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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 1-6024
WOLVERINE WORLD WIDE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-1185150
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
9341 COURTLAND DRIVE, ROCKFORD, MICHIGAN 49351
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (616) 866-5500
Securities registered pursuant to Section 12(b)
of the Securities Exchange Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $1 Par Value New York Stock Exchange/Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No ______
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Number of shares outstanding of the registrant's Common Stock, $1 par value
(excluding shares of treasury stock) as of March 1, 1999: 41,002,243.
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant based on the closing price on the New York
Stock Exchange on March 1, 1999: $408,751,360.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the registrant's annual
stockholders' meeting to be held April 23, 1999, are incorporated by
reference into Part III of this report.
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PART I
ITEM 1. BUSINESS.
GENERAL.
Wolverine World Wide, Inc. (the "Company") is a leading designer,
manufacturer and marketer of a broad line of quality comfortable casual
shoes, rugged outdoor and work footwear, and constructed slippers and
moccasins. The Company, a Delaware corporation, is the successor of a 1969
reorganization of a Michigan corporation of the same name, originally
organized in 1906, which in turn was the successor of a footwear business
established in Grand Rapids, Michigan in 1883.
Consumers around the world purchased more than 38 million pairs of
Company branded footwear during fiscal 1998, making the Company a global
leader among U.S. shoe companies in the marketing of branded casual, work
and outdoor footwear. The Company's products generally feature
contemporary styling with patented technologies designed to provide maximum
comfort. The products are marketed throughout the world under widely
recognized brand names, including HUSH PUPPIES[REGISTERED],
WOLVERINE[REGISTERED], BATES[REGISTERED], CATERPILLAR[REGISTERED],
COLEMAN[REGISTERED], HY-TEST[REGISTERED], MERRELL[REGISTERED] and HARLEY-
DAVIDSON[REGISTERED]. The Company believes that its primary competitive
strengths are its well recognized brand names, broad range of comfortable
footwear, patented comfort technologies, numerous distribution channels and
diversified manufacturing and sourcing base.
The Company's footwear is sold under a variety of brand names designed
to appeal to most consumers of casual, work and outdoor footwear at
numerous price points. The Company's footwear products are organized under
three operating divisions: (i) the Wolverine Footwear Group, focusing on
work, outdoor and lifestyle boots and shoes, (ii) the
CATERPILLAR[REGISTERED] Footwear Group, focusing on the
CATERPILLAR[REGISTERED] product line of work and lifestyle footwear and
(iii) the Casual Footwear Group, focusing on HUSH PUPPIES[REGISTERED] brand
comfortable casual shoes, slippers and moccasins under the HUSH
PUPPIES[REGISTERED] brand and other private labels for third party
retailers and children's footwear under various Wolverine brands. The
Company's Global Operations Group is responsible for manufacturing and
sourcing in support of the various Wolverine brands. The Company's
footwear is distributed domestically to over 65,000 department store,
footwear chain, catalog, specialty retailer and mass merchant accounts, as
well as 56 Company-owned retail stores. The Company's products are
distributed worldwide in 134 markets through licensees and distributors.
The Company, through its Wolverine Leathers Division, operates a
Company-owned tannery and is one of the premier tanners of quality pigskin
leather for the shoe and leather goods industries. The pigskin leather
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tanned by the Company is used in a significant portion of the footwear
manufactured and sold by the Company, and is also sold to Company licensees
and other domestic and foreign manufacturers of shoes. In addition,
Wolverine Procurement, Inc. both performs skinning operations and
purchases raw pigskins which it then cures and sells to the Wolverine
Leathers Division and to outside customers for processing into pigskin
leather products.
In October 1997, the Company acquired certain assets of the
MERRELL[REGISTERED] outdoor footwear business from the Outdoor Division of
Sports Holdings Corp. The acquisition included substantially all the
assets of the MERRELL[REGISTERED] hiking and rugged outdoor footwear
business and global rights to the MERRELL[REGISTERED] trademark. In
addition, on March 12, 1998, the Company was granted the rights to
manufacture and market footwear, including motorcycle, casual, fashion,
work and western footwear under the HARLEY-DAVIDSON[REGISTERED] brand. The
MERRELL[REGISTERED] and HARLEY-DAVIDSON[REGISTERED] footwear businesses are
operated as part of the Wolverine Footwear Group.
For financial information regarding the Company, see the consolidated
financial statements of the Company, which are attached as Appendix A to
this Form 10-K. Effective January 4, 1998, the Company adopted Statement
of Financial Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. The Company has one reportable
operating segment, Branded Footwear. The "Branded Footwear" segment is
engaged in the manufacture and marketing of branded footwear, including
casual shoes, slippers, moccasins, dress shoes, boots, uniform shoes and
work shoes. The Company's "Other Businesses" category consists of the
Company's retail stores, tannery and pigskin procurement operations.
Financial information regarding the Company's operating segments can be
found in Note J to the consolidated financial statements of the Company,
which are attached as Appendix A to this Form 10-K.
BRANDED FOOTWEAR.
The Company manufacturers and markets a broad range of footwear styles
including shoes, boots and sandals, under many recognizable brand names
including HUSH PUPPIES[REGISTERED], WOLVERINE[REGISTERED],
BATES[REGISTERED], CATERPILLAR[REGISTERED], COLEMAN[REGISTERED], HY-
TEST[REGISTERED], MERRELL[REGISTERED] and HARLEY-DAVIDSON[REGISTERED]. The
Company through its wholly owned subsidiary, Wolverine Slipper Group, Inc.,
also manufactures constructed slippers and moccasins and markets them under
the HUSH PUPPIES[REGISTERED] trademark and on a private label basis. The
Company combines quality materials and skilled workmanship from around the
world to produce footwear according to its specifications at both
Company-owned and independent manufacturing facilities.
The Company's three branded footwear operating divisions are described
below.
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1. THE WOLVERINE FOOTWEAR GROUP. The Wolverine Footwear
Group is one of the world's largest work and outdoor footwear
companies, encompassing multiple brands designed with performance
and comfort features to serve a variety of work, outdoor and
lifestyle functions. The WOLVERINE[REGISTERED] brand, which has
been in existence for 116 years, is identified with performance
and quality and markets work and outdoor footwear in two
categories: (i) work and industrial footwear; and (ii) rugged
outdoor and sport footwear. The Wolverine Footwear Group also
includes the BATES[REGISTERED] and HY-TEST[REGISTERED] product
lines. These products feature patented technologies and designs,
such as the DURASHOCKS[REGISTERED] and DURASHOCKS SR<Trademark>
systems, innovative technologies with patent applications pending
such as WOLVERINE FUSION<Trademark> and the use of quality
materials and components. The Wolverine Footwear Group also
includes the HARLEY-DAVIDSON[REGISTERED] Footwear Division, which
markets motorcycle, casual, fashion, work and western footwear
through the HARLEY-DAVIDSON[REGISTERED] product line. In
addition, the Wolverine Footwear Group markets hiking and outdoor
shoes, boots and sandals through the MERRELL[REGISTERED] and
COLEMAN[REGISTERED] product lines.
WOLVERINE[REGISTERED] WORK AND INDUSTRIAL FOOTWEAR.
The Company believes the WOLVERINE[REGISTERED] brand has
built its reputation by making quality, durable and
comfortable work boots and shoes. The development of
DURASHOCKS[REGISTERED] technology allowed the
WOLVERINE[REGISTERED] brand to introduce a broad line
of work footwear with a focus on comfort and the new
WOLVERINE FUSION<Trademark> technology is expected to
continue the Company's tradition of comfortable work
and industrial footwear. The WOLVERINE[REGISTERED]
Work product line features work boots and shoes,
including steel toe boots and shoes, targeting male
and female industrial and farm workers.
WOLVERINE[REGISTERED] RUGGED OUTDOOR AND SPORT
FOOTWEAR. The WOLVERINE[REGISTERED] rugged outdoor and
sport product lines incorporate DURASHOCKS[REGISTERED],
DURASHOCKS SR<Trademark> and WOLVERINE
FUSION<Trademark> technology and other comfort features
into products designed for rugged outdoor use. This
broad product line targets active lifestyles and
includes all-terrain sport boots, walking shoes, trail
hikers, rugged casuals and outdoor sandals. The
Company also produces boots that target hunters,
fishermen and other active outdoor users. Warmth,
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waterproofing and comfort are achieved through the use
of GORE-TEX[REGISTERED], THINSULATE[REGISTERED] and the
Company's performance leathers and patented
DURASHOCKS[REGISTERED] technologies. In addition, the
Company produces WOLVERINE[REGISTERED] brand rubber
footwear, boots and waders for hunters, fishermen and
farm workers.
BATES UNIFORM FOOTWEAR. The Company's Bates Uniform
Footwear Division is an industry leader in supplying footwear
to military and civilian uniform users. The Bates Uniform
Footwear Division utilizes DURASHOCKS[REGISTERED], DURASHOCKS
SR<Trademark>, COOL TECH<Trademark> and other proprietary
comfort technologies in the design of its military-style boots
and oxfords including the BATES[REGISTERED] ENFORCER
SERIES<Trademark> footwear line. The Bates Uniform Footwear
Division currently contracts with the U.S. Department of
Defense and other governmental organizations to supply
military footwear. Civilian uniform uses include police,
security, postal, restaurant and other industrial occupations.
Bates Uniform Footwear Division products are also distributed
through specialty retailers and catalogs.
HY-TEST. The HY-TEST[REGISTERED] product line
consists primarily of high quality work boots and shoes
designed to protect male and female industrial workers
from foot injuries. HY-TEST[REGISTERED] footwear
incorporates various safety features into its product
lines, including steel toe footwear and electrical
hazard, static dissipating and conductive footwear to
protect against hazards of the workplace. In addition,
HY-TEST[REGISTERED] brand footwear incorporates
features such as FOOTRESTS[REGISTERED] comfort
technology to provide comfort together with safety for
working men and women. HY-TEST[REGISTERED] footwear is
distributed primarily through a network of mobile truck
"Shoemobiles<Trademark>" providing direct sales to workers at
industrial facilities.
HARLEY-DAVIDSON FOOTWEAR DIVISION. On March 12,
1998 the Company entered into a License Agreement with
the Harley-Davidson Motor Company granting the Company
the right to manufacture, market, distribute and sell
footwear under the HARLEY-DAVIDSON[REGISTERED] brand in
most countries of the world. The Company's rights to
the HARLEY-DAVIDSON[REGISTERED] brand became effective
in North America, South America and Central America in
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1998, and become effective in the remaining areas of
the world at various times in the future, such that by
January 1, 2000, the Company will have the exclusive
right to produce and distribute HARLEY-
DAVIDSON[REGISTERED] footwear in most countries of the
world. HARLEY-DAVIDSON[REGISTERED] brand footwear
products include motorcycle, casual, fashion, work and
western footwear for men, women and children. HARLEY-
DAVIDSON[REGISTERED] footwear is sold primarily through
a network of 600 independent HARLEY-
DAVIDSON[REGISTERED] dealerships and through department
stores and specialty retailers.
WOLVERINE OUTDOOR DIVISION. The Wolverine Outdoor
Division consists of the MERRELL[REGISTERED] and
COLEMAN[REGISTERED] footwear brands.
- MERRELL. The MERRELL[REGISTERED] product line,
acquired by the Company in October 1997, consists
primarily of technical hiking and rugged outdoor
footwear designed for backpacking, day hiking and
rugged every day use. MERRELL[REGISTERED] products are
sold primarily through department stores, specialty retailers
and catalogs.
- COLEMAN. The Company has been granted the
exclusive worldwide rights to manufacture, market,
distribute and sell outdoor footwear under the
COLEMAN[REGISTERED] brand. COLEMAN[REGISTERED] brand
footwear products include lightweight hiking boots,
rubber footgear and outdoor sandals, which are sold
primarily at value-oriented prices through specialty
retailers and mass merchants.
2. THE CATERPILLAR[REGISTERED] FOOTWEAR GROUP. The
CATERPILLAR[REGISTERED] Footwear Group began operating as a
separate division of the Company in 1997. Previously, the
CATERPILLAR[REGISTERED] Footwear Group operated as part of the
Wolverine Footwear Group. The Company has been granted the
exclusive worldwide rights to manufacture, market and distribute
footwear under the CATERPILLAR[REGISTERED], CAT &
DESIGN[REGISTERED], WALKING MACHINES[REGISTERED] and other
trademarks. The Company believes the association with
CATERPILLAR[REGISTERED] equipment enhances the reputation of its
boots for quality, ruggedness and durability.
CATERPILLAR[REGISTERED] brand footwear products include work
boots and shoes, sport boots, rugged casuals and lifestyle
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footwear. In addition, in 1997 the Company introduced
CAT[REGISTERED] Marine Power footwear, designed for industrial
and recreational marine uses. CATERPILLAR[REGISTERED] brand
products target work and industrial users and active lifestyle
users.
3. THE CASUAL FOOTWEAR GROUP. The Casual Footwear Group
consists of the Hush Puppies Company, Wolverine Slipper Group,
Inc., and the Children's Footwear Group. Each of these groups
are described below.
THE HUSH PUPPIES COMPANY. The Company believes that the 40-
year heritage of the HUSH PUPPIES[REGISTERED] brand as a pioneer
of comfortable casual shoes positions the brand to capitalize on
the global trend toward more casual workplace and leisure attire.
The diverse product line includes numerous styles for both work
and casual wear and utilizes comfort features, such as the
COMFORT CURVE[REGISTERED] sole and patented BOUNCE[REGISTERED]
technology. HUSH PUPPIES[REGISTERED] shoes are sold to men, women
and children in over 80 countries.
WOLVERINE SLIPPER GROUP, INC. Through its wholly owned
subsidiary, Wolverine Slipper Group, Inc., the Company is one of
the leading suppliers of constructed slippers in the United
States. Prior to 1999 these activities were operated as a
division of the Company. The styling of Wolverine Slipper
Group's footwear reflects consumer demand for the "rugged indoor"
look by using natural leathers such as moosehide, shearling and
suede in constructed slipper and indoor and outdoor moccasin
designs. Wolverine Slipper Group, Inc., designs and manufactures
constructed slippers and moccasins on a private label basis
according to customer specifications. Such products are
manufactured for leading United States retailers and catalogs,
such as Nordstrom, J.C. Penney, L.L. Bean, Eddie Bauer and Lands'
End. In addition to its traditional line of private label
slippers, the Wolverine Slipper Group also manufactures HUSH
PUPPIES[REGISTERED] brand slippers.
THE CHILDREN'S FOOTWEAR GROUP. The Children's Footwear
Group was formed in 1998 to consolidate the Company's rapidly
growing HUSH PUPPIES[REGISTERED] and CATERPILLAR[REGISTERED]
children's footwear business with the recently started children's
footwear programs for slippers and the COLEMAN[REGISTERED] and
Harley-Davidison[REGISTERED] brands. The Company believes the
consolidation will make possible the dedicated marketing,
sourcing and sales programs that are necessary to extend the
Company's high-profile, global brands into the children's
footwear market segment.
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OTHER BUSINESSES.
In addition to the manufacture and marketing of the Company's
footwear products that are reported in the Branded Footwear segment, the
Company also (i) operates a Company-owned pigskin tannery through its
Wolverine Leathers Division, (ii) purchases and cures raw pigskins for sale
to various customers through its wholly owned subsidiary Wolverine
Procurement, Inc. and (iii) operates 56 domestic retail footwear stores.
1. THE WOLVERINE LEATHERS DIVISION. The Wolverine
Leathers Division produces pigskin leathers primarily for use in
the footwear industry. The Wolverine Leathers Division is the
largest domestic tanner of pigskin. WOLVERINE
LEATHERS[REGISTERED] brand products are manufactured in the
Company's pigskin tannery located in Rockford, Michigan. The
Company believes these leathers offer superior performance and
cost advantages over cowhide leathers. The Company's waterproof,
stain resistant and washable leathers are featured in many of the
Company's domestic footwear lines and many products offered by
the Company's international licensees and distributors.
2. WOLVERINE PROCUREMENT, INC. Wolverine Procurement,
Inc. both performs skinning operations and purchases raw
pigskins from third parties, which it then cures and sells to
the Wolverine Leathers Division and to outside customers for
processing into pigskin leather products.
3. RETAIL STORES. The Company operated 56 domestic retail
shoe stores as of March 1, 1999, under two formats, consisting of
factory outlet stores and one mall-based speciality store. The
Company expects the scope of its retail operations to remain
relatively consistent in the foreseeable future. Most of the
Company's 55 factory outlet stores carry a large selection of
first quality Company branded footwear at a discount to
conventional retail prices. The regional mall-based full
service, full price HUSH PUPPIES[REGISTERED] Specialty Store
features a broad selection of men's and women's HUSH
PUPPIES[REGISTERED] brand footwear and other Company brands and
is used by the Company to test new styles and merchandising
strategies.
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MARKETING.
The Company's overall marketing strategy is to develop brand-specific
plans and related promotional materials for the United States market to
foster a differentiated and globally consistent image for each of the
Company's core footwear brands. Each footwear brand group within the
Company has its own marketing personnel who develop the marketing strategy
for products within that group. Domestic marketing campaigns target both
the Company's retail accounts and consumers, and strive to increase overall
brand awareness for the Company's branded products. The Company's
advertisements typically emphasize fashion, comfort, quality, durability,
functionality and other performance and lifestyle aspects of the Company's
footwear. Components of the brand-specific plans include print, radio and
television advertising, in-store point of purchase displays, promotional
materials, and sales and technical assistance.
The Company's footwear brand groups provide its international
licensees and distributors with creative direction and materials to convey
consistent messages and brand images. Examples of marketing assistance
provided by the Company to its licensees and distributors are (i) direction
concerning the categories of footwear to be promoted, (ii) photography and
layouts, (iii) broadcast advertising, including commercials and film
footage, (iv) point of purchase presentation specifications, blueprints and
packaging, (v) sales materials, and (vi) consulting concerning retail store
layout and design. The Company believes its footwear brand names provide
a competitive advantage. In support of this belief, the Company has
increased its expenditures on marketing and promotion to support the
position of its products and enhance brand awareness.
DOMESTIC SALES AND DISTRIBUTION.
The Company uses a wide variety of distribution channels to distribute
its branded footwear products. To meet the diverse needs of its broad
customer base, the Company uses four primary distribution strategies.
- Traditional wholesale distribution is used to service department
stores (such as J.C. Penney, Sears and Nordstrom), large footwear
chains (such as Famous Footwear), specialty retailers, catalog and
independent retailers, and military outlets. A dedicated sales
force and customer service team, advertising and point of purchase
support, and in-stock inventories are used to service these
accounts.
- Volume direct programs provide branded and private label footwear
at competitive prices with limited marketing support. These
programs service major retail, mail order, mass merchants and
government customers.
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- First cost agreements are primarily utilized to furnish brands
licensed by the Company to mass merchants on a royalty basis.
- A network of independent SHOEMOBILE<Trademark> distributors is
primarily used to distribute and sell HY-TEST[REGISTERED] brand
products. The Company also distributes additional products
through this independent distributor network.
In addition to its wholesale activities, the Company also operates
domestic retail shoe stores as described above.
A broad distribution base insulates the Company from dependence on any
one customer. No customer of the Company accounted for more than 10% of
the Company's net sales and other operating income in fiscal 1998.
Footwear sales are seasonal with significant increases in sales
experienced during the Christmas, Easter and back-to-school periods. Due
to this seasonal nature of footwear sales, the Company experiences some
fluctuation in the levels of working capital. The Company provides working
capital for such fluctuations through internal financing and through a
revolving credit agreement that the Company has in place. The Company
expects the seasonal sales pattern to continue in future years.
INTERNATIONAL OPERATIONS AND GLOBAL LICENSING.
The Company records revenue from foreign sources through a combination
of sales of branded footwear products generated from the Company's wholly
owned operations in Canada, the United Kingdom and Russia, and from royalty
income through a network of independent licensees and distributors. The
Company's owned operations include Hush Puppies UK, Ltd., Merrell Europe
Ltd., Hush Puppies Canada and Wolverine CIS, Ltd. In addition, the
Company's owned operations include Wolverine Russia, Inc., which provides
operational support, marketing assistance and consulting services to promote
the sale of both HUSH PUPPIES[REGISTERED] and CATERPILLAR[REGISTERED] brand
footwear in Russia. The Company's owned operations are located in markets
where the Company believes it can gain a strategic advantage.
The Company derives royalty income from sales of Company footwear
bearing the HUSH PUPPIES[REGISTERED], WOLVERINE[REGISTERED],
BATES[REGISTERED], HY-TEST[REGISTERED], MERRELL[REGISTERED] and other
trademarks by independent distributors and licensees. The Company also
derives royalty income from sales of footwear bearing the
CATERPILLAR[REGISTERED], COLEMAN[REGISTERED] and HARLEY-
DAVIDSON[REGISTERED] trademarks through foreign distributors. License and
distribution arrangements enable the Company to develop international
markets without the capital commitment required to maintain inventories or
fund localized marketing programs. In fiscal 1998, the Company's wholly
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owned foreign operations, together with the Company's foreign licensees and
distributors sold an estimated 17 million pairs of footwear, a slight
decrease from approximately 18 million pairs sold in fiscal 1997.
The Company continues to develop a global network of licensees and
distributors to market its footwear brands. The Company assists in
designing products that are appropriate to each foreign market but are
consistent with the global brand position. The licensees and distributors
then purchase goods from either the Company or authorized third-party manu-
facturers pursuant to a distribution agreement or manufacture branded
products consistent with Company standards pursuant to a license agreement.
Distributors and licensees are responsible for independently marketing and
distributing Company branded products in their respective territories, with
general oversight provided by the Company.
MANUFACTURING AND SOURCING.
Although approximately eighty percent of the Company's global branded
footwear product line is purchased or sourced from third parties, the
remainder is produced at Company-owned facilities. The Company's footwear
is manufactured at Company-owned facilities in several domestic and certain
affiliated foreign facilities located in Michigan, Arkansas, Missouri, New
York, the Caribbean Basin, Costa Rica, Mexico and Canada. The Company has
implemented a "twin plant" concept whereby a majority of the labor
intensive cutting and fitting construction of the "upper" portion of shoes
and boots is performed at the Company's facilities in the Caribbean Basin,
Costa Rica and Mexico and the technology intensive construction, or
"bottoming," is performed at the Company's domestic and Canadian
facilities.
The Company's factories each have the flexibility to produce a variety
of footwear, and depart from the industry's historic practice of dedicating
a given facility to production of specific footwear products. This
flexibility allows the Company to quickly respond to changes in market
preference and demand. The Company produces various products for both men
and women in most of its domestic and international facilities, allowing
the Company to respond to both market and customer-specific demand.
The Company sources certain footwear from a variety of foreign
manufacturing facilities in the Asia-Pacific region, Central and South
America, India and Europe. The Company maintains technical offices in the
Asia-Pacific region and in Europe to facilitate the sourcing and
importation of quality footwear. The Company has established guidelines
for each of its third-party manufacturers in order to monitor product
quality, labor practices and financial viability. In addition, the Company
has developed its "Engagement Criteria for Partners & Sources" to require
that its domestic and foreign manufacturers, licensees and distributors use
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ethical business standards, comply with all applicable health and safety
laws and regulations, are committed to environmentally safe practices,
treat employees fairly with respect to wages, benefits and working
conditions, and do not use child or prison labor.
The Company's domestic manufacturing operations allow the Company to
(i) reduce its lead time, enabling it to quickly respond to market demand
and reduce inventory risk, (ii) lower freight and shipping costs, and (iii)
closely monitor product quality. The Company's foreign manufacturing
strategy allows the Company to (i) benefit from lower labor costs,
(ii) source the highest quality raw materials from around the world, and
(iii) avoid additional capital expenditures necessary for factories and
equipment. The Company believes that its overall global manufacturing
strategy gives the Company maximum flexibility to properly balance the need
for timely shipments, high quality products and competitive pricing.
The Company owns and operates through its Wolverine Leathers Division,
a pigskin tannery, which is one of the premier tanners of quality leather
for the footwear industry. The Company and its licensees receive virtually
all of their pigskin requirements from the tannery. The Company believes
the tannery provides a strategic advantage for the Company by producing
leather using proprietary technology at prices below those available from
other sources. The continued operation of this tannery is important to the
Company's competitive position in the footwear industry.
The Company's principal required raw material is quality leather,
which it purchases primarily from a select group of domestic suppliers,
including the Company's tannery. The global availability of shearling and
cowhide leather eliminates any reliance by the Company upon a sole
supplier. The Company currently purchases the vast majority of the raw
pigskins used in a significant portion of its tannery operations from two
domestic sources. One of these sources has been a reliable and consistent
supplier for over 30 years. The Company purchases all of its other raw
materials and component parts from a variety of sources, none of which is
believed by the Company to be a dominant supplier.
The Company is subject to the normal risks of doing business abroad
due to its international operations, including the risk of expropriation,
acts of war, political disturbances and similar events, the imposition of
trade barriers, quotas and tariffs and loss of most favored nation trading
status. With respect to international sourcing activities, management
believes that over a period of time, it could arrange adequate alternative
sources of supply for the products currently obtained from its foreign
suppliers. A sustained disruption of such sources of supply could,
particularly on a short-term basis, have an adverse impact on the Company's
operations.
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TRADEMARKS, LICENSES AND PATENTS.
The Company holds a number of registered and common law trademarks
that identify its branded footwear products. The trademarks that are most
widely used by the Company include HUSH PUPPIES[REGISTERED],
WOLVERINE[REGISTERED], BATES[REGISTERED], WOLVERINE FUSION<Trademark>,
DURASHOCKS[REGISTERED], HIDDEN TRACKS[REGISTERED], BOUNCE AND
DESIGN[REGISTERED], COMFORT CURVE[REGISTERED], TRU-STITCH[REGISTERED],
SIOUX MOX[REGISTERED], HY-TEST[REGISTERED], MERRELL[REGISTERED] and
FOOTRESTS[REGISTERED]. The Company has obtained the right to manufacture,
market and distribute footwear throughout most countries of the world under
the CATERPILLAR[REGISTERED] HARLEY-DAVIDSON[REGISTERED] and
COLEMAN[REGISTERED] trademarks pursuant to license agreements with the
respective trademark owners. All of the Company's licenses are long term
and extend for four or more years with renewal options. The licenses are
subject to customary approval, performance and default provisions. Pigskin
leather produced by the Company's Wolverine Leather Division is sold under
the trademarks WOLVERINE LEATHERS [REGISTERED], WEATHER TIGHT[REGISTERED]
and ALL SEASON WEATHER LEATHERS.<Trademark>
The Company believes that its products are identified by consumers by
its trademarks and that its trademarks are valuable assets. The Company is
not aware of any infringing uses or any prior claims of ownership of its
trademarks that could materially affect its current business. It is the
policy of the Company to pursue registration of its primary marks whenever
possible and to vigorously defend its trademarks against infringement or
other threats to the greatest extent practicable under the laws of the
United States and other countries. The Company also holds several patents,
copyrights and various other proprietary rights. The Company protects all
of its proprietary rights to the greatest extent practicable under
applicable law.
ORDER BACKLOG.
At March 27, 1999, the Company had a backlog of orders of
approximately $181 million compared with a backlog of approximately
$189 million at March 28, 1998. While orders in backlog are subject to
cancellation by customers, the Company has not experienced significant
cancellation of orders in the past and the Company expects that
substantially all of the orders will be shipped in fiscal 1999. The
backlog at a particular time is affected by a number of factors, including
seasonality and the scheduling of the manufacture and shipment of products.
-13-
<PAGE>
Accordingly, a comparison of backlog from period to period is not
necessarily meaningful and may not be indicative of eventual actual
shipments.
COMPETITION.
The Company's footwear lines are manufactured and marketed in a highly
competitive environment. The Company competes with numerous manufacturers
(domestic and foreign) and importers of footwear, some of which are larger
and have greater resources than the Company. The Company's major
competitors for its brands of footwear are located in the United States.
The Company has at least ten major competitors in connection with the sale
of its work shoes and boots, at least eight major competitors in connection
with the sale of its sport boots, and at least fifteen major competitors in
connection with the sale of its casual and dress shoes. Product
performance and quality, including technological improvements, product
identity, competitive pricing, and the ability to adapt to style changes
are all important elements of competition in the footwear markets served by
the Company. The footwear industry in general is subject to changes in
consumer preferences. The Company strives to meet competition and maintain
its competitive position through promotion of brand awareness,
manufacturing efficiencies, its tannery operations, and the style, comfort
and value of its products. Future sales by the Company will be affected by
its continued ability to sell its products at competitive prices and to
meet shifts in consumer preferences.
Because of the lack of reliable published statistics, the Company is
unable to state with certainty its position in the footwear industry.
Market shares in the footwear industry are highly fragmented and no one
company has a dominant market position; however, the Company believes it is
among the largest domestic manufacturers of footwear.
RESEARCH AND DEVELOPMENT.
In addition to normal and recurring product development, design and
styling activities, the Company engages in research and development related
to new and improved materials for use in its branded footwear and other
products and in the development and adaptation of new production
techniques. The Company's continuing relationship with the Biomechanics
Evaluation Laboratory at Michigan State University has led to specific
biomechanical design concepts, such as BOUNCE[REGISTERED],
DURASHOCKS[REGISTERED] and HIDDEN TRACKS[REGISTERED] comfort technologies,
that have been incorporated in the Company's footwear. While the Company
continues to be a leading developer of footwear innovations, research and
development costs do not represent a material portion of operating
expenses.
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<PAGE>
ENVIRONMENTAL MATTERS.
Compliance with federal, state and local provisions which have been
enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment
have not had, nor are they expected to have, any material effect on the
capital expenditures, earnings or competitive position of the Company. The
Company uses and generates, and in the past has used and generated, certain
substances and wastes that are regulated or may be deemed hazardous under
certain federal, state and local regulations with respect to the
environment. The Company from time to time works with federal, state and
local agencies to resolve cleanup issues at various waste sites or other
regulatory issues.
EMPLOYEES.
As of January 2, 1999, the Company had approximately 6,600 domestic
and foreign production, office and sales employees. Approximately 1,731
employees were covered by eight union contracts expiring at various dates
through February 11, 2002. The Company has experienced no work stoppages
since 1990. The Company presently considers its employee relations to be
good.
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<PAGE>
ITEM 2. PROPERTIES.
The Company owned or leased the following offices and manufacturing
facilities as of January 2, 1999:
<TABLE>
<CAPTION>
OWNED SQUARE
LOCATION TYPE OF FACILITY LEASED FOOTAGE
<S> <C> <C> <C>
Rockford, MI Administration/Sales Owned 193,300
Jonesboro, AR Administration/Sales Leased 5,680
Malone, NY Administration/Sales Owned 11,718
New York, NY Administration/Sales Leased 3,811
Montecatine Terme, Italy Administration/Sales Leased 2,800
St. Laurent, Quebec, Canada Administration/Sales Leased 2,800
Saint-Sauveur-des-Monts, Quebec, Canada Administration/Sales Leased 1,500
Taipei, Taiwan Administration/Sales Leased 2,800
Chungli, Taiwan Administration/Sales Leased 2,800
Tai Chung, Taiwan Administration/Sales Leased 3,000
Leicester, England, United Kingdom Administration/Sales Leased 13,250
Bristol, England, United Kingdom Administration/Sales Leased 2,200
Moscow, Russia Administration/Sales Leased 3,800
TOTAL ADMINISTRATION/SALES 249,459
Rockford, MI Tannery Owned 160,000
Des Moines, IA Procurement Owned 6,200
Dyersburg, TN Procurement Leased 12,000
Durant, OK Procurement Leased 12,900
Dennison, KS Procurement Leased 1,855
TOTAL TANNERY AND PROCUREMENT 192,955
Jonesboro, AR Manufacturing Leased 79,197
Jonesboro, AR Manufacturing Owned 11,680
Monette, AR Manufacturing Owned 18,030
Rockford, MI Manufacturing Owned 20,833
Rockford, MI Manufacturing Owned 19,624
Rockford, MI Manufacturing Owned 7,790
Big Rapids, MI Manufacturing Owned 77,626
Kirksville, MO Manufacturing Owned 104,000
Malone, NY Manufacturing Owned 90,664
Malone, NY Manufacturing Owned 37,596
Malone, NY Manufacturing Owned 8,100
Malone, NY Manufacturing Owned 27,125
-16-
<PAGE>
Bombay, NY Manufacturing Owned 58,980
Monterrey, MX Manufacturing Leased 60,000
Aquadilla, Puerto Rico Manufacturing Leased 62,100
San Pedro, Dominican Republic Manufacturing Leased 65,111
Santo Domingo, Dominican Republic Manufacturing Leased 54,332
Alexandria, Ontario, Canada Manufacturing Owned 28,000
Cartago, Costa Rica Manufacturing Leased 88,308
TOTAL MANUFACTURING 919,096
Jonesboro, AR Warehouse Leased 2,000
Jonesboro, AR Warehouse Leased 19,500
Jonesboro, AR Warehouse Owned 13,500
Jonesboro, AR Warehouse Owned 15,478
Walnut Ridge, AR Warehouse Leased 2,000
Rockford, MI Warehouse Owned 304,278
Rockford, MI Warehouse Owned 93,140
Rockford, MI Warehouse Owned 75,000
Grand Rapids, MI Warehouse Leased 20,000
Cedar Springs, MI Warehouse Leased 32,900
Cedar Springs, MI Warehouse Leased 230,000
Big Rapids, MI Warehouse Owned 39,800
Howard City, MI Warehouse Leased 350,000
Malone, NY Warehouse Owned 115,211
Bombay, NY Warehouse Owned 26,000
St. Laurent, Quebec, Canada Warehouse Leased 33,000
Moscow, Russia Warehouse Leased 2,500
TOTAL WAREHOUSE 1,374,307
</TABLE>
In addition, the Company operates its retail stores through leases
with various third-party landlords. The Company believes that its current
facilities are suitable and adequate to meet its anticipated needs for the
next twelve months.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in litigation and various legal matters
arising in the normal course of business, including certain environmental
compliance activities. The Company has considered facts that have been
ascertained and opinions of counsel handling these matters, and does not
believe the ultimate resolution of such proceedings will have a material
adverse effect on the Company's financial condition or results of
operations.
-17-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year covered by this report.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table lists the names and ages of the Executive Officers
of the Company as of the date of this Annual Report on Form 10-K, and the
positions presently held with the Company. The information provided below
the table lists the business experience of each such Executive Officer
during the past five years. All Executive Officers serve at the pleasure
of the Board of Directors of the Company, or if not appointed by the Board
of Directors, they serve at the pleasure of management.
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD WITH THE COMPANY
---- --- -------------------------------
<S> <C> <C> <C>
Geoffrey B. Bloom 57 Chief Executive Officer and Chairman
of the Board
John Deem 43 Executive Vice President, and President,
Casual Footwear Group
Steven M. Duffy 46 Executive Vice President and President,
Global Operations Group
V. Dean Estes 49 Vice President and President,
Wolverine Footwear Group
Stephen L. Gulis, Jr. 41 Executive Vice President, Chief Financial
Officer and Treasurer
Blake W. Krueger 45 Executive Vice President, General Counsel
and Secretary
Thomas P. Mundt 49 Vice President of Strategic Planning and
Corporate Communications
Timothy J. O'Donovan 53 Chief Operating Officer and President
Nicholas P. Ottenwess 36 Corporate Controller
Robert J. Sedrowski 49 Vice President of Human Resources
James D. Zwiers 31 Associate General Counsel and Assistant
Secretary
</TABLE>
Geoffrey B. Bloom has served the Company as Chief Executive Officer
and Chairman of the Board since April 1996. From 1993 to 1996 he served
the Company as President and Chief Executive Officer. From 1987 to 1993 he
served the Company as President and Chief Operating Officer.
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<PAGE>
John Deem has served the Company as Executive Vice President and
President, Casual Footwear Group since July 1998. From 1996 to July 1998,
he served as Vice President of Global Product Development. From 1992 to
1996 he served as Executive Vice President of Product Development and
Marketing at Dexter Shoe Company.
Steven M. Duffy has served the Company as an Executive Vice President
since April 1996 and is President of the Company's Global Operations Group.
From 1993 to 1996 he served the Company as a Vice President. From 1989 to
April 1993 he served the Company in various senior manufacturing positions.
V. Dean Estes has served the Company as a Vice President since 1995.
Mr. Estes is also President of the Wolverine Footwear Group. Since he
joined the Company in 1975, Mr. Estes has served in various positions
relating to the sales, marketing and product development functions of the
Company's work boot and shoe and related businesses.
Stephen L. Gulis, Jr., has served the Company as Executive Vice
President, Chief Financial Officer and Treasurer since April 1996. From
1994 to April 1996 he served the Company as Vice President and Chief
Financial Officer. From 1993 to 1994 he served the Company as Vice
President of Finance and Corporate Controller, and from 1986 to 1993 he was
the Vice President of Administration and Controller for The Hush Puppies
Company.
Blake W. Krueger has served the Company as Executive Vice President,
General Counsel and Secretary since April 1996. From 1993 to April 1996 he
served the Company as General Counsel and Secretary. From 1985 to 1996 he
was a partner of the law firm of Warner Norcross & Judd LLP.
