000 -- 6.8%
140 East 45th Street
43rd Floor
New York, New York 10017(1)
Metropolitan Life Insurance Company 933,400(5) -- 5.1%
One Madison Avenue
New York, New York 10010(2)
Putnam Investments, Inc. -- 1,138,858 6.2%
One Post Office Square
Boston, Massachusetts 02109(3)
State Street Research & Management Company 932,300(5) -- 5.1%
One Financial Center
30th Floor
Boston, Massachusetts 02111-2690(4)
</TABLE>
- -------------------------
(1) Based on information set forth in Amendment No. 4 to Schedule 13G dated
February 8, 1996. The Schedule 13G indicates that The Kaufmann Fund, Inc. is
a registered investment company.
(2) Based on information set forth in Schedule 13G dated February 9, 1996. The
Schedule 13G indicates that Metropolitan Life Insurance Company is the sole
parent company of State Street Research & Management Company.
(3) Based on information set forth in Schedule 13G dated January 29, 1996. The
Schedule 13G indicates that Putnam Investment Management, Inc. and The
Putnam Advisory Company, Inc. are registered investment advisers and
(together with their parent corporations, Putnam Investments, Inc. and Marsh
& McLennan Companies, Inc.) are considered beneficial owners in the
aggregate of 1,138,858 shares of the Company's Common Stock and that such
shares were acquired for investment purposes by such investment managers for
certain of their advisory clients. The Schedule 13G indicates that such
investment managers have shared voting power over an aggregate of 375,743
shares of Common Stock and shared dispositive power over an aggregate of
1,138,858 shares of Common Stock.
(4) Based on information set forth in Schedule 13G dated February 13, 1996. The
Schedule 13G indicates that State Street Research & Management Company
("State Street") is a registered investment adviser and wholly owned
subsidiary of Metropolitan Life Insurance Company. The Schedule 13G
indicates that such shares were acquired for certain State Street advisory
clients.
(5) These numbers include 932,300 shares of Common Stock held by State Street
Research & Management Company.
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<PAGE> 7
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned as of March 1, 1996 by each of Wolverine's directors and
nominees for director, each of the named executive officers, and all of
Wolverine's directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP OF COMMON STOCK(1)
---------------------------------------------------
SOLE VOTING AND SHARED VOTING OR TOTAL
NAME OF DISPOSITIVE DISPOSITIVE BENEFICIAL PERCENT
BENEFICIAL OWNER POWER(2) POWER(3) OWNERSHIP(2) OF CLASS
- ------------------------------------- --------------- ---------------- ------------ --------
<S> <C> <C> <C> <C>
Geoffrey B. Bloom 252,525 -- 252,525 1.4%
Daniel T. Carroll 18,000 -- 18,000 *
Steven M. Duffy 32,191 -- 32,191 *
V. Dean Estes 77,638 -- 77,638 *
Thomas D. Gleason 229,945 333 230,278 1.3%
Alberto L. Grimoldi 8,436 -- 8,436 *
Stephen L. Gulis, Jr. 37,245 -- 37,245 *
David T. Kollat 22,500 -- 22,500 *
Phillip D. Matthews 37,500 12,000 49,500 *
David P. Mehney 41,250 -- 41,250 *
Stuart J. Northrop 14,175 -- 14,175 *
Timothy J. O'Donovan 169,299 8,212 177,511 1.0%
Joseph A. Parini 6,975 8,740 15,715 *
Joan Parker 15,750 -- 15,750 *
Elizabeth A. Sanders 9,937 -- 9,937 *
All directors and executive officers
as a group 1,039,394 31,967 1,071,361 5.7%
</TABLE>
- -------------------------
* Less than 1%.
(1) The numbers of shares stated are based on information provided by each
person listed and include shares personally owned of record by the person
and shares which, under applicable regulations, are considered to be
otherwise beneficially owned by the person.
(2) These numbers include shares that may be acquired through the exercise of
stock options granted under the 1988 Stock Option Plan, the Directors Stock
Option Plan (1988), the 1993 Stock Incentive Plan, the 1994 Directors' Stock
Option Plan and the 1995 Stock Incentive Plan within 60 days after March 1,
1996. The number of shares subject to stock options for each listed person
is shown below:
Mr. Bloom 117,040
Mr. Carroll 14,625
Mr. Duffy 14,440
Mr. Estes 43,875
Mr. Gleason --
Mr. Grimoldi 1,687
Mr. Gulis 20,029
Mr. Kollat 11,250
Mr. Matthews 22,500
Mr. Mehney 15,750
Mr. Northrop 12,375
Mr. O'Donovan 74,640
Mr. Parini 4,500
Ms. Parker 5,625
Ms. Sanders 8,437
All directors and executive officers as a
group 404,261
(3) These numbers include shares over which the listed person is legally
entitled to share voting or dispositive power by reason of joint ownership,
trust or other contract or property right, and shares held by spouses,
children or other relatives over whom the listed person may have substantial
influence by reason of relationship.
5
<PAGE> 8
BOARD OF DIRECTORS
The Company's Board of Directors currently consists of twelve directors,
two of whom are standing for reelection. Mr. Gleason and Mr. Northrop are
retiring from the Board of Directors at the close of the annual meeting of
stockholders and are not standing for reelection. The Board of Directors has
determined to reduce the size of the Board of Directors to ten members effective
at the close of the annual meeting of stockholders. Wolverine's Amended and
Restated Bylaws provide that the Board of Directors shall be divided into three
classes, with each class to be as nearly equal in number as possible. The Board
of Directors intends in future years as the terms of the incumbent directors end
or additional directors are added to adjust the number of directors in each
class to again make each class as nearly equal in number as possible. Each class
of directors serves a term of office of three years, with the term of one class
expiring at the annual meeting of stockholders in each successive year.
Biographical information as of December 31, 1995, is presented below for
each person who either is nominated for election as a director at the annual
meeting of stockholders or is continuing as an incumbent director. Except as
indicated, all have had the same principal positions and employment for over
five years.
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 1999
DANIEL T. CARROLL (age 69) has been a director since 1979. Mr. Carroll is
Chairman of the Board and President of The Carroll Group, Inc., a management
consulting firm. Mr. Carroll is also a director of American Woodmark Corp.; A.M.
Castle & Co.; Aon Corporation; Comshare, Inc.; Diebold, Incorporated; Woodhead
Industries, Inc.; DeSoto, Inc.; and Oshkosh Truck Corporation.
PHILLIP D. MATTHEWS (age 57) has been a director since 1981. Mr. Matthews
is Chairman of the Board and Chairman of the Executive Committee of the Company.
In his capacity as Chairman, Mr. Matthews is an officer of the Board of
Directors and is responsible for Board of Directors governance issues and
provides assistance in defining strategic direction for the Company. Mr.
Matthews is primarily engaged in other business activities and is not involved
in the day-to-day operations of the Company. Mr. Matthews is also Chairman of
Reliable Company, a coin-operated laundry equipment company servicing the
multi-unit housing industry. Mr. Matthews is also a director of H.F. Ahmanson
and Bell Sports Corp. From 1981 until 1989, Mr. Matthews was Chairman, Chief
Executive Officer and Owner of Bell Helmets, Inc., a predecessor of Bell Sports
Corp.
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 1998
GEOFFREY B. BLOOM (age 54) has been a director since 1987. Mr. Bloom is
President and Chief Executive Officer of the Company. Formerly, Mr. Bloom was
Chief Operating Officer of the Company from 1987 until 1993. Mr. Bloom is also a
director of Comshare, Inc.
DAVID T. KOLLAT (age 57) has been a director since 1992. Mr. Kollat is
President and Chairman of 22, Inc., a company specializing in research and
management consulting for retailers and consumer goods manufacturers. Mr. Kollat
is also a director of The Limited, Inc.; Cooker Restaurant Corporation; and
Consolidated Stores.
DAVID P. MEHNEY (age 56) has been a director since 1977. Mr. Mehney is
President of The KMW Group, Inc., a distributor of medical and marine products.
TIMOTHY J. O'DONOVAN (age 50) has been a director since 1993. Mr. O'Donovan
is Executive Vice President of the Company.
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 1997
ALBERTO L. GRIMOLDI (age 54) was appointed to the Board of Directors in
1994. Mr. Grimoldi is Chairman of Grimoldi, S.A., a shoe manufacturer and
retailer in Argentina. He has held that position since 1986. Mr. Grimoldi is
also a founding member and has been Vice Chairman of Banco Privado de
Inversiones,
6
<PAGE> 9
S.A., an Argentinean investment adviser, since 1994. Mr. Grimoldi is also a
founding member and director of INFUPA S.A., a diversified Argentinean financial
services firm; a director of Bonafide S.A., a chocolate and coffee manufacturer,
distributor and retailer; and an advisory director of Autolatina, an automobile
joint venture between the Ford Motor Company and Volkswagen AG. Mr. Grimoldi has
also held various positions in the Argentinean government.
JOSEPH A. PARINI (age 64) has been a director since 1987. He is President
and Chief Executive Officer of Elbit Systems, Inc., a designer, manufacturer and
marketer of infrared instrumentation, electronics for telecommunications,
defense products and medical instrumentation. He has held that position since
1990. Formerly, Mr. Parini was President of Inframetrics, Inc., a manufacturer
of infrared instrumentation, from 1990 until 1994, and President and Chief
Executive Officer of Rospatch Corporation (now Ameriwood Industries
International, Corp.), a manufacturer of wood products, from 1980 until 1990.
Mr. Parini is also a director of Foremost Corporation of America.
JOAN PARKER (age 60) has been a director since 1981. Ms. Parker is a Senior
Partner with J. Walter Thompson, an international advertising firm. From
September 1995 until December 1995, Ms. Parker was the sole proprietor of Parker
& Associates, an advertising firm. From 1994 until September 1995, she was
Executive Vice President and Director of N. W. Ayer & Partners, an international
advertising firm, and Executive Vice President and Managing Director of the Ayer
Public Relations Division of N. W. Ayer & Partners. Formerly, Ms. Parker was
Senior Vice President and Managing Director of the Ayer Public Relations
Division.
ELIZABETH A. SANDERS (age 50) was appointed to the Board of Directors in
1994. Ms. Sanders is a principal partner in The Sanders Partnership, a
management consulting firm. Ms. Sanders has held that position since 1990.
Formerly, Ms. Sanders was Vice President of Nordstrom, Inc., a retailer. Ms.
