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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended January 3, 2009
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-6024
WOLVERINE WORLD WIDE, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 38-1185150 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
| incorporation or organization) | ||
| 9341 Courtland Drive, Rockford, Michigan | 49351 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (616) 866-5500
Securities registered pursuant to Section 12(b) of the Securities Exchange Act:
| Title of each class | Name of each exchange on which registered | |
| Common Stock, $1 Par Value | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes þ No o
Indicate by check mark whether the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
| Large accelerated filer þ | Accelerated filer o | Non-Accelerated filer o | Smaller reporting company o | |||
| (do not check if a smaller reporting company) | ||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
The aggregate market value of the registrant’s voting stock held by non-affiliates of the
registrant based on the closing price on the New York Stock Exchange on June 14, 2008, the last
business day of the registrant’s most recently completed second fiscal quarter: $1,333,734,754.
Number of shares outstanding of the registrant’s Common Stock, $1 par value (excluding shares of
treasury stock) as of February 23, 2009: 49,516,160.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the registrant’s annual stockholders’ meeting to be
held April 23, 2009 are incorporated by reference into Part III of this report.
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FORWARD-LOOKING STATEMENTS
This Report on Form 10-K contains forward-looking statements that are based on management’s
beliefs, assumptions, current expectations, estimates and projections about the footwear business,
worldwide economics and the Company itself. Forward-looking statements include, without limitation,
those related to:
| • | future revenue, earnings, margins, growth, cash flows, operating measurements, tax rates
and tax benefits; |
| • | expected economic returns; |
| • | projected 2009 operating results and dividend rates; |
| • | future share repurchase activity; |
| • | the effect of new accounting rules and guidance; |
| • | future strength of the Company; |
| • | future brand positioning; |
| • | seasonal sales patterns and capital requirements; |
| • | ability to arrange adequate alternative sources of supply; |
| • | the outcome of litigation; |
| • | achievement of the Company vision; |
| • | future pension expenses, contributions and costs; |
| • | future marketing investments; |
| • | the ability to successfully extend into new lines or categories of products, including
the extension into Merrell® Apparel; |
| • | the ability to integrate the acquired Chaco® Footwear and Cushe® Footwear businesses; |
| • | future growth or success in specific countries, categories or market sectors; |
| • | liquidity; |
| • | capital resources; and |
| • | market risk. |
In addition, words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,”
“intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” variations of such words
and similar expressions are intended to identify forward-looking statements. These statements are
not guarantees of future performance and involve certain risks, uncertainties and assumptions
(“Risk Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree
of occurrence. Therefore, actual results and outcomes may materially differ from what may be
expressed or forecasted in such forward-looking statements.
Risk Factors include, but are not limited to:
| • | uncertainties relating to changes in demand for the Company’s products; |
| • | changes in consumer preferences or spending patterns; |
| • | changes in local, domestic or international economic and market conditions; |
| • | the impact of competition and pricing by the Company’s competitors; |
| • | the cost and availability of inventories, services, labor and equipment furnished to the
Company; |
| • | the ability of the Company to manage and forecast its growth and inventories; |
| • | increased costs of future pension funding requirements; |
| • | changes in duty structures in countries of import and export; |
| • | changes in interest rates, tax laws, duties, tariffs, quotas or applicable assessments; |
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| • | foreign currency fluctuation in valuations compared to the U.S. dollar; |
| • | changes in monetary controls and valuations of the Chinese yuan and the relative value
to the U.S. dollar; |
| • | the risk of doing business in developing countries and economically volatile areas; |
| • | the cost and availability of contract manufacturers; |
| • | the cost and availability of raw materials, including leather and petroleum based
materials; |
| • | changes in planned consumer demand or at-once orders; |
| • | loss of significant customers; |
| • | customer order cancellations; |
| • | the exercise of future purchase options by the U.S. Department of Defense on previously
awarded contracts; |
| • | the impact of a global recession on demand for the Company’s products; |
| • | the impact of the global credit crisis on the Company’s suppliers, distributor and
customers; |
| • | the success of new business initiatives, including and Merrell® Apparel; |
| • | changes in business strategy or development plans; |
| • | integration of operations of newly acquired businesses; |
| • | relationships with international distributors and licensees; |
| • | the ability to secure and protect trademarks, patents and other intellectual property; |
| • | technological developments; |
| • | the ability to attract and retain qualified personnel; |
| • | the size and growth of footwear markets; |
| • | service interruptions at shipping and receiving ports; |
| • | changes in the amount or severity of inclement weather; |
| • | changes due to the growth of Internet commerce; |
| • | popularity of particular designs and categories of footwear; |
| • | the Company’s ability to adapt and compete in global apparel and accessory markets; |
| • | the ability to retain rights to brands licensed by the Company; |
| • | the impact of the Company’s 2009 restructuring plan; |
| • | the Company’s ability to meet at-once orders; |
| • | changes in government and regulatory policies; |
| • | retail buying patterns; |
| • | consolidation in the retail sector; and |
| • | the acceptance of U.S. brands in international markets. |
Additionally, concerns regarding acts of terrorism, the war in the Middle East, and subsequent
events have created significant global economic and political uncertainties that may have material
and adverse effects on consumer demand, foreign sourcing of footwear, shipping and transportation,
product imports and exports and the sale of products in foreign markets. These matters are
representative of the Risk Factors that could cause a difference between an ultimate actual outcome
and a forward-looking statement. Historical operating results are not necessarily indicative of the
results that may be expected in the future. The Risk Factors included here are not exhaustive.
Other Risk Factors exist, and new Risk Factors emerge from time-to-time, that may cause actual
results to differ materially from those contained in any forward-looking statements. Given these
risks and uncertainties, investors should not place undue reliance on forward-looking statements as
a prediction of actual results. Furthermore, the Company undertakes no obligation to update, amend
or clarify forward-looking statements, whether as a result of new information, future events or
otherwise.
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PART I
Item 1. Business.
General.
Wolverine World Wide, Inc. (the “Company”) is a leading designer, manufacturer and marketer of
a broad range of quality casual shoes, rugged outdoor and work footwear. The Company, a Delaware
corporation, is the successor of a Michigan corporation of the same name, originally organized in
1906, which in turn was the successor of a footwear business established in Grand Rapids, Michigan
in 1883.
Approximately 46.6 million pairs of the Company’s branded footwear were sold during fiscal
2008, making the Company a global leader among footwear companies in the marketing of branded
casual, work and outdoor footwear. The Company’s products generally feature contemporary styling
with proprietary technologies designed to provide maximum comfort and performance. The products
are marketed throughout the world under widely recognized brand names, including Bates®, Cat®
Footwear, Chaco®, Cushe®, Harley-Davidson® Footwear, Hush Puppies®, HyTest®, Merrell®, Patagonia®
Footwear, Sebago® and Wolverine®. The Company believes that its primary competitive strengths are
its well-recognized brand names, broad range of comfortable footwear, patented and proprietary
designs and comfort technologies, numerous distribution channels and diversified manufacturing and
sourcing base. Cat® is a registered trademark of Caterpillar Inc., Harley-Davidson® is a
registered trademark of H-D Michigan, Inc. and Patagonia® is a registered trademark of Patagonia,
Inc.
The Company’s footwear is sold under a variety of brand names designed to appeal to most
consumers of casual, work and outdoor footwear at numerous price points. The Company’s footwear
products are organized under four operating units: (i) the Wolverine Footwear Group, consisting of
the Bates®, HyTest® and Wolverine® boots and shoes, and Wolverine® brand apparel, (ii) the Outdoor
Group, consisting of Merrell®, Patagonia® and Chaco® footwear, and Merrell® brand apparel, (iii)
the Heritage Brands Group, consisting of Cat® footwear, Harley-Davidson® footwear and Sebago®
footwear, and (iv) The Hush Puppies Company, consisting of Hush Puppies® footwear and Cushe®
footwear. The Company also licenses its brands for use on non-footwear products, including
apparel, eyewear, watches, socks, gloves, handbags and plush toys.
The Company’s Global Operations Group is responsible for manufacturing, sourcing, distribution
and customer support for the various Company brands. The Company’s footwear is distributed
domestically through Company-owned retail stores, to governments and municipalities and to numerous
accounts, including department stores, footwear chains, catalogs, specialty retailers, mass
merchants and Internet retailers. Many of the retailers to which Wolverine distributes operate
multiple storefront locations. The Company’s products are marketed worldwide in approximately 180
countries and territories through Company-owned wholesale operations, licensees and distributors.
The Company, through its Wolverine Leathers Division, operates a pigskin leather business
supplying pigskin leather for the shoe and leather goods industries. A significant portion of the
Wolverine Leathers Division’s pigskin leather is used in the footwear marketed by the Company, and
is also sold to Company licensees and other domestic and foreign manufacturers of footwear. The
Company currently operates a tanning facility to support the Wolverine Leathers Division business.
The Company has announced that it will likely close its tanning facility and outsource leather
processing in 2009. In addition, Wolverine Procurement, Inc., a Company-owned subsidiary, performs
skinning operations and purchases raw pigskins, which it then cures and sells to outside customers
for processing into pigskin leather products.
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For financial information regarding the Company, see the consolidated financial statements of
the Company and the notes thereto, which are attached as Appendix A to this Form 10-K. The Company
has one reportable segment, Branded Footwear, Apparel, and Licensing. The Branded Footwear,
Apparel, and Licensing segment is engaged in manufacturing, sourcing, licensing, marketing and
distributing branded footwear and apparel, including casual shoes and apparel, dress shoes, boots,
uniform shoes, work shoes and rugged outdoor footwear and apparel. The Company’s Other Business
units consist of its retail stores, leathers and pigskin procurement operations. Financial
information regarding the Company’s business segments and financial information about geographic
areas is found in Note 9 to the consolidated financial statements of the Company that are attached
as Appendix A to this Form 10-K.
Branded Footwear, Apparel and Licensing.
The Company sources and markets a broad range of footwear styles, including shoes, boots and
sandals under many recognizable brand names, including Bates®, Cat®, Chaco®, Cushe
®,
Harley-Davidson®, Hush Puppies®, HyTest®, Merrell®, Patagonia®, Sebago®
and Wolverine®. The
Company combines quality materials and skilled workmanship from around the world to produce
footwear according to its specifications at both Company-owned and third-party manufacturing
facilities. The Company also markets Merrell®, Sebago®, and Wolverine® brand apparel and licenses
its brands for use on non-footwear products, including apparel, eyewear, watches, socks, handbags,
gloves and plush toys. Current significant licensing programs include Hush Puppies® apparel,
eyewear, watches, socks, handbags and plush toys, and Wolverine® brand gloves, eyewear, socks and
headwear.
The Company’s four branded footwear, apparel, and licensing operating units are described
below.
1. The Outdoor Group. The Outdoor Group consists of Merrell® Footwear,
Patagonia® Footwear, Chaco® Footwear and Merrell® Apparel. Outdoor Group products include
performance outdoor and hiking footwear, casual and after-sport footwear and performance and
casual Merrell® Apparel.
Merrell® Footwear. The Merrell® Footwear line consists primarily of running,
technical hiking, rugged outdoor and outdoor-inspired casual footwear designed for
backpacking, day hiking and everyday use. The Merrell® Footwear line also includes
the “After-Sport” category, incorporating Merrell® Footwear’s technical hiking and
outdoor expertise with Wolverine Performance Leathers™ and other technical materials
to create footwear with unique styling, performance and comfort features. Merrell®
Footwear products are sold primarily through outdoor specialty retailers, department
stores and catalogs. Merrell® Footwear is marketed in approximately 150 countries
and territories worldwide.
Merrell® Apparel. The Merrell® Apparel line consists primarily of technical
outdoor and outdoor-inspired casual apparel and performance socks. In addition to
Merrell® Apparel, the Outdoor Group markets Merrell® packs, bags and luggage.
Patagonia® Footwear. The Company entered into a license agreement providing
the Company with exclusive worldwide rights to manufacture, market, distribute and
sell footwear under the Patagonia®, Water Girl® and other trademarks. The Patagonia®
Footwear line focuses primarily on casual and outdoor performance footwear.
Chaco® Footwear and ULU® Footwear. The Company acquired the Chaco® and ULU®
Footwear businesses in January 2009. The Chaco® line is focused primarily on
performance sandals and ULU® is focused primarily on fashionable, performance winter
boots.
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2. Wolverine Footwear Group. The Wolverine Footwear Group encompasses footwear
primarily under the Wolverine®, Bates®, and HyTest® brands and markets footwear designed
with performance and comfort features to serve a variety of work, outdoor and lifestyle
functions. The Wolverine Footwear Group also markets Wolverine® brand apparel.
Wolverine® Work and Industrial Footwear. The Wolverine® brand has built its
reputation by offering high quality work boots and shoes that incorporate innovative
technologies to deliver comfort and durability. The Wolverine® brand, which has
been in existence for 126 years, markets work and outdoor footwear in three
categories: (i) work and industrial; (ii) outdoor sport; and (iii) rugged casual.
The development of DuraShocks® technology and MultiShox® technology has allowed the
Wolverine® brand to introduce a broad line of work footwear with a focus on comfort.
The Wolverine Fusion®, DuraShocks SR™ and Wolverine Compressor® technologies
represent the Company’s tradition of comfortable work and industrial footwear, a
tradition that is continued and enhanced with the development of the MultiShox®
Individual Comfort System and the Contour Welt™ product line. The Wolverine®
work product line features work boots and shoes, including steel toe boots and
shoes, targeting industrial and farm workers. The Wolverine® rugged casual and
outdoor sport product lines incorporate DuraShocks® technology and other comfort
features into products designed for casual and outdoor sport use. The rugged casual
line targets active lifestyles and includes trail shoes, rugged casuals and outdoor
sandals. The outdoor sport line is designed to meet the demands of hunters,
fishermen and other active outdoor sports enthusiasts. Warmth, waterproofing and
comfort are achieved through the use of Gore-Tex® (a registered trademark of W.L.
Gore & Associates, Inc.) and Thinsulate® (a registered trademark of Minnesota Mining
and Manufacturing Company) brand fabrics, the Company’s performance leathers and
patented DuraShocks® technologies.
Wolverine® Apparel and Licensing. The Wolverine Footwear Group markets a line
of work and rugged casual Wolverine® brand apparel. In addition, the Wolverine®
brand is licensed for use on eyewear, headwear, gloves and socks.
Bates® Uniform Footwear. The Bates Uniform Footwear Division is an industry
leader in supplying footwear to military and civilian uniform users. The Bates
Uniform Footwear Division utilizes DuraShocks®, DuraShocks SR™, CoolTech® and other
proprietary comfort technologies in the design of its military-style boots and
oxfords, including the Bates®, Enforcer Series® and Special Ops™ footwear lines.
The Bates Uniform Footwear Division contracts with the U.S. Department of Defense
and the militaries of several foreign countries to supply military footwear.
Civilian uniform uses include police, security, postal, restaurant and other
industrial occupations. Bates Uniform Footwear Division’s products are also
distributed through specialty retailers and catalogs.
HyTest® Safety Footwear. The HyTest® product line consists primarily of
high-quality work boots and shoes designed to protect industrial workers from foot
injuries. HyTest® footwear incorporates various specialty safety features into its
product lines,
including steel toe, composite toe, metatarsal guards, electrical hazard, static
dissipating and conductive footwear to protect against hazards of the workplace. In
addition, HyTest® brand footwear incorporates features, such as FootRests® comfort
technology, to provide comfort together with safety for working men and women.
HyTest® footwear is distributed primarily through a network of independently-owned
Shoemobile® mobile truck retail outlets providing direct sales of the Company’s
occupational and work footwear brands to workers at industrial facilities and also
through direct sales arrangements with large industrial customers.
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3. The Heritage Brands Group. The Heritage Brands Group consists of
Caterpillar® Footwear, Harley-Davidson® Footwear and the Sebago® product line.
Caterpillar® Footwear. Pursuant to a license arrangement with Caterpillar
Inc., the Company has exclusive worldwide rights to manufacture, market and
distribute footwear under the Caterpillar®, Cat & Design®, Walking Machines® and
other trademarks. The Company believes the association with Cat® equipment enhances
the reputation of its footwear for quality, ruggedness and durability. Cat® brand
footwear products include work boots and shoes, sport boots, rugged casuals and
lifestyle footwear, including lines of work and casual footwear featuring
iTechnology™ and Hidden Tracks® comfort features. In addition, the
Company also manufactures and markets Cat® Marine Power® footwear, designed for
industrial and recreational marine uses. Cat® footwear products target work and
industrial users and active lifestyle users. Cat® footwear is marketed in
approximately 140 countries and territories worldwide. Cat®, Caterpillar®, Cat &
Design®, Walking Machines® and Marine Power® are registered trademarks of
Caterpillar Inc.
Harley-Davidson® Footwear. Pursuant to a license arrangement with the
Harley-Davidson Motor Company, the Company has the exclusive right to manufacture,
market, distribute and sell Harley-Davidson® branded footwear throughout the world.
Harley-Davidson® branded footwear products include motorcycle, casual, fashion, work
and western footwear for men, women and children. Harley-Davidson® footwear is sold
globally through a network of independent Harley-Davidson® dealerships, as well as
through department stores and specialty retailers. Harley-Davidson® is a registered
trademark of H-D Michigan, Inc.
Sebago®. The Sebago® product line consists primarily of performance nautical
and American-inspired casual footwear for men and women, such as boat shoes and
handsewn loafers, that have been manufactured and distributed since 1946. Highly
recognized Sebago® line extensions include Sebago Docksides®, Sebago Drysides™,
Sebago Campsides™ and Athletic Marine. The Sebago® product line is marketed in
approximately 115 countries and territories worldwide. The Sebago® manufacturing and
design tradition of quality componentry, durability, comfort and “Americana”
heritage is further supported by targeted distribution to better-grade independent,
marine and department store retailers throughout the world. The Company expects to
launch a classic and marine Sebago® apparel line in 2009.
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4. The Hush Puppies Company.
Hush Puppies. Since 1958, the Hush Puppies® brand has been a leader in the
casual footwear market. The brand offers shoes and boots for men, women and
children,
and is marketed in approximately 140 countries and territories. The modern styling
is complemented by a variety of comfort features and proprietary technologies that
have earned the brand its reputation for comfort. In addition, the Hush Puppies®
brand is licensed for use on apparel, eyewear, handbags, socks, watches and plush
toys.
Cushe. The Company acquired the Cushe® Footwear business in January 2009. The
Cushe business focuses on relaxed, design-led footwear for active men and women.
Other Businesses.
In addition to manufacturing, sourcing, marketing and distributing the Company’s footwear and
apparel products as reported in the Branded Footwear, Apparel, and Licensing segment, the Company
also (i) operates 90 North American and 2 U.K.-based retail footwear stores, (ii) operates a
performance leathers business through its Wolverine Leathers Division, and (iii) purchases and
cures raw pigskins for sale to various customers through its wholly-owned subsidiary Wolverine
Procurement, Inc.
1. Wolverine Retail. The Company operates 90 North American and 2 U.K.-based
retail shoe stores as of February 2009. These stores are operated under the Hush Puppies®,
Hush Puppies and FamilySM, Track’N Trail®, Rockford Footwear Depot® and Merrell®
names. Both the Rockford Footwear Depot® and Track’N Trail® retail formats carry a large
selection of Company-branded footwear, featuring such brands as Wolverine®, Merrell®, Hush
Puppies®, Cat®, Patagonia®, Sebago® and Harley-Davidson®. The Company also operates
direct-to-customer retail websites, including www.upfootgear.com, www.trackandtrail.com,
www.catfootwear.com, www.hushpuppies.com, www.sebago.com and www.merrell.com.
2. The Wolverine Leathers Division. The Wolverine Leathers Division produces
and markets pigskin leathers primarily for use in the footwear industry. The Company
believes pigskin leathers offer superior performance and advantages over cowhide leathers.
The Company’s waterproof and stain resistant leathers are featured in some of the Company’s
domestic footwear lines and many products offered by the Company’s international licensees
and distributors. Wolverine performance leathers are also featured in certain outside
brands of athletic and outdoor footwear.
3. Wolverine Procurement, Inc. Wolverine Procurement, Inc. performs skinning
operations and purchases raw pigskins from third parties, which it cures and sells to the
Wolverine Leathers Division and to outside customers for processing into pigskin leather
products.
Marketing.
The Company’s overall marketing strategy is to develop brand-specific plans and related
promotional materials for U.S. and international markets to foster a differentiated and consistent
image for each of the Company’s core brands. Each brand group has its own marketing personnel who
develop the marketing strategy for products within that group. Marketing campaigns and strategies
vary by brand and may target accounts and/or end users as they strive to increase overall brand
awareness for the Company’s branded products. The Company’s advertisements typically emphasize
fashion, comfort, quality, durability, functionality and other performance and lifestyle aspects of
the Company’s products. Components of the brand-specific plans vary and may include print, radio
and television advertising, event sponsorships, in-store point of purchase displays, promotional
materials, and sales and technical assistance.
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The Company’s brand groups provide its international licensees and distributors with creative
direction and materials to convey consistent messages and brand images. Examples of marketing
assistance that may be provided by the Company to its licensees and distributors are (i) direction
on the categories of footwear to be promoted, (ii) photography and layouts, (iii) broadcast
advertising, including commercials and film footage, (iv) point-of-purchase presentation
specifications, blueprints and packaging, (v) sales materials and (vi) consulting on retail store
layout and design. The Company believes its brand names provide a competitive advantage and the
Company makes significant expenditures on marketing and promotion to support the position of its
products and enhance brand awareness.
Domestic Sales and Distribution.
The Company uses a wide variety of domestic distribution channels to distribute its branded
footwear products. To meet the diverse needs of its broad customer base, the Company uses the
following distribution strategies:
| • | Traditional wholesale distribution is used to service department
stores, large footwear chains, specialty retailers, catalogs,
independent retailers and uniform outlets. A dedicated sales force
and customer service team, advertising and point of purchase support
and in-stock inventories are used to service these accounts. |
| • | Volume direct programs provide footwear at competitive prices with
limited marketing support. These programs service major retail, mail
order, mass merchant and government customers. |
| • | A network of independent Shoemobile® distribution outlets is used to
distribute the Company’s work and occupational footwear at industrial
facilities. |
| • | The Company solicits all branches of the United States military and
enters bids for contracts to supply specific footwear products. Such
contracts typically contain future purchase options that are not
required to be exercised. |
In addition to its
wholesale activities, the Company also operates a retail operation as
described above. The Company continues to develop various programs, both independently and with its
retail customers, for the distribution of its products.
A broad distribution base insulates the Company from dependence on any one customer. No
customer of the Company accounted for more than 10% of the Company’s revenue in fiscal 2008.
The Company experiences moderate fluctuations in sales volume during the year as reflected in
quarterly revenue (and taking into consideration the 16 weeks or 17 weeks included in the fourth
accounting period versus the 12 weeks included in the first three accounting periods). The Company
also experiences some fluctuation in its levels of working capital, typically including an increase
in working capital requirements near the end of the third quarter. The Company provides working
capital for such fluctuations through internal financing and through a revolving credit agreement.
The Company expects current seasonal sales patterns to continue in future years.
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International Operations and Global Licensing.
The Company records revenue from foreign sources through a combination of (i) sales of branded
footwear products generated from the Company’s owned operations in Canada, the United Kingdom,
Austria, Finland, France, Germany, Italy, the Netherlands, Spain, Sweden and Switzerland and from
sales to international distributors for certain markets and businesses and (ii) from royalty income
through a network of third-party licensees and distributors. The Company’s owned operations are
located in markets where the Company believes it can gain a strategic advantage by more directly
controlling the sale into retail accounts.
The Company derives royalty income from sales of products (primarily Company footwear) bearing
the Hush Puppies®, Wolverine®, Bates®, Merrell®, Sebago® and other trademarks by independent
distributors and licensees. The Company also derives royalty income from sales of footwear bearing
the Cat® and Harley-Davidson® trademarks through foreign distributors. License and distribution
arrangements enable the Company to develop sales in international markets without the capital
commitment required to maintain related foreign operations, employees, inventories or localized
marketing programs.
The Company continues to develop its network of licensees and distributors to market its
footwear brands. The Company assists in designing products that are appropriate to each foreign
market but are consistent with the global brand position. Independent licensees and distributors
purchase goods from either the Company or authorized third-party manufacturers pursuant to
distribution agreements or manufacture branded products consistent with Company standards pursuant
to license agreements. Distributors and licensees are responsible for independently marketing and
distributing Company branded products in their respective territories, with product and market
support provided by the Company.
Manufacturing and Sourcing.
The Company controls the sourcing and/or manufacture of approximately 81% of the pairs of
footwear marketed globally under the Company’s brand names. The balance is controlled directly by
the Company’s licensees. Of the pairs purchased by the Company, approximately 93% are purchased or
sourced from third parties, with the remainder produced at Company-operated facilities. The
Company sources a majority of its footwear from a variety of foreign manufacturing facilities in
the Asia-Pacific region, South America and India. The Company maintains technical offices in the
Asia-Pacific region to facilitate the sourcing and importation of quality footwear. The Company
has established guidelines for each of its third-party manufacturers in order to monitor product
quality, labor practices and financial viability. In addition, the Company has adopted “Engagement
Criteria for Partners & Sources” to require that its domestic and foreign manufacturers, licensees
and distributors use ethical business standards, comply with all applicable health and safety laws
and regulations, are committed to environmentally safe practices, treat employees fairly with
respect to wages, benefits and working conditions, and do not use child or prison labor. Footwear
produced by the Company is manufactured at Company-operated facilities located in Michigan,
Arkansas, and the Dominican Republic.
The Company’s factories each have the flexibility to produce a variety of footwear, which
departs from the industry’s historical practice of dedicating a given facility to production of
specific footwear products. This flexibility allows the Company to quickly respond to changes in
market preference and demand. The Company currently produces military footwear as well as work,
casual and dress casual footwear in its owned facilities. For some of the Company-produced
footwear, a “twin plant” concept is utilized whereby a majority of the labor intensive cutting and
fitting construction of the “upper” portion of shoes and boots is performed at the Company’s
facilities in the Dominican Republic and Arkansas, and
the technology intensive construction, or “bottoming,” is performed primarily at the Company’s
facilities in Michigan and the Dominican Republic.
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The Company’s owned manufacturing operations allow the Company to (i) reduce its production
lead time, enabling it to quickly respond to market demand and reduce inventory risk, (ii) lower
freight and shipping costs, and (iii) closely monitor product quality. The Company’s foreign
manufacturing strategy allows the Company to (a) benefit from lower manufacturing costs and
state-of-the-art manufacturing facilities, (b) source the highest quality raw materials from around
the world, and (c) avoid additional capital expenditures necessary for owned factories and
equipment. The Company believes that its overall global manufacturing strategy gives the Company
the flexibility to properly balance the need for timely shipments, high quality products and
competitive pricing.
The Company owns and operates a pigskin tannery through its Wolverine Leathers Division. The
Company and its licensees receive a majority of their pigskin leather requirements from this
tannery. During 2009, the Company will evaluate strategic alternatives for the Company-owned
leather business. The Company’s management currently expects that this evaluation will result in
the closure of the Company’s pigskin tannery and outsourcing of the Company’s pigskin leather
processing.
The Company’s principal required raw material is quality leather, which it purchases from a
select group of domestic and offshore suppliers, including the Company’s tannery. The global
availability of common upper materials and specialty leathers eliminates any reliance by the
Company upon a sole supplier. The Company currently purchases the vast majority of the raw
pigskins used in a significant portion of its Wolverine Leathers Business from one domestic source.
This source has been a reliable and consistent supplier for over 30 years. Alternative sources of
raw pigskin are available; however the price, processing and/or product characteristics are less
advantageous to the Company. The Company purchases all of its other raw materials and component
parts from a variety of sources, none of which is believed by the Company to be a dominant
supplier.
The Company is subject to the normal risks of doing business abroad due to its international
operations, including the risk of expropriation, acts of war or terrorism, political disturbances
and similar events, the imposition of trade barriers, quotas, tariffs and duties, loss of most
favored nation trading status and currency and exchange rate fluctuations. With respect to
international sourcing activities, management believes that over a period of time, it could arrange
adequate alternative sources of supply for the products currently obtained from its foreign
suppliers. A sustained disruption of such sources of supply could have an adverse impact on the
Company’s operations and financial condition.
Trademarks, Licenses and Patents.
The Company holds a significant portfolio of registered and common law trademarks that
identify its branded footwear and apparel products. The owned trademarks that are most widely used
by the Company include Hush Puppies®, Wolverine®, Bates®, Cushe®, Chaco®, Soft Style®, Wolverine
Fusion®, DuraShocks®, MultiShox®, Wolverine Compressor®, Hidden Tracks®, iTechnologyTM,
Bounce®, Comfort Curve®, HyTest®, Merrell®, Continuum®, Sebago®, Q-Form® and Track ‘N Trail®.
Pigskin leather marketed by the Company’s Wolverine Leathers Division is sold under the trademarks
Wolverine Leathers & Design®, Wolverine Warrior Leather®, Weather Tight® and All Season Weather
Leathers™. As of the date of this Annual Report, the Company has obtained license rights to
manufacture, market and distribute footwear throughout the world under the Cat®, Harley-Davidson®
and Patagonia® trademarks pursuant to license arrangements with the respective trademark owners.
The Cat®, Harley-Davidson®, and Patagonia® licenses extend for five or more years and are subject
to early termination for breach.
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The Company believes that its products are identified by consumers by its trademarks and that
its trademarks are valuable assets. The Company is not aware of any infringing uses or any prior
claims of ownership of its trademarks that could materially affect its current business. It is the
policy of the Company to pursue registration of its primary trademarks whenever practicable and to
vigorously defend its trademarks against infringement or other threats. The Company also holds
many design and utility patents, copyrights and various other proprietary rights. The Company
vigorously protects its proprietary rights under applicable laws.
Order Backlog.
At February 21, 2009, the Company had an order backlog of approximately $357 million compared
to an order backlog of approximately $389 million at February 16, 2008, determined on a basis
consistent with the current year. Substantially all of the backlog relates to demand for products
expected to be shipped in 2009. Orders in the backlog are subject to cancellation by customers and
to changes in planned customer demand or at-once orders. The backlog at a particular time is
affected by a number of factors, including seasonality, retail conditions, expected customer
demand, product availability and the schedule for the manufacture and shipment of products.
Accordingly, a comparison of backlog from period to period is not necessarily meaningful and may
not be indicative of eventual actual shipments.
Competition.
The Company’s footwear lines are manufactured and marketed in a highly competitive
environment. The Company competes with numerous domestic and foreign marketers, manufacturers and
importers of footwear, some of which are larger and have greater resources than the Company. The
Company’s major competitors for its brands of footwear are located in the United States and Europe.
The Company has at least thirty major competitors in connection with the sale of its casual, work
and outdoor footwear. Product performance and quality, including technological improvements,
product identity, competitive pricing and ability to control costs, and the ability to adapt to
style changes are all important elements of competition in the footwear markets served by the
Company. The footwear industry in general is subject to changes in consumer preferences. The
Company strives to maintain its competitive position through promotion of brand awareness,
manufacturing and sourcing efficiencies, and the style, comfort and value of its products. Future
sales by the Company will be affected by its continued ability to sell its products at competitive
prices and to meet shifts in consumer preferences.
Because of the lack of reliable published statistics, the Company is unable to state with
certainty its position in the footwear industry. Market shares in the non-athletic footwear
industry are highly fragmented and no one company has a dominant market position.
Research and Development.
In addition to normal and recurring product development, design and styling activities, the
Company engages in research and development related to the development of new production techniques
and to improving the function, performance, reliability and quality of its branded footwear and
other products. The Company’s continuing relationship with the Biomechanics Evaluation Laboratory
at Michigan State University, for example, has helped validate and refine specific biomechanical
design concepts, such as Bounce®, DuraShocks® and Hidden Tracks® comfort technologies, that have
been incorporated in the Company’s footwear. While the Company expects to continue to be a leading
developer of footwear innovations, research and development costs do not represent a material
portion of operating expenses.
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Environmental Matters.
Compliance with federal, state and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise relating to the protection
of the environment have not had, nor are they expected to have, any material effect on the capital
expenditures, earnings or competitive position of the Company and its subsidiaries. The Company
uses and generates certain substances and wastes that are regulated or may be deemed hazardous
under certain federal, state and local regulations with respect to the environment. The Company
from time to time works with federal, state and local agencies to resolve cleanup issues at various
waste sites and other regulatory issues.
Employees.
As of January 3, 2009, the Company had approximately 4,578 domestic and foreign production,
office and sales employees. Approximately 528 employees were covered by four union contracts
expiring at various dates through January 21, 2010. The Company presently considers its employee
relations to be good.
Available Information.
Information about the Company, including the Company’s Code of Conduct & Compliance, Corporate
Governance Guidelines, Director Independence Standards, Accounting and Finance Code of Ethics,
Audit Committee Charter, Compensation Committee Charter, and Governance Committee Charter, is
available at its website, www.wolverineworldwide.com. Printed copies of the documents listed above
are available, without charge, by writing to the Company at 9341 Courtland Drive, N.E., Rockford,
Michigan 49351, Attention: General Counsel.
The Company also makes available on or through its website, free of charge, the Company’s
annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and
amendments to those reports (along with certain other Company filings with the Securities and
Exchange Commission (“SEC”)) as soon as reasonably practicable after electronically filing such
material with, or furnishing it to, the SEC. These materials are also accessible on the SEC’s
website at www.sec.gov.
Item 1A. Risk Factors.
The Company’s sales, operating results and financial condition are dependant on general economic
conditions and other factors affecting consumer spending.
The success of the Company’s operations depends to a significant extent upon a number of factors
affecting disposable consumer income and consumer spending patterns, both nationally and
internationally, including general economic conditions and factors such as employment, business
conditions, interest rates and taxation. Uncertainty about current and future global economic
conditions may cause the Company’s customers to defer or cancel purchases of the Company’s
products. In addition, recessionary economic cycles, higher interest borrowing rates, restricted
credit availability, inflation, higher levels of unemployment and consumer debt, higher tax rates
or other economic factors may cause consumer confidence to decline, which could adversely affect
the demand for the Company’s products. Consumer spending patterns may be affected by changes in
the amount or severity of inclement weather, the acceptability of U.S. brands in international
markets and the growth or decline of global footwear markets. If demand for the Company’s products
declines, the Company’s sales and profit margins may also decline.
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General economic conditions and regulatory factors such as those listed above, as well as increased
costs of fuel, labor, commodities, insurance and healthcare, may increase the Company’s cost of
sales and operating expenses, which may adversely affect the Company’s financial condition and
results of operations.
The Company’s business will be adversely affected if the Company is not able to maintain its
competitive position in the footwear industry, or compete effectively in retail and apparel
markets.
The Company competes with numerous other marketers of footwear, some of which are larger and
have greater resources than the Company. Product performance and quality, including technological
improvements, product identity, competitive pricing and the ability to adapt to style changes are
all important elements of competition in the footwear industry. The footwear industry in general
is subject to changes in consumer preferences with respect to the popularity of particular designs
and categories of footwear. The Company strives to maintain and improve its competitive position
through promotion of brand awareness, sourcing efficiencies, and the style, comfort and value of
its products. Future sales by the Company will be affected by its continued ability to sell its
products at competitive prices and to meet shifts in consumer preferences. If the Company is
unable to respond effectively to competitive pressures and changes in consumer spending, the
Company’s business, results of operations and financial condition may be adversely affected.
In addition, the Company has only recently begun to expand into apparel and has increased its
focus on competing in the retail sector. Many of its current or future competitors in these areas
have greater experience, a more developed consumer and customer base in these sectors, lower
prices, or greater financial, technical or marketing resources than the Company. The Company’s
competitors in these sectors may be able to undertake more effective marketing campaigns; adopt
more aggressive pricing policies; make more attractive offers to potential employees, distribution
partners and manufacturers; or may be able to respond more quickly to changes in consumer
preferences, than the Company. If the Company’s retail operations and expansion into apparel are
not successful, the Company’s business, results of operations and financial condition may be
adversely affected.
If the Company is not able to manage its inventories effectively, its costs could increase and/or
its sales could decrease, each of which could adversely affect its operating results.
The Company’s ability to manage its inventories properly is an important factor in its
operations. Inventory shortages can impede the Company’s ability to meet at-once orders and can
adversely affect the timing of shipments to customers and diminish brand loyalty. Conversely,
excess inventories can result in increased interest costs as well as lower gross margins due to the
necessity of lowering prices in order to liquidate excess inventories. If the Company is unable to
effectively manage its inventory, its business, results of operations and financial condition may
be adversely affected.
The potential imposition of additional duties, quotas, tariffs and other trade restrictions could
have an adverse impact on the Company’s sales and profitability.
All of the Company’s products manufactured overseas and imported into the United States, the
European Union and other countries are subject to customs duties collected by customs authorities.
Customs information submitted by the Company is routinely subject to review by customs authorities.
Additional U.S. or foreign customs duties, quotas, tariffs, anti-dumping duties, safeguard
measures, cargo restrictions to prevent terrorism or other trade restrictions may be imposed on the
importation of the Company’s products in the future. The imposition of such costs or restrictions
in foreign countries where
the Company operates, as well as in countries where the Company’s third party distributors and
licensees operate, could result in increases in the cost of the Company’s products generally and
could adversely affect the sales and profitability of the Company.
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In October 2006, the European Union imposed anti-dumping duties on specific types of leather
upper footwear originating in China and Vietnam and imported into member states of the European
Union. In October 2008, the European Union initiated an expiry review of the duties to determine
whether they should be extended beyond the original expiration date. The duties remain in effect
while this review is conducted. Because the Company sources a substantial portion of its products
from suppliers located in China and Vietnam, the imposition of these anti-dumping duties has
negatively affected, and, for as long as such anti-dumping duties remain in effect, will continue
to negatively affect, the Company’s sales and gross margin in the European Union.
The Company’s business could be adversely affected by changes in currency values.
Foreign currency fluctuation in valuations compared to the U.S. dollar, changes in monetary
controls and valuations, and the relative value to the U.S. dollar affect the Company’s
profitability. Changes in the relative values of currencies may significantly affect the Company’s
results of operations, financial condition and cash flows. In addition, because currency
valuations fluctuate and the Company may employ hedging strategies over time, changes in currency
exchange rates may impact the Company’s financial results positively or negatively in one period
and not another, which may also make it difficult to compare the Company’s operating results from
different periods. Currency exchange rate fluctuations may also adversely impact the third parties
that manufacture the Company’s products by making their purchases of raw materials or other
production costs more expensive and harder to finance and thereby raising prices for the Company,
its distributors and licensees. For a more detailed discussion of risk relating to foreign
currency fluctuation, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk.
A majority of the Company’s products are produced outside the United States where the Company is
subject to the risks of international commerce.
The Company currently sources most of its footwear from third-party manufacturers in foreign
countries, predominantly China. As is common in the industry, the Company does not have long-term
contracts with its third-party footwear suppliers. There can be no assurance, however, that the
Company will not experience difficulties with such suppliers, including reduction in the
availability of production capacity, failure to meet production deadlines or increases in
manufacturing costs. The Company’s future results will depend partly on its ability to maintain
positive working relationships with its third-party suppliers.
Foreign manufacturing is subject to a number of risks, including work stoppages,
transportation delays and interruptions, political instability, foreign currency fluctuations,
changing economic conditions, expropriation, nationalization, the imposition of tariffs, import and
export controls and other non-tariff barriers and changes in governmental policies. Various
factors could significantly interfere with the Company’s ability to manufacture its products,
including adverse developments in trade or political relations with China or other countries where
the Company sources its products, or China shifting its manufacturing capacity away from footwear
to other industries. Any of these events could have an adverse effect on the Company’s business,
results of operations and financial condition and in particular on the Company’s ability to meet
customer demands and produce its products in a cost-effective manner.
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Currency exchange rate fluctuations in China could result in higher costs and decreased margins.
The Company sources a substantial portion of its products from China. The official exchange
rate for conversion of the Chinese yuan was pegged to the U.S. dollar from 1994 to 2005. In 2005,
the exchange rate for the yuan was linked to a trade-weighted basket of foreign currencies of
China’s primary trading partners, and permitted to float each day up to 0.5% in either direction
from the previous day’s close. As a result, the value of the yuan may increase incrementally over
time. Such increases could significantly increase production costs of products the Company sources
from China. Additional revaluations in the yuan could impact the prices the Company pays its
Chinese manufacturers if they adjust their selling prices accordingly. Increases in the Company’s
production costs will decrease its gross margin unless the Company is able to increase prices to
offset such increased costs.
The Company depends on a limited number of suppliers for key production materials, and any
disruption in the supply of such materials could interrupt product manufacturing and increase
product costs.
The Company’s ability to competitively price its products depends on the cost of footwear
components, services, labor, equipment and raw materials, including leather and materials used in
the production of outsoles. The cost of services and materials is subject to change based on
availability and market conditions that are difficult to predict. Conditions such as diseases
affecting the availability of leather affect the cost of the footwear marketed by the Company. In
addition, the Company’s shipping costs are affected by fuel prices and numerous other factors, such
as the possibility of service interruptions at shipping and receiving ports.
The Company purchases raw pigskins for its leathers operations from a single domestic source
pursuant to short-term contracts. Although this source has been a reliable and consistent supplier
for over 30 years, there are no assurances that it will continue as a supplier. Failure of this
source to continue to supply the Company with raw pigskin or to supply the Company with raw pigskin
on less favorable terms could have a negative impact on the Company’s business, results of
operations and financial condition, including increasing the Company’s cost of raw materials and as
a result, decreasing the Company’s profits.
If the Company’s customers significantly reduce their purchases from the Company or are not able to
pay for its products in a timely manner, the Company’s business, results of operations and
financial condition may be adversely affected.
The Company’s financial success is directly related to the willingness of its customers to
continue to purchase its products. The Company does not typically have long-term contracts with its
customers. Sales to the Company’s customers are generally on an order-by-order basis and are
subject to rights of cancellation and rescheduling by the customers. Failure to fill customers’
orders in a timely manner could harm the Company’s relationships with its customers. Furthermore,
if any of the Company’s major customers experience a significant downturn in its business, or fail
to remain committed to the Company’s products or brands, then these customers may reduce or
discontinue purchases from the Company, which could have an adverse effect on the Company’s
business, results of operations and financial condition.
The Company sells its products to wholesale customers and extends credit based on an
evaluation of each customer’s financial condition, usually without requiring collateral. The
financial difficulties of a customer could cause the Company to stop doing business with that
customer or reduce its business with that customer. The Company’s inability to collect from its
customers or a cessation or reduction of sales
to certain customers because of credit concerns could have an adverse effect on the Company’s
business, results of operations and financial condition.
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The recent trend toward consolidation in the retail industry could lead to customers seeking
more favorable terms of purchase from the Company and could lead to a decrease in the number of
stores that carry the Company’s products. In addition, changes in the channels of distribution,
such as the growth of Internet commerce and the trend toward the sale of private label products by
major retailers, could have an adverse effect on the Company’s business, results of operations and
financial condition.
The Company has been awarded a number of U.S. Department of Defense contracts that include
future purchase options for Bates® footwear. Failure to exercise these purchase options by the
Department of Defense or the failure of the Company to secure future U.S. Department of Defense
contracts could have an adverse effect on the Company’s business, results of operations and
financial condition.
The Company’s financial success may be adversely affected by the current crisis in the credit
markets.
Difficulties in the mortgage and broader credit markets have led to a substantial decrease in
the availability of credit. Commercial banks are demanding borrowers pay higher interest rates and
agree to more onerous terms, and in other cases are refusing to provide financing. If these
conditions continue or worsen, they could adversely impact the Company’s future results of
operations and financial condition. If the Company’s third-party distributors, suppliers and
retailers are not able to obtain financing on favorable terms, or at all, they may delay or cancel
orders for the Company’s products, or fail to meet their obligations to the Company in a timely
manner, either of which could adversely impact the Company’s sales, cash flow and operating
results. In addition, the lack of available credit and/or the increased cost of credit may
significantly impair the Company’s ability to obtain additional credit to finance future expansion
plans, or refinance existing credit, on favorable terms, or at all. Market disruption may also
contribute to extreme price and volume fluctuations in the stock market. This volatility could
affect the market price of Company’s common stock for reasons unrelated to its operating
performance. The extent and duration of any future continued weakening of the credit markets is
unknown. In addition, there can be no assurance that any of the governmental or private sector
initiatives designed to strengthen the condition of the credit markets will be successful.
Unfavorable findings resulting from a government audit could subject the Company to a variety of
penalties and sanctions, and could negatively impact the Company’s future revenues.
The federal government has the right to audit the Company’s performance under its government
contracts. If a government audit uncovers improper or illegal activities, the Company could be
subject to civil and criminal penalties and administrative sanctions, including termination of
contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from
doing business with U.S. federal government agencies. The Company could also suffer serious harm to
its reputation if the government alleges that the Company acted in an improper or illegal manner,
whether or not these allegations have merit. If, as the result of an audit or for any other
reason, the Company is suspended or barred from contracting with the federal government generally,
or any specific agency, if the Company’s reputation or relationship with government agencies is
impaired, or if the government otherwise ceases doing business with the Company or significantly
decreases the amount of business it does with the Company, the Company’s revenue and profitability
could decrease.
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Failure of the Company’s international licensees and distributors to meet sales goals could have an
adverse effect on the Company.
The Company’s products are sold in many international markets through independent licensees or
distributors. Failure by the Company’s licensees or distributors to meet planned annual sales goals
could have an adverse effect on the Company’s business, results of operations and financial
condition, and it may be difficult and costly to locate an acceptable substitute distributor or
licensee. If a change in distributors becomes necessary, the Company may experience increased
costs, as well as substantial disruption and a resulting loss of sales and brand equity in the
market where such distributors operate.
The Company’s reputation and competitive position could suffer if its third-party manufacturers,
distributors, licensees and others violate laws or fail to conform to the Company’s ethical
standards.
The Company requires its independent contract manufacturers, distributors, licensees and
others with which it does business to comply with the Company’s standards relating to working
conditions and other matters. If a party with which the Company does business is found to have
violated the Company’s standards, the Company could receive negative publicity that could damage
its reputation and negatively affect the value of its brands.
The Company’s business could be adversely affected by global political and economic uncertainty.
Concerns regarding acts of terrorism, the war in the Middle East and subsequent events have
created significant global economic and political uncertainties that may have material and adverse
effects on consumer demand, foreign sourcing of footwear, shipping and transportation, product
imports and exports and the sale of products in foreign markets, any of which could adversely
affect the Company’s ability to manufacture, distribute and sell its products. The Company is
subject to risks of doing business in developing countries and economically volatile areas. These
risks include social, political and economic instability; nationalization of the Company’s assets
and operations in a developing country by local government authorities; slower payment of invoices;
and restrictions on the Company’s ability to repatriate foreign currency. In addition, commercial
laws in these areas may not be well-developed or consistently administered, and new laws may be
retroactively applied. Any of these risks could have an adverse impact on the Company’s prospects
and results of operations in these areas.
If the Company’s efforts to establish and protect its intellectual property are unsuccessful, the
value of its brands could suffer.
The Company invests significant resources to develop and protect its intellectual property,
and believes that its trademarks and other intellectual property rights are important to its
success. The Company’s ability to remain competitive is dependent upon its continued ability to
secure and protect trademarks, patents and other intellectual property rights in the United States
and internationally for all of its lines of business. The Company relies on a combination of trade
secret, patent, copyright and other laws, license agreements and other contractual provisions and
technical measures to protect its intellectual property rights; however, some countries’ laws do
not protect intellectual property rights to the same extent as do U.S. laws. The Company’s business
could be significantly harmed if it is not able to protect its intellectual property, or if a court
found that the Company was infringing on other persons’ intellectual property rights. Any
intellectual property lawsuits or threatened lawsuits in which the Company is involved, either as a
plaintiff or as a defendant, could cost the Company a significant amount of time and money and
distract management’s attention from operating the Company’s business. In addition, if the Company
does not prevail on any intellectual property claims, the Company may have to change its
manufacturing processes, products or trade names, any of which could reduce its profitability.
In addition, some of the Company’s branded footwear operations are operated pursuant to licensing
agreements with third-party trademark owners. These agreements are subject to early termination
for breach. Expiration or early termination of any of these license agreements by the licensor
could have a material adverse effect on the Company’s revenues and profits.
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Loss of services of the Company’s key personnel could adversely affect its business.
The Company is dependent on the efforts and abilities of its senior executive officers. While
the Company believes that its senior management team has significant depth and that appropriate
senior management succession plans are in place, the loss of one or more members of senior
executive management or the failure to successfully implement succession planning could have an
adverse effect on the Company, its results of operations and financial condition. The Company’s
future success also depends on its ability to identify, attract and retain additional qualified
personnel. Competition for such employees in the footwear industry is intense and failure to retain
or attract key employees could adversely impact the Company.
Inflationary and other pressures may lead to higher employment costs for the Company.
General inflationary pressures, changes in employment laws and regulations, and other factors could
increase the Company’s overall employment costs. The Company’s employment costs include costs
relating to health care benefits and benefits under the Company’s retirement plans, including a
U.S.-based defined benefit plan. The annual cost of benefits can vary significantly depending on a
number of factors, including changes in the assumed or actual rate of return on plan assets, a
change in the discount rate used to measure obligations, a change in method or timing of meeting
funding obligations, and the rate of health care cost inflation. Increases in the Company’s
overall employment costs could have an adverse effect on the Company’s business, results of
operations and financial condition.
Disruption to the Company’s information technology systems could adversely affect the Company’s
business.
The Company’s technology systems are critical to the operations of its business. Any
interruption, impairment or loss of data integrity or malfunction of these systems could severely
impact the Company’s business, including delays in product fulfillment and reduced efficiency in
operations. In addition, costs and potential problems and interruptions associated with the
implementation of new or upgraded systems or with maintenance or adequate support of existing
systems could also disrupt or reduce the efficiency of our operations.
The Company is subject to risks associated with its growth strategy and acquiring other businesses.
The Company acquired Chaco® Footwear and Cushe® Footwear in 2009. The Company may make other
strategic acquisitions in the future and cannot provide assurance that it will be able to
successfully integrate the operations of Chaco, Cushe or other newly-acquired businesses into the
Company’s operations. Acquisitions involve numerous risks, including risks inherent in entering
new markets in which the Company may not have prior experience; potential loss of significant
customers or key personnel of the acquired business; managing geographically-remote operations; and
potential diversion of management’s attention from other aspects of the Company’s business
operations. Acquisitions may also result in incurrence of debt, dilutive issuances of the
Company’s equity securities and write-offs of goodwill and substantial amortization expenses of
other intangible assets. The failure to
integrate newly acquired businesses or the inability to make suitable strategic acquisitions in the
future could have an adverse effect on the Company’s business, results of operations and financial
condition.
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The maintenance and growth of the Company’s business will be dependent upon the availability of
adequate capital.
The maintenance and growth of the Company’s business will depend on the availability of
adequate capital, which in turn will depend in large part on cash flow generated by its business
and the availability of equity and debt financing. The Company cannot provide assurance that its
operations will generate positive cash flow or that it will be able to obtain equity or debt
financing on acceptable terms or at all. Recent distress in the financial markets has had an
adverse impact on the availability of credit and liquidity resources. The Company’s current
revolving credit agreement expires in July 2010. The Company’s ability to replace the revolving
credit agreement on similar terms may be limited if market and general economic conditions continue
to deteriorate. As a result, the Company cannot provide assurance that it will be able to finance
any expansion plans.
Expanding the Company’s brands into new markets may be difficult and costly, and if the Company is
unable to successfully continue such expansion, its brands may be adversely affected.
As part of its growth strategy, the Company seeks to enhance the positioning of its brands and
to extend its brands into complementary product categories and consumer groups, to expand
geographically, and to improve operational performance. There can be no assurance that the Company
will be able to successfully implement any or all of these growth strategies, which could have an
adverse effect on the Company’s business, results of operations and financial condition. The
Company has invested substantial resources into these strategies and the failure of one or more of
these strategies could have an adverse effect on the Company’s business, results of operations and
financial condition.
Counterfeiting of the Company’s brands can divert sales and damage its brand image.
The Company periodically discovers products that are counterfeit reproductions of its products
or that otherwise infringe on its intellectual property rights in its markets. The Company has not
always been able to successfully stop production and sales of counterfeit products and infringement
of the Company’s intellectual property rights. The actions the Company takes to establish and
protect trademarks, patents and other intellectual property rights both inside and outside of the
United States may not be adequate to prevent imitation of its products by others. If the Company is
unsuccessful in challenging a party’s products on the basis of trademark or design or utility
patent infringement, continued sales of these products could adversely affect the Company’s sales,
devalue its brands and result in the shift of consumer preference away from the Company’s products.
Changes in government regulation may increase the costs of compliance.
The Company’s business is affected by changes in government and regulatory policies in the
United States and on a global basis. New requirements relating to product safety and testing and
new environmental requirements, as well as changes in interest rates, tax laws, duties, tariffs and
quotas could have a negative impact on the Company’s ability to produce and market footwear at
competitive prices.
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The disruption, expense, and potential liability associated with existing and future litigation
against the Company could have a material adverse effect on its reputation, financial condition and
results of operations.
The Company is a defendant from time to time in lawsuits and regulatory actions relating to
its business. Due to the inherent uncertainties of litigation and regulatory proceedings, the
Company cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable
outcome could have an adverse impact on the Company’s business, financial condition and results of
operations. In addition, regardless of the outcome of any litigation or regulatory proceedings,
such proceedings are expensive and may require that the Company devote substantial resources and
executive time to defend the Company.
Provisions of Delaware law and the Company’s certificate of incorporation and bylaws could prevent
or delay a change in control or change in management that could be beneficial to the Company’s
stockholders.
Provisions of the Company’s certificate of incorporation and bylaws, as well as provisions of
Delaware law, could discourage, delay or prevent a merger, acquisition or other change in control
of the Company. These provisions are intended to protect stockholders’ interests by providing the
Board of Directors a means to attempt to deny coercive takeover attempts or to negotiate with a
potential acquirer in order to obtain more favorable terms. Such provisions include a board of
directors that is classified so that only one-third of directors stand for election each year.
These provisions could also discourage proxy contests and make it more difficult for stockholders
to elect directors and take other corporate actions.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
The Company operates its domestic administration, sales and marketing operations primarily
from an owned facility of approximately 225,000 square feet in Rockford, Michigan. The Company’s
manufacturing and tanning operations are primarily conducted at a combination of leased and owned
facilities in Arkansas, Michigan and the Dominican Republic. The Company operates its warehousing
operations primarily through owned warehouses in Rockford, Michigan, totaling approximately 475,000
square feet, a leased warehouse in Cedar Springs, Michigan, of approximately 356,000 square feet
and a leased warehouse in Howard City, Michigan, of approximately 460,000 square feet.
The Company also leases and owns various other offices and warehouses in the United States to
meet its operational requirements. In addition, the Company operates retail stores through leases
with various third-party landlords. International operations are conducted in Canada, the United
Kingdom, China, Hong Kong and Europe through leased warehouses, offices and/or showrooms. The
Company believes that its current facilities are suitable and adequate for its current needs.
Item 3. Legal Proceedings.
The Company is involved in litigation and various legal matters arising in the normal course
of business, including certain environmental compliance activities. The Company has considered
facts related to legal and regulatory matters and opinions of counsel handling these matters, and
does not
believe the ultimate resolution of such proceedings will have a material adverse effect on the
Company’s financial condition, results of operations, or cash flows.
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Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders, through the solicitation of proxies or
otherwise, during the fourth quarter of the fiscal year covered by this report.
Supplemental Item. Executive Officers of the Registrant.
The following table lists the names and ages of the Executive Officers of the Company and the
positions presently held with the Company. The information provided below the table lists the
business experience of each such Executive Officer during the past five years. All Executive
Officers serve at the pleasure of the Board of Directors of the Company, or if not appointed by the
Board of Directors, they serve at the pleasure of management.
| Name | Age | Positions held with the Company | ||||
Kenneth A. Grady
|
52 | General Counsel and Secretary | ||||
Donald T. Grimes
|
46 | Senior Vice President, Chief Financial Officer and Treasurer | ||||
Blake W. Krueger
|
55 | Chief Executive Officer and President | ||||
Pamela L. Linton
|
59 | Senior Vice President, Human Resources | ||||
Michael F. McBreen
|
43 | President, Global Operations Group | ||||
Michael D. Stornant
|
42 | Corporate Controller | ||||
James D. Zwiers
|
41 | Senior Vice President | ||||
Kenneth A. Grady has served the Company as General Counsel and Secretary since October 2006.
During 2006, he was President and shareholder of the law firm K.A. Grady PC. During 2005, he
served as Vice President, General Counsel and Secretary of PC Connection, Inc., a direct marketer
of information technology products and solutions. From 2004 to 2005, Mr. Grady served as Executive
Vice President of Administration, General Counsel and Secretary of KB Toys, Inc., a specialty toy
retailer. From 2001 to 2004, he served as Vice President, General Counsel and Secretary of KB
Toys, Inc.
Donald T. Grimes has served the Company as Senior Vice President, Chief Financial Officer and
Treasurer since May 2008. From 2007 to 2008, he was the Executive Vice President and Chief
Financial Officer for Keystone Automotive Operations, Inc., a distributor of automotive accessories
and equipment. Prior to Keystone, Mr. Grimes held a series of senior corporate and divisional
finance roles at Brown-Forman Corporation, a manufacturer and marketer of premium wines and
spirits. During his employment at Brown-Forman, Mr. Grimes was Vice President, Director of
Beverage Finance from 2006 to 2007; Vice President, Director of Corporate Planning and Analysis
from 2003 to 2006; and Chief Financial Officer of Brown-Forman Spirits America from 1999 to 2003.
Blake W. Krueger has served the Company as Chief Executive Officer and President since April
2007. From October 2005 to April 2007 he served as Chief Operating Officer and President. From
August 2004 to October 2005, he served as Executive Vice President and Secretary of the Company and
President of the Heritage Brands Group. From November 2003 to August 2004 he served the Company as
Executive Vice President, Secretary, and President of Caterpillar Footwear. From April 1996 to
November 2003 he served the Company as Executive Vice President, General Counsel and Secretary.
From 1993 to April 1996 he served as General Counsel and Secretary. From 1985 to 1996 he was a
partner with the law firm of Warner Norcross & Judd LLP.
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Pamela L. Linton has served the Company as Senior Vice President, Human Resources since
December 2007. From 2005 to 2007 she was an independent consultant. From 2001 to 2005 she was
Senior Vice President, Global Human Resources of American Greetings Corporation, a greeting card
and gift wrap company.
Michael F. McBreen has served the Company as President, Global Operations Group of Wolverine
since June 2008. From 2007 to 2008, he was Vice President, Supply Chain & Logistics for Furniture
Brands International, a home furnishings company. Prior to Furniture Brands International, Mr.
McBreen held a series of senior supply chain roles with Nike, Inc., a marketer of athletic footwear
and apparel. During his employment at Nike, Mr. McBreen was Director, Global Apparel Operations
from 2004 to 2007; Director, Global Apparel Operations & Corporate Responsibility from 2002 to
2004; and Director, Global Supply Chain Operations from 2000 to 2002.
Michael D. Stornant has served the Company as Corporate Controller since May 2008. From 2007
to 2008, he served as Senior Vice President of Owned Operations for the Global Operations Group at
Wolverine. From 2006 to 2007, he was Wolverine’s Vice President of Finance for the Global
Operations Group. From 2003 to 2006, he served the Company as the Director of Internal Audit. From
1996 to 2003, he held various finance-related positions at the Company.
James D. Zwiers has served the Company as Senior Vice President since January 2008. From
October 2006 to December 2007 he served as President of the Company’s Hush Puppies U.S. Division.
From October 2005 to October 2006 he served as the Company’s General Counsel and Secretary. From
December 2003 to October 2005 he served as General Counsel and Assistant Secretary. From January
1998 to December 2003 he served the Company as Associate General Counsel and Assistant Secretary.
From 1995 to 1998 he was an attorney with the law firm of Warner Norcross & Judd LLP.
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PART II
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities. |
The Company’s common stock is traded on the New York Stock Exchange under the symbol “WWW.”
The following table shows the high and low stock prices on the New York Stock Exchange and
dividends declared by calendar quarter for 2008 and 2007. The number of stockholders of record on
February 23, 2009, was 1,257.
| 2008 | 2007 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
Stock Price |
||||||||||||||||
First quarter |
$ | 29.17 | $ | 19.85 | $ | 31.08 | $ | 26.78 | ||||||||
Second quarter |
31.21 | 26.59 | 30.80 | 27.30 | ||||||||||||
Third quarter |
28.66 | 22.23 | 29.22 | 24.55 | ||||||||||||
Fourth quarter |
29.45 | 16.24 | 29.60 | 23.38 | ||||||||||||
| 2008 | 2007 | |||||||
Cash Dividends Declared Per Share |
||||||||
First quarter |
$ | 0.11 | $ | 0.09 | ||||
Second quarter |
0.11 | 0.09 | ||||||
Third quarter |
0.11 | 0.09 | ||||||
Fourth quarter |
0.11 | 0.09 | ||||||
A quarterly dividend of $0.11 per share was declared during the first quarter of fiscal 2009. See Item 12 for information with respect to the Company’s equity compensation plans.
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Stock Performance Graph
The following graph compares the cumulative total stockholder return on Wolverine common stock
to the Standard & Poor’s Small Cap 600 Index and the Standard & Poor’s 600 Footwear Index, assuming
an investment of $100.00 at the beginning of the period indicated. Wolverine is part of the
Standard & Poor’s Small Cap 600 Index and the Standard & Poor’s Footwear Index. This Stock
Performance Graph shall not be deemed to be incorporated by reference into the Company’s SEC
filings and shall not constitute soliciting material or otherwise be considered filed under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
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The following table provides information regarding the Company’s purchases of its own common
stock during the fourth quarter of fiscal 2008:
Issuer Purchases of Equity Securities
| Total Number | ||||||||||||||||
| of Shares | Maximum | |||||||||||||||
| Purchased | Number | |||||||||||||||
| as Part of | of Shares that | |||||||||||||||
| Total | Publicly | May Yet | ||||||||||||||
| Number of | Average | Announced | Be Purchased | |||||||||||||
| Shares | Price Paid | Plans or | Under the Plans | |||||||||||||
| Period | Purchased | per Share | Programs | or Programs | ||||||||||||
Period 1 (September 7, 2008 to October 4, 2008) |
||||||||||||||||
Common Stock Repurchase Program(1) |
— | $ | — | — | 678,196 | |||||||||||
Employee Transactions(2) |
1,051 | 26.65 | N/A | N/A | ||||||||||||
Period 2 (October 5, 2008 to November 1, 2008) |
||||||||||||||||
Common Stock Repurchase Program(1) |
1,600 | $ | 20.99 | 1,600 | 676,596 | |||||||||||
Employee Transactions(2) |
— | — | N/A | N/A | ||||||||||||
Period 3 (November 2, 2008 to November 29,
2008) |
||||||||||||||||
Common Stock Repurchase Program(1) |
70,400 | $ | 19.98 | 70,400 | 606,196 | |||||||||||
Employee Transactions(2) |
— | — | N/A | N/A | ||||||||||||
Period 4 (November 30, 2008 to January 3, 2009) |
||||||||||||||||
Common Stock Repurchase Program(1) |
— | $ | — | — | 606,196 | |||||||||||
Employee Transactions(2) |
— | — | N/A | N/A | ||||||||||||
Total for Fourth Quarter ended January 3, 2009 |
||||||||||||||||
Common Stock Repurchase Program(1) |
72,000 | $ | 20.00 | 72,000 | 606,196 | |||||||||||
Employee Transactions(2) |
1,051 | 26.65 | N/A | N/A | ||||||||||||
| (1) | The Company’s Board of Directors approved a common stock repurchase
program on April 19, 2007. This program authorizes the repurchase of
7.0 million shares of common stock over a 36-month period, commencing
on the effective date of the program. All shares repurchased during
the period covered by this report were purchased under this
publicly-announced program. |
|
| (2) | Employee transactions include: (1) shares delivered or attested in
satisfaction of the exercise price and/or tax withholding obligations
by holders of employee stock options who exercised options, and (2)
restricted shares withheld to offset tax withholding that occurs upon
vesting of restricted shares. The Company’s employee stock
compensation plans currently provide that the value of the shares
delivered or attested to, or withheld, shall be the closing price of
the Company’s common stock on the date the relevant transaction
occurs. |
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Item 6. Selected Financial Data.
Five-Year Operating and Financial Summary (1)
| (Thousands of Dollars, Except Per Share Data) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Summary of Operations |
||||||||||||||||||||
Revenue |
$ | 1,220,568 | $ | 1,198,972 | $ | 1,141,887 | $ | 1,060,999 | $ | 991,909 | ||||||||||
Net earnings |
95,821 | 92,886 | 83,647 | 74,467 | 65,938 | |||||||||||||||
Per share of common stock: |
||||||||||||||||||||
Basic net earnings(2)(3) |
$ | 1.96 | $ | 1.77 | $ | 1.52 | $ | 1.33 | $ | 1.15 | ||||||||||
Diluted net earnings(2)(3) |
1.90 | 1.70 | 1.47 | 1.27 | 1.09 | |||||||||||||||
Cash dividends declared(2) |
0.44 | 0.36 | 0.30 | 0.26 | 0.19 | |||||||||||||||
Financial Position at Year End |
||||||||||||||||||||
Total assets |
$ | 664,780 | $ | 638,378 | $ | 671,092 | $ | 626,580 | $ | 639,571 | ||||||||||
Long-term debt |
5 | 10,731 | 21,471 | 32,411 | 43,904 | |||||||||||||||
Notes to Five-Year Operating and Financial Summary
| (1) | This summary should be read in conjunction with the consolidated
financial statements and the related notes, which are attached as
Appendix A to this Annual Report on Form 10-K. |
|
| (2) | On December 15, 2004, the Company announced a three-for-two stock
split in the form of a stock dividend on shares of common stock
outstanding at January 3, 2005 that was distributed to stockholders on
February 1, 2005. All per share data has been retroactively adjusted
for the increased shares resulting from this stock split. |
|
| (3) | Basic earnings per share are based on the weighted average number of
shares of common stock outstanding during the year after adjustment
for nonvested restricted common stock. Diluted earnings per share
assume the exercise of dilutive stock options and the vesting of all
outstanding restricted stock. |
Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
OVERVIEW
BUSINESS OVERVIEW
Wolverine World Wide, Inc. (the “Company”) continues to evolve from a leading global marketer of
branded footwear into a multi-brand global marketer of footwear, apparel, and accessories. The
Company’s business strategy is to market a portfolio of lifestyle brands that will: “Excite
Consumers Around the World with Innovative Footwear and Apparel that Bring Style to Purpose.” The
Company intends to continue to execute this strategy by offering innovative products to achieve
product/brand excellence, delivering supply-chain excellence and operating efficiency,
complementing its footwear brands with strong apparel and accessories offerings, and building a
more substantial global consumer-direct footprint.