Thomas P. Mundt has served the Company as Vice President of Strategic
Planning and Corporate Communications since April 1996. From December 1993
to April 1996, he served the Company as Vice President of Strategic
Planning and Treasurer. From 1988 to 1993 he served in various financial
and planning positions at Sears Roebuck & Co., including Vice President
Planning, Coldwell Banker's Real Estate Group and Director of Corporate
Planning for Sears Roebuck & Co.
Timothy J. O'Donovan has served the Company as Chief Operating Officer
and President since April 1996. From 1982 to April 1996 he served the
Company as Executive Vice President.
Nicholas P. Ottenwess has served as Corporate Controller of the
Company since September 1997. From 1993 to September 1997 he served as
Vice President of Finance & Administration for The Hush Puppies Company.
-19-
<PAGE>
Robert J. Sedrowski has served the Company as Vice President of Human
Resources since October 1993. From 1990 to 1993 he served as Director of
Human Resources for the Company.
James D. Zwiers has served the Company as Associate General Counsel
and Assistant Secretary since January 1998. From 1995 to 1998 he was an
attorney with the law firm of Warner Norcross & Judd LLP. From 1992 to
1995 he attended the University of Michigan Law School. From 1990 to 1992
he was a Certified Public Accountant at BDO Siedman LLP.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Wolverine World Wide, Inc. common stock is traded on the New York
Stock Exchange and the Pacific Exchange, Inc. under the symbol "WWW." The
following table shows the high and low sales prices by calendar quarter for
1998 and 1997 as reported on the New York Stock Exchange. The prices shown
below have been retroactively adjusted to reflect the three-for-two stock
split announced in April 1997. The number of stockholders of record of
common stock on March 1, 1999, was 2,230.
<TABLE>
<CAPTION>
1998 1997
---- ----
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C> <C>
1st quarter 30 15/16 20 7/8 26 1/4 18 9/16
2nd quarter 29 1/4 19 7/8 27 5/8 22 11/16
3rd quarter 22 7/8 8 1/16 31 1/8 21 5/8
4th quarter 15 8 5/8 26 3/8 19 7/16
</TABLE>
<TABLE>
<CAPTION>
CASH DIVIDENDS DECLARED PER SHARE:
1998 1997
---- ----
<S> <C> <C> <C>
1st quarter $.0275 $.0217
2nd quarter .0275 .0217
3rd quarter .0275 .0217
4th quarter .0275 .0217
</TABLE>
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<PAGE>
Cash dividends declared per share for 1997 have been retroactively ad-
justed to reflect the three-for-two stock split announced in April 1997.
Dividends of $.03 were declared for the first quarter of fiscal 1999.
On December 8, 1998, the Company issued 6.50% Senior Notes of the
Company due on December 8, 2008, in the aggregate principal amount of
$75,000,000 (the "Notes"). The Notes were sold to a limited number of
institutional investors for cash pursuant to a private placement
exemption from registration.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
FIVE-YEAR OPERATING AND FINANCIAL SUMMARY <F1>
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales and other
operating income $669,329 $665,125 $511,029 $413,957 $387,534
Net earnings 41,651 41,539 32,856 24,067 16,598
Per share of common stock:
Net earnings<F2><F3>:
Basic $ 1.00 $ 1.00 $ .81 $ .66 $ .48
Diluted .97 .96 .76 .62 .45
Cash dividends<F3><F4> .11 .09 .07 .06 .05
FINANCIAL POSITION AT YEAR END
Total assets $527,478 $449,663 $361,598 $283,554 $231,582
Long-term debt 161,650 94,264 41,309 30,678 43,786
</TABLE>
NOTES TO FIVE-YEAR OPERATING AND FINANCIAL SUMMARY
1. This summary should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto, which are
attached as Appendix A to this Form 10-K.
2. Basic earnings per share are based on the weighted average number of
shares of common stock outstanding during the year after adjustment
for nonvested common stock. Diluted earnings per share assume the
exercise of dilutive stock options and the vesting of all common
stock.
-21-
<PAGE>
3. On April 17, 1997, July 11, 1996, April 19, 1995, and March 10, 1994,
the Company announced three-for-two stock splits on shares of common
stock outstanding at May 2, 1997, July 26, 1996, May 1, 1995, and
March 21, 1994, respectively. All share and per share data have been
retroactively adjusted for the increased shares resulting from these
stock splits.
4. Cash dividends per share represent the rates paid by the Company on
the shares outstanding.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OPERATIONS
RESULTS OF OPERATIONS 1998 COMPARED TO 1997
Net sales and other operating income increased 0.6% to $669.3 million
in 1998 as compared to $665.1 million in 1997. The Company's branded footwear
businesses consist primarily of The Hush Puppies Company, the Wolverine
Footwear Group (comprised of WOLVERINE[REGISTERED], HY-TEST[REGISTERED],
MERRELL[REGISTERED], COLEMAN[REGISTERED], BATES[REGISTERED] and HARLEY-
DAVIDSON[REGISTERED] brands), the CATERPILLAR[REGISTERED] Footwear Group, and
the Wolverine Slipper Group and contributed a $10.1 million (1.7%) increase
in 1998 net sales and other operating income, while the Company's other
business units (Hush Puppies Retail Division and Wolverine Leathers Division)
reported a $5.9 million (7.7%) decline in net sales and other operating
income in 1998 compared to 1997.
The Hush Puppies Company reported a $29.8 million (13.0%) decline in
1998 net sales and other operating income, while the Wolverine Footwear
Group contributed $33.6 million (13.8%) of additional net sales and other
operating income in 1998 as compared to 1997. The Caterpillar Footwear
Group recorded a $1.8 million (2.8%) decrease in 1998 net sales and other
operating income compared to 1997. Net sales and other operating income of
the Wolverine Slipper Group decreased $1.9 million (4.5%) for 1998 compared
to the prior year. The Company acquired Sivan-Co. Limited in the fourth
quarter of 1998 and established a wholesale footwear operation in Russia
that contributed $5.0 million to net sales and other operating income in
1998.
The Hush Puppies U.S. wholesale operations' net sales and other
operating income decreased $12.7 million (9.3%) from the 1997 level
primarily as the result of decreased demand for the HUSH
PUPPIES[REGISTERED] Classics line. Net sales and other operating income
related to Hush Puppies international licensing increased $0.6 million
(5.3%) in 1998 over 1997 levels, highlighted by gains from licensees in
Japan, Mexico, Central America, India and Australia. The Hush Puppies U.K.
-22-
<PAGE>
wholesale operation's 1998 net sales and other operating income decreased
$18.7 million (29.7%) from 1997 as a result of the planned reduction in the
specialty store segment of its distribution channel. Net sales and other
operating income in the Hush Puppies Canadian wholesale operation increased
$1.0 million (5.8%) in 1998 compared to 1997.
The Wolverine Footwear Group reported record net sales and other
operating income in 1998 despite unseasonably warm weather during the key
boot selling season. The Wolverine Boots and Shoes Division reported a $1.5
million (1.1%) increase in net sales and other operating income over 1997
as the fourth quarter introduction of the new WOLVERINE FUSION<Trademark>
durable comfort technology received favorable acceptance in the market
place. Net sales and other operating income related to international
licensing decreased $0.3 million (16.2%) in 1998 compared to the prior
year. Hy-Test Boots and Shoes experienced a $3.8 million (10.3%) decrease
in net sales and other operating income from 1997 primarily related to the
sale of five Company-owned distribution units over the last eighteen
months. The MERRELL[REGISTERED] outdoor footwear business, which was
acquired in the fourth quarter of 1997, contributed $23.9 million to the
increase in net sales and other operating income in 1998 over 1997, while
HARLEY-DAVIDSON[REGISTERED] brand footwear, manufactured under a license
acquired in 1998, began shipping in the third quarter of 1998 and
contributed $6.0 million to net sales and other operating income.
COLEMAN[REGISTERED] brand footgear contributed an additional $6.0 million
in net sales and other operating income to 1998 results as compared to
1997. Net sales and other operating income for BATES[REGISTERED] brand
footwear, including shipments to the United States Department of Defense,
remained flat in 1998 compared to 1997.
The CATERPILLAR[REGISTERED] Footwear Group recognized a $1.8 million
(2.8%) decrease in 1998 net sales and other operating income from the 1997
level. The U.S. wholesale operation reported a $3.7 million (8.3%) drop in
net sales and other operating income which was related primarily to
unfavorably warm weather in the fourth quarter of 1998 and difficult retail
market conditions. International royalty revenue continued to grow,
reflecting a $1.9 million (10.2%) increase over 1997 in net sales and other
operating income for 1998.
The Wolverine Slipper Group's net sales and other operating income
decreased $1.9 million (4.5%) compared to the level recorded in 1997. The
Wolverine Slipper Group, which historically ships the majority of its
products in the fourth quarter, was particularly hard hit by the second
unseasonably warm winter in a row.
The Hush Puppies Retail Division's net sales and other operating
income increased $1.2 million (3.4%) in 1998 compared to 1997; however,
same-store net sales declined 3.7%.
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<PAGE>
The Wolverine Leathers Division recorded a net sales and other
operating income decrease of $7.1 million (17.5%) in 1998 as compared to
1997. The decrease relates primarily to reduced demand for the HUSH
PUPPIES[REGISTERED] Classics suede product line. In addition, during 1998
the price of cowhide leather decreased making it a cost-effective alternative
to pigskin supplied by this business unit.
Gross margin as a percentage of net sales and other operating income
increased to 31.8% in 1998 from 30.7% in 1997. Gross margin dollars
increased $8.5 million (4.2%) in 1998 to $212.6 million as compared to
$204.1 million in 1997. The gross margin percentage of the branded
footwear businesses increased to 31.0% in 1998 from 30.4% in 1997. The Hush
Puppies Company reported a gross margin percentage in 1998 that was
comparable with 1997 as improved margins in the Hush Puppies U.K. wholesale
operation were offset by increased seasonal markdowns experienced by the
U.S. wholesale operation. The Wolverine Footwear Group experienced a 0.5
percentage point increase in gross margins in 1998 compared to 1997 due
primarily to the higher initial gross margins on MERRELL[REGISTERED] brand
products. The CATERPILLAR[REGISTERED] Footwear Group reported an improved
gross margin percentage in 1998 compared to 1997 as a result of higher
international royalties, which positively impacts the gross margin
percentage. Additionally, the Wolverine Slipper Group experienced a 3.3%
margin improvement primarily reflecting efficiencies resulting from the
1997 factory restructuring that was fully implemented in 1998 and the
elimination of unprofitable product lines. Gross margins for the other
business units increased from 33.0% in 1997 to 37.9% in 1998 primarily as
a result of improved labor efficiencies and lower raw material costs
experienced in the Wolverine Leathers Division.
Selling and administrative expenses as a percentage of net sales and
other operating income increased to 21.4% in 1998 from 20.6% in 1997 as
these costs increased $6.2 million (4.6%) to $143.4 million in 1998 from
$137.2 million in 1997. The increase in selling and administrative expenses
as a percentage of net sales and other operating income resulted primarily
from costs associated with the start up of the new 350,000 square foot
Howard City distribution center, increased media advertising spending on
the Company's core brands and increased investments in branded marketing
and operations related to various new business initiatives, including the
HARLEY-DAVIDSON[REGISTERED], MERRELL[REGISTERED] and COLEMAN[REGISTERED]
footwear brands and the Russian footwear distribution operations.
Net interest expense of $7.3 million was $2.7 million (58.7%) greater
in 1998 than the 1997 level of $4.6 million. The increase in net interest
expense for 1998 reflects additional borrowings on the Company's revolving
credit facility to support the repurchase of 2.3 million shares of the
Company's common stock during 1998, the 1997 fourth quarter acquisition of
the MERRELL[REGISTERED] outdoor footwear business and increased working
capital requirements in 1998 as compared to 1997.
-24-
<PAGE>
The 1998 effective tax rate of 32.6% increased from 32.0% in 1997 as a
result of earnings from certain foreign subsidiaries, which are taxed
generally at lower rates, becoming a smaller percentage of total
consolidated earnings.
Net earnings of $41.7 million for 1998 reflect a 0.3% increase over
net earnings of $41.5 million reported for 1997. Diluted earnings per
share for 1998 were $0.97 compared to $0.96 in 1997. Basic earnings per
share of $1.00 were reported for both 1998 and 1997. Increased net earnings
are primarily a result of the items noted above.
RESULTS OF OPERATIONS 1997 COMPARED TO 1996
Net sales and other operating income increased 30.2% to $665.1 million
during 1997 from $511.0 million in 1996. The Company's branded footwear
businesses contributed a $133.5 million (29.3%) increase in 1997 net sales
and other operating income, while the Company's other business units
reported a $20.6 million (36.8%) increase in net sales and other operating
income in 1997 compared to 1996.
The Hush Puppies Company had a $59.4 million (35.0%) increase in 1997
net sales and other operating income, while the Wolverine Footwear Group
contributed $42.9 million (24.4%) of additional net sales and other
operating income in 1997 as compared to 1996. The CATERPILLAR[REGISTERED]
Footwear Group continued its strong growth rate showing a $24.9 million
(63.7%) increase in 1997 net sales and other operating income over 1996.
Net sales and other operating income of the Wolverine Slipper Group were
flat for 1997 as compared to the prior year.
The Hush Puppies U.S. wholesale operations' net sales and other
operating income increased $16.6 million (13.7%) over the 1996 level as a
result of the continued popularity of the HUSH PUPPIES[REGISTERED] Classics
product line. Net sales and other operating income related to Hush Puppies
international licensing increased $1.3 million (12.1%) in 1997 over 1996
levels, reflecting solid growth rates throughout the world. The Hush
Puppies U.K. wholesale operation, which was acquired at the end of the
third quarter of 1996, had a $36.4 million increase over its four months of
1996 operations.
The Wolverine Footwear Group continued its strong performance in 1997
as the Wolverine Boots and Shoes Division reported a $22.8 million (19.0%)
increase in net sales and other operating income over 1996. Hy-Test Boots
and Shoes, which was acquired near the end of the first quarter of 1996,
had a $12.1 million (49.4%) increase over its nine months of 1996
operations. BATES[REGISTERED] footwear net sales and other operating income
improved $4.3 million (14.8%) in 1997 over 1996 reflecting increased
penetration into military, uniform and export markets. The
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<PAGE>
MERRELL[REGISTERED] outdoor footwear business was acquired in the fourth
quarter of 1997 and contributed marginally to net sales and other operating
income.
The CATERPILLAR[REGISTERED] Footwear Group recognized a $24.9 million
(63.7%) increase in 1997 net sales and other operating income over 1996.
Domestically, the CAT[REGISTERED] footwear brand continued to gain momentum
as approximately 800 new specialty and department store customers were
added in 1997. Internationally, the brand continued to show solid growth
gains in the United Kingdom and Europe and accelerated its growth in the
Pacific Rim and Latin American regions.
The Wolverine Slipper Group's net sales and other operating income was
1.0% above the level recorded in 1996. Higher sales of HUSH
PUPPIES[REGISTERED] branded slippers offset lower sales of private branded
products in 1997.
The Hush Puppies Retail Division's net sales and other operating
income increased $6.1 million (20.2%) in 1997 with same-store net sales and
other operating income improving 7.9%.
The Wolverine Leathers Division recorded a significant net sales and
other operating income improvement of $14.5 million (56.1%) in 1997 with
both licensee and domestic accounts contributing to the increase. The 1997
performance represented the fourth consecutive year of net sales and other
operating income increases for the division. Strong demand for performance
leather and sueded products continued to drive volume increases.
Gross margin as a percentage of net sales and other operating income
increased to 30.7% in 1997 from 30.5% in 1996. The gross margin percentage
of the branded footwear businesses increased to 30.4% in 1997 from 29.9% in
1996. Gross margin dollars increased $48.3 million (31.0%) in 1997 to
$204.1 million as compared to $155.8 million in 1996. The gross margin
improvement was primarily generated by The Hush Puppies Company where the
Hush Puppies U.S. wholesale operation reported a gross margin improvement
of 4.3 percentage points in 1997 related primarily to initial pricing
improvements and manufacturing and sourcing efficiencies. The 1997
improvement in gross margin percentage by The Hush Puppies Company was
tempered to some degree by the increased net sales and other operating
income of the Hush Puppies U.K. wholesale operation, which operates at
lower gross margin levels than comparable U.S. operations. The Wolverine
and CATERPILLAR[REGISTERED] Footwear Groups experienced slightly lower
gross margin percentages in 1997 as compared to 1996 as a result of initial
investments required to position recent acquisitions and new products in
both domestic and international markets. The Wolverine Slipper Group
experienced lower gross margins as a percentage of net sales and other
operating income due to a decline in factory efficiencies. Gross margins
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<PAGE>
for the Company's other businesses declined slightly as a percentage of net
sales and other operating income as a result of strong growth of the
Wolverine Leathers Division which operates at lower gross margins than the
Hush Puppies' Retail Division.
Selling and administrative expenses as a percentage of net sales and
other operating income decreased to 20.6% in 1997 from 21.0% in 1996 as
these costs increased $29.7 million (27.6%) to $137.2 million in 1997 from
$107.5 million in 1996. Excluding the 1997 acquisition of the
MERRELL[REGISTERED] outdoor footwear business and the 1996 acquisitions of
Hy-Test and Hush Puppies (U.K.) Ltd., selling, advertising and distribution
costs increased $15.4 million or 21.4% during 1997. The reduction in
selling and administrative expenses as a percentage of net sales and other
operating income occurred despite increased investments in branded
marketing initiatives, significant information system up-grades, higher
profit sharing provisions and costs associated with employee performance
incentive plans.
Net interest expense of $4.6 million was $3.0 million greater in 1997
than the 1996 level of $1.6 million. The increase in net interest expense
for 1997 reflects additional borrowings on the revolving credit facility
over the 1996 level resulting from the 1997 acquisition of the
MERRELL[REGISTERED] outdoor footwear business and increased working capital
requirements associated with higher sales volume. Additionally, proceeds
from the November 1995 equity offering provided cash, which resulted in
lower average borrowings for the first quarter of 1996.
On September 24, 1997, the Company moved to strengthen its domestic
footwear businesses by closing three Arkansas women's shoe factories and
converting a New York slipper factory into a warehouse. These actions
resulted in a restructuring charge of $3.5 million in 1997. The
restructuring balanced the sourcing mix for HUSH PUPPIES[REGISTERED]
women's shoes and the Wolverine Slipper Group as more products will be
sourced internationally in future years.
The 1997 effective tax rate of 32.0% increased from 31.1% in 1996 as a
result of earnings from certain foreign subsidiaries, which are taxed
generally at lower rates, becoming a smaller percentage of total
consolidated earnings.
Net earnings of $41.5 million for 1997 reflect a 26.4% increase over
net earnings of $32.9 million reported for 1996. Diluted earnings per
share for 1997 were $0.96 compared to $0.76 in 1996. Basic earnings per
share of $1.00 and $0.81 were reported for 1997 and 1996, respectively.
Increased net earnings are primarily a result of the items noted above.
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LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $4.5 million in 1998
compared to $0.2 million in 1997. Cash of $54.7 in 1998 and $52.6 million
in 1997 was used to fund working capital requirements. Accounts receivable
of $152.1 million at January 2, 1999 reflect a $14.0 million (10.2%)
increase over the $138.1 million balance at January 3, 1998. Inventories
of $167.0 million at January 2, 1999 increased by $23.2 million (16.1%)
over the $143.8 million balance at January 3, 1998. More than half of the
increase in inventories is attributable to new business initiatives,
including the HARLEY-DAVIDSON[REGISTERED], MERRELL[REGISTERED] and
COLEMAN[REGISTERED] brand initiatives and the acquisition of a wholesale
footwear operation in Russia. As of year-end 1998, the Company's backlog
was 13.0% below the prior year's levels, and plans are in place to reduce
inventory levels to meet the Company's expected future customer demand.
Accounts payable of $14.9 million at January 2, 1999 reflects a $9.4 million
(38.6%) decrease from the $24.3 million balance at January 3, 1998. The
decrease in accounts payable is primarily attributable to the timing of 1998
year-end payments compared to 1997.
Additions to property, plant and equipment of $32.4 million in 1998
compare to $35.4 million reported in 1997. The replacement of legacy
information systems accounted for $15.1 million of the 1998 additions.
Other expenditures were related to the completion of the new corporate
business center, modernization of existing office buildings, expansion of
warehouse facilities and purchases of manufacturing equipment necessary to
upgrade the Company's footwear and leather manufacturing operations.
Depreciation and amortization expense of $13.0 million in 1998 compares to
$9.2 million in 1997. This increase resulted from the capital investments
noted above and the amortization of goodwill related to the 1998 and 1997
acquisitions discussed below.
The Company maintains short-term borrowing and commercial letter-of-
credit facilities of $68.4 million, of which $30.1 million and $37.0
million were outstanding at the end of 1998 and 1997, respectively. Long-
term debt, including current maturities of $161.7 million at the end of
1998 increased $67.4 million from the $94.2 million balance at the end of
1997. The increase in debt primarily resulted from seasonal working
capital requirements and the repurchase of 2.3 million shares of the
Company's common stock as discussed below.
Effective August 20, 1998, the Company's Board of Directors approved
and the Company executed a common stock repurchase program totalling 2.2
million shares of common stock. The primary purpose of this stock
repurchase program was to take advantage of the low market price relative
to management's assessment of the future prospects of the business and its
corresponding favorable effect on stockholder value. The total cost of
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shares repurchased under this program totaled $23.0 million, averaging
$10.25 per share. In addition, the Company repurchased in the ordinary
course of business 0.1 million shares of common stock at a total cost of
$1.9 million.
It is expected that continued Company growth will require increases in
capital funding over the next several years. In the first quarter of 1998,
the Company renegotiated its long-term revolving debt agreement and
increased the amount available under its domestic credit facilities from
$100 million to $150 million. The Company's subsidiary in the United
Kingdom has a $17.2 million, three-year variable rate revolving credit
agreement expiring in January 2000 to support its working capital
requirements. In addition, the Company issued $75 million of senior debt
during the fourth quarter of 1998 and used the proceeds to reduce
outstanding borrowings under its revolving credit facility. The combination
of credit facilities and cash flows from operations is expected to be
sufficient to meet future capital needs.
The Company declared dividends of $4.6 million in 1998, or $0.11 per
share, which reflects a 25.3% increase over the $3.7 million, or $0.09 per
share declared in 1997. Additionally, shares issued under stock incentive
plans provided cash of $4.1 million in 1998 compared to $8.9 million during
1997.
On September 29, 1998, the Company acquired certain assets and assumed
bank debt in the amount of $4.1 million of Sivan-Co Limited, a Russian
wholesale distributor of Hush Puppies and Caterpillar branded footwear, in
exchange for the forgiveness of $7.3 million in trade accounts receivable
that were due to the Company.
On October 17, 1997, the Company completed the purchase of
substantially all of the assets of the MERRELL[REGISTERED] outdoor footwear
business from the Outdoor Division of Sports Holdings Corp for $15.8
million and a $0.5 million note payable.
The current ratio at year-end was 6.7 to 1.0 in 1998 compared to 4.7
to 1.0 at year-end 1997. The Company's total debt to total capital ratio
increased to .36 to 1.0 in 1998 from .26 to 1.0 in 1997.
MARKET RISK DISCLOSURE
The Company has assets, liabilities and inventory purchase commitments
outside the United States that are subject to fluctuations in foreign
currency exchange rates. A substantial portion of inventory sourced from
foreign countries is purchased in U.S. dollars and is accordingly not
subject to exchange rate fluctuations. Similarly, revenues from products
sold in foreign countries under licensing and distribution arrangements are
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denominated in U.S. dollars. As a result, the Company does not engage in
forward foreign exchange or other similar contracts to reduce its economic
exposure to changes in exchange rates as the associated risk is not
considered significant.
Assets and liabilities outside the United States are primarily located
in Canada, the United Kingdom and Russia. The Company's investment in
foreign subsidiaries with a functional currency other than the U.S. dollar
are generally considered long-term. Accordingly, the Company does not hedge
these net investments. Foreign currency risk related to the Company's
operations in Russia, whose economy is presently considered to be
hyperinflationary, is limited as substantially all transactions are
denominated in the U.S. dollar. As a result of current uncertainty
regarding the stability of the Russian economy, the Company is presently
limiting additional capital investment in Russia. At January 2, 1999, the
Company's net investment in Russia was approximately $14.0 million.
Because the Company markets, sells and licenses its products
throughout the world, it could be significantly affected by weak economic
conditions in foreign markets that could reduce demand for its products.
The Company is exposed to changes in interest rates primarily as a
result of its long-term debt requirements. The Company's interest rate risk
management objectives are to limit the effect of interest rate changes on
earnings and cash flows and to lower overall borrowing costs. To achieve
its objectives, the Company maintains a significant percentage of fixed-
rate debt (62% at January 2, 1999) to take advantage of lower relative
interest rates currently available and finances seasonal working capital
needs with variable-rate debt. The Company has not historically utilized
interest swap or similar hedging arrangements to fix interest rates, but in
1998 entered into an interest rate lock agreement to fix the interest rate
prior to the issuance of 6.5% senior notes in the amount of $75 million.
The contract was settled in 1998 and resulted in a prepayment of $2.2
million that is being amortized over the term of the senior notes. The
amortization of the prepayment creates an effective interest rate of 6.78%
on the senior debt.
The table that follows provides principal cash flows and related
interest rates of the Company's short and long-term debt by fiscal year of
maturity. For foreign currency-denominated debt, the information is
presented in U.S. dollar equivalents. Variable interest rates are based on
the weighted average rates of the portfolio at January 2, 1999.
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<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
THERE- FAIR
(MILLIONS OF DOLLARS) 1999 2000 2001 2002 2003 AFTER TOTAL VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DENOMINATED IN U.S. DOLLARS:
Fixed Rate $4.8 $4.2 $4.3 $15.0 $15.0 $57.9 $101.2 $99.6
Average Interest Rate 7.8% 7.8% 7.8% 6.9% 6.9% 6.6%
Variable Rate $59.0 $59.0 $59.0
Average Interest Rate 6.7%
DENOMINATED IN CANADIAN DOLLARS:
Variable Rate $4.5 $4.5 $4.5
Average Interest Rate 7.1%
DENOMINATED IN BRITISH STERLING:
Variable Rate $1.8 $1.7 $3.5 $3.5
Average Interest Rate 7.0% 7.0%
</TABLE>
The Company does not enter into contracts for speculative or trading
purposes, nor is it a party to any leveraged derivative instruments.
YEAR 2000 READINESS DISCLOSURE
The "Year 2000 Issue" is the result of computer programs that use two
digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This
situation could result in system failures or miscalculations causing
disruptions to operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar
normal business activities.
The Company has and continues to modify or replace portions of its
software so that its computer systems and equipment will function properly
with respect to dates in the year 2000 and thereafter. This modification
and replacement process is being implemented by the Company's Information
Systems Team under a general remediation strategy developed by an Executive
Oversight Committee, consisting of internal executive management, a member
of the Board of Directors and various other third parties. The Company
presently believes that with planned modifications to existing software and
conversions to new software, the Year 2000 Issue will not pose significant
operational problems for its computer systems. However, if the Company
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fails to complete modifications required to obtain Year 2000 compliance in
a timely manner or if significant suppliers or customers experience Year
2000 problems, the Year 2000 Issue could have a material adverse impact on
the operations and financial condition of the Company.
The Company has completed a thorough assessment of all its existing
information systems. A significant portion of the Company's Year 2000
Issues will be resolved by the installation of Year 2000 compliant
information systems. The new systems are designed to manage order
processing, warehousing and finance on a fully integrated enterprise-wide
basis (the "Base System"). Implementation of the Base System began in 1997
primarily in response to business demand and growth, although implementation
of the Base System will replace software that is not Year 2000 compliant as
an ancillary benefit. Year 2000 compliance for information systems not
replaced by the Base System, including manufacturing and raw material
inventory systems, will be addressed through a combination of reprogramming
and replacement. The Company is utilizing both internal and external
resources to replace, reprogram and test its information systems for Year
2000 modifications. The Company anticipates implementation of the Base
System to be substantially complete by mid-1999 and anticipates reprogramming
and replacement efforts for Year 2000 compliance in its information systems
to be substantially complete by the end of third quarter 1999, which is prior
to any anticipated impact on its operating systems, with the balance of
modifications to be completed on less critical systems during the fourth
quarter of 1999.
The Company has also completed a thorough assessment of all operating
systems and equipment containing computer microchips that may be Year 2000
sensitive (commonly referred to as "embedded chips"). With priority given
to critical items, the Company intends to test operating systems and
equipment containing embedded chips for Year 2000 compliance and to
reprogram or replace such equipment as appropriate. Company-owned
manufacturing systems are generally Year 2000 compliant and will not
require significant reprogramming or replacement. It is intended that Year
2000 modifications for critical operating systems and equipment will be
completed by mid-1999, with the modification or elimination of lower
priority systems and equipment to be completed during the third and fourth
quarters of 1999.
The Company has initiated formal communications with significant
suppliers and vendors to determine the extent to which the Company may be
vulnerable to a failure by any of these third parties to remediate their
own Year 2000 Issues. The Company has also received Year 2000
communications from substantially all its significant customers indicating
formal attention to Year 2000 Issues. Although the Company has not
received any specific indications that any significant suppliers, vendors
or customers will not be Year 2000 compliant, other companies are widely
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resistant to providing any written or binding assurances that they will be
Year 2000 compliant given the scope and uncertainties relating to Year 2000
Issues. For this reason, the Company can provide no assurance that the
systems of suppliers, vendors or significant customers will be Year 2000
compliant or that the lack of Year 2000 compliance among suppliers, vendors
or significant customers could not have an adverse effect on the Company's
operations or financial condition.
To date, the Company has spent approximately $14.0 million for
implementation of the new Base System and estimates that total costs for
implementing the new Base System will approximate $20.0 million. The
Company has also spent approximately $0.7 million to date for additional
assessment, reprogramming, replacement and other Year 2000 compliance
issues not covered by implementation of the Base System and estimates that
total costs for such items will approximate $2.5 million. To the extent
these costs represent investment in new or upgraded technology with
definable value lasting beyond 2000 and Year 2000 compliance is merely an
ancillary benefit, the Company capitalizes and depreciates such assets over
their estimated useful lives. To the extent that Year 2000 costs do not
qualify as capital investments, the Company will expense such costs as
incurred.
The Company has given consideration to the most reasonably likely
worst-case Year 2000 scenarios and contingency planning to address such
scenarios. Year 2000 problems may involve temporary delays in the delivery
to the Company of footwear or raw materials used in manufacturing
operations. The Company sources footwear from numerous vendors located in
22 countries and sources raw materials, principally leather and footwear
soles, from a select group of domestic and international suppliers. The
possibility that Year 2000 problems could cause the temporary failure in
basic utilities, delays in transportation, interruption of electronic com-
munications or the interruption of banking and commercial payment systems
in various parts of the world is beyond the reasonable ability of the
Company to assess or control. Any such events could disrupt suppliers'
ability to make timely deliveries to the Company and could disrupt the
Company's own operations. Although there is also the risk that suppliers
may fail to completely remediate their own internal Year 2000 problems, the
Company believes this risk is mitigated by the fact that the bulk of its
supplied goods, such as pigskins for tanning or leather footwear uppers
stitched offshore, involve relatively lower levels of technology that are
less susceptible to Year 2000 problems. To the extent Year 2000 problems
affect vendors and suppliers, the Company could experience delays which in
turn could adversely affect its ability to fill customer orders in a timely
manner resulting in a reduction or delay in Company sales and earnings.
The Company believes that any supply delays will generally be
temporary in nature and that the Company can address any material delays in
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supply through the diversity of its supplier base and owned manufacturing
facilities. Because the Company sources finished footwear and stitched uppers
from numerous vendors throughout the world, and because this work is to a
large degree interchangeable, management believes it can address any serious
supplier problems by shifting orders to suppliers not experiencing significant
Year 2000 Issues or shifting production to Company-owned facilities as may
be required. To the extent any important suppliers are unable to provide
reasonable assurances of continued performance during the Year 2000, the
Company may elect to accumulate reasonable advance inventories or, because
the Company is not dependent upon any single supplier for footwear or raw
materials, may identify alternative suppliers for the goods in question.
The Company's customers consist primarily of mass merchants and
footwear retailers. Although the Company's customers are subject to the
general risks associated with the Year 2000, these risks may be mitigated
because the Company's footwear products are not vulnerable to Year 2000
Issues and because the Company's customers sell footwear in retail stores
and have a relatively low degree of direct dependence upon technology that
is vulnerable to Year 2000 Issues. Year 2000 problems among customers
could adversely affect the Company's sales and earnings. Customers are not
under an obligation to purchase Company products and an inability of
customers to purchase Company products arising from Year 2000 problems is
beyond the ability of the Company to correct or control.
Internally, an unforseen delay in implementation of the Company's new
Base System could adversely affect the Company's operations and sales and
would have to be addressed by the parallel remediation of legacy
information systems to support continuing operations until completion of
the Base System. Additionally, any delay in the reprogramming and
replacement of manufacturing or raw material inventory related systems
could also adversely affect the Company's operations and sales. The
Company does not currently believe these risks are likely because
implementation of the Base System and the reprogramming and replacement
efforts are scheduled for completion prior to the Year 2000.
The costs and anticipated completion dates for Year 2000 modifications
and the estimated impact of Year 2000 issues are based on management's best
estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources, third
party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, the level of Year 2000
disruptions experienced by the Company's suppliers and customers and the
success of any required contingency actions, and similar uncertainties.
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<PAGE>
This Year 2000 Readiness Disclosure is in part based upon and repeats
information provided to the Company by outside sources, including certain
customers, suppliers, outside consultants and other business partners and
certain manufacturers, vendors and licensors of the Company's software,
hardware and other systems and equipment. Although the Company believes
this outside information is accurate, the Company is not the original
source of this outside information and has not independently verified the
information.
INFLATION
Inflation has not had a significant effect on the Company over the
past three years nor is it expected to have a significant effect in the
foreseeable future. The Company continuously attempts to minimize the
effect of inflation through cost reductions and improved productivity.
FORWARD-LOOKING STATEMENTS
This discussion and analysis of financial condition and results of
operations, and other sections of this report, contain forward-looking
statements that are based on management's beliefs, assumptions, current
expectations, estimates and projections about the footwear industry, the
economy and about the Company itself. Words such as "anticipates,"
"believes," "estimates," "expects," "forecasts," "intends," "is likely,"
"plans," "predicts," "projects," variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions ("Future Factors") that are difficult
to predict with regard to timing, extent, likelihood and degree of
occurrence. Therefore, actual results and outcomes may materially differ
from what may be expressed or forecasted in such forward-looking
statements.
Future Factors include, but are not limited to, uncertainties relating
to changes in demand for the Company's products; changes in consumer
preferences or spending patterns; the cost and availability of inventories,
services, labor and equipment furnished to the Company; the degree of
competition by the Company's competitors; changes in government and
regulatory policies; changes in trading policies or import and export
regulations; changes in interest rates, tax laws, duties or applicable
assessments; technological developments; disruptions due to Year 2000
problems experienced by the Company and/or its suppliers or customers; and
changes in domestic or international economic conditions. These matters are
representative of the Future Factors that could cause a difference between
an ultimate actual outcome and a forward-looking statement. Historical
operating results are not necessarily indicative of the results that may be
expected in the future. Furthermore, the Company undertakes no obligation
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to update, amend or clarify forward-looking statements, whether as a result
of new information, future events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The response to this item is set forth under the caption "MARKET RISK
DISCLOSURE" in Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and is here incorporated by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this Item is set forth in Appendix A of this Annual
Report on Form 10-K and is here incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding directors of the Company contained under the
captions "Board of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the definitive Proxy Statement of the Company
dated March 22, 1999, is incorporated herein by reference. The information
regarding Executive Officers is provided in the Supplemental Item following
Item 4 of Part I above.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the captions "Compensation of
Directors," "Executive Compensation," "Employment Agreements and
Termination of Employment and Change in Control Arrangements," and
"Compensation Committee Report on Executive Compensation" in the definitive
Proxy Statement of the Company dated March 22, 1999, is incorporated herein
by reference.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the captions "Ownership of Common
Stock" and "Securities Ownership of Management" contained in the definitive
Proxy Statement of the Company dated March 22, 1999, is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information regarding certain employee loans following the caption
"Executive Compensation," under the subheading "Stock Options," and the
information contained under the captions "Compensation of Directors" and
"Certain Relationships and Related Transactions" contained in the
definitive Proxy Statement of the Company dated March 22, 1999, are
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM
8-K.
ITEM 14(a)(1). FINANCIAL STATEMENTS. Attached as Appendix A.
The following consolidated financial statements of Wolverine World
Wide, Inc. and subsidiaries are filed as a part of this report:
- Consolidated Balance Sheets as of January 2, 1999, and January 3,
1998.
- Consolidated Statements of Stockholders' Equity and Comprehensive
Income for the Fiscal Years Ended January 2, 1999, January 3, 1998,
and December 28, 1996.
- Consolidated Statements of Operations for the Fiscal Years Ended
January 2, 1999, January 3, 1998, and December 28, 1996.
- Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 2, 1999, January 3, 1998, and December 28, 1996.
- Notes to Consolidated Financial Statements as of January 2, 1999.
- Report of Independent Auditors.
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<PAGE>
ITEM 14(a)(2). FINANCIAL STATEMENT SCHEDULES. Attached as Appendix B.
The following consolidated financial statement schedule of
Wolverine World Wide, Inc. and subsidiaries is filed as a part of this
report:
- Schedule II--Valuation and qualifying accounts.
All other schedules (I, III, IV, and V) for which provision is made in
the applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
ITEM 14(a)(3). EXHIBITS.
The following exhibits are filed as part of this report:
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<PAGE>
EXHIBIT
NUMBER DOCUMENT
- ------ --------
3.1 Certificate of Incorporation, as amended. Previously filed as
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for
the period ended June 14, 1997. Here incorporated by reference.
3.2 Amended and Restated By-laws.
4.1 Certificate of Incorporation, as amended. See Exhibit 3.1 above.
4.2 Rights Agreement dated as of April 17, 1997. Previously filed
with the Company's Form 8-A filed April 12, 1997. Here
incorporated by reference.
4.3 Credit Agreement dated as of October 11, 1996, with NBD Bank as
Agent. Previously filed as Exhibit 4.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 28, 1996.
Here incorporated by reference.
4.4 Note Purchase Agreement dated as of August 1, 1994, relating to
7.81% Senior Notes. Previously filed as Exhibit 4(d) to the
Company's Quarterly Report on Form 10-Q for the period ended
September 10, 1994. Here incorporated by reference.
4.5 Note Purchase Agreement dated as of December 8, 1998, relating to
6.50% Senior Notes due on December 8, 2008.
4.6 Amendment No. 1 dated as of January 8, 1998, to the Credit
Agreement dated as of October 11, 1996, with NBD Bank as Agent.
4.7 The Registrant has several classes of long-term debt instruments
outstanding in addition to that described in Exhibits 4.4 and 4.5
above. The amount of none of these classes of debt outstanding on
March 2, 1998, exceeds 10% of the Company's total consolidated
assets. The Company agrees to furnish copies of any agreement
defining the rights of holders of any such long-term indebtedness
to the Securities and Exchange Commission upon request.
10.1 Stock Option Plan of 1979, and amendment.<F*> Previously filed
as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1988. Here incorporated by
reference.
10.2 1993 Stock Incentive Plan.<F*> Previously filed as Exhibit 10(b)
to the Company's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994. Here incorporated by reference.
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<PAGE>
EXHIBIT
NUMBER DOCUMENT
- ------ --------
10.3 1988 Stock Option Plan.<F*> Previously filed as an exhibit to
the Company's registration statement on Form S-8, filed July 21,
1988, Registration No. 33-23196. Here incorporated by reference.
10.4 Amended and Restated Directors Stock Option Plan.<F*> Previously
filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended January 1, 1994. Here incorporated by
reference.
10.5 Employees Pension Plan.<F*> Previously filed as Exhibit 10.5 to
the Company's annual Report on Form 10-K for the fiscal year
ended January 3, 1998. Here incorporated by reference.
10.6 Employment Agreement dated April 27, 1998, between the Company
and Geoffrey B. Bloom.<F*>
10.7 Executive Long-Term Incentive (Three Year) Plan 1996-1998
Period.<F*> Previously filed as Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 28,
1996. Here incorporated by reference.
10.8 1994 Directors' Stock Option Plan.<F*> Previously filed as
Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for
the period ended June 18, 1994. Here incorporated by reference.
10.9 Stock Option Loan Program.<F*> Previously filed as Exhibit 10(h)
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1991. Here incorporated by reference.
10.10 Executive Severance Agreement.<F*> Previously filed as Exhibit
10.10 to the Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998. Here incorporated by reference.
10.11 Supplemental Executive Retirement Plan, as amended.<F*>
Previously filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the period ended June 15, 1996. Here
incorporated by reference. An updated participant schedule is
attached as Exhibit 10.11.
10.12 1995 Stock Incentive Plan.<F*> Previously filed as an Appendix
to the Company's Definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders held on April 19, 1995.
Here incorporated by reference.
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EXHIBIT
NUMBER DOCUMENT
- ------ --------
10.13 Executive Long-Term Incentive (Three Year) Plan for the three
year period 1994-1996.<F*> Previously filed as Exhibit 10.13 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 30, 1995. Here incorporated by reference.
10.14 Executive Long-Term Incentive (Three Year) Plan for the three
year period 1995-1997.<F*> Previously filed as Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 30, 1995. Here incorporated by reference.
10.15 Indemnification Agreements.<F*> The form of agreement was
previously filed as Exhibit 10(n) to the Company's Annual Report
on Form 10-K for the fiscal year ended January 2, 1993. Here
incorporated by reference. The Company has entered into an
Indemnification Agreement with each director and executive
officer.
10.16 Supplemental Retirement Benefits.<F*> Previously filed as
Exhibit 10(l) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988. Here incorporated by
reference.
10.17 Benefit Trust Agreement dated May 19, 1987, and Amendments Number
1, 2 and 3 thereto.<F*> Previously filed as Exhibit 10(p) to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993. Here incorporated by reference.
10.18 1996 Executive Short-Term Incentive Plan (Annual Bonus Plan).<F*>
Previously filed as Exhibit 10.19 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 30, 1995. Here
incorporated by reference.
10.19 Outside Directors' Deferred Compensation Plan.<F*> Previously
filed as Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the period ended June 15, 1996. Here incorporated by
reference.
10.20 1984 Executive Incentive Stock Purchase Plan, and amendment.<F*>
Previously filed as Exhibit 10(b) to the Company's Annual Report
on Form 10-K for the fiscal year ended January 2, 1988. Here
incorporated by reference.
-41-
<PAGE>
EXHIBIT
NUMBER DOCUMENT
- ------ --------
10.21 Supplemental Director's Fee Agreement dated as of March 27, 1995,
between the Company and Phillip D. Matthews.<F*> Previously
filed as Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the period ended March 25, 1995. Here incorporated by
reference.
10.22 Restricted Stock Agreement dated as of March 27, 1995, between
the Company and Phillip D. Matthews.<F*> Previously filed as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the period ended March 25, 1995. Here incorporated by reference.
10.23 1997 Stock Incentive Plan.<F*> Previously filed as Appendix A to
the Company's Definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders held on April 16, 1997.
Here incorporated by reference.
10.24 Executive Short-Term Incentive Plan (Annual Bonus Plan).<F*>
Previously filed as Appendix B to the Company's Definitive Proxy
Statement with respect to the Company's Annual Meeting of
Stockholders held on April 16, 1997. Here incorporated by
reference.
10.25 Executive Long-Term Incentive Plan (3-Year Bonus Plan).<F*>
Previously filed as Appendix C to the Company's Definitive Proxy
Statement with respect to the Company's Annual Meeting of
Stockholders held on April 16, 1997. Here incorporated by
reference.
21 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
____________________________
<F*>Management contract or compensatory plan or arrangement.
-42-
<PAGE>
The Company will furnish a copy of any exhibit listed above to any
stockholder without charge upon written request to Mr. Blake W. Krueger,
Executive Vice President, General Counsel and Secretary, 9341 Courtland
Drive, Rockford, Michigan 49351.
ITEM 14(b). REPORTS ON FORM 8-K.
No reports on Form 8-K were filed in the fourth quarter of the fiscal
year ended January 2, 1999.
-43-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
WOLVERINE WORLD WIDE, INC.
Dated: April 2, 1999 By:/S/STEPHEN L. GULIS, JR.
Stephen L. Gulis, Jr.
Executive Vice President,
Chief Financial Officer and
Treasurer (Principal Financial
and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
*/S/GEOFFREY B. BLOOM Chief Executive Officer April 2, 1999
Geoffrey B. Bloom and Chairman of the Board
of Directors
*/S/TIMOTHY J. O'DONOVAN President and Director April 2, 1999
Timothy J. O'Donovan
/S/STEPHEN L. GULIS, JR. Executive Vice President, April 2, 1999
Stephen L. Gulis, Jr. Chief Financial Officer and
Treasurer (Principal
Financial and Accounting
Officer)
*/S/DANIEL T. CARROLL Director April 2, 1999
Daniel T. Carroll
*/S/DONALD V. FITES Director April 2, 1999
Donald V. Fites
-44-
<PAGE>
*/S/ALBERTO L. GRIMOLDI Director April 2, 1999
Alberto L. Grimoldi
*/S/DAVID T. KOLLAT Director April 2, 1999
David T. Kollat
*/S/PHILLIP D. MATTHEWS Director April 2, 1999
Phillip D. Matthews
*/S/DAVID P. MEHNEY Director April 2, 1999
David P. Mehney
*/S/JOSEPH A. PARINI Director April 2, 1999
Joseph A. Parini
*/S/JOAN PARKER Director April 2, 1999
Joan Parker
*/S/ELIZABETH A. SANDERS Director April 2, 1999
Elizabeth A. Sanders
*/S/PAUL D. SCHRAGE Director April 2, 1999
Paul D. Schrage
*BY/S/STEPHEN L. GULIS, JR.
Stephen L. Gulis, Jr.
Attorney-in-Fact
-45-
<PAGE>
APPENDIX A
<PAGE>
WOLVERINE WORLD WIDE, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
AS OF FISCAL YEAR END
(THOUSANDS OF DOLLARS) 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,203 $ 5,768
Accounts receivable, less allowances
(1998-$5,896; 1997-$7,292) 152,110 138,066
Inventories:
Finished products 113,923 100,272
Raw materials and work-in-process 53,116 43,562
- ----------------------------------------------------------------------------------------------------
167,039 143,834
Refundable income taxes 4,822 7,174
Deferred income taxes 5,938 4,880
Other current assets 4,866 4,139
- ----------------------------------------------------------------------------------------------------
Total current assets 340,978 303,861
Property, plant and equipment:
Land 1,177 1,178
Buildings and improvements 63,006 58,483
Machinery and equipment 108,094 96,710
Software 22,097 7,010
- ----------------------------------------------------------------------------------------------------
194,374 163,381
Less accumulated depreciation 83,239 73,050
- ----------------------------------------------------------------------------------------------------
111,135 90,331
Other assets:
Goodwill and other intangibles, less accumulated
amortization (1998-$2,447; 1997-$1,017) 19,931 18,789
Cash value of life insurance 14,725 13,166
Prepaid pension costs 15,242 9,963
Assets held for exchange 7,942 6,033
Notes receivable 4,921 4,388
Other 6,604 3,132
- ----------------------------------------------------------------------------------------------------
69,365 55,471
- ----------------------------------------------------------------------------------------------------
Total assets $521,478 $449,663
====================================================================================================
-1-
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 6,546 $ 3,251
Accounts payable 14,934 24,318
Salaries, wages and other compensation 7,776 13,512
Taxes, other than income taxes 1,927 3,463
Other accrued expenses 15,524 15,934
Current maturities of long-term debt 4,561 4,417
- ----------------------------------------------------------------------------------------------------
Total current liabilities 51,268 64,895
Long-term debt, less current maturities $157,089 89,847
Supplemental employee retirement benefits 6,993 7,741
Deferred income taxes 5,808 4,203
Other noncurrent liabilities 547
Stockholders' equity:
Common stock, $1 par value:
Authorized: 80,000,000 shares
issued, including treasury shares:
1998-43,832,070 shares; 1997-43,310,718 shares 43,832 43,311
Additional paid-in capital 72,825 64,912
Retained earnings 227,829 190,799
Accumulated other comprehensive income (1,014) (68)
Unearned compensation (5,999) (4,285)
Cost of shares in treasury:
1998-3,067,177 shares; 1997-758,113 shares (37,153) (12,239)
- ----------------------------------------------------------------------------------------------------
Total stockholders' equity 300,320 282,430
- ----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $521,478 $449,663
====================================================================================================
</TABLE>
( ) Denotes deduction.
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
WOLVERINE WORLD WIDE, INC.
<TABLE>
<CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
<CAPTION>
FISCAL YEAR
(THOUSANDS OF DOLLARS) 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of the year $ 43,311 $ 42,244 $ 41,551
Common stock issued under stock incentive
plans (1998-521,352 shares;
1997-1,067,109 SHARES; 1996-693,027 SHARES) 521 1,067 693
- --------------------------------------------------------------------------------------------------
Balance at end of the year 43,832 43,311 42,244
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of the year 64,912 53,943 48,475
Proceeds over par value and income tax benefits
associated with common stock issued under
stock incentive plans 7,913 10,969 5,468
- --------------------------------------------------------------------------------------------------
Balance at end of the year 72,825 64,912 53,943
RETAINED EARNINGS
Balance at beginning of the year 190,799 152,948 123,066
Net earnings 41,651 41,539 32,856
Cash dividends (1998-$.11 per share;
1997-$.09 per share; 1996-$.07 per share) (4,621) (3,688) (2,974)
- --------------------------------------------------------------------------------------------------
Balance at end of the year 227,829 190,799 152,948
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of the year (68) 79 (324)
Foreign currency translation adjustment (946) (147) 403
- --------------------------------------------------------------------------------------------------
Balance at end of the year (1,014) (68) 79
UNEARNED COMPENSATION
Balance at beginning of the year (4,285) (2,908) (1,827)
Awards under stock incentive plans (4,383) (3,117) (2,469)
Compensation expense 2,669 1,740 1,388
- --------------------------------------------------------------------------------------------------
Balance at end of the year (5,999) (4,285) (2,908)
-3-
<PAGE>
COST OF SHARES IN TREASURY
Balance at beginning of the year (12,239) (7,014) (6,727)
Common stock purchased for treasury
(1998-2,309,064 shares; 1997-200,790 shares;
1996-9,410 shares) (24,914) (5,225) (287)
- --------------------------------------------------------------------------------------------------
Balance at end of the year (37,153) (12,239) (7,014)
- --------------------------------------------------------------------------------------------------
Total stockholders' equity at end of the year $300,320 $282,430 $239,292
==================================================================================================
COMPREHENSIVE INCOME
Net earnings $ 41,651 $ 41,539 $ 32,856
Foreign currency translation adjustments (946) (147) 403
- --------------------------------------------------------------------------------------------------
Total comprehensive income $ 40,705 $ 41,392 $ 33,259
==================================================================================================
</TABLE>
( ) Denotes deduction.
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
WOLVERINE WORLD WIDE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
FISCAL YEAR
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales and other operating income $669,329 $665,125 $511,029
Costs and expenses:
Cost of products sold 456,726 460,999 355,224
Selling and administrative expenses 143,403 137,157 107,492
Interest expense 8,449 5,455 3,127
Interest income (1,170) (845) (1,532)
Restructuring charge 3,450
Other income - net 113 (2,172) (949)
- -----------------------------------------------------------------------------------------
607,521 604,044 463,362
- -----------------------------------------------------------------------------------------
Earnings before income taxes 61,808 61,081 47,667
Income taxes 20,157 19,542 14,811
- -----------------------------------------------------------------------------------------
Net earnings $ 41,651 $ 41,539 $ 32,856
=========================================================================================
Net earnings per share:
Basic $ 1.00 $ 1.00 $ .81
Diluted .97 .96 .76
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
WOLVERINE WORLD WIDE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
FISCAL YEAR
(THOUSANDS OF DOLLARS) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 41,651 $ 41,539 $ 32,856
Adjustments necessary to reconcile net earnings
to net cash provided by (used in) operating activities:
Depreciation and amortization 13,036 9,151 7,147
Deferred income taxes (credit) 547 4,642 (214)
Other (5,025) (2,980) (398)
Changes in operating assets and liabilities:
Accounts receivable (21,322) (6,092) (32,752)
Inventories (17,043) (27,744) (19,526)
Other operating assets 1,657 (5,794) 154
Accounts payable (9,384) (17,162) 26,085
Other operating liabilities (8,588) 4,214 4,056
- ----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (4,471) (226) 17,408
INVESTING ACTIVITIES
Business acquisitions (15,753) (29,158)
Additions to property, plant and equipment (32,376) (35,419) (20,639)
Other (1,348) (5,950) 4,086
- ----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (33,724) (57,122) (45,711)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 12,739 4,711
Payments of short-term debt (9,444) (3,090) (1,313)
Proceeds from long-term borrowings 180,089 112,090 58,000
Payments of long-term debt (116,814) (59,135) (47,369)
Deferred financing and interest costs (2,456)
Cash dividends (4,621) (3,688) (2,974)
Purchase of common stock for treasury (24,914) (5,225) (287)
Proceeds from shares issued under stock incentive plans 4,051 8,919 3,692
- ----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 38,630 54,582 9,749
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 435 (2,766) (18,554)
-6-
<PAGE>
Cash and cash equivalents at beginning of the year 5,768 8,534 27,088
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the year $ 6,203 5,768 $ 8,534
==========================================================================================================
OTHER CASH FLOW INFORMATION
Interest paid $ 9,596 6,361 $ 3,595
Income taxes paid 10,751 11,174 8,426
</TABLE>
( ) Denotes reduction in cash and cash equivalents.
See accompanying notes to consolidated financial statements.
-7-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Wolverine
World Wide, Inc. and its wholly owned subsidiaries (collectively, the
Company). Upon consolidation, all intercompany accounts, transactions and
profits have been eliminated.
FISCAL YEAR
The Company's fiscal year is the 52- or 53-week period that ends on the
Saturday nearest the end of December. Fiscal years presented herein
include the 52-week periods ended January 2, 1999 and December 28, 1996,
and the 53-week period ended January 3, 1998.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Revenue is recognized on the sale of products when the related goods have
been shipped and legal title has passed to the customer.
CASH EQUIVALENTS
All short-term investments with a maturity of three months or less when
purchased are considered cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method for substantially all inventories
(see Note C). Foreign and retail inventories are valued using methods
approximating cost under the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost and include
expenditures for new facilities, major renewals, betterments and software.
Normal repairs and maintenance are expensed as incurred.
Depreciation of plant, equipment and software is computed using the
straight-line method. The depreciable lives for buildings and improvements
-8-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
range from five to forty years; from three to ten years for machinery and
equipment; and from three to ten years for software.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED AND OBTAINED FOR INTERNAL USE. The SOP provides guidelines
for determining whether costs should be expensed or capitalized for computer
software developed or purchased for internal use. SOP 98-1 is effective for
fiscal years beginning after December 15, 1998. The Company believes that its
current accounting policies for such items are substantially in compliance
with SOP 98-1 and, therefore, adoption will not have a material effect on its
consolidated financial position or results of operations.
ADVERTISING COSTS
Advertising costs are expensed as incurred and totaled $29,673,000 in 1998,
$26,976,000 in 1997 and $21,186,000 in 1996.
INCOME TAXES
The provision for income taxes is based on the earnings reported in the
consolidated financial statements. A deferred income tax asset or liability
is determined by applying currently enacted tax laws and rates to the
cumulative temporary differences between the carrying value of assets and
liabilities for financial statement and income tax purposes. Deferred income
tax expense (credit) is measured by the net change in deferred income tax
assets and liabilities during the year.
EARNINGS PER SHARE
Basic earnings per share is computed based on weighted average shares of
common stock outstanding during each year after adjustment for nonvested
common stock issued under stock incentive plans. Diluted earnings per share
assumes the exercise of dilutive stock options and the vesting of all common
stock.
The following table sets forth the reconciliation of weighted average shares
used in the computation of basic and diluted earnings per share:
-9-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding during the year 42,218,378 42,214,620 41,541,944
Adjustment for nonvested common stock (697,962) (699,107) (900,898)
- -----------------------------------------------------------------------------------------
Denominator for basic earnings per share 41,520,416 41,515,513 40,641,046
Effect of dilutive stock options 733,195 1,249,070 1,412,691
Adjustment for nonvested common stock 697,962 699,107 900,898
- -----------------------------------------------------------------------------------------
Denominator for diluted earnings per share 42,951,573 43,463,690 42,954,635
=========================================================================================
</TABLE>
Options to purchase 989,662 shares of common stock in 1998 and 116,275 shares
in 1997 have not been included in the denominator for computation of diluted
earnings per share because related exercise prices were greater than the
average market price for the period and, therefore, were antidilutive.
Antidilutive options in 1996 were not significant.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company's financial instruments consist of cash and cash equivalents,
accounts and notes receivable, accounts and notes payable and long-term debt.
The Company's estimate of the fair value of these financial instruments
approximates their carrying amounts at January 2, 1999, January 3, 1998 and
December 28, 1996. Fair value was determined using discounted cash flow
analyses and current interest rates for similar instruments. The Company
does not hold or issue financial instruments for trading purposes.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which is effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 requires companies to record
derivative instruments on the balance sheet at fair value and establishes
accounting rules for changes in fair value that result from hedging
activities. The Company does not currently engage in significant hedging
activities that require use of derivative instruments and does not believe
the adoption of SFAS No. 133 will have a material effect on its consolidated
financial position or results of operations.
The Company does not require collateral or other security on trade accounts
receivable.
-10-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMPREHENSIVE INCOME
As of the beginning of 1998, the Company adopted SFAS No. 130, REPORTING
COMPREHENSIVE INCOME. SFAS No. 130 defines comprehensive income as including
net earnings and any revenues, expenses, gains and losses that, under
generally accepted accounting principles, are excluded from net earnings and
recognized directly as a component of stockholders' equity. The Company
elected to disclose comprehensive income within the consolidated statements
of stockholders' equity and comprehensive income.
RECLASSIFICATIONS
Certain amounts previously reported in 1997 and 1996 have been reclassified
to conform with the presentation used in 1998.
- ---------------------------------------------------------------------------
NOTE B - BUSINESS ACQUISITIONS
- ---------------------------------------------------------------------------
On September 29, 1998, the Company acquired certain assets and assumed bank
debt in the amount of $4,111,000 of Sivan-Co Limited, a Russian wholesale
distributor of Hush Puppies and Caterpillar branded footwear, in exchange for
the forgiveness of $7,278,000 in trade accounts receivable that were due to
the Company.
On October 17, 1997, the Company acquired the assets of the Merrell outdoor
footwear business from the Outdoor Division of Sports Holding Corp. for cash
of $15,753,000, including related transaction expenses, and a $500,000 note
payable in 1998.
On March 22, 1996, the Company acquired the assets and assumed certain
liabilities of the work, safety and occupational footwear business of Hy-
Test, Inc. from The Florsheim Shoe Company for a cash purchase price of
$24,468,000, including related transaction expenses.
On August 24, 1996, the Company acquired the rights to and certain assets of
the Hush Puppies[REGISTERED] wholesale shoe business in the United Kingdom
and Ireland from British Shoe Corporation, a subsidiary of Sears Plc, for a
purchase price of $7,045,000, of which $2,355,000 is payable over a three-
year period ending in 1999.
The acquisitions were accounted for using the purchase method and,
accordingly, the operating results of these acquired businesses are included
in the consolidated statements of operations since the dates of acquisition.
-11-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The purchase prices were allocated to the net assets acquired based on their
fair market value at the dates of acquisition. Goodwill and other intangibles
recognized in connection with these transactions totaled $2,446,000 in 1998,
$5,914,000 in 1997 and $11,480,000 in 1996, and are being amortized over
periods ranging from five to seventeen years.
Consolidated net sales would not have differed materially from reported
amounts in 1998 and would have approximated $685,000,000 in 1997 and
$602,000,000 in 1996 on a pro forma basis if the acquisitions had occurred at
the beginning of 1996. Consolidated pro forma net earnings for all three
years would not have been materially different from reported amounts.
- ---------------------------------------------------------------------------
NOTE C - INVENTORIES
- ---------------------------------------------------------------------------
Inventories of $136,198,000 at January 2, 1999 and $122,607,000 at January 3,
1998 have been valued using the LIFO method. If the FIFO method had been
used, inventories would have been $14,455,000 and $18,204,000 higher than
reported at January 2, 1999 and January 3, 1998, respectively.
- ---------------------------------------------------------------------------
NOTE D - DEBT
- ---------------------------------------------------------------------------
Notes payable consist primarily of unsecured short-term debt of the Company's
Canadian and United Kingdom subsidiaries. The notes bear interest of up to 1%
over the respective foreign bank base rate (7.1% and 6.6% weighted average
base rate at January 2, 1999 and January 3, 1998, respectively).
The Company has short-term debt and commercial letter-of-credit facilities
that allow for total borrowings up to $68,399,000. In addition to the notes
payable discussed above, amounts outstanding under these facilities consist
of letters-of-credit that totaled $30,075,000 and $37,047,000 at January 2,
1999 and January 3, 1998, respectively.
-12-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-term debt consists of the following obligations:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS) 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
6.5% senior notes payable $ 75,000
7.81% senior notes payable to insurance companies 25,714 $30,000
Revolving credit obligations 60,660 63,922
Other 276 342
- -----------------------------------------------------------------------------------
161,650 94,264
Less current maturities 4,561 4,417
- -----------------------------------------------------------------------------------
$157,089 $89,847
===================================================================================
</TABLE>
The 6.5% senior notes payable require payments of interest only through
December 2002 at which time annual principal payments of $10,714,000 become
due through the maturity date of December 8, 2008. In connection with the
issuance of these senior notes, the Company entered into an interest rate
lock agreement with a bank that was settled on November 4, 1998 and resulted
in a prepayment of $2,200,000. This prepayment is being amortized over the
term of the notes using the effective interest method.
The 7.81% senior notes payable to insurance companies require equal annual
principal payments of $4,285,000 through 2003, with the balance due on August
15, 2004.
The Company has domestic and foreign revolving credit agreements that allow
for borrowings of up to $167,470,000 ($167,227,000 in 1997), of which
$17,470,000 pertains to the Company's United Kingdom subsidiary. The
agreements require that interest be paid at variable rates based on both
LIBOR and the domestic prime rate. The weighted average interest rate of
outstanding borrowings under these facilities was 6.7% at January 2, 1999 and
6.4% at January 3, 1998. The foreign commitment expires on January 9, 2000
and the domestic facility expires on October 11, 2001. Maximum borrowings
under the agreements were $149,000,000 in 1998 and $99,600,000 in 1997.
The long-term loan agreements contain restrictive covenants which, among
other things, require the Company to maintain certain financial ratios and
-13-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
minimum levels of tangible net worth. At January 2, 1999, unrestricted
retained earnings are $53,099,000. The agreements also impose restrictions on
securing additional debt, sale and merger transactions and the disposition of
significant assets.
Principal maturities of long-term debt during the four years subsequent to
1999 are as follows: 2000 $5,946,000; 2001 $63,286,000; 2002 $15,000,000;
2003 $15,000,000.
Interest costs of $1,145,000 in 1998, $768,000 in 1997 and $610,000 in 1996
were capitalized in connection with various capital improvement and computer
hardware and software installation projects.
- ---------------------------------------------------------------------------
NOTE E - LEASES
- ---------------------------------------------------------------------------
The Company leases machinery, transportation equipment and certain warehouse
and retail store space under operating lease agreements which expire at
various dates through 2012. At January 2, 1999, minimum rental payments due
under all noncancelable leases are as follows: 1999 $6,721,000;
2000 $5,862,000; 2001 $4,948,000; 2002 $3,350,000; 2003 $2,423,000;
thereafter $14,068,000.
Rental expense under all operating leases consisted primarily of minimum
rentals and totaled $9,085,000 in 1998, $9,013,000 in 1997 and $7,468,000 in
1996.
- ---------------------------------------------------------------------------
NOTE F - CAPITAL STOCK
- ---------------------------------------------------------------------------
The Company has 2,000,000 authorized shares of $1 par value preferred stock,
of which none is issued and outstanding.
On April 17, 1997 and July 11, 1996, the Company announced three-for-two
stock splits on shares of common stock outstanding at May 2, 1997 and July
26, 1996, respectively. All share and per share data included in the
consolidated financial statements has been retroactively adjusted for the
increased shares resulting from these stock splits.
-14-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has a preferred stock rights plan that is designed to protect
stockholder interests in the event the Company is confronted with coercive or
unfair takeover tactics. One right is associated with each share of common
stock currently outstanding. The rights trade with the common stock and
become exercisable only upon the occurrence of certain triggering events.
Each right, when exercisable, will entitle the holder to purchase one one-
hundredth of a share of Series B junior participating preferred stock for
$120. The Company has designated 500,000 shares of preferred stock as Series
B junior participating preferred stock for possible future issuance under the
Company's stock rights plan. Upon issuance for reasons other than
liquidation, each share of Series B junior participating preferred stock will
have 100 votes and a preferential quarterly dividend equal to the greater of
$21 per share or 100 times the dividend declared on common stock.
In the event the Company is a party to a merger or other business
combination, regardless of whether the Company is the surviving corporation,
rights holders other than the party to the merger will be entitled to receive
common stock of the surviving corporation worth twice the exercise price of
the rights. The plan also provides for protection against self-dealing
transactions by a 15% stockholder or the activities of an adverse person (as
defined). The Company may redeem the rights for $.01 each at any time prior
to a person being designated as an adverse person or fifteen days after a
triggering event. Unless redeemed earlier, all rights expire on May 7, 2007.
The Company has stock incentive plans under which options to purchase shares
of common stock may be granted to officers, other key employees and
nonemployee directors. Options granted are exerciseable over ten years and
vest over various periods ranging up to three years. All unexercised options
are available for future grants upon their cancellation.
-15-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the transactions under the stock option plans is as follows:
<TABLE>
<CAPTION>
SHARES UNDER WEIGHTED-AVERAGE
OPTIONS OPTION PRICE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1995 2,248,437 $ 5.43
Granted in 1996 624,666 13.05
Exercised (515,227) 13.85
Cancelled (16,098) 11.02
- ----------------------------------------------------------------------------------------
Outstanding at December 28, 1996 2,341,778 7.71
Granted in 1997 798,015 24.12
Exercised (922,491) 20.48
Cancelled (35,861) 17.09
- ----------------------------------------------------------------------------------------
Outstanding at January 3, 1998 2,181,441 13.65
Granted in 1998 1,171,967 18.88
Exercised (328,899) 20.65
Cancelled (626,058) 25.48
- ----------------------------------------------------------------------------------------
Outstanding at January 2, 1999 2,398,451 $14.82
========================================================================================
</TABLE>
Shares available for grant under the stock option plans were 1,131,544 at
January 2, 1999 and 1,879,818 at January 3, 1998.
The weighted-average grant-date fair value was $7.37 in 1998, $7.91 in 1997
and $4.27 in 1996 for stock options granted.
During 1998, the Board of Directors approved the cancellation and reissuance
of stock options representing 594,478 shares of common stock. The cancelled
options had original exercise prices ranging from $21.00 to $27.97. The
reissued options have an exercise price of $15.00, which was 38% above the
closing market price on the date of reissuance.
The exercise price of options outstanding at January 2, 1999 ranges from
$1.73 to $30.56. A summary of stock options outstanding at January 2, 1999
by range of option price is as follows:
-16-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
----------------------------------------
NUMBER OF OPTIONS OPTION PRICE
---------------------------------------------------- REMAINING
OUTSTANDING EXERCISABLE OUTSTANDING EXERCISABLE CONTRACTUAL LIFE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Less than $10 689,092 689,092 $ 6.51 $ 6.51 5.3 years
$10 to $20 1,089,039 497,800 13.88 13.29 8.6 years
Greater than $20 620,320 427,946 25.72 25.59 7.9 years
- ------------------------------------------------------------------------------------------------
2,398,451 1,614,838 $14.82 $13.66 7.5 years
================================================================================================
</TABLE>
The Company has elected to follow Accounting Principles Board (APB) Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations
in accounting for its stock incentive plans because the alternative fair
value accounting provided for under SFAS No.123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, requires the use of option valuation models that were not
specifically developed for valuing the types of stock incentive plans
maintained by the Company. Under APB Opinion No. 25, compensation expense is
recognized when the market price of the underlying stock award on the date of
grant exceeds any related exercise price.
Pro forma information regarding net earnings and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its stock awards using the fair value method. The fair value of
these awards was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions: risk free
interest rate of 5% (6% in 1997 and 1996); dividend yield of 0.5%; expected
market price volatility factor of 0.46 (0.32 in 1997 and 1996); and an
expected option life of four years.
The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options which have no vesting provisions and are
fully transferable. In addition, the model requires input of highly
subjective assumptions. Because the Company's stock options have
characteristics significantly different from traded options and the input
assumptions can materially affect the estimate of fair value, in management's
opinion, the Black-Scholes option model does not necessarily provide a
reliable measure of the fair value of its stock options.
-17-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For purposes of pro forma disclosures, the estimated fair value of stock
options are amortized to expense over the related vesting period. The
Company's pro forma information under SFAS No. 123 is as follows:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net earnings $39,130 $38,945 $31,613
Pro forma net earnings per share:
Basic $ .94 $ .94 $ .78
Diluted .91 .90 .74
</TABLE>
The Company also has nonvested stock award plans for officers and other key
employees. Common stock issued under these plans is subject to certain
restrictions, including prohibition against any sale, transfer or other
disposition by the officer or employee, and a requirement to forfeit the
award upon termination of employment. These restrictions lapse over a three-
to five-year period from the date of the award. Shares aggregating 195,625 in
1998, 154,862 in 1997 and 200,418 in 1996 were awarded under these plans. The
weighted-average award-date fair value was $27.67 in 1998, $23.75 in 1997 and
$13.09 in 1996 for the shares awarded. There were no cancellations of rights
to shares in 1998, while rights to 8,250 shares in 1997 and 21,869 shares in
1996 were cancelled. Any future shares awarded reduce the number of shares
identified as available for future grants in the stock option table. The
market value of the shares awarded is recognized as unearned compensation in
the consolidated statements of stockholders' equity and is amortized to
operations over the vesting period.
- ---------------------------------------------------------------------------
NOTE G - RETIREMENT PLANS
- ---------------------------------------------------------------------------
The Company has noncontributory, defined benefit pension plans covering a
majority of its domestic employees. The Company's principal defined benefit
pension plan provides benefits based on the employee's years of service and
final average earnings (as defined), while the other plans provide benefits
at a fixed rate per year of service. The Company intends to annually
contribute amounts deemed necessary to maintain the plans on a sound
actuarial basis.
-18-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company also has individual deferred compensation agreements with certain
current and former employees that entitle them to receive payments from the
Company for a period of fifteen to eighteen years following retirement. Under
the terms of the individual contracts, the employees are eligible for reduced
benefits upon early retirement. The Company maintains life insurance
policies which are intended to fund these deferred benefits.
The Company has a defined contribution money accumulation plan covering
substantially all employees that provides for Company contributions based on
earnings. This plan is combined with the principal defined benefit pension
plan for funding purposes. Contributions to the money accumulation plan were
$1,500,000 in 1998, $1,495,000 in 1997 and $1,200,000 in 1996.
The following summarizes the Company's pension assets and related obligations
for its defined benefit pension plans:
<TABLE>
<CAPTION>
SEPTEMBER 30,
(THOUSANDS OF DOLLARS) 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Pension assets at fair value, including underfunded plan
amounts of $5,370 in 1998 and $8,184 in 1997 $ 107,582 $ 131,406
Projected benefit obligation on services rendered to date,
including underfunded plan amounts of $18,414 in 1998
and $11,371 in 1997 (100,322) (81,221)
- --------------------------------------------------------------------------------------------------
Net pension assets $ 7,260 $ 50,185
==================================================================================================
Components of net pension assets:
Prepaid pension costs in other assets $ 15,242 $ 9,963
Unrecognized amounts, net of amortization:
Transition assets 968 1,902
Prior service costs (8,934) (7,140)
Net experience gains (16) 45,460
- --------------------------------------------------------------------------------------------------
Net pension assets $ 7,260 $ 50,185
==================================================================================================
-19-
<PAGE>
Change in fair value of pension assets:
Fair value of pension assets at beginning of the year $ 131,406 $ 104,673
Actual net investment income (loss) (20,285) 30,015
Company contributions 414 278
Benefits paid to plan participants (3,953) (3,560)
- --------------------------------------------------------------------------------------------------
Fair value of pension assets at end of the year $ 107,582 $ 131,406
==================================================================================================
Components of prepaid pension costs (liability):
For overfunded plans $ 19,982 $ 13,566
For underfunded plans (4,740) (3,603)
- --------------------------------------------------------------------------------------------------
Prepaid pension costs $ 15,242 $ 9,963
==================================================================================================
Change in projected benefit obligation:
Projected benefit obligation at beginning of the year $ 81,221 $ 73,277
Service cost pertaining to benefits earned during the year 4,249 3,698
Interest cost on projected benefit obligation 6,221 5,597
Effect of changes in actuarial assumptions and plan amendments 2,544 2,954
Actuarial losses (gains) 10,040 (745)
Benefits paid (3,953) (3,560)
- --------------------------------------------------------------------------------------------------
Projected benefit obligation at end of the year $ 100,322 $ 81,221
==================================================================================================
</TABLE>
-20-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of net pension income recognized by the Company:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS) 1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost pertaining to benefits earned during
the year $(4,249) $ (3,698) $(3,626)
Interest cost on projected benefit obligation (6,221) (5,116) (4,704)
Expected return on pension assets 11,409 29,924 8,066
Net amortization 3,926 (18,481) 1,865
- ------------------------------------------------------------------------------------------------
Net pension income $ 4,865 $ 2,629 $ 1,601
================================================================================================
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
were 7% and 4.5%, respectively, in 1998 and 7.5% and 5%, respectively, in
1997. The expected long-term return on plan assets was 10% in each year.
Plan assets were invested in listed equity securities (71%), fixed income
funds (20%) and short-term and other investments (9%). Equity securities
include 788,912 shares of the Company's common stock with a fair value of
$8,575,000 at September 30, 1998. Dividends paid on these shares of the
Company's common stock were not significant.
