<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:
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<PAGE> 2
FLORSHEIM GROUP INC.
[FLORSHEIM LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1999 annual meeting of the stockholders of Florsheim Group Inc. (the
"Company") will be held at 10:00 a.m., local time, on Tuesday, May 25, 1999, at
the Swissotel, 323 East Wacker Drive, Chicago, Illinois, for the following
purposes:
I. To elect ten directors; and
II. To transact such other business as may properly come before the meeting or
at any adjournment thereof.
The Board of Directors has fixed March 29, 1999 as the record date for the 1999
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,
Larry R. Solomon
Assistant Secretary
April 7, 1999.
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
1999 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 1999 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 1998 annual report to stockholders, which includes financial
statements for the fiscal year ended January 2, 1999, are expected to be mailed
to stockholders on or about April 15, 1999. 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 29, 1999 (the "Record
Date") are entitled to vote at the Meeting. On the Record Date there were
8,453,651 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 vote 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
Assistant 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 29, 1999
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) 66.4%
DIRECTORS AND EXECUTIVE OFFICERS:
Adam M. Aron............................................ -- *
Bernard Attal........................................... -- *
Charles J. Campbell..................................... 229,700(3) 2.7%
Robert H. Falk.......................................... 5,615,160(4) 66.4%
Michael S. Gross........................................ 5,615,160(4) 66.4%
John J. Hannan.......................................... 5,615,160(4) 66.4%
Joshua J. Harris........................................ 5,615,160(4) 66.4%
John H. Kissick......................................... 5,615,160(4) 66.4%
Ronald J. Mueller....................................... 5 *
Michael D. Weiner....................................... 5,615,160(4) 66.4%
Richard J. Anglin....................................... -- *
Thomas W. Joseph........................................ 13,500(5) *
L. David Sanguinetti.................................... 13,500(5) *
Gregory J. Van Gasse(6)................................. -- *
Directors and executive officers as a group (13
persons).............................................. 5,871,865(7) 69.5%
</TABLE>
- ---------------
* Less than one percent
(1) Percentage calculated with reference to an aggregate of 8,453,651 shares of
Common Stock outstanding at March 29, 1999.
(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. The address for Apollo and Lion
Advisors is 1301 Avenue of the Americas, 38th Floor, New York, New York
10019.
(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 28, 1999) to acquire 150,000 additional shares.
3
<PAGE> 6
(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.
(5) Represents shares subject to options that are exercisable (or will become
exercisable by May 28, 1999) to acquire 4,500 shares.
(6) Mr. Van Gasse terminated his employment with the Company on September 30,
1998.
(7) Includes an aggregate of shares subject to options that are exercisable (or
will become exercisable by May 28, 1999) to acquire 177,000 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 2000
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 2000. 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, 44.............................................. 1997
Chairman of the Board and Chief Executive Officer of Vail
Resorts, Inc. and Director of Crestline Capital Corp.,
Sunterra Corporation and Vail Resorts, Inc.
Bernard Attal, 35............................................. 1996
President of Heights Advisors
Director of Samsonite Corporation
Charles J. Campbell, 54....................................... 1995
Chairman of the Board, President and Chief Executive Officer
of Florsheim
Robert H. Falk, 60............................................ 1996
Officer of Apollo Capital Management, Inc. and Lion Capital
Management, Inc.(a)
Director of Alliance Imaging, Inc., Converse, Inc. and
Samsonite Corporation
Michael S. Gross, 37.......................................... 1996
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., Saks
Incorporated and United Rentals, Inc.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
FLORSHEIM
DIRECTOR
NAME, AGE, PRINCIPAL OCCUPATION OR POSITION, OTHER DIRECTORSHIPS SINCE
- ---------------------------------------------------------------- ---------
<S> <C>
John J. Hannan, 46............................................ 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, 34.......................................... 1994
Officer of Apollo Capital Management, Inc. and Lion Capital
Management, Inc.(a)
Director of Alliance Imaging, Inc., Breuners Home Furnishings,
Inc., Converse, Inc., NRT, Inc. and Quality Distribution,
Inc.
John H. Kissick, 57........................................... 1994
Officer of Lion Capital Management, Inc. and Consultant to
Apollo Capital Management, Inc.(a)
Director of Continental Graphics Holdings, Inc., Converse,
Inc., Mariner Post-Acute Network, Inc. and Quality
Distribution, Inc.