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FINANCIAL HIGHLIGHTS
The following represent the financial performance highlights of fiscal year 2008 compared to 2007:
| • | Record revenue and earnings per share for the eighth consecutive year. |
| • | Revenue for 2008 of $1.221 billion, a 1.8% increase over 2007 revenue of $1.199 billion. |
| • | Diluted earnings per share grew to $1.90 per share for 2008 compared to $1.70 per share
for 2007, an increase of 11.8%. |
| • | Accounts receivable decreased 6.7% in 2008 compared to 2007 on a reported 3.2% decrease
in fourth quarter revenue. |
| • | Inventory turnover increased to 3.8 turns in 2008 from 3.7 turns in the prior year. |
| • | Solid operating results generated $93.5 million of cash from operating activities for
2008, compared to $123.3 million for 2007. |
| • | The Company ended 2008 with $89.5 million of cash on hand and interest-bearing debt of
$59.5 million, for a net cash position of $30.0 million. |
| • | During 2008, the Company repurchased 2.8 million shares of its stock for $74.1 million. |
| • | The Company declared cash dividends of $0.44 per share in 2008, a 22.2% increase over
the $0.36 per share declared in 2007. |
RECENT DEVELOPMENTS
Strategic Restructuring Plan
On January 7, 2009, the Company’s Board of Directors approved management’s request to implement a
strategic restructuring plan. This plan will allow the Company to create significant operating
efficiencies, improve its supply chain, and create a stronger global brand platform.
The Company has provided preliminary estimated ranges for expected costs and benefits of the
restructuring plan and will provide further disclosure as appropriate.
In 2009, the implementation costs to consolidate key manufacturing, distribution and global
operations functions are estimated to range from $31.0 million to $36.0 million. Approximately
$9.0 million to $10.0 million of this estimate represents non-cash charges. Continuing annualized
pretax benefits once all initiatives are fully implemented are estimated to be $17.0 million to
$19.0 million. The strategic restructuring plan is expected to be completed in 2009.
Cushe® Footwear Brand
On January 8, 2009, the Company announced the acquisition of the Cushe® footwear brand, an
acquisition that is expected to drive new global opportunities and leverage the strength of the
Company’s business model and operating infrastructure. Cushe® is a part of The Hush Puppies
Company.
Chaco® Footwear Brand
On January 22, 2009, the Company announced the acquisition of Chaco®, a performance outdoor
footwear brand based in Colorado with a unique heritage and strong consumer following. This
acquisition represents an excellent opportunity for the Company to leverage its world-class
sourcing and logistics infrastructure, building upon Chaco®’s leadership in the U.S. market while
expanding its business internationally. Chaco® is a part of the Outdoor Group.
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OUTLOOK FOR 2009
Looking ahead, the Company expects that 2009 will be a difficult economic environment, with
unpredictable consumer spending.
The Company’s backlog of future orders is lower than the prior year as retailers remain cautious in
the face of global economic uncertainty. Future orders are not necessarily indicative of the
Company’s expected revenue growth for 2009, as the mix of orders can shift between future and
at-once orders. As economic turmoil continues, the Company anticipates that retailers will
increasingly expect wholesalers to maintain sufficient inventory balances to meet near-term
consumer demand. In addition, foreign exchange rate fluctuations, variable order cancellations and
discounts can cause differences between future orders for a given period and actual revenues
ultimately recorded in that period. As such, the Company views backlog as an increasingly less
relevant predictor of future sales.
The Company expects that the U.S. dollar will continue to strengthen against the British pound,
euro, and Canadian dollar in 2009. As a result, the Company anticipates that foreign exchange will
negatively impact revenue by approximately $90.0 million and earnings per share by approximately
$0.15 per share in 2009 compared to 2008.
The Company’s defined benefit pension plans, which were more than fully funded at the beginning of
2008, experienced a significant decline in the value of pension assets during the year. As a
result, the Company will record approximately $9.0 million of additional pension expense in 2009.
In light of these current challenging economic conditions, the Company is taking actions through
its strategic restructuring plan, its recent acquisitions, and a thorough examination of all
sources of profit growth. While 2009 will likely present some challenges, the Company believes it
has a strong competitive position and views the current environment as an opportunity to emerge as
an even stronger player in its industry.
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Table of Contents
The following is a discussion of the Company’s results of operations and liquidity and capital
resources. This section should be read in conjunction with the Company’s consolidated financial
statements and related notes included elsewhere in this Annual Report.
RESULTS OF OPERATIONS — FISCAL 2008 COMPARED TO FISCAL 2007
FINANCIAL SUMMARY — 2008 VERSUS 2007
| 2008 | 2007 | Change | ||||||||||||||||||||||
| (Millions of Dollars, Except Per Share Data) | $ | % of Total |
$ | % of Total |
$ | % of Total |
||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Branded footwear, apparel, and
licensing |
$ | 1,106.1 | 90.6 | % | $ | 1,099.2 | 91.7 | % | $ | 6.9 | 0.6 | % | ||||||||||||
Other business units |
114.5 | 9.4 | % | 99.8 | 8.3 | % | 14.7 | 14.8 | % | |||||||||||||||
Total Revenue |
$ | 1,220.6 | 100.0 | % | $ | 1,199.0 | 100.0 | % | $ | 21.6 | 1.8 | % | ||||||||||||
| % of | % of | % of | ||||||||||||||||||||||
| $ | Revenue | $ | Revenue | $ | Revenue | |||||||||||||||||||
Gross Profit |
||||||||||||||||||||||||
Branded footwear, apparel, and
licensing |
$ | 444.7 | 40.2 | % | $ | 434.6 | 39.5 | % | $ | 10.1 | 2.3 | % | ||||||||||||
Other business units |
41.3 | 36.1 | % | 37.3 | 37.4 | % | 4.0 | 10.7 | % | |||||||||||||||
Total Gross Profit |
$ | 486.0 | 39.8 | % | $ | 471.9 | 39.4 | % | $ | 14.1 | 3.0 | % | ||||||||||||
Selling, General, and
Administrative expenses |
$ | 345.2 | 28.3 | % | $ | 333.2 | 27.8 | % | $ | 12.0 | 3.6 | % | ||||||||||||
Interest (income) expense — net |
1.1 | 0.1 | % | (0.7 | ) | (0.1 | %) | 1.8 | 264.6 | % | ||||||||||||||
Other (income) expense — net |
(0.9 | ) | (0.1 | %) | 0.8 | 0.1 | % | (1.7 | ) | (196.2 | %) | |||||||||||||
Earnings before income taxes |
$ | 140.6 | 11.5 | % | $ | 138.6 | 11.6 | % | $ | 2.0 | 1.5 | % | ||||||||||||
Net Earnings |
$ | 95.8 | 7.9 | % | $ | 92.9 | 7.7 | % | $ | 2.9 | 3.2 | % | ||||||||||||
Diluted earnings per share |
$ | 1.90 | — | $ | 1.70 | — | $ | 0.20 | 11.8 | % | ||||||||||||||
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The Company has one reportable segment that is engaged in manufacturing, sourcing, marketing,
licensing, and distributing branded footwear, apparel, and accessories. Within the branded
footwear, apparel, and licensing segment, the Company has identified four primary operating units,
consisting of the Outdoor Group (consisting of the Merrell® and Patagonia® Footwear brands), the
Wolverine Footwear Group (consisting of the Wolverine®, HyTest®, Bates® Footwear and Stanley®
Footgear brands and certain private label branded products), the Heritage Brands Group (consisting
of the Cat® Footwear, Harley-Davidson® Footwear and Sebago® brands), The Hush Puppies Company, and
Other. The Company’s other business units, which do not collectively comprise a second reportable
segment, consist of Wolverine Retail and Wolverine Leathers (comprised of the tannery and
procurement operations). The following is supplemental information on total revenue:
TOTAL REVENUE
| 2008 | 2007 | Change | ||||||||||||||||||||||
| (Millions of Dollars) | $ | % | $ | % | $ | % | ||||||||||||||||||
Outdoor Group |
$ | 428.4 | 35.1 | % | $ | 416.7 | 34.8 | % | $ | 11.7 | 2.8 | % | ||||||||||||
Wolverine Footwear Group |
261.9 | 21.5 | % | 256.6 | 21.4 | % | 5.3 | 2.1 | % | |||||||||||||||
Heritage Brands Group |
242.3 | 19.8 | % | 241.0 | 20.1 | % | 1.3 | 0.5 | % | |||||||||||||||
The Hush Puppies Company |
160.9 | 13.2 | % | 174.1 | 14.5 | % | (13.2 | ) | (7.6 | %) | ||||||||||||||
Other |
12.6 | 1.0 | % | 10.8 | 0.9 | % | 1.8 | 17.2 | % | |||||||||||||||
Total branded footwear,
apparel, and licensing
revenue |
$ | 1,106.1 | 90.6 | % | $ | 1,099.2 | 91.7 | % | $ | 6.9 | 0.6 | % | ||||||||||||
Other business units |
114.5 | 9.4 | % | 99.8 | 8.3 | % | 14.7 | 14.8 | % | |||||||||||||||
Total Revenue |
$ | 1,220.6 | 100.0 | % | $ | 1,199.0 | 100.0 | % | $ | 21.6 | 1.8 | % | ||||||||||||
REVENUE
Revenue for 2008 exceeded revenue for 2007 by $21.6 million. Changes in product mix and changes in
selling price for the branded footwear, apparel, and licensing operations, as discussed below,
contributed $16.7 million of the revenue increase. The impact of translating foreign-denominated
revenue to U.S. dollars increased revenue by $3.2 million. These increases were partially offset
by a decrease of $13.0 million due to the planned phase-out of the Hush Puppies® slippers, Stanley®
Footgear, and private label businesses. The other business units contributed $14.7 million to the
revenue increase. International revenue represented 40.2% of total revenue in 2008 compared to
39.0% in 2007.
The Outdoor Group earned revenue of $428.4 million for 2008, an $11.7 million increase over 2007.
The Merrell® brand grew revenue at a low single-digit rate over the prior year, due primarily to
the inclusion of a full year of sales of Merrell® Apparel, which was introduced in the second half
of 2007. Patagonia® Footwear grew its revenue at a rate in the low teens in 2008, its second full
year of operation. The solid revenue growth, which is primarily attributable to increased sales of
Patagonia® Footwear products in the performance category, demonstrates the brand’s appeal for
outdoor enthusiasts.
The Wolverine Footwear Group recorded revenue of $261.9 million for 2008, a $5.3 million increase
from 2007. Despite the challenging retail environment in the United States, revenue from the
Wolverine® brand increased at a low single-digit rate for 2008 compared to 2007 due primarily to
the success of the premium-priced Contour WeltTM collection. The Bates® military and
civilian uniform footwear business delivered a strong performance in 2008, growing its revenue at a
rate in the mid teens due to increased civilian business and U.S. Department of Defense contract
shipments compared to 2007. HyTest® grew revenue at a high single-digit rate over the prior year
due primarily to a successful contract bid for one of its distributors. Revenue from the Stanley®
Footgear and private label businesses decreased by $11.4 million in 2008 compared to 2007 as a
result of the planned phase-out of these businesses. The Stanley® Footgear license expired on June
30, 2008.
The Heritage Brands Group generated revenue of $242.3 million during 2008, a $1.3 million increase
over 2007. Cat® Footwear’s revenue increased at a low single-digit rate in 2008 as a result of
solid revenue growth in the United States, Canada, and globally through the international
distribution network, partially offset by a decrease in Europe as a result of the challenging
retail climate. Harley-Davidson® Footwear revenue decreased at a mid single-digit rate in 2008 due
primarily to the planned repositioning of the brand in the United States market and resulting
distribution channel modifications. Revenue for the Sebago® brand increased slightly from 2007, as
strong revenue growth in the United States was offset by lower sales in international markets.
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The Hush Puppies Company recorded revenue of $160.9 million in 2008, a $13.2 million decrease from
2007. Revenue earned by the international licensing business grew at a rate in the mid teens
during 2008 due to positive response to Hush Puppies® product offerings. Decreases in the United
States, Europe, and Canada more than offset this increase, driven by bankruptcies of key retailers
in the United States and United Kingdom, soft retail conditions, production delays resulting from
factory closures, and a planned exit of a highly-promotional department store customer in Canada.
Hush Puppies® 2008 revenue also declined by $1.6 million from 2007 as a result of the planned
phase-out of the slipper business.
Within the Company’s other business units, Wolverine Retail reported a high single-digit sales
increase in comparison to 2007 as a result of growth from the Company’s e-commerce channel.
Wolverine Retail operated 90 retail stores in North America at the end of both 2008 and 2007. The
Wolverine® Leathers operation reported a revenue growth rate in the mid twenties for 2008,
primarily due to an increase in orders placed by key customers and increased demand for its
proprietary products.
The Company’s ending backlog for 2008 decreased at a high single-digit rate on a pair basis in
comparison to 2007.
GROSS MARGIN
Gross margin for 2008 of 39.8% was 40 basis points higher than the prior year. Benefits from
foreign exchange were partially offset by higher freight and product costs from third-party
manufacturers and service providers and the variation in the business mix.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses of $345.2 million for 2008 increased $12.0 million
from $333.2 million in 2007. Continued investment in brand development through product, marketing,
and retail placement initiatives increased costs in 2008 by $4.7 million in comparison to 2007.
The remaining increase related primarily to increased selling costs due to the increase in revenue
and an increase in corporate general and administrative expenses, partially driven by costs
associated with the consolidation of the Company’s European operations in new London-based offices.
INTEREST, OTHER, AND TAXES
The change in net interest (income) expense reflected increased borrowings to fund the repurchase
of the Company’s stock throughout 2008.
The change in other (income) expense primarily related to the change in realized gains or losses on
foreign denominated assets and liabilities.
The Company’s effective tax rate for 2008 was 31.8% compared to 33.0% in 2007. In the fourth
quarter of 2008, the research and development tax credit was extended by the U.S. Congress and as a
result the Company recognized an income tax benefit in the fourth quarter. In addition, the
reduced rate reflects a higher portion of earnings from lower-taxed foreign jurisdictions. The
annualized effective tax rate for fiscal 2009 is projected in the range of 31.5% to 32.5%.
NET EARNINGS
As a result of the revenue, gross margin, and expense changes discussed above, the Company achieved
net earnings of $95.8 million in 2008 compared to $92.9 million in 2007, an increase of $2.9
million. Basic net earnings per share increased 10.7% in 2008 to $1.96 from $1.77 in 2007, and
diluted net earnings per share increased 11.8% in 2008 to $1.90 from $1.70 in 2007. In addition to
the increase in net earnings,
the increase in earnings per share is attributable to fewer shares outstanding throughout 2008 as a
result of the repurchase of the Company’s common stock.
Inflation has not had a significant impact on revenue or net earnings.
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RESULTS OF OPERATIONS — FISCAL 2007 COMPARED TO FISCAL 2006
FINANCIAL SUMMARY — 2007 VERSUS 2006
| 2007 | 2006 | Change | ||||||||||||||||||||||
| % of | % of | % of | ||||||||||||||||||||||
| (Millions of Dollars, Except Per Share Data) | $ | Total | $ | Total | $ | Total | ||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Branded footwear, apparel, and
licensing |
$ | 1,099.2 | 91.7 | % | $ | 1,036.9 | 90.8 | % | $ | 62.3 | 6.0 | % | ||||||||||||
Other business units |
99.8 | 8.3 | % | 105.0 | 9.2 | % | (5.2 | ) | (4.9 | %) | ||||||||||||||
Total Revenue |
$ | 1,199.0 | 100.0 | % | $ | 1,141.9 | 100.0 | % | $ | 57.1 | 5.0 | % | ||||||||||||
| % of | % of | % of | ||||||||||||||||||||||
| $ | Revenue | $ | Revenue | $ | Revenue | |||||||||||||||||||
Gross Profit |
||||||||||||||||||||||||
Branded footwear, apparel, and
licensing |
$ | 434.6 | 39.5 | % | $ | 402.3 | 38.8 | % | $ | 32.3 | 8.0 | % | ||||||||||||
Other business units |
37.3 | 37.4 | % | 39.2 | 37.4 | % | (1.9 | ) | (4.9 | %) | ||||||||||||||
Total Gross Profit |
$ | 471.9 | 39.4 | % | $ | 441.5 | 38.7 | % | $ | 30.4 | 6.9 | % | ||||||||||||
Selling, General, and
Administrative expenses |
$ | 333.2 | 27.8 | % | $ | 318.2 | 27.9 | % | $ | 15.0 | 4.7 | % | ||||||||||||
Interest income — net |
(0.7 | ) | (0.1 | %) | (0.2 | ) | 0.0 | % | (0.5 | ) | (227.1 | % ) | ||||||||||||
Other expense — net |
0.8 | 0.1 | % | 1.2 | 0.1 | % | (0.4 | ) | (27.6 | %) | ||||||||||||||
Earnings before income taxes |
$ | 138.6 | 11.6 | % | $ | 122.3 | 10.7 | % | $ | 16.3 | 13.3 | % | ||||||||||||
Net Earnings |
$ | 92.9 | 7.7 | % | $ | 83.6 | 7.3 | % | $ | 9.3 | 11.0 | % | ||||||||||||
Diluted earnings per share |
$ | 1.70 | — | $ | 1.47 | — | $ | 0.23 | 15.6 | % | ||||||||||||||
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The following is supplemental information on total revenue:
TOTAL REVENUE
| 2007 | 2006 | Change | ||||||||||||||||||||||
| (Millions of Dollars) | $ | % | $ | % | $ | % | ||||||||||||||||||
Outdoor Group |
$ | 416.7 | 34.8 | % | $ | 358.8 | 31.4 | % | $ | 57.9 | 16.1 | % | ||||||||||||
Wolverine Footwear Group |
256.6 | 21.4 | % | 275.8 | 24.2 | % | (19.2 | ) | (6.9 | %) | ||||||||||||||
Heritage Brands Group |
241.0 | 20.1 | % | 226.8 | 19.8 | % | 14.2 | 6.3 | % | |||||||||||||||
The Hush Puppies Company |
174.1 | 14.5 | % | 169.9 | 14.9 | % | 4.2 | 2.4 | % | |||||||||||||||
Other |
10.8 | 0.9 | % | 5.6 | 0.5 | % | 5.2 | 92.5 | % | |||||||||||||||
Total branded footwear,
apparel, and licensing
revenue |
$ | 1,099.2 | 91.7 | % | $ | 1,036.9 | 90.8 | % | $ | 62.3 | 6.0 | % | ||||||||||||
Other business units |
99.8 | 8.3 | % | 105.0 | 9.2 | % | (5.2 | ) | (4.9 | %) | ||||||||||||||
Total Revenue |
$ | 1,199.0 | 100.0 | % | $ | 1,141.9 | 100.0 | % | $ | 57.1 | 5.0 | % | ||||||||||||
REVENUE
Revenue for 2007 increased $57.1 million over 2006. Increases in unit volume, changes in product
mix, and changes in selling price for the branded footwear, apparel, and licensing segment
operations, as discussed below, contributed $39.5 million of the revenue increase. The impact of
translating foreign-denominated revenue to U.S. dollars improved revenue by $22.8 million. The
other business units’ revenue decreased $5.2 million. Both domestic and international revenue
increased, with international revenue accounting for 39.0% of total revenue in 2007 compared to
36.8% in 2006.
The Outdoor Group reported an increase in revenue of $57.9 million over 2006. The Merrell®
footwear business realized a $41.8 million increase over the prior year, as revenue increases were
achieved across substantially all geographies. Strong sales in the multi-sport and trail running
categories, along with strong performance from women’s casual product, drove the majority of the
increase. The brand also continued to experience growth with its network of international
distributors. The Merrell® Apparel division, which launched in the second half of 2007,
contributed $4.6 million in revenue. In the first full year of business, Patagonia® experienced
strong sell-through, especially in men’s product, and contributed approximately $11.5 million to
the increase.
The Wolverine Footwear Group recorded a $19.2 million decrease in revenue for 2007, compared to
2006. The Wolverine® business, which includes the HyTest® brand, experienced an increase of $5.2
million during 2007 due to higher demand in the mobile distribution channel, strong reorder
activity on the MultiShox® comfort technology product, the successful introduction of the Contour
WeltTM technology, and the launch of the Wolverine® Apparel business. The Bates®
division recognized a decrease in revenue from 2006 of $7.2 million due to a planned reduction in
demand from the U.S. Department of Defense. Lower sales due to the planned phase out of Stanley®
Footgear and private label businesses decreased revenue by $5.2 million and $12.0 million,
respectively.
The Heritage Brands Group experienced a $14.2 million revenue increase in 2007, compared to 2006.
Cat® Footwear’s revenue increased $7.4 million, driven by strong revenue growth in the United
States and through its international distribution network. Positive momentum has been driven
through continued focus on strong integrated product marketing concepts including the Legendary Raw
Collection and iTechnology™ collection. The Harley-Davidson® Footwear brand experienced a $0.3
million revenue decrease in 2007 as the brand refocused its distribution in the United States. The
Sebago® brand
experienced an increase in revenue of $7.1 million during 2007 due to strong consumer and retail
response across all categories including marine, dress casual, sandals, and kids.
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The Hush Puppies Company’s revenue increased $4.2 million in 2007. The majority of the revenue
growth was driven by increased wholesale shipments in the Canadian and European markets, as well as
higher royalty income generated by international licensees. Strong response to the Hush Puppies®
product fueled a revenue increase of $2.3 million in Canada and an increase of $8.7 million in
Europe. Revenue for the brand in the U.S. market decreased $6.5 million from 2006 due to the
internal reorganization of the SoftStyle® business, a weak spring sandal season, and the decision
to reduce inventories to limit retail risk. A $3.9 million revenue decrease in the slipper
operations was experienced as the Company decided to phase out of this business. International
licensing revenue increased $3.6 million in 2007 as global demand for Hush Puppies® product
continued to grow.
Within the Company’s other business units, Wolverine Retail reported a $4.8 million increase in
revenue as a result of a mid-single digit same-store sales increases and the net addition of eight
stores compared to 2006. The Wolverine Leathers operation reported a $10.0 million revenue
decrease, primarily due to decreased demand for the Company’s proprietary suede products.
The Company ended 2007 with an increase in order backlog of nearly 10% above 2006 year-end levels.
This backlog principally reflected demand for the first half of 2008.
GROSS MARGIN
Gross margin in 2007 of 39.4% was a 70 basis point increase over the prior year. Higher initial
margins, strong inventory reduction programs, and improvements in sourcing and manufacturing
operations increased margin by 110 basis points. Offsetting a portion of this improvement were
inventory reserve increases associated with apparel inventory and domestically produced footwear.
Benefits from favorable foreign exchange contract rates associated with the Company’s foreign
entity inventory purchases added 60 basis points. These improvements were partially offset by a
reduction of 20 basis points due to increased product costs sold into Europe related to new
anti-dumping duties imposed on products sourced from China and Vietnam and a reduction of 80 basis
points due to increased shipments to lower gross margin international distributors.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses of $333.2 million for 2007 increased $15.0 million
from $318.2 million in 2006. Selling, general, and administrative expenses as a percentage of
revenue decreased 10 basis points compared to the prior year reflecting improvements in overall
distribution costs and reductions in employee benefit expenses of $7.0 million. The Company
invested an incremental $9.4 million in product development, selling, advertising, and
administrative costs on the new Merrell® Apparel and Patagonia® Footwear initiatives in 2007
compared to 2006. Additional brand development initiatives during the year increased selling and
advertising costs by $9.5 million. The remaining increases related primarily to selling and
distribution costs that vary with the increase in revenue.
INTEREST, OTHER, AND TAXES
The change in net interest reflected lower average outstanding amounts on senior notes.
The decrease in other expense primarily related to the change in realized gains or losses on
foreign denominated assets and liabilities.
The Company’s effective income tax rate for 2007 was 33.0% compared to 31.6% in 2006. In the
fourth quarter of 2006, the Company recognized a one-time net income tax benefit of $1.5 million
resulting from the closure of prior year income tax audits.
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NET EARNINGS
As a result of the revenue, gross margin, and expense changes discussed above, the Company achieved
net earnings of $92.9 million compared to $83.6 million in 2006, an increase of $9.3 million.
LIQUIDITY AND CAPITAL RESOURCES
| January 3, | December 29, | Change | ||||||||||||||
| (Millions of Dollars) | 2009 | 2007 | $ | % | ||||||||||||
Cash and cash equivalents |
$ | 89.5 | $ | 76.1 | $ | 13.4 | 17.6 | % | ||||||||
Accounts receivable |
167.9 | 179.9 | (12.0 | ) | (6.7 | %) | ||||||||||
Inventories |
196.8 | 165.9 | 30.9 | 18.6 | % | |||||||||||
Accounts payable |
45.3 | 51.6 | (6.3 | ) | (12.1 | %) | ||||||||||
Accrued salaries and wages |
22.7 | 20.7 | 2.0 | 9.8 | % | |||||||||||
Accrued pension liabilities |
28.1 | 4.8 | 23.3 | 489.8 | % | |||||||||||
Other accrued liabilities |
35.7 | 41.9 | (6.2 | ) | (14.8 | %) | ||||||||||
Interest-bearing debt |
59.5 | 10.7 | 48.8 | 454.5 | % | |||||||||||
Cash provided by operating activities |
93.5 | 123.3 | (29.8 | ) | (24.2 | %) | ||||||||||
Additions to property, plant, and equipment |
24.1 | 17.9 | 6.2 | 34.9 | % | |||||||||||
Depreciation and amortization |
20.7 | 22.8 | (2.1 | ) | (9.2 | %) | ||||||||||
Earnings before interest, taxes, and
depreciation |
162.4 | 160.7 | 1.7 | 1.0 | % | |||||||||||
Cash of $44.8 million was used to fund working capital investments in 2008 compared to $0.4 million
used in 2007. Inventory levels increased 18.6% from 2007 while inventory turns increased from 3.7
turns to 3.8 turns. The increase in inventory levels was primarily driven by the strategic
decision to make inventory pre-buys of core product in the fourth quarter prior to 2009 cost
increases, higher product costs, and the timing of spring inventory receipts, which fell into
fiscal 2008 due to the 53rd week in the fiscal year. Accounts receivable decreased 6.7%
compared to a 1.8% increase in full-year revenue over 2007. No single customer accounted for more
than 10% of the outstanding accounts receivable balance at January 3, 2009.
The decrease in accounts payable as compared to 2007 was primarily attributable to the timing of
inventory purchases from contract suppliers. The decrease in other accrued liabilities was
primarily attributable to foreign currency forward exchange contracts and a decrease in taxes
payable.
The Company has a revolving credit agreement that expires in July 2010 and allows for borrowings up
to $150.0 million. The revolving credit facility is used to support working capital and general
business requirements. The amount outstanding under the revolving credit facility at January 3,
2009 was $59.5 million which the Company considers short-term in nature. No amount was outstanding
at December 29, 2007. The Company was in compliance with all debt covenant requirements at January
3, 2009 and December 29, 2007. Proceeds from the existing credit facility along with cash flows
from operations are expected to be sufficient to meet capital needs in the foreseeable future. Any
excess cash flows from operating activities are expected to be used to purchase property, plant,
and equipment, pay down existing debt, fund internal and external growth initiatives, pay
dividends, or repurchase the Company’s common stock.
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The increase in debt at January 3, 2009 compared to December 29, 2007 was the result of the
outstanding balance under the revolving credit agreement, primarily due to the repurchase of the
Company’s stock throughout 2008. The increase in debt at January 3, 2009 was partially offset by
annual principal payments on the Company’s senior notes, which were paid off in 2008. The Company
had outstanding commercial letter-of-credit facilities of $2.5 million and $2.1 million at the end
of 2008 and 2007, respectively. The total debt-to-capital ratio for the Company was 12.2% in 2008
and 2.2% in 2007, reflecting higher borrowings under the revolving credit agreement compared to the
prior year.
The majority of capital expenditures were for information system enhancements, consumer-direct
initiatives, manufacturing equipment, and building improvements. The Company leases machinery,
equipment, and certain warehouse, office, and retail store space under operating lease agreements
that expire at various dates through 2023.
The Company’s pension benefit results are based upon actuarial valuations. These valuations are
based on key assumptions, including assumptions about discount rates and expected returns on plan
assets. The Company is required to consider market conditions, including changes in interest
rates, in selecting these assumptions. Pre-tax expense resulting from the Company’s qualified
defined benefit pension plans decreased $1.1 million for 2008 when compared to 2007, primarily due
to a decrease in the amortization of prior losses in the market value of pension assets and a
discount rate increase. The Company estimates that pre-tax expense related to qualified defined
benefit pension plans will increase in 2009 as compared to 2008 by approximately $9.0 million
primarily as a result of losses in market value of pension assets in 2008.
Applying the provisions of SFAS No. 87 and SFAS No. 158, the Company’s qualified defined benefit
pension plans (the “Plans”) were underfunded by $36.4 million at January 3, 2009 and were
overfunded by $17.2 million at December 29, 2007. Under the Employee Retirement Income Security
Act of 1974, the Plans had no minimum funding requirements for 2008 and 2007. Discretionary cash
contributions were made to the Plans totaling $3.0 million in both 2008 and in 2007 to provide
long-term stability to the Plans. The Company expects to contribute approximately $26.1 million to
its qualified defined benefit pension plans and approximately $2.0 million to the Supplemental
Executive Retirement Plan (SERP) in 2009.
In the fourth quarter of 2006 and full year 2006 results, the Company recognized a one-time net
income tax benefit of $1.5 million resulting from the closure of prior year income tax audits. No
provision has been made for U.S. federal and state income taxes or foreign taxes that may result
from future remittances of the undistributed earnings of foreign subsidiaries of $235.2 million at
January 3, 2009 ($177.2 million at December 29, 2007), as the Company expects such earnings will
remain invested overseas indefinitely.
The Company’s Board of Directors approved common stock repurchase programs on April 19, 2007 and
December 13, 2005. These programs authorize the repurchase of 7.0 million and 3.0 million shares
of common stock over a 36-month and 24-month period, respectively, commencing on the effective date
of the program. The primary purpose of these stock repurchase programs is to increase shareholder
value. The Company intends to continue repurchasing shares of its common stock in open market or
privately negotiated transactions, from time-to-time, depending upon market conditions and other
factors.
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| 2008 | 2007 | Cumulative | ||||||||||||||||||||||
| Market price | Market price | Market price | ||||||||||||||||||||||
| Shares | of shares | Shares | of shares | Shares | of shares | |||||||||||||||||||
| repurchased | repurchased | repurchased | repurchased | repurchased | repurchased | |||||||||||||||||||
Authorization
effective date |
||||||||||||||||||||||||
April 19, 2007 |
2,844,269 | $ | 73,948,000 | 3,549,535 | $ | 95,945,000 | 6,393,804 | $ | 169,893,000 | |||||||||||||||
December 13, 2005 |
— | — | 1,191,882 | 33,864,000 | 3,000,000 | 75,950,000 | ||||||||||||||||||
The Company declared dividends of $21.5 million, or $0.44 per share, in 2008, a 22.2% increase on a
per share basis over the dividends of $0.36 per share, or $18.8 million, declared in 2007. On
February 11, 2009, the Company declared a quarterly cash dividend of $0.11 per share of common
stock. The quarterly dividend is payable on May 1, 2009, to shareholders of record on April 1,
2009.
In October 2006, the European Commission announced definitive anti-dumping duties at rates of 16.5%
and 10.0% on imports from China and Vietnam, respectively. These definitive measures became
effective October 7, 2006, and were in effect until October 6, 2008. In October 2008, the European
Commission announced a review of the anti-dumping duties to determine whether the duties should
continue or expire. During the expiry review, the anti-dumping duties imposed in October 2006
remain in effect. The continued imposition of these anti-dumping measures could have a material
impact on the Company’s business, results of operations, financial condition, and cash flows.
NEW ACCOUNTING STANDARDS
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value
Measurements (“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring the fair value
of assets and liabilities. This framework is intended to provide increased consistency in how fair
value determinations are made under various existing accounting standards that permit, or in some
cases require, estimates of fair market value. SFAS No. 157 also expands financial statement
disclosure requirements about a company’s use of fair value measurements, including the effect of
such measures on earnings. For financial assets and liabilities, SFAS No. 157 was effective for
fiscal years beginning after November 15, 2007 (fiscal year 2008 for the Company). In February
2008, the FASB issued FASB Staff Position (FSP) 157-2, Partial Deferral of the Effective Date of
Statement 157 (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS No. 157, for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually), to fiscal years
beginning after November 15, 2008 (fiscal year 2009 for the Company). The adoption is not expected
to have a material impact on the Company’s consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS No. 141(R)”). SFAS
No. 141(R) establishes principles and requirements for how the acquirer of a business recognizes
and measures in its financial statements the identifiable assets acquired, the liabilities assumed,
and any noncontrolling interest in the acquiree. The statement also provides guidance for
recognizing and measuring the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. SFAS No. 141(R) is to be applied prospectively to
business combinations for which the acquisition date is on or after an entity’s fiscal year
beginning after December 15, 2008 (fiscal year 2009 for the Company). The Company expects the
adoption will have an impact on the consolidated financial statements when effective, but the
nature and magnitude of the specific effects will depend upon the nature, terms, and size of the
acquisitions consummated after the effective date. The Company will apply this standard when
future acquisitions occur.
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In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements — an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 establishes new accounting
and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation
of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling
interest (minority interest) as equity in the consolidated financial statements and separate from
the parent’s equity. The amount of net income attributable to the noncontrolling interest will be
included in consolidated net income on the face of the income statement. SFAS No. 160 clarifies
that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation
are equity transactions if the parent retains its controlling financial interest. In addition,
this statement requires that a parent recognize a gain or loss in net income when a subsidiary is
deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling
equity investment on the deconsolidation date. SFAS No. 160 also includes expanded disclosure
requirements regarding the interests of the parent and its noncontrolling interest. SFAS No. 160
is effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008 (fiscal year 2009 for the Company). Earlier adoption is prohibited. The Company
currently does not have any noncontrolling interests and will apply this standard when future
acquisitions occur.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities—an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 changes the
disclosure requirements for derivative instruments and hedging activities. Entities are required
to provide enhanced disclosures about how and why an entity uses derivative instruments, how the
instruments are accounted for under SFAS No. 133 and its related interpretations, and how the
instruments and related hedged items affect an entity’s financial position, financial performance,
and cash flows. The guidance in SFAS No. 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008 (fiscal year 2009 for the
Company). Since SFAS No. 161 requires only additional disclosures concerning derivatives and
hedging activities, adoption of SFAS No. 161 will not affect the Company’s financial condition,
results of operations, or cash flows.
In June 2008, the FASB issued Staff Position (“FSP”) Emerging Issue Task Force (“EITF”) Issue
No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 provides that unvested share-based
payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether
paid or unpaid) are participating securities and shall be included in the computation of earnings
per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years
beginning after December 15, 2008 (fiscal year 2009 for the Company). Upon adoption, a company is
required to retrospectively adjust its earnings per share data, including any amounts related to
interim periods, summaries of earnings, and selected financial data, to conform to the provisions
of FSP EITF 03-6-1. The adoption of FSP EITF 03-6-1 will reduce basic earnings per share by $0.02
for fiscal 2008, 2007, and 2006, and have no impact on diluted earnings per share for fiscal 2008
and 2007 and reduce diluted earnings per share by $0.01 for fiscal 2006.
On December 30, 2008, the FASB issued FSP SFAS No. 132(R)-1, Employer’s Disclosures about
Postretirement Benefit Plan Assets (“FSP SFAS No. 132(R)-1”). This FSP amends FASB Statement No.
132 (Revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits (“SFAS
No. 132(R)”), to provide guidance on an employer’s disclosures about plan assets of a defined
benefit pension or other postretirement plan. The disclosures about plan assets required by FSP
SFAS No. 132(R)-1 shall be provided for fiscal years ending after December 15, 2009 (fiscal 2009
for the Company). Upon initial application, the provisions of FSP SFAS No. 132(R)-1 are not
required for earlier periods that are presented for comparative purposes. Earlier application of
the provisions of FSP SFAS No. 132(R)-1 is permitted. Since FSP SFAS No. 132(R)-1 requires only
additional disclosures
concerning plan assets, adoption of FSP SFAS No. 132(R)-1 will not affect the Company’s financial
condition, results of operations, or cash flows.
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CRITICAL ACCOUNTING POLICIES
The preparation of the Company’s consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States, requires management
to make estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are
based on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources.
Historically, actual results have not been materially different from the Company’s estimates.
However, actual results may differ materially from these estimates under different assumptions or
conditions.
The Company has identified the following critical accounting policies used in determining estimates
and assumptions in the amounts reported. Management believes that an understanding of these
policies is important to an overall understanding of the Company’s consolidated financial
statements.
REVENUE RECOGNITION
Revenue is recognized on the sale of products manufactured or sourced by the Company when the
related goods have been shipped, legal title has passed to the customer, and collectibility is
reasonably assured. Revenue generated through programs with licensees and distributors involving
products bearing the Company’s trademarks is recognized as earned according to stated contractual
terms upon either the purchase or shipment of branded products by licensees and distributors.
The Company records provisions against gross revenue for estimated stock returns and cash discounts
in the period when the related revenue is recorded. These estimates are based on factors that
include, but are not limited to, historical stock returns, historical discounts taken, and analysis
of credit memorandum activity. The actual amount of customer returns or allowances may differ from
the Company’s estimates. The Company records either an increase or decrease to net sales in the
period in which it determines an adjustment to be appropriate.
ACCOUNTS RECEIVABLE
The Company maintains an allowance for uncollectible accounts receivable for estimated losses
resulting from its customers’ inability to make required payments. Company management evaluates
the allowance for uncollectible accounts receivable based on a review of current customer status
and historical collection experience. Historically, losses have been within the Company’s
expectations. Adjustments to these estimates may be required if the financial condition of the
Company’s customers were to change. If the Company were to determine that increases or decreases
to the allowance for uncollectible accounts were appropriate, the Company would record either an
increase or decrease to general and administrative expenses in the period in which the Company made
such a determination. At January 3, 2009 and December 29, 2007, management believed that it had
provided sufficient reserves to address future collection uncertainties.
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INVENTORY
The Company values its inventory at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for all domestic raw materials and work-in-process inventories,
and certain domestic finished goods inventories. Cost is determined using methods approximating
cost under the first-in, first-out (FIFO) method for all raw materials, work-in-process, and
finished good inventories in foreign countries. The FIFO method is also used for all finished
goods inventories of the Company’s retail
business, due to the unique nature of that operation, and for certain domestic finished goods
inventories. Once elected, the Company has applied these inventory cost valuation methods
consistently from year to year. The Company reduces the value of its inventories to the lower of
cost or market for excess or obsolete inventories based upon assumptions about future demand and
market conditions. If the Company were to determine that the estimated market value of its
inventory is less than the carrying value of such inventory, the Company would provide a reserve
for such difference as a charge to cost of sales. If actual market conditions are different from
those projected, adjustments to those inventory reserves may be required. The adjustments would
increase or decrease the Company’s cost of sales and net income in the period in which they were
realized or recorded. Inventory quantities are verified at various times throughout the year by
performing annual physical inventory observations and perpetual inventory cycle count procedures.
If the Company determines that adjustments to the inventory quantities are appropriate, an increase
or decrease to the Company’s cost of sales and inventory is recorded in the period in which such
determination was made. At January 3, 2009 and December 29, 2007, management believed that it had
provided sufficient reserves for excess or obsolete inventories.
GOODWILL AND OTHER NON-AMORTIZABLE INTANGIBLES
Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject
to impairment tests at least annually. The first step of the goodwill impairment test requires
that the fair value of the applicable reporting unit be compared with its recorded value. The
Company establishes fair value by calculating the present value of the expected future cash flows
of the reporting unit. The Company uses assumptions about expected future operating performance in
determining estimates of those cash flows, which may differ from actual cash flows. If the
recorded values of these assets are not recoverable, based on this discounted cash flow analysis,
management performs the next step which compares the fair value of the reporting unit calculated in
step one to the fair value of the tangible and intangible assets of the reporting unit, which
results in an implied fair value of goodwill. Goodwill is reduced by any shortfall of implied
goodwill to its carrying value. Impairment tests for other non-amortizable intangibles require the
determination of the fair value of the intangible asset. The carrying value is reduced by any
excess over fair value. The Company reviewed the carrying amounts of goodwill and other
non-amortizable intangible assets and determined that there was no impairment indicated for the
years ended January 3, 2009 or December 29, 2007.
INCOME TAXES
The Company operates in multiple tax jurisdictions both inside and outside the United States.
Accordingly, management must determine the appropriate allocation of income in accordance with
local law for each of these jurisdictions. The Company believes its tax accruals are adequate to
cover exposures related to changes in income allocation between tax jurisdictions. The carrying
value of the Company’s deferred tax assets assumes that the Company will be able to generate
sufficient taxable income in future years to utilize these deferred tax assets. If these
assumptions change, the Company may be required to record valuation allowances against its gross
deferred tax assets in future years, which would cause the Company to record additional income tax
expense in the Company’s consolidated statements of operations. Management evaluates the potential
the Company will be able to realize its gross deferred tax assets and assesses the need for
valuation allowances on a quarterly basis. The Company did not record a valuation allowance in
2008 or 2007.
On a periodic basis, the Company estimates what the effective tax rate will be for the full fiscal
year and records a quarterly income tax provision in accordance with the anticipated annual rate.
As the fiscal year progresses, that estimate is refined based upon actual events and earnings in
each tax jurisdictions during the year. This continual estimation process periodically results in
a change to the expected effective tax rate for the fiscal year. When this occurs, the Company
adjusts the income tax provision during the quarter in which the change in estimate occurs so that
the year-to-date provision equals the revised
expected annual rate.
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RETIREMENT BENEFITS
The determination of the obligation and expense for retirement benefits is dependent on the
selection of certain actuarial assumptions used in calculating such amounts. These assumptions
include, among others, the discount rate, expected long-term rate of return on plan assets, and
rates of increase in compensation. These assumptions are reviewed with the Company’s actuaries and
updated annually based on relevant external and internal factors and information, including but not
limited to, long-term expected asset returns, rates of termination, regulatory requirements, and
plan changes.
The Company utilizes a bond matching calculation to determine the discount rate. A hypothetical
bond portfolio is created based on a presumed purchase of bonds with maturities that match the
plan’s expected future cash outflows. The discount rate is the resulting yield of the hypothetical
bond portfolio. The bonds selected are rated AA- or higher by a recognized ratings agency, and are
noncallable, currently purchasable, and nonprepayable. The discount rate is used in the
calculation of the year end pension liability and pension expense for the subsequent year. The
discount rate at year end 2008 was 7.25%. With all other assumptions and values held constant,
every 10 basis point decrease in the discount rate would increase net pension liabilities at year
end 2008 by approximately $2.0 million and would increase 2009 pension expense by approximately
$0.4 million. Pension expense is also impacted by the expected long-term rate of return on plan
assets, which the Company has determined to be 8.5%. This determination is based on both actual
historical rates of return experienced by the pension assets and the long-term rate of return of a
composite portfolio of equity and fixed income securities that approximately reflects the
diversification of the pension assets. Every 10 basis point decrease in the expected long-term
rate of return on plan assets would increase 2009 pension expense by approximately $0.1 million.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with the fair value recognition
provisions of SFAS No. 123(R), Share-Based Payment. The Company utilizes the Black-Scholes model,
which requires the input of subjective assumptions. These assumptions include estimating (a) the
length of time employees will retain their vested stock options before exercising them (“expected
term”), (b) the volatility of the Company’s common stock price over the expected term, and (c) the
number of options that will be forfeited. Changes in these assumptions can materially affect the
estimate of fair value of stock-based compensation and, consequently, the related expense amounts
recognized on the consolidated statements of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company faces market risk to the extent that changes in foreign currency exchange rates affect
the Company’s foreign assets, liabilities, and inventory purchase commitments and to the extent
that its long-term debt requirements are affected by changes in interest rates. The Company
manages these risks by attempting to denominate contractual and other foreign arrangements in U.S.
dollars. The Company does not believe that there has been a material change during 2008 in the
nature of the Company’s primary market risk exposures, including the categories of market risk to
which the Company is exposed and the particular markets that present the primary risk of loss to
the Company. As of the date of this Annual Report on Form 10-K, the Company does not know of or
expect there to be any material change in the general nature of its primary market risk exposure in
the near term.
Under the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended by SFAS Nos. 137 and 138, the Company is required to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not qualifying hedges must be adjusted to fair
value through earnings. If a derivative is a qualifying hedge, depending on the nature of the
hedge, changes in the fair
value of derivatives are either offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in accumulated other comprehensive
income until the hedged item is recognized in earnings.
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The Company conducts wholesale operations outside of the United States in the United Kingdom,
continental Europe, and Canada where the functional currencies are primarily the British pound,
euro, and Canadian dollar, respectively. The Company utilizes foreign currency forward exchange
contracts to manage the volatility associated with inventory purchases made by non-U.S. wholesale
operations in U.S. dollars in the normal course of business. At January 3, 2009 and December 29,
2007, the Company had outstanding forward currency exchange contracts to purchase $63.1 million and
$70.4 million, respectively, of U.S. dollars with maturities ranging up to 287 days.
The Company also has production facilities in the Dominican Republic and sourcing locations in
Asia, where financial statements reflect U.S. dollars as the functional currency. However,
operating costs are paid in the local currency. Royalty revenue generated by the Company from
third-party foreign licensees is calculated in the licensees’ local currencies, but paid in U.S.
dollars. Accordingly, the Company is subject to related foreign currency remeasurement gains and
losses in 2009 and beyond.
Assets and liabilities outside the United States are primarily located in the United Kingdom,
Canada, and the Netherlands. The Company’s investments in foreign subsidiaries with a functional
currency other than the U.S. dollar are generally considered long-term. Accordingly, the Company
does not hedge these net investments. For the year ended January 3, 2009, the strengthening of the
U.S. dollar compared to foreign currencies decreased the value of these investments in net assets
by $36.3 million. For the year ended December 29, 2007, the weakening of the U.S. dollar compared
to foreign currencies increased the value of these investments in net assets by $13.6 million.
These changes resulted in cumulative foreign currency translation adjustments at January 3, 2009
and December 29, 2007 of $0.9 million and $35.4 million, respectively, that are deferred and
recorded as a component of accumulated other comprehensive income in stockholders’ equity.
Because the Company markets, sells, and licenses its products throughout the world, it could be
affected by weak economic conditions in foreign markets that could reduce demand for its products.
The Company is exposed to changes in interest rates primarily as a result of its revolving credit
agreement. The Company has not historically utilized interest rate swaps or similar hedging
arrangements to fix interest rates; however, in 1998 the Company entered into an interest rate lock
agreement to fix the interest rate prior to the issuance of 6.5% senior notes in the amount of $75
million. The contract was settled in 1998 and resulted in a prepayment of interest of $2.2 million
that was amortized over the term of the senior notes. These notes were fully repaid during 2008
and, as such, there was no remaining unamortized balance at January 3, 2009. The amortization of
the prepayment created an effective interest rate of 6.78% on the senior notes.
The Company does not enter into contracts for speculative or trading purposes, nor is it a party to
any leveraged derivative instruments.
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OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements as of January 3, 2009.
CONTRACTUAL OBLIGATIONS
The following table lists required principal payments and related interest rates for the Company’s
short- and long-term debt by fiscal year of maturity.
| 2008 | 2007 | |||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars, Except Percentages) | 2009 | 2010 | 2011 | 2012 | 2013 | There- after |
Total | Fair Value |
Total | Fair Value |
||||||||||||||||||||||||||||||
Denominated in U.S. dollars: |
||||||||||||||||||||||||||||||||||||||||
Fixed rate |
$ | — | — | — | — | — | — | $ | — | $ | — | $ | 10.7 | $ | 11.0 | |||||||||||||||||||||||||
Average interest rate |
— | — | — | — | — | — | — | — | 6.5 | % | — | |||||||||||||||||||||||||||||
The Company has the following payments under contractual obligations due by period:
| (Thousands of Dollars) | Total | Less than 1 year |
1-3 years | 3-5 years | More than 5 years |
|||||||||||||||
Capital leases |
$ | 5 | $ | 5 | $ | — | $ | — | $ | — | ||||||||||
Operating leases |
125,672 | 16,551 | 28,135 | 21,245 | 59,741 | |||||||||||||||
Purchase obligations (1) |
134,986 | 134,986 | — | — | — | |||||||||||||||
Deferred compensation |
1,156 | 249 | 369 | 324 | 214 | |||||||||||||||
Pension (2) |
26,156 | 26,156 | — | — | — | |||||||||||||||
SERP |
21,103 | 1,988 | 3,847 | 3,870 | 11,398 | |||||||||||||||
Dividends declared |
5,416 | 5,416 | — | — | — | |||||||||||||||
Minimum royalties |
11,152 | 1,328 | 3,316 | 3,705 | 2,803 | |||||||||||||||
Minimum advertising |
10,425 | 2,121 | 4,483 | 2,696 | 1,125 | |||||||||||||||
Total (3) |
$ | 336,071 | $ | 188,800 | $ | 40,150 | $ | 31,840 | $ | 75,281 | ||||||||||
| (1) | Purchase obligations primarily relate to inventory and capital expenditure commitments. |
|
| (2) | Pension obligations reflect only planned pension funding as there are currently no
required funding obligations under government regulation. Funding amounts are
calculated on an annual basis and no required or planned funding beyond one year has
been determined. |
|
| (3) | The Company adopted Financial Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, (“FIN 48”) on December 31, 2006. The total amount of unrecognized tax
benefits on the Consolidated Balance Sheet at January 3, 2009 is $3.2 million. At
this time, the Company is unable to make a reasonably reliable estimate of the timing
of payments in individual years beyond 12 months due to uncertainties in the timing of
tax audit outcomes. As a result, this amount is not included in the table above. |
The Company had $93.4 million of additional borrowing capacity available under all of its existing
credit facilities at January 3, 2009. The Company’s additional borrowing capacity is summarized as
follows:
| Expiration of availability | ||||||||||||
| Total commitments | Less than | 1 year or | ||||||||||
| (Millions of Dollars) | available | 1 year | greater | |||||||||
Revolving credit |
$ | 90.5 | $ | — | $ | 90.5 | ||||||
Standby letters of credit |
2.9 | 2.9 | — | |||||||||
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The response to this Item is set forth under the caption “Quantitative and Qualitative
Disclosures About Market Risk” in Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The response to this Item is set forth in Appendix A of this Annual Report on Form 10-K and is
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
An evaluation was performed under the supervision and with the participation of the Company’s
management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of the Company’s disclosure controls and procedures. Based on and as of
the time of such evaluation, the Company’s management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were
effective as of the end of the period covered by this report.
Management’s Report on Internal Control Over Financial Reporting.
Management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Securities Exchange Act Rule 13a-15(f). Under the
supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control
over financial reporting as of January 3, 2009, based on the framework in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on that evaluation, our management concluded that our internal control over
financial reporting was effective as of January 3, 2009.
The effectiveness of the Company’s internal control over financial reporting as of January 3,
2009, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as
stated in its report, which is included in Appendix A and is incorporated into this Item 9A by
reference.
Changes in Internal Control Over Financial Reporting.
There was no change in the Company’s internal control over financial reporting that occurred
during the seventeen-week period ended January 3, 2009 that has materially affected, or that is
reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant.
The Company’s Audit Committee is comprised of four Board members, all of whom are independent
under independence standards adopted by the Board and applicable SEC Regulations and New York Stock
Exchange standards (including independence standards related specifically to Audit Committee
membership). The Audit Committee members each have financial and business experience with
companies of substantial size and complexity and have a significant understanding of generally
accepted accounting principles, financial statements, internal controls and audit committee
functions. The Company’s Board of Directors has determined that Jeffrey M. Boromisa and William K.
Gerber are audit committee financial experts, as defined by the SEC. Additional information
regarding the Audit Committee is provided in the Definitive Proxy Statement of the Company with
respect to the Annual Meeting of Stockholders to be held on April 23, 2009, under the caption
“Wolverine’s Board of Directors” under the subheading “Board Committees and Meetings — Audit
Committee.”
The Company has adopted an Accounting and Finance Code of Ethics that applies to the Company’s
principal executive officer, principal financial officer and principal accounting officer, and has
adopted a Code of Conduct & Compliance that applies to the Company’s directors and employees. The
Accounting and Finance Code of Ethics and the Code of Conduct & Compliance are available on the
Company’s website, www.wolverineworldwide.com. Any waiver from the Accounting and Finance Code of
Ethics or the Code of Conduct & Compliance with respect to the Company’s executive officers and
directors will be disclosed on the Company’s website. Any amendment to the Accounting and Finance
Code of Ethics will be disclosed on the Company’s website.
The information regarding directors of the Company contained under the caption “Election of
Directors” and under the caption “Wolverine’s Board of Directors” under the subheading “Nominees
for Terms Expiring in 2012,” “Continuing Directors — Terms Expiring in 2011,” and “Continuing
Directors — Terms Expiring in 2010” in the definitive Proxy Statement of the Company with respect
to the Annual Meeting of Stockholders to be held on April 23, 2009, is incorporated herein by
reference.
The information regarding directors and executive officers of the Company under the caption
“Related Matters” under the subheading “Section 16(a) Beneficial Ownership Reporting Compliance” in
the definitive Proxy Statement of the Company with respect to the Annual Meeting of Stockholders to
be held on April 23, 2009, is incorporated herein by reference.
Item 11. Executive Compensation.
The information contained under the captions “Executive Compensation,” “Potential Payments
Upon Termination or Change in Control,” “Compensation Committee Interlocks and Insider
Participation” and “Compensation Committee Report” in the definitive Proxy Statement of the Company
with respect to the Annual Meeting of Stockholders to be held on April 23, 2009, is incorporated
herein by reference.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The information contained under the caption “Ownership of Wolverine Stock” contained in the
definitive Proxy Statement of the Company with respect to the Annual Meeting of Stockholders to be
held on April 23, 2009, is incorporated herein by reference.
The following table provides information about Wolverine’s equity compensation plans as of
January 3, 2009:
Equity Compensation Plan Information
| Number of | Number of Securities | |||||||||||
| Securities to be | Weighted Average | Remaining Available for | ||||||||||
| Issued Upon | Exercise Price of | Future Issuance Under | ||||||||||
| Exercise of | Outstanding | Equity Compensation | ||||||||||
| Outstanding | Options, | Plans (Excluding | ||||||||||
| Options, Warrants | Warrants and | Securities Reflected in | ||||||||||
| and Rights | Rights | Column (a)) | ||||||||||
| Plan Category (1) | (a) | (b) | (c) | |||||||||
Equity compensation plans approved by
security holders |
4,572,384 | (2)(3) | $ | 17.87 | 3,706,008 | (4) | ||||||
Equity compensation
plans not approved by
security holders |
— | N/A | — | |||||||||
Total |
4,572,384 | $ | 17.87 | 3,706,008 | ||||||||
Notes to Equity Compensation Plan Information
| (1) | Each plan for which aggregated information is provided contains
customary anti-dilution provisions that are applicable in the event of
a stock split, stock dividend or certain other changes in the
Company’s capitalization. |
|
| (2) | Includes: (i) 4,088,561 stock options awarded to employees under the
1993 Stock Incentive Plan, the 1995 Stock Incentive Plan, the 1997
Stock Incentive Plan, the Stock Incentive Plan of 1999, the Stock
Incentive Plan of 2001, the Stock Incentive Plan of 2003 and the Stock
Incentive Plan of 2005; and (ii) and 483,823 stock options awarded to
non-employee directors under the Stock Incentive Plan of 2005, the
Amended and Restated Directors’ Stock Option Plan approved by
stockholders in 2002 and the previous Amended and Restated Directors’
Stock Option Plan initially adopted in 1988. Column (a) does not
include stock units credited to outside directors’ fee accounts or
retirement accounts under the Outside Directors’ Deferred Compensation
Plan. Stock units do not have an exercise price. Each stock unit
credited to a director’s fee account and retirement account under the
Outside Directors’ Deferred Compensation Plan will be converted into
one share of common stock upon distribution. Column (a) also does not
include shares of restricted or unrestricted common stock previously
issued under the Company’s equity compensation plans. |
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| (3) | Of this amount, 1,169,160 options were not exercisable as of January
3, 2009, due to vesting restrictions. |
|
| (4) | Comprised of: (i) 485,550 shares available for issuance under the
Outside Directors’ Deferred Compensation Plan upon the retirement of
the current directors or upon a change in control; and (ii) 3,220,458
shares issuable under the various employee stock incentive plans. Of
these total amounts available, the number of shares with respect to
the following plans may be issued other than upon the exercise of an
option, warrant or right outstanding as of January 3, 2009: |
• Outside Directors’ Deferred Compensation Plan: |
485,550 | |||
• Stock Incentive Plan of 1999: |
72,198 | |||
• Stock Incentive Plan of 2001: |
378,255 | |||
• Stock Incentive Plan of 2003: |
88,148 | |||
• Stock Incentive Plan of 2005: |
1,340,929 |
The Outside Directors’ Deferred Compensation Plan is a supplemental, unfunded,
nonqualified deferred compensation plan for non-employee directors. Beginning
in 2006, the Company began paying an annual equity retainer to non-management
directors in the form of a contribution under the Outside Directors’ Deferred
Compensation Plan. Participation in the plan in addition to the annual equity
retainer is voluntary. The plan allows participating directors to receive, in
lieu of some or all directors’ fees, a number of stock units equal to the
amount of the deferred directors’ fees divided by the fair market value of the
Company’s common stock on the date of payment of the next cash dividend on the
Company’s common stock. These stock units are increased by a dividend
equivalent based on dividends paid by the Company and the amount of stock units
credited to the participating director’s fee account and retirement account.
Upon distribution, the participating directors receive a number of shares of
the Company’s common stock equal to the number of stock units to be distributed
at that time. Distribution is triggered by termination of service as a
director or by a change in control of the Company and can occur in a lump sum,
in installments or on another deferred basis. Of the 485,550 shares issuable
under the Outside Directors’ Deferred Compensation Plan, 179,867 shares have
been issued to a trust to satisfy the Company’s obligations when distribution
is triggered and are included in shares reported as issued and outstanding as
of the record date. |
||
The employee stock incentive plans listed above are equity-based incentive
plans for officers, key employees, and, under the Stock Incentive Plan of 2005,
directors. Those plans authorize awards of stock options, restricted common
stock, common stock and, under certain plans, tax benefit rights, restricted
stock units, deferred stock units, and/or stock appreciation rights. The Stock
Incentive Plans of 2001 and 2003 specifically limit the number of shares that
can be awarded as restricted or unrestricted common stock to 40% and 15%,
respectively, of the shares authorized for issuance under the applicable plan.
The Stock Incentive Plan of 2005 provides that each share of restricted or
unrestricted common stock, each restricted stock unit and each stock
appreciation right is counted as two shares against the total number of shares
authorized for issuance under the plan. The number of securities listed as
remaining available in column (c) of the table assumes the grant of all stock
options, which count as only one share against the total number of shares
authorized for issuance under the Stock Incentive Plan of 2005. Actual shares
available under the Stock Incentive Plan of 2005 will be less to the extent
that awards of restricted or unrestricted common stock, restricted stock units
or stock appreciation rights are issued from that plan. The numbers provided
in this footnote and in column (c) will increase to the extent that options
relating to the number of shares listed in column (a) of the table or other
outstanding awards (e.g., shares of restricted or unrestricted stock,
restricted stock units or stock appreciation rights) previously issued under a
plan are canceled, surrendered, modified, exchanged for substitutes or expire
or terminate prior to exercise or vesting because the number of shares
underlying any such awards will again become available for issuance under the
plan under which the award was granted. |
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Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information contained under the caption “Related Matters” under the subheading “Certain
Relationships and Related Transactions” contained in the definitive Proxy Statement of the Company
with respect to the Annual Meeting of Stockholders to be held on April 23, 2009, is incorporated
herein by reference. The information contained under the caption “Corporate Governance Principles”
under the subheading “Independence” contained in the definitive Proxy Statement of the Company with
respect to the Annual Meeting of Stockholders to be held on April 23, 2009, is incorporated herein
by reference.
Item 14. Principal Accountant Fees and Services.
The information contained under the caption “Selection of Auditors” in the definitive Proxy
Statement of the Company with respect to the Annual Meeting of Stockholders to be held on April 23,
2009, is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
Item 15(a)(1). Financial Statements. Attached as Appendix A.
The following consolidated financial statements of Wolverine World Wide, Inc. and subsidiaries
are filed as a part of this report:
| • | Consolidated Balance Sheets as of January 3, 2009 and December 29, 2007. |
| • | Consolidated Statements of Stockholders’ Equity and Comprehensive
Income for the Fiscal Years Ended January 3, 2009, December 29, 2007,
and December 30, 2006. |
| • | Consolidated Statements of Operations for the Fiscal Years Ended
January 3, 2009, December 29, 2007, and December 30, 2006. |
| • | Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 3, 2009, December 29, 2007, and December 30, 2006. |
| • | Notes to the Consolidated Financial Statements as of January 3, 2009. |
| • | Reports of Independent Registered Public Accounting Firm. |
Item 15(a)(2). Financial Statement Schedules. Attached as Appendix B.
The following consolidated financial statement schedule of Wolverine World Wide, Inc. and
subsidiaries is filed as a part of this report:
| • | Schedule II—Valuation and Qualifying Accounts of Continuing Operations. |
All other schedules (I, III, IV, and V) for which provision is made in the applicable
accounting regulations of the SEC are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
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Item 15(a)(3). Exhibits.
The following exhibits are filed as part of this report:
| Exhibit | ||||
| Number | Document | |||
| 3.1 | Restated Certificate of Incorporation. Previously filed as Exhibit 3.1 to
the Company’s Annual Report on Form 10-K for the period ended December 30,
2006. Here incorporated by reference. |
|||
| 3.2 | Amended and Restated By-laws. Previously filed as Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed on October 15, 2008. Here
incorporated by reference. |
|||
| 4.1 | The
Registrant has other long-term debt instruments outstanding
in addition to those described in Exhibit 4.2. The authorized amount of none
of these classes of debt exceeds 10% of the Company’s total consolidated
assets. The Company agrees to furnish copies of any agreement defining the
rights of holders of any such long-term indebtedness to the Securities and
Exchange Commission upon request. |
|||
| 4.2 | Credit Agreement dated as of July 22, 2005, among Wolverine World Wide, Inc.
and certain of its subsidiaries, JPMorgan Chase Bank, N.A., as Administrative
Agent, Harris, N.A., as Syndication Agent, Comerica Bank, Standard Federal
Bank N.A. and National City Bank of the Midwest, as Documentation Agents, and
certain other Banks that are parties to the Credit Agreement. Previously
filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
July 28, 2005. Here incorporated by reference. |
|||
| 10.1 | 1993 Stock Incentive Plan, as amended and restated.* |
|||
| 10.2 | Amended and Restated 1995 Stock Incentive Plan.* |
|||
| 10.3 | Amended and Restated 1997 Stock Incentive Plan.* |
|||
| 10.4 | Amended and Restated Stock Incentive Plan of 1999.* |
|||
| 10.5 | Amended and Restated Stock Incentive Plan of 2001.* |
|||
| 10.6 | Amended and Restated Stock Incentive Plan of 2003.* |
|||
| 10.7 | Amended and Restated Stock Incentive Plan of 2005.* |
|||
| 10.8 | Amended and Restated Directors’ Stock Option Plan.* |
|||
| 10.9 | Amended and Restated Outside Directors’ Deferred Compensation Plan.*
Previously filed as Exhibit 10.9 to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 29, 2007. Here incorporated by reference. |
|||
51
Table of Contents
| Exhibit | ||||
| Number | Document | |||
| 10.10 | Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan).* |
|||
| 10.11 | Amended and Restated Executive Long-Term Incentive Plan (3-Year Bonus Plan).* |
|||
| 10.12 | Amended and Restated Stock Option Loan Program.* Previously filed as Exhibit
10.12 to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 29, 2007. Here incorporated by reference. |
|||
| 10.13 | Executive Severance Agreement.* Previously filed as Exhibit 10.3 to the
Company’s Current Report on Form 8-K filed on December 17, 2008. Here
incorporated by reference. A participant schedule of current executive
officers who are parties to the agreement is attached as Exhibit 10.13. |
|||
| 10.14 | Form of Indemnification Agreement.* The Company has entered into an
Indemnification Agreement with each director and executive officer.
Previously filed as Exhibit 10.3 to the Company’s Quarterly Report on Form
10-Q for the period ended March 22, 2008. Here incorporated by reference. |
|||
| 10.15 | Amended and Restated Benefit Trust Agreement dated April 25, 2007.*
Previously filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K
filed on April 25, 2007. Here incorporated by reference. |
|||
| 10.16 | Employees’ Pension Plan (Restated as amended through November 30, 2007).*
Previously filed as Exhibit 10.17 to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 29, 2007. Here incorporated by reference. |
|||
| 10.17 | Form of Incentive Stock Option Agreement.* Previously filed as Exhibit 10.1
to the Company’s Current Report on Form 8-K dated February 9, 2005. Here
incorporated by reference. |
|||
| 10.18 | Form of Non-Qualified Stock Option Agreement for Stephen L. Gulis, Blake W.
Krueger and Timothy J. O’Donovan.* Previously filed as Exhibit 10.2 to the
Company’s Current Report on Form 8-K dated February 9, 2005. Here
incorporated by reference. |
|||
| 10.19 | Form
of Non-Qualified Stock Option Agreement for executive officers other than those
to whom Exhibit 10.18 applies.* Previously filed as Exhibit 10.3 to the
Company’s Current Report on Form 8-K dated February 9, 2005. Here
incorporated by reference. |
|||
| 10.20 | Form of Restricted Stock Agreement.* Previously filed as Exhibit 10.4 to the
Company’s Current Report on Form 8-K dated February 9, 2005. Here
incorporated by reference. |
|||
| 10.21 | Form of Incentive Stock Option Agreement.* Previously filed as Exhibit 10.1
to the Company’s Current Report on Form 8-K dated February 15, 2006. Here
incorporated by reference. |
|||
| 10.22 | Form of Non-Qualified Stock Option Agreement for Stephen L. Gulis, Blake W.
Krueger and Timothy J. O’Donovan.* Previously filed as Exhibit 10.2 to the
Company’s Current Report of Form 8-K dated February 15, 2006. Here
incorporated by reference. |
|||
52
Table of Contents
| Exhibit | ||||
| Number | Document | |||
| 10.23 | Form
of Non-Qualified Stock Option Agreement for executive officers other than those
to whom Exhibit 10.22 applies.* Previously filed as Exhibit 10.3 to the
Company’s Current Report on Form 8-K dated February 15, 2006. Here
incorporated by reference. |
|||
| 10.24 | Form of Restricted Stock Agreement.* Previously filed as Exhibit 10.4 to the
Company’s Current Report on Form 8-K dated February 15, 2006. Here
incorporated by reference. |
|||
| 10.25 | Form of Stock Option Agreement for non-employee directors.* Previously filed
as Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the fiscal
year ended January 1, 2005. Here incorporated by reference. |
|||
| 10.26 | 2009
Form of Non-Qualified Stock Option Agreement for Donald T.
Grimes, Blake W. Krueger, Pamela L. Linton, Michael F. McBreen
and James D. Zwiers.* |
|||
| 10.27 | 2009
Form of Non-Qualified Stock Option Agreement for executive officers
other than those to whom Exhibit 10.26 applies.* |
|||
| 10.28 | Form
of Performance Share Award Agreement.* |
|||
| 10.29 | Separation Agreement between Wolverine World Wide, Inc. and Blake W. Krueger,
dated as of March 13, 2008, as amended.* Previously filed as
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the period ended March 22, 2008. Here incorporated by
reference. |
|||
| 10.30 | First
Amendment to Separation Agreement between Wolverine World Wide, Inc.
and Blake W. Krueger, dated as of December 11, 2008.* |
|||
| 10.31 | 409A Supplemental Executive Retirement Plan.* Previously filed as Exhibit
10.1 to the Company’s Current Report on Form 8-K filed on December 17, 2008.
