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<SEC-DOCUMENT>0000950124-02-000964.txt : 20020415
<SEC-HEADER>0000950124-02-000964.hdr.sgml : 20020415
ACCESSION NUMBER:		0000950124-02-000964
CONFORMED SUBMISSION TYPE:	10-K405
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20011231
FILED AS OF DATE:		20020325

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			WEYCO GROUP INC
		CENTRAL INDEX KEY:			0000106532
		STANDARD INDUSTRIAL CLASSIFICATION:	WHOLESALE-APPAREL, PIECE GOODS & NOTIONS [5130]
		IRS NUMBER:				390702200
		STATE OF INCORPORATION:			WI
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K405
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-09068
		FILM NUMBER:		02583729

	BUSINESS ADDRESS:	
		STREET 1:		234 E RESERVOIR AVE
		STREET 2:		PO BOX 1188
		CITY:			MILWAUKEE
		STATE:			WI
		ZIP:			53201
		BUSINESS PHONE:		4142638800

	MAIL ADDRESS:	
		STREET 1:		234 EAST RESERVOIR AVENUE
		STREET 2:		234 EAST RESERVOIR AVENUE
		CITY:			MILWAUKEE
		STATE:			WI
		ZIP:			53212

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	WEYENBERG SHOE MANUFACTURING CO
		DATE OF NAME CHANGE:	19900514
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>c68246e10-k405.txt
<DESCRIPTION>FORM 10-K PURSUANT TO ITEM 405
<TEXT>
<PAGE>
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

                                    FORM 10-K

(Mark One)

 X     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ---    ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended          December 31, 2001     .
                          -------------------------------
                                       OR

       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----   EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For transition period from ..................  to ..............................
Commission file number        0-9068


                                Weyco Group, Inc.
- --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                      Wisconsin               39-0702200
- --------------------------------------------------------------------------------
     (State or other jurisdiction of       (I.R.S. Employer
      incorporation or organization)       Identification No.)

         333 W. Estabrook Boulevard, P. O. Box 1188, Milwaukee, WI 53201
- --------------------------------------------------------------------------------
   (Address of principal executive offices)        (Zip Code)

Registrant's telephone number, include area code (414) 908-1600 Securities
registered pursuant to Section 12(b) of the Act:


                                                     Name of each exchange on
               Title of each class                      which registered
                      None
- --------------------------------------      ------------------------------------
- --------------------------------------      ------------------------------------
Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock - $1.00 par value per share
- --------------------------------------------------------------------------------
                                (Title of Class)

- --------------------------------------------------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in any definitive proxy of information
statements incorporated by reference or in any amendment to this Form 10-K. (X)

As of March 4, 2002, there were outstanding 2,835,264 shares of Common Stock and
908,554 shares of Class B Common Stock. At the same date, the aggregate market
value (based upon the average of the high and low trades for that day) of all
common stock held by non-affiliates was approximately $60,015,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Corporation's Annual Report to Shareholders for the year ended
December 31, 2001, are incorporated by reference in Parts II and IV of this
report.

Portions of the Corporation's Proxy Statement, dated March 25, 2002, prepared
for the Annual Meeting of Shareholders scheduled for April 23, 2002, are
incorporated by reference in Part III of this report.

Exhibit Index Pages 9-10


<PAGE>



                                     PART I

Item 1. Business

     The Company is a Wisconsin corporation incorporated in the year 1906 as
Weyenberg Shoe Manufacturing Company. Effective April 25, 1990, the name of the
corporation was changed to Weyco Group, Inc.

     The Company and its subsidiaries engage in one line of business, the
manufacture, purchase and distribution of men's footwear. The Company does not
sell women's or children's shoes because these markets differ significantly from
the men's market. The principal brands of shoes sold are "Nunn Bush," `Nunn Bush
NXXT," "Brass Boot," "Stacy Adams," and "SAO by Stacy Adams." Trademarks
maintained by the Company on these names are important to the business. The
Company's products consist of both mid-priced quality leather dress shoes which
would be worn as a part of more formal and traditional attire and quality casual
footwear of man-made materials or leather which would be appropriate for leisure
or less formal occasions. The Company's footwear, and that of the industry in
general, is available in a broad range of sizes and widths, primarily produced
or purchased to meet the needs and desires of the American male population.

     The Company assembles footwear at one manufacturing plant in Wisconsin.
Shoe components, referred to as "uppers," are purchased from outside sources,
generally foreign, and turned into complete shoes by attaching the sole, either
leather or man-made, applying appropriate "finishes" and packing the shoes into
individual cartons, ready for sale. The Company purchases raw materials and shoe
components from many suppliers and is not dependent on any one of them. The
supply of these items is generally plentiful and there are no long-term purchase
commitments. Over the past five years, production at the Company's plant has
accounted for approximately 6% of the value of the Company's wholesale footwear
sales.

     In addition to the production of footwear at the Company's own
manufacturing plant, complete shoes are purchased from many sources worldwide,
generally in U. S. dollars. These purchases account for the balance of the
Company's wholesale footwear sales. In recent years, domestic production of
men's shoes by the Company and the industry has declined, while imports to the
United States have increased.

     The Company's business is separated into two divisions - wholesale and
retail. Wholesale sales constituted approximately 96% of total sales in 2001 and
2000 and 95% in 1999. At wholesale, shoes are marketed nationwide through more
than 8,000 shoe, clothing and department stores. Sales are to unaffiliated
customers, primarily in North America. Sales to the Company's largest customer,
Brown Shoe Group, were 10%, 10% and 12% of total sales for 2001, 2000 and 1999,
respectively. There are no other individually significant customers. The Company
employs traveling salesmen who sell the Company's products to the retail
outlets. Shoes are shipped to these retailers primarily from a warehouse
maintained in Glendale, Wisconsin. Although there is no clearly identifiable
seasonality in the men's footwear business, new styles are historically
developed and shown twice each year, in spring and fall. In accordance with the
industry practices, the Company is required to carry significant amounts of
inventory to meet customer delivery requirements and periodically provides
extended payment terms to customers.

                                       -1-


<PAGE>


     Retail sales constituted approximately 4% of total sales in 2001 and 2000
and 5% of total sales in 1999. In the retail division, there are currently seven
company-operated stores in principal cities of the United States. The decrease
in retail sales in recent years is a result of the Company closing retail units.
Two stores were closed in January 2002, no stores were closed in 2001, two in
2000 and none in 1999. These stores were closed primarily due to unprofitable
operations or unattractive lease renewal terms. Management intends to continue
to closely monitor retail operations and may close other retail units in the
future if they are deemed unprofitable. Sales in retail outlets are made
directly to the consumer by Company employees. In addition to the sale of the
Company's brands of footwear in these retail outlets, other branded footwear and
accessories are also sold in order to provide the consumer with as complete a
selection as practically possible.

     As of December 31, 2001, the Company employed approximately 295 persons. Of
those 295 employees, approximately 74 were members of the United Food and
Commercial Works Local 651 Union. The Company ratified a new contract with the
Union during 1997, which will expire in March 2003. Future wage and benefit
increases under the contract are not expected to have a significant impact on
the future operations or financial position of the Company.

     Price, quality and service are all important competitive factors in the
shoe industry and the Company has been recognized as a leader in all of them.
Although the Company engages in no specific research and development activities,
new products and new processes are continually being tested by the Company and
used where appropriate, in order to produce the best value for the consumer,
consistent with reasonable price. Compliance with environmental regulations
historically has not had, and is not expected to have, a material adverse effect
on the Company's results of operations or cash flows.

                                       -2-


<PAGE>





Item 2. Properties

     The following facilities are operated by the Company and its subsidiaries:


       Location                          Character             Owned/Leased
       --------                          ---------             ------------
   Glendale, Wisconsin                  One story office
                                         and distribution
                                           center                  Owned
  Beaver Dam, Wisconsin               Multistory factory         Leased (1)

               (1) Not a material lease.

The manufacturing facilities noted above are adequately equipped, well
maintained and suitable for foreseeable needs. If all available manufacturing
space were utilized and significant additional shoe making equipment were
acquired, production could be increased about 25%.

     In addition to the above-described manufacturing and warehouse facilities,
the Company operates seven retail stores throughout the United States under
various rental agreements. See Note 11 to Consolidated Financial Statements and
Item 1. Business above.

Item 3. Legal Proceedings

     Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders

     Not Applicable

                                       -3-


<PAGE>



Executive Officers of the Registrant

<TABLE>
<CAPTION>
                                                                            Served
             Officer                     Age            Office(s)            Since               Business Experience
- ----------------------------             ---        ----------------------  -------       --------------------------------
<S>                                     <C>         <C>                         <C>          <C>
Thomas W. Florsheim, Jr.                 44         President and Chief        1995       President and Chief Executive Officer
                                                    Executive Officer                     of the Company - 1999 to present;
                                                                                          President and Chief Operating Officer
                                                                                          of the Company - 1996 to 1999; Vice
                                                                                          President of the Company - 1988 to 1995

John W. Florsheim                        38         Executive Vice President,   1995      Executive Vice President, Chief
                                                    Chief Operating Officer               Operating Officer and Assistant
                                                    and Assistant Secretary               Secretary of the Company - 1999 to
                                                                                          present; Executive Vice President
                                                                                          of the Company - 1996 to 1999;
                                                                                          Vice President of the Company -
                                                                                          1994 to 1996; Brand Manager,
                                                                                          M & M/Mars, Inc. - 1990 to 1994

David N. Couper                          53         Vice President              1981      Vice President of the Company -
                                                                                          1981 to present
James F. Gorman                          58         Vice President              1975      Vice President of the Company -
                                                                                          1975 to present
Peter S. Grossman                        58         Vice President              1971      Vice President of the Company -
                                                                                          1971 to present
John F. Wittkowske                       42         Vice President, Chief       1993      Vice President, Chief Financial Officer
                                                    Financial Officer and                 and Secretary of the Company - 1995
                                                    Secretary                             to present; Secretary/Treasurer of the
                                                                                          Company - 1993 to 1995; Audit Manager,
                                                                                          Arthur Andersen LLP, Independent Public
                                                                                          Accountants - 1986 to 1993

Thomas W. Florsheim, Jr. and John W. Florsheim are brothers, and Chairman of
the Board Thomas W. Florsheim is their father.

</TABLE>












                                      -4-


<PAGE>




                                     PART II

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters

     Information required by this Item is set forth on pages 5, 18 and 21 of the
     Annual Report to Shareholders for the year ended December 31, 2001, and is
     incorporated herein by reference.

Item 6. Selected Financial Data

     Information required by this Item is set forth on page 5 of the Annual
     Report to Shareholders for the year ended December 31, 2001, and is
     incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
     of Operations

     Information required by this Item is set forth on pages 6 through 8 of the
     Annual Report to Shareholders for the year ended December 31, 2001, and is
     incorporated herein by reference.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

     Information required by this Item is set forth on page 8 of the Annual
     Report to Shareholders for the year ended December 31, 2001, and is
     incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

     Information required by this Item is set forth on pages 9 through 19 of the
     Annual Report to Shareholders for the year ended December 31, 2001, and is
     incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and
     Financial Disclosures

     Not applicable.





                                       -5-


<PAGE>





                                    PART III

Item 10. Directors and Executive Officers of the Registrant

     Information required by this Item is set forth on pages 1 through 4 of the
     Company's proxy statement for the Annual Meeting of Shareholders to be held
     on April 23, 2002, and is incorporated herein by reference.

Item 11. Executive Compensation

     Information required by this Item is set forth on pages 6 through 8 of the
     Company's proxy statement for the Annual Meeting of Shareholders to be held
     on April 23, 2002, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners of Management

     Information required by this Item is set forth on pages 1 and 2 of the
     Company's proxy statement for the Annual Meeting of Shareholders to be held
     on April 23, 2002, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

     Information required by this Item is set forth on pages 8 and 9 of the
     Company's proxy statement for the Annual Meeting of Shareholders to be held
     on April 23, 2002, and is incorporated herein by reference.

                                       -6-


<PAGE>




                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

 (a)     The following documents are filed as a part of this report:

<TABLE>
<CAPTION>
                                                                         Page Reference
                                                                              to
                                                                          Annual Report
                                                                         --------------
<S>                                                                        <C>
    1.    Financial Statements -

             Consolidated Statements of Earnings
                 for the years ended December 31,
                 2001, 2000 and 1999                                              9

             Consolidated Balance Sheets -
                 December 31, 2001 and 2000                                 10 - 11

             Consolidated Statements of Shareholders'
                 Investment for the years ended
                 December 31, 2001, 2000 and 1999                                12

             Consolidated Statements of Cash Flows
                 for the years ended December 31,
                 2001, 2000 and 1999                                             13

             Notes to Consolidated Financial
                 Statements - December 31, 2001, 2000
                 and 1999                                                   14 - 19

             Report of Independent Public Accountants                            20
</TABLE>












                                       -7-


<PAGE>


Item 14.  Exhibits, Financial Statement Schedules, and Report on Form 8-K
          (Continued)

<TABLE>
<CAPTION>
                                                                        Page Reference
                                                                             to
                                                                         Form 10-K
                                                                        --------------

<S>                                                                        <C>
    2.    Financial Statement Schedules for the
              years ended December 31, 2001,
              2000 and 1999 -

             Schedule II - Valuation and Qualifying Accounts                11

           All other schedules have been omitted because of the
             absence of the conditions under which they are
             required.
</TABLE>

                        REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

     We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements included in Weyco
Group, Inc.'s Annual Report to Shareholders included and incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
14, 2002, except for Note 15, as to which the date is March 3, 2002. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in the index at item 14(a)(2) is the responsibility
of the company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP


Milwaukee, Wisconsin,
February 14, 2002.






                                       -8-


<PAGE>


Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
         (Continued)

         3. Exhibits

<TABLE>
<CAPTION>
                                                                     Incorporated Herein
Exhibit                       Description                              By Reference To
- -------        -----------------------------------                   -------------------
<S>           <C>                                                    <C>
    2.1        Asset Purchase Agreement, Florsheim
                  Group, Inc., dated March 3, 2002

    3.1        Articles of Incorporation as Restated                 Exhibit 3.1 to Form 10-K
                  August 29, 1961, and Last Amended                    for Year Ended
                  April 25, 1990                                       December 31, 1990

    3.2        Bylaws as Revised January 21, 1991
                  and Last Amended January 28, 2002

   10.1*       Consulting Agreement - Thomas W.
                  Florsheim, dated December 28, 2000

   10.2*       Employment Agreement - Thomas W.                      Exhibit 10.2 to Form 10-K
                 Florsheim, Jr., dated January 1, 1997,                for Year Ended
                 as amended January 1, 1999                            December 31, 1996, and
                                                                       Amendment No. 1 filed as
                                                                       Exhibit 10.2 to Form 10-K
                                                                       for Year Ended December
                                                                       31, 1998

   10.3*       Employment Agreement - John W.                        Exhibit 10.3 to Form 10-K
                 Florsheim, dated January 1, 1997,                     for Year Ended
                 as amended January 1, 1999                            December 31, 1996, and
                                                                       Amendment No. 1 filed as
                                                                       Exhibit 10.3 to Form 10-K
                                                                       for Year  Ended December
                                                                       31, 1998

   10.4*       Restated and Amended Deferred                         Exhibit 10.3 to Form 10-K
                  Compensation Agreement - Thomas W.                   for Year Ended
                  Florsheim, dated December 1, 1995                    December 31, 1995

   10.5*       Restated and Amended Deferred                         Exhibit 10.4 to Form 10-K
                  Compensation Agreement - Robert                      for Year Ended
                  Feitler, dated December 1, 1995                      December 31, 1995

   10.6*       Excess Benefits Plan - Restated Effective             Exhibit 10.6 to Form 10-K
                  as of January 1, 1989                                for Year Ended
                                                                       December 31, 1991

   10.7*       Pension Plan - Amended and Restated                   Exhibit 10.7 to Form 10-K
                  Effective January 1, 1989                            for Year Ended
                                                                       December 31, 1991

   10.8*       Deferred Compensation Plan - Effective                Exhibit 10.8 to Form 10-K
                  as of January 1, 1989                                for Year Ended
                                                                       December 31, 1991
</TABLE>

                                      -9-


<PAGE>


Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
         (Continued)

         3.   Exhibits (Continued)


<TABLE>
<CAPTION>
                                                                     Incorporated Herein
Exhibit                       Description                              By Reference To
- -------        -----------------------------------                   -------------------
<S>           <C>                                                    <C>

   10.10*        Death Benefit Plan Agreement -                      Exhibit 10.10 to Form
                     Thomas W. Florsheim, dated                       10-K for Year Ended
                     November 8, 1993                                 December 31, 1993

   10.12*        1996 Nonqualified Stock Option Plan                 Exhibit 10.12 to Form
                                                                      10-K for Year Ended
                                                                      December 31, 1995

   10.13*        1997 Stock Option Plan                              Exhibit 10.13 to Form
                                                                      10-K for Year Ended
                                                                      December 31, 1997

   10.14*        Change of Control Agreement                         Exhibit 10.14 to Form
                   John Wittkowske, dated                             10-K for Year Ended
                   January 26, 1998                                   December 31, 1997


   10.15*        Change of Control Agreement                         Exhibit 10.15 to Form
                   Peter S. Grossman, dated                           10-K for Year Ended
                   January 26, 1998                                   December 31, 1997

   10.16*        Change of Control Agreement                         Exhibit 10.16 to Form
                   James F. Gorman, dated                             10-K for Year Ended
                   January 26, 1998                                   December 31, 1997

   10.17*        Change of Control Agreement                         Exhibit 10.17 to Form
                   David N. Couper, dated                             10-K for Year Ended
                   January 26, 1998                                   December 31, 1997

   13            Annual Report to Shareholders

   21            Subsidiaries of the Registrant

   23.1          Consent of Independent Public
                    Accountants Dated March 19, 2002

                 *Management contract or compensatory plan
                     or arrangement
</TABLE>



(b)  Reports on Form 8-K

      None

                                      -10-


<PAGE>




                                                                     SCHEDULE II



                                WEYCO GROUP, INC.

                        VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                                  Deducted from Assets
                                                 ----------------------------------------------------------
                                                 Doubtful           Cash        Returns and
                                                 Accounts         Discounts      Allowances       Total
                                                 --------         ---------     -----------       -----
<S>                                              <C>               <C>           <C>             <C>
BALANCE, DECEMBER 31, 1998                       $1,500,000        $52,000       $1,080,000      $2,632,000
     Add - Additions charged to
                earnings                            391,149        495,918        3,521,913       4,408,980
     Deduct - Charges for purposes for
                   which reserves were
                   established                     (241,149)      (492,918)      (3,521,913)     (4,255,980)
                                                 ----------        -------       ----------      ----------
BALANCE, DECEMBER 31, 1999                       $1,650,000        $55,000       $1,080,000      $2,785,000
     Add - Additions charged to
                earnings                            210,328        464,760        7,079,046       7,754,134
     Deduct - Charges for purposes for
                   which reserves were
                   established                     (210,328)      (450,760)      (7,079,046)     (7,740,134)
                                                 ----------        -------       ----------      ----------
BALANCE, DECEMBER 31, 2000                       $1,650,000        $69,000       $1,080,000      $2,799,000
     Add - Additions charged to
                earnings                            460,972        208,885        6,445,176       7,115,033
     Deduct - Charges for purposes for
                   which reserves were
                   established                     (310,972)      (208,885)      (6,445,176)     (6,965,033)
                                                 ----------      ---------       ----------      ----------
BALANCE, DECEMBER 31, 2001                       $1,800,000        $69,000       $1,080,000      $2,949,000
                                                 ==========      =========       ==========      ==========
</TABLE>


                                      -11-


<PAGE>



                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

WEYCO GROUP, INC.
             (Registrant)
By /s/ John Wittkowske                                            March 25, 2002
  ---------------------------------------------------------    -----------------
  John Wittkowske, Vice President - Chief Financial Officer

                                 --------------
                                Power of Attorney

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas W. Florsheim, Sr., Thomas W. Florsheim,
Jr., and John Wittkowske, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this report, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue thereof.
                                 --------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      Signatures and Titles                                          Date
<S>                                                                              <C>
/s/ Thomas W.Florsheim                                                            March 25, 2002
- --------------------------------------------                                  ---------------------
 Thomas W. Florsheim, Chairman of the Board

/s/ Thomas W. Florsheim, Jr.                                                      March 25, 2002
- --------------------------------------------                                  ---------------------
 Thomas W. Florsheim, Jr., President and Chief
    Executive Officer and Director

/s/ John W. Florsheim                                                             March 25, 2002
- --------------------------------------------                                  ---------------------
 John W. Florsheim, Executive Vice President
    and Chief Operating Officer and Director

/s/ John Wittkowske                                                               March 25, 2002
- --------------------------------------------                                  ---------------------
 John Wittkowske, Vice President-Finance
  (Principal Accounting Officer)

/s/ Virgis W. Colbert                                                             March 25, 2002
- --------------------------------------------                                  ---------------------
 Virgis W. Colbert, Director

/s/ Robert Feitler                                                                March 25, 2002
- --------------------------------------------                                  ---------------------
 Robert Feitler, Director

/s/ Leonard J. Goldstein                                                          March 25, 2002
- --------------------------------------------                                  ---------------------
 Leonard J. Goldstein, Director

/s/ Frederick P. Stratton, Jr.                                                    March 25, 2002
- --------------------------------------------                                  ---------------------
 Frederick P. Stratton, Jr., Director
</TABLE>

                                      -12-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.1
<SEQUENCE>3
<FILENAME>c68246ex2-1.txt
<DESCRIPTION>ASSET PURCHASE AGREEMENT, FLORSHEIM GROUP, INC.
<TEXT>
<PAGE>
                                                                     EXHIBIT 2.1








                            ASSET PURCHASE AGREEMENT




                                  BY AND AMONG




                                WEYCO GROUP, INC.




                              FLORSHEIM GROUP INC.



                                       AND




                       THE OTHER SELLERS IDENTIFIED HEREIN




                            DATED AS OF MARCH 3, 2002


<PAGE>


                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
ARTICLE I      DEFINITIONS.....................................................1

     1.1       Accounts........................................................2
     1.2       Accrued Expenses................................................2
     1.3       Affiliate.......................................................2
     1.4       Agreement.......................................................2
     1.5       Agreement Sections..............................................2
     1.6       Assumed Liabilities.............................................3
     1.7       Bill of Sale....................................................3
     1.8       Business Day....................................................4
     1.9       Buyer...........................................................4
     1.10      Buyer Closing Certificate.......................................4
     1.11      Closing.........................................................4
     1.12      Closing Date....................................................4
     1.13      Closing Inventory Value.........................................4
     1.14      Code............................................................4
     1.15      Cure Costs......................................................4
     1.16      Disclosure Schedule.............................................4
     1.17      Escrow Agent....................................................4
     1.18      Escrow Agreement................................................4
     1.19      ERISA...........................................................4
     1.20      Excluded Store Inventory........................................5
     1.21      Excluded Stores.................................................5
     1.22      Existing Insurance Policies.....................................5
     1.23      Existing Permits................................................5
     1.24      Financial Information...........................................5
     1.25      Financial Statements............................................5
     1.26      Florsheim.......................................................5
     1.27      GAAP............................................................5
     1.28      Golf Inventory..................................................5
     1.29      Information Assets..............................................5
     1.30      Inventory.......................................................5
     1.31      Inventory Purchase Agreement....................................6
     1.32      Inventory Value.................................................6
     1.33      John Deere Inventory............................................6
     1.34      Knowledge of Sellers............................................6
     1.35      Law.............................................................6
     1.36      Lien............................................................6
     1.37      Material Adverse Change.........................................6
     1.38      Miscellaneous Assets............................................7
     1.39      Person..........................................................7
     1.40      Prepaid Expenses................................................7


                                       i


<PAGE>


                                TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE
                                                                            ----
     1.41      Purchase Price..................................................7
     1.42      Purchased Assets................................................7
     1.43      Purchased Contracts.............................................8
     1.44      Purchased Equipment.............................................8
     1.45      Purchased Leases................................................8
     1.46      Purchased Stores................................................8
     1.47      Records.........................................................8
     1.48      Retained Assets.................................................8
     1.49      Retained Liabilities............................................9
     1.50      SAP and Other Computer Assets...................................9
     1.51      Seller or Sellers...............................................9
     1.52      Sellers Closing Certificate.....................................9
     1.53      Store Assets....................................................9
     1.54      Trademarks......................................................9
     1.55      Transition Services Agreement...................................9

ARTICLE II     PURCHASE AND SALE...............................................9

     2.1       Purchase and Sale...............................................9
     2.2       Final Inventory Value; Payment at Closing......................10

ARTICLE III    OTHER AGREEMENTS...............................................11

     3.1       Access.........................................................11
     3.2       Disclosure Schedule............................................11
     3.3       Duties Concerning Consents; Conditions.........................12
     3.4       Deliveries of Information; Consultation........................12
     3.5       Acquisition Proposals..........................................12
     3.6       Public Announcements...........................................13
     3.7       Retained Liabilities...........................................13
     3.8       Referrals and Deliveries.......................................13
     3.9       Allocation of Purchase Price...................................14
     3.10      Prorations.....................................................14
     3.11      Transaction Taxes..............................................14
     3.12      Risk of Loss...................................................14
     3.13      Employee Matters...............................................15
     3.14      Access to Records..............................................15
     3.15      Effective Time of Closing......................................16
     3.16      Pacific Rim Assets; Other International Assets.................16
     3.17      Florsheim 401(k) Plan Assumption...............................17
     3.18      Purchased Equipment............................................18


                                       ii


<PAGE>


                                TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE
                                                                            ----
     3.19      Bankruptcy Matters.............................................18
     3.20      Financing Commitments..........................................20
     3.21      Purchase Orders................................................20
     3.22      Use of Name....................................................20

ARTICLE IV     REPRESENTATIONS AND WARRANTIES OF THE SELLERS..................20

     4.1       Organization; Business.........................................20
     4.2       Authorization; Enforceability..................................21
     4.3       No Violation or Conflict.......................................21
     4.4       Assets.........................................................21
     4.5       Litigation.....................................................22
     4.6       Financial Information..........................................22
     4.7       Absence of Certain Changes.....................................22
     4.8       Store Assets...................................................23
     4.9       Purchased Contracts............................................23
     4.10      Performance of Purchased Contracts.............................23
     4.11      Intentionally Omitted..........................................24
     4.12      No Violation of Law............................................24
     4.13      Brokers........................................................24
     4.14      Taxes..........................................................24
     4.15      Purchased Stores...............................................24
     4.16      Consents; Approvals............................................24
     4.17      No Pending Acquisitions........................................24
     4.18      Labor Matters..................................................25
     4.19      Permits........................................................25
     4.20      Inventory......................................................25
     4.21      Information Assets.............................................25
     4.22      Environmental Protection.......................................26
     4.23      Accounts.......................................................27
     4.24      Customers and Suppliers........................................27
     4.25      Insurance......................................................27

ARTICLE V      REPRESENTATIONS AND WARRANTIES OF THE BUYER....................27

     5.1       Organization; Business.........................................27
     5.2       Authorization; Enforceability..................................28
     5.3       No Violation or Conflict.......................................28
     5.4       Brokers........................................................28


                                      iii


<PAGE>


                                TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE
                                                                            ----
     5.5       Consents; Approvals............................................28
     5.6       Litigation.....................................................28
     5.7       Financing Commitments..........................................28
     5.8       Due Diligence..................................................28
     5.9       No Further Representations.....................................29

ARTICLE VI     CONDUCT OF BUSINESS PENDING THE CLOSING........................29

     6.1       Carry on in Ordinary Course....................................29
     6.2       Use of Purchased Assets........................................29
     6.3       No Default.....................................................29
     6.4       Existing Insurance Policies....................................30
     6.5       Employment Matters.............................................30
     6.6       Contracts and Commitments......................................30
     6.7       Preservation of Relationships..................................30
     6.8       Compliance with Laws...........................................30

ARTICLE VII    CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER...........30

     7.1       Compliance with Agreement......................................30
     7.2       Proceedings and Instruments Satisfactory.......................30
     7.3       No Litigation..................................................30
     7.4       Representations and Warranties of the Sellers..................31
     7.5       No Material Adverse Change, Etc................................31
     7.6       Bankruptcy Matters.............................................31
     7.7       Deliveries at Closing..........................................31
     7.8       Other Deliveries...............................................31
     7.9       HSR............................................................31
     7.10      Other Closings.................................................31

ARTICLE VIII   CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS.........32

     8.1       Compliance with Agreement......................................32
     8.2       Proceedings and Instruments Satisfactory.......................32
     8.3       No Litigation..................................................32
     8.4       Representations and Warranties of the Buyer....................32
     8.5       Deliveries at Closing..........................................32
     8.6       Other Documents................................................32
     8.7       Delivery of Purchase Price.....................................33


                                       iv


<PAGE>


                                TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE
                                                                            ----
     8.8       Letters of Credit..............................................33
     8.9       Bankruptcy Matters.............................................33
     8.10      Other Closings.................................................33
     8.11      Letters of Credit..............................................33

ARTICLE IX     TERMINATION; MISCELLANEOUS.....................................33

     9.1       Termination....................................................33
     9.2       Rights on Termination..........................................34
     9.3       Waiver of Conditions...........................................35
     9.4       Survival of Representations and Warranties.....................35
     9.5       Entire Agreement; Amendment....................................35
     9.6       Expenses.......................................................35
     9.7       Governing Law; Venue...........................................35
     9.8       Assignment.....................................................36
     9.9       Notices........................................................36
     9.10      Counterparts; Headings.........................................37
     9.11      Interpretation.................................................37
     9.12      Severability...................................................37
     9.13      No Reliance....................................................37
     9.14      Exhibits and Disclosure Schedule...............................37
     9.15      Income Tax Position............................................37
     9.16      Further Assurances.............................................37









                                       v


<PAGE>


SIGNATURES....................................................................39


EXHIBITS:*

1.   List of Miscellaneous Assets
2.   Prepaid Expenses
3.   Reserves for Accounts
4.   List of Purchased Contracts
5.   List of Purchased Leases
6.   List of Purchased Stores
7.   List of Retained Vehicles and Other Assets
8.   Other Computer Assets
9.   Allocation of Purchase Price
10.  Inventory of Agreements
11.  Permitted Liens


ANNEXES:

A.   Form of Bill of Sale
B.   Form of Buyer Closing Certificate
C.   Form of Escrow Agreement
D.   Form of Inventory Purchase Agreement
E.   Form of Sellers Closing Certificate
F.   Form of Transition Services Agreement
G.   Intentionally Omitted
H.   Intentionally Omitted





*These items are not material to an investment decision and, therefore, are not
included in this Exhibit 2.1 to Form 10-K. Copies will be furnished to the
Commission upon request.




