<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CONVERSE INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CONVERSE INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
Converse Inc.
One Fordham Road
North Reading, Massachusetts 01864
Telephone: (508) 664-1100
April 24, 1997
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend
the 1997 Annual Meeting of Stockholders of Converse Inc. (the "Company"). The
Annual Meeting will be held at the Company's headquarters, One Fordham Road,
North Reading, Massachusetts at 10:00 a.m., local time, on Wednesday, June 18,
1997.
The accompanying Notice of Annual Meeting and Proxy Statement describe
the formal matters to be acted on at the meeting. During the Annual Meeting we
will also report on the operations of the Company.
If you plan to attend the meeting, please mark the appropriate box on
your proxy card. Whether or not you plan to attend the Annual Meeting in person,
it is important that your shares be represented and voted at the meeting.
Accordingly, please sign, date and return the enclosed proxy card promptly.
I look forward to seeing you at the meeting; and on behalf of the Board
of Directors and management of the Company, I would like to express my
appreciation for your interest in Converse.
Sincerely,
/s/ Glenn N. Rupp
Glenn N. Rupp
Chairman of the Board and
Chief Executive Officer
<PAGE>
CONVERSE INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1997 Annual Meeting of stockholders of Converse Inc. (the "Company")
will be held at 10:00 a.m., local time, on Wednesday, June 18, 1997, at the
Company's headquarters, One Fordham Road, North Reading, Massachusetts, for the
following purposes:
I. To elect twelve directors; and
II. To ratify the appointment by the Board of Directors of
Price Waterhouse LLP as the Company's independent
auditors for the fiscal year ending January 3, 1998;
and
III. To transact such other business as may properly come
before the meeting and at any adjournments thereof.
The Board of Directors has fixed April 21, 1997 as the record date for
the Meeting. Accordingly, only stockholders of record at the close of business
on such date will be entitled to notice of and to vote during the 1997 annual
meeting and during any adjournment or adjournments thereof.
By order of the Board of Directors,
/s/ Jack A. Green
Jack A. Green,
Senior Vice President, General
Counsel and Secretary
North Reading, Massachusetts
April 24, 1997
IMPORTANT
---------
Whether or not you plan to attend the meeting, please complete, date
and sign the enclosed proxy card, and return it PROMPTLY in the
enclosed envelope which requires no postage if mailed in the United States.
<PAGE>
CONVERSE INC.
One Fordham Road
North Reading, Massachusetts 01864
______________________________________________________
PROXY STATEMENT
1997 Annual Meeting of Stockholders
______________________________________________________
This Proxy Statement is furnished to the stockholders of Converse Inc.,
a Delaware corporation ("Converse" or the "Company"), in connection with the
solicitation of proxies on behalf of the Board of Directors (the "Board") of
Converse for use during the 1997 annual meeting of stockholders to be held at
10:00 a.m., local time, on Wednesday, June 18, 1997 at the Company's
headquarters, One Fordham Road, North Reading, Massachusetts and at any
adjournments thereof, for the purposes set forth in the accompanying notice of
annual meeting of stockholders.
The cost of the solicitation of proxies will be borne by Converse 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. Directors, officers and other employees of Converse may also
solicit proxies personally or by telephone or telecopy. In addition, Converse
has engaged Morrow & Co. to assist in the solicitation from brokers, bank
nominees and institutional holders for a fee of $5,000 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 April 25, 1997. A copy of the
Company's 1996 Annual Report containing financial statements for the year ended
December 28, 1996, was previously distributed to stockholders.
Voting Procedure
Stockholders of record at the close of business on April 21, 1997 (the
"Record Date") are entitled to vote during the 1997 annual meeting and may cast
one vote for each share of the Company's common stock, without par value
("Common Stock") held on the Record Date on each matter that may properly come
before the meeting. On the Record Date there were 17,250,056 shares of Common
Stock outstanding.
<PAGE>
The holders of a majority of the outstanding shares of Common Stock must
be present in person or represented by proxy 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 twelve nominees for director who receive the highest
numbers of votes of the votes cast will be elected. With regard to the election
of directors, votes may be cast in favor of or withheld from any or all
nominees. Votes that are withheld with respect to this matter will be excluded
entirely from the vote and will have no effect, other than for purposes of
determining the presence of a quorum. Abstentions may be specified on the
proposal to ratify the selection of the Company's independent auditors (but not
for the election of directors). Abstentions will be considered present and
entitled to vote at the meeting but will not be counted as votes cast in the
affirmative. Abstentions will have no impact upon the ratification of the
selection of independent auditors proposal or such other proposals as may be
properly presented at the meeting since such matters require approval by a
majority of the votes cast.
Shares represented by proxy will be voted as directed on the proxy card
and, if no direction is given, will be voted in the election of directors for
the persons nominated by the Board, in favor of each of the proposals
recommended 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 Converse prior to the date of the meeting.
Brokers who hold shares in street name for customers have the authority
under the rules of the various stock exchanges to vote on certain items when
they have not received instructions from beneficial owners. Brokers that do
not receive instructions are entitled to vote those shares with respect to the
election of directors and ratification of the selection of independent
auditors. A failure by brokers to vote those shares will have no effect on the
outcome of such proposal because such shares are not considered shares present
and entitled to vote with respect to such matters under applicable Delaware law.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information (as of April 14,
1997, except as otherwise noted) regarding the beneficial ownership of shares of
Converse Common Stock by (i) each person known by Converse to beneficially own
more than 5% of the outstanding shares of Converse Common Stock, (ii) each
executive officer named in the Summary Compensation Table below, (iii) each
director of Converse and (iv) the directors and executive officers of Converse
as a group.
2
<PAGE>
<TABLE>
<CAPTION>
Number of Percent of Common
--------- -----------------
Shares Stock Beneficially
------ ------------------
Beneficially Owned
------------ -----
Greater than 5% Stockholders Owned
- ---------------------------- -----
<S> <C> <C>
Apollo Investment Fund, L.P., c/o Apollo Advisors, L.P.
and
Lion Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577 (1)................................... 11,230,365 65.1%
Vinik Partners, L.P., Vinik Asset Management L.P., Jeffrey N.
Vinik, Michael S. Gordon, Mark D. Hosletter, VGII Partners,
L.L.C. and Vinik Asset Management, L.L.C.
260 Franklin Street
Boston, Massachusetts 02110 (2)................................ 1,034,800 6.0
Directors and Executive Officers
- --------------------------------
Glenn N. Rupp (3).............................................. 105,000 *
Gilbert Ford................................................... 10,000 *
Alistair Thorburn (3).......................................... 32,250 *
Thomas L. Nelson (3)........................................... 14,000 *
Ronald J. Ryan (3)............................................. 28,250 *
Donald J. Camacho (3).......................................... 34,500 *
Michael C. Bell (5)............................................ 5,000 *
Donald J. Barr (3)............................................. 7,500 *
Leon D. Black (1)(4)........................................... 11,230,365 65.1
Julius W. Erving (3)........................................... 5,000 *
Robert H. Falk (1)(4).......................................... 11,230,365 65.1
Michael S. Gross (1)(4)........................................ 11,230,365 65.1
John J. Hannan (1)(4).......................................... 11,230,365 65.1
Joshua J. Harris (1)(4)........................................ 11,230,365 65.1
John H. Kissick (1)(4)......................................... 11,230,365 65.1
Richard B. Loynd (3)........................................... 42,166 *
Michael D. Weiner (1)(4)....................................... 11,230,365 65.1
Directors and executive officers of the
Company as a group (21 persons)(3)............................. 11,555,281 67.0
- ------------------------------------------------
</TABLE>
* Less than 1%.
