UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)

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WOLVERINE WORLD WIDE, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Wolverine World Wide, Inc.
9341 Courtland Drive, N.E.
Rockford, Michigan 49351

 

NOTICE OF ANNUAL MEETING

 

To our Stockholders:

 

You are invited to attend Wolverine’s Annual Meeting of Stockholders at Wolverine’s headquarters located at 9341 Courtland Drive, N.E., Rockford, Michigan, on Thursday, April 19, 2007, at 10 a.m. local time. At the meeting, we will:

 

 

You can vote at the meeting and any adjournment of the meeting if you were a stockholder of record on March 1, 2007. A list of stockholders entitled to vote at the meeting will be available for review by Wolverine stockholders at the office of Kenneth A. Grady, Secretary and General Counsel of Wolverine, located at 9341 Courtland Drive, N.E., Rockford, Michigan, during ordinary business hours for the 10-day period before the meeting.

 

A copy of the Annual Report to Stockholders for the year ended December 30, 2006, is enclosed with this Notice. The following proxy statement and enclosed proxy card are being sent to stockholders on and after March 14, 2007.

 

By Order of the Board of Directors

 

Kenneth A. Grady, Secretary and General Counsel

 

March 14, 2007

 

WOLVERINE WORLD WIDE, INC.
9341 Courtland Drive, N.E.
Rockford, Michigan 49351

 

 

ANNUAL MEETING OF STOCKHOLDERS

 

April 19, 2007

 

 

Proxy Statement

 

This proxy statement and enclosed proxy card are being furnished to you in connection with the solicitation of proxies by the Wolverine Board of Directors for use at the annual meeting. In this proxy statement, “we,” “us,” “our” and “Wolverine” refer to Wolverine World Wide, Inc. and “you” and “your” refer to Wolverine stockholders.

 

Questions and Answers About the Proxy Materials and Our 2007 Annual Meeting

 

 

      • election of four directors for three-year terms expiring in 2010;

 

      • approval of the Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan);

 

      • approval of the Amended and Restated Executive Long-Term Incentive Plan (3-Year Plan); and

 

      • ratification of the appointment of Ernst & Young LLP as independent auditors for Wolverine for the current fiscal year.

 

 

Election of Directors

 

As recommended by the Governance Committee, the Board of Directors proposes that the following nominees be elected as directors for terms expiring at the 2010 annual meeting:

 

Jeffrey M. Boromisa
David T. Kollat
David P. Mehney
Timothy J. O’Donovan

 

All of the nominees are currently directors of Wolverine whose terms will expire at the annual meeting. Each proposed nominee is willing to be elected and serve as a director. However, if a nominee is unable to serve or is otherwise unavailable for election, which is not contemplated, the incumbent Wolverine Board of Directors may or may not select a substitute nominee. If a substitute nominee is selected, your shares will be voted for the substitute nominee (unless you give other instructions). If a substitute nominee is not selected, your shares will be voted for the remaining nominees. Proxies will not be voted for more than four nominees.

 

Wolverine’s Board of Directors currently consists of 11 directors. Paul D. Schrage is retiring at this year’s annual meeting after ten years of service as a director.

 

Wolverine’s Amended and Restated Bylaws provide that the Board of Directors is divided into three classes, with each class to be as nearly equal in number as possible. Each class serves a term of office of three years, with the term of one class expiring at the annual meeting in each successive year.

 

Biographical information for each nominee and each current director who will continue to serve after the annual meeting is presented below. Except as otherwise indicated, all have had the same principal positions and employment for over five years.

 

Your Board of Directors recommends that you vote FOR each nominee.

 

Wolverine’s Board of Directors

 

Nominees for Terms Expiring in 2010

 

JEFFREY M. BOROMISA (age 52) has been a director since 2006. Mr. Boromisa is Executive Vice President of Kellogg International, President of Asia Pacific and Senior Vice President of Kellogg Company, a leading global cereal, snack and specialty foods company. He has held these positions since 2006. Mr. Boromisa is also a member of Kellogg Company’s Executive Management Committee. From 2004 until 2006, he was Senior Vice President and Chief Financial Officer of Kellogg Company. In 2002, Mr. Boromisa was promoted to Senior Vice President, Corporate Controller and Chief Financial Officer of Kellogg International. Mr. Boromisa served as Vice President and Corporate Controller of Kellogg Company from November 1999 until 2002. In 1997, he was promoted to Vice President — Purchasing of Kellogg North America, and since 1981, has served Kellogg Company in various financial positions.

 

DAVID T. KOLLAT (age 68) has been a director since 1992. Mr. Kollat is President and Chairman of 22, Inc., a company specializing in research and management consulting for retailers and consumer goods manufacturers. Mr. Kollat is also a director of Limited Brands, Inc.; Big Lots, Inc.; and Select Comfort Corporation.

 

DAVID P. MEHNEY (age 67) has been a director since 1977. Mr. Mehney is President of The KMW Group, Inc., an importer and distributor of medical products, and distributor of marine products in Michigan.

 

TIMOTHY J. O’DONOVAN (age 61) has been a director since 1993. Mr. O’Donovan is Chief Executive Officer and Chairman of the Board of Wolverine and has served in that capacity since April 2005. Mr. O’Donovan served Wolverine as its Chief Executive Officer and President from April 2000 until April 2005. Before April 2000, Mr. O’Donovan was Chief Operating Officer and President of Wolverine since 1996. Before 1996, Mr. O’Donovan was Executive Vice President of Wolverine. Mr. O’Donovan is also a director of Spartan Stores, Inc. and Kaydon Corporation.

Continuing Directors — Terms Expiring in 2009

 

ALBERTO L. GRIMOLDI (age 65) has been a director since 1994. Mr. Grimoldi is Chairman of Grimoldi, S.A., a shoe manufacturer and retailer in Argentina. He has held that position since 1986. Mr. Grimoldi was previously a member of the Advisory Board of Ford Motor Company in Argentina, and has also held various positions in the Argentinean government.

 

BRENDA J. LAUDERBACK (age 56) was appointed to the Board of Directors in 2003. From 1995 until her retirement in 1998, Ms. Lauderback was president of the Wholesale and Retail Group of Nine West Group, Inc., a footwear wholesaler and distributor. She was previously the President of the Wholesale Division of U.S. Shoe Corporation, a footwear manufacturer and distributor, and a Vice President of Dayton Hudson Corporation, a retailer. Ms. Lauderback is also a director of Irwin Financial Corporation; Big Lots, Inc.; Denny’s Corporation; and Select Comfort Corporation.

 

SHIRLEY D. PETERSON (age 65) has been a director since 2005. From 1995 until her retirement in 2000, Ms. Peterson served as President of Hood College of Frederick, Maryland. From 1993 to 1995 she was a partner at the law firm Steptoe & Johnson LLP. She was previously the Commissioner of the Internal Revenue Service and an Assistant Attorney General of the Tax Division for the U.S. Department of Justice. Ms. Peterson is also a director of Federal-Mogul Corporation; The Goodyear Tire & Rubber Company; AK Steel Holding Corporation; Champion Enterprises Inc.; and is a director or trustee of various funds within the DWS Fund Complex. Ms. Peterson also is a trustee of Bryn Mawr College.

 

Continuing Directors — Terms Expiring in 2008

 

BLAKE W. KRUEGER (age 53) has been a director since 2006. Mr. Krueger is President and Chief Operating Officer of Wolverine, a position he assumed in October 2005. From 2004 to October 2005, he served as Executive Vice President and Secretary of Wolverine and President of the Heritage Brands Group. From 2003 to 2004, Mr. Krueger served as Executive Vice President and Secretary of Wolverine and President of the Caterpillar Footwear Group. He has also previously served as Executive Vice President, General Counsel and Secretary of Wolverine with various responsibilities including the human resources, retail, business development, accessory licensing, mergers and acquisitions, and legal areas.

 

PHILLIP D. MATTHEWS (age 68) has been a director since 1981. Mr. Matthews is Lead Director of Wolverine and was Chairman of the Board of Wolverine from 1993 until 1996. Mr. Matthews is also Chairman of Water Pik Technologies, Inc., a developer, manufacturer and marketer of health care products. Mr. Matthews is also a director of Washington Mutual, Inc.

 

MICHAEL A. VOLKEMA (age 51) has been a director since 2005. Mr. Volkema is Chairman of Herman Miller, Inc., a leading designer and manufacturer of furnishings for the office and home. He has held that position since 2000. Mr. Volkema became President and Chief Executive Officer of Herman Miller in 1995 and held those positions until 2003 and 2004, respectively. Mr. Volkema is also a director of Applebee’s International, Inc.

 

 

Board Committees and Meetings

 

During the 2006 fiscal year, the Board of Directors held five regular meetings. Each of the directors attended 75% or more of the aggregate of the total number of full Board meetings and the total number of meetings of committees on which he or she served (during the periods that he or she served).

 

The Board of Directors has four standing committees: the Audit Committee, the Compensation Committee, the Executive Committee and the Governance Committee. Members of each committee are appointed by the Board of Directors and the authority, duties and responsibilities of each committee are governed by written charters approved by the Board of Directors.

 

In addition to regular Board and Committee meetings, Wolverine has regular scheduled executive sessions for non-management directors. Wolverine’s independent Lead Director, Mr. Matthews, presides at all non-management executive sessions. Interested parties may make concerns known to the non-management directors

by communicating with Mr. Matthews or with the non-management directors as a group, through one of the Board communication mechanisms described later in this proxy statement under the heading “Corporate Governance Principles — Communication with the Board.”

 

The table below shows current membership for each of the standing committees:

 

 

 

Below is a description of each of the standing committees.

 

Audit Committee.  The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 and performs the following duties:

 

 

Only independent directors may serve on the Audit Committee. Each member of the Audit Committee satisfies the independence standards for such committee members established by the New York Stock Exchange (“NYSE”). The Audit Committee met 11 times in 2006.

 

Compensation Committee.  The Compensation Committee:

 

 

Only independent directors may serve on the Compensation Committee. Each member of the Compensation Committee satisfies the independence standards for such committee members established by NYSE. The Compensation Committee met four times during 2006.

 

Wolverine has engaged Watson Wyatt for compensation consulting services. Pursuant to the engagement, Watson Wyatt provides comparative compensation data to the Compensation Committee. Watson Wyatt also assists the Compensation Committee, as deemed necessary from time to time, in formulating Wolverine’s compensation policies, provides advice to the Compensation Committee concerning specific compensation packages and appropriate levels of executive and Board of Director compensation, provides advice about competitive levels of compensation and reviews and recommends changes in the compensation system and programs of Wolverine.

 

Executive Committee.  Subject to limitations set forth in the Executive Committee Charter and applicable laws, rules and regulations, the Executive Committee exercises the powers of the Board of Directors during periods between Board meetings with respect to matters that the Chairman of the Board determines must be addressed before the next scheduled meeting of the Board and for which a special meeting of the Board is not practicable. The Executive Committee did not meet during 2006.