- ---------------------------------------------------------------------------
NOTE H - INCOME TAXES
- ---------------------------------------------------------------------------
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS) 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $16,248 $12,505 $13,247
State and foreign 3,362 2,395 1,778
Deferred (credit) 547 4,642 (214)
- ---------------------------------------------------------------------------
$20,157 $19,542 $14,811
===========================================================================
</TABLE>
-21-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the Company's total income tax expense and the amount
computed by applying the statutory federal income tax rate of 35% to earnings
before income taxes is as follows:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS) 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at statutory rate $21,633 $21,378 $16,683
State income taxes, net of federal
income tax reduction 899 777 746
Nontaxable earnings of Puerto Rican
subsidiary and foreign affiliates (2,211) (2,233) (1,854)
Other (164) (380) (764)
- -----------------------------------------------------------------------------------------
$20,157 $19,542 $14,811
=========================================================================================
</TABLE>
Significant components of the Company's deferred income tax assets and
liabilities as of the end of 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS) 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets:
Accounts receivable and inventory valuation allowances $ 2,987 $ 1,256
Deferred compensation accruals 2,018 2,207
Other amounts not deductible until paid 5,470 6,281
- --------------------------------------------------------------------------------------
Total deferred income tax assets 10,475 9,744
Deferred income tax liabilities:
Tax over book depreciation (3,479) (3,032)
Prepaid pension costs (5,877) (4,239)
Unremitted earnings of Puerto Rican subsidiary (802) (1,543)
Other (187) (253)
- --------------------------------------------------------------------------------------
Total deferred income tax liabilities (10,345) (9,067)
- --------------------------------------------------------------------------------------
Net deferred income tax assets $ 130 $ 677
======================================================================================
</TABLE>
-22-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has provided for all taxes that would be payable if accumulated
earnings of its Puerto Rican subsidiary were distributed. Similar taxes on
the unremitted earnings of the Company's foreign affiliates have not been
provided because such earnings are considered permanently invested. The
additional taxes that would be payable if unremitted earnings of its foreign
affiliates were distributed approximate $7,910,000 at January 2, 1999 and
$6,042,000 at January 3, 1998.
- ---------------------------------------------------------------------------
NOTE I - LITIGATION AND CONTINGENCIES
- ---------------------------------------------------------------------------
The Company is involved in various environmental claims and other legal
actions arising in the normal course of business. The environmental claims
include sites where the Environmental Protection Agency has notified the
Company that it is a potentially responsible party with respect to
environmental remediation. These remediation claims are subject to ongoing
environmental impact studies, assessment of remediation alternatives,
allocation of cost between responsible parties and concurrence by regulatory
authorities and have not yet advanced to a stage where the Company's
liability is fixed. However, after taking into consideration legal counsel's
evaluation of all actions and claims against the Company, management is
currently of the opinion that their outcome will not have a significant
effect on the Company's consolidated financial position or future results of
operations.
- ---------------------------------------------------------------------------
NOTE J - BUSINESS SEGMENTS
- ---------------------------------------------------------------------------
Effective January 4, 1998, the Company adopted SFAS No. 131, DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131
establishes new standards for the way public business enterprises report
information about operating segments, and also requires certain disclosures
about products and services, geographic areas of business and major
customers. The adoption of SFAS No. 131 did not affect the Company's
consolidated financial position or results of operations, but did change
business segment information previously reported.
The Company has one reportable segment that is engaged in the manufacture and
marketing of branded footwear, including casual shoes, slippers, moccasins,
-23-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
dress shoes, boots, uniform shoes and work shoes, to the retail sector.
Revenues of this segment are derived from the sale of branded footwear
products to external customers and the Company's retail division as well as
royalty income from the licensing of the Company's trademarks and brand names
to licensees. The business units comprising the branded footwear segment
manufacture or source, market and distribute products in a similar manner.
Branded footwear is distributed through wholesale channels and under
licensing and distributor arrangements.
The other business units in the following tables consists of the Company's
retail, tannery and pigskin procurement operations. The Company operates 56
domestic retail stores at January 2, 1999 that sell Company-manufactured or
sourced products and footwear manufactured by unaffiliated companies. The
other business units distribute products through retail and wholesale
channels.
The Company measures segment profits as earnings before income taxes. The
accounting policies used to determine profitability and total assets of the
branded footwear segment are the same as disclosed in the summary of
significant accounting policies (see Note A).
Business segment information is as follows:
<TABLE>
<CAPTION>
1998
- ----------------------------------------------------------------------------------------------------------
BRANDED OTHER
(THOUSANDS OF DOLLARS) FOOTWEAR BUSINESSES CORPORATE CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and other operating income
from external customers $598,741 $70,588 $669,329
Intersegment sales 31,120 8,323 39,443
Interest expense (net) 12,728 1,558 $ (7,007) 7,279
Depreciation expense 6,787 2,083 2,736 11,606
Earnings before income taxes 53,336 7,095 1,377 61,808
Assets 385,262 33,178 103,038 521,478
Additions to property, plant and equipment 17,160 2,179 13,037 32,376
</TABLE>
-24-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and other operating income
from external customers $588,666 $76,459 $665,125
Intersegment sales 78,158 12,382 90,540
Interest expense (net) 9,104 1,521 $(6,015) 4,610
Depreciation expense 4,598 1,919 1,810 8,327
Restructuring charge 3,450 3,450
Earnings before income taxes 61,374 8,019 (8,312) 61,081
Assets 329,224 31,851 88,588 449,663
Additions to property, plant and equipment 10,189 2,450 22,780 35,419
</TABLE>
<TABLE>
<CAPTION>
1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and other operating income
from external customers $455,153 $55,876 $511,029
Intersegment sales 82,320 12,825 95,145
Interest expense (net) 5,854 1,226 $(5,485) 1,595
Depreciation expense 4,151 1,787 1,016 6,954
Earnings before income taxes 46,238 4,573 (3,144) 47,667
Assets 276,279 31,543 53,776 361,598
Additions to property, plant and equipment 12,681 2,466 5,492 20,639
</TABLE>
Geographic information related to net sales and other operating income
included in the consolidated statements of operations is as follows:
-25-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS) 1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
United States $568,730 $552,874 $448,314
Canada 19,384 18,400 12,794
Europe 60,571 79,750 40,010
Central and South America 8,211 7,155 4,681
Middle East and Russia 8,162 2,690 687
Asia 4,271 4,256 4,543
- -----------------------------------------------------------------------------
$669,329 $665,125 $511,029
=============================================================================
</TABLE>
The Company's long-lived assets (primarily intangible assets and property,
plant and equipment) summarized between domestic and foreign locations are as
follows:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS) 1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
United States $157,152 $128,175 $84,459
Foreign countries 23,348 17,627 12,511
</TABLE>
The Company does not believe that it is dependent upon any single customer,
since none account for more than 10% of consolidated net sales and other
operating income.
No product groups, other than footwear, account for more than 10% of
consolidated net sales and other operating income. Revenues derived from the
sale and licensing of footwear account for approximately 95% of net sales and
other operating income in 1998, 1997, and 1996.
Approximately 26% of the Company's employees are subject to bargaining unit
contracts extending through various dates to 2002.
-26-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
NOTE K - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- ---------------------------------------------------------------------------
The Company generally reports its quarterly results of operations on the
basis of 12-week periods for each of the first three quarters and a 16-week
period for the fourth quarter. The fourth quarter of 1998 includes 16 weeks
of operating results, while the fourth quarter of 1997 includes 17 weeks,
because 1997 was a 53-week period.
The Company's unaudited quarterly results of operations are as follows:
<TABLE>
<CAPTION>
1998
- --------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and other operating income $148,514 $142,002 $164,486 $214,327
Gross margin 45,897 47,732 51,720 67,254
Net earnings 6,388 9,155 10,831 15,277
Net earnings per share:
Basic $ .15 $ .22 $ .26 $ .37
Diluted .15 .21 .25 .36
</TABLE>
<TABLE>
<CAPTION>
1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and other operating income $129,301 $127,789 $162,246 $245,789
Gross margin 38,389 40,817 47,910 77,010
Net earnings 4,693 7,368 9,199 20,279
Net earnings per share:
Basic $ .11 $ .18 $ .22 $ .49
Diluted .11 .17 .21 .47
</TABLE>
-27-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
NOTE L - RESTRUCTURING CHARGE
- ---------------------------------------------------------------------------
On September 24, 1997, the Company announced a restructuring of its domestic
manufacturing and warehousing operations and closed three Hush
Puppies[REGISTERED] women's shoe factories and converted a slipper factory
into a warehouse. The total restructuring charge of $3,450,000 included
employee termination benefits ($2,472,000) and other closing costs ($978,000)
associated with the facilities, and is disclosed separately in the 1997
consolidated statement of operations. As of January 2, 1999 and January 3,
1998, $3,409,000 and $1,620,000, respectively, of the restructuring costs
have been incurred and charged against the related liability. The
restructuring is substantially complete as of January 2, 1999.
-28-
<PAGE>
WOLVERINE WORLD WIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Wolverine World Wide, Inc.
We have audited the accompanying consolidated balance sheets of Wolverine
World Wide, Inc. and subsidiaries as of January 2, 1999 and January 3, 1998,
and the related consolidated statements of stockholders' equity and
comprehensive income, operations and cash flows for each of the three fiscal
years in the period ended January 2, 1999. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Wolverine World
Wide, Inc. and subsidiaries at January 2, 1999 and January 3, 1998, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended January 2, 1999 in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
February 8, 1999
-29-
<PAGE>
APPENDIX B
<PAGE>
Schedule II - Valuation and Qualifying Accounts
Wolverine World Wide, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ----------------------------------------------------------------------------------------------------------------
Additions
-------------------------
(1) (2)
Balance at Charged to Charged to Balance at
Beginning of Costs and Other Accounts Deductions End of
Description Period Expenses (Describe) (Describe) Period
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 2, 1999
Deducted from asset accounts:
Allowance for doubtful accounts $ 6,038,000 $ 1,035,000 $ 2,344,000<FA> $ 4,729,000
Allowance for cash discounts 1,254,000 5,394,000 5,481,000<FB> 1,167,000
Inventory valuation allowances 4,552,000 12,629,000 13,939,000<FC> 3,242,000
-----------------------------------------------------------------------
$ 11,844,000 $19,058,000 $ 21,764,000 $ 9,138,000
=======================================================================
FISCAL YEAR ENDED JANUARY 3, 1998
Deducted from asset accounts:
Allowance for doubtful accounts $ 4,228,000 $ 2,956,000 $ 1,146,000<FA> $ 6,038,000
Allowance for cash discounts 1,406,000 7,690,000 7,842,000<FB> 1,254,000
Inventory valuation allowances 2,954,000 6,888,000 5,290,000<FC> 4,552,000
-----------------------------------------------------------------------
$ 8,588,000 $17,534,000 $14,278,000 $11,844,000
=======================================================================
FISCAL YEAR ENDED DECEMBER 28, 1996
Deducted from asset accounts:
Allowance for doubtful accounts $ 2,657,000 $ 2,005,000 $ 434,000<FA> $ 4,228,000
Allowance for cash discounts 750,000 4,896,000 4,240,000<FB> 1,406,000
Inventory valuation allowances 1,317,000 5,535,000 3,898,000<FC> 2,954,000
-----------------------------------------------------------------------
$ 4,724,000 $12,436,000 $8,572,000 $ 8,588,000
-----------------------------------------------------------------------
<FN>
<FA> Accounts charged off, net of recoveries.
<FB> Discounts given to customers.
<FC> Adjustment upon disposal of related inventories
</FN>
</TABLE>
<PAGE>
Commission File No. 1-6024
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM 10-K
For the Fiscal Year Ended
January 2, 1999
Wolverine World Wide, Inc.
9341 Courtland Drive
Rockford, Michigan 49351
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
3.1 Certificate of Incorporation, as amended. Previously filed as
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
period ended June 14, 1997. Here incorporated by reference.
3.2 Amended and Restated By-laws.
4.1 Certificate of Incorporation, as amended. See Exhibit 3.1 above.
4.2 Rights Agreement dated as of April 17, 1997. Previously filed with
the Company's Form 8-A filed April 12, 1997. Here incorporated by
reference.
4.3 Credit Agreement dated as of October 11, 1996, with NBD Bank as
Agent. Previously filed as Exhibit 4.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 28, 1996.
Here incorporated by reference.
4.4 Note Purchase Agreement dated as of August 1, 1994, relating to
7.81% Senior Notes. Previously filed as Exhibit 4(d) to the
Company's Quarterly Report on Form 10-Q for the period ended
September 10, 1994. Here incorporated by reference.
4.5 Note Purchase Agreement dated as of December 8, 1998, relating to
6.50% Senior Notes due on December 8, 2008.
4.6 Amendment No. 1 dated as of January 8, 1998, to the Credit
Agreement dated as of October 11, 1996, with NBD Bank as Agent.
4.7 The Registrant has several classes of long-term debt instruments
outstanding in addition to that described in Exhibits 4.4 and 4.5
above. The amount of none of these classes of debt outstanding on
March 2, 1998, exceeds 10% of the Company's total consolidated
assets. The Company agrees to furnish copies of any agreement
defining the rights of holders of any such long-term indebtedness
to the Securities and Exchange Commission upon request.
10.1 Stock Option Plan of 1979, and amendment.<F*> Previously filed as
an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1988. Here incorporated by reference.
10.2 1993 Stock Incentive Plan.<F*> Previously filed as Exhibit 10(b)
to the Company's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994. Here incorporated by reference.
<PAGE>
10.3 1988 Stock Option Plan.<F*> Previously filed as an exhibit to the
Company's registration statement on Form S-8, filed July 21, 1988,
Registration No. 33-23196. Here incorporated by reference.
10.4 Amended and Restated Directors Stock Option Plan.<F*> Previously
filed as an exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended January 1, 1994. Here incorporated by
reference.
10.5 Employees Pension Plan.<F*> Previously filed as Exhibit 10.5 to
the Company's Annual report on Form 10-K for the fiscal year ended
January 3, 1998. Here incorporated by reference.
10.6 Employment Agreement dated April 27, 1998, between the Company and
Geoffrey B. Bloom.<F*>
10.7 Executive Long-Term Incentive (Three Year) Plan 1996-1998
Period.<F*> Previously filed as Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 28,
1996. Here incorporated by reference.
10.8 1994 Directors' Stock Option Plan.<F*> Previously filed as Exhibit
10(aa) to the Company's Quarterly Report on Form 10-Q for the
period ended June 18, 1994. Here incorporated by reference.
10.9 Stock Option Loan Program.<F*> Previously filed as Exhibit 10(h)
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1991. Here incorporated by reference.
10.10 Executive Severance Agreement.<F*> Previously filed as Exhibit
10.10 to the Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998. Here incorporated by reference.
10.11 Supplemental Executive Retirement Plan, as amended.<F*> Previously
filed as Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the period ended June 15, 1996. Here incorporated by
reference. An updated participant schedule is attached as Exhibit
10.11.
10.12 1995 Stock Incentive Plan.<F*> Previously filed as an Appendix to
the Company's Definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders held on April 19, 1995.
Here incorporated by reference.
10.13 Executive Long-Term Incentive (Three Year) Plan for the three year
period 1994-1996.<F*> Previously filed as Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 30, 1995. Here incorporated by reference.
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<PAGE>
10.14 Executive Long-Term Incentive (Three Year) Plan for the three year
period 1995-1997.<F*> Previously filed as Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 30, 1995. Here incorporated by reference.
10.15 Indemnification Agreements.<F*> The form of agreement was
previously filed as Exhibit 10(n) to the Company's Annual Report on
Form 10-K for the fiscal year ended January 2, 1993. Here
incorporated by reference. The Company has entered into an
Indemnification Agreement with each director and executive officer.
10.16 Supplemental Retirement Benefits.<F*> Previously filed as
Exhibit 10(l) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988. Here incorporated by
reference.
10.17 Benefit Trust Agreement dated May 19, 1987, and Amendments Number
1, 2 and 3 thereto.<F*> Previously filed as Exhibit 10(p) to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993. Here incorporated by reference.
10.18 1996 Executive Short-Term Incentive Plan (Annual Bonus Plan).<F*>
Previously filed as Exhibit 10.19 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 30, 1995. Here
incorporated by reference.
10.19 Outside Directors' Deferred Compensation Plan.<F*> Previously filed
as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the period ended June 15, 1996. Here incorporated by reference.
10.20 1984 Executive Incentive Stock Purchase Plan, and amendment.<F*>
Previously filed as Exhibit 10(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended January 2, 1988. Here
incorporated by reference.
10.21 Supplemental Director's Fee Agreement dated as of March 27, 1995,
between the Company and Phillip D. Matthews.<F*> Previously filed
as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the period ended March 25, 1995. Here incorporated by reference.
10.22 Restricted Stock Agreement dated as of March 27, 1995, between the
Company and Phillip D. Matthews.<F*> Previously filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the period
ended March 25, 1995. Here incorporated by reference.
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<PAGE>
10.23 1997 Stock Incentive Plan.<F*> Previously filed as Appendix A to
the Company's Definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders held on April 16, 1997.
Here incorporated by reference.
10.24 Executive Short-Term Incentive Plan (Annual Bonus Plan).<F*>
Previously filed as Appendix B to the Company's Definitive Proxy
Statement with respect to the Company's Annual Meeting of
Stockholders held on April 16, 1997. Here incorporated by
reference.
10.25 Executive Long-Term Incentive Plan (3-Year Bonus Plan).<F*>
Previously filed as Appendix C to the Company's Definitive Proxy
Statement with respect to the Company's Annul Meeting of
Stockholders held on April 16, 1997. Here incorporated by
reference.
21 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
___________________________
<F*>Management contract or compensatory plan or arrangement.
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
WOLVERINE WORLD WIDE, INC.
ARTICLE I
OFFICES
Section 1. The corporation's principal office shall be in the City of
Rockford, County of Kent, State of Michigan.
Section 2. The corporation's principal office and place of business
in Delaware shall be its registered office in Delaware as set forth in the
Certificate of Incorporation.
Section 3. The corporation may also have offices at such other
places, both within and without the States of Michigan and Delaware as the
Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders shall be held, except as
otherwise provided by statute or these By-Laws, at such time and place as
may be fixed from time to time by the Board of Directors. Meetings of
stockholders may be held within or without the State of Delaware as shall
be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2. Annual meetings of the stockholders shall be held each
year at such time and on such business day in the month of April as may be
designated by the Board of Directors, or if no such designation is made, at
10:00 a.m. local time on the last Thursday in April, or if that day is a
legal holiday, then on the next succeeding business day at such time as
shall be stated in the notice of the meeting. Annual meetings shall be
held to elect by a plurality vote successors to those members of the Board
of Directors whose terms expire at the meeting and to transact only such
other business as may be properly brought before the meeting in accordance
with these By-Laws.
<PAGE>
Notwithstanding anything in the By-Laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in Section 4 of Article II, provided, that nothing in
Section 4 of Article II shall be considered to preclude discussion by any
stockholder of any business properly brought before the annual meeting.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of Section 4 of
Article II, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall
not be transacted.
Section 3. Special meetings of the stockholders may be called by the
Board of Directors, or by the Chief Executive Officer, or upon the written
request of stockholders holding in the aggregate at least forty (40)
percentum of the issued and outstanding capital stock of the corporation
entitled to vote on the business to be transacted at such meeting,
delivered to such officer. Such stockholder request shall state the
purpose or purposes of the proposed meeting. The meetings shall be held on
a date fixed by the Board of Directors or the Chief Executive Officer, or
in the case of a stockholder request, on a date determined by the
Secretary. In the event the Secretary questions the propriety of any
meeting requested by stockholders, such request shall be submitted to the
Board of Directors at its next meeting, and the determination of the Board
as to such propriety shall be final. No special meeting of stockholders
shall be called for the purpose of removing a director or directors, for
electing directors, or for amending the By-Laws of the corporation, such
matters to be considered only at the annual meeting of stockholder,
PROVIDED, HOWEVER, that a special meeting of stockholders may be called for
the purpose of removing a director for cause, such term to be as defined
under Delaware law, provided further that such cause is set forth in the
request for meeting.
Section 4. Except as otherwise provided by statute, the
corporation's Certificate of Incorporation or these By-Laws:
(a) No matter may be presented for stockholder action
at an annual or special meeting of stockholders unless such
matter is: (i) specified in the notice of the meeting (or
any supplement to the notice) given by or at the direction
of the Board of Directors; (ii) otherwise presented at the
meeting by or at the direction of the Board of Directors;
(iii) properly presented for action at the meeting by a
stockholder in accordance with the notice provisions set
forth in this Section and any other applicable requirements;
or (iv) a procedural matter presented, or accepted for
presentation, by the Chairman in his sole discretion.
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<PAGE>
(b) For a matter to be properly presented by a
stockholder, the stockholder must have given timely notice
of the matter in writing to the Secretary of the
Corporation. To be timely, the notice must be delivered to
or mailed to and received at the principal executive offices
of the Corporation not less than 120 calendar days prior to
the date corresponding to the date of the Corporation's
proxy statement or notice of meeting released to
stockholders in connection with the last preceding annual
meeting of stockholders in the case of an annual meeting
(unless the Corporation did not hold an annual meeting
within the last year, or if the date of the upcoming annual
meeting changed by more than 30 days from the date of the
last preceding meeting, then the notice must be delivered or
mailed and received not more than ten days after the earlier
of the date of the notice of the meeting or public
disclosure of the date of the meeting), and not more than
ten days after the earlier of the date of the notice of the
meeting or public disclosure of the date of the meeting in
the case of a special meeting. The notice by the
stockholder must set forth: (i) a brief description of the
matter the stockholder desires to present for stockholder
action; (ii) the name and record address of the stockholder
proposing the matter for stockholder action; (iii) the class
and number of shares of capital stock of the Corporation
that are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in the matter proposed
for stockholder action. For purposes of this Section,
"public disclosure" means disclosure in a press release
reported by the Dow Jones News Service, Associated Press or
other comparable national financial news service or in a
document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13,
14 or 15 of the Securities Exchange Act of 1934, as amended.
(c) Except to the extent that a stockholder proposal
submitted pursuant to this Section is not made available at
the time of mailing, the notice of the purposes of the
meeting shall include the name and address of and the number
of shares of the voting security held by the proponent of
each stockholder proposal.
(d) Notwithstanding the above, if the stockholder
desires to require the Corporation to include the
stockholder's proposal in the Corporation's proxy materials,
matters and proposals submitted for inclusion in the
Corporation's proxy materials shall be governed by the
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<PAGE>
solicitation rules and regulations of the Securities
Exchange Act of 1934, as amended, including without
limitation Rule 14a-8.
Section 5. Written notice of all meetings of stockholders, stating
the time, place and in the case of special meetings, the purpose or
purposes thereof, shall be given to each stockholder entitled to vote
thereat, at least ten (10) days before the date fixed for the meeting.
Section 6. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address of
and the number of shares registered in the name of each stockholder. Such
list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at
least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held and which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where said
meeting is to be held, and the list shall be produced and kept at the time
and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 7. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for
the transaction of business, except as otherwise provide by statute or by
the Certificate of Incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the officer of
the corporation presiding as chairman of the meeting shall have the power
to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meetings at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 8. Except as otherwise set forth in Section 1(f) of Article
III hereunder, when a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes
or of the Certificate of Incorporation, a different vote is required, in
which case such express provision shall govern and control the decision of
such question.
Section 9. Except as otherwise provided by the Certificate of
Incorporation or the resolution or resolutions of the Board of Directors
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<PAGE>
creating any class of stock, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder.
Section 10. Meetings of stockholders generally shall follow accepted
rules of parliamentary procedure, subject to the following:
(a) The chairman of the meeting shall have absolute
authority over matters of procedure, and there shall be no appeal
from the ruling of the chairman. If, in his absolute discretion,
the chairman deems it advisable to dispense with the rules of
parliamentary procedure as to any one meeting of stockholders or
part thereof, he shall so state and shall clearly state the rules
under which the meeting or appropriate part thereof shall be
conducted.
(b) If disorder should arise which prevents the
continuation of the legitimate business of the meeting, the
chairman may quit the chair and announce the adjournment of the
meeting; and upon his so doing, the meeting is immediately
adjourned.
(c) The chairman may ask or require that anyone not a bona
fide stockholder or proxy leave the meeting.
(d) A resolution or motion shall be considered for vote
only if proposed by a stockholder or a duly authorized proxy and
seconded by a stockholder or a duly authorized proxy other than
the individual who proposed the resolution or motion.
Section 11. At or prior to any meeting of stockholders, the Board of
Directors, or, if the Board of Directors shall have taken no action with
respect thereto, the chairman of the meeting, may appoint one or more
inspectors to act at the meeting or any adjournment thereof. In case any
person appointed as inspector fails to appear or act, the vacancy may be
filled by appointment made by the person presiding at the meeting or
entitled to preside at the adjourned meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability.
Section 12. The Secretary of the corporation shall furnish the
inspectors with a certificate setting forth the number of shares
outstanding and entitled to vote, the voting power of each, the number of
shares required to make a quorum and the number of shares required to be
voted on any issue presented to the meeting if more than a simple majority
of the quorum present. The inspectors shall determine the shares
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<PAGE>
represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right
to vote, count and tabulate all votes, ballots or consents, determine the
results and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. On request of the person presiding at the
meeting or any shareholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by
them. The inspectors shall execute a certificate of the results of the
election or vote found by them. Any report or certificate made by them
shall be prima facie evidence of the facts stated and of the vote as
certified by them. In their determination of the validity and effect of
proxies, the inspectors shall make such determination, to the extent
possible, so as not to disenfranchise any stockholder.
Section 13. The inspectors may employ agents or other persons to
assist in their duties. The meetings of the inspectors shall be closed to
all persons except as may be requested by the inspectors, provided that the
inspectors shall permit a reasonable time after their initial tabulations
for the presentation and determination of challenges to the validity and
effect of proxies and ballots. In the case of an election contest,
whenever the representative of one or more sides is present during the
course of the inspectors' duties, a representative of all other sides shall
be afforded the opportunity to attend.
Section 14. In the tabulation of votes cast by proxies, it shall not
be necessary for proxies to execute a ballot on matters, voting
instructions (including no vote) for which are contained on the form of
proxy itself, and in the absence of a ballot executed on such proxies, the
proxy itself will be deemed a written ballot and tabulated in accordance
with the directions contained thereon.
Section 15. The person presiding at a meeting of the stockholders may
close the polls after the request for submission of proxies and ballots,
upon the temporary adjournment of the meeting called to tabulate the
proxies and ballots, or within a reasonable time thereafter. After the
polls are closed, no proxy, revocation of proxy or ballot shall be accepted
by or considered in the tabulation of proxies and ballots.
Section 16. In the event it becomes necessary to adjourn a meeting of
stockholders beyond the day of the scheduled meeting in order to determine
the results of any election or vote, said meeting may be adjourned from
time to time by the person presiding or entitled to preside, with such
meeting to be reconvened at the principal offices of the corporation in
Rockford, Michigan. The only matter to be acted upon at such reconvened
meeting shall be the acceptance and filing of the report from the
inspectors of election.
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<PAGE>
ARTICLE III
DIRECTORS
Section 1. Directors of the corporation shall be elected, replaced
and removed as follows:
(a) NUMBER AND QUALIFICATION OF DIRECTORS. The number of
directors which shall constitute the whole Board of Directors
shall be not less than five (5) persons. Subject to the limit
above specified, the number of directors shall be determined from
time to time by resolution of the Board of Directors, provided
that a vacancy in the Board of Directors need not be filled
immediately, and until filled, such lesser number shall
constitute the entire Board of Directors. Except as otherwise
provided in this Section, directors shall be elected at the
annual meeting of the stockholders, and each such director
elected shall hold office until the annual meeting for the year
in which his or her term expires and until his or her successor
is elected. A director need not be a stockholder, a citizen of
the United States or a resident of the State of Delaware.
(b) CLASSIFICATION. The Board of Directors shall be
divided into three classes, Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third
of the total number of directors constituting the entire Board of
Directors. At the 1990 annual meeting of stockholders, Class I
directors shall be elected for a one- year term, Class II
directors for a two-year term and Class III directors for a
three-year term. At each succeeding annual meeting of
stockholders, the successors of the class of directors whose term
expires at that meeting shall be elected to hold office for a
term expiring at the annual meeting of stockholders held in the
third year following the year of their election. Notwithstanding
the foregoing, whenever the holders of any one or more classes or
series of preferred stock shall have the right, voting separately
as a class, to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies
and other features of such directorships shall be governed by the
terms of the Certificate of Incorporation applicable thereto, and
such directors shall not be divided into classes pursuant to this
Section 1(b) of ARTICLE III, and the number of such directors
shall not be counted in determining the maximum number of
directors permitted under Section 1(a) of ARTICLE III hereof, in
each case unless expressly provided by the Certificate of
Incorporation.
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<PAGE>
(c) VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to
the right of the holders of any series of preferred stock then
outstanding, any vacancy occurring in the Board of Directors
caused by resignation, removal, death, disqualification or other
incapacity, and any newly created directorships resulting from an
increase in the number of directors, shall be filled exclusively
by a majority vote of the directors then in office, whether or
not a quorum and shall not be filled by the stockholders. When
the number of directors is changed, any newly created or
eliminated directorship shall be so apportioned among the classes
of directors as to make all classes as nearly equal in number as
possible. Each director chosen to fill a vacancy or a newly
created directorship shall hold office for the term coinciding
with the class of his or her directorship and until his successor
shall be elected and qualify. No decrease in the number of
directors constituting the Board of Directors shall shorten the
term of any incumbent director.
(d) REMOVAL. Subject to the rights of the holders of any
series of preferred stock then outstanding, any or all of the
directors may be removed from office at any time, but only for
cause.
(e) RESIGNATION. Any director may resign at any time and
such resignation shall take effect upon receipt thereof by the
Chief Executive Officer or the Secretary unless otherwise
specified in the resignation.
(f) AMENDMENT OR REPEAL. Notwithstanding any other
provision of these By-Laws to the contrary, the provisions
contained in this Section 1 shall not be amended, altered,
modified or repealed, and no provision inconsistent with this
Section 1 may be adopted, except upon either (i) the affirmative
vote of the holders of not less than two-thirds of the
outstanding stock of the corporation entitled to vote in
elections of directors or (ii) the affirmative vote of a majority
of the whole Board of Directors and the affirmative vote of the
holders of a majority of such outstanding stock present in person
or represented by proxy at any meeting of stockholders.
(g) NOMINATION OF DIRECTORS. Subject to the rights of
holders of any classes or series of preferred stock then
outstanding, only persons who are nominated in accordance with
the following procedures shall be eligible for election as
Directors. Nomination of persons for election to the Board of
the corporation at an annual meeting may be made at the annual
meeting of stockholders by or at the direction of the Board of
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<PAGE>
Directors by any nominating committee or person appointed by the
Board or by any stockholder of the corporation entitled to vote
for the election of Directors at the annual meeting who complies
with the notice procedures set forth in this Section 1(g) of
Article III. Such nominations, other than those made by or at
the direction of the Board, shall be made pursuant to timely
notice in writing to the Secretary of the corporation. To be
timely, a stockholder's notice shall be delivered to or mailed
and received at the principal executive offices of the
corporation not less than 50 days nor more than 75 days before
the annual meeting; provided, however, that in the event that
less than 65 days' notice or prior public disclosure of the date
of an annual meeting is given or made to stockholders, notice by
the stockholder to be timely must be so received not later than
the close of business on the 15th day following the day on which
such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's
notice to the Secretary shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or
re-election as a Director, (i) the name, age, business address
and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and
number of shares of capital stock of the corporation which are
beneficially owned by the person and (iv) any other information
relating to the person that is required to be disclosed in
solicitations for proxies for election of Directors pursuant to
Rule 14a under the Securities Exchange Act of 1934, as amended;
and (b) as to the stockholder giving the notice (i) the name and
record address of stockholder and (ii) the class and number of
shares of capital stock of the corporation which are beneficially
owned by the stockholder. The corporation may require any
proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the
eligibility of such proposed nominee to serve as Director of the
corporation. No person shall be eligible for election as a
Director of the corporation unless nominated in accordance with
the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedure, and if he should
so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 2. The business of the corporation shall be managed by its
Board of Directors, which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the
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<PAGE>
Certificate of Incorporation or by these By- Laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 4. The first meeting of each newly elected Board of Directors
shall be held following the annual meeting of stockholders, and no notice
of such meeting shall be necessary to the newly elected directors in order
legally to constitute the meeting, provided a quorum shall be present. In
the event such meeting is not held immediately following the annual meeting
of stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of
the Board of Directors, or as shall be specified in a written waiver signed
by all of the directors.
Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 6. Special meetings of the Board may be called by the Chief
Executive Officer or Secretary or by any two (2) directors on two (2) days'
notice to each director. Neither the business to be transacted at nor the
purpose of any regular or special meeting of the Board of Directors need be
specified in the notice of such meeting.
Section 7. At all meetings of the Board a majority of the directors
(other than directors elected at that meeting) shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the
Board of Directors, except as may be otherwise specifically provided by
statute, the Certificate of Incorporation or these By-Laws. If a quorum
shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall
be present.
Section 8. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent thereto is signed by
all members of the Board or of such committee as the case may be, and such
written consent is filed with the minutes of proceedings of the Board or
committee.
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<PAGE>
Section 9. The Board of Directors or any committee designated by the
Board of Directors may participate in a meeting of such Board, or
committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other, and participation in a meeting pursuant to this section
shall constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may appoint an Executive Committee
whose membership shall consist of such members of the Board of Directors
as it may deem advisable from time to time to serve during the pleasure of
the Board. The Board of Directors may also appoint directors to serve as
alternates for members of the committee in the absence or disability of
regular members. The Board of Directors may fill any vacancies as they
occur. The Executive Committee shall have and may exercise the powers of
the Board of Directors in the management of the business affairs and
property of the corporation during the intervals between meetings of the
Board of Directors, subject to law and to such limitations and control as
the Board of Directors may impose from time to time, except that the
Executive Committee shall not, without the express authorization of the
Board of Directors:
(a) Alter or amend the Certificate of Incorporation or the
By-Laws;
(b) Fill vacancies in the membership of the Board of
Directors or the Executive Committee;
(c) Declare dividends;
(d) Authorize the issuance of stock.
Section 11. The Board of Directors may designate such other
committees as it may deem appropriate, and such committees shall exercise
the authority delegated to them.
Section 12. Each committee provided for above shall meet as often as
its business may require and may fix a day and time each week or at other
intervals for regular meetings, notice of which shall not be required.
Whenever the day fixed for a meeting shall fall on a holiday, the meeting
shall be held on the business day following or on such other day as the
committee may determine. Special meetings of the committees may be called
by the chairman, and notice thereof may be given to the members by
telephone, telegram or letter. A majority of its members shall constitute
a quorum for the transaction of the business of any of the committees. A
record of the proceedings of each committee shall be kept and presented to
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the Board of Directors. The chairperson of any of the standing or special
committees of the Board of Directors may appoint one or more independent
directors to serve as alternates for members of the committee in the
absence or disability of regular members.
COMPENSATION OF DIRECTORS
Section 13. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors and a
stated salary as director. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
CONSENT OF STOCKHOLDERS IN LIEU OF MEETING
Section 14. In order that the corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than
ten (10) days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. Any stockholders of record
seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the
Board of Directors to fix a record date. The Board of Directors shall
promptly, but in all events within ten (10) days after the date on which
such a request is received, adopt a resolution fixing the record date. If
no record date has been fixed by the Board of Directors within ten (10)
days following the receipt of such a request, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is
required by applicable law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of
stockholders meetings are recorded, to the attention of the Secretary of
the corporation. Delivery shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the
Board of Directors and prior action by the Board of Directors is required
by applicable law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the date on which the Board of Directors adopts the
resolution taking such prior action.
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ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing
and delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice by mail
shall be deemed to be given at the time when the same shall be mailed.
Notice to directors may also be given by telegram, which shall be deemed
given at the time when the same shall be sent.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or by
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting has not been lawfully
called or convened.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors at its first meeting after the annual meeting of
stockholders, or as soon as practicable after the annual election of
directors in each year, and shall include a Chairman of the Board of
Directors, a Chief Executive Officer, a President, a Secretary and a
Treasurer. The Board of Directors may also choose one or more Vice
Presidents, one or more Assistant Secretaries and Assistant Treasurers, and
such other officers as the Board of Directors may from time to time
determine. Any two or more offices, except those of Chief Executive
Officer and Vice President, or Chief Executive Officer and Secretary, may
be held by the same person.