(1) Includes (i) 5,616,306 shares beneficially owned by Apollo Investment Fund,
L.P. ("AIF") and (ii) 5,614,054 shares beneficially owned by Lion Advisors,
L.P. ("Lion Advisors") for the benefit of an investment account under
management over which Lion Advisors has sole investment, voting and
dispositive power. The managing general partner of AIF is Apollo Advisors,
L.P. ("Apollo Advisors") whose general partner is Apollo Capital Management,
Inc. ("Apollo Capital"). The general partner of Lion Advisors is Lion
Capital Management, Inc. ("Lion Capital"), which is affiliated with Apollo
Capital.
(2) Information is as of March 24, 1997 and is based upon Amendment No. 2 to
Schedule 13D, dated March 24, 1997 filed with the Securities and Exchange
Commission by Vinik Partners L.P. ("Vinik Partners"), Vinik Asset
Management, L.P. ("VAM, L.P."), Jeffrey N. Vinik ("Vinik"), Michael S.
Gordon ("Gordon"), Mark D. Hosletter ("Hosletter"), VGH Partners, L.L.C.
("VGH") and Vinik Asset Management, L.L.C. ("VAM, L.L.C."). These shares
include (i) 431,200 shares which may be deemed to be beneficially owned by
Vinik Partners, (ii) 603,600 shares which may be deemed to be beneficially
owned by VAM, L.P., (iii) 1,034,800 shares which may be deemed to be
beneficially owned by Messrs. Vinik, Gordon and Hosletter, (iv) 431,200
shares which may be deemed to be beneficially owned VGH, and (v) 603,600
shares which may be deemed to be beneficially owned by VAM, L.L.C. The
general partner of VAM, L.P. is VAM, L.L.C. Mr. Vinik is the senior managing
member, and Messrs. Gordon and Hosletter are managing members of VGII and
VAM, L.L.C.
(3) Shares beneficially owned represent options to purchase Converse Common
Stock that are exercisable within 60 days, except for shares held of record
by the following: Mr. Rupp 5,000 shares, Mr. Ryan 2,000 shares, Mr. Camacho
2,500 shares, Mr. Barr 2,500 shares and Mr. Loynd 37,166 shares. Messrs.
Black and Hannan are directors and officers of Apollo Capital and Lion
Capital. Messrs. Falk, Gross, Harris and Weiner are officers of
(4) Apollo Capital and Lion Capital. Mr. Kissick is an officer of Lion Capital
and a consultant to Apollo Capital. Each such director disclaims beneficial
ownership of, and a personal pecuniary interest in, the shares beneficially
owned by AIF and Lion Advisors.
(5) Mr. Bell has not served as an officer or director of Converse since August
14, 1996.
3
<PAGE>
Proposal One ELECTION OF DIRECTORS
General
The Company's Board has one class of directors and, subject to their
earlier resignation or removal, all directors serve until the next annual
meeting and until their successors are elected and qualified. Twelve persons
are to be elected directors during the 1997 annual meeting. The names of the
nominees and certain information with respect to them are presented below. All
of the nominees were elected at the 1996 annual meeting.
Should any of the director nominees become unable or unwilling to
continue to serve, an event that is not expected 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.
The Board unanimously recommends a vote FOR each of the nominees for
director.
<TABLE>
<CAPTION>
Converse
Name, Age, Principal Occupation Director
or Position, Other Directorships Since
- --------------------------------------------------------------------------------------------------
<S> <C>
Donald J. Barr, 62 1994
Retired; Formerly Executive Vice President of Time Inc.
Mr. Barr was an Executive Vice President of Time Inc. from
October 1990 until his retirement in 1996. Prior to 1990, Mr.
Barr was the publisher of Sports Illustrated (1985-1990) and
Vice President of Time Inc. (1987-1990). Mr. Barr was an
employee of Time Inc. for 38 years.
Leon D. Black, 45 1994
Officer and Director of Apollo Capital Management, Inc.,
Lion Capital Management, Inc. and Apollo Real Estate Management, Inc.
Mr. Black is one of the founding principals of Apollo Advisors,
which acts as general partner of AIF, AIF II, L.P. and Apollo
Investment Fund, III, private securities investment funds, of
Lion Advisors, which acts as financial advisor to and
representative for certain institutional investors with respect
to securities investments, and of Apollo Real Estate Advisors,
L.P. ("Apollo Real Estate Advisors"), which acts as general
partner of the Apollo Real Estate Investment Funds, private real
estate oriented investment funds. Mr. Black has been a director
and officer of Apollo Capital and Lion Capital since 1990 and of
Apollo Real Estate Management, Inc. ("Apollo Real Estate") since
1993. Apollo Capital is the general partner of Apollo Advisors;
Lion Capital is the general partner of Lion Advisors; and Apollo
Real Estate is the managing general partner of Apollo Real
Estate Advisors. Mr. Black also serves as a
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Converse
Name, Age, Principal Occupation Director
or Position, Other Directorships Since
- --------------------------------------------------------------------------------------------------
<S> <C>
director of Big Flower Press, Inc., Culligan Water
Technologies, Inc., Furniture Brands International, Inc.,
Samsonite Corporation, Telemundo Group, Inc. and Vail Resorts,
Inc.
Julius W. Erving, 47 1994
President, The Erving Group and Dr. J. Enterprises
Mr. Erving has been the President of The Erving Group and Dr. J.
Enterprises since 1979. Mr. Erving is also a part owner of
Philadelphia Coca-Cola Bottling Company and Television Station
WKBW, Buffalo, New York. Mr. Erving also serves as an analyst
for professional basketball for NBC Sports. He was a member of
the Philadelphia 76'ers basketball team until April 1987 and has
been an endorser of Converse's products since 1975. Mr. Erving
is also a director of CoreStates Bank, N.A. and Philadelphia
Coca-Cola Bottling Company.
Robert H. Falk, 58 1994
Officer of Apollo Capital Management, Inc. and Lion Capital Management,
Inc.
Mr. Falk has been an officer of Apollo Capital and Lion Capital
since 1992. Prior to 1992, Mr. Falk was a senior partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom. Mr. Falk is
also a director of Culligan Water Technologies, Inc., Florsheim
Group Inc. and Samsonite Corporation.
Gilbert Ford, 65 1987
Consultant; Formerly the Chairman of the Board and Chief Executive
Officer of Converse Inc.
Mr. Ford served as Vice Chairman of the Board of Converse from
April 11, 1996 to December 1, 1996, at which time Mr. Ford
retired from Converse. Mr. Ford served as Chairman of the Board
of Converse from September 1994 to April 1996 and as Chief
Executive Officer of Converse from October 1986 to April 1996.