 

Governance Committee.  The Governance Committee:

 

 

In prior years Watson Wyatt assisted the Governance Committee in reviewing the general compensation structure for directors. Watson Wyatt is engaged by Wolverine.

 

In evaluating the skills and characteristics required of Board members, the Governance Committee addresses issues such as experience, diversity, age and skills in the context of the current make-up of the Board. The Governance Committee will consider candidates for nomination that are recommended by stockholders, directors, officers, third-party search firms and other sources. Stockholders may recommend individual nominees for consideration by the Governance Committee by communicating with the Governance Committee through one of the Board communication mechanisms described under the heading “Corporate Governance Principles — Communication with the Board.” The Board of Directors ultimately determines individuals to be nominated at each annual meeting. Direct stockholder nominations may be made through the procedure described below under the subheading “Stockholder Nominations.” From time to time, the Governance Committee engages third-party search firms to assist with identifying and evaluating potential nominees.

 

In making nominee recommendations to the Board, the Governance Committee considers a potential nominee’s ability, judgment and personal and professional integrity. The Governance Committee seeks nominees who are likely to be most effective, in conjunction with other nominees and Board members, in collectively serving the long-term interests of the stockholders.

 

Only independent directors may serve on the Governance Committee. Each member of the Governance Committee satisfies the independence standards for such committee members established by NYSE. The Governance Committee met five times during 2006.

 

Stockholder Nominations

 

Nominations may be made by a stockholder entitled to vote for the election of directors if, and only if, the stockholder submits advance notice of the proposed nomination to the Secretary of Wolverine and the notice is received by the Secretary of Wolverine not less than 50 nor more than 75 days before the annual meeting.

However, if the first to occur of the notice of the meeting or public disclosure is given or made to stockholders less than 65 days before the annual meeting, the notice of the proposed nomination must be received not later than the close of business on the 15th day after the day on which the notice of the date of the meeting was mailed or the public disclosure was made, whichever occurs first. Each notice submitted by a stockholder must set forth each nominee’s name, age, business address, residence address and principal occupation and employment, the class and number of shares of common stock beneficially owned by each nominee, and any other information concerning each nominee required to be included in a proxy statement soliciting proxies for the election of the nominee under the rules of the SEC. In addition, the notice must state the name, record address and the class and number of shares of common stock beneficially owned by the stockholder submitting the notice. If the chairman of the meeting determines that a nomination was not made in accordance with these procedures, he or she must announce that determination at the meeting and the nomination will be disregarded.

 

Corporate Governance Principles

 

Wolverine has developed governance principles to assist the Board in fulfilling its responsibilities to stockholders and to provide a framework for the Board’s oversight responsibilities regarding the management of Wolverine. Wolverine’s governance principles are dynamic and have been developed and revised over a period of many years to reflect changing laws, regulations and best business practices. The governance principles also provide guidance and transparency to management, employees, investors and other stakeholders regarding the Board’s philosophy, high ethical standards, expectations for conducting business, and decision-making processes.

 

The following is a summary of certain of Wolverine’s policies, charters, guidelines and principles relating to corporate governance and financial reporting. You may access complete current copies of our Code of Conduct & Compliance, Corporate Governance Guidelines, Director Independence Standards, Accounting and Finance Code of Ethics, Audit Committee Charter, Governance Committee Charter, Compensation Committee Charter and Executive Committee Charter at our website, www.wolverineworldwide.com. Each of these is also available in print to any stockholder upon request, and the Director Independence Standards are attached as Appendix A to this Proxy Statement.

 

Independence

 

The Board believes that the independence of directors and Board committee members is important to assure that the Board and its committees operate only in the best interests of the stockholders and to avoid any appearance of conflict of interest. For over 13 years, Wolverine has functioned with not more than two active or former management employees as directors. The remainder of the Board’s 9 to 12 directors over this period have been non-management directors. Only two current or former management employees, Wolverine’s Chief Executive Officer and Chairman and its President and Chief Operating Officer, currently serve as directors. Wolverine’s formal Corporate Governance Guidelines require that a substantial majority of the directors be independent.

 

The Board has determined that the following 8 of its 11 directors meet the director independence standards adopted by the Board and the applicable NYSE standards for independence (including, with respect to audit committee members, the heightened independence criteria applicable to audit committee members under the NYSE and SEC independence standards), have no material relationship with Wolverine, and therefore are independent:

 

 

Our Board of Directors has adopted categorical Independence Standards, which are attached as Appendix A to this Proxy Statement and which are also available at our website. These Independence Standards comply with and, in some areas, exceed the director independence standards required by NYSE. In summary,

 

* See the discussion of indirect related party transactions under the caption “Related Matters,” subheading “Certain Relationships and Related Transactions.”

under these standards a director is considered independent only if the director and his or her immediate family members do not have, and generally have not had in the most recent three years, any material relationships with Wolverine, its subsidiaries or affiliates (including certain relationships with Wolverine’s independent auditors). The standards establish thresholds at which such relationships are deemed to be not material. In addition, the Board examines on a case-by-case basis transactions and relationships that are not of a nature addressed by the categorical standards.

 

Corporate Governance Guidelines

 

The Board has adopted Corporate Governance Guidelines that set forth the primary framework of governance principles applicable to Wolverine. The Corporate Governance Guidelines outline the general duties and functions of the Board and management, and set forth general principles regarding Board composition, independence, Board meetings and responsibilities, Board committees, expectations of directors, annual performance evaluations, management succession and ethical expectations.

 

Stock Ownership Requirements for Directors and Executive Officers

 

For many years, the Board has believed that directors and management should have a significant financial stake in Wolverine to align their interests with those of the stockholders. For that reason, several years ago the Board adopted formal requirements that directors and executive management own specified amounts of Wolverine stock (including ownership credit for Stock Units allocated to non-employee directors) within five years of their respective election to the Board or appointment as a member of executive management. The ownership requirements are as follows: (i) for directors, five times the current Board retainer, (ii) for the Chief Executive Officer, five times base salary, (iii) for other executive officers, between two and three times base salaries, and (iv) for other executive management, between one and two times base salaries. Some non-employee directors also participate in the Deferred Compensation Plan that allows non-employee directors to convert a portion or all of their cash compensation into stock ownership and all non-employee directors participate in the Deferred Compensation Plan with respect to the annual equity retainer.

 

Code of Conduct & Compliance

 

For years, Wolverine and its employees and directors have followed an extensive Code of Conduct & Compliance (“Code”). This comprehensive Code establishes basic guidelines to help employees and directors comply with applicable legal requirements and sets forth Wolverine’s expectations regarding business ethics, integrity, honesty, fairness and keeping commitments. The Code contains Wolverine’s principles and procedures regarding conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of Wolverine’s assets, compliance with laws, rules and regulations, engagement criteria for Wolverine’s trading partners, “whistle blower” protection provisions, expectations regarding the integrity of books and records, and guidelines and procedures for many other subjects. Employees are surveyed annually to identify any areas of noncompliance with the Code, and the results of this survey are reported to the Board.

 

Accounting and Finance Code of Ethics

 

The Board has adopted an Accounting and Finance Code of Ethics (“Finance Ethics Code”). This is an ethics code focused on the financial reporting process and is intended to protect the interests of all of Wolverine’s constituents, including stockholders, employees, customers and the communities in which Wolverine conducts business. Many of the basic tenets of the Finance Ethics Code have been incorporated for many years in the Code. The Finance Ethics Code is applicable to Wolverine’s Chief Executive Officer, Chief Financial Officer and Corporate Controller and sets forth specific rules of conduct and expectations regarding the financial reporting process, protection of Wolverine’s assets, compliance with rules and regulations and honest and ethical conduct in connection with the financial reporting process and related disclosures. The Finance Ethics Code and the Code are available on the Corporate Governance section of the Investors section of Wolverine’s website at www.wolverineworldwide.com, where Wolverine will post any waiver of these codes for directors or executive officers.

 

Board Committee Charters

 

The Board has organized and formed four committees, the Audit Committee, the Compensation Committee, the Executive Committee and the Governance Committee. The Board has approved a committee charter for each committee that contains basic principles regarding the committee’s organization, purpose, authority and responsibilities. The performance of each committee is

reviewed annually by committee members and the Board.

 

Leadership

 

Since 1993, the Board has operated with an independent Lead Director, who is selected by the independent directors. The duties of the independent Lead Director include: (a) working closely with the Chairman regarding the agenda and scheduling for Board and committee meetings; (b) overseeing information sent to the Board; (c) presiding over executive sessions; (d) serving as a liaison between the Chairman and the independent Directors; (e) presiding over Board meetings in the absence of the Chairman; and (f) being available for consultation and communications with stockholders as appropriate.

 

Attendance

 

The Board prides itself on its ability to recruit and retain directors who have a diversity of experience, who have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment and who are effective (in conjunction with the other members of the Board) in collectively serving the long-term interests of the stockholders. Board and committee attendance is central to the proper functioning of the Board of Directors and is a priority. Directors are expected to make every effort to personally attend every Board meeting. Directors are also expected to attend the Annual Meeting of Stockholders in person. All ten then-current directors attended the 2006 annual meeting.

 

Communication with the Board

 

Stockholders and interested parties may communicate with members of Wolverine’s Board of Directors through various links provided on the Corporate Governance section of the Investors section of Wolverine’s website at www.wolverineworldwide.com or by sending correspondence to the Board, a specific Board committee or a Board member c/o General Counsel, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351. Any communications submitted by any of the above means (or the means described below) are received by Wolverine’s General Counsel and forwarded to the appropriate person or persons. Complaints or concerns regarding Wolverine’s financial statements and accounting, auditing, internal control and reporting practices can be reported to the audit committee (including anonymous and confidential submissions) by sending an e-mail to financialconcerns@wwwinc.com or by writing to the audit committee c/o the General Counsel at the above address.

 

Board and Company Culture

 

Wolverine’s comprehensive governance guidelines and principles are coupled with a robust, open and effective Board environment that promotes respect, trust and candor, fosters a culture of open dissent and permits each director to express opinions and contribute to the Board process. Directors are expected to have unrestricted access to management and any company information they desire. The participation of Board members and the open exchange of opinions is further encouraged at the Board committee level through the periodic rotation of Board members among its standing committees. This open and candid operating environment is shared by management and the Board and is essential to fully realize the benefits of Wolverine’s formal governance guidelines, principles, charters and policies.

 

Amended and Restated Short-Term Incentive Plan (Annual Bonus Plan)

 

To provide incentives and rewards for achievement of annual business unit goals, on February 8, 2007, the Board of Directors adopted, subject to stockholder approval, the Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan) (the “Restated Annual Bonus Plan”). The Restated Annual Bonus Plan would amend and restate the existing Executive Short-Term Incentive Plan (Annual Bonus Plan), which was approved by the stockholders at the 2002 Annual Meeting of Stockholders (the “2002 Annual Plan”).

