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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [x] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
REEBOK INTERNATIONAL LTD.
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[REEBOK LOGO]
REEBOK INTERNATIONAL LTD.
1895 J.W. FOSTER BOULEVARD
CANTON, MASSACHUSETTS 02021
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 2001
Notice is hereby given that the Annual Meeting of Shareholders of Reebok
International Ltd. will be held at Reebok's Corporate Headquarters, located at
the above address, at 10:00 a.m. local time on Tuesday, May 1, 2001 for the
following purposes:
1. To elect four (4) Class II members of the Board of Directors.
2. To approve the Executive Performance Incentive Plan.
3. To approve the 2001 Equity Incentive and Director Deferred Compensation
Plan providing for the issuance of up to 5,000,000 new shares of common
stock.
4. To transact any other business that may properly come before the
Meeting or any adjournment thereof.
Stockholders of record at the close of business on March 2, 2001, are
entitled to notice of and to vote at the Meeting and any adjournment thereof.
If you are unable to be present in person, please sign and date the
enclosed proxy and return it promptly in the enclosed envelope.
By Order of the Board of Directors
DAVID A. PACE
Clerk
March 26, 2001
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ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 2001
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Reebok International Ltd. ("Reebok" or the "Company") to be voted at the Annual
Meeting of Shareholders to be held at the Company's principal executive offices,
located at 1895 J.W. Foster Boulevard, Canton, Massachusetts 02021, on Tuesday,
May 1, 2001 or at any adjournment thereof (the "Meeting"). The cost of
solicitation of proxies will be borne by Reebok. Directors, officers and
employees of Reebok may also solicit proxies by telephone, telegraph, electronic
mail or personal interview. Reebok will reimburse banks, brokerage firms and
other custodians, nominees and fiduciaries for reasonable expenses incurred by
them in sending proxy materials on behalf of Reebok's management to the
beneficial owners of shares. This Proxy Statement and the enclosed proxy were
first mailed to shareholders on March 26, 2001.
Only shareholders of record at the close of business on March 2, 2001 (the
"Record Date") are entitled to notice of and to vote at the Meeting. There were
58,491,275 shares of the Company's common stock, $.01 par value per share
("Common Stock"), outstanding on the Record Date, each of which is entitled to
one vote. Under the bylaws of the Company, a majority of the shares of Common
Stock issued and outstanding and entitled to vote will constitute a quorum for
the Meeting. If a quorum is present, the four nominees for directors in Class II
who receive the greatest number of votes properly cast (or a plurality of the
votes) will be elected directors. An affirmative majority of the votes properly
cast at the meeting in person or by proxy is required for approval of proposals
2 and 3. Votes cast by proxy or in person at the Meeting will be counted by
persons selected by the Company to act as election inspectors for the Meeting
(the "Election Inspectors").
The Election Inspectors will count shares represented by proxies that
withhold authority to vote for a nominee for election as a director or that
reflect abstentions and "broker non-votes" (i.e., shares represented at the
Meeting held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote, and (ii) the
broker or nominee does not have the discretionary voting power on a particular
matter) only as shares that are present and entitled to vote on the matters for
purposes of determining the presence of a quorum; but neither proxies that
withhold authority to vote for any nominee (without naming an alternative
nominee), abstentions nor broker non-votes will be counted as votes cast at the
Meeting. Such proxies therefore will not be a factor for the election of
directors at the Meeting or for Proposals 2 and 3.
Shares represented by proxies in the form enclosed, if properly executed
and returned and not revoked, will be voted at the Meeting. To be voted, proxies
must be filed with the Clerk prior to voting. Proxies may be revoked at any time
before exercise by filing a notice of such revocation with the Clerk. Proxies
will be voted as specified by the shareholders. Where specific choices are not
indicated, proxies will be voted FOR the election of each nominee for director
identified below, FOR the approval of the Executive Performance Incentive Plan,
FOR the approval of the 2001 Equity Incentive and Director Deferred Compensation
Plan, and in the discretion of the named proxies as to any other matter that may
come before the Meeting or any adjournments of the Meeting.
Reebok's Annual Report on Form 10-K for fiscal year ended December 31,
2000, has been mailed with this Proxy Statement.
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PROPOSAL 1: ELECTION OF DIRECTORS
Pursuant to the provisions of Section 50A of Chapter 156B of the
Massachusetts General Laws, the Board of Directors is divided into three
classes, having staggered terms of three years each. Under Section 50A and the
bylaws of the Company, the Board of Directors may determine the total number of
directors and the number of directors to be elected at any annual meeting of
shareholders or special meeting in lieu thereof.
Of the current directors, three (3) Class II directors have terms expiring
at the Meeting, three (3) Class III directors have terms expiring at the 2002
Annual Meeting and two (2) Class I directors have terms expiring at the 2003
Annual Meeting. Two (2) Class II directors whose terms expire at the Meeting
have been nominated by the Board of Directors for reelection at the Meeting. The
Board of Directors has also nominated two (2) additional persons as Class II
directors. Each Class II director elected at the Meeting will serve until the
2004 Annual Meeting of Shareholders or special meeting in lieu thereof, and
until each such director's successor is elected and qualified.
Consistent with the Company's past practice, the Board of Directors has
fixed at twelve (12) the total number of directors and has fixed at four (4) the
number of directors to be elected by the Company's shareholders at the Meeting.
If these four (4) nominees are elected at the Meeting, the Board of Directors
will have a total of nine (9) members, including four (4) Class II directors,
three (3) Class III directors and two (2) Class I directors. Although the Board
of Directors does not currently have candidates to fill the three (3) vacancies
that would exist on the Board of Directors following the election of the four
nominees, it is fixing the number of directors at 12 and is actively seeking
qualified candidates for appointment to the Board of Directors in the future.
The Board has nominated Norman Axelrod and Deval Patrick as Class II
directors. Although Section 50A of Chapter 156B would permit the Board of
Directors to appoint either of them as a Class I director without shareholder
approval, the Board determined to seek shareholder approval for Mr. Axelrod's
and Mr. Patrick's nominations as a matter of good corporate practice.
Accordingly, both individuals have been nominated as a Class II director even
though in the short term it will create an imbalance among the classes. If
during the coming year the Board finds qualified candidates willing to serve as
directors, it intends to fill a vacancy in Class I with the first such
candidate.
INFORMATION WITH RESPECT TO DIRECTORS AND NOMINEES FOR DIRECTOR
Unless authority is withheld, proxies in the accompanying form will be
voted in favor of electing Norman Axelrod, Paul R. Duncan, Richard G. Lesser,
and Deval L. Patrick as Class II directors, to hold office until the 2004 Annual
Meeting of Shareholders, or special meeting in lieu thereof, and until their
respective successors are elected and qualified. If a proxy is executed in such
a manner as to withhold authority to vote for one or more nominees for director,
such instructions will be followed by the persons named as proxies.
Two of the nominees (Mr. Duncan and Mr. Lesser) for director are now Class
II members of the Board of Directors. Mr. Patrick and Mr. Axelrod have been
nominated by the Board of Directors as additional Class II members. The Company
has no reason to believe that any of the nominees will be unable to serve. In
the event that any nominee should not be available, the persons named in the
proxy will vote for the others and may vote for a substitute for such nominee.
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Listed below are the nominees for Class II director, with information
showing the business experience and current public directorships, if any, of
each, the age of each and the year each was first elected a director of the
Company, where applicable.
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
---- ----------------------- --- --------
Norman Axelrod.................... Chief Executive Officer and President of Linens 'N 48 n/a
Things, Inc. ("LNT"), a national retailer of home
textiles, housewares and home accessories (since
1988); Chairman of the Board of Directors for LNT
(since January 1997); various senior management
positions at Bloomingdale's, a national department
store (from 1976 to 1988); and Director of Jaclyn,
Inc., a handbags and apparel company.
Paul R. Duncan.................... Executive Vice President of the Company (served from 60 1989
February 1990 until December 31, 1998; and from
January 31, 2000 until January 2, 2001), with various
executive responsibilities including President of the
Company's Specialty Business Group (from October 1995
to November 1996 and from January 31, 2000 until
January 2, 2001); Chief Financial Officer of the
Company (from 1985 to June 1995); and Director of
Cabletron Systems, Inc., a computer networking
company.
Richard G. Lesser................. Executive Vice President and Director of TJX 66 1988
Companies, Inc. ("TJX Companies"), an off-price
apparel and home furnishings retailer, and Chief
Operating Officer of TJX Companies (from November
1994 to February 2000); Chairman, The Marmaxx Group,
a division of TJX Companies that operates TJ Maxx and
Marshalls (since February 2001); President, The
Marmaxx Group (February 1996 through February 2001);
President, TJ Maxx (from October 1986 to November
1994); Director of A.C. Moore Arts & Crafts, Inc., an
operator of arts and crafts stores; and Director of
Dollar Tree Stores, Inc., a national chain of variety
stores selling merchandise at one dollar.
Deval L. Patrick.................. Executive Vice President and General Counsel, The 44 n/a
Coca-Cola Company, a beverage sales company
(beginning April 2, 2001); Vice President and General
Counsel, Texaco Inc., an energy company (from 1999 to
March 2001); Partner, Day, Berry & Howard (from 1997
to 1999), a law firm; Assistant Attorney General,
Civil Rights Division of the U.S. Department of
Justice (from 1994 to 1997); and Director of UAL
Corporation, which operates United Airlines.
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Current Class III members of the Board of Directors, whose terms of office
expire at the 2002 Annual Meeting of Shareholders, are as follows:
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
---- ----------------------- --- --------
Paul B. Fireman................... Chief Executive Officer and Chairman of the Board of 57 1979
Directors of the Company; President of the Company
(from 1979 to March 1987 and since December 1989);
and Director of Abiomed, Inc., a manufacturer of
medical devices.
Thomas M. Ryan.................... President and Chief Executive Officer (since May 48 1998
1998) and Vice Chairman of the Board (since 1996) of
CVS Corporation ("CVS"), a company in the chain drug
store industry; President and Chief Executive Officer
of CVS Pharmacy, Inc. (since 1994); Chief Operating
Officer of CVS (from October 1996 to May 1998); and
Director of Fleet Financial Group, Inc., a financial
services company.
Dorothy E. Puhy................... Chief Financial Officer and Assistant Treasurer, 49 2000
Dana-Farber Cancer Institute (since 1994), a leading
health care provider and research concern; Chief
Financial Officer, New England Medical Center
Hospitals, Inc. (from 1989 to 1994), a major health
care provider.
