-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RawjaaAzNA7ooOd3tbxFA3Aw8yMvnK/9BBKGAa4E9F8aLxrPVmzg7l5X3uG7LXFl LyUOC8wpJnWgDXOaYaXHwg== 0000950124-98-001731.txt : 19980331 0000950124-98-001731.hdr.sgml : 19980331 ACCESSION NUMBER: 0000950124-98-001731 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEYCO GROUP INC CENTRAL INDEX KEY: 0000106532 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 390702200 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-09068 FILM NUMBER: 98577994 BUSINESS ADDRESS: STREET 1: 234 E RESERVOIR AVE STREET 2: PO BOX 1188 CITY: MILWAUKEE STATE: WI ZIP: 53201 BUSINESS PHONE: 4142638800 MAIL ADDRESS: STREET 1: 234 EAST RESERVOIR AVENUE STREET 2: 234 EAST RESERVOIR AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53212 FORMER COMPANY: FORMER CONFORMED NAME: WEYENBERG SHOE MANUFACTURING CO DATE OF NAME CHANGE: 19900514 10-K405 1 FORM 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1997. OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For transition period from to ------------------ ------------------ Commission file number 0-9068 Weyco Group, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0702200 - -------------------------------- -------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 234 E. Reservoir Avenue, P.O. Box 1188, Milwaukee, WI 53201 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, include area code (414) 263-8800 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered None - --------------------------------------- ----------------------------------- - --------------------------------------- ----------------------------------- Securities registered pursuant to Section 12(g) of the Act: Common Stock - $1.00 par value per share - -------------------------------------------------------------------------------- (Title of Class) - -------------------------------------------------------------------------------- (Title of Class) 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 X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in any definitive proxy of information statements incorporated by reference or in any amendment to this Form 10-K. (X) As of March 3, 1998, there were outstanding 3,833,931 shares of Common Stock and 965,494 shares of Class B Common Stock. At the same date, the aggregate market value (based upon the average of the high and low trades for that day) of all common stock held by non-affiliates was approximately $69,883,000. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Corporation's Annual Report to Shareholders for the year ended December 31, 1997, are incorporated by reference in Parts I, II and IV of this report. Portions of the Corporation's Proxy Statement, dated March 30, 1998, prepared for the Annual Meeting of Shareholders scheduled for April 28, 1998, are incorporated by reference in Part III of this report. Exhibit Index Pages 9-10 2 PART I Item 1. Business The Company is a Wisconsin corporation incorporated in the year 1906 as Weyenberg Shoe Manufacturing Company. Effective April 25, 1990, the name of the corporation was changed to Weyco Group, Inc. The Company and its subsidiaries engage in one line of business, the manufacture, purchase and distribution of men's footwear. The Company does not sell women's or children's shoes because these markets differ significantly from the men's market. The principal brands of shoes sold are "Nunn Bush," "Brass Boot," "Stacy Adams," and "Weyenberg" and trademarks maintained by the Company on these names are important to the business. The Company's products consist of both mid-priced quality leather dress shoes which would be worn as a part of more formal and traditional attire and lower priced quality casual footwear of man-made materials or leather which would be appropriate for leisure or less formal occasions. The Company's footwear, and that of the industry in general, is available in a broad range of sizes and widths, primarily produced or purchased to meet the needs and desires of the American male population. The Company assembles footwear at one manufacturing plant in Wisconsin. Shoe components, referred to as "uppers," are purchased from outside sources, generally foreign, and turned into complete shoes by attaching the sole, either leather or man-made, applying appropriate "finishes" and packing the shoes into individual cartons, ready for sale. The Company purchases raw materials and shoe components from many suppliers and is not dependent on any one of them. The supply of these items is generally plentiful and there are no long-term purchase commitments. Over the past five years, production at the Company's plant has accounted for approximately 15% of the value of the Company's wholesale footwear sales. In addition to the production of footwear at the Company's own manufacturing plant, complete shoes are purchased from many sources worldwide, generally in U.S. dollars. These purchases account for the balance of the Company's wholesale footwear sales. In recent years, domestic production of men's shoes by the Company and the industry has declined, while imports to the United States have increased. The Company's business is separated into two divisions - wholesale and retail. Wholesale sales constituted approximately 93% of total sales in 1997, 92% in 1996, and 87% in 1995. At wholesale, shoes are marketed nationwide through more than 8,000 shoe, clothing and department stores. All sales are to unaffiliated customers in North America. Sales to the Company's largest customer, J C Penney, were 13%, 13% and 15% of total sales for 1997, 1996 and 1995, respectively. Sales to another customer, Brown Shoe Group, were 10% of total sales for 1996. There are no other individually significant customers. The Company employs traveling salesmen who sell the Company's products to the retail outlets. Shoes are shipped to these retailers primarily from warehouses maintained in Milwaukee and Beaver Dam, Wisconsin. Although there is no clearly identifiable seasonality in the men's footwear business, new styles are historically developed and shown twice each year, in spring and fall. In accordance with the industry practices, the Company is required to carry significant amounts of inventory to meet customer delivery requirements and periodically provides extended payment terms to customers. -1- 3 Retail sales constituted approximately 7% of total sales in 1997, 8% in 1996 and 13% in 1995. In the retail division, there are currently 13 company-operated stores in principal cities of the United States. The decrease in retail sales in recent years is a result of the termination of leased departments and company-operated stores. In 1997, 4 company-operated stores were closed. In 1996, 1 company-operated store and 13 leased departments were closed. In 1995, 10 company-operated stores were closed. These stores were closed primarily due to unprofitable operations or unattractive lease renewal terms. Management intends to continue to closely monitor retail operations and may close other retail units in the future if they are deemed unprofitable. Sales in retail outlets are made directly to the consumer by Company employees. In addition to the sale of the Company's brands of footwear in these retail outlets, other branded footwear and accessories are also sold in order to provide the consumer with as complete a selection as practically possible. In dollar sales, management estimates that the Company is about eighth largest among approximately 900 domestic men's shoe distributors. During 1997 it sold approximately 3% of the total men's non-rubber dress and casual shoes sold in the United States. As of December 31, 1997, the Company employed approximately 410 persons. Of those 410 employees, approximately 180 were members of the United Food and Commercial Works Local 651 Union. The Company ratified a new contract with the Union during 1997, which will expire in March 2003. Future wage and benefit increases under the new contract are not expected to have a significant impact on the future operations or financial position of the Company. Price, quality and service are all important competitive factors in the shoe industry and the Company has been recognized as a leader in all of them. Although the Company engages in no specific research and development activities, new products and new processes are continually being tested by the Company and used where appropriate, in order to produce the best value for the consumer, consistent with reasonable price. Compliance with environmental regulations historically has not had, and is not expected to have, a material adverse effect on the Company's results of operations or cash flows. Item 2. Properties The following facilities are operated by the Company and its subsidiaries:
Location Character Owned/Leased Milwaukee, Wisconsin Multistory office Owned and warehouse Milwaukee, Wisconsin Multistory warehouse Owned Beaver Dam, Wisconsin Multistory warehouse Owned Beaver Dam, Wisconsin Multistory factory Leased (1)
(1) Not a material lease. The manufacturing facilities noted above are adequately equipped, well maintained and suitable for foreseeable needs. If all available manufacturing space were utilized and significant additional shoe making equipment were acquired, production could be increased about 25%. -2- 4 In December 1997 the Company broke ground on a new 346,000 square foot office and distribution center. Management estimates that the building will be completed in the fall of 1998 with installation of equipment and systems to follow. Operations are expected to begin in the new facility in the second quarter of 1999. Management believes that this facility, coupled with system improvements, will greatly enhance the distribution process enabling the Company to better serve customers and continue to grow. The entire project is expected to cost $12 million. In addition to the above-described manufacturing and warehouse facilities, the Company operates 13 retail stores throughout the United States under various rental agreements. See Note 10 to Consolidated Financial Statements and Item 1. Business above. Item 3. Legal Proceedings Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable -3- 5 Executive Officers of the Registrant
Served Officer Age Office(s) Since Business Experience ------- --- -------- ------ ------------------- Thomas W. Florsheim 67 Chairman of the Board and 1968 Chairman of the Company -- Chief Executive Officer 1968 to present Thomas W. Florsheim, Jr. 40 President and Chief 1995 President of the Company -- Operating Officer & Director 1995 to present; Vice President of the Company -- 1988 to 1995 John W. Florsheim 34 Executive Vice President & 1995 Executive Vice President of the Director Company --1995 to present; Vice President of the Company -- 1994 to 1995; Brand Manager, M & M/Mars, Inc. 1990 to 1994 David N. Couper 49 Vice President 1981 Vice President of the Company -- 1981 to present James F. Gorman 54 Vice President 1975 Vice President of the Company -- 1975 to present Peter S. Grossman 54 Vice President 1971 Vice President of the Company -- 1971 to present John F. Wittkowske 38 Vice President-Finance & 1993 Vice President-Finance of the Company Secretary 1995 to present; Secretary/Treasurer of the company --1993 to 1995; Audit Manager, Arthur Andersen LLP, Independent Public Accountants -- 1986 to 1993
Thomas W. Florsheim is the father of John W. Florsheim and Thomas W. Florsheim, Jr. -4- 6 PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters Information required by this Item is set forth on pages 2 and 17 of the Annual Report to Shareholders for the year ended December 31, 1997, and is incorporated herein by reference. Item 6. Selected Financial Data Information required by this Item is set forth on page 2 of the Annual Report to Shareholders for the year ended December 31, 1997, and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information required by this Item is set forth on pages 3 and 4 of the Annual Report to Shareholders for the year ended December 31, 1997, and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data Information required by this Item is set forth on pages 5 through 15 of the Annual Report to Shareholders for the year ended December 31, 1997, and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures Not applicable. -5- 7 PART III Item 10. Directors and Executive Officers of the Registrant Information required by this Item is set forth on pages 1 through 3 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 28, 1998, and is incorporated herein by reference. Item 11. Executive Compensation Information required by this Item is set forth on pages 4 through 7 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 28, 1998, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners of Management Information required by this Item is set forth on pages 1 and 2 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 28, 1998, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information required by this Item is set forth on pages 6 through 7 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 28, 1998, and is incorporated herein by reference. -6- 8 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as a part of this report:
Page Reference to Annual Report 1. Financial Statements - Consolidated Statements of Earnings for the years ended December 31, 1997, 1996 and 1995 5 Consolidated Balance Sheets - December 31, 1997 and 1996 6-7 Consolidated Statements of Shareholders' Investment for the years ended December 31, 1997, 1996 and 1995 8 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 9 Notes to Consolidated Financial Statements - December 31, 1997, 1996 and 1995 10-15 Report of Independent Public Accountants 16
-7- 9 Item 14. Exhibits, Financial Statement Schedules, and Report on Form 8-K (Continued)
Page Reference to Form 10-K 2. Financial Statement Schedules for the years ended December 31, 1997, 1996 and 1995 - Schedule II - Valuation and Qualifying 11 Accounts All other schedules have been omitted because of the absence of the conditions under which they are required.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Weyco Group, Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 13, 1998. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index at item 14(a)(2) is the responsibility of the company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Milwaukee, Wisconsin, February 13, 1998. -8- 10 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Continued) 3. Exhibits
Incorporated Herein Exhibit Description By Reference To - ------- ----------- ------------------- 3.1 Articles of Incorporation as Restated Exhibit 3.1 to Form August 29, 1961, and Last Amended 10-K for Year Ended April 25, 1990 December 31, 1990 3.2 Bylaws as Revised January 21, 1991 Exhibit 3.2 to Form and Amended November 3, 1992 10-K for Year Ended December 31, 1992 10.1* Employment Agreement - Thomas W. Exhibit 10.1 to Form Florsheim, dated January 1, 1997 10-K for Year Ended December 31, 1996 10.2* Employment Agreement - Thomas W. Exhibit 10.2 to Form Florsheim, Jr., dated January 1, 1997 10-K for Year Ended December 31, 1996 10.3* Employment Agreement - John W. Exhibit 10.3 to Form Florsheim, dated January 1, 1997 10-K for Year Ended December 31, 1996 10.4* Restated and Amended Deferred Exhibit 10.3 to Form Compensation Agreement - Thomas W. 10-K for Year Ended Florsheim, dated December 1, 1995 December 31, 1995 10.5* Restated and Amended Deferred Exhibit 10.4 to Form Compensation Agreement - Robert 10-K for Year Ended Feitler, dated December 1, 1995 December 31, 1995 10.6* Excess Benefits Plan - Restated Effective Exhibit 10.6 to Form as of January 1, 1989 10-K for Year Ended December 31, 1991 10.7* Pension Plan - Amended and Restated Exhibit 10.7 to Form Effective January 1, 1989 10-K for Year Ended December 31, 1991 10.8* Deferred Compensation Plan - Effective Exhibit 10.8 to Form as of January 1, 1989 10-K for Year Ended December 31, 1991 10.9* 1992 Nonqualified Stock Option Plan Exhibit 10.9 to Form 10-K for Year Ended December 31, 1991
-9- 11 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued) 3. Exhibits (Continued)
Incorporated Herein Exhibit Description By Reference To - ------- ----------- ------------------- 10.10* Death Benefit Plan Agreement - Exhibit 10.10 to Form Thomas W. Florsheim, dated 10-K for Year Ended November 8, 1993 December 31, 1993 10.12* 1996 Nonqualified Stock Option Plan Exhibit 10.12 to Form 10-K for Year Ended December 31, 1995 10.13* 1997 Stock Option Plan 10.14* Change of Control Agreement John Wittkowske, dated January 26, 1998 10.15* Change of Control Agreement Peter S. Grossman, dated January 26, 1998 10.16* Change of Control Agreement James F. Gorman, dated January 26, 1998 10.17* Change of Control Agreement David N. Couper, dated January 26, 1998 21 Subsidiaries of the Registrant 23.1 Consent of Independent Public Accountants Dated March 27, 1998 *Management contract or compensatory plan or arrangement (b) Reports on Form 8-K None
