SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
X Filed by the Registrant
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 Rule 14a-11(c) or
Rule 14a-12
NS GROUP, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
X No fee required
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) 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:
Ninth & Lowell Streets
Newport, Kentucky 41072
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held February 11, 1999
To the Shareholders of NS GROUP, INC.:
The Annual Meeting of Shareholders of NS Group, Inc., a
Kentucky corporation, will be held at the Metropolitan Club,
50 East RiverCenter Boulevard, Covington, Kentucky, on
Thursday, February 11, 1999, at 10:30 a.m. Eastern Standard
Time, for the following purposes:
1. To elect six directors of the Company;
2. To approve the adoption of an amendment to the NS
Group, Inc. 1995 Stock Option and Stock Appreciation
Rights Plan to increase the number of options available
for issuance under such plan from 750,000 to 1,750,000;
3. To ratify the Board of Directors' appointment of Arthur
Andersen LLP as the Company's independent public
accountants for its fiscal year ending September 25,
1999; and
4. To transact such other business as may properly be
brought before the meeting, or any adjournment thereof.
The close of business on December 11, 1998 has been fixed as
the record date for determination of shareholders entitled
to notice of and to vote at the Annual Meeting.
By order of the Board of Directors,
Newport, Kentucky Jack W. Mehalko
December 21, 1998 Secretary
SHAREHOLDERS ARE URGED TO SIGN, DATE AND RETURN THE ENCLOSED
PROXY AS SOON AS POSSIBLE. A POSTAGE PAID, RETURN ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
NS GROUP, INC.
Ninth & Lowell Streets
Newport, Kentucky 41072
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD FEBRUARY 11, 1999
This Proxy Statement is being first mailed to
shareholders on or about December 21, 1998 in connection
with the solicitation of proxies to be used at the Annual
Meeting of Shareholders of NS Group, Inc., a Kentucky
corporation (the "Company"), to be held on Thursday,
February 11, 1999, at 10:30 a.m. Eastern Standard Time at
the Metropolitan Club, 50 East RiverCenter Boulevard,
Covington, Kentucky, for the purposes set forth in the
accompanying Notice of Annual Meeting.
SOLICITATION AND REVOCATION OF PROXIES
THE ACCOMPANYING PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF THE COMPANY. The solicitation of proxies will
be by mail, except for incidental personal solicitation made
by officers, directors and employees of the Company. The
cost of preparing, assembling and mailing this Proxy
Statement and any other material furnished to shareholders
in connection with such solicitation, as well as the cost
(expected to be nominal) of any such solicitation and the
reasonable expenses of banks, brokers and other custodians,
nominees and fiduciaries, who, at the request of the
Company, shall mail such material to or otherwise
communicate with beneficial owners, will be borne by the
Company.
Shares represented by duly executed proxies in the
accompanying form which are received before the Annual
Meeting and not subsequently revoked will be voted as
described in "Voting and Other Matters" herein.
Any shareholder giving a proxy has the power to revoke
it in writing at any time prior to its exercise, but the
revocation of a proxy is not effective until written notice
thereof has been received by the Secretary of the Company.
VOTING RIGHTS
Only holders of the Company's common stock, no par
value (the "Common Stock") of record at the close of
business on December 11, 1998 (the "Record Date") will be
entitled to notice of, and to vote at, the Annual Meeting.
As of the Record Date, there were 22,408,470 shares of
Common Stock outstanding.
SHARE OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Except as otherwise noted, the following table sets
forth certain information as of October 23, 1998 with
respect to shares of Common Stock owned beneficially by each
Director of the Company (each of whom is a nominee for
Director), each executive officer of the Company, all
Directors and executive officers of the Company as a group,
and each person who, to the knowledge of the Company,
beneficially owned more than 5% of the Common Stock on
October 23, 1998.
Number of Percentage
Name Shares Owned of Class
Directors, Nominees and
Executive Officers
Clifford R. Borland (1) 3,004,700(2) 13.0
Ronald R. Noel 1,037,787(2)(3) 4.5
John B. Lally 521,374(4) 2.3
John R. Parker (5) 79,572(2)(6) *
R. Glen Mayfield 77,380 *
Paul C. Borland, Jr. 77,100(2) *
Patrick J. B. Donnelly 26,375(7) *
All Directors and Executive
Officers as a group
(7 persons) 4,824,288(2) 20.8
Other 5% Shareholders
Everest Capital Limited (1) 1,778,100 7.7
* Less than one percent
(1) The address of Mr. C. R. Borland is NS Group, Inc.,
Ninth and Lowell Streets, Newport, Kentucky 41072. The
address of Everest Capital Limited is The Bank of
Butterfield Building, 65 Front Street, 6th Floor,
Hamilton HM JX, Bermuda. The information regarding
Everest Capital Limited is derived from its Schedule
13D filing dated October 23, 1998.
(2) Includes, where applicable, shares of Common Stock (a)
which may be acquired within 60 days of October 23,
1998 by Mr. C. R. Borland (98,200), Mr. Noel (11,684),
Mr. P. C. Borland, Jr. (75,000), Mr. Parker (41,902),
and all Directors and executive officers as a group
(226,786) pursuant to the Company's non-qualified stock
option and stock appreciation rights plans and (b)
owned by Mr. Noel (1,103) and all Directors and
executive officers as a group (1,103) and held by the
trustee of the Company's Salaried Employees' Flexible
Compensation Plan, which shares are voted as directed
by the participants to whose account they are
allocated.
(3) Includes 25,000 shares owned by Mr. Noel's wife. Mr.
Noel disclaims any beneficial interest in these shares.
(4) Includes 16,500 shares owned by Mr. Lally's wife. Mr.
Lally disclaims any beneficial interest in these
shares.
(5) Mr. Parker is 54 years old and has held the same or
similar positions with the Company for more than five
years.
(6) Includes 18,800 shares owned by Mr. Parker's wife. Mr.
Parker disclaims any beneficial interest in these
shares.
(7) Includes 12,850 shares owned by Mr. Donnelly's wife.
Mr. Donnelly disclaims any beneficial interest in these
shares.
ELECTION OF DIRECTORS
Nominees for Election as Directors
Six directors will be elected at the 1999 Annual
Meeting to hold office until the next Annual Meeting, and
until their successors are duly elected and qualified.
Set forth in the following table is certain information
with respect to each nominee for director. Each of the six
nominees is currently a director of the Company and was
previously elected by the shareholders. The Board of
Directors recommends a vote FOR the election of the nominees
for director of the Company.
First Became Principal Occupation
Name And Age Director & Other Directorships
Clifford R. Borland (61) 1981 Chairman and Chief
Executive Officer of
the Company since
December 4, 1995. Mr. C.
R. Borland held the
position of President of
the Company from 1981
until December 4, 1995,
and resumed the position
of President and assumed
the position of Chief
Operating Officer
effective July 31, 1998.
Mr. Borland is a Director
of Kentucky Electric
Steel, Inc.
Paul C. Borland, Jr. (64) 1996 President and Chief
Operating Officer of the
Company from December 4,
1995 until his
retirement, effective
July 31, 1998. Mr. P. C.
Borland, Jr. joined the
Company in 1989 as Vice
President and General
Manager of Kentucky
Electric Steel
Corporation and served
as President of Koppel
Steel Corporation
("Koppel") from 1990
until November 6, 1997.
Mr. P. C. Borland, Jr. is
the brother of Mr. C. R.
Borland.
Patrick J.B. Donnelly (62) 1981 Partner in the law firm
of Niles, Barton and
Wilmer, Baltimore,
Maryland.
John B. Lally (62) 1981 Chairman of the Board of
LB Industries, Inc., a
privately-owned pipe
distributor. Director
and Chairman of the Board
of LB Steel Plate
Company, a privately-owned
steel plate
processor and
distributor.
R. Glen Mayfield (57) 1981 President of Mayfield &
Robinson, Inc., an
independent management
and financial consulting
firm.