Here incorporated by reference. A participant schedule of current executive
officers who participate in this plan is attached as
Exhibit 10.31. |
|||
| 10.32 | Form
of 409A Supplemental Retirement Plan Participation Agreement with Mr. Krueger.* |
|||
| 10.33 | Outside
Directors Deferred Compensation Plan.* Previously filed as Exhibit
10.2 to the Company’s Current Report on Form 8-K filed on December 17, 2008.
Here incorporated by reference. |
|||
| 10.34 | Separation and Release Agreement between Wolverine World Wide, Inc. and
Cheryl L. Johnson.* Previously filed as Exhibit 10.27 to the Company’s Annual
Report on Form 10-K for the fiscal year ended December 29, 2007. Here
incorporated by reference. |
|||
| 21 | Subsidiaries of Registrant. |
|||
| 23 | Consent of Ernst & Young LLP. |
|||
| 24 | Powers of Attorney. |
|||
| 31.1 | Certification of President and Chief Executive Officer under Section 302 of
the Sarbanes-Oxley Act of 2002. |
|||
| 31.2 | Certification of Senior Vice President, Chief Financial Officer and Treasurer
under Section 302 of the Sarbanes-Oxley Act of 2002. |
|||
| 32 | Certification pursuant to 18 U.S.C. § 1350. |
|||
| * | Management contract or compensatory plan or arrangement. |
The Company will furnish a copy of any exhibit listed above to any stockholder without charge
upon written request to Mr. Kenneth A. Grady, General Counsel and Secretary, 9341 Courtland Drive,
Rockford, Michigan 49351.
53
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
| WOLVERINE WORLD WIDE, INC. |
||||
| Dated: March 4, 2009 | By: | /s/ Blake W. Krueger | ||
| Blake W. Krueger | ||||
| Chief Executive Officer and President (Principal Executive Officer) |
||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
| Signature | Title | Date | ||
/s/ Blake W. Krueger
|
Chief Executive Officer and President (Principal Executive Officer) |
March 4, 2009 | ||
/s/ Donald T. Grimes
|
Senior Vice President, Chief
Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
March 4, 2009 | ||
*/s/ Jeffrey M. Boromisa
|
Director | March 4, 2009 | ||
*/s/ William K. Gerber
|
Director | March 4, 2009 | ||
*/s/ Alberto L. Grimoldi
|
Director | March 4, 2009 | ||
*/s/ Joseph R. Gromek
|
Director | March 4, 2009 | ||
*/s/ David T. Kollat
|
Director | March 4, 2009 |
54
Table of Contents
| Signature | Title | Date | ||
/s/ Blake W. Krueger
|
Director | March 4, 2009 | ||
*/s/ Brenda J. Lauderback
|
Director | March 4, 2009 | ||
*/s/ David P. Mehney
|
Director | March 4, 2009 | ||
*/s/ Timothy J. O’Donovan
|
Director and Chairman | March 4, 2009 | ||
*/s/ Shirley D. Peterson
|
Director | March 4, 2009 | ||
*/s/ Michael A. Volkema
|
Director | March 4, 2009 | ||
*By /s/ Blake W. Krueger
Attorney-in-Fact |
Chief Executive Officer and President | March 4, 2009 |
55
Table of Contents
APPENDIX A
Financial Statements
Table of Contents
CONSOLIDATED BALANCE SHEETS
| As of Fiscal Year End | ||||||||
| (Thousands of Dollars) | 2008 | 2007 | ||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 89,502 | $ | 76,087 | ||||
Accounts receivable, less allowances (2008 - $15,161; 2007 - $13,643) |
167,949 | 179,934 | ||||||
Inventories |
||||||||
Finished products |
177,801 | 148,925 | ||||||
Raw materials and work-in-process |
18,976 | 16,927 | ||||||
| 196,777 | 165,852 | |||||||
Deferred income taxes |
8,127 | 11,909 | ||||||
Prepaid expenses and other current assets |
11,487 | 11,859 | ||||||
Total current assets |
473,842 | 445,641 | ||||||
Property, plant, and equipment: |
||||||||
Land |
882 | 882 | ||||||
Buildings and improvements |
81,875 | 76,678 | ||||||
Machinery and equipment |
143,203 | 149,944 | ||||||
Software |
72,478 | 60,702 | ||||||
| 298,438 | 288,206 | |||||||
Less accumulated depreciation |
212,681 | 202,789 | ||||||
| 85,757 | 85,417 | |||||||
Other assets: |
||||||||
Goodwill |
32,310 | 39,573 | ||||||
Other non-amortizable intangibles |
9,257 | 8,936 | ||||||
Cash surrender value of life insurance |
35,531 | 32,886 | ||||||
Pension assets |
— | 17,752 | ||||||
Deferred income taxes |
23,314 | 3,877 | ||||||
Other |
4,769 | 4,296 | ||||||
| 105,181 | 107,320 | |||||||
Total assets |
$ | 664,780 | $ | 638,378 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 45,320 | $ | 51,551 | ||||
Accrued salaries and wages |
22,702 | 20,668 | ||||||
Income taxes |
1,817 | 3,911 | ||||||
Taxes, other than income taxes |
4,308 | 5,855 | ||||||
Other accrued liabilities |
29,533 | 32,109 | ||||||
Accrued pension liabilities |
28,144 | 4,772 | ||||||
Current maturities of long-term debt |
5 | 10,731 | ||||||
Revolving credit agreement |
59,500 | — | ||||||
Total current liabilities |
191,329 | 129,597 | ||||||
Deferred compensation |
7,714 | 8,011 | ||||||
Accrued pension liabilities |
34,777 | 20,912 | ||||||
Other liabilities |
1,038 | 1,079 | ||||||
Stockholders’ equity: |
||||||||
Common stock, $1 par value: authorized 160,000,000 shares; shares
issued, including treasury shares: 2008 - 61,655,814; 2007 - 61,085,123 |
61,656 | 61,085 | ||||||
Additional paid-in capital |
64,696 | 47,786 | ||||||
Retained earnings |
666,027 | 591,706 | ||||||
Accumulated other comprehensive income (loss) |
(42,834 | ) | 22,268 | |||||
Cost of shares in treasury: 2008 - 12,748,721 shares; 2007 - 9,850,299
shares |
(319,623 | ) | (244,066 | ) | ||||
Total stockholders’ equity |
429,922 | 478,779 | ||||||
Total liabilities and stockholders’ equity |
$ | 664,780 | $ | 638,378 | ||||
| ( ) | Denotes deduction. |
See accompanying notes to consolidated financial statements.
A-1
Table of Contents
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
AND COMPREHENSIVE INCOME
| Fiscal Year | ||||||||||||
| (Thousands of Dollars, Except Per Share Data) | 2008 | 2007 | 2006 | |||||||||
COMMON STOCK |
||||||||||||
Balance at beginning of the year |
$ | 61,085 | $ | 60,468 | $ | 59,212 | ||||||
Common stock issued under stock incentive plans
(2008 - 570,691 shares; 2007 - 618,123 shares;
2006 - 1,255,286 shares) |
571 | 617 | 1,256 | |||||||||
Balance at end of the year |
61,656 | 61,085 | 60,468 | |||||||||
ADDITIONAL PAID-IN CAPITAL |
||||||||||||
Balance at beginning of the year |
47,786 | 31,341 | 13,203 | |||||||||
Stock-based compensation expense |
8,164 | 8,316 | 7,155 | |||||||||
Reclassification of unearned compensation upon
adoption of SFAS No. 123(R) |
— | — | (5,873 | ) | ||||||||
Amounts associated with common stock issued
under stock incentive plans: |
||||||||||||
Proceeds over par value |
5,859 | 4,603 | 12,254 | |||||||||
Income tax benefits |
2,842 | 3,572 | 4,672 | |||||||||
Issuance of treasury shares (2008 - 22,842 shares;
2007 - 12,661 shares; 2006 - 14,511 shares) |
54 | 47 | 55 | |||||||||
Net change in employee notes receivable |
(9 | ) | (93 | ) | (125 | ) | ||||||
Balance at end of the year |
64,696 | 47,786 | 31,341 | |||||||||
RETAINED EARNINGS |
||||||||||||
Balance at beginning of the year |
591,706 | 519,815 | 452,672 | |||||||||
Net earnings |
95,821 | 92,886 | 83,647 | |||||||||
Cash dividends declared (2008 - $0.44 per share;
2007 - $0.36 per share; 2006 - $0.30 per share) |
(21,500 | ) | (18,844 | ) | (16,504 | ) | ||||||
Cumulative effect of adopting FIN 48 (See Note 7) |
— | (509 | ) | — | ||||||||
Pension adjustments (See Note 6) |
— | (1,642 | ) | — | ||||||||
Balance at end of the year |
666,027 | 591,706 | 519,815 | |||||||||
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) |
||||||||||||
Balance at beginning of the year |
22,268 | 3,923 | 9,398 | |||||||||
Foreign currency translation adjustments |
(36,305 | ) | 13,643 | 9,548 | ||||||||
Change in fair value of foreign exchange contracts,
net of taxes (2008 - ($3,447); 2007 - $929; 2006 -
$901) |
5,978 | (1,007 | ) | (1,657 | ) | |||||||
Pension adjustments, net of taxes
(2008 - $18,963; 2007 - ($3,396); 2006 - $6,885) |
(34,775 | ) | 5,709 | (13,366 | ) | |||||||
Balance at end of the year |
(42,834 | ) | 22,268 | 3,923 | ||||||||
UNEARNED COMPENSATION |
||||||||||||
Balance at beginning of the year |
— | — | (5,873 | ) | ||||||||
Reclassification of unearned compensation upon
adoption of SFAS No. 123(R) |
— | — | 5,873 | |||||||||
Balance at end of the year |
— | — | — | |||||||||
COST OF SHARES IN TREASURY |
||||||||||||
Balance at beginning of the year |
(244,066 | ) | (110,988 | ) | (66,291 | ) | ||||||
Common stock purchased for treasury (2008 - 2,921,264
shares; 2007 - 4,587,473 shares; 2006 - 1,937,450
shares) |
(76,129 | ) | (133,379 | ) | (45,009 | ) | ||||||
Issuance of treasury shares (2008 - 22,842 shares;
2007 - 12,661 shares; 2006 - 14,511 shares) |
572 | 301 | 312 | |||||||||
Balance at end of the year |
(319,623 | ) | (244,066 | ) | (110,988 | ) | ||||||
Total stockholders’ equity at end of the year |
$ | 429,922 | $ | 478,779 | $ | 504,559 | ||||||
COMPREHENSIVE INCOME |
||||||||||||
Net earnings |
$ | 95,821 | $ | 92,886 | $ | 83,647 | ||||||
Foreign currency translation adjustments |
(36,305 | ) | 13,643 | 9,548 | ||||||||
Change in fair value of foreign exchange contracts, net
of taxes |
5,978 | (1,007 | ) | (1,657 | ) | |||||||
Pension adjustments, net of taxes |
(34,775 | ) | 5,709 | (306 | ) | |||||||
Total comprehensive income |
$ | 30,719 | $ | 111,231 | $ | 91,232 | ||||||
| ( ) | Denotes deduction. |
See accompanying notes to consolidated financial statements.
A-2
Table of Contents
CONSOLIDATED STATEMENTS OF OPERATIONS
| Fiscal Year | ||||||||||||
| (Thousands of Dollars, Except Per Share Data) | 2008 | 2007 | 2006 | |||||||||
Revenue |
$ | 1,220,568 | $ | 1,198,972 | $ | 1,141,887 | ||||||
Cost of products sold |
734,547 | 727,041 | 700,349 | |||||||||
Gross profit |
486,021 | 471,931 | 441,538 | |||||||||
Selling, general, and administrative expenses |
345,183 | 333,151 | 318,243 | |||||||||
Operating profit |
140,838 | 138,780 | 123,295 | |||||||||
Other expenses (income): |
||||||||||||
Interest expense |
2,850 | 2,470 | 2,973 | |||||||||
Interest income |
(1,757 | ) | (3,134 | ) | (3,175 | ) | ||||||
Other (income) expense |
(839 | ) | 873 | 1,205 | ||||||||
| 254 | 209 | 1,003 | ||||||||||
Earnings before income taxes |
140,584 | 138,571 | 122,292 | |||||||||
Income taxes |
44,763 | 45,685 | 38,645 | |||||||||
Net earnings |
$ | 95,821 | $ | 92,886 | $ | 83,647 | ||||||
Net earnings per share: |
||||||||||||
Basic |
$ | 1.96 | $ | 1.77 | $ | 1.52 | ||||||
Diluted |
1.90 | 1.70 | 1.47 | |||||||||
See accompanying notes to consolidated financial statements.
A-3
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Fiscal Year | ||||||||||||
| (Thousands of Dollars) | 2008 | 2007 | 2006 | |||||||||
OPERATING ACTIVITIES |
||||||||||||
Net earnings |
$ | 95,821 | $ | 92,886 | $ | 83,647 | ||||||
Adjustments necessary to reconcile net earnings
to net cash provided by operating activities: |
||||||||||||
Depreciation |
18,460 | 20,223 | 21,024 | |||||||||
Amortization |
2,236 | 2,568 | 968 | |||||||||
Deferred income taxes |
(43 | ) | (5,660 | ) | (8,543 | ) | ||||||
Stock-based compensation expense |
8,164 | 8,316 | 7,155 | |||||||||
Excess tax benefits from stock-based compensation |
(1,610 | ) | (2,620 | ) | (3,599 | ) | ||||||
Pension |
1,252 | 2,884 | 7,254 | |||||||||
Other |
13,966 | 4,339 | 3,498 | |||||||||
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable |
3,419 | (21,530 | ) | 6,409 | ||||||||
Inventories |
(39,201 | ) | 22,450 | (18,764 | ) | |||||||
Other operating assets |
(386 | ) | 3,141 | (3,382 | ) | |||||||
Accounts payable |
(5,064 | ) | 3,140 | 5,434 | ||||||||
Other operating liabilities |
(3,544 | ) | (6,849 | ) | 8,588 | |||||||
Net cash provided by operating activities |
93,470 | 123,288 | 109,689 | |||||||||
INVESTING ACTIVITIES |
||||||||||||
Additions to property, plant, and equipment |
(24,126 | ) | (17,879 | ) | (17,067 | ) | ||||||
Other |
(4,133 | ) | (4,441 | ) | (2,039 | ) | ||||||
Net cash used in investing activities |
(28,259 | ) | (22,320 | ) | (19,106 | ) | ||||||
FINANCING ACTIVITIES |
||||||||||||
Net borrowings under revolver |
59,500 | — | — | |||||||||
Payments of long-term debt |
(10,714 | ) | (10,713 | ) | (10,916 | ) | ||||||
Payments of capital lease obligations |
(12 | ) | (26 | ) | (23 | ) | ||||||
Cash dividends paid |
(20,758 | ) | (18,391 | ) | (16,079 | ) | ||||||
Purchase of common stock for treasury |
(76,129 | ) | (133,379 | ) | (45,009 | ) | ||||||
Proceeds from shares issued under stock incentive plans |
7,047 | 5,662 | 13,752 | |||||||||
Excess tax benefits from stock-based compensation |
1,610 | 2,620 | 3,599 | |||||||||
Net cash used in financing activities |
(39,456 | ) | (154,227 | ) | (54,676 | ) | ||||||
Effect of foreign exchange rate changes |
(12,340 | ) | 4,683 | 3,498 | ||||||||
Increase (decrease) in cash and cash equivalents |
13,415 | (48,576 | ) | 39,405 | ||||||||
Cash and cash equivalents at beginning of the year |
76,087 | 124,663 | 85,258 | |||||||||
Cash and cash equivalents at end of the year |
$ | 89,502 | $ | 76,087 | $ | 124,663 | ||||||
OTHER CASH FLOW INFORMATION |
||||||||||||
Interest paid |
$ | 2,365 | $ | 1,916 | $ | 2,545 | ||||||
Net income taxes paid |
35,995 | 48,336 | 35,784 | |||||||||
| ( ) | Denotes reduction in cash and cash equivalents. |
See accompanying notes to consolidated financial statements.
A-4
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
NATURE OF OPERATIONS
Wolverine World Wide, Inc. is a leading designer, manufacturer and marketer of a broad range of
quality casual shoes, performance outdoor footwear, apparel, work shoes and boots, and uniform
shoes and boots. The Company’s global portfolio of owned and licensed brands includes: Bates®, Cat®
Footwear, Harley-Davidson® Footwear, Hush Puppies®, HyTest®, Merrell®, Patagonia® Footwear,
Sebago®, Stanley® Footgear, and Wolverine®. Licensing programs are utilized to extend the global
reach of the Company’s owned brands. The Company also operates a retail division to market its
brands and branded footwear and apparel from other manufacturers; a tannery that produces Wolverine
Performance Leathers™; and a pigskin procurement operation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Wolverine World Wide, Inc. and its
wholly-owned subsidiaries (collectively, the “Company”). All intercompany accounts and
transactions have been eliminated in consolidation.
FISCAL YEAR
The Company’s fiscal year is the 52- or 53-week period that ends on the Saturday nearest to
December 31. Fiscal years presented in this report include the 53-week period ended January 3,
2009 and the 52-week periods ended December 29, 2007 and December 30, 2006.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized on the sale of products manufactured or sourced by the Company when the
related goods have been shipped, legal title has passed to the customer, and collectibility is
reasonably assured. Revenue generated through programs with licensees and distributors involving
products bearing the Company’s trademarks is recognized as earned according to stated contractual
terms upon either the purchase or shipment of branded products by licensees and distributors.
The Company records provisions against gross revenue for estimated sales returns and cash discounts
in the period when the related revenue is recorded. These estimates are based on factors that
include, but are not limited to, historical sales returns, historical cash discounts taken, and
analysis of credit memorandum activity.
COST OF PRODUCTS SOLD
Cost of products sold includes the actual product costs, including inbound freight charges,
purchasing, sourcing, inspection, and receiving costs. Warehousing costs are included in selling,
general, and administrative expenses.
SHIPPING AND HANDLING COSTS
Shipping and handling costs that are charged to and reimbursed by the customer are recognized as
revenue, while the related expenses incurred by the Company are recorded as cost of products sold.
A-5
Table of Contents
CASH EQUIVALENTS
Cash equivalents include highly liquid investments with a maturity of three months or less when
purchased. Cash equivalents are stated at cost, which approximates market.
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
The Company maintains an allowance for uncollectible accounts receivable for estimated losses
resulting from its customers’ inability to make required payments. Company management evaluates
the allowance for uncollectible accounts receivable based on a review of current customer status
and historical collection experience. Adjustments to these estimates may be required if the
financial condition of the Company’s customers were to change. The Company does not require
collateral or other security on trade accounts receivable for the majority of its customers.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by the last-in,
first-out (LIFO) method for all domestic raw materials and work-in-process inventories, and certain
U.S. finished goods inventories. Cost is determined using methods approximating cost under the
first-in, first-out (FIFO) method for all raw materials, work-in-process, and finished goods
inventories in foreign countries. The FIFO method is also used for all finished goods inventories
of the Company’s retail business, due to the unique nature of that operation, and for certain U.S.
finished goods inventories. Once elected, the Company has applied these inventory cost valuation
methods consistently from year to year.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated on the basis of cost and include expenditures for new
facilities, major renewals, betterments, and software. Normal repairs and maintenance are expensed
as incurred.
Depreciation of property, plant, and equipment is computed using the straight-line method. The
depreciable lives range from five to forty years for buildings and improvements and from three to
ten years for machinery, equipment, and software. Leasehold improvements are depreciated at the
lesser of the estimated useful life or lease term, including reasonably assured lease renewals as
determined at lease inception.
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the excess of the purchase price over the fair value of net tangible and
identifiable intangible assets of acquired businesses. Other intangibles consist primarily of
trademarks, brand names, patents, and customer relationships. Goodwill and intangible assets
deemed to have indefinite lives are not amortized, but are subject to impairment tests at least
annually in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill
and Other Intangible Assets. The Company reviews the carrying amounts of goodwill and other
non-amortizable intangible assets annually by reporting unit to determine if such assets may be
impaired. If the carrying amounts of these assets are not recoverable based upon a discounted cash
flow analysis, such assets are reduced by the estimated shortfall of fair value to recorded value.
Other amortizable intangible assets (principally patents) are amortized using the straight-line
method over their estimated useful lives (periods ranging from two to ten years). Other amortizable
intangible assets are included in other assets on the consolidated balance sheets and have net
carrying amounts of $4,390,000 and $3,487,000 for 2008 and 2007, respectively, and accumulated
amortization of $4,433,000 and $4,986,000 for 2008 and 2007, respectively. Estimated aggregate
amortization expense for such intangibles for each of the five fiscal years subsequent to 2008 is
as follows: 2009 — $1,668,000; 2010 — $1,554,000; 2011 — $925,000; 2012 — $98,000; 2013 — $65,000.
The Company has performed the required annual impairment tests and has determined that goodwill and
other non-amortizable intangibles were not impaired at January 3, 2009 and December 29, 2007.
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Table of Contents
The changes in the carrying amount of goodwill and other non-amortizable intangibles for the years
ended January 3, 2009 and December 29, 2007 are as follows:
| (Thousands of Dollars) | Goodwill | Trademarks | Total | |||||||||
Balance at December 31, 2006 |
$ | 38,776 | $ | 8,506 | $ | 47,282 | ||||||
Intangibles acquired |
— | 430 | 430 | |||||||||
Foreign currency translation effects |
797 | — | 797 | |||||||||
Balance at December 29, 2007 |
$ | 39,573 | $ | 8,936 | $ | 48,509 | ||||||
Intangibles acquired |
— | 338 | 338 | |||||||||
Intangibles disposed |
— | (17 | ) | (17 | ) | |||||||
Foreign currency translation effects |
(7,263 | ) | — | (7,263 | ) | |||||||
Balance at January 3, 2009 |
$ | 32,310 | $ | 9,257 | $ | 41,567 | ||||||
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset or an asset group may not be recoverable. Each
impairment test is based on a comparison of the carrying amount of the asset or asset group to the
future undiscounted net cash flows expected to be generated by the asset or asset group. If such
assets are considered to be impaired, the impairment amount to be recognized is the amount by which
the carrying value of the assets exceeds their fair value.
RETIREMENT BENEFITS
The determination of the obligation and expense for retirement benefits is dependent on the
selection of certain actuarial assumptions used in calculating such amounts. These assumptions
include, among others, the discount rate, expected long-term rate of return on plan assets, and
rates of increase in compensation. These assumptions are reviewed with the Company’s actuaries and
updated annually based on relevant external and internal factors and information, including but not
limited to, long-term expected asset returns, rates of termination, regulatory requirements, and
plan changes. See Note 6 to the consolidated financial statements for additional information.
STOCK-BASED COMPENSATION
Prior to January 1, 2006, the Company followed Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations, in accounting for awards
under its stock incentive plans. The Company did not recognize stock-based compensation expense
related to employee stock options in its statements of operations for periods prior to the adoption
of SFAS No. 123(R), Share-Based Payment, as options granted had an exercise price equal to the
market value of the underlying common stock on the date of grant. Effective January 1, 2006, the
Company adopted the fair value recognition provisions of SFAS No. 123(R) using the modified
prospective transition method. Under that transition method, compensation cost recognized in the
years ended January 3, 2009, December 29, 2007 and December 30, 2006 includes: (a) compensation
cost for all stock-based payments granted prior to, but not yet vested as of January 1, 2006, based
on the grant date fair value estimate in accordance with the original provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, and (b) compensation cost for all stock-based payments
granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance
with the provisions of SFAS No. 123(R).
The Company recognized compensation costs of $8,164,000, $8,316,000, and $7,155,000 and related
income tax benefits of $1,699,000, $2,092,000, and $1,967,000 for awards under its stock-based
compensation plans in the statements of operations for the years ended January 3, 2009, December
29, 2007, and December 30, 2006, respectively. Compensation costs capitalized as part of inventory
and property, plant and equipment were not material.
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The Company estimated the fair value of employee stock options on the date of grant using the
Black-Scholes model. The estimated weighted-average fair value for each option granted was $5.68,
$6.87 and $5.29 per share in 2008, 2007 and 2006, respectively, with the following weighted-average
assumptions:
| 2008 | 2007 | 2006 | ||||||||||
Expected market price volatility (1) |
28.9 | % | 23.3 | % | 24.5 | % | ||||||
Risk-free interest rate (2) |
2.5 | % | 4.8 | % | 4.6 | % | ||||||
Dividend yield (3) |
1.6 | % | 1.4 | % | 1.4 | % | ||||||
Expected term (4) |
4 years | 4 years | 4 years | |||||||||
| (1) | Based on historical volatility of the Company’s common stock. The
expected volatility is based on the daily percentage change in the
price of the stock over the four years prior to the grant. |
|
| (2) | Represents the U.S. Treasury yield curve in effect for the expected
term of the option (average of three- and five-year Treasury bonds) at
the time of grant. |
|
| (3) | Represents the Company’s cash dividend yield for the expected term. |
|
| (4) | Represents the period of time that options granted are expected to be
outstanding. The Company determined that all employee groups exhibit
similar exercise and post-vesting termination behavior to determine
the expected term. |
Stock-based compensation expense recognized in the consolidated condensed statements of operations
for the years ended January 3, 2009, December 29, 2007 and December 30, 2006 has been reduced for
estimated forfeitures, as it is based on awards ultimately expected to vest. SFAS No. 123(R)
requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on
historical experience.
ADVERTISING COSTS
Advertising costs are expensed as incurred and customer-specific advertising dollars are expensed
when earned by customers. Total advertising expense was $47,436,000 in 2008, $45,982,000 in 2007
and $42,037,000 in 2006, and includes customer-specific advertising dollars of $10,752,000 in 2008,
$12,160,000 in 2007 and $9,327,000 in 2006. The Company provides sales incentives to certain
retail customers in the form of a cooperative advertising program and accounts for costs under this
program in accordance with EITF 01-9, Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendor’s Products). Under this program, customers are reimbursed for
Company-approved advertising expenditures where the value to the Company is objectively verifiable.
INCOME TAXES
The provision for income taxes is based on the earnings reported in the consolidated financial
statements. A deferred income tax asset or liability is determined by applying currently enacted
tax laws and rates to the cumulative temporary differences between the carrying values of assets
and liabilities for financial statement and income tax purposes. The Company recognizes interest
and penalties related to unrecognized tax benefits through interest expense and income tax expense,
respectively.
EARNINGS PER SHARE
Basic earnings per share is computed based on weighted-average shares of common stock outstanding
during each year after adjustment for nonvested common stock issued under restricted stock
incentive plans. Diluted earnings per share assumes the exercise of dilutive stock options and the
vesting of all common stock under restricted stock programs.
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Table of Contents
The following table sets forth the reconciliation of weighted average shares used in the
computation of basic and diluted earnings per share:
| 2008 | 2007 | 2006 | ||||||||||
Weighted average shares outstanding during the year |
49,381,789 | 53,140,581 | 55,655,822 | |||||||||
Adjustment for nonvested restricted common stock |
(513,063 | ) | (641,088 | ) | (802,624 | ) | ||||||
Denominator for basic earnings per share |
48,868,726 | 52,499,493 | 54,853,198 | |||||||||
Effect of dilutive stock options |
1,151,567 | 1,586,804 | 1,622,103 | |||||||||
Adjustment for nonvested common stock — treasury
method |
337,424 | 401,369 | 455,806 | |||||||||
Denominator for diluted earnings per share |
50,357,717 | 54,487,666 | 56,931,107 | |||||||||
Options to purchase 1,273,676 shares of common stock in 2008, 546,247 shares in 2007, and 507,775
shares in 2006 have not been included in the denominator for the computation of diluted earnings
per share because the related exercise prices were greater than the average market price for the
period and, therefore, they were antidilutive.
FOREIGN CURRENCY
For most of the Company’s international subsidiaries, the local currency is the functional
currency. Assets and liabilities of these subsidiaries are translated into U.S. dollars at the
year-end exchange rate. Operating statement amounts are translated at average exchange rates for
the period. The cumulative translation adjustments resulting from changes in exchange rates are
included in the consolidated balance sheets as a component of accumulated other comprehensive
income (loss) in stockholders’ equity. Transaction gains and losses are included in the
consolidated statements of operations and were not material in 2008, 2007, and 2006.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company’s financial instruments consist of cash and cash equivalents, accounts and notes
receivable, accounts payable, borrowings under the revolving credit agreement, and long-term debt.
There was no long-term debt outstanding at January 3, 2009. At December 29, 2007, fixed rate
long-term debt with a carrying value of $10,714,000 and a fair value of $10,976,000 was
outstanding. Excluding the fixed rate long-term debt, the Company’s estimate of the fair values of
the aforementioned financial instruments approximates their carrying amounts for the respective
years. Fair value was determined using discounted cash flow analyses and current interest rates
for similar instruments. The Company does not hold or issue financial instruments for trading
purposes.
Effective December 30, 2007 (fiscal year 2008), the Company adopted the provisions of SFAS No. 157,
Fair Value Measurements (“SFAS No. 157”), for financial assets and liabilities measured on a
recurring basis. SFAS No. 157 applies to all financial assets and liabilities that are being
measured and reported on a fair value basis and establishes a framework for measuring fair value of
assets and liabilities and expands disclosures about fair value measurements. There was no impact
to the Company’s consolidated financial statements as a result of the adoption of SFAS No. 157. As
of January 3, 2009 and December 29, 2007, an asset of $3,246,000 and a liability of $1,918,000,
respectively, have been recognized for the fair value of the foreign currency forward exchange
contracts. In accordance with SFAS No. 157, these assets and liabilities fall within Level 2 of
the fair value hierarchy. Level 2 represents financial instruments lacking quoted prices
(unadjusted) from active market exchanges, including over-the-counter exchange-traded financial
instruments. The prices for the financial instruments are determined using prices for
recently-traded financial instruments with similar underlying terms as well as directly or
indirectly observable inputs. The Company did not have any additional assets or liabilities that
were measured at fair value on a recurring basis at January 3, 2009.
The Company follows SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS Nos. 137 and 138, which requires that all derivative instruments be
recorded on the consolidated balance sheets at fair value and establishes criteria for designation
and effectiveness of hedging relationships. The Company utilizes foreign currency forward exchange
contracts to manage the volatility associated with inventory purchases made by non-U.S. wholesale
operations in U.S. dollars in
the normal course of business. At January 3, 2009 and December 29, 2007, foreign exchange
contracts with a notional value of $63,129,000 and $70,357,000, respectively, were outstanding to
purchase U.S. dollars with maturities ranging up to 287 days. These contracts have been designated
as cash flow hedges.
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Table of Contents
The fair value of the foreign currency forward exchange contracts represents the estimated receipts
or payments necessary to terminate the contracts. Hedge effectiveness is evaluated by the
hypothetical derivative method. Any hedge ineffectiveness is reported within cost of products
sold. Hedge ineffectiveness was not material in 2008, 2007, or 2006. If, in the future, the
foreign exchange contracts are determined to be ineffective hedges or terminated before their
contractual termination dates, the Company would be required to reclassify into earnings all or a
portion of the unrealized amounts related to the cash flow hedges that are currently included in
accumulated other comprehensive income (loss) within stockholders’ equity.
COMPREHENSIVE INCOME
Comprehensive income represents net earnings and any revenue, expenses, gains, and losses that,
under accounting principles generally accepted in the United States, are excluded from net earnings
and recognized directly as a component of stockholders’ equity.
Ending accumulated other comprehensive income (loss) is as follows:
| (Thousands of Dollars) | 2008 | 2007 | ||||||
Foreign currency translation adjustments |
$ | (872 | ) | $ | 35,433 | |||
Foreign currency cash flow hedge adjustments, net of taxes
(2008 - ($1,904); 2007 - $1,543) |
3,923 | (2,055 | ) | |||||
Pension adjustments, net of taxes
(2008 - $24,231; 2007 - $5,268) |
(45,885 | ) | (11,110 | ) | ||||
Accumulated other comprehensive income (loss) |
$ | (42,834 | ) | $ | 22,268 | |||
RECLASSIFICATIONS
Certain amounts previously reported in 2007 and 2006 have been reclassified to conform with the
presentation used in 2008.
2. Inventories
Inventories of $65,000,000 at January 3, 2009 and $61,070,000 at December 29, 2007 have been valued
using the LIFO method. If the FIFO method had been used, inventories would have been $11,854,000
and $8,983,000 higher than reported at January 3, 2009 and December 29, 2007, respectively.
3. Debt
Long-term debt consists of the following obligations:
| (Thousands of Dollars) | 2008 | 2007 | ||||||
6.5% senior notes payable |
$ | — | $ | 10,714 | ||||
Other |
5 | 17 | ||||||
| 5 | 10,731 | |||||||
Less current maturities |
5 | 10,731 | ||||||
| $ | — | $ | — | |||||
The 6.5% unsecured senior notes payable were paid in 2008. Required annual principal payments of
$10,714,000 were due through the maturity date of December 8, 2008. In connection with the
issuance of these senior notes, the Company entered into an interest rate lock agreement with a
bank that was settled in 1998 and resulted in a prepayment of interest of $2,200,000. This
prepayment was amortized over the
remaining term of the senior notes using the effective interest method. The prepayment was fully
amortized at January 3, 2009.
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Table of Contents
The Company has an unsecured revolving credit agreement that allows for borrowings up to
$150,000,000, subject to increase or decrease as specified in the credit agreement. This
agreement, which expires in July 2010, contains restrictive covenants that, among other things,
require the Company to maintain certain financial ratios related to debt to total capital and
minimum fixed charge coverage. At January 3, 2009, the Company was in compliance with all
restrictive covenants. Interest is paid at a variable rate based on one of the following options
elected by the Company: prime, LIBOR, or money market rate plus applicable spread. At January 3,
2009, $59,500,000 was outstanding under a revolving credit agreement which the Company considers
short-term in nature. No amount was outstanding at December 29, 2007.
The Company had commercial letters of credit outstanding of $2,466,000 and $2,060,000 at January 3,
2009 and December 29, 2007, respectively.
Interest costs of $227,000 in 2008, $237,000 in 2007, and $170,000 in 2006 were capitalized in
connection with various capital improvement and computer hardware and software installation
projects.
4. Leases
The Company leases machinery, equipment, and certain warehouse, office, and retail store space
under operating lease agreements that expire at various dates through 2023. Certain leases contain
renewal provisions and generally require the Company to pay utilities, insurance, taxes, and other
operating expenses. At January 3, 2009, minimum rental payments due under all noncancelable leases
were as follows: 2009 — $16,551,000; 2010 — $14,824,000; 2011 — $13,311,000; 2012 — $11,020,000;
2013 — $10,225,000; thereafter — $59,741,000.
Rental expense under all operating leases, consisting primarily of minimum rentals, totaled
$18,255,000 in 2008, $14,681,000 in 2007, and $13,934,000 in 2006.
5. Capital Stock
The Company has 2,000,000 authorized shares of $1 par value preferred stock, of which none was
issued or outstanding as of January 3, 2009 or December 29, 2007. The Company has designated
500,000 shares of preferred stock as Series B junior participating preferred stock for possible
future issuance under a preferred stock rights plan.
As of January 3, 2009, the Company had stock options outstanding or available for grant under stock
incentive plans adopted in 1993, 1995, 1997, 1999, 2001, 2003, and 2005. Shares of restricted
stock may also be granted under each of these plans, with the exception of the 1993, 1995, and 1997
plans. As of January 3, 2009, the Company had approximately 2,681,324 stock incentive units
available for issuance under the Stock Incentive Plan of 2005. Under the provisions of the Stock
Incentive Plan of 2005, each option granted counts as one stock incentive unit and each share of
restricted stock granted counts as two stock incentive units. In addition, as of January 3, 2009,
the Company had approximately 536,911 stock incentive units available for grant under the balance
of its other plans. Options granted under each plan have an exercise price equal to the fair
market value of the underlying stock on the grant date, expire no later than ten years from the
grant date, and generally vest over three years. Common stock issued under these plans is subject
to certain restrictions, including a prohibition against any sale, transfer, or other disposition
by the officer or employee during the vesting period (except for certain transfers for estate
planning purposes for certain officers), and a requirement to forfeit all or a certain portion of
the award upon certain terminations of employment or upon failure to achieve performance criteria
in certain instances. These restrictions typically lapse over a three- to five-year period from the
date of the award. The Company has elected to recognize expense for these stock-based incentive
plans ratably over the vesting term on a straight-line basis. Certain option and restricted share
awards provide for accelerated vesting under various scenarios, including retirement and upon a
change in control of the Company. With regard to acceleration of vesting upon retirement,
employees of eligible retirement age are vested in
accordance with plan provisions and applicable stock option and restricted stock agreements. The
Company issues shares to plan participants upon exercise or vesting of stock-based incentive awards
from either authorized, but unissued, shares or treasury shares.
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Table of Contents
A summary of the transactions under the stock option plans is as follows:
| Average | ||||||||||||||||
| Weighted- | Remaining | |||||||||||||||
| Shares | Average | Contractual | Aggregate | |||||||||||||
| Under | Exercise | Term | Intrinsic | |||||||||||||
| Option | Price | (Years) | Value | |||||||||||||
Outstanding at December 31, 2005 |
5,040,712 | $ | 14.72 | 5.6 | $ | 39,201,000 | ||||||||||
Granted |
735,210 | 22.71 | ||||||||||||||
Exercised |
(1,168,639 | ) | 12.51 | |||||||||||||
Cancelled |
(32,338 | ) | 20.46 | |||||||||||||
Outstanding at December 30, 2006 |
4,574,945 | $ | 16.53 | 5.6 | $ | 54,873,000 | ||||||||||
Granted |
623,577 | 30.16 | ||||||||||||||
Exercised |
(551,020 | ) | 14.67 | |||||||||||||
Cancelled |
(59,257 | ) | 27.73 | |||||||||||||
Outstanding at December 29, 2007 |
4,588,245 | $ | 18.46 | 5.4 | $ | 31,096,000 | ||||||||||
Granted |
845,843 | 25.21 | ||||||||||||||
Exercised |
(713,048 | ) | 15.46 | |||||||||||||
Cancelled |
(148,656 | ) | 25.36 | |||||||||||||
Outstanding at January 3, 2009 |
4,572,384 | $ | 19.95 | 5.6 | $ | 16,155,438 | ||||||||||
Estimated forfeitures |
(12,917 | ) | ||||||||||||||
Vested or expected to vest at
January 3, 2009 |
4,559,467 | $ | 19.93 | 5.5 | $ | 16,155,320 | ||||||||||
Nonvested at January 3, 2009
and expected to vest |
(1,156,243 | ) | ||||||||||||||
Exercisable at January 3, 2009 |
3,403,224 | $ | 17.87 | 4.5 | $ | 16,152,334 | ||||||||||
The total pre-tax intrinsic value of options exercised during the year ended January 3, 2009 was
$8,593,000. As of January 3, 2009, there was $2,851,000 of unrecognized compensation cost related
to stock option awards that is expected to be recognized over a weighted-average period of 1.2
years.
The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value,
based on the Company’s closing stock price of $21.52 as of January 2, 2009, which would have been
received by the option holders had all option holders exercised in-the-money options as of that
date. The total number of in-the-money options exercisable as of January 3, 2009 was 2,183,319.
As of December 29, 2007, 3,635,095 outstanding options were exercisable, and the weighted-average
exercise price was $16.22.
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A summary of the nonvested restricted shares issued under stock award plans is as follows:
| Weighted- | ||||||||
| Average | ||||||||
| Grant Date | ||||||||
| Shares | Fair Value | |||||||
Nonvested at December 31, 2005 |
933,891 | $ | 14.28 | |||||
Granted |
178,950 | 22.59 | ||||||
Vested |
(324,735 | ) | 12.06 | |||||
Forfeited |
(12,296 | ) | 17.09 | |||||
Nonvested at December 30, 2006 |
775,810 | $ | 17.09 | |||||
Granted |
146,950 | 30.17 | ||||||
Vested |
(335,695 | ) | 14.81 | |||||
Forfeited |
(13,684 | ) | 27.64 | |||||
Nonvested at December 29, 2007 |
573,381 | $ | 21.52 | |||||
Granted |
179,755 | 24.85 | ||||||
Vested |
(234,581 | ) | 18.36 | |||||
Forfeited |
(46,063 | ) | 24.08 | |||||
Nonvested at January 3, 2009 |
472,492 | $ | 24.11 | |||||
As of January 3, 2009, there was $4,072,000 of unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under restricted stock award plans. That cost is
expected to be recognized over a weighted-average period of 1.8 years. The total fair value of
shares vested during the year ended January 3, 2009 was $6,300,000.
6. Retirement Plans
The Company has noncontributory, defined benefit pension plans covering a majority of its domestic
employees. The Company’s principal defined benefit pension plan provides benefits based on the
employees’ years of service and final average earnings (as defined in the plan), while the other
plan provides benefits at a fixed rate per year of service. The Company intends to annually
contribute amounts deemed necessary to maintain the plans on a sound actuarial basis.
The Company has a Supplemental Executive Retirement Plan (“SERP”) for certain current and former
employees that entitles them to receive payments from the Company following retirement based on the
employees’ years of service and final average earnings (as defined in the SERP). Under the SERP,
the employees can elect early retirement with a corresponding reduction in benefits. The Company
also has individual deferred compensation agreements with certain former employees that entitle
them to receive payments from the Company for a period of fifteen to eighteen years following
retirement. The Company maintains life insurance policies with a cash surrender value of
$35,531,000 at January 3, 2009 and $32,886,000 at December 29, 2007 that are intended to fund
deferred compensation benefits under the SERP and deferred compensation agreements.
The Company has a defined contribution money accumulation plan (“MAP”) covering substantially all
domestic employees that provides for Company contributions based on earnings. Prior to January 1,
2007, this plan was combined with the principal defined benefit pension plan for funding purposes
under Section 414(k) of the Internal Revenue Code (“IRC”). On January 1, 2007, the assets and
projected benefit obligation attributable to the Section 414(k) arrangement were split off from the
defined benefit pension plan and merged with the MAP. The Company recognized expense for the MAP
of $2,245,000 in 2008, $2,078,000 in 2007, and $2,100,000 in 2006.
The Company has certain defined contribution plans at foreign subsidiaries. Contributions to these
plans were $1,194,000 in 2008, $1,327,000 in 2007, and $978,000 in 2006. The Company also has a
defined benefit plan at a foreign location that provides for retirement benefits based on years of
service. The obligation recorded under this plan was $2,620,000 at January 3, 2009 and $2,466,000
at December 29, 2007 which is recognized as a deferred compensation liability on the accompanying
balance sheet.
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Table of Contents
Effective in 2007, the Company adopted the measurement date provisions of SFAS No. 158 requiring
the measurement date of the defined benefit pension plans to correspond with the Company’s fiscal
year end. As a result, the Company recognized a reduction of $1,642,000 in retained earnings and a
reduction in accumulated other comprehensive income of $6,338,000. The previous measurement date
was September 30. The following summarizes the status of and changes in the Company’s pension
assets and related obligations for its pension plans (which include the Company’s defined benefit
pension plans and the SERP) as of:
| (Thousands of Dollars) | 2008 | 2007 | ||||||
Change in projected benefit obligations: |
||||||||
Projected benefit obligations at beginning of the year |
$ | 175,091 | $ | 176,262 | ||||
Service cost pertaining to benefits earned during the year |
4,859 | 6,061 | ||||||
Interest cost on projected benefit obligations |
11,413 | 13,701 | ||||||
Actuarial (gains) losses |
(5,309 | ) | 141 | |||||
Plan amendment |
220 | 717 | ||||||
IRC Section 414(k) split-off |
— | (10,785 | ) | |||||
Benefits paid to plan participants |
(11,304 | ) | (11,006 | ) | ||||
Projected benefit obligations at end of the year |
$ | 174,970 | $ | 175,091 | ||||
Change in fair value of pension assets: |
||||||||
Fair value of pension assets at beginning of the year |
$ | 167,159 | $ | 163,498 | ||||
Actual return (loss) on plan assets |
(48,879 | ) | 20,682 | |||||
Company contributions |
5,073 | 4,770 | ||||||
IRC Section 414(k) split-off |
— | (10,785 | ) | |||||
Benefits paid to plan participants |
(11,304 | ) | (11,006 | ) | ||||
Fair value of pension assets at end of the year |
$ | 112,049 | $ | 167,159 | ||||
Funded status |
$ | (62,921 | ) | $ | (7,932 | ) | ||
Amounts recognized in the consolidated balance sheets: |
||||||||
Current liabilities |
$ | (28,144 | ) | $ | (4,772 | ) | ||
Non current assets |
— | 17,752 | ||||||
Non current liabilities |
(34,777 | ) | (20,912 | ) | ||||
Net amount recognized |
$ | (62,921 | ) | $ | (7,932 | ) | ||
Amounts recognized in accumulated other comprehensive income (loss),
net of tax: |
||||||||
Unrecognized net actuarial loss |
$ | (44,707 | ) | $ | (9,757 | ) | ||
Unrecognized prior service cost |
(1,178 | ) | (1,353 | ) | ||||
Net amount recognized |
$ | (45,885 | ) | $ | (11,110 | ) | ||
Funded status of pension plans and SERP (supplemental): |
||||||||
Funded status of qualified defined benefit plans and SERP |
$ | (62,921 | ) | $ | (7,932 | ) | ||
Nonqualified trust assets (cash surrender value of life insurance) recorded
in other assets and intended to satisfy the projected benefit obligation
of unfunded supplemental employee retirement plans |
33,633 | 30,715 | ||||||
Net funded status of pension plans and SERP (supplemental) |
$ | (29,288 | ) | $ | 22,783 | |||
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Table of Contents
Information for pension plans with an accumulated benefit obligation in excess of plan assets:
| (Thousands of Dollars) | 2008 | 2007 | ||||||
Projected benefit obligations |
$ | 174,970 | $ | 28,729 | ||||
Accumulated benefit obligations |
165,432 | 26,910 | ||||||
Fair value of plan assets |
112,049 | 2,886 | ||||||
The accumulated benefit obligations for all defined benefit pension plans and the SERP were
$165,432,000 at January 3, 2009 and $164,094,000 at December 29, 2007.
The following is a summary of net pension and SERP cost recognized by the Company:
| (Thousands of Dollars) | 2008 | 2007 | 2006 | |||||||||
Service cost pertaining to benefits earned during the year |
$ | (4,859 | ) | $ | (4,849 | ) | $ | (4,940 | ) | |||
Interest cost on projected benefit obligations |
(11,413 | ) | (11,011 | ) | (10,342 | ) | ||||||
Expected return on pension assets |
13,914 | 14,024 | 12,844 | |||||||||
Net amortization loss |
(3,967 | ) | (5,569 | ) | (8,743 | ) | ||||||
Net pension cost |
$ | (6,325 | ) | $ | (7,405 | ) | $ | (11,181 | ) | |||
The prior service cost and actuarial loss included in accumulated other comprehensive income (loss)
and expected to be recognized in net periodic pension cost during 2009 is $441,000 ($287,000, net
of tax) and $9,154,000 ($5,950,000, net of tax), respectively. Expense for qualified defined
benefit pension plans was $3,601,000 in 2008, $4,707,000 in 2007, and $8,759,000 in 2006.
| 2008 | 2007 | |||||||
Weighted-average assumptions used to determine
benefit obligations at fiscal year end: |
||||||||
Discount rate |
7.25 | % | 6.70 | % | ||||
Rate of compensation increase |
3.50 | % | 3.50 | % | ||||
Weighted average assumptions
used to determine net periodic benefit
cost for the years ended: |
||||||||
Discount rate |
6.70 | % | 6.25 | % | ||||
Expected long-term rate of return on plan assets |
8.50 | % | 8.75 | % | ||||
Rate of compensation increase |
3.50 | % | 3.50 | % | ||||
Unrecognized net actuarial losses exceeding certain corridors are amortized over a five-year
period, unless the minimum amortization method based on average remaining service periods produces
a higher amortization. The Company utilizes a bond matching calculation to determine the discount
rate. A hypothetical bond portfolio is created based on a presumed purchase of bonds with
maturities that match the plan’s expected future cash outflows. The discount rate is the resulting
yield of the hypothetical bond portfolio. The discount rate is used in the calculation of the year
end pension liability and pension expense for the subsequent year.
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Table of Contents
The long-term rate of return is based on overall market expectations for a balanced portfolio with
an asset mix similar to the Company’s, utilizing historic returns for broad market and fixed income
indices.
| 2008 | 2007 | |||||||
Weighted average asset allocations at fiscal year end
by asset category are as follows: |
||||||||
Equity securities |
65.8 | % | 75.4 | % | ||||
Fixed income investments |
31.8 | % | 20.0 | % | ||||
Cash and money market investments |
2.4 | % | 4.6 | % | ||||
| 100.0 | % | 100.0 | % | |||||
The Company’s investment policy for plan assets uses a blended approach of U.S. and foreign
equities combined with U.S. fixed income investments. Policy guidelines indicate that total
equities should not exceed 80% and fixed income securities should not exceed 50%. Within the
equity and fixed income classifications, the investments are diversified.
The Company expects to contribute $26,156,000 to its qualified defined benefit pension plans and
$1,988,000 to the SERP in 2009.
Expected benefit payments for the five years subsequent to 2008 and the sum of the five years
following those are as follows: 2009 — $10,591,000; 2010 — $10,746,000; 2011 — $11,056,000; 2012 -
$11,230,000; 2013 — $11,728,000; and 2014 through 2018 — $66,029,000.
7. Income Taxes
Earnings before income taxes consist of the following:
| (Thousands of Dollars) | 2008 | 2007 | 2006 | |||||||||
United States |
$ | 82,604 | $ | 87,648 | $ | 84,379 | ||||||
Foreign |
57,980 | 50,923 | 37,913 | |||||||||
| $ | 140,584 | $ | 138,571 | $ | 122,292 | |||||||
The provisions for income taxes consist of the following:
| (Thousands of Dollars) | 2008 | 2007 | 2006 | |||||||||
Currently payable: |
||||||||||||
Federal |
$ | 31,221 | $ | 37,404 | $ | 35,442 | ||||||
State |
483 | 977 | 784 | |||||||||
Foreign |
13,102 | 12,964 | 10,962 | |||||||||
Deferred credit |
(43 | ) | (5,660 | ) | (8,543 | ) | ||||||
| $ | 44,763 | $ | 45,685 | $ | 38,645 | |||||||
A reconciliation of the Company’s total income tax expense and the amount computed by applying the
statutory federal income tax rate of 35% to earnings before income taxes is as follows:
| (Thousands of Dollars) | 2008 | 2007 | 2006 | |||||||||
Income taxes at statutory rate |
$ | 49,204 | $ | 48,500 | $ | 42,850 | ||||||
State income taxes, net of federal income tax |
375 | 302 | 349 | |||||||||
Nontaxable earnings of foreign affiliates |
(1,555 | ) | (2,026 | ) | (2,123 | ) | ||||||
Research and development credits |
(875 | ) | (877 | ) | (481 | ) | ||||||
Foreign earnings taxed at rates differing from
the U.S. statutory rate |
(3,352 | ) | (1,439 | ) | (93 | ) | ||||||
Tax reserve adjustments |
244 | 670 | (1,535 | ) | ||||||||
Other |
722 | 555 | (322 | ) | ||||||||
| $ | 44,763 | $ | 45,685 | $ | 38,645 | |||||||
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Table of Contents
Significant components of the Company’s deferred income tax assets and liabilities as of the end of
2008 and 2007 are as follows:
| (Thousands of Dollars) | 2008 | 2007 | ||||||
Deferred income tax assets: |
||||||||
Accounts receivable and inventory valuation allowances |
$ | 5,631 | $ | 6,486 | ||||
Deferred compensation accruals |
2,825 | 1,916 | ||||||
Future benefit of foreign net operating losses |
— | 254 | ||||||
Accrued pension costs |
24,231 | 5,268 | ||||||
Other amounts not deductible until paid |
7,153 | 10,370 | ||||||
Total deferred income tax assets |
39,840 | 24,294 | ||||||
Deferred income tax liabilities: |
||||||||
Tax depreciation in excess of book depreciation |
(4,484 | ) | (4,164 | ) | ||||
Prepaid pension costs |
(2,173 | ) | (2,670 | ) | ||||
Other |
(1,742 | ) | (1,674 | ) | ||||
Total deferred income tax liabilities |
(8,399 | ) | (8,508 | ) | ||||
Net deferred income tax assets |
$ | 31,441 | $ | 15,786 | ||||
The Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), Accounting for
Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109, on the first day of
fiscal year 2007, December 31, 2006. Prior to adoption of FIN 48, the Company had unrecognized tax
benefits of $1,599,000, net of tax. As a result of the implementation of FIN 48, the Company
recognized an increase in the liability for unrecognized tax benefits of $369,000, and a
corresponding decrease to the December 31, 2006 balance of retained earnings.
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
| (Thousands of Dollars) | 2008 | 2007 | ||||||
Beginning balance |
$ | 2,927 | $ | 2,415 | ||||
Increases related to current year tax positions |
244 | 1,001 | ||||||
Release due to settlements of audits |
— | (489 | ) | |||||
Ending balance |
$ | 3,171 | $ | 2,927 | ||||
The Company had unrecognized tax benefits of $2,646,000 as of January 3, 2009, and $2,382,000 as of
December 29, 2007, that if recognized currently would reduce the annual effective tax rate. The
Company recognizes interest and penalties related to unrecognized tax benefits through interest
expense and income tax expense, respectively. The Company has accrued approximately $140,000 for
interest as part of the cumulative effect of implementing the provisions of FIN 48, which was
accounted for as a reduction to the December 31, 2006 balance of retained earnings. Net interest
accrued related to unrecognized tax benefits was $553,000 as of January 3, 2009 and $282,000 as of
December 29, 2007.
The Company is subject to periodic audits by domestic and foreign tax authorities. Currently, the
Company is undergoing routine periodic audits in both domestic and foreign tax jurisdictions. It
is reasonably possible that the amounts of unrecognized tax benefits could change in the next 12
months as a result of the audits; however, any payment of tax is not expected to be significant to
the consolidated financial statements.
For the majority of tax jurisdictions, the Company is no longer subject to U.S. federal, state and
local, or non-U.S. income tax examinations by tax authorities for years before 2004.
No provision has been made for U.S. federal and state income taxes or foreign taxes that may result
from future remittances of the remaining undistributed earnings of foreign subsidiaries of
$235,151,000 at January 3, 2009, as the Company expects such earnings will remain invested overseas
indefinitely. At December 29, 2007, undistributed foreign earnings were $177,226,000.
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8. Litigation and Contingencies
The Company is involved in various environmental claims and other legal actions arising in the
normal course of business. The environmental claims include sites where the U.S. Environmental
Protection Agency has notified the Company that it is a potentially responsible party with respect
to environmental remediation. These remediation claims are subject to ongoing environmental impact
studies, assessment of remediation alternatives, allocation of costs between responsible parties,
and concurrence by regulatory authorities and have not yet advanced to a stage where the Company’s
liability is fixed. However, after taking into consideration legal counsel’s evaluation of all
actions and claims against the Company, management is currently of the opinion that their outcome
will not have a material adverse effect on the Company’s consolidated financial position, results
of operations, or cash flows.
The Company is involved in routine litigation incidental to its business and is a party to legal
actions and claims, including, but not limited to, those related to employment and intellectual
property. Some of the legal proceedings include claims for compensatory as well as punitive
damages. While the final outcome of these matters cannot be predicted with certainty, considering,
among other things, the meritorious legal defenses available and liabilities that have been
recorded along with applicable insurance, it is currently the opinion of the Company’s management
that these items will not have a material adverse effect on the Company’s financial condition,
results of operations, or cash flows.
Pursuant to certain of the Company’s lease agreements, the Company has provided financial
guarantees to third parties in the form of indemnification provisions. These provisions require
the Company to indemnify and reimburse the third parties for costs, including but not limited to
adverse judgments in lawsuits, taxes, and operating costs. The terms of the guarantees are equal
to the terms of the related lease agreements. The Company is not able to calculate the maximum
potential amount of future payments it could be required to make under these guarantees, as the
potential payment is dependent upon the occurrence of future unknown events.
The Company has future minimum royalty obligations due under the terms of certain licenses held by
the Company. These minimum future obligations are as follows:
| (Thousands of Dollars) | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||
Minimum royalties |
$ | 1,328 | $ | 1,544 | $ | 1,772 | $ | 1,825 | $ | 4,683 | ||||||||||
Minimum advertising |
2,121 | 2,208 | 2,275 | 2,343 | 353 | |||||||||||||||
Minimum royalties are based on both fixed obligations and assumptions regarding the consumer price
index. Royalty obligations in excess of minimum requirements are based upon future sales levels
and are not included in the above table. In accordance with these agreements, the Company incurred
royalty expense of $3,198,000, $3,456,000, and $3,159,000 for 2008, 2007, and 2006, respectively.
The terms of certain license agreements also require the Company to make advertising expenditures
based on the level of sales. In accordance with these agreements, the Company incurred advertising
expense of $3,018,000, $3,508,000, and $2,331,000 for 2008, 2007, and 2006, respectively.
9. Business Segments
The Company has one reportable segment that is engaged in manufacturing, sourcing, marketing,
licensing, and distributing branded footwear, apparel, and accessories to the retail sector,
including casual shoes, dress shoes, performance outdoor footwear, boots, uniform shoes, work
shoes, slippers, moccasins, and apparel and accessories. Revenue earned by operation of this
segment is derived from the sale of branded footwear and apparel to external customers as well as
royalty income from the licensing of the Company’s trademarks and brand names to licensees and
distributors. The business units comprising the branded footwear, apparel, and licensing segment
manufacture or source, market, and distribute products in a similar manner. Branded footwear,
apparel, and licensed products are distributed through wholesale channels and under licensing and
distributor arrangements.
A-18
Table of Contents
The other business units in the following tables consist of the Company’s retail, tannery, and
pigskin procurement operations. These other operations do not collectively form a reportable
segment because their respective operations are dissimilar. The Company operated 90 retail stores
in North America and 21 consumer-direct internet sites at January 3, 2009 that sell
Company-manufactured and sourced products, as well as footwear and apparel manufactured by
unaffiliated companies. The other business units distribute products through retail and wholesale
channels.
The Company measures segment profits as earnings before income taxes. The accounting policies used
to determine profitability and total assets of the branded footwear, apparel, and licensing segment
and other business units are the same as disclosed in Note 1.
Business segment information is as follows:
| 2008 | ||||||||||||||||
| Branded | ||||||||||||||||
| Footwear, | ||||||||||||||||
| Apparel, | Other | |||||||||||||||
| (Thousands of Dollars) | and Licensing | Businesses | Corporate | Consolidated | ||||||||||||
Revenue |
$ | 1,106,081 | 114,487 | — | 1,220,568 | |||||||||||
Intersegment sales |
47,386 | 3,542 | — | 50,928 | ||||||||||||
Interest (income) expense — net |
9,650 | 1,102 | (9,659 | ) | 1,093 | |||||||||||
Depreciation expense |
6,823 | 3,768 | 7,869 | 18,460 | ||||||||||||
Earnings (loss) before income taxes |
158,615 | 3,294 | (21,325 | ) | 140,584 | |||||||||||
Total assets |
483,041 | 57,049 | 124,690 | 664,780 | ||||||||||||
Additions to property, plant, and
equipment |
11,443 | 4,654 | 8,029 | 24,126 | ||||||||||||
| 2007 | ||||||||||||||||
| Branded | ||||||||||||||||
| Footwear, | ||||||||||||||||
| Apparel, | Other | |||||||||||||||
| (Thousands of Dollars) | and Licensing | Businesses | Corporate | Consolidated | ||||||||||||
Revenue |
$ | 1,099,205 | $ | 99,767 | $ | — | $ | 1,198,972 | ||||||||
Intersegment sales |
45,603 | 2,616 | — | 48,219 | ||||||||||||
Interest (income) expense — net |
9,578 | 1,128 | (11,370 | ) | (664 | ) | ||||||||||
Depreciation expense |
9,660 | 3,621 | 6,942 | 20,223 | ||||||||||||
Earnings (loss) before income taxes |
145,686 | 2,338 | (9,453 | ) | 138,571 | |||||||||||
Total assets |
491,926 | 52,018 | 94,434 | 638,378 | ||||||||||||
Additions to property, plant, and
equipment |
7,313 | 3,380 | 7,186 | 17,879 | ||||||||||||
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Table of Contents
| 2006 | ||||||||||||||||
| Branded | ||||||||||||||||
| Footwear, | ||||||||||||||||
| Apparel, | Other | |||||||||||||||
| (Thousands of Dollars) | and Licensing | Businesses | Corporate | Consolidated | ||||||||||||
Revenue |
$ | 1,036,929 | $ | 104,958 | $ | — | $ | 1,141,887 | ||||||||
Intersegment sales |
38,712 | 2,798 | — | 41,510 | ||||||||||||
Interest (income) expense — net |
9,862 | 1,050 | (11,114 | ) | (202 | ) | ||||||||||
Depreciation expense |
9,800 | 3,859 | 7,365 | 21,024 | ||||||||||||
Earnings (loss) before income taxes |
133,463 | 6,976 | (18,147 | ) | 122,292 | |||||||||||
Total assets |
439,248 | 50,040 | 181,804 | 671,092 | ||||||||||||
Additions to property, plant, and
equipment |
6,943 | 3,205 | 6,919 | 17,067 | ||||||||||||
Geographic information, based on shipping destination, related to revenue from external customers
included in the consolidated statements of operations is as follows:
| (Thousands of Dollars) | 2008 | 2007 | 2006 | |||||||||
United States |
$ | 729,826 | $ | 730,654 | $ | 721,459 | ||||||
Foreign countries: |
||||||||||||
Europe |
243,701 | 250,428 | 220,370 | |||||||||
Canada |
90,789 | 86,339 | 80,289 | |||||||||
Other |
156,252 | 131,551 | 119,769 | |||||||||
Total foreign countries revenue |
490,742 | 468,318 | 420,428 | |||||||||
| $ | 1,220,568 | $ | 1,198,972 | $ | 1,141,887 | |||||||
The Company’s long-lived assets (primarily property, plant, and equipment and intangible assets)
are as follows:
| (Thousands of Dollars) | 2008 | 2007 | ||||||
United States |
$ | 139,101 | $ | 135,756 | ||||
Foreign countries |
28,523 | 35,352 | ||||||
| $ | 167,624 | $ | 171,108 | |||||
The Company does not believe that it is dependent upon any single customer because no customer
accounts for more than 10% of consolidated revenue.
The Company sources approximately 93% (based on pairs) of its footwear products from unrelated
suppliers located primarily in Asia. The remainder is produced in Company-owned manufacturing
facilities in the United States and the Dominican Republic. All apparel and accessories are
sourced from unrelated suppliers. While changes in suppliers could cause delays in manufacturing
and a possible loss of sales, management believes that other suppliers could provide similar
products on comparable terms.
Revenue derived from the branded footwear, apparel, and licensing segment accounted for
approximately 91% of revenue in 2008, 92% in 2007, and 91% in 2006. No other product groups
account for more than 10% of consolidated revenue.
Approximately 11% of the Company’s employees are subject to bargaining unit contracts extending
through various dates through 2010.
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Table of Contents
10. Quarterly Results of Operations (Unaudited)
The Company reports its quarterly results of operations on the basis of 12-week periods for each of
the first three quarters and a 16- or 17-week period for the fourth quarter. The fourth quarter of
2008 includes 17 weeks and the fourth quarter of 2007 includes 16 weeks.
The Company’s unaudited quarterly results of operations are as follows:
| 2008 | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
| (Thousands of Dollars, Except Per Share Data) | Quarter | Quarter | Quarter | Quarter | ||||||||||||
Revenue |
$ | 288,238 | $ | 267,362 | $ | 318,852 | $ | 346,116 | ||||||||
Gross profit |
121,561 | 102,399 | 128,730 | 133,331 | ||||||||||||
Net earnings |
23,701 | 16,812 | 31,191 | 24,117 | ||||||||||||
Net earnings per share: |
||||||||||||||||
Basic |
$ | 0.48 | $ | 0.34 | $ | 0.64 | $ | 0.50 | ||||||||
Diluted |
0.46 | 0.33 | 0.62 | 0.49 | ||||||||||||
| 2007 | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
| (Thousands of Dollars, Except Per Share Data) | Quarter | Quarter | Quarter | Quarter | ||||||||||||
Revenue |
$ | 281,052 | $ | 250,329 | $ | 310,168 | $ | 357,423 | ||||||||
Gross profit |
114,001 | 95,528 | 124,952 | 137,450 | ||||||||||||
Net earnings |
22,289 | 15,518 | 29,483 | 25,596 | ||||||||||||
Net earnings per share: |
||||||||||||||||
Basic |
$ | 0.41 | $ | 0.29 | $ | 0.56 | $ | 0.51 | ||||||||
Diluted |
0.39 | 0.28 | 0.54 | 0.49 | ||||||||||||
11. Subsequent Events
On January 7, 2009, the Company’s Board of Directors approved management’s request to implement a
strategic restructuring plan. This plan will allow the Company to create significant operating
efficiencies, improve its supply chain, and create a stronger global brand platform.
The Company has provided preliminary estimated ranges for expected costs and benefits of the
restructuring plan and will provide further disclosure as appropriate. In 2009, the implementation
costs to consolidate key manufacturing, distribution and global operations functions are estimated
to range from $31,000,000 to $36,000,000.
On January 8, 2009, the Company announced the acquisition of the Cushe® footwear brand, an
acquisition that is expected to drive new global opportunities and leverage the strength of the
Company’s business model and operating infrastructure.
On January 22, 2009, the Company announced the acquisition of Chaco®, a performance outdoor
footwear brand with a unique heritage and strong consumer following.
A-21
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board
of Directors and Shareholders of
Wolverine World Wide, Inc.
Wolverine World Wide, Inc.
We have audited the accompanying consolidated balance sheets of Wolverine World Wide, Inc. and
subsidiaries as of January 3, 2009 and December 29, 2007, and the related consolidated statements
of stockholders’ equity and comprehensive income, operations, and cash flows for each of the three
fiscal years in the period ended January 3, 2009. Our audits also included the financial statement
schedule listed in the Index at Item 15(a). These financial statements and schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Wolverine World Wide, Inc. and subsidiaries at
January 3, 2009 and December 29, 2007, and the consolidated results of their operations and their
cash flows for each of the three fiscal years in the period ended January 3, 2009, in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in Note 6 to the consolidated financial statements, in 2006 and in 2007 the Company
changed its method of accounting for defined benefit plans in connection with the required adoption
of Statement of Financial Accounting Standards No. 158. As discussed in Note 7 to the
consolidated financial statements, in 2007 the Company changed its method of accounting for
uncertain tax positions in connection with the required adoption of Financial Accounting Standards
Board Interpretation No. 48.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Wolverine World Wide, Inc.’s internal control over financial reporting as of
January 3, 2009, based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February
20, 2009 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
February 20, 2009
February 20, 2009
A-22
Table of Contents
Report of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders of
Wolverine World Wide, Inc.
Wolverine World Wide, Inc.