Current Class I members of the Board of Directors, whose terms of office
expire at the 2003 Annual Meeting of Shareholders, are as follows:
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
---- ----------------------- --- --------
Mannie L. Jackson................. Chairman, Chief Executive Officer and majority owner 61 1996
of Harlem Globetrotters International, Inc., a sports
and entertainment entity; Retired Senior Vice
President-Corporate Marketing and Administration of
Honeywell, Inc., a manufacturer of control systems,
and prior to that, served in various executive
capacities for Honeywell, Inc. beginning in 1968;
Director of Ashland Inc., a vertically integrated
petroleum and chemical company; Director, True North,
a global advertising company; and Director of The
Stanley Works, a commercial, consumer and specialty
tools company.
Geoffrey Nunes.................... Retired Senior Vice President and General Counsel for 70 1986
Millipore Corporation, a leader in the field of
separation technology.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 2000, the Board of Directors held six meetings. All of the directors
who were on the Board at the end of 2000 attended at least 75% of the Board and
relevant committee meetings during 2000; except for Dorothy Puhy, who was
appointed on December 13, 2000, to fill the vacancy among Class III directors
left by the resignation of Carl Yankowski in December, 1999, and Thomas Ryan,
who attended only four of the six
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meetings for the Board of Directors and four of six committee meetings in 2000.
For information on the compensation of directors, see "Compensation of
Directors" below.
The Audit Committee, composed of Mr. Lesser, Mr. Nunes and Ms. Puhy (since
December 13, 2000), held three meetings during 2000. The Audit Committee
recommends to the Board of Directors the independent public auditors to be
engaged by the Company; reviews with such auditors and management the Company's
internal accounting procedures and controls; and reviews with such auditors the
audit scope and results of their audit of the consolidated financial statements
of the Company. The Audit Committee adopted a new committee charter effective
May 2, 2000, a copy of which is attached as Exhibit A to this Proxy Statement.
The Compensation Committee, composed of Messrs. Nunes, Mr. Ryan and Mr.
Glavin (until his resignation from the Committee effective December 31, 2000),
held three meetings during 2000. The Compensation Committee administers the
Company's stock option and compensation plans, sets compensation for the Chief
Executive Officer, reviews the compensation of the other executive officers and
provides recommendations to the Board regarding compensation matters.
The Board Affairs Committee, composed of Messrs. Lesser, Jackson, Ryan,
Nunes and Glavin (until his resignation from the Committee effective December
31, 2000), held three meetings during 2000. The Board Affairs Committee is
responsible for considering Board governance issues. The Board Affairs Committee
also recommends individuals to serve as directors of the Company and will
consider nominees recommended by shareholders. Recommendations by shareholders
should be submitted in writing to the Board Affairs Committee, in care of the
President of the Company.
The Executive Committee, composed of Messrs. Fireman, Duncan and Nunes, did
not meet during 2000. The Executive Committee may take certain action permitted
by law and the bylaws in the intervals between meetings of the full Board.
COMPENSATION OF DIRECTORS
During 2000, each director who was not an officer or employee of the
Company received an annual retainer of $25,000, plus $2,000 for each committee
chairmanship held and $2,000 for each directors' meeting and $1,000 for each
committee meeting attended, plus expenses. As part of a policy adopted by the
Board of Directors in 1998 that requires each director to own Reebok's Common
Stock with a market value of at least four times the amount of the annual
retainer within five years after the director's first election to the Board, a
minimum of forty percent of the annual retainer was paid to the directors in
Reebok's Common Stock.
The Company's Equity and Deferred Compensation Plan for Directors (the
"Directors' Plan") provides for the issuance of stock options to directors and
provides a means by which directors may defer all or a portion of their director
fees.
The deferred compensation portion of the Directors' Plan permits directors
who are not employees of the Company to defer all or a portion of their director
compensation and to invest such deferred compensation in Reebok's Common Stock
or in cash, which earns interest at the Merrill Lynch Corporate Bond Rate (the
"Bond Rate"). Compensation deferred into Common Stock is converted into stock
based on the price of the stock on the first day of the calendar quarter
following the quarter in which the fees were deferred. Dividends paid on the
Common Stock are also credited to the director's deferred compensation account.
Directors who elect to defer their compensation will receive a distribution
of their deferred compensation in either a lump sum or in annual installments
(at the director's election) beginning on a date specified by the director or on
the date on which the director is no longer a member of the Board of Directors,
whichever occurs first. If the deferred compensation is invested at the Bond
Rate, the distribution will be in cash in an
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amount equal to the deferred compensation plus interest accrued. If the
compensation is deferred into Common Stock, the distribution will be in the form
of shares of Common Stock.
Under the stock option portion of the Directors' Plan, each newly elected
(or re-elected) Eligible Director (as defined below) is granted an option on the
date of such election (or re-election) to purchase shares of Common Stock having
an aggregate market value on such date equal to six times the average cash
compensation received by all directors in the immediately prior calendar year
(the "Election Year Grant"). On April 28 of each year after the Election Year
Grant, each Eligible Director is granted an option to purchase shares of Common
Stock having a fair market value on the date of such grant equal to three times
the average annual cash compensation received by all directors in the
immediately prior calendar year (or a pro rata portion based on the date of his
or her election). The exercise price for all options granted under the
Directors' Plan is the fair market value of Common Stock on the date of the
grant.
On April 28, 1999, all Eligible Directors were granted an option equal to
an Election Year Grant, even those Eligible Directors for whom 1999 was not an
election year. The options granted under the Directors' Plan in 2000 were
adjusted pro rata for these 1999 grants so that the nominees and the directors
whose terms expired at the 2000 Annual Meeting of Shareholders received
one-third of the Election Year Grant in 2000. The options granted under the
Directors' Plan in 2001 will also be adjusted pro rata for the 1999 grants such
that directors whose terms will expire at the Meeting will receive two-thirds of
the Election Year Grant in 2001. On April 28, 2000, Messrs. Jackson and Nunes
each were granted an option to purchase 7,037 shares of Common Stock, and an
option to purchase 4,691 shares of Common Stock. On April 28, 2000, Messrs.
Glavin, Lesser and Ryan each were granted an option to purchase 7,037 shares of
Common Stock. Upon her appointment to the Board of Directors on December 13,
2000, Ms. Puhy was granted an option to purchase 10,452 shares of Common Stock.
An "Eligible Director" is any director who is not an officer or employee of
the Company and is not a holder of more than five percent (5%) of the
outstanding shares of the Company's Common Stock or a person who is in control
of such holder. In 2000 all the directors were Eligible Directors, except for
Mr. Fireman and Mr. Duncan, who retired from the Company on December 31, 1998,
but returned to employment with the Company in January 2000. Mr. Duncan has
since retired effective January 2, 2001. All the directors will be Eligible
Directors in 2001, except for Mr. Fireman.
Passage of Proposal 3 will not affect awards outstanding under the
Directors' Plan. The Company expects that any future grants of options and
shares to Directors will be made pursuant to the Equity Plan, as defined and
discussed in the section on Proposal 3.
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BENEFICIAL OWNERSHIP OF SHARES
The following table shows certain information about the shares of Common
Stock owned as of the Record Date by persons owning of record or, to the
knowledge of the Company, beneficially five percent (5%) or more of the
outstanding shares of Common Stock. It also shows ownership by each director and
nominee for director, by each executive officer named in the Summary
Compensation Table below and by all directors and executive officers of the
Company as a group. Except as otherwise noted, the address of each person is c/o
Reebok International Ltd., 1895 J.W. Foster Boulevard, Canton, Massachusetts
02021.
COMMON STOCK
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS(2)
- ---- ------------ -----------
Paul B. Fireman(3)(8)....................................... 7,058,782 11.9%
Phyllis Fireman(4).......................................... 5,047,002 8.6%
Paul R. Duncan(5)(8)........................................ 214,214 *
William F. Glavin(5)(8)..................................... 51,606 *
Mannie L. Jackson(5)(8)..................................... 53,752 *
Richard G. Lesser(5)(6)(8).................................. 74,707 *
Geoffrey Nunes(5)(8)........................................ 68,858 *
Thomas M. Ryan(5)(8)........................................ 40,373 *
Dorothy E. Puhy(5).......................................... 119 *
Kenneth I. Watchmaker(8).................................... 174,651 *
Angel R. Martinez(8)........................................ 120,000 *
David A. Perdue(8).......................................... 92,811 *
Terry R. Pillow(8).......................................... 42,084 *
Directors and Executive Officers listed above and other
Executive Officers as a group (16 persons)(7)(8).......... 8,408,140 14.0%
Brandes Investment Partners, L.P.(9)........................ 3,651,827 6.2%
FMR Corporation(10)......................................... 4,001,986 6.8%
Investors Group Trust Co. Ltd.(11).......................... 4,773,900 8.2%
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* Less than 1%.
(1) Except as otherwise noted, all persons and entities have sole voting and
investment power over their shares. All amounts shown in this column
include shares obtainable upon exercise of stock options exercisable within
60 days of the date of this table.
(2) Computed on the basis of 58,491,275 shares outstanding as of the Record
Date and the number of options exercisable within 60 days of the Record
Date for each beneficial owner whose ownership is being reported.
(3) Excludes 3,737,526 shares that are beneficially owned by Phyllis Fireman,
Paul Fireman's wife. Mr. Fireman disclaims beneficial ownership of these
shares. Mr. Fireman possesses indirect beneficial ownership of 2,544,497
shares held in the Paul Fireman Reebok Grantor Retained Annuity Trust
established in 1999.
(4) Excludes 5,749,036 shares that are beneficially owned by Paul Fireman,
Phyllis Fireman's husband. Mrs. Fireman disclaims beneficial ownership of
these shares. Mrs. Fireman possesses indirect beneficial ownership of
1,309,476 shares held in the Phyllis Fireman Reebok Grantor Retained
Annuity Trust established in 1999.
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(5) Includes for the following persons, the following shares, which represent
shares deferred pursuant to the Directors' Plan: William F. Glavin, 9,221
shares; Mannie L. Jackson, 10,305 shares; Richard G. Lesser, 5,362 shares;
Geoffrey Nunes, 4,905 shares; Thomas M. Ryan, 6,616 shares; Dorothy E.
Puhy, 119 shares; and Paul R. Duncan, 2,786 shares.
(6) Excludes 3,576 shares held by Mr. Lesser's wife and child. Mr. Lesser
disclaims beneficial ownership of these shares.
(7) Excludes the 3,737,526 shares described in note (3) above and the 3,576
shares described in note (6). Includes shares subject to options held by
directors and executive officers that are exercisable within 60 days of the
date of this table (see note (8) below).
(8) Includes for the following persons, the following shares which are subject
to stock options exercisable within 60 days of the date of this table: Paul
B. Fireman, 611,150 shares; Paul R. Duncan, 142,965 shares; William F.
Glavin, 41,135 shares; Mannie L. Jackson, 42,447 shares; Richard G. Lesser,
55,389 shares; Geoffrey Nunes, 52,953 shares; Thomas M. Ryan, 33,757
shares; Kenneth I. Watchmaker, 115,500 shares; Angel Martinez, 120,000
shares; Terry Pillow, 8,750 shares; David A. Perdue, 35,800 shares; and all
directors and executive officers listed above and other executive officers
as a group, 1,572,332 shares.
