INTERCO
I N C O R P O R A T E D
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of the stockholders of INTERCO INCORPORATED
will be held at 10 a.m. on Wednesday, May 4, 1994, at the Rihga
Royal Hotel, 151 West 54th Street, New York, New York, for the
following purposes:
I. to elect nine directors; and
II. to transact such other business as may
properly come before the meeting.
Stockholders of record at the close of business on March 7, 1994,
will be entitled to receive notice of and to vote during the 1994
annual meeting and during any adjournment or adjournments
thereof.
By order of the Board of Directors,
Duane A. Patterson,
Vice-President and Secretary
St. Louis, Missouri, March 23, 1994.
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY FORM, AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. <PAGE>
PROXY STATEMENT
This proxy statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors
("Board") of INTERCO INCORPORATED ("INTERCO"), 101 South Hanley
Road, St. Louis, Missouri 63105, for use during the 1994 annual
meeting of stockholders and at any adjournments thereof, for the
purposes set forth in the accompanying notice of annual meeting
of stockholders. The cost of the solicitation will be borne by
INTERCO and will consist primarily of printing, postage and
handling, including the expenses of brokers, nominees and other
fiduciaries in forwarding proxy materials to beneficial owners;
and directors, officers and other employees of INTERCO may also
solicit proxies personally or by telephone or telegram. In
addition, INTERCO has engaged Morrow & Co. to assist in the
solicitation from brokers, bank nominees and institutional
holders for a fee of $6,000 plus out-of-pocket expenses. The
notice of meeting, this proxy statement and the form of proxy are
expected to be mailed to stockholders on or about March 23, 1994.
A copy of INTERCO's Annual Report containing financial statements
for the calendar year ended December 31, 1993, has been forwarded
to all registered stockholders under separate cover.
VOTING PROCEDURE
Stockholders of record at the close of business on March 7,
1994 ("record date") are entitled to vote during the 1994 annual
meeting and may cast one vote for each share of INTERCO's Common
Stock ("Common Stock") held on the record date on each matter
that may properly come before the meeting. On the record date
there were 50,021,623 shares of Common Stock outstanding.
The holders of a majority of the outstanding shares of
Common Stock must be present or represented at the meeting for
there to be a quorum for the conduct of business. If a quorum is
present and/or represented at the meeting, then the nine nominees
for director who receive the highest numbers of votes of the
votes cast will be elected. Shares represented by proxies which
are marked "withheld" as applied to voting for directors or to
deny discretionary authority on any other matters will be counted
as shares present for purposes of determining the presence of a
quorum; such shares will also be treated as shares present and
entitled to vote, which will have the same effect as a vote
against any such other matters. Shares represented by proxy
will be voted as directed on the proxy forms and, if no direction
is given, will be voted in the election of directors for the
persons nominated by the Board and in the best judgment of the
persons named in the proxies on such other matters that may
properly come before the meeting. Any proxy given by a
stockholder may be revoked at any time prior to its use by
execution of a later dated proxy, by a personal vote at the
meeting, or by written notice to the Secretary of INTERCO.
SECURITY OWNERSHIP
Table 1 below sets forth information regarding the firms
that have reported beneficial ownership, including sole voting
and investment power, of more than 5% of the Common Stock.
TABLE 1
SHARES PERCENT
CLASS OF BENEFICIALLY OF
NAME AND ADDRESS STOCK OWNED (a) CLASS(a)
-----------------------------------------------------------------
Apollo Interco, L.P. (b) Common 33,864,205 67.5%
Two Manhattanville Road
Purchase, New York 10577
TCW Management Company (c) Common 2,788,649 5.5%
865 South Figueroa Street
Los Angeles, California
90017
----------
(a) Shares beneficially owned, above and below, are as of
January 31, 1994 and as defined by the Securities and
Exchange Commission ("SEC")Rule 13d-3 which provides in part
that persons are deemed the beneficial owners of securities
if they have or share the power to vote or dispose of the
securities or if they have the right to acquire the
securities within the next sixty days. Accordingly,
included, above and below, in shares beneficially owned are
shares of Common Stock that may be acquired upon exercise
of outstanding warrants and of outstanding stock options to
the extent exercisable, and such shares were deemed to be
outstanding for purposes of calculating percentages of
outstanding shares. (See footnote (a) to Table 2.)
(b) The Apollo Directors, identified below, are associated with
Apollo Interco Partners, L.P. ("Apollo Interco").
(c) Mr. Bruce A. Karsh, a director, is associated with TCW
Management Company.
----------
Table 2 below sets forth information regarding the
beneficial ownership of Common Stock by directors, nominees for
directors, executive officers named in the Summary Compensation
Table, below ("Named Executive Officers"), and all directors and
executive officers as a group (20 persons) as of January 31,
1994. Except as noted below, all such persons possessed sole
voting and investment power with respect to the shares listed.