-10- 12 SCHEDULE II WEYCO GROUP, INC. VALUATION AND QUALIFYING ACCOUNTS
Deducted from Assets ---------------------------------------------------------- Doubtful Cash Returns and Accounts Discounts Allowances Total -------- --------- ----------- --------- BALANCE, DECEMBER 31, 1994 898,180 55,000 720,000 1,673,180 Add - Additions charged to earnings 486,549 275,694 4,692,992 5,455,235 Deduct - Charges for purposes for which reserves were established (361,549) (264,694) (4,452,992) (5,079,235) ----------- --------- ---------- ---------- BALANCE, DECEMBER 31, 1995 1,023,180 66,000 960,000 2,049,180 Add - Additions charged to earnings 438,938 454,241 4,314,617 5,207,796 Deduct - Charges for purposes for which reserves were established (313,938) (456,241) (4,194,617) (4,964,796) ----------- --------- ---------- ---------- BALANCE, DECEMBER 31, 1996 1,148,180 64,000 1,080,000 2,292,180 Add - Additions charged to earnings 434,599 491,925 4,086,561 5,013,085 Deduct - Charges for purposes for which reserves were established (234,599) (513,925) (4,086,561) (4,835,085) ----------- --------- ---------- ---------- BALANCE, DECEMBER 31, 1997 $ 1,348,180 $ 42,000 $1,080,000 $2,470,180 =========== ========= ========== ==========
-11- 13 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. WEYCO GROUP, INC. (Registrant) By /s/ John Wittkowske March 30, 1998 --------------------------------- John Wittkowske, Vice President-Finance ----------------- Power of Attorney KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas W. Florsheim, Sr., Thomas W. Florsheim, Jr., and John Wittkowske, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue thereof. 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. Signatures and Titles Date --------------------- ---- /s/ Thomas W.Florsheim March 30, 1998 - ------------------------------------------- Thomas W. Florsheim, Chairman of the Board and Chief Executive Officer (Principal Executive Officer) /s/ Thomas W. Florsheim, Jr. March 30, 1998 - ------------------------------------------- Thomas W. Florsheim, Jr., President and Chief Operating Officer and Director /s/ John W. Florsheim March 30, 1998 - ------------------------------------------- John W. Florsheim, Executive Vice President and Director /s/ John Wittkowske March 30, 1998 - ------------------------------------------- John Wittkowske, Vice President-Finance (Principal Accounting Officer) /s/ Robert Feitler March 30, 1998 - ------------------------------------------- Robert Feitler, Director /s/ Leonard J. Goldstein March 30, 1998 - ------------------------------------------- Leonard J. Goldstein, Director /s/ Frank W. Norris March 30, 1998 - ------------------------------------------- Frank W. Norris, Director /s/ Frederick P. Stratton, Jr. March 30, 1998 - ------------------------------------------- Frederick P. Stratton, Jr., Director -12- EX-10.13 2 EXHIBIT 10.13 1 EXHIBIT 10.13 WEYCO GROUP, INC. 1997 STOCK OPTION PLAN 1. Introduction. (a) Purposes. The purpose of the 1997 Weyco Group, Inc. Stock Option Plan (the "1997 Plan" or "Plan") is to promote the growth and development of Weyco Group, Inc. and to increase shareholder value by providing incentives for salaried employees of Weyco Group, Inc. and of any present or future Subsidiary and by facilitating the efforts of Weyco Group, Inc. and its Subsidiaries to obtain and retain employees of outstanding ability. (b) Effect on Prior Plan. No further grants will be made under the Weyco Group, Inc. 1996 Nonqualified Stock Option Plan (the "1996 Plan"). Options granted previously under the 1996 Plan will remain in effect until they have been exercised or have expired. The options shall be administered in accordance with their terms and in accordance with the 1996 Plan. 2. Definitions. (a) "1934 Act" means the Securities Exchange Act of 1934, as it may be amended from time to time. (b) "Board" means the Board of Directors of Weyco Group, Inc. (c) "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. (d) "Committee" means the Stock Option Committee of the Board, or any other committee the Board may subsequently appoint to administer the Plan, as herein described. (e) "Common Stock" or "Stock" means the common stock of the Corporation having a par value of $1.00 per share. (f) "Corporation" means Weyco Group, Inc. A-1 2 (g) "Fair Market Value" means for purposes of the Plan on any date the average of the highest and lowest sale prices of the stock on such date as reported by NASDAQ (the National Association of Securities Dealers, Inc. Automatic Quotation System) or, in the absence of reported sales on NASDAQ on said date, the average of the closing bid and asked prices for the stock on NASDAQ on said date. However, if at any time the Common Stock is listed on any exchange, the "Fair Market Value" shall be the average of the reported highest and lowest prices at which shares are sold on such exchange on the date the option is granted or, in the absence of reported sales on the exchange on the date the option is granted, the "Fair Market Value" shall be the average of the closing bid and asked prices for the shares on such exchange on the date the option is granted. (h) "Grant Date" means the date on which any Option shall be duly granted by the Committee. (i) "Grantee" means an individual who has been granted an option. (j) "Incentive Stock Option" means an option that is intended to meet the requirements of Section 422 of the Code and regulations thereunder. (k) "Non-Qualified Stock Option" means an option other than an Incentive Stock Option. (l) "Option" means an Incentive Stock Option or a Non-Qualified Stock Option, as appropriate. (m) "Option Agreement" means the agreement between the Corporation and the Grantee specifying the terms and conditions as described thereunder. (n) "Plan" means the Weyco Group, Inc. 1997 Stock Option Plan as set forth herein, as it may be amended from time to time. (o) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and any future regulation amending or superseding such regulation. (p) "Subsidiary" means any corporation more than 50 percent of whose total combined voting stock of all classes is held by the Corporation or by another corporation qualifying as a Subsidiary within this definition. 3. Shares Subject to Option. The number of shares of Common Stock of the Corporation which may be sold upon the exercise of Options granted under the Plan, and accordingly the number of shares for which A-2 3 Options may be granted, shall not exceed 600,000 shares. Such number of authorized but unissued shares shall be reserved for this purpose. The aggregate number of shares of Common Stock available under the Plan shall be subject to adjustment as set forth in Article 15 hereunder. Shares sold upon the exercise of Options granted under the Plan may come from authorized but unissued shares, from treasury shares held by the Corporation, from shares purchased by the Corporation on an open market for such purpose, or from any combination of the foregoing. If treasury shares or shares purchased on the open market are sold upon the exercise of any Option, the number of authorized but unissued shares reserved for the Plan shall be reduced correspondingly. If any unexercised Option for any reason is cancelled, terminates or expires in whole or in part prior to the termination of the Plan, the unpurchased shares subject thereto shall become available for the granting of other Options under the Plan. 4. Administration of the Plan. The Plan shall be administered by the Committee. The Committee at all times shall be constituted to permit the Plan to comply with the provisions of Rule 16b-3 and IRS Regulation Section 1.162-27(e)(3) (or its successor). The Committee shall have full and final authority, in its discretion, but subject to the express provisions of the Plan to: (a) grant Options and to determine the purchase price of the stock covered by each Option, the individuals to whom, the number of shares subject to, and the time or times at which, Options shall be granted, and the time or times at and the manner in which Options can be exercised; (b) interpret the Plan; (c) prescribe, amend and rescind rules and regulations relating to the Plan; (d) determine the terms and provisions of the respective agreements (which need not be identical) by which Options shall be evidenced; (e) cancel with the consent of the holder outstanding Options and to grant new Options, as appropriate, in substitution therefore; (f) make all other determinations deemed necessary or advisable for the administration of the Plan; (g) require withholding from or payment by a Grantee of any federal, state or local taxes; and (h) impose, on any Grantee, such additional conditions, restrictions and limitations upon exercise and retention of Options as the Committee shall deem appropriate. A-3 4 (i) modify, extend or renew any Option previously granted. Any action of the Committee with respect to the administration of the Plan shall be taken pursuant to a majority vote or by the unanimous written consent of its members. The Committee's determinations and interpretations shall be final and conclusive. 5. Participation. Options may be granted to salaried employees of the Corporation and any of its Subsidiaries; provided, however that no employee can be granted an Option or Options covering, in the aggregate, more than 45,000 shares of Stock in any calendar year. If an Option is cancelled, such cancelled Option shall continue to be counted against the maximum number of shares for which Options may be granted to the employee. In selecting the individuals to whom Options shall be granted, as well as in determining the number of Options granted, the Committee shall take into consideration such factors as it deems relevant to accomplishing the purposes of the Plan. 6. Granting of Options. For purposes of the Plan, an Option shall be considered as having been granted on the date on which the Committee authorized the grant of the Option, except where the Committee has designated a later date, in which event the later date shall constitute the date of grant of the option; provided, however, that in either case notice of the grant of the option shall be given to the employee within a reasonable time. The officers of the Corporation are authorized and directed, upon receipt of notice from the Committee of the granting of an Option, to sign and deliver on behalf of the Corporation, by mail or otherwise, to the Grantee an Option upon the terms and conditions specified under the Plan and in the form of the Option Agreement. The Option Agreement shall be dated and signed by an officer of the Corporation as of the Grant Date. If the Grantee fails to sign and return the Option Agreement, by delivery or by mailing, within 30 days after the date of its delivery or mailing to him, the Option grant shall be deemed withdrawn. 7. Option Price. The purchase price of the Common Stock covered by each Option shall be not less than the Fair Market Value of such Stock on the Grant Date. Such price shall be subject to adjustment as provided in Article 15 hereof. 8. Option Designation. At the time of the grant of each Option, the Committee shall designate the Option as (a) an Incentive Stock Option or (b) a Non-Qualified Stock Option, as described in Sections (a) and (b) below, respectively. A-4 5 (a) Incentive Stock Options: Any Option designated as an Incentive Stock Option shall comply with the requirements of Section 422 of the Code. If an Option is so designated, the Fair Market Value (determined as of the Grant Date) of the shares of Stock with respect to which that and any other Incentive Stock Option first becomes exercisable during any calendar year under this Plan or any other stock option plan of the Corporation or its affiliates shall not exceed $100,000; provided, however, that the time or times of exercise of an Incentive Stock Option may be accelerated pursuant to Article 11, 14 or 15 hereof, and, in the event of such acceleration, such Incentive Stock Option shall be treated as a Non-Qualified Option to the extent that the aggregate Fair Market Value (determined as of the Grant Date) of the shares of stock with respect to which such Option first becomes exercisable in the calendar year (including Options under this Plan and any other Plan of the Corporation or its affiliates) exceeds $100,000, the extent of such excess to be determined by the Committee taking into account the order in which the Options were granted, or such other factors as may be consistent with the requirements of Section 422 of the Code and rules promulgated thereunder. Furthermore, no Incentive Stock Option shall be granted to any individual who, immediately before the Option is granted, directly or indirectly owns (within the meaning of Section 424(d) of the Code, as amended) shares representing more than 10% of the total combined voting power of all classes of stock of the Corporation or its subsidiaries, unless, at the time the option is granted, and in accordance with the provisions of Section 422, the option exercise price is 110% of the Fair Market Value of shares of Stock subject to the Option and the Option must be exercised within 5 years of the Grant Date. (b) Non-Qualified Stock Options: All Options not subject to or in conformance with the additional restrictions required to satisfy Section 422 shall be designated Non-Qualified Stock Options. 9. Non-transferability of Options. An Option granted under the Plan may be exercised during the lifetime of an employee (to the extent exercisable) only by him and may not be transferred except by will or the laws of descent and distribution. Subject to the above, the Option and any rights and privileges pertaining thereto shall not be transferred, assigned, pledged or hypothecated by him in any way whether by operation of law or otherwise and shall not be subject to execution, attachment or similar process. 10. Substituted Options. In the event the Committee cancels any Option granted under this Plan, and a new Option is substituted therefor, the Grant Date of the cancelled Option (except to the extent inconsistent with the restrictions described in Article 8(a), if applicable) shall be the date used to determine the earliest date for exercising the new substituted Option under Article 11 hereunder so that the A-5 6 Grantee may exercise the substituted Option at the same time as if the Grantee had held the substituted Option since the Grant Date of the cancelled Option. 11. Exercise and Term of Option. The Committee shall have the power to set the time or times within which each Option shall be exercisable, and to accelerate the time or times of exercise, provided that no Option granted under this Plan may be exercised until at least six months have elapsed from the Grant Date or prior to shareholder approval of the Plan. No Option may be exercised if in the opinion of counsel for the Corporation the issuance or sale of Stock pursuant to such exercise shall be unlawful for any reason, nor after the expiration of 10 years from the Grant Date. In no event shall the Corporation be required to issue fractional shares upon the exercise of an Option. Although the Corporation intends to exert its best efforts so that the Stock purchasable upon the exercise of an Option, when it first comes exercisable, will be registered under, or exempt from the registration requirements of, the federal Securities Act of 1933 (the "Act") and any applicable state securities laws, if the exercise of an Option would otherwise result in the violation by the Company of any provision of the Act or of any state securities law, the Company may require that such exercise be deferred until the Company has taken appropriate action to avoid any such violation. 12. Withholding. Shares of Stock shall not be issued upon the exercise of any Option under the Plan unless and until withholding tax, if any, or other withholding obligation, if any, imposed by any governmental entity has, in the opinion of the Committee, been satisfied or provision for satisfaction of such tax has been made. A Grantee shall satisfy such withholding obligation by depositing with the Corporation cash (or, at the request of Grantee but in the discretion of the Committee and subject to such rules and regulations as the Committee may adopt from time to time, in shares of Delivered Stock, as defined in Article 13) in the amount thereof at the time of any exercise of the Option. The Committee may provide that, if and to the extent withholding of any federal, state or local tax is required in connection with the exercise of an Option, the Grantee may elect, at such time and in such manner as the Committee may prescribe, to have the Corporation hold back from the shares to be issued, the number of shares of Common Stock calculated to have a Fair Market Value equal to such withholding obligation. Notwithstanding the foregoing, in the case of a Grantee subject to the reporting requirements of Section 16(a) of the 1934 Act, no such election shall be effective unless made in compliance with any applicable requirements of Rule 16b-3. 