                                       vi


<PAGE>


                         ASSET PURCHASE AGREEMENT [U.S.]


          THIS ASSET PURCHASE AGREEMENT is made as of this 3rd day of March,
2002 between and among WEYCO GROUP, INC., a Wisconsin corporation, FLORSHEIM
GROUP INC., a Delaware corporation, and those subsidiaries of Florsheim Group
Inc. that are identified as a Seller on the signature pages hereto.


                                    RECITALS

          WHEREAS, following the date hereof, each of the Sellers intends to
file voluntary petitions under Chapter 11 of the Bankruptcy Code (collectively,
the "Bankruptcy Case") before the United States Bankruptcy Court for the
Northern District of Illinois (the "Bankruptcy Court"); and

          WHEREAS, the Buyer (or its permitted assigns as provided in Section
9.8 hereof) desires to purchase all of the Sellers' right, title and interest in
and to the Purchased Assets and assume the Assumed Liabilities from the Sellers,
and the Sellers desire to sell, convey, assign and transfer to the Buyer (or its
permitted assigns as provided in Section 9.8 hereof) all of the Sellers' right,
title and interest in and to the Purchased Assets together with the Assumed
Liabilities, all in the manner and subject to the terms and conditions set forth
in this Agreement and in accordance with Sections 105, 363 and 365 and other
applicable sections of the Bankruptcy Code; and

          WHEREAS, subsequent to the execution of this Agreement, Florsheim,
certain subsidiaries of Florsheim and the Buyer shall enter into the
International Asset Purchase Agreement (as hereinafter defined); and

          WHEREAS, if Florsheim and Florsheim Pacific (each as hereinafter
defined) exercise the Pacific Rim Option (as hereinafter defined) subsequent to
the date of this Agreement, subject to certain terms and conditions of this
Agreement and the terms and conditions of the Pacific Rim Asset Purchase
Agreement (as hereinafter defined), the Buyer shall purchase and assume, as
applicable, from Florsheim Pacific the Pacific Rim Assets and Liabilities (as
hereinafter defined);

          NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:


                                    ARTICLE I

                                   DEFINITIONS

          When used in this Agreement, the following terms shall have the
meanings specified:


                                       1


<PAGE>


          1.1  Accounts. "Accounts" shall mean all accounts receivable, notes
and associated rights owned by any Seller, the categories of which are set forth
on the Disclosure Schedule, but excluding such accounts receivable, notes and
rights specifically related to Florsheim's license with John Deere & Company and
any intercompany accounts, accounts receivable, notes and associated rights
reflecting amounts owed to a Seller by another Seller or a an Affiliate of any
other Seller.

          1.2  Accrued Expenses. "Accrued Expenses" shall mean the liabilities
and obligations of any Seller under or with respect to the Purchased Contracts,
Purchased Leases, Existing Permits and any other assets included in the
Purchased Assets arising or accruing after the filing of the Bankruptcy Case and
prior to the Closing Date and which Buyer agrees to assume and which are listed
on an update to the Disclosure Schedule delivered to Buyer at least two (2)
Business Days prior to Closing but only to the extent that: (i) such liabilities
and obligations do not represent any indebtedness for borrowed money or any
obligations of a Seller to any Affiliate of a Seller; (ii) such liabilities and
obligations have been incurred in the ordinary course of business; and (iii) a
credit is made against the Purchase Price for such liabilities and obligations
pursuant to Section 1.41.

          1.3  Affiliate. "Affiliate" of any Person shall mean any Person
controlling such Person, controlled by such Person or under common control with
such Person, by ownership of equity interests, contract or otherwise; provided,
however, that "Affiliate" shall not include any shareholder of Florsheim or
Weyco Group, Inc. or any Person controlling any such shareholder.

          1.4  Agreement. "Agreement" shall mean this Asset Purchase Agreement,
together with the Exhibits attached hereto and the Disclosure Schedule, as the
same may be amended from time to time in accordance with the terms hereof.

          1.5  Agreement Sections. The following terms shall have the meanings
specified in the Sections of this Agreement listed in the following table.

<TABLE>
<CAPTION>
               TERM                                             SECTION
               ----                                             -------
               <S>                                              <C>
               Acquisition                                      3.5(a)
               Acquisition Proposal                             3.5(a)
               Bankruptcy Case                                  3.19
               Bankruptcy Court                                 3.19
               Bankruptcy Motion                                3.19(b)
               CERCLA                                           4.22(e)
               CERCLIS                                          4.22(e)
               Disclosure Schedule Change                       3.2(b)
               Effective Time of Closing                        3.15
               Environmental Laws                               4.22(e)
               Environmental Liabilities                        4.22(e)
               European Sellers                                 3.16(c)
               European Assets and Liabilities                  3.16(c)
               Final Inventory Value                            2.2(b)
</TABLE>

                                       2


<PAGE>


<TABLE>
<CAPTION>
               TERM                                             SECTION
               ----                                             -------
               <S>                                              <C>
               Florsheim 401(k) Plan                            3.17(a)
               Hazardous Substance                              4.22(e)
               HSR Act                                          7.9
               Intellectual Property                            4.22
               International Asset Purchase Agreement           3.16(c)
               Major Customers                                  4.24
               Major Suppliers                                  4.24
               Pacific Rim Asset Purchase Agreement             3.16(a)
               Pacific Rim Assets and Liabilities               3.16(a)
               Permitted Liens                                  4.4
               Procedures Order                                 3.19(c)
               Qualifying Buyer                                 3.16(b)
               Sale Order                                       3.19(d)
               Store Employees                                  4.18
               Transferred Employee                             3.13(a)
</TABLE>


          1.6  Assumed Liabilities. "Assumed Liabilities" shall mean the
following obligations and no others:

               (a)  the Accrued Expenses;

               (b)  all liabilities and obligations of Sellers under or with
respect to the Purchased Contracts, the Purchased Leases, the Existing Permits
and any other assets included in the Purchased Assets to the extent that such
liabilities and obligations arise or accrue on or subsequent to the Closing Date
and relate to the period on or subsequent to the Closing Date;

               (c)  all Cure Costs associated with the Purchased Contracts and
the Purchased Leases; and

               (d)  the following employee related obligations with respect to
any Transferred Employees: (i) with respect to Transferred Employees at
Purchased Stores, and any other individuals who are Transferred Employees, who
are not covered by any collective bargaining agreement, accrued vacation
benefits; (ii) with respect to Transferred Employees at Purchased Stores who are
covered by a collective bargaining agreement, the accrued but unpaid obligations
under that collective bargaining agreement (provided that any accrued but unpaid
compensation and employment taxes shall be included as Accrued Expenses); and
(iii) with respect to all Transferred Employees, if any, subject to employment
agreements as of the date hereof, any liabilities and obligations under such
employment agreements.

          1.7  Bill of Sale. "Bill of Sale" shall mean a separate Bill of Sale
and Assumption of Liabilities in substantially the form of ANNEX A attached to
this Agreement to be executed by Buyer and each Seller.


                                       3


<PAGE>


          1.8  Business Day. "Business Day" shall mean a day other than
Saturday, Sunday or any day on which banks in New York City, Chicago, Illinois
and Milwaukee, Wisconsin are authorized or obligated to close.

          1.9  Buyer. "Buyer" shall mean Weyco Group, Inc., a Wisconsin
corporation, or any assignee or assignees permitted by Section 9.8 hereof.

          1.10 Buyer Closing Certificate. "Buyer Closing Certificate" shall mean
the Closing Certificate of the Buyer in substantially the form of ANNEX B
attached to this Agreement.

          1.11 Closing. "Closing" shall mean the conference to be held on the
Closing Date at the offices of Quarles & Brady, LLP, 411 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, or such other time and place as the parties may
mutually agree to in writing, at which the transactions contemplated by this
Agreement shall be consummated.

          1.12 Closing Date. "Closing Date" shall mean such date as the parties
may mutually agree to in writing, which date shall be within five (5) Business
Days following the satisfaction or waiver of each of the conditions set forth in
Article VII and Article VIII hereof.

          1.13 Closing Inventory Value. "Closing Inventory Value" shall mean the
Inventory Value as of the Effective Time of Closing.

          1.14 Code. "Code" shall mean the Internal Revenue Code of 1986, as the
same may be in effect from time to time.

          1.15 Cure Costs. "Cure Costs" shall mean, with respect to a Purchased
Contract or a Purchased Lease, the amount necessary to cure past monetary
defaults thereunder in order for the Sellers to assume and assign to Buyer such
Purchased Contract or Purchased Lease in the Bankruptcy Case.

          1.16 Disclosure Schedule. "Disclosure Schedule" shall mean the
Disclosure Schedule, dated the date of this Agreement, delivered by the Sellers
to the Buyer contemporaneously with the execution and delivery of this Agreement
and as the same may be amended from time to time after the date of this
Agreement and prior to the Closing Date in accordance with the terms of this
Agreement.

          1.17 Escrow Agent. "Escrow Agent" shall mean an escrow agent mutually
acceptable to the Buyer and the Sellers.

          1.18 Escrow Agreement. "Escrow Agreement" shall mean the escrow
agreement among the Buyer, Florsheim and the Escrow Agent, relating to the
payment of any premium for the extension of the Sellers' current directors and
officers insurance policy, to be executed on the Closing Date in substantially
the form of ANNEX C attached hereto.

          1.19 ERISA. "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as the same may be in effect from time to time.


                                       4


<PAGE>


          1.20 Excluded Store Inventory. "Excluded Store Inventory" shall mean
the inventory owned by any Seller located at or in transit to the Excluded
Stores.

          1.21 Excluded Stores. "Excluded Stores" shall mean any retail and
outlet stores operated by any of the Sellers in the United States other than the
Purchased Stores.

          1.22 Existing Insurance Policies. "Existing Insurance Policies" shall
mean all of the insurance policies currently in effect and owned by any Seller
and which insure against risks related to the Purchased Assets, Sellers' U.S.
wholesale business or a Purchased Store.

          1.23 Existing Permits. "Existing Permits" shall mean all permits,
licenses, approvals, qualifications, permissions and governmental authorizations
(including Environmental Permits) held by any Seller in the conduct its business
and which primarily relate to Sellers' U.S. wholesale business or a Purchased
Store.

          1.24 Financial Information. "Financial Information" shall mean: (a)
the Financial Statements; (b) the books and records of account of Sellers and
(c) all other financial information relating to the financial condition of
Sellers delivered by the Sellers to the Buyer prior to the date hereof.

          1.25 Financial Statements. "Financial Statements" shall mean the
audited financial statements of Florsheim and its subsidiaries for the year
ended December 30, 2000 and the unaudited financial statements of Florsheim and
its subsidiaries for the interim period ended September 29, 2001.

          1.26 Florsheim. "Florsheim" shall mean Florsheim Group Inc., a
Delaware corporation.

          1.27 GAAP. "GAAP" shall mean U.S. generally accepted accounting
principles as applied on a consistent basis.

          1.28 Golf Inventory. "Golf Inventory" shall mean the Seller's
Inventory related to its former Golf product line, provided that the amount of
such inventory shall not exceed $100,000.

          1.29 Information Assets. "Information Assets" shall mean the
Trademarks, Trademark registrations and applications, issued patents, patent
applications, copyrights, copyright registrations, information and advertising
owned by any Seller, including but not limited to trade secrets, know-how,
operating methods and procedures, proprietary information, processes, technical
knowledge, formulae, advertising copy, plans, customer lists (excluding customer
information subject to Sellers' privacy policy posted on their Web site),
supplier lists, telephone numbers, domain names, URLs and Web sites.

          1.30 Inventory. "Inventory" shall mean all inventories owned by any
Seller, including raw materials, work in process and finished goods: (a)
associated with any Seller's U.S. wholesale shoe operations, based on the asset
classifications reflected in the Financial Statements dated as of September 29,
2001 or (b) located at or in transit to the Purchased Stores,


                                       5


<PAGE>


but shall exclude the Excluded Store Inventory, the John Deere Inventory and the
Golf Inventory.

          1.31 Inventory Purchase Agreement. "Inventory Purchase Agreement"
shall mean the inventory purchase agreement between Buyer and Florsheim in
substantially the form of ANNEX D attached hereto with respect to Buyer's
purchase of any unsold Excluded Store Inventory upon the expiration of the
license period with respect to the Trademarks set forth in the Transition
Services Agreement.

          1.32 Inventory Value. "Inventory Value" shall mean the gross book
value of the finished goods Inventory calculated, as of any date, as the number
of units on hand of each item number as of such date multiplied by the standard
cost of such item of finished goods Inventory as of December 29, 2001; provided,
however, that the standard cost of any such Inventory located in any of the
Purchased Stores shall be calculated at retail standard cost, consistent with
Sellers' past practice in the ordinary course of business, as reflected on
Sellers' retail financial reports. In the event no standard cost exists for any
item as of December 29, 2001, the standard cost of such item shall be based on
the price paid by the Sellers as set forth in the Sellers' purchase order for
such item or, in the event no such purchase order exists, the Sellers' original
cost estimate therefor from the party that sold such item to the Sellers plus,
in either case, the Sellers' cost of freight, duty and overhead with respect to
such item.

          1.33 John Deere Inventory. "John Deere Inventory" means all inventory
specifically associated with Florsheim's license with John Deere & Company.

          1.34 Knowledge of Sellers. "Knowledge of Sellers" shall mean the
actual knowledge of Peter P. Corritori, Jr., Thomas P. Polke, Thomas W. Joseph,
Mark Medici or Gino Giombetti.

          1.35 Law. "Law" shall mean any domestic, federal, state, local or
other law, rule, regulation or governmental requirement of any kind, and the
rules, regulations and orders promulgated thereunder and any final orders,
decrees or judgments of any regulatory agency, court or other governmental
entity.

          1.36 Lien. "Lien" shall mean, with respect to any asset: (a) any
mortgage, pledge, lien, charge, claim, restriction, condition, easement,
covenant, lease, encroachment, title defect, imposition, security interest or
other encumbrance or adverse claim of any kind; and (b) the interest of a vendor
or lessor under any conditional sale agreement, financing lease or other title
retention agreement relating to such asset.

          1.37 Material Adverse Change. "Material Adverse Change" shall mean any
condition or fact which is, or is reasonably expected to be, materially adverse
to the financial condition, properties, business or results of operation of
Sellers' U.S. wholesale business or the Purchased Stores, taken as a whole,
measured from the date of this Agreement to the date of determination; provided,
that in no event shall any of the following be taken into account (alone or in
combination with any other event identified in this proviso) in determining
whether there has been such a Material Adverse Change: any change, event,
circumstance, development or effect primarily attributable to conditions
generally affecting the retail or wholesale shoe


                                       6


<PAGE>


industries, except to the extent that any such change, event, circumstance,
development or effect has an adverse effect on the Sellers that is materially
and disproportionately greater than the adverse effect on comparable entities
operating in such industries; provided, that the filing or pendency of the
Bankruptcy Case and any proceedings thereunder are not by themselves a Material
Adverse Change (it being understood that the facts underlying any allegations or
claims against the Sellers asserted in such proceedings may be the basis for a
Material Adverse Change).

          1.38 Miscellaneous Assets. "Miscellaneous Assets" shall mean: (a) a
Seller's cash and cash equivalents that are located at a Purchased Store in
accordance with the applicable Seller's customary practices, (b) all trade show
booths and related fixtures owned by Sellers; and (c) those other assets owned
by Sellers and set forth in EXHIBIT 1.

          1.39 Person. "Person" shall mean a natural person, corporation, trust,
partnership, limited liability company, association, unincorporated
organization, governmental entity, agency or branch or department thereof, or
any other legal entity.

          1.40 Prepaid Expenses. "Prepaid Expenses" shall mean any expense, the
categories of which are set forth on EXHIBIT 2, related to Sellers' U.S.
wholesale business or a Purchased Store and prepaid by any Seller on or prior to
the Closing Date and which both corresponds to a period after the Closing Date
and which is transferred to Buyer pursuant to this Agreement.

          1.41 Purchase Price. "Purchase Price" shall mean, subject to the
adjustments set forth herein, a total amount equal to: (a) $35,950,000; plus (b)
the fair market value of the Purchased Equipment as determined in accordance
with Section 3.18 hereof; plus (c) the value of the Accounts as of the Closing
Date set forth on EXHIBIT 3; plus (d) the amount of any Prepaid Expenses; minus
(e) the amount of any Accrued Expenses; minus (f) the amount of any Cure Costs
(other than the Cure Costs related to the non-SAP licenses described in the
definition of SAP and Other Computer Assets); minus (g) the amount of any
insurance proceeds received by the Sellers under the Existing Insurance Policies
as a result of any loss or damage to any tangible Purchased Assets (other than
Inventory) between the date hereof and the Closing Date, but only to the extent
such damaged tangible Purchased Assets are not repaired or replaced in
accordance with Section 3.12 hereof; and plus or minus (h) the adjustment
described in Section 2.2(c) relating to the Final Inventory Value.

          1.42 Purchased Assets. "Purchased Assets" shall mean (a) the Accounts,
(b) the Purchased Contracts, (c) the Purchased Leases, (d) the Purchased
Equipment, (e) the Existing Permits, (f) the Inventory, (g) the Information
Assets, (h) the Miscellaneous Assets, (i) the Store Assets, (j) the SAP and
Other Computer Assets, (k) the Prepaid Expenses, (l) the Records and (m) each
Seller's causes of actions and claims against a third party that is a debtor in
possession under Chapter 11 of the Bankruptcy Code but only to the extent that
such causes of action and claims were asserted after a petition under Chapter 11
of the Bankruptcy Code was filed with respect to such third party. The Purchased
Assets shall exclude the Retained Assets.


                                       7


<PAGE>


          1.43 Purchased Contracts. "Purchased Contracts" shall mean those
written contracts, agreements, purchase orders, personal property leases and
licenses to which a Seller is a party or by which a Seller is bound and which
are set forth on EXHIBIT 4.

          1.44 Purchased Equipment. "Purchased Equipment" shall mean the
computer equipment and furniture associated with Florsheim's headquarters and
the computer equipment, furniture, fixtures, and other equipment associated with
the Sellers' warehouse, in each case owned by the Sellers, that Buyer may elect
to purchase in its reasonable discretion in connection with its incremental
employment needs resulting from the consummation of the transactions
contemplated by this Agreement; provided that the fair market value of the
Purchased Equipment shall be calculated in accordance with Section 3.18 hereof.

          1.45 Purchased Leases. "Purchased Leases" shall mean the real property
leases related to the Purchased Stores as set forth on EXHIBIT 5.

          1.46 Purchased Stores. "Purchased Stores" shall mean the retail and
outlet stores operated by any Seller in the United States and that are
identified on EXHIBIT 6, but not including the Excluded Stores.

          1.47 Records. "Records" shall mean (a) copies of such books, documents
and records primarily owned or used by a Seller in the operation of Sellers'
U.S. wholesale business or a Purchased Store, including any accounting records,
correspondence, governmentally required records, engineering data, designs,
drawings, blue prints, plans, photos, specifications, lists, customer lists
(excluding customer information subject to Sellers' privacy policy posted on
their Web site), computer media, software and software documentation, sales
literature, catalogues, promotional items, advertising materials and other
written materials, and (b) originals of historical photos, advertising and
similar documents or records owned by any Seller, but shall exclude any items
listed in clause (a) or (b) that are located at any of the Excluded Stores.

          1.48 Retained Assets. "Retained Assets" shall mean all of the assets
of Sellers as of the Closing Date which are not Purchased Assets, including,
without limitation, the following: (a) each Seller's franchise to be a
corporation, articles of incorporation, bylaws, minute books, stock books,
corporate seals and other corporate records having to do with the corporate
organization and capitalization of each Seller; (b) all canceled checks, bank
statements and tax returns of each Seller and all rights of each Seller to tax
refunds and tax rebates; (c) Sellers' accounts receivable and related license
with John Deere & Company and the John Deere Inventory; (d) Florsheim's
warehouse located in Jefferson City, Missouri; (e) Florsheim's headquarters
located at 200 N. LaSalle Street, Chicago, Illinois; (f) the leaseholds,
leasehold improvements, personal property, equipment, machinery, tooling, tools,
fixed assets, fixtures, furnishings and furniture and other tangible assets
located at or related to Florsheim's warehouse or headquarters (other than the
Purchased Equipment); (g) the leaseholds of the Excluded Stores and all Excluded
Store Inventory and other assets located at or primarily related to any Excluded
Store; (h) any other contracts or leases to which a Seller is a party or by
which a Seller is bound but which is not a Purchased Contract or Purchased
Lease; (i) the Existing Insurance Policies, any life insurance contract of which
any Seller is a beneficiary and any proceeds thereof and claims thereunder; (j)
each Seller's cash and cash equivalents, except to the extent included in the
Miscellaneous Assets; (k) each Seller's causes of actions and claims against
third parties


                                       8


<PAGE>


relating to the period prior to the Effective Time of Closing and avoidance
claims and other claims of the Sellers under the Bankruptcy Code, 11 U.S.C.
ss.ss. 101 et seq.; (l) the vehicles and other assets set forth on the EXHIBIT
7; (m) all employee benefit plans of Sellers and associated rights, obligations
and liabilities including, subject to Section 3.17 hereof, the Florsheim 401(k)
Plan; (n) any Accounts placed for collection by the Sellers prior to the Closing
Date; and (o) any other asset of Sellers that is not a Purchased Asset.

          1.49 Retained Liabilities. "Retained Liabilities" shall mean all
obligations and liabilities of Sellers arising out of the operation of their
respective businesses or the ownership of the Purchased Assets prior to the
Effective Time of Closing which are not Assumed Liabilities.

          1.50 SAP and Other Computer Assets. "SAP and Other Computer Assets"
shall mean (a) the Sellers' SAP operating system and all associated software
(including any of the Sellers' modifications thereof) and related licenses, but
excluding maintenance and consulting agreements, hardware and hardware leases,
and (b) the other computer software and related licenses of the Sellers
described on EXHIBIT 8; provided, that the Buyer shall assume any Cure Costs
with respect to any licenses described on such Exhibit without any adjustment to
the Purchase Price therefor.

          1.51 Seller or Sellers. "Seller" or "Sellers" shall mean Florsheim or
any of its domestic subsidiaries which are identified as Sellers on the
signature pages hereto.

          1.52 Sellers Closing Certificate. "Sellers Closing Certificate" shall
mean the Closing Certificate of each Seller in substantially the form of ANNEX E
attached to this Agreement.

          1.53 Store Assets. "Store Assets" shall mean all machinery, tooling,
equipment, furniture, fixed assets, fixtures, motor vehicles, furnishings,
parts, tools, dies, jigs, patterns, office equipment, personal property, cash
registers, computers, construction in progress, leasehold improvements, and
other assets owned by a Seller located at a Purchased Store or primarily used by
a Seller in the operation of a Purchased Store, including, but not limited, to
those assets which are set forth in the Disclosure Schedule.

          1.54 Trademarks. "Trademarks" shall mean the business names, product
brand names, trade names, trademarks, service marks, and logos owned by a Seller
(including the name "Florsheim") and the goodwill and other rights associated
therewith.

          1.55 Transition Services Agreement. "Transition Services Agreement"
shall mean the transition services agreement between Buyer and Florsheim to be
executed on the Closing Date in substantially the form of ANNEX F attached
hereto.


                                   ARTICLE II

                                PURCHASE AND SALE

          2.1  Purchase and Sale. At the Closing, and upon all of the terms and
subject to all of the conditions of this Agreement:


                                       9


<PAGE>


               (a)  the Sellers shall sell, assign, convey and deliver to the
Buyer, and the Buyer shall purchase and accept from the Sellers, all of each
Seller's right, title and interest in and to the Purchased Assets; and

               (b)  the Buyer shall assume and agree to pay, perform and
discharge, promptly when payment or performance is due or required the Assumed
Liabilities and be bound by all of the terms and obligations of the Assumed
Liabilities.

          2.2  Final Inventory Value; Payment at Closing.

               (a)  The Inventory Value shall be determined based on a one
hundred percent (100%) physical count conducted by Buyer and Florsheim or an
inventory service reasonably acceptable to Buyer and Florsheim no more than five
(5) Business Days prior to the anticipated Closing Date. Except as Buyer and
Florsheim may otherwise agree, no wholesale sales or shipments from the Sellers'
warehouse in Jefferson City, Missouri will occur after the physical count is
taken and before the Closing Date unless a new physical count is taken prior to
the Closing Date. In the event that the physical count is conducted by an
inventory service, Buyer and Florsheim shall each have one or more
representatives observe such physical count. The cost of any inventory service
shall be shared equally by Buyer and Florsheim. Prior to the physical count, the
parties shall agree on the methodology by which such count shall be conducted.

               (b)  At least two (2) days prior to the anticipated Closing Date,
Florsheim shall deliver to the Buyer for its approval, which approval shall not
be unreasonably withheld, Florsheim's determination of the Closing Inventory
Value (upon such approval by Buyer and with any corrections or adjustments
approved by Buyer and Florsheim, the "Final Inventory Value"), along with a
certificate of Florsheim's President or Chief Financial Officer certifying that
Florsheim's determination of the Closing Inventory Value was based on the
results of the physical count described in subsection (a) above and the books
and records of Sellers, presents fairly each Seller's determination of the
Closing Inventory Value and was prepared in accordance with the provisions of
this Agreement. Provided that the physical count is conducted in accordance with
the agreed upon methodology described in subsection (a) above, Buyer shall not
have the right to object to Florsheim's determination of the Closing Inventory
Value based solely upon the methodology used in the physical count. The same
"standard cost" methodology and the same amount of standard cost for each item
shall be used in computing the Closing Inventory Value, the Final Inventory
Value and the dollar amount set forth in Section 2.2(c). Throughout the period
in which the physical count is being taken and the Final Inventory Value is
being determined, each Seller shall provide Buyer and its representatives with
access to and the right to copy any records of Sellers relating to the Inventory
Value.

               (c)  In the event that the Final Inventory Value is in excess of
$27,925,979.63, the Purchase Price shall be increased by the amount of such
excess. In the event that the Final Inventory Value is less than $27,925,979.63,
the Purchase Price shall be reduced by the amount of such deficiency in excess
of $1,600,000.

               (d)  At the Closing, the Buyer shall deliver the Purchase Price
less $500,000 to the Sellers by a single wire transfer of immediately available
funds. Such wire


                                       10


<PAGE>


transfer shall be delivered to the Sellers in care of Florsheim, which all
Sellers hereby designate as their agent to receive, hold and disburse whatever
portion of the Purchase Price that each Seller is entitled to receive for the
sale of the Purchased Assets owned by such Seller.

               (e)  At the Closing, the Buyer shall deliver $500,000 to the
Escrow Agent to be held by the Escrow Agent on the terms and subject to the
conditions set forth in the Escrow Agreement.


                                   ARTICLE III

                                OTHER AGREEMENTS

          3.1  Access. Upon reasonable notice, from the date hereof through the
Closing Date, the Sellers shall afford to the officers, employees, accountants,
legal counsel and other representatives of the Buyer full access upon reasonable
prior notice and during normal business hours to all of the properties, books,
contracts, commitments, SAP data bases and associated files, file structure and
file field definitions, Financial Information and records of the Sellers related
to the Purchased Assets. Buyer shall be entitled to conduct appraisals of all or
any portion of the Purchased Assets and to conduct inspections thereof. In
addition, Sellers shall grant Buyer limited access (with Florsheim's
participation in such contacts) to the Major Customers, the Major Suppliers and
the lessors of the Purchased Stores and shall reasonably cooperate with Buyer in
communicating with such persons. Nothing in this Agreement shall prevent Buyer
or its Affiliates from initiating or having contact with any Person (including
Major Customers, Major Suppliers and the lessors of the Purchased Stores) in the
ordinary course of Buyer's business, provided that prior to the Effective Time
of Closing Buyer shall have no discussion regarding this Agreement or the
Sellers (except to confirm information publicly disclosed by the Sellers or to
state that such matters cannot be discussed) except with Florsheim's
participation. Between the date hereof and the Closing Date, the Sellers shall
use commercially reasonable efforts to make available to Buyer the services of
the Sellers' information technology employees as reasonably requested by Buyer,
provided, however, that any request that, in the Sellers' discretion, would
significantly interfere with the ordinary course operation of the Sellers'
business would not be reasonable for this purpose. If Buyer expressly requests
that Sellers use their best efforts to retain the services of a particular
information technology employee, Buyer shall reimburse the Sellers for the
Sellers' costs (including salary and benefits but not corporate overhead),
determined on an hourly basis, of continuing to employ any such information
technology employee, and Buyer shall reimburse the Sellers for the full cost of
any severance obligations incurred by the Sellers with respect to any such
information technology employee.