(9) Information based on an amendment to Schedule 13G dated February 14, 2001,
filed with the SEC by Brandes Investment Partners L.P., Brandes Investment
Partners, Inc., Brandes Holdings, L.P., Charles H. Brandes, Glenn R.
Carlson, and Jeffrey A. Busby as a group (collectively, the "Brandes
Holders"), an investment advisor, which reported the beneficial ownership
of 3,651,827 shares, of which it has shared voting power with respect to
2,079,381 shares and shared dispositive power with respect to 3,651,827
shares. The address of the Brandes Holders is 11988 El Camino Real, Suite
500, San Diego, CA 92130.
(10) Information based on a Schedule 13G dated February 14, 2001, filed with the
SEC by FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson as a group
(collectively, "FMR Holders"), an investment advisor, which reported the
beneficial ownership of 4,001,986 shares, of which the FMR Holders have
sole voting power with respect to 262,386 shares and sole dispositive power
with respect to 4,001,986 shares. The address of the FMR Holders is 82
Devonshire Street, Boston, MA 02109.
(11) Information based on a Schedule 13G dated February 14, 2001, filed with the
SEC by Investors Group Trust Co. Ltd., Investors Group Inc., Investors
Group Trust Inc., I.G. Investment Management, Ltd., Investors U.S. Growth
Fund, Investors Global Fund, Investors Canadian Small Cap Fund II,
Investors U.S. Opportunities Fund and Investors Canadian Equity Fund as a
group (collectively, "IGT Holders"), a diversified financial services
holding company, which reported the beneficial ownership of 4,773,900
shares, of which the IGT Holders have both shared voting and dispositive
power with respect to all shares. The address of the IGT Holders is One
Canada Centre, 447 Portage Avenue, Winnipeg, Manitoba R3C 3B6.
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EXECUTIVE COMPENSATION
The following table shows the aggregate compensation paid or accrued by the
any for services rendered during the years that ended December 1998, 1999 and
2000 (when applicable) for (i) the Chief Executive Officer; and (ii) each of the
four other most highly compensated executive officers (those falling within
either clause (i) or (ii) shall be referred to herein as the "named executive
officers"):
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION --------------------------
------------------------------------ AWARDS
OTHER --------------------------
ANNUAL RESTRICTED SECURITIES
COMPEN- STOCK UNDERLYING ALL OTHER
YEAR SALARY($) BONUS($)(1) SATION($) AWARDS($) OPTIONS(#)(2) COMPENSATION($)
---- ---------- ----------- --------- ---------- ------------- ---------------
Paul B. Fireman................. 2000 1,000,012 2,100,000 -- None 2,000,000(3) 55,251(4)
Chairman, President and 1999 1,000,012 None -- None 500,000(5) 81,539(4)
Chief Executive Officer 1998 1,000,012 None -- None None 56,275(4)(6)
Angel R. Martinez............... 2000 550,004 514,800 -- None 100,000 32,962(7)
Executive Vice President; 1999 550,004 150,000 -- None 100,000 45,779(7)
Chief Marketing Officer 1998 488,481 None -- None 240,000(8) 38,434(7)
Kenneth I. Watchmaker........... 2000 592,310 980,866 -- 393,750(9) 100,000 44,865(10)
Executive Vice President; 1999 542,308 457,542 -- None 101,000(11) 44,062(10)
Chief Financial Officer 1998 499,980 250,000 -- None 240,000(8) 30,480(10)
and Treasurer
David A. Perdue................. 2000 434,624 604,597 -- 393,750(9) 100,000 9,962(12)
Senior Vice President; 1999 350,012 215,250 -- None None 274,291(13)
President and CEO, 1998 134,620 101,493 -- None 21,600(8) 34,685(13)
Reebok Division
Terry R. Pillow................. 2000 353,431 302,062 -- 393,750(9) 100,000 51,118(14)
Senior Vice President; 1999 221,622 150,000 -- None 35,000 28,404(14)
President and CEO, 1998 None None -- None None None
The Rockport Company
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(1) Includes any amounts deferred by the individual pursuant to the Company's
Savings and Profit-Sharing Retirement Plan (the "Savings and Profit-Sharing
Plan") and the Reebok Executive Deferred Compensation Plan.
(2) Unless otherwise indicated, these options were granted under the 1994
Equity Incentive Plan. These options have a four-year vesting schedule
under which twenty-five percent (25%) of the shares granted became
exercisable on the first four anniversaries of the date of the grant. The
options will also become exercisable upon the death or permanent disability
of the optionee and may become exercisable upon certain circumstances in
the event of a merger, consolidation, sale of substantially all of the
Company's assets or other transaction or series of transactions that result
in a change of control of the Company's Common Stock.
(3) The Company granted these options to Mr. Fireman in May 2000, as discussed
below in the section entitled "Employee Agreements."
(4) Includes contributions by the Company on behalf of Mr. Fireman as follows:
for 2000, $13,250 to the Savings and Profit-Sharing Plan and $42,001 in
credits allocated to Mr. Fireman's account under the Company's Excess
Benefits Plan; for 1999, $13,000 to the Savings and Profit-Sharing Plan and
$68,539 in credits allocated to Mr. Fireman's account under the Company's
Excess Benefits Plan; and for 1998, $13,000 to the Profit Sharing/Savings
Plan and $42,615 in credits allocated to Mr. Fireman's account under the
Company's Excess Benefits Plan. Mr. Fireman is 100% vested in these
contributions and allocations.
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(5) An option to purchase 499,000 shares was granted to Mr. Fireman by the
Company on April 19, 1999, under the Company's 1994 Equity Incentive Plan,
pursuant to an Agreement, dated April 19, 1999, between the Company and Mr.
Fireman, as described below in "Employee Agreements." In connection with
this grant, an option for 500,000 which had an identical exercise price,
but which expired on July 24, 2000, and which was granted under Mr.
Fireman's Stock Option Agreement was canceled. See the section entitled
"Employee Agreements" for more information. An option to purchase 1,000
shares was granted to Mr. Fireman by the Compensation Committee in
consideration of consenting to an amendment to the Company's SERP (as
defined below) pursuant to a Consent dated as of April 19, 1999, as further
described below in "Employee Agreements."
(6) Includes $660 for 1998, reflecting the present value of the economic
benefit to Mr. Fireman of the portion of the premium paid by the Company
during 1998 ($19,245) with respect to the split-dollar life insurance
agreement (see "Employee Agreements" below for a description of such
agreement), based on the time period between the date on which the premium
was paid by the Company and May 26, 1998, which, as of March 26, 1998, is
the earliest date on which the Company could terminate the agreement and
receive a refund, without interest, of the premium it paid. Under a
split-dollar life insurance agreement, the Company was obligated to pay the
premium for the split-dollar policy for only six years, ending in 1996,
and, therefore, the Company paid only the premium on a related "key man"
policy of which the Company is a beneficiary, resulting in the substantial
reduction in the total premium payment. In 1999, the Company restructured
the related key man policy and applied its cash value to the full premium
of the restructured policy resulting in no premium payment obligations in
1999 or thereafter.
(7) Includes contributions by the Company on behalf of Mr. Martinez as follows:
for 2000, $13,250 to the Savings and Profit-Sharing Plan and $19,712 in
credits allocated to Mr. Martinez's account under the Excess Benefits Plan;
for 1999, $13,000 to the Savings and Profit-Sharing Plan and $32,779 in
credits allocated to Mr. Martinez's account under the Excess Benefits Plan;
and for 1998, $13,000 to the Savings and Profit-Sharing Plan and $25,434 in
credits allocated to Mr. Martinez's account under the Excess Benefits Plan.
Mr. Martinez is 100% vested in these contributions and allocations.
(8) These options were issued on October 16, 1998, pursuant to the Company's
Option Exchange and Restructuring Program in which each named executive
exchanged all of his above-market options for new options at the market
price on the date of grant, but at a ratio of four new shares for every
five shares exchanged and subject to a new four-year vesting schedule,
under which twenty-five percent (25%) of the shares granted become
exercisable on each of the first four anniversaries of the date of grant.
These options will also become exercisable upon the death or permanent
disability of the optionee and may become exercisable under certain
circumstances in the event of a merger, consolidation, sale of
substantially all of the Company's assets or other transaction or series of
transactions that result in a change of control of the Company's Common
Stock.
(9) The value of the 50,000 shares of restricted stock held by each of Mr.
Watchmaker and Mr. Perdue as of December 31, 2000, assuming a sale price of
$25.89 per share, would be $1,294,500. The value of the 38,000 shares of
restricted stock held by Mr. Pillow as of December 31, 2000, assuming a
sale price of $25.89 per share would be $983,820. The Company awarded each
of them 50,000 shares of restricted stock on January 24, 2000 at the per
share price of $7.875, subject to restrictions and other conditions as
discussed below in "Employee Agreements." 16,667 shares vested on July 26,
2000, after the Company met its first performance objective.
(10) Includes contributions by the Company on behalf of Mr. Watchmaker as
follows: for 2000, $13,250 to the Savings and Profit-Sharing Plan and
$31,615 in credits allocated to Mr. Watchmaker's account under the Excess
Benefits Plan; for 1999, $13,000 to the Savings and Profit-Sharing Plan and
$31,062 in
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credits allocated to Mr. Watchmaker's account under the Excess Benefits
Plan; and for 1998, $13,000 to the Savings and Profit-Sharing Plan and
$17,480 in credits allocated to Mr. Watchmaker's account under the Excess
Benefits Plan. Mr. Watchmaker is 100% vested in these contributions and
allocations.
(11) An option to purchase 1,000 shares was granted to Mr. Watchmaker by the
Compensation Committee in consideration of his consent to an amendment to
the Company's SERP pursuant to a Consent dated as of April 19, 1999, as
further described below in "Employee Agreements."
(12) Represents contributions by the Company on behalf of Mr. Perdue during 2000
of $9,962 to the Savings and Profit-Sharing Plan. Mr. Perdue is 40% vested
in these contributions.
(13) These amounts represent reimbursements of expenses incurred by Mr. Perdue
in connection with his relocation to Massachusetts.
(14) These amounts represent reimbursements of expenses incurred by Mr. Pillow
in connection with his relocation to Massachusetts.