 

The Restated Annual Bonus Plan differs from the 2002 Annual Plan in three ways: (a) it would extend the term of the 2002 Annual Plan to the first meeting of stockholders in 2012; (b) it would provide greater flexibility to the Compensation Committee in allowing new employees or an employee who is assigned new duties to participate for a shorter performance period, which would begin on the date the employee assumes his or her new duties; and (c) it would increase the maximum incentive bonus from $1,500,000 to $1,800,000. The term of the 2002 Annual Plan expires at this year’s Annual Meeting of Stockholders unless

stockholders approve the extension of the 2002 Annual Plan by approving the Restated Annual Bonus Plan.

 

The Restated Annual Bonus Plan is designed to provide executive officers, senior corporate and divisional officers and other key employees with the opportunity for bonuses based on the performance of the business unit or units to which the employee is assigned. The Restated Annual Bonus Plan is intended to provide performance-based compensation under Section 162(m) of the Code, as amended, and is interpreted and administered to achieve that purpose. Wolverine intends to continue its established practice of paying annual incentive bonuses to officers and key management employees based on individual performance goals. Participants in the Restated Annual Bonus Plan may also receive cash or other bonuses from Wolverine under other bonus programs, which may or may not qualify for deductibility under Section 162(m) of the Code. No payment under any such other arrangement may be contingent upon failure to satisfy the criteria for payment of an incentive bonus under the Restated Annual Bonus Plan.

 

The Board of Directors believes that it is in the best interests of Wolverine and its stockholders to provide for a stockholder-approved plan under which annual bonuses paid to its executive officers can qualify for deductibility for federal income tax purposes. Accordingly, Wolverine has structured the Restated Annual Bonus Plan in a manner such that payments under it can satisfy the requirements for “performance-based” compensation within the meaning of Section 162(m) of the Code.

 

In general, Section 162(m) places a limit on the deductibility for federal income tax purposes of the compensation paid to the named executive officers set forth in the Summary Compensation Table who were employed by Wolverine on the last day of its taxable year. Under Section 162(m), compensation paid to such persons in excess of $1 million in a taxable year is not generally deductible. However, compensation that qualifies as “performance-based” as determined under Section 162(m) does not count against the $1,000,000 limitation. One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goal under which compensation may be paid be disclosed to and approved by Wolverine’s stockholders. For purposes of Section 162(m) the material terms include: (a) the employees eligible to receive compensation; (b) a description of the business criteria on which the performance goal is based; and (c) the maximum amount of compensation that can be paid to an employee under the performance goal. Each of these aspects of the Restated Annual Bonus Plan is discussed below and stockholder approval of the Restated Annual Bonus Plan will be deemed to constitute approval of each of these aspects of the Restated Annual Bonus Plan for purposes of the approval requirements of Section 162(m) of the Code.

 

The following is a summary of the principal features of the Restated Annual Bonus Plan and is qualified in its entirety by reference to the terms of the Restated Annual Bonus Plan set forth in Appendix B to this Proxy Statement.

 

The Restated Annual Bonus Plan is effective as of February 8, 2007. Payment of bonuses pursuant to the Restated Annual Bonus Plan for 2007 are contingent upon stockholder approval. In the absence of such approval, the 2002 Annual Plan would terminate without action by the Board of Directors on April 19, 2007.

 

The Restated Annual Bonus Plan is administered by the Compensation Committee of the Board of Directors (the “Compensation Committee”) or such other committee as the Board designates to administer the Restated Annual Bonus Plan. The Compensation Committee currently consists of four independent members, all of whom are “non-employee directors” as defined in Rule 16b-3 issued under the Securities Exchange Act of 1934 and “outside directors” as defined in the regulations issued under Section 162(m) of the Internal Revenue Code. Except as limited by the Restated Annual Bonus Plan, the Compensation Committee has all of the express and implied powers and duties set forth in the Restated Annual Bonus Plan and has full authority and discretion to interpret the Restated Annual Bonus Plan and to make all other determinations considered necessary or advisable for the administration of the Restated Annual Bonus Plan. The Compensation Committee can adopt such other rules, policies and forms for the administration, interpretation and implementation of the Restated Annual Bonus Plan as it considers advisable. All determinations, interpretations and selections made by the Compensation Committee regarding the Restated Annual Bonus Plan are final and conclusive.

 

For each fiscal year or part thereof, the Compensation Committee selects the executive officers (currently six persons), senior corporate and divisional officers and other key employees (currently approximately 443 persons) who would be participants for the year. The Compensation Committee can limit the number of executive officers and senior corporate and divisional officers and other key employees who would be

participants for a fiscal year or part thereof. Selection as a participant for a fiscal year or part thereof by the Compensation Committee is limited to that fiscal year or part thereof. An individual is a participant for a fiscal year or part thereof only if designated as a participant by the Compensation Committee for such fiscal year or part thereof. The amount of bonus any individual receives under the Restated Annual Bonus Plan depends upon corporate and/or business unit performance for each fiscal year and is not presently determinable for Wolverine’s 2007 fiscal year. The benefits set forth in the table below were paid under the Restated Annual Bonus Plan with respect to fiscal 2006.

 

Name and Position		Dollar Value
Timothy J. O’Donovan, Chief Executive Officer and Chairman		$	735,087
Stephen L. Gulis, Jr., Executive Vice President, Chief Financial Officer and Treasurer		$	249,834
Cheryl L. Johnson, Vice President of Human Resources		$	76,778
Blake W. Krueger, President and Chief Operating Officer		$	408,000
Nicholas P. Ottenwess, Vice President — Finance		$	95,739
James D. Zwiers, President — Hush Puppies U.S. Division		$	94,072
Executive Group		$	1,659,510
Non-Executive Director Group		$	0
Non-Executive Officer Employee Group		$	7,288,392

 

Executive officers, senior corporate and divisional officers and other key employees of Wolverine who are participants in the Restated Annual Bonus Plan may be considered to have an interest in the Restated Annual Bonus Plan.

 

The Compensation Committee pre-establishes performance goals for each participant in the manner and within the time limits specified below. A target bonus goal is established by the Compensation Committee, expressed as a percentage of the participant’s base salary or a specified dollar amount. The Compensation Committee then establishes incentive bonus levels, expressed as a percentage of the target bonus, that is paid to the participant at specified levels of performance by Wolverine, a subsidiary, division, or profit center. The term incentive bonus, as used in the Restated Annual Bonus Plan, means an annual bonus awarded and paid to a participant for services to Wolverine during a fiscal year or part thereof that is based upon achievement of pre-established financial objectives. The Compensation Committee also establishes any specific conditions under which an incentive bonus could be reduced or forfeited (but not increased).

 

The incentive bonus levels described above can be expressed as either: (i) a matrix of percentages of the target bonus that would be paid at specified levels of performance; or (ii) a mathematical formula that determines the percentage of the target bonus that would be paid at varying levels of performance.

 

Under the Restated Annual Bonus Plan, performance of Wolverine and/or its subsidiaries, operating divisions or profit centers is determined by reference to one or more of the following objectively determinable factors, as selected by the Compensation Committee: net earnings, net earnings before taxes, operating income, revenues, net sales, net sales and other operating income, return on sales, return on equity, earnings per share, total stockholder return, economic value added measurements, return on assets, return on invested capital or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, restructuring, or other special charges. These factors could be measured against pre-determined levels or Wolverine’s relative performance when compared to a pre-established peer group.

 

Payment of an incentive bonus to a participant for a fiscal year or part thereof under the Restated Annual Bonus Plan is entirely contingent upon achievement of the performance levels established by the Compensation Committee. Pursuant to the amendments under the Restated Annual Bonus Plan, all determinations to be made by the Compensation Committee for a performance period are made by the Compensation Committee during the shorter of the first 90 days of such performance period and the period ending on the date on which 25 percent of the performance period has

elapsed. An incentive bonus is based solely upon objective criteria, from which an independent third party with knowledge of the facts could determine whether the performance goal or range of goals were met and from that determination could calculate the incentive bonus to be paid. Although the Compensation Committee has authority to exercise reasonable discretion to interpret the Restated Annual Bonus Plan and the criteria it specifies pursuant to the Restated Annual Bonus Plan, it can not amend or waive such criteria after the shorter of the period ending on the 90th day of a performance period or the date on which 25 percent of the performance period has elapsed. The Compensation Committee has no authority or discretion to increase any incentive bonus or to construct, modify or apply the measurement of performance in a manner that would directly or indirectly increase the incentive bonus for any participant for any fiscal year or part thereof above the amount determined by the applicable objective standards established within the time periods described above.

 

The incentive bonus for each eligible participant for a fiscal year is determined on the basis of the target bonus and performance criteria established by the Compensation Committee for the fiscal year or part thereof. The Compensation Committee determines, and certifies in writing prior to payment of the incentive bonus, that performance for the fiscal year or part thereof satisfied the criteria established by the Compensation Committee for the year. The incentive bonus for any participant for a fiscal year may not, in any event, exceed $1,800,000. The incentive bonus of each participant is paid as soon as feasible following the final determination and certification by the Compensation Committee of the amount payable.

 

In the event of a termination of the employment prior to the end of a fiscal year, the incentive bonus otherwise payable to a participant for the fiscal year is adjusted as follows. If a participant ceases to be a participant before the end of any fiscal year and more than six months after the beginning of such fiscal year because of death, normal or early retirement under Wolverine’s retirement plan, as then in effect, or total disability under Wolverine’s long-term disability plan, an award is paid to the participant or the participant’s beneficiary after the end of such fiscal year prorated as follows: the award, if any, for such fiscal year is equal to 100% of the incentive bonus that the participant would have received if the participant had been a participant during the entire fiscal year, multiplied by the ratio of the participant’s full months as a participant during that fiscal year to the 12 months in that fiscal year. If an employee ceases to be a participant during any fiscal year, or prior to actual receipt of the award for a previous fiscal year, because of the participant’s termination of employment for any reason other than described above, the participant is not entitled to any award for such fiscal year.

 

The Board of Directors can terminate the Restated Annual Bonus Plan at any time or can from time to time amend the Restated Annual Bonus Plan as it considers proper and in the best interests of Wolverine. No amendment adopted after the shorter of the period ending on the 90th day of a performance period or the date on which 25 percent of a performance period has elapsed can directly or indirectly increase any incentive bonus for that fiscal year. Except as otherwise provided in the Restated Annual Bonus Plan and the applicable objective criteria established pursuant to the Restated Annual Bonus Plan for determining the amount of any incentive bonus for a fiscal year or part thereof, no incentive bonuses would be payable for the fiscal year in which the Restated Annual Bonus Plan was terminated or, if later, in which the termination was effective.

 

If the Restated Annual Bonus Plan is approved by Wolverine’s stockholders, the Restated Annual Bonus Plan would terminate as of the date of the first meeting of stockholders occurring in the fifth year following approval (that is, 2012) or any subsequent reapproval. If the Restated Annual Bonus Plan terminates due to lack of approval by the stockholders, no incentive bonus would be awarded under the plan for the fiscal year in which the Restated Annual Bonus Plan terminates.