Ronald R. Noel (57) 1981 Vice President of the
Company since 1981.
President of Newport
Steel Corporation
("Newport") since
March 1994. Mr. Noel
held the position of
Secretary of the Company
from November 1989 until
February 1995.
Except as otherwise noted, each of the nominees has
held the same position or other executive positions with the
employers listed above during the past five years.
The Articles of Incorporation provide at such time as
there are nine or more directors, the Board of Directors may
by resolution divide the Board into three classes with the
terms of office of each class ending in successive years.
INFORMATION REGARDING MEETINGS AND COMMITTEES
OF THE BOARD OF DIRECTORS
Meetings of the Board
The Board of Directors met six times during fiscal 1998
(excluding actions taken by written consent). Each Director
attended in excess of 83% of the aggregate of (i) the total
number of meetings held by the Board of Directors and (ii)
the total number of meetings held by each committee of which
he was a member during fiscal 1998.
Committees of the Board
The standing committees of the Board of Directors are
the Executive Committee, Audit Committee, Executive
Compensation Committee, Investment Committee and the Stock
Option Committee. There is no nominating committee of the
Board.
During fiscal 1998, the Audit Committee consisted of
Messrs. Donnelly (Chairman), Lally and Mayfield. The Audit
Committee is responsible for the selection of the Company's
independent public accountants, subject to the approval of
the Board, and reviews with representatives of the
independent public accountants the scope of their
examination, their fees, the results of their examination,
and any conditions requiring attention identified by them
regarding internal controls. The Audit Committee held three
meetings during fiscal 1998.
During fiscal 1998, the Executive Compensation
Committee consisted of Messrs. Mayfield (Chairman), Donnelly
and Lally. The Executive Compensation Committee determines
the compensation of the Company's officers, reviews the
officers' compensation programs, and monitors the grants
made under the Company's various executive benefit plans.
The Executive Compensation Committee held two meetings
during fiscal 1998.
During fiscal 1998, the Stock Option Committee
consisted of Messrs. Lally (Chairman), Donnelly and
Mayfield. The Stock Option Committee administers the stock
option plans of the Company. The Stock Option Committee
held one meeting during fiscal 1998.
During fiscal 1998, the Investment Committee consisted
of Messrs. C.R. Borland (Chairman), Mayfield and Noel. The
Investment Committee reviews and administers the Company's
investment policies and oversees and monitors investment
activity and results. The Investment Committee held three
meetings during fiscal 1998.
Director Compensation
Directors who are not employees of the Company are paid
an annual retainer of $24,000 and $1,000 for each meeting of
the Board of Directors attended in excess of four meetings
per fiscal year and expenses for attendance at meetings of
the Board and Committees. In addition, such outside
Directors are paid $750 ($1,000 for Committee Chairmen) for
each Committee meeting attended.
EXECUTIVE COMPENSATION
The following table presents summary information for
each of the last three fiscal years concerning compensation
awarded to, earned by, or paid to the Chief Executive
Officer and each of the other officers serving in an
executive officer capacity during fiscal 1998 ("named
executive officers") for services rendered to the Company
and its subsidiaries.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal Other Annual
Position Year Salary Bonus Compensation(1)
Clifford R. Borland 1998 $413,750 $ 81,830 (4) $ 1,000
Chairman and Chief 1997 404,375 378,916 1,000
Executive Officer (3)1996 395,000 18,750 -
Paul C. Borland, Jr. 1998 $340,625 $ 68,192 (4) $15,038
President and Chief 1997 399,375 378,916 13,951
Operating Officer 1996 356,607 31,348 -
of the Company;
President of
Koppel (3)
Ronald R. Noel 1998 $215,000 $ 20,782 (4) $ 1,000
Vice President 1997 209,000 182,921 1,000
of the Company; 1996 203,000 4,700 -
President of
Newport
John R. Parker 1998 $193,500 $ 37,096 (4) $ 433
Vice President, 1997 189,250 171,775 433
Treasurer and Chief 1996 185,000 8,500 -
Financial Officer
Long Term
Compensation
Securities
Underlying All Other
Name Year Options/SARS Compensation (2)
Clifford R. Borland 1998 30,000 $36,140
1997 - 35,940
1996 - 31,112
Paul C. Borland,Jr. 1998 25,000 $53,598
1997 - 29,452
1996 50,000 27,952
Ronald R. Noel 1998 13,500 $22,063
1997 - 21,863
1996 - 21,026
John R. Parker 1998 13,500 $19,644
1997 - 19,444
1996 - 19,145
(1) Represents amounts reimbursed for the payment of taxes.
The dollar value of perquisites did not in any year exceed
the lesser of $50,000 or 10% of any such officer's annual
salary and bonus.
(2) All Other Compensation includes insurance premiums and
payments made pursuant to the Company's salary continuation
program and in connection with certain disability insurance
policies. Under the Company's salary continuation program,
which the Company funds with insurance policies, the Company
will pay certain employees, including the executive
officers, upon retirement at or after age 62 an amount
ranging from 26% to 50% of his current base salary for life,
with payments for a minimum of 10 years either to each
participant or his descendants. During fiscal 1998, 1997
and 1996, respectively, the Company paid aggregate premiums
as follows: $18,382, $18,382, and $14,200 for Mr. C.R.
Borland; $16,800, $16,800 and $16,800 for Mr. P. C. Borland,
Jr.; $12,573, $12,573, and $12,573 for Mr. Noel; and
$10,991, $10,991 and $10,991 for Mr. Parker. Following his
retirement effective July 31,1998, Mr. P.C. Borland, Jr. was
paid $18,000 under the salary continuation program for
fiscal 1998.
The Company has purchased disability insurance policies
for the benefit of certain employees of the Company,
including the named executive officers. In the event an
insured is disabled for more than 60 days, he will be paid
an amount ranging from 25% to 54% of his current base salary
during the term of such disability up to age 65. During
fiscal 1998, 1997 and 1996, respectively, the Company paid
aggregate premiums as follows: $14,558, $14,558 and
$14,558 for Mr. C.R. Borland; $8,848, $9,652 and $9,652 for
Mr. P.C. Borland, Jr.; $6,290, $6,290 and $6,290 for Mr.
Noel; and $5,453, $5,453 and $5,453 for Mr. Parker.
Subsequent to the end of fiscal 1995, it was determined
that no bonus payments were earned by any executive officer
under the Company's bonus plan for fiscal 1995. All
estimated advance payments under the bonus plan were repaid
to the Company and All Other Compensation for fiscal 1996
includes imputed interest on such estimated advance payments
as follows: $854 for Mr. C.R. Borland; $663 for Mr. Noel;
and $1,202 for Mr. Parker.
For fiscal 1998, 1997 and 1996, All Other Compensation
also includes Company matching contributions to the
Company's Salaried Employees' Flexible Compensation Plan in
the amount of $3,200, $3,000 and $1,500, respectively, for
each of the named executive officers.
Effective August 1, 1998, the Company entered into a
consulting agreement with Mr. P.C. Borland, Jr. to oversee
and direct the operations of Koppel on an as needed basis
until termination of the agreement. Under the agreement,
Mr. P.C. Borland, Jr. was paid a total of $6,750 during
fiscal 1998. The agreement may be terminated upon 30 days
notice by either party.
(3) Mr. P.C. Borland, Jr. became an executive officer
December 4, 1995, when he was elected President and Chief
Operating Officer of the Company. He also served as
President of Koppel during the periods presented until
November 6, 1997. Mr. P.C. Borland, Jr. retired as
President and Chief Operating Officer of the Company
effective July 31, 1998. Mr. C. R. Borland resumed the
position of President and assumed the position of Chief
Operating Officer effective July 31,1998.