13. Method of Exercise. To the extent that the right to purchase shares pursuant to an Option has occurred hereunder and if the Grantee has been continuously employed by the Corporation or a Subsidiary since the Grant Date, such Option may be exercised from time to time by written notice to the A-6 7 Corporation stating the number of shares of Stock being purchased and accompanied by the payment in full of the Option price for such shares. Such payment shall be made in cash or, with the approval of the Committee, by delivering shares of the Common Stock which have been beneficially owned by the Grantee, the Grantee's spouse, or both of them for a period of at least six months prior to the time of exercise ("Delivered Stock") or in combinations thereof. If shares of Common Stock are used in part or full payment for the shares to be acquired upon exercise of the Option, such shares shall be valued for the purpose of such exchange as of the date of exercise of the Option at the Fair Market Value of the shares. 14. Effect of Termination of Employment, Disability or Death. Unless otherwise provided herein or in a specific Option Agreement which may provide longer or shorter periods of exercisability, no Option shall be exercisable after the expiration of the earliest of: (i) in the case of an Incentive Stock Option: (1) 10 years from the date the option is granted, or five years from the date the option is granted to an individual owning (after the application of the family and other attribution rules of Section 424(d) of the Code) at the time such option was granted more than 10% of the total combined voting power of all classes of stock of the Corporation. (2) three months after the date the Grantee ceases to perform services for the Corporation or its Subsidiaries, if such cessation is for any reason other than death, disability (within the meaning of Code Section 22(e)(3)), or cause, (3) one year after the date the Grantee ceases to perform services for the Corporation or its Subsidiaries, if such cessation is by reason of death or disability (within the meaning of Code Section 22(e)(3)), or (4) the date the Grantee ceases to perform services for the Corporation or its Subsidiaries, if such cessation is for cause, as determined by the Board or the Committee in its sole discretion; (ii) in the case of a Nonqualified Stock Option: (1) 10 years from the date of grant, (2) ninety days after the date the Grantee ceases to perform services for the Corporation or its Subsidiaries, if such cessation is for any reason other than death, permanent disability or cause, A-7 8 (3) one year after the date the Grantee ceases to perform services for the Corporation or its Subsidiaries, if such cessation is by reason of death, permanent disability, or (4) the date the Grantee ceases to perform services for the Corporation or its Subsidiaries, if such cessation is for cause, as determined by the Board or the Committee in its sole discretion; provided, that, unless otherwise provided in a specific grant agreement, an Option shall only be exercisable for the periods above following the date a Grantee ceases to perform services to the extent the Option was exercisable on the date of such cessation. For purposes of this Section, termination shall be deemed to have been for cause if such termination shall have been for misconduct or negligence by Grantee in the performance of his duties. Notwithstanding the foregoing, no Option shall be exercisable after the date of expiration of its term. In the event of Grantee's death, the person or persons to whom the option is transferred by will or the laws of descent and distribution shall be the person or persons who may exercise the option to the extent the Grantee was entitled to do so. 15. Effect of Change in Stock Subject to Plan. In the event of a reorganization, recapitalization, stock split, stock dividend, merger, consolidation, rights offering or like transaction, the Committee shall make or provide for such adjustment in the exercise price of any Option or in the number or kinds of stock covered by Options or reserved for issuance under the Plan as it may, in its discretion, deem to be equitable to prevent any diminution or enlargement of the right of Grantees; provided, however, upon the dissolution or liquidation of the Corporation or upon any merger in which the Corporation is not the surviving corporation and which is approved by the Corporation's non-insider shareholders (a "triggering event"), the Corporation shall settle all outstanding Options exercisable by their terms for cash. The amount of cash to be paid to the employee for any such Option shall be equal to the difference between the Option exercise price and the Fair Market Value of the Corporation's Common Stock on the effective date of the triggering event. 16. Employment Rights. Neither the establishment of nor the awarding of Options under this Plan shall be construed to create a contract of employment between any Grantee and the Corporation or its Subsidiaries; nor does it give any Grantee the right to continue in the employment of the Corporation or its Subsidiaries or limit in any way the right of the Corporation or its Subsidiaries to discharge any Grantee at any time and without notice, with or without cause, or to any benefits not specifically provided by this Plan, or in any manner modify the Corporation's right to establish, modify, amend or terminate any profit sharing or retirement plans. Transfer of an employee from the Corporation to a Subsidiary or from a Subsidiary to the Corporation or another Subsidiary A-8 9 shall not be a termination of employment or an interruption of continuous employment for the purposes of the Plan. 17. Shareholder Rights. Grantee shall not, by reason of any Options granted hereunder, have any right of a shareholder of the Corporation with respect to the shares covered by his Options until shares of Stock have been issued to him. 18. Controlling Law. The law of the State of Wisconsin, except its law with respect to choice of law, shall be controlling in all matters relating to the Plan. 19. Indemnification. In addition to such other rights of indemnification as they may have as members of the Committee or as directors generally, the members of the Committee administering the Plan and other members of the Board shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Option granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Corporation) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such member acted in bad faith in the performance of his duties; provided that within 20 days after institution of any such action, suit or proceeding, the member shall in writing offer the Corporation the opportunity, at its own expense, to handle and defend the same. 20. Use of Proceeds. The proceeds from the sale of shares of Common Stock pursuant to Options granted under the Plan shall constitute general funds of the Corporation. 21. Amendment of the Plan. The Board may from time to time amend, modify, suspend or terminate the Plan; provided, however, that no such action shall be made without shareholder approval where such change would be required in order to comply with Rule 16b-3 or the Code. A-9 10 22. Effective Date of Plan. The Plan shall become effective on the date of the resolutions of the Board of Directors of the Corporation adopting the Plan, subject to approval by the shareholders of the Corporation within 12 months thereof. Options may be granted under the Plan on or after the effective date but shall in no circumstances be exercisable prior to such shareholder approval. If such shareholder approval is not obtained within 12 months, the grant of such Options and this Plan shall be of no force and effect, but the 1996 Plan would then continue in effect in accordance with its terms. 23. Termination of the Plan. The Plan shall terminate after the expiration of ten years from its effective date and no grants shall be made after such date under the Plan; provided, however, that the Plan shall terminate at such earlier time as the Board may determine. Any such termination, either partially or wholly, shall not affect any Options then outstanding under the Plan. A-10 EX-10.14 3 EXHIBIT 10.14 1 EXHIBIT 10.14 WEYCO GROUP, INC. CHANGE OF CONTROL AGREEMENT AGREEMENT, made as of the 26th day of January, 1998, between Weyco Group, Inc., a Wisconsin corporation, ("Company") and John Wittkowske ("Executive"). WHEREAS, the Executive is now serving as an executive of the Company in a position of importance and responsibility; and WHEREAS, the Company wishes to continue to receive the benefit of the Executive's knowledge and experience and, as an inducement for continued service, is willing to offer the Executive certain payments due to Change of Control as set forth herein; NOW, THEREFORE, the Executive and Company agree as follows: Section 1. Definitions. (a) Change of Control. For purposes of this Agreement, a "Change of Control" shall occur: (1) if any person or group of persons (as defined in Section 13(d)(3) of the Securities and Exchange Act of 1934 and regulations thereunder), other than the group consisting of members of the family of Thomas W. Florsheim and their descendants or trusts for their benefit (the "Florsheim Group"), directly or indirectly controls in excess of 25% of the voting power of the outstanding common stock of the Company; (2) in the event of the consolidation or merger of the Company with or into another corporation or entity which is not a wholly owned subsidiary of the Company unless such consolidation or merger has been approved by the Board of Directors at a time when the majority of the Directors are persons who have been nominated by the Board of Directors or the Florsheim Group; (3) in the event of the sale of all or substantially all of the operating assets of the Company; (4) in the event of the replacement of a majority of the existing members of the Company's Board of Directors by persons not nominated by the Board of Directors or the Florsheim Group, or 2 (5) in the event of any amendment to Section 2 of Article III of the Company's bylaws to enlarge the number of the directors of the Company if the change was not supported by the existing Board of Directors or the Florsheim Group, (b) "Beneficiary" means any one or more primary or secondary beneficiaries designated in writing by the Executive on a form provided by the Company to receive any benefits which may become payable under this Agreement on or after the Executive's death. The Executive shall have the right to name, change or revoke the Executive's designation of a Beneficiary on a form provided by the Company. The designation on file with the Company at the time of the Executive's death shall be controlling. Should the Executive fail to make a valid Beneficiary designation or leave no named Beneficiary surviving, any benefits due shall be paid to the Executive's spouse, if living or, if not living, then to the Executive's estate. (c) "Code" means the Internal Revenue Code of 1986, as amended. Section 2. Payments Upon Change of Control. (a) Within 30 days following a Change of Control, a cash payment shall be made to the Executive in an amount equal to 299% of the "base amount" as that term is defined in Code Section 280G. The determination of the base amount shall be made by the Company's independent auditors. For this purpose, the "base amount" shall be calculated with respect to the 3 taxable year period ending before the date on which the Change of Control as defined herein occurs, regardless of whether such Change of Control is an event described in Code Section 280G (b)(2)(A). (b) If the payment under paragraph (a) above would result in disallowance of any portion of the Company's deduction therefor under Section 162(m) of the Code, the payment called for under paragraph (a) shall be limited to the amount which is deductible, with the balance to be paid as soon as deductible by the Company. Any amounts which are so deferred shall earn interest until paid at an annual rate equal to the prime rate. For interest accruing during any calendar year the "prime rate" shall be the rate reported as the prime rate in the Wall Street Journal on the first business day of that year. Section 3. Limitation on Payments. If the payments under Section 2 in combination with any other payments which the Executive has the right to receive from the Company (the "Total Payments") would not be deductible (in whole or in part) as a result of Section 280G of the Code, the payments under Section 2 shall be reduced until (i) no portion of the Total Payments is nondeductible as a result of Section 280G of the Code or (ii) the payments under Section 2 are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments, the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date payments commence under Section 2, shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Executive, does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii) the payments -2- 3 under Section 2 shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of the tax counsel referred to in clause (ii), and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Company's independent auditors, in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. Section 4. Death After the Executive has Begun Receiving Payments. Should the Executive die after a Change of Control, but before receiving all payments due the Executive hereunder, any remaining payments due shall be made to the Executive's Beneficiary. Section 5. Miscellaneous. (a) Non-Assignability. This Agreement is personal to the Executive and shall not be assignable by the Executive. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and shall also be enforceable by the Executive's legal representatives. (b) Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. (c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Wisconsin, without reference to principles of conflict of laws, to the extent not preempted by federal law. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (d) Notices. All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: John Wittkowske 2519 E. Shorewood Blvd. Shorewood, WI 53211 -3- 4 If to the Company: Weyco Group, Inc. P. O. Box 1188 Milwaukee, WI 53201 Attention: Corporate Secretary or to such other address as either party furnishes to the other in writing in accordance with this paragraph. Notices and communications shall be effective when actually received by the addressee. (e) Construction. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law. (f) No Guarantee of Employment. Nothing contained in this Agreement shall give the Executive the right to be retained in the employment of the Company or affect the right of the Company to dismiss the Executive. (g) Amendment; Entire Agreement. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives. This Agreement contains the entire agreement between the parties on the subjects covered and replaces all prior writings, proposals, specifications or other oral or written materials relating thereto. (h) Impact on Other Plans. No amounts paid to the Executive under this Agreement will be taken into account as "wages", "salary", "base pay" or any other type of compensation when determining the amount of any payment or allocation, or for any other purpose, under any other qualified or nonqualified plan or agreement of the Company, except as otherwise may be specifically provided by such plan or agreement by making specific reference to payments under this Agreement. (i) Other Agreements. This Agreement supersedes any other severance arrangement between the Company and the Executive. This Agreement does not confer any payments or benefits other than the payments described in Section 2 hereof. (j) Withholding. To the extent required by law, the Company shall withhold any taxes required to be withheld with respect to this Agreement by the federal, state or local government from payments made hereunder or from other amounts paid to the Executive by the Company. (k) Facility of Payment. If the Executive or, if applicable, the Executive's Beneficiary, is under legal disability, the Company may direct that payments be made to a relative of such person for the benefit of such person, without the intervention of any legal guardian or conservator, or to any legal guardian or -4- 5 conservator of such person. Any such distribution shall constitute a full discharge with respect to the Company and the Company shall not be required to see to the application of any distribution so made. Section 6. Claims Procedure. (a) Claim Review. If the Executive or the Executive's Beneficiary (a "Claimant") believes that he or she has been denied all or a portion of a benefit under this Agreement, he or she may file a written claim for benefits with the Company. The Company shall review the claim and notify the Claimant of the Company's decision within 60 days of receipt of such claim, unless the Claimant receives written notice prior to the end of the 60 day period stating that special circumstances require an extension of the time for decision. The Company's decision shall be in writing, sent by mail to the Claimant's last known address, and if a denial of the claim, must contain the specific reasons for the denial, reference to pertinent provisions of this Agreement on which the denial is based, a designation of any additional material necessary to perfect the claim, and an explanation of the claim review procedure. (b) Appeal Procedure to the Board. A Claimant is entitled to request a review of any denial by the full Board by written request to the Chair of the Board within 60 days of receipt of the denial. Absent a request for review within the 60-day period, the claim will be deemed to be conclusively denied. The Board shall afford the Claimant the opportunity to review all pertinent documents and submit issues and comments in writing and shall render a review decision in writing, all within 60 days after receipt of a request for review (provided that, in special circumstances the Board may extend the time for decision by not more than 60 days upon written notice to the Claimant.) The Board's review decision shall contain specific reasons for the decision and reference to the pertinent provisions of this Agreement. Section 7. No Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment. -5- 6 Section 8. Expense Reimbursement. In the event that any dispute arises between the Executive and the Company as to the terms or interpretation of this Agreement, whether instituted by formal legal proceedings or otherwise, including any action that the Executive takes to enforce the terms of this Agreement or to defend against any action taken by the Company, the Executive shall be reimbursed for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions, provided that the Executive shall obtain a final judgment by a court of competent jurisdiction in favor of the Executive. Such reimbursement shall be paid within thirty (30) days after the Executive furnishes to the Company written evidence, which may be in the form, among other things, of a canceled check or receipt, of any costs or expenses incurred by Executive. IN WITNESS WHEREOF, the Executive has signed this Agreement and, pursuant to the authorization of the Board, the Company has caused this Agreement to be signed, all as of the date first set forth above. /s/ John Wittkowske --------------------------------------------------- Executive - John Wittkowske WEYCO GROUP, INC. By: /s/ Thomas W. Florsheim, Jr. ------------------------------------------------ Thomas W. Florsheim, Jr. President Attest: /s/ John W. Florsheim -------------------------------------------- John W. Florsheim, Executive Vice President EX-10.15 4 EXHIBIT 10.15 1 EXHIBIT 10.15 WEYCO GROUP, INC. CHANGE OF CONTROL AGREEMENT AGREEMENT, made as of the 26th day of January, 1998, between Weyco Group, Inc., a Wisconsin corporation, ("Company") and Peter S. Grossman ("Executive"). WHEREAS, the Executive is now serving as an executive of the Company in a position of importance and responsibility; and WHEREAS, the Company wishes to continue to receive the benefit of the Executive's knowledge and experience and, as an inducement for continued service, is willing to offer the Executive certain payments due to Change of Control as set forth herein; NOW, THEREFORE, the Executive and Company agree as follows: Section 1. Definitions. (a) Change of Control. For purposes of this Agreement, a "Change of Control" shall occur: (1) if any person or group of persons (as defined in Section 13(d)(3) of the Securities and Exchange Act of 1934 and regulations thereunder), other than the group consisting of members of the family of Thomas W. Florsheim and their descendants or trusts for their benefit (the "Florsheim Group"), directly or indirectly controls in excess of 25% of the voting power of the outstanding common stock of the Company; (2) in the event of the consolidation or merger of the Company with or into another corporation or entity which is not a wholly owned subsidiary of the Company unless such consolidation or merger has been approved by the Board of Directors at a time when the majority of the Directors are persons who have been nominated by the Board of Directors or the Florsheim Group; (3) in the event of the sale of all or substantially all of the operating assets of the Company; 2 (4) in the event of the replacement of a majority of the existing members of the Company's Board of Directors by persons not nominated by the Board of Directors or the Florsheim Group, or (5) in the event of any amendment to Section 2 of Article III of the Company's bylaws to enlarge the number of the directors of the Company if the change was not supported by the existing Board of Directors or the Florsheim Group, (b) "Beneficiary" means any one or more primary or secondary beneficiaries designated in writing by the Executive on a form provided by the Company to receive any benefits which may become payable under this Agreement on or after the Executive's death. The Executive shall have the right to name, change or revoke the Executive's designation of a Beneficiary on a form provided by the Company. The designation on file with the Company at the time of the Executive's death shall be controlling. Should the Executive fail to make a valid Beneficiary designation or leave no named Beneficiary surviving, any benefits due shall be paid to the Executive's spouse, if living or, if not living, then to the Executive's estate. (c) "Code" means the Internal Revenue Code of 1986, as amended. Section 2. Payments Upon Change of Control. (a) Within 30 days following a Change of Control, a cash payment shall be made to the Executive in an amount equal to 299% of the "base amount" as that term is defined in Code Section 280G. The determination of the base amount shall be made by the Company's independent auditors. For this purpose, the "base amount" shall be calculated with respect to the 3 taxable year period ending before the date on which the Change of Control as defined herein occurs, regardless of whether such Change of Control is an event described in Code Section 280G (b)(2)(A). (b) If the payment under paragraph (a) above would result in disallowance of any portion of the Company's deduction therefor under Section 162(m) of the Code, the payment called for under paragraph (a) shall be limited to the amount which is deductible, with the balance to be paid as soon as deductible by the Company. Any amounts which are so deferred shall earn interest until paid at an annual rate equal to the prime rate. For interest accruing during any calendar year the "prime rate" shall be the rate reported as the prime rate in the Wall Street Journal on the first business day of that year. Section 3. Limitation on Payments. If the payments under Section 2 in combination with any other payments which the Executive has the right to receive from the Company (the "Total Payments") would not be deductible (in whole or in part) as a result of Section 280G of the Code, the payments under Section 2 shall be reduced until (i) no portion of the Total Payments is nondeductible as a result of Section 280G of the Code or (ii) the payments under Section 2 are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments, the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date 3 payments commence under Section 2, shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Executive, does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii) the payments under Section 2 shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of the tax counsel referred to in clause (ii), and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Company's independent auditors, in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. Section 4. Death After the Executive has Begun Receiving Payments. Should the Executive die after a Change of Control, but before receiving all payments due the Executive hereunder, any remaining payments due shall be made to the Executive's Beneficiary. Section 5. Miscellaneous. (a) Non-Assignability. This Agreement is personal to the Executive and shall not be assignable by the Executive. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and shall also be enforceable by the Executive's legal representatives. (b) Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. (c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Wisconsin, without reference to principles of conflict of laws, to the extent not preempted by federal law. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (d) Notices. All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Peter S. Grossman 1453 E.Goodrich Lane Milwaukee, WI 53217 -9- 4 If to the Company: Weyco Group, Inc. P. O. Box 1188 Milwaukee, WI 53201 Attention: Corporate Secretary or to such other address as either party furnishes to the other in writing in accordance with this paragraph. Notices and communications shall be effective when actually received by the addressee. (e) Construction. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law. (f) No Guarantee of Employment. Nothing contained in this Agreement shall give the Executive the right to be retained in the employment of the Company or affect the right of the Company to dismiss the Executive. (g) Amendment; Entire Agreement. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives. This Agreement contains the entire agreement between the parties on the subjects covered and replaces all prior writings, proposals, specifications or other oral or written materials relating thereto. (h) Impact on Other Plans. No amounts paid to the Executive under this Agreement will be taken into account as "wages", "salary", "base pay" or any other type of compensation when determining the amount of any payment or allocation, or for any other purpose, under any other qualified or nonqualified plan or agreement of the Company, except as otherwise may be specifically provided by such plan or agreement by making specific reference to payments under this Agreement. (i) Other Agreements. This Agreement supersedes any other severance arrangement between the Company and the Executive. This Agreement does not confer any payments or benefits other than the payments described in Section 2 hereof. (j) Withholding. To the extent required by law, the Company shall withhold any taxes required to be withheld with respect to this Agreement by the federal, state or local government from payments made hereunder or from other amounts paid to the Executive by the Company. -10- 5 (k) Facility of Payment. If the Executive or, if applicable, the Executive's Beneficiary, is under legal disability, the Company may direct that payments be made to a relative of such person for the benefit of such person, without the intervention of any legal guardian or conservator, or to any legal guardian or conservator of such person. Any such distribution shall constitute a full discharge with respect to the Company and the Company shall not be required to see to the application of any distribution so made. Section 6. Claims Procedure. (a) Claim Review. If the Executive or the Executive's Beneficiary (a "Claimant") believes that he or she has been denied all or a portion of a benefit under this Agreement, he or she may file a written claim for benefits with the Company. The Company shall review the claim and notify the Claimant of the Company's decision within 60 days of receipt of such claim, unless the Claimant receives written notice prior to the end of the 60 day period stating that special circumstances require an extension of the time for decision. The Company's decision shall be in writing, sent by mail to the Claimant's last known address, and if a denial of the claim, must contain the specific reasons for the denial, reference to pertinent provisions of this Agreement on which the denial is based, a designation of any additional material necessary to perfect the claim, and an explanation of the claim review procedure. (b) Appeal Procedure to the Board. A Claimant is entitled to request a review of any denial by the full Board by written request to the Chair of the Board within 60 days of receipt of the denial. Absent a request for review within the 60-day period, the claim will be deemed to be conclusively denied. The Board shall afford the Claimant the opportunity to review all pertinent documents and submit issues and comments in writing and shall render a review decision in writing, all within 60 days after receipt of a request for review (provided that, in special circumstances the Board may extend the time for decision by not more than 60 days upon written notice to the Claimant.) The Board's review decision shall contain specific reasons for the decision and reference to the pertinent provisions of this Agreement. Section 7. No Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment. -11- 6 Section 8. Expense Reimbursement. In the event that any dispute arises between the Executive and the Company as to the terms or interpretation of this Agreement, whether instituted by formal legal proceedings or otherwise, including any action that the Executive takes to enforce the terms of this Agreement or to defend against any action taken by the Company, the Executive shall be reimbursed for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions, provided that the Executive shall obtain a final judgment by a court of competent jurisdiction in favor of the Executive. Such reimbursement shall be paid within thirty (30) days after the Executive furnishes to the Company written evidence, which may be in the form, among other things, of a canceled check or receipt, of any costs or expenses incurred by Executive. IN WITNESS WHEREOF, the Executive has signed this Agreement and, pursuant to the authorization of the Board, the Company has caused this Agreement to be signed, all as of the date first set forth above. /s/ Peter S. Grossman ---------------------------------------------------- Executive - Peter S.Grossman WEYCO GROUP, INC. By: /s/ Thomas W. Florsheim, Jr. ------------------------------------------------ Thomas W. Florsheim, Jr. President Attest: /s/ John Wittkowske ----------------------------------------- John Wittkowske - Vice President-Finance EX-10.16 5 EXHIBIT 10.16 1 EXHIBIT 10.16 WEYCO GROUP, INC. CHANGE OF CONTROL AGREEMENT AGREEMENT, made as of the 26th day of January, 1998, between Weyco Group, Inc., a Wisconsin corporation, ("Company") and James F. Gorman ("Executive"). WHEREAS, the Executive is now serving as an executive of the Company in a position of importance and responsibility; and WHEREAS, the Company wishes to continue to receive the benefit of the Executive's knowledge and experience and, as an inducement for continued service, is willing to offer the Executive certain payments due to Change of Control as set forth herein; NOW, THEREFORE, the Executive and Company agree as follows: Section 1. Definitions. (a) Change of Control. For purposes of this Agreement, a "Change of Control" shall occur: (1) if any person or group of persons (as defined in Section 13(d)(3) of the Securities and Exchange Act of 1934 and regulations thereunder), other than the group consisting of members of the family of Thomas W. Florsheim and their descendants or trusts for their benefit (the "Florsheim Group"), directly or indirectly controls in excess of 25% of the voting power of the outstanding common stock of the Company; (2) in the event of the consolidation or merger of the Company with or into another corporation or entity which is not a wholly owned subsidiary of the Company unless such consolidation or merger has been approved by the Board of Directors at a time when the majority of the Directors are persons who have been nominated by the Board of Directors or the Florsheim Group; (3) in the event of the sale of all or substantially all of the operating assets of the Company; 2 (4) in the event of the replacement of a majority of the existing members of the Company's Board of Directors by persons not nominated by the Board of Directors or the Florsheim Group, or (5) in the event of any amendment to Section 2 of Article III of the Company's bylaws to enlarge the number of the directors of the Company if the change was not supported by the existing Board of Directors or the Florsheim Group, (b) "Beneficiary" means any one or more primary or secondary beneficiaries designated in writing by the Executive on a form provided by the Company to receive any benefits which may become payable under this Agreement on or after the Executive's death. The Executive shall