An asterisk (*) in the column listing the percentage of class
indicates that the person beneficially owned less than 1% of the
Common Stock as of January 31, 1994.<PAGE>
TABLE 2
DIRECTORS, SHARES
NOMINEES FOR DIRECTORS CLASS OF BENEFICIALLY PERCENT OF
AND EXECUTIVE OFFICERS STOCK OWNED (a)(b) CLASS
---------------------------------------------------------------
L. D. Black Common 33,864,205 67.5%
C. M. Cogut Common 33,864,205 67.5
R. H. Falk Common 33,864,205 67.5
G. Ford Common 25,000 *
M. S. Gross Common 33,864,205 67.5
J. J. Hannan Common 33,864,205 67.5
B. A. Karsh Common 2,788,649 5.5
J. H. Kissick Common 33,864,205 67.5
D. E. Lasater Common 5,226 *
L. M. Liberman Common 273 *
R. B. Loynd Common 146,400 *
M. J. Morahan Common 123,171 *
R. J. Mueller Common 25,045 *
E. B. Siegel Common 33,864,205 67.5
E. F. Smith Common 20,005 *
K. S. Tyler Common 31,308 *
B. Vasiliou Common 72,014 *
Directors and
Executive Officers
as a group
(20 persons) Common 37,141,311 72.3
<PAGE>
----------
(a) The shares listed as beneficially owned by Messrs. Black,
Cogut, Falk, Gross, Hannan, Kissick and Siegel (collectively
"Apollo Directors") are the shares identified on Table 1
above as beneficially owned by Apollo Interco, with which
the Apollo Directors are associated, and consist of
33,691,097 shares and warrants to acquire 173,108 additional
shares; each Apollo Director disclaims personal pecuniary
interest in said shares and warrants; the shares listed as
beneficially owned by Mr. Ford consist of options to acquire
such shares; the shares listed as beneficially owned by Mr.
Karsh are the shares identified above as beneficially owned
by TCW Management Company, with which Mr. Karsh is
associated, and consist of 1,963,108 shares and warrants to
purchase 825,541 additional shares; Mr. Karsh disclaims
personal pecuniary interest in said shares and warrants;
the shares listed as beneficially owned by Mr. Lasater
consist of 5,158 shares and warrants to acquire 68
additional shares; the shares listed as beneficially owned
by Mr. Liberman consist of 191 shares and warrants to
acquire 82 additional shares; the shares listed as
beneficially owned by Mr. Loynd consist of 21,400 shares and
options to acquire 125,000 additional shares; the shares
listed by Mr. Morahan consist of 86,406 shares and warrants
to acquire 36,765 additional shares, with respect to which
Mr. Morahan has sole voting and investment power as to
26,354 of the shares and 10,193 warrants and shared voting
and investment power as to 60,052 of the shares and 26,572
of the warrants; Mr. Morahan disclaims personal pecuniary
interest in 2,396 of the shares and 1,018 of the warrants;
the shares listed as beneficially owned by Mr. Mueller
consist of 31 shares, with respect to which Mr. Mueller
shares voting and investment power, warrants to acquire 14
additional shares and options to acquire 25,000 additional
shares; the shares listed as beneficially owned by Mr.
Smith consist of 5 shares, with respect to which Mr. Smith
has voting power only, and options to acquire 20,000
additional shares; the shares listed as beneficially owned
by Mr. Tyler consist of 58 shares with respect to which Mr.
Tyler has shared investment power only and options to
acquire 31,250 additional shares; and the shares listed as
beneficially owned by Mr. Vasiliou consist of 50,518 shares
and warrants to acquire 21,496 additional shares.
(b) The shares listed as beneficially owned by directors and
executive officers as a group consist of 35,817,987 shares,
warrants to acquire 1,057,074 additional shares and options
to acquire 266,250 additional shares. Included in the
foregoing are 15 shares of Common Stock held in employee
accounts under an INTERCO savings plan, as to which the
employees have voting power only.
I. ELECTION OF DIRECTORS
NOMINEES AND CONTINUING DIRECTORS
Consistent with stockholder approval, during the 1993 annual
meeting, of the proposal to accelerate the phase-out of the
classification of directors, the Board is currently divided into
two classes, with terms of office of classes ending in 1994 and
1995 and, subject to their earlier resignation or removal, all
directors serve for their terms of office and until their
successors are elected and qualify. Nine persons are to be
elected directors during the 1994 annual meeting for terms of one
year and certain information with respect to the nominees and the
directors continuing in office is presented below.
Should any of the director nominees become unable or
unwilling to continue to serve, an event that is not anticipated
to occur, proxies (except proxies marked to the contrary) will be
voted for another person designated by the Board unless the Board
shall have reduced the number of directors to be elected. <PAGE>
INTERCO
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
OR POSITION, OTHER DIRECTORSHIPS SINCE
----------------------------------------------------------
DIRECTORS AND NOMINEES FOR REELECTION IN 1994
Leon D. Black, 42 1992
Officer and director of Apollo
Capital Management, Inc. (a)(c)
Director of Astrum International, Inc.,
Gillett Holdings, Inc. and The New
York Law Publishing Company
Craig M. Cogut, 40 1992
Officer and director of Apollo
Capital Management, Inc. (a)
Director of Environmental Test Systems,
Inc., Gillett Holdings, Inc., The
New York Law Publishing Company
and Salant Corporation
Robert H. Falk, 55 1992
Officer of Apollo Capital Management
Inc. (a)
Director of Astrum International, Inc.,
and The New York Law Publishing Company
John J. Hannan, 41 1992
Officer and director of Apollo Capital
Management, Inc. (a)
Director of Aris Industries, Inc. and Cole
National Corporation, and member of
Supervisory Board of Memorex Telex N.V.
John H. Kissick, 52 1992
Officer of Lion Capital Management,
Inc. (a)(c)
Director of Cherokee, Inc., Family
Restaurants, Inc. and Williamhouse
Regency of Delaware, Inc.
Donald E. Lasater, 68 1970
Retired, formerly Chairman of the Board
and Chief Executive Officer of
Mercantile Bancorporation, Inc., a bank
holding company
Director of General American Life
Insurance Company, A. P. Green
Industries, Inc. and Illinois
Power Company <PAGE>
INTERCO
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
OR POSITION, OTHER DIRECTORSHIPS SINCE
----------------------------------------------------------
DIRECTORS AND NOMINEES FOR REELECTION IN 1994
(continued)
Lee M. Liberman, 72 1985
Retired from and currently a consultant to
Laclede Gas Company, a gas public utility,
of which he was formerly Chairman of the
Board and Chief Executive Officer
Director of Angelica Corporation, Boatmen's
Bancshares, Inc., CPI Corporation,
Falcon Products Company and Instituform
Mid-America, Inc.