We have audited Wolverine World Wide, Inc. and subsidiaries’ internal control over financial
reporting as of January 3, 2009, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Wolverine World Wide, Inc.’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Wolverine World Wide, Inc. maintained, in all material respects, effective internal
control over financial reporting as of January 3, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Wolverine World Wide, Inc. and
subsidiaries as of January 3, 2009 and December 29, 2007, and the related consolidated statements
of stockholders’ equity and comprehensive income, operations and cash flows for each of the three
fiscal years in the period ended January 3, 2009, and our report dated February 20, 2009 expressed
an unqualified opinion thereon.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
February 20, 2009
February 20, 2009
A-23
Table of Contents
APPENDIX B
Schedule II — Valuation and Qualifying Accounts
Wolverine World Wide, Inc. and Subsidiaries
| Column C | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| (2) | ||||||||||||||||||||
| Column B | (1) | Charged to | Column E | |||||||||||||||||
| Balance at | Charged to | Other | Column D | Balance at | ||||||||||||||||
| Column A | Beginning of | Costs and | Accounts | Deductions | End of | |||||||||||||||
| Description | Period | Expenses | (Describe) | (Describe) | Period | |||||||||||||||
Fiscal year ended January 3, 2009 |
||||||||||||||||||||
Deducted from asset accounts: |
||||||||||||||||||||
Allowance for doubtful accounts |
$ | 6,866,000 | $ | 2,266,000 | $ | 749,000 | (A) | $ | 8,383,000 | |||||||||||
Allowance for sales returns |
5,269,000 | 31,994,000 | 31,952,000 | (B) | 5,311,000 | |||||||||||||||
Allowance for cash discounts |
1,508,000 | 14,602,000 | 14,643,000 | (C) | 1,467,000 | |||||||||||||||
Inventory valuation allowances |
14,902,000 | 9,806,000 | 15,796,000 | (D) | 8,912,000 | |||||||||||||||
| $ | 28,545,000 | $ | 58,668,000 | $ | 63,140,000 | $ | 24,073,000 | |||||||||||||
Fiscal year ended December 29, 2007 |
||||||||||||||||||||
Deducted from asset accounts: |
||||||||||||||||||||
Allowance for doubtful accounts |
$ | 6,324,000 | $ | 2,169,000 | $ | 1,627,000 | (A) | $ | 6,866,000 | |||||||||||
Allowance for sales returns |
5,322,000 | 30,363,000 | 30,416,000 | (B) | 5,269,000 | |||||||||||||||
Allowance for cash discounts |
1,674,000 | 14,955,000 | 15,121,000 | (C) | 1,508,000 | |||||||||||||||
Inventory valuation allowances |
10,458,000 | 6,831,000 | 2,387,000 | (D) | 14,902,000 | |||||||||||||||
| $ | 23,778,000 | $ | 54,318,000 | $ | 49,551,000 | $ | 28,545,000 | |||||||||||||
Fiscal year ended December 30, 2006 |
||||||||||||||||||||
Deducted from asset accounts: |
||||||||||||||||||||
Allowance for doubtful accounts |
$ | 4,656,000 | $ | 3,106,000 | $ | 1,438,000 | (A) | $ | 6,324,000 | |||||||||||
Allowance for sales returns |
2,540,000 | 29,675,000 | 26,893,000 | (B) | 5,322,000 | |||||||||||||||
Allowance for cash discounts |
1,533,000 | 14,920,000 | 14,779,000 | (C) | 1,674,000 | |||||||||||||||
Inventory valuation allowances |
6,456,000 | 9,954,000 | 5,952,000 | (D) | 10,458,000 | |||||||||||||||
| $ | 15,185,000 | $ | 57,655,000 | $ | 49,062,000 | $ | 23,778,000 | |||||||||||||
| (A) | Accounts charged off, net of recoveries. |
|
| (B) | Actual customer returns. |
|
| (C) | Discounts given to customers. |
|
| (D) | Adjustment upon disposal of related inventories. |
Table of Contents
EXHIBIT INDEX
| Exhibit | ||||
| Number | Document | |||
| 3.1 | Restated Certificate of Incorporation. Previously filed as Exhibit 3.1 to
the Company’s Annual Report on Form 10-K for the period ended December 30,
2006. Here incorporated by reference. |
|||
| 3.2 | Amended and Restated By-laws. Previously filed as Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed on October 15, 2008. Here
incorporated by reference. |
|||
| 4.1 | The
Registrant has other long-term debt instruments outstanding
in addition to those described in Exhibit 4.22. The authorized amount of
none of these classes of debt exceeds 10% of the Company’s total consolidated
assets. The Company agrees to furnish copies of any agreement defining the
rights of holders of any such long-term indebtedness to the Securities and
Exchange Commission upon request. |
|||
| 4.2 | Credit Agreement dated as of July 22, 2005, among Wolverine World Wide, Inc.
and certain of its subsidiaries, JPMorgan Chase Bank, N.A., as Administrative
Agent, Harris, N.A., as Syndication Agent, Comerica Bank, Standard Federal
Bank N.A. and National City Bank of the Midwest, as Documentation Agents, and
certain other Banks that are parties to the Credit Agreement. Previously
filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
July 28, 2005. Here incorporated by reference. |
|||
| 10.1 | 1993 Stock Incentive Plan, as amended and restated.* |
|||
| 10.2 | Amended and Restated 1995 Stock Incentive Plan.* |
|||
| 10.3 | Amended and Restated 1997 Stock Incentive Plan.* |
|||
| 10.4 | Amended and Restated Stock Incentive Plan of 1999.* |
|||
| 10.5 | Amended and Restated Stock Incentive Plan of 2001.* |
|||
| 10.6 | Amended and Restated Stock Incentive Plan of 2003.* |
|||
| 10.7 | Amended and Restated Stock Incentive Plan of 2005.* |
|||
| 10.8 | Amended and Restated Directors’ Stock Option Plan.* |
|||
| 10.9 | Amended and Restated Outside Directors’ Deferred Compensation Plan.*
Previously filed as Exhibit 10.9 to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 29, 2007. Here incorporated by reference. |
|||
| 10.10 | Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan).* |
|||
| 10.11 | Amended and Restated Executive Long-Term Incentive Plan (3-Year Bonus Plan).* |
|||
| 10.12 | Amended and Restated Stock Option Loan Program.* Previously filed as Exhibit
10.12 to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 29, 2007. Here incorporated by reference. |
|||
ii
Table of Contents
| Exhibit | ||||
| Number | Document | |||
| 10.13 | Executive Severance Agreement.* Previously filed as Exhibit 10.3 to the
Company’s Current Report on Form 8-K filed on December 17, 2008. Here
incorporated by reference. A participant schedule of current executive
officers who are parties to the agreement is attached as Exhibit 10.13. |
|||
| 10.14 | Form of Indemnification Agreement.* The Company has entered into an
Indemnification Agreement with each director and executive officer.
Previously filed as Exhibit 10.3 to the Company’s Quarterly Report on Form
10-Q for the period ended March 22, 2008. Here incorporated by reference. |
|||
| 10.15 | Amended and Restated Benefit Trust Agreement dated April 25, 2007.*
Previously filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K
filed on April 25, 2007. Here incorporated by reference. |
|||
| 10.16 | Employees’ Pension Plan (Restated as amended through November 30, 2007).*
Previously filed as Exhibit 10.17 to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 29, 2007. Here incorporated by reference. |
|||
| 10.17 | Form of Incentive Stock Option Agreement.* Previously filed as Exhibit 10.1
to the Company’s Current Report on Form 8-K dated February 9, 2005. Here
incorporated by reference. |
|||
| 10.18 | Form of Non-Qualified Stock Option Agreement for Stephen L. Gulis, Blake W.
Krueger and Timothy J. O’Donovan.* Previously filed as Exhibit 10.2 to the
Company’s Current Report on Form 8-K dated February 9, 2005. Here
incorporated by reference. |
|||
| 10.19 | Form
of Non-Qualified Stock Option Agreement for executive officers other than those
to whom Exhibit 10.18 applies.* Previously filed as Exhibit 10.3 to the
Company’s Current Report on Form 8-K dated February 9, 2005. Here
incorporated by reference. |
|||
| 10.20 | Form of Restricted Stock Agreement.* Previously filed as Exhibit 10.4 to the
Company’s Current Report on Form 8-K dated February 9, 2005. Here
incorporated by reference. |
|||
| 10.21 | Form of Incentive Stock Option Agreement.* Previously filed as Exhibit 10.1
to the Company’s Current Report on Form 8-K dated February 15, 2006. Here
incorporated by reference. |
|||
| 10.22 | Form of Non-Qualified Stock Option Agreement for Stephen L. Gulis, Blake W.
Krueger and Timothy J. O’Donovan.* Previously filed as Exhibit 10.2 to the
Company’s Current Report of Form 8-K dated February 15, 2006. Here
incorporated by reference. |
|||
| 10.23 | Form
of Non-Qualified Stock Option Agreement for executive officers other than those
to whom Exhibit 10.22 applies.* Previously filed as Exhibit 10.3 to the
Company’s Current Report on Form 8-K dated February 15, 2006. Here
incorporated by reference. |
|||
| 10.24 | Form of Restricted Stock Agreement.* Previously filed as Exhibit 10.4 to the
Company’s Current Report on Form 8-K dated February 15, 2006. Here
incorporated by reference. |
|||
| 10.25 | Form of Stock Option Agreement for non-employee directors.* Previously filed
as Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the fiscal
year ended January 1, 2005. Here incorporated by reference. |
|||
| 10.26 | 2009
Form of Non-Qualified Stock Option Agreement for Donald T.
Grimes, Blake W. Krueger, Pamela L. Linton, Michael F.
McBreen and James D. Zwiers.* |
|||
| 10.27 | 2009
Form of Non-Qualified Stock Option Agreement for executive officers
other than those to whom Exhibit 10.26 applies.* |
|||
| 10.28 | Form
of Performance Share Award Agreement.* |
|||
| 10.29 | Separation Agreement between Wolverine World Wide, Inc. and Blake W. Krueger,
dated as of March 13, 2008.* Previously filed as
Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the period ended March 22, 2008. Here
incorporated by reference. |
|||
iii
Table of Contents
| Exhibit | ||||
| Number | Document | |||
| 10.30 | First
Amendment to Separation Agreement between Wolverine World Wide, Inc.
and Blake W. Krueger, dated as of December 11, 2008.* |
|||
| 10.31 | 409A Supplemental Executive Retirement Plan.* Previously filed as Exhibit
10.1 to the Company’s Current Report on Form 8-K filed on December 17, 2008.
Here incorporated by reference. A participant schedule of current executive
officers who participate in this plan is attached as
Exhibit 10.31. |
|||
| 10.32 | Form
of 409A Supplemental Retirement Plan Participation Agreement with Mr. Krueger.* |
|||
| 10.33 | Outside Directors Deferred Compensation Plan.* Previously filed as Exhibit
10.2 to the Company’s Current Report on Form 8-K filed on December 17, 2008.
Here incorporated by reference. |
|||
| 10.34 | Separation and Release Agreement between Wolverine World Wide, Inc. and
Cheryl L. Johnson.* Previously filed as Exhibit 10.27 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 29, 2007. Here
incorporated by reference. |
|||
| 21 | Subsidiaries of Registrant. |
|||
| 23 | Consent of Ernst & Young LLP. |
|||
| 24 | Powers of Attorney. |
|||
| 31.1 | Certification of President and Chief Executive Officer under Section 302 of
the Sarbanes-Oxley Act of 2002. |
|||
| 31.2 | Certification of Senior Vice President, Chief Financial Officer and Treasurer
under Section 302 of the Sarbanes-Oxley Act of 2002. |
|||
| 32 | Certification pursuant to 18 U.S.C. § 1350. |
|||
| * | Management contract or compensatory plan or arrangement. |
iv
Exhibit 10.1
WOLVERINE WORLD WIDE, INC.
1993 STOCK INCENTIVE PLAN
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the 1993 STOCK INCENTIVE
PLAN (the “Plan”) for its corporate, divisional, and Subsidiary officers and other key employees.
The Plan permits the grant and award of Stock Options, Restricted Stock, and Stock Awards.
1.2 Purpose of Plan. The purpose of the Plan is to provide officers and key
management employees of the Company, its divisions, and its Subsidiaries with an increased
incentive to make significant and extraordinary contributions to the long-term performance and
growth of the Company and its Subsidiaries, to join the interests of officers and key employees
with the interests of the Company’s stockholders through the opportunity for increased stock
ownership, and to attract and retain officers and key employees of exceptional ability. The Plan is
further intended to provide flexibility to the Company in structuring long-term incentive
compensation to best promote the foregoing objectives.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning is plainly required
by the context:
2. 1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Board” means the Board of Directors of the Company.
2.3 “Change in Control” means (a) the sale, lease, exchange, or other transfer of
substantially all of the Company’s assets (in one transaction or in a series of related
transactions) to, or the merger or consolidation of the Company with, a corporation that is not
controlled by the Company; or (b) a change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation l4A promulgated
under the Act: provided that, without limitation, such a change in control shall be deemed to have
occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Act),
other than a Subsidiary or any employee benefit plan of the Company or a Subsidiary or any entity
holding Common Stock pursuant to the terms of any such employee benefit plan, is or becomes the
beneficial owner (as defined in Rule l3(d)-3 under the Act), directly or indirectly, of securities
of the Company representing twenty percent (20%) or more of the combined voting power of the
Company’s then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority of the Board, unless the election, or nomination for
election by the Company’s stockholders, of each new director was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who were directors at the beginning of the
period.
2.4 “Code” means the Internal Revenue Code of 1986, as amended.
2.5 “Committee” means the Compensation Committee of the Board or such other committee as the
Board shall designate to administer the Plan. The Committee shall consist of at least two members
of the Board, and all of its members shall be “disinterested persons” as defined in Rule 16b-3
under the Act.
2.6 “Common Stock” means the Common Stock of the Company, par value $1 per share.
2.7 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.8 “Incentive Award” means the award or grant of a Stock Option, Restricted Stock, or Stock
Award to a Participant pursuant to the Plan.
2.9 “Market Value” shall equal the closing market price of shares of Common Stock reported on
the New York Stock Exchange (or any successor exchange that is the primary stock exchange for
trading of Common Stock) on the date of grant, exercise or vesting, as applicable, or if the New
York Stock Exchange (or any such successor) is closed on that date, the last preceding date on
which the New York Stock Exchange (or any such successor) was open for trading and on which shares
of Common Stock were traded.
2.10 “Participant” means a corporate officer, divisional officer, or other key employee of the
Company, its divisions, or its Subsidiaries who the Committee determines is eligible to participate
in the Plan and who is designated to be granted an Incentive Award under the Plan.
2. 11 “Restricted Period” means the period of time during which Restricted Stock awarded under
the Plan is subject to restrictions. The Restricted Period may differ among Participants and may
have different expiration dates with respect to shares of Common Stock covered by the same
Incentive Award.
2.12 “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 6 of
the Plan.
2.13 “Retirement” means the voluntary termination of all employment by a Participant after the
Participant has attained 60 years of age, or such other age as shall be determined by the Committee
in its sole discretion or as otherwise may be set forth in the Incentive Award agreement or other
grant document with respect to a Participant and a particular Incentive Award.
2.14 “Stock Award” means an award of Common Stock awarded to a Participant pursuant to Section
7 of the Plan.
2.15 “Stock Option” means the right to purchase Common Stock at a stated price for a specified
period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a nonqualified stock option.
2
2.16 “Subsidiary” means any corporation or other entity of which fifty percent (50%) or more
of the outstanding voting stock or voting ownership interest is directly or indirectly owned or
controlled by the Company or by one or more Subsidiaries of the Company.
SECTION 3
Administration
3.1 Power and Authority. The Committee shall administer the Plan, shall have full
power and authority to interpret the provisions of the Plan, and shall have full power and
authority to supervise the administration of the Plan. All determinations, interpretations, and
selections made by the Committee regarding the Plan shall be final and conclusive. The Committee
shall hold its meetings at such times and places as it deems advisable. Action may be taken by a
written instrument signed by a majority of the members of the Committee, and any action so taken
shall be fully as effective as if it had been taken at a meeting duly called and held. The
Committee shall make such rules and regulations for the conduct of its business as it deems
advisable. The members of the Committee shall not be paid any additional fees for their services.
3.2 Grants or Awards to Participants. In accordance with and subject to the
provisions of the Plan, the Committee shall have the authority to determine all provisions of
Incentive Awards as the Committee may deem necessary or desirable and as are consistent with the
terms of the Plan, including, without limitation, the following: (a) the persons who shall be
selected as Participants; (b) the nature and extent of the Incentive Awards to be made to each
Participant (including the number of shares of Common Stock to be subject to each Incentive Award,
any exercise price, the manner in which an Incentive Award will vest or become exercisable, and the
form of payment for the Incentive Award); (c) the time or times when Incentive Awards will be
granted; (d) the duration of each Incentive Award; and (e) the restrictions and other conditions to
which payment or vesting of Incentive Awards may be subject.
3.3 Amendments or Modifications of Awards. The Committee shall have the authority to
amend or modify the terms of any outstanding Incentive Award in any manner, provided that the
amended or modified terms are not prohibited by the Plan as then in effect and provided such
actions do not cause an Incentive Award not already subject to Section 409A of the Code to become
subject to Section 409A of the Code, unless the Committee expressly determines to make an Incentive
Award subject to Section 409A of the Code, including, without limitation, the authority to: (a)
modify the number of shares or other terms and conditions of an Incentive Award; provided that any
increase in the number of shares of an Incentive Award other than pursuant to Section 4.2 shall be
considered to be a new grant with respect to such additional shares for purposes of Section 409A of
the Code and such new grant shall be made at Market Value on the
date of grant; (b) extend the term of an Incentive Award to a date that is no later than the
earlier of the latest date upon which the Incentive Award could have expired by its terms under any
circumstances or the 10th anniversary of the date of grant (for purposes of clarity, as
permitted under Section 409A of the Code, if the term of a Stock Option is extended at a time when
the Stock Option price equals or exceeds the Market Value, it will not be an extension of the term
of the Stock Option, but instead will be treated as a modification of the Stock Option and a new
Stock Option will be treated as having been granted); (c) accelerate the exercisability or vesting
or otherwise terminate any restrictions relating to an Incentive Award; (d) accept the surrender of
any outstanding Incentive Award or (e) to the extent not previously exercised or vested, authorize
the grant of new Incentive Awards in substitution for surrendered Incentive Awards; provided,
however, that such grant of new Incentive Awards shall be considered to be a new grant for purposes
of Section 409A of the Code and such new grant shall be made at Market Value on the date of the new
grant.
3
3.4 Indemnification of Committee Members. Each person who is or shall have been a
member of the Committee shall be indemnified and held harmless by the Company from and against any
cost, liability, or expense imposed or incurred in connection with such person’s or the Committee’s
taking or failing to take any action under the Plan. Each such person shall be justified in relying
on information furnished in connection with the Plan’s administration by any appropriate person or
persons.
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in subsection 4.2 of the
Plan, a maximum of 350,000 shares of Common Stock (not including any adjustments occurring before
the date of this amendment pursuant to Section 4.2) shall be available for Incentive Awards under
the Plan. Such shares shall be authorized and may be either unissued or treasury shares.
4.2 Adjustments. If the number of shares of Common Stock outstanding changes by
reason of a stock dividend, stock split, recapitalization, merger, consolidation, combination,
exchange of shares, or any other change in the corporate structure or shares of the Company, the
number and kind of securities subject to and reserved under the Plan, together with applicable
exercise prices, shall be appropriately adjusted. No fractional shares shall be issued pursuant to
the Plan, and any fractional shares resulting from adjustments shall be eliminated from the
respective Incentive Awards, with an appropriate cash adjustment for the value of any Incentive
Awards eliminated. If an Incentive Award is cancelled, surrendered, modified, exchanged for a
substitute Incentive Award, or expires or terminates during the term of the Plan but prior to the
exercise or vesting of the Incentive Award in full, the shares subject to but not delivered under
such Incentive Award shall be available for other Incentive Awards.
SECTION 5
Stock Options
5.1 Grant. A Participant may be granted one or more Stock Options under the Plan.
Stock Options shall be subject to such terms and conditions, consistent with the other provisions
of the Plan, as may be determined by the Committee in its sole discretion. In addition, the
Committee may vary, among Participants and among Stock Options granted to the same Participant, any
and all of the terms and conditions of the Stock Options granted under the Plan. The Committee
shall have complete discretion in determining the number of Stock Options granted to each
Participant. The Committee may designate whether or not a Stock Option is to be considered an
incentive stock option as defined in Section 422(b) of the Code.
4
5.2 Stock Option Agreements. Stock Options shall be evidenced by Stock Option
agreements containing such terms and conditions, consistent with the provisions of the Plan, as the
Committee shall from time to time determine. Unless a Stock Option agreement provides otherwise,
Stock Options shall be subject to the terms and conditions set forth in this Section.
5.3 Stock Option Price. The per share Stock Option price shall be determined by the
Committee; provided, however, that the per share Stock Option price shall be equal to or greater
than one hundred percent (100%) of the Market Value on the date of grant.
5.4 Medium and Time of Payment. The exercise price for each share purchased pursuant
to a Stock Option granted under the Plan shall be payable in cash or, if the Committee consents, in
shares of Common Stock (including Common Stock to be received upon a simultaneous exercise) or
other consideration substantially equivalent to cash. To the extent any such amendment would not
cause a Stock Option to become subject to Section 409A of the Code, unless the Committee expressly
determines to make a Stock Option subject to Section 409A of the Code, the time and terms of
payment may be amended with the consent of a Participant before or after exercise of a Stock
Option, but such amendment shall not reduce the Stock Option price. The Committee may from time to
time authorize payment of all or a portion of the Stock Option price in the form of a promissory
note or installments according to such terms as the Committee may approve. The Board may restrict
or suspend the power of the Committee to permit such loans and may require that adequate security
be provided.
5.5 Stock Options Granted to Ten Percent Stockholders. No Stock Option granted to any
Participant who at the time of such grant owns, together with stock attributed to such Participant
under Section 424(d) of the Code, more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any of its Subsidiaries may be designated as an incentive
stock option, unless such Stock Option provides an exercise price equal to at least one hundred ten
percent (110%) of the Market Value of the Common Stock and the exercise of the Stock Option after
the expiration of five years from the date of grant of the Stock Option is prohibited by its terms.
5.6 Limits on Exercisability. Stock Options shall be exercisable for such periods as
may be fixed by the Committee, not to exceed 10 years from the date of grant. At the time of the
exercise of a Stock Option, the holder of the Stock Option, if requested by the Committee, must
represent to the Company that the shares are being acquired for
investment and not with a view to the distribution thereof. The Committee may in its discretion
require a Participant to continue the Participant’s service with the Company and its Subsidiaries
for a certain length of time prior to a Stock Option becoming exercisable and may eliminate such
delayed vesting provisions. No Stock Option issued to officers and employees subject to Section 16
of the Act shall be exercisable during the first six months of its term.
5
5.7 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or unless the Stock
Option agreement or grant provide otherwise: (i) no Stock Options granted under the Plan
may be sold, exchanged, transferred, pledged, assigned, or other wise alienated or
hypothecated except by will or the laws of descent and distribution; and (ii) all Stock
Options granted to a Participant shall be exercisable during the Participant’s lifetime
only by such Participant, his guardian, or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any
shares of Common Stock acquired pursuant to the exercise of a Stock Option under the Plan
as the Committee deems advisable, including, without limitation, restrictions under
applicable federal or state securities laws.
5.8 Termination of Employment or Officer Status.
(a) General. If a Participant ceases to be employed by or an officer of the
Company or one of its Subsidiaries for any reason other than the Participant’s death,
disability, Retirement, or termination for cause, the Participant may exercise his Stock
Options only for a period of three months after such termination of employment or officer
status, but only to the extent the Participant was entitled to exercise the Stock Options
on the date of termination, unless the Committee otherwise consents or the terms of the
Stock Option agreement or grant provide otherwise. For purposes of the Plan, the following
shall not be deemed a termination of employment or officer status: (i) a transfer of an
employee from the Company to any Subsidiary; (ii) a leave of absence, duly authorized in
writing by the Company, for military service or for any other purpose approved by the
Company if the period of such leave does not exceed 90 days; (iii) a leave of absence in
excess of 90 days, duly authorized in writing by the Company, provided that the employee’s
right to reemployment is guaranteed either by statute or contract; or (iv) a termination of
employment with continued service as an officer.
(b) Death. If a Participant dies either while an employee or officer of the
Company or one of its Subsidiaries or after the termination of employment other than for
cause but during the time when the Participant could have exercised a Stock Option under
the Plan, the Stock Option issued to such Participant shall be exercisable by the personal
representative of such Participant or other successor to the interest of the Participant
for one year after the Participant’s death, but only to the extent that the Participant was
entitled to exercise the Stock Option on the date of death or termination of employment,
whichever first
occurred, unless the Committee otherwise consents or the terms of the Stock Option
agreement or grant provide otherwise.
(c) Disability. If a Participant ceases to be an employee or officer of the
Company or one of its Subsidiaries due to the Participant’s disability, the Participant may
exercise a Stock Option for a period of one year following such termination of employment,
but only to the extent that the Participant was entitled to exercise the Stock Option on
the date of such event, unless the Committee otherwise consents or the terms of the Stock
Option agreement or grant provide otherwise.
6
(d) Participant Retirement. If a Participant Retires as an employee or
officer of the Company or one of its Subsidiaries, any Stock Option granted under the Plan
may be exercised during the remaining term of the Stock Option, unless the terms of the
Stock Option agreement or grant provide otherwise.
(e) Termination for Cause. If a Participant is terminated for cause, the
Participant shall have no further right to exercise any Stock Option previously granted.
SECTION 6
Restricted Stock
6.1 Grant. A Participant may be granted Restricted Stock under the Plan. Restricted
Stock shall be subject to such terms and conditions, consistent with the other provisions of the
Plan, as shall be determined by the Committee in its sole discretion. The Committee may impose such
restrictions or conditions, consistent with the provisions of the Plan, to the vesting of
Restricted Stock as it deems appropriate.
6.2 Restricted Stock Agreements. Awards of Restricted Stock shall be evidenced by
Restricted Stock agreements containing such terms and conditions, consistent with the provisions of
the Plan, as the Committee shall from time to time determine. Unless a Restricted Stock agreement
provides otherwise, Restricted Stock Awards shall be subject to the terms and conditions set forth
in this Section 6.
6.3 Termination of Employment or Officer Status.
(a) General. In the event of termination of employment or officer status
during the Restricted Period for any reason other than death, disability, Retirement, or
termination for cause, then any shares of Restricted Stock still subject to restrictions at
the date of such termination shall automatically be forfeited and returned to the Company;
provided, however, that in the event of a voluntary or involuntary termination of the
employment or officer status of a Participant by the Company, the Committee may, in its
sole discretion, waive the automatic forfeiture of any or all such shares of Restricted
Stock and/or may add such new restrictions to such shares of Restricted Stock as it deems
appropriate. For purposes of the Plan, the following shall not be deemed a termination of
employment or officer status: (i) a transfer of an employee from the Company to any
Subsidiary; (ii) a leave of absence, duly authorized in writing by the Company, for
military service or for any other purpose approved by the Company if the period of such
leave does not exceed 90 days; (iii) a leave of absence in
excess of 90 days, duly authorized in writing by the Company, provided that the employee’s
right to reemployment is guaranteed either by statute or contract; and (iv) a termination
of employment with continued service as an officer.
7
(b) Death, Retirement Disability. Unless the Committee otherwise consents or
unless the terms of the Restricted Stock agreement or grant provide otherwise, in the event
a Participant terminates his employment with the Company because of death, disability, or
Retirement during the Restricted Period, the restrictions applicable to the shares of
Restricted Stock shall terminate automatically with respect to that number of shares
(rounded to the nearest whole number) equal to the total number of shares of Restricted
Stock granted to such Participant multiplied by the number of full months that have elapsed
since the date of grant divided by the maximum number of full months of the Restricted
Period. All remaining shares shall be forfeited and returned to the Company; provided,
however, that the Committee may, in its sole discretion, waive the restrictions remaining
on any or all such remaining shares of Restricted Stock either before or after the death,
disability, or Retirement of the Participant.
(c) Termination for Cause. If a Participant’s employment is terminated for
cause, the Participant shall have no further right to exercise or receive any Restricted
Stock, and all Restricted Stock still subject to restrictions at the date of such
termination shall automatically be forfeited and returned to the Company.
6.4 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or unless the terms of
the Restricted Stock agreement or grant provide otherwise: (i) shares of Restricted Stock
shall not be sold, exchanged, transferred, pledged, assigned, or otherwise alienated or
hypothecated during the Restricted Period except by will or the laws of descent and
distribution; and (ii) all rights with respect to Restricted Stock granted to a Participant
under the Plan shall be exercisable during the Participant’s lifetime only by such
Participant, his guardian, or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any
shares of Common Stock acquired pursuant to an award of Restricted Stock under the Plan as
the Committee deems advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
6.5 Legending of Restricted Stock. Any certificates evidencing shares of
Restricted Stock awarded pursuant to the Plan shall bear the following legend:
The shares represented by this certificate were issued subject to certain restrictions
under the Wolverine World Wide, Inc. 1993 Stock Incentive Plan (the “Plan”). A copy of the
Plan is on file in the office of the Secretary of the Company. This certificate is held
subject to the terms and conditions contained in a restricted stock agreement that includes
a prohibition against the sale or transfer of the stock represented by this certificate
except in compliance with that agreement, and that provides for forfeiture upon certain
events.
6.6 Representations and Warranties. A Participant who is awarded Restricted Stock
shall represent and warrant that the Participant is acquiring the Restricted Stock for the
Participant’s own account and investment and without any intention to resell or redistribute the
Restricted Stock. The Participant shall agree not to resell or distribute such Restricted Stock
after the Restricted Period except upon such conditions as the Company may reasonably specify to
ensure compliance with federal and state securities laws.
8
6.7 Rights as a Stockholder. A Participant shall have all voting, dividend,
liquidation, and other rights with respect to Restricted Stock held of record by such Participant
as if the Participant held unrestricted Common Stock; provided, however, that the unvested portion
of any award of Restricted Stock shall be subject to any restrictions on transferability or risks
of forfeiture imposed pursuant to subsections 6. 1 and 6.4 of the Plan. Unless the Committee
otherwise determines or unless the terms of the Restricted Stock agreement or grant provide
otherwise, any noncash dividends or distributions paid with respect to shares of unvested
Restricted Stock shall be subject to the same restrictions as the shares to which such dividends or
distributions relate. Any dividend payment with respect to Restricted Stock shall be made no later
than the end of the calendar year in which the dividends are paid to stockholders, or, if later,
the 15th day of the third month following the date the dividends are paid to
stockholders.
SECTION 7
Stock Awards
7.1 Grant. A Participant may be granted one or more Stock Awards under the Plan in
lieu of, or as payment for, the rights of a Participant under any other compensation plan, policy,
or program of the Company or its Subsidiaries. Stock Awards shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be determined by the Committee
in its sole discretion. Notwithstanding the previous sentence, the shares of stock subject to
Stock Awards shall be issued no later than the 15th day of the third month after the end
of the calendar year in which the award is granted.
7.2 Rights as a Stockholder. A Participant shall have all voting, dividend.
liquidation, and other rights with respect to shares of Common Stock issued to the Participant as a
Stock Award under this Section 7 upon the Participant becoming the holder of record of the Common
Stock granted pursuant to such Stock Awards; provided, however, that the Committee may impose such
restrictions on the assignment or transfer of Common Stock awarded pursuant to a Stock Award as it
deems appropriate. Any dividend payment with respect to Stock Awards shall be made no later than
the end of the calendar year in which the dividends are paid to stockholders, or, if later, the
15th day of the third month following the date the dividends are paid to stockholders.
SECTION 8
Change in Control
8.1 Acceleration of Vesting. If a Change in Control of the Company shall occur, then,
unless the Committee or the Board otherwise determines with respect to one or more Incentive
Awards, without action by the Committee or the Board (a) all
outstanding Stock Options shall become immediately exercisable in full and shall remain exercisable
during the remaining term thereof, regardless of whether the Participants to whom such Stock
Options have been granted remain in the employ or service of the Company or any Subsidiary; and (b)
all other outstanding Incentive Awards shall become immediately fully vested and nonforfeitable.
9
8.2 Cash Payment for Stock Options. If a Change in Control of the Company shall
occur, then the Committee, in its sole discretion, and without the consent of any Participant
affected thereby, may determine that some or all Participants holding outstanding Stock Options
shall receive, with respect to some or all of the shares of Common Stock subject to such Stock
Options, as of the effective date of any such Change in Control of the Company, cash in an amount
equal to the greater of the excess of (a) the highest sales price of the shares on the New York
Stock Exchange on the date immediately prior to the effective date of such Change in Control of the
Company or (b) the highest price per share actually paid in connection with any Change in Control
of the Company over the exercise price per share of such Stock Options.
8.3 Limitation on Change in Control Payments. Notwithstanding anything in subsection
8.1 or 8.2 to the contrary, if, with respect to a Participant, the acceleration of the vesting of
an Incentive Award as provided in subsection 8.1 or the payment of cash in exchange for all or part
of a Stock Option as provided in subsection 8.2 (which acceleration or payment could be deemed a
“payment” within the meaning of Section 280G(b)(2) of the Code), together with any other payments
that such Participant has the right to receive from the Company or any corporation that is a member
of an “affiliated group” (as defined in Section 1504(a) of the Code without regard to Section
1504(b) of the Code) of which the Company is a member, would constitute a “parachute payment” (as
defined in Section 280G(b)(2) of the Code), then the payments to such Participant pursuant to
subsection 8.1 or 8.2 shall be reduced to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code.
SECTION 9
General Provisions
9.1 No Rights to Awards. No Participant or other person shall have any claim to be
granted any Incentive Award under the Plan, and there is no obligation of uniformity of treatment
of Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and
conditions of Incentive Awards of the same type and the determination of the Committee to grant a
waiver or modification of any Incentive Award and the terms and conditions thereof need not be the
same with respect to each Participant.
9.2 Withholding. The Company or a Subsidiary shall be entitled to (a) withhold and
deduct from future wages of a Participant (or from other amounts that may be due and owing to a
Participant from the Company or a Subsidiary), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any and all federal, state, and local withholding
and employment-related tax requirements attributable to an Incentive Award, including, without
limitation, the grant, exercise, or vesting of, or payment of dividends with respect to, an
Incentive Award or a
disqualifying disposition of Common Stock received upon exercise of an incentive stock option; or
(b) require a Participant promptly to remit the amount of such withholding to the Company before
taking any action with respect to an Incentive Award. Unless the Committee determines otherwise,
withholding may be satisfied by withholding Common Stock to be received upon exercise or by
delivery to the Company of previously owned Common Stock. The Company may establish such rules and
procedures concerning timing of any withholding election as it deems appropriate to comply with
Rule 16b-3 under the Act.
10
9.3 Compliance With Laws; Listing and Registration of Shares. All Incentive Awards
granted under the Plan (and all issuances of Common Stock or other securities under the Plan) shall
be subject to all applicable laws, rules, and regulations, and to the requirement that if at any
time the Committee shall determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the grant of such Incentive Award or the issue
or purchase of shares thereunder, such Incentive Award may not be exercised in whole or in part, or
the restrictions on such Incentive Award shall not lapse, unless and until such listing,
registration, qualification, consent, or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
9.4 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall
prevent the Company or any Subsidiary from adopting or continuing in effect other or additional
compensation arrangements, including the grant of stock options and other stock-based awards, and
such arrangements may be either generally applicable or applicable only in specific cases.
9.5 No Right to Employment. The grant of an Incentive Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or any Subsidiary. The
Company or any Subsidiary may at any time dismiss a Participant from employment, free from any
liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any
written agreement with a Participant.
9.6 Governing Law. The validity, construction, and effect of the Plan and any rules
and regulations relating to the Plan shall be determined in accordance with the laws of the State
of Michigan and applicable federal law.
9.7 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of
the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had
not been included.
SECTION 10
Termination and Amendment
The Board may terminate the Plan at any time, or may from time to time amend the Plan as it
deems proper and in the best interests of the Company, provided that without stockholder approval
no such amendment may: (a) materially increase either the benefits to Participants under the Plan
or the number of shares that may be issued under
the Plan; (b) materially modify the eligibility requirements; or (c) impair any outstanding
Incentive Award without the consent of the Participant, except according to the terms of the Plan
or the Incentive Award, and provided further that the Plan may not be amended in any way that
causes the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the Board
expressly determines to amend the Plan to be subject to Section 409A of the Code. No termination,
amendment, or modification of the Plan shall become effective with respect to any Incentive Award
previously granted under the Plan without the prior written consent of the Participant holding such
Incentive Award unless such amendment or modification operates solely to the benefit of the
Participant.
SECTION 11
Effective Date and Duration of the Plan
This Plan shall take effect April 27, 1993, subject to approval by the stockholders at the
1993 Annual Meeting of Stockholders or any adjournment thereof or at a Special Meeting of
Stockholders. Unless earlier terminated by the Board of Directors, the Plan shall terminate on
April 26, 2003. No Incentive Award shall be granted under the Plan after such date.
As amended October 9, 2008.
11
Exhibit 10.2
WOLVERINE WORLD WIDE, INC.
AMENDED AND RESTATED
1995 STOCK INCENTIVE PLAN
1995 STOCK INCENTIVE PLAN
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the 1995 STOCK INCENTIVE
PLAN (the “Plan”) for its corporate, divisional, and Subsidiary officers and other key employees.
The Plan permits the grant and award of Stock Options, Restricted Stock, and Stock Awards.
1.2 Purpose of Plan. The purpose of the Plan is to provide officers and key
management employees of the Company, its divisions, and its Subsidiaries with an increased
incentive to make significant and extraordinary contributions to the long-term performance and
growth of the Company and its Subsidiaries, to join the interests of officers and key employees
with the interests of the Company’s stockholders through the opportunity for increased stock
ownership, and to attract and retain officers and key employees of exceptional ability. The Plan
is further intended to provide flexibility to the Company in structuring long-term incentive
compensation to best promote the foregoing objectives.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning is plainly required
by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Board” means the Board of Directors of the Company.
2.3 “Change in Control” means (i) the failure of the Continuing Directors at any time to
constitute at least a majority of the members of the Board; (ii) the acquisition by any Person
other than an Excluded Holder of beneficial ownership (within the meaning of Rule l3d-3 promulgated
under the Act) of twenty percent (20%) or more of the outstanding Common Stock or the combined
voting power of the Company’s outstanding securities entitled to vote generally in the election of
directors; (iii) the approval by the stockholders of the Company of a reorganization, merger or
consolidation, unless with or into a Permitted Successor; or (iv) the
approval by the stockholders of the Company of a complete liquidation or dissolution of the Company
or the sale or disposition of all or substantially all of the assets of the Company other than to a
Permitted Successor.
2.4 “Code” means the Internal Revenue code of 1986, as amended.
2.5 “Committee” means the Compensation Committee of the Board or such other committee as the
Board shall designate to administer the Plan. The Committee shall consist of at least two members
of the Board, and all of its members shall be “disinterested persons” as defined in Rule 16b-3
under the Act.
2.6 “Common Stock” means the Common Stock of the Company, par value $1 per share.
2.7 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.8 “Continuing Directors” mean the individuals constituting the Board as of the date this
Plan was adopted and any subsequent directors whose election or nomination for election by the
Company’s stockholders was approved by a vote of two-thirds (2/3) of the individuals who are then
Continuing Directors, but specifically excluding any individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as the term is used in Rule
14a-11 of Regulation 14A promulgated under the Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board.
2.9 “Employee Benefit Plan” means any plan or program established by the Company or a
Subsidiary for the compensation or benefit of employees of the Company or any of its Subsidiaries.
2.10 “Excluded Holder” means (A) any Person who at the time this Plan was adopted was the
beneficial owner of twenty percent (20%) or more of the outstanding Common Stock or (B) the
Company, a Subsidiary or any Employee Benefit Plan of the Company or a Subsidiary or any trust
holding Common Stock or other securities pursuant to the terms of an Employee Benefit Plan.
2.11 “Incentive Award” means the award or grant of a Stock Option, Restricted Stock, or Stock
Award to a Participant pursuant to the Plan.
2.12 “Market Value” shall equal the closing market price of shares of Common Stock reported on
the New York Stock Exchange (or any successor exchange that is the primary stock exchange for
trading of Common Stock) on the date of grant, exercise or vesting, as applicable, or if the New
York Stock Exchange (or any such successor) is closed on that date, the last preceding date on
which the New York Stock Exchange (or any such successor) was open for trading and on which shares
of Common Stock were traded.
2.13 “Participant” means a corporate officer, divisional officer, or any key employee of the
Company, its divisions, or its Subsidiaries who the Committee determines is eligible to participate
in the Plan and who is designated to be granted an Incentive Award under the Plan.
-2-
2.14 “Permitted Successor” means a corporation which, immediately following the consummation
of a transaction specified in clauses (iii) and (iv) of the definition of “Change in Control”
above, satisfies each of the following criteria: (A) sixty percent (60%) or more of the outstanding
common stock of the corporation and the combined voting power of the outstanding securities of the
corporation entitled to vote generally in the election of directors (in each case determined
immediately following the consummation of the applicable transaction) is beneficially owned,
directly or indirectly, by all or substantially all of the Persons who were the beneficial owners
of the Company’s outstanding Common Stock and outstanding securities entitled to vote generally in
the election of directors (respectively) immediately prior to the applicable transaction, (B) no
Person other than an Excluded Holder beneficially owns, directly or indirectly, twenty percent
(20%) or more of the outstanding common stock of the corporation or the combined voting power of
the outstanding securities of the corporation entitled to vote generally in the election of
directors (for these purposes the term Excluded Holder shall include the corporation, any
Subsidiary of the corporation and any Employee Benefit Plan of the corporation or any such
Subsidiary or any trust holding common stock or other securities of the corporation pursuant to the
terms of any such Employee Benefit Plan), and (C) at least a majority of the board of directors is
comprised of Continuing Directors.
2.15 “Person” has the same meaning as set forth in Section 13(d) and 14(d)(2) of the Act.
2.16 “Restricted Period” means the period of time during which Restricted Stock awarded under
the Plan is subject to restrictions. The Restricted Period may differ among Participants and may
have different expiration dates with respect to shares of Common Stock covered by the same
Incentive Award.
2.17 “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 6 of
the Plan.
2.18 “Retirement” means the voluntary termination of all employment by a Participant after the
Participant has attained 60 years of age, or such other age as shall be determined by the Committee
in its sole discretion or as otherwise may be set forth in the Incentive Award agreement or other
grant document with respect to a Participant and a particular Incentive Award.
2.19 “Stock Award” means an award of Common Stock awarded to a Participant pursuant to Section
7 of the Plan.
2.20 “Stock Option” means the right to purchase Common Stock at a stated price for a specified
period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a nonqualified stock option.
2.21 “Subsidiary” means any corporation or other entity of which fifty percent (50%) or more
of the outstanding voting stock or voting ownership interest is directly or indirectly owned or
controlled by the Company or by one or more Subsidiaries of the Company.
-3-
SECTION 3
Administration
3.1 Power and Authority. The Committee shall administer the Plan, shall have full
power and authority to interpret the provisions of the Plan and Incentive Awards granted under the
Plan, and shall have full power and authority to supervise the administration of the Plan and
Incentive Awards granted under the Plan. All determinations, interpretations, and selections made
by the Committee regarding the Plan shall be final and conclusive. The Committee shall hold its
meetings at such times and places as it deems advisable. Action may be taken by a written
instrument signed by a majority of the members of the Committee, and any action so taken shall be
fully as effective as if it had been taken at a meeting duly called and held. The Committee shall
make such rules and regulations for the conduct of its business as it deems advisable. The members
of the Committee shall not be paid any additional fees for their services.
3.2 Grants or Awards to Participants. In accordance with and subject to the
provisions of the Plan, the Committee shall have the authority to determine all provisions of
Incentive Awards as the Committee may deem necessary or desirable and as are consistent with the
terms of the Plan, including, without limitation, the following: (a) the persons who shall be
selected as Participants; (b) the nature and extent of the Incentive Awards to be made to each
Participant (including the number of shares of Common Stock to be subject to each Incentive Award,
any exercise price, the manner in which an Incentive Award will vest or become exercisable, and the
form of payment for the Incentive Award); (c) the time or times when Incentive Awards will be
granted; (d) the duration of each Incentive Award; and (e) the restrictions and other conditions to
which payment or vesting of Incentive Awards may be subject.
3.3 Amendments or Modifications of Awards. The Committee shall have the authority to
amend or modify the terms of any outstanding Incentive Award in any manner, provided that the
amended or modified terms are not prohibited by the Plan as then in effect and provided such
actions do not cause an Incentive Award not already subject to Section 409A of the Code to become
subject to Section 409A of the Code, unless the Committee expressly determines to make an Incentive
Award subject to Section 409A of the Code, including, without limitation, the authority to: (a)
modify the number of shares or other terms and conditions of an Incentive Award; provided that any
increase in the number of shares of an Incentive Award other than pursuant to Section 4.2 shall be
considered to be a new grant with respect to such additional shares for purposes of Section 409A of
the Code and such new grant shall be made at Market Value on the date of grant; (b) extend the
term of an Incentive Award to a date that is no later than the earlier of the latest date upon
which the Incentive Award could have expired by its terms under any circumstances or the
10th anniversary of the date of grant (for purposes of clarity, as
permitted under Section 409A of the Code, if the term of a Stock Option is extended at a time when
the Stock Option price equals or exceeds the Market Value, it will not be an extension of the term
of the Stock Option, but instead will be treated as a modification of the Stock Option and a new
Stock Option will be treated as having been granted); (c) accelerate the exercisability or vesting
or otherwise terminate any restrictions relating to an Incentive Award; (d) accept the surrender of
any outstanding Incentive Award; or (e) to the extent not previously exercised or vested, authorize
the grant of new Incentive Awards in substitution for surrendered Incentive Awards; provided,
however, that such grant of new Incentive Awards shall be considered to be a new grant for purposes
of Section 409A of the Code and such new grant shall be made at Market Value on the date of the new
grant.
-4-
3.4 Indemnification of Committee Members. Each person who is or shall have been a
member of the Committee shall be indemnified and held harmless by the Company from and against any
cost, liability, or expense imposed or incurred in connection with such person’s or the Committee’s
taking or failing to take any action under the Plan. Each such person shall be justified in
relying on information furnished in connection with the Plan’s administration by any appropriate
person or persons.
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in subsection 4.2 of the
Plan, a maximum of 500,000 shares of Common Stock (not including any adjustments occurring before
the date of this amendment pursuant to Section 4.2) shall be available for Incentive Awards under
the Plan. Such shares shall be authorized and may be either unissued or treasury shares.
4.2 Adjustments. If the number of shares of Common Stock outstanding changes by
reason of a stock dividend, stock split, recapitalization, merger, consolidation, combination,
exchange of shares, or any other change in the corporate structure or shares of the Company, the
number and kind of securities subject to and reserved under the Plan, together with applicable
exercise prices, shall be appropriately adjusted. No fractional shares shall be issued pursuant to
the Plan, and any fractional shares resulting from adjustments shall be eliminated from the
respective Incentive Awards, with an appropriate cash adjustment for the value of any Incentive
Awards eliminated. If an Incentive Award is cancelled, surrendered, modified, exchanged for a
substitute Incentive Award, or expires or terminates during the term of the Plan but prior to the
exercise or vesting of the Incentive Award in full, the shares subject to but not delivered under
such Incentive Award shall be available for other Incentive Awards.
SECTION 5
Stock Options
5.1 Grant. A Participant may be granted one or more Stock Options under the Plan.
Stock Options shall be subject to such terms and conditions, consistent with the other provisions
of the Plan, as may be determined by the Committee in its sole discretion. In addition, the
Committee may vary, among Participants and among Stock Options granted to the same Participant, any
and all of the terms and conditions of the Stock Options granted under the Plan. The Committee
shall have complete discretion in determining the number of Stock Options granted to each
Participant. The Committee may designate whether or not a Stock Option is to be considered an
incentive stock option as defined in Section 422(b) of the Code.
-5-
5.2 Stock Option Agreements. Stock Options shall be evidenced by Stock Option
agreements containing such terms and conditions, consistent with the provisions of the Plan, as the
Committee shall from time to time determine. To the extent not covered by the Stock Option
agreement, the terms and conditions of this Section 5 shall govern.
5.3 Stock Option Price. The per share Stock Option price shall be determined by the
Committee; provided, however, that the per share Stock Option price shall be equal to or greater
than one hundred percent (100%) of the Market Value on the date of grant.
5.4 Medium and Time of Payment. The exercise price for each share purchased pursuant
to a Stock Option granted under the Plan shall be payable in cash or, if the Committee consents, in
shares of Common Stock (including Common Stock to be received upon a simultaneous exercise) or
other consideration substantially equivalent to cash. To the extent any such amendment would not
cause a Stock Option to become subject to Section 409A of the Code, unless the Committee expressly
determines to make a Stock Option subject to Section 409A of the Code, the time and terms of
payment may be amended with the consent of a Participant before or after exercise of a Stock
Option. The Committee may from time to time authorize payment of all or a portion of the Stock
Option price in the form of a promissory note or other deferred payment installments according to
such terms as the Committee may approve. The Board may restrict or suspend the power of the
Committee to permit such loans and may require that adequate security be provided.
5.5 Stock Options Granted to Ten Percent Stockholders. No Stock Option granted to any
Participant who at the time of such grant owns, together with stock attributed to such Participant
under Section 424 (d) of the Code, more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any of its Subsidiaries may be designated as an incentive
stock option, unless such Stock Option provides an exercise price equal to at least one hundred ten
percent (110%) of the Market Value of the Common Stock and the exercise of the Stock Option after
the expiration of five years from the date of grant of the Stock Option is prohibited by its terms.
5.6 Limits on Exercisability. Stock Options shall be exercisable for such periods as
may be fixed by the Committee, not to exceed 10 years from the date of grant. At the time of the
exercise of a Stock Option, the holder of the Stock Option, if requested by the Committee, must
represent to the Company that the shares are being acquired for investment and not with a view to
the distribution thereof. The Committee may in its discretion require a Participant to continue
the Participant’s service with the Company and its Subsidiaries for a certain length of time prior
to a Stock Option becoming exercisable and may eliminate such delayed vesting provisions. No
Stock Option issued to officers and employees subject to Section 16 of the Act shall be exercisable
during the first six months of its term.
-6-
5.7 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents (before or after the
option grant) or unless the Stock Option agreement or grant provide otherwise; (i) no Stock
Options granted under the Plan may be sold, exchanged, transferred, pledged, assigned, or
otherwise alienated or hypothecated except by will or the laws of descent and distribution;
and (ii) all Stock Options granted to a Participant shall be exercisable during the
Participant’s lifetime only by such Participant, his guardian, or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any
shares of Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as
the Committee deems advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
5.8 Termination of Employment or Officer Status.
(a) General. If a Participant ceases to be employed by or an officer of the
Company or one of its Subsidiaries for any reason other than the Participant’s death,
disability, Retirement, or termination for cause, the Participant may exercise his Stock
Options only for a period of three months after such termination of employment or officer
status, but only to the extent the Participant was entitled to exercise the Stock Options on
the date of termination, unless the Committee otherwise consents or the terms of the Stock
Option agreement or grant provide otherwise. For purposes of the Plan, the following shall
not be deemed a termination of employment or officer status: (i) a transfer of an employee
from the Company to any Subsidiary; (ii) a leave of absence, duly authorized in writing by
the Company, for military service or for any other purpose approved by the Company if the
period of such leave does not exceed 90 days; (iii) a leave of absence in excess of 90 days,
duly authorized in writing by the Company, provided that the employee’s right to
reemployment is guaranteed either by statute or contract; or (iv) a termination of
employment with continued service as an officer.
(b) Death. If a Participant dies either while an employee or officer of the
Company or one of its Subsidiaries or after the termination of employment other than for
cause but during the time when the Participant could have exercised a Stock Option under the
Plan, the Stock Option issued to such Participant shall be exercisable by the personal
representative of such Participant or other successor to the interest of the Participant for
one year after the Participant’s death, but only to the extent that the Participant was
entitled to exercise the Stock Option on the date of death or termination of employment,
whichever first occurred, unless the Committee otherwise consents or the terms of the Stock
Option agreement or grant provide otherwise.
(c) Disability. If a Participant ceases to be an employee or officer of the
Company or one of its Subsidiaries due to the Participant’s disability, the Participant may
exercise a Stock Option for a period of one year following such termination of employment,
but only to the extent that the Participant was entitled to exercise the Stock Option on the
date of such event, unless the Committee otherwise consents or the terms of the Stock Option
agreement or grant provide otherwise.
-7-
(d) Participant Retirement. If a Participant Retires as an employee or officer
of the Company or one of its Subsidiaries, any Stock Option granted under the Plan may be
exercised during the remaining term of the Stock Option, unless the terms of the Stock
Option agreement or grant provide otherwise.
(e) Termination for Cause. If a Participant is terminated for cause, the
Participant shall have no further right to exercise any Stock Option previously granted,
unless the committee and the Board determine otherwise.
SECTION 6
Restricted Stock
6.1 Grant. A Participant may be granted Restricted Stock under the Plan. Restricted
Stock shall be subject to such terms and conditions, consistent with the other provisions of the
Plan, as shall be determined by the Committee in its sole discretion. The Committee may impose
such restrictions or conditions, consistent with the provisions of the Plan, to the vesting of
Restricted Stock as it deems appropriate.
6.2 Termination of Employment or Officer Status.
(a) General. In the event of termination of employment or officer status
during the Restricted Period for any reason other than death, disability, Retirement, or
termination for cause, then any shares of Restricted Stock still subject to restrictions at
the date of such termination shall automatically be forfeited and returned to the Company;
PROVIDED, HOWEVER, that in the event of a voluntary or involuntary termination of the
employment or officer status of a Participant by the Company, the Committee may, in its sole
discretion, waive the automatic forfeiture of any or all such shares of Restricted Stock
and/or may add such new restrictions to such shares of Restricted Stock as it deems
appropriate. For purposes of the Plan, the following shall not be deemed a termination of
employment or officer status: (i) a transfer of an employee from the Company to any
Subsidiary; (ii) a leave of absence, duly authorized in writing by the Company, for military
service or for any other purpose approved by the Company if the period of such leave does
not exceed 90 days; (iii) a leave of absence in excess of 90 days duly authorized in writing
by the Company, provided that the employee’s right to reemployment is guaranteed either by
statute or contract; and (iv) a termination of employment with continued service as an
officer.
(b) Death, Retirement, or Disability. Unless the Committee otherwise consents
or unless the terms of the Restricted Stock agreement or grant provide otherwise, in the
event a Participant terminates his employment with the Company because of death, disability,
or Retirement during the Restricted Period, the restrictions applicable to the shares of
Restricted Stock shall terminate automatically with respect to that number of shares
(rounded to the nearest whole number) equal to the total number of shares of Restricted
Stock granted to such Participant multiplied by the number of full months that have elapsed
since the date of gant divided by the maximum number of full months of the Restricted
Period. All remaining shares shall be forfeited and returned to the Company; PROVIDED,
HOWEVER, that the Committee may, in its sole discretion, waive the restrictions remaining on
any or all such remaining shares of Restricted Stock either before or after the death,
disability, or Retirement of the Participant.
-8-
(c) Termination for Cause. If a Participant’s employment is terminated for
cause, the Participant shall have no further right to exercise or receive any Restricted
Stock, and all Restricted Stock still subject to restrictions at the date of such
termination shall automatically be forfeited and returned to the Company, unless the
Committee and the Board determine otherwise.
6.4 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or unless the terms of
the Restricted Stock agreement or grant provide otherwise: (i) shares of Restricted Stock
shall not be sold, exchanged, transferred, pledged, assigned, or otherwise alienated or
hypothecated during the Restricted Period except by will or the laws of descent and
distribution; and (ii) all rights with respect to Restricted Stock granted to a Participant
under the Plan shall be exercisable during the Participant’s lifetime only by such
Participant, his guardian, or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any
shares of Common Stock acquired pursuant to an award of Restricted Stock under the Plan as
the Committee deems advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
6.5 Legending of Restricted Stock. Any certificates evidencing shares of Restricted
Stock awarded pursuant to the Plan shall bear the following legend:
The shares represented by this certificate were issued subject to certain restrictions
under the Wolverine World Wide, Inc. 1995 Stock Incentive Plan (the “Plan”). A copy of the
Plan is on file in the office of the Secretary of the Company. This certificate is held
subject to the terms and conditions contained in a restricted stock agreement that includes
a prohibition against the sale or transfer of the stock represented by this certificate
except in compliance with that agreement, and that provides for forfeiture upon certain
events.
6.6 Representations and Warranties. A Participant who is awarded Restricted Stock
shall represent and warrant that the Participant is acquiring the Restricted Stock for the
Participant’s own account and investment and without any intention to resell or redistribute the
Restricted Stock. The Participant shall agree not to resell or distribute such Restricted Stock
after the Restricted Period except upon such conditions as the Company may reasonably specify to
ensure compliance with federal and state securities laws.
-9-
6.7 Rights as a Stockholder. A Participant shall have all voting, dividend,
liquidation, and other rights with respect to Restricted Stock held of record by such Participant
as if the Participant held unrestricted Common Stock; PROVIDED, HOWEVER, that the unvested portion
of any award of Restricted Stock shall be subject to any restrictions on transferability or risks
of forfeiture imposed pursuant to subsections 6.1 and 6.4 of the Plan. Unless the Committee
otherwise determines or unless the terms of the Restricted Stock agreement or grant provide
otherwise, any noncash dividends or distributions paid with respect to shares of unvested
Restricted Stock shall be subject to the same restrictions as the shares to which such dividends or
distributions relate. Any dividend payment with respect to Restricted Stock shall be made no later
than the end of the calendar year in which the dividends are paid to stockholders, or, if later,
the 15th day of the third month following the date the dividends are paid to
stockholders.
SECTION 7
Stock Awards
7.1 Grant. A Participant may be granted one or more Stock Awards under the Plan in
lieu of, or as payment for, the rights of a Participant under any other compensation plan, policy,
or program of the Company or its Subsidiaries. Stock Awards shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be determined by the Committee
in its sole discretion. Notwithstanding the previous sentence, the shares of stock subject to
Stock Awards shall be issued no later than the 15th day of the third month after the end
of the calendar year in which the award is granted.
7.2 Rights as a Stockholder. A Participant shall have all voting, dividend,
liquidation, and other rights with respect to shares of Common Stock issued to the Participant as a
Stock Award under this Section 7 upon the Participant becoming the holder of record of the Common
Stock granted pursuant to such Stock Awards; provided, however, that the Committee may impose such
restrictions on the assignment or transfer of Common Stock awarded pursuant to a Stock Award as it
deems appropriate. Any dividend payment with respect to Stock Awards shall be made no later than
the end of the calendar year in which the dividends are paid to stockholders, or, if later, the
15th day of the third month following the date the dividends are paid to stockholders.
SECTION 8
Change in Control
8.1 Acceleration of Vesting. If a Change in Control of the Company shall occur, then,
unless the Committee or the Board otherwise determines with respect to one or more Incentive
Awards, without action by the Committee or the Board (a) all outstanding Stock Options shall become
immediately exercisable in full and shall remain exercisable during the remaining term thereof,
regardless of whether the Participants to whom such Stock Options have been granted remain in the
employ or service of the Company or any Subsidiary; and (b) all other outstanding Incentive Awards
shall become immediately fully vested and nonforfeitable.
-10-
8.2 Cash Payment for Stock Options. If a Change in Control of the Company shall
occur, then the Committee, in its sole discretion, and without the consent of any Participant
affected thereby, may determine that some or all Participants holding outstanding Stock Options
shall receive, with respect to some or all of the shares of Common Stock subject to such Stock
Options, as of the effective date of any such Change in Control of the Company, cash in an amount
equal to the greater of the excess of (a) the highest sales price of the shares on the New York
Stock Exchange on the date immediately prior to the effective date of such Change in Control of the
Company or (b) the highest price per share actually paid in connection with any Change in Control
of the Company over the exercise price per share of such Stock Options.
SECTION 9
General Provisions
9.1 No Rights to Awards. No Participant or other person shall have any claim to be
granted any Incentive Award under the Plan, and there is no obligation of uniformity of treatment
of Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and
conditions of Incentive Awards of the same type and the determination of the Committee to grant a
waiver or modification of any Incentive Award and the terms and conditions thereof need not be the
same with respect to each Participant.
9.2 Withholding. The Company or a Subsidiary shall be entitled to (a) withhold and
deduct from future wages of a Participant (or from other amounts that may be due and owing to a
Participant from the Company or a Subsidiary), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any and all federal, state, and local withholding
and employment-related tax requirements attributable to an Incentive Award, including, without
limitation, the grant, exercise, or vesting of, or payment of dividends with respect to, an
Incentive Award or a disqualifying disposition of Common Stock received upon exercise of an
incentive stock option; or (b) require a Participant promptly to remit the amount of such
withholding to the Company before taking any action with respect to an Incentive Award. Unless the
Committee determines otherwise, withholding may be satisfied by withholding Common Stock to be
received upon exercise or by delivery to the Company of previously owned Common Stock. The Company
may establish such rules and procedures concerning timing of any withholding election as it deems
appropriate to comply with Rule l6b-3 under the Act.
9.3 Compliance With Laws; Listing and Registration of Shares. All Incentive Awards
granted under the Plan (and all issuances of Common Stock or other securities under the Plan) shall
be subject to all applicable laws, rules, and regulations, and to the requirement that if at any
time the Committee shall determine, in its discretion, that the listing, registration, or
qualification of the shares covered thereby upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the grant of such Incentive Award or the issue
or purchase of shares thereunder, such Incentive Award may not be exercised in whole or in part, or
the restrictions on such Incentive Award shall not lapse, unless and until such listing,
registration, qualification, consent, or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
-11-
9.4 Limit on Plan Awards. No Participant shall be eligible to receive Incentive
Awards under the Plan which in the aggregate represent more than 25% of the total shares available
for Incentive Awards granted under the Plan.
9.5 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall
prevent the Company or any Subsidiary from adopting or continuing in effect other or additional
compensation arrangements, including the grant of stock options and other stock-based awards, and
such arrangements may be either generally applicable or applicable only in specific cases.
9.6 No Right to Employment. The grant of an Incentive Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or any Subsidiary. The
Company or any Subsidiary may at any time dismiss a Participant from employment, free from any
liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any
written agreement with a Participant.
9.7 Governing Law. The validity, construction, and effect of the Plan and any rules
and regulations relating to the Plan shall be determined in accordance with the laws of the State
of Michigan and applicable federal law.
9.8 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of
the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had
not been included.
SECTION 10
Termination and Amendment
The Board may terminate the Plan at any time, or may from time to time amend the Plan as it
deems proper and in the best interests of the Company, provided that without stockholder approval
no such amendment may: (a) materially increase either the benefits to Participants under the Plan
or the number of shares that may be issued under the Plan; (b) materially modify
the eligibility requirements; or (c) impair any outstanding Incentive Award without the consent of
the Participant, except according to the terms of the Plan or the Incentive Award, and provided
further that the Plan may not be amended in any way that causes the Plan to fail to comply with or
be exempt from Section 409A of the Code, unless the Board expressly determines to amend the Plan to
be subject to Section 409A of the Code. No termination, amendment, or modification of the Plan
shall become effective with respect to any Incentive Award previously granted under the Plan
without the prior written consent of the Participant holding such Incentive Award unless such
amendment or modification operates solely to the benefit of the Participant.
SECTION 11
Effective Date and Duration of the Plan
This Plan shall take effect April 19, 1995, subject to approval by the stockholders at the
1995 Annual Meeting of Stockholders or any adjournment thereof or at a Special Meeting of
Stockholders. Unless earlier terminated by the Board of Directors, the Plan shall terminate on
April 18, 2005. No Incentive Award shall be granted under the Plan after such date.
As amended October 9, 2008.
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Exhibit 10.3
WOLVERINE WORLD WIDE, INC.
AMENDED AND RESTATED
1997 STOCK INCENTIVE PLAN
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the 1997 STOCK INCENTIVE
PLAN (the “Plan”) for its corporate, divisional and Subsidiary officers and other key employees.
The Plan permits the grant and award of Stock Options, Restricted Stock, and Stock Awards.
1.2 Purpose of Plan. The purpose of the Plan is to provide officers and key management
employees of the Company, its divisions and its Subsidiaries with an increased incentive to make
significant and extraordinary contributions to the long-term performance and growth of the Company
and its Subsidiaries, to join the interests of officers and key employees with the interests of the
Company’s stockholders through the opportunity for increased stock ownership and to attract and
retain officers and key employees of exceptional abilities. The Plan is further intended to provide
flexibility to the Company in structuring long-term incentive compensation to best promote the
foregoing objectives. Within that context, the Plan is intended to provide performance-based
compensation under Section 162 (m) of the Code and shall be interpreted, administered and amended
if necessary to achieve that purpose.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning is plainly required
by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Board” means the Board of Directors of the Company.
2.3 “Change in Control” means (a) the failure of the Continuing Directors at any time to
constitute at least a majority of the members of the Board; (b) the acquisition by any Person other
than an Excluded Holder of beneficial ownership (within the meaning of Rule l3d-3 issued under the
Act) of 20% or more of the outstanding Common Stock or the combined voting power of the Company’s
outstanding securities entitled to vote generally in the election of directors; (c) the approval by
the stockholders of the Company of a reorganization, merger or consolidation, unless with or into a
Permitted Successor; or (d) the approval by the stockholders of the
Company of a complete liquidation or dissolution of the Company or the sale or disposition of all
or substantially all of the assets of the Company other than to a Permitted Successor.
2.4 “Code” means the Internal Revenue Code of 1986, as amended.
2.5 “Committee” means the Compensation Committee of the Board or such other committee as the
Board shall designate to administer the Plan. The Committee shall consist of at least two members
of the Board and all of its members shall be “non-employee directors” as defined in Rule 16b-3
issued under the Act and “outside directors” as defined in the regulations issued under Section
162(m) of the Code.
2.6 “Common Stock” means the Common Stock of the Company, $1 par value.
2.7 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.8 “Continuing Directors” mean the individuals constituting the Board as of the date this
Plan was adopted and any subsequent directors whose election or nomination for election by the
Company’s stockholders was approved by a vote of three-quarters (3/4) of the individuals who are
then Continuing Directors, but specifically excluding any individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as the term is used
in Rule 14a-1 I of Regulation 14A issued under the Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board.
2.9 “Employee Benefit Plan” means any plan or program established by the Company or a
Subsidiary for the compensation or benefit of employees of the Company or any of its Subsidiaries.
2.10 “Excluded Holder” means (a) any Person who at the time this Plan was adopted was the
beneficial owner of 20% or more of the outstanding Common Stock; or (b) the Company, a Subsidiary
or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Common Stock or
other securities pursuant to the terms of an Employee Benefit Plan.
2.11 “Incentive Award” means the award or grant of a Stock Option, Restricted Stock, or Stock
Award to a Participant pursuant to the Plan.
2.12 “Market Value” shall equal the closing market price of shares of Common Stock reported on
the New York Stock Exchange (or any successor exchange that is the primary stock exchange for
trading of Common Stock) on the date of grant, exercise or vesting, as applicable, or if the New
York Stock Exchange (or any such successor) is closed on that date, the last preceding date on
which the New York Stock Exchange (or any such successor) was open for trading and on which shares
of Common Stock were traded.
2.13 “Participant” means a corporate officer, divisional officer or any key employee of the
Company, its divisions or its Subsidiaries is granted an Incentive Award under the Plan.