Previously, Mr. Ford held various positions within Converse,
including President (October 1986 to September 1994), and was an
employee of Converse for over 34 years.
Michael S. Gross, 35 1992
Officer of Apollo Capital Management, Inc. and Lion Capital Management,
Inc.
Mr. Gross is one of the founding principals of Apollo Advisors
and Lion Advisors and has served as an officer of Apollo Capital
and Lion Capital since 1990. Mr. Gross is also a director of
Florsheim Group Inc., Furniture Brands International, Inc.,
Proffitt's, Inc. and Urohealth, Inc.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Converse
Name, Age, Principal Occupation Director
or Position, Other Directorships Since
- --------------------------------------------------------------------------------------------------
<S> <C>
John J. Hannan, 44 1994
Officer and Director of Apollo Capital Management, Inc. and
Lion Capital Management, Inc.
Mr. Hannan is one of the founding principals of Apollo Advisors,
Lion Advisors and Apollo Real Estate Advisors and has served as
an officer and director of Apollo Capital and Lion Capital since
1990 and of Apollo Real Estate since 1993. Mr. Hannan is also a
director of Aris Industries, Inc., Florsheim Group Inc.,
Furniture Brands International, Inc. and United Auto Group, Inc.
Joshua J. Harris, 32 1992
Officer of Apollo Capital Management, Inc. and Lion Capital Management,
Inc.
Mr. Harris is an officer of Apollo Capital and Lion
Capital, having been associated with them since 1990. Mr. Harris
is also a director of Florsheim Group Inc. and Furniture Brands
International, Inc.
John H. Kissick, 55 1994
Officer of Lion Capital Management, Inc. and advisor to Apollo Capital
Management, Inc.
Mr. Kissick is one of the founding principals of Apollo Advisors
and Lion Advisors and has served as an officer of Lion Capital
and consultant to Apollo Capital since 1991. Mr. Kissick is also
a director of Continental Graphics Holdings, Inc., Florsheim
Group Inc., Food 4 Less Holdings, Inc. and Furniture Brands
International, Inc.
Richard B. Loynd, 69 1982
Chairman of the Board of Furniture Brands International, Inc.
Mr. Loynd has served as Chairman of the Board of Furniture
Brands since June 1990. Mr. Loynd was also Chief Executive
Officer of Furniture Brands International Inc. from 1989 through
October 1996. Mr. Loynd was Chairman of the Board of Converse
from 1982 to August 1994. Mr. Loynd is also a director of
Emerson Electric Co. and Florsheim Group Inc.
Glenn N. Rupp, 52 1996
Chairman of the Board and Chief Executive Officer of Converse
Mr. Rupp was elected Chairman of the Board and Chief Executive
Officer by Converse's Board of Directors on April 11, 1996. From
August 1994 to April 1996, Mr. Rupp was the Acting Chairman of
McKenzie Sports Products, Inc. and a Strategic Planning Advisor
for CRC Industries, Inc. Mr. Rupp was President and Chief
Executive Officer of Simmons Upholstered Furniture Inc.
("Simmons") from August 1991 until May 1994. Prior to 1991, Mr.
Rupp held various positions with Wilson Sporting Goods Co.,
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Converse
Name, Age, Principal Occupation Director
or Position, Other Directorships Since
- --------------------------------------------------------------------------------------------------
<S> <C>
including President and Chief Executive Officer from 1987
to 1991. Mr. Rupp is also a director of Consolidated Papers,
Inc. In July 1994, a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code was filed on
behalf of Simmons.
Michael D. Weiner, 44 1996
Officer of Apollo Capital Management, Inc. and Lion Capital
Management, Inc.
Mr. Weiner has been an officer of Apollo Capital and of Lion
Capital since 1992 and of Apollo Real Estate since 1993. Prior
to 1992, Mr. Weiner was a partner in the law firm of Morgan,
Lewis & Bockius LLP. Mr. Weiner is also director of Applause,
Inc., Capital Apartment Properties, Inc., Continental Graphics
Holdings, Inc., Florsheim Group Inc. and Furniture Brands
International, Inc.
</TABLE>
Organization and Compensation of Converse Board of Directors
There were six meetings of the Board during 1996, and, with the
exception of Mr. Loynd, each incumbent director who served during 1996 attended
at least 75% of the Board meetings and the meetings held by committees on which
he served.
The Board has a number of standing committees, including an Executive
Committee, an Audit Committee and an Executive Compensation and Stock Option
Committee. The Board does not currently have a nominating committee.
The Executive Committee, which currently consists of Mr. Loynd,
Chairman, and Messrs. Rupp, Gross and Harris, has the full power of the Converse
Board between Board meetings, with certain limitations relating to major
corporate matters. Although not currently a member of this Committee, Mr. Ford
served on this Committee until April 1996. This Committee met six times in 1996.
In addition, this Committee took actions from time to time pursuant to
resolutions adopted by unanimous written consent.
The Audit Committee, which currently consists of Mr. Loynd, Chairman,
and Messrs. Barr and Erving, 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. This
Committee met four times in 1996. In addition, this Committee took actions from
time to time pursuant to resolutions adopted by unanimous written consent.
The Executive Compensation and Stock Option Committee, which currently
consists of Mr. Gross, Chairman, and Messrs. Harris and Loynd, 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. This committee met four times in 1996.
7
<PAGE>
In addition, this Committee took actions from time to time pursuant to
resolutions adopted by unanimous written consent.
Each Converse director who is not an employee of Converse or any
Converse subsidiary is paid a monthly fee of $1,000 and a fee of $1,500 plus
expenses for each meeting of the Board attended. In addition, for attending a
meeting of a committee of the Board, each director who is not an employee of
Converse or any Converse subsidiary is paid a fee of $800 plus expenses if such
director is a member of the committee or $900 plus expenses if such director is
the Chairman of the committee.
In March 1995, the Executive Committee of the Company's Board of
Directors adopted a Non-Employee Director Stock Option Plan (the "1995 Plan"),
which pursuant to its terms provides for a grant of options to each director who
is not employed by Converse or employed by, or affiliated with, Lion Advisors or
AIF (a "Non-Employee Director"), to purchase 7,500 shares of the Company's
common stock at its fair market value on the date the options are granted. The
Company's stockholders approved the 1995 Plan at the 1995 annual meeting of
stockholders. These options become exercisable in one-third increments on each
of the first three anniversaries of the grant date. The Company's current Non-
Employee Directors are Messrs. Loynd, Erving and Barr.
Executive Officers
The executive officers of Converse are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- ------------
<S> <C> <C>
Glenn N. Rupp................................. 52 Chairman of the Board and
Chief Executive Officer
Donald J. Camacho............................. 46 Senior Vice President and
Chief Financial Officer
Edward C. Frederick........................... 50 Senior Vice President, Research
and Development
Jack A. Green................................. 51 Senior Vice President, General
Counsel and Secretary
Thomas L. Nelson.............................. 42 Senior Vice President, Sales/North
America
Herbert R. Rothstein.......................... 55 Senior Vice President, Production
Ronald J. Ryan................................ 55 Senior Vice President, Operations
James E. Solomon.............................. 41 Senior Vice President, Marketing
Alistair Thorburn............................. 39 Senior Vice President, International
James E. Lawlor............................... 43 Vice President, Finance and
Treasurer
</TABLE>
8
<PAGE>
Mr. Rupp's biography appears previously under "Selection of Directors".