          3.2  Disclosure Schedule.

               (a)  Disclosure Schedule. Contemporaneously with the execution
and delivery of this Agreement, Florsheim is delivering to the Buyer the
Disclosure Schedule, which is accompanied by a certificate signed by the
President of Florsheim, stating that the Disclosure Schedule is being delivered
pursuant to this Agreement and is the Disclosure Schedule referred to in this
Agreement. The Disclosure Schedule is deemed to constitute an integral part of
this Agreement and is included in the representations, warranties, covenants or
agreements of the


                                       11


<PAGE>


Sellers contained in this Agreement to the extent that such representations,
warranties, covenants or agreements expressly refer to the Disclosure Schedule
or if information in the Disclosure Schedule on its face qualifies or is an
exception to such representations, warranties, covenants or agreements.

               (b)  Updates. Prior to the Closing Date, Florsheim shall update
the Disclosure Schedule from time to time by written notice to the Buyer to
reflect any matter that is materially adverse to the Seller's U.S. wholesale
business, the Purchased Stores or the Purchased Assets which has occurred from
and after the date of this Agreement which, if existing on the date of this
Agreement, would have been required to be described in the Disclosure Schedule
or would have required a revision of such section (in either case, a "Disclosure
Schedule Change"). If requested by the Buyer, Florsheim shall meet and discuss
with the Buyer any such Disclosure Schedule Change. If the parties cannot
resolve any differences regarding a Disclosure Schedule Change within fifteen
(15) days, and if the Disclosure Schedule Change constitutes a Material Adverse
Change, the Buyer may terminate this Agreement within ten (10) days after the
end of such fifteen (15) day period.

          3.3  Duties Concerning Consents; Conditions. Between the date hereof
and the Closing Date, each party to this Agreement shall cooperate with each
other and use commercially reasonable efforts to: (a) obtain any third party
consents or approvals required by this Agreement; and (b) take, or cause to be
taken, all other action and do, or cause to be done, all other things reasonably
necessary or appropriate to cause each of the conditions precedent set forth in
Articles VII and VIII of this Agreement to be satisfied and to consummate the
transactions contemplated by this Agreement.

          3.4  Deliveries of Information; Consultation. From time to time prior
to the Closing Date, each of the following shall occur:

               (a)  Deliveries by the Sellers. Each Seller shall furnish
promptly to the Buyer: (i) Florsheim's 2001 fiscal year Financial Statements
promptly after such Financial Statements are filed with the Securities and
Exchange Commission; (ii) prior to the filing of the Bankruptcy Case, the
monthly consolidated financial statements of Florsheim (as prepared by Florsheim
in accordance with its normal accounting procedures); (iii) after the filing of
the Bankruptcy Case, the monthly operating reports filed by the Sellers with the
Bankruptcy Court; and (iv) all other information concerning the Sellers' U.S.
wholesale business, the Purchased Stores and the Purchased Assets as the Buyer
may reasonably request and that does not significantly interfere with the
ordinary course operation of the Sellers' business.

               (b)  Consultation. At the reasonable request of the Buyer, the
Sellers shall meet with representatives of the Buyer to discuss operational and
financial matters of Sellers with respect to Sellers' U.S. wholesale business,
the Purchased Stores and the Purchased Assets.

          3.5  Acquisition Proposals.

               (a)  Definitions. As used in this Agreement, the following terms
shall have the meanings specified:


                                       12
<PAGE>
            (i) "Acquisition" shall mean any or all of the following, other than
the transactions described in this Agreement: (A) a merger, share exchange,
consolidation, reorganization, combination or similar transaction involving any
Seller; (B) a purchase, exchange or tender offer for 50% or more of the
outstanding shares of stock of any Seller; or (C) a purchase, lease or other
acquisition of the Purchased Assets or any equity interest (or any option,
warrant or securities convertible into any equity interest) from any Seller,
except sales of inventory sold in the ordinary course of business consistent
with past practice.

            (ii) "Acquisition Proposal" shall mean the making of any proposal by
any Person concerning an Acquisition.

         (b) Until the filing of the Bankruptcy Case, Florsheim shall not, and
shall cause the other Sellers, and shall use commercially reasonable efforts to
cause all of Sellers' respective officers, directors, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained or engaged by that party) to not, directly or indirectly: (i) initiate
or solicit any inquiries concerning an Acquisition or an Acquisition Proposal;
(ii) engage in any negotiations concerning, or provide any confidential
information or data to, any Person relating to an Acquisition or an Acquisition
Proposal; or (iii) consummate, agree or commit to consummate any Acquisition or
Acquisition Proposal. Florsheim shall immediately cease or cause to be
terminated any of the foregoing activities until the filing of the Bankruptcy
Case. This Section 3.5(b) shall not apply to soliciting, negotiating,
implementing and consummating any Acquisition Proposal with respect to the
Pacific Rim Assets and Liabilities or the Retained Assets or any assets of an
Affiliate of any Seller which are not covered by this Agreement or the
International Asset Purchase Agreement.

         (c) After the filing of the Bankruptcy Case, consistent with the
Sellers' fiduciary duties, the restrictions of clause (b) shall no longer be
applicable. Sellers shall not sell the Purchased Assets to another party except
(i) in accordance with the bidding procedures approved by the Bankruptcy Court
through the entry of the Procedures Order or (ii) in the event that this
Agreement is terminated prior to the Closing pursuant to Section 9.1. Buyer
shall receive copies of all Qualified Bids (as defined in the bidding
procedures) received by the Sellers for the Purchased Assets in accordance with
the terms of the bidding procedures approved by the Bankruptcy Court as a result
of the entry of the Procedures Order.

     3.6 Public Announcements. Subject to each party's disclosure obligations
imposed by Law, the Buyer and Florsheim will cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or any of the transactions
contemplated by this Agreement and shall not issue any public announcement or
statement with respect thereto prior to consultation with, and review by, the
other party.

     3.7 Retained Liabilities. Except for the Assumed Liabilities, the Buyer is
not assuming any liabilities or obligations of any Seller, including, without
limitation, the Retained Liabilities.

     3.8 Referrals and Deliveries. After the Closing, the Sellers shall
immediately: (a) deliver to the Buyer, in the form received with the addition of
any required endorsements by


                                       13
<PAGE>
the Sellers, any cash, checks or other payments received by the Sellers in
respect of the Accounts; (b) refer to Buyer any and all inquiries from customers
or suppliers of the Sellers or other Persons relating to the business of Sellers
other than with respect to the Retained Assets and, if the option described in
Section 3.16(a) is not exercised, the Pacific Rim Assets and Liabilities; and
(c) deliver to Buyer all purchase orders received by the Sellers relating to the
business of any Seller other than with respect to the Retained Assets and, if
the option described in Section 3.16(a) is not exercised, the Pacific Rim Assets
and Liabilities.

     3.9 Allocation of Purchase Price. The Purchase Price shall be allocated in
accordance with Section 1060 of the Internal Revenue Code and substantially as
set forth on EXHIBIT 9 attached hereto. The Buyer and the Sellers shall
cooperate with each other in the preparation and filing of I.R.S. Form 8594 in
connection with such allocation. Neither the Buyer nor the Sellers, nor any of
their respective Affiliates, shall take any position (whether in financial
statements, audits, tax returns or otherwise) which is inconsistent with the
allocation of the Purchase Price unless required to do so by applicable Law.

     3.10 Prorations. Except to the extent included in the Assumed Liabilities,
all personal property taxes, real property expenses, utility expenses, and other
similar expenses of the Sellers relating to the Sellers' U.S. wholesale
business, the Purchased Stores or the Purchased Assets, if any, payable after
the Effective Time of Closing shall be prorated, whereby the Sellers shall be
responsible for that portion of the prorated expenses accrued for the period
ending as of the Effective Time of Closing, and Buyer shall be responsible for
that portion of the prorated expenses attributable to the period beginning as of
the Effective Time of Closing. Such prorated expenses shall be settled between
the parties promptly after the determination from time to time of such prorated
expenses.

     3.11 Transaction Taxes. All federal, state and local sales, transfer,
gains, excise, value-added or other similar taxes, including, without
limitation, all state and local taxes in connection with the transfer of the
Purchased Assets, and all recording and filing fees (collectively, "Transaction
Taxes"), that may be imposed by reason of the sale, transfer, assignment and
delivery of the Purchased Assets, and are not exempt under section 1146(c) of
the Bankruptcy Code, shall be paid one half by the Buyer and one half by the
Sellers. The Buyer and the Sellers agree to cooperate to determine the amount of
Transaction Taxes payable in connection with the transactions contemplated under
this Agreement. The Sellers agree to assist the Buyer reasonably in the
preparation and filing of any and all required returns for or with respect to
such Transaction Taxes with any and all appropriate taxing authorities.

     3.12 Risk of Loss. Risk of loss with respect to the Purchased Assets shall
remain with Sellers until the Effective Time of Closing and shall pass to Buyer
upon the Effective Time of Closing. In the event of any loss or damage to the
tangible Purchased Assets prior to the Closing, the Sellers shall use
commercially reasonable efforts to apply any proceeds received by the Sellers
under the Existing Insurance Policies in respect of such loss or damage to
repair or replace the damaged tangible Purchased Assets.


                                       14
<PAGE>

     3.13 Employee Matters.

         (a) Within forty five (45) days after the filing of the Bankruptcy
Case, the Buyer shall provide the Sellers with a list of all employees of the
Sellers to whom the Buyer or any of its Affiliates intends to offer employment,
and the Buyer or any of its Affiliates shall promptly thereafter make offers of
employment to such employees. Prior to the delivery of such list, if requested
by the Buyer and as soon as practicable thereafter, Sellers shall provide
accrued vacation benefit information regarding any employees identified by Buyer
for use by Buyer and its Affiliates in determining whether to make offers of
employment to such persons. Any such offer of employment by the Buyer or any of
its Affiliates shall be made for employment commencing on the Closing Date and
shall be, at a minimum, consistent with the Buyer's standard compensation
arrangements other than the Buyer's defined benefit plans. On the Closing Date,
the Buyer shall provide the Sellers with a complete list of all employees of the
Sellers who shall be (or have been) hired by the Buyer or any of its Affiliates
as of the Closing Date (any such employee shall be referred to herein as a
"Transferred Employee"). In the event that neither the Buyer nor any of its
Affiliates makes an offer of employment to any employee of a Seller identified
by the Buyer on the list described in the first sentence of this Section 3.13(a)
(provided that this sentence shall not apply to any employee identified by the
Buyer on such list who does not accept the offer of employment of Buyer or any
of its Affiliates), then the Buyer shall promptly reimburse the Sellers for any
retention bonus or related payment that is due to any such employee upon the
consummation of the transactions contemplated by this Agreement. Transferred
Employees shall be employed on an at will basis, and no provision of this
Agreement shall be construed as providing to such Transferred Employees a
guarantee of continued employment. The Buyer shall not be responsible for any
liabilities and obligations with respect to the Transferred Employees or any
other employee of the Sellers other than (x) in accordance with Section 1.6
hereof; (y) in accordance with Section 3.1 hereof or (z) in accordance with
applicable Laws. Nothing in this Section 3.13 or elsewhere in this Agreement
shall be deemed to make any employee of the Sellers a third party beneficiary of
this Agreement.

         (b) For a period of 180 days after the Closing Date, or in the event
that this Agreement is terminated prior to the consummation of the transactions
contemplated hereby, for a period of one (1) year following such termination,
the Buyer shall not, and shall not permit any of its Affiliates, directly or
indirectly, to solicit or employ any of the employees of a Seller who are not
Transferred Employees without the prior written consent of Florsheim; provided,
however, that nothing contained herein shall prohibit the Buyer from generally
advertising for personnel, not specifically targeting any employees of the
Sellers or their Affiliates, and employing employees of the Sellers or their
Affiliates who respond to such general personnel advertisements. If, within 180
days after the Closing Date and except as permitted by the preceding sentence,
the Buyer hires an employee of a Seller who is not a Transferred Employee, the
Buyer shall promptly notify Florsheim and reimburse the Sellers for any amounts
that the Sellers are required to pay in connection with the termination of such
employee and, for any such employee who is a party to a written employment
agreement, assume all obligations that accrue from and after the Closing Date
under such employment agreement and reimburse the Sellers for any damages
arising from the Sellers' rejection of such employment agreement.

         3.14 Access to Records. After the Closing Date, each party shall permit
the other parties, and such other parties' attorneys, accountants, agents and
designees, such access to,



                                       15

<PAGE>
and right to copy, all books of account, papers and records (including the
Records), as the requesting party may reasonably deem necessary or desirable.
Any such examination shall be at the expense of the requesting party, shall be
performed during normal business hours at the place where such Records are
regularly maintained by the party from which access is requested and shall not
unreasonably interfere with the normal business activities of such party. Each
party shall notify the others at any time within the five (5) year period after
the Closing Date if it intends to destroy any or all of the books of account,
papers and records described above, and such other parties shall have the right
to review and remove any of such books of account, papers and records at their
own expense.

     3.15 Effective Time of Closing. The parties agree that, the transactions
described in this Agreement shall be deemed effective as of 12:01 A.M., Eastern
Time, on the Closing Date (the "Effective Time of Closing").

     3.16 Pacific Rim Assets; Other International Assets.

         (a) Florsheim and Florsheim Pacific Limited, a Hong Kong corporation
and a wholly owned subsidiary of Florsheim ("Florsheim Pacific") shall have the
option (the "Pacific Rim Option") to sell to Buyer and, if Florsheim and
Florsheim Pacific so elect, Buyer irrevocably agrees to purchase from Florsheim
Pacific, substantially all of the assets of Florsheim Pacific, and the Buyer
shall assume substantially all of the operating liabilities of Florsheim Pacific
(collectively, the "Pacific Rim Assets and Liabilities"), all on the terms and
subject to the conditions provided in the Pacific Rim Asset Purchase Agreement
(the "Pacific Rim Asset Purchase Agreement") to be entered into no later than
the commencement of the hearing before the Bankruptcy Court on the Procedures
Order (each such term as defined below). The purchase price for the Pacific Rim
Assets and Liabilities shall be $1,000,000, subject to the following
adjustments: (i) such purchase price shall be subject to an upward or downward
dollar for dollar adjustment if, as of the Closing Date, the net working capital
as defined under GAAP (but excluding cash and cash equivalents and intercompany
accounts), associated with the Pacific Rim Assets and Liabilities is greater or
less than such net working capital based on the Sellers' September 29, 2001
balance sheet; and (ii) such purchase price also may be subject to other
adjustments agreed upon and described in the Pacific Rim Asset Purchase
Agreement. The Pacific Rim Option shall be exercised by Florsheim and Florsheim
Pacific delivering written notice to the Buyer on or before the date which is
the earliest of: (A) seventy (70) days after the date of this Agreement, (B)
five (5) Business Days prior to the date of the hearing to obtain the Sale Order
(as defined in Section 3.19(e) hereof) and (C) ten (10) Business Days prior to
the Closing Date.

         (b) If Florsheim and Florsheim Pacific do not exercise the Pacific Rim
Option as provided above and instead desire to sell all or substantially all of
the Pacific Rim Assets and Liabilities to one or more third parties, or if
Florsheim and Florsheim Australia Limited, an Australian corporation (the
"Australian Subsidiary" and together with Florsheim, the "Australian Sellers"),
desire to sell all or substantially all of the assets of the Australian
Subsidiary to one or more third parties, such third parties must satisfy the
following criteria and must otherwise be reasonably acceptable to the Buyer:


                                       16

<PAGE>

            (i) Such third parties shall be financially sound and reasonably
experienced with operating a business of the kind consistent with the
positioning of the business in the past;

            (ii) In light of such reasonable experience, such third parties are
unlikely to denigrate the Trademarks to be licensed to them by the Buyer as
provided below; and

            (iii) Such third parties shall provide expectations of a financially
reasonable royalty stream equal to not less than five percent of their net
wholesale sales and shall have committed to reasonable minimum royalty levels.

(a "Qualifying Buyer"). Buyer hereby agrees to enter into a license agreement
with any Qualifying Buyer for use of the Trademarks in form and substance
reasonably satisfactory to the Buyer and the Qualifying Buyer. If the Australian
Sellers elect to liquidate the Australian Assets, Buyer hereby agrees to enter
into one or more license agreements with the Australian Sellers or one or more
third party buyers of such assets each in form and substance reasonably
satisfactory to the Buyer and such other parties for the limited purpose of
liquidating the Australian Assets. After the Closing, to the extent that the
Australian Assets have not been sold or liquidated in accordance with this
Section 3.16, the parties agree to maintain the existing license agreement
between Florsheim and the Australian Subsidiary on the same terms and conditions
as of the date hereof.

         (c) Florsheim, Florsheim Canada, Inc., an Ontario corporation,
Florsheim Europe S.R.L., an Italian corporation, Florsheim S.A. de C.V., a
Mexican corporation, Florsheim B.V., a Netherlands corporation, and Florsheim
France, SARL, a French corporation, (the foregoing entities, excluding
Florsheim, are hereinafter referred to as the "European Sellers") shall sell to
the Buyer and the Buyer will purchase from them, substantially all of the assets
of the European Sellers, and the Buyer shall assume substantially all of the
operating liabilities of the European Sellers (collectively, the "European
Assets and Liabilities"), all as provided in one or more International Asset
Purchase Agreements (referred to herein collectively as the "International Asset
Purchase Agreement") to be entered into no later than the commencement of the
hearing before the Bankruptcy Court on the Procedures Order (each such term as
defined below). The purchase price for the European Assets and Liabilities shall
be $1,500,000, subject to the following adjustments: (i) such purchase price
shall be subject to an upward or downward dollar for dollar adjustment if, as of
the Closing Date, the net working capital as defined under GAAP (but excluding
cash and cash equivalents and intercompany accounts), associated with the
European Assets and Liabilities is greater or less than such net working capital
based on the Sellers' September 29, 2001 balance sheet; and (ii) such purchase
price also may be subject to other adjustments agreed upon and described in the
International Asset Purchase Agreement.

     3.17 Florsheim 401(k) Plan Assumption. Not later than fifteen (15) days
prior to the Closing Date, Florsheim shall deliver written notice to the Buyer
of Florsheim's determination of whether, in its sole discretion and consistent
with applicable Law and the exercise of its fiduciary duties on behalf of
participants in the Florsheim and Affiliates 401(k) Plan (the "Florsheim 401(k)
Plan"), Florsheim desires to assign the Florsheim 401(k) Plan to the


                                       17
<PAGE>
Buyer. If Florsheim notifies the Buyer of its desire to make such assignment,
not later than sixty (60) days after deliver of such written notice, Buyer shall
deliver written notice to Florsheim of Buyer's election whether or not to accept
the assignment of the Florsheim 401(k) Plan. If Buyer elects to accept such
assignment, Florsheim shall assign to Buyer, all of the rights, responsibilities
and obligations of Florsheim and its Affiliates as sponsor of the Florsheim
401(k) Plan and Buyer shall assume all of the liabilities and obligations of
Florsheim and its Affiliates under the Florsheim 401(k) Plan. If Buyer elects to
accept the assignment of the Plan, Buyer and Florsheim shall take such steps as
may reasonably be required to effect such assignment and assumption and, upon
consummation of such assignment and assumption, Buyer shall pay Florsheim
$1,000,000 by wire transfer of immediately available funds.

     3.18 Purchased Equipment. Buyer shall inform Florsheim of the Purchased
Equipment it desires to purchase from the Sellers hereunder by delivering
written notice to Florsheim no later than twenty one (21) days after the date of
this Agreement. Buyer and Florsheim shall mutually agree as to the
reasonableness of the items of Purchased Equipment and the fair market value
thereof to be included in the Purchase Price as contemplated by Section 1.41(b);
provided, however, that the Purchased Equipment shall not include items
reasonably required by the Sellers to wind up its businesses after the Closing.

     3.19 Bankruptcy Matters. The Sellers intend to file voluntary petitions
under Chapter 11 of the Bankruptcy Code (collectively, the "Bankruptcy Case")
before the United States Bankruptcy Court for the Northern District of Illinois
(the "Bankruptcy Court"). In light of the Bankruptcy Case of the Sellers, the
following are requirements of the consummation of the transactions contemplated
by this Agreement; and time is of the essence with respect to all time deadlines
in such requirements unless and except to the extent that Buyer agrees in
writing to extend any such deadline for the Sellers to perform:

         (a) The Bankruptcy Case shall be filed with the Bankruptcy Court on or
before March 4, 2002, which date the Sellers may extend for an additional period
of up to fifteen (15) days.

         (b) On or before five (5) calendar days after the filing date of the
Bankruptcy Case, the Sellers shall file in the Bankruptcy Case a motion to (i)
approve this Agreement and the consummation of the transactions contemplated
hereby under Bankruptcy Code ss.363 and any and all other applicable bankruptcy
statutes and rules of procedure; and (ii) approve procedures for competing bids
regarding this Agreement and the consummation of the transactions contemplated
hereby and to set a final hearing for approval of this Agreement and the
consummation of the transactions contemplated hereby (the "Bankruptcy Motion").
The Bankruptcy Motion shall be in form and content satisfactory to Buyer and the
Sellers and drafts thereof must be provided to Buyer for review and comments by
Buyer's counsel and approved by Buyer no later than the filing date of the
Bankruptcy Case.

         (c) The Sellers shall use best efforts, on or before thirty five (35)
calendar days after the filing date of the Bankruptcy Case, to obtain the
Bankruptcy Court's entry of an order (the "Procedures Order"), approving the
procedures for competing bids in the Bankruptcy Motion and setting a final
hearing for approval of the this Agreement and the consummation of the
transactions contemplated hereby. The Procedures Order entered by the


                                       18
<PAGE>

Bankruptcy Court must be in form and content satisfactory to both the Sellers
and the Buyer and must establish the procedures governing the submission of any
competing bid for the purchase of the Purchased Assets and the assumption of the
Assumed Liabilities and the conduct of an auction if any such competing bid is
submitted, including, without limitation, a provision for initial and subsequent
bidding increments that the Sellers and the Buyer mutually approve.

         (d) The Sellers shall use best efforts, on or before seventy (70)
calendar days after the filing date of the Bankruptcy Case, to obtain the
Bankruptcy Court's entry of an order (the "Sale Order") approving this Agreement
and the consummation of the transactions contemplated hereby. Among other
things, the Sale Order must adjudicate, under Bankruptcy Code ss.363(f) and to
the full extent allowed by that statute, that the sale of the Purchased Assets
to Buyer is free and clear of all Liens and adverse interests of any kind that
can be extinguished as to the Purchased Assets in accordance with Bankruptcy
Code ss.363(f); and such Sale Order must further adjudicate that Buyer is a good
faith purchaser of the Purchased Assets entitled to all of the protections of
Bankruptcy Code ss. 363(m). The Sale Order entered by the Bankruptcy Court must
be in form and content satisfactory to the Buyer and the Sellers.

         (e) The Bankruptcy Motion shall request, and the Sellers shall use best
efforts to obtain the Bankruptcy Court's adjudications in the Procedures Order,
that Buyer shall receive full cash reimbursement from the Sellers of all actual
costs and fees (including reasonable attorneys' fees) incurred by Buyer and any
professionals retained by Buyer in negotiating, documenting, investigating and
obtaining Bankruptcy Court approval of this Agreement and the consummation of
the transactions contemplated hereby, if Buyer is not the successful bidder for
the Purchased Assets at the hearing scheduled by the Bankruptcy Court to approve
this Agreement (the "Sale Hearing"), or if the transactions contemplated by this
Agreement do not close as a result of a material breach by the Sellers under
this Agreement, provided that Buyer is not then in material breach of this
Agreement, subject to a maximum amount of $375,000.

         (f) The Sellers shall use best efforts to obtain the Bankruptcy Court's
adjudication in the Procedures Order that Buyer shall be paid by the Sellers the
amount of $875,000.00 in cash (the "Break-Up Fee") in addition to the costs and
fees described in subparagraph (e) above, if Buyer is not the successful bidder
for the Purchased Assets at the Sale Hearing, or if the transactions
contemplated by this Agreement do not close as a result of either a material
breach by the Sellers under this Agreement or a failure by Sellers to satisfy a
material obligation under this Agreement that is within Sellers' control,
provided that Buyer is not then in material breach of this Agreement. Such
Break-Up Fee shall be, and is, in recognition of the fact that any competitive
bidder appearing and bidding more than Buyer will have been brought to the
bidding process at the level of the ultimate successful bid because of this
Agreement. The Sellers also shall obtain binding commitments from their
pre-petition bank group to use their commercially reasonable efforts to support
the Break-Up Fee.

         (g) The Bankruptcy Motion shall request, and the Sellers shall use best
efforts to obtain the Bankruptcy Court's adjudications in the Sale Order,
pursuant to Bankruptcy Code ss.ss. 363 and 365, for the assumption by the
Sellers and assignment to Buyer of the Purchased Leases and the Purchased
Contracts, provided that the Purchase Price, as provided in


                                       19
<PAGE>

Section 1.41 hereof, shall be reduced by the amount of the Cure Costs, as
provided in Section 1.15 hereof.

     3.20 Financing Commitments. The Buyer has previously delivered to the
Sellers written commitments for satisfactory senior debt financing from
financial institutions acceptable to Buyer and sufficient to consummate the
transactions contemplated by this Agreement (the "Commitments").

     3.21 Purchase Orders. From and after the date of this Agreement and prior
to the Closing Date, the Sellers shall, prior to the execution thereof, provide
the Buyer with a copy of any purchase order for inventory for the Sellers' U.S.
wholesale business pursuant to which delivery is expected to occur after the
Closing Date. Within two (2) Business Days after the date on which the Sellers
deliver to the Buyer a copy of any such purchase order, the Buyer shall notify
the Sellers of any objection the Buyer may have to the purchase order. If the
Buyer does not so object within such two (2) Business Day period, the Sellers
then execute and deliver the purchase order and the inventory is not delivered
prior to the Closing Date, the purchase order shall be deemed a Purchased
Contract hereunder and any liabilities and obligations arising from such
purchase order shall be Assumed Liabilities in accordance with Section 1.6(b).
If the Buyer does so object within such two (2) Business Day period and the
Buyer and the Sellers cannot agree to changes to such purchase order within a
reasonable time, such purchase order, if then executed and delivered by the
Sellers, shall be deemed a Retained Asset hereunder. With respect to any letters
of credit provided by or on behalf of the Sellers in connection with purchase
orders that are Purchased Contracts on the Closing Date, (i) Buyer shall replace
any such letter of credit with a replacement letter of credit procured by the
Buyer and acceptable to the supplier of the purchased goods or (ii) the Buyer
will cash collateralize 105% of the face amount of the letter of credit issued
on behalf of the Sellers with the issuing institution.

     3.22 Use of Name. After the Closing, promptly following the expiration of
the license period with respect to the Trademarks set forth in the Transition
Services Agreement, the Sellers shall take such measures as may be necessary or
appropriate to change their names to names substantially dissimilar to
"Florsheim"; provided, however, that the Sellers may continue to use their names
as of the date hereof in the Bankruptcy Case.


                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE SELLERS

     The Sellers hereby jointly and severally represent and warrant to the Buyer
that:

     4.1 Organization; Business.

         (a) Each Seller is a corporation duly and validly organized and
existing and in good standing under the Laws of the jurisdiction specified in
the Disclosure Schedule and is qualified to do business as a foreign corporation
and is in good standing in all jurisdictions where the ownership or leasing of
property by it or the conduct of its business requires qualification as a
foreign corporation. The Disclosure Schedule contains a list of all such
jurisdictions in which each Seller is qualified to do business.


                                       20
<PAGE>

         (b) Each Seller has full corporate power and authority necessary to
carry on its business as it is now conducted and to own, lease and operate its
assets and properties.

         (c) Each Seller owns or has the right to use all property, real or
personal, tangible or intangible, which is necessary for the operation of its
U.S. wholesale business, the Purchased Stores (taken as a whole) and the
Purchased Assets as currently conducted.

         (d) Each Seller other than Florsheim is a direct or indirect
wholly-owned subsidiary of Florsheim.

                  4.2 Authorization; Enforceability. The execution, delivery and
performance of this Agreement and each of the documents and instruments required
by this Agreement to be executed and delivered by any Seller are within the
corporate power of such Seller and have been duly authorized by all necessary
corporate action by such Seller. This Agreement is, and the other documents and
instruments required by this Agreement to be executed and delivered by any
Seller or Sellers will be, when executed and delivered by the Seller or Sellers,
the valid and binding obligations of the respective Sellers, enforceable against
each such Seller in accordance with their respective terms, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws generally affecting the rights of
creditors and subject to general equity principles.

     4.3 No Violation or Conflict. The execution, delivery and performance of
this Agreement and the other documents and instruments to be executed and
delivered by the Sellers (or any of them) pursuant to this Agreement and the
consummation by the Sellers of the transactions contemplated hereby or thereby
do not and will not:

         (a) conflict with, violate, or constitute a default (or an event which,
with notice or the passage of time, or both, would constitute a default) under,
any Law, the Certificate of Incorporation or Bylaws (or other charter documents)
of any Seller, or any Purchased Contract or Purchased Lease except as may be
caused by the filing of the Bankruptcy Case; or

         (b) result in the creation of any Lien (except any Permitted Lien) with
respect to any of the Purchased Assets.

     4.4 Assets.

         (a) Except as set forth in the Disclosure Schedule, each Seller owns
and will convey to Buyer good and marketable title to the Purchased Assets owned
by such Seller free and clear of any and all Liens except the Assumed
Liabilities and the Permitted Liens. Except as set forth in the Disclosure
Schedule, all of Seller's tangible assets included in the Purchased Assets are
physically located in a Purchased Store, the Sellers' warehouse located in
Jefferson City, Missouri or Florsheim's headquarters located at 200 N. LaSalle
Street, Chicago, Illinois. Except with respect to the Purchased Leases or
otherwise as set forth in the Disclosure Schedule, none of the Purchased Assets
is leased, rented, licensed or otherwise not owned by the Sellers.