2.14 “Permitted Successor” means a company which, immediately following the consummation of a
transaction specified in clauses (c) and (d) of the definition of “Change in Control” above,
satisfies each of the following criteria: (a) 50% or more of the outstanding common stock of the
company and the combined voting power of the outstanding securities of the company entitled to vote
generally in the election of directors (in each case determined
immediately following the consummation of the applicable transaction) is beneficially owned,
directly or indirectly, by all or substantially all of the Persons who were the beneficial owners
of the Company’s outstanding Common Stock and outstanding securities entitled to vote generally in
the election of directors (respectively) immediately prior to the applicable transaction; (b) no
Person other than an Excluded Holder beneficially owns, directly or indirectly, 20% or more of the
outstanding common stock of the company or the combined voting power of the outstanding securities
of the company entitled to vote generally in the election of directors (for these purposes the term
Excluded Holder shall include the company, any subsidiary of the company and any employee benefit
plan of the company or any such subsidiary or any trust holding common stock or other securities of
the company pursuant to the terms of any such employee benefit plan); and (c) at least a majority
of the board of directors is comprised of Continuing Directors.
2
2.15 “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act.
2.16 “Restricted Period” means the period of time during which Restricted Stock awarded under
the Plan is subject to restrictions. The Restricted Period may differ among Participants and may
have different expiration dates with respect to shares of Common Stock covered by the same
Incentive Award.
2.17 “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 6 of
the Plan.
2.18 “Retirement” means the voluntary termination of all employment by a Participant after the
Participant has attained 60 years of age, or such other age as shall be determined by the Committee
in its sole discretion or as otherwise may be set forth in the Incentive Award agreement or other
grant document with respect to a Participant and a particular Incentive Award.
2.19 “Stock Award” means an award of Common Stock awarded to a Participant pursuant to Section
7 of the Plan.
2.20 “Stock Option” means the right to purchase Common Stock at a stated price for a specified
period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a nonqualified stock option.
2.21 “Subsidiary” means any company or other entity of which 50% or more of the outstanding
voting stock or voting ownership interest is directly or indirectly owned or controlled by the
Company or by one or more Subsidiaries of the Company.
SECTION 3
Administration
3.1 Power and Authority. The Committee shall administer the Plan. The Committee may
delegate record keeping, calculation, payment and other ministerial administrative functions to
individuals designated by the Committee, who may be employees of the Company and its Subsidiaries.
Except as limited in this Plan or as may be necessary to assure that this Plan provides
performance-based compensation under Section 162(m) of the Code, the Committee shall have all of
the express and implied powers and duties set forth in this Plan, shall have full
power and authority to interpret the provisions of the Plan and Incentive Awards granted under the
Plan and shall have full power and authority to supervise the administration of the Plan and
Incentive Awards granted under the Plan and to make all other determinations considered necessary
or advisable for the administration of the Plan. All determinations, interpretations and selections
made by the Committee regarding the Plan shall be final and conclusive. The Committee shall hold
its meetings at such times and places as it deems advisable. Action may be taken by a written
instrument signed by a majority of the members of the Committee and any action so taken shall be
fully as effective as if it had been taken at a meeting duly called and held. The Committee shall
make such rules and regulations for the conduct of its business as it deems advisable.
3
3.2 Grants or Awards to Participants. In accordance with and subject to the
provisions of the Plan, the Committee shall have the authority to determine all provisions of
Incentive Awards as the Committee may deem necessary or desirable and as are consistent with the
terms of the Plan, including, without limitation, the following: (a) the persons who shall be
selected as Participants; (b) the nature and, subject to the limitation set forth in Section 4.2 of
the Plan, extent of the Incentive Awards to be made to each Participant (including the number of
shares of Common Stock to be subject to each Incentive Award, any exercise price, the manner in
which an Incentive Award will vest or become exercisable and the form of payment for the Incentive
Award); (c) the time or times when Incentive Awards will be granted; (d) the duration of each
Incentive Award; and (e) the restrictions and other conditions to which payment or vesting of
Incentive Awards may be subject.
3.3 Amendments or Modifications of Awards. The Committee shall have the authority to
amend or modify the terms of any outstanding Incentive Award in any manner, provided that the
amended or modified terms are not prohibited by the Plan as then in effect and provided such
actions do not cause an Incentive Award not already subject to Section 409A of the Code to become
subject to Section 409A of the Code, unless the Committee expressly determines to make an Incentive
Award subject to Section 409A of the Code, including, without limitation, the authority to: (a)
modify the number of shares or other terms and conditions of an Incentive Award; provided that any
increase in the number of shares of an Incentive Award other than pursuant to Section 4.3 shall be
considered to be a new grant with respect to such additional shares for purposes of Section 409A of
the Code and such new grant shall be made at Market Value on the date of grant; (b) extend the term
of an Incentive Award to a date that is no later than the earlier of the latest date upon which the
Incentive Award could have expired by its terms under any circumstances or the 10th
anniversary of the date of grant (for purposes of clarity, as permitted under Section 409A of the
Code, if the term of a Stock Option is extended at a time when the Stock Option price equals or
exceeds the Market Value, it will not be an extension of the term of the Stock Option, but instead
will be treated as a modification of the Stock Option and a new Stock Option will be treated as
having been granted); (c) accelerate the exercisability or vesting or otherwise terminate any
restrictions relating to an Incentive Award; (d) accept the surrender of any outstanding Incentive
Award; and (e) to the extent not previously exercised or vested, authorize the grant of new
Incentive Awards in substitution for surrendered Incentive Awards; provided, however, that such new
grant of Incentive Awards will be considered to be a new grant for purposes of Section 409A of the
Code and such new grant shall be made at Market Value on the date of the new grant.
3.4 Indemnification of Committee Members. Neither any member or former member of the
Committee nor any individual to whom authority is or has been delegated shall be personally
responsible or liable for any act or omission in connection with the performance of powers or
duties or the exercise of discretion or judgment in the administration and implementation of the
Plan. Each person who is or shall have been a member of the Committee shall be indemnified and held
harmless by the Company from and against any cost, liability or expense imposed or incurred in
connection with such person’s or the Committee’s taking or failing to take any action under the
Plan. Each such person shall be justified in relying on information furnished in connection with
the Plan’s administration by any appropriate person or persons.
4
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 of the Plan, a
maximum of 1,000,000 shares of Common Stock (not including any adjustments occurring before the
date of this amendment pursuant to Section 4.3) shall be available for Incentive Awards under the
Plan. Such shares shall be authorized and may be either unissued or treasury shares.
4.2 Limitation Upon Incentive Awards. No Participant shall be granted, during any
calendar year, Incentive Awards with respect to more than 25% of the total number of shares of
Common Stock available for Incentive Awards under the Plan set forth in Section 4.1 of the Plan,
subject to adjustment as provided in Section 4.3 of the Plan. The purpose of this Section 4.2 is to
ensure that the Plan provides performance-based compensation under Section 162(m) of the Code and
this Section 4.2 shall be interpreted, administered and amended if necessary to achieve that
purpose.
4.3 Adjustments. If the number of shares of Common Stock outstanding changes by
reason of a stock dividend, stock split, recapitalization, merger, consolidation, combination,
exchange of shares or any other change in the corporate structure or shares of the Company, the
number and kind of securities subject to and reserved under the Plan, together with applicable
exercise prices, shall be appropriately adjusted. No fractional shares shall be issued pursuant to
the Plan and any fractional shares resulting from adjustments shall be eliminated from the
respective Incentive Awards. If an Incentive Award is canceled, surrendered, modified, exchanged
for a substitute Incentive Award or expires or terminates during the term of the Plan but prior to
the exercise or vesting of the Incentive Award in full, the shares subject to but not delivered
under such Incentive Award shall be available for other Incentive Awards. If shares subject to and
otherwise deliverable upon the exercise of an Incentive Award are surrendered to the Company in
connection with the exercise or vesting of an Incentive Award, the surrendered shares subject to
the Incentive Award shall be available for other Incentive Awards.
SECTION 5
Stock Options
5.1 Grant. A Participant may be granted one or more Stock Options under the Plan. The
Committee, in its discretion and except as otherwise limited by the Plan, may provide in the
initial grant of a Stock Option for the subsequent automatic grant of additional Stock Options for
the number of shares, if any, that are subject to the initial Stock Option and surrendered to the
Company in connection with the exercise of the initial or any subsequently granted Stock Option.
Stock Options shall be subject to such terms and conditions, consistent with the other provisions
of the Plan, as may be determined by the Committee in its sole discretion. In addition, the
Committee may vary, among Participants and among Stock Options granted to the same Participant, any
and all of the terms and conditions of the Stock Options granted under the Plan. The Committee
shall have complete discretion in determining the number of Stock Options granted to each
Participant. The Committee may designate whether or not a Stock Option is to be considered an
incentive stock option as defined in Section 422(b) of the Code.
5
5.2 Stock Option Agreements. Stock Options shall be evidenced by stock option
agreements containing such terms and conditions, consistent with the provisions of the Plan, as the
Committee shall from time to time determine. To the extent not covered by the stock option
agreement, the terms and conditions of this Section 5 shall govern.
5.3 Stock Option Price. The per share Stock Option price shall be determined by the
Committee; provided, that the per share Stock Option price shall be equal to or greater than 100%
of the Market Value on the date of grant.
5.4 Medium and Time of Payment. The exercise price for each share purchased pursuant
to a Stock Option granted under the Plan shall be payable in cash or, if the Committee consents, in
shares of Common Stock (including Common Stock to be received upon a simultaneous exercise) or
other consideration substantially equivalent to cash. To the extent any such amendment would not
cause a Stock Option to become subject to Section 409A of the Code, unless the Committee expressly
determines to make a Stock Option subject to Section 409A of the Code, the time and terms of
payment may be amended with the consent of a Participant before or after exercise of a Stock
Option. The Committee may from time to time authorize payment of all or a portion of the Stock
Option price in the form of a promissory note or other deferred payment installments according to
such terms as the Committee may approve. The Board may restrict or suspend the power of the
Committee to permit such loans and may require that adequate security be provided.
5.5 Stock Options Granted to Ten Percent Stockholders. No Stock Option granted to any
Participant who at the time of such grant owns, together with stock attributed to such Participant
under Section 424(d) of the Code, more than 10% of the total combined voting power of all classes
of stock of the Company or any of its Subsidiaries may be designated as an incentive stock option,
unless such Stock Option provides an exercise price equal to at least 110% of the Market Value of
the Common Stock and the exercise of the Stock Option after the expiration of 5 years from the date
of grant of the Stock Option is prohibited by its terms.
5.6 Limits on Exercisability. Stock Options shall be exercisable for such periods,
not to exceed 10 years from the date of grant, as may be fixed by the Committee. At the time of the
exercise of a Stock Option, the holder of the Stock Option, if requested by the Committee, must
represent to the Company that the shares are being acquired for investment and not with a view to
the distribution thereof. The Committee may in its discretion require a Participant to continue
the Participant’s service with the Company and its Subsidiaries for a certain length of time prior
to a Stock Option becoming exercisable and may eliminate such delayed vesting provisions.
5.7 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents (before or after the
option grant) or unless the stock option agreement or grant provides otherwise; (i) no
incentive stock option granted under the Plan may be sold, exchanged, transferred, pledged,
assigned or otherwise alienated or hypothecated except by will or the laws of descent and
distribution; and (ii) all Stock Options that are not incentive stock options may be
transferred; provided, that as a condition to any such transfer the transferee must execute
a written agreement permitting the Company to withhold from the shares subject to the Stock
Option a number of shares having a Market Value at least equal to the amount of any federal,
state or local withholding or other taxes associated with or resulting from the exercise of
a Stock Option. All provisions of a Stock Option which are determined with reference to the
Participant, including without limitation those which refer to the Participant’s employment
with the Company or its Subsidiaries, shall continue to be determined with reference to the
Participant after any transfer of a Stock Option.
6
(b) Other Restrictions. The Committee may impose other restrictions on any
shares of Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as
the Committee deems advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
5.8 Termination of Employment or Officer Status.
(a) General. If a Participant ceases to be employed by or an officer of the
Company or one of its Subsidiaries for any reason other than the Participant’s death,
disability, Retirement or termination for cause, the Participant may exercise his or her
Stock Options only for a period of 3 months after such termination of employment or officer
status, but only to the extent the Participant was entitled to exercise the Stock Options on
the date of termination, unless the Committee otherwise consents or the terms of the stock
option agreement or grant provide otherwise. For purposes of the Plan, the following shall
not be deemed a termination of employment or officer status: (i) a transfer of an employee
from the Company to any Subsidiary; (ii) a leave of absence, duly authorized in writing by
the Company, for military service or for any other purpose approved by the Company if the
period of such leave does not exceed 90 days; (iii) a leave of absence in excess of 90 days,
duly authorized in writing by the Company, provided that the employee’s right to
reemployment is guaranteed either by statute or contract; or (iv) a termination of
employment with continued service as an officer.
(b) Death. If a Participant dies either while an employee or officer of the
Company or one of its Subsidiaries or after the termination of employment other than for
cause but during the time when the Participant could have exercised a Stock Option under the
Plan, the Stock Option issued to such Participant shall be exercisable by the personal
representative of such Participant or other successor to the interest of the Participant for
1 year after the Participant’s death, but only to the extent that the Participant was
entitled to exercise the Stock Option on the date of death or termination
of employment, whichever first occurred, unless the Committee otherwise consents or the
terms of the stock option agreement or grant provide otherwise.
(c) Disability. If a Participant ceases to be an employee or officer of the
Company or one of its Subsidiaries due to the Participant’s disability, the Participant may
exercise a Stock Option for a period of 1 year following such termination of employment, but
only to the extent that the Participant was entitled to exercise the Stock Option on the
date of such event, unless the Committee otherwise consents or the terms of the stock option
agreement or grant provide otherwise.
(d) Participant Retirement. If a Participant Retires as an employee or officer
of the Company or one of its Subsidiaries, any Stock Option granted under the Plan may be
exercised during the remaining term of the Stock Option, unless the terms of the stock
option agreement or grant provide otherwise.
(e) Termination for Cause. If a Participant is terminated for cause, the
Participant shall have no further right to exercise any Stock Option previously granted,
unless the Committee and the Board determine otherwise.
7
SECTION 6
Restricted Stock
6.1 Grant. A Participant may be granted Restricted Stock under the Plan. Restricted
Stock shall be subject to such terms and conditions, consistent with the other provisions of the
Plan, as shall be determined by the Committee in its sole discretion. The Committee may impose such
restrictions or conditions, consistent with the provisions of the Plan, to the vesting of
Restricted Stock as it deems appropriate. The Committee may also require that certificates
representing shares of Restricted Stock be retained and held in escrow by a designated employee or
agent of the Company or any Subsidiary until any restrictions applicable to shares of Common Stock
so retained have been satisfied or lapsed.
6.2 Restricted Stock Agreements. Awards of Restricted Stock shall be evidenced by
restricted stock agreements containing such terms and conditions, consistent with the provisions of
the Plan, as the Committee shall from time to time determine. Unless a restricted stock agreement
provides otherwise, Restricted Stock awards shall be subject to the terms and conditions set forth
in this Section 6.
6.3 Termination of Employment or Officer Status.
(a) General. In the event of termination of employment or officer status
during the Restricted Period for any reason other than death, disability, Retirement or
termination for cause, then any shares of Restricted Stock still subject to restrictions at
the date of such termination shall automatically be forfeited and returned to the Company;
provided, that in the event of a voluntary or involuntary termination of the employment or
officer status of a Participant by the Company, the Committee may, in its sole discretion,
waive the automatic forfeiture of any or all such shares of Restricted Stock and/or may add
such new restrictions to such shares of Restricted Stock as it deems appropriate. For
purposes of the Plan, the following shall not be considered a termination of employment or
officer status: (i) a transfer of an employee from the
Company to any Subsidiary; (ii) a leave of absence, duly authorized in writing by the
Company, for military service or for any other purpose approved by the Company if the period
of such leave does not exceed 90 days; (iii) a leave of absence in excess of 90 days duly
authorized in writing by the Company, provided that the employee’s right to reemployment is
guaranteed either by statute or contract; and (iv) a termination of employment with
continued service as an officer.
(b) Death, Retirement or Disability. Unless the Committee otherwise consents
or unless the terms of the restricted stock agreement or grant provide otherwise, in the
event a Participant terminates his or her employment with the Company because of death,
disability or Retirement during the Restricted Period, the restrictions applicable to the
shares of Restricted Stock shall terminate automatically with respect to that number of
shares (rounded to the nearest whole number) equal to the total number of shares of
Restricted Stock granted to such Participant multiplied by the number of full months that
have elapsed since the date of grant divided by the total number of full months in the
Restricted Period. All remaining shares shall be forfeited and returned to the Company;
provided, that the Committee may, in its sole discretion, waive the restrictions remaining
on any or all such remaining shares of Restricted Stock either before or after the death,
disability or Retirement of the Participant.
8
(c) Termination for Cause. If a Participant’s employment is terminated for
cause, the Participant shall have no further right to exercise or receive any Restricted
Stock and all Restricted Stock still subject to restrictions at the date of such termination
shall automatically be forfeited and returned to the Company, unless the Committee and the
Board determine otherwise.
6.4 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or unless the terms of
the Restricted Stock agreement or grant provide otherwise: (i) shares of Restricted Stock
shall not be sold, exchanged, transferred, pledged, assigned or otherwise alienated or
hypothecated during the Restricted Period except by will or the laws of descent and
distribution; and (ii) all rights with respect to Restricted Stock granted to a Participant
under the Plan shall be exercisable during the Participant’s lifetime only by such
Participant, his or her guardian or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any
shares of Common Stock acquired pursuant to an award of Restricted Stock under the Plan as
the Committee deems advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
6.5 Legending of Restricted Stock. Any certificates evidencing shares of Restricted
Stock awarded pursuant to the Plan shall bear the following legend:
The shares represented by this certificate were issued subject to certain restrictions under
the Wolverine World Wide, Inc. 1997 Stock Incentive Plan (the “Plan”). A copy of the Plan is on
file in the office of the Secretary of the Company. This certificate is held subject to the terms
and conditions contained in a restricted stock agreement that includes a prohibition against the
sale or transfer of the stock represented by this certificate except in compliance with that
agreement and that provides for forfeiture upon certain events.
6.6 Representations and Warranties. A Participant who is awarded Restricted Stock
shall represent and warrant that the Participant is acquiring the Restricted Stock for the
Participant’s own account and investment and without any intention to resell or redistribute the
Restricted Stock. The Participant shall agree not to resell or distribute such Restricted Stock
after the Restricted Period except upon such conditions as the Company may reasonably specify to
ensure compliance with federal and state securities laws.
6.7 Rights as a Stockholder. A Participant shall have all voting, dividend,
liquidation and other rights with respect to Restricted Stock held of record by such Participant as
if the Participant held unrestricted Common Stock; provided, that the unvested portion of any award
of Restricted Stock shall be subject to any restrictions on transferability or risks of forfeiture
imposed pursuant to Sections 6.1, 6.3 and 6.4 of the Plan. Unless the Committee otherwise
determines or unless the terms of the restricted stock agreement or grant provide otherwise, any
noncash dividends or distributions paid with respect to shares of unvested Restricted Stock shall
be subject to the same restrictions as the shares to which such dividends or distributions relate.
Any dividend payment with respect to Restricted Stock shall be made no later than the end of the
calendar year in which the dividends are paid to stockholders, or, if later, the 15th
day of the third month following the date the dividends are paid to stockholders.
9
SECTION 7
Stock Awards
7.1 Grant. A Participant may be granted one or more Stock Awards under the Plan in
lieu of, or as payment for, the rights of a Participant under any other compensation plan, policy
or program of the Company or its Subsidiaries. Stock Awards shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be determined by the Committee
in its sole discretion. Notwithstanding the previous sentence, the shares of stock subject to
Stock Awards shall be issued no later than the 15th day of the third month after the end
of the calendar year in which the award is granted.
7.2 Rights as a Stockholder. A Participant shall have all voting, dividend,
liquidation and other rights with respect to shares of Common Stock issued to the Participant as a
Stock Award under this Section 7 upon the Participant becoming the holder of record of the Common
Stock granted pursuant to such Stock Awards; provided, that the Committee may impose such
restrictions on the assignment or transfer of Common Stock awarded pursuant to a Stock Award as it
deems appropriate. Any dividend payment with respect to Stock Awards shall be made no later than
the end of the calendar year in which the dividends are paid to stockholders, or, if later, the
15th day of the third month following the date the dividends are paid to stockholders.
SECTION 8
Change in Control
8.1 Acceleration of Vesting. If a Change in Control of the Company shall occur, then,
unless the Committee or the Board otherwise determines with respect to one or more Incentive
Awards, without action by the Committee or the Board: (a) all outstanding Stock Options shall
become immediately exercisable in full and shall remain exercisable during the
remaining term thereof, regardless of whether the Participants to whom such Stock Options have been
granted remain in the employ or service of the Company or any Subsidiary; and (b) all other
outstanding Incentive Awards shall become immediately fully vested and exercisable and
nonforfeitable.
8.2 Cash Payment for Stock Options. If a Change in Control of the Company shall
occur, then the Committee, in its sole discretion, and without the consent of any Participant
affected thereby, may determine that some or all Participants holding outstanding Stock Options
shall receive, with respect to some or all of the shares of Common Stock subject to such Stock
Options, as of the effective date of any such Change in Control of the Company, cash in an amount
equal to the greater of the excess of (a) the highest sales price of the shares on the New York
Stock Exchange on the date immediately prior to the effective date of such Change in Control of the
Company or (b) the highest price per share actually paid in connection with any Change in Control
of the Company over the exercise price per share of such Stock Options.
10
SECTION 9
General Provisions
9.1 No Rights to Awards. No Participant or other person shall have any claim to be
granted any Incentive Award under the Plan and there is no obligation of uniformity of treatment of
Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and
conditions of Incentive Awards of the same type and the determination of the Committee to grant a
waiver or modification of any Incentive Award and the terms and conditions thereof need not be the
same with respect to each Participant.
9.2 Withholding. The Company or a Subsidiary shall be entitled to: (a) withhold and
deduct from future wages of a Participant (or from other amounts that may be due and owing to a
Participant from the Company or a Subsidiary), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any and all federal, state, local and foreign
withholding and employment-related tax requirements attributable to an Incentive Award, including,
without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an
Incentive Award or a disqualifying disposition of Common Stock received upon exercise of an
incentive stock option; or (b) require a Participant promptly to remit the amount of such
withholding to the Company before taking any action with respect to an Incentive Award. Unless the
Committee determines otherwise, withholding may be satisfied by withholding Common Stock to be
received upon exercise or by delivery to the Company of previously owned Common Stock.
9.3 Compliance With Laws; Listing and Registration of Shares. All Incentive Awards
granted under the Plan (and all issuances of Common Stock or other securities under the Plan) shall
be subject to all applicable laws, rules and regulations, and to the requirement that if at any
time the Committee shall determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the grant of such Incentive Award or the issue
or purchase of shares thereunder, such Incentive Award may not be exercised in whole or in part, or
the restrictions on such Incentive Award shall not lapse, unless and until such listing,
registration, qualification, consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
9.4 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall
prevent the Company or any Subsidiary from adopting or continuing in effect other or additional
compensation arrangements, including the grant of stock options and other stock-based awards, and
such arrangements may be either generally applicable or applicable only in specific cases.
9.5 No Right to Employment. The grant of an Incentive Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or any Subsidiary. The
Company or any Subsidiary may at any time dismiss a Participant from employment, free from any
liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any
written agreement with a Participant.
11
9.6 Governing Law. The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws of the State of
Delaware and applicable federal law.
9.7 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of
the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had
not been included.
SECTION 10
Termination and Amendment
The Board may terminate the Plan at any time, or may from time to time amend the Plan as it
deems proper and in the best interests of the Company, provided that no such amendment may impair
any outstanding Incentive Award without the consent of the Participant, except according to the
terms of the Plan or the Incentive Award, and provided further that the Plan may not be amended in
any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code,
unless the Board expressly determines to amend the Plan to be subject to Section 409A of the Code.
No termination, amendment or modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior written consent of the
Participant holding such Incentive Award unless such amendment or modification operates solely to
the benefit of the Participant.
SECTION 11
Effective Date and Duration of the Plan
This Plan shall take effect April 16, 1997, subject to approval by the stockholders at the
1997 Annual Meeting of Stockholders or any adjournment thereof or at a Special Meeting of
Stockholders. Unless earlier terminated by the Board of Directors, no Incentive Award shall be
granted under the Plan after April 15, 2007.
As amended October 9, 2008.
12
Exhibit 10.4
WOLVERINE WORLD WIDE, INC.
AMENDED AND RESTATED
STOCK INCENTIVE PLAN OF 1999
STOCK INCENTIVE PLAN OF 1999
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the STOCK INCENTIVE PLAN OF
1999 (the “Plan”) for its corporate, divisional and Subsidiary officers and other key employees.
The Plan permits the grant and award of Stock Options, Restricted Stock, and Stock Awards.
1.2 Purpose of Plan. The purpose of the Plan is to provide officers and key management
employees of the Company, its divisions and its Subsidiaries with an increased incentive to
contribute to the long-term performance and growth of the Company and its Subsidiaries, to join the
interests of officers and key employees with the interests of the Company’s stockholders through
the opportunity for increased stock ownership and to attract and retain officers and key employees.
The Plan is further intended to provide flexibility to the Company in structuring long-term
incentive compensation to best promote the foregoing objectives. Within that context, the Plan is
intended to provide performance-based compensation under Section 162(m) of the Code and shall be
interpreted, administered and amended if necessary to achieve that purpose.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning plainly is required
by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Board” means the Board of Directors of the Company.
2.3 “Change in Control” unless otherwise defined in an Incentive Award, means (a) the failure
of the Continuing Directors at any time to constitute at least a majority of the members of the
Board; (b) the acquisition by any Person other than an Excluded Holder of beneficial ownership
(within the meaning of Rule l3d-3 issued under the Act) of 20% or more of the outstanding Common
Stock or the combined voting power of the Company’s outstanding securities entitled to vote
generally in the election of directors; (c) the approval by the stockholders of the Company of a
reorganization, merger or consolidation, unless with or into a Permitted Successor; or (d) the
approval by the stockholders of the Company of a complete liquidation or dissolution of the Company
or the sale or disposition of all or substantially all of the assets of the Company other than to a
Permitted Successor.
2.4 “Code” means the Internal Revenue Code of 1986, as amended.
2.5 “Committee” means the Compensation Committee of the Board. The Committee shall consist of
at least 2 members of the Board and all of its members shall be “non-employee directors” as defined
in Rule 16b-3 issued under the Act and “outside directors” as defined in the regulations issued
under Section 162(m) of the Code.
2.6 “Common Stock” means the Common Stock, $1 par value, of the Company.
2.7 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.8 “Continuing Directors” mean the individuals constituting the Board as of the date this
Plan was adopted and any subsequent directors whose election or nomination for election by the
Company’s stockholders was approved by a vote of three-quarters (3/4) of the individuals who are
then Continuing Directors, but specifically excluding any individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as the term is used
in Rule 14a-11 of Regulation 14A issued under the Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board.
2.9 “Employee Benefit Plan” means any plan or program established by the Company or a
Subsidiary for the compensation or benefit of employees of the Company or any of its Subsidiaries.
2.10 “Excluded Holder” means (a) any Person who at the time this Plan was adopted was the
beneficial owner of 20% or more of the outstanding Common Stock; or (b) the Company, a Subsidiary
or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Common Stock or
other securities pursuant to the terms of an Employee Benefit Plan.
2.11 “Incentive Award” means the award or grant of a Stock Option, Restricted Stock, or Stock
Award to a Participant pursuant to the Plan.
2.12 “Market Value” shall equal the closing market price of shares of Common Stock reported on
the New York Stock Exchange (or any successor exchange that is the primary stock exchange for
trading of Common Stock) on the date of grant, exercise or vesting, as applicable, or if the New
York Stock Exchange (or any such successor) is closed on that date, the last preceding date on
which the New York Stock Exchange (or any such successor) was open for trading and on which shares
of Common Stock were traded.
2.13 “Participant” means a corporate officer, divisional officer or any key employee of the
Company, its divisions or its Subsidiaries who is granted an Incentive Award under the Plan.
2.14 “Permitted Successor” means a company that, immediately following the consummation of a
transaction specified in clauses (c) and (d) of the definition of “Change in Control” above,
satisfies each of the following criteria: (a) 50% or more of the outstanding common stock of the
company and the combined voting power of the outstanding securities of the company entitled to vote
generally in the election of directors (in each case determined immediately following the
consummation of the applicable transaction) is beneficially owned, directly or indirectly, by all
or substantially all of the Persons who were the beneficial owners of the Company’s outstanding
Common Stock and outstanding securities entitled to vote generally in the election of directors
(respectively) immediately prior to the applicable transaction; (b) no
Person other than an Excluded Holder beneficially owns, directly or indirectly, 20% or more of the
outstanding common stock of the company or the combined voting power of the outstanding securities
of the company entitled to vote generally in the election of directors (for these purposes the term
Excluded Holder shall include the company, any subsidiary of the company and any employee benefit
plan of the company or any such subsidiary or any trust holding common stock or other securities of
the company pursuant to the terms of any such employee benefit plan); and (c) at least a majority
of the board of directors of the company is comprised of Continuing Directors.
2
2.15 “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act.
2.16 “Restricted Period” means the period of time during which Restricted Stock awarded under
the Plan is subject to restrictions. The Restricted Period may differ among Participants and may
have different expiration dates with respect to shares of Common Stock covered by the same
Incentive Award.
2.17 “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 6 of
the Plan.
2.18 “Retirement” means the voluntary termination of all employment by a Participant after the
Participant has attained 60 years of age, or such other age as shall be determined by the Committee
in its sole discretion or as otherwise may be set forth in the Incentive Award agreement or other
grant document with respect to a Participant and a particular Incentive Award.
2.19 “Stock Award” means an award of Common Stock awarded to a Participant pursuant to Section
7 of the Plan.
2.20 “Stock Option” means the right to purchase Common Stock at a stated price for a specified
period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a nonqualified stock option.
2.21 “Subsidiary” means any corporation or other entity of which 50% or more of the
outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled
by the Company or by 1 or more Subsidiaries of the Company.
SECTION 3
Administration
3.1 Power and Authority. The Committee shall administer the Plan. The Committee may
delegate record keeping, calculation, payment and other ministerial administrative functions to
individuals designated by the Committee, who may be officers or employees of the Company or its
Subsidiaries. Except as limited in this Plan or as may be necessary to ensure that this Plan
provides performance-based compensation under Section 162(m) of the Code, the Committee shall have
all of the express and implied powers and duties set forth in the Bylaws of the Company and this
Plan, shall have full power and authority to interpret the provisions of the Plan and Incentive
Awards granted under the Plan and shall have full power and authority to supervise the
administration of the Plan and Incentive Awards granted under the Plan and to make all other
determinations considered necessary or advisable for the administration of the
Plan. All determinations, interpretations and selections made by the Committee regarding the Plan
shall be final and conclusive. The Committee shall hold its meetings at such times and places as it
considers advisable. Action may be taken by a written instrument signed by a majority of the
members of the Committee and any action so taken shall be fully as effective as if it had been
taken at a meeting duly called and held. The Committee shall make such rules and regulations for
the conduct of its business as it considers advisable.
3
3.2 Grants or Awards to Participants. In accordance with and subject to the
provisions of the Plan, the Committee shall have the authority to determine all provisions of
Incentive Awards as the Committee may consider necessary or desirable and as are consistent with
the terms of the Plan, including, without limitation, the following: (a) the persons who shall be
selected as Participants; (b) the nature and, subject to the limitation set forth in Section 4.2 of
the Plan, extent of the Incentive Awards to be made to each Participant (including the number of
shares of Common Stock to be subject to each Incentive Award, any exercise price, the manner in
which an Incentive Award will vest or become exercisable and the form of payment for the Incentive
Award); (c) the time or times when Incentive Awards will be granted; (d) the duration of each
Incentive Award; and (e) the restrictions and other conditions to which payment or vesting of
Incentive Awards may be subject.
3.3 Amendments or Modifications of Awards. The Committee shall have the authority to
amend or modify the terms of any outstanding Incentive Award in any manner, provided that the
amended or modified terms are not prohibited by the Plan as then in effect and provided such
actions do not cause an Incentive Award not already subject to Section 409A of the Code to become
subject to Section 409A of the Code, unless the Committee expressly determines to make an Incentive
Award subject to Section 409A of the Code, including, without limitation, the authority to: (a)
modify the number of shares or other terms and conditions of an Incentive Award; provided that any
increase in the number of shares of an Incentive Award other than pursuant to Section 4.3 shall be
considered to be a new grant with respect to such additional shares for purposes of Section 409A of
the Code and such new grant shall be made at Market Value on the date of grant; (b) extend the term
of an Incentive Award to a date that is no later than the earlier of the latest date upon which the
Incentive Award could have expired by its terms under any circumstances or the 10th
anniversary of the date of grant (for purposes of clarity, as permitted under Section 409A of the
Code, if the term of a Stock Option is extended at a time when the Stock Option price equals or
exceeds the Market Value, it will not be an extension of the term of the Stock Option, but instead
will be treated as a modification of the Stock Option and a new Stock Option will be treated as
having been granted); (c) accelerate the exercisability or vesting or otherwise terminate, waive or
modify any restrictions relating to an Incentive Award; (d) accept the surrender of any outstanding
Incentive Award and (e) to the extent not previously exercised or vested, authorize the grant of
new Incentive Awards in substitution for surrendered Incentive Awards; provided, however, that such
grant of new Incentive Awards will be considered to be a new grant for purposes of Section 409A of
the Code and such new grant shall be made at Market Value on the date of the new grant; provided
further, that Incentive Awards issued under the Plan may not be repriced, replaced, regranted
through cancellation or modified without stockholder approval if the effect of such repricing,
replacement, regrant or modification would be to reduce the exercise price of then outstanding
Incentive Awards to the same Participants.
3.4 Indemnification of Committee Members. Neither any member or former member of the
Committee nor any individual to whom authority is or has been delegated shall be personally
responsible or liable for any act or omission in connection with the performance of powers or
duties or the exercise of discretion or judgment in the administration and implementation of the
Plan. Each person who is or shall have been a member of the Committee shall be indemnified and held
harmless by the Company from and against any cost, liability or expense imposed or incurred in
connection with such person’s or the Committee’s taking or failing to take any action under the
Plan. Each such person shall be justified in relying on information furnished in connection with
the Plan’s administration by any appropriate person or persons.
4
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 of the Plan,
the total number of shares of Common Stock available for Incentive Awards under the Plan shall be
2,000,000 shares of Common Stock (not including any adjustments occurring before the date of this
amendment pursuant to Section 4.3); plus shares subject to Incentive Awards that are canceled,
surrendered, modified, exchanged for substitute Incentive Awards or expire or terminate prior to
the exercise or vesting of the Incentive Award in full and shares that are surrendered to the
Company in connection with the exercise or vesting of an Incentive Award, whether previously owned
or otherwise subject to such Incentive Award. Such shares shall be authorized and may be either
unissued or treasury shares or shares repurchased by the Company, including shares purchased on the
open market.
4.2 Limitation Upon Incentive Awards. No Participant shall be granted, during any
calendar year, Incentive Awards with respect to more than 25% of the total number of shares of
Common Stock available for Incentive Awards under the Plan set forth in Section 4.1 of the Plan,
subject to adjustment as provided in Section 4.3 of the Plan. The purpose of this Section 4.2 is to
ensure that the Plan provides performance-based compensation under Section 162(m) of the Code and
this Section 4.2 shall be interpreted, administered and amended if necessary to achieve that
purpose.
4.3 Adjustments.
(a) Stock Dividends and Distributions. If the number of shares of Common Stock
outstanding changes by reason of a stock dividend, stock split, recapitalization or other
general distribution of Common Stock or other securities to holders of Common Stock, the
number and kind of securities subject to Incentive Awards and reserved for issuance under
the Plan, together with applicable exercise prices, as well as the number of shares
available for issuance under the Plan, shall be adjusted appropriately. No fractional shares
shall be issued pursuant to the Plan and any fractional shares resulting from such
adjustments shall be eliminated from the respective Incentive Awards.
(b) Other Actions Affecting Common Stock. If there occurs, other than as
described in the preceding subsection, any merger, business combination, recapitalization,
reclassification, subdivision or combination approved by the Board that would result in the
Persons who were stockholders of the Company immediately prior to
the effective time of any such transaction owning or holding, in lieu of or in addition to
shares of Common Stock, other securities, money and/or property (or the right to receive
other securities, money and/or property) immediately after the effective time of such
transaction, then the outstanding Incentive Awards and reserves for Incentive Awards under
this Plan shall be adjusted in such manner and at such time as shall be equitable
under the
circumstances. It is intended that in the event of any such transaction, Incentive Awards
under this Plan shall entitle the holder of each Incentive Award to receive (upon exercise
in the case of Stock Options), in lieu of or in addition to shares of Common Stock, any
other securities, money and/or property receivable upon consummation of any such transaction
by holders of Common Stock with respect to each share of Common Stock outstanding
immediately prior to the effective time of such transaction; upon any such adjustment,
holders of Incentive Awards under this Plan shall have only the right to receive in lieu of
or in addition to shares of Common Stock such other securities, money and/or other property
as provided by the adjustment. If the agreement, resolution or other document approved by
the Board to effect any such transaction provides for the adjustment of Incentive Awards
under the Plan in connection with such transaction, then the adjustment provisions contained
in such agreement, resolution or other document shall be final and conclusive.
5
SECTION 5
Stock Options
5.1 Grant. A Participant may be granted one or more Stock Options under the Plan. The
Committee, in its discretion and except as otherwise limited by the Plan, may provide in the
initial grant of a Stock Option or other Incentive Award for the subsequent automatic grant of
additional Stock Options for the number of shares, if any, that are subject to the initial Stock
Option or other Incentive Award and surrendered to the Company in connection with the exercise or
vesting of the initial or any subsequently granted Stock Option or other Incentive Award. Stock
Options shall be subject to such terms and conditions, consistent with the other provisions of the
Plan, as may be determined by the Committee in its sole discretion. In addition, the Committee may
vary, among Participants and among Stock Options granted to the same Participant, any and all of
the terms and conditions of the Stock Options granted under the Plan. Subject to the limitation
imposed by Section 4.2 of the Plan, the Committee shall have complete discretion in determining the
number of Stock Options granted to each Participant. The Committee may designate whether or not a
Stock Option is to be considered an incentive stock option as defined in Section 422(b) of the
Code; provided, that the number of shares of Common Stock that may be designated as subject to
incentive stock options for any given Participant shall be limited to that number of shares that
become exercisable for the first time by the Participant during any calendar year (under all plans
of the Company and its Subsidiaries) and have an aggregate Market Value less than or equal to
$100,000 (or such other amount as may be set forth in the Code) and all shares subject to an
Incentive Award that have a Market Value in excess of such aggregate amount shall automatically be
subject to Stock Options that are not incentive stock options.
5.2 Stock Option Agreements. Stock Options shall be evidenced by stock option
agreements and/or certificates of award containing the terms and conditions applicable to such
Stock Options. To the extent not covered by the stock option agreement, the terms and conditions of
this Section 5 shall govern.
5.3 Stock Option Price. The per share Stock Option price shall be determined by the
Committee; provided, that the per share Stock Option price shall be equal to or greater than 100%
of the Market Value on the date of grant.
6
5.4 Medium and Time of Payment. The exercise price for each share purchased pursuant
to a Stock Option granted under the Plan shall be payable in cash or, if the Committee consents or
provides in the applicable stock option agreement or grant, in shares of Common Stock (including
Common Stock to be received upon a simultaneous exercise of that or any other Incentive Award) or
other consideration substantially equivalent to cash. To the extent any such amendment would not
cause a Stock Option to become subject to Section 409A of the Code, unless the Committee expressly
determines to make a Stock Option subject to Section 409A of the Code, the time and terms of
payment may be amended with the consent of a Participant before or after exercise of a Stock
Option. The Committee may from time to time authorize payment of all or a portion of the Stock
Option price in the form of a promissory note or other deferred payment installments according to
such terms as the Committee may approve. The Board may restrict or suspend the power of the
Committee to permit such loans and may require that adequate security be provided.
5.5 Stock Options Granted to 10% Stockholders. No Stock Option granted to any
Participant who at the time of such grant owns, together with stock attributed to such Participant
under Section 424 (d) of the Code, more than 10% of the total combined voting power of all classes
of stock of the Company or any of its Subsidiaries may be designated as an incentive stock option,
unless such Stock Option provides an exercise price equal to at least 110% of the Market Value of
the Common Stock and the exercise of the Stock Option after the expiration of 5 years from the date
of grant of the Stock Option is prohibited by its terms.
5.6 Limits on Exercisability. Except as set forth in Section 5.5, Stock Options shall
be exercisable for such periods, not to exceed 10 years from the date of grant, as may be fixed by
the Committee. At the time of the exercise of a Stock Option, the holder of the Stock Option, if
requested by the Committee, must represent to the Company that the shares are being acquired for
investment and not with a view to the distribution thereof. The Committee may in its discretion
require a Participant to continue the Participant’s service with the Company and its Subsidiaries
for a certain length of time prior to a Stock Option becoming exercisable and may eliminate such
delayed vesting provisions.
5.7 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or permits (before or
after the option grant) or unless the stock option agreement or grant provides otherwise,
Stock Options granted under the Plan may not be sold, exchanged, transferred, pledged,
assigned or otherwise alienated or hypothecated except by will or the laws of descent and
distribution, and, as a condition to any transfer permitted by the Committee or the terms of
the stock option agreement or grant, the transferee must execute a written agreement
permitting the Company to withhold from the shares subject to the Stock Option a number of
shares having a Market Value at least equal to the amount of any federal, state or local
withholding or other taxes associated with or resulting from the exercise of a Stock Option.
All provisions of a Stock Option that are determined with reference to the
Participant, including without limitation those that refer to the Participant’s employment
with the Company or its Subsidiaries, shall continue to be determined with reference to the
Participant after any transfer of a Stock Option.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as the
Committee deems advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
7
5.8 Termination of Employment or Officer Status. Unless the Committee otherwise
consents or permits (before or after the option grant) or unless the stock option agreement or
grant provides otherwise:
(a) General. If a Participant ceases to be employed by or an officer of the
Company or one of its Subsidiaries for any reason other than the Participant’s death,
disability, Retirement or termination for cause, the Participant may exercise his or her
Stock Options in accordance with their terms for a period of 3 months after such termination
of employment or officer status, but only to the extent the Participant was entitled to
exercise the Stock Options on the date of termination. For purposes of the Plan, the
following shall not be considered a termination of employment or officer status: (i) a
transfer of an employee from the Company to any Subsidiary; (ii) a leave of absence, duly
authorized in writing by the Company, for military service or for any other purpose approved
by the Company if the period of such leave does not exceed 90 days; (iii) a leave of absence
in excess of 90 days, duly authorized in writing by the Company, provided that the
employee’s right to re-employment is guaranteed by statute, contract or written policy of
the Company; or (iv) a termination of employment with continued service as an officer. For
purposes of the Plan, termination of employment shall be considered to occur on the date on
which the employee is no longer obligated to perform services for the Company or any of its
Subsidiaries and the employee’s right to re-employment is not guaranteed by statute,
contract or written policy of the Company, regardless of whether the employee continues to
receive compensation from the Company or any of its Subsidiaries after such date.
(b) Death. If a Participant dies either while an employee or officer of the
Company or one of its Subsidiaries or after the termination of employment other than for
cause but during the time when the Participant could have exercised a Stock Option, the
Stock Options issued to such Participant shall be exercisable in accordance with their terms
by the personal representative of such Participant or other successor to the interest of the
Participant for 1 year after the Participant’s death, but only to the extent that the
Participant was entitled to exercise the Stock Options on the date of death or termination
of employment, whichever first occurred, and not beyond the original terms of the Stock
Options.
(c) Disability. If a Participant ceases to be an employee or officer of the
Company or one of its Subsidiaries due to the Participant’s disability, the Participant may
exercise his or her Stock Options in accordance with their terms for 1 year following such
termination of employment, but only to the extent that the Participant was entitled to
exercise the Stock Options on the date of such event and not beyond the original terms of
the Stock Options.
(d) Participant Retirement. If a Participant Retires as an employee or officer
of the Company or one of its Subsidiaries, Stock Options granted under the Plan may be
exercised in accordance with their terms during the remaining terms of the Stock Options.
(e) Termination for Cause. If a Participant is terminated for cause, the
Participant shall have no further right to exercise any Stock Options previously granted.
The Committee or officers designated by the Committee shall have absolute discretion to
determine whether a termination is for cause.
8
SECTION 6
Restricted Stock
6.1 Grant. A Participant may be granted Restricted Stock under the Plan. Restricted
Stock shall be subject to such terms and conditions, consistent with the other provisions of the
Plan, as shall be determined by the Committee in its sole discretion. The Committee may impose such
restrictions or conditions, consistent with the provisions of the Plan, to the vesting of
Restricted Stock as it considers appropriate. The Committee may also require that certificates
representing shares of Restricted Stock be retained and held in escrow by a designated employee or
agent of the Company or any Subsidiary until any restrictions applicable to shares of Common Stock
so retained have been satisfied or lapsed.
6.2 Restricted Stock Agreements. Awards of Restricted Stock shall be evidenced by
restricted stock agreements or certificates of award containing such terms and conditions,
consistent with the provisions of the Plan, as the Committee shall from time to time determine.
Unless a restricted stock agreement or certificate provides otherwise, Restricted Stock awards
shall be subject to the terms and conditions set forth in this Section 6.
6.3 Termination of Employment or Officer Status. Unless the Committee otherwise
consents or permits (before or after the grant of Restricted Stock) or unless the restricted stock
agreement or grant provides otherwise:
(a) General. In the event of termination of employment or officer status during
the Restricted Period for any reason other than death, disability, Retirement or termination
for cause, any shares of Restricted Stock still subject to restrictions at the date of such
termination shall automatically be forfeited and returned to the Company. For purposes of
the Plan, the following shall not be considered a termination of employment or officer
status: (i) a transfer of an employee from the Company to any Subsidiary; (ii) a leave of
absence, duly authorized in writing by the Company, for military service or for any other
purpose approved by the Company if the period of such leave does not exceed 90 days; (iii) a
leave of absence in excess of 90 days duly authorized in writing by the Company, provided
that the employee’s right to re-employment is guaranteed by statute, contract or written
policy of the Company; and (iv) a termination of employment with continued service as an
officer. For purposes of the Plan, termination of employment shall be considered to occur on
the date on which the employee is no longer obligated to perform services for the Company or
any of its Subsidiaries and the employee’s right to re-employment is not guaranteed by
statute,
contract or written policy of the Company, regardless of whether the employee continues to
receive compensation from the Company or any of its Subsidiaries after such date.
(b) Death, Retirement or Disability. In the event a Participant terminates his
or her employment with the Company because of death, disability or Retirement during the
Restricted Period, the restrictions applicable to the shares of Restricted Stock shall
terminate automatically with respect to that number of shares (rounded to the nearest whole
number) equal to the total number of shares of Restricted Stock granted to such Participant
multiplied by the number of full months that have elapsed since the date of grant divided by
the total number of full months in the Restricted Period. All remaining shares shall be
forfeited and returned to the Company; provided, that the Committee may, in its sole
discretion, waive the restrictions remaining on any or all such remaining shares of
Restricted Stock either before or after the death, disability or Retirement of the
Participant.
9
(c) Termination for Cause. If a Participant’s employment is terminated for
cause, the Participant shall have no further right to exercise or receive any Restricted
Stock and all Restricted Stock still subject to restrictions at the date of such termination
shall automatically be forfeited and returned to the Company. The Committee or officers
designated by the Committee shall have absolute discretion to determine whether a
termination is for cause.
6.4 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or permits or unless the
terms of the restricted stock agreement or grant provide otherwise: (i) shares of Restricted
Stock shall not be sold, exchanged, transferred, pledged, assigned or otherwise alienated or
hypothecated during the Restricted Period except by will or the laws of descent and
distribution; and (ii) all rights with respect to Restricted Stock granted to a Participant
under the Plan shall be exercisable during the Participant’s lifetime only by such
Participant, his or her guardian or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any
shares of Common Stock acquired pursuant to an award of Restricted Stock under the Plan as
the Committee considers advisable, including, without limitation, restrictions under
applicable federal or state securities laws.
6.5 Legending of Restricted Stock. Any certificates evidencing shares of Restricted
Stock awarded pursuant to the Plan shall bear the following legend:
The shares represented by this certificate were issued subject to certain restrictions under
the Wolverine World Wide, Inc. Stock Incentive Plan of 1999 (the “Plan”). This certificate
is held subject to the terms and conditions contained in a restricted stock agreement that
includes a prohibition against the sale or transfer of the stock represented by this
certificate except in compliance with that agreement and that provides for forfeiture upon
certain events. Copies of the Plan and the restricted stock agreement are on file in the
office of the Secretary of the Company.
6.6 Rights as a Stockholder. A Participant shall have all voting, dividend,
liquidation and other rights with respect to Restricted Stock held of record by such Participant as
if the Participant held unrestricted Common Stock; provided, that the unvested portion of any award
of
Restricted Stock shall be subject to any restrictions on transferability or risks of forfeiture
imposed pursuant to Sections 6.1, 6.3 and 6.4 of the Plan. Unless the Committee otherwise
determines or unless the terms of the restricted stock agreement or grant provide otherwise, any
noncash dividends or distributions paid with respect to shares of unvested Restricted Stock shall
be subject to the same restrictions as the shares to which such dividends or distributions relate.
Any dividend payment with respect to Restricted Stock shall be made no later than the end of the
calendar year in which the dividends are paid to stockholders, or, if later, the 15th
day of the third month following the date the dividends are paid to stockholders.
10
SECTION 7
Stock Awards
7.1 Grant. A Participant may be granted one or more Stock Awards under the Plan.
Stock Awards shall be subject to such terms and conditions, consistent with the other provisions of
the Plan, as may be determined by the Committee in its sole discretion. Notwithstanding the
previous sentence, the shares of stock subject to Stock Awards shall be issued no later than the
15th day of the third month after the end of the calendar year in which the award is
granted.
7.2 Rights as a Stockholder. A Participant shall have all voting, dividend,
liquidation and other rights with respect to shares of Common Stock issued to the Participant as a
Stock Award under this Section 7 upon the Participant becoming the holder of record of the Common
Stock granted pursuant to such Stock Award; provided, that the Committee may impose such
restrictions on the assignment or transfer of Common Stock awarded pursuant to a Stock Award as it
considers appropriate. Any dividend payment with respect to Stock Awards shall be made no later
than the end of the calendar year in which the dividends are paid to stockholders, or, if later,
the 15th day of the third month following the date the dividends are paid to
stockholders.
SECTION 8
Change in Control
8.1 Acceleration of Vesting. If a Change in Control of the Company shall occur, then,
unless the Committee or the Board otherwise determines with respect to 1 or more Incentive Awards,
without action by the Committee or the Board: (a) all outstanding Stock Options shall become
immediately exercisable in full and shall remain exercisable during the remaining term thereof,
regardless of whether the Participants to whom such Stock Options have been granted remain in the
employ or service of the Company or any Subsidiary; and (b) all other outstanding Incentive Awards
shall become immediately fully vested and exercisable and nonforfeitable.
8.2 Cash Payment for Stock Options. If a Change in Control of the Company shall
occur, then the Committee, in its sole discretion, and without the consent of any Participant
affected thereby, may determine that some or all Participants holding outstanding Stock Options
shall receive, with respect to some or all of the shares of Common Stock subject to such Stock
Options, as of the effective date of any such Change in Control of the Company, cash in an amount
equal to the greater of the excess of (a) the highest sales price of the shares on the New York
Stock Exchange on the date immediately prior to the effective date of such Change in
Control of the Company or (b) the highest price per share actually paid in connection with any
Change in Control of the Company over the exercise price per share of such Stock Options.
11
SECTION 9
General Provisions
9.1 No Rights to Awards. No Participant or other person shall have any claim to be
granted any Incentive Award under the Plan and there is no obligation of uniformity of treatment of
Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and
conditions of Incentive Awards of the same type and the determination of the Committee to grant a
waiver or modification of any Incentive Award and the terms and conditions thereof need not be the
same with respect to each Participant.
9.2 Withholding. The Company or a Subsidiary shall be entitled to: (a) withhold and
deduct from future wages of a Participant (or from other amounts that may be due and owing to a
Participant from the Company or a Subsidiary), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any and all federal, state, local and foreign
withholding and employment-related tax requirements attributable to an Incentive Award, including,
without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an
Incentive Award or a disqualifying disposition of Common Stock received upon exercise of an
incentive stock option; or (b) require a Participant promptly to remit the amount of such
withholding to the Company before taking any action with respect to an Incentive Award. Unless the
Committee determines otherwise, withholding may be satisfied by withholding Common Stock to be
received upon exercise or vesting of an Incentive Award or by delivery to the Company of previously
owned Common Stock.
9.3 Compliance With Laws; Listing and Registration of Shares. All Incentive Awards
granted under the Plan (and all issuances of Common Stock or other securities under the Plan) shall
be subject to all applicable laws, rules and regulations, and to the requirement that if at any
time the Committee shall determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the grant of such Incentive Award or the issue
or purchase of shares thereunder, such Incentive Award may not be exercised in whole or in part, or
the restrictions on such Incentive Award shall not lapse, unless and until such listing,
registration, qualification, consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
9.4 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall
prevent the Company or any Subsidiary from adopting or continuing in effect other or additional
compensation arrangements, including the grant of stock options and other stock-based awards, and
such arrangements may be either generally applicable or applicable only in specific cases.
9.5 No Right to Employment. The grant of an Incentive Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or any Subsidiary. The
Company or any Subsidiary may at any time dismiss a Participant from employment, free
from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or
in any written agreement with a Participant.
9.6 Suspension of Rights under Incentive Awards. The Company, by written notice to a
Participant, may suspend a Participant’s and any transferee’s rights under any Incentive Award for
a period not to exceed 30 days while the termination for cause of that Participant’s employment
with the Company and its Subsidiaries is under consideration.
12
9.7 Governing Law. The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws of the State of
Delaware and applicable federal law.
9.8 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of
the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had
not been included.
SECTION 10
Termination and Amendment
The Board may terminate the Plan at any time or may from time to time amend the Plan as it
considers proper and in the best interests of the Company, provided that no such amendment may
impair any outstanding Incentive Award without the consent of the Participant, except according to
the terms of the Plan or the Incentive Award and provided further that the Plan may not be amended
in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code,
unless the Board expressly determines to amend the Plan to be subject to Section 409A of the Code.
No termination, amendment or modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior written consent of the
Participant holding such Incentive Award unless such amendment or modification operates solely to
the benefit of the Participant.
SECTION 11
Effective Date and Duration of the Plan
This Plan shall take effect February 24, 1999, subject to approval by the stockholders at the
1999 Annual Meeting of Stockholders or any adjournment thereof or at a Special Meeting of
Stockholders. Unless earlier terminated by the Board of Directors, no Incentive Award shall be
granted under the Plan after February 24, 2009.
As amended October 9, 2008.
13
Exhibit 10.5
WOLVERINE WORLD WIDE, INC.
STOCK INCENTIVE PLAN OF 2001
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the STOCK INCENTIVE PLAN OF 2001
(the “Plan”) for its corporate, divisional and Subsidiary officers and other key employees. The
Plan permits the grant and award of Stock Options, Restricted Stock, and Stock Awards.
1.2 Purpose of Plan. The purpose of the Plan is to provide officers and key management
employees of the Company, its divisions and its Subsidiaries with an increased incentive to
contribute to the long-term performance and growth of the Company and its Subsidiaries, to join the
interests of officers and key employees with the interests of the Company’s stockholders through
the opportunity for increased stock ownership and to attract and retain officers and key employees.
The Plan is further intended to provide flexibility to the Company in structuring long-term
incentive compensation to best promote the foregoing objectives. Within that context, it is
intended that most awards of Stock Options under the Plan are to provide performance-based
compensation under Section 162(m) of the Code and the Plan shall be interpreted, administered and
amended if necessary to achieve that purpose.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning plainly is required
by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Board” means the Board of Directors of the Company.
2.3 “Change in Control,” unless otherwise defined in an Incentive Award, means (a) the failure
of the Continuing Directors at any time to constitute at least a majority of the members of the
Board; (b) the acquisition by any Person other than an Excluded Holder of beneficial ownership
(within the meaning of Rule 13d-3 issued under the Act) of 20% or more of the outstanding Common
Stock or the combined voting power of the Company’s outstanding securities entitled to vote
generally in the election of directors; (c) the approval by the stockholders of the Company of a
reorganization, merger or consolidation, unless with or into a Permitted Successor; or (d) the
approval by the stockholders of the Company of a complete liquidation or dissolution of the Company
or the sale or disposition of all or substantially all of the assets of the Company other than to a
Permitted Successor.
2.4 “Code” means the Internal Revenue Code of 1986, as amended.
2.5 “Committee” means the Compensation Committee of the Board. The Committee shall consist of
at least 2 members of the Board and all of its members shall be “non-employee directors” as defined
in Rule 16b-3 issued under the Act and “outside directors” as defined in the regulations issued
under Section 162(m) of the Code.
2.6 “Common Stock” means the Common Stock, $1 par value, of the Company.
2.7 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.8 “Continuing Directors” mean the individuals constituting the Board as of the date this
Plan was adopted and any subsequent directors whose election or nomination for election by the
Company’s stockholders was approved by a vote of three-quarters (3/4) of the individuals who are
then Continuing Directors, but specifically excluding any individual whose initial assumption of
office occurs as a result of either an actual or threatened solicitation subject to Rule 14a-12(c)
of Regulation 14A issued under the Act or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
2.9 “Employee Benefit Plan” means any plan or program established by the Company or a
Subsidiary for the compensation or benefit of employees of the Company or any of its Subsidiaries.
2.10 “Excluded Holder” means (a) any Person who at the time this Plan was adopted was the
beneficial owner of 20% or more of the outstanding Common Stock; or (b) the Company, a Subsidiary
or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Common Stock or
other securities pursuant to the terms of an Employee Benefit Plan.
2.11 “Incentive Award” means the award or grant of a Stock Option, Restricted Stock, or Stock
Award to a Participant pursuant to the Plan.
2.12 “Market Value” shall equal the closing market price of shares of Common Stock reported on
the New York Stock Exchange (or any successor exchange that is the primary stock exchange for
trading of Common Stock) on the date of grant, exercise or vesting, as applicable, or if the New
York Stock Exchange (or any such successor) is closed on that date, the last preceding date on
which the New York Stock Exchange (or any such successor) was open for trading and on which shares
of Common Stock were traded.
2.13 “Participant” means a corporate officer, divisional officer or any key employee of the
Company, its divisions or its Subsidiaries who is granted an Incentive Award under the Plan.
2.14 “Permitted Successor” means a company that, immediately following the consummation of a
transaction specified in clauses (c) and (d) of the definition of “Change in Control” above,
satisfies each of the following criteria: (a) 50% or more of the outstanding common stock of the
company and the combined voting power of the outstanding securities of the company entitled to vote
generally in the election of directors (in each case determined immediately following the
consummation of the applicable transaction) is beneficially owned, directly or indirectly, by all
or substantially all of the Persons who were the beneficial owners of the Company’s outstanding
Common Stock and outstanding securities entitled to vote generally in the election of directors
(respectively) immediately prior to the applicable transaction; (b) no Person other than an
Excluded Holder beneficially owns, directly or indirectly, 20% or more of the outstanding common
stock of the company or the combined voting power of the outstanding
securities of the company entitled to vote generally in the election of directors (for these
purposes the term Excluded Holder shall include the company, any subsidiary of the company and any
employee benefit plan of the company or any such subsidiary or any trust holding common stock or
other securities of the company pursuant to the terms of any such employee benefit plan); and (c)
at least a majority of the board of directors of the company is comprised of Continuing Directors.
2
2.15 “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act.
2.16 “Restricted Period” means the period of time during which Restricted Stock awarded under
the Plan is subject to restrictions. The Restricted Period may differ among Participants and may
have different expiration dates with respect to shares of Common Stock covered by the same
Incentive Award.
2.17 “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 6 of
the Plan.
2.18 “Retirement” means the voluntary termination of all employment by a Participant after the
Participant has attained 55 years of age, or such other age as shall be determined by the Committee
in its sole discretion or as otherwise may be set forth in the Incentive Award agreement or other
grant document with respect to a Participant and a particular Incentive Award.
2.19 “Stock Award” means an award of Common Stock awarded to a Participant pursuant to Section
7 of the Plan.
2.20 “Stock Option” means the right to purchase Common Stock at a stated price for a specified
period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a nonqualified stock option.
2.21 “Subsidiary” means any corporation or other entity of which 50% or more of the
outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled
by the Company or by one or more Subsidiaries of the Company.
SECTION 3
Administration
3.1 Power and Authority. The Committee shall administer the Plan. The Committee may delegate
record keeping, calculation, payment and other ministerial administrative functions to individuals
designated by the Committee, who may be officers or employees of the Company or its Subsidiaries.
Except as limited in this Plan or as may be necessary to ensure that this Plan provides
performance-based compensation under Section 162(m) of the Code, the Committee shall have all of
the express and implied powers and duties set forth in the Bylaws of the Company and this Plan,
shall have full power and authority to interpret the provisions of the Plan and Incentive Awards
granted under the Plan and shall have full power and authority to supervise the administration of
the Plan and Incentive Award granted under the Plan and to make all other determinations considered
necessary or advisable for the administration of the Plan. All determinations, interpretations and
selections made by the Committee regarding the Plan shall be final and conclusive. The Committee
shall hold its meetings at such times and places as it
considers advisable. Action may be taken by a written instrument signed by a majority of the
members of the Committee and any action so taken shall be fully as effective as if it had been
taken at a meeting duly called and held. The Committee shall make such rules and regulations for
the conduct of its business as it considers advisable.
3
3.2 Grants or Awards to Participants. In accordance with and subject to the provisions of the
Plan, the Committee shall have the authority to determine all provisions of Incentive Awards as the
Committee may consider necessary or desirable and as are consistent with the terms of the Plan,
including, without limitation, the following: (a) the persons who shall be selected as
Participants; (b) the nature and, subject to the limitations set forth in Sections 4.1 and 4.2 of
the Plan, extent of the Incentive Awards to be made to each Participant (including the number of
shares of Common Stock to be subject to each Incentive Award, any exercise price, the manner in
which an Incentive Award will vest or become exercisable and the form of payment for the Incentive
Award); (c) the time or times when Incentive Awards will be granted; (d) the duration of each
Incentive Award; and (e) the restrictions and other conditions to which payment or vesting of
Incentive Awards may be subject.
3.3 Amendments or Modifications of Awards. The Committee shall have the authority to amend or
modify the terms of any outstanding Incentive Award in any manner, provided that the amended or
modified terms are not prohibited by the Plan as then in effect and provided such actions do not
cause an Incentive Award not already subject to Section 409A of the Code to become subject to
Section 409A of the Code, unless the Committee expressly determines to make an Incentive Award
subject to Section 409A of the Code, including, without limitation, the authority to: (a) modify
the number of shares or other terms and conditions of an Incentive Award; provided that any
increase in the number of shares of an Incentive Award other than pursuant to Section 4.3 shall be
considered to be a new grant with respect to such additional shares for purposes of Section 409A of
the Code and such new grant shall be made at Market Value on the date of grant; (b) extend the term
of an Incentive Award to a date that is no later than the earlier of the latest date upon which the
Incentive Award could have expired by its terms under any circumstances or the 10th
anniversary of the date of grant (for purposes of clarity, as permitted under Section 409A of the
Code, if the term of a Stock Option is extended at a time when the Stock Option price equals or
exceeds the Market Value, it will not be an extension of the term of the Stock Option, but instead
will be treated as a modification of the Stock Option and a new Stock Option will be treated as
having been granted); (c) accelerate the exercisability or vesting or otherwise terminate, waive or
modify any restrictions relating to an Incentive Award; (d) accept the surrender of any outstanding
Incentive Award; and (e) to the extent not previously exercised or vested, authorize the grant of
new Incentive Awards in substitution for surrendered Incentive Awards; provided, however, that such
grant of new Incentive Awards will be considered to be a new grant for purposes of Section 409A of
the Code and such new grant shall be made at Market Value on the date of the new grant; provided
further, that Incentive Awards issued under the Plan may not be repriced, replaced, regranted
through cancellation or modified without stockholder approval if the effect of such repricing,
replacement, regrant or modification would be to reduce the exercise price of then outstanding
Incentive Awards to the same Participants.
3.4 Indemnification of Committee Members. Neither any member or former member of the Committee
nor any individual to whom authority is or has been delegated shall be personally responsible or
liable for any act or omission in connection with the performance of
powers or duties or the exercise of discretion or judgment in the administration and implementation
of the Plan. Each person who is or shall have been a member of the Committee shall be indemnified
and held harmless by the Company from and against any cost, liability or expense imposed or
incurred in connection with such person’s or the Committee’s taking or failing to take any action
under the Plan. Each such person shall be justified in relying on information furnished in
connection with the Plan’s administration by any appropriate person or persons.
4
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 of the Plan, the total
number of shares of Common Stock available for Incentive Awards under the Plan shall be 2,000,000
shares of Common Stock (not including any adjustments occurring before the date of this amendment
pursuant to Section 4.3); plus shares subject to Incentive Awards that are canceled, surrendered,
modified, exchanged for substitute Incentive Awards or expire or terminate prior to the exercise or
vesting of the Incentive Award in full and shares that are surrendered to the Company in connection
with the exercise or vesting of an Incentive Award, whether previously owned or otherwise subject
to such Incentive Award; provided, that not more than 40% of the shares authorized for issuance
under the Plan pursuant to this Section 4.1 may be issued as Restricted Stock or Stock Awards,
combined. Such shares shall be authorized and may be either unissued or treasury shares or shares
repurchased by the Company, including shares purchased on the open market.
4.2 Limitation Upon Incentive Awards. No Participant shall be granted, during any calendar
year, Incentive Awards with respect to more than 25% of the total number of shares of Common Stock
available for Incentive Awards under the Plan set forth in Section 4.1 of the Plan for the Plan
Year that includes the greatest number of days contained in such calendar year, subject to
adjustment as provided in Section 4.3 of the Plan. The purpose of this Section 4.2 is to ensure
that the Plan may provide performance-based compensation under Section 162(m) of the Code and this
Section 4.2 shall be interpreted, administered and amended if necessary to achieve that purpose.
4.3 Adjustments.
(a) Stock Dividends and Distributions. If the number of shares of Common Stock
outstanding changes by reason of a stock dividend, stock split, recapitalization or other
general distribution of Common Stock or other securities to holders of Common Stock, the
number and kind of securities subject to Incentive Awards and reserved for issuance under
the Plan, together with applicable exercise prices, as well as the number of shares
available for issuance under the Plan, shall be adjusted appropriately. No fractional shares
shall be issued pursuant to the Plan and any fractional shares resulting from such
adjustments shall be eliminated from the respective Incentive Awards.
(b) Other Actions Affecting Common Stock. If there occurs, other than as described in
the preceding subsection, any merger, business combination, recapitalization,
reclassification, subdivision or combination approved by the Board that would result in the
Persons who were stockholders of the Company immediately prior to
the effective time of any such transaction owning or holding, in lieu of or in addition to
shares of Common Stock, other securities, money and/or property (or the right to receive
other securities, money and/or property) immediately after the effective time of such
transaction, then the outstanding Incentive Awards (including exercise prices) and reserves
for Incentive Awards under this Plan shall be adjusted in such manner and at
such time as
shall be equitable under the circumstances. It is intended that in the event of any such
transaction, Incentive Awards under this Plan shall entitle the holder of each Incentive
Award to receive (upon exercise in the case of Stock Options), in lieu of or in addition to
shares of Common Stock, any other securities, money and/or property receivable upon
consummation of any such transaction by holders of Common Stock with respect to each share
of Common Stock outstanding immediately prior to the effective time of such transaction;
upon any such adjustment, holders of Incentive Awards under this Plan shall have only the
right to receive in lieu of or in addition to shares of Common Stock such other securities,
money and/or other property as provided by the adjustment. If the agreement, resolution or
other document approved by the Board to effect any such transaction provides for the
adjustment of Incentive Awards under the Plan in connection with such transaction, then the
adjustment provisions contained in such agreement, resolution or other document shall be
final and conclusive.