(4) During fiscal 1998, estimated quarterly bonus payments
were made to the named executive officers pursuant to the
Company's bonus plan in the following amounts: $147,074 for
Mr. C. R. Borland; $147,074 for Mr. Paul C. Borland, Jr.;
$50,051 for Mr. Noel; and $66,674 for Mr. Parker. The
amounts reflected in the table as Bonus for fiscal 1998 are
the actual amounts earned by each named executive officer.
Each named executive officer is obligated to repay the
excess of the amount paid over the amount earned, without
interest, prior to December 31, 1999.
The following tables present certain information
concerning stock options granted to and exercised by the
named executive officers of the Company during fiscal 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Percent
Number of Total
of Options
Securities Granted
Under- to Market
lying Employ- Per Price
Options ees in Share on Expir-
Granted Fiscal Exercise Date of ation
Name (1) Year(2) Price Grant Date
Clifford R.
Borland 30,000 3.5% $14.375 $13.875 1/15/08
Paul C.
Borland, Jr. 25,000 2.9 14.375 13.875 1/15/08
Ronald R.
Noel 13,500 1.6 14.375 13.875 1/15/08
John R.
Parker 13,500 1.6 14.375 13.875 1/15/08
Potential Realizable Value at Assumed
Annual Rates of Stock Price
Appreciation for Option Term (3)
Name 5% 10%
Clifford R.
Borland $246,777 $648,395
Paul C.
Borland, Jr. 205,648 540,329
Ronald R.
Noel 111,050 291,778
John R.
Parker 111,050 291,778
(1) Represents non-qualified stock options granted on January
15, 1998 pursuant to the NS Group, Inc. 1995 Stock Option
and Stock Appreciation Rights Plan. Messrs. C. R.
Borland, Noel and Parker's options become exercisable
over a three year period in increments of 33 1/3% per
year beginning with the first anniversary of the date of
grant. Mr. P.C. Borland, Jr.'s options became
exercisable on July 15, 1998.
(2) The Company granted options representing 851,950 shares
to employees in fiscal 1998 (232,000 representing
non-qualified stock
options and 619,950 representing
incentive stock options).
(3) The amounts shown under these columns are the result of
calculations at 5% and 10% rates as required by the
Securities and Exchange Commission and are not intended
to forecast future appreciation of the stock price of the
Company's common stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
No. of Total Number of Shares
Shares Value Underlying Unexercised
Acquired Real- Options/SARs at
Name on Exercise ized(1) September 26, 1998
Exercisable Unexercisable
Clifford R.
Borland 19,000 $74,500 89,933 60,800
Paul C.
Borland, Jr. 48,608 368,533 75,000 0
Ronald R.
Noel 39,218 154,272 9,000 25,452
John R.
Parker 9,000 37,418 39,218 25,452
Total Value of Unexercised,
In-the-Money
Options/SARS held
at September 26,1998 (2)
Name Exercisable Unexercisable
Clifford R. Borland $116,813 $16,875
Paul C. Borland, Jr. 196,625 0
Ronald R. Noel 0 10,969
John R. Parker 61,297 10,969
(1) Represents the difference between the exercise price of
the option and the average of the high and low sales
price of the Common Stock on the date of exercise.
(2) In-the-Money Options/SARs are those where the fair market
value of the underlying securities at fiscal year-end
exceed the exercise price of the option or SAR.
Senior Management Change of Control Agreements
The Company has entered into Change of Control Severance
Agreements with Messrs. C. R. Borland, Noel and Parker. These
agreements provide that if, during the two year period
following a "Change of Control," the Company terminates the
executive's employment other than for cause, or the executive
terminates his employment for good reason, then the executive
will receive a defined payment, certain medical, dental, life
and disability insurance benefits and outside assistance in
finding other employment. Mr. C.R. Borland's payment would be
the aggregate of three times the amount of his then current
base salary and three times the average amount of his bonus
payments in the prior five years, plus a pro rata portion of
his current year bonus. The payments to Messrs. Noel and
Parker would be the aggregate of two times the amount of the
executive's then current base salary and two times the average
amount of the executive's bonus payments in the prior five
years, plus a pro rata portion of the executive's current year
bonus. The Company and certain other officers of the Company
have also entered into Change of Control Severance Agreements
with terms similar to the agreements between Messrs. Noel and
Parker and the Company.
Under the terms of the agreements, a "Change of Control"
of the Company includes: (i) a sale of substantially all of
its assets; (ii) a merger with the effect that its
stockholders hold less than 51% of the voting power of the
merged entity; (iii) a liquidation; (iv) a tender offer or
other purchases resulting in a group of persons (other than a
group of persons with respect to which C.R. Borland is the
beneficial owner of the majority of the voting securities)
becoming the beneficial owner of 30% or more of the Company's
securities; or (v) changes in the composition of the majority
of the members of the Board of Directors. In these
agreements, each executive also agrees not to divulge the
Company's confidential information or to solicit any present
or prospective executive employee of the Company to be
employed by a competitor.
REPORT OF THE EXECUTIVE COMPENSATION AND STOCK OPTION
COMMITTEES
The Company's executive compensation program (the
"Program") is administered by the Executive Compensation and
Stock Option Committees of the Board of Directors (the
"Committees") which are composed of the same individuals,
although with different chairmen.
The Program has been designed to enable the Company to
attract, motivate and retain senior management by providing a
competitive total compensation opportunity based on
performance. The Program is comprised of three basic
elements: base salaries which are competitive within the
industry segments in which the Company operates and which
reflect individual performance; annual bonus opportunities
which are payable in cash for the achievement of certain
annual financial performance criteria; and long-term stock-based
incentive opportunities. The Committees believe that
both the annual bonus and stock-based incentive opportunities
directly strengthen the mutuality of interests between the
Company's executive officers and its shareholders. In
developing and administering the individual elements of the
Program, the Committees strive to balance short and long-term
incentive objectives. Except for the salary continuation
program and change of control agreements, the Company does not
have any employment or other agreements with its executive
officers because their performance is evaluated annually and
long-term incentives are provided pursuant to the Company's
stock option plans.
The Company, under the supervision of the Committees,
periodically obtains competitive survey data from a number of
sources in connection with the Committees' administration and
review of the Program. Such survey data confirms the
Committees' belief that the Program is currently competitive
and effective because it aligns the financial interests of
the Company's executive officers with the Company's financial
performance and long-term total return to the Company's
shareholders. Notwithstanding such conclusion, the Committees
continually review the Program and consider modifications in
order to further motivate the Company's executive officers.
A discussion of each of the elements of the Program along
with a description of the significant decisions of the
Committees with regard to fiscal 1998 compensation is set
forth below. The officers serving in executive officer
capacity during fiscal 1998 consisted of Messrs. Clifford R.
Borland, Paul C. Borland, Jr., Ronald R. Noel and John R.
Parker.
Annual Cash Compensation Program
Annual total cash compensation for senior management
consists of a base salary and the potential for an annual
bonus under the Company's Executive Bonus Plan (the "Bonus
Plan"). Base salaries are determined by an assessment of
salaries paid by companies within the Company's industry
segments, executive responsibilities and individual
performance. The annual base salaries for the executive
officers other than the Chief Executive Officer and the
President are determined through an interactive review process
between the Committees and Mr. C.R. Borland using the above
criteria. The Chief Executive Officer's and the President's
base salaries have been reviewed and established annually by
the Committees. In addition to the criteria described above,
the Committees also consider the overall performance of the
Company when establishing Mr. C.R. Borland's salary. Based
upon the criteria described, the Committees last increased
Mr. C. R. Borland's base salary in fiscal 1997 by 4.7%.
The Company maintains a Bonus Plan in which the executive
officers as well as other key employees are eligible to
participate. Under the Bonus Plan, participants may be
awarded annual bonuses if the Company and/or its operating
subsidiaries meet certain financial performance criteria.
