<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
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
FLORSHEIM GROUP INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
FLORSHEIM GROUP 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)(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:
- - --------------------------------------------------------------------------------
<PAGE> 2
FLORSHEIM GROUP INC.
FLORSHEIM LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1998 annual meeting of the stockholders of Florsheim Group Inc. (the
"Company") will be held at 10:00 a.m., local time, on Wednesday, May 20, 1998,
at the Swissotel, 323 East Wacker Drive, Chicago, Illinois, for the following
purposes:
I. To elect ten directors;
II. To ratify the selection of independent auditors; and
III. To transact such other business as may properly come before the meeting or
at any adjournment thereof.
The board of directors has fixed March 23, 1998 as the record date for the 1998
annual meeting. Accordingly, only stockholders of record at the close of
business on such date will be entitled to notice of the meeting and to vote at
the meeting and any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
Thomas E. Poggensee
Treasurer, Secretary, Controller
and Chief Accounting Officer
April 13, 1998.
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY FORM, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
FLORSHEIM GROUP INC.
200 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601-1014
------------------------
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
------------------------
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors (the "Board") of Florsheim Group
Inc. ("Florsheim" or the "Company"), 200 North LaSalle Street, Chicago, Illinois
60601-1014, for use during the 1998 annual meeting of stockholders and at any
adjournments thereof (the "Meeting"), for the purposes set forth in the
accompanying notice of annual meeting of stockholders.
The cost of solicitation of proxies will be borne by Florsheim. In addition
to the use of the mails, proxies may be solicited personally or by telephone or
telegram by officers, directors or employees of Florsheim or its subsidiaries
who will not be specially compensated for such services. In addition, Florsheim
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, the form of proxy and
Florsheim's 1997 annual report to stockholders, which includes financial
statements for the fiscal year ended January 3, 1998, are expected to be mailed
to stockholders on or about April 13, 1998. A list of the stockholders of the
Company entitled to vote at the Meeting will be available for inspection at the
Company's offices during normal business hours by any stockholder for the ten
days prior to the Meeting.
VOTING AT THE MEETING
Holders of shares of common stock of Florsheim, without par value ("Common
Stock"), of record at the close of business on March 23, 1998 (the "Record
Date") are entitled to vote at the Meeting. On the Record Date there were
8,412,901 shares of Common Stock outstanding. Each stockholder entitled to vote
shall have the right to one vote for each share of Common Stock outstanding in
such stockholder's name.
The Company presently has no other class of stock outstanding and entitled
to be voted at the Meeting. The presence in person or by proxy of stockholders
entitled to cast a majority of all votes entitled to be cast at the Meeting
constitutes a quorum. The election of directors requires a plurality of the
votes cast. A majority of the votes cast, a quorum being present, generally is
required to take action with respect to any other matter that may properly be
brought before the Meeting.
Shares cannot be voted at the Meeting unless the holder of record is
present in person or by proxy. The enclosed proxy form is a means by which a
stockholder may authorize the voting of his or her shares at the Meeting. The
shares of Common Stock represented by each properly executed proxy form will be
voted at the Meeting in accordance with each stockholder's directions.
Stockholders are urged to specify their choices by marking the appropriate boxes
on the enclosed proxy form; if no choice has been specified, the shares will be
voted as recommended by the Board. If any other matters are properly presented
to the Meeting for action, the proxy holders will vote the proxies (which confer
discretionary authority to vote on such matters) in accordance with their
judgment.
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 typically
will have no impact upon other proposals as may be properly presented at the
Meeting since such matters generally require approval by a majority of the votes
cast.
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.
1
<PAGE> 4
Execution of the accompanying proxy will not affect a stockholder's right
to attend the Meeting and vote in person. Any stockholder giving a proxy has the
right to revoke it by giving written or oral notice of revocation to the
Secretary of the Company, or by delivering a subsequently executed proxy form,
at any time before the proxy is voted.
Your proxy vote is important. Accordingly, you are asked to complete, sign
and return the accompanying proxy form whether or not you plan to attend the
Meeting. If you plan to attend the Meeting to vote in person and your shares are
registered with the Company's transfer agent in the name of a broker or bank,
you must secure a proxy form from the broker or bank assigning voting rights to
you for your shares.