                                       21
<PAGE>

         (b) Except as set forth in the Disclosure Schedule and except for the
Retained Assets, the Purchased Assets include all of the material assets and
properties owned or used by the Sellers which are reasonably necessary for the
operation of Sellers' U.S. wholesale business or the Purchased Stores as
currently conducted. The "Inventory of Agreements" previously provided to the
Buyer, as supplemented by Sellers and annexed hereto as EXHIBIT 10, is a true,
correct and complete list of all material contracts of the Sellers other than
the Purchased Leases.

         (c) When used in this Agreement, the term "Permitted Liens" means the
Liens so described in EXHIBIT 11 hereto and no others.

     4.5 Litigation. Except as set forth in the Disclosure Schedule, (a) there
is not now any litigation, suit, arbitration, proceeding or action of any kind
pending or, to the Knowledge of Sellers, proposed or threatened, or, to the
Knowledge of Sellers, any governmental investigation, against or relating to any
Seller that, if adversely determined, would reasonably be expected to adversely
affect the Purchased Assets, Sellers' U.S. wholesale business or the Purchased
Stores by an amount of $100,000 or more; and (b) there are no actions, suits or
proceedings pending or, to the Knowledge of Sellers, proposed or threatened,
against any Seller by any Person which would prevent or materially impair the
ability of the Sellers to consummate the transactions contemplated by this
Agreement or which question or affect the legality or validity of the
transactions contemplated by this Agreement.

     4.6 Financial Information.

         (a) The Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis and fairly present in all material respects the
consolidated financial position of Florsheim and its subsidiaries as of the
dates thereof and the results of the operations and changes in financial
position for the periods then ended, subject, in the case of the interim
financial statements, to customary year-end and audit adjustments and any other
adjustments described therein and the absence of footnotes in such interim
financial statements.

         (b) The Financial Information of Sellers (other than the Financial
Statements) that Sellers have provided to Buyer prior to the date hereof: (i) is
correct and complete in all material respects; and (ii) is maintained in a
manner consistent with past practice.

     4.7 Absence of Certain Changes. Except as set forth in the Disclosure
Schedule, since September 29, 2001, the Sellers have operated the Purchased
Assets, the Sellers' U.S. wholesale business and the Purchased Stores in the
ordinary course of business consistent with past practice and there has not been
any:

         (a) damage, destruction or loss which has materially and adversely
affected the Purchased Assets or the results of operation of Sellers' U.S.
wholesale business or any damage, destruction or loss which makes any Purchased
Store substantially unusable (whether or not covered by insurance);

         (b) transactions consummated by Sellers involving the Purchased Assets,
the Sellers' U.S. wholesale business or the Purchased Stores other than in the
ordinary course of business consistent with past practice;


                                       22
<PAGE>
         (c) material increase in the level or rate of compensation of any Store
Employee other than in the ordinary course of business consistent with past
practice;

         (d) purchase, sale or other disposition, in one or more related
transactions, of assets or properties included in the Purchased Assets, the
Sellers' U.S. wholesale business or a Purchased Store for consideration in
excess of $250,000, other than purchases, sales or other dispositions in the
ordinary course of business;

         (e) waiver or release in writing or, to the Knowledge of Sellers, any
oral waiver or release, of any material rights or claims associated with the
Purchased Assets, the Sellers' U.S. wholesale business or, taken as a whole, the
Purchased Stores;

         (f) authorization by any Seller of the cancellation or compromise of
any debts owed to any Seller and payable after the Closing by a customer of the
Sellers' U.S. wholesale business that exceed $10,000 for any such wholesale
customer;

         (g) grant of credit or price concessions to any Major Customer on terms
or in amounts materially more favorable than those which have been extended to
such customer in the past twelve months or grant of such credit or price
concessions to any other U.S. wholesale customer which, taken together, are
materially adverse to Sellers' U.S. wholesale business, except, in either case,
as reflected in the Financial Statements;

         (h) executory purchase commitments related to the Purchased Assets, the
Sellers' U.S. wholesale business or a Purchased Store which, taken together, are
materially in excess of Sellers' historical business requirements, including
with respect to operating inventories, or at prices materially higher than
current market prices; or

         (i) any termination or material disruption in any of Sellers' business
relationships with any Major Customer. The Disclosure Schedule sets forth the
amount of sales, on a monthly basis, by the Sellers to each Major Customer
during the Sellers' fiscal year ended December 29, 2001.

     4.8 Store Assets. Except as set forth in the Disclosure Schedule, for each
Purchased Store, the Store Assets, taken as a whole, are in good operating
condition and repair for the purposes for which they are used by the Sellers
consistent with past practice, reasonable wear and tear excepted.

     4.9 Purchased Contracts. The Purchased Contracts include all domestic and
international licenses of the Trademarks owned or licensed by the Sellers.
Florsheim has delivered or made available true, correct and complete copies of
all Purchased Contracts to the Buyer.

     4.10 Performance of Purchased Contracts. The Sellers and, to the Knowledge
of Sellers, each other party to each material Purchased Contract, have fully
performed each material term, covenant and condition of each such contract which
is to be performed by them at or before the date hereof; provided, that all
Purchased Contracts marked with an asterisk (*) on EXHIBIT 4 shall be deemed to
be material Purchased Contracts for the purpose of this Section 4.10. Except
with respect to the filing of the Bankruptcy Case, each material Purchased
Contract


                                       23
<PAGE>

is in full force and effect and in all material respects constitutes the legal
and binding obligation of each Seller that is a party thereto, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws generally affecting the rights of
creditors and subject to general equity principles.

     4.11 Intentionally Omitted.

     4.12 No Violation of Law. Except as set forth in the Disclosure Schedule,
the Purchased Assets, the Sellers' U.S. wholesale business and the Purchased
Stores do not violate or conflict in any material respect with any Law that is
material to the operation thereof in the ordinary course of business consistent
with past practice. To the Knowledge of Sellers, the Purchased Assets, the
Sellers' U.S. wholesale business and the Purchased Stores are not currently the
subject of an inspection or inquiry regarding violations or alleged violations
of any Law by any federal, state, provincial, local or other governmental
agency.

     4.13 Brokers. Except for fees payable to Financo Inc., which shall be the
sole responsibility of the Sellers, no Seller has incurred any broker's,
finder's or any similar fee in connection with the transactions contemplated by
this Agreement.

     4.14 Taxes. There are no tax Liens upon any of the Purchased Assets except
Liens for current taxes not yet due and payable.

     4.15 Purchased Stores.

         (a) The Purchased Stores: (i) to the Knowledge of Sellers, are not
subject to any leases or tenancies of any kind (except that of the applicable
Seller); (ii) are not in the possession of any adverse possessors; (iii) are
used in a manner which is consistent with applicable Law; (iv) are served by
water, sewer, electrical, telephone, drainage and other utilities required to
operate the Purchased Stores in the ordinary course of business consistent with
past practice; and (v) require no material work or improvement to be brought
into compliance with any material applicable Law.

         (b) Except as set forth in the Disclosure Schedule, to the Knowledge of
Sellers, there is no: (i) planned or contemplated public improvements which may
result in material special assessments against the Sellers relating to the
Purchased Stores or which may adversely affect the availability of utility
service to the Purchased Stores or (ii) contemplated material increase in the
real estate taxes payable by the Sellers pursuant to the Purchased Leases.

     4.16 Consents; Approvals. Except the approval of the Bankruptcy Court and
with respect to any required HSR filing, no permission, approval, determination,
consent or waiver by, or any declaration, filing or registration with, any
governmental or regulatory authority or any other Person is required in
connection with the execution, delivery and performance of this Agreement by the
Sellers.

     4.17 No Pending Acquisitions. Except for this Agreement, no Seller is a
party to or bound by any agreement to effect an Acquisition.


                                       24
<PAGE>


     4.18 Labor Matters. There is no pending or, to the Knowledge of Sellers,
threatened labor dispute, strike or work stoppage related to Sellers' U.S.
wholesale business or the Purchased Stores. With respect to the employees of the
Sellers employed at the Purchased Stores (the "Store Employees"), (i) there is
not now pending or, to the Knowledge of Sellers, threatened, any charge or
complaint against any Seller by or before the National Labor Relations Board and
(ii) except as set forth on the Disclosure Schedule, to the Knowledge of
Sellers, no union organizing activities are in process or contemplated and no
petitions have been filed for union organization or representation of employees
of any Seller not presently organized.

     4.19 Permits. The Disclosure Schedule lists all of the Existing Permits
that are material to the operation of Sellers' U.S. wholesale business and the
Purchased Stores (the "Material Permits"). The Existing Permits constitute all
material permits, licenses, approvals, qualifications, permissions and
governmental authorizations which are required for the operation of Sellers'
U.S. wholesale business and the Purchased Stores as currently conducted. Each of
the Material Permits is in full force and effect and the applicable Seller is in
compliance with all obligations, restrictions or requirements thereof. True and
accurate copies of the Material Permits have been delivered or made available to
Buyer.

     4.20 Inventory. The Inventory is in all material respects merchantable and
useable or resalable in the ordinary course of the Sellers' business consistent
with past practice of the Sellers, except for Inventory identified as damaged or
worn on the Sellers' SAP operating system consistent with the Sellers' past
practices.

     4.21 Information Assets.

         (a) The Disclosure Schedule sets forth a list of all of the United
States, Australian, Canadian, European and Pacific rim Trademark registrations
and applications maintained by the Sellers and all United States, Australian,
Canadian, European, Pacific rim issued patents and patent applications
maintained by the Sellers, included in the Purchased Assets (the "Intellectual
Property"), and other Trademark registrations and applications, included in the
Purchased Assets, and other issued patents and patent applications, and U.S.
copyright registrations, in each case owned by the Sellers. To the Knowledge of
Sellers, all of such Intellectual Property registrations are valid and
subsisting, all pending applications for such Intellectual Property are live and
all maintenance, renewal and other fees relating to such registrations or
applications are current, in each case, in all material respects. As defined
herein, Intellectual Property includes all Trademark registrations and
applications that Sellers currently use.

         (b) Except as set forth in the Disclosure Schedule, each Seller owns
the entire right, title and interest in and to each item of Intellectual
Property which it purports to own. Each Seller owns or possesses adequate
licenses or other rights to use all other items of Information Assets used by
such Seller. No Seller has received written notice alleging that it is
infringing on the intellectual property rights of others. There are no material
claims, demands or proceedings instituted or pending or, to the Knowledge of
Sellers, threatened by any Person contesting or challenging the right of any
Seller to use any Information Assets which, if adversely determined, would be
materially adverse to the Sellers' U.S. wholesale business, the Purchased Assets
or the Purchased Stores. To the Knowledge of Sellers, there are no material


                                       25
<PAGE>


registered patents, trademarks, trade names or copyrights owned by a Person
other than the Sellers which any Seller is using without license to do so. To
the Knowledge of Sellers, no Person is infringing in any material respect on any
item of Information Assets which is material to the operation of the Sellers'
U.S. wholesale business, the Purchased Assets or the Purchased Stores in the
ordinary course of business consistent with past practice.

         4.22 Environmental Protection. Except as set forth on the Disclosure
Schedule,

            (a) The use and operation of the Sellers' U.S. wholesale business,
the Purchased Stores and, to the Knowledge of Sellers, the buildings in which
the Purchased Stores are located is, and at all times has been, in compliance
with, and has not been and is not in violation of and has not created any
liability of the Sellers under, any Environmental Law.

            (b) No Seller has received any written notice that any of the
Purchased Stores has been identified on any current or proposed (i) National
Priorities List under 40 C.F.R. ss. 300, (ii) CERCLIS list or (iii) any list
arising from a state or local law similar to CERCLA.

            (c) No Seller has received any written notice of any claims or Liens
resulting from any Environmental Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting the Sellers' U.S. wholesale
business, any of the Purchased Stores or, to the Knowledge of Sellers, the
buildings in which the Purchased Stores are located, or otherwise affecting the
use and operation of the Purchased Assets.

            (d) No Seller has received any written citation, directive, inquiry,
notice, order, summons, warning, or other communication in writing during the
last three (3) years that relates to any alleged, actual, or potential violation
or failure of the Sellers to comply with any Environmental Law, or of any
alleged, actual, or potential obligation of the Sellers to undertake or bear the
cost of any Environmental Liabilities, with respect to any of the Purchased
Stores or with respect to the use and operation of the Purchased Assets.

            (e) As used in this Agreement:

               (i) "CERCLA" shall mean the federal Comprehensive Environmental
Response, Compensation and Liability Act, as the same may have been amended.

               (ii) "CERCLIS" shall mean the Comprehensive Environmental
Response Compensation and Liability Inventory System established pursuant to
CERCLA.

               (iii) "Environmental Law" shall mean any Law of, any permit from,
or any consent decree or agreement with, any federal, state, regional, special
district or local governmental authority regulating, relating to or imposing
liability or enforceable standards of conduct relating to environmental matters
or the protection of the environment, including, without limitation, the federal
Clean Air Act, the federal Clean Water Act, the federal Resource Conservation
and Recovery Act, CERCLA, any so-called "Superfund" or "Superlien" Law, the
federal Toxic Substances Control Act and any similar state or local Law.

               (iv) "Environmental Liabilities" means any liabilities arising
from or under Environmental Law and consisting of or relating to: (A) any
environmental



                                       26

<PAGE>


matters or conditions (including on-site or off-site contamination and
regulation of Hazardous Substances); (B) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, claims,
demands, and remedial action, response, investigation or inspection costs and
expenses arising under Environmental Law; or (C) financial responsibility under
Environmental Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remedial action required
by applicable Environmental Law.

               (v) "Hazardous Substance" shall mean any hazardous, toxic or
polluting contaminant, substance or waste, including, without limitation, any
solid waste, toxic substance, hazardous substance, hazardous material, hazardous
chemical, pollutant or hazardous or acutely hazardous waste defined or
qualifying as such in (or for the purposes of) any Environmental Law, and shall
also include (but not be limited to) petroleum (including, without limitation,
crude oil and any fraction thereof), any radioactive material (including,
without limitation, any source and special nuclear by-product material as
defined at 42 U.S.C. ss. 2011 et seq., as amended or hereafter amended),
polychlorinated biphenyls (PCBs) and asbestos in any form or condition.

         4.23 Accounts. All Accounts have arisen from bona fide transactions by
Sellers in the ordinary course of business.

         4.24 Customers and Suppliers. The Disclosure Schedule lists the ten
(10) largest customers (the "Major Customers") and the five (5) largest
suppliers (the "Major Suppliers") of the Sellers' U.S. wholesale business taken
as a whole during the Sellers' fiscal year ended December 30, 2000 and for the
period from December 31, 2000 through December 29, 2001 on the basis of the
total dollar amount of sales to customers and purchases from suppliers. Since
September 29, 2001, there has been no termination or material adverse disruption
of the business relationship of any Seller with any Major Customer or Major
Supplier, nor to the Knowledge of Sellers has any Seller received any notice
that any Major Customer or Major Supplier intends to so terminate or materially
disrupt its business relationship.

         4.25 Insurance. To the Knowledge of Sellers, the Sellers maintain
casualty insurance with respect to the tangible Store Assets which is adequate
to cover the tangible Store Assets in all material respects.

                                   ARTICLE V

                   REPRESENTATIONS AND WARRANTIES OF THE BUYER

         The Buyer hereby represents and warrants to the Sellers that:

         5.1 Organization; Business. The Buyer is a corporation duly and validly
organized and existing and in active status under the Laws of the State of
Wisconsin. The Buyer has full corporate power and authority necessary to carry
on its business as it is now conducted and to own, lease and operate its assets
and properties. The Buyer owns or has the right to use all property, real or
personal, tangible or intangible, which is necessary for the operation of its
business as currently conducted.


                                       27

<PAGE>




         5.2 Authorization; Enforceability. The execution, delivery and
performance of this Agreement by the Buyer and all of the documents and
instruments required by this Agreement to be executed and delivered by the Buyer
are within the corporate power of the Buyer and have been duly authorized by all
necessary corporate action by the Buyer. This Agreement is, and the other
documents and instruments required by this Agreement to be executed and
delivered by the Buyer will be, when executed and delivered by the Buyer, the
valid and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws generally affecting the rights of creditors and subject to general
equity principles.

         5.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement by the Buyer do not and will not conflict with or violate any
Law, the Articles of Incorporation or Bylaws of the Buyer or any contract or
agreement to which the Buyer is a party or by which Buyer may be bound.

         5.4 Brokers. Except for fees to Riverview Financial Group, which shall
be the sole responsibility of the Buyer, the Buyer has not incurred any
broker's, finder's or any similar fee in connection with the transactions
contemplated by this Agreement.

         5.5 Consents; Approvals. Except the approval of the Bankruptcy Court
and with respect to any required HSR filing, no permission, approval,
determination, consent or waiver by, or any declaration, filing or registration
with, any governmental or regulatory authority or any other Person is required
in connection with the execution, delivery and performance of this Agreement by
the Buyer.

         5.6 Litigation. (a) There is not now any, litigation, suit,
arbitration, proceeding or action of any kind pending or, to the knowledge of
the Buyer, proposed or threatened, or, to the knowledge of the Buyer, any
governmental investigation, against or relating to the Buyer that, if adversely
determined, would reasonably be expected to have a material and adverse on the
Buyer; and (b) there are no actions, suits or proceedings pending or, to the
knowledge of the Buyer, proposed or threatened, against the Buyer by any Person
which would prevent or materially impair the ability of the Buyer to consummate
the transactions contemplated by this Agreement or which question or affect the
legality or validity of the transactions contemplated by this Agreement.

         5.7 Financing Commitments. The Commitments shall provide the Buyer with
sufficient funds to pay the Purchase Price in accordance with this Agreement,
and the Buyer otherwise has sufficient funds to satisfy its obligations under
this Agreement. The Buyer does not have any reason to believe that the
Commitments will not be funded at or prior to the Closing. The Commitments are
not subject to due diligence, syndication or participation conditions.

         5.8 Due Diligence. The Buyer has had an opportunity to ask questions
and receive answers from the Sellers and their management regarding the terms
and conditions of the purchase and sale of the Purchased Assets and the Assumed
Liabilities and regarding the business, financial affairs, and other aspects of
the Sellers. Notwithstanding the foregoing, the



                                       28

<PAGE>


Sellers acknowledge and agree that no due diligence investigation undertaken by
the Buyer or its representatives shall be deemed to reduce or eliminate the
Buyer's reliance upon the Sellers' representations and warranties made herein.

         5.9 No Further Representations. THE BUYER HEREBY ACKNOWLEDGES AND
AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE SELLERS MAKE NO
REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO
ANY MATTER RELATING TO THE PURCHASED ASSETS OR THE ASSUMED LIABILITIES,
INCLUDING, WITHOUT LIMITATION, INCOME TO BE DERIVED OR EXPENSES TO BE INCURRED
IN CONNECTION WITH THE PURCHASED ASSETS OR THE ASSUMED LIABILITIES, THE PHYSICAL
CONDITION OF ANY PERSONAL PROPERTY COMPRISING A PART OF THE PURCHASED ASSETS OR
WHICH IS THE SUBJECT OF ANY OTHER LEASE OR CONTRACT TO BE ASSUMED BY THE BUYER
AT THE CLOSING, THE ENVIRONMENTAL CONDITION OF ANY REAL PROPERTY UNDERLYING ANY
OF THE PURCHASED ASSETS WHICH ARE TO BE TRANSFERRED TO THE BUYER AT CLOSING OR
ARE THE SUBJECT OF ANY REAL PROPERTY LEASE TO BE ASSUMED BY THE BUYER AT THE
CLOSING, THE ZONING OF ANY SUCH REAL PROPERTY OR IMPROVEMENTS, THE VALUE OF THE
PURCHASED ASSETS (OR ANY PORTION THEREOF), THE TERMS, AMOUNT, VALIDITY OR
ENFORCEABILITY OF ANY ASSUMED LIABILITIES, THE COLLECTIBILITY OF THE ACCOUNTS,
THE FITNESS OF THE PERSONAL PROPERTY OR ANY OTHER PORTION OF THE PURCHASED
ASSETS FOR ANY PARTICULAR PURPOSE.

                                   ARTICLE VI

                     CONDUCT OF BUSINESS PENDING THE CLOSING

         From and after the date of this Agreement and until the Closing Date
except as contemplated in or caused by the filing of the Bankruptcy Case,
Florsheim shall, and shall cause each Seller to:

         6.1 Carry on in Ordinary Course. Subject to Section 3.21 hereof, use
commercially reasonable efforts to carry on its business in the ordinary course
of business consistent with past practice and not make or institute any unusual
methods of purchase, sale, lease, management, accounting or operation that would
be material and adverse to Sellers' U.S. wholesale business or the Purchased
Stores. Nothing in this Section 6.1 shall limit Sellers' discretion with respect
to the Retained Assets or prohibit Sellers from conducting store closing
clearance sales as contemplated by the Transition Services Agreement.

         6.2 Use of Purchased Assets. Use commercially reasonable efforts to
use, operate, maintain and repair the Purchased Assets in the ordinary course of
business consistent with past practice.

         6.3 No Default. Use commercially reasonable efforts not to do any act
or omit to do any act, or permit any act or omission to act, which will cause a
material breach of any of the Purchased Contracts.


                                       29

<PAGE>




         6.4 Existing Insurance Policies. Use commercially reasonable efforts to
maintain all of the Existing Insurance Policies in full force and effect.

         6.5 Employment Matters. With respect to the Store Employees, not: (a)
grant any increase in the rate of pay of any of such employees except in the
ordinary course of business consistent with past practice or as otherwise
approved by the Bankruptcy Court in connection with any employee retention or
severance plan; or (b) enter into or modify any written employment arrangement
with any of such employees.

         6.6 Contracts and Commitments. With respect to the Purchased Assets,
the Sellers' U.S. wholesale business or the Purchased Stores, not, without the
Buyer's prior written consent, enter into any contract or commitment or engage
in any transaction (a) in excess of $100,000 or not in the ordinary course of
business consistent with past practice and (b) not purchase, lease, sell or
dispose of any capital asset included in the Purchased Assets; except, in each
case, as otherwise provided herein or as approved by the Bankruptcy Court.

         6.7 Preservation of Relationships. Use commercially reasonable efforts
to preserve intact its business organization related to Sellers' U.S. wholesale
business and the Purchased Stores and preserve the business relationships of the
Major Customers and Major Suppliers.

         6.8 Compliance with Laws. Use commercially reasonable efforts to comply
in all material respects with all material Laws applicable to the Purchased
Assets.

                                  ARTICLE VII

              CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER

         Each and every obligation of the Buyer to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following express conditions precedent:

         7.1 Compliance with Agreement. The Sellers shall have performed and
complied in all material respects with all of their obligations under this
Agreement which are to be performed or complied with by the Sellers prior to or
on the Closing Date.

         7.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to the Buyer, and the Sellers shall have made
available to the Buyer for examination the originals or true and correct copies
of all such documents the Buyer may reasonably request.

         7.3 No Litigation. No suit, action or other proceeding shall be pending
before any court in which (i) the consummation of the transactions contemplated
by this Agreement is restrained or enjoined or (ii) the relief requested is to
restrain, enjoin or prohibit the consummation of the transactions contemplated
by this Agreement and such relief has a substantial likelihood of being granted.
No injunction or other order that declares this


                                       30

<PAGE>


Agreement invalid or unenforceable or which prevents the consummation of the
transactions hereby shall be in effect.

         7.4 Representations and Warranties of the Sellers. The representations
and warranties made by the Sellers in this Agreement shall be true and correct
in all material respects, taken as a whole, as of the Closing Date with the same
force and effect as though said representations and warranties had been made at
such time, except to the extent any representations and warranties speak as of a
specified date, in which case such representations and warranties shall be true
and correct in all material respects as of such date, and except as would not
constitute a Material Adverse Change; provided, however, that the
representations and warranties made by the Sellers in Sections 4.2 and 4.20 of
this Agreement shall be true and correct in all material respects.

         7.5 No Material Adverse Change, Etc.. During the period from the date
of this Agreement to the Closing Date there shall not have occurred a Material
Adverse Change.

         7.6 Bankruptcy Matters. Each of the bankruptcy matters described in
Section 3.19 hereof shall have been satisfied as provided therein. The Buyer
shall have no obligation to complete the Closing until the Sale Order is a final
and non-appealable order that is not subject to any stay of any kind of its
effectiveness, provided that, in its sole and absolute discretion, the Buyer
shall have the right to complete the Closing so long as the Sale Order is in
full force and effect and is not subject to any stay of any kind.

         7.7 Deliveries at Closing. Florsheim, as agent for all of the Sellers,
shall have delivered to the Buyer the following documents, each dated the
Closing Date and properly executed: (a) the Bill of Sale; (b) the Inventory
Purchase Agreement; (c) the Transition Services Agreement; (d) the Seller
Closing Certificate; and (e) assignments in recordable form for each Purchased
Lease, for the Information Assets and (if requested by Buyer) for any executory
contracts and other assets, necessary to effect the transfer of the Purchased
Assets to the Buyer.

         7.8 Other Deliveries.

            (a) Each Seller shall have delivered to the Buyer such certificates
and documents of officers of the Seller and public officials as shall be
reasonably requested by the Buyer to establish the existence of such Seller and
the due authorization of this Agreement and the transactions contemplated by
this Agreement by such Seller.

            (b) Florsheim shall have delivered to the Buyer any consent or other
approval required to transfer a Purchased Asset to Buyer. Florsheim shall also
use commercially reasonable efforts to obtain appropriate documents from its
lenders confirming their release of Liens.

         7.9 HSR. The waiting period under the Hart-Scott Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), if applicable, shall have
expired.

         7.10 Other Closings. The transactions contemplated by the International
Asset Purchase Agreement and, if Florsheim and Florsheim Pacific exercise their
option to sell the


                                       31

<PAGE>


Pacific Rim Assets and Liabilities as provided herein, the Pacific Rim Asset
Purchase Agreement, shall have been consummated prior to or contemporaneously
with the Closing.

                                  ARTICLE VIII

                           CONDITIONS PRECEDENT TO THE
                           OBLIGATIONS OF THE SELLERS

         Each and every obligation of the Sellers to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following express conditions precedent:

         8.1 Compliance with Agreement. The Buyer shall have performed and
complied in all material respects with all of its obligations under this
Agreement which are to be performed or complied with by it prior to or on the
Closing Date.

         8.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Florsheim, as agent for all of the
Sellers, and the Buyer shall have made available to Florsheim for examination
the originals or true and correct copies of all such documents which Florsheim
may reasonably request.

         8.3 No Litigation. No suit, action or other proceeding shall be pending
before any court in which (i) the consummation of the transactions contemplated
by this Agreement is restrained or enjoined or (ii) the relief requested is to
restrain, enjoin or prohibit the consummation of the transactions contemplated
by this Agreement and such relief has a substantial likelihood of being granted.
No injunction or other order that declares this Agreement invalid or
unenforceable or which prevents the consummation of the transactions hereby
shall be in effect.

         8.4 Representations and Warranties of the Buyer. The representations
and warranties made by the Buyer in this Agreement shall be true and correct in
all material respects, taken as a whole, as of the Closing Date with the same
force and effect as though such representations and warranties had been made at
such time, except to the extent any representations and warranties speak as of a
specified date, in which case such representations and warranties shall be true
and correct in all material respects as of such date.

         8.5 Deliveries at Closing. The Buyer shall have delivered to Florsheim
the following documents, each dated the Closing Date and properly executed: (a)
the Buyer Closing Certificate; (b) the Inventory Purchase Agreement; (c) the
Transition Services Agreement; and (d) the Bill of Sale.

         8.6 Other Documents. The Buyer shall have delivered to Florsheim such
certificates and documents of officers of the Buyer and of public officials as
shall be reasonably requested by Florsheim to establish the existence and good
standing of the Buyer and the due



                                       32

<PAGE>


authorization of this Agreement and the transactions contemplated by this
Agreement by the Buyer.

         8.7 Delivery of Purchase Price. The Buyer shall have delivered the
Purchase Price to Florsheim, as agent for all of the Sellers. All of the Sellers
acknowledge and agree that it shall be the sole and exclusive responsibility of
Florsheim to deliver to each of them their respective allocated amounts of the
Purchase Price.

         8.8 HSR. The waiting period under the HSR Act, if applicable, shall
have expired.

         8.9 Bankruptcy Matters. Each of the bankruptcy matters described in
Section 3.19 hereof shall have been satisfied as provided therein.

         8.10 Other Closings. The transactions contemplated by the International
Asset Purchase Agreement and, if Florsheim and Florsheim Pacific exercise their
option to sell the Pacific Rim Assets and Liabilities as provided herein, the
Pacific Rim Asset Purchase Agreement, shall have been consummated prior to or
contemporaneously with the Closing.

         8.11 Letters of Credit. The Buyer shall have provided replacement
letters of credit or cash collateralized the Sellers' existing letters of credit
in accordance with Section 3.21 hereof.