Mr. Camacho has served as Senior Vice President and Chief Financial
Officer since September 1994. Previously, Mr. Camacho held the positions of Vice
President and Controller from 1992 to 1994, Controller from 1984 to 1992,
Assistant Controller from 1980 to 1984, and several other positions of
increasing responsibility since 1974.
Dr. Frederick has served as Senior Vice President, Research and
Development since April 1997. From February 1996 to April 1997, Dr. Frederick
was a consultant to Converse through his wholly-owned consulting company, Exeter
Research, Inc. ("Exeter") and held the title of Chief Product Executive of
Converse. Dr. Frederick has been the President of Exeter since 1987. Since 1995,
Dr. Frederick has also served as an Adjunct Professor in the Department of
Exercise Sciences, School of Public Health and Health Sciences, University of
Massachusetts. Dr. Frederick worked as a consultant for adidas, AG in the fields
of development, design and technology from 1991 to 1996. Previously, Dr.
Frederick worked as the Director of Research for Nike, Inc. ("Nike") from 1980
to 1986 and as a design consultant for Nike from 1978 to 1980 and from 1986 to
1990.
Mr. Green has served as Senior Vice President and General Counsel and
Secretary since August 1985, having joined the Company as Vice President Legal
in 1983.
Mr. Nelson joined Converse as Senior Vice President, Sales/North America
on March 13, 1995. Before joining Converse, Mr. Nelson worked for The Rockport
Company, a subsidiary of Reebok International Ltd., where he served as Senior
Vice President of Sales/Operations from 1992 to 1995. Prior to that, Mr. Nelson
worked for G.H. Bass & Company from 1983 to 1992 where he held several sales-
related positions before being promoted to Senior Vice President of Sales in
1990.
Mr. Rothstein has served as Senior Vice President, Production since
January 1996. Previously, Mr. Rothstein was Senior Vice President Sourcing from
1992 to 1996, Senior Vice President of Materials Management and Manufacturing
from 1991 to 1992 and Vice President of Materials Management from 1988 to 1991.
Before joining Converse, Mr. Rothstein held several senior management positions
with Reebok International Ltd. from 1985 to 1988; Morse Shoe Inc. from 1973 to
1985, BGS Shoe Corporation from 1969 to 1972 and Signet from 1964 to 1969.
Mr. Ryan has served as Senior Vice President, Operations since September
1994. Previously, Mr. Ryan held the position of Senior Vice President of
Finance and Operations since May 1994, having joined the Company as Senior Vice
President of Finance and Administration from 1990 to 1994. Prior thereto, Mr.
Ryan served as Vice President of Finance and Business Planning for the Europe,
Middle East and Africa divisions of the Bristol-Myers Squibb Company from 1984
to 1990.
9
<PAGE>
Mr. Solomon has served as Senior Vice President, Marketing since October
1996. Previously, Mr. Solomon worked for Lenox Inc. from August 1990 to
September 1996 in a number of senior positions, including president and chief
operating officer of the Dansk International Design division from May 1994 to
September 1996 and Gorham, Kirk-Stieff, Dansk division from July 1991 to May
1994. He also has experience in the athletic footwear industry, having served
as Executive Vice President of Kangaroos USA from 1989 to 1990, Vice President,
Marketing of Avia Athletic Footwear from 1985 to 1988, and Group Product
Manager, New Balance Athletic Shoes from 1981 to 1983.
Mr. Thorburn has served as Senior Vice President, International since
December 1993. Prior to joining the Company, Mr. Thorburn was Vice President
Europe/Asia Pacific for the Wilson Sporting Goods Co., Ltd. from 1987 to 1993.
Mr. Lawlor has served as Vice President, Finance of Converse since June
1995. Previously, Mr. Lawlor held the positions of Vice President and Treasurer
from September 1994 to June 1995, Treasurer from 1984 to 1994 and other
positions of increasing responsibility since 1975.
Executive Compensation
The following table sets forth certain information for each period
presented with respect to compensation awarded to, earned by or paid to each of
the two individuals who served in the position of Chief Executive Officer
during 1996, the four most highly compensated executive officers of Converse
other than Converse's Chief Executive Officers who were serving at December 28,
1996, and one individual for whom disclosure would have been provided but for
the fact that the individual was not serving as an executive officer of
Converse at December 28, 1996 (the "Named Executive Officers").
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards
------
Other Annual Securities Underlying
Bonus ($) Compensation ($) Options (#) All Other
Name and Principal Position Year Salary ($) (1) (2) (3) Compensation ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Glenn N. Rupp 1996 311,539 130,136 26,997 500,000 0
Chairman and Chief 1995 0 0 0 0 0
Executive Officer 1994 0 0 0 0 0
Alistair Thorburn 1996 222,266 11,019 0 50,000 21,657 (4)
Senior Vice President 1995 202,205 36,361 0 15,000 21,585
1994 180,000 142,115 0 35,000 18,600
Thomas L. Nelson 1996 220,000 11,000 0 35,000 508 (5)
Senior Vice President 1995 162,308 31,096 5,012 35,000 0
1994 0 0 0 0 0
Ronald J. Ryan 1996 194,033 9,702 0 0 16,757 (5)
Senior Vice President 1995 191,775 48,024 6,341 5,000 31,766
1994 179,250 104,708 0 35,000 14,382
Donald J. Camacho 1996 175,000 8,750 0 0 10,022 (5)
Senior Vice President 1995 164,269 43,313 5,255 80,000 19,560
1994 126,923 66,347 0 20,000 4,716
Gilbert Ford (8) 1996 353,365 0 0 0 585,021 (6)
Former Chairman and 1995 356,827 101,325 9,214 80,000 83,233
Chief Executive Officer 1994 316,154 251,668 11,320 100,000 35,930
Michael C. Bell (9) 1996 224,808 0 0 0 530,342 (7)
Former President 1995 313,654 110,250 15,342 150,000 38,639
1994 278,942 178,563 11,320 60,000 7,431
</TABLE>
- -------------
(1) The Company generally pays bonuses to its executives in the first
quarter of each fiscal year, except that in 1996 Mr. Rupp received a
signing bonus of $110,250 which was paid in equal monthly installments
during 1996 pursuant to his employment agreement. The bonuses for each
year contained in the table reflect the amount of bonus earned in such
year although such bonuses, with the exception of Mr. Rupp's signing
bonus, were paid in the following year.
(2) Amount shown for Mr. Rupp represents relocation and temporary housing
expenses incurred by Mr. Rupp in connection with his move to
Massachusetts, all other amounts shown represent amounts reimbursed for
the payment of taxes.
(3) Options granted in 1996 include certain options that were originally
granted in 1995 but were repriced in 1996, as follows: Mr. Thorburn
50,000 and Mr. Nelson 35,000. In the case of Mr. Nelson, options to
purchase 15,000 shares which were originally granted in 1995 were
canceled in connection with the 1996 repricing. Options granted in 1995
include certain options that were originally granted in 1994 but were
repriced in 1995, as follows: Mr. Ford 50,000, Mr. Thorburn 15,000, Mr.