2
<PAGE> 5
FLORSHEIM SECURITY OWNERSHIP
The following table sets forth certain information as of March 23, 1998
regarding the beneficial ownership of shares of Common Stock by (i) each person
known by Florsheim to beneficially own more than five percent of the outstanding
shares of Common Stock, (ii) each director of Florsheim, (iii) each "Named
Officer" identified in the Summary Compensation Table on page 7 below and (iv)
all directors and executive officers of Florsheim, as a group. Unless noted
otherwise, each person has sole voting and investment power over the shares
listed as beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NAME NUMBER OF SHARES PERCENTAGE OF CLASS(1)
---- ---------------- ----------------------
<S> <C> <C>
5% STOCKHOLDERS:
Apollo Investment Fund, L.P.
c/o CICB Bank and Trust Company
(Cayman) Limited
Edward Street
Georgetown, Grand Cayman,
Cayman Islands, British West Indies
and
Lion Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577.............................. 5,615,160(2) 66.7%
DIRECTORS AND EXECUTIVE OFFICERS:
Adam M. Aron............................................ -- *
Bernard Attal........................................... -- *
Charles J. Campbell..................................... 179,700(3) 2.1%
Robert H. Falk.......................................... 5,615,160(4) 66.7%
Michael S. Gross........................................ 5,615,160(4) 66.7%
John J. Hannan.......................................... 5,615,160(4) 66.7%
Joshua J. Harris........................................ 5,615,160(4) 66.7%
John H. Kissick......................................... 5,615,160(4) 66.7%
Ronald J. Mueller....................................... 5 *
Michael D. Weiner....................................... 5,615,160(4) 66.7%
Thomas W. Joseph........................................ 4,500(5) *
L. David Sanguinetti.................................... 4,500(5) *
Karen Nyman Latham(6)................................... -- *
Gregory J. Van Gasse.................................... 17,000(7) *
Directors and executive officers as a group (14
persons).............................................. 5,820,865(8) 69.2%
</TABLE>
- - ---------------
* Less than one percent
(1) Percentage calculated with reference to an aggregate of 8,412,901 shares of
Common Stock outstanding at March 23, 1998.
(2) Includes (i) 2,808,142 shares owned by Apollo Investment Fund, L.P.
("Apollo") and (ii) 2,807,018 shares held 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. Lion
Advisors is affiliated with Apollo Advisors, L.P. ("Apollo Advisors"), the
managing general partner of Apollo.
(3) Includes 79,700 shares for which Mr. Campbell shares voting and investment
power, and shares subject to options that are exercisable (or will become
exercisable by May 22, 1998) to acquire 100,000 additional shares.
(4) Messrs. Falk, Gross, Hannan, Harris, Kissick and Weiner (collectively
"Apollo Directors") are associated with Apollo and Lion Advisors. Each
Apollo Director disclaims beneficial ownership of and a personal pecuniary
interest in the shares beneficially owned by Apollo and Lion Advisors.
3
<PAGE> 6
(5) Represents shares subject to options that are exercisable (or will become
exercisable by May 22, 1998) to acquire 4,500 shares.
(6) Ms. Latham resigned as Vice President and Chief Financial Officer in October
1997.
(7) Includes 2,500 shares for which Mr. Van Gasse shares voting and investment
power, and shares subject to options that are exercisable (or will become
exercisable by May 22, 1998) to acquire 14,500 additional shares.
(8) Includes an aggregate of shares subject to options that are exercisable (or
will become exercisable by May 22, 1998) to acquire 123,500 shares of Common
Stock by all directors and executive officers, as a group.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
Each of the ten nominees named below and on the following page has been
nominated for election as a director of the Company to serve until the 1999
annual meeting of stockholders, and until his successor has been duly elected
and qualified. Each nominee is currently a director of the Company with a term
expiring in 1998. All nominees have consented to be named and to serve if
elected. If so authorized, the persons named in the accompanying proxy form
intend to vote for the election of each nominee. Stockholders who do not wish
their shares to be voted for a particular nominee may so indicate in the space
provided on the proxy form.
The ten directors are to be elected by a plurality of the votes cast. If
one or more of the nominees should become unavailable to serve at the time of
the Meeting, the shares represented by proxy will be voted for the remaining
nominees and for any substitute nominee or nominees designated by the Board. If
no substitute is designated, the size of the Board may be reduced. The Board
knows of no reason why any of the nominees will be unavailable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
IDENTIFIED BELOW.
There follows a brief description of each nominee's principal occupation
and business experience, age and directorships held in other corporations.
<TABLE>
<CAPTION>
FLORSHEIM
DIRECTOR
NAME, AGE, PRINCIPAL OCCUPATION OR POSITION, OTHER DIRECTORSHIPS SINCE
- - ---------------------------------------------------------------- ---------
<S> <C>
Adam M. Aron, 43.............................................. 1997
Chairman of the Board and Chief Executive Officer of Vail
Resorts, Inc. and Director of Signature Resorts, Inc.