 

The vote of the stockholders holding a majority of the shares present in person or represented by proxy and entitled to vote on this proposal is required to approve the Restated Annual Bonus Plan. For purposes of counting votes on this proposal, abstentions will be counted as voted against the proposal. Broker non-votes will not be counted as voted on the proposal and will be deducted from the total shares of which a majority is required.

 

Your Board of Directors recommends that you vote FOR approval of the Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan).

Amended And Restated Executive Long-Term Incentive Plan
(3-Year Bonus Plan)

 

To provide incentives and rewards for long-term planning and decision-making and the achievement of long-term corporate performance goals, on February 8, 2007, the Board of Directors adopted, subject to stockholder approval, the Amended and Restated Executive Long-Term Incentive Plan (3-Year Bonus Plan) (the “Restated Long-Term Plan”). The Restated Long-Term Plan would amend and restate the existing Long-Term Incentive Plan (3-Year Bonus Plan) that was approved by the stockholders at the 2002 Annual Meeting of Stockholders (the “LTIP”).

 

The Restated Long-Term Plan differs from the current LTIP in four ways: (a) it would extend the term of the LTIP to the first meeting of stockholders in 2012; (b) it would provide greater flexibility to the Compensation Committee in allowing new employees or an employee who is assigned new duties to participate for a shorter performance period, which would begin on the date the employee assumes his or her new duties; (c) it would increase the maximum incentive bonus from $1,500,000 to $1,800,000; and (d) it would require the incentive bonus to be paid in cash unless the Compensation Committee determined that the incentive bonus should be paid in a mixture of cash and restricted stock. The LTIP expires at this year’s Annual Meeting of Stockholders unless stockholders approve the extension of the LTIP by approving the Restated Long-Term Plan.

 

The Restated Long-Term Plan is designed to provide executive officers and key management employees the opportunity for additional compensation based upon the achievement of corporate financial performance goals over a three-year period or part thereof thereof. The primary purposes of the Restated Long-Term Plan are to provide a significant incentive to substantially improve the longer-term financial performance of Wolverine and to foster cooperation among all business units. The target financial performance goals are ambitious in nature and generally require earnings growth that provide a significant challenge to management. The Restated Long-Term Plan provides performance-based compensation under Section 162(m) of the Code and is interpreted and administered to achieve that purpose. Wolverine also intends to continue its established practice of paying incentive bonuses to officers and key management employees based on individual performance goals. Participants in the Restated Long-Term Plan may also receive cash or other bonuses from Wolverine under other bonus programs, which may or may not qualify for deductibility under Section 162(m) of the Code. No payment under any such other arrangement may be contingent upon failure to satisfy the criteria for payment of an incentive bonus under the Restated Long-Term Plan or otherwise designed to provide Restated Long-Term Plan participants all or part of the compensation they would receive under the Restated Long-Term Plan regardless of whether the performance goal under the Restated Long-Term Plan is attained.

 

The Board of Directors believes that it is in the best interests of Wolverine and its stockholders to provide for a stockholder-approved plan under which long-term incentive compensation paid to its executive officers can qualify for deductibility for federal income tax purposes. Accordingly, Wolverine has structured the Restated Long-Term Plan in a manner such that payments under it can satisfy the requirements for “performance-based” compensation within the meaning of Section 162(m) of the Code. One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goal under which compensation may be paid be disclosed to and approved by Wolverine’s stockholders. For purposes of Section 162(m) the material terms include: (a) the employees eligible to receive compensation; (b) a description of the business criteria on which the performance goal is based; and (c) the maximum amount of compensation that can be paid to an employee under the performance goal. Each of these aspects of the Restated Long-Term Plan is discussed below and stockholder approval of the Restated Long-Term Plan will be deemed to constitute approval of each of these aspects of the Restated Long-Term Plan for purposes of the approval requirements of Section 162(m) of the Code.

 

The following is a summary of the principal features of the Restated Long-Term Plan and is qualified in its entirety by reference to the terms of the Restated Long-Term Plan as set forth in Appendix C to this Proxy Statement. The Restated Long-Term Plan is effective as of February 8, 2007. If the Restated Long-Term Plan is not approved at the 2007 Annual Stockholder Meeting, then it shall terminate without action by the Board as of April 19, 2007.

 

The Restated Long Term Plan is administered by the Compensation Committee, or such other committee as

the Board designates to administer the Restated Long-Term Plan. The Compensation Committee currently consists of four independent members, all of whom are “non-employee directors” as defined in Rule 16b-3 issued under the Securities Exchange Act and “outside directors” as defined in the regulations issued under Section 162(m) of the Internal Revenue Code. Except as limited by the Restated Long-Term Plan, the Compensation Committee has all of the express and implied powers and duties set forth in the Restated Long-Term Plan and has full authority and discretion to interpret the Restated Long-Term Plan and to make all other determinations considered necessary or advisable for the administration of the Restated Long-Term Plan. The Compensation Committee can adopt such other rules, policies and forms for the administration, interpretation and implementation of the Restated Long-Term Plan as it considers advisable. All determinations, interpretations and selections made by the Compensation Committee regarding the Restated Long-Term Plan are final and conclusive.

 

The primary concept of the Restated Long-Term Plan is to establish financial performance goals for each overlapping three-year time period or part thereof for Wolverine. Performance periods begin every fiscal year and end three full fiscal years later.

 

For each three-year period or part thereof, the Compensation Committee selects the executive officers (currently six persons) and other key management employees (currently approximately 31 persons) who would be participants for the three-year period. The Compensation Committee can limit the number of executive officers and key management employees who would be participants for a performance period. Selection as a participant for a three-year period or part thereof by the Compensation Committee is limited to that three-year period or part thereof. An eligible executive officer or key management employee is a participant for a performance period only if designated as a participant by the Compensation Committee for such period. The amount of bonus any individual receives under the Restated Long-Term Plan depends upon corporate performance for each performance period and is not presently determinable for fiscal year 2007. The benefits set forth in the table below were paid under the Restated Long-Term Plan with respect to the 2004 — 2006 performance period.

 

 

Name and Position		Dollar Value
Timothy J. O’Donovan, Chief Executive Officer and Chairman		$	623,567
Stephen L. Gulis, Jr., Executive Vice President, Chief Financial Officer and Treasurer		$	208,696
Cheryl L. Johnson, Vice President of Human Resources		$	22,559
Blake W. Krueger, President and Chief Operating Officer		$	248,815
Nicholas P. Ottenwess, Vice President — Finance		$	80,325
James D. Zwiers, President — Hush Puppies U.S. Division		$	58,442
Executive Group		$	1,242,404
Non-Executive Director Group		$	0
Non-Executive Officer Employee Group		$	1,892,771

 

Executive officers and other key management employees of Wolverine who are participants in the Restated Long-Term Plan may be considered to have an interest in the Restated Long-Term Plan.

 

The Compensation Committee pre-establishes performance goals for each participant in the manner and within the time limits specified in the Restated Long-Term Plan. For each participant in each three-year period or part thereof, the Compensation Committee specifies a target bonus goal established by the Compensation Committee, expressed as a specified dollar amount or as a percentage of the participant’s average annual earned salary, and incentive bonus levels, expressed as a percentage of the target bonus, that would be paid to the participant at specified levels of performance. The term incentive bonus, as used in the Restated Long-Term Plan, means a bonus awarded and paid to a participant for services to Wolverine during a three-year period or part thereof that is based upon achievement of pre-established financial objectives by Wolverine. The Compensation Committee can also specify any specific conditions under which an incentive bonus would be reduced or forfeited (but not increased).

The incentive bonus levels described above can be expressed either as (i) a matrix of percentages of the target bonus that would be paid at specified levels of performance; or (ii) a mathematical formula that determines the percentage of the target bonus that would be paid at varying levels of performance.

 

Under the Restated Long-Term Plan, performance of Wolverine and/or its subsidiaries, operating divisions, or profit centers are determined by reference to one or more of the following objectively determinable factors, as selected by the Compensation Committee: net earnings, net earnings before taxes, operating income, revenues, net sales, net sales and other operating income, return on sales, return on equity, earnings per share, total stockholder return, economic value added measurements, return on assets, return on invested capital or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, restructuring, or other special charges. These factors are measured against pre-determined levels or Wolverine’s relative performance when compared to a pre-established peer group.

 

Payment of an incentive bonus to a participant for a three-year period or part thereof under the Restated Long-Term Plan is entirely contingent upon the performance goals established by the Compensation Committee, the satisfaction of which is substantially uncertain when established by the Compensation Committee for the three-year period or part thereof.

 

Pursuant to the amendments under the Restated Long-Term Plan, all determinations to be made by the Compensation Committee for a three-year period or part thereof are made by the Compensation Committee during the shorter of the first 90 days of such performance period and the period ending on the date on which 25 percent of the performance period has elapsed. An incentive bonus is based solely upon objective criteria, from which an independent third party with knowledge of the facts could determine whether the performance goals or range of goals were met and from that determination could calculate the incentive bonus to be paid. Although the Compensation Committee has authority to exercise reasonable discretion to interpret the Restated Long-Term Plan and the criteria it would specify pursuant to the Restated Long-Term Plan, it can not amend or waive such criteria after the shorter of the period ending on the 90th day of a performance period or the date on which 25 percent of the performance period has elapsed. The Compensation Committee has no authority or discretion to increase any incentive bonus or to construct, modify or apply the measurement of performance in a manner that would directly or indirectly increase the incentive bonus for any participant for any three-year period or part thereof above the amount determined by the applicable objective standards established within the time periods described above.

 

The incentive bonus for each eligible participant for a three-year period or part thereof is determined on the basis of the target bonus and performance criteria established by the Compensation Committee for such performance period. The Compensation Committee determines, and certifies in writing prior to payment of any incentive bonus, that Wolverine’s performance for the three-year period or part thereof satisfied the criteria established by the Compensation Committee for such period.

 

In the event of a termination of employment prior to the end of a three-year performance period, the incentive bonus otherwise payable to a participant for the three-year period is adjusted as follows. If a participant ceases to be a participant before the end of any three-year period and more than 12 months after the beginning of such 3-year period because of death, normal or early retirement under Wolverine’s retirement plan, as then in effect, or total disability under Wolverine’s long-term disability plan, an award is paid to the participant or the participant’s beneficiary after the end of such three-year period prorated as follows: the award, if any, for such three-year period is equal to 100% of the incentive bonus that the participant would have received if the participant had been a participant during the entire performance period multiplied by the ratio of the participant’s full months as a participant during that performance period to the total number of months in that performance period. The award, if any, would only be made in the form of a cash payout. If an employee ceases to be a participant during any three-year period(s), or prior to actual receipt of the award for a previous period because of the participant’s termination of employment for any reason other than described above, the participant would not be entitled to any award for such three-year period. If a participant continued in Wolverine’s employment but no longer was approved by the Compensation Committee to participate in future three-year periods, the participant would be eligible for a prorated award determined in the same manner set forth above.