Sanders is also a director of WalMart Stores, Inc.; H.F. Ahmanson; and Flagstar,
Inc.
BOARD COMMITTEES AND MEETINGS
The Company's Board of Directors has four standing committees: the Audit
Committee, the Compensation Committee, the Executive Committee and the
Governance Committee.
Audit Committee. The Audit Committee recommends to the Board of
Directors the selection of independent accountants; approves the nature and
scope of services to be performed by the independent accountants and
reviews the range of fees for such services; confers with the independent
accountants and reviews the results of the annual audit; reviews with the
independent accountants the Company's internal auditing, accounting and
financial controls; and reviews policies and practices regarding compliance
with laws and conflicts of interest. Messrs. Grimoldi, Kollat, Northrop and
Parini and Ms. Parker currently serve on the Audit Committee. Mr. Parini is
Chairman of the Audit Committee. During 1995, the Audit Committee held
three meetings.
Compensation Committee. The Compensation Committee is responsible for
reviewing and recommending to the Board of Directors the timing and amount
of compensation for the Chief Executive Officer and other key employees,
including salaries, bonuses and other benefits. The Compensation Committee
also is responsible for administering the Company's stock option and other
equity-based incentive plans, recommending retainer and attendance fees for
directors who are not employees of the Company or any of its subsidiaries
("Non-Employee Directors"), reviewing compensation plans and awards as they
relate to the Chief Executive Officer and other key employees, and
administering the Company's pension plans and 401(k) savings plan. Messrs.
Carroll, Mehney and Parini and Ms. Sanders currently serve on the
Compensation Committee. Mr. Carroll is Chairman of the Compensation
Committee. During 1995, the Compensation Committee held four meetings.
Executive Committee. The Executive Committee is responsible for and
may exercise all powers and authority of the Board of Directors in the
management of the business and affairs of the Company except to the extent
that delegation is prohibited by law. The Executive Committee may consider
or act upon matters requiring Board action during periods between Board
meetings. Messrs. Bloom, Carroll, Gleason,
7
<PAGE> 10
Matthews and Northrop currently serve on the Executive Committee. Mr.
Matthews is Chairman of the Executive Committee. The Executive Committee
met once during 1995.
Governance Committee. The Governance Committee is responsible for: (i)
recommending to the Board of Directors suitable candidates for nomination
for positions on the Board of Directors; (ii) reviewing with the Board of
Directors the appropriate skills and characteristics of Board members;
(iii) reviewing and evaluating each director's performance on the Board;
and (iv) reviewing and reporting to the Board on all matters generally
relating to corporate governance. The Governance Committee also recommends
the officers of the Company for election by the Board of Directors. Messrs.
Gleason, Kollat, Matthews and Mehney and Ms. Parker currently serve on the
Governance Committee. Mr. Mehney is Chairman of the Governance Committee.
During 1995, the Governance Committee held two meetings. The Governance
Committee will consider nominees for election to the Board of Directors
submitted by stockholders. The Amended and Restated Bylaws of the Company
provide that nominations for the election of directors may be made by a
stockholder entitled to vote for the election of directors if, and only if,
the stockholder submits advance notice of the proposed nomination and the
notice is received by the Secretary of the Company not less than 50 nor
more than 75 days before the annual meeting. However, if fewer than 65
days' notice of the meeting or prior public disclosure is given to
stockholders, the notice of the proposed nomination must be received not
later than the close of business on the 15th day after the day on which the
notice of the date of the meeting was mailed or the public disclosure was
made, whichever first occurs. Each notice submitted by a stockholder must
set forth the name, age, business address, residence address, principal
occupation and employment of, the class and number of shares of the
Company's stock beneficially owned by, and any other information concerning
each nominee as would be required to be included in a proxy statement
soliciting proxies for the election of the nominee under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, as to the
stockholder giving the notice, the name, record address and the class and
number of shares of the Company's stock beneficially owned by the
stockholder. If the chairman of the meeting determines that a nomination
was not made in accordance with these procedures, he or she must announce
that determination at the meeting and the nomination will be disregarded.
During the Company's last fiscal year, the Board of Directors held five
regular meetings and one special meeting. Each of the directors attended 75% or
more of the aggregate of (i) the total number of meetings of the Board of
Directors, and (ii) the total number of meetings held by all committees of the
Board of Directors on which he or she served (during the periods that he or she
served).
COMPENSATION OF DIRECTORS
Non-Employee Directors receive an $8,000 annual retainer fee plus
compensation in accordance with the following schedule: $1,000 per day for
attendance at each regular meeting of the Board of Directors; $900 for
attendance at each Executive Committee meeting when such committee functions in
place of the Board; $500 per day for attendance at each special meeting of the
Board of Directors; and $250 per day for attendance at each committee meeting.
In addition, the chairmen of the Audit, Compensation and Governance Committees
receive annual fees of $2,000. Directors who are also employees of the Company
or any of its subsidiaries receive no annual retainer and are not compensated
for attendance at Board or committee meetings. The Company also reimburses
directors for expenses associated with attending Board of Director and committee
meetings.
Under the Directors Stock Option Plan adopted and approved by the
stockholders in 1988 (the "1988 Directors' Plan"), each Non-Employee Director
has been granted an option to purchase 6,750 shares of Common Stock (as adjusted
for stock splits) on the date of his or her initial appointment or election as a
director and an option to purchase 1,125 shares (as adjusted for stock splits)
annually on a specified date after his or her appointment or election. The per
share exercise price of options granted under the 1988 Directors' Plan was 100%
of the market value of Common Stock on the date each option was granted. The
term of each option could not exceed 10 years. The 1994 Directors' Stock Option
Plan (the "1994 Directors' Plan")
8
<PAGE> 11
discussed below was adopted and approved by the stockholders to supplement and
replace the 1988 Directors' Plan, under which all available option stock has
been granted.
The 1994 Directors' Plan was adopted and approved by the stockholders at
the 1994 annual meeting of stockholders. The 1994 Directors' Plan supplemented
and replaced the 1988 Directors' Plan. Options are granted under the 1994
Directors' Plan in amounts and on terms substantially identical to those set
forth in the 1988 Directors' Plan on the date of election or appointment to the
Board and annually on the date of each annual meeting, except that annual grants
under the 1994 Directors' Plan are for 1,687 shares (as adjusted for stock
splits) rather than 1,125 shares under the 1988 Directors' Plan. Options were
granted under the 1994 Directors' Plan to all Non-Employee Directors on April
19, 1995. Options to purchase a maximum of 180,000 shares of Common Stock may be
granted under the 1994 Directors' Plan.
In 1990, the Company adopted a Director Retirement Plan. Under this plan,
each Non-Employee Director who has served on the Board of Directors a minimum of
five years will receive an annual benefit after the later of attaining age 65 or
termination of service as a director. The benefit received will depend upon the
number of each director's years of service, but may not exceed a maximum of 80%
of the director's final annual retainer. Directors are also entitled to receive
an actuarially reduced benefit if they would like payments of these benefits to
begin after retirement or termination of service as a director, but before
attaining age 65. The annual benefit is payable to each director for the shorter
of 10 years or the number of years the director served on the Board.
On April 27, 1993, Mr. Matthews was elected to serve as Chairman of the
Board of Directors of the Company. In connection with his service as Chairman,
the Company entered into a supplemental director's fee agreement with Mr.
Matthews during 1995 (the "Fee Agreement") which replaced an earlier agreement
that contained substantially similar terms. Under the Fee Agreement, Mr.
Matthews agreed to serve as Chairman of the Board (as an officer of the Board
and not as an executive officer of the Company) for an initial term of two
years. The Fee Agreement automatically renews each year after the initial term
for an additional one-year term unless and until the Company delivers to Mr.
Matthews a notice of non-renewal. Under the Fee Agreement, the Company agreed to
pay to Mr. Matthews an annual supplemental director's fee, in addition to any
standard retainer and Board meeting fees (but not committee meeting fees) to
which all Non-Employee Directors may be entitled, equal to $75,000 for the first
year, $50,000 for the second year, and an amount to be agreed upon by Mr.
Matthews and the Company not to exceed $50,000 for any renewal term. The Company
also agreed to reimburse Mr. Matthews for office, clerical and related expenses
incurred in connection with his service not to exceed $12,000 for the first year
and $8,000 for the second year. During 1995, the Company reimbursed Mr. Matthews
for such expenses in the amount of $6,600. In addition, the Company granted Mr.
Matthews an award for 15,000 (post-split) shares of Common Stock subject to
certain restrictions set forth in a restricted stock agreement. The restrictions
lapsed with respect to one-third of the shares on March 27, 1995, and one-third
of the shares on January 1, 1996, and will lapse with respect to the remaining
one-third of the shares on January 1, 1997. The Fee Agreement may be terminated
by the Company or Mr. Matthews. If the Fee Agreement is terminated by the
Company other than for Cause (as defined in the Fee Agreement), compensation
under the Fee Agreement would continue until the end of the term of the Fee
Agreement. If the Fee Agreement is not renewed by the Company following a Change
in Control (as defined in the Fee Agreement), Mr. Matthews will receive a lump
sum payment of $50,000 in addition to the compensation discussed above prorated
through the date he receives the lump sum payment. Upon any termination of the
Fee Agreement, Mr. Matthews will again be entitled to receive the standard
retainer and fees for Board and committee meeting attendance paid to all other
Non-Employee Directors.
The Company entered into an amended and restated employment and transition
agreement with Mr. Gleason which extended through January 31, 1996 (the
"Agreement"). Under the Agreement, Mr. Gleason and the Company agreed to
terminate Mr. Gleason's prior employment agreement which extended through August
31, 1996. Under the Agreement, Mr. Gleason retired on January 31, 1996 from all
positions with the Company (except for his director position with the Company).
Mr. Gleason is retiring as a director of the Company at the close of the annual
meeting of stockholders.
9
<PAGE> 12
Mr. Gleason received an annual base salary of $250,000 (effective January
1, 1995) through January 31, 1996. In connection with the execution of the
Agreement, the Company's interest in the cash value of an insurance policy (on
which the Company continues to pay premiums) was transferred to Mr. Gleason. Mr.
Gleason's annual benefit under the Company's pension plan will be at least
$130,000 (subject to the social security offset provisions of the pension plan).