Bernard Attal, 34............................................. 1996
President of Heights Advisors
Director of Culligan Water Technologies, Inc. and Samsonite
Corporation
Charles J. Campbell, 53....................................... 1995
Chairman of the Board, President and Chief Executive Officer
of Florsheim
Robert H. Falk, 59............................................ 1996
Officer of Apollo Capital Management, Inc. and Lion Capital
Management, Inc.(a)
Director of Converse Inc., Culligan Water Technologies, Inc.,
Salant Corporation and Samsonite Corporation
Michael S. Gross, 36.......................................... 1994
Officer of Apollo Capital Management, Inc. and Lion Capital
Management, Inc.(a)
Director of Alliance Imaging, Inc., Allied Waste Industries,
Inc., Breuners Home Furnishings, Inc., Converse Inc.,
Furniture Brands International, Inc., Imagyn Medical
Technology, Inc. and Proffitt's, Inc.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
FLORSHEIM
DIRECTOR
NAME, AGE, PRINCIPAL OCCUPATION OR POSITION, OTHER DIRECTORSHIPS SINCE
- - ---------------------------------------------------------------- ---------
<S> <C>
John J. Hannan, 45............................................ 1994
Officer and director of Apollo Capital Management, Inc. and
Lion Capital Management, Inc.(a)
Director of Aris Industries, Inc., Converse Inc. and United
Auto Group, Inc.
Joshua J. Harris, 33.......................................... 1994
Officer of Apollo Capital Management, Inc. and Lion Capital
Management, Inc.(a)
Director of Alliance Imaging, Inc., Converse Inc., NRT, Inc.
and SMT Health Services Inc.
John H. Kissick, 56........................................... 1994
Officer of Lion Capital Management, Inc. and Consultant to
Apollo Capital Management, Inc.(a)
Director of Converse Inc., Continental Graphics Holdings, Inc.
and Paragon Health Network, Inc.
Ronald J. Mueller, 63......................................... 1994
Retired President and Chief Executive Officer of Florsheim
Michael D. Weiner, 45......................................... 1995
Officer of Apollo Capital Management, Inc. and Lion Capital
Management, Inc.(a)
Director of Alliance Imaging, Inc., Continental Graphics
Holdings, Inc., Converse Inc. and NRT, Inc.
</TABLE>
- - ---------------
(a) Apollo Capital Management, Inc. ("Apollo Capital") is the general partner of
Apollo Advisors, the managing general partner of Apollo, a securities
investment fund. Lion Capital Management, Inc. ("Lion Capital") is the
general partner of Lion Advisors, which serves as a financial advisor to and
representative for certain institutional investors. Lion Advisors is
affiliated with Apollo Advisors.
Each of the director nominees has held the same position or other executive
positions with the same employer during the past five years, except as follows:
Mr. Aron has served as Chairman of the Board and Chief Executive Officer of Vail
Resorts, Inc., a mountain resort operator, since July 1996, and prior thereto he
served as President and Chief Executive Officer of Norweigian Cruise Line Ltd.
from July 1993 until July 1996 and as Senior Vice President of Marketing for
United Airlines from 1990 until July 1993; Mr. Attal has been the President of
Heights Advisors, a financial advisor and representative for certain European
institutional investors with respect to their investments in the United States,
since April 1995, and prior thereto he served as Vice President of Credit
Lyonnais Securities Inc. from 1992 until April 1995; Mr. Campbell has been
Chairman of the Board of Florsheim since September 1995 and President and Chief
Executive Officer of Florsheim since October 1995, and prior thereto he served
as Chairman, President and Chief Executive Officer of Crystal Brands, Inc., a
multi-division apparel company, from August 1993 until February 1995 and as
President and Chief Executive Officer of Munsingwear Inc., a manufacturer and
marketer of branded men's sportswear from 1989 until August 1993; Mr. Mueller
served as President and Chief Executive Officer of Florsheim from November 1994
until October 1995, and prior thereto he served as President of The Florsheim
Shoe Company Division of Furniture Brands International, Inc. ("FBI") and as
Vice-President of FBI from 1985 until November 1994.
COMPENSATION AND ORGANIZATION OF BOARD OF DIRECTORS
The Board met four times during the fiscal year ended January 3, 1998. Each
director attended at least 75% of the total number of meetings of the Board and
committees of the Board on which he served. Except as described below, each
director 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 is paid a fee of $800 plus expenses if the director
is a member of the committee or $900 plus expenses if the director is the
Chairman of the committee. Such fees are not paid to directors who are employees
of Florsheim or a subsidiary of Florsheim.
5
<PAGE> 8
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 is composed of Mr. Gross, Chairman, and
Messrs. Campbell and Harris, and which met three times during the fiscal year
ended January 3, 1998, has the full power of the Board between meetings, with
specified limitations relating to major corporate matters.
The Audit Committee, which currently consists of Mr. Harris, Chairman, and
Mr. Gross, and which met four times during the fiscal year ended January 3,
1998, 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.