                                   ARTICLE IX

                           TERMINATION; MISCELLANEOUS

         9.1 Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the
Closing, as follows:

            (a) by mutual written agreement of the Buyer and the Sellers;

            (b) by the Buyer if there is a material breach by the Sellers of any
representation or warranty of the Sellers under this Agreement and the Sellers
are unable or shall fail or refuse to cure such breach within twenty (20) days
after notice from the Buyer specifying such breach;

            (c) by the Buyer if there is a material breach by the Sellers of any
material covenant of the Sellers under this Agreement or a failure by the
Sellers to satisfy a material obligation under this Agreement that is within the
Sellers' control and the Sellers are unable or shall fail or refuse to cure such
breach or satisfy such obligation within twenty (20) days after notice from the
Buyer specifying such breach or failure;

            (d) by the Buyer if, after best efforts of the Sellers, the matters
related to the Bankruptcy Case set forth in Section 3.19 hereof are not
satisfied as described, and as of the dates set forth, in such section;

            (e) by the Buyer pursuant to Section 3.2(b) of this Agreement;



                                       33

<PAGE>




            (f) by the Sellers if there is a material breach by the Buyer of any
representation, warranty or covenant of the Buyer under this Agreement and the
Buyer is unable or shall fail or refuse to cure such breach within twenty (20)
days after notice from the Sellers specifying such breach;

            (g) by the Sellers, upon the execution of a definitive agreement
involving a sale of all or substantially all of the Purchased Assets by the
Sellers to a purchaser or purchasers other than the Buyer (an "Alternative
Transaction"); or

            (h) by either the Buyer or the Seller if the Closing has not
occurred on or before June 30, 2002.

         9.2 Rights on Termination.

            (a) If this Agreement is validly terminated pursuant to Section 9.1
hereof, this Agreement shall forthwith become null and void and have no effect
(other than Sections 9.2, 9.3, 9.6, 9.7, 9.9, 9.10 and 9.11 of this Agreement
which shall survive any such termination), and there shall be no liability or
obligation on the part of any party hereto, or their respective Affiliates,
directors, officers, employees, agents or representatives, with respect to this
Agreement or any document or instrument in connection therewith, except (i) the
liability of a party for its own expenses pursuant to Section 9.6, (ii) any
liability provided for in Section 9.2(b) and Section 9.2(c) and (iii) nothing
contained in this Agreement shall relieve any party from any liability for any
material breach prior to such termination of such party's representations,
warranties, covenants or agreements set forth in this Agreement, except to the
extent a fee has been paid pursuant to Section 9.2(b) or Section 9.2(c) below,
in which case such fee shall constitute liquidated damages and shall be the
Buyer's sole remedy for such breach by the Sellers.

            (b) If this Agreement is terminated pursuant to Section 9.1(b),
Section 9.1(d) (other than a termination by the Buyer pursuant to Section 9.1(d)
based upon its unreasonable failure to be satisfied with either the Procedures
Order or the Sale Order) or Section 9.1(e), unless, in each case, at the time of
such termination there is a material breach by the Buyer of any representation,
warranty or covenant of the Buyer under this Agreement, the Sellers shall
reimburse the Buyer for all actual costs and fees (including reasonable
attorneys' fees) incurred by the Buyer and any professionals retained by the
Buyer in negotiating, documenting, investigating and obtaining Bankruptcy Court
approval of this Agreement and the consummation of the transactions contemplated
hereby subject to a maximum amount of $375,000 (collectively, "Expense
Reimbursement").

            (c) If this Agreement is terminated pursuant to Section 9.1(c) or
Section 9.1(g), unless at the time of such termination pursuant to Section
9.1(c) there is a material breach by the Buyer of any representation, warranty
or covenant of the Buyer under this Agreement, the Sellers shall reimburse the
Buyer for all items of Expense Reimbursement and pay to the Buyer an amount
equal to the Break-Up Fee, provided, however, that the Break-Up Fee shall not be
payable in connection with a termination under Section 9.1(g) until the closing
of such Alternative Transaction.


                                       34

<PAGE>




            9.3 Waiver of Conditions. If any of the conditions set forth in
Article VII of this Agreement have not been satisfied, the Buyer may
nevertheless elect to proceed with the consummation of the transactions
contemplated by this Agreement and if any of the conditions set forth in Article
VIII of this Agreement have not been satisfied, the Seller may nevertheless
elect to proceed with the consummation of the transactions contemplated by this
Agreement. Any such election to proceed shall be evidenced by a certificate
signed on behalf of the waiving party by an officer of that party.

            9.4 Survival of Representations and Warranties. The representations
and warranties of Buyer and the Sellers contained in this Agreement or made
pursuant to this Agreement shall not survive the Closing Date and the Effective
Time of Closing and the consummation of the transactions contemplated by this
Agreement.

            9.5 Entire Agreement; Amendment. This Agreement and the documents
referred to in this Agreement and required to be delivered pursuant to this
Agreement constitute the entire agreement among the parties pertaining to the
subject matter of this Agreement, and supersede all prior agreements,
understandings, negotiations and discussions of the parties, whether oral or
written, and there are no warranties, representations or other agreements among
the parties in connection with the subject matter of this Agreement, except as
specifically set forth in this Agreement. No amendment, supplement,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the Buyer and the Sellers. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

            9.6 Expenses. Except as otherwise provided herein, whether or not
the transactions contemplated by this Agreement are consummated, each of the
parties to this Agreement shall pay the fees and expenses of its respective
counsel, accountants, brokers, consultants, investment bankers and other experts
incident to the negotiation and preparation of this Agreement and consummation
of the transactions contemplated by this Agreement.

            9.7 Governing Law; Venue. This Agreement shall be governed by, and
construed and interpreted in accordance with, the Laws of the State of Illinois,
without regard to the conflicts of laws principles thereof. The parties agree
that, during the period from the filing of the Bankruptcy Case until the date on
which the Bankruptcy Case is closed or dismissed (the "Bankruptcy Period"), the
Bankruptcy Court shall have exclusive jurisdiction to resolve any controversy,
claim or dispute arising out of or relating to this Agreement or any other
agreement entered into in connection herewith, or the breach hereof or thereof.
The parties further agree that, prior to and following the Bankruptcy Period,
any action or proceeding with respect to such controversy, claim or dispute may
be brought against any of the parties exclusively in the United States District
Court for the Northern District of Illinois, and each of the parties hereby
consents to the personal jurisdiction of such court and the Bankruptcy Court
(and to the appropriate appellate courts) in any such action or proceeding and
waives any objection, including, without limitation, any objection to the laying
of venue or on the grounds of forum non conveniens, which any of them may now or
hereafter have to the bringing of such action or proceeding in such respective
jurisdictions. Each party hereby irrevocably consents to the service of process
of any of the aforesaid courts in any such action or proceeding by the mailing
of copies thereof by


                                       35

<PAGE>


registered or certified mail, postage prepaid, to the other parties to such
action or proceeding. Each party acknowledges and agrees that any controversy
which may arise under this Agreement is likely to involve complicated and
difficult issues, and therefore each party hereby irrevocably and
unconditionally waives any right such party may have to a trial by jury.

            9.8 Assignment. This Agreement shall not be assigned in whole or in
part by any Seller without the prior written consent of Buyer, and it shall not
be assigned in whole or in part by Buyer except: (a) with the prior written
consent of Florsheim; (b) to any subsidiary(ies) or Affiliate(s) of Buyer
provided that any such assignment shall not release Buyer from any of its
obligations set forth herein; or (c) as collateral security, in which case
Sellers shall execute and deliver any acknowledgment of such assignment as may
be reasonably required by Buyer's lender.

            9.9 Notices. All communications or notices required or permitted by
this Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party by personal
delivery or telephonic facsimile transmission or five days after being deposited
in the United States mail, certified or registered mail, postage prepaid, return
receipt requested, and addressed as follows, unless and until any of such
parties notifies the others in accordance with this Section of a change of
address:

            If to the Sellers:       Florsheim Group Inc.
                                     Attention:  Peter P. Corritori, Jr.
                                     200 North LaSalle Street
                                     Chicago, IL  60601-1014
                                     Fax No.:  312-458-2540

                                     with a copy to (which shall not constitute
                                     notice):

                                     Financo Inc.
                                     Attention:  Karen Goodman
                                     535 Madison Avenue
                                     New York, NY  10022
                                     Fax No.:  212-593-0309

                                     with a copy to (which shall not constitute
                                     notice):

                                     Akin, Gump, Strauss, Hauer & Feld, L.L.P.
                                     Attention:  Lisa G. Beckerman, Esq. and
                                                 Stephen B. Kuhn, Esq.
                                     590 Madison Avenue
                                     New York, NY 10022
                                     Fax No.:  212-872-1002

            If to the Buyer:         Weyco Group, Inc.
                                     Attention: John Wittkowske
                                     333 West Estabrook Boulevard
                                     Milwaukee, WI 53212
                                     Fax No.:  414-908-1603


                                       36


<PAGE>


                                     with a copy to (which shall not constitute
                                     notice):

                                     Riverview Financial Group
                                     Attention:  Ronald Miller
                                     100 East Wisconsin Avenue, 24th Floor
                                     Milwaukee, WI  53202
                                     Fax No.:  414-291-4558

                                     with a copy to (which shall not constitute
                                     notice):

                                     Quarles & Brady, LLP
                                     Attention:  Patrick M. Ryan
                                     411 East Wisconsin Avenue
                                     Milwaukee, WI  53202
                                     Fax No:  414-271-3550

         9.10 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute one and the same Agreement. The Table of Contents and
Article and Section headings in this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.

         9.11 Interpretation. Unless the context requires otherwise, all words
used in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the singular,
and all words in any gender shall extend to and include all genders.

         9.12 Severability. If any provision, clause, or part of this Agreement,
or the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby unless such
invalidity materially impairs the ability of the parties to consummate the
transactions contemplated by this Agreement.

         9.13 No Reliance. Except for the parties to this Agreement and any
assignees permitted by Section 9.8 of this Agreement: (a) no Person is entitled
to rely on any of the representations, warranties and agreements of the parties
contained in this Agreement; and (b) the parties assume no liability to any
Person because of any reliance on the representations, warranties and agreements
of the parties contained in this Agreement.

         9.14 Exhibits and Disclosure Schedule. All capitalized terms used in
any Exhibit to this Agreement or in the Disclosure Schedule shall have the
definitions specified in this Agreement unless otherwise defined therein.

         9.15 Income Tax Position. Neither the Buyer nor the Sellers shall take
a position for income tax purposes which is inconsistent with this Agreement.

         9.16 Further Assurances. From time to time after the Closing Date, upon
the reasonable request of and at the sole expense of the Buyer, the Sellers
shall execute and deliver



                                       37

<PAGE>


or cause to be executed and delivered such further instruments of conveyance,
assignment and transfer and take such further action as the Buyer may reasonably
request in order to more effectively sell, assign, convey, transfer, reduce to
possession and record title to any of the Purchased Assets. The Sellers agree to
cooperate with the Buyer in all reasonable respects to assure to the Buyer the
continued title to and possession of the Purchased Assets as contemplated by
this Agreement.

         [the remainder of this page has been intentionally left blank]



                                       38

<PAGE>


         IN WITNESS WHEREOF, the parties have caused this Asset Purchase
Agreement to be duly executed as of the day and year first above written.

BUYER:                     WEYCO GROUP, INC.


                           By: /s/ Thomas W. Florsheim, Jr.
                              --------------------------------------------
                              Thomas W. Florsheim, Jr., Chief Executive Officer

SELLERS:                   FLORSHEIM GROUP INC.


                           By: /s/ Peter P. Corritori, Jr.
                              --------------------------------------------
                              Peter P. Corritori, Jr., Chief Executive Officer

                           THE FLORSHEIM SHOE STORE COMPANY - NORTHEAST

                           By: /s/ Peter P. Corritori, Jr.
                              --------------------------------------------
                              Peter P. Corritori, Jr., Chief Executive Officer

                           THE FLORSHEIM SHOE STORE COMPANY - WEST

                           By: /s/ Peter P. Corritori, Jr.
                              --------------------------------------------
                              Peter P. Corritori, Jr., Chief Executive Officer

                           L.J. O'NEILL SHOE CO.


                           By: /s/  Peter P. Corritori, Jr.
                              --------------------------------------------
                              Peter P. Corritori, Jr., Chief Executive Officer

                           FLORSHEIM OCCUPATIONAL FOOTWEAR, INC.


                           By: /s/  Peter P. Corritori, Jr.
                              --------------------------------------------
                              Peter P. Corritori, Jr., Chief Executive Officer



                                       39

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>4
<FILENAME>c68246ex3-2.txt
<DESCRIPTION>BYLAWS
<TEXT>
<PAGE>
                                                                     EXHIBIT 3.2






                                     BYLAWS



                                       of



                                WEYCO GROUP, INC.



                                     ADOPTED



                                January 21, 1991
                  as amended November 3, 1992, January 8, 1996,
                      January 31, 2000 and January 28, 2002



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                           ARTICLE I. OFFICES; RECORDS


     1.01. Principal and Business Offices. The corporation may have such
principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.

     1.02. Registered Office and Registered Agent. The registered office of the
corporation required by the Wisconsin Business Corporation Law to be maintained
in the State of Wisconsin may be, but need not be, identical with the principal
office in the State of Wisconsin. The address of the registered office may be
changed from time to time by any officer or by the registered agent. The
business office of the registered agent of the corporation shall be identical to
such registered office.

     1.03. Corporate Records. The following records shall be kept at the
corporation's principal office or at such other reasonable location as may be
specified by the corporation:

          (a) Minutes of shareholders' and board of directors' meetings and any
     written notices thereof.

          (b) Records of actions taken by the shareholders or directors without
     a meeting.

          (c) Records of actions taken by committees of the board of directors.

          (d) Accounting records.

          (e) Records of its shareholders.


                            ARTICLE II. SHAREHOLDERS


     2.01. Annual Meeting. The annual meeting of the shareholders shall be held
on the fourth Tuesday in April of each year at 10:00 AM, or at such other time
and date as may be fixed by or under the authority of the Board of Directors,
for the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual meeting
is a legal holiday in the State of Wisconsin, such meeting shall be held on the
next succeeding business day. If the election of directors is not held on the
day designated herein, or fixed as herein provided, for any annual meeting of
the shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as soon
thereafter as may be convenient.

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     2.02. Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or the Board of Directors. If and as required by the Wisconsin
Business Corporation Law, a special meeting shall be called upon written demand
describing one or more purposes for which it is to be held by holders of shares
with at least 10% of the votes entitled to be cast on any issue proposed to be
considered at the meeting. The purpose or purposes of any special meeting shall
be described in the notice required by Section 2.04 of these Bylaws.

     2.03. Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Wisconsin, as the place of meeting for any
annual meeting or any special meeting. If no designation is made, the place of
meeting shall be the principal business office of the corporation but any
meeting may be adjourned to reconvene at any place designated by vote of a
majority of the shares represented thereat.

     2.04. Notices to Shareholders. (a) Required Notice. Written notice stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) days nor more than sixty (60) days before the date of the meeting
(unless a different time is provided by law or the Articles of Incorporation),
by or at the direction of the President or the Secretary, to each shareholder
entitled to vote at such meeting or, if the Wisconsin Business Corporation Law
requires that notice be given to shareholders not entitled to vote, to all
shareholders. If mailed, such notice is effective when deposited in the United
States mail, and shall be addressed to the shareholder's address shown in the
current record of shareholders of the corporation, with postage thereon prepaid.
At least twenty (20) days' notice shall be provided if the purpose, or one of
the purposes, of the meeting is to consider a plan of merger or share exchange
or the sale, lease, exchange or other disposition of all or substantially all of
the corporation's property, with or without good will, otherwise than in the
usual and regular course of business.

         (b) Adjourned Meeting. Except as provided in the next sentence, if any
shareholder meeting is adjourned to a different date, time, or place, notice
need not be given of the new date, time, and place, if the new date, time, and
place is announced at the meeting before adjournment. If a new record date for
the adjourned meeting is or must be fixed, then notice must be given pursuant to
the requirements of paragraph (a) of this Section 2.04, to those persons who are
shareholders as of the new record date.

         (c) Waiver of Notice. A shareholder may waive notice in accordance with
Article VI of these Bylaws.

         (d) Contents of Notice. The notice of each special shareholder meeting
shall include a description of the purpose or purposes for which the meeting is
called. Except as otherwise provided in this section 2.04(d), or as provided in
the Articles of Incorporation, or otherwise in the Wisconsin Business
Corporation Law, the

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notice of an annual shareholder meeting need not include a description of the
purpose or purposes for which the meeting is called.

         (e) Fundamental Transactions. If a purpose of any shareholder meeting
is to consider either: (l) a proposed amendment to the Articles of Incorporation
(including any restated articles); (2) a plan of merger or share exchange; (3)
the sale, lease, exchange or other disposition of all or substantially all of
the corporation's property, with or without good will, otherwise than in the
usual and regular course of business; (4) the dissolution of the corporation; or
(5) the removal of a director, the notice must so state and in cases (1), (2)
and (3) above must be accompanied by, respectively, a copy or summary of the:
(1) proposed articles of amendment; (2) proposed plan of merger or share
exchange; or (3) proposed transaction for disposition of all or substantially
all of the corporation's property. If the proposed corporate action creates
dissenters' rights, the notice must state that shareholders and beneficial
shareholders are or may be entitled to assert dissenters' rights, and must be
accompanied by a copy of Sections 180.1301 to 180.1331 of the Wisconsin Business
Corporation Law.

         (f) Certain Stock Issuances. If the corporation issues or authorizes
the issuance of shares for promissory notes or for promises of future services,
the corporation shall report in writing to the shareholders entitled to receive
notice of the next shareholder meeting, with or before the notice of that
meeting, the number of shares authorized or issued, and the consideration
received or to be received by the corporation.

         (g) Indemnification; Advance of Expenses. If the corporation
indemnifies or advances expenses to a director or officer under Sections
180.0850 et seq. of the Wisconsin Business Corporation Law in connection with a
proceeding by or in the right of the corporation, this shall be reported to
shareholders entitled to receive notice of the next shareholder meeting with or
before the notice of that meeting.

     2.05. Fixing of Record Date. The Board of Directors may fix in advance a
date as the record date for one or more voting groups for any determination of
shareholders entitled to notice of a shareholder meeting, to demand a special
meeting, to vote, or to take any other action, such date in any case to be not
more than seventy (70) days prior to the meeting or action requiring such
determination of shareholders, and may fix the record date for determining
shareholders entitled to a share dividend or distribution. If no record date is
fixed for the determination of shareholders entitled to demand a shareholder
meeting, to notice of or to vote at a meeting of shareholders, or to consent to
action without a meeting, (a) the close of business on the day before the
corporation receives the first written demand for a shareholder meeting, (b) the
close of business on the day before the first notice of the meeting is mailed or
otherwise delivered to shareholders, or (c) the close of business on the day
before the first written consent to shareholder action without a meeting is
received by the corporation, as the case may be, shall be the record date for
the determination of shareholders. If no record date is fixed for the
determination of shareholders entitled to receive a share dividend or
distribution (other than a distribution involving a purchase, redemption or
other acquisition of the corporation's shares), the close of business on the day
on which the resolution of the

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Board of Directors is adopted declaring the dividend or distribution shall be
the record date. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall be applied to any adjournment thereof unless the Board of
Directors fixes a new record date and except as otherwise required by law. A new
record date must be set if a meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting.

     2.06. Shareholder List. The officer or agent having charge of the stock
transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to notice of
such meeting, arranged by class or series of shares and showing the address of
and the number of shares held by each shareholder. The shareholder list shall be
available at the meeting and may be inspected by any shareholder or his or her
agent or attorney at any time during the meeting or any adjournment. Any
shareholder or his or her agent or attorney may inspect the shareholder list
beginning two (2) business days after the notice of the meeting is given and
continuing to the date of the meeting, at the corporation's principal office or
at a place identified in the meeting notice in the city where the meeting will
be held and, subject to Section 180.1602(2)(b) 3 to 5 of the Wisconsin Business
Corporation Law, may copy the list, during regular business hours and at his or
her expense, during the period that it is available for inspection hereunder.
The original stock transfer books and nominee certificates on file with the
corporation (if any) shall be prima facie evidence as to who are the
shareholders entitled to inspect the shareholder list or to vote at any meeting
of shareholders. Failure to comply with the requirements of this section shall
not affect the validity of any action taken at such meeting.

     2.07. Quorum and Voting Requirements. Except as otherwise provided in the
Articles of Incorporation, a majority of the votes entitled to be cast by shares
entitled to vote as a separate voting group on a matter, represented in person
or by proxy, shall constitute a quorum of that voting group for action on that
matter at a meeting of shareholders. If a quorum exists, action on a matter,
other than the election of directors, by a voting group is approved if the votes
cast within the voting group favoring the action exceed the votes opposing the
action unless a greater number of affirmative votes is required by the Wisconsin
Business Corporation Law or the Articles of Incorporation. If the Articles of
Incorporation or the Wisconsin Business Corporation Law provide for voting by
two or more voting groups on a matter, action on that matter is taken only when
voted upon by each of those voting groups counted separately. Action may be
taken by one voting group on a matter even though no action is taken by another
voting group entitled to vote on the matter. Once a share is represented for any
purpose at a meeting, other than for the purpose of objecting to holding the
meeting or transacting business at the meeting, it is considered present for
purposes of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or must be
set for that meeting.

     2.08. Conduct of Meetings. The Chairman of the Board, and in the absence of
the Chairman of the Board, the President, and in the President's absence, a Vice
President in the order provided under Section 4.05 of these Bylaws, and in their

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absence, any person chosen by the shareholders present shall call the meeting of
the shareholders to order and shall act as chair of the meeting, and the
Secretary shall act as secretary of all meetings of the shareholders, but, in
the absence of the Secretary, the presiding officer may appoint any other person
to act as secretary of the meeting.

     2.09. Proxies. At all meetings of shareholders, a shareholder entitled to
vote may vote in person or by proxy appointed in writing by the shareholder or
by his or her duly authorized attorney-in-fact. All proxy appointment forms
shall be filed with the Secretary or other officer or agent of the corporation
authorized to tabulate votes before or at the time of the meeting. Unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest, a proxy appointment may be revoked at any time. The
presence of a shareholder who has filed a proxy appointment shall not of itself
constitute a revocation. No proxy appointment shall be valid after eleven months
from the date of its execution, unless otherwise expressly provided in the
appointment form. The Board of Directors shall have the power and authority to
make rules as to the validity and sufficiency of proxy appointments.

     2.10. Voting of Shares. Each outstanding share which is entitled to vote
shall be entitled to vote on each matter submitted to a vote of shareholders in
accordance with the provisions of Article III of the Articles of Incorporation
of this corporation. Shares owned directly or indirectly by another corporation
are not entitled to vote if this corporation owns, directly or indirectly,
sufficient shares to elect a majority of the directors of such other
corporation. However, the prior sentence shall not limit the power of the
corporation to vote any shares, including its own shares, held by it in a
fiduciary capacity. Redeemable shares are not entitled to vote after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company, or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.

                         ARTICLE III. BOARD OF DIRECTORS


     3.01. General Powers and Number. The business and affairs of the
corporation shall be managed by its Board of Directors. The number of directors
of the corporation shall be seven (7) and shall be divided into three classes,
as nearly equal in number as possible. The terms of the directors shall be
staggered such that a group consisting of approximately one-third (1/3) of the
directors shall have terms that expire at the first annual shareholders meeting
after their election, a second group consisting of approximately one-third (1/3)
of the directors shall have terms that expire at the second annual shareholders
meeting after their election, and the terms of the remaining directors shall
expire at the third annual shareholders meeting after their election. At each
annual shareholders meeting held thereafter, the number of directors equal to
the number of the group whose term expires at the time of the meeting shall be
chosen for a term of three years. The number of directors may be increased or
decreased from time to time by amendment to this Section adopted by the
shareholders or the Board of Directors, but no decrease shall have the effect of
shortening the term of an incumbent director.

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     3.02. Tenure and Qualifications. Each director shall be elected by a
plurality of the votes cast by the shares entitled to vote in the election at a
shareholders meeting at which a quorum is present; i.e., the individuals with
the largest number of votes are elected as directors up to the maximum number of
directors to be chosen in the election. In the event two or more persons tie for
the last vacancy to be filled, a run-off vote shall be taken from among the
candidates receiving the tie vote. Each director shall hold office for the
remainder of the term for which he or she has been elected and until the
director's successor shall have been elected, or until his or her prior death,
resignation or removal. Any director or directors may be removed from office by
the shareholders, but only for cause, if the votes cast to remove the director
exceeds the number cast not to remove him or her, taken at a meeting of
shareholders called for that purpose, provided that the meeting notice states
that the purpose, or one of the purposes, of the meeting is removal of the
director. A director may resign at any time by delivering a written resignation
to the Board of Directors, its chairperson, or the Secretary of the corporation.
Directors need not be residents of the State of Wisconsin or shareholders of the
corporation.

     3.03. Regular Meetings. A regular meeting of the Board of Directors shall
be held, without other notice than this Bylaw, immediately after the annual
meeting of shareholders, and each adjourned session thereof. The place of such
regular meeting shall be the same as the place of the meeting of shareholders
which precedes it, or such other suitable place as may be announced at such
meeting of shareholders. The Board of Directors may provide, by resolution, the
time and place, either within or without the State of Wisconsin, for the holding
of additional regular meetings without other notice than such resolution.

     3.04. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the President or any two directors. The persons
calling any special meeting of the Board of Directors may fix any place, either
within or without the State of Wisconsin, as the place for holding any special
meeting of the Board of Directors called by them, and if no other place is fixed
the place of meeting shall be the principal business office of the corporation
in the State of Wisconsin.

     3.05. Meetings By Telephone or Other Communication Technology. (a) Any or
all directors may participate in a regular or special meeting or in a committee
meeting of the Board of Directors by, or conduct the meeting through the use of,
telephone or any other means of communication by which either: (i) all
participating directors may simultaneously hear each other during the meeting or
(ii) all communication during the meeting is immediately transmitted to each
participating director, and each participating director is able to immediately
send messages to all other participating directors.

     (b) If a meeting will be conducted through the use of any means described
in paragraph (a), all participating directors shall be informed that a meeting
is taking place at which official business may be transacted. A director
participating in a
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meeting by any means described in paragraph (a) is deemed to be present in
person at the meeting.

     (c) The identity of each director participating in a meeting of the Board
of Directors or a committee thereof by any means described in paragraph (a) must
be verified before the directors vote at the meeting (i) on a plan of merger or
share exchange; (ii) to sell, lease, exchange or otherwise dispose of
substantial property or assets of the corporation; (iii) to voluntarily dissolve
the corporation or to revoke voluntary dissolution proceedings; or (iv) to file
for bankruptcy. The procedure for verifying a director's identity shall be by
disclosure by the director of a confidential Director Identification Number
assigned to such director in advance of the meeting by the Secretary which is
provided confidentially to the director with the notice of the meeting or
otherwise. A transaction within the meaning of subpart (ii) of this paragraph
(c) shall be one which involves the sale, lease, exchange or other disposition
of more than fifty percent (50%) in value of the corporation's assets to a
person other than a subsidiary of the corporation.

     3.06. Notice of Meetings. Except as otherwise provided in the Articles of
Incorporation or the Wisconsin Business Corporation Law, notice of the date,
time and place of any special meeting of the Board of Directors and of any
meeting of a committee of the Board shall be given orally or in writing to each
director or committee member at least 48 hours prior to the meeting, except that
notice by mail shall be given at least 72 hours prior to the meeting. The notice
need not describe the purpose of or the business to be transacted at the
meeting. Notice may be communicated in person, by telephone, telegraph or
facsimile, or by mail or private carrier. Oral notice is effective when
communicated. Written notice is effective as follows: If delivered in person,
when received; if given by mail, when deposited, postage prepaid, in the United
States mail addressed to the director at his or her business or home address (or
such other address as the director may have designated in writing filed with the
Secretary); if given by facsimile, at the time transmitted to a facsimile number
at any address designated above; and if given by telegraph, when delivered to
the telegraph company.

     3.07. Quorum. Except as otherwise provided by the Wisconsin Business
Corporation Law, a majority of the number of directors as provided in Section
3.01 shall constitute a quorum for the transaction of business at any meeting of
the Board of Directors.

     3.08. Manner of Acting. Except as otherwise provided by the Wisconsin
Business Corporation Law, the affirmative vote of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the vote of a greater number is required by the Wisconsin
Business Corporation Law, or the Articles of Incorporation.

     3.09. Conduct of Meetings. The President, and in the President's absence, a
Vice President in the order provided under Section 4.05 of these Bylaws, and in
their absence, any director chosen by the directors present, shall call meetings
of the Board of
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Directors to order and shall chair the meeting. The Secretary of the corporation
shall act as secretary of all meetings of the Board of Directors, but in the
absence of the Secretary, the presiding officer may appoint any assistant
secretary or any director or other person present to act as secretary of the
meeting.

     3.10. Vacancies. Any vacancy occurring in the Board of Directors, including
a vacancy created by an increase in the number of directors, may be filled for
the remainder of the term by the shareholders or the Board of Directors. If the
directors remaining in office constitute fewer than a quorum of the Board, the
directors may fill a vacancy by the affirmative vote of a majority of all
directors remaining in office. A vacancy that will occur at a specific later
date (because of a resignation effective at a later date or otherwise) may be
filled before the vacancy occurs, but the new director may not take office until
the vacancy occurs.

     3.11. Compensation. The Board of Directors, irrespective of any personal
interest of any of its members, may fix the compensation of directors.

     3.12. Presumption of Assent. A director who is present and is announced as
present at a meeting of the Board of Directors or a committee thereof at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless (i) the director objects at the beginning of the meeting
or promptly upon his or her arrival to holding the meeting or transacting
business at the meeting, or (ii) the director's dissent or abstention from the
action taken is entered in the minutes of the meeting, or (iii) the director
delivers his or her written dissent or abstention to the presiding officer of
the meeting before the adjournment thereof or to the corporation immediately
after the adjournment of the meeting. Such right to dissent or abstain shall not
apply to a director who voted in favor of such action.