Section 2. The Chairman of the Board of Directors, the Chief
Executive Officer and the President shall be selected from among the
members of the Board of Directors. No other officer need be a member of
the Board of Directors.
TERM OF OFFICE
Section 3. Each officer shall hold office at the pleasure of the
Board. The Board of Directors may remove any officer for cause or without
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cause. Any officer may resign his or her office at any time, such
resignation to take effect upon receipt of written notice thereof by the
corporation unless otherwise specified in the resignation. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by
the Board.
THE CHAIRMAN OF THE BOARD
Section 4. The Chairman of the Board shall, when present, preside at
all meetings of the directors and stockholders. He or she shall have such
other duties and powers as may be imposed or given by the Board.
THE CHIEF EXECUTIVE OFFICER
Section 5. The Chief Executive Officer of the corporation shall have
general and active management of the business of the corporation, and shall
see that all orders and resolutions of the Board of Directors are carried
into effect.
Section 6. In the event of the absence of the Chairman of the Board,
the Chief Executive Officer shall preside at all meetings of the
stockholders and of the directors. Except as otherwise herein provided,
the Chief Executive Officer shall have the power, subject to the control of
the Board of Directors, to appoint or discharge and to prescribe the duties
and to fix the compensation of such agents and employees of the corporation
as he may deem necessary, including the power to make temporary suspensions
or appointments as officers of the corporation, such suspensions or
appointments to be made effective only until the next meeting of the Board
of Directors or the Executive Committee thereof. The Chief Executive
Officer shall be the medium of communication to the Board of all matters
presented for their consideration by persons other than the directors
themselves. He or she shall be the direct representative of the Board of
Directors and, subject to the Board of Directors, shall have the final
control of the affairs and policy of the corporation. He or she shall be
the arbiter of all differences between officers of the corporation, and his
decision shall be final and binding, subject only to review by the Board of
Directors of the corporation. He or she shall do and perform such other
duties as may be assigned to him by the Board of Directors.
VICE PRESIDENTS
Section 7. Each Vice President shall have such title and powers and
perform such duties as may be assigned to him from time to time by the
Chief Executive Officer or the Board of Directors.
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THE SECRETARY
Section 8. The Secretary shall attend all meetings of the Board and
of the stockholders and record all votes and the minutes of all proceedings
in a book to be kept for that purpose, and shall perform like duties for
committees when required. He or she shall give, or cause to be given,
notice of all meetings of the stockholders and meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or the Chief Executive Officer. He or she shall keep in
safe custody the seal of the corporation and shall have authority to affix
the same to all instruments where its use is required or appropriate.
THE TREASURER
Section 9. The Treasurer shall have the custody of the corporate
funds and securities, except as otherwise provided by the Board, and shall
cause to be kept full and accurate accounts of receipts and disbursements
in books belonging to the corporation and shall deposit all moneys and
other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors. He or
she shall disburse the funds of the corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer and the directors, at the regular meetings of
the Board, or whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the
corporation.
OTHER OFFICERS
Section 10. There may be elected one or more Assistant Secretaries
and Assistant Treasurers who may, in the absence, disability or nonfeasance
of the Secretary or Treasurer, perform the duties and exercise the powers
of such persons respectively.
Section 11. All other officers, as may from time to time be appointed
by the Board of Directors pursuant to this Article shall perform such
duties and exercise such authority as the Board of Directors shall
prescribe.
Section 12. In the case of the absence of any officer, or for any
other reason that the Board may deem sufficient, the Chief Executive
Officer or the Board may delegate for the time being the powers or duties
of such officer to any other person.
EXECUTIVE OFFICERS
Section 13. The Chairman of the Board, Chief Executive Officer,
President, Vice President(s), Secretary and Treasurer shall be known as
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executive officers and shall have all the usual powers and shall perform
all the usual duties incident to their respective offices, and shall in
addition perform such other duties as shall be assigned to them from time
to time by the Board of Directors.
OFFICER SALARIES
Section 14. The salaries of all corporate officers appointed by the
Board of Directors shall be fixed by the Compensation Committee of the
Board of Directors.
ARTICLE VI
SUBSIDIARIES AND DIVISIONS
Section 1. The Board of Directors or the Chief Executive Officer may,
as they shall deem necessary, designate certain individuals as divisional
officers. Any titles given to divisional officers may be withdrawn at any
time, with or without cause, by the Board of Directors or the Chief
Executive Officer. A divisional officer may, but need not be, a director
or an executive officer of the corporation. All divisional officers shall
perform such duties and exercise such authority as the Board of Directors
or the Chief Executive Officer shall prescribe.
Section 2. The Board of Directors or the Chief Executive Officer may
vote the shares of stock owned by the corporation in any subsidiary,
whether wholly or partly owned by the corporation, in such manner as they
may deem in the best interests of the corporation, including, without
limitation, for the election of directors of any such subsidiary
corporation, or for any amendments to the charter or by-laws of any such
subsidiary corporation, or for the liquidation, merger, or sale of assets
of any such subsidiary corporation. The Board of Directors or the Chief
Executive Officer may cause to be elected to the board of directors of any
such subsidiary corporation such persons as they shall designate, any of
whom may, but need not be, directors, executive officers, or other
employees or agents of the corporation. The Board of Directors or the
Chief Executive Officer may instruct the directors of any such subsidiary
corporation as to the manner in which they are to vote upon any issue
properly coming before them as the directors of such subsidiary
corporation, and such directors shall have no liability to the corporation
as the result of any action taken in accordance with such instructions.
Section 3. Divisional officers, and the officers of any subsidiary
corporation, shall not, by virtue of holding such title and position, be
deemed to be officers of the corporation, nor shall any such divisional
officer or officer of a subsidiary corporation, unless he shall also be a
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director or officer of the corporation, be entitled to have access to any
files, records or other information relating or pertaining to the
corporation, its business and finances, or to attend or receive the minutes
of any meetings of the Board of Directors or any committee of the
corporation, except as and to the extent authorized and permitted by the
Board of Directors or the Chief Executive Officer.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
Chief Executive Officer, President or a Vice President and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by such stockholder in
the corporation.
Section 2. Where a certificate is signed (1) by a transfer agent or
an assistant transfer agent, or (2) by a transfer clerk acting on behalf of
the corporation and a registrar, the signature of any such Chief Executive
Officer, President, Vice President, Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary may be facsimile. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature
has been placed upon a certificate, shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificate
or certificates, or his legal representative, to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may
be made against the corporation with respect to the certificate alleged to
have been lost or destroyed.
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TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the
transaction upon its books.
RECORD DATES
Section 5. The Board of Directors may fix in advance a date, not
exceeding sixty (60) days, but not less than ten (10) days preceding the
date of any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, or
a date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at,
any such meeting, and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange
of capital stock, or to give such consent, and in such case such
stockholders and only such stockholders as shall be stockholders of record
on the date so fixed shall be entitled to such notice of, and to vote at,
such meeting, and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation after any such record
date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive rights of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and shall not be bound to
recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws
of the State of Delaware.
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ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may
be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares
of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds in the corporation, available for dividends such sum or sums
as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation,
or for such other purpose as the directors shall think conducive to the
interest of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time
designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name
of the corporation, and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
VOTING SECURITIES
Section 6. Unless otherwise directed by the Board, the Chief
Executive Officer shall have full power and authority on behalf of the
corporation to attend and to act and to vote, or to execute in the name or
on behalf of the corporation a proxy authorizing an agent or
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attorney-in-fact for the corporation to attend and vote at any meetings of
security holders of corporations in which the corporation may hold
securities, and at such meetings the Chief Executive Officer or his or her
duly authorized agent or attorney-in-fact shall possess and may exercise
any and all rights and powers incident to the ownership of such securities
and which, as the owner thereof, the corporation might have possessed and
exercised if present. The Board by resolution from time to time may confer
like power upon any other person or persons.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be amended, altered, changed, added to
or repealed at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the Board of Directors.
ARTICLE X
INDEMNIFICATION
The Corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of Delaware, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and
the indemnification provided for herein shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any
By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such a person.
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EXHIBIT 4.5
==========================================================
WOLVERINE WORLD WIDE, INC.
$75,000,000 6.50% Senior Notes due December 8, 2008
NOTE PURCHASE AGREEMENT
Dated December 8, 1998
==========================================================
<PAGE>
TABLE OF CONTENTS
1. AUTHORIZATION OF NOTES. . . . . . . . . . . . . . . . . . . . . . . . .1
2. SALE AND PURCHASE OF NOTES. . . . . . . . . . . . . . . . . . . . . . .1
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . .2
4.1 Representations and Warranties . . . . . . . . . . . . . . . . .2
4.2 Performance; No Default. . . . . . . . . . . . . . . . . . . . .2
4.3 Compliance Certificates. . . . . . . . . . . . . . . . . . . . .3
4.4 Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . .3
4.5 Purchase Permitted by Applicable Law . . . . . . . . . . . . . .3
4.6 Sale of Other Notes. . . . . . . . . . . . . . . . . . . . . . .3
4.7 Payment of Special Counsel Fees. . . . . . . . . . . . . . . . .4
4.8 Private Placement Number . . . . . . . . . . . . . . . . . . . .4
4.9 Changes in Corporate Structure . . . . . . . . . . . . . . . . .4
4.10 Proceedings and Documents. . . . . . . . . . . . . . . . . . . .4
4.11 Offeree Letter . . . . . . . . . . . . . . . . . . . . . . . . .4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . .4
5.1 Organization; Power and Authority. . . . . . . . . . . . . . . .4
5.2 Authorization, etc.. . . . . . . . . . . . . . . . . . . . . . .5
5.3 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . .5
5.4 Organization and Ownership of Shares of Subsidiaries;
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . .6
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . .6
5.6 Compliance with Laws, Other Instruments, etc.. . . . . . . . . .7
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5.7 Governmental Authorizations, etc.. . . . . . . . . . . . . . . .7
5.8 Litigation; Observance of Agreements, Statutes and
Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
5.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
5.10 Title to Property; Leases. . . . . . . . . . . . . . . . . . . .8
5.11 Licenses, Permits, etc.. . . . . . . . . . . . . . . . . . . . .8
5.12 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . .9
5.13 Private Offering by the Company. . . . . . . . . . . . . . . . 10
5.14 Use of Proceeds; Margin Regulations. . . . . . . . . . . . . . 10
5.15 Existing Indebtedness; Future Liens. . . . . . . . . . . . . . 10
5.16 Foreign Assets Control Regulations, etc. . . . . . . . . . . . 11
5.17 Status under Certain Statutes. . . . . . . . . . . . . . . . . 11
5.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 11
5.19 Year 2000 Issues . . . . . . . . . . . . . . . . . . . . . . . 12
6. REPRESENTATIONS OF THE PURCHASER. . . . . . . . . . . . . . . . . . . 12
6.1 Purchase for Investment. . . . . . . . . . . . . . . . . . . . 12
6.2 Source of Funds. . . . . . . . . . . . . . . . . . . . . . . . 13
7. INFORMATION AS TO COMPANY . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Financial and Business Information . . . . . . . . . . . . . . 14
7.2 Officer's Certificate. . . . . . . . . . . . . . . . . . . . . 17
7.3 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8. PREPAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 Required Prepayments; Payment at Maturity. . . . . . . . . . . 18
8.2 Optional Prepayments with Make-Whole Amounts . . . . . . . . . 19
8.3 Allocation of Partial Prepayments. . . . . . . . . . . . . . . 19
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8.4 Maturity; Surrender, etc.. . . . . . . . . . . . . . . . . . . 19
8.5 Purchase of Notes. . . . . . . . . . . . . . . . . . . . . . . 20
8.6 Make-Whole Amount. . . . . . . . . . . . . . . . . . . . . . . 20
8.7 Offer to Prepay Notes in the Event of a Debt
Prepayment Application . . . . . . . . . . . . . . . . . . . . 21
9. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . 22
9.2 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.3 Maintenance of Properties. . . . . . . . . . . . . . . . . . . 23
9.4 Payment of Taxes and Claims. . . . . . . . . . . . . . . . . . 23
9.5 Corporate Existence, etc.. . . . . . . . . . . . . . . . . . . 24
10. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Fixed Charge Coverage. . . . . . . . . . . . . . . . . . . . . 24
10.2 Maintenance of Consolidated Net Worth. . . . . . . . . . . . . 24
10.3 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.4 Incurrence of Funded Debt. . . . . . . . . . . . . . . . . . . 27
10.5 Priority Debt. . . . . . . . . . . . . . . . . . . . . . . . . 27
10.6 Merger or Consolidation. . . . . . . . . . . . . . . . . . . . 27
10.7 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . 28
10.8 Transactions With Affiliates . . . . . . . . . . . . . . . . . 29
10.9 Nature of Business . . . . . . . . . . . . . . . . . . . . . . 29
11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 29
12. REMEDIES ON DEFAULT, ETC. . . . . . . . . . . . . . . . . . . . . . 31
12.1 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.2 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 32
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12.3 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.4 No Waivers or Election of Remedies, Expenses, etc. . . . . . . 33
13. REGISTRATION; EXCHANGE, SUBSTITUTION OF NOTES . . . . . . . . . . . 33
13.1 Registration of Notes. . . . . . . . . . . . . . . . . . . . . 33
13.2 Transfer and Exchange of Notes . . . . . . . . . . . . . . . . 33
13.3 Replacement of Notes . . . . . . . . . . . . . . . . . . . . . 34
14. PAYMENTS ON NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.1 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . 34
14.2 Home Office Payment. . . . . . . . . . . . . . . . . . . . . . 35
15. EXPENSES, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.1 Transaction Expenses . . . . . . . . . . . . . . . . . . . . . 35
15.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
17. AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . . . . . . 36
17.1 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 36
17.2 Solicitation of Holders of Notes . . . . . . . . . . . . . . . 36
17.3 Binding Effect, etc. . . . . . . . . . . . . . . . . . . . . . 37
17.4 Notes held by Company, etc.. . . . . . . . . . . . . . . . . . 37
18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
19. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . 38
20. CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . 38
21. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . 39
22. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
22.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 40
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22.2 Payments Due on Non-Business Days. . . . . . . . . . . . . . . 40
22.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 40
22.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 40
22.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 40
22.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 41
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SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of
Subsidiary Stock; Company's Affiliates; Company's
Directors and Senior Officers
SCHEDULE 5.11 -- Disclosures Regarding Patents, etc.
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness; Liens
EXHIBIT 1 -- Form of Senior Note
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
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WOLVERINE WORLD WIDE, INC.
9341 Courtland Drive, NE
Rockford, Michigan 49351
6.50% Senior Notes due December 8, 2008
December 8, 1998
TO EACH OF THE PURCHASERS
LISTED IN THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
Wolverine World Wide, Inc., a Delaware corporation (the "COMPANY"),
agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of Seventy-Five Million
Dollars ($75,000,000) aggregate principal amount of its 6.50% Senior Notes
due December 8, 2008 (the "NOTES", such term to include any such notes
issued in substitution therefor pursuant to Section 13 of this Agreement or
the Other Agreements (as hereinafter defined)). The Notes shall be
substantially in the form set out in Exhibit 1, with such changes
therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B;
references to a "Schedule" or an "Exhibit" are, unless otherwise specified,
to a Schedule or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amounts specified
opposite your name in Schedule A at the purchase price of 100% of the
principal amount thereof. Contemporaneously with entering into this
Agreement, the Company is entering into separate Note Purchase Agreements
(the "OTHER AGREEMENTS") identical with this Agreement with each of the
other purchasers named in Schedule A (the "OTHER PURCHASERS"), providing
for the sale at such Closing to each of the Other Purchasers of Notes in
the principal amount specified opposite its name in Schedule A. Your
obligations hereunder and the obligations of the Other Purchasers under the
Other Agreements are several and not joint obligations and you shall have
no obligation under any Other Agreement and no liability to any Person for
the performance or nonperformance by any Other Purchaser thereunder.
<PAGE>
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Kilpatrick Stockton, LLP, at
1100 Peachtree Street, Suite 2800, Atlanta, Georgia 30309, at a closing
(the "CLOSING") on December 8, 1998 or on such other Business Day
thereafter as may be agreed upon by the Company and you and the Other
Purchasers. At the Closing the Company will deliver to you the Notes to be
purchased by you in the form of a single Note (or such greater number of
Notes in denominations of at least $100,000 as you may request) dated the
date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of
immediately available funds in the amount of the purchase price therefor by
wire transfer of immediately available funds for the account of the Company
to account number 04 045 53, Account Name: "Wolverine World Wide, Inc.", at
NBD Bank N.A., Detroit, Michigan, ABA Routing # 072000326. If at the
Closing the Company shall fail to tender such Notes to you as provided
above in this Section 3, or any of the conditions specified in Section 4
shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement,
without thereby waiving any rights you may have by reason of such failure
or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to
you at the Closing is subject to the fulfillment to your satisfaction,
prior to or at the Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the Closing.
4.2 PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or
complied with by it prior to or at the Closing and after giving effect to
the issue and sale of the Notes (and the application of the proceeds
thereof as contemplated by Schedule 5.14) no Default or Event of Default
shall have occurred and be continuing. Neither the Company nor any
Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by this Agreement had it applied
since such date.
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4.3 COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have delivered to
you an Officer's Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1, 4.2 and 4.9 have been
fulfilled.
(b) SECRETARY'S CERTIFICATE. The Company shall have delivered
to you a certificate from a duly authorized Secretary or Assistant
Secretary of the Company certifying as to the resolutions attached thereto
and other corporate proceedings relating to the authorization, execution
and delivery of the Notes, this Agreement and the Other Agreements.
4.4 OPINIONS OF COUNSEL.
You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing (a) from Warner,
Norcross & Judd LLP, counsel for the Company, in the form attached hereto
as Exhibit 4.4(a) and additional opinions of such counsel covering such
other matters incident to the transactions contemplated hereby as you or
your counsel may reasonably request (and the Company hereby instructs its
counsel to deliver such opinions to you) and (b) from Kilpatrick Stockton
LLP, your special counsel in connection with such transactions, covering
the enforceability of this Agreement and the Notes, the absence of any
requirement to register the Notes under the Securities Act or to qualify as
an indenture under the Trust Indenture Act of 1939, as amended, and such
other matters incident to such transactions as you may reasonably request.
4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the
New York Insurance Law) permitting limited investments by insurance
companies without restriction as to the character of the particular
investment, (ii) not violate any applicable Law (including, without
limitation, Regulation T, U or X of the Board of Governors of the Federal
Reserve System) and (iii) not subject you to any Tax, penalty or liability
under or pursuant to any applicable Law, which Law was not in effect on the
date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably
specify to enable you to determine whether such purchase is so permitted.
4.6 SALE OF OTHER NOTES.
Contemporaneously with the Closing, the Company shall sell to the
Other Purchasers and the Other Purchasers shall purchase the Notes to be
purchased by them at the Closing as specified in Schedule A.
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4.7 PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company
shall have paid on or before the Closing the reasonable fees, charges and
disbursements of your special counsel referred to in Section 4.4 to the
extent reflected in a statement of such counsel rendered to the Company at
least one Business Day prior to the Closing.
4.8 PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained
for the Notes.
4.9 CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 4.9, the Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part
of the liabilities of any other entity, at any time following the date of
the most recent financial statements referred to in Section 5.5.
4.10 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be satisfactory to you and
your special counsel, and you and your special counsel shall have received
all such counterpart originals or certified or other copies of such
documents as you or they may reasonably request.
4.11 OFFEREE LETTER.
The Company shall have delivered a letter from First Chicago
Capital Markets, Inc. to you and your special counsel describing in such
detail as you may request the number and character of Persons to whom the
Company or any Person acting on its behalf has offered any of the Notes or
any similar securities of the Company and such other matters regarding the
manner of such offering as you may request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
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5.1 ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is duly
qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the corporate
power and authority to own or hold under lease the properties it purports
to own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement and the Other
Agreements and the Notes and to perform the provisions hereof and thereof.
5.2 AUTHORIZATION, ETC.
This Agreement and the Other Agreements and the Notes have been
duly authorized by all necessary corporate action on the part of the
Company, and this Agreement constitutes, and upon execution and delivery
thereof each Note will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
5.3 DISCLOSURE.
The Company, through its agent, First Chicago Capital Markets,
Inc., has delivered to you and each Other Purchaser a copy of a
Confidential Offering Memorandum, dated October, 1998 (the "MEMORANDUM"),
relating to the transactions contemplated hereby. The Memorandum fairly
describes, in all material respects, the general nature of the business and
principal properties of the Company and its Subsidiaries. Except as
disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents,
certificates or other writings delivered to you by or on behalf of the
Company in connection with the transactions contemplated hereby and the
financial statements identified in Section 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in
light of the circumstances under which they were made. Except as disclosed
in the Memorandum or as expressly described in Schedule 5.3, or in one of
the documents, certificates or other writings identified therein, or in the
financial statements identified in Section 5.5, since January 3, 1998,
there has been no change in the financial condition, operations, business,
properties or prospects of the Company or any Subsidiary except changes
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that individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect. There is no fact known to the Company that
could reasonably be expected to have a Material Adverse Effect that has not
been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on behalf of the
Company specifically for use in connection with the transactions
contemplated hereby.
5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its organization,
and the percentage of shares of each class of its capital stock or similar
equity interests outstanding owned by the Company and each other
Subsidiary, and specifying those Subsidiaries that are Material
Subsidiaries, (ii) of the Company's Affiliates, other than Subsidiaries,
and (iii) of the Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 5.4 as being owned by
the Company and its Subsidiaries have been validly issued, are fully paid
and nonassessable and are owned by the Company or another Subsidiary free
and clear of any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified
as a foreign corporation or other legal entity and is in good standing in
each jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any
legal restriction or any agreement (other than this Agreement, the
agreements listed on Schedule 5.4, and customary limitations imposed by
corporate law statutes) restricting the ability of such Subsidiary to pay
dividends out of profits or make any other similar distributions of profits
to the Company or any of its Subsidiaries that owns outstanding shares of
capital stock or similar equity interests of such Subsidiary.
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<PAGE>
5.5 FINANCIAL STATEMENTS.
The Company has delivered to you and to each Other Purchaser the
consolidated balance sheets of the Company and its Subsidiaries as of
December 31, 1994, December 30, 1995, December 28, 1996, and January 3,
1998 and the statements of income and retained earnings and changes in
financial position or cash flows for the fiscal years ended on said dates,
each accompanied by a report thereon containing an opinion unqualified as
to scope limitations imposed by the Company and otherwise without
qualification except as therein noted, by Ernst & Young. All of such
statements (including in each case the related schedules and notes) have
been prepared in accordance with GAAP except as therein noted, are correct
and complete and present fairly the financial position of the Company and
its Subsidiaries as of such dates and the consolidated results of their
operations and changes in their financial position or cash flows for such
periods. The Company has delivered to you and to each Other Purchaser the
unaudited consolidated balance sheets of the Company and its Subsidiaries
as of September 12, 1998 and September 6, 1997, and the unaudited
statements of operations and cash flows for the nine-month periods ended on
said dates. Such financial statements have been prepared in accordance
with GAAP consistently applied, are correct and complete and present fairly
the financial position of the Company and its Subsidiaries as of said dates
and the consolidated results of their operations and cash flows for such
periods except as therein noted (subject to normal year-end adjustments).
5.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement, the Other Agreements, and the Notes will not (i) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company or any
Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which the Company or any Subsidiary is bound or
by which the Company or any Subsidiary or any of their respective
properties may be bound or affected, (ii) conflict with or result in a
breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (iii) violate any
provision of any Law of any Governmental Authority applicable to the
Company or any Subsidiary.
5.7 GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing
or declaration with, any Governmental Authority is required in connection
with the execution, delivery or performance by the Company of this
Agreement, the Other Agreements, or the Notes.
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<PAGE>
5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) There are no actions, suits or proceedings pending or, to
the knowledge of the Company, threatened against or affecting the Company
or any Subsidiary or any property of the Company or any Subsidiary in any
court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under
any term of any agreement or instrument to which it is a party or by which
it is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any Law
(including without limitation Environmental Laws) of any Governmental
Authority, which default or violation, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
5.9 TAXES.
The Company and its Subsidiaries have filed all tax returns that
are required to have been filed in any jurisdiction, and have paid or
reflected appropriate reserves or accruals on its balance sheets for all
taxes (including federal, state, local, sales, use, VAT, customs, excise,
franchise, assets, ad valorem and withholding taxes), duties, assessments
and levies (collectively "TAXES"), except for any Taxes (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in
accordance with GAAP. The Company knows of no basis for any other tax or
assessment that could reasonably be expected to have a Material Adverse
Effect. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of federal, state or other Taxes for all fiscal
periods are adequate. The federal income tax returns of the Company and
its Subsidiaries have been audited by the Internal Revenue Service for all
fiscal years up to and including the fiscal year ended December 30, 1995
and any resulting deficiencies, additional assessments, fines, penalties,
interest or other charges have either been paid or adequately reserved for
in the financial statements identified in Section 5.5.
5.10 TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title
to their respective properties that individually or in the aggregate are
Material, including all such properties reflected as owned in the most
recent audited balance sheet referred to in Section 5.5 or purported to
have been acquired by the Company or any Subsidiary after said date (except
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<PAGE>
as sold or otherwise disposed of in the ordinary course of business), in
each case free and clear of Liens prohibited by this Agreement. All leases
that individually or in the aggregate are Material are valid and subsisting
and are in full force and effect in all material respects.
5.11 LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material;
(b) the ownership or use of the licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks and
tradenames, and other rights owned or used by the Company and its
Subsidiaries do not conflict with the rights of others, except for
such conflicts which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect;
(c) to the best knowledge of the Company, no product of the
Company or any Subsidiary infringes in any material respect any
license, permit, franchise, authorization, patent, copyright, service
mark, trademark, trade name or other right owned by any other Person;
and
(d) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or
any of its Subsidiaries.
5.12 COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and
no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability by
the Company or any ERISA Affiliate, or in the imposition of any Lien on any
of the rights, properties or assets of the Company or any ERISA Affiliate,
in either case pursuant to Title I or IV of ERISA or to such penalty or
excise tax provisions or to Section 401(a)(29) or 412 of the Code, other
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than such liabilities or Liens as would not be individually or in the
aggregate Material.
(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the
end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities by
more than $50,000 in the aggregate for all Plans. The term "BENEFIT
LIABILITIES" has the meaning specified in section 4001 of ERISA and the
terms "CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in
section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined
as of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and its Subsidiaries
is not Material.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any transaction
that is subject to the prohibitions of section 406 of ERISA or in
connection with which a tax could be imposed pursuant to section
4975(c)(1)(A)-(F) of the Code. The representation by the Company
in the first sentence of this Section 5.12(e) is made in reliance upon and
subject to (i) the accuracy of your representation in Section 6.2 as to the
sources of the funds used to pay the purchase price of the Notes to be
purchased by you and (ii) the assumption, made solely for the purpose of
making such representation, that Department of Labor Interpretive Bulletin
75-2 with respect to prohibited transactions remains valid in the
circumstances of the transactions contemplated herein.
5.13 PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered
the Notes or any similar securities for sale to, or solicited any offer to
buy any of the same from, or otherwise approached or negotiated in respect
thereof with, any Person other than you, the Other Purchasers and not more
than 45 other Institutional Investors, each of which has been offered the
Notes at a private sale for investment. Neither the Company nor anyone
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acting on its behalf has taken, or will take, any action that would subject
the issuance or sale of the Notes to the registration requirements of
Section 5 of the Securities Act.
5.14 USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as
set forth in Schedule 5.14. No part of the proceeds from the sale of the
Notes hereunder will be used, directly or indirectly, for the purpose of
buying or carrying any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System (12 CFR 221), or for
the purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of
said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 1% of the value of the consolidated assets of the
Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 1% of the value of
such assets. As used in this Section, the terms "MARGIN STOCK" and
"PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in
said Regulation U.
5.15 EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, Schedule 5.15 sets forth a
complete and correct list of all outstanding Indebtedness of the Company
and its Subsidiaries as of September 12, 1998 and, as to each item listed,
a general description of any property securing such Indebtedness. Since
the date as of which the Company has prepared Schedule 5.15, there has been
no Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Indebtedness of the Company or
its Subsidiaries or the security therefor. Neither the Company nor any
Subsidiary is in default and no waiver of default is currently in effect,
in the payment of any principal or interest on any Indebtedness of the
Company or such Subsidiary and no event or condition exists with respect to
any Indebtedness of the Company or any Subsidiary that would permit (or
that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its
stated maturity or before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company
nor any Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien not
permitted by Section 10.3.
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5.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its
use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto.
5.17 STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public Utility
Holding Company Act of 1935, as amended, the Interstate Commerce Act, as
amended, or the Federal Power Act, as amended.
5.18 ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim
or has received any notice of any claim, and no proceeding has been
instituted raising any claim against the Company or any of its Subsidiaries
or any of their respective real properties now or formerly owned, leased or
operated by any of them or other assets, alleging any damage to the
environment or violation of any Environmental Laws, except, in each case,
such as could not reasonably be expected to result in a Material Adverse
Effect. Except as otherwise disclosed to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of
any facts which would give rise to any claim, public or private,
of violation of Environmental Laws or damage to the environment
emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of
them or to other assets or their use, except, in each case, such
as could not reasonably be expected to result in a Material
Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has
stored any Hazardous Materials on real properties now or formerly
owned, leased or operated by any of them and has not disposed of
any Hazardous Materials in a manner contrary to any Environmental
Laws in each case in any manner that could reasonably be expected
to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased
or operated by the Company or any of its Subsidiaries are in
compliance with applicable Environmental Laws, except where
failure to comply could not reasonably be expected to result in a
Material Adverse Effect.
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5.19 YEAR 2000 ISSUES.
The Company and its Subsidiaries have made a reasonable
assessment of Year 2000 Issues, have adopted a program intended to
remediate all Year 2000 Issues concerning the information and other systems
and computer applications operated or used by the Company and its
Subsidiaries on a timely basis, and have fully complied with the
requirements of the Securities and Exchange Commission regarding disclosure
of Year 2000 issues. Based on such assessment and program, the Company
does not reasonably anticipate that Year 2000 Issues concerning the
information and other systems and computer applications operated or used by
the Company and its Subsidiaries will have a Material Adverse Effect. The
Company has delivered to you a copy of its Quarterly Report on Form 10-Q
for the most recently ended fiscal quarter of the Company filed with the
Securities and Exchange Commission. There is no fact known to the Company
that is inconsistent with the continued accuracy of the information
contained in such Form under the heading "Year 2000 Readiness Disclosure"
and such information continues to represent the Company's best estimate of
the estimated impact of Year 2000 Issues on the Company and its
Subsidiaries as provided therein.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 PURCHASE FOR INVESTMENT.
You represent that (i) you are not a "creditor" as defined in
Regulation T of the Board of Governors of the Federal Reserve System (12
CFR 220), (ii) you are an insurance company having its principal place of
business in a state set forth on the Purchaser Schedule attached as
Schedule A, (iii) you (and any separate accounts for which you are
purchasing a Note or Notes) are an "accredited investor" as defined in Rule
501 of Regulation D promulgated under the Securities Act, and (iv) that you
are purchasing the Notes for your own account or for one or more separate
accounts maintained by you and not with a view to the distribution thereof,
PROVIDED that the disposition of your or their property shall at all times
be within your or their control. You understand that the Notes have not
been registered under the Securities Act or any other state securities law
and may be resold only if registered pursuant to the provisions of the
Securities Act and applicable state securities laws or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company
is not required to register the Notes.
6.2 SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used
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by you to pay the purchase price of the Notes to be purchased by you
hereunder:
(a) the Source is an "insurance company general account" within
the meaning of Prohibited Transaction Exemption ("PTE") 95-60 (issued
July 12, 1995) and there is no employee benefit plan (treating as a
single plan all plans maintained by the same employer or employee
organization) with respect to which the amount of the general account
reserves and liabilities for all contracts held by or on behalf of
such plan exceeds 10% of the total reserves and liabilities of such
general account (exclusive of separate account liabilities) plus
surplus, as set forth in your most recent annual statement in the form
required by the National Association of Insurance Commissioners as
filed with your state of domicile; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within the meaning
of the PTE 91-38 (issued July 12, 1991) and, except as you have
disclosed to the Company in writing pursuant to this paragraph (b), no
employee benefit plan or group of plans maintained by the same
employer or employee organization beneficially owns more than 10% of
all assets allocated to such pooled separate account or collective
investment fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of Section
V(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions of Part I(c)
and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a
Person controlling or controlled by the QPAM (applying the definition
of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more
interest in the Company, and (i) the identity of such QPAM and
(ii) the names of all employee benefit plans whose assets are included
in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
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benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN",
"GOVERNMENTAL PLAN", and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) QUARTERLY STATEMENTS -- within 45 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than
the last quarterly fiscal period of each such fiscal year), duplicate
copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of operations and cash flows of
the Company and its Subsidiaries, for such quarter and (in the
case of the second and third quarters) for the portion of the
fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments;
PROVIDED THAT delivery within the time period specified above of
copies of the Company's Quarterly Report on Form 10-Q prepared in
compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a) so long as such requirements of
the Securities and Exchange Commission continue to require that Form
10-Q include the financial statements described in subparagraphs (i)
and (ii) above;
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(b) ANNUAL STATEMENTS -- within 90 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of operations, changes in
stockholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by:
(A) an opinion thereon of Ernst & Young LLP, or
another firm of independent certified public accountants of comparable
national standing, which opinion shall state that such financial
statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of
operations and cash flows and have been prepared in conformity with
GAAP, and that the examination of such accountants in connection with
such financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances; and
(B) a certificate of such accountants stating that
they have reviewed this Agreement and stating further whether, in
making their audit, they have become aware of any condition or event
that then constitutes a Default or an Event of Default, and, if they
are aware that any such condition or event then exists, specifying the
nature and period of the existence thereof (it being understood that
such accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in making an
audit in accordance with generally accepted auditing standards or did
not make such an audit);
PROVIDED THAT the delivery within the time period specified above of
the Company's Annual Report on Form 10-K for such fiscal year
(together with the Company's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in
accordance with the requirements therefor and filed with the
Securities and Exchange Commission, together with the accountant's
certificate described in clause (B) above, shall be deemed to satisfy
the requirements of this Section 7.1(b) so long as such requirements
of the Securities and Exchange Commission continue to require that
Form 10-K include the financial statements described in subparagraphs
(i) and (ii) above;
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(c) SEC AND OTHER REPORTS -- promptly upon their becoming
available, one copy of (I) each financial statement, report, notice or
proxy statement sent by the Company or any Subsidiary to public
securities holders generally, and (II) each regular or periodic
report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any Subsidiary
to the public concerning developments that are Material;
(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in
any event within five days after a Responsible Officer becoming aware
of the existence of any Default or Event of Default or that any Person
has given any notice or taken any action with respect to a claimed
default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in
Section 11(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(e) ERISA MATTERS -- promptly, and in any event within ten days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if
any, that the Company or an ERISA Affiliate proposes to take with
respect thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived pursuant
to such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan, or the receipt by the
Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan if such termination is reasonably likely
to result in liability of the Company or any Subsidiary to PBGC
or any Plan in excess of $200,000; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty
or excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
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properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any
other such liabilities or Liens then existing, could reasonably
be expected to have a Material Adverse Effect; or
(iv) if at any time the aggregate "amount of unfunded
benefit liabilities" (within the meaning of section 4001(a)(18)
of ERISA) under all Plans, determined in accordance with Title IV
of ERISA, shall exceed $50,000;
(f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any Federal or state Governmental
Authority relating to any Law that could reasonably be expected to
have a Material Adverse Effect;
(g) RULE 144A INFORMATION -- with reasonable promptness, any
information necessary to permit any such holder to comply with Rule
144A under the Securities Act, or any successor rule; and
(h) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to
time may be reasonably requested by any holder of Notes that is an
Institutional Investor.
7.2 OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by
a certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was
in compliance with the requirements of Sections 10.1 through 10.7
hereof, inclusive, during the quarterly or annual period covered by
the statements then being furnished (including with respect to each
such Section, where applicable, the calculations of the maximum or
minimum amount, ratio or percentage, as the case may be, permissible
under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
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conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition
or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of
the Company or any Subsidiary to comply with any Law), specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
7.3 INSPECTION.
The Company shall permit the representatives of each holder of
Notes that is an Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of Default then exists,
at the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld, and after
giving the Company the opportunity to accompany the holder on such
visitation) its independent public accountants, and (with the consent
of the Company, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Company and each
Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) DEFAULT -- if a Default or Event of Default then exists, at
the expense of the Company to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to
make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and
accounts of the Company and its Subsidiaries), all at such times and
as often as may be requested.
8. PREPAYMENT OF THE NOTES.
8.1 REQUIRED PREPAYMENTS; PAYMENT AT MATURITY.
On December 8, 2002 and on each December thereafter to and
including December, 2007, the Company will prepay $10,714,285, and on
December 8, 2008 the Company will make a final payment of $10,714,290 of
principal amount (or such amount as shall then be the remaining outstanding
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principal amount) of the Notes at par and without payment of the Make-Whole
Amount or any premium, PROVIDED that upon any partial prepayment of the
Notes pursuant to Section 8.2 or Section 8.7 the principal amount of each
required prepayment and the payment at final maturity of the Notes becoming
due under this Section 8.1 on and after the date of such prepayment shall
be reduced in the same proportion as the aggregate unpaid principal amount
of the Notes is reduced as a result of such prepayment.