The Executive Compensation and Stock Option Committee (the "Compensation
Committee"), which currently consists of Mr. Gross, Chairman, and Mr. Harris,
and which met one time during the fiscal year ended January 3, 1998; 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.
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
During the Meeting, in addition to the other matters described above,
stockholders will be asked to consider and act upon one proposal, which has been
recommended unanimously by the Board and is described below.
Upon recommendation of its Audit Committee, the Board continued the
engagement of KPMG Peat Marwick LLP, certified public accounts, as independent
auditors for the fiscal year ending January 2, 1999, and has unanimously
recommended that the stockholders ratify that action. A formal statement by
representatives of KPMG Peat Marwick LLP, is not planned for the meeting;
however, representatives of KPMG Peat Marwick LLP are expected to be present
during the Meeting and to respond to appropriate questions. A majority of the
votes cast during the Meeting, a quorum being present, is required to ratify the
selection of independent auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table shows, for the fiscal year depicted, compensation
awarded to, earned by or paid to the Chief Executive Officer of the Company, the
three individuals other than the Chief Executive Officer who were serving as
executive officers at January 3, 1998 and who received salary and bonus of at
least $100,000 in 1997 and an additional individual who served as an executive
officer during the last completed fiscal year but was not serving as such at
January 3, 1998 (collectively the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND POSITION YEAR $ $ $ # $
----------------- ------ ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Campbell..................... 1997 453,269 96,028 -- -- 300(1)
Chairman, President and 1996 437,000 186,649 237,815 -- 300
Chief Executive Officer 1995 134,461 94,683 31,335 250,000 --
Thomas W. Joseph........................ 1997 145,000 26,308 -- -- 300(1)
Vice President, President, 1996 140,000 37,198 -- 30,000 300
International Division 1995 120,000 23,880 -- -- 300
Karen Nyman Latham(2)................... 1997 165,423 23,290 -- 30,000 --
Vice President and Chief 1996 -- -- -- -- --
Financial Officer 1995 -- -- -- -- --
L. David Sanguinetti.................... 1997 268,942 49,748 8,795(3) -- 300(1)
Executive Vice President, 1996 174,461 30,006 118,392 30,000 --
Chief Operating Officer and 1995 -- -- -- -- --
President, Retail Division
Gregory J. Van Gasse.................... 1997 165,481 30,000 -- -- 300(1)
Senior Vice President, Sales 1996 160,000 30,672 -- 30,000 300
and Marketing 1995 148,000 29,452 7,294 -- 300
</TABLE>
- - ---------------
(1) Amounts shown consist of 401(k) savings plan matching contributions.
(2) Ms. Latham resigned as Vice President and Chief Financial Officer of
Florsheim in October 1997.
(3) Represents $6,871 of imputed interest income relating to a loan made by the
Company to Mr. Sanguinetti in connection with his relocating to Chicago and
$1,924 as a reimbursement for taxes payable in connection with such income.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 3, 1998, Messrs. Gross and Harris each
served as members of the Compensation Committee. Messrs. Gross and Harris are
associated with Apollo Advisors, Apollo and Lion Advisors. Florsheim has entered
into an agreement with Apollo Advisors pursuant to which Apollo Advisors
provides corporate advisory, financial and other consulting services to
Florsheim (the "Consulting Agreement"). A fee under the Consulting Agreement is
payable at an annual rate of $400,000 plus out-of-pocket expenses for a term
expiring December 31, 1998. The Consulting Agreement is automatically renewable
for successive one year terms unless terminated by the Board. Apollo and Lion
Advisors, Florsheim's controlling stockholders, have the contractual right to
require Florsheim to file registration statements concerning Apollo's and Lion
Advisors' shares and include Apollo's and Lion Advisors' shares in registration
statements otherwise filed by Florsheim. Costs and expenses of preparing such
registration statements are required to be paid by Florsheim.
7
<PAGE> 10
STOCK OPTIONS
The following table discloses options granted to the Named Officers during
the fiscal year ended January 3, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF ANNUAL RATES OF
SECURITIES TOTAL STOCK PRICE
UNDERLYING OPTIONS EXERCISE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME # FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Karen Nyman Latham(2).............. 30,000 14% 5.625 1/8/07 106,126 268,944
</TABLE>
- - ---------------
(1) The dollar amounts under these columns assume 5% and 10% Common Stock
appreciation above the referenced exercise price and are the result of
assumed rates set forth in the rules promulgated by the Securities and
Exchange Commission. Consequently, such values are not intended to forecast
possible future appreciation, if any, of the Common Stock price of the
Company. The Company did not use an alternative formula for a grant date
valuation, as the Company is not aware of any formula which will determine
with reasonable accuracy a present value based on future unknown or volatile
factors. There can be no assurance that the dollar amounts reflected in
these columns will be achieved. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Common Stock and
overall market conditions, as well as the executive officer's continued
employment through the vesting period.