Mr. Gleason was also entitled to participate in all other plans and to receive
other benefits normally provided by the Company to top-level executives, except
that Mr. Gleason's bonus under each of the Company's annual bonus plan and
long-term bonus plan could not exceed $50,000 annually. In addition to his
salary, Mr. Gleason received bonuses and other benefits totaling $100,000 in
1995.
In the Agreement, Mr. Gleason granted the Company a covenant not to compete
(and certain related restrictive covenants) that generally extended to January
31, 1996.
Mr. Gleason participates in the former deferred compensation plan of the
Company. The deferred compensation plan provides participants with deferred
compensation beginning upon retirement from the Company at normal or early
retirement age. The plan also provides benefits in the event of death and
reduced benefits upon disability. The Company has purchased insurance on the
participants' lives payable to the Company in amounts which, if the assumptions
made as to mortality experience, policy dividends and other factors are
realized, will cover all the Company's payments for the insurance and all
deferred compensation obligations, and will provide an additional amount for use
of the Company's money. Mr. Gleason's anticipated annual benefits from the
deferred compensation plan upon retirement at normal retirement age and
continuing for 18 years are $180,000 for the first five years and $154,000 for
the following thirteen years. Mr. Gleason's deferred compensation agreement
provides for benefits payable for 18 years after attaining age 55, if he elects,
or otherwise upon attaining age 60. An election to receive benefits before age
60 triggers a reduction in the benefits. Mr. Gleason is fully vested with
respect to benefits under his deferred compensation agreement.
Mr. Gleason also participated in the Company's employee stock option loan
program described on page 14 of this Proxy Statement during 1995. As of March 1,
1996, Mr. Gleason had no outstanding loan balances. Mr. Gleason's largest
outstanding balance under all such loans since January 1, 1995 was $646,472.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
Wolverine Common Stock to the Standard & Poor's 500 Stock Index and two indices
of peer companies that produce non-athletic footwear, assuming an investment of
$100.00 at the beginning of the period indicated. The Standard & Poor's 500
Stock Index is a broad equity market index published by Standard & Poor's. The
indices of peer companies were constructed by the Company and include the
companies listed in the footnotes to the graph below. The index identified as
"Old Peer Index"(1) below was used in the Stock Price Performance Graph in the
Company's 1995 Proxy Statement. The Company anticipates using the index
identified as "New Peer Index"(2) below in future proxy statements. The Company
believes the modest change in peer groups is appropriate to reflect the results
of consolidations and acquisitions that occurred in the footwear industry after
the original peer group was constructed and to include newer companies for which
historical information necessary to prepare an index was not available at the
time the original peer group was constructed. In constructing the peer indices,
the return of each component company was weighted according to its respective
stock market capitalization at the beginning of each period indicated.
Cumulative total stockholder return is measured by dividing (i) the sum of: (a)
the cumulative amount of dividends for the measurement period, assuming dividend
reinvestment; and (b) the difference between the share price at the end and the
beginning of the measurement period, by (ii) the share price at the beginning of
the measurement period.
10
<PAGE> 13
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL STOCKHOLDER RETURN
[GRAPH]
<TABLE>
<CAPTION>
Measurement Period Old Peer New Peer
(Fiscal Year Covered) Wolverine S & P 500 Index Index
<S> <C> <C> <C> <C>
1990 100 100 100 100
1991 139.91 130.47 160.92 160.84
1992 188.56 140.41 169.71 179.60
1993 381.42 154.56 160.48 198.06
1994 488.33 156.60 118.99 151.24
1995 901.16 215.45 98.83 151.18
</TABLE>
- -------------------------
(1) The Old Peer Index includes J. Baker, Inc.; R.G. Barry; Brown Group, Inc.;
Candies, Inc.; Daniel Green; Genesco, Inc.; Interco, Inc.(3); Justin
Industries; Penobscot Shoe; Sam & Libby, Inc.; Stride Rite Corporation;
Wellco Enterprises; and Weyco Group, Inc. The Old Peer Index also included
U.S. Shoe, Corp. During 1995, U.S. Shoe, Corp. was acquired by Luxottica
Group SpA. The information necessary to include U.S. Shoe, Corp. in the Old
Peer Index is no longer available.
(2) The New Peer Index includes J. Baker, Inc.; R.G. Barry; Brown Group, Inc.;
Candies, Inc.; Daniel Green; Genesco, Inc.; Interco, Inc.(3); Justin
Industries; Kenneth Cole Products; Lacrosse Footwear; Nine West Group;
Penobscot Shoe; Rocky Shoes and Boots; Sam & Libby, Inc.; Stride Rite
Corporation; Timberland Company; Wellco Enterprises; and Weyco Group, Inc.
(3) Interco, Inc. filed a petition for relief under Chapter 11 of the United
States Bankruptcy Code on January 24, 1991. As part of the bankruptcy
reorganization, all outstanding capital stock of Interco, Inc. was canceled
on June 26, 1992, and the company was completely recapitalized with new
stock issued to the creditors of Interco, Inc. Interco, Inc. is accounted
for in the stock performance graph as a new company effective in 1992.
11
<PAGE> 14
The dollar values for total stockholder return plotted in the graph above
are shown in the table below:
<TABLE>
<CAPTION>
FISCAL S&P OLD PEER NEW PEER
YEAR-END WOLVERINE 500 INDEX INDEX
- -------- --------- ------- -------- --------
<S> <C> <C> <C> <C>
1990 $100.00 $100.00 $100.00 $100.00
1991 139.91 130.47 160.92 160.84
1992 188.56 140.41 169.71 179.60
1993 381.42 154.56 160.48 198.06
1994 488.33 156.60 118.99 151.24
1995 901.16 215.45 98.83 151.18
</TABLE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following Summary Compensation Table shows certain information
concerning the compensation earned during each of the three fiscal years in the
period ended December 30, 1995, of the Chief Executive Officer of the Company
during the last completed fiscal year, and each of Wolverine's four most highly
compensated executive officers who served in positions other than Chief
Executive Officer at the end of the last completed fiscal year. The numbers of
shares subject to awards of stock options have been adjusted to reflect stock
splits.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ----------------------
---------------------------------- NUMBER OF PAYOUTS
OTHER RESTRICTED SHARES ----------
NAME AND ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS(1) OPTIONS PAYOUTS(2) COMPENSATION(3)
- ------------------------ ---- -------- -------- ------------ --------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Geoffrey B. Bloom 1995 $391,923 $335,989(4) $ 37,119(5) $203,438 40,200 $321,114 $ 8,953(6)
President, Chief 1994 357,692 285,939 -- 179,688 33,750 183,053 117,314
Executive Officer 1993 320,769 276,449 -- 90,000 33,750 -- 127,248(7)
and Director
Steven M. Duffy 1995 $185,797 $ 99,530 $ -- $ 54,250 8,250 $ 71,407 $ 6,168
Vice President 1994 156,287 82,952 -- 44,922 8,437 35,000 6,626
1993 135,255 87,954 -- 22,500 8,437 -- 5,511
V. Dean Estes 1995 $188,640 $ 85,391 $ -- $ 81,375 15,000 $ 58,244 $ 3,750
Vice President 1994 172,248 82,892 -- 71,875 11,250 30,933 3,750
1993 135,903 84,745 -- 22,500 8,437 -- 3,405
Stephen L. Gulis, Jr. 1995 $169,678 $ 90,895 $ -- $ 54,250 8,250 $ 48,469 $ 4,877
Vice President and Chief 1994 143,594 76,761 -- 44,922 8,437 21,648 4,877
Financial Officer 1993 101,315 57,195 -- 18,000 6,750 -- 3,233
Timothy J. O'Donovan 1995 $233,423 $ 98,138 $ -- $122,063 22,500 $107,924 $ 7,123
Executive Vice President 1994 199,577 107,392 -- 107,813 20,250 49,424 7,123
and Director 1993 173,128 114,132 -- 36,000 13,500 -- 7,026
</TABLE>
12
<PAGE> 15
- -------------------------
(1) The values of restricted stock awards reported in this column are calculated
using the closing market price of Common Stock on the date of grant. As of
the end of Wolverine's 1995 fiscal year, each of the named executive
officers held shares of restricted stock. Dividends will be paid on shares
of restricted stock at the same rate dividends are paid on Common Stock. The
number of shares of restricted stock held by each named individual and the
aggregate value of those shares (as represented by the closing price of
Common Stock on December 29, 1995) at the end of the Company's 1995 fiscal
year, without giving effect to the diminution of value attributable to the
restrictions on the stock, are set forth below:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
OF SHARES VALUE
--------- ----------
<S> <C> <C>
Mr. Bloom 45,674 $1,427,722
Mr. Duffy 13,405 418,457
Mr. Estes 13,837 433,236
Mr. Gulis 9,467 296,403
Mr. O'Donovan 22,218 695,215
</TABLE>
These numbers do not include the number or value of shares of restricted
stock awarded during 1996 in connection with the Company's Long-Term
Incentive Plan (1993-1995), the values of which are included in the amounts
reported in the "LTIP Payout" column for each listed individual in this
table.
(2) Under the Company's Long-Term Incentive Plan (1993-1995), amounts payable
under the plan are paid (i) in cash equal to 50% of the amount payable, and
(ii) in shares of restricted stock that have a market value, on the date the
cash payment is made, equal to 140% of the remaining 50% payable under the
plan. The dollar amounts reported in this column for 1995 reflect the cash
payment and the market value of the shares of restricted stock on the date
of payment. Shares of restricted stock are granted under the Company's
existing plans that provide for such awards. The restrictions lapse with
respect to one-third of the shares on each anniversary of the date of grant
over a three-year period. Pursuant to the plan, the Company granted 25,158
shares of restricted stock to key management employees with respect to
amounts payable under the plan for the three-year performance period ended
December 30, 1995.
(3) The compensation listed in this column for 1995 consisted of: (i) Company
contributions to the accounts of the named executive officers under
Wolverine's 401(k) Savings Plan as follows: $3,750 for Mr. Bloom; $3,750 for
Mr. Duffy; $3,750 for Mr. Estes; $3,750 for Mr. Gulis; and $3,750 for Mr.
O'Donovan; and (ii) payments made by Wolverine for the premiums on certain
life insurance policies as follows: $5,203 for Mr. Bloom; $2,418 for Mr.
Duffy; $1,127 for Mr. Gulis; and $3,373 for Mr. O'Donovan. No payments of
insurance premiums were made on behalf of Mr. Estes.