Annual bonuses for Mr. C.R. Borland and the other executive
officers are based upon Company-wide financial performance
criteria. The financial criteria against which performance is
measured includes operating margins, return on assets, return
on total capital and sales growth. The bonus percentage for
Mr. C.R. Borland and the other executive officers varies from
0% to 100% of annual salary depending on the levels at which
the financial performance criteria are met. Under the Bonus
Plan, Mr. C.R. Borland and the other executive officers earned
bonuses ranging from 9.7% to 20.0% of their salary in fiscal
1998; from 87.5% to 94.8% of their salary in fiscal 1997 and
from 2.3% to 8.8% of their salary in fiscal 1996.
Stock Option Programs
Long-term incentive awards provided by the Company's
stock option plans are designed to develop and maintain strong
management through share ownership. Executive officers have
historically been granted non-qualified stock options under
the Company's stock option plans. Generally, the exercise
price for options granted have been greater than or equal to
the market value of the Common Stock of the Company on the
date of grant, and options have become exercisable over
periods ranging from three to eight years.
The number of options granted to executive officers is
based upon current performance, anticipated future
contribution based on that performance, the ability to impact
corporate and/or subsidiary business results and comparative
industry practices. The size and price of previous option
grants and the number of options currently held by an
executive are not taken into account in determining the number
and price of options granted. Mr. C.R. Borland recommends
stock option grants for the other executive officers, other
than for Mr. P.C. Borland, Jr., and the Committees review and
approve such awards. With respect to Mr. C.R. Borland and Mr.
P.C. Borland, Jr., the Committees determine the options to be
granted. Reference is made to the option tables contained
herein for information as to grants and exercises of options
and fiscal year-end option values.
The foregoing report has been furnished by:
The Executive Compensation and Stock Option Committees of the
Board of Directors
R. Glen Mayfield (Chair of the Executive Compensation
Committee)
John B. Lally (Chair of the Stock Option Committee)
Patrick J.B. Donnelly
PERFORMANCE GRAPH
The following graph sets forth a comparison of the
Company's cumulative total stockholder return from September
30, 1993 through September 30, 1998, with the cumulative total
return for the same period measured by the Standard & Poor's
500 Composite Index and the Standard & Poor's Iron & Steel 500
Index.
Comparison of Five Year Cumulative Total Return (1)
1993 1994 1995 1996 1997 1998
NS Group, Inc. 100 80.00 36.92 40.00 398.46 75.38
Standard &
Poor's 500 100 103.69 134.53 161.88 227.36 247.92
Standard &
Poor's Iron
& Steel 500 100 128.61 91.38 90.13 104.78 76.33
(1) Assumes $100 invested on September 30, 1993 in the
Company's Common Stock, the Standard & Poor's 500 Composite
Index and the Standard & Poor's Iron & Steel 500 Index.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee is composed of
Messrs. Mayfield, Lally and Donnelly, none of whom has served
as an officer or employee of the Company or any of its
subsidiaries. John B. Lally owns the controlling interest in
L B Industries, Inc. The Company sells substantially all of
its secondary and limited service tubular products to L B
Industries, Inc., at prices and on terms substantially
equivalent to those offered to other customers. Sales to L B
Industries, Inc. amounted to approximately $13.2 million in
fiscal 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") requires the Company's officers and directors
and persons who own more than 10% of a registered class of the
Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange. Such
persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based solely
on the Company's review of the copies of such reports
furnished to the Company or written representation that no
reports were required to be filed, the Company believes that
such persons complied with all Section 16(a) filing
requirements applicable to them with respect to transactions
during fiscal 1998.
PROPOSAL TO APPROVE THE AMENDMENT OF THE
NS GROUP, INC. 1995 STOCK OPTION
AND STOCK APPRECIATION RIGHTS PLAN
TO INCREASE THE NUMBER OF OPTIONS
AVAILABLE FOR ISSUANCE
General
It is the judgment of the Board of Directors that the
awarding of stock options pursuant to stock option plans
previously approved by shareholders has been beneficial in
attracting and retaining key employees. The Company has two
such stock options plans, the 1993 Incentive Stock Option Plan
(the "1993 Plan") and the 1995 Stock Option and Stock
Appreciation Rights Plan (the "1995 Plan"), which can grant
options under either form of incentive stock options or
non-qualified stock
options. The 1993 Plan and 1995 have fewer
than 4,000 and 280,000 options available for future grant,
respectively, which the Board of Directors believes is not
sufficient to meet the long-term needs for broad-based grants
to key employees. The Board of Directors has voted
unanimously to amend the 1995 Plan, subject to shareholder
approval, to increase the number of options issuable under the
1995 Plan from 750,000 to 1,750,000, bringing the total
options available for future grant to approximately 1,284,000.
A copy of the Amended and Restated 1995 Stock Option and
Stock Appreciation Rights Plan (the "Plan"), is attached as
Exhibit A to this Proxy Statement. The following summary of
the terms of the Plan is qualified in its entirety by Exhibit
A.
The purpose of the Plan is to provide an incentive to,
and to encourage ownership of, the Company's stock by the
grant of stock options and/or stock appreciation rights to
employees in a position of administrative or managerial
responsibility with the Company or its subsidiaries ("Key
Employee"). Options intended to qualify as "incentive stock
options" ("ISO") pursuant to Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and "non-qualified
stock options" ("NSO") can be issued under the Plan.
Approximately 288 and 12 persons are currently eligible to
receive ISO and NSO awards under the Plan, respectively.
The Plan is administered by the Stock Option Committee of
the Board of Directors (the "Committee") which, subject to the
express provisions of the Plan, has the complete authority to
(i) determine the individuals to whom and the time or times
when options and stock appreciation awards shall be granted;
(ii) determine the number of shares to be subject to each
option and stock appreciation award, and the terms and
provisions of each option and stock appreciation award; (iii)
interpret the Plan; (iv) prescribe, amend and rescind rules
and regulations relating to the Plan; (v) waive or modify or
amend at any time, either before or after an option or stock
appreciation award is granted, any condition, limitation or
restrictions with respect to the exercise of such option or
award imposed by or pursuant to the Plan in such circumstances
as the Committee may, in its discretion, deem appropriate
(including, without limitation, in the event of a proposed
Change of Control, as defined in the Plan, or other similar
transaction involving the Company); (vi) authorize the
payment in cash to a participant holding an option at any
time, but only with the consent of the participant, in
exchange for the cancellation of all or part of the option;
and (vii) make all other determinations which the Committee
considers necessary or advisable for the administration of the
Plan.
The exercise price of an ISO cannot be less than 100% of
the fair market value of the Common Stock on the date of grant
and the exercise price of an NSO cannot be less than 50% of
the market value (as defined by the Plan) on the date of
grant. Options granted under the Plan will become exercisable
with respect to one-third of the shares of Common Stock
covered by the options on each of the first three
anniversaries of the date of grant, unless the Committee
provides otherwise at the time the options are granted. The
Committee also may provide for other restrictions and
conditions on the exercise of any option. Options must be
exercised within 10 years of the date of the grant. All
options are non-transferrable, other than by will or by the
laws of descent and distribution, unless the Committee
provides otherwise at the time the options are granted.
Options may be exercised during the lifetime of the holder
only by the holder. The purchase price of stock purchased
upon the exercise of an option must be paid in full at the
time of exercise in cash or, if the Committee permits, in
shares of the Company, or a combination of the two.
In addition to the foregoing provisions, no ISO may be
granted to an officer or other employee who possesses directly
or indirectly at the time of the grant more than ten percent
of the voting power of all classes of capital shares of the
Company, unless (i) the option price is at least 110% of the
fair market value of the shares subject to the ISO on the date
the ISO is granted, and (ii) the ISO is not exercisable after
the expiration of five years from the date of grant. The
aggregate exercise value of an ISO grant in one year to one
individual cannot exceed $100,000 and ISO options must be
granted under the Plan prior to March 1, 2005.