Richard B. Loynd, 66 1987
Chairman of the Board, President
and Chief Executive Officer of INTERCO (b)
Director of Emerson Electric Co. and
Hills Stores, Inc.
Eric B. Siegel, 36 1992
Officer of Apollo Capital Management,
Inc. (a)
Director of Forum Group, Inc.
DIRECTORS CONTINUING IN OFFICE UNTIL 1995
Michael S. Gross, 32 1992
Officer of Apollo Capital Management, Inc. (a)
Director of Cardinal Health Distribution, Inc.,
Cole National Corporation and Hills Stores,
Inc., and member of Supervisory Board of
Memorex Telex N.V.
Bruce A. Karsh, 38 1992
Managing Director of Trust Company of the West,
a provider of investment management services
Director of KinderCare Learning Centers and
Littelfuse, Inc.
Matthew J. Morahan, 44 1992
Managing Director of PaineWebber Incorporated,
a full-service, independent securities firm <PAGE>
INTERCO
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
OR POSITION, OTHER DIRECTORSHIPS SINCE
----------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE UNTIL 1995
(continued)
Basil Vasiliou, 45 1992
Chairman of the Board of Vasiliou & Co., a
registered securities broker-dealer
----------
(a) Apollo Capital Management, Inc. ("Apollo Capital") is the
general partner of Apollo Advisors, L.P. ("Apollo
Advisors"), the managing general partner of Apollo
Investment Fund, L.P., a securities investment fund, which,
in turn, is the general partner of Apollo Interco. Each of
the Apollo Directors, other than Mr. Kissick, is a limited
partner of Apollo Advisors and each holds a comparable
position with Lion Capital Management, Inc., a related
company, which provides investment management and advisory
services. Mr. Kissick is a consultant to Apollo Capital.
(b) In 1991, a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code was filed on behalf
of INTERCO. A Chapter 11 Plan of Reorganization became
effective August 3, 1992, on which date INTERCO emerged from
Chapter 11.
(c) In 1990, a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code was filed on behalf
of Drexel Burnham Lambert Incorporated ("Drexel Burnham").
A Chapter 11 Plan of Reorganization became effective April
30, 1992, on which date Drexel Burnham emerged from Chapter
11.
----------
Each of the director nominees and continuing directors has
held the same position or other executive positions with the same
employer during the past five years, except as follows: Mr.
Black has been associated with Apollo Capital and associated
entities since 1990, and prior thereto he was a managing director
and a senior executive of Drexel Burnham; Mr. Cogut has been
associated with Apollo Capital and associated entities since
1990, and prior thereto he was a consultant and legal advisor,
principally to Drexel Burnham and associated entities; Mr. Falk
has been associated with Apollo Capital and associated entities
since 1992, and prior thereto he practiced law as a partner of
Skadden, Arps, Slate, Meagher & Flom; Mr. Gross has been
associated with Apollo Capital and associated entities since
1990, and prior thereto he was an investment banker with Drexel
Burnham; Mr. Hannan has been associated with Apollo Capital and <PAGE>
associated entities since 1990, and prior thereto he was a
managing director of Drexel Burnham; Mr. Kissick has been
associated with Apollo Capital and associated entities since
1991, and prior thereto, he was a consultant with Kissick &
Associates and a senior executive of Drexel Burnham; Mr. Morahan
has been associated with PaineWebber Incorporated since 1991, and
prior thereto he was a private investor and associated with
Wertheim Schroder & Co. Incorporated; and Mr. Siegel has been
associated with Apollo Capital and associated entities since
1991, and prior thereto he was a consultant and practiced law as
a principal of Cogut, Taylor, Siegel & Engelman and as a partner
of Irell & Manella.
COMPENSATION AND ORGANIZATION OF BOARD OF DIRECTORS
There were five meetings of the Board during the fiscal year
ended December 31, 1993, and all director nominees and continuing
directors were present for at least 75% of the meetings of the
Board and committees of the Board on which they served. Each
director who is not an employee of INTERCO or of a subsidiary of
INTERCO is paid a monthly fee of $1,750 and a fee of $1,000 plus
expenses for each meeting of the Board attended. In addition,
for attending a meeting of a committee of the Board, each is paid
a fee of $700 plus expenses if the director is a member of the
committee or $950 plus expenses if the director is the Chairman
of the committee. Such fees are not paid to directors who are
employees of INTERCO or a subsidiary of INTERCO.
In addition, INTERCO has a retirement plan for non-employee
directors. Under the plan, a director who is not an employee of
INTERCO or of a subsidiary of INTERCO and who has reached age 62
or older and has served as a director for at least five years
will, after termination of service as a director, receive for
life a percentage of the monthly fee for directors in effect at
the time of termination of service. Such percentage is 50% for
five years' service and increases 10% for each additional year of
service to 100% for ten or more years' service.
The Board has a number of standing committees, including an
Audit Committee and an Executive Compensation and Stock Option
Committee. The Board does not currently have a Nominating
Committee.
The Audit Committee, which currently consists of Mr.
Liberman, Chairman and Messrs. Lasater and Morahan, and which met
five times during the fiscal year ended December 31, 1993:
recommends the selection and retention of independent
accountants; reviews auditing and financial accounting and
reporting matters, the adequacy of internal accounting controls
and asset security, audit fees and expenses, and compliance with
the code of corporate conduct; and counsels regarding auditing
and financial accounting and reporting matters. <PAGE>
The Executive Compensation and Stock Option Committee, which
currently consists of Mr. Lasater, Chairman, and Messrs. Cogut,
Gross, Karsh and Kissick, and which met four times during the
fiscal year ended December 31, 1993: reviews and recommends
compensation of officers and directors; administers
supplementary retirement, performance incentive and stock option
plans; and counsels regarding compensation of other key
employees, management development and succession, and major
personnel matters.