 

Under the Restated Long-Term Plan, the participant would receive his or her incentive bonus in cash as soon as feasible following final determination and certification by the Compensation Committee of the

amount payable unless the Compensation Committee determined that the incentive bonus should be paid in a mixture of cash and stock (restricted or unrestricted). If the Committee determined to pay all or part of the incentive bonus using restricted or unrestricted stock, each participant would receive the number of shares of stock equal to the incentive bonus (or part thereof) divided by the market value of Wolverine’s common stock on the date of grant, rounded to the nearest whole share. It is currently the Compensation Committee’s policy to pay 100% of the incentive bonus in cash. The incentive bonus payable to any participant with respect to any three-year period or part thereof may not, in any event, exceed $1,800,000.

 

The Board of Directors can terminate the Restated Long-Term Plan at any time or can from time to time amend the Restated Long-Term Plan as it considers proper and in the best interests of Wolverine. No amendment adopted after the shorter of the period ending on the 90th day of a performance period or the date on which 25 percent of a performance period has elapsed can directly or indirectly increase the amount of any incentive bonus, or alter the objective criteria in a manner which would increase any incentive bonus, for that three-year period or part thereof. Except as otherwise provided in the Restated Long-Term Plan and the applicable objective criteria established pursuant to the Restated Long-Term Plan for determining the amount of any incentive bonus for a three-year period or part thereof, no incentive bonuses are payable for the three-year period or part thereof in which the Restated Long-Term Plan was terminated or, if later, in which the termination was effective.

 

If stockholders approve the Restated Long-Term Plan at the 2007 Annual Meeting of Stockholders, the Restated Long-Term Plan would terminate as of the date of the first meeting of the stockholders in the fifth year following approval (that is, 2012) and each subsequent reapproval unless reapproved on or before the termination date.

 

The vote of the stockholders holding a majority of the shares present in person or represented by proxy and entitled to vote on this proposal is required to approve the Restated Long-Term Plan. For purposes of counting votes on this proposal, abstentions will be counted as voted against the proposal.

 

Broker non-votes will not be counted as voted on the proposal and will be deducted from the total shares of which a majority is required.

 

Your Board of Directors recommends that you vote FOR approval of the Amended and Restated Executive Long-Term Incentive Plan (3-Year Bonus Plan).

 

Ownership of Wolverine Stock

 

Five Percent Stockholders

 

The following table sets forth information concerning the number of shares of Wolverine stock held by each entity known to Wolverine to be the beneficial owner of more than five percent of Wolverine’s outstanding shares of common stock:

 

		Amount and Nature of Beneficial
		Ownership of Common Stock
										Shared Voting				Total
Name and Address		Sole Voting				Sole Dispositive				or Dispositive				Beneficial				Percent
of Beneficial Owner		Power				Power				Power				Ownership				of Class
Franklin Resources, Inc.(1)			3,473,220				3,473,220				0				3,473,220				6.3	%
One Franklin Parkway San Mateo, California 94403
FMR Corp.(2)			2,120,660				3,454,160				0				3,454,160				6.2	%
82 Devonshire Street Boston, Massachusetts 02109
Barclays Global Investors, NA(3)			2,586,065				2,836,058				0				2,836,058				5.1	%
45 Fremont Street San Francisco, CA 94105

 

 

 

 

Stock Ownership By Management

 

The following table sets forth the number of shares of common stock beneficially owned as of March 1, 2007, by each of Wolverine’s directors and nominees for director, each of the named executive officers and all of Wolverine’s directors, nominees for director and executive officers as a group. An asterisk in the column for “Percent of Class” means the individual beneficially owns less than one percent of the common stock:

 

		Amount and Nature of Beneficial
		Ownership of Common Stock(1)
		Sole Voting				Shared Voting								Total
Name of		and Dispositive				or Dispositive				Stock				Beneficial				Percent
Beneficial Owner		Power				Power(2)				Options(3)				Ownership(3)				of Class
Jeffrey M. Boromisa			—				—				7,682				7,682				*
Alberto L. Grimoldi			6,157				—				51,114				57,271				*
Stephen L. Gulis, Jr.			157,413				—				269,544				426,957				*
Cheryl L. Johnson			6,100				—				2,867				8,967				*
David T. Kollat			81,630				—				59,303				140,933				*
Blake W. Krueger			211,772				—				288,016				499,788				*
Brenda J. Lauderback			5,100				—				7,986				13,086				*
Phillip D. Matthews(4)			34,238				—				59,303				93,541				*
David P. Mehney			48,154				49,250				59,303				156,707				*
Timothy J. O’Donovan			452,806				140,202				539,299				1,132,307				2.1	%
Nicholas P. Ottenwess			32,203				190				80,940				113,333				*
Shirley D. Peterson			3,000				—				16,549				19,549				*
Paul D. Schrage			29,363				—				59,689				89,052				*
Michael A. Volkema			5,000				—				11,849				16,849				*
James D. Zwiers			33,213				—				27,441				60,654				*
All directors and executive officers as a group			1,109,349				189,642				1,540,885				2,839,876				5.1	%

 

Executive Compensation

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Overview

 

The Compensation Committee assists the Board of Directors in discharging its responsibilities relating to executive compensation and in fulfilling its responsibilities relating to Wolverine’s compensation and benefit programs and policies. The Compensation Committee also administers and makes recommendations with respect to Wolverine’s compensation plans and reviews and approves (with input from independent directors in the case of the Chief Executive Officer) the compensation of key senior executives. The Compensation Committee currently consists of four directors, none of whom is a current or former employee of Wolverine or its subsidiaries and all of whom are independent under the standards adopted by the Board of Directors and applicable NYSE standards. The Compensation Committee receives recommendations from the Company’s Chief Executive Officer regarding the compensation of senior executives (other than the Chief Executive Officer).

 

The Compensation Committee consults with compensation consulting firms as it deems necessary from time to time to: assist the Compensation Committee in formulating Wolverine’s compensation policies; provide advice to the Compensation Committee concerning specific compensation packages and appropriate levels of executive and Board of Director compensation; provide advice about competitive levels of compensation; and review and recommend changes in the compensation system and programs of Wolverine. Wolverine currently engages Watson Wyatt for compensation consulting.

 

Objectives of the Company’s Compensation Programs

 

The basic compensation philosophy of the Compensation Committee and Wolverine is to provide competitive salaries and incentives to achieve superior financial performance. Wolverine’s executive compensation policies are designed to achieve four primary objectives:

 

 

The Compensation Committee reviews and structures Wolverine’s compensation programs to effectively balance employee salaries with compensation that is performance-based and also to reward annual performance while maintaining a focus on longer-term objectives. The Company believes it serves the needs of its stockholders and key management employees to provide incentives commensurate with individual management responsibilities and past and future contributions to corporate objectives. The mix of compensation elements varies based on an employee’s position and responsibilities.

 

To maximize stockholder value, the Company believes it is necessary to deliver consistent, long-term sales and earnings growth. Accordingly, the Compensation Committee reviews not only the individual compensation elements, but the mix of individual compensation elements that make up the aggregate compensation and attempts to balance the total compensation package between cash, non-cash, long-term, short-term and currently paid compensation in a way that meets the goals set forth above.

 

Elements of Compensation

 

Executive compensation at Wolverine consists primarily of the following elements:

 

 

These components, individually and in the aggregate, are designed to accomplish one or more of the four compensation objectives described above.

 

Base Salary

 

To attract and retain well-qualified executives, the Compensation Committee seeks to establish competitive base salaries. The Compensation Committee determines the base salaries of executives by comparing each executive’s position with similar positions in companies of similar type, size and financial performance. Although some footwear companies are among the companies included in the comparison group, this group is not limited to footwear companies because Wolverine competes for talent with a wide range of corporations. The Company’s current comparison group includes: Jones Apparel Group, Inc.; Brown Shoe Company, Inc.; The Timberland Company; Genesco, Inc.; Columbia Sportswear Company; Skechers U.S.A., Inc.; The Stride Rite Corp.; Kenneth Cole Productions, Inc.; K-Swiss Inc.; Steven Madden, Ltd.; Rocky Brands, Inc.; Deckers Outdoor Corporation; and Weyco Group, Inc. (the “Peer Group”). In general, the Compensation Committee has targeted salaries to be at the median to slightly below the median percentile of base salaries paid for comparable positions within the Peer Group. Other factors considered by the Compensation Committee are the executive’s performance, the executive’s current compensation, the executive’s responsibilities and Wolverine’s or the applicable business unit’s performance (determined by reference to pre-tax levels of profit and levels of sales).

 

Although the Compensation Committee does not give specific weight to any particular factor, the most weight is given to the executive’s performance (in determining whether to adjust above or below the current salary level), and a significant but lesser weight is generally given to the comparative data. In general, base salaries for Wolverine’s executive officers during 2006 were near the median of salaries paid by companies included in the Peer Group. The 2006 average base salary of executive officers increased over the previous year’s level as a result of a combination of factors, including improved individual performance, improved or continued high-level performance by Wolverine, promotions and increased responsibilities.

 

Annual Incentive Bonus

 

The Annual Bonus Plan is designed to provide key employees with the opportunity for bonuses based on the performance of Wolverine and/or the performance of its subsidiaries, operating divisions or profit centers. Stockholders most recently approved the Annual Bonus Plan at the 2002 Annual Meeting of Stockholders and are being asked to vote upon approval of an amended and restated Annual Bonus Plan, as more fully described above, at this year’s Annual Meeting of Stockholders. The Annual Bonus Plan continues the annual bonus policy that Wolverine has used for many years. A target bonus goal (the “target bonus”), expressed as a percentage of the participant’s base salary, is established by the Compensation Committee. The Compensation Committee then establishes “incentive bonus” levels, expressed as a percentage of the target bonus, that are paid to the participant at specified levels of performance by Wolverine, the subsidiary, operating division or profit center.

 

“Incentive bonus” as used in the Annual Bonus Plan means an annual performance bonus awarded and paid to a participant for services to Wolverine during a fiscal year that is based upon achievement of pre-established financial objectives of Wolverine or a subsidiary, operating division or profit center. The incentive bonus levels may be expressed as either: (i) a matrix of percentages of the target bonus that would be paid at specified levels of performance; or (ii) a mathematical formula that determines the percentage of the target bonus that would be paid at varying levels of performance.

 

Performance of Wolverine and/or its subsidiaries, operating divisions or profit centers is determined by reference to one or more of the following (collectively, the “Performance Factors”): net earnings; net earnings before taxes; operating income; revenues; net sales; net sales and other operating income; return on sales; return on equity; earnings per share; total stockholder return; economic value added measurements; return on assets; return on invested capital; or any of the foregoing before or after the effect of acquisitions, divestitures, accounting changes, restructuring or other special charges or extraordinary items.