5
SECTION 5
Stock Options
5.1 Grant. A Participant may be granted one or more Stock Options under the Plan. The
Committee, in its discretion and except as otherwise limited by the Plan, may provide in the
initial grant of a Stock Option or other Incentive Award for the subsequent automatic grant of
additional Stock Options for the number of shares, if any, that are surrendered to the Company in
connection with the exercise or vesting of the initial or any subsequently granted Stock Option or
other Incentive Award. Stock Options shall be subject to such terms and conditions, consistent with
the other provisions of the Plan, as may be determined by the Committee in its sole discretion. In
addition, the Committee may vary, among Participants and among Stock Options granted to the same
Participant, any and all of the terms and conditions of the Stock Options granted under the Plan.
Subject to the limitation imposed by Section 4.2 of the Plan, the Committee shall have complete
discretion in determining the number of Stock Options granted to each Participant. The Committee
may designate whether or not a Stock Option is to be considered an incentive stock option as
defined in Section 422(b) of the Code; provided, that the number of shares of Common Stock that may
be designated as subject to incentive stock options for any given Participant shall be limited to
that number of shares that become exercisable for the first time by the Participant during any
calendar year (under all plans of the Company and its Subsidiaries) and have an aggregate Market
Value less than or equal to $100,000 (or such other amount as may be set forth in the Code) and all
shares subject to an Incentive Award that have a Market Value in excess of such aggregate amount
shall automatically be subject to Stock Options that are not incentive stock options.
5.2 Stock Option Agreements. Stock Options shall be evidenced by stock option agreements
and/or certificates of award containing the terms and conditions applicable to such
Stock Options. To the extent not covered by the stock option agreement, the terms and conditions of
this Section 5 shall govern.
5.3 Stock Option Price. The per share Stock Option price shall be determined by the Committee,
but shall be a price that is equal to or greater than 100% of the Market Value of the Company’s
Common Stock on the date of grant.
6
5.4 Medium and Time of Payment. The exercise price for each share purchased pursuant to a
Stock Option granted under the Plan shall be payable in cash or, if the Committee consents or
provides in the applicable stock option agreement or grant, in shares of Common Stock (including
Common Stock to be received upon a simultaneous exercise of that or any other Incentive Award) or
other consideration substantially equivalent to cash. To the extent any such amendment would not
cause a Stock Option to become subject to Section 409A of the Code, unless the Committee expressly
determines to make a Stock Option subject to Section 409A of the Code, the time and terms of
payment may be amended with the consent of a Participant before or after exercise of a Stock
Option. The Committee may from time to time authorize payment of all or a portion of the Stock
Option price in the form of a promissory note or other deferred payment installments according to
such terms as the Committee may approve. The Board may restrict or suspend the power of the
Committee to permit such loans and may require that adequate security be provided.
5.5 Stock Options Granted to 10% Stockholders. No Stock Option granted to any Participant who
at the time of such grant owns, together with stock attributed to such Participant under Section
424(d) of the Code, more than 10% of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries may be designated as an incentive stock option, unless such
Stock Option provides an exercise price equal to at least 110% of the Market Value of the Common
Stock on the date of grant and the exercise of the Stock Option after the expiration of 5 years
from the date of grant of the Stock Option is prohibited by its terms.
5.6 Limits on Exercisability. Except as set forth in Section 5.5, Stock Options shall be
exercisable for such periods, not to exceed 10 years from the date of grant, as may be fixed by the
Committee. At the time of exercise of a Stock Option, the holder of the Stock Option, if requested
by the Committee, must represent to the Company that the shares are being acquired for investment
and not with a view to the distribution thereof. The Committee may in its discretion require a
Participant to continue the Participant’s service with the Company and its Subsidiaries for a
certain length of time prior to a Stock Option becoming exercisable and may eliminate such delayed
vesting provisions.
5.7 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or permits (before or after the
option grant) or unless the stock option agreement or grant provides otherwise, Stock
Options granted under the Plan may not be sold, exchanged, transferred, pledged, assigned or
otherwise alienated or hypothecated except by will or the laws of descent and distribution,
and, as a condition to any transfer permitted by the Committee or the terms of the stock
option agreement or grant, the transferee must execute a written agreement permitting the
Company to withhold from the shares subject to the Stock Option a number of shares having a
Market Value at least equal to the amount of any federal, state or local withholding or
other taxes associated with or resulting from the exercise of a
Stock Option. All provisions of a Stock Option that are determined with reference to the
Participant, including without limitation those that refer to the Participant’s employment
with the Company or its Subsidiaries, shall continue to be determined with reference to the
Participant after any transfer of a Stock Option.
7
(b) Other Restrictions. The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as the
Committee deems advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
5.8 Termination of Employment or Officer Status. Unless the Committee otherwise consents or
permits (before or after the option grant) or unless the stock option agreement or grant provides
otherwise:
(a) General. If a Participant ceases to be employed by or an officer of the Company or
one of its Subsidiaries for any reason other than the Participant’s death, disability,
Retirement or termination for cause, the Participant may exercise his or her Stock Options
in accordance with their terms for a period of 3 months after such termination of employment
or officer status, but only to the extent the Participant was entitled to exercise the Stock
Options on the date of termination. For purposes of the Plan, the following shall not be
considered a termination of employment or officer status: (i) a transfer of an employee from
the Company to any Subsidiary; (ii) a leave of absence, duly authorized in writing by the
Company, for military service or for any other purpose approved by the Company if the period
of such leave does not exceed 90 days; (iii) a leave of absence in excess of 90 days, duly
authorized in writing by the Company, provided that the employee’s right to re-employment is
guaranteed by statute, contract or written policy of the Company; or (iv) a termination of
employment with continued service as an officer. For purposes of the Plan, termination of
employment shall be considered to occur on the date on which the employee is no longer
obligated to perform services for the Company or any of its Subsidiaries and the employee’s
right to re employment is not guaranteed by statute, contract or written policy of the
Company, regardless of whether the employee continues to receive compensation from the
Company or any of its Subsidiaries after such date.
(b) Death. If a Participant dies either while an employee or officer of the Company or
one of its Subsidiaries or after the termination of employment other than for cause but
during the time when the Participant could have exercised a Stock Option, the Stock Options
issued to such Participant shall be exercisable in accordance with their terms by the
personal representative of such Participant or other successor to the interest of the
Participant for one year after the Participant’s death, but only to the extent that the
Participant was entitled to exercise the Stock Options on the date of death or termination
of employment, whichever first occurred, and not beyond the original terms of the Stock
Options.
(c) Disability. If a Participant ceases to be an employee or officer of the Company or
one of its Subsidiaries due to the Participant’s disability, the Participant may exercise
his or her Stock Options in accordance with their terms for one year following such
termination of employment, but only to the extent that the Participant was entitled
to exercise the Stock Options on the date of such event and not beyond the original terms of
the Stock Options.
(d) Participant Retirement. If a Participant Retires as an employee or officer of the
Company or one of its Subsidiaries, Stock Options granted under the Plan may be exercised in
accordance with their terms during the remaining terms of the Stock Options.
8
(e) Termination for Cause. If a Participant is terminated for cause, the Participant
shall have no further right to exercise any Stock Options previously granted. The Committee
or officers designated by the Committee shall have absolute discretion to determine whether
a termination is for cause.
SECTION 6
Restricted Stock
6.1 Grant. Subject to the limitations set forth in Sections 4.1 and 4.2 of the Plan, a
Participant may be granted Restricted Stock under the Plan. Restricted Stock shall be subject to
such terms and conditions, consistent with the other provisions of the Plan, as shall be determined
by the Committee in its sole discretion. The Committee may impose such restrictions or conditions,
consistent with the provisions of the Plan, to the vesting of Restricted Stock as it considers
appropriate. The Committee may also require that certificates representing shares of Restricted
Stock be retained and held in escrow by a designated employee or agent of the Company or any
Subsidiary until any restrictions applicable to shares of Restricted Stock so retained have been
satisfied or lapsed.
6.2 Restricted Stock Agreements. Awards of Restricted Stock shall be evidenced by restricted
stock agreements or certificates of award containing such terms and conditions, consistent with the
provisions of the Plan, as the Committee shall from time to time determine. Unless a restricted
stock agreement or certificate provides otherwise, Restricted Stock awards shall be subject to the
terms and conditions set forth in this Section 6.
6.3 Termination of Employment or Officer Status. Unless the Committee otherwise consents or
permits (before or after the grant of Restricted Stock) or unless the restricted stock agreement or
grant provides otherwise:
(a) General. In the event of termination of employment or officer status during the
Restricted Period for any reason other than death, disability, Retirement or termination for
cause, any shares of Restricted Stock still subject to restrictions at the date of such
termination shall automatically be forfeited and returned to the Company. For purposes of
the Plan, the following shall not be considered a termination of employment or officer
status: (i) a transfer of an employee from the Company to any Subsidiary; (ii) a leave of
absence, duly authorized in writing by the Company, for military service or for any other
purpose approved by the Company if the period of such leave does not exceed 90 days; (iii) a
leave of absence in excess of 90 days duly authorized in writing by the Company, provided
that the employee’s right to re-employment is guaranteed by statute, contract or written
policy of the Company; and (iv) a termination of employment with continued service as an
officer. For purposes of the Plan, termination of employment shall be considered to occur on
the date on which the
employee is no longer obligated to perform services for the Company or any of its
Subsidiaries and the employee’s right to re-employment is not guaranteed by statute,
contract or written policy of the Company, regardless of whether the employee continues to
receive compensation from the Company or any of its Subsidiaries after such date.
9
(b) Death, Retirement or Disability. In the event a Participant terminates his or her
employment with the Company because of death, disability or Retirement during the Restricted
Period, the restrictions applicable to the shares of Restricted Stock shall terminate
automatically with respect to that number of shares (rounded to the nearest whole number)
equal to the total number of shares of Restricted Stock granted to such Participant
multiplied by the number of full months that have elapsed since the date of grant divided by
the total number of full months in the Restricted Period. All remaining shares shall be
forfeited and returned to the Company; provided, that the Committee may, in its sole
discretion, waive the restrictions remaining on any or all such remaining shares of
Restricted Stock either before or after the death, disability or Retirement of the
Participant.
(c) Termination for Cause. If a Participant’s employment is terminated for cause, the
Participant shall have no further right to exercise or receive any Restricted Stock and all
Restricted Stock still subject to restrictions at the date of such termination shall
automatically be forfeited and returned to the Company. The Committee or officers designated
by the Committee shall have absolute discretion to determine whether a termination is for
cause.
6.4 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or permits or unless the terms of
the restricted stock agreement or grant provide otherwise: (i) shares of Restricted Stock
shall not be sold, exchanged, transferred, pledged, assigned or otherwise alienated or
hypothecated during the Restricted Period except by will or the laws of descent and
distribution; and (ii) all rights with respect to Restricted Stock granted to a Participant
under the Plan shall be exercisable during the Participant’s lifetime only by such
Participant, his or her guardian or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to an award of Restricted Stock under the Plan as the
Committee considers advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
6.5 Legending of Restricted Stock. Any certificates evidencing shares of Restricted Stock
awarded pursuant to the Plan shall bear the following legend:
The shares represented by this certificate were issued subject to certain restrictions under
the Wolverine World Wide, Inc. Stock Incentive Plan of 2001 (the “Plan”). This certificate
is held subject to the terms and conditions contained in a restricted stock agreement that
includes a prohibition against the sale or transfer of the stock represented by this
certificate except in compliance with that agreement and that provides for forfeiture upon
certain events. Copies of the Plan and the restricted stock agreement are on file in the
office of the Secretary of the Company.
6.6 Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation and
other rights with respect to Restricted Stock held of record by such Participant as if the
Participant held unrestricted Common Stock; provided, that the unvested portion of any award of
Restricted Stock shall be subject to any restrictions on transferability or risks of forfeiture
imposed pursuant to Sections 6.1, 6.3 and 6.4 of the Plan. Unless the Committee otherwise
determines or unless the terms of the restricted stock agreement or grant provide otherwise, any
noncash dividends or distributions paid with respect to shares of unvested Restricted Stock shall
be subject to the same restrictions as the shares to which such dividends or distributions relate.
Any dividend payment with respect to Restricted Stock shall be made no later than the end of the
calendar year in which the dividends are paid to stockholders, or, if later, the 15th
day of the third month following the date the dividends are paid to stockholders.
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SECTION 7
Stock Awards
7.1 Grant. Subject to the limitations set forth in Sections 4.1 and 4.2 of the Plan, a
Participant may be granted one or more Stock Awards under the Plan. Stock Awards shall be subject
to such terms and conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. Notwithstanding the previous sentence, the
shares of stock subject to Stock Awards shall be issued no later than the 15th day of
the third month after the end of the calendar year in which the award is granted.
7.2 Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation and
other rights with respect to shares of Common Stock issued to the Participant as a Stock Award
under this Section 7 upon the Participant becoming the holder of record of the Common Stock granted
pursuant to such Stock Award; provided, that the Committee may impose such restrictions on the
assignment or transfer of Common Stock awarded pursuant to a Stock Award as it considers
appropriate. Any dividend payment with respect to Stock Awards shall be made no later than the end
of the calendar year in which the dividends are paid to stockholders, or, if later, the
15th day of the third month following the date the dividends are paid to stockholders.
SECTION 8
Change in Control
8.1 Acceleration of Vesting. If a Change in Control of the Company shall occur, then, unless
the Committee or the Board otherwise determines with respect to one or more Incentive Awards,
without action by the Committee or the Board: (a) all outstanding Stock Options shall become
immediately exercisable in full and shall remain exercisable during the remaining terms thereof,
regardless of whether the Participants to whom such Stock Options have been granted remain in the
employ or service of the Company or any Subsidiary; and (b) all other outstanding Incentive Awards
shall become immediately fully vested and exercisable and nonforfeitable.
8.2 Cash Payment for Stock Options. If a Change in Control of the Company shall occur, then
the Committee, in its sole discretion, and without the consent of any Participant affected thereby,
may determine that some or all Participants holding outstanding Stock Options shall receive, with
respect to some or all of the shares of Common Stock subject to such Stock
Options, as of the effective date of any such Change in Control of the Company, cash in an amount
equal to the greater of the excess of(a) the highest sales price of the shares on the New York
Stock Exchange on the date immediately prior to the effective date of such Change in Control of the
Company or (b) the highest price per share actually paid in connection with any Change in Control
of the Company over the exercise price per share of such Stock Options.
11
SECTION 9
General Provisions
9.1 No Rights to Awards. No Participant or other person shall have any claim to be granted any
Incentive Award under the Plan and there is no obligation of uniformity of treatment of
Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and
conditions of Incentive Awards of the same type and the determination of the Committee to grant a
waiver or modification of any Incentive Award and the terms and conditions thereof need not be the
same with respect to each Participant or the same Participant.
9.2 Withholding. The Company or a Subsidiary shall be entitled to: (a) withhold and deduct
from future wages of a Participant (or from other amounts that may be due and owing to a
Participant from the Company or a Subsidiary), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any and all federal, state, local and foreign
withholding and employment- related tax requirements attributable to an Incentive Award, including,
without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an
Incentive Award or a disqualifying disposition of Common Stock received upon exercise of an
incentive stock option; or (b) require a Participant promptly to remit the amount of such
withholding to the Company before taking any action with respect to an Incentive Award. Unless the
Committee determines otherwise, withholding may be satisfied by withholding Common Stock to be
received upon exercise or vesting of an Incentive Award or by delivery to the Company of previously
owned Common Stock.
9.3 Compliance With Laws; Listing and Registration of Shares. All Incentive Awards granted
under the Plan (and all issuances of Common Stock or other securities under the Plan) shall be
subject to all applicable laws, rules and regulations, and to the requirement that if at any time
the Committee shall determine, in its discretion, that the listing, registration or qualification
of the shares covered thereby upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the grant of such Incentive Award or the issue or purchase of
shares thereunder, such Incentive Award may not be exercised in whole or in part, or the
restrictions on such Incentive Award shall not lapse, unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
9.4 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent
the Company or any Subsidiary from adopting or continuing in effect other or additional
compensation arrangements, including the grant of stock options and other stock-based awards, and
such arrangements may be either generally applicable or applicable only in specific cases.
9.5 No Right to Employment. The grant of an Incentive Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or any Subsidiary.
The Company or any Subsidiary may at any time dismiss a Participant from employment, free from any
liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any
written agreement with a Participant.
9.6 Suspension of Rights under Incentive Awards. The Company, by written notice to a
Participant, may suspend a Participant’s and any transferee’s rights under any Incentive Award for
a period not to exceed 30 days while the termination for cause of that Participant’s employment
with the Company and its Subsidiaries is under consideration.
12
9.7 Governing Law. The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws of the State of
Delaware and applicable federal law.
9.8 Severability. In the event any provision of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision had not been
included, unless such construction would cause the Plan to fail in its essential purposes.
SECTION 10
Termination and Amendment
The Board may terminate the Plan at any time or may from time to time amend the Plan as it
considers proper and in the best interests of the Company, provided that no such amendment may
impair any outstanding Incentive Award without the consent of the Participant, except according to
the terms of the Plan or the Incentive Award and provided further that the Plan may not be amended
in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code,
unless the Board expressly determines to amend the Plan to be subject to Section 409A of the Code.
No termination, amendment or modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior written consent of the
Participant holding such Incentive Award unless such amendment or modification operates solely to
the benefit of the Participant.
SECTION 11
Effective Date and Duration of the Plan
This Plan shall take effect March 6, 2001, subject to approval by the stockholders at the 2001
Annual Meeting of Stockholders or any adjournment thereof or at a Special Meeting of Stockholders.
Unless earlier terminated by the Board of Directors, no Incentive Award shall be granted under the
Plan after March 5, 2011.
As amended October 9, 2008.
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Exhibit 10.6
AMENDED AND RESTATED
WOLVERINE WORLD WIDE, INC.
STOCK INCENTIVE PLAN OF 2003
WOLVERINE WORLD WIDE, INC.
STOCK INCENTIVE PLAN OF 2003
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the STOCK INCENTIVE PLAN OF 2003
(the “Plan”) for its corporate, divisional and Subsidiary officers and key employees. The Plan
permits the grant and award of Stock Options, Restricted Stock, and Stock Awards.
1.2 Purpose of Plan. The purpose of the Plan is to provide officers and key management
employees of the Company, its divisions and its Subsidiaries with an increased incentive to
contribute to the long-term performance and growth of the Company and its Subsidiaries, to join the
interests of officers and key employees with the interests of the Company’s stockholders through
the opportunity for increased stock ownership and to attract and retain officers and key employees.
The Plan is further intended to provide flexibility to the Company in structuring long-term
incentive compensation to best promote the foregoing objectives. Within that context, it is
intended that most awards of Stock Options under the Plan are to provide performance-based
compensation under Section 162(m) of the Code and the Plan shall be interpreted, administered and
amended if necessary to achieve that purpose.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning plainly is required
by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Board” means the Board of Directors of the Company.
2.3 “Change in Control,” unless otherwise defined in an Incentive Award, means (a) the failure
of the Continuing Directors at any time to constitute at least a majority of the members of the
Board; (b) the acquisition by any Person other than an Excluded Holder of beneficial ownership
(within the meaning of Rule 13d-3 issued under the Act) of 20% or more of the outstanding Common
Stock or the combined voting power of the Company’s outstanding securities entitled to vote
generally in the election of directors; (c) the approval by the stockholders of the Company of a
reorganization, merger or consolidation, unless with or into a Permitted Successor; or (d) the
approval by the stockholders of the Company of a complete liquidation or dissolution of the Company
or the sale or disposition of all or substantially all of the assets of the Company other than to a
Permitted Successor.
2.4 “Code” means the Internal Revenue Code of 1986, as amended.
2.5 “Committee” means the Compensation Committee of the Board. The Committee shall consist of
at least 2 members of the Board and all of its members shall be “non-employee directors” as defined
in Rule 16b-3 issued under the Act and “outside directors” as defined in the regulations issued
under Section 162(m) of the Code.
2.6 “Common Stock” means the Common Stock, $1 par value, of the Company.
2.7 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.8 “Continuing Directors” mean the individuals constituting the Board as of the date this
Plan was adopted and any subsequent directors whose election or nomination for election by the
Company’s stockholders was approved by a vote of three-quarters (3/4) of the individuals who are
then Continuing Directors, but specifically excluding any individual whose initial assumption of
office occurs as a result of either an actual or threatened solicitation subject to Rule 14a-12(c)
of Regulation 14A issued under the Act or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
2.9 “Employee Benefit Plan” means any plan or program established by the Company or a
Subsidiary for the compensation or benefit of employees of the Company or any of its Subsidiaries.
2.10 “Excluded Holder” means (a) any Person who at the time this Plan was adopted was the
beneficial owner of 20% or more of the outstanding Common Stock; or (b) the Company, a Subsidiary
or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Common Stock or
other securities pursuant to the terms of an Employee Benefit Plan.
2.11 “Incentive Award” means the award or grant of a Stock Option, Restricted Stock, or Stock
Award to a Participant pursuant to the Plan.
2.12 “Market Value” shall equal the closing market price of shares of Common Stock reported on
the New York Stock Exchange (or any successor exchange that is the primary stock exchange for
trading of Common Stock) on the date of grant, exercise or vesting, as applicable, or if the New
York Stock Exchange (or any such successor) is closed on that date, the last preceding date on
which the New York Stock Exchange (or any such successor) was open for trading and on which shares
of Common Stock were traded.
2.13 “Participant” means a corporate officer, divisional officer or any key employee of the
Company, its divisions or its Subsidiaries who is granted an Incentive Award under the Plan.
2.14 “Permitted Successor” means a company that, immediately following the consummation of a
transaction specified in clauses (c) and (d) of the definition of “Change in Control” above,
satisfies each of the following criteria: (a) 50% or more of the outstanding common stock of the
company and the combined voting power of the outstanding securities of the company entitled to vote
generally in the election of directors (in each case determined immediately following the
consummation of the applicable transaction) is beneficially owned, directly or indirectly, by all
or substantially all of the Persons who were the beneficial owners of the Company’s outstanding
Common Stock and outstanding securities entitled to vote generally in the election of directors
(respectively) immediately prior to the applicable transaction; (b) no Person other than an
Excluded Holder beneficially owns, directly or indirectly, 20% or more of the outstanding common
stock of the company or the combined voting power of the outstanding
securities of the company entitled to vote generally in the election of directors (for these
purposes the term Excluded Holder shall include the company, any subsidiary of the company and any
employee benefit plan of the company or any such subsidiary or any trust holding common stock or
other securities of the company pursuant to the terms of any such employee benefit plan); and (c)
at least a majority of the board of directors of the company is comprised of Continuing Directors.
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2.15 “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act.
2.16 “Restricted Period” means the period of time during which Restricted Stock awarded under
the Plan is subject to restrictions. The Restricted Period may differ among Participants and may
have different expiration dates with respect to shares of Common Stock covered by the same
Incentive Award.
2.17 “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 6 of
the Plan.
2.18 “Retirement” means the voluntary termination of all employment by a Participant after the
Participant has attained (i) 50 years of age and seven years of service (as an employee and/or
officer of the Company or a Subsidiary), (ii) 62 years of age, or (iii) such other age or years of
service as shall be determined by the Committee in its sole discretion or as otherwise may be set
forth in the Incentive Award agreement or other grant document with respect to a Participant and a
particular Incentive Award.
2.19 “Stock Award” means an award of Common Stock awarded to a Participant pursuant to Section
7 of the Plan.
2.20 “Stock Option” means the right to purchase Common Stock at a stated price for a specified
period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a nonqualified stock option.
2.21 “Subsidiary” means any corporation or other entity of which 50% or more of the
outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled
by the Company or by one or more Subsidiaries of the Company.
SECTION 3
Administration
3.1 Power and Authority. The Committee shall administer the Plan. The Committee may delegate
record keeping, calculation, payment and other ministerial administrative functions to individuals
designated by the Committee, who may be officers or employees of the Company or its Subsidiaries.
Except as limited in this Plan or as may be necessary to ensure that this Plan provides
performance-based compensation under Section 162(m) of the Code, the Committee shall have all of
the express and implied powers and duties set forth in the Bylaws of the Company and this Plan,
shall have full power and authority to interpret the provisions of the Plan and Incentive Awards
granted under the Plan and shall have full power and authority to supervise the administration of
the Plan and Incentive Awards granted under the Plan and to make all other determinations
considered necessary or advisable for the administration of the Plan. All determinations,
interpretations and selections made by the Committee regarding the
Plan shall be final and conclusive. The Committee shall hold its meetings at such times and places
as it considers advisable. Action may be taken by a written instrument signed by a majority of the
members of the Committee and any action so taken shall be fully as effective as if it had been
taken at a meeting duly called and held. The Committee shall make such rules and regulations for
the conduct of its business as it considers advisable.
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3.2 Grants or Awards to Participants. In accordance with and subject to the provisions of the
Plan, the Committee shall have the authority to determine all provisions of Incentive Awards as the
Committee may consider necessary or desirable and as are consistent with the terms of the Plan,
including, without limitation, the following: (a) the persons who shall be selected as
Participants; (b) the nature and, subject to the limitations set forth in Sections 4.1 and 4.2 of
the Plan, extent of the Incentive Awards to be made to each Participant (including the number of
shares of Common Stock to be subject to each Incentive Award, any exercise price, the manner in
which an Incentive Award will vest or become exercisable and the form of payment for the Incentive
Award); (c) the time or times when Incentive Awards will be granted; (d) the duration of each
Incentive Award; and (e) the restrictions and other conditions to which payment or vesting of
Incentive Awards may be subject.
3.3 Amendments or Modifications of Awards. The Committee shall have the authority to amend
or modify the terms of any outstanding Incentive Award in any manner, provided that the amended or
modified terms are not prohibited by the Plan as then in effect and provided such actions do not
cause an Incentive Award not already subject to Section 409A of the Code to become subject to
Section 409A of the Code, unless the Committee expressly determines to make an Incentive Award
subject to Section 409A of the Code, including, without limitation, the authority to: (a) modify
the number of shares or other terms and conditions of an Incentive Award; provided that any
increase in the number of shares of an Incentive Award other than pursuant to Section 4.3 shall be
considered to be a new grant with respect to such additional shares for purposes of Section 409A of
the Code and such new grant shall be made at Market Value on the date of grant; (b) extend the term
of an Incentive Award to a date that is no later than the earlier of the latest date upon which the
Incentive Award could have expired by its terms under any circumstances or the 10th
anniversary of the date of grant (for purposes of clarity, as permitted under Section 409A of the
Code, if the term of a Stock Option is extended at a time when the Stock Option price equals or
exceeds the Market Value, it will not be an extension of the term of the Stock Option, but instead
will be treated as a modification of the Stock Option and a new Stock Option will be treated as
having been granted); (c) accelerate the exercisability or vesting or otherwise terminate, waive or
modify any restrictions relating to an Incentive Award; (d) accept the surrender of any outstanding
Incentive Award; and (e) to the extent not previously exercised or vested, authorize the grant of
new Incentive Awards in substitution for surrendered Incentive Awards; provided, however, that such
grant of new Incentive Awards will be considered to be a new grant for purposes of Section 409A of
the Code and such new grant shall be made at Market Value on the date of the new grant; provided
further, that Incentive Awards issued under the Plan may not be repriced, replaced, regranted
through cancellation or modified without stockholder approval if the effect of such repricing,
replacement, regrant or modification would be to reduce the exercise price of then outstanding
Incentive Awards to the same Participants.
3.4 Indemnification of Committee Members. Neither any member nor former member of the
Committee nor any individual to whom authority is or has been delegated shall be
personally responsible or liable for any act or omission in connection with the performance of
powers or duties or the exercise of discretion or judgment in the administration and implementation
of the Plan. Each person who is or shall have been a member of the Committee shall be indemnified
and held harmless by the Company from and against any cost, liability or expense imposed or
incurred in connection with such person’s or the Committee’s taking or failing to take any action
under the Plan. Each such person shall be justified in relying on information furnished in
connection with the Plan’s administration by any appropriate person or persons.
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SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 of the Plan, the total
number of shares of Common Stock available for Incentive Awards under the Plan shall be 1,300,000
shares of Common Stock (not including any adjustments occurring before the date of this amendment
pursuant to Section 4.3). The following shares shall replace shares previously awarded as Incentive
Awards under the Plan and be available for future Incentive Awards under the Plan: (i) shares
subject to Incentive Awards that are canceled, surrendered, modified, exchanged for substitute
Incentive Awards or expire or terminate prior to the exercise or vesting of the Incentive Award in
full; (ii) shares that are surrendered to the Company in connection with the exercise or vesting of
an Incentive Award or surrendered to satisfy withholding requirements, whether previously owned or
otherwise subject to such Incentive Award; and (iii) shares of Common Stock repurchased by the
Company with the cash paid by Participants for the exercise price of Incentive Awards. No more than
15% of the shares authorized for issuance under the Plan pursuant to this Section 4.1 may be issued
as Restricted Stock or Stock Awards, combined. Shares of Common Stock subject to this Section 4.1
shall be authorized and may be either unissued or treasury shares or shares repurchased by the
Company, including shares purchased on the open market.
4.2 Limitation Upon Incentive Awards. No Participant shall be granted, during any calendar
year, Incentive Awards with respect to more than 300,000 shares of Common Stock, subject to
adjustment as provided in Section 4.3 of the Plan. The purpose of this Section 4.2 is to ensure
that the Plan may provide performance-based compensation under Section 162(m) of the Code and this
Section 4.2 shall be interpreted, administered and amended if necessary to achieve that purpose.
4.3 Adjustments.
(a) Stock Dividends and Distributions. If the number of shares of Common Stock
outstanding changes by reason of a stock dividend, stock split, recapitalization or other
general distribution of Common Stock or other securities to holders of Common Stock, the
number and kind of securities subject to Incentive Awards and reserved for issuance under
the Plan and the limitation provided in Section 4.2, together with applicable exercise
prices, as well as the number of shares available for issuance under the Plan, shall be
adjusted appropriately. No fractional shares shall be issued pursuant to the Plan and any
fractional shares resulting from such adjustments shall be eliminated from the respective
Incentive Awards.
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(b) Other Actions Affecting Common Stock. If there occurs, other than as described in
the preceding subsection, any merger, business combination, recapitalization,
reclassification, subdivision or combination approved by the Board that would result in the
Persons who were stockholders of the Company immediately prior to the effective time of any
such transaction owning or holding, in lieu of or in addition to shares of Common Stock,
other securities, money and/or property (or the right to receive other securities, money
and/or property) immediately after the effective time of such transaction, then the
outstanding Incentive Awards (including exercise prices) and reserves for Incentive Awards
under this Plan shall be adjusted in such manner and at such time as shall be equitable
under the circumstances. It is intended that in the event of any such transaction, Incentive
Awards under this Plan shall entitle the holder of each Incentive Award to receive (upon
exercise in the case of Stock Options), in lieu of or in addition to shares of Common Stock,
any other securities, money and/or property receivable upon consummation of any such
transaction by holders of Common Stock with respect to each share of Common Stock
outstanding immediately prior to the effective time of such transaction; upon any such
adjustment, holders of Incentive Awards under this Plan shall have only the right to receive
in lieu of or in addition to shares of Common Stock such other securities, money and/or
other property as provided by the adjustment. If the agreement, resolution or other document
approved by the Board to effect any such transaction provides for the adjustment of
Incentive Awards under the Plan in connection with such transaction, then the adjustment
provisions contained in such agreement, resolution or other document shall be final and
conclusive.
SECTION 5
Stock Options
5.1 Grant. A Participant may be granted one or more Stock Options under the Plan. The
Committee, in its discretion and except as otherwise limited by the Plan, may provide in the
initial grant of a Stock Option or other Incentive Award for the subsequent automatic grant of
additional Stock Options for the number of shares, if any, that are surrendered to the Company in
connection with the exercise or vesting of the initial or any subsequently granted Stock Option or
other Incentive Award. Stock Options shall be subject to such terms and conditions, consistent with
the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The
Committee may impose such restrictions or conditions, consistent with the provisions of the Plan,
to the vesting, or the acceleration of vesting based on any of the performance goals provided in
Section 6.2, of Stock Options as it considers appropriate. The Committee, in its sole discretion,
may establish vesting schedules (i) based upon Company performance, or (ii) that extend over a
period of time selected by the Committee, provided, that such period of time shall not provide for
full vesting in a period of less than 3 years. In addition, the Committee may vary, among
Participants and among Stock Options granted to the same Participant, any and all of the terms and
conditions of the Stock Options granted under the Plan. Subject to the limitation imposed by
Section 4.2 of the Plan, the Committee shall have complete discretion in determining the number of
Stock Options granted to each Participant. The Committee may designate whether or not a Stock
Option is to be considered an incentive stock option as defined in Section 422(b) of the Code;
provided, that the number of shares of Common Stock that may be designated as subject to incentive
stock options for any given Participant shall
be limited to that number of shares that become exercisable for the first time by the Participant
during any calendar year (under all plans of the Company and its Subsidiaries) and have an
aggregate Market Value less than or equal to $100,000 (or such other amount as may be set forth in
the Code) and all shares subject to an Incentive Award that have a Market Value in excess of such
aggregate amount shall automatically be subject to Stock Options that are not incentive stock
options.
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5.2 Stock Option Agreements. Stock Options shall be evidenced by stock option agreements
and/or certificates of award containing the terms and conditions applicable to such Stock Options.
To the extent not covered by the stock option agreement, the terms and conditions of this Section 5
shall govern.
5.3 Stock Option Price. The per share Stock Option price shall be determined by the Committee,
but shall be a price that is equal to or greater than 100% of the Market Value of the Company’s
Common Stock on the date of grant.
5.4 Medium and Time of Payment. The exercise price for each share purchased pursuant to a
Stock Option granted under the Plan shall be payable in cash or, if the Committee consents or
provides in the applicable stock option agreement or grant, in actual or attested shares of Common
Stock owned by the Participant or other consideration substantially equivalent to cash. To the
extent any such amendment would not cause a Stock Option to become subject to Section 409A of the
Code, unless the Committee expressly determines to make a Stock Option subject to Section 409A of
the Code, the time and terms of payment may be amended with the consent of a Participant before or
after exercise of a Stock Option. The Committee may from time to time authorize payment of all or a
portion of the Stock Option price in the form of a full recourse promissory note or other deferred
payment installments according to such terms as the Committee may approve. The Board may restrict
or suspend the power of the Committee to permit such loans and may require that adequate security
be provided. The Committee may implement a program for the broker-assisted cashless exercise of
Stock Options. The Company or any of its Subsidiaries shall not extend credit, directly or
indirectly, to an executive officer in violation of Section 13 of the Act.
5.5 Stock Options Granted to 10% Stockholders. Unless otherwise permitted by applicable laws
and regulations, no Stock Option granted to any Participant who at the time of such grant owns,
together with stock attributed to such Participant under Section 424(d) of the Code, more than 10%
of the total combined voting power of all classes of stock of the Company or any of its
Subsidiaries may be designated as an incentive stock option, unless such Stock Option provides an
exercise price equal to at least 110% of the Market Value of the Common Stock on the date of grant
and the exercise of the Stock Option after the expiration of 5 years from the date of grant of the
Stock Option is prohibited by its terms.
5.6 Limits on Exercisability. Except as set forth in Section 5.5, Stock Options shall be
exercisable for such periods, not to exceed 10 years from the date of grant, as may be fixed by the
Committee. At the time of exercise of a Stock Option, the holder of the Stock Option, if requested
by the Committee, must represent to the Company that the shares are being acquired for investment
and not with a view to the distribution thereof. The Committee may in its discretion require a
Participant to continue the Participant’s service with the Company and its Subsidiaries for a
certain length of time prior to a Stock Option becoming exercisable and may eliminate such delayed
vesting provisions.
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5.7 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or permits (before or after the
option grant) or unless the stock option agreement or grant provides otherwise, Stock
Options granted under the Plan may not be sold, exchanged, transferred, pledged, assigned or
otherwise alienated or hypothecated except by will or the laws of descent and distribution,
and, as a condition to any transfer permitted by the Committee or the terms of the stock
option agreement or grant, the transferee must execute a written agreement permitting the
Company to withhold from the shares subject to the Stock Option a number of shares having a
Market Value at least equal to the amount of any federal, state, local and foreign
withholding or other taxes associated with or resulting from the exercise of a Stock Option.
All provisions of a Stock Option that are determined with reference to the Participant,
including without limitation those that refer to the Participant’s employment with the
Company or its Subsidiaries, shall continue to be determined with reference to the
Participant after any transfer of a Stock Option.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as the
Committee deems advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
5.8 Termination of Employment or Officer Status. Unless the Committee otherwise consents or
permits (before or after the option grant) or unless the stock option agreement or grant provides
otherwise:
(a) General. If a Participant ceases to be employed by or an officer of the Company or
a Subsidiary for any reason other than the Participant’s death, disability, Retirement,
consensual severance or termination for cause, the Participant may exercise his or her Stock
Options in accordance with their terms for a period of 3 months after such termination of
employment or officer status, but only to the extent the Participant was entitled to
exercise the Stock Options on the date of termination. For purposes of the Plan, the
following shall not be considered a termination of employment or officer status: (i) a
transfer of an employee from the Company to any Subsidiary; (ii) a leave of absence, duly
authorized in writing by the Company, for military service or for any other purpose approved
by the Company if the period of such leave does not exceed 90 days; (iii) a leave of absence
in excess of 90 days, duly authorized in writing by the Company, provided that the
employee’s right to re-employment is guaranteed by statute, contract or written policy of
the Company; or (iv) a termination of employment with continued service as an officer. For
purposes of the Plan, termination of employment shall be considered to occur on the date on
which the employee is no longer obligated to perform services for the Company or any of its
Subsidiaries and the employee’s right to re- employment is not guaranteed by statute,
contract or written policy of the Company, regardless of whether the employee continues to
receive compensation from the Company or any of its Subsidiaries after such date.
(b) Death. If a Participant dies either while an employee or officer of the Company or
a Subsidiary or after the termination of employment other than for cause but during the time
when the Participant could have exercised a Stock Option, the Stock Options issued to such
Participant shall become fully vested and exercisable in
accordance with their terms by the personal representative of such Participant or other
successor to the interest of the Participant for one year after the Participant’s death, but
not beyond the original terms of the Stock Options.
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(c) Disability. If a Participant ceases to be an employee or officer of the Company or
a Subsidiary due to the Participant’s disability (as defined in the Company’s long-term
disability plan), the Participant shall become fully vested in any Stock Options that had
not been fully vested prior to the disability and the Participant or the personal
representative of the Participant may exercise his or her Stock Options in accordance with
their terms for one year following such termination of employment, but not beyond the
original terms of the Stock Options.
(d) Participant Retirement. Upon a Participant’s Retirement from the Company as an
employee or officer of the Company or a Subsidiary, the Participant shall be fully vested in
his or her Stock Options granted under the Plan and the Participant or the personal
representative of the Participant, in the event Participant dies or is disabled subsequent
to his or her Retirement, may exercise the Stock Options in accordance with their terms
during the remaining term of the Stock Options.
(e) Consensual Severance. If a Participant terminates employment with the Company or a
Subsidiary under circumstances (other than death, disability or Retirement) in which the
Committee determines that partial or full vesting of his or her Stock Options is in the best
interests of the Company, the Committee may, in its sole discretion either before or after
such termination, partially or fully vest any or all of the Participant’s Stock Options that
have not been fully vested prior to such termination and permit the Participant to exercise
his or her Stock Options in accordance with their terms for a period of time as may be
determined by the Committee, but not beyond the original term of the Stock Options.
(f) Termination for Cause. If a Participant is terminated for cause, the Participant
shall have no further right to exercise any Stock Options previously granted. The Committee
or officers designated by the Committee shall have absolute discretion to determine whether
a termination is for cause.
SECTION 6
Restricted Stock
6.1 Grant. Subject to the limitations set forth in Sections 4.1 and 4.2 of the Plan, a
Participant may be granted Restricted Stock under the Plan. Restricted Stock shall be subject to
such terms and conditions, consistent with the other provisions of the Plan, as shall be determined
by the Committee in its sole discretion. The Committee may impose such restrictions or conditions,
consistent with the provisions of the Plan, to the vesting of Restricted Stock as it considers
appropriate. The Committee in its sole discretion may establish vesting schedules (i) based upon
Company performance, or (ii) that extend over a period of time selected by the Committee, provided,
that such period of time shall not provide for full vesting in a period of less than 3 years. The
Committee may also require that certificates representing shares of Restricted Stock be retained
and held in escrow by a designated employee or agent of the
Company or any Subsidiary until any restrictions applicable to shares of Restricted Stock so
retained have been satisfied or lapsed.
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6.2 Measurement of Performance. If the Committee imposes performance conditions to the vesting
or acceleration of the vesting of Restricted Stock, the Committee shall select one or more of the
following measurements of the performance of the Company and/or its Subsidiaries, operating
divisions or profit centers: net earnings, net earnings before taxes, operating income, revenues,
net sales, net sales and other operating income, return on sales, return on equity, earnings per
share, total stockholder return, economic value added measurements, return on invested capital or
any of the foregoing before or after the effect of acquisitions, divestitures, accounting changes,
restructuring, or other extraordinary items. These factors could be measured against pre-determined
levels or the Company’s relative performance when compared to a pre-established peer group.
6.3 Restricted Stock Agreements. Awards of Restricted Stock shall be evidenced by restricted
stock agreements or certificates of award containing such terms and conditions, consistent with the
provisions of the Plan, as the Committee shall from time to time determine. Unless a restricted
stock agreement or certificate provides otherwise, Restricted Stock awards shall be subject to the
terms and conditions set forth in this Section 6.
6.4 Termination of Employment or Officer Status. Unless the Committee otherwise consents or
permits (before or after the grant of Restricted Stock) or unless the restricted stock agreement or
grant provides otherwise:
(a) General. In the event of termination of employment or officer status during the
Restricted Period for any reason other than death, disability, Retirement or consensual
severance, any shares of Restricted Stock still subject to restrictions at the date of such
termination shall automatically be forfeited and returned to the Company. For purposes of
the Plan, the following shall not be considered a termination of employment or officer
status: (i) a transfer of an employee from the Company to any Subsidiary; (ii) a leave of
absence, duly authorized in writing by the Company, for military service or for any other
purpose approved by the Company if the period of such leave does not exceed 90 days; (iii) a
leave of absence in excess of 90 days duly authorized in writing by the Company, provided
that the employee’s right to re-employment is guaranteed by statute, contract or written
policy of the Company; and (iv) a termination of employment with continued service as an
officer. For purposes of the Plan, termination of employment shall be considered to occur on
the date on which the employee is no longer obligated to perform services for the Company or
any of its Subsidiaries and the employee’s right to re- employment is not guaranteed by
statute, contract or written policy of the Company, regardless of whether the employee
continues to receive compensation from the Company or any of its Subsidiaries after such
date.
(b) Death, Retirement or Disability. In the event a Participant terminates his or her
employment with the Company or a Subsidiary because of death, disability (as defined in the
Company’s long-term disability plan) or Retirement during the Restricted Period, the
restrictions applicable to the shares of Restricted Stock shall terminate automatically.
(c) Consensual Severance. If a Participant terminates employment with the Company or a
Subsidiary during the Restricted Period under circumstances (other than
death, disability or Retirement) in which the Committee
determines that partial or full waiver of the
restrictions is in the best interests of the Company, the
Committee may, in its sole discretion either before or
after such termination, waive the restrictions remaining
on any or all remaining shares of Restricted Stock.
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6.5 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or permits or unless the terms of
the restricted stock agreement or grant provide otherwise: (i) shares of Restricted Stock
shall not be sold, exchanged, transferred, pledged, assigned or otherwise alienated or
hypothecated during the Restricted Period except by will or the laws of descent and
distribution; and (ii) all rights with respect to Restricted Stock granted to a Participant
under the Plan shall be exercisable during the Participant’s lifetime only by such
Participant, his or her guardian or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to an award of Restricted Stock under the Plan as the
Committee considers advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
6.6 Legending of Restricted Stock. Any certificates evidencing shares of Restricted Stock
awarded pursuant to the Plan shall bear the following legend:
The shares represented by this certificate were issued subject to certain restrictions under
the Wolverine World Wide, Inc. Stock Incentive Plan of 2003 (the “Plan”). This certificate
is held subject to the terms and conditions contained in a restricted stock agreement that
includes a prohibition against the sale or transfer of the stock represented by this
certificate except in compliance with that agreement and that provides for forfeiture upon
certain events. Copies of the Plan and the restricted stock agreement are on file in the
office of the Secretary of the Company.
6.7 Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation and
other rights with respect to Restricted Stock held of record by such Participant as if the
Participant held unrestricted Common Stock; provided, that the unvested portion of any award of
Restricted Stock shall be subject to any restrictions on transferability or risks of forfeiture
imposed pursuant to Sections 6.1, 6.4 and 6.5 of the Plan. Unless the Committee otherwise
determines or unless the terms of the restricted stock agreement or grant provide otherwise, any
noncash dividends or distributions paid with respect to shares of unvested Restricted Stock shall
be subject to the same restrictions as the shares to which such dividends or distributions relate.
Any dividend payment with respect to Restricted Stock shall be made no later than the end of the
calendar year in which the dividends are paid to stockholders, or, if later, the 15th
day of the third month following the date the dividends are paid to stockholders.
SECTION 7
Stock Awards
7.1 Grant. Subject to the limitations set forth in Sections 4.1 and 4.2 of the Plan, a
Participant may be granted one or more Stock Awards under the Plan. Stock Awards shall be subject
to such terms and conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. Notwithstanding the previous sentence, the
shares of stock subject to Stock Awards shall be issued no later than the 15th day of
the third month after the end of the calendar year in which the award is granted.
11
7.2 Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation and
other rights with respect to shares of Common Stock issued to the Participant as a Stock Award
under this Section 7 upon the Participant becoming the holder of record of the Common Stock granted
pursuant to such Stock Award; provided, that the Committee may impose such restrictions on the
assignment or transfer of Common Stock awarded pursuant to a Stock Award as it considers
appropriate. Any dividend payment with respect to Stock Awards shall be made no later than the end
of the calendar year in which the dividends are paid to stockholders, or, if later, the
15th day of the third month following the date the dividends are paid to stockholders.
SECTION 8
Change in Control
8.1 Acceleration of Vesting. If a Change in Control of the Company shall occur, then, unless
the Committee or the Board otherwise determines with respect to one or more Incentive Awards,
without action by the Committee or the Board: (a) all outstanding Stock Options shall become
immediately exercisable in full and shall remain exercisable during the remaining terms thereof,
regardless of whether the Participants to whom such Stock Options have been granted remain in the
employ or service of the Company or any Subsidiary; and (b) all other outstanding Incentive Awards
shall become immediately fully vested and exercisable and nonforfeitable.
8.2 Cash Payment for Stock Options. If a Change in Control of the Company shall occur, then
the Committee, in its sole discretion, and without the consent of any Participant affected thereby,
may determine that some or all Participants holding outstanding Stock Options shall receive, with
respect to some or all of the shares of Common Stock subject to such Stock Options, as of the
effective date of any such Change in Control of the Company, cash in an amount equal to the greater
of the excess of (a) the highest sales price of the shares on the New York Stock Exchange on the
date immediately prior to the effective date of such Change in Control of the Company or (b) the
highest price per share actually paid in connection with any Change in Control of the Company over
the exercise price per share of such Stock Options.
SECTION 9
General Provisions
9.1 No Rights to Awards. No Participant or other person shall have any claim to be granted any
Incentive Award under the Plan and there is no obligation of uniformity of treatment of
Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and
conditions of Incentive Awards of the same type and the determination of the Committee to grant a
waiver or modification of any Incentive Award and the terms and conditions thereof need not be the
same with respect to each Participant or the same Participant.
9.2 Withholding. The Company or a Subsidiary shall be entitled to: (a) withhold and deduct
from future wages of a Participant (or from other amounts that may be due and owing to a
Participant from the Company or a Subsidiary), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any and all federal, state, local and foreign
withholding and employment-related tax requirements attributable to an Incentive Award, including,
without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an
Incentive Award or a disqualifying disposition of Common Stock received upon exercise of an
incentive stock option; or (b) require a Participant promptly to remit the amount of such
withholding to the Company before taking any action with respect to an Incentive Award. Unless the
Committee determines otherwise, withholding may be satisfied (but only to the extent necessary to
satisfy mandatory statutory withholding amounts) by withholding Common Stock to be received upon
exercise or vesting of an Incentive Award or by delivery to the Company of previously owned Common
Stock.
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9.3 Compliance With Laws; Listing and Registration of Shares. All Incentive Awards granted
under the Plan (and all issuances of Common Stock or other securities under the Plan) shall be
subject to all applicable laws, rules and regulations, and to the requirement that if at any time
the Committee shall determine, in its discretion, that the listing, registration or qualification
of the shares covered thereby upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the grant of such Incentive Award or the issue or purchase of
shares thereunder, such Incentive Award may not be exercised in whole or in part, or the
restrictions on such Incentive Award shall not lapse, unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
9.4 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent
the Company or any Subsidiary from adopting or continuing in effect other or additional
compensation arrangements, including the grant of stock options and other stock-based awards, and
such arrangements may be either generally applicable or applicable only in specific cases.
9.5 No Right to Employment. The grant of an Incentive Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or any Subsidiary. The Company or
any Subsidiary may at any time dismiss a Participant from employment, free from any liability or
any claim under the Plan, unless otherwise expressly provided in the Plan or in any written
agreement with a Participant.
9.6 Suspension of Rights under Incentive Awards. The Company, by written notice to a
Participant, may suspend a Participant’s and any transferee’s rights under any Incentive Award for
a period not to exceed 30 days while the termination for cause of that Participant’s employment
with the Company and its Subsidiaries is under consideration.
9.7 Governing Law. The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws of the State of
Delaware and applicable federal law.
9.8 Severability. In the event any provision of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision had not been
included, unless such construction would cause the Plan to fail in its essential purposes.
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SECTION 10
Termination and Amendment
The Board may terminate the Plan at any time or may from time to time amend the Plan as it
considers proper and in the best interests of the Company, provided that no such amendment may
impair any outstanding Incentive Award without the consent of the Participant, except according to
the terms of the Plan or the Incentive Award and provided further that the Plan may not be amended
in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code,
unless the Board expressly determines to amend the Plan to be subject to Section 409A of the Code.
No termination, amendment or modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior written consent of the
Participant holding such Incentive Award unless such amendment or modification operates solely to
the benefit of the Participant.
SECTION 11
Effective Date and Duration of the Plan
This Plan shall take effect February 13, 2003, subject to approval by the stockholders at the
2003 Annual Meeting of Stockholders or any adjournment thereof or at a Special Meeting of
Stockholders. Unless earlier terminated by the Board of Directors, no Incentive Award shall be
granted under the Plan after February 12, 2013.
As amended October 9, 2008.
14
Exhibit 10.7
WOLVERINE WORLD WIDE, INC.
AMENDED AND RESTATED
STOCK INCENTIVE PLAN OF 2005
STOCK INCENTIVE PLAN OF 2005
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the STOCK INCENTIVE PLAN OF 2005
(the “Plan”) for its non-employee directors and corporate, divisional and Subsidiary officers and
key employees. The Plan permits the grant and award of Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units and Stock Awards.
1.2 Purpose of Plan. The purpose of the Plan is to provide non-employee directors, officers
and key management employees of the Company, its divisions and its Subsidiaries with an increased
incentive to contribute to the long-term performance and growth of the Company and its
Subsidiaries, to join the interests of non-employee directors, officers and key employees with the
interests of the Company’s stockholders through the opportunity for increased stock ownership and
to attract and retain non-employee directors, officers and key employees. The Plan is further
intended to provide flexibility to the Company in structuring long-term incentive compensation to
best promote the foregoing objectives.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning plainly is required
by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Award Agreement” means one or more written agreements or other instruments as may be
approved from time to time by the Committee implementing the grant of an Incentive Award. An Award
Agreement may but need not be in the form of an agreement to be executed by both the Participant
and the Company (or an authorized representative of the Company), and may consist of certificates,
notices, terms and conditions or similar instruments as approved by the Committee.
2.3 “Board” means the Board of Directors of the Company.
2.4 “Change in Control,” unless otherwise defined in an Incentive Award, means (a) the failure
of the Continuing Directors at any time to constitute at least a majority of the members of the
Board; (b) the acquisition by any Person other than an Excluded Holder of beneficial ownership
(within the meaning of Rule 13d-3 issued under the Act) of 20% or more of the outstanding Common
Stock or the combined voting power of the Company’s outstanding securities entitled to vote
generally in the election of directors; (c) the approval by the stockholders of the Company of a
reorganization, merger or consolidation, unless with or into a
Permitted Successor; or (d) the approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company or the sale or disposition of all or substantially all of
the assets of the Company other than to a Permitted Successor.
2.5 “Code” means the Internal Revenue Code of 1986, as amended.
2.6 “Committee” has the meaning set forth in Section 3.1.
2.7 “Common Stock” means the Common Stock, $1 par value, of the Company.
2.8 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.9 “Continuing Directors” mean the individuals constituting the Board as of the date this
Plan was adopted and any subsequent directors whose election or nomination for election by the
Company’s stockholders was approved by a vote of three-quarters (3/4) of the individuals who are
then Continuing Directors, but specifically excluding any individual whose initial assumption of
office occurs as a result of either an actual or threatened solicitation subject to Rule 14a- 12(c)
of Regulation 14A issued under the Act or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
2.10 “Director” means each member of the Board who is not an officer or employee of the
Company or any Subsidiary of the Company. The status of the Chairman of the Board as a Director or
officer shall be determined by the Committee.
2.11 “Employee Benefit Plan” means any plan or program established by the Company or a
Subsidiary for the compensation or benefit of employees of the Company or any of its Subsidiaries.
2.12 “Excluded Holder” means (a) any Person who at the time this Plan was adopted was the
beneficial owner of 20% or more of the outstanding Common Stock; or (b) the Company, a Subsidiary
or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Common Stock or
other securities pursuant to the terms of an Employee Benefit Plan.
2.13 “Incentive Award” means the award or grant of a Stock Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit or Stock Award to a Participant pursuant to the Plan.
2.14 “Market Value” shall equal, unless a different calculation measure is specified by the
Committee, the closing market price of shares of Common Stock reported on the New York Stock
Exchange (or any successor exchange that is the primary stock exchange for trading of Common Stock)
on the date of grant, exercise or vesting, as applicable, or if the New York Stock Exchange (or any
such successor) is closed on that date, the last preceding date on which the New York Stock
Exchange (or any such successor) was open for trading and on which shares of Common Stock were
traded.
2.15 “Participant” means a Director, corporate officer, divisional officer or any key employee
of the Company, its divisions or its Subsidiaries who is granted an Incentive Award under the Plan.
2
2.16 “Permitted Successor” means a company that, immediately following the consummation of a
transaction specified in clauses (c) and (d) of the definition of “Change in
Control” above, satisfies each of the following criteria: (a) 50% or more of the outstanding common
stock of the company and the combined voting power of the outstanding securities of the company
entitled to vote generally in the election of directors (in each case determined immediately
following the consummation of the applicable transaction) is beneficially owned, directly or
indirectly, by all or substantially all of the Persons who were the beneficial owners of the
Company’s outstanding Common Stock and outstanding securities entitled to vote generally in the
election of directors (respectively) immediately prior to the applicable transaction; (b) no Person
other than an Excluded Holder beneficially owns, directly or indirectly, 20% or more of the
outstanding common stock of the company or the combined voting power of the outstanding securities
of the company entitled to vote generally in the election of directors (for these purposes the term
Excluded Holder shall include the company, any subsidiary of the company and any employee benefit
plan of the company or any such subsidiary or any trust holding common stock or other securities of
the company pursuant to the terms of any such employee benefit plan); and (c) at least a majority
of the board of directors of the company is comprised of Continuing Directors.
2.17 “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act.
2.18 “Qualifying Performance Criteria” shall have the meaning provided in Section 11.2.
2.19 “Restricted Period” means the period of time during which Restricted Stock or Restricted
Stock Units awarded under the Plan are subject to the risk of forfeiture and restrictions on
transfer pursuant to Section 7. The Restricted Period may differ among Participants and may have
different expiration dates with respect to shares of Common Stock covered by the same Incentive
Award.
2.20 “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 7 of
the Plan.
2.21 “Restricted Stock Unit” means an award to a Participant pursuant to Section 7 of the
Plan.
2.22 “Retirement” means the voluntary termination of all employment or service as a member of
the Board by a Participant after the Participant has attained (i) 50 years of age and seven years
of service (as a Director and/or an employee and/or officer of the Company or a Subsidiary), (ii)
62 years of age, or (iii) such other age or years of service as shall be determined by the
Committee or as otherwise may be set forth in the Incentive Award agreement or other grant document
with respect to a Participant and a particular Incentive Award.
2.23 “Stock Appreciation Right” or “SAR” means a right awarded to a Participant pursuant to
Section 6 of the Plan that entitles the Participant to receive, in cash or shares of Common Stock
or a combination thereof, as determined by the Committee, an amount equal to or otherwise based on
the excess of (a) the Market Value of a share of Common Stock at the time of exercise over (b) the
exercise price of the right, as established by the Committee on the date the award is granted.
2.24 “Stock Award” means an award of Common Stock awarded to a Participant pursuant to Section
8 of the Plan.
3
2.25 “Stock Option” means the right to purchase Common Stock at a stated price for a specified
period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a nonqualified stock option.
2.26 “Subsidiary” means any corporation or other entity of which 50% or more of the
outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled
by the Company or by one or more Subsidiaries of the Company.
SECTION 3
Administration
3.1 The Plan shall be administered by the Compensation Committee of the Board (the
“Committee”). Any power of the Committee may also be exercised by the Board, except to the extent
that the grant or exercise of such authority would cause any Incentive Award or transaction to
become subject to (or lose an exemption under) the short-swing profit recovery provisions of
Section 16 of the Securities Exchange Act of 1934 or cause an Incentive Award intended to qualify
for treatment as performance-based compensation under Section 162(m) of the Code not to qualify for
such treatment. To the extent that any permitted action taken by the Board conflicts with action
taken by the Committee, the Board action shall control. The Committee may by resolution authorize
one or more officers of the Company to perform any or all things that the Committee is authorized
and empowered to do or perform under the Plan, and for all purposes under this Plan, such officer
or officers shall be treated as the Committee; provided, however, that the resolution so
authorizing such officer or officers shall specify the total number of Incentive Awards (if any)
such officer or officers may award pursuant to such delegated authority, and any such Incentive
Award shall be subject to the form of Incentive Award agreement theretofore approved by the
Committee. No such officer shall designate himself or herself as a recipient of any Incentive
Awards granted under authority delegated to such officer. In addition, the Committee may delegate
any or all aspects of the day-to-day administration of the Plan to one or more officers or
employees of the Company or any Subsidiary, and/or to one or more agents.
3.2 Power and Authority. Subject to the express provisions of this Plan, the Committee shall
be authorized and empowered to do all things that it determines to be necessary or appropriate in
connection with the administration of this Plan, including, without limitation: (i) to prescribe,
amend and rescind rules and regulations relating to this Plan and to define terms not otherwise
defined herein; (ii) to determine which persons are Participants, to which of such Participants, if
any, Incentive Awards shall be granted hereunder and the timing of any such Incentive Awards; (iii)
to grant Incentive Awards to Participants and determine the terms and conditions thereof; including
the number of shares subject to Incentive Awards, the exercise or purchase price of such shares and
the circumstances under which Incentive Awards become exercisable or vested or are forfeited or
expire, which terms may but need not be conditioned upon the passage of time, continued employment,
the satisfaction of performance criteria, the occurrence of certain events (including events which
the Board or the Committee determine constitute a Change of Control), or other factors, and the
period of time following termination of employment or service as a member of the Board during which
Incentive Awards may be exercised; (iv) to establish and verify the extent of satisfaction of any
performance goals or other conditions applicable to the grant, issuance, exercisability, vesting
and/or ability to retain any
Incentive Award; (v) to prescribe and amend the terms of the agreements or other documents
evidencing Incentive Awards made under this Plan (which need not be identical) and the terms of or
form of any document or notice required to be delivered to the Company by Participants under this
Plan; (vi) to determine whether, and the extent to which, adjustments are required pursuant to
Section 4.4; (vii) to interpret and construe this Plan, any rules and regulations under this Plan
and the terms and conditions of any Incentive Award granted hereunder, and to make exceptions to
any such provisions in good faith and for the benefit of the Company; and (viii) to make all other
determinations deemed necessary or advisable for the administration of this Plan.
4
3.3 Determinations by the Committee. All decisions, determinations and interpretations by the
Committee regarding the Plan, any rules and regulations under the Plan and the terms and conditions
of or operation of any Incentive Award granted hereunder, shall be final and binding on all
Participants, beneficiaries, heirs, assigns or other persons holding or claiming rights under the
Plan or any Incentive Award. The Committee shall consider such factors as it deems relevant, in its
sole and absolute discretion, to making such decisions, determinations and interpretations
including, without limitation, the recommendations or advice of any officer or other employee of
the Company and such attorneys, consultants and accountants as it may select.
3.4 Amendments or Modifications of Incentive Awards; No Stock Option Repricing. Subject to
Section 13, the Committee shall have the authority to amend or modify the terms of any outstanding
Incentive Award in any manner, provided that the amended or modified terms are not prohibited by
the Plan as then in effect and provided such actions do not cause an Incentive Award not already
subject to Section 409A of the Code to become subject to Section 409A of the Code, unless the
Committee expressly determines to make an Incentive Award subject to Section 409A of the Code,
including, without limitation, the authority to: (a) modify the number of shares or other terms and
conditions of an Incentive Award; provided that any increase in the number of shares of an
Incentive Award other than pursuant to Section 4.4 shall be considered to be a new grant with
respect to such additional shares for purposes of Section 409A of the Code and such new grant shall
be made at Market Value on the date of grant; (b) extend the term of an Incentive Award to a date
that is no later than the earlier of the latest date upon which the Incentive Award could have
expired by its terms under any circumstances or the 10th anniversary of the date of
grant (for purposes of clarity, as permitted under Section 409A of the Code, if the term of a Stock
Option is extended at a time when the Stock Option price equals or exceeds the Market Value, it
will not be an extension of the term of the Stock Option, but instead will be treated as a
modification of the Stock Option and a new Stock Option will be treated as having been granted);
and (c) accelerate the exercisability or vesting or otherwise terminate, waive or modify any
restrictions relating to an Incentive Award; provided, that Stock Options and SARs issued under the
Plan may not be repriced or modified without stockholder approval if the effect of such repricing
or modification would be to reduce the exercise price of such Incentive Awards to the same
Participants.
3.5 Indemnification of Committee Members. Neither any member nor former member of the
Committee nor any individual to whom authority is or has been delegated shall be personally
responsible or liable for any act or omission in connection with the performance of powers or
duties or the exercise of discretion or judgment in the administration and implementation of the
Plan. Each person who is or shall have been a member of the Committee shall be indemnified and held
harmless by the Company from and against any cost, liability or
expense imposed or incurred in connection with such person’s or the Committee’s taking or failing
to take any action under the Plan. Each such person shall be justified in relying on information
furnished in connection with the Plan’s administration by any employee, officer, agent or expert
employed or retained by the Committee or the Company.
5
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.4 of the Plan, the total
number of shares of Common Stock issued under Incentive Awards pursuant to the Plan shall not
exceed 4,250,000 shares of Common Stock (not including any adjustments occurring before the date of
this amendment pursuant to Section 4.4), provided that each share of Common Stock issued pursuant
to awards of Restricted Stock, Restricted Stock Units, Stock Appreciation Rights or Stock Awards
shall be counted against this limit as two (2) shares. For purposes of the first sentence of this
Section 4.1, the number of shares issued pursuant to Incentive Awards under this Plan at any time
shall not be reduced by shares subject to Incentive Awards that have been terminated, expired
unexercised, forfeited or settled in cash. Shares of Common Stock subject to this Section 4.1 shall
be authorized and may be either unissued or treasury shares or shares repurchased by the Company,
including shares purchased on the open market.
4.2 Limitations Upon Incentive Awards. No Participant shall be granted, during any calendar
year, Incentive Awards with respect to more than 450,000 shares of Common Stock, which number shall
be calculated and adjusted pursuant to Section 4.4 only to the extent that such calculation or
adjustment will not affect the status of any Incentive Award theretofore issued or that may
thereafter be issued as “performance based compensation” under Section 162(m) of the Code. The
aggregate number of shares of Common Stock that may be issued pursuant to the exercise of incentive
stock options (within the meaning of Section 422(b) of the Code) granted under the Plan shall not
exceed 4,250,000, subject to adjustment as provided in Section 4.4, but only to the extent that
such adjustment will not affect the status of any Stock Option intended to qualify as an incentive
stock option under Section 422(b) of the Code.
4.3 Limitations on Incentive Awards to Directors. The maximum number of shares subject to
Incentive Awards granted during any calendar year to a Participant who is a Director shall equal a
number of shares of Common Stock having a deemed value on the date of grant equal to one hundred
fifty percent (150%) of the aggregate value of the retainer and full Board meeting fees that the
Committee determines that such Director is eligible to earn in respect of such calendar year, with
the “deemed value” of Stock Awards, Restricted Stock or Restricted Stock Units for purposes only of
this Section 4.3 being calculated as the Market Value of the shares subject to such award, and the
“deemed value” of Stock Options and SARs being calculated as the Market Value of the shares subject
to such award divided by two (2); provided, however, that in the first calendar year in which such
Participant becomes a Director, the maximum number of shares subject to Incentive Awards granted to
the Participant shall equal a number of shares of Common Stock having a deemed value as calculated
under this Section 4.3 on the date of grant equal to three hundred percent (300%) of the aggregate
value of the retainer and full Board meeting fees that the Committee determines that such Director
is eligible to earn in respect of a year of service as a Director.
6
4.4 Adjustments.
(a) Stock Dividends and Distributions. If the number of shares of Common Stock
outstanding changes by reason of a stock dividend, stock split, recapitalization or other
general distribution of Common Stock or other securities to holders of Common Stock, the
Committee shall provide that the number and kind of securities subject to Incentive Awards
and reserved for issuance under the Plan and the limitation provided in Section 4.2,
together with applicable exercise prices, as well as the number and kind of securities
available for issuance under the Plan, shall be adjusted in such manner and at such time as
it determines shall be appropriate under the circumstances. No fractional shares shall be
issued pursuant to the Plan and any fractional shares resulting from such adjustments shall
be eliminated from the respective Incentive Awards.