(2) Ms. Latham resigned as Vice President and Chief Financial Officer in October
1997. All the options granted to Ms. Latham were repurchased pursuant to the
terms of an agreement between her and the Company. See "Certain Agreements"
below.
The following table contains information concerning unexercised stock
options held as of January 3, 1998. None of the Named Officers exercised any
options during 1997.
AGGREGATED FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
JANUARY 3, 1998(#) JANUARY 3, 1998($)
---------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles J. Campbell......................... 100,000 150,000 47,916(1) 71,875(1)
Thomas W. Joseph............................ 4,500 55,500 6,469(1)(2) 251,081(1)(2)
Karen Nyman Latham.......................... -- 30,000 -- 24,375(1)
L. David Sanguinetti........................ 4,500 25,500 6,469(1) 36,656(1)
Gregory J. Van Gasse........................ 14,500 55,500 77,944(1)(2) 251,081(1)(2)
</TABLE>
- - ---------------
(1) Value presented is based upon (i) the difference between the $6.4375 per
share closing price of the Common Stock on the Nasdaq National Market on
January 2, 1998 and the exercise price of unexercised-in-the-money options.
(2) Value presented is based upon (i) the difference between the $6.4375 per
share closing price of the Common Stock on the Nasdaq National Market on
January 2, 1998 and the exercise price of unexercised-in-the-money options
and (ii) the contractual right to receive a cash payment upon the exercise
of certain options, which was established in connection with the Company's
spin-off (the "Distribution") from FBI in order to preserve a portion of the
value associated with FBI options that were exchanged for Florsheim options
(the "Florsheim Cash Spread Rights").
8
<PAGE> 11
RETIREMENT PLANS
Messrs. Joseph, and Van Gasse were participants in the Furniture Brands
International, Inc. Retirement Plan ("FBI Retirement Plan"), a noncontributory,
defined benefit pension plan designed to provide retirement benefits upon normal
retirement at age 65. Covered remuneration is base salary and incentive
compensation (reported, respectively, as "Salary" and "Bonus" in the Summary
Compensation Table on page 7 of this proxy statement), and, based on straight
life annuity annual benefits at normal retirement, is the greater of (i) the sum
of 1.1% of final average compensation (the highest 5 consecutive calendar years
of the last ten years) multiplied by years of credited service up to a maximum
of 35 years and 0.45% of final average compensation in excess of "covered
compensation" as defined by the IRS multiplied by credited service up to a
maximum of 35 years, without deduction for Social Security benefits (the "Final
Average Pay Formula"), or (ii) a total of career average accruals for each year
of plan participation equal to 1.95% of covered remuneration without deduction
for Social Security benefits. As of the date of the Distribution, such officers'
benefits under the FBI Retirement Plan were frozen and additional defined
benefits started to accrue under Florsheim Group Inc. Retirement Plan, a
noncontributory, defined benefit pension plan designed to provide retirement
benefits upon normal retirement at age 65, which Florsheim has been obligated to
fund for benefits accruing after the date of the Distribution. It is expected
that the combined benefits under both pension plans will be substantially
similar to benefits that would have accrued under the FBI Retirement Plan if
such officers remained employees of FBI until retirement at age 65. Benefits
payable pursuant to provisions of the foregoing retirement plans may be limited
by applicable laws and regulations. A supplemental retirement plan ("SERP") has
been adopted by Florsheim to provide for payments from general funds to
executive officers of any retirement income that would otherwise be payable
pursuant to its retirement plan in the absence of any such limitations.
The following table shows the estimated annual aggregate benefits payable
at normal retirement under the Final Average Pay Formula taking into account (i)
the combined benefits of the FBI and Florsheim plans, (ii) the effects of
integration with Social Security benefits and (iii) the effects of the Company's
SERP as described above.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000.......................... $ 27,084 $ 36,113 $ 45,141 $ 54,169 $ 63,197
150,000.......................... 32,897 43,863 54,828 65,794 76,760
175,000.......................... 38,709 51,613 64,516 77,419 90,322
200,000.......................... 44,522 59,363 74,203 89,044 103,885
225,000.......................... 50,334 67,113 83,891 100,669 117,447
250,000.......................... 56,147 74,863 93,578 112,294 131,010
300,000.......................... 67,772 90,363 112,953 135,544 158,135
400,000.......................... 91,022 121,363 151,703 182,044 212,385
450,000.......................... 102,647 136,863 171,078 205,294 239,510
500,000.......................... 114,272 152,363 190,453 228,544 266,635
550,000.......................... 125,897 167,863 209,828 251,794 293,760
600,000.......................... 137,522 183,363 229,203 275,044 320,885
650,000.......................... 149,147 198,863 248,578 298,294 348,010
</TABLE>
As of January 3, 1998, Messrs. Campbell, Joseph, Sanguinetti, and Van Gasse,
respectively, had 1, 26, 1 and 6 years credited service under the combined
plans. Ms. Latham had 0 years of credited service under the Florsheim plan.