Ryan 5,000, and Mr. Camacho 15,000 (see "Ten Year Option Repricing"
below).
(4) Amount represents payment to Mr. Thorburn's United Kingdom based
Personal Pension Fund in lieu of Mr. Thorburn's participation in the
Converse Inc. Retirement Plan (see "Retirement Plans" below).
(5) Amounts represent payments by the Company relating to the Company's
matching contribution under the Converse Inc. Thrift Savings Plan and
the payment of "split dollar" life insurance premiums on behalf of each
Named Executive Officer respectively, as follows: Mr. Nelson $508 and
$0, Mr. Ryan $2,375 and $14,382, and Mr. Camacho $2,375 and $7,647.
(6) Amounts reflect severance payments of $562,209 made by the Company to
Mr. Ford as required by his employment agreement with Converse (see
"Employment Contracts" below), payments of $2,375 relating to the
Company's matching contribution under the Converse Inc. Thrift Savings
Plan, and payment of "split dollar" life insurance premiums in the
amount of $20,437 by the Company on behalf of Mr. Ford.
(7) Amounts reflect severance payments of $517,869 made by the Company to
Mr. Bell as required by his employment agreement with Converse (see
"Employment Contracts" below), payments of $2,375 relating to the
Company's matching contribution under the Converse Inc. Thrift Savings
Plan, and payment of "split dollar" life insurance premiums in the
amount of $10,098 by the Company on behalf of Mr. Bell.
(8) Mr. Ford's employment with Converse terminated on December 1, 1996.
(9) Mr. Bell's employment with Converse terminated on August 14, 1996.
11
<PAGE>
Retirement Plans
Messrs. Rupp, Ford, Nelson, Ryan, Camacho and Bell are participants in
the Converse Inc. Retirement Plan (the "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 years of 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. Benefits payable
under the Retirement Plan are limited by certain provisions of the Internal
Revenue Code of 1986, as amended (the "Code"). A supplemental executive
retirement plan ("SERP") has been adopted by Converse to provide for payments
from general funds to Mr. Ford of any retirement income that would otherwise be
payable pursuant to the Retirement Plan in absence of any such limitations. Set
forth below is the credited service under the Retirement Plan as of December 28,
1996 and estimated annual benefits payable upon the normal retirement of each of
the Named Executive Officers, assuming continuation of current covered
remuneration. In the case of Mr. Ford, such amount includes amounts payable
under the SERP.
<TABLE>
<CAPTION>
Years of
Credited Service Annual
at December 28, Benefits
Name 1996 Payable
<S> <C> <C>
Glenn N. Rupp............................. 0.75 $133,015
Thomas L. Nelson.......................... 1.8 73,432
Ronald J. Ryan............................ 6.2 53,080
Donald J. Camacho......................... 22.3 87,570
Gilbert Ford.............................. 30.0 165,966
Michael C. Bell........................... 17.75 93,002
</TABLE>
Mr. Thorburn is not eligible to participate in the Retirement Plan
because he is not a citizen of the United States. In lieu of Mr. Thorburn's
participation in this plan, Converse contributes an amount equal to
approximately 10% of Mr. Thorburn's annual salary directly to Mr. Thorburn's
United Kingdom based Personal Pension Fund. See "Executive Compensation."
Stock Options
The following table contains information concerning stock option grants
made during the fiscal year ended December 28, 1996, pursuant to the Converse
Inc. 1994 Stock Option Plan (the "1994 Plan"). The Company granted no stock
appreciation rights in 1996.
12
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Name Number of % of Total Exercise Expiration Potential Realizable Value
Securities Options or Date at Assumed Annual Rates of
Underlying Granted Base Price Stock Price Appreciation for
Options to Employees ($ per Option Term (1)
Granted in Fiscal Year Share) ---------------------------
(#) 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Glenn N. Rupp 500,000(2) 45.00 5.00 4/11/05 796,565 2,510,635
Alistair Thorburn 50,000(3) 4.50 6.375 9/5/05 175,734 432,845
Thomas L. Nelson 35,000(3) 3.15 6.375 9/5/05 123.,014 302,991
Ronald J. Ryan ----- ----- ----- ----- ----- -----
Donald J. Camacho ----- ----- ----- ----- ----- -----
Gilbert Ford ----- ----- ----- ----- ----- -----
Michael C. Bell ----- ----- ----- ----- ----- -----
</TABLE>
- ---------------
(1) 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.
(2) Represents new options granted under the 1994 Plan. Such options vest in 20%
increments on each of the first five anniversaries of April 11, 1996.
Pursuant to Mr. Rupp's employment agreement, this vesting may be accelerated
in the event that the Company does not offer to extend the term of this
employment agreement when it expires on April 15, 1999.
(3) Represents options that were originally granted in 1995 and were repriced in
1996. Such options vest in 20% increments on each of the five anniversaries
of September 5, 1996 (see "Ten Year Option Repricing" below).
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End at FY-End (1)
Shares -------------------------------------------------------------------
Acquired
on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Glenn N. Rupp 0 0 0 500,000 0 5,062,500
Alistair Thorburn 0 0 29,250 70,750 120,686 567,103
Thomas L. Nelson 0 0 7,000 63,000 56,875 533,750
Ronald J. Ryan 2,000 16,720 25,250 12,750 247,230 118,775
Donald J. Camacho 5,000 43,675 26,000 69,000 178,100 367,300
Gilbert Ford 140,000 593,500 0 0 0 0
Michael C. Bell 80,000 104,100 0 0 0 0
</TABLE>
- --------------
(1) Based on the $15.125 per share closing price of the Common Stock on the
New York Stock Exchange ("NYSE") on December 28, 1996.
13
<PAGE>
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of Market Length of
Securities Price of Exercise Original Option
Underlying Stock at Price at Term
Options Time of Time of New Remaining at
Repriced Repricing Repricing Exer- Date of
or or or cise Repricing or
Amended Amendment Amendment Price Amendment
Name and Position Date (#) ($/sh) ($/sh) ($/sh) (yrs.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald J. Camacho, Senior Vice
President & Chief Financial Officer 6/2/95 30,000 7.00 10.75 7.00 8.5
Edward C. Frederick, Senior Vice
President, Research and Development 9/5/96 20,000(3) 6.375 (1) 6.375 8.1
Jack A. Green, Senior Vice President,
General Counsel and Secretary 6/2/95 5,000 7.00 10.75 7.00 8.5
James E. Lawlor, Vice President,
Finance 6/2/95 10,000 7.00 10.75 7.00 8.5
Thomas L. Nelson, Senior Vice
President, Sales/North America 6/2/95 35,000 7.00 10.75 7.00 8.5
9/5/96 35,000 (2) 6.375 (1) 6.375 8.1
Herbert R. Rothstein, Senior Vice
President, Production 6/2/95 5,000 7.00 10.75 7.00 8.5
Ronald J. Ryan, Senior Vice President, 6/2/95 5,000 7.00 10.75 7.00 8.5
Operations
Alistair Thorburn, Senior Vice 6/2/95 15,000 $7.00 $10.75 $7.00 8.5
President, International 9/5/96 50,000 6.375 (1) 6.375 8.1
Gilbert Ford, Former Chairman of the 6/2/95 50,000 7.00 10.75 7.00 8.5
Board & Chief Executive Officer
Michael C. Bell, Former President 6/2/95 60,000 7.00 10.75 7.00 8.5
</TABLE>
- -----------------------
(1) The per share exercise prices for these options were set in 5,000 share
increments of $5.00, $7.00, $9.00, $11.00, $13.00, $15.00, $17.00, $19.00,
$21.00 and $23.00.