A stock appreciation award under the Plan may be granted
either by itself or in tandem with a stock option, and
entitles the grantee to elect to receive an amount (in cash or
Common Stock, or a combination thereof, as determined by the
Committee) equal to the amount by which the fair market value
of the Common Stock on the date of such election exceeds the
stated value per share of the stock appreciation award. An
exercise of an option under the Plan cancels any stock
appreciation award granted in tandem with such option, and any
election to receive payment of a stock appreciation award
cancels any option granted in tandem with such stock
appreciation award.
A stock appreciation award is non-transferable, except
that the award agreement may provide that if a participant, at
the date of death, was entitled to elect payment on the date
of death, that his estate shall have the right to make such
election, but in no event more than ten years from date of
grant.
The closing price per share of the Company's Common Stock
on December 11, 1998 was $4.625.
Amendment or Termination
The Plan will expire on March 1, 2005, unless terminated
sooner by the Board of Directors of the Company. Any stock
appreciation awards or options outstanding at the termination
of the Plan will continue in full force and effect and will
not be affected by such termination of the Plan. The Board
may, at any time prior to that date, terminate the Plan or
make such modifications of the Plan as it may deem advisable;
provided, however, that any such amendment must be approved by
the holders of the outstanding Common Stock by such vote, if
any, as then may be required by, and otherwise in compliance
with, applicable federal and state law (including Rule 16b-3
or any successor provision adopted under the Securities
Exchange Act of 1934 and the like) and the requirements of any
stock exchange or other trading system upon which the Common
Stock then may be listed.
Adjustment Upon Changes in Capitalization
Notwithstanding any other provisions in the Plan, if
there is any change in the Common Stock of the Company by
reason of stock dividends, split-ups, recapitalizations,
spin-offs,
mergers, consolidations, reorganizations, combinations
or exchanges of shares, or the like, the number of stock
appreciation units and the number and class of shares subject
to any outstanding options and stock appreciation units, and
the price thereof, shall be appropriately adjusted by the
Committee.
Federal Income Tax Consequences
The grant of a stock option under the Plan will not
result in taxable income at the time of grant for the optionee
or the Company. The optionee will not have taxable income
upon exercising an ISO (except that the alternative minimum
tax may apply), and the Company will receive no deduction when
an ISO is exercised. Upon exercising an NSO, the optionee
will recognize ordinary income in the amount by which the fair
market value exceeds the option price; the Company will be
entitled to a deduction for the same amount. The tax
treatment to an optionee of a disposition of shares acquired
through the exercise of an option is dependent upon the length
of time the shares have been held and on whether such shares
were acquired by exercising an ISO, NSO or stock appreciation
award. Generally, there will be no tax consequence to the
Company in connection with the disposition of shares acquired
under an option except that the Company may be entitled to a
deduction in the case of a disposition of shares acquired upon
exercise of an ISO before the applicable holding periods have
been satisfied.
Although the recipient of a stock appreciation award does
not recognize income at the time the right is granted, in the
year payment of cash or shares under the award is made, he or
she recognizes income in an amount equal to the cash and the
fair market value of the shares received. The Company will be
entitled to deduct as compensation expense an amount equal to
the income recognized by the recipient in the Company's tax
year in which payment is made to the recipient.
The Board of Directors recommends a vote FOR approval of
the amendment to the Plan.
PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP has examined the
financial statements of the Company since 1981 and the Board
of Directors, upon the recommendation of its Audit Committee,
wishes to continue the services of this firm for the current
fiscal year ending September 25, 1999. A resolution will be
presented at the Annual Meeting to ratify the appointment by
the Board of Directors of the firm of Arthur Andersen LLP, as
independent auditors, to examine the financial statements of
the Company for the current fiscal year ending September 25,
1999, and to perform other appropriate accounting services.
The Company has been advised that a representative of Arthur
Andersen LLP will be present at the Annual Meeting with an
opportunity to make a statement if he desires and will be
available to respond to questions of the shareholders.
The Board of Directors recommends a vote FOR ratification
of the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ended
September 25, 1999.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the
2000 Annual Meeting must be received by the Company by August
23, 1999, for inclusion in the Company's Proxy Statement and
proxy relating to that meeting. Upon receipt of any such
proposal the Company will determine whether or not to include
such proposal in the Proxy Statement and proxy in accordance
with regulations governing the solicitation of proxies.
In order for a shareholder to nominate a candidate for
director, under the Company's Bylaws timely notice of the
nomination must be given to the Company in advance of the
meeting. Ordinarily, such notice must be given not less than
60 nor more than 90 days before the meeting (but if the
Company gives less than 70 days notice or prior public
disclosure of the meeting, then the shareholder must give such
notice within 10 days after notice of the meeting is mailed or
other public disclosure of the meeting is made). The
shareholder filing the notice of nomination must describe
various matters regarding the nominee, including matters such
as name, address, occupation and shares held.
In order for a shareholder to bring other business before
a shareholder meeting, timely notice must be given to the
Company within the time limits described above. Such notice
must include a description of the proposed business, the
reasons therefor, and other specified matters. These
requirements are separate from and in addition to the
requirements a shareholder must meet to have a proposal
included in the Company's Proxy Statement. These time limits
also apply in determining whether notice is timely for
purposes of rules adopted by the Securities and Exchange
Commission relating to the exercise of discretionary voting
authority.
In each case the notice must be given to the Secretary of
the Company, whose address is Ninth and Lowell Streets,
Newport, Kentucky 41072. Any shareholder desiring a copy of
the Company's Bylaws will be furnished one without charge upon
written request to the Secretary.
VOTING AND OTHER MATTERS
Unless other designation is made, the shares represented
by the proxy herein solicited will be voted for the election
of the named nominees as directors of the Company, for the
approval of the amendment to the NS Group, Inc. 1995 Stock
Option and Stock Appreciation Rights Plan and for the
ratification of the Board of Directors' appointment of Arthur
Andersen LLP as the Company's independent public accountants
for its fiscal year ending September 25, 1999, as set forth in
the accompanying Notice of Annual Meeting.
If any of the named nominees for directors should become
unavailable for any reason, it is intended that the persons
named as proxies in the accompanying form will vote for the
election of such other person as the Board of Directors may
recommend in place of such nominee. If cumulative voting
rights are exercised by any shareholder, the proxies may be
voted cumulatively for fewer than all of the Company's
nominees in the discretion of the persons voting such proxies.
The Company knows of no other business other than the
matters set forth herein that will be presented to the Annual
Meeting. If matters other than those described herein should
properly come before the Annual Meeting, the proxies solicited
hereby will be voted on such matters in accordance with the
judgment of the persons voting such proxies.
A quorum will exist at the Annual Meeting if a majority
of the votes entitled to be cast at the meeting are
represented, in person or by proxy, at the Annual Meeting. In
voting on matters other than the election of Directors, each
shareholder has one vote for each share of stock held. With
respect to the election of Directors, shareholders have
cumulative voting rights, which means that each shareholder
has the number of votes equal to the number of shares held,
multiplied by the number of Directors to be elected, and each
shareholder may cast the whole number of such votes, either in
person or by proxy, for one nominee, or distribute them among
two or more nominees.
The six persons who have been duly nominated to be
directors of the Company who receive the most votes shall be
elected directors of the Company. Shares represented by
proxies which are marked "withhold authority" with respect to
the election of any one or more nominees for election as
directors, and shares not voted on the election of directors
but voted on one or more other matters on proxies returned by
brokers, will therefore not directly affect the number of
shares needed to elect directors.
The approval of the amendment to the NS Group, Inc. 1995
Stock Option and Stock Appreciation Rights Plan requires the
affirmative vote of a majority of the shares represented at
the meeting and entitled to so vote. Shares represented by
proxies which are marked "abstain" on such matter will be
counted for the purpose of determining the number of shares
represented by proxy at the Meeting for such matter, and shall
therefore have the same effect as if the shares represented
thereby were voted against such approval. Shares not voted on
the matter of approval of the amendment to the 1995 Stock
Option and Stock Appreciation Rights Plan but voted on one or
more other matters on proxies returned by brokers will be
treated as not represented at the Meeting as to the approval
of the amendment to the 1995 Stock Option and Stock
Appreciation Rights Plan for purposes of determining the
number of votes needed for approval.