have the right to name, change or revoke the Executive's designation of a Beneficiary on a form provided by the Company. The designation on file with the Company at the time of the Executive's death shall be controlling. Should the Executive fail to make a valid Beneficiary designation or leave no named Beneficiary surviving, any benefits due shall be paid to the Executive's spouse, if living or, if not living, then to the Executive's estate. (c) "Code" means the Internal Revenue Code of 1986, as amended. Section 2. Payments Upon Change of Control. (a) Within 30 days following a Change of Control, a cash payment shall be made to the Executive in an amount equal to 299% of the "base amount" as that term is defined in Code Section 280G. The determination of the base amount shall be made by the Company's independent auditors. For this purpose, the "base amount" shall be calculated with respect to the 3 taxable year period ending before the date on which the Change of Control as defined herein occurs, regardless of whether such Change of Control is an event described in Code Section 280G (b)(2)(A). (b) If the payment under paragraph (a) above would result in disallowance of any portion of the Company's deduction therefor under Section 162(m) of the Code, the payment called for under paragraph (a) shall be limited to the amount which is deductible, with the balance to be paid as soon as deductible by the Company. Any amounts which are so deferred shall earn interest until paid at an annual rate equal to the prime rate. For interest accruing during any calendar year the "prime rate" shall be the rate reported as the prime rate in the Wall Street Journal on the first business day of that year. Section 3. Limitation on Payments. If the payments under Section 2 in combination with any other payments which the Executive has the right to receive from the Company (the "Total Payments") would not be deductible (in whole or in part) as a result of Section 280G of the Code, the payments under Section 2 shall be reduced until (i) no portion of the Total Payments is nondeductible as a result of Section 280G of the Code or (ii) the payments under Section 2 are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments, the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date 3 payments commence under Section 2, shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Executive, does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii) the payments under Section 2 shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of the tax counsel referred to in clause (ii), and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Company's independent auditors, in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. Section 4. Death After the Executive has Begun Receiving Payments. Should the Executive die after a Change of Control, but before receiving all payments due the Executive hereunder, any remaining payments due shall be made to the Executive's Beneficiary. Section 5. Miscellaneous. (a) Non-Assignability. This Agreement is personal to the Executive and shall not be assignable by the Executive. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and shall also be enforceable by the Executive's legal representatives. (b) Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. (c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Wisconsin, without reference to principles of conflict of laws, to the extent not preempted by federal law. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (d) Notices. All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: James F. Gorman 1230 Overhill Road Elm Grove, WI 53122 -15- 4 If to the Company: Weyco Group, Inc. P. O. Box 1188 Milwaukee, WI 53201 Attention: Corporate Secretary or to such other address as either party furnishes to the other in writing in accordance with this paragraph. Notices and communications shall be effective when actually received by the addressee. (e) Construction. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law. (f) No Guarantee of Employment. Nothing contained in this Agreement shall give the Executive the right to be retained in the employment of the Company or affect the right of the Company to dismiss the Executive. (g) Amendment; Entire Agreement. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives. This Agreement contains the entire agreement between the parties on the subjects covered and replaces all prior writings, proposals, specifications or other oral or written materials relating thereto. (h) Impact on Other Plans. No amounts paid to the Executive under this Agreement will be taken into account as "wages", "salary", "base pay" or any other type of compensation when determining the amount of any payment or allocation, or for any other purpose, under any other qualified or nonqualified plan or agreement of the Company, except as otherwise may be specifically provided by such plan or agreement by making specific reference to payments under this Agreement. (i) Other Agreements. This Agreement supersedes any other severance arrangement between the Company and the Executive. This Agreement does not confer any payments or benefits other than the payments described in Section 2 hereof. (j) Withholding. To the extent required by law, the Company shall withhold any taxes required to be withheld with respect to this Agreement by the federal, state or local government from payments made hereunder or from other amounts paid to the Executive by the Company. -16- 5 (k) Facility of Payment. If the Executive or, if applicable, the Executive's Beneficiary, is under legal disability, the Company may direct that payments be made to a relative of such person for the benefit of such person, without the intervention of any legal guardian or conservator, or to any legal guardian or conservator of such person. Any such distribution shall constitute a full discharge with respect to the Company and the Company shall not be required to see to the application of any distribution so made. Section 6. Claims Procedure. (a) Claim Review. If the Executive or the Executive's Beneficiary (a "Claimant") believes that he or she has been denied all or a portion of a benefit under this Agreement, he or she may file a written claim for benefits with the Company. The Company shall review the claim and notify the Claimant of the Company's decision within 60 days of receipt of such claim, unless the Claimant receives written notice prior to the end of the 60 day period stating that special circumstances require an extension of the time for decision. The Company's decision shall be in writing, sent by mail to the Claimant's last known address, and if a denial of the claim, must contain the specific reasons for the denial, reference to pertinent provisions of this Agreement on which the denial is based, a designation of any additional material necessary to perfect the claim, and an explanation of the claim review procedure. (b) Appeal Procedure to the Board. A Claimant is entitled to request a review of any denial by the full Board by written request to the Chair of the Board within 60 days of receipt of the denial. Absent a request for review within the 60-day period, the claim will be deemed to be conclusively denied. The Board shall afford the Claimant the opportunity to review all pertinent documents and submit issues and comments in writing and shall render a review decision in writing, all within 60 days after receipt of a request for review (provided that, in special circumstances the Board may extend the time for decision by not more than 60 days upon written notice to the Claimant.) The Board's review decision shall contain specific reasons for the decision and reference to the pertinent provisions of this Agreement. Section 7. No Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment. -17- 6 Section 8. Expense Reimbursement. In the event that any dispute arises between the Executive and the Company as to the terms or interpretation of this Agreement, whether instituted by formal legal proceedings or otherwise, including any action that the Executive takes to enforce the terms of this Agreement or to defend against any action taken by the Company, the Executive shall be reimbursed for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions, provided that the Executive shall obtain a final judgment by a court of competent jurisdiction in favor of the Executive. Such reimbursement shall be paid within thirty (30) days after the Executive furnishes to the Company written evidence, which may be in the form, among other things, of a canceled check or receipt, of any costs or expenses incurred by Executive. IN WITNESS WHEREOF, the Executive has signed this Agreement and, pursuant to the authorization of the Board, the Company has caused this Agreement to be signed, all as of the date first set forth above. /s/ James F.Gorman -------------------------------------------------- Executive - James F. Gorman WEYCO GROUP, INC. By: /s/ Thomas W. Florsheim, Jr. ---------------------------------------------- Thomas W. Florsheim, Jr. President Attest: /s/ John Wittkowske ----------------------------------------- John Wittkowske - Vice President-Finance EX-10.17 6 EXHIBIT 10.17 1 EXHIBIT 10.17 WEYCO GROUP, INC. CHANGE OF CONTROL AGREEMENT AGREEMENT, made as of the 26th day of January, 1998, between Weyco Group, Inc., a Wisconsin corporation, ("Company") and David N. Couper ("Executive"). WHEREAS, the Executive is now serving as an executive of the Company in a position of importance and responsibility; and WHEREAS, the Company wishes to continue to receive the benefit of the Executive's knowledge and experience and, as an inducement for continued service, is willing to offer the Executive certain payments due to Change of Control as set forth herein; NOW, THEREFORE, the Executive and Company agree as follows: Section 1. Definitions. (a) Change of Control. For purposes of this Agreement, a "Change of Control" shall occur: (1) if any person or group of persons (as defined in Section 13(d) (3) of the Securities and Exchange Act of 1934 and regulations thereunder), other than the group consisting of members of the family of Thomas W. Florsheim and their descendants or trusts for their benefit (the "Florsheim Group"), directly or indirectly controls in excess of 25% of the voting power of the outstanding common stock of the Company; (2) in the event of the consolidation or merger of the Company with or into another corporation or entity which is not a wholly owned subsidiary of the Company unless such consolidation or merger has been approved by the Board of Directors at a time when the majority of the Directors are persons who have been nominated by the Board of Directors or the Florsheim Group; (3) in the event of the sale of all or substantially all of the operating assets of the Company; 2 (4) in the event of the replacement of a majority of the existing members of the Company's Board of Directors by persons not nominated by the Board of Directors or the Florsheim Group, or (5) in the event of any amendment to Section 2 of Article III of the Company's bylaws to enlarge the number of the directors of the Company if the change was not supported by the existing Board of Directors or the Florsheim Group, (b) "Beneficiary" means any one or more primary or secondary beneficiaries designated in writing by the Executive on a form provided by the Company to receive any benefits which may become payable under this Agreement on or after the Executive's death. The Executive shall have the right to name, change or revoke the Executive's designation of a Beneficiary on a form provided by the Company. The designation on file with the Company at the time of the Executive's death shall be controlling. Should the Executive fail to make a valid Beneficiary designation or leave no named Beneficiary surviving, any benefits due shall be paid to the Executive's spouse, if living or, if not living, then to the Executive's estate. (c) "Code" means the Internal Revenue Code of 1986, as amended. Section 2. Payments Upon Change of Control. (a) Within 30 days following a Change of Control, a cash payment shall be made to the Executive in an amount equal to 299% of the "base amount" as that term is defined in Code Section 280G. The determination of the base amount shall be made by the Company's independent auditors. For this purpose, the "base amount" shall be calculated with respect to the 3 taxable year period ending before the date on which the Change of Control as defined herein occurs, regardless of whether such Change of Control is an event described in Code Section 280G (b)(2)(A). (b) If the payment under paragraph (a) above would result in disallowance of any portion of the Company's deduction therefor under Section 162(m) of the Code, the payment called for under paragraph (a) shall be limited to the amount which is deductible, with the balance to be paid as soon as deductible by the Company. Any amounts which are so deferred shall earn interest until paid at an annual rate equal to the prime rate. For interest accruing during any calendar year the "prime rate" shall be the rate reported as the prime rate in the Wall Street Journal on the first business day of that year. Section 3. Limitation on Payments. If the payments under Section 2 in combination with any other payments which the Executive has the right to receive from the Company (the "Total Payments") would not be deductible (in whole or in part) as a result of Section 280G of the Code, the payments under Section 2 shall be reduced until (i) no portion of the Total Payments is nondeductible as a result of Section 280G of the Code or (ii) the payments under Section 2 are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments, the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date 3 payments commence under Section 2, shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Executive, does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii) the payments under Section 2 shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of the tax counsel referred to in clause (ii), and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Company's independent auditors, in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. Section 4. Death After the Executive has Begun Receiving Payments. Should the Executive die after a Change of Control, but before receiving all payments due the Executive hereunder, any remaining payments due shall be made to the Executive's Beneficiary. Section 5. Miscellaneous. (a) Non-Assignability. This Agreement is personal to the Executive and shall not be assignable by the Executive. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and shall also be enforceable by the Executive's legal representatives. (b) Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. (c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Wisconsin, without reference to principles of conflict of laws, to the extent not preempted by federal law. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (d) Notices. All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: David N. Couper W8180 Quarry Road Watertown, WI 53094 -21- 4 If to the Company: Weyco Group, Inc. P. O. Box 1188 Milwaukee, WI 53201 Attention: Corporate Secretary or to such other address as either party furnishes to the other in writing in accordance with this paragraph. Notices and communications shall be effective when actually received by the addressee. (e) Construction. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law. (f) No Guarantee of Employment. Nothing contained in this Agreement shall give the Executive the right to be retained in the employment of the Company or affect the right of the Company to dismiss the Executive. (g) Amendment; Entire Agreement. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives. This Agreement contains the entire agreement between the parties on the subjects covered and replaces all prior writings, proposals, specifications or other oral or written materials relating thereto. (h) Impact on Other Plans. No amounts paid to the Executive under this Agreement will be taken into account as "wages", "salary", "base pay" or any other type of compensation when determining the amount of any payment or allocation, or for any other purpose, under any other qualified or nonqualified plan or agreement of the Company, except as otherwise may be specifically provided by such plan or agreement by making specific reference to payments under this Agreement. (i) Other Agreements. This Agreement supersedes any other severance arrangement between the Company and the Executive. This Agreement does not confer any payments or benefits other than the payments described in Section 2 hereof. (j) Withholding. To the extent required by law, the Company shall withhold any taxes required to be withheld with respect to this Agreement by the federal, state or local government from payments made hereunder or from other amounts paid to the Executive by the Company. -22- 5 (k) Facility of Payment. If the Executive or, if applicable, the Executive's Beneficiary, is under legal disability, the Company may direct that payments be made to a relative of such person for the benefit of such person, without the intervention of any legal guardian or conservator, or to any legal guardian or conservator of such person. Any such distribution shall constitute a full discharge with respect to the Company and the Company shall not be required to see to the application of any distribution so made. Section 6. Claims Procedure. (a) Claim Review. If the Executive or the Executive's Beneficiary (a "Claimant") believes that he or she has been denied all or a portion of a benefit under this Agreement, he or she may file a written claim for benefits with the Company. The Company shall review the claim and notify the Claimant of the Company's decision within 60 days of receipt of such claim, unless the Claimant receives written notice prior to the end of the 60 day period stating that special circumstances require an extension of the time for decision. The Company's decision shall be in writing, sent by mail to the Claimant's last known address, and if a denial of the claim, must contain the specific reasons for the denial, reference to pertinent provisions of this Agreement on which the denial is based, a designation of any additional material necessary to perfect the claim, and an explanation of the claim review procedure. (b) Appeal Procedure to the Board. A Claimant is entitled to request a review of any denial by the full Board by written request to the Chair of the Board within 60 days of receipt of the denial. Absent a request for review within the 60-day period, the claim will be deemed to be conclusively denied. The Board shall afford the Claimant the opportunity to review all pertinent documents and submit issues and comments in writing and shall render a review decision in writing, all within 60 days after receipt of a request for review (provided that, in special circumstances the Board may extend the time for decision by not more than 60 days upon written notice to the Claimant.) The Board's review decision shall contain specific reasons for the decision and reference to the pertinent provisions of this Agreement. Section 7. No Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment. -23- 6 Section 8. Expense Reimbursement. In the event that any dispute arises between the Executive and the Company as to the terms or interpretation of this Agreement, whether instituted by formal legal proceedings or otherwise, including any action that the Executive takes to enforce the terms of this Agreement or to defend against any action taken by the Company, the Executive shall be reimbursed for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions, provided that the Executive shall obtain a final judgment by a court of competent jurisdiction in favor of the Executive. Such reimbursement shall be paid within thirty (30) days after the Executive furnishes to the Company written evidence, which may be in the form, among other tings, of a canceled check or receipt, of any costs or expenses incurred by Executive. IN WITNESS WHEREOF, the Executive has signed this Agreement and, pursuant to the authorization of the Board, the Company has caused this Agreement to be signed, all as of the date first set forth above. /s/ David N.Couper ------------------------------------------------ Executive - David N. Couper ------------------------------------------------ WEYCO GROUP, INC. By: /s Thomas W. Florsheim, Jr. -------------------------------------------- Thomas W. Florsheim, Jr. President Attest: /s/ John Wittkowske ---------------------------------------- John Wittkowske - Vice President-Finance -24- EX-13 7 EXHIBIT 13 1 TO OUR SHAREHOLDERS: - -------------------------------------------------------------------------------- 1997 was another record year for our company. Net earnings grew to $9.1 million, an increase of 12% over 1996. Our earnings per share were $1.88 per share, an increase of over 13%. This now marks the third straight year we have achieved record earnings. Our continuing mission is to provide the best value across the various footwear categories in which we compete. Our commitment to this end has enabled us to strengthen our position as a key player in the men's branded footwear market. During 1997, our wholesale sales were essentially flat, registering a slight increase over 1996. While all three of our brands - Nunn Bush, Stacy Adams, and Brass Boot continue to perform strongly at retail, the overall market for footwear sales was slow in the fourth quarter, which impacted the shipment flow to our customers. As we look toward 1998, we believe all of our brands are well positioned for continued growth. In 1997, our retail division was reduced from 17 units to 13 units. This resulted in overall retail sales declining by $2.5 million, which also resulted in our overall sales being down from 1996. While our retail division now accounts for a relatively small percentage of our business, sales at existing stores have steadily improved and we are pleased to announce that our retail division was profitable in 1997. We will continue to evaluate our retail division as store leases expire, in an effort to continue to maintain our profitability in this division. Same-store sales in our retail division increased 8% in 1997. In December 1997, we broke ground on our new 346,000 square foot office/distribution complex. This facility will combine our two individual warehouses and, coupled with our system improvements, will greatly enhance our distribution process. This will enable us to better serve our customers and continue to grow. The building is scheduled to be completed in the fall of 1998, with the installation of equipment and systems to follow. We anticipate starting operations in the new facility in the second quarter of 1999. With the continuing consolidation of retailers, the current environment presents unique challenges. We believe that we are taking the necessary steps to keep our brands relevant and profitable. We look forward to a successful 1998. /s/ Thomas W. Florsheim Thomas W. Florsheim Chairman of the Board and Chief Executive Officer /s/ Thomas W. Florsheim, Jr. Thomas W. Florsheim, Jr. President and Chief Operating Officer 1 2 SELECTED FINANCIAL DATA - --------------------------------------------------------------------------------
Years Ended December 31 ------------------------------------------------------------------------ 1997 1996 1995 1994 1993 ------------ ------------ ------------ ------------ ------------ Net sales................... $127,029,000 $129,314,000 $120,643,000 $114,719,000 $122,144,000 Net earnings before cumulative effect of accounting change......... 9,068,000 8,072,000 6,807,000 6,179,000 4,908,000 Cumulative effect of accounting change......... -- -- -- -- 880,000 ------------ ------------ ------------ ------------ ------------ Net earnings................ $ 9,068,000 $ 8,072,000 $ 6,807,000 $ 6,179,000 $ 5,788,000 ============ ============ ============ ============ ============ Diluted earnings per share before cumulative effect of accounting change...... $1.88 $1.65 $1.21 $.99 $.77 Cumulative effect of accounting change......... -- -- -- -- .14 ------------ ------------ ------------ ------------ ------------ Diluted earnings per share..................... $1.88 $1.65 $1.21 $.99 $.91 ============ ============ ============ ============ ============ Weighted average diluted shares outstanding........ 4,825,050 4,886,188 5,647,360 6,250,480 6,367,962 Cash dividends per share.... $.31 $.29 $.28 $.27 $.26 Working capital............. $ 28,269,000 $ 33,840,000 $ 45,997,000 $ 52,968,000 $ 55,864,000 Total assets................ $ 82,204,000 $ 73,077,000 $ 79,328,000 $ 72,827,000 $ 74,915,000
Note: Earnings per share and weighted average shares shown above for past years have been restated to reflect dilution in accordance with Statement of Accounting Standards No. 128. See Notes 1 and 12 to the Consolidated Financial Statements. They have also been retroactively restated for a 200% stock dividend declared in 1997. COMMON STOCK DATA - --------------------------------------------------------------------------------
1997 1996 --------------------------------------------------------------------- Price Range Cash Price Range Cash ----------- Dividends ----------- Dividends High Low Declared High Low Declared Quarter: --------------------------------------------------------------------- First................................. $16.50 $13.42 $.07 $13.67 $12.50 $.07 Second................................ 23.08 15.33 .08 14.00 12.67 .07 Third................................. 34.00 21.17 .08 14.17 13.17 .07 Fourth................................ 33.00 20.00 .08 14.33 13.17 .08 ---- ---- $.31 $.29 ==== ====
Note: All share, per share, stock price and dividend information has been adjusted to reflect the September 2, 1997 200% stock dividend. There are approximately 500 holders of record of the Company's common stock as of March 3, 1998. The stock prices shown above are the high and low actual trades for the calendar periods indicated. The Class B Common Stock is not listed nor does it trade publicly because of its limited transferability. See Note 11 to the Consolidated Financial Statements for additional information. 2 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- LIQUIDITY The Company's primary source of liquidity is its cash and marketable securities which aggregated approximately $40,789,000 at December 31, 1997, and $31,457,000 at December 31, 1996. In addition, the Company maintains a $7,500,000 bank line of credit and has banker acceptance loan facilities to provide funds on a short-term basis when necessary. There were no draws on the line of credit during 1997. During 1995, 1996 and 1997, the Company repurchased shares of its Common and Class B Common Stock. Management intends to continue to repurchase stock, provided that it represents an attractive investment opportunity to the Company when it becomes available. The Company's capital expenditures were $554,000, $251,000 and $195,000 in 1997, 1996 and 1995, respectively. In December 1997, the Company broke ground on a new 346,000 square foot office and distribution center. Management estimates that the building will be completed in the fall of 1998 with installation of equipment and systems to follow. Operations are expected to begin in the new facility in the second quarter of 1999. Management believes that this facility, coupled with system improvements, will greatly enhance the distribution process enabling the Company to better serve customers and continue to grow. The entire project is expected to cost $12 million. The Company believes that available cash and marketable securities, cash provided from operations and available borrowing facilities will provide adequate support for the cash needs of the business. RESULTS OF OPERATIONS 1997 VS. 1996 Sales in 1997 were $127,029,000 compared with $129,314,000 in 1996. The decrease in overall net sales is the result of a decline in retail sales from $10,952,000 in 1996 to $8,423,000 in 1997. This decline was caused by the closing of 13 leased departments in July 1996 and the closing of 4 additional retail units in 1997. Same store retail sales increased 7.6% in 1997. Sales in the wholesale division were up slightly from $118,362,000 in 1996 to $118,606,000 in 1997. Overall gross earnings as a percent of net sales were 28% for 1997 and 27% for 1996. Wholesale gross earnings as a percent of wholesale net sales were 26% for 1997 and 25% for 1996. Retail gross earnings as a percent of retail net sales increased from 47% for 1996 to 50% for 1997, primarily due to a $600,000 charge made to retail cost of sales during the first quarter of 1996 for the closing of retail units. Overall selling and administrative expenses as a percent of net sales were consistent at 18% for the years ended December 31, 1997 and 1996. Wholesale selling and administrative expenses as a percent of wholesale net sales increased from 15% in 1996 to 16% in 1997, primarily due to fees incurred in 1997 relating to enhancements of our information systems. Retail selling and administrative expenses as a percent of retail net sales decreased from 49% in 1996 to 46% in 1997. The decreases noted in the retail figures resulted from the closing of less profitable retail units during 1996 and 1997. Sales at the remaining retail stores have increased in relation to occupancy and employee expenses. Interest income increased from $1,144,000 in 1996 to $1,475,000 in 1997, primarily due to higher marketable securities balances during the year. 1996 VS. 1995 Total net sales of the Company increased approximately 7% from $120,643,000 in 1995 to $129,314,000 in 1996. Net sales in the wholesale division increased 13% from $105,149,000 in 1995 to $118,362,000 in 1996. The increase in sales resulted from an increase of 7% in the number of pairs of shoes shipped, as well as an increase in the average selling price per pair of 5% from 1995 to 1996. The increase in the selling price per pair was principally caused by a change in product mix. Retail net sales decreased 29% in 1996 from $15,494,000 in 1995 to $10,952,000 in 1996. Retail sales declined due to the closing of 13 leased shoe departments and 1 retail store 3 4 - -------------------------------------------------------------------------------- during 1996. Same store net sales increased 1% in 1996. Gross earnings as a percent of net sales were flat between 1995 and 1996 at 27%. Selling and administrative expenses decreased from $23,947,000 in 1995 to $23,176,000 in 1996. The decrease can be principally attributed to the retail store closings in 1995 and 1996. Consequently, retail selling and administrative expenses decreased 31% from $7,754,000 in 1995 to $5,362,000 in 1996. Wholesale selling and administrative expenses increased 9% from $16,365,000 in 1995 to $17,814,000 in 1996. As a percentage of wholesale sales, these expenses decreased from 15.5% in 1995 to 15.0% in 1996. Interest income decreased from $1,420,000 in 1995 to $1,144,000 in 1996 due to lower marketable securities balances during the year. Other income and expense decreased from $788,000 in 1995 to ($17,000) in 1996, primarily because 1995 included $850,000 of income realized from a lease assignment. OVERALL ANALYSIS The Company continues to purchase finished shoes and components from outside suppliers around the world. The majority of these foreign sourced purchases are denominated in U. S. dollars. The Company presently operates one shoe manufacturing plant in Wisconsin. Production in this factory has changed little during the past three years. There have been few inflationary pressures in the shoe industry in recent years and leather and other component prices have been stable. It is anticipated that, when necessary, selling price increases could be initiated to offset periodic increases in costs of purchased shoes, components, materials, labor and other expenses. In recent years, management has focused on the wholesale portion of the business, and has closed the less profitable retail units upon the expiration of their leases. Management intends to continue to evaluate the remaining 13 retail units from a profitability standpoint, and may close more retail stores in the future if they are deemed unprofitable. OTHER YEAR 2000 COMPUTER COMPLIANCE In response to the "Year 2000 Problem" relating to the inability of certain computer software programs to process 2-digit year-date codes after December 31, 1999, management has conducted a comprehensive review of its systems and has developed a plan to modify or replace programs as considered necessary. The total cost of implementing this Year 2000 Plan is not expected to be significant to the Company's financial results. FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements with respect to the Company's new office and distribution center, Year 2000 issues, and its outlook for 1998. These statements represent the Company's reasonable judgement with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially. These factors could include the effects of delays in construction of the distribution center or significant adverse changes in the economic conditions affecting the men's footwear markets served by the Company. 4 5 CONSOLIDATED STATEMENTS OF EARNINGS For the years ended December 31, 1997, 1996 and 1995 - --------------------------------------------------------------------------------