 

These factors may be measured against pre-determined levels or Wolverine’s relative performance when compared to a pre-established peer group. Payment of an incentive bonus to a participant for a fiscal year

under the Annual Bonus Plan is entirely contingent upon achievement of the performance levels established by the Compensation Committee. All determinations to be made by the Compensation Committee for a fiscal year are made during the first 90 days of each fiscal year.

 

The two primary measures of corporate and divisional performance in 2006 were pre-tax profits and sales, with approximately 80% of participants’ target amounts weighted on pre-tax profits. The Compensation Committee determined that this weighting reflected Wolverine’s goal to grow sales, but not at the expense of profits and shareholder return. Performance objectives for 2006 under the Annual Bonus Plan were in line with the Company’s stated long-term goals for revenue growth at the mid- to upper-single digit level and earnings growth at one and one half times revenue growth, with the threshold payout targeted at the low end of the range and the maximum payout targeted at the high end of the range. During fiscal 2006, the named executive officers were generally targeted to receive from 20% to 48% of their annual salaries in annual bonus compensation, which was determined to be competitive in the marketplace for similar positions and responsibilities. For executive officers, actual payouts, if any, could range from 50% to 213% of the target percentage, based on performance. In determining these percentages, the Compensation Committee considered each named executive officer’s position, competitive incentives and the executive’s aggregate incentive compensation potential under all of Wolverine’s plans. The percentage of total compensation represented by annual bonuses is generally higher for more senior executives to reflect their greater influence on profits and sales and to put a larger percentage of their total potential cash compensation “at risk.” Accordingly, Mr. O’Donovan is at the top end of the range.

 

For 2006, Wolverine’s corporate sales performance and corporate pre-tax profit performance exceeded maximum performance goals. Accordingly, named executive officers received bonuses related to corporate performance under the Annual Bonus Plan at maximum levels.

 

The Annual Bonus Plan closely links the bonus opportunity for key employees to the performance of the specific divisions and operations over which they have substantial control and ability to impact results. This structure provides clear incentives and line-of-sight management to drive operational performance and divisional achievements on an annual basis. This complements the approach of the LTIP described below, which is focused on Wolverine’s long-term achievements in earnings-per-share and total stockholder return.

 

Discretionary Bonus

 

In addition to performance-based compensation based on corporate and/or divisional performance pursuant to the Annual Bonus Plan, Wolverine generally pays annual incentive bonuses to employees based on individual performance goals. Bonuses based on individual performance are paid on a discretionary basis based on achievement of pre-established personal goals, which may include executing strategies to support Wolverine’s vision, developing people, supporting social and environmental responsibility and driving operational excellence. The performance bonus for the Chief Executive Officer is paid only after the review and approval of the Compensation Committee. No discretionary bonuses are paid to executive officers if Wolverine (or the applicable division) does not achieve its threshold goal under the Annual Bonus Plan. During 2006, discretionary bonuses for named executive officers participating in this plan were generally targeted at 5% to 12% of annual salaries depending upon the named executive officer’s level of responsibility, the achievement of threshold sales and earnings requirements and actual graded performance against pre-established personal objectives. Because Wolverine exceeded its corporate threshold sales and earnings goals under the Annual Bonus Plan for fiscal 2006, discretionary bonus payments were made to Wolverine’s executive officers for this period based upon achievement of individual performance goals.

 

Long-Term Incentive Plan (3-Year Bonus Plan)

 

The LTIP provides the opportunity for performance-based compensation based upon the achievement of company financial performance goals over a three-year period. Stockholders most recently approved the LTIP at the 2002 Annual Meeting of Stockholders and are being asked to vote upon approval of an amended and restated Long-Term Plan, as more fully described above, at this year’s Annual Meeting of Stockholders. The primary purposes of the LTIP are to provide significant incentive and to foster cooperation among all business units so the long-term earnings performance of Wolverine and total stockholder return is substantially improved. The primary concept of the LTIP is to establish financial performance goals for each three-year time period for Wolverine. New performance periods begin each fiscal year and end three full fiscal years later.

Awards under the LTIP are based on a percentage of average annual earned salary during the three-year period. For each participant in each three-year period, the Compensation Committee specifies a target bonus goal (the “target bonus”), expressed as a specified dollar amount or as a percentage of the participant’s average annual earned salary, and “incentive bonus” levels, expressed as a percentage of the target bonus, that will be paid to the participant at specified levels of performance. “Incentive bonus” as used in the LTIP means a bonus awarded and paid to a participant for services to Wolverine during a three-year period, which bonus is based upon achievement of previously-established financial objectives by Wolverine. The incentive bonus levels may be expressed as either: (i) a matrix of percentages of the target bonus that will be paid at specified levels of performance; or (ii) a mathematical formula that determines the percentage of the target bonus that will be paid at varying levels of performance.

 

Performance is determined by reference to one or more of the Performance Factors listed above. These factors may be measured against pre-determined levels or Wolverine’s relative performance when compared to the Peer Group. If the minimum three-year targeted goal is not achieved, no bonus will be paid. For the 2006-2008 performance period, named executive officers are targeted to receive long-term bonus compensation in amounts that range from 25% to 60% of their average annual earned base salaries. In determining the percentages, the Compensation Committee considered the factors discussed above in connection with the Annual Bonus Plan and each named executive officer’s capacity to affect the long-term performance of Wolverine. Actual payouts, if any, range from 50% to 200% of target.

 

For the 2004-2006 performance period, performance was determined 50% by reference to Wolverine’s earnings per share (“EPS”) and 50% by reference to total stockholder return (“TSR”) compared to the Peer Group. The Compensation Committee believes it is important to provide a reward and incentive for increasing EPS, but also believes that such reward must be gauged against and superior to the results achieved by the Peer Group. Performance objectives for the 2004-2006 performance period under the LTIP relating to relative total shareholder return against the Peer Group requires a ranking of 7th in total shareholder return among the Peer Group to achieve a threshold payment and requires a ranking of 1st to achieve maximum payment, with prorated payment for rankings between 1st and 7th. A ranking of 8th or lower is below threshold and no credit is received with respect to the total shareholder return under the LTIP. EPS performance objectives for the 2004-2006 period require EPS growth at rates greater than historical EPS growth in equity markets to achieve maximum payment levels, with EPS growth at mid-single-digit levels required to meet threshold levels of payments. EPS performance was at the maximum level and TSR performance was at the target level for the 2004-2006 performance period under the LTIP. Based on EPS and TSR performance, Wolverine paid cash incentive bonuses with respect to the three-year performance period ended December 30, 2006, between target and maximum levels.

 

Equity-Based Incentive Plans

 

Awards under Wolverine’s stock option and restricted stock plans are designed to:

 

 

The Compensation Committee believes that stock ownership by management has been demonstrated to be beneficial to all stockholders and stock incentives have been granted by Wolverine to executives and other key employees pursuant to various equity-based plans for several decades. The Compensation Committee administers all aspects of these plans and determines the amount of and terms applicable to any award under these plans.

 

In determining the number of shares of restricted stock and/or the number of options to be awarded to executives in 2006, the Compensation Committee took into consideration the executive’s level of responsibility and compensation practices of the companies within the Peer Group. The Compensation Committee also considers the recommendations of management (except for awards to the Chief Executive Officer), the individual performance of the executive and the number of shares previously awarded to the executive. The Compensation Committee has reviewed the mix of restricted stock and stock options and believes the mix is appropriate based on the retentive nature of restricted stock and the incentive nature of stock options. As a general practice, both the number of shares granted and their proportion relative to the total number of shares granted increase in some proportion to increases in each executive’s responsibilities. Accordingly, Mr. O’Donovan

generally receives a greater amount of stock options and restricted stock than the other named executive officers.

 

The Compensation Committee also maintains stock ownership guidelines that apply to all executive management and require, within certain time periods, ownership in amounts from one to five times the executive’s base salary. The Compensation Committee believes that these ownership guidelines bolster the goal of aligning management’s interests with stockholders’ interests under Wolverine’s restricted stock plans by requiring continued levels of ownership of Wolverine stock even after restrictions on the sale of stock lapse. The Company’s policy has been to not allow hedging by Company officers.

 

Wolverine generally awards stock options and restricted stock in February of each year at the Compensation Committee’s regularly schedule meeting.

 

Restricted Stock

 

Under Wolverine’s plans that provide for awards of restricted stock, all of which have been previously approved by the stockholders, the Compensation Committee may grant shares of restricted stock to executives and other key employees. These shares are subject to certain restrictions that generally lapse over a period of five years from the date of grant. This vesting schedule encourages retention and long-term investment in Wolverine by participating executives.

 

Stock Options

 

The Compensation Committee administers Wolverine’s stock option plans (all of which have been previously approved by stockholders) and also has authority to determine the individuals to whom and the terms upon which options are granted, the number of shares subject to each option and the form of consideration payable upon the exercise of an option. The Chief Executive Officer makes recommendations of stock option grants (other than for himself), which the Compensation Committee then considers. The Compensation Committee takes final action on the amount, timing, price and other terms of all options granted to employees of Wolverine. The Compensation Committee grants both incentive stock options and nonqualified options within the meaning of the Internal Revenue Code. Under the terms and conditions of all the plans other than 2001, 2003 and 2005 plans, the Compensation Committee may grant nonqualified options with an exercise price above or below the market price on the date of grant. The 2001, 2003 and 2005 plans require that all options have an exercise price equal to or greater than the market value of Wolverine’s common stock on the date of grant. Virtually all stock options granted under all of Wolverine’s plans have had an exercise price equal to the market value of common stock on the date of grant.

 

Stock options are generally granted for a term of 10 years. All stock options permit the exercise price to be paid by delivery of cash, and the Compensation Committee has also approved the payment of the exercise price by surrendering shares of common stock in certain circumstances.

 

Primarily to reduce non-cash compensation expense that Wolverine would have had to record in future fiscal periods, the Board of Directors accelerated the vesting of all unvested stock options previously awarded to employees and officers of Wolverine under Wolverine’s various stock option plans, effective December 13, 2005. As a result of this action, all stock options granted before that date are exercisable. All stock options granted after that date are exercisable with respect to one-third of the shares on each of the first three anniversaries of the date of the grant, with full vesting occurring on the third anniversary date of the grant. Vesting of such stock options may be accelerated upon certain events, including a change in control of Wolverine.

 

Certain senior executives are permitted to transfer nonqualified stock options to a limited group of permissible transferees, primarily for estate planning purposes. Stock options terminate, with certain limited exercise provisions, in the event of certain terminations of employment.

 

Retirement Plans

 

The named executive officers participate in Wolverine’s qualified pension plan and 401(k) savings plan covering most salaried domestic employees and certain named executive officers participate in a supplemental executive retirement plan covering certain executive officers. The Compensation Committee believes that, through vesting and participation requirements and increased value based on years of service, Wolverine’s retirement plans encourage long-term commitment by Wolverine’s executives and assist Wolverine in attracting and retaining talented executives.