(4) Includes one-third of the outstanding principal balance ($34,330) of a
three-year, interest-free loan made to Mr. Bloom pursuant to his amended and
restated employment agreement which was forgiven by the Company because the
Company achieved its targeted performance goals under the annual bonus plan.
(5) Includes imputed income from a three-year, interest-free loan made to Mr.
Bloom pursuant to his amended and restated employment agreement ($8,516)
and, because the Company achieved the performance goals necessary to permit
payment of the maximum amount under the annual bonus plan during 1995, an
amount to satisfy Mr. Bloom's tax liability ($28,603) associated with the
forgiveness by the Company of one-third of the principal balance of such
loan.
(6) As stipulated in Mr. Bloom's amended and restated employment agreement, the
Company forgave the remaining principal balance ($105,465) of a loan made to
Mr. Bloom to permit him to purchase shares of Common Stock, plus all accrued
but unpaid interest ($2,896) associated with the principal balance forgiven.
See the discussion of Mr. Bloom's amended and restated employment agreement
on page 18 of this Proxy Statement.
(7) As stipulated in Mr. Bloom's amended and restated employment agreement, the
Company forgave one-half of the principal balance ($105,465) of a loan made
to Mr. Bloom to permit him to purchase shares of Common Stock, plus all
accrued but unpaid interest ($12,443) associated with the principal balance
forgiven. See the discussion of Mr. Bloom's amended and restated employment
agreement on page 18 of this Proxy Statement.
13
<PAGE> 16
STOCK OPTIONS
The Company's stock option plans are administered by the Compensation
Committee of the Board of Directors which has authority to determine the
individuals to whom and the terms upon which options will be granted, the number
of shares to be subject to each option and the form of consideration that may be
paid upon the exercise of an option.
The following tables set forth information regarding stock options granted
to and exercised by the named executive officers during the fiscal year ended
December 30, 1995:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------
PERCENT
OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL RATES
NUMBER OF GRANTED MARKET OF STOCK PRICE APPRECIATION
SECURITIES TO PRICE PER FOR
UNDERLYING EMPLOYEES EXERCISE SHARE ON OPTION TERM
OPTIONS IN FISCAL PRICE PER GRANT EXPIRATION -----------------------------
NAME GRANTED(1) YEAR SHARE DATE DATE 0% 5% 10%
- --------------------- ---------- --------- --------- --------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Geoffrey B. Bloom 6,450 2% $ 14.71 $ 18.00 2/28/05 $21,231 $ 94,221 $206,186
33,750 12 18.08 18.08 3/8/05 -- 383,689 972,268
Steven M. Duffy 8,250 3 18.08 18.08 3/8/05 -- 93,791 237,665
V. Dean Estes 15,000 5 18.08 18.08 3/8/05 -- 170,529 432,119
Stephen L. Gulis, Jr. 8,250 3 18.08 18.08 3/8/05 -- 93,791 237,665
Timothy J. O'Donovan 2,250 1 14.71 18.00 2/28/05 7,406 32,868 71,925
20,250 7 18.08 18.08 3/8/05 -- 230,214 583,361
</TABLE>
- -------------------------
(1) All options granted during 1995 are exercisable with respect to 25% of the
shares on the date of grant and become exercisable in cumulative 25%
installments on each anniversary date thereafter with full vesting occurring
on the third anniversary date of the grant. Vesting may be accelerated upon
certain events relating to a change in control of the Company. All options
were granted for a term of ten years. Options terminate, with certain
limited exercise provisions, in the event of death, retirement or other
termination of employment. All options permit the option price to be paid by
delivery of cash or, with the consent of the Compensation Committee, shares
of the Company's Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Geoffrey B. Bloom 88,612 $1,612,101 82,615 55,460 $1,808,683 $ 874,177
Steven M. Duffy 5,568 77,765 6,284 12,514 92,413 196,502
V. Dean Estes 1,875 29,115 33,329 18,983 757,934 285,454
Stephen L. Gulis, Jr. 1,712 26,259 12,295 12,092 237,713 186,638
Timothy J. O'Donovan 7,125 100,542 56,327 30,373 1,285,647 464,806
</TABLE>
The Company's employee loan program provides that an employee may borrow
from the Company up to 95% of the option price to exercise options acquired
under the Company's stock option plans. These loans bear interest at a rate
equal to the greater of 6 1/2% per annum or the interest rate imputed by the
Internal Revenue Service with interest payable quarterly. Principal is payable
quarterly at the rate of 15% per annum, beginning five years after the date on
which the option to which the loan relates is exercised. All loans are secured
by a pledge of the Common Stock obtained upon exercise of the applicable option.
Outstanding loan balances as of March 1, 1996, and, if higher, the maximum
amount outstanding since January 1, 1995 (indicated in parentheses), for each of
the named executive officers of the Company were as follows: Mr. Bloom, $0
($83,600); Mr. Duffy, $22,655; Mr. Estes, $44,285 ($45,277); Mr. Gulis, $14,378;
and Mr. O'Donovan, $77,932 ($79,810).
14
<PAGE> 17
LONG-TERM INCENTIVE AWARDS
The Company has established the Long-Term Incentive Plan (1995-1997)
pursuant to which the Company may award cash and shares of restricted stock to
plan participants conditioned upon the achievement of certain corporate
performance goals over a three-year performance period.
The following table sets forth certain information concerning awards of
long-term incentive compensation to the named individuals during the last fiscal
year:
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS
NUMBER OF PERIOD UNDER NON-STOCK-PRICE-BASED
SHARES, UNTIL PLANS(2)
UNITS OR MATURATION ---------------------------------
NAME OTHER RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- --------------------------------- --------------- ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Geoffrey B. Bloom 50% 3 years $123,553 $247,108 $370,661
Steven M. Duffy 25 3 years 30,084 60,168 90,252
V. Dean Estes 25 3 years 29,734 59,468 89,202
Stephen L. Gulis, Jr 25 3 years 26,746 53,491 80,237
Timothy J. O'Donovan 35 3 years 51,511 103,021 154,532
</TABLE>
- -------------------------
(1) Under the Company's Long-Term Incentive Plan (1995-1997), key management
employees may earn incentive compensation based upon achievement of
specified earnings per share ("EPS") over a three-year performance period.
The numbers reported in the column under the heading "Number of Shares,
Units or Other Rights" represent the percentage of each officer's average
base salary during the three-year period that the officer will receive as
bonus compensation under the plan if the specified EPS are achieved. These
amounts were determined by the Compensation Committee. If higher or lower
actual EPS are attained during the three-year performance period, the
percentage of base salary to be received as bonus compensation by each
officer will be correspondingly higher or lower. Bonuses are conditioned
upon achieving a minimum or "threshold" EPS. Bonuses are also capped at a
maximum amount and may not exceed 150% of the percentage of base salary
reported under the heading "Number of Shares, Units or Other Rights" with
respect to each participant. EPS goals were established by the Compensation
Committee at the beginning of 1995 for the period ending on the last day of
the Company's 1997 fiscal year. EPS goals are expressed as net earnings per
share after taxes. For any bonuses to be paid, EPS in the third year of the
performance period must equal at least 20% of the total EPS goal for the
entire period.
(2) Under the plan, amounts earned as bonus compensation are calculated based on
each participant's average annual base salary during the three-year
performance period. For purposes of this table, the "Threshold," "Target"
and "Maximum" amounts have been calculated using each named individual's
base salary for 1995 as reported in the Summary Compensation Table, adjusted
for cost of living increases in each successive year in the performance
period which average 5.0% per year. Amounts payable under the plan are paid
(i) in cash equal to 50% of the amount payable, and (ii) in shares of
restricted stock that have a market value, on the date the cash payment is
made, equal to 140% of the remaining 50% payable under the plan. The dollar
amounts reported under the headings "Threshold," "Target" and "Maximum"
reflect the value of the cash payment and the market value of restricted
stock to be received on the date of payment. Shares of restricted stock are
granted under the Company's existing plans that provide for such awards. The
restrictions lapse with respect to one-third of the shares on each
anniversary of the date of grant over a three-year period.
15
<PAGE> 18
PENSION PLAN
The Company has established a qualified pension plan covering most of the
Company's salaried employees. The Internal Revenue Code of 1986, as amended (the
"Code"), imposes certain limitations on the maximum amount of pension benefits
payable under qualified plans. The Code also imposes a cap of $150,000 (subject
to certain grandfather provisions for earnings accrued before January 1, 1994)
on the amount of earnings which may be taken into account in determining
benefits payable under qualified plans.
The following table illustrates the estimated annual benefits payable under
the pension plan for Wolverine's executive officers if they retire at age 65 at
the annual levels of average remuneration and years of service indicated
(computed on a straight life annuity basis without the reduction required by the
plan for the Social Security Allowance received by participants in the plan and
without regard to any accrued grandfathered benefit for earnings before January
1, 1994):
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------------
AVERAGE REMUNERATION 10 15 20 25 30 OR MORE
- -------------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$150,000 $ 36,000 $ 54,000 $ 72,000 $ 90,000 $108,000
</TABLE>
Subject to the limitations imposed by the Code, the pension plan provides
monthly benefits at normal retirement in an amount equal to the greater of: (i)
$16.00 (increased from $15.00 effective January 1, 1996) times the participant's
number of years of service up to 30 years; (ii) 1.6% of final average monthly
remuneration times the participant's number of years of service up to 30 years;
or (iii) for certain designated participants, 2.4% (for all individuals listed
in the Summary Compensation Table) or 2.0% of final average monthly remuneration
times the participant's number of years of service up to 30 years. Benefits are
reduced by the Social Security Allowance as defined in the plan. Under the plan,
benefits may be based upon an employee's "final average pay," which is defined
as the average of the 48 highest consecutive months of employee earnings within
the latest 120 calendar months. Except for the $150,000 cap imposed by the Code,
the remuneration covered by the plan for an employee would be essentially
equivalent to the sum of the amounts reported under the heading "Annual
Compensation" in the Summary Compensation Table above.