1997 1996 1995 ------------ ------------ ------------ NET SALES............................................ $127,028,749 $129,314,045 $120,642,617 COST OF SALES........................................ 91,708,986 94,474,268 88,093,991 ------------ ------------ ------------ Gross earnings..................................... 35,319,763 34,839,777 32,548,626 SELLING AND ADMINISTRATIVE EXPENSES.................. 22,673,557 23,175,555 23,946,940 ------------ ------------ ------------ Earnings from operations........................... 12,646,206 11,664,222 8,601,686 INTEREST INCOME...................................... 1,475,230 1,143,523 1,420,080 OTHER INCOME AND EXPENSE, net........................ 12,032 (17,324) 788,225 ------------ ------------ ------------ Earnings before provision for income taxes......... 14,133,468 12,790,421 10,809,991 PROVISION FOR INCOME TAXES........................... 5,065,000 4,718,000 4,003,000 ------------ ------------ ------------ Net earnings....................................... $ 9,068,468 $ 8,072,421 $ 6,806,991 ============ ============ ============ BASIC EARNINGS PER SHARE*............................ $1.90 $1.66 $1.21 ============ ============ ============ DILUTED EARNINGS PER SHARE*.......................... $1.88 $1.65 $1.21 ============ ============ ============
- ------------------------- *Earnings per share figures have been adjusted to reflect the September 2, 1997 200% stock dividend. The accompanying notes to consolidated financial statements are an integral part of these statements. 5 6 CONSOLIDATED BALANCE SHEETS December 31, 1997 and 1996 - --------------------------------------------------------------------------------
1997 1996 ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 3,323,035 $ 6,837,765 Marketable securities, at amortized cost.................. 7,360,953 8,179,263 Accounts receivable, less reserves of $2,470,180 and $2,292,180, respectively............................... 17,672,176 18,235,404 Inventories............................................... 11,161,453 12,399,444 Deferred income tax benefits.............................. 3,357,000 2,161,000 Prepaid expenses and other current assets................. 37,447 -- ----------- ----------- Total current assets................................. 42,912,064 47,812,876 ----------- ----------- MARKETABLE SECURITIES, AT AMORTIZED COST.................... 30,105,090 16,440,201 DEFERRED INCOME TAX BENEFITS................................ -- 33,000 OTHER ASSETS................................................ 6,874,191 6,138,205 PLANT AND EQUIPMENT, NET.................................... 2,312,770 2,652,873 ----------- ----------- $82,204,115 $73,077,155 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 6 7 - --------------------------------------------------------------------------------
1997 1996 ----------- ----------- LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable.......................................... $ 6,275,563 $ 6,793,555 Dividend payable.......................................... 381,954 349,354 Accrued liabilities - Wages, salaries and commissions........................ 2,785,932 2,689,200 Taxes other than income taxes.......................... 134,958 122,788 Other.................................................. 4,085,278 3,025,765 Accrued income taxes...................................... 979,024 992,241 ----------- ----------- Total current liabilities............................ 14,642,709 13,972,903 ----------- ----------- DEFERRED INCOME TAX LIABILITIES............................. 884,000 -- SHAREHOLDERS' INVESTMENT: Common Stock, $1.00 par value, authorized 4,000,000 shares, issued and outstanding 3,809,171 shares in 1997 and 1,259,053 shares in 1996........................... 3,809,171 1,259,053 Class B Common Stock, $1.00 par value, authorized 2,000,000 shares, issued and outstanding 965,754 shares in 1997 and 328,422 shares in 1996..................... 965,754 328,422 Capital in excess of par value............................ 2,086,054 1,666,065 Reinvested earnings....................................... 59,816,427 55,850,712 ----------- ----------- Total shareholders' investment....................... 66,677,406 59,104,252 ----------- ----------- $82,204,115 $73,077,155 =========== ===========
7 8 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT For the years ended December 31, 1997, 1996 and 1995 - --------------------------------------------------------------------------------
Class B Capital in Common Common Excess of Reinvested Stock Stock Par Value Earnings ---------- --------- ----------- ----------- Balance, December 31, 1994.................... $1,441,802 $ 452,211 $ 1,669,737 $55,863,713 Add (Deduct) - Net earnings............................. -- -- -- 6,806,991 Cash dividends declared ($.28 per share*)................................ -- -- -- (1,562,808) Conversions of Class B Common Stock to Common Stock........................... 5,733 (5,733) -- -- Stock options exercised.................. 41,500 -- 1,081,500 -- Income tax benefit from stock options exercised.............................. -- -- 156,293 -- Shares purchased and retired............. (46,248) (5,250) (135,000) (1,681,444) ---------- --------- ----------- ----------- Balance, December 31, 1995.................... 1,442,787 441,228 2,772,530 59,426,452 Add (Deduct) - Net earnings............................. -- -- -- 8,072,421 Cash dividends declared ($.29 per share*)................................ -- -- -- (1,394,930) Conversions of Class B Common Stock to Common Stock........................... 6,446 (6,446) -- -- Stock options exercised.................. 2,500 -- 77,031 -- Shares purchased and retired............. (192,680) (106,360) (1,183,496) (10,253,231) ---------- --------- ----------- ----------- Balance, December 31, 1996.................... 1,259,053 328,422 1,666,065 55,850,712 Add (Deduct) - Net earnings............................. -- -- -- 9,068,468 Cash dividends declared ($.31 per share*)................................ -- -- -- (1,476,832) Common Stock Dividend.................... 2,522,898 648,052 -- (3,170,950) Conversions of Class B Common Stock to Common Stock........................... 8,720 (8,720) -- -- Stock options exercised.................. 35,700 -- 389,151 -- Income tax benefit from stock options exercised.............................. -- -- 207,656 -- Shares purchased and retired............. (17,200) (2,000) (176,818) (454,971) ---------- --------- ----------- ----------- Balance, December 31, 1997.................... $3,809,171 $ 965,754 $ 2,086,054 $59,816,427 ========== ========= =========== ===========
- --------------- * Adjusted to reflect the September 2, 1997 200% stock dividend, as well as dilution from outstanding stock options. The accompanying notes to consolidated financial statements are an integral part of these statements. 8 9 CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1997, 1996 and 1995 - --------------------------------------------------------------------------------
1997 1996 1995 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings........................................ $ 9,068,468 $ 8,072,421 $ 6,806,991 Adjustments to reconcile net earnings to net cash provided by operating activities - Depreciation..................................... 821,317 1,044,559 1,133,921 Deferred income taxes............................ (176,000) 71,000 177,000 Deferred compensation............................ 131,460 130,185 183,760 Pension income................................... (364,173) (361,173) (77,241) Loss on retirement of assets..................... 22,696 62,468 121,789 Investment in officers' life insurance........... (479,113) (445,718) (410,695) Changes in operating assets and liabilities - Accounts receivable............................. 563,228 632,102 (1,316,160) Inventories..................................... 1,237,991 2,546,263 (4,208,240) Prepaids and other current assets............... (37,441) 10,211 54,378 Accounts payable................................ (517,992) (2,388,378) 3,935,179 Accrued liabilities............................. 1,254,831 1,306,691 139,556 Accrued income taxes............................ (116,217) 901,875 (1,098,704) ------------ ------------ ------------ Net cash provided by operating activities...... 11,409,055 11,582,506 5,441,534 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities................... (26,018,202) (15,192,006) (33,521,343) Proceeds from sales of marketable securities........ 13,268,698 13,720,516 39,339,872 Purchase of plant and equipment..................... (553,911) (250,893) (195,427) Proceeds from sales of plant and equipment.......... 50,000 4,430 -- ------------ ------------ ------------ Net cash provided by (used for) investing activities.................................. (13,253,415) (1,717,953) 5,623,102 ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payment of deferred compensation.................... -- (1,175,000) (1,175,000) Cash dividends paid................................. (1,444,232) (1,442,689) (1,545,918) Shares purchased and retired........................ (650,989) (11,735,767) (1,867,942) Proceeds from stock options exercised............... 424,851 79,531 1,123,000 ------------ ------------ ------------ Net cash used for financing activities......... (1,670,370) (14,273,925) (3,465,860) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents...................................... (3,514,730) (4,409,372) 7,598,776 CASH AND CASH EQUIVALENTS, at beginning of year....... 6,837,765 11,247,137 3,648,361 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, at end of year............. $ 3,323,035 $ 6,837,765 $ 11,247,137 ============ ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid................................... $ 5,145,963 $ 3,744,349 $ 4,942,309
The accompanying notes to consolidated financial statements are an integral part of these statements. 9 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1997, 1996 and 1995 - -------------------------------------------------------------------------------- 1. SUMMARY OF ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of Weyco Group, Inc. and all subsidiaries ("The Company"). All significant intercompany items are eliminated in the consolidated financial statements. Revenue Recognition - Sales to independent dealers are recorded at the time of shipment to those dealers. Sales through company-owned retail outlets are recorded at the time of delivery to retail customers. Inventories - Inventories are valued at cost, which is not in excess of market, determined on a last-in, first-out (LIFO) basis. Inventory costs include material, labor and factory overhead. Plant and Equipment and Depreciation - Plant and equipment are stated at cost and depreciated over their estimated useful lives using primarily the straight-line method. Fully depreciated machinery and equipment are eliminated from the accounts. Expenditures for lasts, dies and patterns are charged to earnings as incurred. Income Taxes - Deferred income taxes are provided on temporary differences arising from differences in the basis of assets and liabilities for tax and financial reporting purposes. See Note 8. Earnings Per Share - In 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share. Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts have been restated to conform to the Statement 128 requirements. Cash and Cash Equivalents - For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Financial Instruments - The Company has entered into forward exchange contracts for the purpose of hedging firmly committed inventory purchases with outside vendors. The Company accounts for these contracts under the deferral method. Accordingly, gains and losses are recorded in inventory when the inventory is purchased. At December 31, 1997 the Company has financial contracts outstanding to purchase 2.5 billion lira at a total price of $1.4 million. Based upon current exchange rates, the deferred gain/loss on these contracts is not significant. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. Advertising Costs - Advertising costs are expensed as incurred. Advertising costs were $3,058,000, $2,951,000 and $2,757,000 in 1997, 1996 and 1995, respectively. Reporting Comprehensive Income - In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130") which is effective for periods beginning after December 15, 1997, including interim periods. SFAS 130 establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements, either in the statement of earnings or a separate statement. Additionally, SFAS 130 requires the display of the accumulated balance of other comprehensive income. Adoption of this standard will not impact the financial statements of the Company. 2. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of all financial instruments, except marketable securities, approximate fair value due to the short-term nature of those instruments. The fair value of marketable securities is estimated based upon quoted market rates. See Note 4. 10 11 - -------------------------------------------------------------------------------- 3. INVENTORIES At December 31, 1997 and 1996, inventories consist of:
1997 1996 ----------- ----------- Finished shoes........................................... $10,713,099 $11,984,639 Shoes in Process......................................... 347,189 331,718 Raw materials............................................ 101,165 83,087 ----------- ----------- Total inventories..................................... $11,161,453 $12,399,444
The excess of current cost over LIFO cost of inventories as of December 31, 1997 and 1996 was $16,769,000 and $16,597,000, respectively. 4. INVESTMENTS All of the Company's investments are classified as held-to-maturity securities and reported at amortized cost pursuant to SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," as the Company has the intent and ability to hold all security investments to maturity. A summary of the amortized cost and estimated market values of investment securities at December 31, 1997 and 1996 are as follows:
1997 1996 -------------------------- -------------------------- Amortized Amortized Cost Market Value Cost Market Value ----------- ------------ ----------- ------------ Municipality and revenue bonds: Current................................ $ 7,360,953 $ 7,383,257 $ 8,179,263 $ 8,184,516 Due from one through five years........ 26,397,247 26,599,729 16,016,319 16,104,956 Due from five through ten years........ 3,707,843 3,801,006 423,882 423,882 ----------- ----------- ----------- ----------- Total.............................. $37,466,043 $37,783,992 $24,619,464 $24,713,354 =========== =========== =========== ===========
The unrealized gains and losses on investment securities at December 31 are:
1997 1996 1995 ----------------------- ----------------------- ----------------------- Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized Gains Losses Gains Losses Gains Losses ---------- ---------- ---------- ---------- ---------- ---------- Municipality and revenue bonds...... $337,496 $19,547 $127,490 $33,600 $98,574 $11,577
5. PLANT AND EQUIPMENT At December 31, 1997 and 1996, plant and equipment consists of:
1997 1996 ---------- ---------- Land........................................................ $ 678,395 $ 210,821 Buildings................................................... 1,858,423 1,858,423 Machinery and equipment..................................... 4,036,486 3,956,620 Retail fixtures and leasehold improvements.................. 2,034,745 2,653,653 ---------- ---------- Plant and equipment...................................... $8,608,049 $8,679,517 Less: Accumulated depreciation.............................. 6,295,279 6,026,644 ---------- ---------- Plant and equipment, net................................. $2,312,770 $2,652,873
6. BANK LINES OF CREDIT The Company has a short-term line of credit of $7,500,000 with a domestic bank and has banker acceptance loan facilities. There were no borrowings outstanding at December 31, 1997 and 1996 and no bank balances are required in support of these lines of credit. 11 12 - -------------------------------------------------------------------------------- 7. EMPLOYEE RETIREMENT PLANS The Company has defined benefit retirement plans covering substantially all employees. Retirement benefits are provided based on employees' years of credited service and average earnings or stated amounts for years of service. Normal retirement age is 65 with provisions for earlier retirement. The plans also have provisions for disability and death benefits. The Company's funding policy is to make contributions to the plans such that all employees' benefits will be fully provided by the time they retire. Plan assets are stated at market value and consist primarily of U.S. government securities, corporate obligations and corporate equities. The following summarizes the Company's pension income under the defined benefit plans:
1997 1996 1995 ----------- ----------- ----------- Benefits earned during the period.......................... $ 345,000 $ 349,000 $ 327,000 Interest cost on projected benefit obligation.............. 1,071,000 1,025,000 1,031,000 Actual return on plan assets............................... (2,538,000) (1,663,000) (3,202,000) Net amortization and deferral.............................. 758,000 (72,000) 1,767,000 ----------- ----------- ----------- Net pension income...................................... $ (364,000) $ (361,000) $ (77,000) =========== =========== ===========
The funded status of the Company's defined benefit retirement plans at December 31, is as follows:
Plans for Which Assets Exceed Plan for Which Accumulated Accumulated Benefits Benefits Exceed Assets ------------------------------ -------------------------- 1997 1996 1997 1996 ------------------------------------------------------------ Actuarial present value of benefit obligations: Vested.................................... $12,193,000 $10,966,000 $ 1,807,000 $ 2,105,000 Nonvested................................. 178,000 203,000 15,000 6,000 ----------- ----------- ----------- ----------- Accumulated benefit obligation............. 12,371,000 11,169,000 1,822,000 2,111,000 Effect of projected future salary increases.................................. 1,296,000 1,588,000 471,000 427,000 ----------- ----------- ----------- ----------- Projected benefit obligation.............. 13,667,000 12,757,000 2,293,000 2,538,000 Plan assets at market value.................. 20,554,000 18,805,000 -- -- ----------- ----------- ----------- ----------- Plan assets in excess of (less than) projected benefit obligation........... 6,887,000 6,048,000 (2,293,000) (2,538,000) Unrecognized prior service cost (benefit).... (221,000) (530,000) 453,000 552,000 Unrecognized net (gain) loss................. (1,054,000) (331,000) (230,000) 195,000 Unrecognized net transition asset............ (820,000) (1,039,000) -- -- Additional minimum liability................. -- -- -- (320,000) ----------- ----------- ----------- ----------- Net recorded pension asset (liability) included in other assets............... $ 4,792,000 $ 4,148,000 $(2,070,000) $(2,111,000) =========== =========== =========== ===========
The actuarial assumptions used as of December 31, 1997 and 1996 for determining the present value of the projected benefit obligation were as follows: Discount rate............................................... 7% Rate of compensation increase............................... 5% Long-term rate of return on plan assets..................... 8.5%
The Company has a defined contribution plan covering substantially all employees not covered by a collective bargaining agreement. During 1997, 1996 and 1995 the Company contributed $96,000, $85,000 and $85,000, respectively, to the Plan. 12 13 - -------------------------------------------------------------------------------- 8. INCOME TAXES The provision for income taxes includes the following components:
1997 1996 1995 ---------- ---------- ---------- Current - Federal................................................... $4,225,000 $3,854,000 $2,939,000 State..................................................... 907,000 793,000 887,000 Foreign................................................... 109,000 -- -- ---------- ---------- ---------- Total.................................................. 5,241,000 4,647,000 3,826,000 Deferred.................................................... (176,000) 71,000 177,000 ---------- ---------- ---------- Total provision........................................ $5,065,000 $4,718,000 $4,003,000 ========== ========== ========== Effective tax rate.......................................... 35.8% 36.9% 37.0% ========== ========== ==========
The difference between the effective tax rate and the Federal income tax rate of 34% is due to state income taxes, net of the Federal tax benefit of 4.1% in 1997, 4.2% in 1996 and 4.3% in 1995, the effect of municipal bond interest of (3.3%) in 1997, (2.8%) in 1996 and (4.3%) in 1995, and other miscellaneous items. The components of the net deferred tax asset as of December 31, 1997 and 1996, are as follows:
1997 1996 ----------- ----------- Deferred tax assets: Accounts receivable and inventory reserves................ $ 1,171,000 $ 1,104,000 Deferred compensation..................................... 784,000 732,000 Depreciation.............................................. 689,000 572,000 Other..................................................... 1,402,000 1,088,000 ----------- ----------- 4,046,000 3,496,000 ----------- ----------- Deferred tax liabilities: Prepaid pension........................................... (1,101,000) (930,000) Cash value of life insurance.............................. (472,000) (372,000) ----------- ----------- (1,573,000) (1,302,000) ----------- ----------- Net deferred tax asset................................. $ 2,473,000 $ 2,194,000 =========== ===========
The net deferred tax asset is classified in the Consolidated Balance Sheets as follows:
1997 1996 ---------- ---------- Current deferred income tax benefits........................ $3,357,000 $2,161,000 Noncurrent deferred income tax benefits (liabilities)....... (884,000) 33,000 ---------- ---------- $2,473,000 $2,194,000 ========== ==========
9. DEFERRED COMPENSATION The Company has deferred compensation agreements with one current and one former executive. The Company expensed $131,000 in 1997, $130,000 in 1996, and $184,000 in 1995 in connection with these agreements. On December 1, 1995, the Company amended each of these agreements to allow for the acceleration of payments under such agreements, regardless of whether the executive has retired, remains in the Company's employ or otherwise terminates his employment. Accordingly, the Company paid $1,175,000 under these amended agreements in 1995 and in 1996. The remaining amounts owed under the agreements as of December 31, 1997 are available to be paid in 1998 and are included in accrued wages, salaries and commissions on the Consolidated Balance Sheets. 10. OPERATING LEASES The Company operates retail shoe stores and departments under both short-term and long-term leases. Some leases provide for a minimum rental plus percentage rentals based upon sales in 13 14 - -------------------------------------------------------------------------------- excess of a specified amount, and other leases provide for rentals based solely on a percentage of sales. Total minimum rents were $999,000 in 1997, $1,160,000 in 1996 and $1,181,000 in 1995. Percentage rentals were $87,000 in 1997, $401,000 in 1996 and $865,000 in 1995. Future fixed and minimum rental commitments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 1997, are shown below. Renewal options exist for many long-term leases. 1998........................................................ $ 864,000 1999........................................................ 583,000 2000........................................................ 404,000 2001........................................................ 259,000 2002 and thereafter......................................... 225,000 ---------- Total....................................................... $2,335,000 ==========
11. SHAREHOLDERS' INVESTMENT The Class B Common Stock has 10 votes per share, may only be transferred to certain permitted transferees, is convertible to Common Stock and shares equally with the Common Stock in cash dividends and liquidation rights. On July 21, 1997, the Company's Board of Directors declared a 200% stock dividend on the Company's Common Stock, $1.00 par value, and on the Company's Class B Common Stock, $1.00 par value, so as to effect a three-for-one stock split without a change in par value. The additional shares were mailed October 1, 1997, to shareholders of record on September 2, 1997. All per share and share data has been retroactively adjusted to reflect this dividend. 12. EARNINGS PER SHARE The following table sets forth the computation of earnings per share and diluted earnings per share:
1997 1996 1995 ---------- ---------- ---------- Numerator: Net earnings.......................... $9,068,468 $8,072,421 $6,806,991 ========== ========== ========== Denominator: Basic weighted average shares......... 4,763,387 4,870,563 5,640,573 Effective of dilutive securities: Employee stock options............. 61,663 15,625 6,787 ---------- ---------- ---------- Diluted weighted average shares....... 4,825,050 4,886,188 5,647,360 ========== ========== ========== Basic earnings per share................ $1.90 $1.66 $1.21 ========== ========== ========== Diluted earnings per share.............. $1.88 $1.65 $1.21 ========== ========== ==========
13. STOCK BASED COMPENSATION PLANS The Company has three stock option plans, the 1992 Nonqualified Stock Option Plan, the 1996 Nonqualified Stock Option Plan, and the 1997 Stock Option Plan. The Company accounts for these plans under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these plans been 14 15 - -------------------------------------------------------------------------------- determined consistent with FASB Statement No. 123, the Company's net earnings and net earnings per share would have been reduced to the following pro forma amounts:
1997 1996 1995 ---------- ---------- ---------- Net Earnings As Reported........................... $9,068,468 $8,072,421 $6,806,991 Pro Forma............................. $8,706,923 $7,845,795 $6,663,729 Basic Earnings Per Share As Reported........................... $1.90 $1.66 $1.21 Pro Forma............................. $1.83 $1.61 $1.18
Because the Statement No. 123 method of accounting has not been applied to options prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The following table summarizes the stock option activity under the Company's plans for the years ended December 31:
1997 1996 1995 ------------------- ------------------- -------------------- Wtd. Avg. Wtd. Avg. Wtd. Avg. Shares Ex. Price Shares Ex. Price Shares Ex. Price ------- --------- ------- --------- -------- --------- Outstanding at beginning of year..... 302,700 $12.26 220,200 $11.65 257,700 $ 9.89 Granted.............................. 68,000 22.40 90,000 13.58 88,500 13.08 Exercised............................ (41,700) 10.19 (7,500) 10.42 (124,500) 9.02 Forfeited............................ -- -- -- -- -- -- Expired.............................. -- -- -- -- (1,500) 11.54 ------- ------ ------- ------ -------- ------ Outstanding at end of year........... 329,000 $14.62 302,700 $12.26 220,200 $11.65 Exercisable at end of year........... 261,000 $12.59 212,700 $11.70 131,700 $10.69 Weighted average fair market value of options granted.................... $8.28 $4.13 $2.80
The fair market value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used:
1997 1996 1995 -------- -------- -------- Risk-free interest rate............................ 5.7% 6.1% 5.3% Expected dividend yields........................... 1.4% 2.2% 2.2% Expected remaining life............................ 9.0 yrs. 9.0 yrs. 4.5 yrs. Expected volatility................................ 28% 20% 20%
The range of exercise prices for the 329,000 options outstanding at December 31, 1997 is $9.67 to $24.20. The weighted average remaining contractual life for these shares is 5 years as of December 31, 1997. At December 31, 1997, 532,000 shares of stock have been reserved for future issuance under the plans. 14. INDUSTRY SEGMENT INFORMATION The Company engages in one line of business - the manufacture, purchase and distribution of men's footwear. All sales are to unaffiliated customers from North America. Sales to the Company's largest customer were 13%, 13% and 15% of total sales for 1997, 1996, and 1995, respectively. Sales to another customer were 10% of total sales in 1996. There are no other individually significant customers. In June 1997, the Financial Accounting Standards Board issued Statement No. 131 "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131") which is effective for fiscal years beginning after December 15, 1997. SFAS 131 establishes standards for the reporting of segment information. The Company is currently evaluating the impact this standard will have on future reporting. 15 16 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Weyco Group, Inc.: We have audited the accompanying consolidated balance sheets of Weyco Group, Inc. (a Wisconsin corporation) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of earnings, shareholders' investment and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 financial position of Weyco Group, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Milwaukee, Wisconsin February 13, 1998 MANAGEMENT'S RESPONSIBILITIES FOR FINANCIAL REPORTING The management of Weyco Group, Inc. is responsible for the preparation and integrity of all financial statements and other information contained in this Annual Report. The financial statements have been prepared in conformity with generally accepted accounting principles and necessarily include amounts based on judgments and estimates by management giving due consideration to materiality. The Company maintains internal control systems designed to provide reasonable assurance that the Company's financial records reflect the transactions of the Company and that its assets are protected from loss or unauthorized use. The Company's financial statements have been audited by Arthur Andersen LLP, independent public accountants, whose report thereon appears above. Management has made available to Arthur Andersen LLP the Company's financial records and related data to allow them to evaluate the Company's system of accounting controls and provide an independent assessment as to the financial statements. The Audit Committee of the Board of Directors is responsible for reviewing and evaluating the overall performance of the Company's financial reporting and accounting practices. To ensure independence, Arthur Andersen LLP has full and free access to the Audit Committee to discuss the results of their audits, their opinions on the adequacy of internal controls, and the quality of financial reporting. 16 17 - -------------------------------------------------------------------------------- DIRECTORS Robert Feitler Chairman, Executive Committee John W. Florsheim Executive Vice President Thomas W. Florsheim Chairman and Chief Executive Officer Thomas W. Florsheim, Jr. President and Chief Operating Officer Leonard J. Goldstein Retired, Former Chairman, President and Chief Executive Officer, Miller Brewing Company Frank W. Norris Director Associated Bank Milwaukee Frederick P. Stratton, Jr. Chairman and Chief Executive Officer, Briggs & Stratton Corporation, Manufacturer of Gasoline Engines OFFICERS Thomas W. Florsheim Chairman and Chief Executive Officer Thomas W. Florsheim, Jr. President and Chief Operating Officer John W. Florsheim Executive Vice President David N. Couper Vice President James F. Gorman Vice President Peter S. Grossman Vice President John F. Wittkowske Vice President - Finance and Secretary SUPPLEMENTAL INFORMATION STOCK EXCHANGE The Company's Common Stock (symbol WEYS) is listed on the NASDAQ Market System (NMS). TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005 OTHER INFORMATION A copy of the Company's Annual Report to the Securities and Exchange Commission (Form 10-K) will be furnished without charge to any stockholder upon written request. A copy of the Company's Quarterly Reports will be furnished without charge to any stockholder upon written or telephone request. All written requests should be sent to Investor Relations, Weyco Group, Inc., P.O. Box 1188, Milwaukee, Wisconsin 53201. Telephone requests should be made to (414) 263-8800. 17 EX-21 8 EXHIBIT 21 1 EXHIBIT 21 WEYCO GROUP, INC. SUBSIDIARIES OF THE REGISTRANT Incorporated Name of Company In Subsidiary Of -------------- ------------ ------------- House of Advertising, Inc. Wisconsin Weyco Group, Inc. Weyco Investments, Inc. Nevada Weyco Group, Inc. EX-23.1 9 EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included or incorporated by reference in this Form 10-K into the Company's previously filed Registration Statement File Nos. 33-48549 and 333-03025. ARTHUR ANDERSEN LLP Milwaukee, Wisconsin, March 27, 1998. EX-27.(A) 10 EXHIBIT 27A
5 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 3,323 7,361 20,142 2,470 11,161 42,912 8,608 6,295 82,204 14,643 0 0 0 4,775 61,902 82,204 127,029 127,029 91,709 114,383 1,487 435 0 14,133 5,065 9,068 0 0 0 9,068 1.90 1.88
EX-27.(B) 11 EXHIBIT 27B
5 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 6,838 8,179 20,528 2,292 12,399 47,813 8,680 6,027 73,077 13,973 0 0 0 1,587 57,517 73,077 129,314 129,314 94,474 117,650 (1,126) 439 0 12,790 4,718 8,072 0 0 0 8,072 1.66 1.65
EX-27.(C) 12 EXHIBIT 27C
5 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 11,247 12,678 20,917 2,049 14,946 59,494 8,783 5,269 79,328 13,498 0 0 0 1,884 62,199 79,328 120,643 120,643 88,094 112,041 2,208 487 0 10,810 4,003 6,807 0 0 0 6,807 1.21 1.21
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