(b) Other Actions Affecting Common Stock. If there occurs, other than as described in
the preceding subsection, any merger, business combination, recapitalization,
reclassification, subdivision or combination approved by the Board that would result in the
Persons who were stockholders of the Company immediately prior to the effective time of any
such transaction owning or holding, in lieu of or in addition to shares of Common Stock,
other securities, money and/or property (or the right to receive other securities, money
and/or property) immediately after the effective time of such transaction, then the
Committee shall provide that the outstanding Incentive Awards (including exercise prices)
and reserves for Incentive Awards under this Plan shall be adjusted in such manner and at
such time as it determines shall be appropriate under the circumstances. It is intended that
in the event of any such transaction, Incentive Awards under this Plan shall entitle the
holder of each Incentive Award to receive (upon exercise in the case of Stock Options and
SARs), in lieu of or in addition to shares of Common Stock, any other securities, money
and/or property receivable upon consummation of any such transaction by holders of Common
Stock with respect to each share of Common Stock outstanding immediately prior to the
effective time of such transaction; upon any such adjustment, holders of Incentive Awards
under this Plan shall have only the right to receive in lieu of or in addition to shares of
Common Stock such other securities, money and/or other property as provided by the
adjustment. If the agreement, resolution or other document approved by the Board to effect
any such transaction provides for the adjustment of Incentive Awards under the Plan in
connection with such transaction, then the adjustment provisions contained in such
agreement, resolution or other document shall be final and conclusive.
SECTION 5
Stock Options
5.1 Grants. Stock Options may be granted at any time and from time to time prior to the
termination of the Plan to Participants selected by the Committee. The Committee may grant a Stock
Option or provide for the grant of a Stock Option, either from time-to-time in the discretion of
the Committee or automatically upon the occurrence of specified events, including, without
limitation, the achievement of performance goals (including any Qualifying Performance Criteria),
or the satisfaction of an event or condition within the control of the recipient of the Award. No
Participant shall have any rights as a stockholder with respect to any shares of stock
subject to Stock Options granted hereunder until said shares have been issued. Each Stock Option
shall be evidenced by an Award Agreement. Stock Options granted pursuant to the Plan need not be
identical but shall be consistent with the terms of the Plan. Stock Options shall be subject to
such terms and conditions, consistent with the other provisions of the Plan, as may be determined
by the Committee. The Committee shall have the right to make the timing of the ability to exercise
any Stock Option subject to continued employment, the passage of time and/or such performance
requirements as deemed appropriate by the Committee, provided that in no event shall any Stock
Option awarded to a Participant who is not a Director provide for full vesting in a period of less
than 3 years, except in the event of the Participant’s death, disability or Retirement or upon a
Change in Control. Unless provided otherwise in the applicable Award Agreement, the vesting period
and/or exercisability of a Stock Option shall be adjusted by the Committee during or to reflect the
effects of any period during which the Participant is on an approved leave of absence or is
employed on a less than full-time basis. The Committee may designate whether or not a Stock Option
is to be considered an incentive stock option as defined in Section 422(b) of the Code, subject to
Section 5.4 of the Plan.
7
5.2 Stock Option Price. The per share Stock Option price shall be determined by the Committee,
but shall be a price that is equal to or greater than 100% of the Market Value of the Company’s
Common Stock on the date of grant.
5.3 Medium and Time of Payment. The exercise price for each share purchased pursuant to a
Stock Option granted under the Plan shall be payable in cash or, if the Committee consents or so
provides, in actual or attested shares of Common Stock owned by the Participant and meeting holding
requirements established by the Committee or other consideration substantially equivalent to cash.
The Committee may from time to time authorize payment of all or a portion of the Stock Option price
in the form of a full recourse promissory note or other deferred payment installments according to
such terms as the Committee may approve. The Board may restrict or suspend the power of the
Committee to permit such loans and may require that adequate security be provided. The Committee
may implement a program for the broker-assisted cashless exercise of Stock Options. The Company or
any of its Subsidiaries shall not extend credit, directly or indirectly, to an executive officer or
director in violation of Section 13 of the Act.
5.4 Incentive Stock Options. Notwithstanding anything to the contrary in this Section 5, in
the case of the grant of a Stock Option that the Committee designates as intended to qualify as an
“incentive stock option” (within the meaning of Section 422(b) of the Code): (a) if the Participant
owns stock possessing more than 10 percent of the combined voting power of all classes of stock of
the Company (a “10% Stockholder”), the purchase price of such Stock Option must be at least 110
percent of the fair market value of the Common Stock on the date of grant and the Stock Option must
expire within a period of not more than five (5) years from the date of grant, and (b) termination
of employment will be deemed to occur when the person to whom an Incentive Award was granted ceases
to be an employee (as determined in accordance with Section 3401(c) of the Code and the regulations
promulgated thereunder) of the Company and its Subsidiaries. Notwithstanding anything in this
Section 5 to the contrary, options designated as incentive stock options shall not be eligible for
treatment under the Code as incentive stock options to the extent that either (i) the aggregate
fair market value of shares of Common Stock (determined as of the time of grant) with respect to
which such Stock Options are exercisable for the first time by the Participant during any calendar
year (under all plans of the Company and
any Subsidiary) exceeds $100,000, taking Stock Options into account in the order in which they were
granted, and (ii) such Stock Options otherwise remain exercisable but are not exercised within
three (3) months of termination of employment (or such other period of time provided in Section 422
of the Code).
8
5.5 Limits on Exercisability. Except as set forth in Section 5.7, Stock Options shall be
exercisable for such periods, not to exceed 10 years from the date of grant, as may be fixed by the
Committee.
5.6 Restrictions on Stock Options.
(a) General. Unless the Committee provides otherwise, Stock Options granted under the
Plan may not be sold, exchanged, transferred, pledged, assigned or otherwise alienated or
hypothecated except by will or the laws of descent and distribution. To the extent that the
Committee otherwise determines to permit the transfer of a Stock Option, as a condition
thereof, the transferor and the transferee must execute a written agreement containing such
terms specified by the Committee. Except to the extent the Committee provides otherwise, all
provisions of a Stock Option that are determined with reference to the Participant,
including without limitation those that refer to the Participant’s obligation to satisfy tax
withholding requirements and to vesting or forfeiture being related to the Participant’s
employment with the Company or its Subsidiaries, shall continue to be determined with
reference to the Participant after any transfer of a Stock Option.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as the
Committee deems advisable, including, without limitation, holding periods or further
transfer restrictions, forfeiture or “claw-back” provisions, and restrictions under
applicable federal or state securities laws.
5.7 Termination of Employment or Officer or Director Status. Unless the Committee provides
otherwise, Stock Options shall expire upon the earlier of the expiration of the term established
pursuant to Section 5.5 and the date determined as set forth herein:
(a) General. If a Participant’s employment with the Company or a Subsidiary or service
as a member of the Board terminates for any reason other than the Participant’s death,
disability, Retirement or termination for cause, Stock Options granted to the Participant
may continue to be exercised in accordance with their terms for a period of three (3) months
after such termination of employment or of service as a director, but only to the extent the
Participant was entitled to exercise the Stock Options on the date of such termination. For
purposes of the Plan, the following shall not be considered a termination of employment or
service: (i) a transfer of an employee from the Company to any Subsidiary; (ii) a leave of
absence, duly authorized in writing by the Company, for military service or for any other
purpose approved by the Company if the period of such leave does not exceed 90 days; (iii) a
leave of absence in excess of 90 days, duly authorized in writing by the Company, provided
that the employee’s right to re-employment is guaranteed by statute, contract or written
policy of the Company; or (iv) a termination of employment with continued service as a
Director or termination of service as a Director when the Participant thereafter serves as
an employee. For purposes of the Plan, termination of employment shall be considered to
occur on the date on which the employee is no longer obligated to perform services for the
Company or any of its
Subsidiaries and the employee’s right to re-employment is not guaranteed by statute,
contract or written policy of the Company, regardless of whether the employee continues to
receive compensation from the Company or any of its Subsidiaries after such date.
9
(b) Death. If a Participant dies either while an employee or officer of the Company or
a Subsidiary or member of the Board, or after the termination of employment or service as a
member of the Board other than for cause but during the time when the Participant could have
exercised a Stock Option, the Stock Options issued to such Participant shall become fully
vested and exercisable by the personal representative of such Participant or other successor
to the interest of the Participant for one year after the Participant’s death.
(c) Disability. If a Participant ceases to be employed by the Company and its
Subsidiaries or a member of the Board due to the Participant’s disability (as defined in the
Company’s long-term disability plan), then all of the Participant’s Stock Options shall
immediately fully vest, and the Stock Options held by the Participant at the time of such
termination of employment or service shall be exercisable by the Participant or the personal
representative of such Participant for one year following such termination of employment or
service.
(d) Participant Retirement. Upon a Participant’s Retirement as an employee or officer
of the Company and its Subsidiaries or Retirement from service as a member of the Board,
then all of the Participant’s Stock Options shall immediately fully vest, and the Stock
Options held by the Participant at the time of such Retirement shall be exercisable by the
Participant or the personal representative of such Participant during the remaining term of
the Stock Options.
(e) Termination for Cause. If a Participant is terminated for cause, the Participant
shall have no further right to exercise any Stock Options previously granted. The Committee
or officers designated by the Committee shall determine whether a termination is for cause.
SECTION 6
Stock Appreciation Rights
6.1 Grants. Stock Appreciation Rights may be granted to Participants from time to time either
in tandem with or as a component of a Stock Option granted under Section 5, other Incentive Awards
granted under the Plan or stock options granted under any other Company equity compensation plan
(“tandem SARs”) or without reference to other Incentive Awards or stock options (“freestanding
SARs”). The provisions of Stock Appreciation Rights need not be the same with respect to each grant
or each Participant. Any Stock Appreciation Right granted in tandem with a stock option or
Incentive Award may be granted at the same time such option or Incentive Award is granted or at any
time thereafter before exercise or expiration of such stock option or Incentive Award. Unless
settled in cash, the exercise of a tandem SAR will be in lieu of the exercise of the stock option
or Incentive Award in connection with which the tandem SAR was granted. All freestanding SARs shall
be granted subject to the same terms and conditions applicable to Stock Options as set forth in
Section 5 and all tandem SARs shall have the same vesting, exercisability, forfeiture and
termination provisions as such Incentive Award or stock
option to which they relate. Subject to the foregoing sentence and the terms of the Plan, the
Committee may impose such other conditions or restrictions on any Stock Appreciation Right as it
shall deem appropriate.
10
6.2 Exercise or Settlement Price. The per share price for exercise or settlement of Stock
Appreciation Rights shall be determined by the Committee, but shall be a price that is equal to or
greater than 100% of the Market Value of the Company’s Common Stock on the date of grant. Other
than in connection with a change in the Company’s capitalization (as described in Section 4.4) the
exercise price of Stock Appreciation Rights may not be reduced without stockholder approval
(including canceling previously awarded Stock Appreciation Rights and regranting them with a lower
exercise price).
6.3 Medium and Time of Payment. Stock Appreciation Rights may be settled in shares of Common
Stock, cash or a combination thereof, as determined by the Committee.
6.4 Limits on Exercisability. Except as set forth in Section 6.6, Stock Appreciation Rights
shall be exercisable for such periods, not to exceed 10 years from the date of grant, as may be
fixed by the Committee.
6.5 Restrictions on Stock Appreciation Rights.
(a) General. Unless the Committee provides otherwise, Stock Appreciation Rights granted
under the Plan may not be sold, exchanged, transferred, pledged, assigned or otherwise
alienated or hypothecated except by will or the laws of descent and distribution. To the
extent that the Committee otherwise determines to permit the transfer of a Stock
Appreciation Right, as a condition thereof; the transferor and the transferee must execute a
written agreement containing such terms specified by the Committee. Except to the extent the
Committee provides otherwise, all provisions of a Stock Appreciation Right that are
determined with reference to the Participant, including without limitation those that refer
to the Participant’s obligation to satisfy tax withholding requirements and to vesting or
forfeiture being related to the Participant’s employment with the Company or its
Subsidiaries, shall continue to be determined with reference to the Participant after any
transfer of a Stock Appreciation Right.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to the exercise of a Stock Appreciation Right under the Plan
as the Committee deems advisable, including, without limitation, holding periods or further
transfer restrictions, forfeiture or “claw-back” provisions, and restrictions under
applicable federal or state securities laws.
6.6 Termination of Employment or Officer or Director Status. Unless the Committee provides
otherwise, Stock Appreciation Rights shall expire upon the earlier of the expiration of the term
established pursuant to Section 6.4 and the date determined as set forth herein:
(a) General. If a Participant’s employment with the Company or a Subsidiary or service
as a member of the Board terminates for any reason other than the Participant’s death,
disability, Retirement or termination for cause, Stock Appreciation Rights granted to the
Participant may continue to be exercised in accordance with their terms for a period of
three (3) months after such termination of employment or of service as a director, but only
to the extent the Participant was entitled to exercise the Stock Appreciation Rights on the
date of such termination. For purposes of the Plan, the
following shall not be considered a termination of employment or service: (i) a transfer of
an employee from the Company to any Subsidiary; (ii) a leave of absence, duly authorized in
writing by the Company, for military service or for any other purpose approved by the
Company if the period of such leave does not exceed 90 days; (iii) a leave of absence in
excess of 90 days, duly authorized in writing by the Company, provided that the employee’s
right to re-employment is guaranteed by statute, contract or written policy of the Company;
or (iv) a termination of employment with continued service as a Director or termination of
service as a Director when the Participant thereafter serves as an employee. For purposes of
the Plan, termination of employment shall be considered to occur on the date on which the
employee is no longer obligated to perform services for the Company or any of its
Subsidiaries and the employee’s right to re-employment is not guaranteed by statute,
contract or written policy of the Company, regardless of whether the employee continues to
receive compensation from the Company or any of its Subsidiaries after such date.
11
(b) Death. If a Participant dies either while an employee or officer of the Company or
a Subsidiary or member of the Board, or after the termination of employment or service as a
member of the Board other than for cause but during the time when the Participant could have
exercised a Stock Appreciation Right, the Stock Appreciation Rights issued to such
Participant shall become fully vested and exercisable by the personal representative of such
Participant or other successor to the interest of the Participant for one year after the
Participant’s death.
(c) Disability. If a Participant ceases to be employed by the Company and its
Subsidiaries or a member of the Board due to the Participant’s disability (as defined in the
Company’s long-term disability plan), then all of the Participant’s Stock Appreciation
Rights shall immediately fully vest, and the Stock Appreciation Rights held by the
Participant at the time of such termination of employment or service shall be exercisable by
the Participant or the personal representative of such Participant for one year following
such termination of employment or service.
(d) Participant Retirement. Upon a Participant’s Retirement as an employee or officer
of the Company and its Subsidiaries or Retirement from service as a member of the Board,
then all of the Participant’s Stock Appreciation Rights shall immediately fully vest, and
the Stock Appreciation Rights held by the Participant at the time of such Retirement shall
be exercisable by the Participant or the personal representative of such Participant during
the remaining term of the Stock Appreciation Rights.
(e) Termination for Cause. If a Participant is terminated for cause, the Participant
shall have no further right to exercise any Stock Appreciation Rights previously granted.
The Committee or officers designated by the Committee shall determine whether a termination
is for cause.
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SECTION 7
Restricted Stock and Restricted Stock Units
7.1 Grant. Restricted Stock and Restricted Stock Units may be granted at any time and from
time to time prior to the termination of the Plan to Participants selected by the
Committee. Restricted Stock is an award or issuance of shares of Common Stock the grant, issuance,
retention, vesting and/or transferability of which is subject during specified periods of time to
such conditions (including continued employment or performance conditions) and terms as the
Committee deems appropriate. Restricted Stock Units are Incentive Awards denominated in units of
Common Stock under which the issuance of shares of Common Stock is subject to such conditions
(including continued employment or performance conditions) and terms as the Committee deems
appropriate. Unless determined otherwise by the Committee, each Restricted Stock Unit will be equal
to one share of Common Stock and will entitle a Participant to either shares of Common Stock or an
amount of cash determined with reference to the value of shares of Common Stock. To the extent
determined by the Committee, Restricted Stock and Restricted Stock Units may be satisfied or
settled in Common Stock, cash or a combination thereof. Restricted Stock Units shall be settled no
later than the 15th day of the third month after the end of the calendar year in which
the Restricted Stock Units vest. Restricted Stock and Restricted Stock Units granted pursuant to
the Plan need not be identical but shall be consistent with the terms of the Plan. Subject to the
requirements of applicable law, the Committee shall determine the price, if any, at which awards of
Restricted Stock or Restricted Stock Units, or shares of Common Stock issuable under Restricted
Stock Unit awards, shall be sold or awarded to a Participant, which may vary from time to time and
among Participants and which may be below the market price of such shares at the date of grant.
7.2 Restricted Stock Agreements. Each grant of Restricted Stock and Restricted Stock Units
shall be evidenced by an Award Agreement. Unless an Award Agreement provides otherwise, Restricted
Stock and Restricted Stock Unit awards shall be subject to the terms and conditions set forth in
this Section 7.
7.3 Vesting. The grant, issuance, retention and/or vesting of shares of Restricted Stock and
Restricted Stock Units and the settlement of shares of Restricted Stock Units shall occur at such
time and in such installments as determined by the Committee or under criteria established by the
Committee. The Committee shall have the right to make the timing of the grant and/or the issuance,
ability to retain, vesting and/or settlement of shares of Restricted Stock and under Restricted
Stock Units subject to continued employment, passage of time and/or such performance criteria as
deemed appropriate by the Committee; provided that in no event shall the grant, issuance,
retention, vesting and/or settlement of shares under Restricted Stock or Restricted Stock Unit
Awards that is based on performance criteria and the level of achievement versus such criteria be
subject to a performance period of less than one year and no condition that is based upon continued
employment or the passage of time shall provide for vesting or settlement in full of a Restricted
Stock or Stock Unit Award over a period of less than three years from the date the Award is made,
in each case other than as a result of or upon the death, disability or Retirement of the
Participant or a Change in Control. Notwithstanding anything to the contrary herein, the
performance criteria for any Restricted Stock or Restricted Stock Unit that is intended to satisfy
the requirements for “performance-based compensation” under Section 162(m) of the Code shall be a
measure based on one or more Qualifying Performance Criteria selected by the Committee and
specified at the time the Restricted Stock or Restricted Stock Unit is granted.
13
7.4 Termination of Employment or Officer or Director Status. Unless the Committee provides
otherwise:
(a) General. In the event of termination of employment or officer or director status
during the Restricted Period for any reason other than death, disability or Retirement, any
Restricted Stock or Restricted Stock Unit award still subject in full or in part to
restrictions at the date of such termination shall automatically be forfeited and returned
to the Company. For purposes of the Plan, the following shall not be considered a
termination of employment or service: (i) a transfer of an employee from the Company to any
Subsidiary; (ii) a leave of absence, duly authorized in writing by the Company, for military
service or for any other purpose approved by the Company if the period of such leave does
not exceed 90 days; (iii) a leave of absence in excess of 90 days, duly authorized in
writing by the Company, provided that the employee’s right to re-employment is guaranteed by
statute, contract or written policy of the Company; or (iv) a termination of employment with
continued service as a Director or termination of service as a Director when the Participant
thereafter serves as an employee. For purposes of the Plan, termination of employment shall
be considered to occur on the date on which the employee is no longer obligated to perform
services for the Company or any of its Subsidiaries and the employee’s right to
re-employment is not guaranteed by statute, contract or written policy of the Company,
regardless of whether the employee continues to receive compensation from the Company or any
of its Subsidiaries after such date.
(b) Death, Retirement or Disability. In the event a Participant terminates his or her
employment with the Company and its Subsidiaries or service as a member of the Board because
of death, disability (as defined in the Company’s long-term disability plan) or Retirement
during the Restricted Period, the restrictions remaining on any or all shares remaining
subject to a Restricted Stock or Restricted Stock Unit award shall lapse.
7.5 Restrictions on Transferability.
(a) General. Unless the Committee provides otherwise: (i) shares of Restricted Stock
and interests in Restricted Stock Units shall not be sold, exchanged, transferred, pledged,
assigned or otherwise alienated or hypothecated during the Restricted Period except by will
or the laws of descent and distribution; and (ii) all rights with respect to Restricted
Stock and Restricted Stock Units granted to a Participant under the Plan shall be
exercisable during the Participant’s lifetime only by such Participant, his or her guardian
or legal representative.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of
Common Stock subject to Restricted Stock and Restricted Stock Unit awards as the Committee
deems advisable, including, without limitation, holding periods or further transfer
restrictions, forfeiture or “claw-back” provisions, and restrictions under applicable
federal or state securities laws.
14
7.6 Legending of Restricted Stock. The Committee may also require that certificates
representing shares of Restricted Stock be retained and held in escrow by a designated employee or
agent of the Company or any Subsidiary until any restrictions applicable to shares of Restricted
Stock so retained have been satisfied or lapsed. Any certificates evidencing shares of Restricted
Stock awarded pursuant to the Plan shall bear the following legend:
The shares represented by this certificate were issued subject to certain restrictions under
the Wolverine World Wide, Inc. Stock Incentive Plan of 2005 (the “Plan”). This certificate
is held subject to the terms and conditions contained in a restricted stock agreement that
includes a prohibition against the sale or transfer of the stock represented by this
certificate except in compliance with that agreement and that provides for forfeiture upon
certain events. Copies of the Plan and the restricted stock agreement are on file in the
office of the Secretary of the Company.
7.7 Rights as a Stockholder. A Participant shall have all dividend, liquidation and other
rights with respect to Restricted Stock held by such Participant as if the Participant held
unrestricted Common Stock; provided, that the unvested portion of any award of Restricted Stock
shall be subject to any restrictions on transferability or risks of forfeiture imposed pursuant to
Sections 7.1, 7.4 and 7.5 of the Plan. Unless the Committee otherwise determines or unless the
terms of the applicable Award Agreement or grant provide otherwise, a Participant shall have all
dividend and liquidation rights with respect to shares of Common Stock subject to awards of
Restricted Stock Units held by such Participant as if the Participant held unrestricted Common
Stock. Unless the Committee otherwise determines or unless the terms of the applicable Award
Agreement or grant provide otherwise, any noncash dividends or distributions paid with respect to
shares of unvested Restricted Stock and shares of Common Stock subject to unvested Restricted Stock
Units shall be subject to the same restrictions and vesting schedule as the shares to which such
dividends or distributions relate. Any dividend payment with respect to Restricted Stock or
Restricted Stock Units shall be made no later than the end of the calendar year in which the
dividends are paid to stockholders, or, if later, the 15th day of the third month
following the date the dividends are paid to stockholders.
7.8 Voting Rights. Unless otherwise determined by the Committee, Participants holding shares
of Restricted Stock granted hereunder may exercise full voting rights with respect to those shares
during the period of restriction. Participants shall have no voting rights with respect to shares
of Common Stock underlying Restricted Stock Units unless and until such shares are reflected as
issued and outstanding shares on the Company’s stock ledger.
SECTION 8
Stock Awards
8.1 Grant. Subject to the limitations set forth in Section 4.2 of the Plan, a Participant may
be granted one or more Stock Awards under the Plan. Stock Awards shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be determined by the
Committee. Notwithstanding the previous sentence, the shares of stock subject to Stock Awards
shall be issued no later than the 15th day of the third month after the end of the
calendar year in which the award is granted.
8.2 Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation and
other rights with respect to shares of Common Stock issued to the Participant as a Stock Award
under this Section 8 upon the Participant becoming the holder of record of the Common Stock granted
pursuant to such Stock Award; provided, that the Committee may impose such restrictions on the
assignment or transfer of Common Stock awarded pursuant to a Stock Award as it considers
appropriate. Any dividend payment with respect to Stock Awards shall be made
no later than the end of the calendar year in which the dividends are paid to stockholders, or, if
later, the 15th day of the third month following the date the dividends are paid to
stockholders.
15
SECTION 9
Change in Control
9.1 Acceleration of Vesting. If a Change in Control of the Company shall occur, then, unless
the Committee or the Board otherwise determines with respect to one or more Incentive Awards,
without action by the Committee or the Board: (a) all outstanding Stock Options and Stock
Appreciation Rights shall become immediately exercisable in full and shall remain exercisable
during the remaining terms thereof as set forth in Sections 5.5 and 6.4, regardless of whether the
Participants to whom such Stock Options and Stock Appreciation Rights have been granted remain in
the employ or service of the Company or any Subsidiary; and (b) all other outstanding Incentive
Awards shall become immediately fully vested and exercisable and nonforfeitable.
9.2 Cash Payment for Stock Options/Stock Appreciation Rights. If a Change in Control of the
Company shall occur, then the Committee without the consent of any Participant affected thereby,
may determine that some or all Participants holding outstanding Stock Options and/or Stock
Appreciation Rights shall receive, with respect to some or all of the shares of Common Stock
subject to such Stock Options and/or Stock Appreciation Rights, as of the effective date of any
such Change in Control of the Company, cash in an amount equal to the greater of the excess of (a)
the highest sales price of the shares on the New York Stock Exchange on the date immediately prior
to the effective date of such Change in Control of the Company or (b) the highest price per share
actually paid in connection with any Change in Control of the Company over the exercise price per
share of such Stock Options and/or Stock Appreciation Rights.
SECTION 10
Qualifying Performance-Based Compensation
10.1 General. The Committee may specify that the grant, retention, vesting or issuance of any
Incentive Award, or the amount to be paid out under any Incentive Award, be subject to or based on
Qualifying Performance Criteria or other standards of financial performance and/or personal
performance evaluations. Notwithstanding satisfaction of any performance goals, the number of
shares of Common Stock issued or the amount paid under an Incentive Award may, to the extent
specified in the applicable agreement evidencing the award, be reduced by the Committee on the
basis of such further considerations as the Committee shall determine.
10.2 Qualifying Performance Criteria. For purposes of this Plan, the term “Qualifying
Performance Criteria” shall mean any one or more of the following performance criteria, either
individually, alternatively or in any combination, applied to either the Company as a whole or to a
business unit or Subsidiary, either individually, alternatively or in any combination, and measured
either annually or cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years’ results or to a designated comparison group, in
each case as specified by the Committee: (a) net earnings or earnings per share (including earnings
before interest, taxes, depreciation and/or amortization), (b) income, net income or operating
income, (c) revenues, (d) net sales, (e) return on sales, (f) return on equity, (g) return on
capital (including return on total capital or return on invested capital), (h) return on assets or
net assets, (i) earnings per share, (j) economic value added measurements, (k) return on invested
capital, (l) return on operating revenue, (m) cash flow (before or after dividends), (n) stock
price, (o) total stockholder return, (p) market capitalization, (q) economic value added, (r) debt
leverage (debt to capital), (s) operating profit or net operating profit, (t) operating margin or
profit margin or (u) cash from operations. To the extent consistent with Section 162(m) of the
Code, the Committee may appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a performance
period: (i) asset write-downs, (ii) litigation, claims, judgments or settlements, (iii) the effect
of changes in tax law, accounting principles or other such laws or provisions affecting reported
results, (iv) the effect of acquisitions or divestitures (v) accruals for reorganization and
restructuring programs and (vi) any extraordinary, unusual or non recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of
financial condition and results of operations appearing in the Company’s Forms 10-K or any Form
10-Q for the performance period.
16
SECTION 11
General Provisions
11.1 No Rights to Awards. No Participant or other person shall have any claim to be granted
any Incentive Award under the Plan and there is no obligation of uniformity of treatment of
Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and
conditions of Incentive Awards of the same type and the determination of the Committee to grant a
waiver or modification of any Incentive Award and the terms and conditions thereof need not be the
same with respect to each Participant or the same Participant.
11.2 Withholding. The Company or a Subsidiary shall be entitled to: (a) withhold and deduct
from future wages of a Participant (or from other amounts that may be due and owing to a
Participant from the Company or a Subsidiary), or make other arrangements for the collection of
(including through the sale of shares of Common Stock otherwise issuable pursuant to the applicable
Incentive Award), all legally required amounts necessary to satisfy any and all federal, state,
local and foreign withholding and employment-related tax requirements attributable to an Incentive
Award, including, without limitation, the grant, exercise or vesting of, or payment of dividends
with respect to, an Incentive Award or a disqualifying disposition of Common Stock received upon
exercise of an incentive stock option; or (b) require a Participant promptly to remit the amount of
such withholding to the Company before taking any action with respect to an Incentive Award. To the
extent specified by the Committee, withholding may be satisfied by withholding Common Stock to be
received upon exercise or vesting of an Incentive Award or by delivery to the Company of previously
owned Common Stock. In addition, the Company may reasonably delay the issuance or delivery of
shares of Common Stock pursuant to an Incentive Award as it determines appropriate to address tax
withholding and other administrative matters.
11.3 Compliance With Laws; Listing and Registration of Shares. All Incentive Awards granted
under the Plan (and all issuances of Common Stock or other securities under the Plan) shall be
subject to all applicable laws, rules and regulations, and to the requirement that if at any time
the Committee shall determine that the listing, registration or qualification of the shares covered
thereby upon any securities exchange or under any state or federal law, or the consent or approval
of any governmental regulatory body, is necessary or desirable as a condition of; or in connection
with, the grant of such Incentive Award or the issue or purchase of shares thereunder, such
Incentive Award may not be exercised in whole or in part, or the restrictions on such Incentive
Award shall not lapse, unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not acceptable to the
Committee.
17
11.4 Additional Restrictions on Shares. The Committee may provide that the shares of Common
Stock issued upon exercise of a Stock Option or Stock Appreciation Right or otherwise subject to or
issued under an Incentive Award shall be subject to such further agreements, restrictions,
conditions or limitations as the Committee in its discretion may specify prior to the exercise of
such Stock Option or Stock Appreciation Right or the grant, vesting or settlement of such Incentive
Award, including without limitation, conditions on vesting or transferability, forfeiture or
repurchase provisions and method of payment for the shares issued upon exercise, vesting or
settlement of such Incentive Award (including the actual or constructive surrender of Common Stock
already owned by the Participant) or payment of taxes arising in connection with an Incentive
Award. Without limiting the foregoing, such restrictions may address the timing and manner of any
resales by the Participant or other subsequent transfers by the Participant of any shares of Common
Stock issued under an Incentive Award, including without limitation restrictions under an insider
trading policy, blackout period or pursuant to applicable law, and restrictions as to the use of a
specified brokerage firm or equity plan administrator for such resales or other transfers.
11.5 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent
the Company or any Subsidiary from adopting or continuing in effect other or additional
compensation arrangements, including the grant of stock options and other stock-based awards, and
such arrangements may be either generally available or available only in specific cases.
11.6 No Right to Employment. The grant of an Incentive Award shall not be construed as giving
a Participant the right to be retained in the employ of the Company or any Subsidiary. The Company
or any Subsidiary may at any time dismiss a Participant from employment, free from any liability or
any claim under the Plan, unless otherwise expressly provided in the Plan or in any written
agreement authorized by the Committee.
11.7 No Liability of Company. The Company and any Subsidiary or affiliate which is in
existence or hereafter comes into existence shall not be liable to a Participant or any other
person as to: (a) the non-issuance or sale of Common Stock as to which the Company has been unable
to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s
counsel to be necessary to the lawful issuance and sale of any shares hereunder; (b) any tax
consequence to any Participant or other person due to the receipt, exercise or settlement of any
Incentive Award granted hereunder; and (c) any provision of law or legal restriction that prohibits
or restricts the transfer of shares of Common Stock issued pursuant to any Incentive Award.
18
11.8 Suspension of Rights under Incentive Awards. The Company, by written notice to a
Participant, may suspend a Participant’s and any transferee’s rights under any Incentive Award for
a period not to exceed 60 days while the termination for cause of that Participant’s employment
with the Company and its Subsidiaries is under consideration.
11.9 Governing Law. The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws of the State of
Delaware and applicable federal law.
11.10 Severability. In the event any provision of the Plan shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan
and the Plan shall be construed and enforced as if the illegal or invalid provision had not been
included, unless such construction would cause the Plan to fail in its essential purposes.
SECTION 12
Suspension or Termination of Awards
12.1 Except as otherwise provided by the Committee, if at any time (including after a notice
of exercise has been delivered or an award has vested) the Chief Executive Officer or any other
person designated by the Committee (each such person, an “Authorized Officer”) reasonably believes
that a Participant may have committed an Act of Misconduct as described in this Section 12, the
Authorized Officer, Committee or Board may suspend the Participant’s rights to exercise any Stock
Option or Stock Appreciation Right, to vest in an Incentive Award, and/or to receive payment for or
receive shares of Common Stock in settlement of an Incentive Award pending a determination of
whether an Act of Misconduct has been committed.
12.2 If the Committee or an Authorized Officer determines a Participant has committed an act
of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Company or any
Subsidiary, breach of fiduciary duty or deliberate disregard of Company or Subsidiary rules
resulting in loss, damage or injury to the Company or any Subsidiary, or if a Participant makes an
unauthorized disclosure of any Company or Subsidiary trade secret or confidential information,
engages in any conduct constituting unfair competition, breaches any non-competition agreement,
induces any Company or Subsidiary customer to breach a contract with the Company or any Subsidiary,
or induces any principal for whom the Company or any Subsidiary acts as agent to terminate such
agency relationship (any of the foregoing acts, an “Act of Misconduct”), then except as otherwise
provided by the Committee, (i) neither the Participant nor his or her estate nor transferee shall
be entitled to exercise any Stock Option or Stock Appreciation Right whatsoever, vest in or have
the restrictions on an Incentive Award lapse, or otherwise receive payment or shares of Common
Stock under any Incentive Award, (ii) the Participant will forfeit all outstanding Incentive Awards
and (iii) the Participant may be required, at the Committee’s sole discretion, to return and/or
repay to the Company any then unvested shares of Common Stock previously issued under the Plan. In
making such determination, the Committee or an Authorized Officer shall give the Participant an
opportunity to appear and present evidence on his or her behalf at a hearing before the Committee
or an opportunity to submit written comments, documents, information and arguments to be considered
by the Committee.
19
SECTION 13
Termination and Amendment
13.1 The Board may terminate the Plan at any time or may from time to time amend or alter the
Plan or any aspect of it as it considers proper and in the best interests of the Company, provided
that no such amendment may be made, without the approval of stockholders of the Company, that would
(i) reduce the exercise price at which Stock Options or Stock Appreciation Rights may be granted
below the price provided for in Section 5.2 and 6.2, (ii) reduce the exercise price of outstanding
Stock Options, (iii) increase the individual maximum limits in Section 4.2 or (iv) otherwise amend
the Plan in any manner requiring stockholder approval by law or under the New York Stock Exchange
listing requirements and provided further that the Plan may not be amended in any way that causes
the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the Board
expressly determines to amend the Plan to be subject to Section 409A of the Code. The Committee may
alter or amend an Award Agreement and/or Incentive Award previously granted under the Plan to the
extent it determines that such action is appropriate.
13.2 Notwithstanding anything to the contrary in Section 13.1, no such amendment or alteration
to the Plan or to any previously granted Award Agreement or Incentive Award shall be made which
would impair the rights of the holder of the Award, without such holder’s consent, provided that no
such consent shall be required if the Committee determines in its sole discretion and prior to the
date of any Change in Control that such amendment or alteration either is required or advisable in
order for the Company, the Plan or the Incentive Award to satisfy any law or regulation or to meet
the requirements of or avoid adverse financial accounting consequences under any accounting
standard.
SECTION 14
Effective Date and Duration of the Plan
14.1 This Plan shall take effect April 21, 2005, subject to approval by the stockholders at
the 2005 Annual Meeting of Stockholders or any adjournment thereof or at a Special Meeting of
Stockholders, but in no event will such approval be obtained more than twelve (12) months from the
adoption of this Plan by the Board. Unless earlier terminated by the Board, no Incentive Award
shall be granted under the Plan after April 20, 2015.
As amended October 9, 2008.
20
Exhibit 10.8
WOLVERINE WORLD WIDE, INC.
AMENDED AND RESTATED
DIRECTORS’ STOCK OPTION PLAN
DIRECTORS’ STOCK OPTION PLAN
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the AMENDED AND RESTATED DIRECTORS’
STOCK OPTION PLAN (the “Plan”) for its Non-Employee Directors. The Plan amends and restates the
1994 Directors’ Stock Option Plan previously approved by the stockholders at the 1994 Annual
Meeting of Stockholders. The Plan permits the grant of Stock Options that are nonqualified stock
options.
1.2 Purpose of Plan. The purpose of the Plan is to advance the interests of the Company and
its stockholders by attracting and retaining the services of experienced and knowledgeable
Non-Employee Directors and to provide additional incentive for such Non-Employee Directors to
continue to promote and work for the best interests of the Company and its stockholders through
continuing ownership of the Company’s Common Stock.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning is plainly required
by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Board” means the Board of Directors of the Company.
2.3 “Code” means the Internal Revenue Code of 1986, as amended.
2.4 “Committee” means the Compensation Committee of the Board or such other committee as the
Board shall designate to administer the Plan.
2.5 “Common Stock” means the Common Stock of the Company, par value $1 per share.
2.6 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.7 “Market Value” shall equal the closing market price of shares of Common Stock reported on
the New York Stock Exchange (or any successor exchange that is the primary stock exchange for
trading of Common Stock) on the date of grant, exercise or vesting, as applicable, or if the New
York Stock Exchange (or any such successor) is closed on that date, the last preceding date on
which the New York Stock Exchange (or any such successor) was open for trading and on which shares
of Common Stock were traded.
2.8 “Non-Employee Directors” means directors of the Company who are not also employees of the
Company or any of its subsidiaries; provided, that the Committee may exclude any Non-Employee
Director from participating in the Plan at any time or from time to time pursuant to an individual
agreement or arrangement with such Non-Employee Director.
2.9 “Retirement” means the reaching of (i) mandatory retirement age for a director as
established by the Board, which is currently 72 years of age; or (ii) such other age or years of
service as shall be determined by the Committee in its sole discretion or as otherwise may be set
forth in the Stock Option agreement or other grant document with respect to a Non- Employee
Director and a particular Stock Option.
2.10 “Stock Option” means the right to purchase Common Stock at a stated price for a specified
period of time. For purposes of the Plan, all Stock Options shall be nonqualified stock options.
SECTION 3
Administration
3.1 Power and Authority. The Committee shall administer the Plan, shall have full power and
authority to interpret the provisions of the Plan and to supervise the administration of the Plan.
The Committee may delegate record keeping, calculation, payment and other ministerial
administrative functions to individuals designated by the Committee, who may be officers or
employees of the Company or its Subsidiaries. All determinations, interpretations, and selections
made by the Committee regarding the Plan shall be final and conclusive. The Committee shall make
such rules and regulations for the conduct of its business as it deems advisable. The members of
the Committee shall not be paid any additional fees for their services.
3.2 Grants or Awards; Amendments or Modifications. In accordance with and subject to the
provisions of the Plan, the Committee shall have the authority to determine the provisions of Stock
Options as the Committee may consider necessary or desirable and as are consistent with the terms
of the Plan. The Committee shall have the authority to amend or modify the terms of any outstanding
Stock Option in any manner, provided that the amended or modified terms are not prohibited by the
Plan as then in effect and provided such actions do not cause a Stock Option to become subject to
Section 409A of the Code, unless the Committee expressly determines to make a Stock Option subject
to Section 409A of the Code, including, without limitation, the authority to: (a) modify the terms
and conditions of a Stock Option; provided, however, that any modification of the terms and
condition of a Stock Option that increases the number of shares of the Stock Option other than
pursuant to Section 4.2 shall be considered to be a new grant with respect to such additional
shares for purposes of Section 409A of the Code and such new grant shall be made at Market Value on
the date of grant; (b) extend the term of a Stock Option to a date that is no later than the
earlier of the latest date upon which the Stock Option could have expired by its terms under any
circumstances or the 10th anniversary of the date of grant (for purposes of clarity, as
permitted under Section 409A of the Code, if the term of a Stock Option is extended at a time when
the Stock Option price equals or exceeds the Market Value, it will not be an extension of the term
of the Stock Option, but instead will be treated as a modification of the Stock Option and a new
Stock Option will be treated as having been granted); (c) terminate, waive or modify any
restrictions relating to a Stock Option; and (d)
accept the surrender of any outstanding Stock Option; provided, that Stock Options issued under the
Plan may not be repriced, replaced, regranted through cancellation or modified without stockholder
approval if the effect of such repricing, replacement, regrant or modification would be to reduce
the exercise price of then outstanding Stock Options to the same Non-Employee Directors.
2
3.3 Indemnification of Committee Members. Neither any member or former member of the Committee
nor any individual to whom authority is or has been delegated shall be personally responsible or
liable for any act or omission in connection with the performance of powers or duties or the
exercise of discretion or judgment in the administration and implementation of the Plan. Each
person who is or has been a member of the Committee, and each person to whom authority is or has
been delegated, shall be indemnified and held harmless by the Company from and against any cost,
liability, or expense imposed or incurred in connection with such person’s or the Committee’s
taking or failing to take any action under the Plan. Each such person shall be justified in relying
on information furnished in connection with the Plan’s administration by any appropriate person or
persons.
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in subsection 4.2, a maximum of
400,000 shares of Common Stock (not including any adjustments occurring before the date of this
amendment pursuant to Section 4.2) shall be available for Stock Options under the Plan in addition
to any shares previously authorized for issuance under the Plan, as adopted in 1994, plus shares
subject to Stock Options that are canceled, surrendered, modified, exchanged for substitute Stock
Options or expire or terminate prior to the exercise or vesting of the Stock Options in full and
shares that are surrendered to the Company in connection with the exercise or vesting of a Stock
Option, whether previously owned or otherwise subject to such Stock Options. Such shares shall be
authorized and may be either unissued or treasury shares.
4.2 Adjustments.
(a) Stock Dividends and Distributions. If the number of shares of Common Stock
outstanding changes by reason of a stock dividend, stock split, recapitalization or other
general distribution of Common Stock or other securities to holders of Common Stock, the
number and kind of securities subject to Stock Options and reserved for issuance under the
Plan, including, without limitation, the number of shares to be granted pursuant to
subsection 5.1, together with applicable exercise prices, as well as the number of shares
available for issuance under the Plan, shall be adjusted appropriately. No fractional shares
shall be issued pursuant to the Plan and any fractional shares resulting from such
adjustments shall be eliminated from the respective Stock Options.
(b) Other Actions Affecting Common Stock. If there occurs, other than as described in
the preceding subsection, any merger, business combination, recapitalization,
reclassification, subdivision or combination approved by the Board that would result in the
persons who were stockholders of the Company immediately prior to the effective time of any
such transaction owning or holding, in lieu of or in addition to shares of Common Stock,
other securities, money and/or property (or the right to receive
other securities, money and/or property) immediately after the effective time of such
transaction, then the outstanding Stock Options (including exercise prices) and reserves for
Stock Options under this Plan shall be adjusted in such manner and at such time as shall be
equitable under the circumstances. It is intended that in the event of any such transaction,
Stock Options under this Plan shall entitle the holder of each Stock Option to receive upon
exercise, in lieu of or in addition to shares of Common Stock, any other securities, money
and/or property receivable upon consummation of any such transaction by holders of Common
Stock with respect to each share of Common Stock outstanding immediately prior to the
effective time of such transaction; upon any such adjustment, holders of Stock Options under
this Plan shall have only the right to receive in lieu of or in addition to shares of Common
Stock such other securities, money and/or other property as provided by the adjustment. If
the agreement, resolution or other document approved by the Board to effect any such
transaction provides for the adjustment of Stock Options under the Plan in connection with
such transaction, then the adjustment provisions contained in such agreement, resolution or
other document shall be final and conclusive.
3
SECTION 5
Stock Options
5.1 Grant. Subject to adjustment as provided in subsection 4.2, a Stock Option to purchase a
number of shares of Common Stock that have a Market Value equal to three times the annual director
retainer fee then in effect shall be granted automatically on the date of the 2002 Annual Meeting
of Stockholders and the date of each annual meeting thereafter to each director of the Company who
is, at the close of each such annual meeting, a Non-Employee Director. In addition, each Non-
Employee Director shall at the time of his or her initial election or appointment to the Board be
granted a Stock Option to purchase a number of shares of Common Stock that have a Market Value
equal to six times the annual director retainer fee then in effect; provided, that any person that
is or at any time has been an employee of the Company or any of its subsidiaries shall not be
entitled to the award provided in this sentence. Stock Options shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be determined by the Committee
in its sole discretion.
5.2 Stock Option Agreements. Stock Options shall be evidenced by Stock Option agreements
containing such terms and conditions, consistent with the provisions of the Plan, as the Committee
shall from time to time determine. Each Stock Option agreement shall conclusively evidence, by the
Non-Employee Director’s signature thereon, that it is the intent of the Non-Employee Director to
continue to serve as a director of the Company for the remainder of his or her term during which
the Stock Option was granted.
5.3 Stock Option Price. The per share Stock Option price shall be one hundred percent (100%)
of the Market Value of Common Stock on the date of grant.
5.4 Medium and Time of Payment. The exercise price for each share purchased pursuant to a
Stock Option granted under the Plan shall be payable in cash or in shares of Common Stock
(including Common Stock to be received upon a simultaneous exercise) or other consideration
substantially equivalent to cash. When appropriate arrangements are made with a
broker or other institution, payment may be made by a properly executed exercise notice directing
delivery of shares to a broker, together with irrevocable instructions to the broker to deliver
promptly to the Company the amount of sale or loan proceeds to pay the exercise price.
4
5.5 Limits on Exercisability. Stock Options shall be exercisable for a period not to exceed 10
years from the date of grant. At the time of the exercise of a Stock Option, the holder of the
Stock Option, if requested by the Committee, must represent to the Company that the shares are
being acquired for investment and not with a view to the distribution thereof.
5.6 Restrictions on Transferability.
(a) General. Unless the Committee otherwise consents or permits (before or after the
Stock Option grant) or unless the Stock Option agreement or grant provides otherwise, Stock
Options granted under the Plan may not be sold, exchanged, transferred, pledged, assigned or
otherwise alienated or hypothecated except by will or the laws of descent and distribution,
and, as a condition to any transfer permitted by the Committee or the terms of the Stock
Option agreement or grant, the transferee must execute a written agreement permitting the
Company to withhold from the shares subject to the Stock Option a number of shares having a
Market Value at least equal to the amount of any federal, state, local and foreign
withholding or other taxes associated with or resulting from the exercise of a Stock Option.
All provisions of a Stock Option that are determined with reference to the Non-Employee
Director shall continue to be determined with reference to the Non-Employee Director after
any transfer of a Stock Option. All Stock Options granted to a Non-Employee Director shall
be exercisable during the Non-Employee Director’s lifetime only by such Non-Employee
Director or the legal representative acting in the name of the Non-Employee Director.
(b) Other Restrictions. The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as the
Committee deems advisable, including, without limitation, restrictions under applicable
federal or state securities laws.
5.7 Termination of Directorship. Unless the Committee otherwise consents or permits (before or
after the Stock Option grant) or unless the Stock Option agreement or grant provides otherwise:
(a) General. If a Non-Employee Director ceases to be a director of the Company for any
reason other than the Non-Employee Directors death, disability, or Retirement, the
Non-Employee Director may exercise his or her Stock Options only for a period of three
months after such termination of director status.
(b) Death. If a Non-Employee Director dies either while a director of the Company or
after the termination of his or her directorship, Stock Options issued to such Non-Employee
Director shall be exercisable by the personal representative of such Non-Employee Director
or other successor to the interest of the Non-Employee Director for one year after the
Non-Employee Director’s death.
(c) Disability. If a Non-Employee Director ceases to be a director of the Company due
to the Non-Employee Director’s disability, the Non-Employee Director may exercise a Stock
Option for a period of one year following such termination of directorship.
(d) Non-Employee Director Retirement. If a Non-Employee Director ceases to be a
director due to Retirement, any Stock Option granted under the Plan may be exercised during
the remaining term of the Stock Option.
5
SECTION 6
General Provisions
6.1 No Rights to Awards. Except as otherwise provided in subsection 5.1, no Non-Employee
Director or other person shall have any claim to be granted any Stock Option under the Plan, and
there is no obligation of uniformity of treatment of Non-Employee Directors or holders or
beneficiaries of Stock Options under the Plan. To the extent consistent with the Plan, the terms
and conditions of Stock Options and the determination of the Committee to grant a waiver or
modification of any Stock Option and the terms and conditions thereof need not be the same with
respect to each Non-Employee Director.
6.2 Compliance With Laws; Listing and Registration of Shares. All Stock Options granted under
the Plan (and all issuances of Common Stock or other securities under the Plan) shall be subject to
all applicable laws, rules, and regulations, and to the requirement that if at any time the
Committee shall determine, in its discretion, that the listing, registration, or qualification of
the shares covered thereby upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the grant of such Stock Option or the issue or purchase of shares
thereunder, such Stock Option may not be exercised in whole or in part, or the restrictions on such
Stock Option shall not lapse, unless and until such listing, registration, qualification, consent,
or approval shall have been effected or obtained free of any conditions not acceptable to the
Committee.
6.3 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent
the Company from adopting or continuing in effect other or additional compensation arrangements,
including the grant of stock options and other stock-based awards, and such arrangements may be
either generally applicable or applicable only in specific cases.
6.4 No Right to Directorship. The grant of a Stock Option shall not be construed as giving a
Non-Employee Director the right to be retained as a director of the Company. A Non-Employee
Director may be removed from his or her directorship in accordance with the Company’s Amended and
Restated Bylaws, Certificate of Incorporation, as amended, or applicable law, free from any
liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any
written agreement with a Non-Employee Director.
6.5 Governing Law. The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws of the State of
Michigan and applicable federal law.
6.6 Severability. In the event any provision of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision had not been
included.
6
SECTION 7
Amendment
The Board may from time to time amend the Plan as it considers proper and in the best
interests of the Company; provided, however, that the Plan may not be amended more than once every
six months, other than to comport with changes in the Code, the Employee Retirement Income Security
Act, or the rules thereunder; provided further, that without stockholder approval no such amendment
shall be effective that would require stockholder approval pursuant to the rules of the New York
Stock Exchange or any other exchange upon which the Company’s Common Stock is traded; and provided
further that the Plan may not be amended in any way that causes the Plan to fail to comply with or
be exempt from Section 409A of the Code, unless the Board expressly determines to amend the Plan to
be subject to Section 409A of the Code. In addition, no termination, amendment, or modification of
the Plan shall become effective with respect to any Stock Option previously granted under the Plan
without the prior written consent of the Non-Employee Director holding such Stock Option, unless
such termination, amendment, or modification operates solely to the benefit of the Non-Employee
Director, except according to the terms of the Plan or the Stock Option agreement.
SECTION 8
Effective Date and Duration of the Plan
This Plan as amended and restated shall take effect April 25, 2002, subject to approval by the
stockholders at the 2002 Annual Meeting of Stockholders or any adjournment thereof or at a Special
Meeting of Stockholders. The Board may terminate the Plan at any time and, unless earlier
terminated by the Board, the Plan shall terminate on April 24, 2012. No Stock Option shall be
granted under the Plan after such date.
As amended October 9, 2008.
7
Exhibit 10.10
WOLVERINE WORLD WIDE, INC.
AMENDED AND RESTATED
EXECUTIVE SHORT-TERM INCENTIVE PLAN
(ANNUAL BONUS PLAN)
EXECUTIVE SHORT-TERM INCENTIVE PLAN
(ANNUAL BONUS PLAN)
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the AMENDED AND RESTATED EXECUTIVE
SHORT-TERM INCENTIVE PLAN (ANNUAL BONUS PLAN) (the “Plan”), for its executive officers, senior
corporate and divisional officers and other key employees. The Plan amends and restates the
Wolverine World Wide, Inc. Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus
Plan) previously approved by the stockholders at the 2002 Annual Meeting of Stockholders. The Plan
provides for the payment of bonuses to participants based upon the financial performance of the
Company, or a Subsidiary, operating division or profit center of the Company, in a particular
fiscal year or part thereof.
1.2 Purpose of Plan. The purpose of the Plan is to motivate Participants to improve the
Company’s profitability and growth by the attainment of carefully planned goals, promote initiative
and cooperation with awards based on corporate and divisional performance and encourage outstanding
individuals to enter and continue in the employ of the Company. Within that context, the Plan is
intended to provide performance-based compensation under Section 162(m) of the Code and shall be
interpreted and administered to achieve that purpose.
1.3 Effective Date. The Plan is initially effective as of February 8, 2007. Adoption of the
Plan by the Board and payment of Incentive Bonuses for Fiscal Year 2007 shall be contingent upon
approval by the stockholders at the 2007 Annual Meeting of Stockholders or any adjournment thereof
or at a Special Meeting of the Stockholders. In the absence of such approval, this Plan shall be
void.
SECTION 2
Definitions
The following terms have the stated definitions unless a different meaning is plainly required
by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Beneficiary” means the individual, trust or other entity designated by the Participant to
receive any amount payable with respect to the Participant under the Plan after the Participant’s
death. A Participant may designate or change a Beneficiary by filing a signed designation with the
Committee in a form approved by the Committee. A Participant’s will is not effective for this
purpose. If a designation has not been completed properly and filed with the Committee or is
ineffective for any other reason, the Beneficiary shall be the Participant’s Surviving Spouse. If
there is no effective designation and the Participant does not have a Surviving Spouse, the
remaining benefits, if any, shall be paid to the Participant’s estate.
2.3 “Board” means the Board of Directors of the Company.
2.4 “Code” means the Internal Revenue Code of 1986, as amended.
2.5 “Committee” means the Compensation Committee of the Board or such other committee as the
Board shall designate to administer the Plan. The Committee shall consist of at least 2 members
and all of its members shall be “non-employee directors” as defined in Rule 16b-3 issued under the
Act and “outside directors” as defined in the regulations issued under Section 162(m) of the Code.
2.6 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.7 “Fiscal Year” means the fiscal year of the Company for financial reporting purposes as the
Company may adopt from time to time.
2.8 “Incentive Bonus” means an annual bonus awarded and paid to a Participant for services to
the Company during a Fiscal Year that is based upon achievement of pre-established performance
objectives by the Company, or a Subsidiary, operating division or profit center.
2.9 “Participant” means an executive officer, senior corporate or divisional officer or other
key employee of the Company or its Subsidiaries who is designated as a Participant for a Fiscal
Year.
2.10 “Performance” means the level of achievement by the Company or its Subsidiaries,
operating divisions or profit centers of the financial performance criteria established by the
Committee pursuant to Section 5.2.
2.11 “Subsidiary” means any company or other entity of which 50% or more of the outstanding
voting stock or voting ownership interest is directly or indirectly owned or controlled by the
Company or by one or more Subsidiaries of the Company.
2.12 “Surviving Spouse” means the spouse of the Participant at the time of the Participant’s
death who survives the Participant. If the Participant and spouse die under circumstances which
prevent ascertainment of the order of their deaths, it shall be presumed for the Plan that the
Participant survived the spouse.
2.13 “Target Bonus” means the bonus goal established by the Committee for each Participant
under Section 5.1(a).
SECTION 3
Administration
3.1 Power and Authority. The Plan shall be administered by the Committee. The Committee may
delegate recordkeeping, calculation, payment and other ministerial or administrative functions to
individuals designated by the Committee, who may be employees of the Company or its Subsidiaries.
Except as limited in the Plan, the Committee shall have all of the express and implied powers and
duties set forth in the Plan and shall have full authority and discretion to interpret the Plan and
to make all other determinations deemed necessary or advisable for the administration of the Plan.
Action may be taken by a written instrument signed by a majority of the members of the Committee
and any action so taken shall be as effective as if it had been taken at a meeting. The Committee
may make such other rules for the conduct of its business and may adopt such other rules, policies
and forms for the administration, interpretation and implementation of the Plan as it deems
advisable. All determinations, interpretations and selections made by the Committee regarding the
Plan shall be final and conclusive.
3.2 Indemnification of Committee Members. Neither any member or former member of the
Committee nor any individual to whom authority is or has been delegated shall be personally
responsible or liable for any act or omission in connection with the performance of powers or
duties or the exercise of discretion or judgment in the administration and implementation of the
Plan. Each individual who is or has been a member of the Committee, or delegated authority by the
Committee, shall be indemnified and held harmless by the Company from and against any cost,
liability or expense imposed or incurred in connection with any act or failure to act under the
Plan. Each such individual shall be justified in relying on information furnished in connection
with the Plan’s administration by any appropriate person or persons.
SECTION 4
Participation
4.1 Participation. For each Fiscal Year, the Committee shall select the executive officers,
senior corporate and divisional officers and other key employees who shall be the Participants for
the Fiscal Year. The Committee may limit the number of executive officers, senior corporate and
divisional officers and other key employees who will be Participants for a Fiscal Year. Officers
and key employees shall be designated as Participants within the first 90 days of any Fiscal Year;
provided, that an officer or key employee who is first employed by the Company or a Subsidiary
during the Fiscal Year or who is assigned new duties during the
Fiscal Year may be designated as a Participant for a performance period commencing on the date the
officer or key employee assumes his or her new duties through the end of the Fiscal Year.
4.2 Continuing Participation. Selection as a Participant for a Fiscal Year or part thereof by
the Committee is limited to that Fiscal Year. An eligible executive officer, senior corporate or
divisional officer or key employee will be a Participant for a Fiscal Year only if designated as a
Participant by the Committee for such Fiscal Year.
2
SECTION 5
Performance Goals and Criteria
5.1 Selection of Criteria. The Committee shall pre-establish performance goals for each
Participant or group of Participants in the manner and within the time limits specified in this
Section 5. For each Participant or group of Participants for each Fiscal Year or part thereof, the
Committee shall specify:
(a) Target Bonus. A Target Bonus, expressed as a percentage of the Participant’s
base salary or a specified dollar amount;
(b) Incentive Bonus. The Incentive Bonus levels, expressed as a percentage of
the Target Bonus, that shall be paid to the Participant at specified levels of
performance by the Company, division or profit center based on the criteria
established by the Committee pursuant to Section 5.2;
(c) Performance Measurement. The applicable measurement of Performance under
Section 5.2; and
(d) Conditions on Incentive Bonus. Any specific conditions under which an
Incentive Bonus specified under subsection (b) above may be reduced or forfeited (but
not increased).
The Incentive Bonus levels specified under subsection (b) above may be expressed either as (i) a
matrix of percentages of the Target Bonus that will be paid at specified levels of the Performance
or (ii) a mathematical formula that determines the percentage of the Target Bonus that will be paid
at varying levels of Performance.
5.2 Measurement of Performance. Performance of the Company and/or its Subsidiaries, operating
divisions or profit centers shall be determined by reference to one or more of the following: net
earnings, net earnings before taxes, operating income, revenues, net sales, net sales and other
operating income, return on sales, return on equity, earnings per share, total stockholder return,
economic value added measurements, return on assets, return on invested capital or any of the
foregoing before or after the effect of acquisitions, divestitures, accounting changes,
restructuring, or other special charges or extraordinary items. These factors could be measured
against pre-determined levels or the Company’s relative performance when compared to a
pre-established peer group.
5.3 Incentive Bonus Conditioned on Performance. Payment of an Incentive Bonus to a
Participant for a Fiscal Year or part thereof under this Plan shall be entirely contingent upon
achievement of the Performance levels established by the Committee pursuant to this Section 5, the
satisfaction of which is substantially uncertain when established by the Committee for the Fiscal
Year or part thereof.
5.4 Time of Determination by Committee. All determinations to be made by the Committee for a
performance period pursuant to this Section 5 shall be made by the Committee during the shorter of
the first 90 days of such performance period and the period ending on the date on which 25 percent
of the performance period has elapsed.
5.5 Objective Standards. An Incentive Bonus shall be based solely upon objective criteria,
consistent with this Section 5, from which an independent third party with knowledge of the facts
could determine whether the performance goal or range of goals is met and from that determination
could calculate the Incentive Bonus to be paid. Although the Committee has authority to exercise
reasonable discretion to interpret this Plan and the criteria it shall specify pursuant to this
Section 5 of the Plan, it may not amend or waive such criteria after the shorter of the period
ending on the 90th day of a performance period or the date on which 25 percent of the performance
period has elapsed. The Committee shall have no authority or discretion to increase any Incentive
Bonus or to construct, modify or apply the measurement of Performance in a manner that will
directly or indirectly increase the Incentive Bonus for any Participant for any Fiscal Year above
the amount determined by the applicable objective standards established within
the time periods set forth in this Section. The Committee may exercise negative discretion to
reduce or eliminate any Incentive Bonus.
3
SECTION 6
Determination and Payment of Incentive Bonuses
6.1 Committee Certification. The Incentive Bonus for each eligible Participant for a Fiscal
Year or part thereof shall be determined on the basis of the Target Bonus and Performance criteria
established by the Committee pursuant to Section 5. The Committee shall determine, and shall
certify in writing prior to payment of the Incentive Bonus, that the Company Performance for the
Fiscal Year or part thereof satisfied the Performance criteria established by the Committee for the
period. Approved minutes of the Committee shall constitute sufficient written certification for
this purpose.
6.2 Eligibility for Payment. The Incentive Bonus otherwise payable to a Participant for a
Fiscal Year or part thereof shall be adjusted as follows:
(a) Retirement, Death or Total Disability. If a Participant ceases to be a
Participant before the end of any Fiscal Year and more than 6 months after the
beginning of such Fiscal Year because of death, normal or early retirement under the
Company’s retirement plan, as then in effect, or total disability under the Company’s
long-term disability plan, an award shall be paid to the Participant or the
Participant’s Beneficiary after the end of such Fiscal Year prorated as follows: the
award, if any, for such Fiscal Year shall be equal to 100% of the Incentive Bonus that
the Participant would have received if the Participant had been a Participant during
the entire Fiscal Year, multiplied by the ratio of the Participant’s full months as a
Participant during that Fiscal Year to the 12 months in that Fiscal Year.
Notwithstanding the foregoing, the Committee shall have discretion to reduce or
eliminate any Incentive Bonus otherwise payable pursuant to this Section 6.2(a).
(b) Reassignment of Duties. If a Participant is reassigned employment duties
before the end of any Fiscal Year, an award shall be paid to the Participant after the
end of such Fiscal Year prorated as follows: the award shall be equal to 100% of the
Incentive Bonus that the Participant would have received if the Participant had been a
Participant during the entire Fiscal Year, multiplied by the ratio of the
Participant’s full months as a Participant during the Fiscal Year prior to the
reassignment to the 12 months in that Fiscal Year. If such Participant is designated
as a Participant in his or her new position, an additional award shall be paid to the
Participant after the end of such Fiscal Year prorated as follows: the award shall be
equal to 100% of the Incentive Bonus that the Participant would have received if the
Participant had been a Participant during the entire Fiscal Year, multiplied by the
ratio of the Participant’s months as a Participant during that Fiscal Year after the
reassignment (rounded up to the next full month) to the 12 months in that Fiscal Year.
(c) Other Termination. If an employee ceases to be a Participant during any
Fiscal Year, or prior to actual receipt of the award for a previous Fiscal Year,
because of the Participant’s termination of employment for any reason other than
described in Section 6.2(a), the Participant will not be entitled to any award for
such Fiscal Year.
6.3 Maximum Incentive Bonus. The Incentive Bonus for any Participant for a Fiscal Year under
this Plan shall not, in any event, exceed $1,800,000.
6.4 Payment to Participant or Beneficiary. The Incentive Bonus of each Participant shall be
paid to the Participant, or the Beneficiary of any deceased Participant, by the Company as soon as
feasible following final determination and certification by the Committee of the amount payable;
provided, however, in no event will the Incentive Bonus be paid later than the fifteenth day of the
third month following the end of the Fiscal Year for which the Performance criteria for the
Incentive Bonus have been met.
6.5 Manner of Payment. Each Participant will receive his or her Incentive Bonus in cash.
4
SECTION 7
General Provisions
7.1 Benefits Not Guaranteed. Neither the establishment and maintenance of the Plan nor
participation in the Plan shall provide any guarantee or other assurance that an Incentive Bonus
will be payable under the Plan.
7.2 No Right to Participate. Nothing in this Plan shall be deemed or interpreted to provide a
Participant or any non-participating employee any contractual right to participate in or receive
benefits under the Plan. No designation of an employee as a Participant for all or any part of a
Fiscal Year shall create a right to an Incentive Bonus under the Plan for any other Fiscal Year.
There is no obligation of uniformity of treatment of employees, eligible officers or Participants
under the Plan.
7.3 No Employment Right. Participation in this Plan shall not be construed as constituting a
commitment, guarantee, agreement or understanding of any kind that the Company or any Subsidiary
will continue to employ any individual and this Plan shall not be construed or applied as an
employment contract or obligation. Nothing in this Plan shall abridge or diminish the rights of
the Company or any Subsidiary to determine the terms and conditions of employment of any
Participant, officer or other employee or to terminate the employment of any Participant, officer
or other employee with or without reason at any time.
7.4 No Assignment or Transfer. Neither a Participant nor any Beneficiary or other
representative of a Participant shall have any right to assign, transfer, attach or hypothecate any
amount or credit, potential payment or right to future payments of any amount or credit or any
other benefit provided under this Plan. Payment of any amount due or to become due under this Plan
shall not be subject to the claims of creditors of the Participant or to execution by attachment or
garnishment or any other legal or equitable proceeding or process.
7.5 No Limit on Other Compensation Arrangements. Nothing contained in this Plan shall prevent
the Company or any Subsidiary from adopting or continuing in effect other or additional
compensation arrangements. A Participant may have other targets under other plans of the Company.
However, no payment under any other plan or arrangement shall be contingent upon failure to attain
the criteria for payment of an Incentive Bonus under this Plan.
7.6 Withholding and Payroll Taxes. The Company shall deduct from any payment made under this
Plan all amounts required by federal, state, local and foreign tax laws to be withheld and shall
subject any payments made under the Plan to all applicable payroll taxes and assessments.
7.7 Incompetent Payee. If the Committee determines that an individual entitled to a payment
under this Plan is incompetent, it may cause benefits to be paid to another individual for the use
or benefit of the Participant or Beneficiary at the time or times otherwise payable under this Plan
in total discharge of the Plan’s obligations to the Participant or Beneficiary.
7.8 Governing Law. The validity, construction and effect of the Plan shall be determined in
accordance with the laws of the State of Michigan and applicable federal law.
7.9 Severability. In the event any provision of the Plan shall be held illegal or invalid for
any reason, the remaining provisions of the Plan shall not be affected and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been included.
5
SECTION 8
Termination and Amendment
The Board may terminate the Plan at any time, or may from time to time amend the Plan as it
deems proper and in the best interests of the Company. No amendment adopted after the shorter of
the period ending on the 90th day of a performance period or the date on which 25 percent of a
performance period has elapsed may directly or indirectly increase any Incentive Bonus for that
Fiscal Year. Except as otherwise provided in this Plan and the applicable objective criteria
established pursuant to this Plan for determining the amount of any Incentive Bonus for a Fiscal
Year or part thereof, no Incentive Bonuses shall be payable for the Fiscal Year in which the Plan
is terminated, or, if later, in which the termination is effective.
SECTION 9
Duration of the Plan
Subject to earlier termination by the Board, this Plan shall terminate without action by the
Board as of the date of the first meeting of stockholders held in 2012, unless reapproved by the
stockholders at such meeting or earlier. If reapproval occurs, the Plan will terminate as of the
date of the first meeting of stockholders in the fifth year following reapproval or any subsequent
reapproval. If the Plan terminates under this provision due to lack of reapproval by the
stockholders, no Incentive Bonuses shall be awarded for the Fiscal Year in which the Plan
terminates.
As amended October 9, 2008.
6
Exhibit 10.11
WOLVERINE WORLD WIDE, INC.