The pension plan provides that if the pension plan is terminated during any
period beginning on a Restricted Date and ending two years later, surplus plan
assets will be used to purchase retiree medical and life insurance in
satisfaction of the Company's then outstanding obligations, if any, and will be
paid pro rata to increase the benefits of plan participants, subject to legal
limitations. If the pension plan is merged with, or the assets of the plan are
transferred to, another plan, then (i) benefits will be fully vested; (ii)
benefits will be increased as if the plan had been terminated; and (iii)
benefits will be satisfied through the purchase of a guaranteed annuity
contract. A Restricted Date is defined as the date any person or group acquires
more than 50% of the voting stock of the Company in a transaction not approved
by the Board of Directors, or the date during any two-year period on which
individuals who at the beginning of the period constituted the Board of
Directors (including any new director whose nomination or election was approved
by two-thirds of the directors who were directors at the beginning of the
period) cease for any reason to constitute a majority of the Board.
As of December 31, 1995, the persons listed in the Summary Compensation
Table had the following years of credited service under the plan: Mr. Bloom, 9
years; Mr. Duffy, 7 years; Mr. Estes, 20 years; Mr. Gulis, 10 years; and Mr.
O'Donovan, 26 years.
16
<PAGE> 19
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In 1995, the Company adopted a new Supplemental Executive Retirement Plan
("SERP") to replace the deferred compensation agreements entered into between
the Company and certain key employees, including those listed in the Summary
Compensation Table, except that an executive covered by a deferred compensation
agreement will always be entitled to a benefit under the SERP at least equal to
what he or she would have received under the deferred compensation agreement.
Under the SERP, a participating executive will be eligible for an annual
supplemental benefit once he or she has completed five years of service after
becoming a participant in the SERP (or, for those executives already covered by
a deferred compensation agreement, five years after entering into the deferred
compensation agreement); alternatively, a participating executive will be
eligible for a benefit with less than five years of service if he or she retires
at or after age 65. The supplemental benefit is equal to the difference between
the executive's retirement benefit under the Company's qualified pension plan
and an amount equal to a designated percentage of the executive's average
compensation multiplied by the executive's years of service with the Company (up
to 25 years). The designated percentage is either 2.4% for each year of service
(including all of the individuals listed in the Summary Compensation Table), or
2% per year of service. "Average Compensation" is the average of the executive's
annual compensation for the four consecutive highest compensation years out of
the last ten years of the executive's employment. Average Compensation does not
include payments under the long-term (three-year) incentive bonus plan or
severance payments. For this purpose, Average Compensation does not vary
significantly from the amounts shown under the caption "Annual Compensation" in
the Summary Compensation Table above.
A retired participating executive may draw the full benefit beginning at
age 65. A participating executive who has ten years of service may elect to
begin receiving a reduced benefit at or after age 55. The reduction factor is 4%
for each year prior to age 60, and 2% for each year between age 60 and age 65.
The SERP provides for a disability benefit equal to 60% of the supplemental
retirement benefit (based on the executive's years of service at the date of
disability). A disabled executive is still eligible for a supplemental
retirement benefit beginning at age 65, based on all years of service (including
years during which the executive was receiving a disability benefit). The SERP
also provides for a death benefit to the executive's designated beneficiary if
the executive dies before retiring. The death benefit is a lump sum equal to the
present value of the benefit the executive could have received beginning at age
65, based on his or her years of service up to the date of death.
Benefits under the plan are subject to forfeiture if the executive's
employment is terminated for serious misconduct, if the executive competes with
the Company, or if the Company cannot collect under an insurance policy
purchased to fund plan benefits for certain reasons. If, within two or three
(for all individuals listed in the Summary Compensation Table) years after a
"change in control" the executive resigns for "good reason" or is terminated by
the Company (other than for "cause," or due to death or "disability" as defined
in the SERP), the executive will be entitled to a lump sum payment equal to 125%
of the present value of the benefit payments for which the executive would have
been eligible if the executive had retired at age 55 (or at his or her actual
age, if greater than age 55), without the 2%/4% early retirement reduction
factors, but based on years of service at the actual date of termination. For
purposes of the SERP, "change in control" is defined as (i) the failure of the
individuals who were directors at the time the SERP was adopted and those whose
election or nomination to the Board of Directors was approved by a
three-quarters vote of the directors then still in office who were directors at
the time the SERP was adopted, or whose election or nomination was so approved,
to constitute a majority of the Board of Directors; (ii) the acquisition by
certain persons or groups of 20% or more of the Company's Common Stock or
combined outstanding voting power (excluding certain transactions); (iii) the
approval by the stockholders of a reorganization, merger or consolidation
(excluding certain permitted transactions); or (iv) the approval by the
stockholders of a complete liquidation or dissolution of the Company or the sale
or disposition of all or substantially all of the assets of the Company
(excluding certain permitted transactions).
The Company may terminate the plan or stop further accrual of plan benefits
for a participating executive at any time, but termination does not affect
already accrued benefits.
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EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Bloom's Agreement. On April 27, 1993, the Company entered into an
amended and restated employment agreement (the "Employment Agreement") with Mr.
Bloom to employ him as President and Chief Executive Officer until April 30,
1997, with a provision for automatic renewal until April 30, 2000, unless a
one-year prior notice of non-renewal is given by the Company. Under the
Employment Agreement, Mr. Bloom is to receive a salary of not less than $330,000
per year, a leased vehicle, the benefits of a term life insurance policy in the
amount of $500,000 and other benefits normally provided by the Company to
top-level executives. Because Mr. Bloom did not terminate his employment before
January 1, 1994, the Company on January 1, 1994, forgave one-half of the
principal balance ($105,465) of a loan, plus accrued interest on that balance
($12,443), made to Mr. Bloom to permit him to exercise an option to purchase
shares of Common Stock. Because Mr. Bloom did not voluntarily terminate his
employment prior to May 8, 1994, the Company forgave the remainder of the total
outstanding principal balance ($105,465), plus accrued interest ($2,896). Under
the Employment Agreement, the Company was required to provide to Mr. Bloom a
three-year, interest-free loan in an amount equal to the federal and state
withholding taxes resulting from each forgiveness. The Compensation Committee
approved a bonus plan for Mr. Bloom in 1995 under which one-third of the
principal balance of this loan will be forgiven in 1996, 1997 and 1998 if the
Company achieves its targeted performance goals under the annual bonus plan in
1995, 1996 and 1997, respectively, and the Company will pay Mr. Bloom an amount
to satisfy Mr. Bloom's tax liability with respect to each such forgiveness if
the Company achieves the performance goals necessary to permit payment of the
maximum amount under the annual bonus plan in 1995, 1996 and 1997, respectively.
The total principal balance outstanding under this loan at March 1, 1996 was
$68,661 (excluding the amount the Company is required to forgive because the
target performance goals were achieved in 1995 as reported in the Summary
Compensation Table) and the largest aggregate amount outstanding under this loan
since January 1, 1995 was $102,991.
If the Employment Agreement is not renewed or Mr. Bloom is terminated other
than for Cause (as defined in the Employment Agreement), the Employment
Agreement requires Wolverine to pay to Mr. Bloom, in addition to normal salary
and bonuses through the date of termination or non-renewal, a lump sum equal to
two times Mr. Bloom's then current salary. In addition, Mr. Bloom will be
credited with three additional years of benefit service for purposes of
computing his benefits under the pension plan. Mr. Bloom may elect to commence
payments of the pension benefits upon attaining age 58. If Mr. Bloom is
terminated other than for Cause, then Mr. Bloom will be entitled to up to twelve
months' benefits under all employee benefit programs. Payments described in this
paragraph are not subject to mitigation under the Employment Agreement.
In addition, if Mr. Bloom's employment is terminated by the Company other
than for Cause, Retirement or Disability, or by Mr. Bloom for Good Reason (all
as defined in the Employment Agreement), then Mr. Bloom will receive upon
termination, in addition to normal salary and bonuses earned through the date of
termination: (i) cash equal to the present value of his then current salary
(plus bonus) which would have been payable through April 30, 1997; (ii) a lump
sum in cash equal to 150% of the value of the difference between the market
price of Common Stock (or, if higher, the highest price paid in connection with
any change in control of the Company) and the exercise prices of options (other
than incentive stock options granted after May 8, 1992) then held by Mr. Bloom,
whether or not fully exercisable, and 100% of the difference between the market
price and exercise prices of any incentive stock options granted after May 8,
1992, that are or would be exercisable by Mr. Bloom before April 30, 1997; (iii)
reimbursement for relocation expenses and legal fees, and indemnity against loss
in the sale of Mr. Bloom's principal residence; (iv) a cash payment at Mr.
Bloom's retirement age equal to the actuarial value of the retirement pension to
which Mr. Bloom would have been entitled (without regard to vesting
requirements) had he accrued three additional years of service with the Company,
plus the amount awarded to Mr. Bloom during the year most recently ended reduced
by the single sum actuarial equivalent of any amounts to which he is entitled
under the normal retirement plans and programs of the Company; and (v)
outplacement services paid for by the Company. Although the Company believes
that none of these payments would constitute "parachute payments" under Section
280G
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<PAGE> 21
of the Code, the payments will be reduced and/or deferred to the extent they
constitute "parachute payments."
Except as described above, the Employment Agreement requires Mr. Bloom to
mitigate payments under the agreement in accordance with law. However, Mr. Bloom
need not actively seek employment, accept employment outside the West Michigan
area, or accept employment which is not substantially equivalent in all material
respects to his position with the Company in connection with his obligation to
mitigate payments.
Severance Agreements. Pursuant to individual agreements with the Company,
Messrs. Duffy, Estes, Gulis and O'Donovan, and certain other executive officers,
will receive compensation in the event of termination of their employment
following a change in control of the Company, unless: (i) the termination of the
officer is due to death or retirement in accordance with Company policy or as
otherwise agreed; (ii) the termination is by the Company for cause or
disability; or (iii) the termination is by resignation of the officer for other
than Good Reason. Good Reason is defined in the agreements to include, among
other things, the assignment of duties inconsistent with the officer's status as
a senior executive officer of the Company or the duties performed by the officer
immediately before a change in control, a reduction in the officer's annual base
salary, or relocation of the officer.