     3.13. Committees. The Board of Directors, by resolution adopted by the
affirmative vote of a majority of the number of directors as provided in Section
3.01, may designate one or more committees, each committee to consist of two or
more directors as members, which to the extent provided in the resolution as
initially adopted, and as thereafter supplemented or amended by further
resolution adopted by a like vote, shall have and may exercise, the authority of
the Board of Directors, except that no committee may; (a) authorize
distributions; (b) approve or propose to shareholders action that must be
approved by shareholders; (c) fill vacancies on the Board of Directors or any of
its committees, except that the Board of Directors may provide by resolution
that any vacancies on a committee shall be filled by the affirmative vote of a
majority of the remaining committee members; (d) amend the Articles of
Incorporation; (e) adopt, amend or repeal Bylaws; (f) approve a plan of merger;
(g) authorize or approve reacquisition of shares, except according to a formula
or method prescribed by the Board of Directors; or (h) authorize or approve the
issuance or sale or contract for sale of shares, or determine the designation
and relative rights, preferences and limitations of a class or series of shares,
except within limits prescribed by the Board of Directors. The Board of
Directors may elect one or more of its members as alternate members of any such
committee who may take the place of any absent member or members at any meeting
of such committee,
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upon request of the Chairman of the Board or the President or upon request by
the chairman of such meeting. Each such committee shall fix its own rules
governing the conduct of its activities and shall make such reports to the Board
of Directors of its activities as the Board of Directors may request. Unless
otherwise provided by the Board of Directors in creating a committee, a
committee may employ counsel, accountants and other consultants to assist it in
the exercise of authority. The creation of a committee, delegation of authority
to a committee or action by a committee does not relieve the Board of Directors
or any of its members of any responsibility imposed on the Board of Directors or
its members by law.


                              ARTICLE IV. OFFICERS

     4.01. Appointment. The officers shall include a Chairman of the Board, a
President, one or more Vice Presidents (the number and designations to be
determined by the Board of Directors), a Secretary and such other officers if
any, as may be deemed necessary by the Board of Directors, each of whom shall be
appointed by the Board of Directors. Any two or more offices may be held by the
same person.

     4.02. Resignation and Removal. An officer or assistant officer shall hold
office until he or she resigns, dies, is removed hereunder, or a different
person is appointed to the office. An officer or assistant officer may resign at
any time by delivering an appropriate written notice to the corporation. The
resignation is effective when the notice is delivered, unless the notice
specifies a later effective date and the corporation accepts the later effective
date. Any officer, assistant officer or agent may be removed by the Board of
Directors with or without cause, but such removal shall be without prejudice to
the contract rights, if any, of the officer or assistant officer so removed and
the corporation. Appointment shall not of itself create contract rights.

     4.03. Vacancies. A vacancy in any office because of death, resignation,
removal or otherwise, shall be filled by the Board of Directors. If a
resignation is effective at a later date, the Board of Directors may fill the
vacancy before the effective date if the Board of Directors provides that the
successor may not take office until the effective date.

     4.04. Chief Executive Officer. The Board of Directors may elect a Chairman
of the Board and shall elect a President. The Board of Directors shall designate
one of them as Chief Executive Officer.

         In the event that there are both a Chairman and a President, and the
Chairman is designated as Chief Executive Officer, then the President shall
perform such duties as the Chief Executive Officer may prescribe. If there is a
Chairman he shall preside at all meetings of the shareholders and of the Board
of Directors; in the absence of a Chairman the President shall preside at such
meetings.

         The Chief Executive Officer shall supervise and control all of the
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business and affairs of the corporation and shall perform such other duties as
may be prescribed by the Board of Directors from time to time. The Chief
Executive Officer shall have authority, subject to such rules as may be
prescribed by the Board of Directors, to appoint such agents and employees of
the corporation as he or she shall deem necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them. Such agents and
employees shall hold office at the discretion of the Chief Executive Officer.
The Chief Executive Officer shall have authority to sign, execute and
acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock
certificates, contracts, leases, reports and all other documents or instruments
necessary or proper to be executed in the course of the corporation's regular
business, or which shall be authorized by resolution of the Board of Directors;
and, except as otherwise provided by law or the Board of Directors, the Chief
Executive Officer may authorize the President or any Vice President or other
officer or agent of the corporation to sign, execute and acknowledge such
documents or instruments in his or her place and stead.

     4.05. Vice Presidents. In the absence of the Chairman of the Board, and the
President, or in the event of their inability or refusal to act, or in the event
for any reason it shall be impractical for the Chairman or the President to act
personally, a Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated by the Board of
Directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any Vice President may sign, with the Secretary or Assistant
Secretary, certificates for shares of the corporation; and shall perform such
other duties and have such authority as from time to time may be delegated or
assigned to him or her by the President or the Board of Directors. The execution
of any instrument of the corporation by any Vice President shall be conclusive
evidence, as to third parties, of the Vice President's authority to act in the
stead of the President.

     4.06. Secretary. The Secretary shall: (a) keep (or cause to be kept)
regular minutes of all meetings of the shareholders, the Board of Directors and
any committees of the Board of Directors in one or more books provided for that
purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) be custodian of the
corporate records and of the seal of the corporation, if any, and see that the
seal of the corporation, if any, is affixed to all documents which are
authorized to be executed on behalf of the corporation under its seal; (d) keep
or arrange for the keeping of a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the corporation; and (g) in general perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as from time to
time may be delegated or assigned to him or her by the President or by the Board
of Directors.

     4.07. Treasurer. If the Board of Directors appoints a Treasurer, the
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Treasurer shall: (a) have charge and custody of and be responsible for all funds
and securities of the corporation; (b) receive and give receipts for moneys due
and payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositories as shall be selected by the corporation; and (c) in general perform
all of the duties incident to the office of Treasurer and have such other duties
and exercise such other authority as from time to time may be delegated or
assigned to him or her by the President or by the Board of Directors.

     4.08. Assistants and Acting Officers. The Board of Directors and the Chief
Executive Officer shall have the power to appoint any person to act as assistant
to any officer, or as agent for the corporation in the officer's stead, or to
perform the duties of such officer whenever for any reason it is impracticable
for such officer to act personally, and such assistant or acting officer or
other agent so appointed by the Board of Directors or Chief Executive Officer
shall have the power to perform all the duties of the office to which that
person is so appointed to be assistant, or as to which he or she is so appointed
to act, except as such power may be otherwise defined or restricted by the Board
of Directors or the Chief Executive Officer.

     4.09. Salaries. The salaries of the principal officers shall be fixed from
time to time by the Board of Directors or by a duly authorized committee
thereof, and no officer shall be prevented from receiving such salary by reason
of the fact that such officer is also a director of the corporation.


              ARTICLE V. CERTIFICATES FOR SHARES AND THEIR TRANSFER


     5.01. Certificates For Shares. All shares of this corporation shall be
represented by certificates. Certificates representing shares of the corporation
shall be in such form, consistent with law, as shall be determined by the Board
of Directors. At a minimum, a share certificate shall state on its face the name
of the issuing corporation and that it is organized under the laws of the State
of Wisconsin, the name of the person to whom issued, and the number and class of
shares and the designation of the series, if any, that the certificate
represents. If the corporation is authorized to issue different classes of
shares or different series within a class, the front or back of the certificate
must contain either (a) a summary of the designations, relative rights,
preferences and limitations applicable to each class, and the variations in the
rights, preferences and limitations determined for each series and the authority
of the Board of Directors to determine the variations for future series, or (b)
a conspicuous statement that the corporation will furnish the shareholder the
information in clause (a) on request, in writing and without charge. Such
certificates shall be signed, either manually or in facsimile, by the Chairman,
President or a Vice President and by the Secretary or an Assistant Secretary.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the
<PAGE>
                                                                              13



stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except as provided in Section 5.05.

     5.02. Signature by Former Officers. If an officer or assistant officer, who
has signed or whose facsimile signature has been placed upon any certificate for
shares, has ceased to be such officer or assistant officer before such
certificate is issued, the certificate may be issued by the corporation with the
same effect as if that person were still an officer or assistant officer at the
date of its issue.

     5.03. Transfer of Shares. Prior to due presentment of a certificate for
shares for registration of transfer, and unless the corporation has established
a procedure by which a beneficial owner of shares held by a nominee is to be
recognized by the corporation as the shareholder, the corporation may treat the
registered owner of such shares as the person exclusively entitled to vote, to
receive notifications and otherwise to have and exercise all the rights and
power of an owner. The corporation may require reasonable assurance that all
transfer endorsements are genuine and effective and in compliance with all
regulations prescribed by or under the authority of the Board of Directors.

     5.04. Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction upon the transfer of such shares imposed by the corporation or
imposed by any agreement of which the corporation has written notice.

     5.05. Lost, Destroyed or Stolen Certificates. Where the owner claims that
his or her certificate for shares has been lost, destroyed or wrongfully taken,
a new certificate shall be issued in place thereof if the owner (a) so requests
before the corporation has notice that such shares have been acquired by a bona
fide purchaser, and (b) if required by the corporation, files with the
corporation a sufficient indemnity bond, and (c) satisfies such other reasonable
requirements as may be prescribed by or under the authority of the Board of
Directors.

     5.06. Consideration for Shares. The shares of the corporation may be issued
for such consideration as shall be fixed from time to time and determined to be
adequate by the Board of Directors, provided that any shares having a par value
shall not be issued for a consideration less than the par value thereof. The
consideration may consist of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed, contracts
for services to be performed, or other securities of the corporation. If the
corporation issues or authorizes the issuance of shares for promissory notes or
for promises of future services, it shall report to the shareholders in
accordance with Section 2.04(f) of these Bylaws the number of shares authorized
or issued and the consideration received or to be received by the corporation.
When the corporation receives the consideration for which the Board of Directors
authorized the issuance of shares, such shares shall be deemed to be fully paid
and
<PAGE>
                                                                              14


nonassessable by the corporation.

     5.07. Stock Regulations. The Board of Directors shall have the power and
authority to make all such rules and regulations not inconsistent with the
statutes of the State of Wisconsin as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares of the
corporation.


                           ARTICLE VI WAIVER OF NOTICE


     6.01. Shareholder Written Waiver. A shareholder may waive any notice
required by the Wisconsin Business Corporation Law, the Articles of
Incorporation or these Bylaws before or after the date and time stated in the
notice. The waiver shall be in writing and signed by the shareholder entitled to
the notice, shall contain the same information that would have been required in
the notice under the Wisconsin Business Corporation Law except that the time and
place of meeting need not be stated, and shall be delivered to the corporation
for inclusion in the corporate records.

     6.02. Shareholder Waiver by Attendance. A shareholder's attendance at a
meeting, in person or by proxy, waives objection to both of the following:

          (a) Lack of notice or defective notice of the meeting, unless the
     shareholder at the beginning of the meeting or promptly upon arrival
     objects to holding the meeting or transacting business at the meeting.

          (b) Consideration of a particular matter at the meeting that is not
     within the purpose described in the meeting notice, unless the shareholder
     objects to considering the matter when it is presented.

     6.03. Director Written Waiver. A director may waive any notice required by
the Wisconsin Business Corporation Law, the Articles of Incorporation or the
Bylaws before or after the date and time stated in the notice. The waiver shall
be in writing, signed by the director entitled to the notice and retained by the
corporation.

     6.04. Director Waiver by Attendance. A director's attendance at or
participation in a meeting of the Board of Directors or any committee thereof
waives any required notice to him or her of the meeting unless the director at
the beginning of the meeting or promptly upon his or her arrival objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
<PAGE>
                                                                              15


                       ARTICLE VII ACTION WITHOUT MEETINGS


     7.01. Director Action Without Meeting. Unless the Articles of Incorporation
provide otherwise, action required or permitted by the Wisconsin Business
Corporation Law to be taken at a Board of Directors meeting or committee meeting
may be taken without a meeting if the action is taken by all members of the
Board or committee. The action shall be evidenced by one or more written
consents describing the action taken, signed by each director and retained by
the corporation. Action taken hereunder is effective when the last director
signs the consent, unless the consent specifies a different effective date. A
consent signed hereunder has the effect of a unanimous vote taken at a meeting
at which all directors or committee members were present, and may be described
as such in any document.


                          ARTICLE VIII INDEMNIFICATION


     8.01. Indemnification for Successful Defense. Within 20 days after receipt
of a written request pursuant to Section 8.03, the corporation shall indemnify a
director or officer, to the extent he or she has been successful on the merits
or otherwise in the defense of a proceeding, for all reasonable expenses
incurred in the proceeding if the director or officer was a party because he or
she is a director or officer of the corporation.

     8.02. Other Indemnification.

          (a) In cases not included under Section 8.01, the corporation shall
     indemnify a director or officer against all liabilities and expenses
     incurred by the director or officer in a proceeding to which the director
     or officer was a party because he or she is a director or officer of the
     corporation, unless liability was incurred because the director or officer
     breached or failed to perform a duty he or she owes to the corporation and
     the breach or failure to perform constitutes any of the following:

               (1) A willful failure to deal fairly with the corporation or its
          shareholders in connection with a matter in which the director or
          officer has a material conflict of interest.

               (2) A violation of criminal law, unless the director or officer
          had reasonable cause to believe his or her conduct was lawful or no
          reasonable cause to believe his or her conduct was unlawful.

               (3) A transaction from which the director or officer derived an
          improper personal profit.
<PAGE>
                                                                              16


               (4) Willful misconduct.

          (b) Determination of whether indemnification is required under this
     Section shall be made pursuant to Section 8.05.

          (c) The termination of a proceeding by judgment, order, settlement or
     conviction, or upon a plea of no contest or an equivalent plea, does not,
     by itself, create a presumption that indemnification of the director or
     officer is not required under this Section.

     8.03. Written Request. A director or officer who seeks indemnification
under Sections 8.01 or 8.02 shall make a written request to the corporation.

     8.04. Nonduplication. The corporation shall not indemnify a director or
officer under Sections 8.01 or 8.02 if the director or officer has previously
received indemnification or allowance of expenses from any person, including the
corporation, in connection with the same proceeding. However, the director or
officer has no duty to look to any other person for indemnification.

     8.05. Determination of Right to Indemnification.

          (a) Unless otherwise provided by the Articles of Incorporation or by
     written agreement between the director or officer and the corporation, the
     director or officer seeking indemnification under Section 8.02 shall select
     one of the following means for determining his or her right to
     indemnification:

               (1) By a majority vote of a quorum of the board of directors
          consisting of directors not at the time parties to the same or related
          proceedings. If a quorum of disinterested directors cannot be
          obtained, by majority vote of a committee duly appointed by the board
          of directors and consisting solely of 2 or more directors who are not
          at the time parties to the same or related proceedings. Directors who
          are parties to the same or related proceedings may participate in the
          designation of members of the committee.

               (2) By independent legal counsel selected by a quorum of the
          board of directors or its committee in the manner prescribed in sub.
          (l) or, if unable to obtain such a quorum or committee, by a majority
          vote of the full board of directors, including directors who are
          parties to the same or related proceedings.
<PAGE>
                                                                              17


               (3) By a panel of 3 arbitrators consisting of one arbitrator
          selected by those directors entitled under sub. (2) to select
          independent legal counsel, one arbitrator selected by the director or
          officer seeking indemnification and one arbitrator selected by the 2
          arbitrators previously selected.

               (4) By an affirmative vote of shares represented at a meeting of
          shareholders at which a quorum of the voting group entitled to vote
          thereon is present. Shares owned by, or voted under the control of,
          persons who are at the time parties to the same or related
          proceedings, whether as plaintiffs or defendants or in any other
          capacity, may not be voted in making the determination.

               (5) By a court under Section 8.08.

               (6) By any other method provided for in any additional right to
          indemnification permitted under Section 8.07.

          (b) In any determination under (a), the burden of proof is on the
     corporation to prove by clear and convincing evidence that indemnification
     under Section 8.02 should not be allowed.

          (c) A written determination as to a director's or officer's
     indemnification under Section 8.02 shall be submitted to both the
     corporation and the director or officer within 60 days of the selection
     made under (a).

          (d) If it is determined that indemnification is required under Section
     8.02, the corporation shall pay all liabilities and expenses not prohibited
     by Section 8.04 within 10 days after receipt of the written determination
     under (c). The corporation shall also pay all expenses incurred by the
     director or officer in the determination process under (a).

     8.06. Advance of Expenses. Within 10 days after receipt of a written
request by a director or officer who is a party to a proceeding, the corporation
shall pay or reimburse his or her reasonable expenses as incurred if the
director or officer provides the corporation with all of the following:

               (1) A written affirmation of his or her good faith belief that he
          or she has not breached or failed to perform his or her duties to the
          corporation.
<PAGE>
                                                                              18


               (2) A written undertaking, executed personally or on his or her
          behalf, to repay the allowance to the extent that it is ultimately
          determined under Section 8.05 that indemnification under Section 8.02
          is not required and that indemnification is not ordered by a court
          under Section 8.08(b)(2). The undertaking under this subsection shall
          be an unlimited general obligation of the director or officer and may
          be accepted without reference to his or her ability to repay the
          allowance. The undertaking may be secured or unsecured.

     8.07. Nonexclusivity.

          (a) Except as provided in (b), Sections 8.01, 8.02 and 8.06 do not
     preclude any additional right to indemnification or allowance of expenses
     that a director or officer may have under any of the following:

               (1) The Articles of Incorporation.

               (2) A written agreement between the director or officer and the
          corporation.

               (3) A resolution of the board of directors.

               (4) A resolution, after notice, adopted by a majority vote of all
          of the corporation's voting shares then issued and outstanding.

          (b) Regardless of the existence of an additional right under (a), the
     corporation shall not indemnify a director or officer, or permit a director
     or officer to retain any allowance of expenses unless it is determined by
     or on behalf of the corporation that the director or officer did not breach
     or fail to perform a duty he or she owes to the corporation which
     constitutes conduct under Section 8.02(a)(1), (2), (3) or (4). A director
     or officer who is a party to the same or related proceeding for which
     indemnification or an allowance of expenses is sought may not participate
     in a determination under this subsection.

          (c) Sections 8.01 to 8.13 do not affect the corporation's power to pay
     or reimburse expenses incurred by a director or officer in any of the
     following circumstances.

               (1) As a witness in a proceeding to which he or she is not a
          party.

               (2) As a plaintiff or petitioner in a proceeding because he or
          she is or was an employee, agent, director or officer of the
<PAGE>
                                                                              19

          corporation.

     8.08. Court-Ordered Indemnification.

          (a) Except as provided otherwise by written agreement between the
     director or officer and the corporation, a director or officer who is a
     party to a proceeding may apply for indemnification to the court conducting
     the proceeding or to another court of competent jurisdiction. Application
     may be made for an initial determination by the court under Section
     8.05(a)(5) or for review by the court of an adverse determination under
     Section 8.05(a) (1), (2), (3), (4) or (6). After receipt of an application,
     the court shall give any notice it considers necessary.

          (b) The court shall order indemnification if it determines any of the
     following:

               (1) That the director or officer is entitled to indemnification
          under Sections 8.01 or 8.02.

               (2) That the director or officer is fairly and reasonably
          entitled to indemnification in view of all the relevant circumstances,
          regardless of whether indemnification is required under Section 8.02.

          (c) If the court determines under (b) that the director or officer is
     entitled to indemnification, the corporation shall pay the director's or
     officer's expenses incurred to obtain the court-ordered indemnification.

     8.09. Indemnification of Employees and Agents. The corporation shall
indemnify an employee of the corporation, to the extent that he or she has been
successful on the merits or otherwise in defense of a proceeding, for all
expenses incurred in the proceeding if the employee was a party because he or
she was an employee of the corporation. In addition, the corporation may
indemnify and allow reasonable expenses of an employee or agent who is not a
director or officer to the extent provided by the Articles of Incorporation or
Bylaws, by general or specific action of the board of directors or by contract.

     8.10. Insurance. The corporation may purchase and maintain insurance on
behalf of an individual who is an employee, agent, director or officer of the
corporation against liability asserted against or incurred by the individual in
his or her capacity as an employee, agent, director or officer, regardless of
whether the corporation is required or authorized to indemnify or allow expenses
to the individual against the same liability under Sections 8.01, 8.02, 8.06 and
8.09.

     8.11. Securities Law Claims.
<PAGE>
                                                                              20


          (a) Pursuant to the public policy of the State of Wisconsin, the
     corporation shall provide indemnification and allowance of expenses and may
     insure for any liability incurred in connection with a proceeding involving
     securities regulation described under (b) to the extent required or
     permitted under Sections 8.01 to 8.10.

          (b) Sections 8.01 to 8.10 apply, to the extent applicable to any other
     proceeding, to any proceeding involving a federal or state statute, rule or
     regulation regulating the offer, sale or purchase of securities, securities
     brokers or dealers, or investment companies or investment advisers.

     8.12. Liberal Construction. In order for the corporation to obtain and
retain qualified directors, officers and employees, the foregoing provisions
shall be liberally administered in order to afford maximum indemnification of
directors, officers and employees and, accordingly, the indemnification above
provided for shall be granted in all cases unless to do so would clearly
contravene applicable law, controlling precedent or public policy.

     8.13. Report to Shareholders. If the corporation indemnifies or advances
expenses to a director or officer as required or permitted by these bylaws or
Wisconsin law in connection with a proceeding by or in the right of the
corporation, the corporation shall report the indemnification or advance in
writing to the shareholders in accordance with Section 2.04(g) of these Bylaws.

     8.14. Definitions. Applicable to this Article.

          (a) "Affiliate" shall include, without limitation, any corporation,
     partnership, joint venture, employee benefit plan, trust or other
     enterprise that directly or indirectly through one or more intermediaries,
     controls or is controlled by, or is under common control with, the
     corporation.

          (b) "Corporation" means this corporation and any domestic or foreign
     predecessor of this corporation where the predecessor corporation's
     existence ceased upon the consummation of a merger or other transaction.

          (c) "Director or Officer" means any of the following:

               (1) A natural person who is or was a director or officer of this
          corporation.

               (2) A natural person who, while a director or officer of this
          corporation, is or was serving at the corporation's request as a
          director, officer, partner, trustee, member of any governing or
<PAGE>
                                                                              21



          decision-making committee, employee or agent of another corporation or
          foreign corporation, partnership, joint venture, trust or other
          enterprise.

               (3) A natural person who, while a director or officer of this
          corporation, is or was serving an employee benefit plan because his or
          her duties to the corporation also impose duties on, or otherwise
          involve services by, the person to the plan or to participants in or
          beneficiaries of the plan.

               (4) Unless the context requires otherwise, the estate or personal
          representative of a director or officer.


     For purposes of this Article, it shall be conclusively presumed that any
     Director or Officer serving as a director, officer, partner, trustee,
     member of any governing or decision-making committee, employee or agent of
     an Affiliate shall be so serving at the request of the corporation.

          (d) "Expenses" include fees, costs, charges, disbursements, attorney
     fees and other expenses incurred in connection with a proceeding.

          (e) "Liability" includes the obligation to pay a judgment, settlement,
     penalty, assessment, forfeiture or fine, including an excise tax assessed
     with respect to an employee benefit plan, and reasonable expenses.

          (f) "Party" includes a natural person who was or is, or who is
     threatened to be made, a named defendant or respondent in a proceeding.

          (g) "Proceeding" means any threatened, pending or completed civil,
     criminal, administrative or investigative action, suit, arbitration or
     other proceeding, whether formal or informal, which involves foreign,
     federal, state or local law and which is brought by or in the right of the
     corporation or by any other person.

                                ARTICLE IX. SEAL

     The Board of Directors may provide a corporate seal which may be circular
in form and have inscribed thereon the name of the corporation and the state of
incorporation and the words "Corporate Seal."


                              ARTICLE X. AMENDMENTS
<PAGE>
                                                                              22

     10.01. By Shareholders. These Bylaws may be amended or repealed and new
Bylaws may be adopted by the shareholders by the vote provided in Section 2.07
of these Bylaws or by such greater vote as may be required by law.

     10.02. By Directors. Except as the Articles of Incorporation or the
Wisconsin Business Corporation Law may otherwise provide, these Bylaws may also
be amended or repealed and new bylaws may be adopted by the Board of Directors,
but no Bylaw adopted by the shareholders shall be amended, repealed or readopted
by the Board of Directors if the Bylaw so adopted so provides.

     10.03. Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
Bylaws then in effect but is taken or authorized by affirmative vote of not less
than the number of shares or the number of directors required to amend the
Bylaws so that the Bylaws would be consistent with such action, shall be given
the same effect as though the Bylaws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>5
<FILENAME>c68246ex10-1.txt
<DESCRIPTION>CONSULTING AGREEMENT - THOMAS W. FLORSHEIM
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.1

                              CONSULTING AGREEMENT

     THIS AGREEMENT is made and entered into as of this 28th of December 2000,
by and between Weyco Group, Inc. (the "Company"), and Thomas W. Florsheim, Sr.,
an individual ("Consultant").

                              W I T N E S S E T H :

     WHEREAS, the Company is engaged in the business of manufacturing and
distributing shoes (the "Business") and Consultant is the retired Chief
Executive Officer of the Company; and

     WHEREAS, the Company desires to retain Consultant in a consulting capacity
in connection with the Company's acquisition and sales of products and
materials, and

     WHEREAS, the Company and Consultant desire to reduce their agreement
concerning the terms and conditions of such consulting services to written form;

     NOW, THEREFORE, in consideration of the premises, the parties hereby agree
as follows:

     1. Consulting Services. Consultant will at such times and places as
reasonably requested by the Company and agreed to by Consultant act as a
consultant and advisor to the Company in connection with the Company's
acquisition and sales of products and materials. Specifically, it is anticipated
that Consultant's duties will be infrequent and will consist of accompanying and
advising employees of the Company on buying and marketing trips and on general
business matters as necessary.

     2. Consulting Fee and Expenses.

         (a) In consideration of the services to be performed by Consultant
pursuant to Section 1 hereof and Consultant's compliance with the other
provisions of this Agreement, the Company will pay Consultant a consulting fee
of $1,200.00 per month payable on the first of the month.

         (b) The Company will reimburse Consultant for his out-of-pocket
expenses reasonably incurred in connection with the performance of Consultant's
duties hereunder including travel, room and board expenses, subject to the
submission of documentation substantiating such expenses and other compliance
with the Company's written policy, if any, regarding expense reimbursement.

     3. Term. This Agreement shall remain in effect until terminated by either
party upon 30 days advance notice, or by the death or permanent disability of
Consultant.

     4. Services for Others. Consultant is free to perform services for any
other entity or business during the term of this agreement; provided, however,
that neither during or after this agreement may Consultant utilize Confidential
Information as described in Section 5 hereof in the performance of services for
other parties.


<PAGE>



     5. Unauthorized Disclosure. Consultant will not disclose to any person or
entity, other than employees of the Company or other persons to whom disclosure
is reasonably necessary or appropriate in connection with the performance by
Consultant of his duties hereunder, any Confidential Information of the Company
obtained by Consultant. As used herein, the term "Confidential Information"
refers to all information and materials belonging to, used by or in the
possession of the Company relating to its business strategies, products,
pricing, customers, technology, programs, costs, employee compensation,
marketing plans, developmental plans, computer programs, computer systems,
inventions, developments, formulae, processes, designs, drawings and trade
secrets of every kind and character. "Confidential Information" also includes
confidential information belonging to other companies and disclosed to
Consultant by the Company. Nothing in this Agreement shall be construed to limit
or negate the common law of torts or trade secrets where such common law
provides the Company with broader protection than the protection provided by
this Agreement.

     6. Independent Contractor. Consultant shall at all times be an independent
contractor. Neither party will assert that an employment relationship exists or
take any action inconsistent with the independent contractor status of
Consultant. Consultant shall have no authority to bind the Company to any
agreement, except to the extent such authority is expressly conferred upon him
by the Company in writing (exclusive of this Agreement) and Consultant will not
take any action inconsistent with the provisions of this Section.

     7. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect or impair the validity or enforceability of any
other provision and this Agreement shall be construed as if such invalid or
unenforceable provision were not contained herein.

     8. Notices. All notices under this Agreement shall be in writing and a
notice shall be considered to be given and received in all respects on the day
it is personally delivered or deposited in the United States mail, first class,
postage prepaid, addressed as follows or to such other address as may be
designated by one party to the other by notice duly given:

               If to the Company:

                       Weyco Group, Inc.
                       333 W. Estabrook Boulevard
                       Glendale, WI   53212

                       Attention:   Mr. John Wittkowske


               If to Consultant:

                       Mr. Thomas W. Florsheim, Sr.
                       (Mr. Florsheim's address)




<PAGE>


     9. Waiver. A waiver by a party of any breach by the other party of any
provision of this Agreement shall not be deemed to be a waiver by such first
party of any subsequent breach.

     10. Assignment. This Agreement may not be assigned by the Company without
the written consent of Consultant, except that if the Company shall merge or
consolidate with or into, or transfer substantially all of the Business or the
assets thereof to another corporation or other form of business or other entity,
this Agreement may be assigned to such a successor and it shall be binding upon
and inure to its benefit. Consultant may not assign, pledge or encumber this
Agreement or any interest herein.

     11. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, the Company's successors and permitted assigns
and Consultant's heirs and legal representatives.

     12. Amendment. This Agreement may be amended only by a written instrument
executed by the parties hereto or their respective successors, assigns, heirs or
legal representatives, as applicable.

     13. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Wisconsin. All suits
concerning this Agreement shall be commenced in and heard by courts having their
forum within the State of Wisconsin and the parties hereby submit to the
jurisdiction of such courts.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

                                 WEYCO GROUP, INC.


                                 By   /s/ John Wittkowske
                                   ---------------------------------------------
                                                 John Wittkowske

                                 Its                CFO
                                   ---------------------------------------------


                                 Attest:  /s/ Thomas W. Florsheim, Jr.
                                        ----------------------------------------
                                                Thomas W. Florsheim, Jr.