STOCK OPTION GRANTS
The following table shows information concerning individual grants of stock
options and freestanding stock appreciation rights ("SARs") made during 2000 to
each of the named executive officers:
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) IN 2000 ($/SH) DATE 5%($) 10%($)
---- ------------ ------------ ----------- ---------- ---------- ----------
Paul B. Fireman.......... 1,000,000(2) 26.55% $17.375 5/9/10 10,946,250 27,626,250
1,000,000(2) 26.55% 18.375 5/24/10 11,576,250 29,216,250
Angel R. Martinez........ 100,000(3) 2.65% 16.375 5/2/10 1,031,625 2,603,625
Kenneth I. Watchmaker.... 100,000(3) 2.65% 8.1875 1/3/10 515,813 1,301,813
David A. Perdue.......... 100,000(3) 2.65% 8.1875 1/3/10 515,813 1,301,813
Terry R. Pillow.......... 100,000(3) 2.65% 8.1875 1/3/10 515,813 1,301,813
- ---------------
(1) The assumed annual rates of stock price appreciation of 5% and 10% per annum
are established by the SEC and are not to be construed as a forecast of
future appreciation. The actual realized value of such options will depend
on the market value of the Common Stock on the date of exercise; no gain
will be realized by the optionees unless there is an increase in the stock
price from the price on the date of grant.
(2) These options to purchase 1,000,000 shares each were granted to Mr. Fireman
by the Company on May 9 and May 24, 2000, pursuant to an Agreement dated May
2, 2000, between the Company and Mr. Fireman, as described below in the
section entitled "Employee Agreements."
(3) These options were granted to Messrs. Martinez, Watchmaker, Perdue and
Pillow under the 1994 Equity Incentive Plan. These options have a four-year
vesting schedule under which twenty-five percent (25%) of the shares granted
became exercisable on the first four anniversaries of the date of the grant.
The options will also become exercisable upon the death or permanent
disability of the optionee and may become exercisable upon certain
circumstances in the event of a merger, consolidation, sale of substantially
all of the Company's assets or other transaction or series of transactions
that result in a change of control of the Company's Common Stock.
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AGGREGATED OPTION AND SAR EXERCISES AND VALUES
The following table sets forth aggregated option and SAR exercises in 2000
and option values as of December 31, 2000 for each of the named executive
officers:
AGGREGATED OPTION/SAR EXERCISES IN 2000
AND OPTION/SAR VALUES AS OF DECEMBER 31, 2000
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT 12/31/00(#) AT 12/31/00($)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ------------ ------------------------- -------------------------
Paul B. Fireman............ 2,000,000 $60,000 588,920/2,022,230 4,665,000/18,930,000
Angel R. Martinez.......... -- -- 145,000/ 295,000 2,077,425/ 3,797,175
Kenneth I. Watchmaker...... -- -- 145,250/ 295,750 2,079,823/ 4,623,118
David A. Perdue............ -- -- 10,800/ 110,800 158,922/ 1,915,250
Terry R. Pillow............ -- -- 8,750/ 126,250 74,069/ 2,137,456
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Board of Directors, on February 15, 1996, adopted a Supplemental
Executive Retirement Plan (the "SERP") for certain key executive officers,
including Mr. Fireman, Mr. Martinez and Mr. Watchmaker. The SERP provides that a
participant, upon attaining age 60, will receive an annual retirement benefit
equal to (a) twenty-five percent (25%) of his or her average total compensation
for the three calendar years out of the five consecutive calendar years ending
with the year in which the participant retires ("Final Average Compensation"),
in which he or she had the highest total compensation multiplied by (b) the
number of years of such executive's service with the Company (not to exceed 15)
divided by 15. The SERP also provides for reduced benefits for participants who
retire after age 55, but before age 60, and have completed at least five full
years of continuous service with the Company, or who retire before age 55, and
have completed at least ten full years of continuous service.
In February 1999, the SERP was amended to provide that participants who
voluntarily terminate their employment with the Company will forfeit their
eligibility and further benefits if, prior to age 65, they work on a full-time
basis (excluding service on a board of directors, government or public service
or teaching) after leaving the Company, or if at any time they perform any
services for a competitor of the Company.
The following table sets forth estimated annual benefits payable under the
SERP upon a participant's retirement, assuming attainment of age 60 while in the
employment of the Company, for the following compensation levels and years of
service:
YEARS OF SERVICE
FINAL AVERAGE ----------------------------------
COMPENSATION 5 10 15 AND ABOVE
------------- -------- -------- ------------
$ 450,000............................. $ 37,500 $ 75,000 $112,500
550,000............................. 41,667 83,333 125,000
750,000............................. 62,500 125,000 187,500
1,000,000............................. 83,333 166,667 250,000
1,250,000............................. 104,167 208,333 312,500
1,500,000............................. 125,000 250,000 375,000
1,750,000............................. 145,833 291,667 437,500
2,000,000............................. 166,667 333,333 500,000
2,250,000............................. 187,500 375,000 562,500
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The compensation covered by the SERP for any calendar year is the
participant's base compensation and annual incentive bonus earned for such year
(which are reflected in the Salary and Bonus columns of the Summary Compensation
Table), plus any amount that would have been paid to the participant but for a
salary reduction agreement in effect during such year pursuant to Sections 125
or 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). The
benefit payment under the SERP is not subject to any deductions for Social
Security benefits or other offset amounts. Years of service credited under the
SERP for the executive officers named in the Summary Compensation Table above
who are participants in the SERP are as follows: Paul B. Fireman, 21 years;
Angel Martinez, 19 years; and Kenneth I. Watchmaker, 8 years.
EMPLOYEE AGREEMENTS
Mr. Fireman has a Stock Option Agreement with the Company pursuant to which
he received in 1990 a grant of options to purchase 2,500,000 shares of the
Company's Common Stock at exercise prices ranging from $17.32 to $18.37 per
share, which became exercisable in stages over a five-year period ending July
24, 1995. Mr. Fireman and the Company entered into an Agreement, dated as of
April 19, 1999, pursuant to which an option to purchase 500,000 shares of Common
Stock at $18.01 per share was canceled and an option to purchase 499,000 shares
was issued under Reebok's 1994 Equity Incentive Plan. This effectively extended
the exercise date of this option from July 24, 2000 to July 24, 2010. In
addition, the terms of this option have been changed to allow Mr. Fireman to
transfer this option to certain family members, any trust in which certain
family members have more than a fifty percent (50%) beneficial interest, or a
foundation controlled by Mr. Fireman or certain family members.
During 2000, Mr. Fireman expressed his intent to exercise his remaining two
stock options for 1,000,000 shares each granted to him in 1990 (with exercise
prices of $17.32 and $18.37), which were set to expire on July 24, 2000, at such
time as the market price of the Company exceeded the exercise price of the
options. The effect of a sale of the shares would have been significantly
dilutive to the Company's shareholders. The Board believed, after consultation
with its independent financial advisers, that this dilution would not be in the
best interest of the Company or its stockholders.
In May 2000, Mr. Fireman agreed to exercise his two options for 1,000,000
shares each from 1990, once the market price of the Company's common stock
exceeded the exercise price of the options. Mr. Fireman also agreed to
irrevocably offer to sell the shares acquired upon exercise of these options to
the Company at the first trade price above the exercise price. Mr. Fireman
exercised his option and sold the underlying shares to the Company pursuant to
this agreement on May 9 and May 24, 2000. The Company then agreed to grant Mr.
Fireman two new options for 1,000,000 shares each with an exercise price equal
to the market price at which the Company purchased Mr. Fireman's shares at
$17.375 and $18.375, respectively. These options vest annually over a three-year
period; however, they accelerate and become immediately exercisable if Mr.
Fireman is no longer the Chief Executive Officer of the Company (other than as a
result of a termination for cause) or upon a change of control of the Company.
Additionally, the options will not be exercisable at any time as Mr. Fireman is
a "covered employee" under Section 162(m) of the Code or if certain other
conditions are not met. The options have a ten-year term; however, at such time
as Mr. Fireman is no longer actively involved in the management of the Company
as an officer, director or consultant, he would have three years to exercise the
options.
The Company entered into a split-dollar insurance agreement as of September
25, 1991 with a trust established by Mr. Fireman, pursuant to which the Company
and that trust will share in the premium costs of a whole life insurance policy
that pays a death benefit of not less than $50,000,000 upon the death of Mr.
Fireman, age 57, or Phyllis Fireman, age 56 (whichever occurs later). Under the
agreement, the Company paid that portion of each annual policy premium that, in
general terms, was equal to the annual increase in the cash value of the policy.
The Company's obligation to make such premium payments
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terminated in 1996 upon the payment of the sixth annual premium due under the
policy. In 1999, the Company restructured the related key man policy of which
the Company is the beneficiary and which is designed to work in conjunction with
the split-dollar insurance policy to insure the repayment to the Company of the
aggregate amount of the premiums paid by the Company. Pursuant to this
restructuring, the Company applied its cash value to the full premium of the
restructured policy resulting in no premium payment obligations in 1999 or
thereafter. The Company may cause the agreement to be terminated and the policy
to be surrendered at any time upon 60 days' prior notice. Upon surrender of the
policy or payment of the death benefit under the policy, the Company is entitled
to repayment of an amount equal to the cumulative premiums previously paid by
the Company, with all remaining payments to be made to the Paul Fireman
Irrevocable Trust - 1991. See footnote (6) to the "Summary Compensation Table"
above for further information on premium payments made by the Company under this
policy.
In connection with the February 1999 amendment to the SERP, as described
above in the section entitled "Supplemental Executive Retirement Plan", Mr.
Fireman and Mr. Watchmaker executed Consents, each dated April 19, 1999, in
which they agreed to forfeit their eligibility and further benefits under the
SERP if, prior to age 65, they work on a full-time basis (excluding service on a
board of directors, government or public service or teaching) after leaving the
Company, or if at any time they perform any services for a competitor of the
Company. In consideration of these Consents, the Company (i) granted Mr. Fireman
an option to purchase 1,000 shares of Common Stock expiring on April 19, 2009,
at an exercise price of $18.01; and (ii) granted Mr. Watchmaker an option to
purchase 1,000 shares of Common Stock, expiring on April 19, 2009, at an
exercise price of $17.75.
The Company has change of control agreements with Mr. Martinez and Mr.