CERTAIN AGREEMENTS
Florsheim has an employment agreement with Mr. Campbell, dated September 7,
1995 and amended on December 29, 1995 (the "Campbell Employment Agreement"),
providing for an initial employment term
9
<PAGE> 12
commencing on September 11, 1995 and continuing until September 30, 1999 (the
"Employment Term"). On each September 30, the Employment Term will be
automatically extended for an additional year unless either Florsheim or Mr.
Campbell provides notice to the other to the contrary. The Campbell Employment
Agreement provides for: (i) the employment of Mr. Campbell as the Chairman of
the Board (and in such other officer positions as may be designated by the
Board); (ii) the payment to Mr. Campbell of a salary at an annual rate of not
less than $437,000 (the "Base Compensation"); (iii) the entitlement of Mr.
Campbell to earn an annual bonus of up to 65% of the Base Compensation pursuant
to the Florsheim Group Inc. Executive Incentive Program (the "Florsheim
Executive Incentive Plan"); (iv) a grant of options to purchase 250,000 shares
of Florsheim Common Stock pursuant to the Florsheim Group Inc. Charles J.
Campbell Stock Option Plan, as amended and restated (the "Campbell Plan"), which
was made on September 7, 1995; (v) the provision of a loan to Mr. Campbell to
purchase shares of Florsheim Common Stock, which has been repaid in full as
described below; and (vi) in connection with Mr. Campbell's relocation to
Chicago, payment of reasonable moving, temporary housing and housing closing
costs and expenses and the purchase by Florsheim of a house formerly belonging
to Mr. Campbell. Amounts paid by Florsheim to Mr. Campbell in 1997 pursuant to
the Campbell Employment Agreement are included in the Summary Compensation Table
on page 7 above.
If Mr. Campbell's employment is terminated by Florsheim other than for
Cause (as defined in the Campbell Employment Agreement), death or disability,
Mr. Campbell will be entitled to receive as severance, payable monthly for the
balance of the Employment Term (but for not less then two years if termination
is prior to September 30, 1998), an amount equal to Mr. Campbell's Average
Annual Compensation (as defined below). In the event that Mr. Campbell's
employment is terminated within two years following a Change of Control (as
defined below) the combined Base Compensation, bonus and severance paid
following the date of the Change of Control must be at least two times Mr.
Campbell's Average Annual Compensation. The term "Average Annual Compensation"
is defined in the Campbell Employment Agreement to mean the annualized base
salary plus bonus paid during the twenty-four month period (or such shorter
period during which the Campbell Employment Agreement is in effect) preceding
the date of termination without Cause or the date of the Change of Control, as
the case may be. The term "Change of Control" is defined in the Campbell
Employment Agreement to mean any of the following events: (a) the acquisition
(other than from Florsheim or by Apollo Advisors or Lion Advisors or their
affiliates) of 30% or more of either the then outstanding shares of Common Stock
of Florsheim or the combined voting power of Florsheim's then outstanding voting
securities entitled to vote generally in the election of directors if the
beneficial ownership of the acquiror of such shares exceeds the beneficial
ownership of Common Stock and the combined voting power of Florsheim's then
outstanding voting securities held by any person or entity that acquired such
securities from Florsheim and by Apollo Advisors or Lion Advisors (and their
affiliates); (b) individuals who are presently members of the Board of Directors
(the "Incumbent Board") or individuals who are nominated or elected by a vote of
the Incumbent Board shall cease to constitute a majority of the members of the
Board; (c) the approval by Florsheim's stockholders and not by a majority of the
Incumbent Board of (i) a merger, consolidation or other reorganization,
immediately following which the stockholders prior to such reorganization do
not, own, directly or indirectly, more than 50% of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merged or consolidated company's then outstanding voting securities, (ii) a
liquidation or dissolution of Florsheim, or (iii) the sale of all or
substantially all of the assets of Florsheim.
Florsheim and Ms. Latham, who resigned as Vice President and Chief
Financial Officer in October 1997, are parties to an agreement dated January 23,
1998 pursuant to which Ms. Latham continued as an employee of Florsheim through
January 23, 1998. She continued to receive her salary, without adjustment,
through that date and received a bonus for 1997 (as set forth in the Summary
Compensation Table on page 7). In January 1998, she also received a lump sum
payment of $42,500. Under the agreement, options granted to her in January 1997
to purchase 30,000 shares of common stock at $5.625 per share were repurchased
in January 1998 by the Company for an aggregate purchase price of $78,750, an
amount representing the aggregate spread between the exercise price of her
options and the closing price per share of common stock on November 25, 1997.