The compensation payable in the event of such a termination after a change
in control includes: (i) cash equal to two times the officer's annual salary,
including bonus; (ii) cash equal to 150% of the difference between the market
price of Common Stock (or, if higher, the highest price paid in connection with
any change in control of the Company) and the exercise prices of unexercised
stock options granted to the officer (other than incentive stock options granted
after the date of the officer's agreement), and 100% of the difference between
the market price and exercise prices of incentive stock options granted to the
officer after the date of the agreement which are then exercisable; (iii)
relocation expenses, legal fees and indemnity against loss in the sale of the
officer's principal residence; (iv) up to two years' benefits under all employee
benefit programs; (v) a cash payment at the officer's retirement age equal to
the actuarial value of the retirement pension to which the officer would have
been entitled (without regard to vesting requirements) had he or she accrued
three additional years of service with the Company, plus the amount awarded to
the officer during the year most recently ended reduced by the single sum
actuarial equivalent of any amounts to which the officer is entitled under the
normal retirement plans and programs of the Company; and (vi) outplacement
services paid for by the Company. In all of the severance agreements, the
officer has no requirement to mitigate the payments by seeking employment, but
the compensation to be paid during the fourth and later months after termination
will be reduced to the extent of any compensation earned by the officer during
the applicable period. The agreements contain a clause limiting payments to
those that are deductible by the Company under the Code.
A change in control is defined in the agreements to include a change in
control as set forth in the proxy rules issued under the Exchange Act, the
acquisition of 25% or more of the Common Stock of the Company by any person or
group of persons acting together, or a change during any two-year period in a
majority of the Board of Directors of the Company unless each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
Stock Plan Provisions. The Company has granted certain stock options and
awarded shares of restricted stock that are subject to accelerated vesting upon
a change in control of the Company. The options include options issued under the
Company's 1988 Stock Option Plan (the "1988 Plan"), 1993 Stock Incentive Plan
(the "1993 Plan"), and 1995 Stock Incentive Plan (the "1995 Plan"), and the
shares of restricted stock include shares awarded under the 1984 Executive
Incentive Stock Purchase Plan (the "1984 Plan"), the 1993 Plan and the 1995
Plan.
Under the stock option agreements entered into between the Company and
participants in the 1988 Plan, the 1993 Plan and the 1995 Plan, 25% of each
option generally becomes exercisable on the date of grant and the remainder
becomes exercisable at the rate of 25% of the option per year following the date
of grant. However, the stock option agreements also provide that all options
granted under the 1988 Plan become immediately exercisable in the event of a
change in control of the Company.
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The 1984 Plan, the 1993 Plan and the 1995 Plan provide for restricted stock
awards. Except for shares awarded in connection with payment of bonuses under
the long-term (three-year) incentive bonus plan, the restrictions on 25% of the
shares received pursuant to an award normally lapse on the third anniversary of
the date of the award, with an additional 25% of the restrictions lapsing on the
fourth anniversary and the remaining restrictions lapsing on the fifth
anniversary. With respect to shares awarded in connection with the long-term
(three-year) incentive bonus plan, the restrictions on one-third of the shares
received pursuant to an award lapse on each anniversary of the date of the award
over a three-year period. The restricted stock agreements entered into with
employees under these plans provide that all restrictions on restricted stock
will lapse upon certain terminations of employment within a five-year period
after a change in control.
A change in control is defined in the agreements under the 1984 and 1988
Plans to include a change of control as set forth in the proxy rules issued
under the Exchange Act, the acquisition of 25% or more of the Common Stock of
the Company by any person or group of persons acting together, or a change
during any two-year period in a majority of the Board of Directors of the
Company unless each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period. The definition of change in control under the 1993 Plan differs from the
definition of that term in the agreements under the 1984 and 1988 Plans in that
a change in control is considered to have occurred upon the acquisition of 20%
or more (rather than 25%) of the Company's Common Stock, and the definition
includes the sale, lease, exchange or other transfer of substantially all of the
Company's assets to, or the merger or consolidation of the Company with, a
corporation that is not controlled by the Company. Under the 1995 Plan, a change
in control is defined as (i) the failure of the individuals who were directors
at the time the 1995 Plan was adopted and those whose election or nomination to
the Board of Directors was approved by a two-thirds vote of the directors then
still in office who were directors at the time the 1995 Plan was adopted to
constitute a majority of the Board of Directors; (ii) the acquisition by certain
persons or groups of 20% or more of the Company's Common Stock; (iii) the
approval by the stockholders of a reorganization, merger or consolidation
(except with certain permitted entities); or (iv) the approval by the
stockholders of a complete liquidation or dissolution of the Company or the sale
or disposition of all or substantially all of the assets of the Company (other
than to certain permitted entities).
Other Plans and Agreements. Severance agreements with various executive
officers (described above) provide for cash payments in lieu of outstanding
options if a change in control of the Company occurs. In addition, the SERP
(described above) provides for certain benefits and payments if a change in
control of the Company occurs.
Benefit Trust Agreement. In May, 1987, the Company established a Benefit
Trust (the "Trust") to assure that payments to employees under the employment
agreements and severance agreements described above and deferred compensation
agreements with certain employees (collectively, the "Agreements") will not be
improperly withheld after a change in control of the Company as defined in the
agreement establishing the Trust. Under the Trust, upon the occurrence of a
Potential Change in Control (as defined in the Trust agreement), the Company
will deliver to the trustee, to be held in trust, cash, marketable securities or
insurance equal to an amount determined by the Company to have a fair market
value, together with any existing amounts in the trust, equal to the value of
the benefits due to employees under the Agreements given certain assumptions set
forth in the Trust. Additional terms of the Trust provide for the return of the
property to the Company upon written request before a change in control or
automatically if no change in control has occurred within six months after
funding upon a Potential Change in Control. The Company has transferred to the
Trust insurance policies on the lives of certain key employees.
Indemnity Agreements. The Company has entered into indemnity agreements
with Messrs. Bloom, Duffy, Estes, Gulis and O'Donovan, and with each director
and officer of the Company (collectively, "Executives"). The indemnity
agreements indemnify each Executive against all expenses incurred in connection
with any action or investigation involving the Executive by reason of his or her
position with the Company (or with another entity at the Company's request). The
Executives will also be indemnified for costs, including judgments, fines and
penalties, indemnifiable under Delaware law or under the terms of any current or
future liability insurance policy maintained by the Company that covers the
Executives. An Executive involved in a derivative suit will be indemnified for
expenses and amounts paid in settlement. Indemnification is dependent in every
instance on the Executive meeting the standards of conduct set forth in
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the indemnity agreements. If a potential change in control occurs, the Company
will fund a trust to satisfy its anticipated indemnification obligations.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
develops and recommends to the Board of Directors the executive compensation
policies of the Company. The Committee also administers the Company's
compensation plans and recommends for approval by the Board of Directors the
compensation to be paid to the Chief Executive Officer and, with the advice of
the Chief Executive Officer, the other executive officers of the Company. The
Committee consists of four directors, none of whom is a current or former
employee of the Company or its subsidiaries.
The Company has engaged an independent compensation consulting firm to
assist the Committee in formulating Wolverine's compensation policies and to
provide advice to the Committee concerning specific compensation packages and
appropriate levels of executive compensation. The firm was also retained to
provide specific advice concerning the employment and transition agreement with
Mr. Gleason and the employment agreement with Mr. Bloom.
The basic compensation philosophy of the Committee and the Company is to
provide competitive salaries as well as incentives to achieve superior financial
performance. The Company's executive compensation policies are designed to
achieve four primary objectives:
-- Attract and retain well-qualified executives who will lead the Company
and achieve and inspire superior performance;
-- Provide incentives for achievement of specific short-term individual,
business unit and corporate goals;
-- Provide incentives for achievement of longer-term financial goals; and
-- Align the interests of management with those of the stockholders to
encourage achievement of continuing increases in stockholder value.
Executive compensation at Wolverine consists primarily of four components:
base salary and benefits; amounts paid (if any) under the annual bonus plan;
amounts paid (if any) under the long-term (three-year) incentive bonus plan; and
participation in the Company's stock option and equity-based incentive plans.
Each component of compensation is designed to accomplish one or more of the four
compensation objectives.
The participation of specific executive officers and other key employees in
the annual bonus plan, the long-term (three-year) incentive bonus plan and the
stock option and equity-based incentive plans of the Company is recommended by
management, and all recommendations (including the level of participation) are
reviewed, modified (to the extent appropriate) and approved by the Committee.
Senior executive officers are normally eligible to receive a greater percentage
of their compensation in the form of awards under these incentive plans to
reflect the Committee's belief that the percentage of an executive's total
compensation that is "at risk" should increase as the executive's corporate
responsibilities increase.
Section 162(m) of the Code provides that publicly held companies may not
deduct compensation paid to certain executive officers in excess of $1 million
annually, with certain exemptions. The Committee plans to review the Company's
compensation policies during 1996, and to propose appropriate modifications, if
any, to the Company's compensation plans and policies with a view toward
implementing the Company's compensation policy in a manner that reflects due
consideration of Section 162(m) and recently adopted Internal Revenue Service
regulations. The Committee and the Board of Directors view Section 162(m) as a
consideration but not a constraint on compensation policy.
BASE SALARY
To attract and retain well-qualified executives, it is the Committee's
policy to establish base salaries at levels and provide benefit packages that
are considered to be competitive. Base salaries of senior executives are
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determined by the Committee by comparing each executive's position with similar
positions in companies of similar type, size and financial performance. The
Committee uses surveys provided by the compensation consulting firm to make this
comparison. Although some of the companies included in the peer indices used in
the graph of cumulative total stockholder return are among the companies
included in the surveys, the surveys are not limited to those companies since
the Company competes for talent with a wide range of corporations. In general,
the Committee has targeted salaries to be at the median of base salaries paid
for comparable positions by companies included in the surveys provided by the
compensation consulting firm. Other factors considered by the Committee are the
executive's performance, the executive's current compensation, the competitive
marketplace, and the Company's or the applicable business unit's performance
(determined by reference to pre-tax levels of profit and levels of sales).
Although the Committee does not give specific weight to any particular factor,
the most weight is given to the executive's performance (in determining whether
to adjust significantly above or below the current salary level) and a
significant but lesser weight is generally given to the comparative survey data.
In general, base salaries for the Company's executive officers during 1995 were
equal to or slightly below the median of salaries paid by companies included in
the surveys. The 1995 average base salary of senior executives increased 12.9%
over the previous year's level as a result of a combination of factors,
including improved individual performance, improved or continued excellent
performance by the applicable business unit (and Company), promotions, increased
responsibilities and adjustments obligated by employment agreements.