Watchmaker providing for certain compensation and benefits in the event of the
termination of their employment with the Company following a "change in control"
of the Company (as defined in the respective agreements). A "change in control"
includes one which is initiated by Company management except in the case of a
leveraged buy-out or recapitalization of the Company in which the executive
participates as an equity investor. In each agreement, if the executive's
employment with the Company were to terminate (other than as a result of the
death, total disability or retirement of the executive at or after his normal
retirement date) within 24 months following a change in control and the
termination is (a) by the Company for a reason other than as a result of a
conviction of the executive for a felony or a crime involving moral turpitude or
(b) by the executive if the Company fails to maintain the executive in the
positions, with the titles, that he held immediately prior to the change of
control, following a downgrading of his responsibilities or authority or if the
Company makes certain other changes or reductions in the executive's
compensation as specified in the agreement, then the Company will pay to the
executive a lump-sum cash payment equal to 300% of the aggregate of his (i)
then-current annual base salary, (ii) his target bonus for the then-current
year, or, if higher, his bonus for the most recent calendar year ended before
the change of control, (iii) the amount of his then-current annual automobile
allowance and (iv) the annual cost of life insurance then furnished to him by
the Company. In addition, all of the executive's outstanding stock options,
restricted shares and other similar incentive rights and interests will become
immediately and fully vested and exercisable. The executive will be treated for
purposes of the SERP as having three additional years of continuous service and
the Company will pay to him in a single lump-sum cash payment the present value
of his benefit under the SERP. The Company will pay to the executive, in a
single lump-sum cash payment, an amount equal to the difference, if any, between
(i) the total distribution that he receives following his termination under the
Company's Savings and Profit-Sharing Plan and its Excess Benefits Plan and (ii)
the total distribution that he would have received under such plans had he
accumulated three additional years of service for vesting prior to termination.
The executive and his dependents will also continue to participate fully at the
expense of the Company in all accident and health plans provided by the Company
immediately prior to the change in control, or receive substantially equivalent
coverage, until the third anniversary of his termination of employment. In
addition, the agreements provide
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that the executive will be reimbursed by the Company for any legal fees and
expenses incurred by him as a result of the termination of his employment. Each
agreement provides that if it is determined that any payment or benefit provided
by the Company to or on behalf of the executive, either under the executive's
change of control agreement or otherwise, is subject to the excise tax imposed
by Section 4999 of the Code, the Company will make an additional lump-sum
payment to the executive which will be sufficient to make the executive whole
for all taxes and any associated interest and penalties imposed under or as a
result of Section 4999. Messrs. Martinez and Watchmaker are required under the
agreements not to leave voluntarily the employ of the Company in the event that
any person or entity initiates a change of control until such time as the effort
terminates or the change of control is completed. The Company amended Mr.
Watchmaker's change of control agreement in February 2000 to include the event
that Mr. Fireman is no longer Chief Executive Officer of the Company as a
"change of control" under the Agreement.
The Company has non-competition agreements with Mr. Martinez, Mr.
Watchmaker, Mr. Pillow and Mr. Perdue under which each executive has agreed not
to compete, directly or indirectly, with the Company during his employment and
pursuant to which the Company has the right to extend the non-competition
requirement for a period of up to one year after his termination of employment
with the Company (the "Non-Competition Period"). During the Non-Competition
Period, the Company will pay the executive an amount equal to one-half of his
base salary as in effect on his termination date and will continue certain
medical coverage benefits, except that for Mr. Martinez and Mr. Watchmaker, if
the Company terminates their employment without "cause" (as defined in the
agreement), they would be entitled to 100% of their base salary as of the date
of termination, which amount shall be reduced by the amount of any severance
payments received from the Company.
In recognition of the importance of some key executives to Reebok, the
Board of Directors approved the grant of shares of restricted stock in January
2000 and an annual supplemental bonus program. This bonus designed to retain key
senior executives will be in addition to any bonus payable under the Company's
Bonus Plan (as defined below), or any similar program then in effect. The
program will last for four years. The objectives of the restricted stock grant
were to: (1) maintain the focus on shareholder returns and align senior
management's interest more closely with shareholders, (2) retain key executives,
and (3) deliver a significant increase in compensation for exceptional Company
performance. Mr. Watchmaker, Mr. Perdue and Mr. Pillow each received a grant of
shares of Reebok Common Stock as of January 24, 2000 at a price of $7.875. The
shares are "restricted," which means that they are not transferable and cannot
be sold until they vest. The restricted stock will fully vest on January 24,
2004 subject to earlier vesting if the Company achieves certain established
goals. Specifically: (a) one-third of the Restricted Shares will vest prior to
that date if the Company's earnings per share ("EPS") at year end is $1.50 or
more, or if the stock price for Reebok closes at $18.00 per share or more for
any five trading days in any ten trading day period; (b) an additional one-third
of the Restricted Shares will vest if the Company's EPS at year end is $2.25 or
more, or if the stock price for Reebok closes at $27.00 or more for five trading
days in a ten trading day period; and (c) the remaining one-third of the
Restricted Shares will vest if the Company's EPS at year end is $3.00 or more,
or if the stock price for Reebok closes at $36.00 or more for five trading days
in a ten trading day period. As of the Record Date, two-thirds of the Restricted
Shares have vested.
At the same time, Reebok adopted an Executive Loan Program. The loan may be
called and required to be paid in full if: (i) the employee fails to make
payments when due, or (ii) if the employment with Reebok is terminated for any
reason. Each of Mr. Watchmaker, Mr. Perdue and Mr. Pillow, who are all executive
officers, became indebted individually to the Company during 2000 in the amount
of $184,078 through the execution of a promissory note payable over four years
(with interest accruing at 6.21% per year). As of the Record Date, $130,914
remains outstanding on the loan for each individual named in this paragraph.
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The above description is only a summary of the agreements which the Company
has with its various executive officers and is qualified in its entirety by the
actual agreements, copies of which have been filed as Exhibits to the Company's
Annual Report on Form 10-K.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee has submitted the following report:
The Committee in 2000 consisted of Geoffrey Nunes, Chair, Thomas M. Ryan
and William F. Glavin (until his resignation from the Committee on December 31,
2000). The Compensation Committee's responsibilities include setting both the
cash and equity compensation level for the Chief Executive Officer and reviewing
the cash and equity compensation levels for all other executive officers of the
Company. Compensation for these other individuals is established by the Chief
Executive Officer. The Committee also functions as the stock option committee,
and in that capacity administers the 1994 Equity Incentive Plan and grants all
stock options to executive officers.
The Committee held three meetings during 2000. Specifically, it held
meetings in February, May, and December. In its review of executive officer
compensation for 2000, the Committee considered the results of "Competitive
Assessment of Executive Compensation," a report prepared by an outside
compensation consulting firm at the Committee's request. An analysis of the
report showed that compensation payable to executives of the Company was largely
consistent with the Company's philosophy that executives should be compensated
in the seventy-fifth percentile of its peer group of companies in the shoe and
apparel industries as well as other leading consumer product organizations.
The Committee elected to continue Mr. Fireman's cash compensation for 2000
at $1,000,000 per year and established a 2000 bonus for Mr. Fireman based on
objective criteria of operating profit and operating cash flow of both the
Reebok brand and the Company as a whole.
In February 2000, the Committee reviewed the Company's proposed Performance
Incentive Plan (the "Bonus Plan") for 2000, pursuant to the terms of an Omnibus
Executive Performance Incentive Plan previously approved by shareholders in
1996, and the bonus award calculations under the Bonus Plan. The Bonus Plan
permits bonuses to be paid to certain named executives only if specific
financial criteria established by the Committee are met. Thus, bonuses paid
under the Bonus Plan qualify for a tax deduction pursuant to Section 162(m) of
the Code. The financial criteria are based on at least two factors: (a) pre-tax
operating profit, and (b) cash flow from operations. For some executives, these
criteria are assessed against the results of a particular operating unit for
which the executive is responsible, while for others they are assessed against
the Company's overall financial results or a combination of both. In addition,
bonuses for executives who are responsible for a particular operating unit are
also based in part on an increase in sales or year-end sales backlog, as
appropriate.
The Committee also determined the amount of the target award that would be
paid if the financial criteria were satisfied. The Committee approved a change
to the Bonus Plan modifying the amount of potential bonus awards to provide for
a higher than target bonus award percentage only after the Company has achieved
100% of the Bonus Plan financial criteria. For 2000, participants had the
ability to earn (i) a portion of their target award only if at least 87.5% of
the financial criteria were met, (ii) 100% of their target award if all of the
financial criteria were met and (iii) could earn more than 100% of the target
award (up to a maximum of 200% of the award) if the criteria were exceeded.
Under the Bonus Plan, any award in excess of 125% of the target award is
deferred and paid in two equal installments on the first and second anniversary
of the bonus award payment date. Target awards were fixed as a percentage of
base salary and ranged from 50% to 100%. Under the Bonus Plan, the Committee has
reserved the ability to reduce any award or eliminate any award based on the
overall financial performance of the Company, as well as certain other factors.
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Bonuses for the executive officers for 2000 were determined in accordance
with the Bonus Plan and the Company's actual 2000 financial results. In February
2001, the Committee met to review the Company's actual financial results for
2000 and to determine whether such results satisfied the financial criteria
established under the Bonus Plan. Both the Reebok Brand and Corporate groups
exceeded their pre-tax operating profit target and operating cash flow target in
2000. In addition, the Reebok Brand exceeded its sales backlog target. The
Rockport Brand did not achieve 100% of its pre-tax operating profit target, but
did exceed its operating cash flow target. Based on these financial results, the
Bonus Plan provided for funding of the target bonuses that were calculated based
on the pre-tax operating profit and maximum payout of the target bonuses that
were calculated based on the Company's cash flow. In accordance with the Bonus
Plan, the amount of any bonus payable in excess of 125% of the target was
deferred. In addition, if an executive failed to manage departmental expenses
consistent with his or her budget, the bonus was subject to a reduction. In the
case of Mr. Fireman, he received a bonus of $1,800,000 under the Bonus Plan. In
recognition of his accomplishments in 2000 and the fact that he exceeded all of
the stated objectives, the Committee granted in its discretion an additional
bonus, outside of the Bonus Plan, of $300,000.
In May 2000, the Committee reviewed Mr. Fireman's stock option package and
considered a possible grant to Mr. Fireman of stock options. In doing so, the
Committee considered his assumption of the role as President and Chief Executive
Officer of the Reebok Brand, in addition to his role as Chairman and Chief
Executive Officer of the Company. The Committee reviewed a report from an
outside compensation consulting firm indicating that for Mr. Fireman's role, the
median level for an annual option grant would be approximately 500,000 shares
and that the seventy-fifth percentile for an annual option grant would be
approximately 940,000 shares. Additionally, the report indicated that if the
Company wanted to make a "mega-grant" to Mr. Fireman covering a three year
period, the median level was approximately 1,350,000 shares and the
seventy-fifth percentile was approximately 2,820,000 shares. The Committee
acknowledged the Company's philosophy that executives should be compensated in
the seventy-fifth percentile of its peer group.
The Committee then concluded it was appropriate to make a one-time grant to
Mr. Fireman of options for an aggregate of 2,000,000 shares, if Mr. Fireman
agreed to exercise his two options for 1,000,000 shares each immediately upon
the market price of the Company's common stock exceeding the exercise price of
the options, and to irrevocably offer to sell the shares acquired upon exercise
of these options to the Company at the first trade price above the exercise
price. The two new options for 1,000,000 shares each granted to Mr. Fireman have
an exercise price equal to the market price at which the Company purchased Mr.