The ratification of the Board of Directors' appointment
of Arthur Andersen LLP as the Company's independent public
accountants for its fiscal year ending September 25, 1999
requires the affirmative vote of a majority of the shares
represented at the meeting and entitled to so vote. Shares
represented by proxies which are marked "abstain" on such
matter will be counted for the purpose of determining the
number of shares represented by proxy at the Meeting for such
matter, and shall therefore have the same effect as if the
shares represented thereby were voted against such
ratification. Shares not voted on the ratification of Arthur
Andersen LLP but voted on one or more other matters on proxies
returned by brokers will be treated as not represented at the
Meeting as to the ratification of the appointment of the
Company's accountants for purposes of determining the number
of votes needed for approval.
The approval of any other action properly brought before
the Annual Meeting would require the affirmative vote of a
majority of the shares represented at the meeting and entitled
to so vote. Shares represented by proxies which deny
discretionary authority on other matters would be counted for
the purpose of determining the number of shares represented by
proxy at the Meeting for such other matters for purposes of
determining the number of votes needed for approval, and would
therefore have the same effect as if the shares represented
thereby were voted against any such matter.
JACK W. MEHALKO
Secretary
Newport, Kentucky
December 21, 1998
EXHIBIT A
NS GROUP, INC.
AMENDED AND RESTATED
1995 STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
SECTION I. PURPOSE
The purpose of this Plan is to provide an incentive to,
and to encourage ownership of, the Company's stock by the
grant of stock options and stock appreciation rights to
certain "Key Employees" of the Company or its subsidiaries.
SECTION II. DEFINITIONS
A. "Affiliate" of any specified Person means (i) any
other Person which, directly or indirectly, is in control of,
is controlled by or is under common control with such
specified Person or (ii) any other Person who is a director or
officer (A) of such specified Person, (B) of any subsidiary of
such specified Person or (C) of any Person described in clause
(i) above or (iii) any Person in which such Person has,
directly or indirectly, a 5 percent or greater voting or
economic interest or the power to control. For the purposes
of this definition, "control" of a Person means the power,
direct or indirect, to direct or cause the direction of the
management or policies of such Person whether through the
ownership of voting securities, or by contract or otherwise;
and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
B. "Board of Directors" and "Board" means the Board of
Directors of the Company.
C. "Change of Control" shall mean:
(i) the direct or indirect sale, lease, exchange or
other transfer of all or substantially all of the assets
of the Company to any Person or entity or group of
Persons or entities acting in concert as a partnership or
other group (a "Group of Persons") other than a Person
described in clause (i) of the definition of Affiliate;
(ii) the consummation of any consolidation or merger of
the Company with or into another corporation with the
effect that the stockholders of the Company immediately
prior to the date of the consolidation or merger hold
less than 51% of the combined voting power of the
outstanding voting securities of the surviving entity of
such merger or the corporation resulting from such
consolidation ordinarily having the right to vote in the
election of directors (apart from rights accruing under
special circumstances) immediately after such merger or
consolidation;
(iii) the stockholders of the Company shall approve
any plan or proposal for the liquidation or dissolution
of the Company;
(iv) a Person or Group of Persons acting in concert as a
partnership, limited partnership, syndicate or other
group shall, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or
otherwise, have become the direct or indirect beneficial
owner (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")) ("Beneficial Owner") of securities of
the Company representing 30% or more of the combined
voting power of the then outstanding securities of the
Company ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the
election of directors;
(v) a Person or Group of Persons, together with any
Affiliates thereof, shall succeed in having a sufficient
number of its nominees elected to the Board of Directors
of the Company such that such nominees, when added to any
existing director remaining on the Board of Directors of
the Company after such election who is an Affiliate of
such Person or Group of Persons, will constitute a
majority of the Board of Directors of the Company;
provided that the Person or Group of Persons referred to in
clauses (i), (iv) and (v) shall not mean Clifford Borland or
any Group of Persons with respect to which Clifford Borland is
the Beneficial Owner of the majority of the voting equity
interests.
D. "Code" means the Internal Revenue Code of 1986, as
amended.
E. "Committee" means the committee established by the
Board of Directors of the Company pursuant to Section VIII.
F. "Company Stock" means shares of the common stock, no
par value, of the Company.
G. "Company" means NS Group, Inc., a Kentucky
corporation, or any successor thereto.
H. "Fair Market Value" as of a given date, means the
closing price on the New York Stock Exchange, or any successor
exchange or index, on such date or on the most recent business
day prior to such date if the date is not a business day.
I. "Incentive Stock Option" means a stock option granted
under the Plan or any other plan of the Company which
qualifies as an incentive stock option under Section 422 of
the Code and is not designated by the Committee at the time of
grant as a Nonqualified Option.
J. "Key Employee" means a person who is employed in a
position of administrative or managerial responsibility by the
Company or a Subsidiary.
K. "Market Value" as of a given date, means the average
of the daily closing prices on the New York Stock Exchange, or
any successor exchange or index, for the fiscal month
preceding such date.
L. "Nonqualified Option" means a stock option granted
under the Plan which, by its terms, does not qualify as an
Incentive Stock Option and/or is designated by the Committee
at the time of grant as a Nonqualified Option.
M. "Participant" means a Key Employee who is granted an
option and/or a stock appreciation award hereunder.
N. "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency
or political subdivision thereof or any other entity within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act.
O. "Plan" means this NS Group, Inc. Amended and Restated
1995 Stock Option and Stock Appreciation Rights Plan.
P. "Stock Appreciation Unit" means, to the extent
provided in the Plan and only to that extent, a unit of a
stock appreciation award under the Plan, the value of which is
determined with reference to one share of Common Stock.
Q. "Subsidiary" means any corporation, other than the
Company, in an unbroken chain of corporations beginning with
the Company if, at the time of grant of an option or stock
appreciation award hereunder, each of the corporations, other
than the last corporation in the unbroken chain, owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain.
R. "Tax Date" means the date as of which the amount of
withholding tax payment with respect to the exercise of an
option is calculated.
SECTION III. STOCK
The stock which may be issued and sold under the Plan or
pursuant to which stock appreciation awards may be satisfied
shall not exceed, in the aggregate, 1,750,000 shares of Common
Stock. If an option and/or stock appreciation award expires
or is terminated or surrendered without having been fully
exercised, the unpurchased shares of Common Stock subject
thereto shall again be available for the purpose of the Plan.
SECTION IV. ELIGIBILITY
A stock option or a stock appreciation award may be
granted under the Plan only to Key Employees.
SECTION V. STOCK OPTIONS
A. Agreement. The terms of each stock option granted
under the Plan shall be set forth in a written option
agreement in a form approved by the Committee.
B. Option Price. Subject to Subparagraph I, the
purchase price for shares of Common Stock under any option
granted under this Plan shall not be less than 50% of the
Market Value for such shares on the date on which such option
was granted.
C. Term and Exercise of Options. Subject to Subparagraph
I, the term of each option shall be not more than ten years
from the date the option is granted. Within such limit,
options shall become exercisable with respect to one-third of
the shares of Common Stock covered by the options on each of
the first three anniversaries of the date of grant unless, at
the time the option is granted, the Committee otherwise
provides. The Committee also, at the time an option is
granted, may provide for other restrictions and conditions on
the exercise of the option, which need not be uniform for all
Participants. Notwithstanding the foregoing, except as
otherwise provided in Subsections D and E, no option may be
exercised unless the Participant is then in the employ of the
Company or a Subsidiary and shall have been continuously so
employed since the date the option was granted.