 

Qualified Pension Plan

 

Subject to the limitations imposed by the Internal Revenue Code, the Wolverine employee pension plan provides monthly benefits (computed on a straight life

annuity basis without regard to any accrued grandfathered benefits for earnings before January 1, 1994) at normal retirement in an amount equal to the greater of: (i) $24.00 multiplied by the participant’s number of years of service up to 30 years; (ii) 1.6% of final average earnings (as defined in the plan) multiplied by the participant’s number of years of service up to 30 years reduced by the participant’s Social Security allowance as defined in the pension plan; or (iii) for certain designated executives, a percentage benefit multiplier of 2.4% (for Messrs. O’Donovan, Krueger and Gulis) or 2.0% (for Messrs. Ottenwess and Zwiers) of final average earnings multiplied by the participant’s number of years of service up to 25 years.

 

Supplemental Executive Retirement Plan (SERP)

 

In 1995, Wolverine adopted a Supplemental Executive Retirement Plan (the “SERP”) which covers certain executive officers. The SERP is maintained because the Compensation Committee believes that the limit on compensation that can be taken into account for Wolverine’s qualified pension plan does not allow Wolverine to provide sufficient retirement benefits that have the recruitment and retention value necessary to attract and retain highly compensated executives who are significantly responsible for Wolverine’s results of operations. Additionally, the SERP contains a non-competition component which is a significant benefit to Wolverine because it provides a strong disincentive for executive officers to compete with Wolverine if they leave Wolverine’s employment.

 

Under the SERP, a participating executive will be eligible for an annual supplemental benefit once he or she has completed five years of service after having been approved as a participant in the SERP. Alternatively, a participating executive will be eligible for a benefit with less than five years of service if he or she retires at or after age 65. The supplemental benefit is equal to the difference between the executive’s retirement benefit under Wolverine’s qualified pension plan and an amount equal to a designated percentage of the executive’s average earnings multiplied by the executive’s years of service under the pension plan, except that the plan counts years during which the executive received a disability benefit under the SERP (except in computing the SERP’s disability benefit); excludes years that an executive is designated as an inactive participant; and may count deemed years of service granted by the Board of Directors (up to a maximum of 25 years).

 

The designated percentage for benefits under the SERP is either 2.4% for each year of service or 2.0% per year of service. The final SERP benefit is reduced by the amount of any pension benefits to which a participant is entitled under the qualified pension plan.

 

A retired SERP participant may draw the full benefit beginning at age 65 and may elect to begin receiving a reduced benefit at or after age 55. The reduction factor is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. The SERP provides for a disability benefit equal to 60% of the supplemental retirement benefit (based on the executive’s years of service at the date of disability). A disabled executive is still eligible for a supplemental retirement benefit beginning at age 65 based on all years of service (including years during which the executive was receiving a disability benefit). The SERP also provides for a death benefit to the executive’s designated beneficiary if the executive dies before retiring. The death benefit is a lump-sum equal to the present value of the benefit the executive could have received beginning at age 65, based on his or her years of service up to the date of death.

 

Benefits under the SERP are subject to forfeiture if the executive’s employment is terminated for serious misconduct, if the executive later competes with Wolverine or if Wolverine cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons. Wolverine may terminate the SERP or stop further accrual of SERP benefits for a participating executive at any time, but termination will not affect previously accrued benefits.

 

Under the non-competition provisions of the SERP, the participant shall not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant has acquired any ownership interest in a competing business (other than an ownership interest consisting of less than 5% of a class of publicly traded securities), or has been employed as director, officer, employee, consultant, adviser, partner or owner of a competing business.

 

The SERP also includes a confidentially and non-solicitation provision. Under the provision, each participant may not divulge any confidential information such as trade secrets, operating methods, the names of Wolverine customers and suppliers and the relations of Wolverine with such customers and suppliers. Additionally participants must refrain from using or permitting the use of such information or confidences by any interests competitive with Wolverine irrespective of whether or not the participant is then employed by

Wolverine, and must refrain from inducing Wolverine’s employees to terminate employment with Wolverine or undertake employment with its competitors.

 

As of December 30, 2006, the persons listed in the Summary Compensation Table had the following years of credited service under the pension plan and the SERP: Mr. O’Donovan, 25 years; Mr. Krueger, 11 years (pension plan) and 14 years (SERP); Mr. Gulis, 21 years; Mr. Ottenwess, 19 years; Mr. Zwiers, 9 years; and Ms. Johnson, 1 year (pension plan).

 

The Impact of Accounting and Tax Treatments on Compensation

 

Section 162(m) of the Internal Revenue Code provides that publicly held companies may not deduct compensation paid to certain executive officers in excess of $1,000,000 annually, with certain exceptions for qualified “performance-based” compensation. Wolverine has obtained stockholder approval of the Annual Bonus Plan, the LTIP, and the 1997, 1999, 2001 2003 and 2005 stock incentive plans to permit amounts payable under these plans to qualify as “performance-based” compensation for purposes of Section 162(m). Because incentives under these plans are not included in the $1,000,000 limit for purposes of calculating Wolverine’s deduction for compensation paid to its executive officers, Wolverine’s deduction was not limited in 2006 with respect to compensation paid to any named executive officer.

 

Change in Control Provisions

 

Severance Agreements

 

Under individual agreements, Ms. Johnson and Messrs. O’Donovan, Krueger, Gulis, Ottenwess and Zwiers, will receive compensation if their employment is terminated within two (Ms. Johnson and Messrs. Ottenwess and Zwiers) or three (Messrs. O’Donovan, Krueger and Gulis) years following a change in control of Wolverine. The Compensation Committee believes that this “double trigger” requirement (change in control plus termination of employment rather than just a change in control) for triggering the payment of benefits is appropriate because the executive is not materially harmed if there is no termination of employment.

 

No payment will be made under the Severance Agreement if:

 

 

Good reason is defined in the agreements to include, among other things, the assignment of duties inconsistent with the executive’s status as a senior executive officer or the duties performed by the executive immediately before a change in control, a reduction in the executive’s annual base salary or relocation of the executive.

 

The compensation payable if such a termination occurs after a change in control includes:

 

 

 

The severance agreements provide that Wolverine shall maintain all employee benefit plans, programs and arrangements that the executive was entitled to participate in for the longer of six months after the date of termination or the date upon which the executive receives comparable benefits from the new employer, but Wolverine need not maintain the benefits after one year following termination.

 

The severance payment would be adjusted upward or downward in certain situations relating to excise taxes. If the executive is entitled to receive a payment equal to or between 100% and 115% of the amount that would trigger application of the excise tax, then Wolverine must determine whether the executive would receive a greater after-tax amount if the payment is reduced so that the excise tax does not apply. If this is the case, then Wolverine would reduce the payment by the appropriate amount. If the payment exceeds 115% of the amount that would trigger application of the excise tax, then the executive would receive a gross-up payment equal to the amount of the excise tax and the income taxes applicable to the gross-up payment.

 

In all of the severance agreements, the executive has no requirement to mitigate the payments by seeking employment, but the compensation to be paid during the fourth and later months after termination will be reduced to the extent of any compensation earned by the officer during the applicable period.

 

A change in control is defined in the agreements to include the acquisition of 20% or more of the common stock by any person or group of persons acting together or a change in a majority of the Board of Directors unless each new director was approved by a vote of at least three-quarters of the directors then still in office who were directors as of the date of the applicable agreement, or whose election or nomination was so approved.

 

Stock Plan Provisions

 

As mentioned above in this Compensation Discussion and Analysis under the heading “Equity-Based Incentive Plans,” Wolverine has granted certain stock options and awarded shares of restricted stock that are subject to accelerated vesting upon a change in control of Wolverine.

 

Wolverine’s stock incentive plans provide for restricted stock awards. Except for any shares awarded in connection with the payment of bonuses under the LTIP, the restrictions on 25% of the shares received under an award normally lapse on the third anniversary of the date of grant, with the restrictions on an additional 25% of the shares lapsing on the fourth anniversary and the restrictions with respect to the remaining shares lapsing on the fifth anniversary. This vesting schedule promotes the retention of executive officers. Restricted stock becomes fully vested and nonforfeitable upon a change in control of Wolverine.

 

A change in control is defined in the agreements under the 1993 plan to include a change of control as set forth in the proxy rules issued by the Securities and Exchange Commission, the acquisition of 20% or more of the common stock by any person or group of persons acting together; the sale, lease, exchange or other transfer of substantially all of Wolverine’s assets to, or the merger or consolidation of Wolverine with, a corporation that is not controlled by Wolverine; or a change during any two-year period in a majority of the Board of Directors unless each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, or whose election or nomination was so approved. Under the 1995, 1997, 1999, 2001, 2003 and 2005 plans, a change in control is defined as:

 

SERP

 

Pursuant to the SERP, for all participating named executive officers, if, within two (Messrs. Ottenwess and Zwiers) or three (Messrs. O’Donovan, Krueger and Gulis) years after a “change in control” the executive resigns for “good reason” or is terminated by Wolverine or at the request of a third party who effectuates a change in control (other than for “cause” or due to death or “disability” as defined in the SERP), the executive will be entitled to a lump-sum payment equal to 125% of the present value of the benefit payments for which the executive would have been eligible if the executive had retired at age 55 (or at his or her actual age, if greater than age 55), without applying the monthly early retirement reduction factor, but based on years of service at the actual date of termination. For purposes of the SERP, “change in control” is defined as:

 

 

Benefit Trust Agreement

 

In May 1987, Wolverine established a Benefit Trust (“trust”) to ensure that payments to employees under the severance agreements and the SERP (collectively, the “agreements”) will not be improperly withheld after a change in control of Wolverine, as defined in the agreement establishing the trust. Under the trust, upon the occurrence of a “potential change in control,” Wolverine will deliver to the trustee, to be held in trust, cash, marketable securities or insurance corresponding to an amount determined by Wolverine to have a fair market value, together with any existing amounts in the trust, equal to the value of the benefits due to employees under the agreements given certain assumptions set forth in the trust. Additional terms of the trust provide for the return of the property to Wolverine upon written request before a change in control or automatically if no change in control has occurred within six months after funding upon a potential change in control. Wolverine has transferred to the trust insurance policies on the lives of certain key employees.

 

Summary of Executive Compensation

 

The following Summary Compensation Table shows selected information concerning the compensation earned during the fiscal year ended December 30, 2006, to the Principal Executive Officer, Principal Financial Officer, each of Wolverine’s three most highly compensated executive officers who served in positions other than Principal Executive Officer and Principal Financial Officer at the end of the last completed fiscal year as well as a former executive officer who would have been one of the three most highly compensated executive officers serving in a position other than Principal Executive Officer or Principal Financial Officer if he had still been an executive officer at the end of the last completed fiscal year (the “named executive officers”).