CERTAIN BUSINESS RELATIONSHIPS
INTERCO is a party to a Credit Agreement with a group of
eight banks, including among others, The Boatmen's National Bank
of St. Louis, a subsidiary of Boatmen's Bancshares, Inc., of
which Mr. Liberman is a director. The Credit Agreement is a
revolving credit facility which provides financing for INTERCO's
ongoing working capital, letter of credit and general corporate
needs. During the year ended December 31, 1993, cash borrowed
and repaid under the Credit Agreement totaled $35 million. At
December 31, 1993, there were $65.2 million in letters of credit
outstanding under the facility. Fees and interest paid pursuant
to the Credit Agreement for the year ended December 31, 1993 were
approximately $3.7 million.
INTERCO is a party to a Consulting Agreement with Apollo
Advisors pursuant to which Apollo Advisors provides corporate
advisory, financial and other consulting services to INTERCO.
Fees under the Agreement are payable at an annual rate of
$650,000 plus out-of-pocket expenses for a term ending December
31, 1994 and the Consulting Agreement is automatically renewable
for successive one-year terms unless terminated by the Board.
INTERCO has also granted registration rights to Apollo Interco
with regard to the Common Stock.
EXECUTIVE COMPENSATION
The following table shows compensation awarded to, earned by
or paid to the Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive
Officer who were serving at December 31, 1993. <PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
/------------------/---------------/
Annual Compensation / Awards / Payouts /
/---------------------------------------------/------------------/---------------/ All
/ Other / / / Other
/ Annual / Securities / / Compen-
/ Compen- / Underlying / LTIP / sation
Name and Year / Salary Bonus sation / Options / Payouts / $
Position (a) / $ $ $ / # / $ / (f)
- --------------------------------/---------------------------------------------/------------------/---------------/----------------
<S> <C> / <C> <C> <C> / <C> / <C> / <C>
Richard B. Loynd 1993C / 652,011 608,170(b) 284,082(c) / 250,000 / 0 / 75,114
Chairman and 1992C / 530,844 478,850 719 / 0 / 1,500,000(d)/ 21,214
Executive Officer 1992F / 598,000 339,936 n/a(e) / 0 / 0 / n/a(e)
/ / / /
Eugene F. Smith 1993C / 266,083 219,404(b) 439(c) / 0 / 0 / 8,170
Executive Vice- 1992C / 213,750 169,931 250 / 80,000 / 500,000(d)/ 6,705
President & Chief 1992F / 241,900 145,600 n/a(e) / 0 / 0 / n/a(e)
Financial Officer / / / /
/ / / /
K. Scott Tyler, Jr. 1993C / 131,000 379,778(b) 0 / 0 / 0 / 0
President, The 1992C / 104,167 298,412 0 / 125,000 / 0 / 0
Lane Company, 1992F / n/a(e) n/a(e) n/a(e) / n/a(e) / n/a(e)/ n/a(e)
Incorporated / / / /
/ / / /
Ronald J. Mueller 1993C / 268,800 253,051(b) 429(c) / 0 / 0 / 11,810
President, The 1992C / 206,542 241,569 378 / 100,000 / 0 / 0
Florsheim Shoe 1992F / 235,000 224,542 n/a(e) / 0 / 0 / n/a(e)
Company / / / /
/ / / /
Gilbert Ford 1993C / 279,038 312,793(b) 3,545(c) / 0 / 0 / 31,249
President, 1992C / 211,173 254,793 1,564 / 100,000 / 0 / 25,286
Converse Inc. 1992F / n/a(e) n/a(e) n/a(e) / n/a(e) / n/a(e)/ n/a(e)<PAGE>
----------
(a) The fiscal year of INTERCO was changed effective December 31, 1992, from
one ending on the last Saturday in February to one corresponding to the
calendar year; therefore, 1993C refers to the twelve-month calendar year
ended December 31, 1993, 1992C refers to the ten-month transition fiscal
year ended December 31, 1992, and 1992F refers to the twelve-month fiscal
year ended February 29, 1992.
(b) Includes the following final payments made during 1993C pursuant to the
INTERCO Performance/Retention Plan approved in June 1991 by the
Bankruptcy Court to retain key employees during the pendency of Chapter
11 reorganization proceedings: Mr. Loynd $252,864; Mr. Smith $103,280;
Mr. Tyler $54,513; Mr. Mueller $98,550; and Mr. Ford $118,400.
(c) Amounts shown for 1993C consist of the following: value of "split
dollar" insurance policies transferred to an insurance trust for
descendants of Mr. Loynd $283,225; and tax gross-up payments.
(d) Amounts shown for 1992C were payments approved in June 1991 by the
Bankruptcy Court to encourage prompt completion of the Chapter 11
reorganization, and were paid at the August 3, 1992 effective date of
the Chapter 11 Plan of Reorganization.
(e) Amounts excluded pursuant to revised rules on executive officer
compensation disclosure adopted by the Securities and Exchange
Commission. Messrs. Tyler and Ford were not executive officers of
INTERCO during the fiscal year ended February 29, 1992 (1992F).
(f) Amounts shown for 1993C consist of the following: life insurance
premiums for Mr. Loynd $72,865; "split dollar" life insurance premiums,
substantial percentages of which will be recovered at age 65 or death
of the executive, for Mr. Smith $7,970, Mr. Mueller $11,610 and Mr.