8.2 OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes in an
amount not less than 10% of the aggregate principal amount of the Notes
then outstanding in the case of a partial prepayment, at 100% of the
principal amount so prepaid, plus the Make-Whole Amount determined for the
prepayment date with respect to such principal amount. Any such optional
payment shall be on a Business Day. The Company will give each holder of
Notes written notice of each optional prepayment under this Section 8.2 not
less than 30 days and not more than 60 days prior to the date fixed for
such prepayment. Each such notice shall specify such date, the aggregate
principal amount of the Notes to be prepaid on such date, the principal
amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment
date with respect to such principal amount being prepaid, and shall be
accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days prior to
such prepayment, the Company shall deliver to each holder of Notes a
certificate via facsimile transmission of a Senior Financial Officer
specifying the calculation of such Make-Whole Amount as of the specified
prepayment date. The Notes shall not be subject to prepayment at the
option of the Company except pursuant to this Section 8.2.
8.3 ALLOCATION OF PARTIAL PREPAYMENTS.
Except as otherwise provided in Section 8.7, in the case of each
partial prepayment of the Notes, the principal amount of the Notes to be
prepaid shall be allocated among all of the Notes at the time outstanding
in proportion, as nearly as practicable, to the respective unpaid principal
amounts of all such Notes not theretofore called for prepayment.
8.4 MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section
8, the principal amount of each Note to be prepaid shall mature and become
due and payable on the date fixed for such prepayment, together with
interest on such principal amount accrued to such date and the applicable
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Make-Whole Amount, if any. From and after such date, unless the Company
shall fail to pay such principal amount when so due and payable, together
with the interest and Make-Whole Amount, if any, as aforesaid, interest on
such principal amount shall cease to accrue. Any Note paid or prepaid in
full shall be surrendered to the Company and cancelled and shall not be
reissued, and no Note shall be issued in lieu of any prepaid principal
amount of any Note.
8.5 PURCHASE OF NOTES.
The Company will not, and will not permit any Affiliate to,
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any
of the outstanding Notes except upon the payment or prepayment of the Notes
in accordance with the terms of this Agreement and the Notes. The Company
will promptly cancel all Notes acquired by it or any Affiliate pursuant to
any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for
any such Notes.
8.6 MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of such
Note over the amount of such Called Principal, PROVIDED that the Make-Whole
Amount may in no event be less than zero. For the purposes of determining
the Make-Whole Amount, the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to Section 8.2 or has
become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal
of any Note, the rate per annum equal to 0.50% plus the yield to
maturity implied by (i) the yields reported (offer side), as of
10:00 A.M. (New York City time) on the second Business Day preceding
the Settlement Date with respect to such Called Principal, on the
Bloomberg Financial Markets Service for actively traded U.S. Treasury
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securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such
yields are not reported as of such time or the yields reported as of
such time are not ascertainable, the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been so
reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of
such Settlement Date. Such implied yield in (i) and (ii) above will
be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the maturity closest to
and greater than the Remaining Average Life and (2) the actively
traded U.S. Treasury security with the maturity closest to and less
than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth
year) that will elapse between the Settlement Date with respect to
such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date, PROVIDED that if
such Settlement Date is not a date on which interest payments are due
to be made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
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8.7 OFFER TO PREPAY NOTES IN THE EVENT OF A DEBT PREPAYMENT APPLICATION.
(a) NOTICE OF DEBT PREPAYMENT APPLICATION. In the event of a
Debt Prepayment Application pursuant to Section 10.7, the Company
shall offer to prepay, in accordance with and subject to the
definition of Debt Prepayment Application, the Ratable Portion of each
Note held by each holder on the Business Day specified in such offer,
which date shall occur prior to the expiration of the 365 day period
specified in Section 10.7 and no later than the first Debt Prepayment
Application with respect to any other Senior Funded Debt of the
Company or any of its Subsidiaries (the "PROPOSED DPA PREPAYMENT
DATE"). The Proposed DPA Prepayment Date shall be not less than 30
days and not more than 60 days after the date of such offer (if the
Proposed DPA Prepayment Date shall not be specified in such offer, the
Proposed DPA Prepayment Date shall be the 60th day after the date of
such offer, or if such date is not a Business Day, then on the last
Business Day prior to such date). Each offer under this Section
8.7(a) shall be accompanied by the certificate described in
subparagraph (d) of this Section 8.7.
(b) ACCEPTANCE. A holder of Notes may accept an offer to prepay
made pursuant to Section 8.7(a) by causing a notice of such acceptance
to be delivered to the Company at least five Business Days prior to
the Proposed DPA Prepayment Date. A failure by any holder of Notes to
respond to an offer to prepay made pursuant to this Section 8.7 shall
be deemed to constitute a rejection of such offer by such holder.
(c) PREPAYMENT. Prepayment of the Notes to be prepaid pursuant
to this Section 8.7 shall be at 100% of the principal amount of such
Notes, or such lesser principal amount as shall equal the Ratable
Portion of the Notes being repaid, together with interest on such
Notes accrued to the date of prepayment. The prepayment shall be made
on the Proposed DPA Prepayment Date.
(d) OFFICER'S CERTIFICATE. Each offer to prepay the Notes
pursuant to Section 8.7(a) shall be accompanied by a certificate of a
Senior Financial Officer of the Company, dated the date of such offer
and specifying: (i) the Proposed DPA Prepayment Date; (ii) that such
offer is made pursuant to Section 8.7(a); (iii) the aggregate
principal amount of all Notes, and the principal amount of each Note,
offered to be prepaid (determined in accordance with the definition of
Ratable Portion); (iv) the interest that would be due on each Note
offered to be prepaid, accrued to the Proposed DPA Prepayment Date;
and (v) in reasonable detail, the respective natures, dates and Net
Proceeds Amounts of the Asset Dispositions giving rise to such offer
of prepayment.
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9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1 COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to
comply with all Laws to which each of them is subject, including, without
limitation, Environmental Laws and ERISA, and will obtain and maintain in
effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case
to the extent necessary to ensure that non-compliance with such Laws or
failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
9.2 INSURANCE.
The Company will and will cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with
respect to their respective properties and businesses against such
casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as is customary in
the case of entities of established reputations engaged in the same or a
similar business and similarly situated.
9.3 MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary
wear and tear), so that the business carried on in connection therewith may
be properly conducted at all times, PROVIDED that this Section shall not
prevent the Company or any Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and the Company has concluded that
such discontinuance could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
9.4 PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file
all tax returns required to be filed in any jurisdiction and to pay and
discharge all Taxes shown to be due and payable on such returns and all
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other Taxes imposed on them or any of their properties, assets, income or
franchises, to the extent such Taxes have become due and payable and before
they have become delinquent and all claims for which sums have become due
and payable that have or might become a Lien on properties or assets of the
Company or any Subsidiary, PROVIDED that neither the Company nor any
Subsidiary need pay any such Tax or claims if (i) the amount, applicability
or validity thereof is contested by the Company or such Subsidiary on a
timely basis in good faith and in appropriate proceedings, and the Company
or a Subsidiary has established adequate reserves therefor in accordance
with GAAP on the books of the Company or such Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
9.5 CORPORATE EXISTENCE, ETC..
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 10.6, 10.7 and 10.8,
the Company will at all times preserve and keep in full force and effect
the legal existence of each of its Subsidiaries (unless merged into the
Company or a Wholly-Owned Subsidiary) and all rights and franchises of the
Company and its Subsidiaries unless, in the good faith judgment of the
Company, the termination of or failure to preserve and keep in full force
and effect such legal existence, right or franchise could not, individually
or in the aggregate, have a Material Adverse Effect.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
10.1 FIXED CHARGE COVERAGE.
The Company will not, at any time, permit the Fixed Charges
Coverage Ratio to be less than 1.5 to 1.0.
10.2 MAINTENANCE OF CONSOLIDATED NET WORTH.
The Company shall not, at any time, permit Consolidated Net Worth
to be less than the sum of (a) $220,000,000, minus (b) Net Repurchase
Expenditures, if any, at such time, plus (c) 40% of its aggregate
Consolidated Net Earnings (but only if a positive number) for the period
beginning on September 13, 1998 and ending at the end of the fiscal quarter
most recently completed at such time.
10.3 LIENS.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly create, incur, assume or permit to exist (upon
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the happening of a contingency or otherwise) any Lien on or with respect to
any property (including, without limitation, any document or instrument in
respect of goods or accounts receivable) of the Company or any Subsidiary,
whether now owned or held or hereafter acquired, or any income or profits
therefrom (whether or not provision is made for the equal and ratable
securing of the Notes in accordance with the last paragraph of this Section
10.3), or assign or otherwise convey any right to receive income or
profits, except:
(a) Liens for Taxes which are not yet due and payable or the
payment of which is not at the time required by Section 9.4;
(b) any attachment or judgment Lien, unless the judgment it
secures shall not, within 60 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not
have been discharged within 60 days after the expiration of any such
stay, provided that the Company and its Subsidiaries may incur and
permit to exist attachment and judgment Liens not otherwise permitted
by this subparagraph (b) if the judgments secured thereby shall not at
any time exceed, in the aggregate, $5,000,000, and provided, further,
that no attachment or judgment Lien permitted by this subparagraph
shall secure a judgment in excess of $10,000,000 for a period in
excess of 60 days after the entry thereof;
(c) leases or subleases granted to others, easements, rights-of-
way, restrictions and other similar charges or encumbrances, in each
case incidental to, and not interfering with, the ordinary conduct of
the business of the Company or any of its Subsidiaries, provided that
such Liens do not, in the aggregate, materially detract from the value
of such property;
(d) other Liens incidental to the normal conduct of the business
of the Company or any Subsidiary or the ownership of their respective
properties which are not incurred in connection with the incurrence or
maintenance of Indebtedness and which do not in the aggregate
materially impair the use of any property subject thereto in the
operation of the business of the Company or any Subsidiary, or
materially detract from the value of such property;
(e) Liens existing on the date of this Agreement on the property
described by category in the column entitled "Collateral" on Schedule
5.15 and securing, in each case, the Debt of the Company and its
Subsidiaries referred to in the corresponding item of such Schedule
5.15;
(f) any Lien renewing, extending or refunding any Lien permitted
by subparagraph (e) of this Section, provided that (i) the principal
amount of Debt secured by such Lien immediately prior to such
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extension, renewal or refunding is not increased or the maturity
thereof reduced, (ii) such Lien is not extended to any other property,
and (iii) immediately after such extension, removal or refunding no
Default or Event of Default would exist;
(g) Liens on property of any Subsidiary of the Company securing
Indebtedness owing to the Company or to any of its Wholly-Owned
Subsidiaries;
(h) any Lien created to secure all or any part of the purchase
price, or to secure Debt incurred or assumed to pay all or any part of
the purchase price or cost of construction, of tangible property (or
any improvement thereon) acquired or constructed by the Company or a
Subsidiary after the date of the Closing, provided that
(i) any such Lien shall extend solely to the item or items
of such property (or improvement thereon) so acquired or constructed
and, if required by the terms of the instrument originally creating
such Lien, other property (or improvement thereon) which is an
improvement to or is acquired for specific use in connection with such
acquired or constructed property (or improvement thereon) or which is
real property being improved by such acquired or constructed property
(or improvement thereon),
(ii) the principal amount of the Debt secured by any such
Lien shall at no time exceed an amount equal to the lesser of (A) the
cost to the Company or such Subsidiary of the property (or improvement
thereon) so acquired or constructed or (B) the Fair Market Value (as
determined in good faith by the Board of Directors of the Company) of
such property (or improvement thereon) at the time of such acquisition
or construction, and
(iii) any such Lien shall be created contemporaneously
with, or within 180 days after, the acquisition or the completion of
construction of such property;
(i) any Lien existing on property of a Person immediately prior
to its being consolidated or merged with the Company or its becoming a
Subsidiary, or any Lien existing on any property acquired by the
Company or any Subsidiary at the time such property is so acquired
(whether or not the Debt secured thereby shall have been assumed),
provided that (i) no such Lien shall have been created or assumed in
contemplation of such consolidation or merger or such Person's
becoming a Subsidiary or such acquisition of property, (ii) each such
Lien shall extend solely to the item or items of property so acquired
and, if required by the terms of the instrument originally creating
such Lien, other property which is an improvement to or is acquired
for specific use in connection with such acquired property and (iii)
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the principal amount of the Debt secured by any such Lien shall at no
time exceed an amount equal to the lesser of (A) the cost to the
Company or such Subsidiary of such property, as reflected on the books
of the Company or such Subsidiary immediately after such merger,
consolidation or acquisition in accordance with GAAP, or (B) the Fair
Market Value (as determined in good faith by the Board of Directors of
the Company) of such property at the time of such merger,
consolidation or acquisition.; and
(j) other Liens not otherwise permitted by subparagraphs (a)
through (i) of this section securing Funded Debt of the Company or any
Subsidiary, provided that the aggregate amount of such Funded Debt
secured by Liens permitted by this subparagraph (j) shall not at any
time exceed 20% of Consolidated Net Worth as of the end of the then
most recently ended fiscal quarter of the Company.
10.4 INCURRENCE OF FUNDED DEBT.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly create, incur, assume, guarantee or otherwise become
directly or indirectly liable with respect to, any Funded Debt, except:
(a) the Notes;
(b) Funded Debt of a Subsidiary to the Company or to a Wholly-
Owned Subsidiary; and
(c) additional Funded Debt of the Company and its Subsidiaries,
provided that immediately after giving effect to the incurrence thereof and
to the application of the proceeds therefrom, Consolidated Funded Debt does
not exceed 55% of Consolidated Total Capitalization.
For the purposes of this Section 10.4, any Person becoming a Subsidiary
after the date hereof shall be deemed, at the time it becomes a Subsidiary,
to have incurred all of its then outstanding Debt, and any Person
extending, renewing or refunding any Debt shall be deemed to have incurred
such Debt at the time of such extension, renewal or refunding.
10.5 PRIORITY DEBT.
The Company shall not at any time permit Priority Debt to exceed
the greater of (i) $59,000,000 or (ii) 20% of Consolidated Net Worth as of
the end of the then most recently ended fiscal quarter of the Company.
10.6 MERGER OR CONSOLIDATION.
The Company shall not, and shall not permit any Subsidiary to,
merge or consolidate with any other Person, except that:
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(i) any Subsidiary may merge or consolidate with and into the
Company or a Wholly-Owned Subsidiary, provided that the Company or
such Wholly-Owned Subsidiary shall be the successor formed by such
consolidation or the survivor of such merger; and
(ii) the Company may merge or consolidate with any other
corporation so long as:
(a) the successor formed by such consolidation or the survivor
of such merger, as the case may be (the "SUCCESSOR CORPORATION"), shall be
a solvent corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia;
(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to each holder of Notes its
assumption of the due and punctual performance and observance of each
covenant and condition of this Agreement and the Notes (pursuant to such
agreements and instruments as shall be reasonably satisfactory to the
Required Holders), and the Company shall have caused to be delivered to
each holder of Notes an opinion of Warner, Norcross & Judd LLP, or other
nationally recognized independent counsel reasonably satisfactory to the
Required Holders, to the effect that all agreements or instruments
effecting such assumption are enforceable in accordance with their terms
and comply with the terms hereof; and
(c) immediately after giving effect to such transaction:
(1) no Default or Event of Default would exist, and
(2) the Successor Corporation would be permitted by the
provisions of Section 10.4 hereof to incur at least $1.00 of additional
Funded Debt owing to a Person other than a Subsidiary of the Successor
Corporation.
10.7 SALE OF ASSETS.
The Company will not, and will not permit any Subsidiary to, make
any Asset Disposition unless:
(a) in the good faith opinion of the Company, the Asset
Disposition is in exchange for consideration having a Fair Market
Value at least equal to that of the property exchanged and is in the
best interest of the Company or such Subsidiary;
(b) immediately after giving effect to the Asset Disposition, no
Default or Event of Default would exist, and the Company would be
permitted by the provisions of Section 10.4 hereof to incur at least
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$1.00 of additional Funded Debt owing to a Person other than a
Subsidiary; and
(c) immediately after giving effect to the Asset Disposition,
the Disposition Value of all property that was the subject of any
Asset Disposition occurring in the period of four fiscal quarters of
the Company then next ending would not exceed 10% of Consolidated
Total Assets as of the end of the then most recently ended fiscal
quarter of the Company.
If the Net Proceeds Amount for any Transfer is applied to a Debt
Prepayment Application or a Property Reinvestment Application within 365
days after such Transfer, then such Transfer, only for the purpose of
determining compliance with subsection (c) of this Section 10.7 as of a
date on or after the Net Proceeds Amount is so applied, shall be deemed not
to be an Asset Disposition.
10.8 TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to enter
into directly or indirectly any transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with
any Affiliate (other than the Company or another Subsidiary), except in the
ordinary course and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Company or such Subsidiary than would be
obtainable in a comparable arm's length transaction with a Person not an
Affiliate.
10.9 NATURE OF BUSINESS.
The Company will not, and will not permit any of its Subsidiaries
to, engage to any substantial extent in any business other than the
businesses in which the Company and its Subsidiaries are engaged on the
date of this Agreement as described in the Memorandum, and businesses
reasonably related thereto or in furtherance thereof.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
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(b) the Company defaults in the payment of any interest on any
Note for more than five Business Days after the same becomes due and
payable; or
(c) the Company defaults in the performance of or compliance
with any term contained in Sections 7.1(d) or Section 10.1 through
Section 10.9, inclusive; or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 11) and such default is
not remedied within 30 days after the earlier of (i) a Responsible
Officer obtaining actual knowledge of such default and (ii) the
Company receiving written notice of such default from any holder of a
Note (any such written notice to be identified as a "notice of
default" and to refer specifically to this paragraph (d) of
Section 11); or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or
incorrect in any material respect on the date as of which made; or
(f) (i) the Company or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any
Indebtedness that is outstanding in an aggregate principal amount of
at least $5,000,000 beyond any period of grace provided with respect
thereto, or (ii) the Company or any Subsidiary is in default in the
performance of or compliance with any term of any evidence of any
Indebtedness in an aggregate outstanding principal amount of at least
$5,000,000 or of any mortgage, indenture or other agreement relating
thereto or any other condition exists, and as a consequence of such
default or condition such Indebtedness has become, or has been
declared, due and payable before the stated maturity or before the
regularly scheduled dates of payment of such Indebtedness, or (iii) as
a consequence of the occurrence or continuation of any event or
condition (other than the passage of time or the right of the holder
of any Indebtedness to convert such Indebtedness into equity
interests), the Company or any Subsidiary has become obligated to
purchase, redeem, collateralize or pay, or to establish a sinking fund
for, any Indebtedness before the regular maturity or before the
regularly scheduled dates of payment (or before any regularly
scheduled date of mandatory purchase, redemption, collateralization,
or sinking fund payment) of such Indebtedness in an aggregate
outstanding principal amount of at least $5,000,000.
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(g) the Company or any Material Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they
become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or
(h) a court or Governmental Authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of
its Material Subsidiaries, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for relief
or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any of its
Material Subsidiaries, or any such petition shall be filed against the
Company or any of its Material Subsidiaries and such petition shall
not be dismissed within 60 days; or
(i) a final judgment or judgments or one or more final orders of
one or more courts or Governmental Authorities of competent
jurisdiction providing for the payment of money aggregating in excess
of $5,000,000 are rendered against one or more of the Company and its
Subsidiaries and such judgments or orders are not, within 60 days
after entry thereof, bonded, discharged or stayed pending appeal, or
are not discharged within 60 days after the expiration of such stay;
or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or appoint a trustee
to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of ERISA)
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under all Plans, determined in accordance with Title IV of ERISA,
shall exceed $200,000, (iv) the Company or any ERISA Affiliate shall
have incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the
Company or any ERISA Affiliate withdraws from any Multiemployer Plan,
or (vi) the Company or any Subsidiary establishes or amends any
employee welfare benefit plan that provides post employment welfare
benefits in a manner that would increase the liability of the Company
or any Subsidiary thereunder; and any such event or events described
in clauses (i) through (vi) above, either individually or together
with any other such event or events, could reasonably be expected to
have a Material Adverse Effect.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1 ACCELERATION.
(a) If an Event of Default with respect to the Company described
in paragraph (g) or (h) of Section 11 (other than an Event of Default
described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause (i)
of paragraph (g)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of 35% or more in principal amount of the
Notes at the time outstanding may at any time at its or their option, by
notice or notices to the Company, declare all the Notes then outstanding to
be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes
at the time outstanding affected by such Event of Default may at any time,
at its or their option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature
and the entire unpaid principal amount of such Notes, plus (x) all accrued
and unpaid interest thereon and (y) the Make-Whole Amount determined in
respect of such principal amount (to the full extent permitted by
applicable law), shall all be immediately due and payable, in each and
every case without presentment, demand, protest or further notice, all of
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which are hereby waived. The Company acknowledges, and the parties hereto
agree, that each holder of a Note has the right to maintain its investment
in the Notes free from repayment by the Company (except as herein
specifically provided for) and that the provision for payment of a Make-
Whole Amount by the Company in the event that the Notes are prepaid or are
accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2 OTHER REMEDIES.
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 12.1, the holder of any
Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of
the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
12.3 RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the holders of not less than
66% in principal amount of the Notes then outstanding, by written notice to
the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that are due
and payable and are unpaid other than by reason of such declaration, and
(to the extent permitted by applicable Law) all interest on such overdue
principal and Make-Whole Amount, if any, and any overdue interest in
respect of the Notes, at the Default Rate, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment
of any monies due pursuant hereto or to the Notes. No rescission and
annulment under this Section 12.3 will extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of
any Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies.
No right, power or remedy conferred by this Agreement or by any Note upon
any holder thereof shall be exclusive of any other right, power or remedy
referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise. Without limiting the obligations of the
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Company under Section 15, the Company will pay to the holder of each Note
on demand such further amount as shall be sufficient to cover all costs and
expenses of such holder incurred in any enforcement or collection under
this Section 12, including, without limitation, reasonable attorneys' fees,
expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a
register for the registration and registration of transfers of Notes. The
name and address of each holder of one or more Notes, each transfer thereof
and the name and address of each transferee of one or more Notes shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes hereof,
and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and
correct copy of the names and addresses of all registered holders of Notes.
13.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of
the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of
such Note or his attorney duly authorized in writing and accompanied by the
address for notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, at the Company's expense (except as
provided below), one or more new Notes (as requested by the holder thereof)
in exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be
substantially in the form of Exhibit 1. Each such new Note shall be dated
and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no
interest shall have been paid thereon. The Company may require payment of
a sum sufficient to cover any stamp tax or governmental charge imposed in
respect of any such transfer of Notes. Notes shall not be transferred in
denominations of less than $1,000,000 or, prior to the occurrence of any
Default or Event of Default, to any person which is not (i) you or any
Other Purchaser, (ii) an Affiliate of you or of any Other Purchaser, (iii)
an Institutional Investor, or (iv) a nominee of a Person referred to in the
foregoing clauses (i)-(iii), PROVIDED that such nominee is an Affiliate of
such Person or is an entity or institution described in clause (c) of the
definition of Institutional Investor, PROVIDED that if necessary to enable
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the registration of transfer by a holder of its entire holding of Notes,
one Note may be in a denomination of less than $1,000,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its
nominee), shall be deemed to have made the representation set forth in
Section 6.2.
13.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of
any Note (which evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such ownership and
such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to it (PROVIDED that if the holder of
such Note is, or is a nominee for, an original Purchaser or another holder
of a Note with a minimum net worth of at least $50,000,000, such Person's
own unsecured agreement of indemnity shall be deemed to be satisfactory),
or
(b) in the case of mutilation, upon surrender and cancellation
thereof, the Company at its own expense shall execute and deliver, in lieu
thereof, a new Note, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated
Note or dated the date of such lost, stolen, destroyed or mutilated Note
if no interest shall have been paid thereon.
14. PAYMENTS ON NOTES.
14.1 PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be
made in New York, New York, at the principal office of The Bank of New York
in such jurisdiction. The Company may at any time, by notice to each
holder of a Note, change the place of payment of the Notes so long as such
place of payment shall be either the principal office of the Company in
such jurisdiction or the principal office of a bank or trust company in
such jurisdiction.
14.2 HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note,
and notwithstanding anything contained in Section 14.1 or in such Note to
the contrary, the Company will pay all sums becoming due on such Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Schedule A, or by
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such other method or at such other address as you shall have from time to
time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation
thereon, except that upon written request of the Company made concurrently
with or reasonably promptly after payment or prepayment in full of any
Note, you shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at its principal executive office or
at the place of payment most recently designated by the Company pursuant to
Section 14.1. Prior to any sale or other disposition of any Note held by
you or your nominee you will, at your election, either endorse thereon the
amount of principal paid thereon and the last date to which interest has
been paid thereon or surrender such Note to the Company in exchange for a
new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the
direct or indirect transferee of any Note purchased by you under this
Agreement and that has made the same agreement relating to such Note as you
have made in this Section 14.2.
15. EXPENSES, ETC.
15.1 TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including
reasonable attorneys' fees of a special counsel and, if reasonably
required, local or other counsel) incurred by you and each Other Purchaser
or holder of a Note in connection with such transactions and in connection
with any amendments, waivers or consents under or in respect of this
Agreement or the Notes (whether or not such amendment, waiver or consent
becomes effective), including, without limitation: (a) the costs and
expenses incurred in enforcing or defending (or determining whether or how
to enforce or defend) any rights under this Agreement or the Notes or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the Notes, or by reason
of being a holder of any Note, and (b) the costs and expenses, including
financial advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-
out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other holder of a
Note harmless from, all claims in respect of any fees, costs or expenses if
any, of brokers and finders (other than those retained by you).
15.2 SURVIVAL.
The obligations of the Company under this Section 15 will survive
the payment or transfer of any Note, the enforcement, amendment or waiver
of any provision of this Agreement or the Notes, and the termination of
this Agreement.
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16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive
the execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a
Note, regardless of any investigation made at any time by or on behalf of
you or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties
of the Company under this Agreement. Subject to the preceding sentence,
this Agreement and the Notes embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1 REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance
of any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and
the Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term
(as it is used therein), will be effective as to you unless consented to by
you in writing, and (b) no such amendment or waiver may, without the
written consent of the holder of each Note at the time outstanding affected
thereby, (i) subject to the provisions of Section 12 relating to
acceleration or rescission, change the amount or time of any prepayment or
payment of principal of, or reduce the rate or change the time of payment
or method of computation of interest or of the Make-Whole Amount on, the
Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver,
or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
17.2 SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, sufficiently far in advance of the date a decision
is required, to enable such holder to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in
respect of any of the provisions hereof or of the Notes. The Company will
deliver executed or true and correct copies of each amendment, waiver or
consent effected pursuant to the provisions of this Section 17 to each
holder of outstanding Notes promptly following the date on which it is
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<PAGE>
executed and delivered by, or receives the consent or approval of, the
requisite holders of Notes.
(b) PAYMENT. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any holder
of Notes as consideration for or as an inducement to the entering into by
any holder of Notes of any waiver or amendment of any of the terms and
provisions hereof unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably to each holder
of Notes then outstanding even if such holder did not consent to such
waiver or amendment.
17.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this
Section 17 applies equally to all holders of Notes and is binding upon them
and upon each future holder of any Note and upon the Company without regard
to whether such Note has been marked to indicate such amendment or waiver.
No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or
waived or impair any right consequent thereon. No course of dealing
between the Company and the holder of any Note nor any delay in exercising
any rights hereunder or under any Note shall operate as a waiver of any
rights of any holder of such Note. As used herein, the term "THIS
AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of
the holders of a specified percentage of the aggregate principal amount of
Notes then outstanding, Notes directly or indirectly owned by the Company
or any of its Affiliates (including without limitation any Subsidiaries)
shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return
receipt requested (postage prepaid), or (c) by a recognized overnight
delivery service (with charges prepaid). Any such notice must be sent:
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<PAGE>
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of the Chief Financial
Officer (with a copy to the same address to the attention of the
General Counsel), or at such other address as the Company shall have
specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually
received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto including,
without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by you at the Closing (except
the Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the
extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by you in the regular course of
business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting
any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any
such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION"
means information delivered to you by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified when received
by you as being confidential information of the Company or such Subsidiary,
PROVIDED that such term does not include information that (a) was publicly
known or otherwise known to you prior to the time of such disclosure,
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<PAGE>
(b) subsequently becomes publicly known through no act or omission by you
or any Person acting on your behalf, (c) otherwise becomes known to you
other than through disclosure by the Company or any Subsidiary or (d)
constitutes financial statements delivered to you under Section 7.1 that
are otherwise publicly available. You will maintain the confidentiality of
such Confidential Information in accordance with procedures adopted by you
in good faith to protect confidential information of third parties
delivered to you, PROVIDED that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys
and affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with
the terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any
part thereof or any participation therein (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound
by the provisions of this Section 20), (v) any Person from which you offer
to purchase any security of the Company (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound
by the provisions of this Section 20), (vi) any federal or state regulatory
authority having jurisdiction over you, (vii) the National Association of
Insurance Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information about your
investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with
any law, rule, regulation or order applicable to you, (x) in response to
any subpoena or other legal process, (y) in connection with any litigation
to which you are a party or (z) if an Event of Default has occurred and is
continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes and this Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20
as though it were a party to this Agreement. On reasonable request by the
Company in connection with the delivery to any holder of a Note of
information required to be delivered to such holder under this Agreement or
requested by such holder (other than a holder that is a party to this
Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates
as the purchaser of the Notes that you have agreed to purchase hereunder,
by written notice to the Company, which notice shall be signed by both you
and such Affiliate, shall contain such Affiliate's agreement to be bound by
this Agreement and shall contain a confirmation by such Affiliate of the
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<PAGE>
accuracy with respect to it of the representations set forth in Section 6.
Upon receipt of such notice, wherever the word "you" is used in this
Agreement (other than in this Section 21), such word shall be deemed to
refer to such Affiliate in lieu of you. In the event that such Affiliate
is so substituted as a purchaser hereunder and such Affiliate thereafter
transfers to you all of the Notes then held by such Affiliate, upon receipt
by the Company of notice of such transfer, wherever the word "you" is used
in this Agreement (other than in this Section 21), such word shall no
longer be deemed to refer to such Affiliate, but shall refer to you, and
you shall have all the rights of an original holder of the Notes under this
Agreement.
22. MISCELLANEOUS.
22.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by
or on behalf of any of the parties hereto bind and inure to the benefit of
their respective successors and assigns (including, without limitation, any
subsequent holder of a Note) whether so expressed or not.
22.2 PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or
interest on any Note that is due on a date other than a Business Day shall
be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such
next succeeding Business Day.
22.3 SEVERABILITY.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by
law) not invalidate or render unenforceable such provision in any other
jurisdiction.
22.4 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance
with any other covenant. Where any provision herein refers to action to be
taken by any Person, or which such Person is prohibited from taking, such
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<PAGE>
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
22.5 COUNTERPARTS.
This Agreement may be executed in any number of identical
counterparts, each of which shall be an original but all of which together
shall constitute one instrument. Each counterpart may consist of a number
of copies hereof, each signed by less than all, but together signed by all,
of the parties hereto.
22.6 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE
STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION
OTHER THAN SUCH STATE.
[SIGNATURES ON FOLLOWING PAGES]
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<PAGE>
If you are in agreement with the foregoing, please sign the form
of agreement on the accompanying counterpart of this Agreement and return
it to the Company, whereupon the foregoing shall become a binding agreement
between you and the Company.
Very truly yours,
WOLVERINE WORLD WIDE, INC.
By: ___________________________
Stephen L. Gulis, Jr.
Executive Vice President,
Chief Financial Officer and Treasurer
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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<PAGE>
The foregoing is
hereby agreed to
as of the date thereof.
[PURCHASER]
By: ___________________________
Name: _________________________
Title: ________________________
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<PAGE>
<TABLE>
SCHEDULE A TO NOTE PURCHASE AGREEMENT
INFORMATION RELATING TO PURCHASERS
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
EQUITABLE LIFE INSURANCE U.S.$4,000,000 U.S.$4,000,000
COMPANY OF IOWA
(1) All payments on account of Notes
held by such purchaser shall be made
by wire transfer of immediately available
funds for credit to:
The Bank of New York
ABA #021000018
BNF: IOC566
Attn: William Cashman
Re: Equitable Life Insurance Company of Iowa - Account #068071
Reference: Cusip on bond description
Each such wire transfer shall set forth the name of the Corporation,
the full title (including the Coupon rate, issuance date, and final maturity
date) of the Notes on account of which such payment is made, a
reference to the PPN, and the due date and application (as among
principal, premium and interest) of the payment being made.
(2) Address for all notices relating to payments:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Securities Accounting
Fax: (770) 690-4899
(3) Address for all other communications and notices:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Private Placements
Fax: (770) 690-4899
(4) Tax Identification No: 42-0236150
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
USG ANNUITY & LIFE COMPANY U.S.$8,000,000 U.S.$8,000,000
(1) All payments on account of Notes held
by such purchaser shall be made by wire
transfer of immediately available funds
for credit to:
The Bank of New York
ABA #021000018
BNF: IOC566
Attn: William Cushman
Re: USG Annuity & Life Company - Account #368520
Reference: Cusip on bond description
Each such wire transfer shall set forth the name of the
Corporation, the full title (including the Coupon rate,
issuance date, and final maturity date) of the Notes on
account of which such payment is made, a reference to
the PPN, and the due date and application (as among
principal, premium and interest) of the payment being made.
(2) Address for all notices relating to payments:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Securities Accounting
Fax: (770) 690-4899
(3) Address for all other communications and notices:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Private Placements
Fax: (770) 690-4899
(4) Tax Identification No: 73-0663836
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
SECURITY LIFE OF DENVER U.S.$7,000,000 U.S.$7,000,000
INSURANCE COMPANY
(1) All payments on account of Notes
held by such purchaser shall be made
by wire transfer of immediately
available funds for credit to:
Boston Safe Deposit & Trust Co.
Boston, Massachusetts
MBS Income
Account DD#: 125261
ABA #: 011-001-234
CC 1253
Credit to: Security Life of Denver Insurance Company
Account #INGF1007002
Each such wire transfer shall set forth the name of the Corporation, the
full title (including the Coupon rate, issuance date, and final maturity
date) of the Notes on account of which such payment is made, a
reference to the PPN, and the due date and application (as among
principal, premium and interest) of the payment being made.
(2) Address for all notices relating to payments:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Securities Accounting
Fax: (770) 690-4899
(3) Address for all other communications and notices:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Private Placements
Fax: (770) 690-4899
(4) Tax Identification No: 84-0499703
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
MIDWESTERN UNITED LIFE U.S.$3,000,000 U.S.$3,000,000
INSURANCE COMPANY
(1) All payments on account of Notes
held by such purchaser shall be made
by wire transfer of immediately
available funds for credit to:
Boston Safe Deposit & Trust Co.
Boston, Massachusetts
MBS Income
Account DD#: 125261
ABA #: 011-001-234
CC 1253
Credit to: Midwestern United Life Insurance Company
Account #INGF1003002
Each such wire transfer shall set forth the name of the Corporation,
the full title (including the Coupon rate, issuance date, and final
maturity date) of the Notes on account of which such payment is
made, a reference to the PPN, and the due date and application
(as among principal, premium and interest) of the payment being made.
(2) Address for all notices relating to payments:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Securities Accounting
Fax: (770) 690-4899
(3) Address for all other communication and notices:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Private Placements
Fax: (770) 690-4899
(4) Tax Identification No: 35-0838945
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
SOUTHLAND LIFE INSURANCE U.S.$3,000,000 U.S.$3,000,000
COMPANY
(1) All payments on account of Notes
held by such purchaser shall be made
by wire transfer of immediately
available funds for credit to:
Boston Safe Deposit & Trust Co.
Boston, Massachusetts
MBS Income
Account DD#: 125261
ABA #: 011-001-234
CC 1253
Credit to: Southland Life Insurance Company
Account #INGF1013002
Each such wire transfer shall set forth the name of the
Corporation, the full title (including the Coupon rate,
issuance date, and final maturity date) of the Notes on
account of which such payment is made, a reference to
the PPN, and the due date and application (as among
principal, premium and interest) of the payment being made.
(2) Address for all notices relating to payments:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Securities Accounting
Fax: (770) 690-4899
(3) Address for all other communications and notices:
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
Attention: Private Placements
Fax: (770) 690-4899
(4) Tax Identification No: 75-0572420
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
THE GUARDIAN LIFE U.S.$19,000,000 U.S.$19,000,000
INSURANCE COMPANY OF
AMERICA (IN THE NOMINEE NAME OF
CUDD & CO.)