Fireman's shares. These options vest over a three-year period and have a
ten-year term. The options are not exercisable, however, until such time as Mr.
Fireman is no longer the Chief Executive Officer of the Company or one of its
named executive officers, but they may be accelerated and become immediately
exercisable if Mr. Fireman is no longer the Chief Executive Officer of the
Company or upon a change of control. Both the vesting and ability to exercise
the options will be accelerated if Mr. Fireman is no longer actively involved in
the management of the Company as an officer, director or consultant, in which
case he will have only three years to exercise the options. Additionally, the
options will not be exercisable at any time as Mr. Fireman is a "covered
employee" under Section 162(m) of the Code or if certain other conditions are
not met. In the Committee's judgment, the combination of the new option grant
and the agreement with respect to Mr. Fireman's existing options constituted
appropriate compensation to Mr. Fireman without substantial dilution to the
Company's shareholders.
The Committee generally grants stock options to executive officers to
provide long-term performance related incentives that link rewards directly to
shareholder gains over a multi-year period. Under the Company's current program,
the stock options for officers of the Company generally vest over a four-year
period in equal installments. The stock options awarded to executive officers
have an exercise price equal to the fair market value of the Company's Common
Stock on the date of grant. In addition, the Committee
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approved the grant of shares of restricted stock to sixteen key executives in
January 2000, vesting over four years with a potential for accelerated vesting
if certain performance goals are achieved relating to the Company's reported
earnings per share or stock price. The Company also adopted an Executive Loan
Program and an annual supplemental bonus program designed to retain key senior
executives.
In adopting and administering executive compensation plans and
arrangements, the Committee considers whether the deductibility of such
compensation will be limited under Section 162(m) of the Code, and, in
appropriate cases, will attempt to structure such compensation so that any such
limitation will not apply.
COMPENSATION COMMITTEE
Geoffrey Nunes, Chair
Thomas M. Ryan
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is composed of three independent directors (Messrs.
Lesser and Nunes and Ms. Puhy, since December 13, 2000) and operates under a
written charter adopted by the Board of Directors. The Audit Committee reviews
the Company's financial reporting process on behalf of the Board of Directors.
Management has primary responsibility for the financial statements and the
reporting process.
The Audit Committee has met and held discussions with management and the
independent auditors. In our discussions, management has represented to the
Audit Committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and the
Audit Committee has reviewed and discussed the consolidated financial statements
with both management and Ernst & Young, LLP, our independent auditors. The Audit
Committee meets with our independent auditors, with and without management
present, to discuss the results of their examinations, the evaluations of the
Company's internal controls and the overall quality of the Company's financial
reporting. The Audit Committee discussed with the independent auditors matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
The Company's independent accountants also provided to the Committee the
written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee has considered and discussed with Ernst & Young the firm's
independence and the compatibility of the non-audit services provided by the
firm with its independence. Based on the Audit Committee's review of the audited
financial statements and the various discussions noted above, the Audit
Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000.
AUDIT COMMITTEE
Richard G. Lesser, Chair
Geoffrey Nunes
Dorothy E. Puhy
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PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
returns for the Company's Common Stock, the Standard & Poor's 500 Stock Index,
and the Standard & Poor's Shoes and Textile Apparel Manufacturers Indices* from
December 31, 1995 to December 31, 2000. The graph assumes an investment of $100
on December 31, 1995 in each of the Company's Common Stock and the stocks
comprising the Standard & Poor's 500 Stock Index and the Standard & Poor's Shoes
and Textile Apparel Manufacturers Indices. Performance shown for each of the
indices assumes that all dividends were reinvested.
TOTAL SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
PERFORMANCE GRAPH
REEBOK
INTERNATIONAL TEXTILES
LTD. S&P 500 INDEX FOOTWEAR-500 (APPAREL)-500
------------- ------------- ------------ -------------
Dec95 100.00 100.00 100.00 100.00
Dec96 149.72 122.96 166.22 113.53
Dec97 102.71 163.98 112.02 122.44
Dec98 53.03 210.84 109.65 105.96
Dec99 29.19 255.22 130.04 79.08
Dec00 97.46 231.98 157.39 95.35
- ---------------
* The Standard & Poor's Shoes and Textile Apparel Manufacturers Indices were
selected in order to compare the Company's performance with companies in each
of the two primary lines of business in which the Company is engaged. The
indices do not, however, include all of the Company's competitors, nor all
product categories and lines of business in which the Company is engaged.
TRANSACTIONS WITH MANAGEMENT AND AFFILIATES
In April 1996, the Company entered into a three-year agreement (the "1996
Agreement") with Harlem Globetrotters International, Inc. (the "Globetrotters").
In April 1999, the Company and the Globetrotters entered into another agreement
(the "1999 Agreement"), which extended the arrangement through March 31, 2002.
Under both of these agreements, Reebok is the exclusive athletic footwear and
apparel sponsor of the Globetrotters and has been granted a license to produce
and sell Reebok products bearing the Globetrotters' team trademark for a royalty
payment of 5% of Reebok's production cost, with specified guaranteed royalty
payments. Under the 1996 Agreement, Reebok agreed to pay the Globetrotters
$100,000 during the first year and $200,000 per year during the remaining two
years as a guarantee against potential earned royalties. Reebok also agreed to
supply products having an aggregate retail value not to exceed $140,000 to the
Globetrotters each contract year. The 1999 Agreement provides that Reebok will
pay the Globetrotters $200,000 per year and supply to the Globetrotters Reebok
products having an aggregate wholesale value not to exceed $50,000 per year.
During 2000, Reebok paid to the Globetrotters approximately $200,000 in payments
due in accordance with the agreements and $100,000 for special promotional
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appearances. Reebok also supplied products to the Globetrotters with an
approximate wholesale value of $50,000. Finally, Reebok paid $200,000 to the
Globetrotters as part of their 75(th)anniversary celebration to obtain a lead
sponsor position and a forum to launch a new athletic shoe featuring the Pump(R)
technology. Mannie L. Jackson, a current director of the Company, is the
Chairman, Chief Executive Officer and majority owner of the Globetrotters.
In March 2000, the Company entered into an agreement, which was negotiated
at arm's length, with Jenzabar.com, Inc. ("Jenzabar"), an e-commerce company
that enters into exclusive relationships with colleges and universities for
promotional and advertising ventures. Reebok determined that Jenzabar would
provide a valuable marketing opportunity to the Reebok Brand as an avenue for
the Reebok Brand to reach the key target market of college students. The Company
paid Jenzabar approximately $150,000 during 2000. In return for this payment,
Reebok was given the right to sell its products to students at college Spring
Break events organized by Jenzabar, obtained banner advertising on Jenzabar's
website, and generated publicity among student volunteers across college
campuses. Mr. Fireman, the Chairman of the Board of Directors for Reebok and the
Company's Chief Executive Officer, is a director of and shareholder in Jenzabar.
INDEBTEDNESS OF MANAGEMENT
See the section entitled "Employee Agreements" for a description of such
arrangements.
PROPOSAL 2: APPROVAL OF EXECUTIVE PERFORMANCE INCENTIVE PLAN
On December 13, 2000, the Compensation Committee and the Board of Directors
unanimously approved, subject to approval by shareholders at the Meeting, the
Reebok International Ltd. Executive Performance Incentive Plan (the "Incentive
Plan"), which provides for the awarding of bonuses to certain executive officers
or other key employees of the Company and its subsidiaries subject to the
attainment of certain performance criteria. It is the intent of the Company that
awards under the Incentive Plan qualify as performance-based compensation for
purposes of Section 162(m)(4)(c) of the Code so that the Company's tax deduction
for such awards is not disallowed in whole or in part under Section 162(m).
The following is a brief description of certain features of the Incentive
Plan. This summary is qualified in its entirety by reference to the terms of the
Incentive Plan, a copy of which appears as Exhibit B to this Proxy Statement.
TERM
Subject to approval by shareholders, the Incentive Plan will be effective
as of January 1, 2001, and will continue until December 31, 2005, unless
reapproved by the Company's shareholders or unless amended or terminated.
PARTICIPANTS
Participants in the Incentive Plan will be those corporate officers and
other key employees of the Company and its subsidiaries who are selected
annually to participate in the Plan by the Compensation Committee. It is
anticipated that the participants selected by the Compensation Committee will be
those officers and other key employees whose compensation may be subject to
deductibility limits of Section 162(m) of the Code and will include annually
less than twenty individuals. Awards and participants under the Incentive Plan
are indeterminable.
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ADMINISTRATION
The Incentive Plan will be administered by the Compensation Committee,
which will have authority to prescribe rules relating to the Plan. The decisions
of the Compensation Committee with respect to the Incentive Plan will be final
and conclusive.
PERFORMANCE CRITERIA
Within 90 days after the beginning of each fiscal year of the Company, the
Compensation Committee will establish for each participant an objective
performance goal or goals based on one or more of the following performance
criteria: net income (before or after taxes); operating income; sales; revenue;
sales backlog; earnings before income, taxes and depreciation allowance; return
on invested capital; expenses; return on sales; gross or net margin; cash flow;
earnings per share; return on assets; return on equity; total shareholder
return; market share; inventory turnover; and stock price. In establishing such
performance goals, the Compensation Committee may apply the performance criteria
as a measure of the performance of the Company, any subsidiary, any division,
group or other unit of the Company or subsidiary, any product category or
categories, or any combination of the foregoing. The Compensation Committee will
also determine the amounts of the target awards that will be paid if the
performance goal or goals are met and the method by which such amounts will be
calculated. In addition, at the Compensation Committee's option, it may
determine that all or any part of the award will be paid in stock, which shares
will be subject to such restrictions as the Compensation Committee may
determine. In any case, the maximum award that may be paid to any participant
under the Incentive Plan for any year is the lesser of 300% of such
participant's base salary in effect during such year or $3,000,000.
DETERMINATION OF AWARD
At the end of each fiscal year, the Compensation Committee will determine
and certify for each participant whether the performance goal or goals have been
met and the amount of the award, if any, to be paid. Awards will be paid to
participants in cash and/or stock, as applicable, following such determination
and within 90 days after the end of such fiscal year. In order to reflect
additional considerations relating to performance, the Compensation Committee
may, in its discretion, reduce or eliminate any calculated award to be paid to a
participant, but may not increase such award.
An affirmative vote of a majority of the shares present, in person or by
proxy, and entitled to vote at the Meeting is required to approve the Incentive
Plan. The Board of Directors recommends voting in favor of the Incentive Plan
because it provides an easily administered means by which the Company may grant
performance-based compensation to its officers and key employees who, in the
Board's judgment, have made a significant contribution to the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 2.