Ford $28,758; and matching contributions to 401(k) savings plans for Mr.
Loynd $2,249, Mr. Smith $200, Mr. Mueller $200 and Mr. Ford $2,491.
</TABLE>
<PAGE>
----------
EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Among its responsibilities, the Executive Compensation and
Stock Option Committee ("Committee") of INTERCO's Board of
Directors ("Board") reviews the compensation of the officers of
INTERCO and its primary operating companies and makes
recommendations to the Board concerning executive compensation
matters.
In its deliberations the Committee is guided by certain
fundamental considerations, including:
- the need to attract and to retain talented key
executives;
- the need to set and maintain compensation levels
that are competitive with those in similar
businesses;
- the need to provide both annual and long-term
incentives to focus executive performance on the
achievement of company objectives; and
- the need to provide compensation opportunities
that align executive compensation with the
interests of the stockholders.
During calendar year 1993, base salary rates of the Chief
Executive Officer ("CEO") and other Named Executive Officers were
increased, establishing the CEO's salary rate at $652,000 for the
year, an increase of 4.5 percent over the previous year, and
existing annual incentive plans for key personnel (including the
CEO and other Named Executive Officers) were continued in effect.
Those plans utilize sales and pre-tax earnings as objectives, with
pre-tax earnings weighted more heavily. Under the provisions of
the plan for key personnel (including the CEO) based at the
corporate offices, plan participants may earn annual bonuses equal
to percentages of their base salaries (the target percentage of <PAGE>
the CEO being 50% of his base salary) depending upon INTERCO's
degree of achievement against budgeted objectives (currently sales
and pre-tax earnings)and personal performance as determined by the
Committee for the CEO and by the CEO for other plan participants.
For 1993 the CEO received a bonus of $355,306 pursuant to the
Plan.
In addition, following, and based in part on discussions with
the CEO, and partially to induce the CEO, who had reached normal
retirement age, to continue to lead INTERCO, partially to assist
the CEO's estate planning and partially to recognize the CEO's
contributions toward the favorable financial performance of
INTERCO since its emergence from Chapter 11 reorganization: title
to "split dollar" insurance policies on the life of the CEO,
including cash surrender values, if any, were transferred to an
insurance trust for descendants of the CEO and the company will
pay premiums on such policies, totaling $30,575 over periods
ending December 1996 when the policies will be fully paid;
INTERCO will pay portions of the annual premiums, at the rate of
$50,000 per-year, totaling $250,000 over periods ending December
1998, on an insurance policy on the lives of the CEO and his
spouse, which policy is owned by the said insurance trust for
descendants of the CEO; and, as in substance approved by the
stockholders during the 1993 annual meeting, a non-qualified
option was granted pursuant to the 1992 Stock Option Plan under
which the CEO may purchase 250,000 shares of Common Stock, the
decision as to the size of the grant having been based on the
fundamental considerations listed above.
In December 1993 the U.S. Treasury Department first issued
proposed regulations interpreting newly enacted statutory
limitations on the deductibility for tax purposes of executive
compensation in excess of $1 million. An analysis has been
prepared for the Committee on the effects of the limitations, as
interpreted by the proposed regulations, on INTERCO and that
subject will be addressed by the Committee.
Donald E. Lasater, Chairman Bruce A. Karsh
Craig M. Cogut John H. Kissick
Michael S. Gross
COMPENSATION COMMITTEE INTERLOCKS
Messrs. Cogut, Gross and Kissick, directors and members of
the Executive Compensation and Stock Option Committee of the
Board, are associated with Apollo Advisors and Apollo Interco.
INTERCO is a party to a Consulting Agreement with Apollo Advisors
pursuant to which Apollo Advisors provides corporate advisory,
financial and other consulting services to INTERCO. Fees under
the Agreement for a term ending on December 31, 1994 are payable
at an annual rate of $650,000 plus out-of-pocket expenses and the
Consulting Agreement is automatically renewable for successive
one-year-terms unless terminated by the Board. INTERCO believes
that the terms of this agreement are as favorable to INTERCO as
could be received from unaffiliated third parties. INTERCO has
also granted registration rights to Apollo Interco with respect to
the Common Stock.
STOCK OPTIONS
The following table contains information concerning a stock
option grant made during the fiscal year ended December 31, 1993,
pursuant to the INTERCO INCORPORATED 1992 Stock Option Plan ("1992
Plan").
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
% of
Number of Total Potential Realizable
Securi- Options Value at Assumed
ties Granted Exer- Annual Rates of
Under- to cise Stock Price
lying Employees or Appreciation for
Options in Base Expira- Option Term (b)
Granted Fiscal Price tion -----------------------------
Name # Year ($/Sh) Date 0%($) 5%($) 10%($)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
R.B. Loynd 250,000(a) 54.2 10.8125 1/26/02 0 1,490,309 3,670,702
250,000(a) 54.2 7.00 1/26/02 953,125 964,824 2,376,408
E.F. Smith 0 -- -- -- -- -- --
K.S. Tyler,Jr. 0 -- -- -- -- -- --
R.J. Mueller 0 -- -- -- -- -- --
G. Ford 0 -- -- -- -- -- --
----------
(a) The two entries in the table above for Mr. Loynd are presented as required
by SEC regulations and relate to a single stock option grant made under the
1992 Plan in January 1993 under which Mr. Loynd may purchase 250,000 shares
of Common Stock. The exercise price automatically and retroactively became
$7.00 per share, rather than $10.8125 per share, upon stockholder approval
in May 1993 of an amendment to the 1992 Plan to authorize stock option
grants at exercise prices that are less than the fair market value of a
share of Common Stock on the date of grant. The single grant becomes
exercisable in cumulative installments at various dates during 1994 subject
to provisions of the 1992 Plan that would accelerate the exercisability in
the event of a "change of control" of INTERCO.