Ronald J. Mueller, 64......................................... 1994
Retired President and Chief Executive Officer of Florsheim
Michael D. Weiner, 46......................................... 1995
Officer of Apollo Capital Management, Inc. and Lion Capital
Management, Inc.(a)
Director of Alliance Imaging, Inc., Continental Graphics
Holdings, Inc., Converse, Inc., MTL, Inc., NRT, Inc. and
Quality Distribution, 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 Norwegian Cruise Line Ltd.
from July 1993 until July 1996; 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; 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 2, 1999. With
the exception of Messrs. Hannan and Kissick, each director attended at least 75%
of the total number of meetings of the Board and committees of the Board on
which he served. Mr. Hannan missed three of the four Board meetings and Mr.
Kissick missed two of the four Board meetings. 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 did not meet during the fiscal year ended
January 2, 1999, 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 2,
1999, 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 2, 1999. The
Compensation Committee 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.
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 2, 1999 and who received salary and bonus of at
least $100,000 in 1998 and an additional individual who served as an executive
officer during the last completed fiscal year but was not serving as such at
January 2, 1999 (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...................... 1998 463,750 68,250 -- -- 300(1)
Chairman, President and 1997 453,269 96,028 -- -- 300
Chief Executive Officer 1996 437,000 186,649 237,815 -- 300
Richard J. Anglin(2)..................... 1998 188,558 18,500 10,300(2) -- --
Vice President, 1997 19,070 -- 4,884 -- --
Chief Financial Officer
Thomas W. Joseph......................... 1998 165,865 26,600 -- -- 300(1)
Vice President, President, 1997 145,000 26,308 -- -- 300
International Division 1996 140,000 37,198 -- 30,000 300
L. David Sanguinetti..................... 1998 280,288 33,000 -- -- 300(1)
Executive Vice President, 1997 268,942 49,748 8,795 -- 300
Chief Operating Officer and 1996 174,461 30,006 118,392 30,000
President, Retail Division
Gregory J. Van Gasse(3).................. 1998 146,267 -- -- -- --
Senior Vice President, Sales 1997 165,481 30,000 -- -- 300
and Marketing 1996 160,000 30,672 -- 30,000 300
</TABLE>
- ---------------
(1) Amounts shown consist of 401(k) savings plan matching contributions.
(2) Represents $6,300 of imputed interest income relating to a loan made by the
Company to Mr. Anglin in connection with his relocation to Chicago and
$4,000 reimbursement for taxes payable in connection with such income. Mr.
Anglin joined the Company as its Chief Financial Officer on December 1,
1997.
(3) Mr. Van Gasse terminated his employment with the Company on September 30,
1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 2, 1999, 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 $400,000 plus out-of-pocket expenses for a term
expiring December 31, 1999. The Consulting Agreement is automatically renewable
for successive one year terms unless terminated by the Board. Apollo and Lion
Advisors, Florsheim's controlling stockholders, have the contractual right to
require Florsheim to file registration statements concerning Apollo's and Lion
Advisors' shares and include Apollo's and Lion Advisors' shares in registration
statements otherwise filed by Florsheim. Costs and expenses of preparing such
registration statements are required to be paid by Florsheim.
7
<PAGE> 10
STOCK OPTIONS
The following table contains information concerning options exercised
during fiscal year 1998 and unexercised stock options held as of January 2,
1999. None of the Named Executive Officers had option grants in fiscal year
1998.
AGGREGATED OPTION EXERCISES AND YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES JANUARY 2, 1999(#) JANUARY 2, 1999($)
ACQUIRED ON VALUE ---------------------------- ------------------------------
NAME EXERCISE # REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Campbell........ -- -- 150,000 100,000 -- --
Richard J. Anglin.......... -- -- 4,500 25,500 -- --
Thomas W. Joseph........... -- -- 43,500 17,500 $163,800(1)(2) --
L. David Sanguinetti....... -- -- 13,500 17,500 -- --
Gregory J. Van Gasse(3).... 40,000 $241,150 -- -- -- --
</TABLE>
- ---------------
(1) Value presented is based upon (i) the difference between the $4.75 per share
closing price of the Common Stock on the Nasdaq National Market on December
31, 1998 and the exercise price of unexercised-in-the-money options.
(2) Value presented is based upon (i) the difference between the $4.75 per share
closing price of the Common Stock on the Nasdaq National Market on December
31, 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 Furniture Brands International, Inc. ("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").
(3) Mr. Van Gasse terminated his employment with the Company on September 30,
1998.