PROPOSAL 3: APPROVAL OF THE 2001 EQUITY INCENTIVE AND
DIRECTOR DEFERRED COMPENSATION PLAN
On February 8, 2001, the Compensation Committee and the Board of Directors
unanimously voted to adopt the 2001 Equity Incentive and Director Deferred
Compensation Plan (the "Equity Plan"), which provides for the issuance of stock
options, stock appreciation rights, restricted stock and deferred stock to
employees of the Company or its subsidiaries and other persons or entities
(excluding non-employee directors of the Company) and to recommend approval of
the Equity Plan to shareholders.
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The purpose of the Equity Plan is to advance the interests of Reebok and
its subsidiaries by enhancing the ability of Reebok to (i) attract and retain
employees, directors, and other persons or entities who are in a position to
make significant contributions to the success of Reebok and its subsidiaries;
(ii) reward such persons for such contributions; and (iii) encourage such
persons to take into account the long-term interest of Reebok through ownership
of shares of Reebok's Common Stock. The Equity Plan is intended to accomplish
these goals by enabling Reebok to grant awards ("Awards") in the form of
options, stock appreciation rights, restricted stock or deferred stock, all as
more fully described below, and by providing a means for Eligible Directors to
defer all or a portion of their directors' fees.
The following is a summary of the material features of the Equity Plan. If
you would like more information about the Equity Plan, a copy appears as Exhibit
C to this Proxy Statement.
GENERAL
The Equity Plan will be administered by a committee (the "Committee") of
the Board. The Committee will have full and exclusive power to interpret the
Equity Plan, to adopt rules, regulations and guidelines relating to the Equity
Plan, to grant waivers of Equity Plan restrictions and to make all of the
determinations necessary for its administration. A total of 5,000,000 shares of
Common Stock are reserved for issuance under the Equity Plan. Employees of
Reebok and its subsidiaries, Eligible Directors, and other persons or entities
who are in a position to make a significant contribution to the success of
Reebok or its subsidiaries are eligible to receive Awards under the Equity Plan.
Reebok expects that approximately 275 persons will participate in the Equity
Plan annually.
Section 162(m) of the Code places annual limitations on the deductibility
by public companies of compensation in excess of $1,000,000 paid to each of the
chief executive officer and the other four most highly compensated officers,
unless, among other things, the compensation is performance-based. For
compensation attributable to stock options and stock appreciation rights to
qualify as performance-based, the plan under which such stock options and SARs
are granted must state a maximum number of shares with respect to which options
and rights may be granted to an individual during a specified period and must be
approved by the company's shareholders. To comply with these requirements, the
Equity Plan is being submitted for shareholder approval and provides that the
maximum number of shares as to which Awards may be granted to any participant in
any one calendar year under the Equity Plan is 1,000,000 shares.
Stock Options. The Committee may from time to time award options to any
participant subject to the limitations described above. In addition, Eligible
Directors shall receive specified grants of options when they join the Board of
Directors and annually thereafter. An Eligible Director, upon election to the
Board, shall be awarded options on shares with a fair market value equal to six
times the average annual cash compensation received by all Eligible Directors
for the prior calendar year. On April 28 of each year each Eligible Director
shall be awarded for each year of service options on shares with a fair market
value equal to three times the average annual cash compensation received by all
Eligible Directors for the prior calendar year.
The exercise price of an incentive stock option ("ISO") granted under the
Equity Plan shall not be less than 100% of the fair market value of the Common
Stock at the time of grant. The exercise price of a non-ISO granted under the
Equity Plan shall be determined by the Committee, and the exercise price of
options granted to Eligible Directors shall be set at 100% of the fair market
value of the Common Stock at the time of the grant. Options will become
exercisable at such time or times, and on and subject to such conditions, as the
Committee may specify. The Committee may at any time and from time to time
accelerate the time at which all or any part of an option may be exercised. ISOs
granted under the Equity Plan will expire and terminate no more than 10 years
from the date of grant. The exercise price may be paid by cash, check, bank
draft, or money order. The Committee may also permit the exercise price to be
paid by tendering shares of Common
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Stock, by delivery to Reebok of an undertaking by a broker to deliver promptly
sufficient funds to pay the exercise price, or by a combination of the
foregoing.
Stock Appreciation Rights. SARs may be granted either alone or in tandem
with stock option grants. Each SAR entitles the holder upon exercise to receive
an amount in cash or Common Stock or a combination thereof (such form to be
determined by the Committee) determined in whole or in part by reference to
appreciation in the value of a share of Common Stock. SARs may be based solely
on appreciation in the value of Common Stock or may include adjustments
reflecting other measures of performance. If a SAR is granted in tandem with an
option, the SAR will be exercisable only at such times, and to the extent, that
the related option is exercisable.
Stock Awards; Deferred Stock. The Equity Plan provides for awards of
nontransferable shares of restricted Stock subject to forfeiture ("Restricted
Stock"), as well as unrestricted shares of Common Stock. Shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable period and the satisfaction of any
other conditions or restrictions established by the Committee. Other Awards
under the Equity Plan may also be settled with Restricted Stock. The Equity Plan
also provides for deferred grants entitling the recipient to receive shares of
Common Stock in the future at such times and on such conditions as the Committee
may specify ("Deferred Stock").
Eligible Director Deferred Compensation. The Equity Plan provides a
mechanism through which Eligible Directors may elect to defer in either cash or
Common Stock all or a portion of their annual retainer and meeting fees until
such time or times as the directors elect. Deferred fees are credited to
deferred compensation accounts that are credited with interest (in the case of
fees that are deferred in the form of cash) or dividends (in the case of fees
that are deferred in the form of Common Stock). Reebok is not required to
segregate or earmark any funds or Common Stock in respect to these obligations,
and Eligible Directors have no rights against Reebok with respect to these
obligations other than as general unsecured creditors of the Company.
Mergers. In general, in the case of mergers, consolidations, or other
transactions in which Reebok is acquired or is liquidated, prior to the
consummation of the transaction 1) outstanding options and SARs shall become
exercisable; 2) outstanding Restricted Stock and Deferred Stock shall become
free of all restrictions and conditions; and 3) balances in Eligible Directors'
deferred compensation accounts shall be paid out. Upon consummation of the
transaction, all outstanding options and SARs shall terminate and cease to be
exercisable. However, the Committee may arrange to have an acquiring corporation
issue replacement Awards in lieu of the foregoing or make other adjustments to
the treatment of Awards described above in order to avoid the occurrence of an
unintended material adverse effect on the Company's income statement or to avoid
a violation of the pooling of interests requirements for corporate
reorganizations.
Amendment. The Compensation Committee may make such amendments to the terms
and conditions applicable to outstanding Awards as are consistent with this
Equity Plan; provided that, except for adjustments relating to stock splits,
dividends, combinations, or recapitalizations, no such action may modify an
Award in a manner adverse to the participant without the participant's consent,
except as such modification is provided for or contemplated in the terms of the
Award.
NEW EQUITY PLAN BENEFITS
The future benefits or amounts that would be received under the Equity Plan
by the executive officers and the non-executive officer employees are
discretionary and are therefore not determinable at this time. If the Equity
Plan is approved, Reebok does not expect the benefits to non-executive directors
to change from the current practice. Such benefits for non-executive directors
are not determinable at this time.
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FEDERAL TAX EFFECTS
The following discussion summarizes certain federal income tax consequences
of the issuance and receipt of options under the Equity Plan. The summary does
not purport to cover federal employment tax or other federal tax consequences
that may be associated with the Equity Plan, nor does it cover state, local or
non-U.S. taxes.
Incentive Stock Options. In general, an optionee realizes no taxable income
upon the grant or exercise of an ISO. However, the exercise of an ISO may result
in an alternative minimum tax liability to the optionee. With certain
exceptions, a disposition of shares purchased under an ISO within two years from
the date of grant or within one year after exercise produces ordinary income to
the optionee (and a deduction to Reebok) equal to the value of the shares at the
time of exercise less the exercise price. Any additional gain recognized in the
disposition is treated as a capital gain for which Reebok is not entitled to a
deduction. If the optionee does not dispose of the shares until after the
expiration of these one- and two-year holding periods, any gain or loss
recognized upon a subsequent sale is treated as a long-term capital gain or loss
for which Reebok is not entitled to a deduction.
Nonstatutory ("non-ISO") Options. In general, in the case of a non-ISO, the
optionee has no taxable income at the time of grant but realizes income in
connection with exercise of the option in an amount equal to the excess (at the
time of exercise) of the fair market value of the shares acquired upon exercise
over the exercise price; a corresponding deduction is available to Reebok; and
upon a subsequent sale or exchange of the shares, appreciation or depreciation
after the date of exercise is treated as capital gain or loss for which Reebok
is not entitled to a deduction.
In general, an ISO that is exercised more than three months after
termination of employment (other than termination by reason of death) is treated
as a non-ISO. ISOs are also treated as non-ISOs to the extent they first become
exercisable by an individual in any calendar year for shares having a fair
market value (determined as of the date of grant) in excess of $100,000.
Under the so-called "golden parachute" provisions of the Code, the
accelerated vesting of Awards in connection with a change in control of Reebok
may be required to be valued and taken into account in determining whether
participants have received compensatory payments, contingent on the change in
control, in excess of certain limits. If these limits are exceeded, a
substantial portion of amounts payable to the participant, including income
recognized by reason of the grant, vesting or exercise of Awards under the
Equity Plan, may be subject to an additional 20% federal tax (on the payment)
and may be nondeductible to Reebok.
SHAREHOLDER APPROVAL OF EQUITY PLAN
An affirmative vote of a majority of the shares present, in person or by
proxy, and entitled to vote at the Meeting is required to approve the Equity
Plan. The Board of Directors recommends voting in favor of the Equity Plan
because it provides a flexible and easily administered means by which the
Company may grant equity-based compensation to its employees and others who can
make a significant contribution to the Company. Consequently, if the Equity Plan
is not adopted, there may not be sufficient shares reserved for issuance under
existing plans to permit the continuation of stock option grants and stock bonus
awards. Passage of Proposal 3 will not affect awards outstanding under the
Company's existing equity plans.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 3.
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OTHER INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive offers and directors to file initial reports of ownership and reports
of changes in ownership with the SEC and the New York Stock Exchange. Executive
officers and directors are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely on a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and directors,
all required Section 16(a) filings were timely made, except for a delayed Form 4
filing for one transaction by Terry R. Pillow of a sale of 12,000 shares on
October 30, 2000.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP has been reappointed to audit the consolidated financial
statements of the Company for the year ended December 31, 2001, and to report
the results of their audit to the Audit Committee of the Board of Directors.
A representative of Ernst & Young LLP is expected to be present at the
Meeting, will have the opportunity to make a statement if the representative
desires to do so, and will be available to respond to appropriate questions from
shareholders.