----------
(b) The value, if any, one may realize upon exercise of a stock option depends
on the excess of the then current market value per share over the exercise
price per share. There is no assurance that the values to be realized upon
exercise of the stock options listed above will be at or near the amounts
shown.
</TABLE>
The following table contains information concerning unexercised
stock options held as of December 31, 1993. No stock options were
exercised by Named Executive Officers during the fiscal year ended
December 31, 1993.<PAGE>
<TABLE>
AGGREGATED FY-END OPTION VALUES
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End at FY-End (a)
---------------------- --------------------
Exercisable Unexercisable Exercisable Unexercisable
Name # # $ $
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R. B. Loynd 0 250,000 0 1,531,250
E. F. Smith 20,000 60,000 122,500 367,500
K. S. Tyler, Jr. 31,250 93,750 191,406 574,219
R. J. Mueller 25,000 75,000 153,125 459,375
G. Ford 25,000 75,000 153,125 459,375
</TABLE>
----------
(a) Based on the $13.125 per share closing price of the Common
Stock on the New York Stock Exchange on December 31, 1993.
----------
The following table contains information on adjustments of the
exercise prices of stock options held during the last ten completed
fiscal years by any executive officer.<PAGE>
<TABLE>
TEN YEAR OPTION REPRICINGS
<CAPTION>
Length of
Original
Market Option
Number of Price of Exercise Term
Securities Stock at Price at Remaining
Underlying Time of Time of at Date of
Options Repricing Repricing New Repricing
Repriced or or or Exercise or
Amended Amendment Amendment Price Amendment
Name Date (a) (#) ($/Sh) ($/Sh) ($/Sh) (Yrs)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R.B. Loynd
Chrm/CEO 5/05/93 250,000 15.31 10.8125 7.00 9
Pres/CEO 5/16/90 500,000 0.45 1.1875 0.45 9
5/16/90 350,000 0.45 2.9375 0.45 9
5/16/90 250,000 0.45 2.5000 0.45 9
5/16/90 42,600 0.45 3.0000 0.45 7
E.F. Smith
Exec V-P 5/16/90 350,000 0.45 2.9375 0.45 9
5/16/90 35,500 0.45 3.0000 0.45 7
5/16/90 42,600 0.45 1.9718 0.45 4
5/16/90 57,510 0.45 1.4217 0.45 2
R.J. Mueller
Vice-Pres. 5/16/90 350,000 0.45 2.9375 0.45 9
5/16/90 71,000 0.45 3.0000 0.45 7
5/16/90 41,180 0.45 1.9718 0.45 4
D.A. Patterson
Secretary 5/16/90 75,000 0.45 0.9700 0.45 9
5/16/90 14,200 0.45 3.0000 0.45 4
5/16/90 28,400 0.45 1.9718 0.45 2
R.T. Hensley, Jr.
Treasurer 5/16/90 50,000 0.45 0.9700 0.45 9
5/16/90 14,200 0.45 3.0000 0.45 7
5/16/90 17,040 0.45 1.9718 0.45 4
5/16/90 14,200 0.45 1.8178 0.45 1
D.P. Howard
Controller 5/16/90 75,000 0.45 0.9700 0.45 9
5/16/90 10,650 0.45 3.0000 0.45 7
5/16/90 21,300 0.45 1.9718 0.45 4 <PAGE>
H. Saligman
Chairman 5/16/90 142,000 0.45 3.0000 0.45 7
5/16/90 340,800 0.45 1.9718 0.45 4
5/15/90 284,000 0.45 1.8178 0.45 1
R.S. Moore
Vice-Pres. 5/16/90 350,000 0.45 2.9375 0.45 9
S.F. Huck
Asst.Vice-Pres. 5/16/90 50,000 0.45 0.9700 0.45 9
5/16/90 14,200 0.45 3.0000 0.45 7
5/16/90 21,300 0.45 1.9718 0.45 4
----------
(a) Pursuant to provisions of an order of the Bankruptcy Court and the
Bankruptcy Court-confirmed Chapter 11 Plan of Reorganization, as of the
August 3, 1992 effective date of said Plan of Reorganization, all stock
options repriced on May 16, 1990, the stock option plans pursuant to which
said stock options were granted, and the shares of Old Common Stock
issuable upon exercise of said stock options were cancelled, and none of
the stock options repriced on May 16, 1990 was exercised prior to said
cancellation.
</TABLE>
<PAGE>
----------
EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON ADJUSTED OPTION EXERCISE PRICES
As detailed in the proxy statement for the 1993 annual
meeting, (i) on August 31, 1992 grants to purchase 2,500,000 shares
of Common Stock, at an exercise price of $7 per share, were made
under the 1992 Plan to 75 key employees, not including the CEO,
(ii) those grants exhausted the number of shares initially reserved
for grant under the 1992 Plan, (iii) on January 26, 1993 the
Committee determined to recommend that the number of shares of
Common Stock reserved for issuance under the 1992 Plan be increased
and conditionally granted to the CEO an option to purchase 250,000
shares of Common Stock, at an exercise price of $10.8125 per share.
The terms of the grant to the CEO which grant specifically provided
that, upon stockholder approval during the 1993 annual meeting of
an amendment to the 1992 Plan to authorize stock option grants at
exercise prices that are less than the fair market value of a share
of Common Stock on the date of grant, the exercise price in the
said grant to the CEO would, retroactively, without further action
by the Committee, be $7 per share.
The stockholders approved the said amendment during the 1993
annual meeting and the exercise price of $7 per share became fully
effective. The Committee took the actions described above in order
to provide for the CEO the same exercise price as provided for
other key employees in the grants made on August 31, 1992.