(1) Payment by wire to:
The Chase Manhattan Bank
ABA #021000021
CHASE/NYC/CTR/BNF
A/C 900-9-000200
Reference A/C #G05978 The Guardian
and the name and CUSIP for which
payment is being made
(2) Address for all notices relating to payments:
The Guardian Life Insurance Company of America
Attn: Investment Accounting M-IA
201 Park Avenue South
New York, NY 10003
Fax (212) 677-9023
(3) Address for all other communications and notices:
The Guardian Life Insurance Company of America
201 Park Avenue South
New York, NY 10003
Attn: Raymond Henry and
Thomas M. Donohue, Investment Dept. 7B
Fax (212) 777-6715
(4) Tax Identification No.: 13-6022143
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
THE GUARDIAN INSURANCE & U.S.$1,000,000 U.S.$1,000,000
ANNUITY COMPANY, INC. (IN THE
NOMINEE NAME OF SIGLER &
COMPANY)
(1) Payment
Wire:
The Chase Manhattan Bank
ABA # 021000021
For account #544755102
Reference #MR9228419
Payment by check to:
Chase Manhattan Bank
P.O. Box 50000
Newark, NJ 07101
(2) Confirmations
Guardian Insurance & Annuity
Securities Investment Department
201 Park Avenue South - 8B
New York, NY 10003
No Duplicate Confirms
(3) Address for all notices relating to payments:
The Guardian Life Insurance Company of America
Attn: Investment Accounting MIA
201 Park Avenue South
New York, NY 10003
Fax (212) 677-9023
A-7
<PAGE>
(4) Address for all other communications and notices:
The Guardian Life Insurance Company of America
201 Park Avenue South
New York, NY 10003
Attn: Raymond Henry and
Thomas M. Donohue, Investment Dept. 7B
(212) 598-7133
Fax: (212) 777-6715
Inquiries concerning confirmations: Dorene Smith (212) 598-8234
(5) Tax Identification No.: 13-3641527
</TABLE>
A-8
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
PRINCIPAL LIFE INSURANCE U.S.$6,500,000 U.S.$6,500,000
COMPANY
(1) All payments on account of the Notes to be made by 12:00
noon (New York City time) by wire transfer of immediately
available funds to:
ABA #073000228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
For credit to Principal Life Insurance Company
Account No. 0000032395
OBI PFGSE (S) B0061889() Wolverine World Wide, Inc.
In each case with sufficient information (including interest rate,
maturity date, interest amount, principal amount and premium
amount, if applicable) to identify the source and application of
such funds.
(2) All notices with respect to payments to:
Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0960
Attn: Investment Accounting - Securities
Fax (515) 248-2643
Confirmation (515) 247-0689
(3) All other communications to:
Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0800
Attn: Investment - Securities
Fax (515) 248-2490
Confirmation (515) 248-3495
(4) Tax Identification No.: 42-0127290
</TABLE>
A-9
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
COMMERCIAL UNION LIFE U.S.$1,500,000 U.S.$1,500,000
INSURANCE COMPANY OF
AMERICA
(1) All payments on account of the Notes to be made by
12:00 noon (New York City time) by wire transfer of
immediately available funds to:
CoreStates Bank (Philadelphia)
ABA No. 031-0000-11
1500 Market Street
Philadelphia, PA 19102-2509
Attn: Joe Amen
DDA 0123-9806
For further credit to Account No. 060073-02-4 (Commercial Union Life
Insurance Company of America/Principal)
OBI PFGSE (S) B0061889() Wolverine World Wide, Inc.
In each case with sufficient information (including interest rate, maturity
date, interest amount, principal amount and premium amount, if applicable)
to identify the source and application of such funds.
(2) All notices with respect to payments to:
Commercial Union Life Insurance Company of America
711 High Street
Des Moines, Iowa 50392-0960
Attn: Investment Accounting - Securities
Fax (515) 248-2643
Confirmation (515) 247-0689
(3) All other communications to:
Commercial Union Life Insurance Company of America
711 High Street
Des Moines, Iowa 50392-0800
Attn: Investment - Securities - Jon Davidson
Fax (515) 248-2490
Confirmation (515) 248-3495
(4) Tax Identification No.: 04-2235236
A-10
<PAGE>
(5) The principal place of business of Commercial Union Life Insurance
Company of America is located in the State of Massachusetts.
</TABLE>
A-11
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
AMERICAN INVESTORS LIFE U.S.$7,000,000 U.S.$7,000,000
INSURANCE COMPANY (IN THE
NOMINEE NAME OF SALKELD & CO.)
(1) Address for all Notices with Respect to Payments:
AmerUS Capital Management
699 Walnut Street, Suite 1700
Des Moines, Iowa 50309
Attn: Dan Owens
Tele: (515) 283-3431
Fax: (515) 283-3434
(2) Address for all Other Communications:
AmerUS Capital Management
699 Walnut Street, Suite 1700
Des Moines, Iowa 50309
Attn: Investment Department
Tele: (515) 362-3527
Fax: (515) 283-3434
(3) Wire instructions for American Investors Life Insurance Company:
Bankers Trust Company
New York, NY
ABA #021001033
Credit Account #99911145
For Further Credit Account #093398
American Investors Life Insurance Co.
Ref: Wolverine World Wide, Inc. 6.50% Senior Note issued December 8, 1998,
due December 8, 2008; PPN: 978097B*3
(4) American Investors Life Insurance Company Tax ID #48-0696320
Salkeld & Co. Tax ID #13-6065491
A-12
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
AMERICAN UNITED LIFE U.S.$5,000,000 U.S.$5,000,000
INSURANCE COMPANY
(1) Payment:
The Company shall make payment of principal and
interest on the Notes in immediately available funds
by wire transfer to the following bank account:
Bank of New York
Attn: P&I Department
One Wall Street, 3rd Floor
Window A
New York, NY 10286
ABA #021000018, BNF: IOC566
Acct. #186683/AUL
Payments should contain sufficient information to
identify the breakdown of principal and interest and
should identify the full description of the Notes and
the payment date.
(2) Address for all notices:
American United Life Insurance Company
Attn: Christopher D. Pahlke
Securities Department
One American Square
Indianapolis, IN 46282
(3) Tax Identification No.: 35-0145825
</TABLE>
A-13
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
MODERN WOODMEN OF U.S.$5,000,000 U.S.$5,000,000
AMERICA
(1) All payments on account of Notes held by such
purchaser shall be made by wire transfer of
immediately available funds for credit to:
The Northern Trust Company
50 South LaSalle Street
Chicago, IL 60675
ABA No. 071-000-152
Account Name: Modern Woodmen of America
Account No. 84352
Each such sire transfer shall set forth the name of the
Company, the full title (including the applicable coupon
rate and final maturity date) of the Notes, a reference to
PPN No. 978097B*3 and the due date and application
(as among principal, premium and interest) of the
payment being made.
(2) Address for all notices relating to payments:
Modern Woodmen of America
Attn: Investment Accounting Department
1701 First Avenue
Rock Island, IL 61201
(3) Address for all other communications and notices:
Modern Woodmen of America
Attn: Investment Department
1701 First Avenue
Rock Island, IL 61201
(4) Tax Identification Number: 36-1493430
</TABLE>
A-14
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
WOODMEN ACCIDENT AND LIFE U.S.$3,000,000 U.S.$3,000,000
COMPANY
(1) All payments on or in respect of the
Notes to be by bank wire transfer of
Federal funds (identifying each
payment as principal, premium or
interest) to:
US Bank
13 and M Streets
Lincoln, Nebraska 68508
ABA #: 1040-000-29
Credit to: Woodmen Accident and Life Company s
General Fund
Account #1-494-0092-9092
(2) Notices
All notices and communications, including notices with respect
to payments and written confirmation of each such payment,
shall be addressed as follows:
P.O. Box 82288
Lincoln, Nebraska 68501
Attention: Securities Division
Telecopy No. (402) 437-4392
provided, however, all notices and communications delivered
by overnight courier shall be addressed as follows:
Woodmen Accident and Life Company
1526 K Street
Lincoln, Nebraska 68508
Attention: Securities Division
(3) Tax Identification No: 47-0339220
</TABLE>
A-15
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF NOTES NOTE
PURCHASER TO BE PURCHASED DENOMINATION(S)
<S> <C> <C>
THE MUTUAL GROUP (IN THE U.S.$2,000,000 U.S.$2,000,000
NOMINEE NAME OF TMG LIFE
INSURANCE COMPANY)
(1) All payments on account of the
Notes shall be made by wire or
intrabank transfer of immediately
available funds to:
Norwest Bank Minnesota, N.A.
ABA #: 091000019
BNF A/C: 0840245
BNF: Trust Clearing Account
REF: ATTN: Income Collections
TRUST ACCOUNT: 12250600
Wolverine World Wide, Inc.
Company PPN:
(2) All notices in respect of payment shall be delivered to:
TMG Life Insurance Company
c/o The Mutual Group (U.S.), Inc.
Attn: Tamie Greenwood
401 North Executive Drive, Suite 300
Brookfield, WI 53008-0503
Telephone: (414) 641-4027
Facsimile: (414) 641-4055
(3) All other communications shall be delivered to:
TMG Life Insurance Company
c/o The Mutual Group (U.S.), Inc.
Attn: Connie Keller
401 North Executive Drive, Suite 300
Brookfield, WI 53008-0503
Telephone: (414) 641-4027
Facsimile: (414) 641-4055
(4) Tax Identification No: 45-0208990
</TABLE>
A-16
<PAGE>
SCHEDULE B TO NOTE PURCHASE AGREEMENT
DEFINED TERMS
As used herein, the following terms have the respective meanings
set forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly through one
or more intermediaries Controls, or is Controlled by, or is under common
Control with, such first Person, and (b) when used with reference to the
Company or any Subsidiary, any Person beneficially owning or holding,
directly or indirectly, 10% or more of any class of voting or equity
interests of the Company or any Subsidiary or any Person of which the
Company and its Subsidiaries beneficially own or hold, in the aggregate,
directly or indirectly, 10% or more of any class of voting or equity
interests. As used in this definition, "Control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise. Unless the context otherwise
clearly requires, any reference to an "Affiliate" is a reference to an
Affiliate of the Company, including without limitation a Subsidiary.
"ASSET DISPOSITION" means any Transfer except :
(a) any Transfer from a Subsidiary to the Company or a Wholly-
Owned Subsidiary;
(b) any Transfer from the Company to a Wholly-Owned Subsidiary;
(c) any Transfer made in the ordinary course of business and
involving only property that is either (i) inventory held for sale or (ii)
equipment, fixtures, supplies or other property no longer required in the
operation of the business of the Company or any of its Subsidiaries or that
is obsolete; or
(d) any Transfer of Subsidiary Stock to the Company or to a
Wholly-Owned Subsidiary.
"BUSINESS DAY" means (a) for the purposes of Section 8.6 only,
any day other than a Saturday, a Sunday or a day on which commercial banks
in New York City are required or authorized to be closed, and (b) for the
purposes of any other provision of this Agreement, any day other than a
Saturday, a Sunday or a day on which commercial banks in New York City, New
York, Chicago Illinois, or Grand Rapids, Michigan, are required or
authorized to be closed.
B-1
<PAGE>
"CAPITALIZED RENTALS" means, with respect to any Person, the
amount at which the aggregate Rentals due and to become due under all
Capitalized Leases under which such Person is a lessee would be reflected
as a liability on a consolidated balance sheet of such Person determined in
accordance with GAAP.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder from
time to time.
"COMPANY" means Wolverine World Wide, Inc., a Delaware
corporation.
"COMPETITOR" shall mean any Person which is substantially engaged
in the business of the manufacture or marketing of footwear.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED FUNDED DEBT" means, as of any date of
determination, the total of all Funded Debt of the Company and its
Subsidiaries outstanding on such date, after eliminating all offsetting
debits and credits between the Company and its Subsidiaries and all other
items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP.
"CONSOLIDATED NET EARNINGS" means, with reference to any period,
the net income (or loss) of the Company and its Subsidiaries for such
period (taken as a cumulative whole), as determined in accordance with
GAAP, after eliminating all offsetting debits and credits between the
Company and its Subsidiaries, all earnings or losses attributable to
minority interests in Subsidiaries, and all other items required to be
eliminated in the course of the preparation of consolidated financial
statements of the Company and its Subsidiaries in accordance with GAAP,
provided that there shall be excluded:
(a) the income (or loss) of any Person accrued prior to the date
it becomes a Subsidiary or is merged into or consolidated with the Company
or a Subsidiary, and the income (or loss) of any Person, substantially all
of the assets of which have been acquired in any manner, realized by such
other Person prior to the date of acquisition,
(b) the income (or loss) of any Person (other than a Subsidiary)
in which the Company or any Subsidiary has an ownership interest, except to
the extent that any such income has been actually received by the Company
B-2
<PAGE>
or such Subsidiary in the form of cash dividends or similar cash
distributions,
(c) the undistributed earnings of any Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the time permitted by the terms of its charter or
any agreement, instrument, judgment, decree, order, or Law applicable to
such Subsidiary,
(d) any restoration to income of any contingency reserve, except
to the extent that provision for such reserve was made out of income
accrued during such period,
(e) any aggregate net gain or net loss during such period
arising from the sale, conversion, exchange or other disposition of capital
assets (such term to include, without limitation, (i) all non-current
assets and, without duplication, (ii) the following, whether or not
current: all fixed assets, whether tangible or intangible, all inventory
sold in conjunction with the disposition of fixed assets, and all
Securities),
(f) any gains resulting from any write-up of any assets,
(g) any net gain from the collection of the proceeds of life
insurance policies,
(h) any gain arising from the acquisition of any Security, or
the extinguishment, under GAAP, of any Debt, of the Company or any
Subsidiary,
(i) any net income or gain or net loss during such period from
(i) any change in accounting principles in accordance with GAAP, (ii) any
prior period adjustments resulting from any change in accounting principles
in accordance with GAAP, (iii) any extraordinary items, or (iv) any
discontinued operations or the disposition thereof,
(j) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment in
such Subsidiary,
(k) in the case of a successor to the Company by consolidation
or merger, any earnings of the successor corporation prior to such
consolidation or merger, and
(l) any portion of such net income that cannot be freely
converted into United States Dollars.
B-3
<PAGE>
"CONSOLIDATED NET WORTH" means, at any time, (a) the sum of (i)
the par value (or value stated on the books of the corporation) of the
capital stock (but excluding treasury stock and capital stock subscribed
and unissued) of the Company and its Subsidiaries plus (ii) the amount of
the paid-in capital and retained earnings of the Company and its
Subsidiaries, in each case as such amounts would be shown on a consolidated
balance sheet of the Company and its Subsidiaries as of such time prepared
in accordance with GAAP, minus (b) to the extent included in clause (a),
all amounts properly attributable to minority interests, if any, in the
stock and surplus of Subsidiaries.
"CONSOLIDATED TOTAL ASSETS" means as of the date of any
determination thereof, total assets of the Company and its Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL CAPITALIZATION" means, at any time, the sum
of Consolidated Net Worth and Consolidated Funded Debt.
"CURRENT MATURITIES OF FUNDED DEBT" means, at any time and with
respect to any item of Funded Debt, the portion of such Funded Debt
outstanding at such time which by the terms of such Funded Debt or the
terms of any instrument or agreement relating thereto is due on demand or
within one year from such time (whether by sinking fund, other required
prepayment or final payment at maturity).
"DEBT" means, with respect to any Person, without duplication,
all obligations of such Person which would be classified as liabilities of
such Person on a balance sheet of such Person prepared in accordance with
GAAP, and in any case shall include:
(a) all liabilities of such Person for borrowed money;
(b) all liabilities of such Person incurred in connection with
the acquisition of property (excluding accounts payable arising in the
ordinary course of business but including, without limitation, all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any property, whether or not
the rights and remedies of the seller, lender or lessor under
agreement, in the event of default are limited to repossession or sale
of property);
(c) all liabilities of such Person for Capitalized Rentals;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned directly or indirectly by such Person
(whether or not it has assumed or otherwise become liable for such
liabilities); and
B-4
<PAGE>
(e) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (d) hereof.
Debt of any Person shall include all obligations of such Person of the
character described in clauses (a) through (e) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"DEBT PREPAYMENT APPLICATION" means, with respect to any Transfer
of property, the application by the Company or its Subsidiaries of cash in
an amount equal to the Net Proceeds Amount with respect to such Transfer to
pay Senior Funded Debt of the Company (other than Senior Funded Debt owing
to the Company, any of its Subsidiaries or any other Affiliate of the
Company and other than Senior Funded Debt in respect of any revolving
credit or similar credit facility providing the Company or any of its
Subsidiaries with the right to obtain loans or other extensions of credit
from time to time, except to the extent that in connection with such
payment of Senior Funded Debt the availability of credit under such credit
facility is permanently reduced by an amount not less than the amount of
such proceeds applied to the payment of such Senior Funded Debt), PROVIDED
THAT in the course of making such application the Company shall offer to
prepay each outstanding Note in accordance with Section 8.7 in a principal
amount which equals the Ratable Portion for such Note. If any holder of a
Note fails to accept such offer of prepayment, then, the Ratable Portion
for such Note shall not be deemed to constitute a Debt Prepayment
Application except to the extent the Company shall pay other Senior Funded
Debt with the Net Proceeds Amount otherwise payable on such Note. "RATABLE
PORTION" for any Note means an amount equal to the product of (X) the Net
Proceeds Amount being so applied to the payment of Senior Funded Debt
MULTIPLIED BY (Y) a fraction the numerator of which is the outstanding
principal amount of such Note and the denominator of which is the aggregate
principal amount of Senior Funded Debt of the Company and its Subsidiaries.
"DEFAULT" means an event or condition the occurrence or existence
of which would, with the lapse of time or the giving of notice or both,
become an Event of Default.
"DEFAULT RATE" means that rate of interest that is from time to
time the greater of (i) 2% per annum above the rate of interest stated in
clause (a) of the first paragraph of the Notes or (ii) 2% over the rate of
interest publicly announced by First Chicago NBD in Chicago, Illinois as
its "base" or "prime" rate, such rate to change for purposes of determining
the Default Rate when and as changes therein are made by such bank;
provided that in no event shall the Default Rate at any time be greater
than the maximum rate permitted by applicable law.
"DISPOSITION VALUE" means, at any time, with respect to any
property
B-5
<PAGE>
(a) in the case of property that does not constitute Subsidiary
Stock, the book value thereof, valued at the time of such disposition in
good faith by the Company, and
(b) in the case of property that constitutes Subsidiary Stock,
an amount equal to that percentage of book value of the assets of the
Subsidiary that issued such Subsidiary Stock as is equal to the percentage
that the book value of such Subsidiary Stock represents of the book value
of all of the outstanding capital stock or other equity interests of such
Subsidiary (assuming, in making such calculations, that all agreements and
investments convertible into such capital stock or other equity interests
are so converted and giving full effect to all transactions that would
occur or be required in connection with such conversion) determined at the
time of the disposition thereof, in good faith by the Company.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including
but not limited to those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations
promulgated thereunder from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the
Company under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" means, at any time, the sale value of
property that would be realized in an arm's length sale at such time
between an informed and willing buyer, and an informed and willing seller,
under no compulsion to buy or sell, respectively.
"FIXED CHARGES" for any period means on a consolidated basis the
sum of (a) all Rentals (other than Rentals on Capitalized Leases) payable
during such period by the Company and its Subsidiaries, and (b) all
Interest Charges on all Debt (including the interest component of Rentals
on Capitalized Leases) of the Company and its Subsidiaries.
B-6
<PAGE>
"FIXED CHARGES COVERAGE RATIO" means, at any time, the ratio of
(a) Net Earnings Available for Fixed Charges for the period of four
consecutive fiscal quarters ending on, or most recently ended prior to,
such time to (b) Fixed Charges for such period.
"FUNDED DEBT" means, with respect to any Person, (a) all Debt of
such Person which by its terms or by the terms of any instrument or
agreement relating thereto matures, or which is otherwise payable or
unpaid, one year or more from, or is directly or indirectly renewable or
extendible at the option of the obligor in respect thereof to a date one
year or more (including, without limitation, an option of such obligor
under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of one year or more) from, the date
of the creation thereof, (b) all Capitalized Rentals of such Person, and
(c) all Guaranties by such Person of Funded Debt of others. "FUNDED DEBT"
shall not include Debt of such Person outstanding under any revolving
credit or similar agreement, if such agreement has been in effect for the
one year period ending on the date of determination and during such period
all Debt under such agreement has been fully paid (and not refinanced or
otherwise financed from any other Debt) for a period of not less than 30
consecutive days in such one year period pursuant to the terms of such
agreement; PROVIDED, that at the time of or as a result of the making of
any such payment of such Debt, no Default or Event of Default shall have
occurred at any time during such 30 consecutive day period. "FUNDED DEBT"
shall include, as of any date of determination, Current Maturities of
Funded Debt.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America, consistently
applied.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
B-7
<PAGE>
"GUARANTY" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in
effect guaranteeing any Indebtedness, dividend or other obligation of any
other Person in any manner, whether directly or indirectly, including
(without limitation) obligations incurred through an agreement, contingent
or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (I) for the purchase or payment
of such Indebtedness or obligation, or (II) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness or
obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Indebtedness
or obligation of the ability of any other Person to make payment of
the Indebtedness or obligation; or
(d) otherwise to assure the owner of such Indebtedness or
obligation against loss in respect thereof. In any computation of the
Indebtedness or other liabilities of the obligor under any Guaranty,
the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health
or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage,
handling, transportation, transfer, use, disposal, release, discharge,
spillage, seepage, or filtration of which is or shall be restricted,
prohibited or penalized by any applicable law (including, without
limitation, asbestos, urea formaldehyde foam insulation and polychlorinated
biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Company
pursuant to Section 13.1.
"INDEBTEDNESS" with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
B-8
<PAGE>
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or
arising under any conditional sale or other title retention agreement
with respect to any such property);
(c) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of
the character described in clauses (a) through (g) to the extent such
Person remains legally liable in respect thereof notwithstanding that any
such obligation is deemed to be extinguished under GAAP.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a
Note, (b) any holder of a Note holding more than 5% of the aggregate
principal amount of the Notes then outstanding, (c) any bank, trust
company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form and (d) any other Person (other than a natural person) that is
engaged in the business of purchasing notes, securities, obligations or
financial assets, is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated under the Securities Act, and is not,
insofar as known to you, a Competitor.
"INTEREST CHARGES" means, with respect to any period, the sum
(without duplication) of the following (in each case, eliminating all
offsetting debits and credits between the Company and its Subsidiaries and
all other items required to be eliminated in the course of the preparation
of consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP): (A) all interest in respect of Debt of the Company
and its Subsidiaries (including imputed interest on Capitalized Leases)
B-9
<PAGE>
deducted in determining Consolidated Net Earnings for such period, and
(B) all debt discount and expense amortized or required to be amortized in
the determination of Consolidated Net Earnings for such period.
"LAW" means any constitution, statute, regulation, rule, permit,
administrative order, franchise, ordinance, judicial principle, or other
law.
"LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or
title of any vendor, lessor, lender or other secured party to or of such
Person under any conditional sale or other title retention agreement or
Capitalized Lease, upon or with respect to any property or asset of such
Person (including in the case of stock, stockholder agreements, voting
trust agreements and all similar arrangements). The term "LIEN" does not
include the interest or title of a lessor to such Person pursuant to a
Capitalized Lease of such Person.
"MAKE-WHOLE AMOUNT" is defined in Section 8.6.
"MATERIAL" means material in relation to the business,
operations, affairs, financial condition, assets, properties, or prospects
of the Company and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the business, operations, affairs, financial condition, assets, properties
or prospects of the Company and its Subsidiaries taken as a whole, or (b)
the ability of the Company to perform its obligations under this Agreement
and the Notes, or (c) the validity or enforceability of this Agreement or
the Notes.
"MATERIAL SUBSIDIARY" means, at the date of any determination
thereof, any Subsidiary that either (a) had assets that constituted 10% or
more of Consolidated Total Assets as of the end of the then most recently
completed fiscal quarter of the Company or (b) contributed 10% or more of
Consolidated Net Earnings for the period of four fiscal quarters then most
recently ended.
"MEMORANDUM" is defined in Section 5.3.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NET EARNINGS AVAILABLE FOR FIXED CHARGES" means, with respect to
any period, the sum of (a) Consolidated Net Earnings for such period, plus
(to the extent deducted in determining Consolidated Net Earnings) (b) all
federal, state and other Taxes imposed on or measured by income or excess
B-10
<PAGE>
profits made by the Company and its Subsidiaries for such period, and plus
(to the extent deducted in determining Consolidated Net Earnings) (c) Fixed
Charges of the Company and its Subsidiaries for such period.
"NET PROCEEDS AMOUNT" means, with respect to any Transfer of any
property by any Person, an amount equal to the DIFFERENCE of
(a) the aggregate amount of the consideration (valued at the
Fair Market Value of such consideration at the time of the consummation of
such Transfer) received by such Person in respect of such Transfer, MINUS
(b) all ordinary and reasonable out-of-pocket costs and expenses
actually incurred by such Person in connection with such Transfer.
"NET PROCEEDS OF CAPITAL STOCK" means, with respect to any
period, cash proceeds (net of all costs and out-of-pocket expenses in
connection therewith, including, without limitation, placement,
underwriting and brokerage fees and expenses), received by the Company and
its Subsidiaries during such period, from the sale of all capital stock of
the Company, including in such net proceeds:
(a) the net amount paid upon issuance and exercise during such
period of any right to acquire any capital stock, or paid during such
period to convert a convertible debt Security to capital stock (but
excluding any amount paid to the Company upon issuance of such convertible
debt Security); and
(b) any amount paid to the Company upon issuance of any
convertible debt Security issued after the date of Closing and thereafter
converted to capital stock during such period.
"NET REPURCHASE EXPENDITURES" means, as of any date of
determination, the amount, if any, by which (a) the aggregate cash
expenditures by the Company during the period (the "RELEVANT PERIOD")
beginning with the date of the Closing and ending on the earlier of (i)
such date of determination and (ii) the first anniversary of the date of
the Closing, for the repurchase of capital stock of the Company EXCEEDS (b)
the Net Proceeds of Capital Stock for the Relevant Period; provided,
however, that for purposes of Section 10.2 Net Repurchase Expenditures
shall not at any time exceed $75,000,000.
"NOTES" is defined in Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities
extend to the subject matter of such certificate.
"OTHER AGREEMENTS" is defined in Section 2.
B-11
<PAGE>
"OTHER PURCHASERS" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"PERSON" means an individual, corporation, company, limited
liability company, voluntary association, partnership, limited liability
partnership, trust, unincorporated organization or joint venture or a
government or any agency, instrumentality or political subdivision thereof,
and for the purpose of the definition of "ERISA Affiliate", a trade or
business.
"PLAN" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been
established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the Company
or any ERISA Affiliate or with respect to which the Company or any ERISA
Affiliate may have any liability.
"PREFERRED STOCK" means any class of capital stock of a
corporation that is preferred over any other class of capital stock of such
corporation as to the payment of dividends or the payment of any amount
upon liquidation or dissolution of such corporation.
"PRIORITY DEBT" means as of the date of any determination, the
sum of (a) all Debt of Subsidiaries (except Debt held by the Company or a
Wholly-Owned Subsidiary) PLUS (b) Debt of the Company secured by a Lien
other than a Lien permitted by any of clauses (a) - (i) of Section 10.3.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible,
choate or inchoate.
"PROPERTY REINVESTMENT APPLICATION" means, with respect to any
Transfer of property, the satisfaction of each of the following conditions:
a) an amount equal to the Net Proceeds Amount with respect to such
Transfer shall have been applied to the acquisition by the Company, or any
of its Subsidiaries making such Transfer, of property that upon such
acquisition is unencumbered by any Lien (other than Liens described in
subparagraphs (a) through (j), inclusive, of Section 10.3 and that
i) constitutes property that is (X) property classifiable
under GAAP as non-current to the extent that such proceeds are derived
from the transfer of property that was properly classifiable as non-
current, and otherwise properly classifiable as either current or non-
current, and (Y) to be used in the ordinary course of business of the
Company and the Subsidiaries, or
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<PAGE>
ii) constitutes equity interests of a Person that shall be,
on or prior to the time of such acquisition, a Subsidiary of the
Company, and that shall invest the proceeds of such acquisition in
property of the nature described in the immediately preceding
clause (i); and
b) the Company shall have delivered a certificate of a Responsible
Officer of the Company to each holder of a Note referring to Section 10.7
and identifying the property that was the subject of such Transfer, the
Disposition Value of such property, and the nature, terms, amount and
application of the proceeds from the Transfer.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-
14 issued by the United States Department of Labor.
"RENTALS" means, with respect to any period, the sum of all
payments (including as such all payments which a lessee is obligated to
make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Subsidiary, as lessee or sublessee
under a lease of real or personal property (other than Capitalized Leases),
EXCLUDING any amounts required to be paid by the Company or a Subsidiary
(whether or not designated as rents or additional rents) (a) on account of
maintenance, repairs, insurance, taxes and similar charges, or (b) which
are based on profits, revenues or sales realized by the lessee from the
leased property or otherwise based on the performance of the lessee.
"REQUIRED HOLDERS" means, at any time, the holders of at least
51% of the principal amount of the Notes at the time outstanding (exclusive
of Notes then owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any
other officer of the Company with responsibility for the administration of
the relevant portion of this agreement.
"SECURITY" has the meaning set forth in section 2(1) of the
Securities Act of 1933, as amended.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"SENIOR FUNDED DEBT" means (a) all Funded Debt of the Company
that is not subordinated in right of payment and security to the Debt
evidenced by the Notes in accordance with agreements and instruments
satisfactory to the Required Holders and (b) all Funded Debt of any
Subsidiary.
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<PAGE>
"SENIOR FINANCIAL OFFICER" means the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, or the
Treasurer of the Company.
"SUBSIDIARY" means, as to any Person, any corporation,
association or other business entity in which such Person, or one or more
of its Subsidiaries or such Person and one or more of its Subsidiaries,
owns sufficient equity or voting interests to enable it or them (as a
group) ordinarily, in the absence of contingencies, to elect a majority of
the directors (or Persons performing similar functions) of such entity, and
any partnership or joint venture if more than a 50% interest in the profits
or capital thereof is owned by such Person or one or more of its
Subsidiaries, or such Person and one or more of its Subsidiaries (unless
such partnership can and does ordinarily take major business actions
without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"SUBSIDIARY STOCK" means, with respect to any Person, the stock
or other equity interests (or any options or warrants to purchase stock or
other equity interests, or other Securities exchangeable for or convertible
into stock or other equity interests) of any Subsidiary of such Person.
"SUCCESSOR CORPORATION" has the meaning set forth in Section
10.6.
"SWAPS" means, with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount
of the obligation under any Swap shall be the amount determined in respect
thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had terminated at the
end of such fiscal quarter, and in making such determination, if any
agreement relating to such Swap provides for the netting of amounts payable
by and to such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligation shall be the net amount so determined.
"TAXES" has the meaning set forth in Section 5.9.
"TRANSFER" means, with respect to any Person, any transaction in
which such Person sells, conveys, transfers or leases (as lessor) any of
its property, including, without limitation, Subsidiary Stock, but
excluding cash or marketable securities or stock of the Company. An
issuance of capital stock or other equity interests of a Subsidiary shall
constitute a Transfer by such Subsidiary; provided that the issuance
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<PAGE>
thereof to the Company or a Wholly-Owned Subsidiary shall not constitute a
Transfer and further provided that the issuance of capital stock or other
equity interests in a Subsidiary shall not constitute a Transfer if, after
giving effect thereto, the direct and indirect ownership interest of the
Company in the issuing Subsidiary is at least equal to, or greater than,
such ownership prior thereto. For purposes of determining the application
of the Net Proceeds Amount in respect of any Transfer, the Company may
designate any Transfer as one or more separate Transfers each yielding a
separate Net Proceeds Amount. In any such case, the Disposition Value of
any property subject to each such separate Transfer shall be determined by
ratably allocating the aggregate Disposition Value of all property subject
to all such separate Transfers to each such separate Transfer on a
proportionate basis.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or
more of the Company and the Company's other Wholly-Owned Subsidiaries at
such time.
"YEAR 2000 ISSUES" means the anticipated costs, problems and
uncertainties associated with the inability of certain computer
applications to handle effectively data that includes dates before, on, and
after January 1, 2000, as such inability affects the business, operations,
affairs, financial condition, assets, properties or prospects of the
Company and its Subsidiaries and of their respective customers, suppliers
and vendors.
B-15
<PAGE>
EXHIBIT 1 TO NOTE PURCHASE AGREEMENT
FORM OF SENIOR NOTE DUE DECEMBER 8, 2008
WOLVERINE WORLD WIDE, INC.
6.50% SENIOR NOTE DUE DECEMBER 8, 2008
No. [R-_____] [Date of Issue]
$[____________] PPN 978097B*3
FOR VALUE RECEIVED, the undersigned, Wolverine World Wide,
Inc. (herein called the "Company"), a corporation organized and
existing under the laws of the State of Delaware, hereby promises to
pay to [_________________], or registered assigns, the principal sum
of [_______________________________] DOLLARS on [____________], with
interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 6.50% per
annum from the date hereof, payable semiannually, on the 8th day of
December and June in each year, commencing with the December or June
next succeeding the date hereof, until the principal hereof shall have
become due and payable, and (b) to the extent permitted by law, on any
overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any Make-Whole
Amount (as defined in the Note Purchase Agreements referred to below),
payable semiannually as aforesaid (or, at the option of the registered
holder hereof, on demand), at a rate per annum from time to time equal
to the Default Rate (as defined in the Note Purchase Agreements
referred to below).
Subject to Section 14.2 of each Note Purchase Agreement (as
defined below), payments of principal of, interest on and any Make-
Whole Amount with respect to this Note are to be made in lawful money
of the United States of America at the principal office of The Bank of
New York, New York City, New York, or at such other place as the
Company shall have designated by written notice to the holder of this
Note as provided in the Note Purchase Agreements.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to separate Note Purchase Agreements,
dated as of December 8, 1998 (as from time to time amended, the "Note
Purchase Agreements"), between the Company and the respective
Purchasers named therein and is entitled to the benefits thereof.
Each holder of this Note will be deemed, by its acceptance hereof, (i)
to have agreed to the confidentiality provisions set forth in Section
20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase
Agreements.
<PAGE>
This Note is registered on the books of the Company and, as
provided in the Note Purchase Agreements, upon surrender of this Note
for registration, in the books of the Company, of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or such holder's attorney
duly authorized in writing, a new Note for a like principal amount
will be issued to, and registered in the name of, the transferee.
Prior to due presentment for registration of transfer, the Company may
treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to the
contrary.
The Company will make required prepayments of principal on
the dates and in the amounts specified in the Note Purchase
Agreements. This Note is also subject to optional prepayment, in
whole or from time to time in part, at the times and on the terms
specified in the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note may
be declared or otherwise become due and payable in the manner, at the
price (including any applicable Make-Whole Amount) and with the effect
provided in the Note Purchase Agreements.
THIS NOTE IS GOVERNED BY AND IS TO BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE OF
LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
WOLVERINE WORLD WIDE, INC.
By:_________________________
Name:
Title:
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<PAGE>
EXHIBIT 4.6
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of January 9, 1998
(this "Amendment"), is among WOLVERINE WORLD WIDE, INC., a Delaware
corporation (the "Company"), the banks set forth on the signature pages
hereof (collectively, the "Banks") and NBD BANK, a Michigan banking
corporation, as agent for the Banks (in such capacity, the "Agent").
RECITALS
A. The Company, the Agent and the Banks (other than Michigan
National Bank) are parties to a Credit Agreement dated as of October 11,
1996 (the "Credit Agreement"),
B. The Company desires to amend the Credit Agreement to add
Michigan National Bank as a Bank and to modify the Commitments as set forth
herein, and the Agent and the Banks are willing to do so strictly in
accordance with the terms hereof.
TERMS
In consideration of the premises and of the mutual agreements
herein contained, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Credit Agreement shall be amended as follows;
1.1 Michigan National Bank ("MNB") is hereby added as a Bank to
the Credit Agreement. MNB hereby assumes an interest in and to all of the
rights and obligations of a Bank under the Credit Agreement as of the date
hereof with a Commitment equal to the amount set forth next to its
signature on this Amendment. Neither the Agent nor any of the Banks
(i) makes any representation or warranty and assume no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement
or any other instrument or document furnished pursuant thereto; and
(ii) makes any representation or warranty and assume no responsibility with
respect to the financial condition of the Company or the performance or
observance by the Company of any of its obligations under the Credit
Agreement or any other instrument or document furnished pursuant thereto.
MNB (i) confirms that it has received a copy of the Credit Agreement,
together with copies of the financial statements referred to in Section 6.6
thereof and such other documents and information as it has deemed
<PAGE>
appropriate to make its own credit analysis and decision to enter into this
Amendment; (ii) agrees that it will, independently and without reliance
upon the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit
Agreement; (iii) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers and discretion under the
Credit Agreement as are delegated to the Agent by the terms thereof,
together with such powers and discretion as are reasonably incidental
thereto; (iv) agrees that it will perform in accordance with their terms
all of the obligations that by the terms of the Credit Agreement are
required to be performed by it as a Bank. MNB's address for notices is as
set forth next to its signature on this Amendment.