D. Non-Transferability of Options. Unless otherwise
determined by the Committee at the time an option is granted
and so provided in the option agreement with respect to such
option, each option granted under the Plan shall by its terms
be non-transferrable otherwise than by will or by the laws of
descent and distribution, and an option may be exercised,
during the lifetime of the Participant, only by him.
E. Termination of Employment. An option agreement may
provide that if the employment of the Participant is
terminated other than by reason of death, the Participant may
exercise the option, to the extent that he was entitled to
exercise it at the date of such termination of employment, for
such additional period, if any, after such termination of
employment (but not to exceed the remaining term of the
option) as the Committee may determine at the time the option
is granted. No change in the duties of a Participant, while
in the employ of the Company or a Subsidiary, or transfer, if
still employed after the transfer by the Company or a
Subsidiary, shall constitute termination of employment.
Nothing in the Plan or in any option agreement shall be deemed
to create any limitation or restriction on such rights as the
Company or a Subsidiary otherwise would have to terminate the
employment of any person at any time for any reason.
F. Death of Participant. An option agreement may
provide that in the event a Participant dies while entitled to
exercise the option, the option may be exercised, to the
extent that the Participant was entitled to exercise it at the
date of death, by the Participant's estate, or by any person
who acquired the right to exercise such option by bequest or
inheritance or by reason of the death of the Participant, at
any time during such additional period, if any, after death
(but not to exceed the remaining term of the option) as the
Committee may determine at the time the option is granted.
G. Leaves of Absence. An option agreement issued
pursuant to the Plan may contain such provisions as the
Committee shall determine with respect to approved leaves of
absence.
H. Payment of Option Price. The purchase price is to be
paid in full upon the exercise of an option, either (i) in
cash, or (ii) in the discretion of the Committee, by the
tender to the Company of shares of Common Stock owned by the
Participant and registered in his name having a Fair Market
Value equal to the cash exercise price of the option being
exercised, or (iii) in the discretion of the Committee, by any
combination of the payment methods specified in clauses (i)
and (ii) hereof. The proceeds of the sale of Common Stock
upon the exercise of an option are to be added to the general
funds of the Company and used for the corporate purposes of
the Company as the Board of Directors shall determine.
I. Incentive Stock Options. The following additional
terms and provisions shall apply to all Incentive Stock
Options granted under the Plan:
(1) No Incentive Stock Option shall be granted
with a purchase price per share of Common Stock
which is less than the Fair Market Value of a share
of Common Stock on the date of grant.
(2) No Incentive Stock Option shall be granted
to an officer or other employee who possesses,
directly or indirectly (as provided in Section
425(d) of the Code), at the time of grant more than
10% of the voting power of all classes of capital
shares of the Company, any Subsidiary or any parent
of the Company unless (i) the purchase price per
share of Common Stock is at least 110% of the Fair
Market Value of a share of Common Stock on the date
the Incentive Stock Option is granted, and (ii) the
Incentive Stock Option is not exercisable after the
expiration of five years from the date of grant.
(3) The aggregate Fair Market Value
(determined as of the time an Incentive Stock Option
is granted) of the Common Stock with respect to
which Incentive Stock Options granted under the Plan
and all other plans of the Company, any Subsidiary
and any parent corporation are exercisable for the
first time by any individual in any calendar year
shall not exceed $100,000, or such other maximum
amount permitted by the Code.
(4) No Incentive Stock Option may be granted
more than 10 years after the date on which the Plan
is adopted by the Board.
J. Tax Withholding. With the approval of the
Committee, a Participant may elect to have the Company
retain from the Common Stock to be issued upon the
exercise of an option a number of shares of Common Stock,
or may deliver to the Company a number of other shares of
Common Stock, having a Market Value on the Tax Date equal
to all or any part of the federal, state and local
withholding tax payments (whether mandatory or
permissive) to be made on behalf of the Participant with
respect to the exercise of the option (up to a maximum
amount determined by the Participant's top marginal tax
rate) in lieu of making such payments in cash. The
Committee may establish from time to time rules or
limitations with respect to the exercise of the rights
described in this paragraph; provided, however, that, in
any event, any such election made by a person subject to
Section 16 of the Securities Exchange Act of 1934 must be
made in accordance with any applicable rules established
thereunder.
SECTION VI. STOCK APPRECIATION AWARDS
A. Description. A stock appreciation award shall
be that number of Stock Appreciation Units as the
Committee shall from time to time grant. The terms of
each stock appreciation award granted under the Plan
shall be set forth in a written stock appreciation award
agreement in a form approved by the Committee. Upon
electing to receive payment of a stock appreciation
award, a Participant shall receive, for each Stock
Appreciation Unit as to which payment is elected, an
amount in cash, in Common Stock or in any combination
thereof, as the Committee shall determine, equal to the
amount, if any, by which the Fair Market Value of one
share of Common Stock on the date on which such election
is made exceeds the stated value per share (as set forth
in the stock appreciation award agreement) on the date on
which the stock appreciation award was granted.
B. Grant of Award in Tandem with Option. The
Committee may, in its sole discretion, grant a Key
Employee a stock appreciation award in tandem with a
stock option, whereby the exercise of an option granted
in tandem with a stock appreciation award shall cause a
correlative reduction in Stock Appreciation Units
theretofore standing to a Participant's credit, and the
payment of a stock appreciation award shall cause a
correlative cancellation of such option.
C. Term and Exercise of Award.
(1) When a stock appreciation award is
granted, it shall be payable not more than ten years from
the date of granting thereof, or such shorter time as
provided herein. Within such limit, awards shall be
payable, at the Participant's election at such time or
times, and subject to such restrictions, as the Committee
shall, in each instance, approve, which need not be
uniform for all Participants; provided that, except as
provided in Subsections G and H, no election to receive
payment of a stock appreciation award may be made unless
the Participant is then in the employ of the Company or a
Subsidiary and shall have been continuously so employed
since the date of the grant of his stock appreciation
award.
(2) Any election by a Participant who is
subject to Section 16 of the Securities Exchange Act of
1934 to receive cash in full or partial settlement of a
stock appreciation award, as well as any exercise by him
of his stock appreciation award for such cash, shall be
made only during the period beginning on the third
business day following the date of release for
publication by the Company of its quarterly and annual
summary statements of sales and earnings and ending on
the twelfth business day following such date. No stock
appreciation award nor any related stock option may be
exercised by any Participant subject to Section 16 of the
Securities Exchange Act of 1934 during the first six
months of their respective terms. The foregoing
restrictions shall not apply in the event of a Change of
Control.
D. Establishment of Accounts. The Company shall
establish a special ledger and shall record the name of
each Participant and the number of Stock Appreciation
Units awarded to such Participant in any year.
E. Payment of Award. A stock appreciation award
shall be paid, to the extent payment is elected by the
Participant (and is otherwise due and payable), as soon
as practicable after the date on which such election is
made.
F. Non-Transferability of Award. Unless otherwise
determined by the Committee at the time a stock
appreciation award is made and so provided in the stock
appreciation award agreement with respect to such award
and except as provided in Subsection H, no stock
appreciation award or the rights thereunder shall be
transferrable.
G. Termination of Employment. A stock appreciation
award agreement may provide that if the employment of the
Participant is terminated other than by reason of death,
the Participant may elect payment of the stock
appreciation award, to the extent he was entitled to
elect payment at the date of such termination of
employment (but based upon the Fair Market Value per
share on the date of the election), for such additional
period, if any, after such termination of employment (but
not to exceed the remaining term of the award) as the
Committee may determine at the time the stock
appreciation award is granted. No change in the duties
of a Participant while in the employ of the Company or a
Subsidiary, or transfer, if still employed after the
transfer by the Company or a Subsidiary, shall constitute
termination of employment. Nothing in this Plan or in
any stock appreciation award agreement shall be deemed to
create any limitation or restriction on such rights as
the Company or a Subsidiary otherwise would have to
terminate the employment of any person at any time for
any reason.