(2) Options to purchase 15,000 shares issued to Mr. Nelson on October 25, 1995
were canceled in connection with the repricing.
(3) Options to purchase 30,000 shares issued to Mr. Frederick on February 1,
1996 were canceled in connection with the repricing.
Employment Contracts
Mr. Rupp entered into an Employment Agreement with the Company in April
1996. The Agreement expires on April 15, 1999. Under the Agreement, Mr. Rupp
is entitled to a base salary of no less than $450,000 plus a bonus of up to 70%
of Mr. Rupp's salary as determined pursuant to the Company's Executive
Incentive Plan. The Agreement provides that Mr. Rupp's bonus for 1996 shall be
at an annual rate of not less than $160,000. The Agreement provides that Mr.
Rupp be granted options to purchase 500,000 shares of Converse common stock at
a price of $5.00 per share. These options vest in 20% increments on each of the
first five anniversaries of the grant, except that if on or before April 15,
1999 the Company does not offer to extend the term of this Agreement for
14
<PAGE>
at least one more year, all remaining unvested options become exercisable on
April 15, 1999, and if on or before April 15, 2000 the Company does not offer to
extend the term of this Agreement at least one additional year, all remaining
unvested options become exercisable on April 15, 2000. At all times during the
term of his Agreement, Mr. Rupp shall be entitled to participate in Converse's
medical, dental, 401(k), insurance, retirement and other employee benefit plans.
If Mr. Rupp's employment is terminated by Converse during the term of the
Agreement other than for cause (as defined), or if Mr. Rupp chooses to terminate
his employment after being required to relocate his principal office without his
consent, Mr. Rupp shall continue to receive his annual salary for the longer of
(i) the remaining balance of the term of the agreement, or (ii) two years from
the date of termination.
Mr. Camacho entered into an Employment Agreement with the Company in
January 1996. If Mr. Camacho's employment is terminated by Converse other than
for cause (as defined), or if Mr. Camacho's salary, benefits or bonus potential
is involuntarily reduced and he elects to terminate his employment, or if Mr.
Camacho ceases to hold the position and responsibilities of chief financial
officer of Converse and he elects to terminate his employment, or in the event
Mr. Camacho's employment is terminated by his death or disability, the Company
will pay to Mr. Camacho for a period of two years (or one year in the event of
death or in the event such termination occurs after December 31, 1997): (i)
his base salary and annual bonus; (ii) an amount equal to the actuarial present
value of the additional benefits Mr. Camacho would have received under the
Retirement Plan and any supplemental defined benefit plan in which Mr. Camacho
participates, as if his employment had continued uninterrupted for an
additional period of two years at his base salary in effect at the date of
termination; and (iii) an amount equal to Converse's share of the cost of Mr.
Camacho's medical and dental insurance plus an amount equal to the maximum
combined Federal and Massachusetts income tax rate multiplied times such
payment.
Mr. Thorburn, Mr. Ryan and Mr. Nelson each entered into Employment
Agreements with the Company in October 1995. Dr. Frederick entered into an
Employment Agreement with the Company in April 1997. Under the terms of these
Agreements, the Company will pay to such employees amounts equal to their
respective annual salaries in the event that their employment with Converse is
involuntarily terminated.
Mr. Ford entered into an Employment Agreement with the Company in
November 1995. Mr. Ford retired from Converse on December 1, 1996. Under the
Agreement, Mr. Ford was entitled to a base salary of no less than $356,827 plus
an annual bonus determined pursuant to the Company's Executive Incentive Plan.
Pursuant to the terms of this Agreement, the Company is required to pay Mr. Ford
through December 31, 1997: (i) his base salary and annual bonus; (ii) an amount
equal to the actuarial present value of the additional benefits Mr. Ford would
have received under the Retirement Plan and the SERP as if his employment had
continued uninterrupted through December 31, 1997; and (iii) an amount equal to
Converse's share of the cost of Mr. Ford's medical and dental insurance plus an
amount equal to the maximum combined Federal and Massachusetts income tax rate
multiplied times such payment. Mr. Ford continues to serve on Converse's Board.
15
<PAGE>
Mr. Bell entered into an Employment Agreement with the Company in
November 1995. Mr. Bell's employment with Converse terminated on August 14,
1996. Under the Agreement, the Company is required to pay to Mr. Bell for a
period of two years from this date: (i) his base salary and annual bonus; (ii)
an amount equal to the actuarial present value of the additional benefits Mr.
Bell would have received under the Retirement Plan and any supplemental defined
benefit plan in which Mr. Bell participates, as if his employment had continued
uninterrupted for an additional period of two years at his base salary in effect
at the date of termination; and (iii) an amount equal to Converse's share of the
cost of Mr. Bell's medical and dental insurance plus an amount equal to the
maximum combined Federal and Massachusetts income tax rate multiplied times such
payment.
Executive Compensation and Stock Option Committee Report
The Executive Compensation and Stock Option Committee (the "Committee")
of the Company's Board of Directors (the "Board") is responsible for reviewing
the compensation levels of the Company's principal executive officers and
determining stock option awards to be granted under the 1994 Stock Option Plan
and making recommendations to the Board relating to these matters. In making
compensation determinations the Committee is guided by certain fundamental
considerations, including:
. the need to attract and retain talented management;
. the need to set and maintain compensation levels that are competitive
with those in similar businesses; and
. the need to provide substantial short-term as well as long-term
incentives for management to maximize the value of the Company.
The Company's executive compensation for 1996 consisted of three basic
elements: (i) base salaries; (ii) incentive bonuses; and (iii) stock options.
Base Compensation. Base compensation is intended to be competitive as
compared to salary levels for equivalent positions at other comparable
companies. In April 1996, the Company hired Mr. Rupp as Chief Executive
Officer and Chairman of the Board. The Company entered into an employment
agreement with Mr. Rupp providing for an annual salary of $450,000 which the
Committee determined to be a competitive salary after taking into account Mr.
Rupp's business experience in the sporting goods industry and his past success
in turning around troubled companies. In May 1996 a decision was made to
freeze the salaries of all executive officers of the Company due to the
Company's poor financial performance and the Company's financial condition.