Under the terms of the original grant, options to purchase 4,500 shares would
have become exercisable on January 8, 1998. In addition, under the terms of the
agreement, for a period of up to
10
<PAGE> 13
18 months Florsheim will pay Ms. Latham's health insurance premiums for
continued coverage for her and her dependents under the group health insurance
plan maintained for Florsheim employees.
EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Among its responsibilities, the Compensation Committee reviews the
compensation of the officers of Florsheim and makes recommendations to the Board
concerning executive compensation matters.
In its deliberations, the Compensation Committee is guided by certain
fundamental considerations, including the need to attract and retain talented,
key executives, the need to provide both short-term and long-term incentives to
focus executive performance on the achievement of Company objectives and the
development and implementation of compensation policies, plans and programs
which seek to enhance the profitability of the Company, and thus stockholder
value, by aligning closely the financial interests of the Company's senior
management with those of its stockholders.
The Compensation Committee met one time in the fiscal year ended January 3,
1998 and (i) recommended increased base salary levels for Messrs. Joseph,
Sanguinetti and Van Gasse and other executive positions, (ii) established bonus
parameters based upon performance against pre-determined financial targets and
(iii) recommended the continuation of the Florsheim Executive Incentive Plan for
1997.
The Company's compensation program for senior management is comprised of
base salary, annual performance bonuses, longer term incentive compensation in
the form of stock options and benefits available generally to the Company's
employees.
Base salary levels for each of the Company's executive officers (i) are set
generally to be competitive with other retail and footwear companies and
companies of comparable size, (ii) take into consideration the position's
complexity, responsibility and need for special expertise, and (iii) take into
account individual experience and performance.
During each fiscal year, the Compensation Committee considers the
desirability of granting to officers and other employees of the Company stock
options under the 1994 Plan. The objective of the 1994 Plan is to align senior
management and stockholder interests by creating a strong and direct link
between the executive's accumulation of wealth and stockholder return and to
enable executives to develop and maintain a significant ownership position in
Florsheim Common Stock. See "Summary Compensation Table" and "Aggregated Fiscal
Year End Option Values."
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), disallows a public company's income tax deductions for employee
remuneration exceeding $1,000,000 per year paid to the chief executive officer
and the other four most highly compensated officers. There is an exception,
however, for qualified "performance-based compensation." The Company has been
advised that, under Section 162(m) and the final regulations thereunder, grants
made under the 1994 Plan prior to the 1996 annual meeting of stockholders and
grants under the Campbell Plan represent qualified "performance-based
compensation" pursuant to Section 162(m) of the Code.
In determining the base salary of Mr. Campbell, who became the Chairman of
Florsheim in September 1995 and its President and Chief Executive Officer in
October 1995, the Compensation Committee considered pay levels of chief
executive officers of companies comparable to the Company and Mr. Campbell's
experience in the apparel and branded men's sportswear industries and salary
requirements in light of such experience. The Compensation Committee authorized
the Campbell Employment Agreement in order to establish significant incentives,
such as above-market option grants, Common Stock purchase requirements and
annual bonus incentives, that are performance based and closely aligned with the
creation of stockholder value.
Michael S. Gross, Chairman
Joshua J. Harris
11
<PAGE> 14
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder return (assuming
reinvestment of dividends), following assumed investment of $100 in shares of
Common Stock on November 21, 1994, the first date Common Stock was traded on the
Nasdaq National Market. The indices shown below are included for comparative
purposes only and do not necessarily reflect Florsheim's opinion that such
indices are an appropriate measure of the relative performance of the Common
Stock.
<TABLE>
<CAPTION>
The
Measurement Period Florsheim S&P 500 S&P Shoe
(Fiscal Year Covered) Group Inc Index Index
<S> <C> <C> <C>
11/21/94 100 100 100
12/31/94 60.8 97.8 109.4
12/30/95 40.5 134.2 148.4
12/28/96 63.5 165.4 246.6
1/3/98 68.2 220.6 166.2
</TABLE>
<TABLE>
<CAPTION>
11/21/94 12/31/94 12/30/95 12/28/96 1/3/98
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Florsheim Group Inc. ................ [ ] 100 60.8 40.5 63.5 68.2
S&P 500 Index........................ + 100 97.8 134.2 165.4 220.6
S&P Shoe Index....................... T 100 109.4 148.4 246.6 166.2
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
In 1997, Mr. Richard J. Anglin, an officer of the Company, filed a Form 3
late. Also in 1997, Mr. L. David Sanguinetti, an officer of the Company, filed a
Form 3 and a Form 4 late.