Donald E. Lasater, Chairman Bruce A. Karsh
Craig M. Cogut John A. Kissick
Michael S. Gross
RETIREMENT PLANS
Messrs. Loynd and Ford are participants in the Converse Inc.
Retirement Plan, a noncontributory, defined benefit pension plan
designed to provide retirement benefits upon normal retirement at
age 65. Covered remuneration is base salary and, based on a
straight life annuity, annual benefits at normal retirement are
equal to the greater of (a) 2.25% of average final compensation
(the highest 60 consecutive calendar months of the last 120 months)
multiplied by credited service up to a maximum 15 years, plus 1.75%
of average final compensation multiplied by service in excess of 15
years up to a maximum of 15 years, less 1.67% of the Social
Security benefit multiplied by credited service up to a maximum of
30 years, or (b) $10 multiplied by years of credited service.
Messrs. Loynd and Ford, respectively, have 12 and 30 years of
credited service under the plan and estimated annual benefits
payable upon the retirement of Mr. Loynd and the normal retirement
of Mr. Ford are $152,272 and $157,024, respectively, assuming
continuation of current covered remuneration.
Messrs. Smith and Mueller are participants in the INTERCO
INCORPORATED Retirement Plan, a noncontributory, defined benefit
pension plan designed to provide retirement benefits upon normal
retirement at age 65. Covered remuneration is base salary and
incentive compensation, and, based on straight life annuity annual
benefits at normal retirement are the greater of (a) the sum of
1.1% of final average compensation (the highest 60 consecutive
calendar months of the last 120 months) multiplied by credited
service up to a maximum of 35 years and 0.45% of final average
compensation in excess of "covered compensation" as defined by the
IRS multiplied by credited service up to a maximum of 35 years,
without deduction for Social Security benefits, or (b) a total of
career average accruals for each year of plan participation equal
to 1.95% of covered remuneration without deduction for Social
Security benefits. Messrs. Smith and Mueller, respectively, have
11 and 35 years credited service under the plan and estimated
annual benefits payable upon the retirements of Messrs. Smith and
Mueller at normal retirement are $55,921 and $236,531,
respectively, assuming continuation of current covered
remuneration.
Mr. Tyler is a participant in the Pension Plan of The Lane
Company, Incorporated, a noncontributory, defined benefit pension
plan designed to provide retirement benefits upon normal retirement
at age 65. Covered remuneration is base salary and incentive
compensation and, based on a straight life annuity, annual benefits
at normal retirement are equal to the greater of (a) the sum of
0.65% of an average of the highest five consecutive years (of the
last 10 years) of covered remuneration and 0.65% of the said
average in excess of the greater of (i) 10,000 or (ii) 50% of
"covered compensation" as defined by the IRS, multiplied by years
of credited service (not to exceed 36 years), without deduction for
Social Security benefits, or (b) $28 multiplied by years of
credited service. Mr. Tyler has 25 years credited service under
the plan and estimated annual benefits payable upon the retirement
of Mr. Tyler at normal retirement are $205,117, assuming
continuation of current covered remuneration.
Benefits payable pursuant to provisions of company-sponsored
retirement plans may be limited by applicable laws and regulations.
A supplemental retirement plan has been adopted by INTERCO
providing for payments from general funds to certain executives,
including the Named Executive Officers, of any retirement income
that would otherwise be payable pursuant to the retirement plans in
the absence of any such limitations.
AGREEMENTS
INTERCO has agreements, executed in 1988, with Mr. Mueller and
three other officers who are not Named Executive Officers which
provide that in the event of a change of control (as defined in
such agreements) the officer will remain employed in the same
position for a period of three years following the change of
control and receive during that period minimum annual compensation
equal to the officer's highest salary and annual bonus paid within
one year and three years, respectively, prior to the change of
control. If prior to the expiration of such period, the officer is
discharged without cause or the officer terminates his employment
for good reason (including a reduction in compensation or
position), the officer is to receive a lump-sum payment equal to
three years' compensation and pension benefits and to receive
continued coverage under applicable welfare benefit plans for three
years.
Each of the Named Executive Officers is a participant in an
annual incentive compensation plan under which the officer may earn
a bonus during and payable following the close of the calendar year
ending December 31, 1994, contingent upon the achievement of
certain budgeted financial objectives by the company as a whole for
Messrs. Loynd and Smith and by their respective operating companies
for Messrs. Tyler, Mueller and Ford, and upon personal performance.
PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder
returns (assuming reinvestment of dividends) during two periods,
following assumed investment of $100 each in shares of the Common
Stock that were outstanding on February 24, 1989, and on August 3,
1992. As detailed below, all shares of Common Stock ($0.10 per
share stated value)("Old Common Stock ") that were outstanding and
that traded during the period of February 24, 1989 through June 26,
1992 (when trading in the Old Common Stock was suspended
permanently by the New York Stock Exchange) were cancelled prior
to August 3, 1992, pursuant to provisions of an order of the
Bankruptcy Court and the Chapter 11 Plan of Reorganization, and
shares of Common Stock ($1.00 per share stated value)("New Common
Stock") that are currently outstanding are shares that were issued
to former creditors or their assigns on and after August 3, 1992,
and after cancellation of the Old Common Stock, pursuant to
provisions of the same order of the Bankruptcy Court and Chapter 11
Plan of Reorganization. The indices shown below are included for
comparative purposes only and do not necessarily reflect INTERCO's
opinion that such indices are an appropriate measure of the
relative performance of the Common Stock.<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
\2/24/89 \2/23/90 \2/22/91 \2/28/92 \6/26/92 \ \8/3/92 \12/31/92\12/31/93\
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
INTERCO INCORPORATED Common Stock \ 100 \ 12 \ 5 \ 5 \ 0 \ \ 100 \ 110 \ 154 \
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index \ 100 \ 113 \ 127 \ 144 \ 141 \ \ 100 \ 103 \ 110 \
- -------------------------------------------------------------------------------------------------------------------------
Dow Jones Apparel (Including Footwear) Index \ 100 \ 117 \ 154 \ 215 \ 182 \ \ 100 \ 113 \ 84 \
- -------------------------------------------------------------------------------------------------------------------------
Dow Jones Home Furnishings & Appliances Index\ 100 \ 104 \ 87 \ 153 \ 136 \ \ 100 \ 107 \ 152 \
- -------------------------------------------------------------------------------------------------------------------------
__________
(a) That which appears to the left of the vertical double bar in the
Performance Graph, above, is a comparison of (i) the cumulative total
return of the Old Common Stock outstanding prior to INTERCO's emergence
from Chapter 11 reorganization, that is during the period of February 24,
1989 through June 26, 1992 when trading in such shares was suspended
permanently, with (ii) the Standard & Poor's 500 Index, (iii) the Dow Jones
Home Furnishings Sector Index and (iv) the Dow Jones Apparel (includes
footwear) Sector Index. Pursuant to provisions of an order of the
Bankruptcy Court and the Bankruptcy Court-confirmed Chapter 11 Plan of
Reorganization, all shares of Old Common Stock outstanding on and prior to
June 26, 1992 were cancelled prior to the August 3, 1992 effective date of
the said Plan of Reorganization, and no distributions were made on account
of interests in those former securities.
(b) Pursuant to provisions of an order of the Bankruptcy Court and the
Bankruptcy Court-confirmed Chapter 11 Plan of Reorganization, as of the
August 3, 1992 effective date of the said Plan of Reorganization, shares of
New Common Stock currently outstanding were issued to former creditors or
their assigns of INTERCO and its subsidiaries and that which appears to the
right of the vertical double bar in the Performance Graph, above, is a
comparison of (i) the cumulative total return of the New Common Stock
outstanding subsequent to INTERCO's emergence from Chapter 11
reorganization, that is during the period of August 3, 1992 through
December 31, 1993, with (ii) the Standard & Poor's 500 Index, (iii) the Dow
Jones Home Furnishings Sector Index and (iv) the Dow Jones Apparel
(includes footwear) Sector Index.
</TABLE>
____________
INDEPENDENT ACCOUNTANTS
The selection by the Board of KPMG Peat Marwick, certified
public accountants ("Peat Marwick"), as independent auditors for
calendar year 1993 was ratified by the stockholders during the
annual meeting on May 5, 1993. Upon recommendation of its Audit
Committee, the Board has continued the engagement of Peat Marwick
as independent auditors for 1994. A formal statement by
representatives of Peat Marwick is not planned for the annual
meeting on May 4, 1994; however, as in years past, representatives
of Peat Marwick are expected to be present during the annual
meeting and to be available to respond to appropriate questions.
II. STOCKHOLDER PROPOSALS
Neither the Board nor management knows of any matters other
than those items set forth above that will be presented for
consideration during the 1994 annual meeting. However, if other
matters should properly come before the meeting, it is intended
that the persons named in the proxies will vote, act and consent
in accordance with their best judgment with respect to any such
matters.
Stockholder proposals submitted for inclusion in INTERCO's
proxy materials for the 1995 annual meeting should be addressed to
the Secretary of INTERCO and must be received at INTERCO's
executive offices not later than November 23, 1994. Upon receipt
of any such proposal, INTERCO will determine whether or not to
include such proposal in the proxy statement and proxy form in
accordance with SEC regulations governing the solicitation of
proxies.
By order of the Board of Directors,
Duane A. Patterson,
Vice-President and Secretary
St. Louis, Missouri, March 23, 1994.
<PAGE>
INTERCO INCORPORATED
PROXY FOR 1994 ANNUAL MEETING OF STOCKHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints M. S. Gross, R. B. Loynd and D. A.
Patterson, and each of them with power of substitution, proxy or
P proxies to represent the undersigned, and to vote all shares of
Common Stock the undersigned would be entitled to vote, at the
R Annual Meeting of Stockholders of INTERCO INCORPORATED to be held
on May 4, 1994, and at any adjournment thereof, upon the items set
O forth in the proxy statement for the meeting and identified below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
X The Board of Directors recommends a vote FOR
The Board of Directors recommends a vote FOR
Y I. Election of Directors
(Change of Address)
Nominees: L. D. Black, C. M. Cogut, R. M. Falk, --------------------
J. J. Hannan, J. H. Kissick, D. E. Lasater --------------------
L. M. Liberman, R. B. Loynd, and E. B. Siegel --------------------
(If you have written
in the above space,
II. In their discretion, upon such other please mark the cor-
matters as may properly come before responding box on
the meeting. the reverse side of
this card.)
PLEASE SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES ON THE REVERSE SIDE AND
RETURN PROMPTLY. \----------------\
\SEE REVERSE SIDE\
\----------------\
<PAGE>
INTERCO INCORPORATED
PROXY FOR 1994 ANNUAL MEETING SHARES IN YOUR NAME ESOP SHARES
FOR WITHHELD
1. Election of
Directors [ ] [ ] [X] Please mark you votes
(see reverse) as shown to the left.
For, except vote withheld from the following nominee(s):
-------------------------------------------------------
Change
of [ ]
Address
SIGNATURE(S)_____________________________________ DATE_______________
SIGNATURE(S)_____________________________________ DATE ______________
(Please sign exactly as name appears
above. Executors, Administrators, Trustees,
Etc., should so indicate.)