Annual Incentive Bonus. Each executive is eligible to receive an annual
cash bonus under the Company's Executive Incentive Plan. The Company's annual
incentive bonuses are based in part on the Company's performance for the year
with respect to sales and pre-tax earnings compared to the Company's budgeted
plan and in part on achievement of pre-established individual performance
goals. Under the Company's Executive Incentive Plan, the Company's key
personnel (including the CEO) are eligible to earn a "target" bonus equal to a
percentage of his or her base salary (the target percentage of the CEO being
70% and those of the other Named Executive Officers ranging from
16
<PAGE>
55% to 70%). Approximately 75% of the bonus is based on Converse's degree of
achievement against budgeted objectives (sales and pre-tax earnings) and 25% on
achievement of individual performance goals. These target levels are intended to
motivate the Company's executives by providing substantial bonus payments for
the achievement of financial goals within the Company's business plan. In
addition, the Committee may grant discretionary bonuses under the Executive
Incentive Plan. The Company did not achieve its budgeted objectives for 1996,
therefore the Executive Incentive Plan did not provide for automatic bonuses
based on 1996 results. The Committee decided to grant a discretionary bonus of
5% of each participant's annual salary to recognize the improved performance of
the Company in the second half of 1996.
Stock Options. The Company uses qualified managers and to provide
incentives for management to increase stockholder value by creating a direct
link between the executive's compensation and stockholder return. During 1996,
pursuant to the 1994 Stock Option Plan, options to purchase 500,000 shares of
the were granted to Mr. Rupp. In addition, options to purchase an aggregate of
85,000 shares were repriced for two Named Executive Officers during 1996. For
each grant of stock options in 1996, the option exercise prices equaled or
exceeded the market price per share of stock on the date of grant. The grant and
repricing of the foregoing options were intended to give to officers a
significant incentive to increase the value of the stock of the Company.
Stock Option Repricing. As set forth in the Ten Year Option Repricing
table above, in September 1996, the Committee adjusted the exercise prices of
certain of the stock options granted to two Named Executive Officers under the
1994 Plan. These options were originally granted in October 1995 and had
exercise prices set in 5,000 share increments from $5.00 per share to $23.00
per share. This repricing was done in lieu of granting substantial new fair
market value options in order to provide a greater incentive for these two
executive officers to increase stockholder value through stock price
appreciation from an exercise price which is more consistent with the exercise
prices of options granted to other executive officers of the Company.
Section 162 (m). Section 162 (m) of the Code limits the deduction that
may be claimed by a public company for total compensation in excess of $1
million paid to its chief executive officer or to any of the other four most
highly compensated officers except to the extent that any compensation in
excess of $1 million qualifies as performance-based compensation. Grants of
options under the 1994 Plan prior to the 1996 annual meeting of stockholders
were designed to be performance-based compensation.
Members of the Executive Compensation and Stock Option Committee
Michael S. Gross, Chairman
Joshua J. Harris
Richard B. Loynd
17
<PAGE>
Compensation Committee Interlocks and Insider Participation
Mr. Loynd, a director and member of the Executive Compensation and Stock
Option Committee, is the Chairman of the Board and Chief Executive Officer of
Furniture Brands International, Inc. ("Furniture Brands") and formerly an
executive officer of the Company. On November 17, 1994, Furniture Brands, then
named INTERCO INCORPORATED, the sole stockholder of Converse, distributed to
the holders of Furniture Brands common stock all of the outstanding common
stock of Converse (the "Distribution"). As a result of the Distribution,
Converse became an independent publicly-traded company. In connection with the
Distribution, Converse and Furniture Brands entered into a Tax Sharing
Agreement providing, among other things, for an equal allocation between
Furniture Brands and Converse of benefits derived from a carryback of federal
and state tax liabilities to periods prior to completion of the Distribution.
On February 21, 1996, Converse and Furniture Brands amended this Tax Sharing
Agreement. Converse agreed to carryback federal income tax operating losses for
the years ended December 30, 1995 and December 28, 1996 to one or more
pre-distribution tax periods. In consideration for Converse agreeing to
carryback its operating losses, and in accordance with the Tax Sharing
Agreement, as amended, Furniture Brands paid Converse $8,000,000 on February
29, 1996 and in return Furniture Brands will be entitled to the full amount of
the tax refund that relates to the carryback of Converse's 1995 operating
losses, which Converse expects to be approximately $10,800,000. Furniture
Brands is also entitled to any tax refunds resulting from approximately
$10,000,000 of tax operating losses for the year ended December 28, 1996, plus
50% of any tax refunds resulting from operating losses in excess of
$10,000,000, which Converse decides to carryback. Furniture Brands is not
entitled to any refund of the $8,000,000 payment in the event the ultimate tax
refund it receives from the Internal Revenue Service is less than anticipated.
Messrs. Gross and Harris, directors and members of the Executive
Compensation and Stock Option Committee of the Board, are associated with
Apollo Advisors, Lion Advisors and AIF. In November 1994 Converse entered into
a Consulting Agreement with Apollo Advisors pursuant to which Apollo Advisors
provides corporate advisory, financial and other consulting services to the
Company. Fees under the agreement are payable at an annual rate of $500,000
plus out-of-pocket expenses for a one-year term and the Consulting Agreement is
automatically renewable for successive one-year terms unless terminated by the
Converse Board. Converse has granted registration rights to Lion Advisors and
AIF, with respect to their shares of Common Stock. Lion Advisors and AIF can
require Converse to file registration statements and to include their shares in
registration statements otherwise filed by Converse. Costs and expenses of
preparing such registration statements are required to be paid by Converse.
Converse maintains a secured credit facility (the "Credit Facility")
with BT Commercial Corporation, as agent, and certain other institutional
lenders. In November 1995, AIF entered into an accommodation letter with
Converse whereby AIF committed to purchase, upon the occurrence of certain
events and subject to certain conditions, a participation in certain loans
provided to Converse by the financial institutions that are party to its
principal Credit Agreement. In support of this obligation, AIF caused a standby
letter of credit to be furnished to the Agent under the Credit Agreement. AIF's
commitment to purchase, supported by this standby letter of credit, enables
Converse to borrow an additional $25,000,000 above its borrowing base under the
Credit Agreement. In February 1996, and again in September 1996, and March 1997,
AIF agreed to extend its
18
<PAGE>
commitment to purchase. As consideration for providing the standby letter of
credit initially, AIF received a fee equal to three percent of the face amount
of the standby letter of credit in November 1995. In February 1996 it
subsequently received a $100,000 fee for its agreement to extend the purchase
commitment and the standby letter of credit. Converse also agreed to pay the
reasonable expenses of AIF incurred in connection with the foregoing matters.
Certain Transactions
Mr. Erving has a contract with Converse whereby he has agreed to perform
certain services. The agreement provides for Mr. Erving's endorsement of the
Company's footwear and activewear, the right to use his name and likeness to
advertise the Company's products, promotional appearances, and advertising
production and product development consultation. The agreement provides for an
annual fee of $162,500 from October 1, 1995 through September 30, 1996 and
$200,000 from October 1, 1997 to September 30, 1998 and beyond and expires on
September 30, 2000. Mr. Erving is also entitled to receive a royalty of (i) 1%
of the net sales for the first 500,000 pairs of the Dr. J 2000 shoe sold and
1.5% of the net sales for all pairs of the Dr. J 2000 shoe sold in excess of
500,000, (ii) 1.5% of the net sales of apparel items which bear Mr. Erving's
name or are designed to coordinate with shoes bearing Mr. Erving's name, and
(iii) 1% of the net sales of any shoes other than the Dr. J 2000 which bear Mr.