                                          /s/ Thomas W. Florsheim, Sr.
                                 -----------------------------------------------
                                                Thomas W. Florsheim, Sr.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>6
<FILENAME>c68246ex13.txt
<DESCRIPTION>ANNUAL REPORT TO SHAREHOLDERS
<TEXT>
<PAGE>


                                                                      Exhibit 13




                               2001 ANNUAL REPORT






































                                WEYCO GROUP, INC.


<PAGE>



To Our Shareholders:

2001 was a challenging year for the retail industry. The onset of the recession
shook consumer confidence and left retailers in an unpredictable environment.
While our net sales were negatively affected by the events of the year, we ended
the year on a positive note and were able to maintain our profitability. We were
able to achieve good profit margins in a down year by reducing costs, but with a
continued focus toward investing in our brands and increasing our market share.

Net sales for the year were $131.7 million, down 11% from $148.2 million in
2000. Net earnings were $9.5 million, down 11% from $10.6 million in 2000.
Diluted earnings per share were $2.46, down from $2.59 in 2000. Our net earnings
results reflect cost reductions obtained this year on inbound freight, as well
as savings from efficiencies in our distribution center. These savings, however,
were offset by the fixed component of many of our selling and administrative
expenses, which do not react to changes in shipping volumes. Overall, we were
able to reduce costs in key areas, while forging ahead with our initiatives to
build our brands, increase our market share, and provide superior service to our
customers.

Our wholesale business performance reflected how retailers reacted to the
challenging environment by reducing inventories and making fewer commitments to
large future orders. This caused our backlogs to fall, and made inventory
forecasting more difficult. Managing our inventory became our number one
priority, as we sought to maintain enough inventory to meet our customers' needs
while watching our own inventory costs. We believe that inventory management
will continue to grow in importance in the future, as our retail customers are
likely to continue to emphasize at-once business to reduce their risks in the
marketplace.

We believe that we have a strong portfolio of brands in the men's footwear
market. Each of our brands, Nunn Bush, Nunn Bush NXXT, Stacy Adams, SAO by Stacy
Adams, and Brass Boot, appeal to a different segment of consumers with different
styles and at different price-points. Each of our brands performed well in their
respective categories in 2001, although all players were subject to the
challenging retail environment. Although our overall sales were down, our
sell-through performance at retail remained strong, and we believe that we are
in a good position in the marketplace as the country emerges from its current
recession.

Our licensing activities continued to develop nicely in 2001. Since we began
licensing the Stacy Adams name in 1998, we have seen the brand's sophisticated
urban style develop clarity in the marketplace. Consumers now encounter the
brand name on socks, ties, dress shirts, suits, hats, belts, wallets, and
beginning in 2001, sportswear. We believe that we have now emerged from the
infancy stage in our licensing activities, and we look forward to the
opportunities that lie ahead for promoting and developing the Stacy Adams brand.


<PAGE>


To date, royalties from licensing the Stacy Adams name have been reinvested into
promoting the brand by communicating that Stacy Adams has evolved into a
lifestyle brand with multiple apparel products. Our television advertising
campaign was an exciting new endeavor for us this year. The spot was first
televised in Spring of 2001, and features the various Stacy Adams apparel
products together to solidify for viewers the total Stacy Adams image. We look
forward to the opportunity to continue to develop the Stacy Adams image through
the various media available, including television, print, and outdoor
advertising.

We have now operated in our new distribution facility for over two years. Over
this time, we have continuously improved our efficiency and functionality in
processing orders. This year, we implemented incentive programs for our
distribution center employees and are very pleased with the results. Through
these programs, we have attained notable improvements in productivity, which
have led to reductions in operating costs. We have also continued to take on
additional special processing requests for our customers, and have found that
our warehouse management systems provide us the flexibility to be able to meet
our customers' requirements. Overall, we believe that our new facility is an
invaluable tool that will facilitate our future business success.

During 2001, we have continued our program to repurchase our common stock, as we
believe our stock price does not reflect our true value. Purchases have been
made in the open market and in private transactions. In the past four years, the
Company has purchased 1,224,000 shares of its common stock.

We are excited to announce that on March 3, 2002, the Company signed an asset
purchase agreement to purchase Florsheim Group, Inc.'s domestic wholesale
business as well as certain retail stores for approximately $44.8 million.
Pending are separate agreements for the Company to purchase certain Florsheim
foreign subsidiaries for an additional approximately $2.5 million. Concurrently,
Florsheim filed for Chapter 11 bankruptcy, and all of these transactions are
subject to the approval of the Bankruptcy Court.

We are thrilled by this unique opportunity to add a new complementary brand to
our offerings. The Florsheim line will enhance our ability to penetrate the
upper-moderate men's footwear market. We believe that this brand will strengthen
our position in the marketplace, and will be a good with our current operations.
We are also excited about the prospect of developing the potential of the
Florsheim brand, which is an important part of the Florsheim family history.

We believe that we are well positioned for sales growth and improved
profitability as the footwear market rebounds. We appreciate the support of our
shareholders as we continue to build our future.


Thomas W. Florsheim, Jr.                            John W. Florsheim
President and Chief Executive Officer               Executive Vice President and
                                                    Chief Operating Officer


<PAGE>


SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                               Years Ended December 31
                                      ------------------------------------------------------------------------
                                          2001           2000           1999           1998           1997
                                      ------------   ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>            <C>
Net sales .........................   $131,693,000   $148,155,000   $132,905,000   $126,576,000   $126,409,000
Net earnings ......................     $9,501,000    $10,622,000    $11,058,000     $9,805,000     $9,068,000
Diluted earnings per share ........          $2.46          $2.59          $2.55          $2.07          $1.88
Weighted average diluted shares
 outstanding ......................      3,861,667      4,108,234      4,338,587      4,731,075      4,825,050

Cash dividends per share ..........           $.47           $.43           $.39           $.35           $.31

Total assets ......................    $97,954,000    $91,943,000    $95,919,000    $92,782,000    $82,204,000
</TABLE>


COMMON STOCK DATA

<TABLE>
<CAPTION>
                                       2001                                2000
                          -------------------------------     -------------------------------
                             Price Range          Cash           Price Range          Cash
                          -----------------     Dividends     -----------------     Dividends
Quarter:                   High        Low      Declared       High        Low      Declared
                          ------     ------     ---------     ------     ------     ---------
<S>                       <C>        <C>          <C>         <C>        <C>          <C>
First ............        $24.75     $23.88       $.11        $25.63     $22.50       $.10
Second ...........         24.00      22.90        .12         25.63      23.00        .11
Third ............         25.50      23.25        .12         26.63      25.00        .11
Fourth ...........         26.00      25.25        .12         26.62      23.88        .11
                                                  ----                                ----
                                                  $.47                                $.43
                                                  ====                                ====
</TABLE>


There are 307 holders of record of the Company's common stock and 141 holders of
record of the Company's Class B common stock as of March 4, 2002.

The stock prices shown above are the high and low actual trades for the calendar
periods indicated.

The Class B Common Stock is not listed nor does it trade publicly because of its
limited transferability. See Note 12 to the Consolidated Financial Statements
for additional information.


<PAGE>


MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS


LIQUIDITY & CAPITAL RESOURCES

The Company's primary source of liquidity is its cash and marketable securities,
which aggregated $30,871,000 at December 31, 2001, and $25,874,000 at
December 31, 2000. During 2001, the primary sources of cash were operations and
the maturities of marketable securities, while the primary use of cash was the
repurchase of Company stock. The Company maintains $15,000,000 in lines of
credit, which back the issuance of commercial paper and provide a source to
borrow from as needed. At December 31, 2001, there was $7,510,000 of commercial
paper outstanding and no draws on the line of credit. At December 31, 2000,
there was $5,207,000 of short-term borrowings under this arrangement.

The Company's capital expenditures were $744,000, $1,204,000 and $4,431,000 in
2001, 2000 and 1999, respectively. Capital expenditures in 2001 were primarily
related to the remodeling of two retail stores, and the acquisition of equipment
for the distribution center. Capital expenditures in 1999 and 2000 were
primarily related to the construction of the corporate office and distribution
center, which the Company moved into in third quarter 1999.

In the past several years, the Company has repurchased shares of its Common and
Class B Common Stock under its stock repurchase program and in private
transactions. During 1999, the Company purchased 204,400 shares at a total cost
of $4,895,000 under the program, and 108,000 shares at a total cost of
$2,664,000 in private transactions. In 2000, the Company purchased 187,500
shares at a total cost of $4,575,000 under the program, and 85,600 shares at a
total cost of $2,211,000 in private transactions, and in 2001, the Company
purchased 177,500 shares at a total cost of $4,158,000 under the program, and
65,000 shares at a total cost of $1,626,000 in private transactions. At December
31, 2001, the Company is authorized to buy an additional 610,600 shares under
the program.

The Company's significant contractual obligations are its operating leases,
commercial paper, deferred compensation agreements, and its unfunded
supplemental pension plan, which are discussed further in the notes to the
financial statements. The commercial paper, deferred compensation and
supplemental pension obligations are recorded on the Company's consolidated
balance sheets. Future obligations under operating leases are disclosed in
Note 11.


<PAGE>

On March 3, 2002, the Company entered into an asset purchase agreement with
Florsheim Group, Inc. to purchase Florsheim's domestic wholesale business,
related assets and certain Florsheim retail stores for approximately $44.8
million in cash (subject to certain adjustments) and the assumption of certain
trade and lease liabilities. The agreement contemplates entering into separate
purchase agreements for certain Florsheim foreign subsidiaries. The aggregate
purchase price under all of the various purchase agreements is approximately
$47.3 million in cash (subject to certain adjustments). Concurrently, Florsheim
Group voluntarily filed a petition for relief under Chapter 11 of U.S.
Bankruptcy Code, as well as a motion seeking the Bankruptcy Court's approval of
the Company's purchase agreements. The sale is subject to the approval of the
Bankruptcy Court. The Company intends to finance these purchases with a
combination of cash and bank debt.

The Company believes that available cash and marketable securities, cash
provided from operations and available borrowing facilities will provide
adequate support for the cash needs of the business.


RESULTS OF OPERATIONS

2001 vs. 2000

Net sales in 2001 were $131,693,000 compared with $148,155,000 in 2000. The 11%
decrease in overall net sales is the result of the decrease in wholesale net
sales from $141,967,000 in 2000 to $126,597,000 in 2001 and the decrease in
retail net sales from $6,188,000 in 2000 to $5,096,000 in 2001. In general,
sales volume was down this year due to the difficult retail environment.

Overall gross earnings as a percent of net sales was 28.5% for 2001 as compared
to 27.4% for 2000. Wholesale gross earnings as a percent of net sales was 27.6%
for 2001 and 26.3% for 2000, while retail gross earnings as a percent of net
sales were consistent between years. The improvement in gross earnings as a
percent of net sales is primarily the result of inbound freight cost reductions
achieved during 2001.

Overall selling and administrative expenses as a percent of net sales was 18.4%
in 2001 as compared to 16.6% in 2000. This reflects the increase in wholesale
selling and administrative expenses as a percent of wholesale net sales from
15.3% in 2000 to 17.0% in 2001 and the increase in retail selling and
administrative expenses as a percent of net sales from 46.1% in 2000 to 52.3% in
2001. The increase is primarily the result of the various fixed costs included
in selling and administrative expenses.

Interest income was $1,022,000 in 2001 as compared with $1,106,000 in 2000. This
was due to a decrease in the average balance of marketable securities
outstanding between 2000 and 2001.


<PAGE>


Interest expense relates to short-term issuances of commercial paper and
short-term advances. Interest expense was $296,000 in 2001 and $627,000 in 2000.
The decrease in interest expense between years reflects the decrease in the
average balance of short-term debt outstanding from $8,273,000 in 2000 to
$7,049,000 in 2001, as well as a decrease in short-term borrowing rates from
7.5% in 2000 to 4.2% in 2001.

Other income and expense in 2001 includes a $504,000 gain on the sale of other
investments. These investments had been carried at cost and included in Other
Assets on the Consolidated Balance Sheets. See Note 6.

The provision for income taxes was at an effective rate of 35.4% in 2001 vs.
35.5% in 2000.

Net earnings for 2001 were $9,501,000, a decrease of 11% compared to 2000 net
earnings of $10,622,000. Included in 2001 net earnings was the $504,000 gain on
the sale of other investments. Excluding this gain, 2001 net earnings were
$9,175,000, or 7% of 2001 net sales, which is consistent with 2000 net earnings
as a percent of net sales of 7%.


2000 vs. 1999

Net sales in 2000 were $148,155,000 compared with $132,905,000 in 1999. The 11%
increase in overall net sales is the result of an increase in wholesale net
sales from $126,037,000 in 1999 to $141,967,000 in 2000, and a decrease in
retail net sales from $6,868,000 in 1999 to $6,188,000 in 2000. The increase in
wholesale net sales was primarily the result of the success of the new SAO by
Stacy Adams and Nunn Bush NXXT brand extensions that were launched in late 1998.
Pairs shipped in 2000 increased 17%. The net sales increase of 11% as compared
with the 17% increase in pairs shipped reflects a reduction in the average price
per pair due to a change in product mix. Same-store retail net sales decreased
4% between 1999 and 2000 and two retail stores were closed during 2000.

Overall gross earnings as a percent of net sales was 28.0% for 1999 and 27.4%
for 2000. Wholesale gross earnings as a percent of net sales was 26.7% for 1999
and 26.3% for 2000. The decrease in wholesale gross earnings as a percent of net
sales is primarily the result of unfavorable manufacturing variances in 2000 due
to lower utilization of the Beaver Dam, Wisconsin manufacturing plant. Retail
gross earnings as a percent of retail net sales was consistent between 1999 and
2000 at 51%.

Overall selling and administrative expenses as a percent of net sales was 16.5%
in 1999 and 16.6% in 2000. This reflects a slight increase in wholesale selling
and administrative expenses as a percent of wholesale net sales from 15.0% in
1999 to 15.3% in 2000. The primary reason for the increase in selling and
administrative expenses in 2000 is due to increased marketing and advertising
costs. Retail selling and administrative expenses as a percent of net sales
increased from 43.8% in 1999 to 46.1% in 2000.


<PAGE>


Interest income decreased from $1,370,000 in 1999 to $1,106,000 in 2000 due to a
decrease in the average balance of marketable securities outstanding between
1999 and 2000.

Interest expense relates to short-term issuances of commercial paper and
short-term advances. The increase in interest expense from $539,000 in 1999 to
$627,000 in 2000 reflects the increase in average short-term borrowing rates
between years.

Other income and expense in 1999 includes $800,000 from the gain on the sales of
the Company's former warehouse facilities.

The provision for income taxes was at an effective rate of 35.5% in 2000 vs.
34.8% in 1999.

Net earnings for 2000 were $10,622,000, a decrease of 4% compared to 1999 net
earnings of $11,058,000. Included in 1999 net earnings is $496,000 from the gain
on the sales of the warehouse facilities. Excluding this gain, 1999 net earnings
were $10,562,000 or 8% of 1999 net sales, compared to 2000 net earnings of
$10,622,000 or 7% of 2000 net sales. The decrease in net earnings as a percent
of net sales in 2000 is primarily the result of unfavorable manufacturing
variances and increased marketing expenses that were incurred in 2000 to promote
brands.

Overall Analysis
The Company continues to purchase finished shoes and components from outside
suppliers around the world. The majority of these foreign-sourced purchases are
denominated in U. S. dollars. The Company presently operates one shoe
manufacturing plant in Wisconsin. Production in this factory has changed little
during the past three years. There have been few inflationary pressures in the
shoe industry in recent years and leather and other component prices have been
stable. It is anticipated that, when necessary, selling price increases could be
initiated to offset periodic increases in costs of purchased shoes, components,
materials, labor and other expenses.

In recent years, management has focused on the wholesale portion of the
business, and has closed the less profitable retail units upon the expiration of
their leases. Management intends to continue to evaluate the seven remaining
retail units from a profitability standpoint, and may close more retail stores
in the future if they are deemed unprofitable.


OTHER

Critical Accounting Policies
The Company's accounting policies are more fully described in footnote 1 of the
Notes to Consolidated Financial Statements. As disclosed in footnote 1, the
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
about future events that affect the amounts reported in the financial statements
and accompanying footnotes. Future events and their affects cannot be determined
with absolute certainty. Therefore, the determination of estimates requires the
exercise of judgment. Actual results inevitably will differ from those
estimates, and such differences may be material to the financial statements.


<PAGE>


The most significant accounting estimates inherent in the preparation of the
Company's financial statements include estimates as to the recovery of accounts
receivable, as well as those used in the determination of liabilities related to
customer discounts, taxation, and pension benefits. Various assumptions and
other factors underlie the determination of these significant estimates. The
process of determining significant estimates is fact specific and takes into
account factors such as historical experience, current and expected economic
conditions, product mix, and in some cases, actuarial techniques. The Company
re-evaluates these significant factors as facts and circumstances dictate.
Historically, actual results have not differed significantly from those
determined using the estimates described above.

Forward-Looking Statements
This report contains certain forward-looking statements with respect to the
Company's outlook for the future. These statements represent the Company's
reasonable judgment with respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially. These
factors could include significant adverse changes in the economic conditions
affecting overseas suppliers or the men's footwear markets served by the
Company.

Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk from changes in foreign exchange and
interest rates. To reduce the risk from changes in foreign exchange rates, the
Company selectively uses financial instruments. The Company does not hold or
issue financial instruments for trading purposes.

Foreign Currency
The Company's earnings are affected by fluctuations in the value of the U.S.
dollar against foreign currencies, primarily as a result of purchasing inventory
from Italian suppliers and the sale of product to Canadian customers. Forward
exchange contracts are used to partially hedge against the earnings effects of
such fluctuations.

At December 31, 2001, the Company has forward exchange contracts outstanding to
purchase 1,594,000 euro at a total price of $1,380,000. Based on December 31,
2001 exchange rates, there are no significant gains or losses on these
contracts. All contracts expire in less than one year. Assuming a 10%
appreciation in the U. S. dollar at December 31, 2001, there would be a loss on
forward exchange contracts of $111,000.


Interest Rates
The Company is exposed to interest rate fluctuations on its borrowings. During
2001, the Company issued fixed-rate commercial paper with maturities of 30 to 90
days and took back-up advances on its revolving line of credit at times when the
commercial paper was not sold. As of December 31, 2001, $7,510,000 of commercial
paper was outstanding at an average interest rate of 2.25%. Total related
interest expense for 2001 was $296,000. Assuming a 10% increase in the Company's
weighted average interest rate on short-term borrowings, interest expense in
2001 would have increased by $28,000.

<PAGE>

CONSOLIDATED
STATEMENTS OF EARNINGS
For the years ended December 31, 2001, 2000 and 1999



<TABLE>
<CAPTION>
                                                 2001              2000            1999
                                             -------------    -------------    -------------
<S>                                          <C>              <C>              <C>
NET SALES ................................   $ 131,692,896    $ 148,155,044    $ 132,904,841
COST OF SALES ............................      94,107,329      107,597,357       95,737,375
                                             -------------    -------------    -------------
  Gross earnings .........................      37,585,567       40,557,687       37,167,466
SELLING AND ADMINISTRATIVE EXPENSES ......      24,231,452       24,585,638       21,944,150
                                             -------------    -------------    -------------
  Earnings from operations ...............      13,354,115       15,972,049       15,223,316
INTEREST INCOME ..........................       1,021,687        1,106,211        1,369,965
INTEREST EXPENSE .........................        (296,178)        (626,956)        (539,244)
OTHER INCOME AND EXPENSE, net ............         621,618           21,029          904,245
                                             -------------    -------------    -------------
  Earnings before provision for
    income taxes .........................      14,701,242       16,472,333       16,958,282
PROVISION FOR INCOME TAXES ...............       5,200,000        5,850,000        5,900,000
                                             -------------    -------------    -------------
  Net earnings ...........................   $   9,501,242    $  10,622,333    $  11,058,282
                                             =============    =============    =============
BASIC EARNINGS PER SHARE .................   $        2.48    $        2.61    $        2.58
DILUTED EARNINGS PER SHARE ...............   $        2.46    $        2.59    $        2.55
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these statements.


<PAGE>









CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                              2001          2000
                                                           -----------   -----------
<S>                                                        <C>           <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ............................   $16,850,998   $ 3,519,190
  Marketable securities, at amortized cost .............     3,266,846     7,690,551
  Accounts receivable, less reserves of $2,949,000 and
    $2,799,000, respectively ...........................    20,867,106    23,864,339
  Inventories ..........................................    17,501,656    13,713,216
  Deferred income tax benefits .........................     3,068,000     2,697,000
  Prepaid expenses and other current assets ............       165,531       185,342
                                                           -----------   -----------
  Total current assets .................................    61,720,137    51,669,638
MARKETABLE SECURITIES, at amortized cost ...............    10,753,542    14,664,474
OTHER ASSETS ...........................................    10,143,249     9,336,800
PLANT AND EQUIPMENT, net ...............................    15,337,383    16,272,197
                                                           -----------   -----------
                                                           $97,954,311   $91,943,109
                                                           ===========   ===========
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.


<PAGE>





<TABLE>
<CAPTION>
                                                                                2001             2000
                                                                             -----------     -----------
<S>                                                                          <C>             <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
  Short-term borrowings ................................................     $ 7,509,904     $ 5,206,948
  Accounts payable .....................................................       5,317,817       5,955,873
  Dividend payable .....................................................         451,598         445,836
  Accrued liabilities -
     Wages, salaries and commissions ...................................       3,566,298       3,404,393
     Taxes other than income taxes .....................................         395,785         364,248
     Other .............................................................       2,059,155       1,874,750
  Accrued income taxes .................................................       1,609,991         505,792
                                                                             -----------     -----------
     Total current liabilities .........................................      20,910,548      17,757,840
                                                                             -----------     -----------
DEFERRED INCOME TAX LIABILITIES ........................................       3,452,000       2,840,000
SHAREHOLDERS' INVESTMENT:
  Common Stock, $1.00 par value, authorized 4,000,000 shares, issued and
    outstanding 2,839,787 shares in 2001 and 3,053,895 shares in 2000 ..       2,839,787       3,053,895
  Class B Common Stock, $1.00 par value, authorized 2,000,000 shares,
    issued and outstanding 909,031 shares in 2001 and
    918,955 shares in 2000 .............................................         909,031         918,955
  Capital in excess of par value .......................................       3,889,388       3,780,797
  Reinvested earnings ..................................................      65,953,557      63,591,622
                                                                             -----------     -----------
     Total shareholders' investment ....................................      73,591,763      71,345,269
                                                                             -----------     -----------
                                                                             $97,954,311     $91,943,109
                                                                             ===========     ===========
</TABLE>




<PAGE>


CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' INVESTMENT
For the years ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                           Class B            Capital
                                                          Common            Common         in Excess of       Reinvested
                                                          Stock             Stock            Par Value         Earnings
                                                      -------------    --------------      ------------      ------------
<S>                                                   <C>              <C>                 <C>               <C>
Balance, December 31, 1998 .......................    $   3,469,358    $      954,567      $  2,615,295      $ 58,108,657
     Add (Deduct) -
          Net earnings ...........................               --                --                --        11,058,282
          Cash dividends declared ($.39 per share)               --                --                --        (1,670,872)
          Conversions of Class B Common Stock to
               Common Stock ......................            9,024            (9,024)               --                --
          Stock options exercised ................           49,500                --           524,125                --
          Income tax benefit from stock
               options exercised .................               --                --           200,485                --
          Shares purchased and retired ...........         (312,439)               --          (263,513)       (6,982,944)
                                                      -------------    --------------      ------------      ------------
Balance, December 31, 1999 .......................        3,215,443           945,543         3,076,392        60,513,123
     Add (Deduct) -
          Net earnings ...........................               --                --                --        10,622,333
          Cash dividends declared ($.43 per share)               --                --                --        (1,755,896)
          Conversions of Class B Common Stock to
               Common Stock ......................           26,588           (26,588)               --                --
          Stock options exercised ................           85,000                --         1,045,415                --
          Income tax benefit from stock
               options exercised .................               --                --           384,209                --
          Shares purchased and retired ...........         (273,136)               --          (725,219)       (5,787,938)
                                                      -------------    --------------      ------------      ------------
Balance, December 31, 2000 .......................        3,053,895           918,955         3,780,797        63,591,622
     Add (Deduct) -
          Net earnings ...........................               --                --                --         9,501,242
          Cash dividends declared ($.47 per share)               --                --                --        (1,796,554)
          Conversions of Class B Common Stock to
               Common Stock ......................            2,620            (2,620)               --                --
          Stock options exercised ................           18,500                --           236,875                --
          Income tax benefit from
               stock options exercised ...........               --                --            70,841                --
          Shares purchased and retired ...........         (235,228)           (7,304)         (199,125)       (5,342,753)
                                                      -------------    --------------      ------------      ------------
Balance, December 31, 2001 .......................   $   2,839,787    $      909,031      $  3,889,388      $ 65,953,557
                                                      =============    ==============      ============      ============
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.


<PAGE>



CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the years ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                 2001              2000              1999
                                                                             ------------      ------------      ------------
<S>                                                                          <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net earnings ......................................................     $  9,501,242      $ 10,622,333      $ 11,058,282
     Adjustments to reconcile net earnings to net cash
     provided by operating activities -
          Depreciation .................................................        1,608,525         1,489,511         1,241,958
          Deferred income taxes ........................................          295,000         1,110,000         1,332,000
          Deferred compensation ........................................          172,307           161,041           150,504
          Pension income ...............................................         (241,850)         (318,385)         (438,422)
          (Gain) loss on sale of assets ................................          (95,350)            6,677          (854,025)
          Gain on sale of other investments ............................         (504,427)               --                --
          Increase in cash surrender value of life insurance ...........         (493,376)         (417,791)         (320,219)
          Changes in operating assets and liabilities -
               Accounts receivable .....................................        2,997,233        (1,960,932)       (2,305,428)
               Inventories .............................................       (3,788,440)        5,826,515        (7,753,401)
               Prepaids and other current assets .......................           19,811          (119,805)          (65,537)
               Accounts payable ........................................         (638,056)       (3,448,024)        2,014,217
               Accrued liabilities .....................................           34,937          (983,096)       (1,401,796)
               Accrued income taxes ....................................        1,121,040          (317,620)           (1,584)
                                                                             ------------      ------------      ------------
                    Net cash provided by operating activities ..........        9,988,596        11,650,424         2,656,549
                                                                             ------------      ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of marketable securities .................................               --        (5,565,951)       (1,962,456)
     Proceeds from maturities of marketable securities .................        8,334,637         5,745,678        11,448,839
     Proceeds from sales of other investments ..........................          603,807                --                --
     Purchase of plant and equipment ...................................         (743,956)       (1,204,363)       (4,431,437)
     Proceeds from sales of plant and equipment ........................          165,595            29,754         1,250,938
                                                                             ------------      ------------      ------------
                    Net cash provided by (used for) investing activities        8,360,083          (994,882)        6,305,884
                                                                             ------------      ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Cash dividends paid ...............................................       (1,790,792)       (1,731,337)       (1,652,693)
     Shares purchased and retired ......................................       (5,784,410)       (6,786,293)       (7,558,896)
     Proceeds from stock options exercised .............................          255,375         1,130,415           573,625
     Short-term borrowings (repayments) ................................        2,302,956        (3,593,052)         (721,545)
                                                                             ------------      ------------      ------------
                    Net cash used for financing activities .............       (5,016,871)      (10,980,267)       (9,359,509)
                                                                             ------------      ------------      ------------
     Net increase(decrease) in cash and cash equivalents ...............       13,331,808          (324,725)         (397,076)

CASH AND CASH EQUIVALENTS, at beginning of year ........................     $  3,519,190      $  3,843,915      $  4,240,991
                                                                             ------------      ------------      ------------

CASH AND CASH EQUIVALENTS, at end of year ..............................     $ 16,850,998      $  3,519,190      $  3,843,915
                                                                             ============      ============      ============

SUPPLEMENTAL CASH FLOW INFORMATION:
     Income taxes paid, net of refunds .................................     $  3,787,203      $  4,699,673      $  4,675,062
     Interest paid .....................................................     $    321,574      $    633,089      $    576,527
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these statements.


<PAGE>


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999

1.   SUMMARY OF ACCOUNTING POLICIES

Principles of Consolidation - The consolidated financial statements include the
accounts of Weyco Group, Inc. and all subsidiaries ("The Company"). All
significant intercompany items are eliminated in the consolidated financial
statements.

Revenue Recognition - Sales to independent dealers are recorded at the time of
shipment to those dealers. Sales through company-owned retail outlets are
recorded at the time of delivery to retail customers. All sales are recorded net
of estimated allowances for returns and discounts.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB
101 provides additional guidance in applying generally accepted accounting
principles to revenue recognition in financial statements. The revenue
recognition criteria prescribed by SAB 101 became effective for the Company in
the fourth quarter of 2000. The adoption of SAB 101 did not have an impact on
the Company's financial position or results of operations.

Inventories - Inventories are valued at cost, which is not in excess of market,
determined on a last-in, first-out (LIFO) basis. Inventory costs include
material, labor and factory overhead.

Plant and Equipment and Depreciation - Plant and equipment are stated at cost
and depreciated using primarily the straight-line method over their estimated
useful lives as follows: buildings and improvements, 10 to 39 years; machinery
and equipment, 5 to 10 years; furniture and fixtures, 5 to 7 years. Fully
depreciated machinery and equipment are eliminated from the accounts.
Expenditures for lasts, dies and patterns are charged to earnings as incurred.

Income Taxes - Deferred income taxes are provided on temporary differences
arising from differences in the basis of assets and liabilities for tax and
financial reporting purposes. See Note 9.