ANNUAL BONUS PLAN
To provide incentives and rewards for achievement of short-term individual
and business unit goals, the annual bonus plan is designed to provide key
employees with the opportunity for bonuses based on each employee's performance
and the performance of the business unit to which the employee is assigned. In
the case of senior executive officers, the bonus is based on the achievement of
individual performance goals (30% weighting) and the performance of the Company
and/or the applicable operating unit as a whole (70% weighting). Individual
performance goals for senior executive officers are tailored to each
individual's position and duties, and vary in terms of number, scope and
substance among the eligible executives. Individual performance goals for senior
executive officers are recommended by management, are reviewed, modified (to the
extent appropriate) and approved by the Committee, and are then reviewed with
each employee. The performance goals for each business unit and the Company as a
whole relate to the achievement of predetermined pre-tax levels of profit (70%
to 100% weighting for a business unit and 80% weighting for the Company), sales
(0% to 20% weighting for a business unit and 20% weighting for the Company) and,
with respect to a business unit, other specified goals (0% to 10% weighting).
Company and business unit goals are established before the start of each year
and are reviewed and approved by the Committee. Awards under the annual bonus
plan are based on a percentage of earned salary. Bonuses are conditioned on
achieving minimum or "threshold" goals. Bonuses are also capped at a maximum
amount (200% of target) and may not exceed specified levels. The two primary
measures of corporate performance, pre-tax levels of profit (which is given much
more weight than any other factor) and levels of sales, both significantly
exceeded the targeted levels for 1995. During fiscal year 1995, executive
officers were targeted to receive from 20% to 40% of their annual salaries in
bonus compensation. In determining these percentages, the Committee considered
each executive's position, competitive incentives, and the executive's aggregate
incentive compensation potential under all of the Company's plans. The
percentages are generally higher for more senior executives to reflect their
greater influence on profits and to put a larger percentage of their total
potential cash compensation "at risk." Because the two primary measures of
corporate performance under the plan significantly exceeded the targeted levels
for 1995, senior executives generally received bonuses at levels that were at or
near the upper end of the range established by the Committee.
LONG-TERM (THREE-YEAR) INCENTIVE BONUS PLAN
To provide incentives and rewards for longer-term planning and decision
making and the achievement of longer-term corporate performance goals, the
long-term (three-year) incentive bonus plan provides the opportunity for
additional compensation based upon the achievement of aggressive Company
financial performance goals over a three-year period. The primary purposes of
this plan are to provide a significant
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incentive to substantially improve the longer-term earnings performance of the
Company and to foster cooperation among all business units. The target financial
performance goals are ambitious in nature since
they are set above budget and generally provide a significant challenge to
management. Goals are recommended by management and reviewed, modified (to the
extent appropriate) and approved by the Committee prior to the start of each
performance period. Performance periods begin every fiscal year and end three
full fiscal years later. For the 1995-1997 performance period and prior periods,
the Company used earnings per share ("EPS") goals.
Awards under this plan are based on a percentage of average base salary
during the three-year period. If higher or lower actual EPS are achieved during
the three-year performance period, the percentage of base salary to be received
as bonus compensation by each officer will be correspondingly higher or lower.
Bonuses are conditioned upon achieving a minimum or "threshold" EPS. Bonuses are
also capped at a maximum amount and may not exceed 150% of the targeted
percentage of base salary with respect to each executive. For the 1995-1997
performance period, executive officers are targeted to receive from 20% to 50%
of their base salaries in bonus compensation. In determining the percentages,
the Committee considered the factors discussed above in connection with the
annual bonus plan and each executive's capacity to affect the long-term
performance of the Company. Because EPS significantly exceeded the targeted
levels for the 1993-1995 performance period, senior executives generally
received bonuses at levels that were at or near the upper end of the range
established by the Committee.
Under the Company's long-term (three-year) incentive bonus plan, amounts
payable under the plan are paid (i) in cash equal to 50% of the amount payable,
and (ii) in shares of restricted stock that have a market value, on the date the
cash payment is made, equal to 140% of the remaining 50% payable under the plan.
Shares of restricted stock are granted under the Company's existing plans that
provide for such awards. The restrictions lapse with respect to one-third of the
shares on each anniversary of the date of grant over a three-year period.
Pursuant to the plan, the Company granted 25,158 shares of restricted stock to
key management employees with respect to amounts payable under the plan for the
three-year performance period ended December 30, 1995.
STOCK OPTIONS AND EQUITY-BASED INCENTIVE PLANS
Awards under the Company's stock option and equity-based incentive plans
are designed to encourage long-term investment in the Company by participating
executives, more closely align executive and stockholder interests, and reward
executives and other key employees for building stockholder value. The Committee
believes stock ownership by management is beneficial; stock awards have been
granted by the Company to executives and other key employees pursuant to various
equity-based plans for several decades. The Committee administers all aspects of
these plans and reviews, modifies (to the extent appropriate) and approves
management's recommendations for awards.
Under the Company's plans that provide for awards of restricted stock, all
of which have been previously approved by the stockholders, the Committee may
grant to executives and other key employees shares of restricted stock or rights
to purchase stock at a minimum price equal to the par value of the stock. These
shares are subject to certain restrictions that, except for shares awarded in
connection with the long-term (three-year) incentive bonus plan described above,
generally lapse over a period of five years from the date of grant.
Under the Company's stock option plans, all of which have been previously
approved by the stockholders, the Committee may grant to executives and other
key employees options to purchase shares of stock, as well as stock appreciation
rights and tax benefit rights. The Company has never granted stock appreciation
rights or tax benefit rights under its existing plans and has no present intent
of so doing. The Committee reviews, modifies (to the extent appropriate) and
approves the recommendations of management as to the key employees to be granted
options and the amount, timing, price and other terms of the options. Most of
the options granted have been "incentive stock options" within the meaning of
the Code, with an exercise price equal to the market price of Common Stock on
the date of the grant. The Committee may, however, grant options with an
exercise price above or below the market price on the date of grant.
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In determining the number of shares of restricted stock and/or the number
of options to be awarded to an executive, the Committee considers a formula
recommended by the compensation consulting firm which takes into consideration
the levels of responsibility and compensation. The Committee also considers the
recommendations of management (except for awards to the Chief Executive
Officer), the individual performance of the executive, and the number of shares
or other compensation awarded to executives at other companies. Generally, both
the number of shares granted and their proportion relative to the total number
of shares granted increase corresponding to the level of an executive's
responsibility. Although the Committee may also consider the number of shares of
restricted stock and/or options already held by an executive, this factor is not
considered to be particularly important by the Committee in determining the
amounts of awards.
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer's compensation is based upon the policies and
objectives discussed above. The Chief Executive Officer, however, has a higher
percentage of total cash compensation "at risk" because a larger percentage of
potential cash compensation is based upon the annual bonus and long-term
(three-year) incentive bonus plans described above.
Effective April 27, 1993, the Company executed an amended and restated
employment agreement (the "Employment Agreement") with Mr. Bloom which provides
for his continued service to the Company through April 30, 1997, as President
and Chief Executive Officer. The Employment Agreement is also described on page
18 of this Proxy Statement under the heading "Employment Agreements, Termination
of Employment and Change in Control Arrangements."
Under the Employment Agreement, Mr. Bloom will receive an annual base
salary of at least $330,000 effective April 27, 1993, through April 30, 1997,
and if the Employment Agreement is renewed thereafter, through April 30, 2000.
Mr. Bloom will be entitled to participate in the pension plan and the annual
bonus and long-term (three-year) incentive bonus plans, and to receive fringe
benefits similar to those provided to senior executives of the Company through
the term of the Employment Agreement and any renewal period.
Mr. Bloom's 1995 base salary was established consistent with the Employment
Agreement. In setting Mr. Bloom's base salary and total annual cash
compensation, the Committee was advised by the compensation consulting firm and
compared Mr. Bloom's cash compensation with that of chief executive officers in
companies of similar general type and size. Mr. Bloom's base salary is generally
targeted by the Committee to be approximately equal to the median of salaries
paid to chief executive officers by companies included in the survey group. Mr.
Bloom's base salary for 1995 increased 9.6% above his 1994 level, primarily due
to the exceptional performance of the Company during the past year which the
Committee believed was significantly due to his leadership.
Mr. Bloom's annual incentive bonus under the annual bonus plan is based
upon corporate performance goals (70% weighting) and individual performance
goals (30% weighting). The target annual bonus award for Mr. Bloom was 40% of
base salary. Mr. Bloom's annual bonus was subject to achievement of minimum
goals, and his threshold bonus at this level would have been 20% of base salary.
Mr. Bloom's bonus was also capped at 80% of base salary. Corporate performance
goals in 1995 were based on the Company's achievement of predetermined pre-tax
levels of profit (approximately 64% weighting) and sales (16% weighting).
Pre-tax earnings from continuing operations for the 1995 fiscal year increased
by 34.2% over the 1994 fiscal year. Sales also increased substantially for the
1995 fiscal year over 1994 levels. As to his individual performance goals, Mr.
Bloom was rated extremely high by the Committee. Because of these increases and
factors, the annual bonus paid to Mr. Bloom was at the upper end of the possible
range.
As required by the Employment Agreement, because Mr. Bloom did not
terminate his employment before January 1, 1994, the Company on January 1, 1994,
forgave one-half of the principal balance ($105,465) of a loan, plus accrued
interest on that balance ($12,443), made to Mr. Bloom to permit him to exercise
an option to purchase shares of Common Stock. Also as required by the Employment
Agreement, because Mr. Bloom did not voluntarily terminate his employment prior
to May 8, 1994, the Company forgave the remainder of the total outstanding
principal balance ($105,465) under that loan, plus accrued interest ($2,896).
Under the Employment Agreement, the Company was required to provide to Mr. Bloom
a
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three-year, interest-free loan in an amount equal to the federal and state
withholding taxes resulting from each forgiveness. The Committee approved a
bonus plan for Mr. Bloom in 1995 under which one-third of the principal balance
of this loan will be forgiven in 1996, 1997 and 1998 if the Company achieves its
targeted performance goals under the annual bonus plan in 1995, 1996 and 1997,
respectively, and the Company will pay Mr. Bloom an amount to satisfy Mr.
Bloom's tax liability with respect to each such forgiveness if the Company
achieves the performance goals necessary to permit payment of the maximum amount
under the annual bonus plan in 1995, 1996 and 1997, respectively. The Company is
required to forgive one-third of this balance because the target performance
goals were achieved in 1995.