H. Death of Participant. A stock appreciation
award agreement may provide that in the event a
Participant dies entitled to exercise the stock
appreciation award, the payment of the stock appreciation
award may be elected, to the extent that the Participant
was entitled to exercise it at the date of death (but
based upon the Fair Market Value per share on the date of
election), by his estate, or by any person who acquired
the right to make such election by bequest or inheritance
or by reason of the death of the Participant, at any time
during such additional period, if any, after death (but
not to exceed the remaining term of the award) as the
Committee may determine at the time the stock
appreciation award is granted.
I. Leave of Absence. The stock appreciation award
agreements issued pursuant to the Plan may contain such
provisions as the Committee shall determine with respect
to approved leaves of absence.
SECTION VII. ADMINISTRATION
The Plan shall be administered by the Committee.
Subject to the express provisions of the Plan, the
Committee shall have complete authority to:
A. determine the individuals to whom and the time
or times when options and stock appreciation awards shall
be granted;
B. determine the number of shares to be subject to
each option and stock appreciation award, and the terms
and provisions of each option and stock appreciation
award;
C. interpret the Plan;
D. prescribe, amend and rescind rules and
regulations relating to the Plan;
E. waive or modify at any time, either before or
after an option or stock appreciation award is granted,
any condition, limitation or restrictions with respect to
the exercise of such option or award imposed by or
pursuant to the Plan in such circumstances as the
Committee may, in its discretion, deem appropriate
(including, without limitation, in the event of a
proposed Change of Control or other similar transaction
involving the Company); provided, however, that any such
waiver or modification with respect to an outstanding
option or stock appreciation award shall be subject to
the same limitations applicable to amendments to
outstanding options and stock appreciation awards as are
set forth in Subparagraph G;
F. authorize the payment to a Participant holding
an option at any time, but only with the consent of the
Participant, in exchange for the cancellation of all or
part of the option, of cash in an amount not to exceed
the difference between the aggregate Fair Market Value on
the effective date of such cancellation of the Common
Stock with respect to which the option is being canceled
and the aggregate purchase price of such Common Stock;
G. subject to the terms and provisions of the Plan,
amend any outstanding option or stock appreciation award;
provided, however, that (i) no such amendment may reduce
the purchase price payable under an option (except to set
forth an adjustment in the option price made pursuant to
Section IV) or extend the maximum term during which the
option or stock appreciation right, if fully vested, may
be exercised, and (ii) if the amendment would adversely
affect the rights of the Participant holding the option
or award, the consent of such Participant to such
amendment must be obtained; and
H. make all determinations not specifically set
forth in Subparagraphs (A) through (G) above which the
Committee considers necessary or advisable for the
administration of the Plan.
All determinations by the Committee with respect to
the matters described in Subparagraphs (A) through (H)
above shall be final.
SECTION VIII. COMMITTEE
The Committee shall consist of three or more members
of the Board of Directors, all of whom are
"disinterested" to the extent required by Rule 16b-3 (or
any successor provision) adopted by the Securities and
Exchange Commission pursuant to Section 16 of the
Securities Exchange Act of 1934. The members of the
Committee shall be appointed by, and shall serve at the
pleasure of, the Board of Directors, which may from time
to time appoint members in substitution for members
previously appointed and fill vacancies, however caused,
in the Committee. The Committee may select one of its
members as its Chairman and shall hold its meetings at
such times and places as it may determine. A majority of
its members shall constitute a quorum. All
determinations of the Committee shall be made by a
majority of its members. Any decision or determination
reduced to writing and signed by a majority of the
members shall be fully as effective as if it had been
made by a majority vote at a meeting duly called and
held.
SECTION IX. EFFECT OF CHANGE IN STOCK
Notwithstanding any other provision in the Plan, if
there is any change in the Common Stock of the Company by
reason of stock dividends, split-ups, recapitalizations,
spin-offs, mergers, consolidations, reorganizations,
combinations or exchanges of shares, or the like, the
number of stock appreciation units and the number and
class of shares subject to any outstanding options and
stock appreciation units, and the price thereof, shall be
appropriately adjusted by the Committee.
SECTION X. AMENDMENT OR TERMINATION
Unless the Plan shall theretofore have been
terminated as hereinafter provided, the Plan shall
terminate, and no stock appreciation award or stock
option shall be granted hereunder, after ten years from
the date of its adoption by the Board. Any stock
appreciation awards or options outstanding at the
termination of the Plan shall continue in full force and
effect and shall not be affected by such termination of
the Plan. The Board may, at any time prior to that date,
terminate the Plan or make such modifications of the Plan
as it may deem advisable; provided, however, that any
such amendment must be approved by the holders of the
outstanding Common Stock by such vote, if any, as then
may be required by, and otherwise in compliance with,
applicable federal and state law (including Rule 16b-3 or
any successor provision adopted under the Securities
Exchange Act of 1934 and the like) and the requirements
of any stock exchange or other trading system upon which
the Common Stock then may be listed.
SECTION XI. APPROVAL OF STOCKHOLDERS AND DIRECTORS
The Plan shall become effective after adoption by
the Board and approval by the affirmative vote of the
holders of a majority of the outstanding shares of Common
Stock; provided, however, that after such adoption by the
Board, the Committee may grant options and stock
appreciation awards under the Plan so long as such
options and awards, by their terms, may not be exercised
unless the Plan is so approved by the stockholders of the
Company within one year after adoption by the Board.
Adopted by the Board of Directors on May 28, 1995 and as
amended September 25, 1998.
REVOCABLE PROXY
NS GROUP, INC.
X Please mark votes as in this example
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 11, 1999
The undersigned hereby appoints C.R. Borland, J. W.
Mehalko and J. J. Crowe or any of them as Proxies
(acting by a majority or, if one be present, then that
one shall have all of the powers hereunder), each with
full power to appoint his substitute, and hereby
authorizes them, or any of them, to represent and to
vote as designated below, all the shares of Common
Stock of NS Group, Inc. held of record by the
undersigned on December 11, 1998, at the Annual Meeting
of Shareholders to be held on February 11, 1999, or at
any adjournment, or adjournments thereof.
Item 1. Election of the following six (6) Nominees as
Directors:
FOR WITHHOLD FOR ALL EXCEPT
Clifford R. Borland; Paul C. Borland, Jr.; Ronald R.
Noel; John B. Lally; Patrick J.B. Donnelly; R. Glen
Mayfield.
INSTRUCTION: To withhold authority to vote for any
individual nominee, mark "For All Except" and write
that nominee's name in the space provided below.
Item 2. Approve the adoption of the amendment to the
NS Group, Inc. 1995 Stock Option and Stock Appreciation
Rights Plan to increase the number of options available
for issuance under such plan from 750,000 to 1,750,000.
FOR AGAINST ABSTAIN
Item 3. Ratify the appointment of Arthur Andersen LLP
as independent public accountants for fiscal 1999.
FOR AGAINST ABSTAIN
Item 4. In their discretion, the proxy holders are
authorized to vote upon such other business as may
properly come before the meeting; all as described in
the Notice of Annual Meeting of Shareholders and
accompanying Proxy Statement for such meeting, the
receipt of which is hereby acknowledged.
The Board of Directors Recommend a Vote "FOR" all
nominees in Item 1 and "FOR" Items 2 and 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
Please check box if you plan to attend the meeting.
Please be sure to sign and date this Proxy in the box
below
Date:
Stockholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid
envelope provided.
NS GROUP, INC.
This Proxy when properly executed will be voted in the
manner directed herein by the above signed shareholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
THE ELECTION OF ALL NOMINEES LISTED IN ITEM 1 AND "FOR"
ITEMS 2 and 3.
Please sign exactly as name (or names) appears on this
card. When shares are held by joint tenants, both must
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full
corporate name by President or other authorized
officer. If a partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