Earnings Per Share - Basic earnings per share excludes any dilutive effects of
common stock options. Diluted earnings per share includes any dilutive effects
of common stock options.

Cash and Cash Equivalents - The Company considers all highly liquid investments
with original maturities of three months or less to be cash equivalents.

Financial Instruments - In June 1998, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This standard, as amended,
requires that entities recognize derivatives as either assets or liabilities in
the balance sheet and measure those instruments at fair value. The Company
adopted this standard on January 1, 2001. The adoption of this standard did not
have a material effect on the Company's balance sheet or statement of earnings.


<PAGE>


The Company has entered into forward exchange contracts for the purpose of
hedging firmly committed inventory purchases with outside vendors. These forward
contracts are effective hedges under SFAS 133. Accordingly, gains and losses are
recorded in inventory when inventory is purchased and recognized through
earnings when inventory is sold. At December 31, 2001, the Company has financial
contracts outstanding to purchase 1,594,000 euro at a total price of $1,380,000.
Based upon current exchange rates, there are no significant gains or losses on
outstanding contracts.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results could differ from those estimates.

Shipping and Handling Fees - In accordance with the Emerging Issues Task Force
("EITF") Issue 00-10, "Accounting for Shipping and Handling Fees and Costs," the
Company classifies shipping and handling fees billed to customers as revenues.
The corresponding shipping and handling expenses are included in selling and
administrative expenses and totaled $774,000, $1,014,000 and $835,000 for 2001,
2000 and 1999, respectively.

Advertising Costs - Advertising costs are expensed as incurred. Advertising
costs were $4,961,000, $4,826,000 and $3,588,000 in 2001, 2000 and 1999,
respectively. All advertising expenses are included in selling and
administrative expenses with the exception of co-op advertising expenses which
are a reduction of net sales.

Co-op Advertising Expenses - In accordance with EITF Issue 00-25, "Vendor Income
Statement Characterization of Consideration from a Vendor to a Retailer"
relating to co-op advertising expenses, the Company classifies co-op advertising
expenses as a reduction of net sales in the Consolidated Statements of Earnings.
Co-op advertising expenses reduced net sales by $1,949,000, $1,842,000 and
$1,484,000 for 2001, 2000 and 1999, respectively.

New Accounting Pronouncements - In July 2001, the FASB issued SFAS 141,
"Business Combinations," and SFAS 142, "Goodwill and Other Intangible Assets."
SFAS 141 requires that all business combinations be accounted for using the
purchase method. Use of the pooling-of-interests method is no longer allowed.
The provisions of SFAS 141 are effective for all business combinations initiated
after June 30, 2001 and all business combinations accounted for using the
purchase method for which the date of acquisition is July 1, 2001 or later. SFAS
142 addresses the method of accounting for acquired goodwill and other
intangible assets upon, and subsequent to, the date of acquisition. Among other
provisions, SFAS 142 eliminates the amortization of goodwill and replaces it
with periodic assessments of the realization of the recorded goodwill and
indefinitely-lived intangibles. SFAS 142 is effective as of January 1, 2002 and
for business combinations initiated after July 1, 2001. The adoption of these
statements did not impact the Company's results of operations or financial
position because there are no goodwill or intangible assets recorded on the
Company's Consolidated Balance Sheets.


<PAGE>


In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 establishes a single
accounting model for long-lived assets to be disposed of by sale and provides
additional implementation guidance for assets to be held and used and assets to
be disposed of other than by sale. The statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" and amends the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30 related to the disposal of a segment of a
business. The statement is effective for fiscal years beginning after December
15, 2001. The adoption of this statement on January 1, 2002 did not have an
impact on the Company's financial position or results of operations.

2.   FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of all financial instruments, except marketable securities,
approximate fair value due to the short-term nature of those instruments.
Marketable securities are carried at amortized cost. The fair value of
marketable securities is estimated based upon quoted market rates. See Note 3.

3.   INVESTMENTS

All of the Company's investments are classified as held-to-maturity securities
and reported at amortized cost pursuant to SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," as the Company has the intent and
ability to hold all security investments to maturity.

A summary of the amortized cost and estimated market values of investment
securities at December 31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                       2001                             2000
                                           ---------------------------     ---------------------------
                                            Amortized         Market        Amortized         Market
                                               Cost            Value          Cost             Value
                                           -----------     -----------     -----------     -----------
<S>                                        <C>             <C>             <C>             <C>
Municipality and revenue bonds :
  Current                                  $ 3,266,846     $ 3,297,767     $ 7,690,551     $ 7,701,968
  Due from one through five years            7,178,686       7,377,321      10,581,239      10,661,636
  Due from five through ten years            3,414,410       3,494,159       3,548,313       3,613,666
  Due from ten through twenty years             59,364          56,224         430,427         428,336
  Due from twenty through thirty years         101,082         100,000         104,495         104,940
                                           -----------     -----------     -----------     -----------
     Total                                 $14,020,388     $14,325,471     $22,355,025     $22,510,546
                                           ===========     ===========     ===========     ===========
</TABLE>

The unrealized gains and losses on investment securities at December 31 are:

<TABLE>
<CAPTION>
                              2001                     2000                         1999
                     -----------------------  ------------------------    --------------------------
                     Unrealized   Unrealized  Unrealized    Unrealized    Unrealized      Unrealized
                       Gains       Losses       Gains         Losses         Gains          Losses
                     ----------   ----------  ----------    ----------    ----------      ----------
<S>                  <C>          <C>         <C>           <C>           <C>             <C>
Municipality and
revenue bonds ..     $  309,305   $    4,222  $  167,282    $   11,761    $   58,722      $  200,086
</TABLE>







<PAGE>



4.   INVENTORIES

At December 31, 2001 and 2000, inventories consist of:

<TABLE>
<CAPTION>
                            2001             2000
                         -----------     -----------
<S>                      <C>             <C>
Finished shoes           $17,006,221     $13,406,933
Shoes in process             162,833         165,918
Raw materials                332,602         140,365
                         -----------     -----------
   Total inventories     $17,501,656     $13,713,216
</TABLE>


The excess of current cost over LIFO cost of inventories as of December 31, 2001
and 2000 was $16,472,000 and $16,740,000, respectively.

5.   PLANT AND EQUIPMENT

At December 31, 2001 and 2000, plant and equipment consists of:

<TABLE>
<CAPTION>
                                                  2001             2000
                                               -----------     -----------
<S>                                            <C>             <C>
Land                                           $   471,814     $   519,854
Buildings                                        9,521,619       9,520,385
Machinery and equipment                         10,881,944      10,470,059
Retail fixtures and leasehold improvements       1,722,494       1,616,059
Construction in progress                                --         133,217
                                               -----------     -----------
     Plant and equipment                        22,597,871      22,259,574
Less: accumulated depreciation                   7,260,488       5,987,377
                                               -----------     -----------
     Plant and equipment, net                  $15,337,383     $16,272,197
                                               ===========     ===========
</TABLE>

6.   OTHER ASSETS

Other Assets include the following amounts at December 31:

<TABLE>
<CAPTION>
                                             2001              2000
                                           -----------     -----------
<S>                                        <C>             <C>
Prepaid pension (See Note 8)               $ 4,421,726     $ 4,009,273
Cash surrender value of life insurance       5,688,192       5,194,816
Other investments                               33,331         132,711
                                           -----------     -----------
                                           $10,143,249     $ 9,336,800
                                           ===========     ===========
</TABLE>




<PAGE>



7.   SHORT-TERM BORROWINGS AND BANK LINES OF CREDIT

The Company issues commercial paper with 30 to 90 day maturities. The commercial
paper is backed by a three-year $15,000,000 revolving credit agreement, which
the Company takes overnight advances on when the bank is unable to sell the
commercial paper. At December 31, 2001 there was $7,510,000 of commercial paper
outstanding at an average interest rate of 2.25%, and no advances on the
revolving credit agreement. At December 31, 2000 there was $1,007,000 of
commercial paper outstanding at an average interest rate of 6.75%, and
$4,200,000 of advances on the revolving credit agreement at a 6.7% interest
rate. Total interest expense on commercial paper and advances for 2001 was
$296,000. Total related interest expense for 2000 and 1999 was $622,000 and
$539,000, respectively. Average borrowings for 2001, 2000, and 1999 were
$7,049,000, $8,273,000 and $10,435,000, at average interest rates of 4.2%, 7.5%
and 5.2%, respectively.

8.   EMPLOYEE RETIREMENT PLANS

The Company has two defined benefit retirement plans covering substantially all
employees, as well as an unfunded supplemental pension plan for key executives.
Retirement benefits are provided based on employees' years of credited service
and average earnings or stated amounts for years of service. Normal retirement
age is 65 with provisions for earlier retirement. The plans also have provisions
for disability and death benefits. The Company's funding policy is to make
contributions to the plans such that all employees' benefits will be fully
provided by the time they retire. Plan assets are stated at market value and
consist primarily of U. S. government securities, corporate obligations and
corporate equities.

The following is a reconciliation of the change in benefit obligation and plan
assets for the years ended December 31, 2001 and 2000:

CHANGE IN BENEFIT OBLIGATION

<TABLE>
<CAPTION>
                                                       2001              2000
                                                   ------------      ------------
<S>                                                <C>               <C>
Benefit obligation, beginning of year ........     $ 18,059,000      $ 15,782,000
Service cost .................................          393,000           352,000
Interest cost ................................        1,310,000         1,275,000
Actuarial loss ...............................          602,000         1,629,000
Benefits paid ................................       (1,241,000)         (979,000)
                                                   ------------      ------------
Benefit obligation, end of year ..............     $ 19,123,000      $ 18,059,000
                                                   ============      ============

CHANGE IN PLAN ASSETS

Fair value of plan assets, beginning of year .     $ 21,940,000      $ 22,002,000
Actual return on plan assets .................          150,000           886,000
Expenses .....................................               --           (12,000)
Contributions ................................          171,000            43,000
Benefits paid ................................       (1,241,000)         (979,000)
                                                   ------------      ------------
Fair value of plan assets, end of year .......     $ 21,020,000      $ 21,940,000
                                                   ============      ============

Funded status of plan ........................     $  1,897,000      $  3,881,000
Unrecognized net actuarial loss ..............        2,282,000             9,000
Unrecognized prior service cost ..............          384,000           401,000
Unrecognized net transition asset ............         (141,000)         (282,000)
                                                   ------------      ------------
Prepaid benefit cost, recorded in Other Assets     $  4,422,000      $  4,009,000
                                                   ============      ============
</TABLE>





<PAGE>


Assumptions used in determining the funded status for 2001 and 2000 are:

<TABLE>
<CAPTION>
                                               2001     2000
                                               ----     ----
<S>                                            <C>      <C>
Discount rate .........................        7.25%    7.5%
Rate of compensation increase .........        5.0%     5.0%
Long-term rate of return on plan assets        8.5%     8.5%
</TABLE>

The components of net periodic pension cost for the years ended December 31,
2001, 2000 and 1999, are:

<TABLE>
<CAPTION>
                                                     2001           2000           1999
                                                ------------   -------------   -------------
<S>                                             <C>            <C>             <C>
Benefits earned during the period ...........   $    393,000   $     352,000   $     340,000
Interest cost on projected benefit obligation      1,310,000       1,275,000       1,116,000
Expected return on plan assets ..............     (1,822,000)     (1,823,000)     (1,780,000)
Net amortization and deferral ...............       (123,000)       (122,000)       (114,000)
                                                ------------   -------------   -------------
Net pension income ..........................   $   (242,000)  $    (318,000)  $    (438,000)
                                                ============   =============   =============
</TABLE>

The projected benefit obligation, accumulated benefit obligation, fair value of
plan assets, and the accrued benefit liability for the pension plan with
accumulated benefit obligations in excess of plan assets were $2,824,000,
$1,878,000, $0 and $2,899,000, respectively, as of December 31, 2001, and
$2,937,000, $2,319,000, $0 and $2,808,000, respectively, as of December 31,
2000.

The Company also has a defined contribution plan covering substantially all
employees not covered by a collective bargaining agreement. During 2001, 2000
and 1999 the Company contributed $90,000, $93,000 and $87,000, respectively, to
the plan.

9.   INCOME TAXES

The provision for income taxes includes the following components:

<TABLE>
<CAPTION>
                              2001             2000            1999
                            ----------      ----------      ----------
<S>                         <C>             <C>             <C>
Current -
  Federal .............     $3,766,000      $3,773,000      $3,645,000
  State ...............        860,000         765,000         846,000
  Foreign .............        279,000         202,000          77,000
                            ----------      ----------      ----------
     Total ............      4,905,000       4,740,000       4,568,000
Deferred ..............        295,000       1,110,000       1,332,000
                            ----------      ----------      ----------
     Total provision...     $5,200,000      $5,850,000      $5,900,000
                            ==========      ==========      ==========
Effective tax rate.....           35.4%           35.5%           34.8%
                            ==========      ==========      ==========
</TABLE>


The difference between the effective tax rate and the Federal income tax rate of
34% is due to state income taxes, net of the Federal tax benefit, of 3.8% in
2001, 3.2% in 2000 and 3.0% in 1999, the effect of non-taxable municipal bond
interest of (2.2%) in 2001, (2.1%) in 2000 and (2.6%) in 1999, and other
miscellaneous items.


<PAGE>
The foreign component of pretax net earnings was $699,000, $491,000 and $269,000
for 2001, 2000 and 1999, respectively.

The components of deferred taxes as of December 31, 2001 and 2000, are as
follows:


<TABLE>
<CAPTION>


                                                                                               2001                 2000
                                                                                        ----------------     ----------------
<S>                                                                                     <C>                     <C>
Deferred tax assets:
    Accounts receivable
      and inventory reserves.........................................................       $1,317,000          $ 1,246,000
    Deferred compensation ...........................................................        1,027,000              960,000
    Other ...........................................................................          722,000              465,000
                                                                                           -----------          -----------
                                                                                             3,066,000            2,671,000
                                                                                           -----------          -----------

Deferred tax liabilities:
    Prepaid pension .................................................................       (1,724,000)          (1,564,000)
    Cash value of life insurance ....................................................       (1,069,000)            (937,000)
    Depreciation ....................................................................         (657,000)            (313,000)
                                                                                           -----------          -----------
                                                                                            (3,450,000)          (2,814,000)
                                                                                           -----------          -----------
          Net deferred tax asset.....................................................       $ (384,000)         $  (143,000)
                                                                                           ===========          ============
</TABLE>


The net deferred tax asset is classified in the Consolidated Balance Sheets as
follows:


<TABLE>
<CAPTION>

                                                                                  2001            2000
                                                                              ------------    ------------
<S>                                                                           <C>             <C>
Current deferred income tax benefits.......................................   $  3,068,000     $ 2,697,000
Noncurrent deferred income tax liabilities.................................     (3,452,000)     (2,840,000)
                                                                              ------------    ------------
                                                                              $   (384,000)    $  (143,000)
                                                                              =============   ============
</TABLE>

10.  DEFERRED COMPENSATION

The Company has deferred compensation agreements with former executives. The
Company expensed $172,000 in 2001, $161,000 in 2000, and $151,000 in 1999 in
connection with these agreements. Amounts owed under these agreements are
included in Accrued Wages, Salaries and Commissions on the Consolidated Balance
Sheets.

11.  OPERATING LEASES

The Company operates retail shoe stores under both short-term and long-term
leases. Leases provide for a minimum rental plus percentage rentals based upon
sales in excess of a specified amount. Total minimum rents were $600,000 in
2001, $724,000 in 2000 and $804,000 in 1999. Percentage rentals were $42,000 in
2001, $39,000 in 2000 and $35,000 in 1999.

Future fixed and minimum rental commitments required under operating leases that
have initial or remaining noncancelable lease terms in excess of one year as of
December 31, 2001, are shown below. Renewal options exist for many long-term
leases.

<TABLE>
<CAPTION>
                   <S>                                                        <C>
                       2002.............................................         $424,000
                       2003.............................................          433,000
                       2004.............................................          304,000
                       2005.............................................          205,000
                       2006.............................................          155,000
                 Thereafter.............................................          247,000
                                                                              -----------
                                                                   Total       $1,768,000
                                                                              ===========
</TABLE>


<PAGE>
12.  SHAREHOLDERS' INVESTMENT

The Class B Common Stock has 10 votes per share, may only be transferred to
certain permitted transferees, is convertible to Common Stock and shares equally
with the Common Stock in cash dividends and liquidation rights.

In April 1998, the Company's Board of Directors first authorized a stock
repurchase program to purchase shares of its common stock in open market
transactions at prevailing prices. The Company also buys back shares of its
common stock in private transactions at prevailing prices. During 1999, the
Company purchased 204,400 shares at a total cost of $4,895,000 under the
program, and 108,000 shares at a total cost of $2,664,000 in private
transactions. During 2000, the Company purchased 187,500 shares at a total cost
of $4,575,000 under the program, and 85,600 shares at a total cost of $2,211,000
in private transactions, and during 2001, the Company purchased 177,500 shares
at a total cost of $4,158,000 under the program, and 65,000 shares at a total
cost of $1,626,000 in private transactions. At December 31, 2001, the Company is
authorized to buy an additional 610,600 shares under the program.

13.  EARNINGS PER SHARE

The following table sets forth the computation of net earnings per share and
diluted net earnings per share:

<TABLE>
<CAPTION>
                                                                                   2001           2000          1999
                                                                                  ------         -------       ------
<S>                                                                             <C>           <C>           <C>
Numerator:
  Net earnings ..............................................................   $ 9,501,242   $10,622,333   $11,058,282
                                                                                ===========   ===========   ===========

Denominator:
  Basic weighted average shares outstanding .................................     3,835,336     4,076,024     4,292,230
  Effect of dilutive securities :
    Employee stock options ..................................................        26,331        32,210        46,357
                                                                                -----------   -----------   -----------
  Diluted weighted average shares outstanding ...............................     3,861,667     4,108,234     4,338,587
                                                                                ===========   ===========   ===========

Basic earnings per share ....................................................         $2.48         $2.61         $2.58
                                                                                      =====         =====         =====
Diluted earnings per share...................................................         $2.46         $2.59         $2.55
                                                                                      =====         =====         =====
</TABLE>

Diluted weighted average shares outstanding for 2001 exclude outstanding options
to purchase 156,236 shares of common stock at a weighted-average price of $25.65
because they are antidilutive. 2000 diluted weighted average shares outstanding
exclude outstanding options to purchase 148,500 shares of common stock at a
weighted-average price of $25.64 because they are antidilutive. There were no
material antidilutive options outstanding in 1999.

14.  SEGMENT INFORMATION

The Company determines its operating segments based on the information utilized
by the Chief Executive Officer to allocate resources and assess performance.
Based upon this criteria, the Company has determined that it operates in two
business segments: wholesale distribution and retail sales of men's footwear.



<PAGE>


Wholesale shoes are marketed nationwide through more than 8,000 shoe, clothing
and department stores. All sales are to unaffiliated customers in North America.
Sales to the Company's largest customer were 10% of total sales for 2001, 10% of
total sales for 2000 and 12% of total sales for 1999. In addition, at December
31, 2001, another customer's accounts receivable balance was 11% of the
Company's total outstanding accounts receivable. There are no other individually
significant customers.

In the retail division, the Company currently operates seven company-owned
stores in principal cities in the United States. The decrease in retail sales in
recent years is a result of closing company-operated stores. Two stores were
closed in January 2002, no stores were closed in 2001, two in 2000, and none in
1999. These stores were closed primarily due to unprofitable operations or
unattractive lease renewal terms. Management intends to continue to closely
monitor retail operations and may close other retail units in the future if they
are deemed unprofitable. Sales in retail outlets are made directly to the
consumer by Company employees. In addition to the sale of the Company's brands
of footwear in these retail outlets, other branded footwear and accessories are
also sold in order to provide the consumer with as complete a selection as
practically possible.

The accounting policies of the segments are the same as those described in the
Summary of Accounting Policies. The Company evaluates performance based on
earnings from operations before income taxes. Summarized segment data for 2001,
2000 and 1999 are as follows:

<TABLE>
<CAPTION>

                                                  Wholesale
2001                                             Distribution                Retail                    Total
- ----                                             ------------                ------                    -----
<S>                                              <C>                     <C>                       <C>
Net sales                                        $126,597,000            $5,096,000                $131,693,000
Depreciation                                        1,451,000               158,000                   1,609,000
Earnings from operations                           13,344,000                10,000                  13,354,000
Total assets                                       96,139,000             1,815,000                  97,954,000
Capital expenditures                                  317,000               427,000                     744,000

2000
- ----
Net sales                                        $141,967,000            $6,188,000                $148,155,000
Depreciation                                        1,370,000               120,000                   1,490,000
Earnings from operations                           15,646,000               326,000                  15,972,000
Total assets                                       90,122,000             1,821,000                  91,943,000
Capital expenditures                                  920,000               284,000                   1,204,000

1999
- ----
Net sales                                        $126,037,000            $6,868,000                $132,905,000
Depreciation                                        1,103,000               139,000                   1,242,000
Earnings from operations                           14,724,000               499,000                  15,223,000
Total assets                                       93,865,000             2,054,000                  95,919,000
Capital expenditures                                4,429,000                 2,000                   4,431,000
</TABLE>

Net sales above exclude intersegment sales, which are not material.



<PAGE>
15. SUBSEQUENT EVENT

On March 3, 2002, the Company entered into an asset purchase agreement with
Florsheim Group, Inc. to purchase Florsheim's domestic wholesale business,
related assets and certain Florsheim retail stores for approximately $44.8
million in cash (subject to certain adjustments) and the assumption of certain
trade and lease liabilities. The agreement contemplates entering into separate
purchase agreements for certain Florsheim foreign subsidiaries. The aggregate
purchase price under all of the various purchase agreements is approximately
$47.3 million in cash (subject to certain adjustments). Concurrently, Florsheim
Group voluntarily filed a petition for relief under Chapter 11 of U.S.
Bankruptcy Code, as well as a motion seeking the Bankruptcy Court's approval of
the Company's purchase agreements. The sale is subject to the approval of the
Bankruptcy Court. The Company intends to finance these purchases with a
combination of cash and bank debt.

16.  STOCK BASED COMPENSATION PLANS

The Company has two stock option plans: the 1996 Nonqualified Stock Option Plan
and the 1997 Stock Option Plan. Under the plans, options to purchase common
stock are granted to officers and key employees at prices not less than the fair
market value of the common stock on the date of the grant. All options are fully
vested six months after the date of grant, and most expire ten years from the
grant date, with the exception of certain incentive stock options, which expire
five years from the grant date. At December 31, 2001, 229,000 shares of common
stock have been reserved for future stock option grants under the plans.

The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized, as options are granted with exercise
prices equal to or exceeding the fair market value on the date of grant. Had
compensation cost for these plans been determined consistent with FASB Statement
No. 123, the Company's net earnings and net earnings per share would have been
reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                           2001             2000            1999
                                                         ---------        --------         ------
       <S>                                              <C>             <C>              <C>
       Net earnings
         As reported ..............................     $9,501,242      $10,622,333      $11,058,282
         Pro forma ................................     $9,082,890      $10,182,696      $10,697,021
       Basic earnings per share
         As reported ..............................          $2.48            $2.61            $2.58
         Pro forma ................................          $2.37            $2.50            $2.49
       Diluted earnings per share
         As reported ..............................          $2.46            $2.59            $2.55
         Pro forma ................................          $2.35            $2.48            $2.47
</TABLE>

The fair market value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used:

<TABLE>
<CAPTION>
                                                                            2001        2000          1999
                                                                           -------    --------      ---------
<S>                                                                        <C>         <C>           <C>
Risk-free interest rate .............................................       5.39%      5.18%          6.60%
Expected dividend yields ............................................       1.75%      1.75%          1.75%
Expected remaining life .............................................    8.6 yrs.   8.6 yrs.       8.2 yrs.
Expected volatility .................................................       23.0%      24.0%          23.0%
</TABLE>


<PAGE>

The following table summarizes the stock option activity under the Company's
plans for the years ended December 31:

<TABLE>
<CAPTION>
                                                                     2001                  2000                     1999
                                                             ---------------------   --------------------   ---------------------

                                                                         Wtd. Avg.              Wtd. Avg                Wtd. Avg.
                                                             Shares      Ex. Price   Shares     Ex. Price    Shares     Ex. Price
                                                             -------     ---------   -------    ---------    ------     ---------
<S>                                                          <C>          <C>        <C>         <C>         <C>         <C>
Outstanding at beginning of year .....................       368,750       $21.62    374,250       $18.85    352,500       $17.17
Granted ...............................................       83,250        23.72     80,500        25.76     71,250        22.14
Exercised ............................................       (18,500)       13.80    (85,000)       13.30    (49,500)       11.59
Forfeited .............................................           --           --     (1,000)       25.13         --          --
                                                             -------       ------    -------       ------    -------       ------
Outstanding at end of year ............................      433,500        22.35    368,750        21.62    374,250        18.85
Exercisable at end of year ...........................       350,250        22.03    288,250        20.47    292,146        17.72
Weighted average fair market
value of options granted .............................         $7.78                   $8.47                   $7.78
</TABLE>


Of the options outstanding at December 31, 2001, 67,500 are exercisable at
$13.58, with a remaining contractual life of five years. The remaining 366,000
are exercisable at prices ranging from $21.75 to $28.05, and have a weighted
average remaining contractual life of seven years.


<PAGE>




REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of
Weyco Group, Inc.:

We have audited the accompanying consolidated balance sheets of Weyco Group,
Inc. (a Wisconsin corporation) and subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of earnings, shareholders'
investment and cash flows for each of the three years in the period ended
December 31, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Weyco Group, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.




ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin
February 14, 2002, except for Note 15,
as to which the date is March 3, 2002


<PAGE>




MANAGEMENT'S RESPONSIBILITIES
FOR FINANCIAL REPORTING

The management of Weyco Group, Inc. is responsible for the preparation and
integrity of all financial statements and other information contained in this
Annual Report. The financial statements have been prepared in conformity with
generally accepted accounting principles and necessarily include amounts based
on judgments and estimates by management giving due consideration to
materiality. The Company maintains internal control systems designed to provide
reasonable assurance that the Company's financial records reflect the
transactions of the Company and that its assets are protected from loss or
unauthorized use.

The Company's financial statements have been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon appears above. Management
has made available to Arthur Andersen LLP the Company's financial records and
related data to allow them to evaluate the Company's system of accounting
controls and provide an independent assessment as to the financial statements.

The Audit Committee of the Board of Directors is responsible for reviewing and
evaluating the overall performance of the Company's financial reporting and
accounting practices. To ensure independence, Arthur Andersen LLP has full and
free access to the Audit Committee to discuss the results of their audits, their
opinions on the adequacy of internal controls, and the quality of financial
reporting.


<PAGE>




DIRECTORS

Thomas W. Florsheim
    Chairman

Thomas W. Florsheim, Jr.
    President and Chief Executive Officer

John W. Florsheim
    Executive Vice President and Chief Operating Officer

Virgis W. Colbert
    Executive Vice President
    Miller Brewing Company

Robert Feitler
    Chairman, Executive Committee

Leonard J. Goldstein
    Retired,
    Former Chairman, President and Chief Executive Officer,
    Miller Brewing Company

Frederick P. Stratton, Jr.
    Chairman
    Briggs & Stratton Corporation,
    Manufacturer of Gasoline Engines

OFFICERS

Thomas W. Florsheim, Jr.
    President and Chief Executive Officer

John W. Florsheim
    Executive Vice President and Chief Operating Officer

David N. Couper
    Vice President

James F. Gorman
    Vice President

Peter S. Grossman
    Vice President

John F. Wittkowske
    Vice President, Chief Financial Officer and Secretary


<PAGE>


SUPPLEMENTAL INFORMATION

ANNUAL MEETING

Shareholders are invited to attend Weyco Group, Inc.'s 2002 Annual Meeting at
10:00 a.m. on April 23, 2002, at the general offices of the Company, 333 W.
Estabrook Boulevard, Glendale, Wisconsin.

STOCK EXCHANGE

The Company's Common Stock (symbol WEYS) is listed on the NASDAQ Market System
(NMS).

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005


COMPANY HEADQUARTERS

Weyco Group, Inc.
333 W. Estabrook Boulevard
Glendale, WI 53212
414-908-1600

OTHER INFORMATION

A copy of the Company's Annual Report to the Securities and Exchange Commission
(Form 10-K) will be furnished without charge to any shareholder upon written
request.

A copy of the Company's Quarterly Reports will be furnished without charge to
any shareholder upon written or telephone request.

All written requests should be sent to Investor Relations, Weyco Group, Inc., P.
O. Box 1188, Milwaukee, Wisconsin 53201. Telephone requests should be made to
(414) 908-1600.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>c68246ex21.txt
<DESCRIPTION>SUBSIDIARIES
<TEXT>
<PAGE>
                                                                      EXHIBIT 21









                                WEYCO GROUP, INC.

                         SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
                                                          Incorporated
                   Name of Company                             In                 Subsidiary Of
- -------------------------------------------------      ------------------      ----------------
<S>                                                        <C>                 <C>
House of Advertising, Inc.                                  Wisconsin           Weyco Group, Inc.

Weyco Investments, Inc.                                      Nevada             Weyco Group, Inc.
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>8
<FILENAME>c68246ex23-1.txt
<DESCRIPTION>CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
<TEXT>
<PAGE>
                                                                    EXHIBIT 23.1








                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
reports included and incorporated by reference in this Form 10-K into the
Company's previously filed Registration Statement File Nos. 33-48549, 333-03025
and 333-56035.









ARTHUR ANDERSEN LLP


Milwaukee, Wisconsin,
March 19, 2002.

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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