RETIREMENT PLANS
Messrs. Joseph and Van Gasse participated in the Furniture Brands
International, Inc. ("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.
8
<PAGE> 11
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> <C>
125,000....................... 26,961 35,948 44,936 53,923 62,910
150,000....................... 32,774 43,698 54,623 65,548 76,472
175,000....................... 38,586 51,448 64,311 77,173 90,035
200,000....................... 44,399 59,198 73,998 88,798 103,597
225,000....................... 50,211 66,948 83,686 100,423 117,160
250,000....................... 56,024 74,698 93,373 112,048 130,722
300,000....................... 67,649 90,198 112,748 135,298 157,847
400,000....................... 90,899 121,198 151,498 181,798 212,097
450,000....................... 102,524 136,698 170,873 205,048 239,222
500,000....................... 114,149 152,198 190,248 228,298 266,347
550,000....................... 125,774 167,698 209,623 251,548 293,472
600,000....................... 137,399 183,198 228,998 274,798 320,597
650,000....................... 149,024 198,698 248,373 298,048 347,722
</TABLE>
As of January 2, 1999, Messrs. Campbell, Joseph, Sanguinetti and Van Gasse,
respectively, had 2, 27, 2 and 7 years credited service under the combined
plans.
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 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 75% 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; 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
which was subsequently sold by Florsheim. Amounts paid by Florsheim to Mr.
Campbell in 1998 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, 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
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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.
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 2,
1999 and (i) recommended increased base salary levels for Messrs. Anglin, Joseph
and Sanguinetti 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 1999.
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 tax 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
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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 tax 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
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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.
[LINE GRAPH]
<TABLE>
<CAPTION>
11/21/94 12/31/94 12/30/95 12/28/96 1/3/98 1/2/99
-------- -------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Florsheim Group Inc. ..... [ ] 100 60.8 40.5 63.5 68.2 51.4
S&P 500 Index............. + 100 97.8 134.2 165.4 220.6 283.7
S&P Shoe Index............ T 100 109.4 148.4 246.6 166.2 155.7
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that all filings required to be made during fiscal
year 1998 were made on a timely basis.
CERTAIN TRANSACTIONS
On June 5, 1996, the Company granted 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 relocation to the Chicago area. Compensation imputed as
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, interest rate was 8.5% per year. Mr. Sanguinetti
paid the balance due on this loan on May 1, 1998.
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On March 4 and May 6, 1998, the Company granted an interest-free bridge
loan in the amount of $225,000 to Richard J. Anglin, Vice President, Chief
Financial Officer, in connection with Mr. Anglin's relocation to the Chicago
area. Compensation imputed as relating to the interest-free benefit associated
with the loan, which did not bear interest until November 6, 1998, is reflected
in the "Other Annual Compensation" column of the Summary Compensation Table on
page 7 above. Beginning on November 6, 1998, the loan became subject to interest
at 8.5% per year. Unpaid principal and interest are due on November 6, 1999. As
of March 29, 1999, the outstanding principal amount of the loan was $225,000.
For information regarding certain transactions effectuated in connection
with the retention and employment of Mr. Campbell, 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 2000 ANNUAL MEETING
Stockholder proposals submitted for inclusion in Florsheim's proxy
materials for the 2000 annual meeting should be addressed to the Assistant
Secretary of Florsheim and must be received at Florsheim's executive offices not
later than December 17, 1999. 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,
Larry R. Solomon
Assistant Secretary
April 7, 1999.
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PROXY PROXY
Florsheim Group Inc.
--------------------
FLORSHEIM
--------------------
PROXY FOR 1999 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 Tuesday, May 25, 1999, 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, and
II. In their discretion, upon such other matters as may properly come
before the meeting.
PLEASE SPECIFY YOUR CHOICES BY MAKING THE APPROPRIATE -----------
BOXES ON THE REVERSE SIDE AND RETURN PROMPTLY. SEE REVERSE
SIDE
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<TABLE>
<CAPTION>
FLORSHEIM GROUP INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
[ ]
<S> <C> <C> <C> <C>
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 2. In their discretion, to transact such other business as may
Nominees: (see reverse) [ ] [ ] [ ] properly come before the meeting or any adjournment thereof.
For, except vote withheld from the following nominee(s)
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Date:
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Signature(s):
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Signature(s):
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NOTE: (PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. EXECUTOR,
ADMINISTRATOR, TRUSTEE, ETC. SHOULD SO INDICATE.)
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</TABLE>