AMENDED AND RESTATED
EXECUTIVE LONG-TERM INCENTIVE PLAN
(3-YEAR BONUS PLAN)
EXECUTIVE LONG-TERM INCENTIVE PLAN
(3-YEAR BONUS PLAN)
SECTION 1
Establishment of Plan; Purpose of Plan
1.1 Establishment of Plan. The Company hereby establishes the AMENDED AND RESTATED WOLVERINE
WORLD WIDE, INC. EXECUTIVE LONG-TERM INCENTIVE PLAN (3-YEAR BONUS PLAN) (the “Plan”) for its
executive officers and key management employees. The Plan amends and restates the Wolverine World
Wide, Inc. Amended and Restated Executive Long-Term Incentive Plan (3-Year Bonus Plan) previously
approved by the stockholders at the 2002 Annual Meeting of Stockholders. The Plan provides for the
payment of bonuses to participants based upon the financial performance of the Company, or a
Subsidiary, operating division or profit center, over a 3-year period or part thereof.
1.2 Purpose of Plan. The purpose of the Plan is to encourage longer range strategic planning
and not stress over-dependence on short-term performance which could hinder long-term increases in
stockholder value and/or achievement of a strategic position and/or advantage in the marketplace,
to encourage cooperation among all the units of the Company to foster a closer and more cooperative
association and sense of teamwork and to encourage executive officers and key management
individuals to enter and continue in the employ of the Company. Within that context, the Plan is
intended to provide performance-based compensation under Section 162(m) of the Code and shall be
interpreted and administered to achieve that purpose.
1.3 Effective Date. The Plan is initially effective as of February 8, 2007. Adoption of the
Plan by the Board and payment of Incentive Bonuses pursuant to this Plan shall be contingent upon
approval of the Plan by the stockholders of the Company at the 2007 Annual Meeting of Stockholders
or any adjournment thereof or at a Special Meeting of the Stockholders. In the absence of such
approval, this Plan shall be void.
SECTION 2
Definitions
The following terms have the stated definitions unless a different meaning is plainly required
by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Beneficiary” means the individual, trust or other entity designated by the Participant to
receive any amount payable with respect to the Participant under the Plan after the Participant’s
death. A Participant may designate or change a Beneficiary by filing a signed designation with the
Committee in a form approved by the Committee. A Participant’s will is not effective for this
purpose. If a designation has not been completed properly and filed with the Committee or is
ineffective for any other reason, the Beneficiary shall be the Participant’s Surviving Spouse. If
there is no effective designation and the Participant does not have a Surviving Spouse, the
remaining benefits, if any, shall be paid to the Participant’s estate.
2.3 “Board” means the Board of Directors of the Company.
2.4 “Code” means the Internal Revenue Code of 1986, as amended.
2.5 “Committee” means the Compensation Committee of the Board or such other committee as the
Board shall designate to administer the Plan. The Committee shall consist of at least 2 members
and all of its members shall be “non-employee directors” as defined in Rule 16b-3 issued under the
Act and “outside directors” as defined in the regulations issued under Section 162(m) of the Code.
2.6 “Company” means Wolverine World Wide, Inc., a Delaware corporation, and its successors and
assigns.
2.7 “Fiscal Year” means the fiscal year of the Company for financial reporting purposes as the
Company may adopt from time to time.
2.8 “Incentive Bonus” means a bonus awarded and paid to a Participant for services to the
Company during a 3-year period that is based upon achievement of pre-established financial
objectives by the Company, or a Subsidiary, operating division or profit center.
2.9 “Market Value” shall equal the closing market price of shares of common stock of the
Company on the New York Stock Exchange (or any successor exchange that is the primary stock
exchange for trading of common stock of the Company) on the date of grant or reference, or if the
New York Stock Exchange (or any such successor) is closed on that date, the last preceding date on
which the New York Stock Exchange (or any such successor) was open for trading and on which shares
of common stock of the Company were traded.
2.10 “Participant” means an executive officer or key management employee of the Company or its
Subsidiaries who is designated as a Participant for a 3-year period.
2.11 “Performance” means the level of achievement by the Company or its Subsidiaries,
operating divisions or profit centers of the financial performance criteria established by the
Committee pursuant to Section 5.3.
2.12 “Subsidiary” means any corporation or other entity of which 50% or more of the
outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled
by the Company or by one or more Subsidiaries of the Company.
2.13 “Surviving Spouse” means the spouse of the Participant at the time of the Participant’s
death who survives the Participant. If the Participant and spouse die under circumstances which
prevent ascertainment of the order of their deaths, it shall be presumed for the Plan that the
Participant survived the spouse.
2.14 “Target Bonus” means the bonus goal established by the Committee for each Participant
under Section 5.2(a).
SECTION 3
Administration
3.1 Power and Authority. The Plan shall be administered by the Committee. The Committee may
delegate recordkeeping, calculation, payment and other ministerial or administrative functions to
individuals designated by the Committee, who may be employees of the Company or its Subsidiaries.
Except as limited in this Plan, the Committee shall have all of the express and implied powers and
duties set forth in the Plan and shall have full authority and discretion to interpret the Plan and
to make all other determinations deemed necessary or advisable for the administration of the Plan.
Action may be taken by a written instrument signed by a majority of the members of the Committee
and any action so taken shall be as effective as if it had been taken at a meeting. The Committee
may make such other rules for the conduct of its business and may adopt such other rules, policies
and forms for the administration, interpretation and implementation of the Plan as it deems
advisable. All determinations, interpretations and selections made by the Committee regarding the
Plan shall be final and conclusive.
3.2 Indemnification of Committee Members. Neither any member or former member of the
Committee nor any individual to whom authority is or has been delegated shall be personally
responsible or liable for any act or omission in connection with the performance of powers or
duties or the exercise of discretion or judgment in the administration and implementation of the
Plan. Each individual who is or has been a member of the Committee, or delegated authority by the
Committee, shall be indemnified and held harmless by the Company from and against any cost,
liability or expense imposed or incurred in connection with any act or failure to act under the
Plan. Each such individual shall be justified in relying on information furnished in connection
with the Plan’s administration by any appropriate person or persons.
2
SECTION 4
Participation
4.1 Participation. For each 3-year period, the Committee shall select the executive officers
and key management employees who shall be the Participants for the 3-year period. The Committee
may limit the number of executive officers and key management employees who will be Participants
for a 3-year period. Executive officers and key management employees shall be designated as
Participants within the first 90 days of any 3-year period; provided, that an officer or key
employee who is first employed by the Company or a Subsidiary during any 3-year period or who is
assigned new duties during any 3-year period may be designated as a Participant for a performance
period commencing on the date the officer or key employee assumes his or her new duties through the
end of the 3-year period.
4.2 Continuing Participation. Selection as a Participant for a 3-year period or part thereof
by the Committee is limited to that 3-year period. An eligible executive officer or key management
employee will be a Participant for a 3-year period only if designated as a Participant by the
Committee for such 3-year period.
SECTION 5
Performance Goals and Criteria
5.1 Concept. The primary concept of the Plan is to establish financial performance goals for
each 3-year time period for the Company. The performance periods are overlapping, beginning every
Fiscal Year and ending 3 full Fiscal Years later. The Plan provides for the payment of bonuses to
participants based upon the financial performance of the Company over the 3-year period or part
thereof.
5.2 Selection of Criteria. The Committee shall pre-establish performance goals for each
Participant or group of Participants in the manner and within the time limits specified in this
Section 5. For each Participant or group of Participants for each 3-year period or part thereof,
the Committee shall specify:
(a) Target Bonus. A Target Bonus, expressed as a specified dollar amount or as a
percentage of the Participant’s average annual earned salary;
(b) Incentive Bonus. The Incentive Bonus levels, expressed as a percentage of
the Target Bonus, that shall be paid to the Participant at specified levels of
Performance by the Company based on the criteria established by the Committee pursuant
to Section 5.3;
(c) Performance Measurement. The applicable measurement of Performance under
Section 5.3; and
(d) Conditions on Incentive Bonus. Any specific conditions under which an
Incentive Bonus specified under (b) above may be reduced or forfeited (but not
increased).
The Incentive Bonus levels specified under (b) above may be expressed either as (i) a matrix of
percentages of the Target Bonus that will be paid at specified levels of Performance or (ii) a
mathematical formula that determines the percentage of the Target Bonus that will be paid at
varying levels of Performance.
5.3 Measurement of Performance. Performance of the Company and/or its Subsidiaries, operating
divisions or profit centers shall be determined by reference to one or more of the following: net
earnings, net earnings before taxes, operating income, revenues, net sales, net sales and other
operating income, return on sales, return on equity, earnings per share, total stockholder return,
economic value added measurements, return on assets, return on invested capital or any of the
foregoing before or after the effect of acquisitions, divestitures, accounting changes,
restructuring, or other special charges or extraordinary items. These factors could be measured
against pre-determined levels or the Company’s relative performance when compared to a
pre-established peer group.
5.4 Incentive Bonus Conditioned on Performance. Payment of an Incentive Bonus to a
Participant for a 3-year period or part thereof under this Plan shall be entirely contingent upon
the Performance criteria established by the Committee pursuant to this Section 5, the satisfaction
of which is substantially uncertain when established by the Committee for the 3-year period or part
thereof.
3
5.5 Time of Determination by Committee. All determinations to be made by the Committee for a
3-year period or part thereof pursuant to this Section 5 shall be made by the Committee during the
shorter of the first 90 days of such performance period and the period ending on the date on which
25 percent of the performance period has elapsed.
5.6 Objective Standards. An Incentive Bonus shall be based solely upon objective criteria,
consistent with this Section 5, from which an independent third party with knowledge of the facts
could determine whether the performance goal or range of goals is met and from that determination
could calculate the Incentive Bonus to be paid. Although the Committee has authority to exercise
reasonable discretion to interpret this Plan and the criteria it shall specify pursuant to this
Section 5 of the Plan, it may not amend or waive such criteria after the shorter of the period
ending on the 90th day of a performance period or part thereof or the date on which 25 percent of
the performance period has elapsed. The Committee shall have no authority or discretion to
increase any Incentive Bonus or to construct, modify or apply the measurement of Performance in a
manner that will directly or indirectly increase the Incentive Bonus for any Participant for any
3-year period or part thereof above the amount determined by the applicable objective standards
established within the time periods set forth in this Section. The Committee may exercise negative
discretion to decrease or eliminate any Incentive Bonus.
SECTION 6
Determination and Payment of Incentive Bonuses
6.1 Committee Certification. The Incentive Bonus for each eligible Participant for a 3-year
period or part thereof shall be determined on the basis of the Target Bonus and Performance
criteria established by the Committee pursuant to Section 5. The Committee shall determine, and
shall certify in writing prior to payment of any Incentive Bonus, that the Company Performance for
the 3-year period or part thereof satisfied the Performance criteria established by the Committee
for the period. Approved minutes of the Committee shall constitute sufficient written
certification for this purpose.
6.2 Partial Period Performance Adjustments. The Incentive Bonus otherwise payable to a
Participant for a 3-year period or part thereof shall be adjusted as follows:
(a) Retirement, Death or Total Disability. If a Participant ceases to be a
Participant before the end of any 3-year period and more than 12 months after the
beginning of such 3-year period because of death, normal or early retirement under the
Company’s retirement plan, as then in effect, or total disability under the Company’s
long-term disability plan, an award shall be paid to the Participant or the
Participant’s Beneficiary after the end of such 3-year period prorated as follows: the
award, if any, for such 3-year period shall be equal to 100% of the Incentive Bonus
that the Participant would have received if the Participant had been a Participant
during the entire performance period, multiplied by the ratio of the Participant’s
full months as a Participant during that performance period to the total number of
months in that performance period. The award, if any, shall only be made in the form
of a cash payout. Notwithstanding the foregoing, the Committee shall have discretion
to reduce or eliminate any Incentive Bonus otherwise payable pursuant to this Section.
(b) Reassignment of Duties. If a Participant is reassigned employment duties
before the end of any 3-year period, an award shall be paid to the Participant after
the end of such 3-year period prorated as follows: the award shall be equal to 100% of
the Incentive Bonus that the Participant would have received if the Participant had
been a Participant during the entire performance period, multiplied by the ratio of
the Participant’s full months as a Participant during that performance period prior to
the reassignment to the total number of months in that performance period. If such
Participant is designated as a Participant in his or her new position, an additional
award shall be paid to the Participant after the end of such 3-year period prorated as
follows: the award shall be equal to 100% of the Incentive Bonus that the Participant
would have received if the Participant had been a Participant during the entire
performance period, multiplied by the ratio of the Participant’s months as a
Participant during that performance period after the reassignment (rounded up to the
next full month) to the total number of months in that performance period.
(c) Other Termination. If an employee ceases to be a Participant during any
3-year period(s), or prior to actual receipt of the award for a previous period
because of the Participant’s termination of employment for any reason other than
described in Section 6.2(a), the Participant will not be entitled to any award for
such 3-year period. If a Participant continues in Wolverine’s employment but no
longer is approved by the Committee to participate in future 3-year periods, the
Participant shall be eligible for a prorated award determined in the same manner set
forth in Section 6.2(a). Notwithstanding the foregoing, the Committee shall have
discretion to reduce or eliminate any Incentive Bonus otherwise payable pursuant to
this Section.
4
6.3 Maximum Incentive Bonus. The Incentive Bonus for any Participant for a 3-year period
shall not, in any event, exceed $1,800,000.
6.4 Payment to Participant or Beneficiary. The Incentive Bonus of each Participant shall be
paid to the Participant, or the Beneficiary of any deceased Participant, by the Company as soon as
feasible following final determination and certification by the Committee of the amount payable;
provided, however, in no event will the Incentive Bonus be paid later than the fifteenth day of the
third month following the end of the third Fiscal Year of the Incentive Bonus 3-year period for
which the Performance criteria have been satisfied.
6.5 Manner of Payment. Unless the Committee determines otherwise, each Participant will
receive his or her Incentive Bonus in cash. The Committee may, in its discretion, determine to pay
all or part of a Participant’s Incentive Bonus in the form of stock (restricted or unrestricted).
The Company will make the cash payment as soon as feasible following final determination and
certification by the Committee of the amount payable; provided, however, in no event will the
Incentive Bonus be paid later than the fifteenth day of the third month following the end of the
third Fiscal Year of the Incentive Bonus 3-year period for which the Performance criteria have been
satisfied.
6.6 Stock Payment. The Committee may determine to pay all or part of an Incentive Bonus using
restricted or unrestricted stock. In such a case, each Participant will receive a grant of stock
under the Company’s existing stockholder approved plans on the same date the cash payment is made
pursuant to Section 6.5. The number of shares of stock a Participant shall receive will equal the
Incentive Bonus (or part thereof) divided by the Market Value of the Company’s common stock on the
date of grant, rounded to the nearest whole share. Each award of stock shall be evidenced by a
stock agreement containing such terms and conditions, including vesting schedules, consistent with
the provisions of this Plan and the plan under which the stock is so awarded.
SECTION 7
General Provisions
7.1 Benefits Not Guaranteed. Neither the establishment and maintenance of the Plan nor
participation in the Plan shall provide any guarantee or other assurance that an Incentive Bonus
will be payable under the Plan.
7.2 No Right to Participate. Nothing in this Plan shall be deemed or interpreted to provide a
Participant or any non-participating employee any contractual right to participate in or receive
benefits under the Plan. No designation of an employee as a Participant for any 3-year period
shall create a right to an Incentive Bonus under the Plan for any other 3-year period. There is no
obligation of uniformity of treatment of employees, eligible officers or Participants under the
Plan.
7.3 No Employment Right. Participation in this Plan shall not be construed as constituting a
commitment, guarantee, agreement or understanding of any kind that the Company or any Subsidiary
will continue to employ any individual and this Plan shall not be construed or applied as an
employment contract or obligation. Nothing in this Plan shall abridge or diminish the rights of
the Company or any Subsidiary to determine the terms and conditions of employment of any
Participant, officer or other employee or to terminate the employment of any Participant, officer
or other employee with or without reason at any time.
7.4 No Assignment or Transfer. Neither a Participant nor any Beneficiary or other
representative of a Participant shall have any right to assign, transfer, attach or hypothecate any
amount or credit, potential payment or right to future payments of any amount or credit or any
other benefit provided under this Plan. Payment of any amount due or to become due under this Plan
shall not
be subject to the claims of creditors of the Participant or to execution by attachment or
garnishment or any other legal or equitable proceeding or process.
5
7.5 No Limit on Other Compensation Arrangements. Nothing contained in this Plan shall prevent
the Company or any Subsidiary from adopting or continuing in effect other or additional
compensation arrangements. A Participant may have other targets under other plans of the Company.
However, no payment under any other plan or arrangement shall be contingent upon failure to attain
the criteria for payment of an Incentive Bonus under this Plan.
7.6 Withholding and Payroll Taxes. The Company shall deduct from any payment made under this
Plan all amounts required by federal, state, local and foreign tax laws to be withheld and shall
subject any payments made under the Plan to all applicable payroll taxes and assessments.
7.7 Incompetent Payee. If the Committee determines that an individual entitled to a payment
under this Plan is incompetent, it may cause benefits to be paid to another individual for the use
or benefit of the Participant or Beneficiary at the time or times otherwise payable under this Plan
in total discharge of the Plan’s obligations to the Participant or Beneficiary.
7.8 Governing Law. The validity, construction and effect of the Plan shall be determined in
accordance with the laws of the State of Michigan and applicable federal law.
7.9 Severability. In the event any provision of the Plan shall be held illegal or invalid for
any reason, the remaining provisions of the Plan shall not be affected and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been included.
SECTION 8
Termination and Amendment
The Board may terminate the Plan at any time or may from time to time amend the Plan as it
deems proper and in the best interests of the Company. No amendment adopted after the shorter of
the period ending on the 90th day of a performance period or the date on which 25 percent of the
performance period has elapsed may directly or indirectly increase the amount of any Incentive
Bonus, or alter the objective criteria in a manner which will increase any Incentive Bonus, for
that 3-year period or part thereof. Except as otherwise provided in this Plan and the applicable
objective criteria established pursuant to this Plan for determining the amount of any Incentive
Bonus for a 3-year period or part thereof, no Incentive Bonuses shall be payable for the 3-year
period in which the Plan is terminated, or, if later, in which the termination is effective.
SECTION 9
Duration of the Plan
Subject to earlier termination by the Board, this Plan shall terminate without action by the
Board as of the date of the first meeting of the stockholders in 2012 unless reapproved by the
stockholders at that meeting or any earlier meeting. If reapproval occurs, the Plan will terminate
as of the date of the first meeting of the stockholders in the fifth year following reapproval and
each subsequent reapproval unless reapproved on or before the termination date. If the Plan
terminates under this provision due to lack of reapproval by the stockholders, Incentive Bonuses
shall be paid for the 3-year periods already commenced before the date of termination of the Plan,
except for the 3-year period that initially began in the year the Plan terminates.
As amended October 9, 2008.
6
Exhibit 10.13
Exhibit 10.13
The following current executive officers have entered into Executive Severance Agreements with
the Company in the form filed herewith. The information listed below is inserted into the blanks
for the respective executive officer’s Executive Severance Agreement.
| Salary Multiplier | Change of Control | |||||
| Rate | Termination Period | Continuation Period | ||||
| (Section 4(a)(4)) | (Section 1(a)) | (Section 2) | ||||
Blake W. Krueger |
3 | 3 years | 36 months | |||
Kenneth A. Grady |
2 | 2 years | 24 months | |||
Donald T. Grimes |
2 | 2 years | 24 months | |||
Pamela L. Linton |
2 | 2 years | 24 months | |||
Michael F. McBreen |
2 | 2 years | 24 months | |||
James D. Zwiers |
2 | 2 years | 24 months |
Exhibit 10.26
Option No.:
|
Grantee: | |
Grant Date:
|
Expiration Date: | |
Number of Shares:
|
Exercise Price: |
WOLVERINE WORLD WIDE, INC.
NON-QUALIFIED
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT
PURSUANT TO
2005 STOCK INCENTIVE PLAN
This Non-qualified Stock Option Agreement (the “Agreement”) is made as of the Grant Date set
forth above by and between WOLVERINE WORLD WIDE, INC. (“Wolverine”), and the grantee named above
(the “Grantee”).
The Wolverine World Wide, Inc. 2005 Stock Incentive Plan (the “Plan”) is administered by the
Compensation Committee of Wolverine’s Board of Directors (the “Committee”). The Committee has
determined that Grantee is eligible to participate in the Plan. The Committee grants to the Grantee
an option to purchase shares of Wolverine’s common stock, $1 par value (“Common Stock), from
Wolverine. This option is a non-qualified option and is not an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). All of the rights of
the Grantee are subject to the terms, conditions and provisions of the Plan, which are incorporated
by reference into this Agreement. Unless otherwise indicated, all terms used in this Agreement
shall have the meanings given such terms in the Plan.
The Grantee acknowledges receipt of a copy of the Plan and the Plan Description and accepts
this option subject to all of the terms, conditions and provisions of the Plan, and subject to the
following further conditions:
1. Price. The price of the shares of Common Stock to be purchased upon exercise of
this option shall be Dollars ( ) per share (subject to adjustment as provided in
the Plan).
2. Term and Delayed Vesting. The right to exercise this option begins on the Grant
Date shown above and shall terminate on the Expiration Date shown above, unless earlier terminated
under the Plan by reason of termination of employment or officer status. The Grantee’s right to
exercise this option shall vest as follows: one-third of the shares optioned under this Agreement
shall vest at the end of the first, second, and third year anniversary following the date of this
Agreement, respectively. The Committee may, in its sole discretion, accelerate vesting of the
option at any time before full vesting. The Grantee shall deliver to Wolverine at the time of
payment an executed notice of exercise in the form of Exhibit A, which shall be
effective upon receipt by the Chief Financial Officer at Wolverine’s main office, accompanied by
full payment (as set forth below) of the option price. Wolverine will deliver to the Grantee such
shares in certificate or electronic form; provided, however, that the time of delivery may be
postponed for such period as may be required for Wolverine with reasonable diligence to comply with
any registration requirements under the Securities Act of 1933, the Securities Exchange Act of
1934, any requirements under any other law or regulation applicable to the issuance, listing or
transfer of such shares, or any agreement or regulation of the New York Stock Exchange or the
Pacific Exchange. If the Grantee fails to accept delivery of and pay for all or any part of the
number of shares specified in the notice upon tender or delivery of the shares, the Grantee’s right
to exercise the option with respect to such undelivered shares shall terminate.
3. Registration and Listing. The stock options granted under this
Agreement are conditional upon (a) the effective registration or exemption of the Plan, the options
granted under the Plan and the stock to be received upon exercise of options under the Securities
Act of 1933 and applicable state or foreign securities laws, and (b) the effective listing of the
stock on the New York Stock Exchange and the Pacific Exchange.
4. Exercise. Grantee shall exercise this option by giving Wolverine a written notice
of the exercise of this option in the form of Exhibit A hereto. The notice shall
set forth the number of shares to be purchased. The notice shall be effective when received by the
Chief Financial Officer at Wolverine’s main office, accompanied by full payment (as set forth
below) of the option price. Wolverine will deliver to Grantee a certificate or certificates for
such shares: provided, however, that the time of delivery may be postponed for such period as may
be required for Wolverine with reasonable diligence to comply with any registration requirements
under the Securities Act of 1933, the Securities Exchange Act of 1934, any requirements under any
other law or regulation applicable to the issuance, listing or transfer of such shares, or any
agreement or regulation of the New York Stock Exchange and the Pacific Exchange. If Grantee fails
to accept delivery of and pay for all or any part of the number of shares specified in the notice
upon tender or delivery of the shares, Grantee’s rights to exercise the option with respect to such
undelivered shares shall terminate.
5. Payment by Grantee. The exercise price for each share purchased
under this option shall be payable in cash (or by certified check, bank draft or money order), in
shares of Common Stock (including Common Stock to be received upon a simultaneous exercise) or, if
the Committee consents, in other consideration substantially equivalent to cash. The Committee may
permit payment of all or a portion of the exercise price in the form of a promissory note or
installments according to terms approved by the Committee and under the terms of Wolverine’s then
existing Stock Option Loan Program. The Board of Directors of Wolverine may restrict or suspend
the power of the Committee to permit such loans and may require that adequate security be provided.
6. Tax Withholding. Wolverine or one of its subsidiaries shall be entitled to
(a) withhold and deduct from the Grantee’s future wages (or from other amounts that may be due and
owing to the Grantee from Wolverine or a subsidiary), or make other arrangements for the collection
of, all legally required amounts necessary to satisfy any and all federal, state, local and foreign
withholding and employment-related taxes attributable to the option granted under this Agreement,
including, without limitation, the grant, exercise, or vesting of the option; or (b) require the
Grantee promptly to remit the amount of such withholding to Wolverine or a subsidiary before taking
any action with respect to the option. Unless the Committee provides otherwise, withholding may be
satisfied by withholding Common Stock to be received upon exercise or by delivery to Wolverine of
previously owned Common Stock.
7. Transferability. This option shall not be sold, exchanged, transferred, pledged,
assigned or otherwise alienated or hypothecated during the term of the option except by will or the
laws of descent or distribution, except that the Grantee may transfer or assign the option to the
Grantee and Grantee’s spouse as joint tenants with right of survivorship, or to a revocable grantor
trust established by the employee, or other acceptable form of ownership approved by the Committee
in which the option is considered to continue to be beneficially owned by the employee for Federal
income tax purposes and for purposes of the Federal securities laws as they may be amended from
time to time. As a condition to the transfer or assignment of the option, the transferee must
execute a written agreement permitting Wolverine or a subsidiary to withhold from the shares
subject to the option a number of shares having a Market Value at least equal to the amount of any
federal, state, local or foreign withholding or other taxes associated with or resulting from the
exercise of the option and agreeing to the terms and conditions and restrictions under which the
option is issued under the Plan and the Agreement.
8. Acceleration. This option shall be immediately exercisable in the event of any
Change in Control of Wolverine. “Change in Control” is defined in the Plan.
9. Termination of Employment or Officer
Status. This option shall terminate at the times provided in the Plan after the death or
termination of the employment or officer status of the Grantee with Wolverine or any of its
Subsidiaries, except as otherwise set forth in this Section. Notwithstanding, any provisions
contained in the Plan, a portion of this option shall vest and be immediately exercisable upon the
following events resulting in termination of employment or officer status: (a) death; (b)
disability (as defined in Wolverine’s Long-Term Disability Plan); or (c) voluntary termination by a
Participant of all employment and/or officer status with Wolverine and its subsidiaries after the
Participant has attained (i) 50 years of age and seven years of service (as an employee and/or
officer of Wolverine or its Subsidiaries), (ii) 62 years of age, or (iii) such other age, period or
conditions of service as may be determined by the Committee in its sole discretion, (collectively
any of (a), (b), or (c) shall be an “Acceleration Event”). Upon the occurrence of an Acceleration
Event, the percentage of this option that shall vest and be immediately exercisable shall be
determined by dividing the number of full calendar months between the date of this Agreement and
the date of the Acceleration Event by 12 and in no event may the percentage accelerated exceed
100%. For example, if a stock option grant occurs on February 15 of a given year and the
Acceleration Event occurs on November 15 of such year, 66.67% of the option would be accelerated (8
full calendar months divided by 12) upon the occurrence of the Accelerated Event.
10. Corporate Changes. In the event of any stock dividend, stock split or
other increase or reduction in the number of shares of Common Stock outstanding, the number and
class of shares covered by this option, and the exercise price, are subject to adjustment as
provided in the Plan.
11. Administration. The Committee has full power and authority to interpret the
provisions of the Plan, to supervise the administration of the Plan and to adopt forms and
procedures for the administration of the Plan, except as limited by the Plan or as may be necessary
to assure that the Plan provides performance-based compensation under Section 162(m) of the Code.
All determinations made by the Committee shall be final and conclusive.
12. Stockholder Rights. The Grantee shall have no rights as a stockholder
with respect to any shares covered by this option until the date of the issuance of a stock
certificate to the Grantee for such shares.
13. Employment by Wolverine. The grant of this option shall not
impose upon Wolverine or any subsidiary any obligation to retain the Grantee in its employ for any
given period or upon any specific terms of employment. Wolverine or any subsidiary may at any time
dismiss the Grantee from employment, free from any liability or claim under the Plan, unless
otherwise expressly provided in any written agreement with the Grantee.
14. Illegality. The Grantee will not exercise this option, and Wolverine will not be
obligated to issue any shares to the Grantee under this option, if the exercise thereof or the
issuance of such shares shall constitute a violation by the Grantee or Wolverine of any provisions
of any law, order or regulation of any governmental authority.
15. Certifications. The Grantee acknowledges that he or she has been furnished and
has read the most recent Annual Report to Stockholders of Wolverine and the Plan Description
relating to the Plan. The Grantee hereby represents and warrants that the Grantee is acquiring the
option granted under this Agreement for the Grantee’s own account and investment and without any
intent to resell or distribute the shares upon exercise of the option. The Grantee shall not
resell or distribute the shares received upon exercise of the option except in compliance with such
conditions as Wolverine may reasonably specify to ensure compliance with federal and state
securities laws.
16. Agreement Controls. In the event of any conflict between the terms of
this Agreement and the terms of the Plan, the provisions of this Agreement shall control.
17. Effective Date. This option shall be effective as of the date set forth
at the top of this Agreement.
This option has been issued by the Compensation Committee of Wolverine.
| WOLVERINE WORLD WIDE, INC. | ||||
| Executive Vice President and Chief Financial Officer | ||||
| “Wolverine” | ||||
| X | ||||
| (Signature) | ||||
| “Grantee” |
Exhibit 10.27
Option No.:
|
Grantee: | |
Grant Date:
|
Expiration Date: | |
Number of Shares:
|
Exercise Price: |
WOLVERINE WORLD WIDE, INC.
NON-QUALIFIED
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT
PURSUANT TO
2005 STOCK INCENTIVE PLAN
This Non-qualified Stock Option Agreement (the “Agreement”) is made as of the Grant Date set
forth above by and between WOLVERINE WORLD WIDE, INC. (“Wolverine”), and the grantee named above
(the “Grantee”).
The Wolverine World Wide, Inc. 2005 Stock Incentive Plan (the “Plan”) is administered by the
Compensation Committee of Wolverine’s Board of Directors (the “Committee”). The Committee has
determined that Grantee is eligible to participate in the Plan. The Committee grants to the Grantee
an option to purchase shares of Wolverine’s common stock, $1 par value (“Common Stock), from
Wolverine. This option is a non-qualified option and is not an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). All of the rights of
the Grantee are subject to the terms, conditions and provisions of the Plan, which are incorporated
by reference into this Agreement. Unless otherwise indicated, all terms used in this Agreement
shall have the meanings given such terms in the Plan.
The Grantee acknowledges receipt of a copy of the Plan and the Plan Description and accepts
this option subject to all of the terms, conditions and provisions of the Plan, and subject to the
following further conditions:
1. Price. The price of the shares of Common Stock to be purchased upon exercise of
this option shall be _____ Dollars (_____) per share (subject to adjustment as provided in
the Plan).
2. Term and Delayed Vesting. The right to exercise this option begins on the Grant
Date shown above and shall terminate on the Expiration Date shown above, unless earlier terminated
under the Plan by reason of termination of employment or officer status. The
Grantee’s right to exercise this option shall vest as follows: one-third of the shares optioned
under this Agreement shall vest at the end of the first, second, and third year anniversary
following the date of this Agreement, respectively. The Committee may, in its sole discretion,
accelerate vesting of the option at any time before full vesting. The Grantee shall deliver to
Wolverine at the time of payment an executed notice of exercise in the form of Exhibit
A, which shall be effective upon receipt by the Chief Financial Officer at Wolverine’s main
office, accompanied by full payment (as set forth below) of the option price. Wolverine will
deliver to the Grantee such shares in certificate or electronic form; provided, however, that the
time of delivery may be postponed for such period as may be required for Wolverine with reasonable
diligence to comply with any registration requirements under the Securities Act of 1933, the
Securities Exchange Act of 1934, any requirements under any other law or regulation applicable to
the issuance, listing or transfer of such shares, or any agreement or regulation of the New York
Stock Exchange. If the Grantee fails to accept delivery of and pay for all or any part of the
number of shares specified in the notice upon tender or delivery of the shares, the Grantee’s right
to exercise the option with respect to such undelivered shares shall terminate.
3. Registration and Listing. The stock options granted under this
Agreement are conditional upon (a) the effective registration or exemption of the Plan, the options
granted under the Plan and the stock to be received upon exercise of options under the Securities
Act of 1933 and applicable state or foreign securities laws, and (b) the effective listing of the
stock on the New York Stock Exchange and the Pacific Exchange.
4. Exercise. Grantee shall exercise this option by giving Wolverine a written notice
of the exercise of this option in the form of Exhibit A hereto. The notice shall
set forth the number of shares to be purchased. The notice shall be effective when received by the
Chief Financial Officer at Wolverine’s main office, accompanied by full payment (as set forth
below) of the option price. Wolverine will deliver to Grantee a certificate or certificates for
such shares: provided, however, that the time of delivery may be postponed for such period as may
be required for Wolverine with reasonable diligence to comply with any registration requirements
under the Securities Act of 1933, the Securities Exchange Act of 1934, any requirements under any
other law or regulation applicable to the issuance, listing or transfer of such shares, or any
agreement or regulation of the New York Stock Exchange and the Pacific Exchange. If Grantee fails
to accept delivery of and pay for all or any part of the number of shares specified in the notice
upon tender or delivery of the shares, Grantee’s rights to exercise the option with respect to such
undelivered shares shall terminate.
5. Payment by Grantee. The exercise price for each share purchased
under this option shall be payable in cash (or by certified check, bank draft or money order), in
shares of Common Stock (including Common Stock to be received upon a simultaneous exercise) or, if
the Committee consents, in other consideration substantially equivalent to cash. The Committee may
permit payment of all or a portion of the exercise price in the form of a promissory note or
installments according to terms approved by the Committee and under the term’s of Wolverine’s then
existing Stock Option Loan Program. The
Board of Directors of Wolverine may restrict or suspend the power of the Committee to permit such
loans and may require that adequate security be provided.
6. Tax Withholding. Wolverine or one of its subsidiaries shall be entitled to
(a) withhold and deduct from the Grantee’s future wages (or from other amounts that may be due and
owing to the Grantee from Wolverine or a subsidiary), or make other arrangements for the collection
of, all legally required amounts necessary to satisfy any and all federal, state, local and foreign
withholding and employment-related taxes attributable to the option granted under this Agreement,
including, without limitation, the grant, exercise, or vesting of the option; or (b) require the
Grantee promptly to remit the amount of such withholding to Wolverine or a subsidiary before taking
any action with respect to the option. Unless the Committee provides otherwise, withholding may be
satisfied by withholding Common Stock to be received upon exercise or by delivery to Wolverine of
previously owned Common Stock.
7. Transferability. This option shall not be sold, exchanged, transferred, pledged,
assigned or otherwise alienated or hypothecated during the term of the option except by will or the
laws of descent or distribution.
8. Acceleration. This option shall be immediately exercisable in the event of any
Change in Control of Wolverine. “Change in Control” is defined in the Plan.
9. Termination of Employment or Officer Status.
This option shall terminate at the times provided in the Plan after the death or termination of the
employment or officer status of the Grantee with Wolverine or any of its Subsidiaries, except as
otherwise set forth in this Section. Notwithstanding, any provisions contained in the Plan, a
portion of this option shall vest and be immediately exercisable upon the following events
resulting in termination of employment or officer status: (a) death; (b) disability (as defined in
Wolverine’s Long-Term Disability Plan); or (c) voluntary termination by a Participant of all
employment and/or officer status with Wolverine and its subsidiaries after the Participant has
attained (i) 50 years of age and seven years of service (as an employee and/or officer of Wolverine
or its Subsidiaries), (ii) 62 years of age, or (iii) such other age, period or conditions of
service as may be determined by the Committee in its sole discretion, (collectively any of (a),
(b), or (c) shall be an “Acceleration Event”). Upon the occurrence of an Acceleration Event, the
percentage of this option that shall vest and be immediately exercisable shall be determined by
dividing the number of full calendar months between the date of this Agreement and the date of the
Acceleration Event by 12 and in no event may the percentage accelerated exceed 100%. For example,
if a stock option grant occurs on February 15 of a given year and the Acceleration Event occurs on
November 15 of such year, 66.67% of the option would be accelerated (8 full calendar months divided
by 12) upon the occurrence of the Accelerated Event.
10. Corporate Changes. In the event of any stock dividend, stock split or
other increase or reduction in the number of shares of Common Stock outstanding, the number and
class of shares covered by this option, and the exercise price, are subject to adjustment as
provided in the Plan.
11. Administration. The Committee has full power and authority to interpret the
provisions of the Plan, to supervise the administration of the Plan and to adopt forms and
procedures for the administration of the Plan, except as limited by the Plan or as may be necessary
to assure that the Plan provides performance-based compensation under Section 162(m) of the Code.
All determinations made by the Committee shall be final and conclusive.
12. Stockholder Rights. The Grantee shall have no rights as a stockholder
with respect to any shares covered by this option until the date of the issuance of a stock
certificate to the Grantee for such shares.
13. Employment by Wolverine. The grant of this option shall not
impose upon Wolverine or any subsidiary any obligation to retain the Grantee in its employ for any
given period or upon any specific terms of employment. Wolverine or any subsidiary may at any time
dismiss the Grantee from employment, free from any liability or claim under the Plan, unless
otherwise expressly provided in any written agreement with the Grantee.
14. Illegality. The Grantee will not exercise this option, and Wolverine will not be
obligated to issue any shares to the Grantee under this option, if the exercise thereof or the
issuance of such shares shall constitute a violation by the Grantee or Wolverine of any provisions
of any law, order or regulation of any governmental authority.
15. Certifications. The Grantee acknowledges that he or she has been furnished and
has read the most recent Annual Report to Stockholders of Wolverine and the Plan Description
relating to the Plan. The Grantee hereby represents and warrants that the Grantee is acquiring the
option granted under this Agreement for the Grantee’s own account and investment and without any
intent to resell or distribute the shares upon exercise of the option. The Grantee shall not
resell or distribute the shares received upon exercise of the option except in compliance with such
conditions as Wolverine may reasonably specify to ensure compliance with federal and state
securities laws.
16. Agreement Controls. In the event of any conflict between the terms of
this Agreement and the terms of the Plan, the provisions of this Agreement shall control.
17. Effective Date. This option shall be effective as of the date set forth
at the top of this Agreement.
This option has been issued by the Compensation Committee of Wolverine.
| WOLVERINE WORLD WIDE, INC. | ||||||
| Donald T. Grimes | ||||||
| Senior Vice President and Chief Financial Officer | ||||||
| “Wolverine” | ||||||
| X | ||||||
| (Print Name) | ||||||
| “Grantee” | ||||||
Exhibit 10.28
Employee:
|
Number of Shares: | |
| Date of Award: | ||
| Performance Restricted Stock Number: | ||
| Performance Period: |
PERFORMANCE SHARE AWARD AGREEMENT
This Performance Share Award Agreement (“Agreement”) is made as of the award date
set forth above, between WOLVERINE WORLD WIDE, INC., a Delaware corporation
(“Wolverine” or the “Company”), and the employee named above (“Employee”).
Wolverine World Wide, Inc. has an Amended and Restated Executive Long-Term
Incentive Plan (3-Year Bonus Plan) that the Compensation Committee of Wolverine’s
Board of Directors (the “Committee”) administers. The Committee makes long term
incentive awards to encourage longer range strategic planning, cooperation among all
the units of the Company, and executive officers and key management individuals to
enter and continue in the employ of the Company. Wolverine has an Amended and
Restated Stock Incentive Plan of 2005 (the “Plan”) that also is administered by the
Committee, under which the Committee may award restricted stock as all or part of a
long term incentive award. Both the 3-Year Bonus Plan and the Plan have been approved
by the Company’s shareholders.
The Committee has determined that Employee is eligible to participate in the Plan
for a long term incentive award. The Committee has awarded to Employee shares of
Wolverine’s common stock subject to terms, conditions and restrictions contained in
this Agreement and in the Plan (the “Performance Share Award”). Employee acknowledges
receipt of a copy of the Plan and accepts this Performance Share Award subject to all
of those terms, conditions and restrictions.
1. Award. Wolverine hereby awards to Employee a number of shares of
Wolverine’s common stock, $1 par value, as set forth above (the “Performance
Restricted Stock”). The Performance Restricted Stock is subject to the restrictions
imposed under this Agreement and the Plan (“Stock Restrictions”). The periods during
which Performance Restricted Stock is subject to the Stock Restrictions shall be known
as “Restricted Periods.” Unless otherwise determined by the Committee, Employee’s
“Incentive Award” will be the number of shares of Performance Restricted Stock on
which the Stock Restrictions shall lapse.
2. Transferability. Until the Stock Restrictions lapse as set forth in
section 3 below, the Plan provides that Performance Restricted Stock is generally not
transferable by Employee except by will or according to the laws of descent and
distribution. The Plan further provides that all rights with respect to the
Performance Restricted Stock are exercisable during Employee’s lifetime only by
Employee, Employee’s guardian, or legal representative. Wolverine shall place an
appropriate legend upon any certificate representing shares of Performance Restricted
Stock and may also issue appropriate stop transfer instructions to its transfer agent
with respect to such shares.
3. Lapsing of Restrictions. Except as otherwise provided in this
Agreement or by action of the Committee, the Stock Restrictions imposed on the
Performance Restricted Stock shall lapse as set forth in Schedule 1.
4. Registration and Listing; Securities Laws.
(a) The Performance Share Award is conditioned upon (i) the effective
registration or exemption of the Plan and the Performance Restricted Stock granted
there under the Securities Act of 1933 and applicable state or foreign securities
laws, and (ii) the effective listing of the common stock on the New York Stock
Exchange.
(b) Employee hereby represents and warrants that Employee is receiving the
Performance Restricted Stock for Employee’s own account and investment and without any
intent to resell or distribute the Performance Restricted Stock. Employee shall not
resell or distribute the Performance Restricted Stock after any Restricted Period
except in compliance with such conditions as Wolverine may reasonably specify to
ensure compliance with federal and state securities laws.
5. Termination of Employment Status.
(a) Except as set forth in subsection (b), Employee:
(i) must be an employee of the Company or one of its Subsidiaries at the time
the Committee certifies the achievement of the Performance Period performance
criteria for the Stock Restrictions to lapse on any portion of the Performance
Share Award (the performance criteria being Cumulative BVA and Cumulative EPS, as
defined in Schedule 1); and
(ii) shall forfeit the entire Performance Share Award if, before such
certification, Employee’s employment with Wolverine and its Subsidiaries
terminates (the “Employment Termination”) or the Committee terminates Employee’s
Performance Share Award for the Performance Period (“Award Termination”).
(b) If the Employment Termination is:
(i) due to Employee’s:
(1) disability (as defined in Wolverine’s long-term disability plan);
(2) death;
(2) death;
(3) voluntary termination after Employee has attained 50 years of age and
seven years of service as an employee of Wolverine or its Subsidiaries, or 62
years of age, or such other age or years of service as may be determined by the
Committee in its sole discretion; or
(ii) due to such other circumstances as the Committee in its discretion
allows;
then the number of shares of Performance Restricted Stock on which the Stock
Restrictions lapse at the end of the Performance Period shall be calculated as set
forth in subsection (c) or in such other manner as the Committee directs. If there is
an Award Termination, the Committee may in its discretion allow the Stock Restrictions
to lapse on some or all of the Performance Restricted Stock, calculated as set forth
in subsection (c) or in such other manner as the Committee directs.
(c) As soon as reasonably practicable following the end of the Performance
Period, the Committee shall calculate, as set forth in Schedule 1, the number of
shares on which the Stock Restrictions would have lapsed if Employee’s employment or
Performance Share Award had not been terminated prior to the certification. That
number of shares shall then be multiplied by a fraction, the numerator of which shall
be the number of full months during the Performance Period prior to the Employment
Termination or Award Termination (as applicable) and the denominator of which shall be
the total number of months in the Performance Period. The result of the calculation
in the preceding sentence shall be the Employee’s “Prorated Incentive Award” for the
Performance Period, which will be the number of shares of Performance Restricted Stock on which the Stock Restrictions shall lapse. The
remainder of the Performance Share Award shall be forfeited.
2
6. Employment by Wolverine. The award of Performance Restricted Stock
under this Agreement shall not impose upon Wolverine or any of its Subsidiaries any
obligation to retain Employee in its employ for any given period or upon any specific
terms of employment. Wolverine or any of its Subsidiaries may at any time dismiss
Employee from employment, free from any liability or claim under the Plan or this
Agreement, unless otherwise expressly provided in any written agreement with Employee.
7. Stockholder Rights. During the Restricted Period, Employee shall have
all voting and liquidation rights with respect to the Performance Restricted Stock
held of record by Employee as if Employee held unrestricted common stock; provided,
however, that the portion of any Performance Share Award on which the Stock
Restrictions have not lapsed shall be subject to any restrictions on transferability
or risks of forfeiture imposed pursuant to this Agreement or the Plan. Any cash and
stock dividends with respect to any Performance Restricted Stock will be withheld by
the Company for the Award Recipient’s account and will be paid upon the lapsing of the
Stock Restrictions imposed on the Performance Restricted Stock in respect of which the
dividends were paid, and any dividends deferred in respect of any Performance
Restricted Stock will be forfeited upon the forfeiture of such Performance Restricted
Stock. Any noncash dividends or distributions paid with respect to shares of
Performance Restricted Stock on which the Stock Restrictions have not lapsed shall be
subject to the same restrictions as those relating to the Performance Restricted Stock
awarded under this Agreement. After the restrictions applicable to the Performance
Restricted Stock lapse, Employee shall have all stockholder rights, including the
right to transfer the shares, subject to such conditions as Wolverine may reasonably
specify to ensure compliance with federal and state securities laws.
8. Withholding. Wolverine and any of its Subsidiaries shall be entitled
to (a) withhold and deduct from Employee’s future wages (or from other amounts that
may be due and owing to Employee from Wolverine or a Subsidiary), or make other
arrangements for the collection of, all legally required amounts necessary to satisfy
any and all federal, state, and local withholding and employment-related tax
requirements attributable to the Performance Restricted Stock award under this
Agreement, including, without limitation, the award or lapsing of Stock Restrictions
on the Performance Restricted Stock; or (b) require Employee promptly to remit the
amount of such withholding to Wolverine or a subsidiary before taking any action with
respect to the Performance Restricted Stock. Unless the Committee provides otherwise,
withholding may be satisfied by withholding common stock to be received or by delivery
to Wolverine or a subsidiary of previously owned common stock of Wolverine.
9. Effective Date. This award of Performance Restricted Stock shall be
effective as of the date first set forth above.
10. Amendment. This Agreement shall not be modified except in a writing
executed by the parties hereto.
3
11. Agreement Controls. The Plan is incorporated in this Agreement by
reference. Capitalized terms not defined in this Agreement shall have those meanings
provided in the Plan. In the event of any conflict between the terms of this
Agreement and the terms of the Plan, the provisions of the Agreement shall control.
| WOLVERINE WORLD WIDE, INC. | ||||
| By | ||||
| Donald T. Grimes | ||||
| Senior Vice President, Chief Financial Officer and Treasurer | ||||
| Employee Signature | ||||
| Print name | ||||
4
The “Incentive Award” for the Employee will be the number of shares of Performance Restricted Stock
on which the Stock Restrictions shall lapse, calculated as:
rounded up to the nearest whole number, where:
Overall Award Percentage will be the sum of (i) the BVA Award Percentage multiplied by the
BVA Factor, and (ii) the EPS Award Percentage multiplied by the EPS Factor, but in no event
shall the Overall Award Percentage exceed the Award Cap for the Employee. If the Overall
Award Percentage calculated for the Employee is greater than the Award Cap, the Overall
Award Percentage shall be reduced to the Award Cap to calculate the Incentive Award.
1. BVA Award Percentage will be calculated as follows:
If the Cumulative BVA is < Threshold BVA, BVA Award Percentage = 0%
If the Cumulative BVA is ³ Threshold BVA and < Target BVA, BVA Award Percentage =
If the Cumulative BVA is ³ Target BVA and < Goal BVA, BVA Award Percentage =
If the Cumulative BVA is ³ Goal BVA and < Stretch BVA, BVA Award Percentage =
If the Cumulative BVA is ³ Stretch BVA, BVA Award Percentage = Award Cap
2. EPS Award Percentage will be calculated as follows:
If the Cumulative EPS is < Threshold EPS, EPS Award Percentage = 0%
If the Cumulative EPS is ³ Threshold EPS and < Target EPS, EPS Award Percentage =
If the Cumulative EPS is ³ Target EPS and < Goal EPS, EPS Award Percentage =
If the Cumulative EPS is ³ Goal EPS and < Stretch EPS, EPS Award Percentage =
If the Cumulative EPS is ³ Stretch EPS, EPS Award Percentage = Award Cap
and the other defined terms shall have the following meanings:
Actual Average Earnings
|
The Employee’s actual average earnings during the Performance Period. | |
Award Cap
|
The maximum percentage of the Incentive Award that the Employee may receive for the Performance Period upon achievement of “stretch” goal, as set by the Compensation Committee. | |
Award Recipient
|
An employee of the Company to whom the Compensation Committee of the Board of Directors or the Board of Directors grants a Performance Share Award, for such portion of the Performance Period as the Committee determines. | |
BVA
|
An economic value added measurement that equals the operating income for a Fiscal Year reduced by (i) a provision for income taxes equal to the operating income multiplied by the Company’s total effective tax rate for the same Fiscal Year; and (ii) a capital charge equal to a two-point average of “net operating assets” at the beginning and end of a Fiscal Year (with “net operating assets” defined as the net of trade receivables (net of reserves), inventory (net of reserves), other current assets, property, plant and equipment, trade payables and accrued liabilities) multiplied by 10%. | |
BVA Factor
|
As set by the Compensation Committee. | |
Cumulative BVA
|
The sum of the BVA for each of the 2009, 2010 and 2011 Fiscal Years. | |
Cumulative EPS
|
The sum of the EPS for each of the 2009, 2010 and 2011 Fiscal Years. | |
EPS
|
The total after-tax profits for a Fiscal Year divided by the fully-diluted weighted average shares outstanding during the Fiscal Year. | |
EPS Factor
|
As set by the Compensation Committee. | |
Fiscal Year
|
The fiscal year of the Company for financial reporting purposes as the Company may adopt from time to time. | |
Incentive Award Percentage
|
As set by the Compensation Committee. | |
Market Price
|
The closing market price of shares of Common Stock reported on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of Common Stock) on the date the award is granted by the Compensation Committee. | |
Stock Restrictions
|
Restrictions on the common stock covered by the Performance Share Award. | |
Threshold BVA, Target
BVA, Goal BVA, and
Stretch BVA
|
As set by the Compensation Committee. | |
Threshold EPS, Target
EPS, Goal EPS, and Stretch EPS |
As set by the Compensation Committee. |
SCHEDULE 1 – 2
Exhibit 10.30
BLAKE W. KRUEGER
SEPARATION AGREEMENT
FIRST AMENDMENT
SEPARATION AGREEMENT
FIRST AMENDMENT
This First Amendment (the “First Amendment”) dated as of December 11, 2008, amends the
Separation Agreement (“Agreement”) entered into as of March 13, 2008, by and between Blake W.
Krueger (“Executive”) and Wolverine World Wide, Inc. (“Company”).
RECITALS
A. The Agreement contains certain provisions relating to the Wolverine World Wide, Inc.
Supplemental Executive Retirement Plan (the “SERP”).
B. The Company’s Board of Directors approved amendments to the SERP to comply with Internal
Revenue Code Section 409A and to otherwise modify the provisions of the SERP. The Company and the
Executive want to amend the Agreement to clarify that the benefits provided to the Executive under
the Agreement with respect to the SERP continue to apply with respect to the amended SERP.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Executive agree as set forth below.
1. Section 1.2 of the Agreement is hereby deleted in its entirety and the following provision
substituted in its entirety as Section 1.2:
A separation payment equal to the Executive’s base monthly salary as of the
termination date multiplied by eighteen (18) (the “Separation Payment”),
less applicable tax and other withholdings required by law. The Company will pay the
Separation Payment in one lump sum payment within three (3) business days of the
termination date. If (1) the Company’s Board of Directors waive the Competitive
Activity covenant in Section 6.2 of the Wolverine World Wide, Inc. Supplemental
Executive Retirement Plan and Section 6.2 of the Wolverine World Wide, Inc. 409A
Supplement Executive Retirement Plan as provided for under Section 1.6 of
this Agreement, and (2) the Executive begins new employment with a Competing
Business within eighteen (18) months following the termination date, then for each
month during such eighteen (18) month period when Executive is employed with a
Competing Business, the Executive will repay to the Company the salary paid to
Executive by the Competing Business in such month up to (but not exceeding)
one-eighteenth of the Separation Payment less applicable tax and other withholdings
required by law. For purposes of this provision, a “Competing Business” is
(1) any of the fourteen companies included within the Company’s “Peer Group”
as defined and set forth in the Company’s three year plan prior to
the termination date, and (2) any business that is a direct competitor of a core
business of the Company.
2. Section 1.6 of the Agreement is hereby deleted in its entirety and the following provision
substituted in its entirety as Section 1.6:
If the Company does not provide written notice to the Executive whereby the Company
completely waives and releases the Executive from the Competitive Activity covenant
set forth in Section 6.2 of the Wolverine World Wide, Inc. Supplemental
Executive Retirement Plan (“SERP”) and Section 6.2 of the Wolverine World
Wide, Inc. 409A Supplemental Executive Retirement Plan (“409A SERP”) and any other
non-compete or non-solicitation covenants applicable to the Executive now or at any
time in the future within forty-five (45) days of the termination date, then the
Company shall pay the Executive an additional amount equal to his base monthly
salary as of the termination date multiplied by thirty-six (36) in a lump sum, less
applicable tax and other withholdings required by law, within fifty (50) days of the
termination date. This Section 1.6 shall be in effect through and shall
terminate at the earlier of (1) the Executive’s voluntary termination of employment
not for “good reason” or the termination of the Executive’s employment for “cause,”
(2) the delivery of notice to the Executive waiving and releasing him from the
Competitive Activity covenants set forth in Section 6.2 of the SERP and Section 6.2
of the 409A SERP, (3) the payment of the lump sum amount in lieu of providing the
waiver and release, or (4) 11:59 pm on the Executive’s 60th birthday if
the Executive is employed by the Company on that date, after which this Section
1.6 shall no longer be in force and neither the Company nor the Executive shall
have any obligations or benefits under this Section 1.6.
3. Except as explicitly amended by this First Amendment, all other provisions of the Agreement
remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this First Amendment to be executed on its behalf by its
duly authorized officer and Executive has executed the same as of the day and year first above
written.
| WOLVERINE WORLD WIDE, INC. |
||||
| By: | /s/ David T. Kollat | |||
| Title: Lead Director | ||||
| EXECUTIVE |
||||
| /s/ Blake W. Krueger | ||||
| Blake W. Krueger | ||||
2
Exhibit 10.31
Exhibit 10.31
The following executive officers have a percentage benefit multiplier under the Supplemental
Executive Retirement Plan (the “Plan” of 2.4% or 2.0%, as indicated below, in lieu of the 1.6% of
final average monthly remuneration benefit multiplier described in the Plan:
| 2.4% | 2.0% | |
Blake W. Krueger
|
Donald T. Grimes | |
| Pamela L. Linton | ||
| Michael F. McBreen | ||
| James D. Zwiers |
Exhibit 10.32
WOLVERINE WORLD WIDE, INC.
409A SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PARTICIPATION AGREEMENT
409A SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PARTICIPATION AGREEMENT
BLAKE W. KRUEGER (“Employee”) previously has been designated by WOLVERINE WORLD WIDE, INC.
(“Employer”) as a Participant in the Wolverine World Wide, Inc. Supplemental Executive Retirement
Plan, as then in effect and as modified from time to time (“SERP Plan”). As of December 11, 2008,
Employer adopted and the Employee became a Participant in the 409A Supplemental Executive
Retirement Plan (“Comprehensive SERP Plan”) that replaces the SERP Plan and covers all of
Employee’s accrued benefits under the SERP Plan. Therefore, Employer and Employee agree as
follows:
1. Participation Date. Employee became a Participant in the SERP Plan effective
January 1, 1996. Employee agrees that the terms of the Comprehensive SERP Plan apply to all
benefits accrued under the SERP Plan.
2. Years of Service. Employee’s commencement date for purposes of computing Years of
Service under the Comprehensive SERP Plan is April 27, 1993. Employee also has been credited
previously with an additional three (3) deemed Years of Service. Effective April 19, 2007, and
continuing thereafter while the Employee remained a Participant in the SERP Plan and is a
Participant in the Comprehensive SERP Plan, the Employee will be credited with one (1) additional
deemed Year of Service on the same date that the Employee is credited with each Year of Service as
a Participant. By way of example only, in March 2007, when the Employee was credited with one Year
of Service under the SERP Plan the Employee received one additional deemed Year of Service under
the SERP Plan. As of the date hereof, Employee has 18 Years of Service.
3. Designated Percentage. The Designated Percentage under the Comprehensive SERP Plan
Section 5.1(a) is 2.4%.
4. Designated Period. The Designated Period under the Comprehensive SERP Plan Section
10.1 is three (3) years.
5.
Form of Payment.
(a) Lifetime. The Participant accepts the presumed method of
payment under the Comprehensive SERP Plan (during life, a single life
annuity, if single, or joint and 50% spouse annuity, if married) unless one
of the following forms is selected:
| o 5 Year Certain and Life | o Joint and 100% Spouse Annuity | |||
| o 10 Year Certain and Life | o Joint and 75% Spouse Annuity | |||
| o Life Annuity |
(b) Pre-Benefit Death. The Participant hereby selects that any
pre-retirement death benefit to his Surviving Spouse shall be paid as
follows:
o Single Life Annuity of Spouse
o Lump Sum (default)
o Lump Sum (default)
6. Commencement
of Benefit. If the Participant Terminates prior to age 65, the Participant
elects that benefits shall commence:
o Promptly following Termination (but not earlier than age 55) (default)
o Age _____ (but not earlier than age 55 or later than age 65)
o Age _____ (but not earlier than age 55 or later than age 65)
7. Deferred Compensation Agreement. Employer and Employee agree that:
[Check one of the following]
| þ | There is no deferred compensation agreement in effect as described in the Comprehensive SERP Plan Section 5.4(a). | ||
| o | There is a Deferred Compensation Agreement dated in effect as described in Section 5.4(a) of the Comprehensive SERP Plan and attached. Employee hereby relinquishes all rights under such Deferred Compensation Agreement, and agrees to look solely to the terms of the Comprehensive SERP Plan with regard to any computation of a Minimum Benefit as provided in the Comprehensive SERP Plan. |
8. Employment Relationship. Employee agrees that the Comprehensive SERP Plan shall
not be construed to create a contract of employment between the Employer and the Employee or to
otherwise confer upon the Employee or other person a legal right to continuation of employment or
any rights other than those specified herein. The Comprehensive SERP Plan shall not limit or
affect the right of the Employer to discharge or retire the Employee.
The Comprehensive SERP Plan does not constitute a contract on the part of the Employer to
employ Employee until age 65 or to continue his employment for any given period of time, either
fixed or contingent. Moreover, Employee does not by this writing agree to continue in the
employment of the Employer for any specified interval of time. The employment relationship,
therefore, shall continue for so long as, but only for so long as, such employment is mutually
satisfactory to both parties. The Employer does not promise that Employee’s employment will be
continued for such interval as to enable Employee to obtain all or any part of the benefits under
this Agreement.
9. Confidentiality and Relationship. Employee agrees to refrain from divulging any
information of a confidential nature including, but not restricted to, trade secrets, operating
methods, the names of the Employer’s customers and suppliers and the relations of the Employer with
such customers and suppliers, or other confidential information; and to refrain from using or
permitting the use of such information or confidences by any interests competitive with the
Employer; irrespective of whether or not Employee is then employed by the Employer, and to
refrain from including, and from causing inducements to be made to, the Employer’s employees to
terminate employment with the Employer or undertake employment with its competitors. The
obligations herein assumed by Participant shall endure whether or not the remaining promises by
either party remain to be performed or shall be only partially performed.
2
10. Acknowledgments. Employee acknowledges the Employer’s rights to:
(a) Amend or terminate the Comprehensive SERP Plan at any time, subject to Section 11.1
of the Comprehensive SERP Plan; and
(b) To designate the Employee as an Inactive Participant at any time, as provided in
Section 3.2 of the Comprehensive SERP Plan; and
(c) To make final decisions on any claim or dispute related to the Comprehensive SERP
Plan, as provided in Section 8.5 of the Comprehensive SERP Plan; and
(d) To exercise any and all other rights of the Employer under the Comprehensive SERP
Plan, in the Employer’s sole discretion, without any limitation other than as expressly set
forth in the Comprehensive SERP Plan.
Employee agrees that any amendment or termination of the Comprehensive SERP Plan shall
automatically amend or terminate this Agreement, to the extent permitted by the Comprehensive SERP
Plan.
11. Amendments. Employee agrees that this Agreement may not be amended orally, but
only in a written amendment authorized by the Company’s Board of Directors and signed by
the Plan Administrator.
This Participation Agreement replaces and supersedes any prior participation agreement
between Employee and Employer. IN WITNESS WHEREOF, the parties have signed this Agreement.
| WOLVERINE WORLD WIDE, INC. |
||||
| Dated as of December 29, 2008 | By: | /s/ Kenneth A. Grady | ||
| Kenneth A. Grady | ||||
| Its: General Counsel and Secretary “Employer” | ||||
| Dated as of December 29, 2008 | By: | /s/ Blake W. Krueger | ||
| Blake W. Krueger | ||||
| “Employee” | ||||
3
Exhibit 21
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARIES OF THE REGISTRANT
| State or Country of | ||||
| Name | Incorporation or Organization | |||
BSI Shoes, Inc. |
Michigan | |||
Dominican Wolverine Shoe Company Limited |
Cayman Islands | |||
Hush Puppies Retail, Inc. |
Michigan | |||
d/b/a Hush Puppies & Family Rockford Footwear Depot Track ‘N Trail UP Footgear |
||||
Hy-Test, Inc. |
Michigan | |||
d/b/a Hy-Test |
||||
Sebago Dominican Limited |
Cayman Islands | |||
Sebago International Limited |
Cayman Islands | |||
Sebago Realty, LLC |
Delaware | |||
Sebago USA, LLC |
Delaware | |||
Spartan Shoe Company Limited |
Cayman Islands | |||
Supervision Design Ltd. |
England & Wales | |||
Wolverine Colorado, Inc. |
Delaware | |||
Wolverine Consulting Services (Zhuhai) Company Limited |
People’s Republic of China | |||
Wolverine de Costa Rica, S.A. |
Costa Rica | |||
Wolverine de Mexico S.A. de C.V. |
Mexico | |||
Wolverine Design Center, Inc. |
Michigan | |||
Wolverine Europe B.V. |
The Netherlands | |||
Wolverine Europe Limited |
England & Wales | |||
Wolverine Europe Retail B.V. |
The Netherlands | |||
Wolverine Europe Retail Limited |
England & Wales | |||
Wolverine International GP, LLC |
Michigan | |||
Wolverine International, L.P. |
Cayman Islands | |||
Wolverine International S.à.r.l. |
Luxembourg | |||
Wolverine International, S.L. |
Spain | |||
Wolverine Outdoors, Inc. |
Michigan | |||
Wolverine Procurement, Inc. |
Michigan | |||
Wolverine Slipper Group, Inc. |
Michigan | |||
d/b/a Wolverine Slipper Group |
||||
Wolverine Sourcing, Inc. |
Michigan | |||
Wolverine Sourcing, Ltd. |
Cayman Islands | |||
Wolverine World Wide Corporation, Inc. |
Quebec | |||
Wolverine World Wide Europe Limited |
England & Wales | |||
Wolverine World Wide HK Limited |
Hong Kong | |||
Exhibit 23
Exhibit 23 — Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos.
333-67462, 333-93563, 333-49523, 33-63689, 33-55213, 33-64854, 333-88898, 333-97917, 333-106973,
and 333-129202) pertaining to the various stock option, incentive and deferred compensation plans
of Wolverine World Wide, Inc. of our reports dated February 20, 2009, with respect to the
consolidated financial statements and schedule of Wolverine World Wide, Inc., and the effectiveness
of internal control over financial reporting of Wolverine World Wide, Inc., included in this Annual
Report on Form 10-K for the year ended January 3, 2009.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
March 4, 2009
March 4, 2009
Exhibit 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
|||
| January 15, 2009 | /s/ Jeffrey M. Boromisa | |||
| Jeffrey M. Boromisa | ||||
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
|||
| January 21, 2009 | /s/ Alberto L. Grimoldi | |||
| Alberto L. Grimoldi | ||||
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
|||
| January 13, 2009 | /s/ David T. Kollat | |||
| David T. Kollat | ||||
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
|||
| January 22, 2009 | /s/ Brenda J. Lauderback | |||
| Brenda J. Lauderback | ||||
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
|||
| January 20, 2009 | /s/ David P. Mehney | |||
| David P. Mehney | ||||
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
|||
| January 12, 2009 | /s/ Shirley D. Peterson | |||
| Shirley D. Peterson | ||||
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
|||
| January 17, 2009 | /s/ Michael A. Volkema | |||
| Michael A. Volkema | ||||
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
|||
| January 14, 2009 | /s/ William K. Gerber | |||
| William K. Gerber | ||||
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
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| January 20, 2009 | /s/ Timothy J. O’Donovan | |||
| Timothy J. O’Donovan | ||||
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, as the case may be,
of Wolverine World Wide, Inc., does hereby appoint BLAKE W. KRUEGER; KENNETH A. GRADY; TIMOTHY E.
FOLEY; and DONALD T. GRIMES, or any of them, his or her attorneys or attorney, with full power of
substitution, to execute in his or her name an Annual Report of Wolverine World Wide, Inc. on Form
10-K for its fiscal year ended January 3, 2009, and any amendments to that report, and to file it
or them with the Securities and Exchange Commission. Each attorney shall have power and authority
to do and perform in the name and on behalf of the undersigned, in any and all capacities, every
act to be done in the premises as fully and to all intents and purposes as the undersigned could do
in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
| Date | Signature |
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| January 13, 2009 | /s/ Joseph R. Gromek | |||
| Joseph R. Gromek | ||||
Exhibit 31.1
Exhibit 31.1
CERTIFICATIONS
I, Blake W. Krueger, certify that:
1. I have reviewed this annual report on Form 10-K of Wolverine World Wide, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting.
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant’s internal control over financial reporting.
Date: March 4, 2009 |
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/s/ Blake W. Krueger
|
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Blake W. Krueger Chief Executive Officer and President Wolverine World Wide, Inc. |
Exhibit 31.2
Exhibit 31.2
CERTIFICATIONS
I, Donald T. Grimes, certify that:
1. I have reviewed this annual report on Form 10-K of Wolverine World Wide, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting.
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant’s internal control over financial reporting.
Date: March 4, 2009 |
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/s/ Donald T. Grimes
|
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Donald T. Grimes Senior Vice President, Chief Financial Officer and Treasurer Wolverine World Wide, Inc. |
Exhibit 32
Exhibit 32
CERTIFICATION
Solely for the purpose of complying with 18 U.S.C. § 1350, each of the undersigned hereby certifies
in his capacity as an officer of Wolverine World Wide, Inc. (the “Company”) that the Annual Report
of the Company on Form 10-K for the accounting period ended January 3, 2009 fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained
in such report fairly presents, in all material respects, the financial condition of the Company at
the end of such period and the results of operations of the Company for such period.
| /s/ Blake W. Krueger
|
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| Blake W. Krueger Chief Executive Officer and President |
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| /s/ Donald T. Grimes
|
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| Donald T. Grimes Senior Vice President, Chief Financial Officer and Treasurer |