 

																										Change in
																										Pension
																										Value and
																						Non-Equity				Nonqualified
														Stock				Option				Incentive Plan				Deferred				All other
Name and						Salary				Bonus(1)				Awards				Awards				Compensation				Compensation				Compensation				Total
Principal Position		Year				($)(1)				(2)($)				(3)($)				(3)($)				(4)($)				Earnings(5)				(6)($)				($)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)
Timothy J. O’Donovan, CEO and Chairman			2006			$	720,673			$	116,749			$	827,296			$	247,919			$	1,358,654			$	1,190,328			$	24,131			$	4,485,750
Stephen L. Gulis, Jr., Exec. Vice President, CFO and Treasurer			2006			$	367,404			$	39,680			$	302,836			$	69,160			$	458,530			$	204,881			$	9,446			$	1,451,937
Cheryl L. Johnson,* Vice President of Human Resources			2006			$	180,654			$	12,194			$	13,305			$	13,029			$	99,337			$	7,336	(7)		$	8,716			$	334,571
Blake W. Krueger, President and Chief Operating Officer			2006			$	480,000			$	64,800			$	479,772			$	181,959			$	656,815			$	237,730			$	11,342			$	2,112,418
Nicholas P. Ottenwess, Vice President — Finance, and Controller			2006			$	225,269			$	15,206			$	79,398			$	13,029			$	176,064			$	53,534			$	9,638			$	572,138
James D. Zwiers,** President — Hush Puppies U.S. Division			2006			$	221,346			$	14,941			$	58,780			$	13,029			$	152,514			$	25,826	(8)		$	9,585			$	496,021

 

 

 

Officer		LTIP				Annual Bonus Plan
Mr. O’Donovan		$	623,567			$	735,087
Mr. Gulis		$	208,696			$	249,834
Ms. Johnson		$	22,559			$	76,778
Mr. Krueger		$	248,815			$	408,000
Mr. Ottenwess		$	80,325			$	95,739
Mr. Zwiers		$	58,442			$	94,072

 

 

Grants of Plan-Based Awards During 2006

 

The following table provides information concerning each grant of an award made to the named executive officers in the last completed fiscal year.

 

Grants of Plan-Based Awards
																														All Other				All Other
																														Stock				Option								Grant
																														Awards:				Awards:								Date
																														Number				Number				Exercise				Fair
						Estimated Possible Payouts																								of				of				or Base				Value of
						Under Non-Equity Incentive												Estimated Future Payouts												Shares				Securities				Price of				Stock
						Plan Awards(1)												Under Equity Incentive Plan Awards												of Stock				Underlying				Option				and
		Grant				Threshhold				Target				Maximum				Threshhold				Target				Maximum				or Units				Options				Awards				Option
Name		Date				($)				($)				($)				(#)				(#)				(#)				(#)(2)				(#)(3)				($/Sh)(4)(5)				Awards(6)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)				(k)				(l)
Timothy J. O’Donovan			2/15/2006(7	)		$	227,012			$	454,024			$	908,048				—				—				—				22,000				54,500			$	22.47			$	778,901
			2/15/2006(8	)		$	172,962			$	345,923			$	735,087
Stephen L. Gulis, Jr.			2/15/2006(7	)		$	77,155			$	154,310			$	308,620				—				—				—				10,600				26,200			$	22.47			$	374,980
			2/15/2006(8	)		$	58,785			$	117,569			$	249,834
Cheryl L. Johnson			2/15/2006(7	)		$	23,686			$	47,371			$	94,742				—				—				—				3,400				8,600			$	22.47			$	121,301
			2/15/2006(8	)		$	18,065			$	36,131			$	76,778
Blake W. Krueger			2/15/2006(7	)		$	126,000			$	252,000			$	504,000				—				—				—				15,000				40,000			$	22.47			$	545,902
			2/15/2006(8	)		$	96,000			$	192,000			$	408,000
Nicholas P. Ottenwess			2/15/2006(7	)		$	29,567			$	59,133			$	118,266				—				—				—				3,400				8,600			$	22.47			$	121,301
			2/15/2006(8	)		$	22,527			$	45,054			$	95,739
James D. Zwiers			2/15/2006(7	)		$	28,976			$	57,952			$	115,904				—				—				—				3,400				8,600			$	22.47			$	121,301
			2/15/2006(8	)		$	22,135			$	44,269			$	94,072

 

Outstanding Equity Awards at December 30, 2006

 

The following table provides information concerning unexercised options; stock that has not vested; and equity incentive plan awards for each named executive officer outstanding as of December 30, 2006.

 

Outstanding Equity Awards at Fiscal Year-End
																						Stock Awards
																																		Equity
																																		Incentive
																																		Plan
																														Equity				Awards:
																														Incentive				Market
																														Plan				or
		Option Awards																												Awards:				Payout
										Equity																				Number				Value
										Incentive																				of				of
										Plan																Market				Unearned				Unearned
		Number				Number				Awards:												Number				Value of				Shares,				Shares,
		of				of				Number												of Shares				Shares or				Units or				Units or
		Securities				Securities				of												or Units				Units of				Other				Other
		Underlying				Underlying				Securities												of Stock				Stock				Rights				Rights
		Unexercised				Unexercised				Underlying												That				That				That				That
		Options				Options				Unexercised				Option								Have				Have				Have				Have
		(#)				(#)				Unearned				Exercise				Option				Not				Not				Not				Not
		Exercisable				Unexercisable				Options				Price				Expiration				Vested(3)				Vested				Vested				Vested
Name		(1)				(2)				(#)				($)				Date				(#)				($)(4)				(#)				($)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)
Timothy J. O’Donovan			2,106				0				0			$	20.50				2/13/2012				109,943			$	3,135,574				0				0
			1,935				0							$	20.50				3/4/2011
			4,552				0							$	20.50				2/23/2010
			54,500				0							$	23.035				2/18/2015
			1,929				0							$	20.8033				2/21/2009
			5,649				0							$	20.8033				3/2/2009
			1,285				0							$	20.8033				3/3/2009
			1,320				0							$	20.8033				3/2/2009
			5,829				0							$	20.8033				2/23/2010
			54,189				0							$	20.8033				2/23/2010
			1,516				0							$	20.8033				4/27/2007
			31,795				0							$	20.8033				2/23/2007
			13,803				0							$	20.8033				2/17/2014
			29,487				0							$	20.8033				2/11/2013
			51,039				0							$	20.8033				2/13/2012
			1,923				0							$	20.8033				3/4/2011
			3,622				0							$	20.8033				3/2/2009
			2,227				0							$	20.8033				2/23/2010
			2,796				0							$	19.5033				3/10/2009
			1,405				0							$	19.5033				3/9/2009
			1,651				0							$	19.5033				3/1/2009
			466				0							$	19.5033				2/24/2009
			466				0							$	19.5033				2/25/2009
			15,766				0							$	19.5033				3/2/2009
			24,034				0							$	19.5033				3/2/2009
			50,625				0							$	15.3667				2/18/2014
			45,000				0							$	10.5067				2/12/2013
			16,536				0							$	10.2933				2/14/2012
			3,451				0							$	18.0627				4/26/2008
			2,589				0							$	19.9587				3/9/2008
			2,589				0							$	20.3753				3/8/2008
			1,137				0							$	18.7917				2/26/2008
			850				0							$	18.75				2/23/2008
			39,637				0							$	18.646				2/24/2008
			544				0							$	20.8033				2/26/2008
			2,601				0							$	20.8033				2/22/2009
			1,353				0							$	20.8033				2/23/2010
			51,396				0							$	20.8033				3/4/2011
			2,814				0							$	20.8033				3/9/2010
			1,045				0							$	20.8033				2/28/2010
			1,305				0							$	20.8033				2/24/2010

Outstanding Equity Awards at Fiscal Year-End
																						Stock Awards
																																		Equity
																																		Incentive
																																		Plan
																														Equity				Awards:
																														Incentive				Market
																														Plan				or
		Option Awards																												Awards:				Payout
										Equity																				Number				Value
										Incentive																				of				of
										Plan																Market				Unearned				Unearned
		Number				Number				Awards:												Number				Value of				Shares,				Shares,
		of				of				Number												of Shares				Shares or				Units or				Units or
		Securities				Securities				of												or Units				Units of				Other				Other
		Underlying				Underlying				Securities												of Stock				Stock				Rights				Rights
		Unexercised				Unexercised				Underlying												That				That				That				That
		Options				Options				Unexercised				Option								Have				Have				Have				Have
		(#)				(#)				Unearned				Exercise				Option				Not				Not				Not				Not
		Exercisable				Unexercisable				Options				Price				Expiration				Vested(3)				Vested				Vested				Vested
Name		(1)				(2)				(#)				($)				Date				(#)				($)(4)				(#)				($)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)
			466				0							$	20.8033				2/25/2010
			2,281				0							$	20.8033				2/23/2010
			1,449				0							$	20.8033				2/24/2007
			4,806				0							$	20.8033				3/4/2011
			964				0							$	20.8033				2/23/2007
			871				0							$	20.8033				2/26/2008
			181				0							$	20.8033				3/2/2009
			2,614				0							$	20.8033				2/23/2010
			1,015				0							$	20.8033				2/24/2010
			1,288				0							$	20.8033				2/24/2008
			643				0							$	20.8033				2/24/2008
			0				54,500							$	22.47				2/14/2016
Stephen L. Gulis, Jr.			14,886				0				0			$	20.01670				2/23/2010				53,682			$	1,531,011				0				0
			574				0							$	20.01670				2/24/2010
			820				0							$	20.01670				3/3/2009
			1,390				0							$	20.01670				2/23/2010
			15,054				0							$	20.01670				2/11/2013
			1,114				0							$	20.80330				2/23/2010
			963				0							$	20.80330				3/4/2011
			6,288				0							$	20.80330				2/17/2014
			1,081				0							$	20.50				2/13/2012
			22,500				0							$	10.50670				2/12/2013
			2,474				0							$	10.29330				2/14/2012
			9,714				0							$	10.29330				2/14/2012
			26,200				0							$	23.0350				2/8/2015
			2,277				0							$	20.50				2/23/2010
			967				0							$	20.50				3/4/2011
			5,196				0							$	20.01670				3/4/2011
			26,067				0							$	17.52670				2/13/2012
			13,525				0							$	17.52670				3/5/2011
			307				0							$	17.52670				2/26/2008
			600				0							$	17.52670				2/26/2008
			1,837				0							$	17.52670				2/22/2009
			822				0							$	17.52670				2/23/2010
			1,356				0							$	17.52670				3/8/2010
			567				0							$	17.52670				2/27/2010
			261				0							$	17.52670				2/24/2010
			870				0							$	17.52670				2/23/2010
			657				0							$	17.52670				3/8/2009
			834				0							$	17.52670				2/28/2009
			252				0							$	17.52670				2/24/2009
			255				0							$	17.52670				2/23/2009
			23,063				0							$	15.36670				2/18/2014
			5,778				0							$	20.01670				3/2/2009
			1,725				0							$	18.06270				4/26/2008
			1,078				0							$	19.95870				3/9/2008