Mr. Bloom's long-term (three-year) incentive bonus award is based upon
ambitious financial performance goals for the Company expressed in terms of
targeted earnings per share. The target bonus for Mr. Bloom was 50% of average
annual base salary for the 1995-1997 plan period. The bonus payout for Mr. Bloom
can range from 0% -150% of the target bonus. The Company paid $321,114 to Mr.
Bloom pursuant to the 1993-1995 long-term (three-year) incentive bonus plan
since the Company did achieve its financial performance goals for the bonus
period. The dollar value of this payment reflects cash paid to Mr. Bloom for 50%
of the amount payable under the plan and the market value of shares of
restricted stock granted in payment of the remaining 50% payable under the plan.
In 1995, Mr. Bloom was awarded 11,250 shares of restricted stock (excluding
shares awarded in connection with the 1993-1995 long-term (three-year) incentive
bonus plan discussed above) and options to purchase an additional 40,200 shares
of Common Stock. The amounts of these awards were determined by the Committee
considering the formula and factors discussed above.
During 1995, Mr. Bloom's base salary was slightly below the median of base
salaries paid by companies included in the survey group to chief executive
officers. Had the Company only achieved targeted performance goals for 1995, Mr.
Bloom's salary combined with his targeted bonus would have been slightly below
the median of salary and bonus paid by companies included in the survey group.
Because the Company had an exceptional year and significantly exceeded targeted
performance during 1995, Mr. Bloom's salary and bonus in the aggregate were
above the median. Mr. Bloom's total compensation for 1995 (salary, bonus and
long-term incentives combined) exceeded the median paid by companies included in
the survey group primarily due to the strong performance of the Company.
All recommendations of the Committee attributable to 1995 compensation were
unanimous and were approved and adopted by the Board of Directors without
modification.
Respectfully submitted,
Daniel T. Carroll, Chairman
David P. Mehney
Joseph A. Parini
Elizabeth A. Sanders
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995, the Company engaged N. W. Ayer & Partners to perform public
relations and marketing and advertising services. The Company paid $1,110,065 to
N. W. Ayer & Partners representing fees and expenses. The Company also paid
$3,891,823 to N. W. Ayer & Partners in its capacity as paying agent in
connection with the placement of certain advertising, which was then disbursed
by N. W. Ayer & Partners to various media. Ms. Joan Parker, a director of the
Company, was Executive Vice President and a director of N. W. Ayer & Partners
and Executive Vice President and Managing Director of the Ayer Public Relations
Division of N. W. Ayer & Partners until September, 1995. The Company engaged
Parker & Associates, a firm in which Ms. Parker was the sole proprietor, to
perform public relations and marketing services upon her departure from N. W.
Ayer & Partners. During 1995, the Company paid $67,281 to Parker & Associates
representing fees and expenses for these services. After Ms. Parker joined J.
Walter Thompson, an international advertising agency, the Company engaged J.
Walter Thompson to perform public relations and
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marketing and advertising services. The Company anticipates that during the 1996
fiscal year it will make payments to J. Walter Thompson of approximately
$505,000 representing fees and expenses for these services.
In 1989, Wolverine entered into a license agreement with Grimoldi, S.A., an
Argentinean corporation of which Mr. Alberto Grimoldi, a director of Wolverine,
is a large shareholder, to renew a licensing relationship that had existed for
approximately 10 years. The license agreement grants to Grimoldi, S.A. the right
to manufacture and the exclusive rights to distribute and sell Hush Puppies(R)
brand footwear products in Argentina under Wolverine's standard terms and
conditions for all international licenses. In 1994, Wolverine and Grimoldi, S.A.
executed a similar license agreement that grants similar rights with respect to
Brazil. Under these licenses, Grimoldi, S.A. pays to Wolverine royalties and
certain sublicense fees based on Grimoldi, S.A.'s sales of Hush Puppies(R) brand
footwear products in Argentina and Brazil. The royalties and sublicense fees due
to Wolverine on Grimoldi, S.A.'s 1995 sales of Hush Puppies(R) brand footwear
products totaled $1,151,366 and have been invoiced or paid in accordance with
Wolverine's customary terms and practices.
In August 1994, Wolverine and Grimoldi, S.A. entered into a license
agreement that grants to Grimoldi, S.A. similar rights with respect to
Wolverine(R) and Wolverine Wilderness(R) brand footwear products in Argentina.
Under this footwear license, Grimoldi, S.A. pays to Wolverine royalties based on
the factory cost of products purchased from Wolverine or a third party
manufacturer, or Grimoldi, S.A.'s sales in the case of footwear products
manufactured by Grimoldi, S.A. Also in August 1994, Wolverine entered into a
distribution agreement with Grimoldi, S.A. appointing Grimoldi, S.A. to serve as
Wolverine's exclusive distributor for Caterpillar(R) brand footwear products in
Argentina. Under the distribution agreement, Grimoldi, S.A. pays to Wolverine a
service fee based on the cost of each pair of Caterpillar(R) brand footwear
products purchased by Grimoldi, S.A. Under this agreement, Grimoldi, S.A. paid
service fees in 1995 to Wolverine totaling $138,186. These agreements were made
under standard terms and conditions applicable to all international licenses and
distributors, respectively, and all payments due under these agreements were
invoiced or paid in accordance with Wolverine's customary terms and practices.
In the ordinary course of their business, Wolverine and its subsidiaries
sell footwear for resale, samples, components of footwear products (such as
leather and shoe soles), advertising materials and miscellaneous items to
licensees, distributors and customers. In 1995, purchases of such items by
Grimoldi, S.A. totaled $290,902 (including any applicable sublicense fees for
products containing licensed proprietary technology). All of these purchases
were made pursuant to Wolverine's customary trade terms and were invoiced or
paid in accordance with Wolverine's customary payment terms and schedules
applicable to all licensees, distributors and customers.
All of the transactions described above occurred pursuant to continuing
contractual arrangements between Wolverine and Grimoldi, S.A. Wolverine expects
similar transactions to occur between Grimoldi, S.A. and Wolverine and its
subsidiaries during 1996.
SECTION 16(A) REPORTING DELINQUENCIES
Section 16(a) of the Exchange Act requires Wolverine's directors and
officers and persons who beneficially own more than 10% of the outstanding
shares of Common Stock to file reports of ownership and changes in ownership of
shares of Common Stock with the Securities and Exchange Commission. Directors,
officers and greater than 10% beneficial owners are required by Securities and
Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) reports they file. Based on its review of the copies of such
reports received by it, or written representations from certain reporting
persons that no reports on Form 5 were required for those persons for the 1995
fiscal year, Wolverine believes that its directors and officers complied with
all applicable filing requirements during the Company's last fiscal year, except
that one report for Mr. Duffy covering one transaction was filed late.
SELECTION OF AUDITORS
Subject to the approval of stockholders, the Board of Directors has
reappointed the firm of Ernst & Young LLP as independent auditors of the Company
for the current fiscal year.
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Ernst & Young LLP, certified public accountants, has audited the financial
statements of the Company and its subsidiaries for the fiscal year ended
December 30, 1995. Representatives of Ernst & Young LLP are expected to be
present at the annual meeting, will have an opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions from stockholders.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE REAPPOINTMENT OF ERNST & YOUNG LLP
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1997 annual meeting
of stockholders must be received by the Company not later than November 15,
1996, to be considered for inclusion in the proxy statement and form of proxy
relating to that meeting. Proposals of stockholders should be made in accordance
with Securities and Exchange Commission Rule 14a-8 and should be addressed to
the attention of the Secretary of the Company, 9341 Courtland Drive, N.E.,
Rockford, Michigan 49351.
SOLICITATION OF PROXIES
Solicitation of proxies will be made initially by mail. In addition,
directors, officers and employees of the Company and its subsidiaries may
solicit proxies by telephone, facsimile or personally without additional
compensation. Proxies may be solicited by nominees and other fiduciaries who may
mail materials to or otherwise communicate with the beneficial owners of shares
held by them. The Company will bear all costs of the preparation and
solicitation of proxies, including the charges and expenses of brokerage firms,
banks, trustees or other nominees for forwarding proxy material to beneficial
owners. Wolverine has engaged Corporate Investor Communications, Inc. at an
estimated cost of $8,000, plus expenses and disbursements, to assist in
solicitation of proxies.
By Order of the Board of Directors
Blake W. Krueger
Blake W. Krueger, General Counsel and
Secretary
March 15, 1996
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WOLVERINE LOGO
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<TABLE>
<S><C>
PROXY PROXY
WOLVERINE WORLD WIDE, INC.
9341 COURTLAND DRIVE, N.E.
ROCKFORD, MICHIGAN 49351
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints Geoffrey B. Bloom, Daniel T. Carroll and Phillip D. Matthews, and each of them,
each with full power of substitution, proxies to represent the stockholder listed on the reverse side of this Proxy and to vote all
shares of Common Stock of Wolverine World Wide, Inc. that the stockholder would be entitled to vote on all matters which come before
the Annual Meeting of Stockholders to be held at the Amway Grand Plaza Hotel, 187 Monroe Avenue, N.W., Grand Rapids, Michigan, on
Wednesday, April 17, 1996, at 10 a.m., and any adjournment of that meeting.
IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED ON THIS PROXY AS DIRECTORS AND FOR
APPROVAL OF EACH PROPOSAL IDENTIFIED ON THIS PROXY. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE
PROXIES ON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
WOLVERINE WORLD WIDE, INC.
[ ]
1. ELECTION OF DIRECTORS- For All
Nominees: Daniel T. Carroll, For Withhold Except
Phillip D. Matthews // // //
(INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE THROUGH THAT NOMINEE'S NAME
IN THE LIST ABOVE.)
Your Board of Directors Recommends
that You Vote
FOR ALL NOMINEES
2. Proposal to approve the Amendment For Against Abstain
to the Certificate of Incorporation // // //
to Increase the Number of Authorized
Shares of Common Stock.
3. Proposal to ratify the appointment For Against Abstain
of Ernst & Young LLP as independent // // //
auditors for the current fiscal year.
Your Board of Directors Recommends
that You Vote
FOR PROPOSALS 2 AND 3
Dated: ,1996
--------------------
------------------------------------------
------------------------------------------
Signature of Stockholder(s)
IMPORTANT -- Please sign exactly as
your name(s) appear(s) on this Proxy. When
signing on behalf of a corporation,
partnership, estate or trust, indicate title
or capacity of person signing. IF SHARES
ARE HELD JOINTLY, EACH HOLDER SHOULD SIGN.
</TABLE>