1.2 The aggregate Commitments shall be increased to
$150,000,000, and each Bank's Commitment is modified such that each Bank's
Commitment on the effective date hereof shall be equal to the amount set
forth next to the signature of such Bank on this Amendment and the amount
set forth next to the signature of each Bank on the Credit Agreement as its
Commitment shall be deemed equal to the amount set forth to such Bank's
signature on this Amendment.
ARTICLE II. REPRESENTATIONS. The Company represents and warrants to the
Agent and the Banks that:
2.1 The execution, delivery and performance of this Amendment
and the New Notes (as defined below) are within its powers, has been duly
authorized and is not in contravention with any law, of the terms of its
Articles of Incorporation or By-laws, or any undertaking to which it is a
party or by which it is bound.
2.2 This Amendment and the New Notes are the legal, valid and
binding obligation of the Company enforceable against it in accordance with
their terms.
2.3 After giving effect to the amendments herein contained, the
representations and warranties contained in Article VI of the Credit
Agreement are true on and as of the date hereof with the same force and
effect as if made on and as of the date hereof.
2.4 No Event of Default or event or condition which could become
an Event of Default with notice or lapse of time or both exists or has
occurred and is continuing on the date hereof,
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not
become effective until each of the following has been satisfied:
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<PAGE>
3.1 This Amendment shall be signed by the Company, the Agent and
the Banks.
3.2 The Company shall have executed and delivered new Notes (the
"New Notes") in replacement and substitution for the existing Notes (the
"Existing Notes"), which New Notes shall be in the amount of each Bank's
Commitment as revised by this Amendment.
3.3 The Company shall deliver such resolutions, incumbency
certificates and opinions of counsel as required by the Agent in connection
herewith.
3.4 The Company shall pay an amendment fee to the Agent for the
benefit of the Banks in an amount of 2.5 basis points of the amount of each
Bank's commitment as revised by this Amendment.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Loan Documents to (a) the Credit Agreement
shall be deemed to be references to the Credit Agreement as amended hereby
and as further amended from time to time and (b) the Existing Notes shall
be references to the New Notes, together with any promissory note or notes
issued in exchange or replacement thereof and as amended or modified from
time to time. The Company acknowledge and agree that (i) the New Notes are
issued in exchange and replacement for the Existing Notes, (ii) the New
Notes shall not be deemed a novation or satisfaction of the Existing Notes,
(iii) the New Notes evidence the same indebtedness and liabilities as the
Existing Notes plus additional amounts, and (iv) all amounts payable under
the Existing Notes shall be deemed payable under the New Notes in
accordance with the terms thereof.
4.2 The Company agrees to pay and to save the Agent harmless for
the payment of all costs and expenses arising in connection with this
Amendment, including the reasonable fees or counsel to the Agent in
connection with preparing this Amendment and any related documents.
4.3 Except as expressly amended hereby, the Company agrees that
the Loan Documents are ratified and confirmed and shall remain in full
force and effect and that it has no set off, counterclaim, defense or other
claim or dispute with respect to any of the foregoing. Terms used but not
defined herein shall have the respective meanings ascribed thereto in the
Credit Agreement.
4.4 This Amendment may be signed upon any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the
same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties signing this Amendment have caused
this Amendment to be executed and delivered as of January 9,1998.
WOLVERINE WORLD WIDE, INC.
By:_____________________________________
Its:_______________________________
By:_____________________________________
Its:_______________________________
Commitment Amount: $44,000,000 NBD Bank, as Agent and as a Bank
By:_____________________________________
Its:_______________________________
Commitment Amount: $34,000,000 HARRIS TRUST AND SAVINGS BANK
By:_____________________________________
Its:_______________________________
Commitment Amount: $29,000,000 COMERICA BANK
By:_____________________________________
Its:_______________________________
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<PAGE>
Address for Notices:
Attention: Brian Hudson MICHIGAN NATIONAL BANK
77 Monroe Center NW, 2nd Floor
Grand Rapids, MI 49501
Commitment Amount: $23,000,000 By:_____________________________________
Its:_______________________________
Commitment Amount: $10,000,000 OLD KENT BANK
By:_____________________________________
Its:_______________________________
Commitment Amount: $10,000,000 ABN AMRO BANK NV
By:_____________________________________
Its:_______________________________
By:_____________________________________
Its:_______________________________
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<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS IS AN EMPLOYMENT AGREEMENT (the "Agreement") made as of
April 27, 1998, by and between WOLVERINE WORLD WIDE, INC., a Delaware
corporation (the "Employer"), and GEOFFREY B. BLOOM, an individual (the
"Executive").
R E C I T A L S :
Executive has been employed by Employer as its Chief Executive
Officer. Executive has an existing employment agreement with Employer
dated April 17, 1993, which is superseded by this Agreement.
THEREFORE, in consideration of the foregoing and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. Employer hereby agrees to continue to employ
Executive and Executive agrees to continue to serve Employer in an
executive, managerial and supervisory capacity on the terms and conditions
set forth in this Agreement.
2. POSITION AND DUTIES. Executive shall serve as Chief Executive
Officer of Employer reporting only to Employer's Board of Directors.
Executive shall have supervision and control over, and responsibility for,
the general management and operation of Employer, and shall have such other
powers and duties as may from time to time be prescribed by Employer's
Board of Directors. Subject to the foregoing, Executive agrees to devote
his best efforts and substantially all his working time and attention to
the business of Employer and its subsidiaries, and to the performance of
such executive, managerial and supervisory duties as may be assigned to him
by Employer's Board of Directors; provided, that Executive shall be
permitted to serve on a reasonable number of boards of directors of other
companies, subject to the prior consent of Employer's Board of Directors,
and render occasional services in connection with such service, and
Executive shall be permitted to participate in charitable and civic
endeavors to the extent such service does not interfere with Executive's
obligations under this Agreement.
3. TERM OF EMPLOYMENT. Except in the case of early termination as
specifically provided in this Agreement, the term of Executive's employment
shall continue until April 30, 2000; if the Executive's employment
continues thereafter it will be terminable at will, or on such terms as the
parties may agree in writing, but the Executive's obligations under Section
15 of this Agreement, and the Employer's obligation to pay accrued
compensation called for by this Agreement, shall continue in effect.
<PAGE>
4. COMPENSATION. For the services to be rendered by Executive as
provided in this Agreement, Employer agrees to pay Executive in thirteen
(13) equal installments during each year, a base salary of not less than
Six Hundred Thousand Dollars ($600,000) per annum, payable effective as of
April 27, 1998 and prorated for any partial year of employment.
Executive's base salary may be increased at the discretion of Employer's
Board of Directors and/or its Compensation Committee at any time and from
time to time during the term of this Agreement. Executive's base salary
may be decreased, with the consent of Executive, by Employer's Board of
Directors and/or its Compensation Committee at any time and from time to
time during the term of this Agreement. Upon any such increase or decrease
in Executive's base salary, the new rate shall without further action by
the parties be deemed to be substituted for the rate set forth in this
Agreement and this Agreement shall be deemed to be amended accordingly.
5. FRINGE BENEFITS. In addition to the compensation provided in
Section 4 of this Agreement, Executive shall also be entitled to the
following fringe benefits:
(a) Executive shall participate in both the Executive Long-
Term Incentive Plan ("Long-Term Bonus Plan") and the Executive
Short-Term Incentive Plan ("Annual Bonus Plan"), or any successor
or substitute plans, and in such other bonus plans as may be made
available to upper echelon executives of Employer. The Long-Term
Bonus Plan and the Annual Bonus Plan are collectively referred to
herein as the "Plans".
(b) Executive shall be entitled to a leased automobile of a
type to be mutually agreed upon by Executive and Employer. In
addition, Employer shall pay maintenance and all other operating
expenses, including gasoline, repairs and insurance, with respect
to such automobile in accordance with applicable regulations
issued or administered by the Internal Revenue Service.
(c) Employer shall pay for reasonable dues, assessments,
and other non-discretionary expenses and all business related
expenses, associated with a membership in two country clubs or
similar luncheon or social organizations to be selected by
Executive in the Grand Rapids, Michigan area or in such other
clubs or organizations as permitted by Employer's Compensation
Committee.
(d) Employer shall provide Executive with the benefits of a
term life insurance policy in the amount of Five Hundred Thousand
Dollars ($500,000) payable to his designated beneficiaries, in
addition to the benefits of all other life insurance plans as
provided in this Agreement. Upon termination of Executive's
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<PAGE>
employment (except for voluntary resignation by Executive without
Good Reason or termination of Executive's employment by the
Employer for Cause), such Five Hundred Thousand Dollar ($500,000)
life insurance policy shall be assigned to Executive and Employer
shall pay all premiums due after any such assignment until the
expiration of the term of this Agreement. In the event of
voluntary resignation without Good Reason by Executive or
termination of Executive for Cause, at Executive's option, such
life insurance policy shall be assigned to Executive and
Executive shall pay all premiums due after such assignment.
(e) Employer shall provide Executive with tax preparation
services and financial planning advice and services consistent
with Employer's past practice or as may be made available to
upper echelon executives of Employer.
(f) Employer shall pay Executive's reasonable legal
expenses related to the negotiation and execution of this
Agreement.
(g) Executive shall be entitled to four (4) weeks of
vacation per year, plus such additional vacation as may be
permitted with the concurrence of Employer's Board of Directors.
(h) Executive shall further be entitled to all benefits in
the way of "fringes" presently available or which may
subsequently be made available to upper echelon executives of
Employer as a class or benefits substantially equivalent thereto,
so long as such benefits or plans are in effect, including but
not limited to all retirement, stock option, incentive, group
life, disability, hospitalization, medical, dental and surgical
benefit plans presently or hereafter in effect and available to
upper echelon executives of Employer, or their equivalent.
(i) Employer and Executive are party to a Supplemental
Executive Retirement Plan ("SERP") Participation Agreement dated
January 1, 1996. In consideration of entering into this
Agreement, Executive will be credited with two (2) additional
years of "deemed service" under SERP Section 5.1(a).
Additionally, Executive's retirement benefits under the SERP will
be calculated based upon Executive's "Average Earnings" for 1997,
1998 and 1999 rather than "Average Earnings" for the four
consecutive highest compensation years out of the ten preceding
retirement, and without annualization of any earnings in 2000,
and the definition of "Average Earnings" in Executive's SERP
Agreement is hereby amended to provide for the calculation of
"Average Earnings" consistent with this provision.
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<PAGE>
(j) If Executive remains employed under this Agreement
through April 30, 2000, he will be credited with years of service
under the SERP equal to his actual service as of April 30, 2000,
(16 years, including years of deemed service in Section 5(i) of
this Agreement), plus four (4) additional years of "deemed
service" under SERP Section 5.1(a) (iii), (for the total years of
service under the SERP of 20 years). Executive shall also be
credited with an additional four (4) years of deemed service
under the SERP (for total years of service under the SERP of 24
years) if the Employer's Board of Directors determines that the
planning and effectuation of the transition from Executive to his
successor have been carried out successfully (such determination
to be made in the Board's good faith discretion, and to be made
by April 30, 2000). Additional years of "deemed service"
credited in accordance with this Section 5(j) are collectively
referred to as the "Additional SERP Benefit."
(k) Executive shall be awarded 40,000 restricted shares of
the Employer's common stock under the Employer's 1997 Stock
Incentive Plan or other plan designated by the Board of
Directors, on the following terms:
(i) If the Employer's net earnings as reported in
Employer's audited financial statements for its fiscal year
2001 exceed the Employer's net earnings for its fiscal year
2000 by at least 10%, all 40,000 shares shall vest as of
April 30, 2002; or
(ii) If the Employer's net earnings for its fiscal year
2001 exceed the Employer's net earnings for its fiscal year
2000 by at least 5% but less than 10%, the number of shares
that shall vest as of April 30, 2002 shall be: the
percentage increase in net earnings in excess of 5% divided
by 5% times 40,000 (for example, if the increase in net
earnings was 6.32%, the number of shares to vest would be
1.32% divided by 5% times 40,000 = 10,560), and the balance
of the 40,000 shares shall be forfeited; or
(iii) If the Employer's net earnings for its fiscal
year 2001 do not exceed the Employer's net earnings for its
fiscal year 2000 by at least 5%, all 40,000 shares shall be
forfeited.
(l) The Executive shall be awarded 22,500 restricted shares
of the Employer's common stock under the Employer's 1997 Stock
Incentive Plan or other plan designated by the Board of
Directors, on the following terms:
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<PAGE>
(i) If the average closing per share price of the
Employer's common stock as reported on the New York Stock
Exchange ("NYSE") for the 10 trading days preceding April
30, 2001 has increased by at least 15% over the average
closing per share price for the 10 trading days preceding
April 30, 2000, all 22,500 restricted shares shall vest,
effective as of April 30, 2001; or
(ii) If the average closing per share price of the
Employer's common stock as reported on the NYSE for the 10
trading days preceding April 30, 2001 is greater than the
average closing per share price for the 10 trading days
preceding April 30, 2000, but such increase is less than
15%, the number of restricted shares that shall vest as of
April 30, 2001 shall be the percentage increase in the
average closing per share price divided by 15% times 22,500
(for example, 7.5% divided by 15% times 22,500 = 11,250),
and the balance of the 22,500 restricted shares shall be
fortified; or
(iii) If the average closing per share price of the
Employer's common stock as reported on the NYSE for the 10
trading days preceding April 30, 2001 is equal to or less
than the average closing per share price of the Employer's
common stock for the 10 trading days preceding April 30,
2000, all 22,500 shares shall be forfeited.
In making the calculations called for by this Section 5(l), the
average per share price and the number of shares awarded to Executive shall
be adjusted to eliminate the effect of any stock split, stock dividend,
recapitalization or other similar transaction.
Notwithstanding any provision or term of this Agreement to the
contrary, Employer shall not be required or obligated to maintain, amend or
adopt any particular fringe benefit plan or policy, including those plans
or policies referenced in this Section, or to pay, credit or otherwise vest
in Executive as a participant any amount or level of award or grant under
any such plan; provided, however, that the foregoing shall not apply to any
deferred bonus, payment or other credit awarded to Executive under any such
plan, nor shall the foregoing limit in any way or allow the Employer to
avoid the commitment to Executive in Section 5(j), (k) and (l) above.
6. ADDITIONAL BENEFITS. The provisions of this Agreement with
respect to compensation and other benefits payable to Executive shall not
preclude or in any way affect the grant by Employer or the receipt by
Executive of increases in base salary or total compensation, or bonuses, or
additional compensation, contingent or otherwise, to be determined solely
-5-
<PAGE>
in the discretion of Employer's Board of Directors and/or its Compensation
Committee, or by other persons or groups to whom such authority is legally
delegated.
7. EXPENSES. In addition to the compensation and benefits provided
in Sections 4 and 5 of this Agreement, Employer will reimburse or pay
Executive's reasonable and appropriate expenses for his business related
travel and entertainment in accordance with Employer's then current policy.
As a condition to such reimbursement or payment, Executive shall be
required to account to Employer for expenses incurred in the performance of
his employment duties. Executive shall be entitled, if Executive deems it
appropriate, to bring his spouse with him on up to two out of town trips
involving business of Employer per year, and Employer shall reimburse
Executive or pay the reasonable and appropriate expenses incurred for her
travel and entertainment. Employer may pay the travel and entertainment
expenses of Executive's spouse incurred on more than two business trips per
year with the prior approval of Employer's Board of Directors, and/or its
Compensation Committee.
8. TERMINATION OF EMPLOYMENT. During the term of this Agreement,
the Executive's employment may be terminated as follows:
(a) DEATH. The Executive's employment shall terminate
automatically in the event of his death.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness, he shall have been absent from
his duties with Employer on a full time basis for six (6)
consecutive months, and if he shall have not returned to the full
time performance of his duties within thirty (30) days after
written notice after such six (6) month period, Employer may
terminate this Agreement for "Disability."
(c) TERMINATION BY EMPLOYER FOR CAUSE. Employer may
terminate Executive's employment for Cause. For purposes of this
Agreement, "Cause" shall mean: (i) the willful and continued
failure by Executive to substantially perform his duties with
Employer (other than any such failure resulting from Executive's
incapacity due to physical or mental illness, or any such actual
or anticipated failure resulting from Executive's termination for
Good Reason) after a demand for substantial performance is
delivered to Executive by Employer's Board of Directors (which
demand shall specifically identify the manner in which the Board
believes that Executive has not substantially performed his
duties); or (ii) the commission of a felony or other gross
misbehavior injurious to Employer or its reputation, as
determined by Employer's Board of Directors; or (iii) willful
-6-
<PAGE>
misconduct by Executive which is intended to result in material
harm to the business or goodwill of the Employer. For purposes
of this Section, no act or failure to act on the part of
Executive shall be considered "willful" unless done or omitted to
be done by Executive not in good faith and without reasonable
belief that his action(s) or omission(s) was in the best
interests of Employer.
(d) TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive
may terminate his employment at any time for Good Reason and, in
such event, Employer shall continue to be obligated to pay
Executive the amounts and benefits set forth in Sections 11 and
12 of this Agreement. For purposes of this Agreement, "Good
Reason" shall, without Executive's express written consent, mean:
(i) The assignment to Executive of any duties
inconsistent with this Agreement.
(ii) A reduction by Employer (without the consent of
Executive) in Executive's annual base salary as provided in
this Agreement or as the same may be increased from time to
time, except for across-the-board salary reductions, freezes
or reduced increases similarly affecting all executives of
Employer;
(iii) A failure by Employer to continue the
Employer's Plans as such may be modified from time to time
but substantially in the form presently in effect, or a
failure by Employer to continue Executive as a participant
in the Plans or to pay Executive any annual installment of a
previous award under the Plans or any deferred distribution
(as defined in the Plans) awarded under the Plans;
(iv) The relocation of Employer's principal executive
offices to a location outside Rockford, Michigan, or any
requirement that Executive be based anywhere other than
Employer's principal executive offices, except for required
travel on Employer's business to an extent substantially
consistent with Executive's present business travel
obligations, or, in the event Executive consents to any such
relocation of Employer's principal executive offices, the
failure by Employer to pay (or reimburse Executive for) all
reasonable moving expenses incurred by Executive relating to
a change of Executive's principal residence in connection
with such relocation and to indemnify Executive against any
loss (defined as the difference between the actual sale
price of such residence and the higher of (A) Executive's
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<PAGE>
aggregate investment in such residence or (B) the fair
market value of such residence as determined by a real
estate appraiser designated by Executive and reasonably
satisfactory to Employer) realized in the sale of
Executive's principal residence in connection with any such
relocation;
(v) The failure by Employer to continue to provide
Executive with benefits substantially similar to those
enjoyed by Executive under any benefit or compensation plan,
pension, life insurance, medical, health and accident or
disability plan in which Executive is currently
participating, the taking of any action by Employer which
would adversely affect Executive's participation in or
materially reduce Executive's benefits under any of such
plans or deprive Executive of any material fringe benefit
currently enjoyed by Executive, or the failure by Employer
to provide Executive with the number of paid vacation days
to which Executive is then entitled on the basis of years of
service with Employer in accordance with this Agreement and
Employer's normal vacation policy in effect on the date of
this Agreement;
(vi) The failure of Employer to obtain the assumption
of Employer's obligations under this Agreement by any
successor as contemplated in Section 14 of this Agreement;
(vii) Any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination which satisfies the requirements of Section 9
below (and, if applicable, Section 8 above); or
(viii) Any other material breach by Employer of its
obligations under this Agreement.
(e) TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer may
terminate Executive's employment with Employer at will at any
time, subject to its obligations under this Agreement.
(f) TERMINATION BY EXECUTIVE OTHER THAN FOR GOOD REASON.
Executive may terminate his employment with Employer at will at
any time, subject to his obligations under Section 15 of this
Agreement and upon not less than (60) days advance notice to
Employer.
9. NOTICE OF TERMINATION. Any purported termination of Executive's
employment by Employer or by Executive shall be communicated by written
-8-
<PAGE>
Notice of Termination to the other party. For purposes of this Agreement,
a "Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon (except in the
event of death of Executive or termination of Executive without Cause) and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the
provision so indicated (including, if applicable, the requirements of
Section 8(c) hereof).
10. DATE OF TERMINATION. "Date of Termination" shall mean (a) the
date of Executive's death under Section 8(a); (b) if this Agreement is
terminated for Disability, the time specified in Section 8(b) of this
Agreement; and (c) if Executive's employment is terminated for any reason
other than death or Disability, the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Section 8(d)
above shall not be more than sixty (60) days from the date such Notice of
Termination is given); provided, that, if within thirty (30) days after any
Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute
is finally resolved, either by mutual written agreement of the parties or
by a binding arbitration award; and provided further, that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution
of such dispute with reasonable diligence. Notwithstanding the pendency of
any such dispute, Employer will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue Executive as a
participant in all compensation, benefit and insurance plans, subject to
the terms of this Agreement, in which Executive was participating when the
notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Section. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement; provided, however, in the event that the Date of Termination
shall be extended by a notice of dispute and such dispute is resolved in
favor of the Employer, then the Employer may credit and offset any
compensation paid to Executive after the date specified in the Notice of
Termination against any payments due to Executive hereunder or, at
Employer's option, such payments shall be reimbursed by the Executive to
Employer.
11. COMPENSATION UPON TERMINATION. If during the term of this
Agreement Executive's employment is terminated for any reason, Employer
shall pay Executive:
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<PAGE>
(a) his full base salary through the Date of Termination
(as provided in this Agreement) at the rate in effect at the time
Notice of Termination is given; and
(b) accrued benefits and rights under all fringe benefit,
incentive, deferred compensation, stock option, restricted stock,
retirement and other plans and policies of the Employer as
provided under the terms of such plans and policies.
12. ADDITIONAL COMPENSATION UPON CERTAIN TERMINATIONS OF EMPLOYMENT.
If Executive's employment is terminated before April 30, 2000:
(a) By Executive's death or due to Executive's Disability,
Executive will be entitled to the payments and benefits provided
in Section 11 of this Agreement and will receive credit for eight
(8) years of "deemed service" under Section 5(j) (the Additional
SERP Benefit) the same as if all conditions for such credit were
satisfied under Section 5(j). If Executive's employment is
terminated before April 30, 2000 by Executive's death or due to
Executive's Disability, all 62,500 shares of restricted stock
covered by Sections 5(k) and (l) shall be forfeited.
(b) By the Employer without Cause and not due to
Executive's death or Disability, Executive shall be entitled to
Severance Payments under Section 13.
(c) By the Executive for Good Reason, Executive shall be
entitled to Severance Payments under Section 13.
13. SEVERANCE PAYMENTS. Executive shall receive the following
Severance Payments, if he is entitled thereto under Section 12 of this
Agreement, provided that no portion of the Severance Payments shall
duplicate payments to be received by the Executive pursuant to Section 11
of this Agreement.
(a) Employer shall pay to Executive in a lump sum on the
fifth day following the Date of Termination, the following
amounts:
(i) an amount equal to the amount, if any, of the
deferred portion of any awards which pursuant to the Plans
has been awarded to Executive but which have not yet been
paid to Executive as well as a bonus for the year prior to
termination if not yet awarded and for the year of
termination prorated through the date of termination, both
based on 100% of any bonus awarded Executive for the
immediately preceding year, or the average of Executive's
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<PAGE>
bonus awards pursuant to the Plans for the two immediately
preceding years, whichever is greater, and including in
either case the amount of deferred distributions, if any,
which have accrued to Executive's account;
(ii) In lieu of any further salary payments to
Executive for periods subsequent to the Date of Termination,
Employer shall pay Executive, the product of (A) the sum of
Executive's annual base salary at the rate in effect on the
Date of Termination plus the amounts awarded Executive under
the Plans for the year most recently ended (whether or not
fully paid), and (B) the number of years (rounded to the
nearest hundredth) between the Date of Termination and April
30, 2000;
(iii) Employer shall also pay all relocation and
indemnity payments as set forth in Section 8(d) of this
Agreement;
(iv) All reasonable legal fees and expenses incurred by
Executive as a result of such termination if Executive
substantially prevails in enforcing his rights under this
Agreement (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or
in seeking to obtain or enforce any right or benefit
provided by this Agreement);
(v) In lieu of the $1.00 par value per share common
stock of Employer ("Company Shares") issuable upon the
exercise of options that have been awarded to Executive
(whether or not exercisable or vested, but excluding options
or portions thereof which have lapsed without being
exercised by Executive), under any and all Employer stock
option plans or agreements, (which options shall be canceled
upon payment of the amount set forth below), Executive shall
receive an amount in cash equal to one hundred percent
(100%) of the aggregate positive spread between the exercise
prices of all such options held by Executive, whether or not
then fully exercisable, and the closing price of Company
Shares as reported on the New York Stock Exchange on the
Date of Termination or the last trading date preceding the
Date of Termination;
(b) If Employer shall terminate Executive's employment without
Cause or if Executive terminates his employment for Good Reason and at
the time of termination any restrictions against sale, transfer or
other disposition of Company Shares awarded to Executive under any
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<PAGE>
restricted stock plan or agreement have not lapsed on the Date of
Termination, (i) Employer shall declare the restrictions to have
lapsed with respect to those shares, provided such restrictions would
have lapsed prior to April 30, 2000; and (ii) all restrictions on the
62,500 shares of restricted common stock issued pursuant to Sections
5(k) and (l) of this Agreement shall immediately lapse, and all such
shares shall become the property of Executive without restrictions.
(c) Employer shall maintain in full force and effect,
through April 30, 2000, all employee benefit plans and programs
or arrangements in which Executive was entitled to participate
immediately prior to the Date of Termination (except for bonus
and stock option plans) provided that Executive's continued
participation is possible under the general terms and provisions
of such plans and programs. In the event that Executive's
participation in any such plan or program is barred, Employer
shall arrange to provide Executive with benefits substantially
similar to those which Executive is entitled to receive under
such plans and programs. At the end of the period of coverage,
Executive shall have the option to have assigned to him at no
cost and with no apportionment of prepaid premiums, any
assignable insurance policy owned by Employer and relating
specifically to Executive.
(d) If Employer terminates Executive's employment without
Cause or if Executive terminates his employment for Good Reason,
then in addition to the benefits to which Executive is entitled
under the retirement plans or programs in which Executive
participates or any successor plans or programs in effect on the
Date of Termination, Employer shall: (i) grant Executive the full
eight (8) years of deemed additional service under the SERP, as
if all of the conditions of Section 5(j) had been met; and (ii)
pay Executive in one lump sum in cash at Executive's normal
retirement age (or earlier retirement age should Executive so
elect) as defined in the retirement plans or programs in effect
on the Date of Termination, an amount equal to the actuarial
equivalent of the retirement pension to which Executive would
have been entitled under the terms of such retirement plans or
programs without regard to any vesting requirements of such plans
or programs, had Executive accumulated additional continuous
service through April 30, 2000, at Executive's salary rate in
effect on the Date of Termination plus the amount awarded
Executive under the Plans during the year most recently ended
(whether or not fully paid) (including subsequent annual salary
adjustments) under such retirement plans or programs and
including any Additional SERP Benefit credited under this
Agreement, reduced by the single sum actuarial equivalent of any
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<PAGE>
amount to which Executive is entitled pursuant to the provisions
of such retirement plans and programs. For purposes of this
Subsection, "actuarial equivalent" shall be determined using the
same methods and assumptions utilized under Employer's retirement
plans and programs immediately prior to the termination of
employment.
(e) If Employer shall terminate Executive's employment
without Cause or if Executive shall terminate his employment for
Good Reason, Employer shall provide Executive with executive out-
placement services by entering into a contract with a company
specializing in such services.
(f) If Executive's employment is terminated under
circumstances entitling Executive to payments and benefits under
this Agreement and the Executive Severance Agreement between
Executive and Employer (a "change in control termination"), all
payments and benefits due to Executive shall be determined
exclusively in accordance with the Executive Severance Agreement
and the terms of this Agreement shall not apply to the
determination of payments or benefits due to Executive in the
event of a change in control termination. Without limiting the
foregoing, in the event of a change in control termination,
Executive will not be entitled to credit for any additional years
of "deemed service" referenced in Section 5(j) (the Additional
SERP Benefit) or any of the restricted shares referenced in
Sections 5(k) or (l). Notwithstanding the foregoing, in the
event of a change in control termination, Executive shall be
entitled to the assignment of life insurance in accordance with
Section 5(d).
14. SUCCESSORS; BINDING AGREEMENT.
(a) Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of Employer,
to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that Employer would be
required to perform this Agreement if no such succession had
occurred. Failure of Employer to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Executive to
compensation from Employer in the same amount and on the same
terms as Executive would be entitled (i) under Section 13(f); or
(ii) if Section 13(f) is inapplicable, as if Executive terminated
his employment for Good Reason, except that for purposes of
implementing the foregoing clause (ii), the date on which any
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<PAGE>
such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Employer" shall mean
Employer as defined in this Agreement and any successor to its
business and/or assets which assumes and agrees to perform this
Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die following
termination of employment with Employer while any amounts would
still be payable to him hereunder if Executive had continued to
live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his
devisee, legatee, or other designee or, if there be no such
designee, to his estate.
15. NONCOMPETITION. Recognizing that his skill, experience and
knowledge are unique and are a material inducement to Employer to enter
into this Agreement, Executive agrees that during his employment, and for
an additional period of sixty (60) months after any termination of his
employment (provided the Employer complies with this Agreement), Executive
will not (i) enter employment with, or, directly or indirectly, own an
interest in, or manage, operate, control or participate in the business of,
or furnish services or advice to, any company whose business is similar to
or in competition with that of Employer without the express authorization
of Employer's Board of Directors; or (ii) solicit or suggest to any
customer, distributor or other person doing business with Employer that
they should cease or diminish their business with Employer or do business
with any other person or entity, to any extent, instead of Employer; or
(iii) solicit or suggest to any employee of Employer that s/he should
terminate employment with Employer or provide services or advice to any
competitor of Employer. This provision shall not, however, restrict the
right of Executive to own less than five percent (5%) of a class of equity
securities in any company listed on a national or regional stock exchange,
regardless of the nature of its business. The geographic scope of the
covenant against competition in this Section 15 is worldwide. The parties
hereto agree that in view of all the facts and circumstances, this
provision is neither an unreasonable restraint nor unconscionable.
16. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and such officer as may be
specifically designated by Employer's Board of Directors. No waiver by
either party at any time of any breach by the other party of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of the same or similar or dissimilar
-14-
<PAGE>
provisions or conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter of this Agreement have been made by
either party which are not set forth expressly in this Agreement. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Michigan.
17. WITHHOLDING TAXES. Employer may withhold from all payments due
to Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law or regulation, Employer is
required to withhold therefrom.
18. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
19. COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
20. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration in Rockford, Michigan, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of
his right to be paid until the Date of Termination during the pendency of
any dispute or controversy arising under or in connection with this
Agreement.
21. WAR OR NATIONAL EMERGENCY. Employer agrees that, in the event of
a war or national emergency, Executive will, at his request, be granted a
leave of absence for military or governmental service and during said
period of leave of absence shall be paid such compensation as may be fixed
by, or with the authority of Employer's Board of Directors. During any
such leave of absence, Executive shall, except with respect to his rights
to the compensation provided in this Agreement and his obligation to
perform such active duties of Employer, be deemed, for the purposes of this
Agreement, to be continuing in the employment of Employer pursuant to the
Agreement.
22. NOTICE. Any and all notices referred to in this Agreement shall
be sufficient if furnished in writing, sent by certified or registered mail
or by overnight courier service, to the respective parties at the following
addresses:
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If to Employer: Wolverine World Wide, Inc.
9341 Courtland Drive, N.E.
Rockford, MI 49351
Attn: General Counsel
If to Executive: Geoffrey B. Bloom
440 Cambridge, S.E.
East Grand Rapids, MI 49506
23. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and
replaces in its entirety all prior employment agreements between the
parties, including the Amended Restated Employment Agreement dated April
27, 1993 and the Employment Agreement dated May 8, 1992, as amended.
WOLVERINE WORLD WIDE, INC.
By ___________________________________
Daniel T. Carroll
Director and Chairman of the
Compensation Committee of the
Board of Directors
______________________________________
Geoffrey B. Bloom
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<PAGE>
EXHIBIT 10.11
The following persons have a percentage benefit multiplier under
the Supplemental Executive Retirement Plan (the "Plan") of 2.4% or 2.0%, as
indicated below, in lieu of the 1.6% of final average monthly remuneration
benefit multiplier described in the Plan:
<TABLE>
<CAPTION>
2.4% 2.0%
----------------- ------------------
<S> <C> <C>
Geoffrey B. Bloom Owen S. Baxter
Louis A. Dubrow William J.B. Brown
Steven M. Duffy Arthur G. Croci
V. Dean Estes Richard C. DeBlasio
Stephen L. Gulis, Jr. John Deem
Blake W. Krueger Ted Gedra
Timothy J. O'Donovan Blaine C. Jungers
Robert J. Sedrowski Thomas P. Mundt
John Deem James Riedy
Dan L. West
Nicholas P. Ottenwess
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
WOLVERINE WORLD WIDE, INC.
STATE OR COUNTRY OF
NAME INCORPORATION OR ORGANIZATION
Aquadilla Shoe Corporation Michigan
Brooks France, S.A. France
BSI Shoes, Inc. Michigan
Dominican Wolverine Shoe Company Limited Cayman Islands
Frolic de Mexico S.A. de C.V. Mexico
Hush Puppies Canada Footwear, Ltd. Canada
Hush Puppies Retail, Inc. Michigan
d/b/a Little Red Shoe House
Hush Puppies Factory Direct
Hush Puppies (UK) Ltd. England
Hy-Test, Inc. Michigan
Merrell Europe Ltd. England
Spartan Shoe Company Limited Cayman Islands
Wolverine CIS, Ltd. Russia
Wolverine de Costa Rica, S.A. Costa Rica
Wolverine Design Center, Inc. Michigan
Wolverine Outdoors, Inc. Michigan
Wolverine Procurement, Inc. Michigan
Wolverine Russia, Inc. Michigan
Wolverine Slipper Group, Inc. Michigan
Wolverine Sourcing, Inc. Michigan
All of the subsidiaries of the Registrant are wholly owned.
<PAGE>
Exhibit 23 - Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-49523, 33-63689, 33-55213, 33-64854, 33-23195, 33-23196,
2-92600 and 2-68548) pertaining to various stock option and incentive plans
of Wolverine World Wide, Inc. of our report dated February 8, 1999, with
respect to the consolidated financial statements and schedule of Wolverine
World Wide, Inc. and subsidiaries included in the Annual Report on Form 10-K
for the fiscal year ended January 2, 1999.
/s/ ERNST & YOUNG LLP
Grand Rapids, Michigan
March 30, 1999
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
March 1, 1999 /S/ DONALD V. FITES
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
January 25, 1999 /S/ GEOFFREY B. BLOOM
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
January 26, 1999 /S/ DANIEL T. CARROLL
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
January 25, 1999 /S/ ALBERTO L. GRIMOLDI
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
January 21, 1999 /S/ DAVID T. KOLLAT
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
January 21, 1999 /S/ PHILLIP D. MATTHEWS
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
January 26, 1999 /S/ DAVID P. MEHNEY
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
January 21, 1999 /S/ TIMOTHY J. O'DONOVAN
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
January 22, 1999 /S/ JOSEPH A. PARINI
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
February 2, 1999 /S/ JOAN PARKER
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
February 2, 1999 /S/ ELIZABETH A. SANDERS
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Wolverine World Wide, Inc., does hereby
appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS, JR.;
BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her attorneys
or attorney, with full power of substitution, to execute in his or her name
an Annual Report of Wolverine World Wide, Inc. on Form 10-K for its fiscal
year ended January 2, 1999, and any amendments to that report, and to file
it or them with the Securities and Exchange Commission. Each attorney
shall have power and authority to do and perform in the name and on behalf
of the undersigned, in any and all capacities, every act to be done in the
premises as fully and to all intents and purposes as the undersigned could
do in person, and the undersigned hereby ratifies and approves the acts of
such attorneys.
DATE SIGNATURE
January 21, 1999 /S/ PAUL D. SCHRAGE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE AUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES FOR THE PERIOD ENDED
JANUARY 2, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-2-1999
<PERIOD-START> JAN-4-1998
<PERIOD-END> JAN-2-1999
<CASH> 6,203
<SECURITIES> 0
<RECEIVABLES> 152,110
<ALLOWANCES> 5,896
<INVENTORY> 167,039
<CURRENT-ASSETS> 340,978
<PP&E> 194,374
<DEPRECIATION> 83,239
<TOTAL-ASSETS> 521,478
<CURRENT-LIABILITIES> 51,268
<BONDS> 157,089
<COMMON> 43,832
0
0
<OTHER-SE> 256,488
<TOTAL-LIABILITY-AND-EQUITY> 521,478
<SALES> 669,329
<TOTAL-REVENUES> 669,329
<CGS> 456,726
<TOTAL-COSTS> 456,726
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,449
<INCOME-PRETAX> 61,808
<INCOME-TAX> 20,157
<INCOME-CONTINUING> 41,651
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,651
<EPS-PRIMARY> 1.00
<EPS-DILUTED> .97
</TABLE>