Erving's name or for which Mr. Erving is the Company's primary designated
endorser. Mr. Erving earned a total of $215,336 under this agreement during
1996.
Converse entered into a consulting agreement in February 1996 with
Exeter whereby Exeter provides certain services to Converse in the fields of
research and development and product design. Converse entered into an additional
consulting agreement with Exeter in May 1996 to provide additional product
development services. Exeter is owned by Edward C. Frederick, who was hired as
the Company's Senior Vice President, Research and Development in April 1997. The
consulting agreements with Exeter provide for an aggregate fee of $290,000 per
year plus expenses. One of the consulting agreements, the fee under which was
$200,000 per year, was terminated in April 1997 when Dr. Frederick was hired as
an officer of the Company. Exeter was paid a total of $238,679 under these two
agreements during 1996.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and certain other officers and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten-percent stockholders are required by SEC regulation to furnish the Company
with copies of forms they file. To the Company's knowledge, based solely on
review of the copies of such reports furnished to the Company and written
representations that no reports were required, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with during 1996.
19
<PAGE>
Performance Graph
The following graph compares the total return on Common Stock from
November 14, 1994, the date on which the Common Stock began trading on the NYSE
with a "when-issued" designation, through December 28, 1996 to that of (i) the
Standard & Poor's 500 Stock Index and (ii) the Standard & Poor's Shoe Index (the
"Shoe Index") which at December 28, 1996 was composed of Reebok International
Ltd., Nike, Inc. and Stride Rite Corporation. The cumulative total return
represents the change in stock price and the amount of dividends received during
the indicated period, assuming reinvestment of dividends. The graph assumes an
investment of $100 on November 14, 1994.
The historical stock price performance of the Common stock shown on the
Performance Graph set below is not necessarily indicative of future price
performance.
The Performance Graph set below shall not be deemed to be incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange Act and
shall not otherwise be deemed filed under such Acts.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Symbol Nov. 14, Dec. 31, Dec. 30, Dec. 28,
1994 1994 1995 1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CVE 100 104.40 36.26 132.97
S&P 500 Index 100 98.55 132.16 162.38
S&P Shoe Index 100 109.75 146.86 242.34
</TABLE>
20
<PAGE>
Proposal Two RATIFICATION OF THE SELECTION OF INDEPENDENT
AUDITORS
Upon recommendation of its Audit Committee, the Board continued the
engagement of Price Waterhouse LLP, certified public accountants ("Price
Waterhouse"), as independent auditors for the fiscal year ended January 3,
1998. A formal statement by representatives of Price Waterhouse is not planned
for the annual stockholders meeting; however, representatives of Price
Waterhouse are expected to be present during the annual meeting and available
to respond to appropriate questions.
On April 14, 1995, the Company dismissed KPMG Peat Marwick LLP ("KPMG")
as its independent accountants and engaged Price Waterhouse as its independent
accountants for the Company's 1995 fiscal year. The Company's decision to change
its independent accounting firm was made in connection with a reevaluation of
this function in connection with the Company's spin-off from FBN, its former
parent, which occurred on November 17, 1994. The Audit Committee of the
Company's Board of Directors recommended the change of independent auditors to
Price Waterhouse. The Executive Committee of the Company's Board of Directors
voted to approve this change.
KPMG's report on the Company's financial statements for the prior two
fiscal years did not contain an adverse opinion or disclaimer of opinion, nor
was it qualified or modified as to uncertainty, audit scope or accounting
principles. In addition, during the 1993 and 1994 fiscal years and the
subsequent interim period preceding April 14, 1995, there were no disagreements
with KPMG on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement, if
not resolved to the satisfaction of KPMG, would have caused KPMG to make a
reference to the subject matter of the disagreement in connection with its
report. On April 26, 1995, KPMG furnished the Company with a letter addressed
to the Securities and Exchange Commission stating that it agrees with the above
statements.
During the two fiscal years prior to engaging Price Waterhouse and
through April 14, 1995, the Company did not consult with Price Waterhouse on any
items which concerned the subject matter of a disagreement or a reportable event
with the former auditor.
The affirmative vote of a majority of the votes cast during the meeting
is required for ratification of the appointment of Price Waterhouse LLP as
independent auditors for the fiscal year ending January 3, 1998.
The Board of Directors unanimously recommends a vote FOR approval of
ratification of Price Waterhouse LLP as the Company's auditors for the next
fiscal year.
Stockholder Proposals
Stockholder proposals submitted for inclusion in the Company's proxy
materials for the 1998 annual meeting should be addressed to the Secretary of
Converse and must be received at Converse's executive offices not later than
December 25, 1997. Upon receipt of any such proposal, the
21
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Company 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.
Other Business
Neither the Board nor management knows of any matters other than those
items set forth above that will be presented for consideration during the 1997
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.
Form 10-K
Further information regarding the Company is set forth in the Company's
Annual Report on Form 10-K which has been filed with the Securities and
Exchange Commission. The Form 10-K (including financial statements and
schedules, but excluding exhibits) is available without charge by writing to
the Secretary of Converse Inc. at One Fordham Road, North Reading,
Massachusetts 01864. Copies of exhibits to the Form 10-K will be furnished
upon request and the payment of a reasonable duplication fee.
By order of the Board of Directors,
/s/ Jack A. Green
Jack A. Green,
Senior Vice President, General Counsel
and Secretary
April 24, 1997
North Reading, Massachusetts
22
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DETACH HERE
CONVERSE INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS, JUNE 18, 1997
P The undersigned hereby appoints Glenn N. Rupp and Jack A. Green, and each
of them, with power of substitution, proxy or proxies, to represent the
R undersigned and vote all shares of Common Stock the undersigned would be
entitled to vote at the annual meeting of stockholders of Converse Inc.
O to be held at the Company's headquarters, One Fordham Road, North Reading,
Massachusetts, at 10:00 a.m. local time, on Wednesday, June 18, 1997, and
X at any adjournments thereof, on all matters coming before said meeting.
Y THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
1. Election of Twelve Directors, Nominees:
Donald J. Barr, Leon D. Black, Julius W. Erving, Robert H. Falk, Gilbert
Ford, Michael S. Gross, John J. Hannan, Joshua J. Harris, John H.
Kissick, Richard B. Loynd, Glenn N. Rupp, Michael D. Weiner
2. Ratification of the selection of independent auditors.
3. In their discretion, upon such other matters as may properly come before
the meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY [SEE REVERSE SIDE]
<PAGE>
DETACH HERE
[ ] PLEASE MARK VOTES AS IN THIS EXAMPLE.
FOR WITHHELD
1. Election of Directors (see reverse) [ ] [ ]
For, except vote withheld from the following nominee(s):
--------------------------------------------------------
2. Ratification of selection of independent auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Other Business: I authorize the aforementioned Proxies in their
discretion to vote upon such other business as may properly come before
the Annual Meeting and any adjournments thereof.
[ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
Signature Date
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Signature Date
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