CERTAIN TRANSACTIONS
Pursuant to the terms of an employment agreement between Mr. Mueller and
Florsheim, dated September 15, 1995, as amended on December 29, 1995 (the
"Mueller Employment Agreement"), which agreement supersedes a previous agreement
dated October 1, 1994, upon the election by Mr. Mueller to voluntarily terminate
his employment with Florsheim in December 1995, Florsheim became obligated to
provide Mr. Mueller certain severance payments described below. The Mueller
Employment Agreement expired December 31, 1997. Through and until December 31,
1997 Florsheim had (i) paid Mr. Mueller as and when normally payable his Base
Compensation (an amount equal to $280,400, representing the highest annual
salary rate paid to Mr. Mueller at any time during the 1994 or 1995 fiscal
years, plus an annual
12
<PAGE> 15
payment of $10,000) and Annual Bonus (a cash payment equal to $133,801,
representing the highest annual bonus paid or payable to Mr. Mueller pursuant to
the Florsheim Executive Incentive Plan with respect to the 1994 or 1995 fiscal
years) and (ii) continued paying premiums under the existing split dollar life
insurance arrangement. Under such split dollar life insurance arrangement, a
substantial percentage of premiums paid by Florsheim may be recoverable by
Florsheim or its assignee at the earlier of age 65 or the death of Mr. Mueller
and the residual cash value will accrue for the benefit of Mr. Mueller or his
beneficiary.
On June 5, 1996, the Company issued an interest-free bridge loan in the
amount of $125,000 to L. David Sanguinetti, Executive Vice President, Chief
Operating Officer and President, Retail Division of the Company, in connection
with Mr. Sanguinetti's relocating to the Chicago area. Compensation relating to
the interest-free benefit associated with the loan, which did not bear interest
until January 1, 1998, is reflected in the "Other Annual Compensation" column of
the Summary Compensation Table on page 7 above. Beginning on January 1, 1998,
the loan bears interest at 8.5% per year. Unpaid principal and interest are due
on May 1, 1998. As of March 26, 1998, the outstanding principal amount of the
loan was $72,000.
For information regarding certain transactions effectuated in connection
with the retention and employment of Mr. Campbell and the resignation of Ms.
Latham, see "EXECUTIVE COMPENSATION -- Certain Agreements."
OTHER MATTERS
Neither the Board nor management knows of any matters other than those
items set forth above that will be presented for consideration during the
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.
PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals submitted for inclusion in Florsheim's proxy
materials for the 1999 annual meeting should be addressed to the Secretary of
Florsheim and must be received at Florsheim's executive offices not later than
December 14, 1998. Upon receipt of any such proposal, Florsheim will determine
whether or not to include such proposal in the proxy statement and proxy form in
accordance with SEC regulations governing the solicitation of proxies.
By order of the Board of Directors,
Thomas E. Poggensee
Treasurer, Secretary, Controller
and Chief Accounting Officer
April 13, 1998.
13
<PAGE> 16
PROXY FLORSHEIM GROUP INC. PROXY
[FLORSHEIM LOGO]
PROXY FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C.J. Campbell, M.S. Gross, and J. J. Harris,
and each of them with power of substitution, proxy or proxies to represent the
undersigned, and to vote all shares of Common Stock the undersigned would be
entitled to vote at the annual meeting of the stockholders of Florsheim Group
Inc. to be held at 10 a.m., local time, on Wednesday, May 20, 1998, at the
Swissotel, 323 East Wacker Drive, Chicago, Illinois, and at any adjournment
thereof, upon the items set forth in the proxy statement for the meeting and
identified below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
I. Election of Ten directors:
Nominees: A. Aron, B. Attal, C.J. Campbell, R.H. Falk, M.S. Gross,
J.J. Hannan, J. J. Harris, J.H. Kissick, R.J. Mueller and
M.D. Weiner,
II. Ratification of selection of independent auditors; and
III. In their discretion, upon such other matters as may properly come
before the meeting.
PLEASE SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ON THE REVERSE
SIDE AND RETURN PROMPTLY.
SEE REVERSE SIDE.
- - ------------------------------------------------------------------------------
FLORSHEIM GROUP INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
A Vote FOR Items 1, 2, and 3 is recommended by the Board of Directors.
Shares will be so voted unless you otherwise indicate.
For All
1. Election of Directors. For Withheld Except
Nominees: (see reverse) / / / / / /
For, except vote withheld
from the following nominee(s):
_____________________________
For Against Abstain
2. Ratification of selection of / / / / / /
independent auditor for current
fiscal year.
3. In their discretion, to transact such other business as may properly
come before the meeting or any adjournment thereof.
--------------------
Date: _____________________________________
Signature(s): _____________________________
Signature(s): _____________________________
NOTE: (PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. EXECUTOR, ADMINISTRATOR,
TRUSTEE, ETC. SHOULD SO INDICATE.)