FEES BILLED TO THE COMPANY BY ERNST & YOUNG LLP DURING FISCAL YEAR 2000
AUDIT FEES:
Audit fees incurred by the Company from Ernst & Young LLP during the
Company's 2000 fiscal year for the audit of the Company's annual financial
statements and review of those financial statements included in the
Company's quarterly reports on Form 10-Q totaled $1,500,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES:
The Company did not engage Ernst & Young LLP to provide advice to the
Company regarding financial information systems design and implementation
during the Company's 2000 fiscal year.
ALL OTHER FEES:
Fees billed to the Company by Ernst & Young LLP during the Company's 2000
fiscal year for all other non-audit services performed totaled $1,200,000,
which includes audit-related services of $300,000 and other non-audit
services of $900,000. Audit-related services generally include fees for
services performed relating to employee benefit plans and statutory audits,
accounting consultations and SEC registration statements. The balance of
the work included tax consulting, customs services and other miscellaneous
services.
ADVANCE NOTICE PROCEDURES
Under the Company's bylaws, nominations for director may be made only (a)
by or at the direction of the Board of Directors or an appropriate committee of
the Board of Directors or (b) by any stockholder of record who is entitled to
vote for the election of directors at the meeting who has delivered written
notice to the Clerk of the Company (containing certain information specified in
the bylaws) (i) not less than 75 nor more than 120 days prior to the anniversary
date of the preceding year's annual meeting or (ii) if the meeting is called for
a date which is more than 75 days prior to such anniversary date, not later than
the close of business on the 10th day following the day on which notice of such
meeting is mailed or publicly disclosed, whichever is
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earlier. Under recent changes to the federal proxy rules, if a stockholder who
wishes to present such a proposal fails to notify the Company by the date
required by the Company's bylaws, then the proxies that management solicits for
the annual meeting will include discretionary authority to vote on the
stockholder's proposal in the event it is properly brought before the meeting,
notwithstanding anything to the contrary in the Company's bylaws.
The bylaws also provide that no business may be brought before an annual
meeting except as specified in the notice of the meeting or as otherwise brought
before the meeting (a) by or at the direction of the Board of Directors, (b) by
the presiding officer, or (c) by a stockholder entitled to vote at such annual
meeting who has delivered notice to the principal executive offices of the
Company (containing certain information specified in the bylaws) (i) not less
than 75 nor more than 120 days prior to the first anniversary of the preceding
year's annual meeting, or (ii) if the meeting is called for a date which is more
than 75 days prior to such anniversary date, not later than the close of
business on the 10th day following the date notice of such meeting is mailed or
made public, whichever is earlier. These requirements apply to any matter that a
stockholder wishes to raise at an annual meeting other than those stockholder
proposals included in the Company's proxy materials in accordance with the
procedures under Rule 14a-8 of the Securities Exchange Act of 1934, as amended.
The foregoing summary of these provisions of the Company's bylaws is
qualified in its entirety by reference to the Company's bylaws, a copy of which
may be obtained by writing to the Clerk of the Company at 1895 J.W. Foster
Boulevard, Canton, Massachusetts 02021. The bylaws were filed with the SEC as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal years that
ended December 31, 1988, 1989, 1990 and 1997.
SHAREHOLDER PROPOSALS
Proposals of shareholders submitted for consideration at the annual meeting
of shareholders in 2002 must be received by the Company no later than November
22, 2001, and must be in accordance with the advance notice procedures described
above.
OTHER BUSINESS
The Board of Directors knows of no business that will properly come before
the Meeting for action except as described in the accompanying Notice of
Meeting. However, as to any such business that properly comes before the
Meeting, the persons designated as proxies will have discretionary authority to
act in their best judgment.
FORM 10-K
A COPY OF REEBOK'S ANNUAL REPORT ON FORM 10-K FOR THE 2000 FISCAL YEAR AS
FILED WITH THE SEC HAS BEEN MAILED WITH THIS PROXY STATEMENT AND IS AVAILABLE
WITHOUT CHARGE BY WRITING TO: OFFICE OF INVESTOR RELATIONS, REEBOK INTERNATIONAL
LTD., 1895 J.W. FOSTER BOULEVARD, CANTON, MASSACHUSETTS 02021.
March 26, 2001
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EXHIBIT A
AUDIT COMMITTEE CHARTER
The Audit Committee is a standing committee of the Board of Directors. The
committee consists of no fewer than three Directors who meet the New York Stock
Exchange requirements for independence and financial literacy and expertise. The
committee holds at least three scheduled meetings during each calendar year. Its
primary function is to assist the Board in overseeing the financial reporting
process, reviewing financial information issued to shareholders and others, and
monitoring the systems of internal control and the audit process.
In meeting its responsibilities, the Audit Committee:
- Discusses with the auditors their independence from management and the
Company and the matters included in the written disclosures required by
the Independence Standards Board. Makes recommendations to the Board of
Directors regarding the engagement of the independent auditors, reviews
the arrangements for and scope of the independent audit and the fees
proposed for such audit, and reviews periodically the scope and fees for
additional non-audit services. The Audit Committee also reviews and
approves the discharge of the independent auditors.
- Reviews and concurs in the appointment, replacement, reassignment, or
dismissal of the Director of Corporate Audit Services, the internal
auditor.
- Asks management, the Director of Corporate Audit Services and the
independent auditors about significant financial and related risks or
exposures and assesses steps management has taken and/or should have
taken to minimize such risks to the company.
- Reviews with the Director of Corporate Audit Services the audit plan,
scope and results of work performed, as well as coordination of efforts
with the independent auditors.
- Considers and reviews with the independent auditors and the Director of
Corporate Audit Services the adequacy of the company's system of internal
controls, including information systems controls and security, as well as
any related significant findings and recommendations of the independent
audits and internal auditors together with management's responses
thereto.
- Reviews with management and the independent auditors at the completion of
the annual audit examinations:
-- the Company's annual financial statements and related footnotes to
be included in the Company's Annual Report to shareholders.
-- the independent accountant's audit of the annual financial
statements and their report thereto.
-- any significant changes in the independent accountant's audit plan.
-- any difficulties or disputes with management encountered during the
course of the audit.
-- other matters related to the conduct of the audit which are to be
communicated to the committee under generally accepted auditing
standards.
- Meets with the Director of Corporate Audit Services and the independent
auditors, in separate executive sessions, to discuss any matters that the
Committee or these groups believe should be discussed privately with the
Audit Committee.
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- Reports Committee actions to the Board of Directors on a regular basis
with such recommendations as the Committee may deem appropriate.
- Seeks to ensure open communication among internal auditors, independent
auditors, management and the Board of Directors.
- Provides report of Audit Committee as required by the proxy rules of the
Securities and Exchange Commission.
- Reviews and reassess this Charter at least annually.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's Code of Conduct.
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EXHIBIT B
REEBOK INTERNATIONAL LTD.
EXECUTIVE PERFORMANCE INCENTIVE PLAN
1. PURPOSE
The purpose of the Reebok International Ltd. Executive Performance
Incentive Plan (the "Plan") is to provide an incentive for corporate officers
and other key employees who are in a position to contribute materially to the
success of the Company and its Subsidiaries and to recognize and reward those
officers and employees who make such contributions.
2. DEFINITIONS
The following terms will have the following meaning for purposes of the
Plan:
(a) "Award" means a cash and/or stock bonus paid in accordance with
Section 4.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Compensation Committee of the Board.
(e) "Company" means Reebok International Ltd.
(f) "Participant" means a corporate officer or other key employee of the
Company or a Subsidiary selected by the Committee to participate in
the Plan.
(g) "Performance Criteria" means the following measures of performance:
- net income (before or after taxes);
- operating income;
- sales;
- revenue;
- sales backlog;
- expenses;
- return on sales;
- earnings before income, taxes and depreciation allowance;
- return on invested capital;
- operating profit (before or after taxes);
- employee diversity;
- gross or net margin;
- cash flow;
- earnings per share;
- return on assets;
- return on equity;
- total shareholder return;
- Days Sales Outstanding in accounts receivable;
- market share;
- inventory turnover; and
- stock price.
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A Performance Criterion may be applied by the Committee as a measure of the
performance of any, all, or any combination of the following: the Company, a
Subsidiary, a division, group or other unit of the Company or a Subsidiary, or a
particular product category or categories of the Company or a Subsidiary.
(h) "Performance Goal(s)" means the goal or goals established for a
Participant by the Committee in accordance with Section 4(a).
(i) "Subsidiary" means any corporation in which the Company, directly or
indirectly, controls 50 percent or more of the total combined voting
power of all classes of stock.
(j) "Target Award" means the amount of the target award established for
each Participant by the Committee in accordance with Section 4(a).
3. TERM
The Plan shall be effective as of January 1, 2001, subject to shareholder
approval, and shall continue until December 31, 2005, unless reapproved by the
Company's shareholders or unless amended or terminated pursuant to Section 9
hereof.
4. AWARDS
(a) Within 90 days after the beginning of each fiscal year of the Company
(a "year"), the Committee will select Participants for the year and
establish in writing (i) objective Performance Goal or Goals for each
Participant for that year based on one or more of the Performance
Criteria, (ii) the specific Award amounts that will be paid to each
Participant if the Performance Goal or Goals are achieved (the "Target
Award"), and (iii) the method by which such amounts will be calculated.
At the Committee's option, the Committee may determine that all or any
part of any Award may be paid in shares of Common Stock of the Company
having an equivalent value to the amount of the Award to be paid in
stock, which shares shall be subject to such restrictions as the
Committee may determine. If the Committee determines that any part of
the Award shall be paid in stock, it shall also determine the basis on
which the Award will be converted into stock.
(b) The maximum Award that may be paid to any Participant under the Plan
for any year will be the lesser of 300% of such Participant's annual
base salary in effect during such year or $3,000,000.
(c) The Committee may reduce or eliminate, but may not increase, any Award
calculated under the methodology established in accordance with
paragraph (a) in order to reflect additional considerations relating to
performance.
(d) As soon as practicable following each year while the Plan is in effect,
the Committee shall determine and certify, for each Participant, the
extent to which the Performance Goal or Goals have been met and the
amount of the Award, if any, to be made. Awards will be paid to the
Participants in cash and/or stock, as applicable, following such
certification by the Committee and no later than ninety (90) days
following the close of the year with respect to which the Awards are
made.
(e) The Company shall withhold from any Award made hereunder any amount
required to be withheld for taxes.
5. TERMINATION OF EMPLOYMENT
A Participant shall have no right to an Award under the Plan for any year
in which the Participant is not actively employed by the Company or its
Subsidiaries on December 31 of such year. In establishing Target Awards, the
Committee may also provide that in the event a Participant is not employed by
the Company or its Subsidiaries on the date on which the Award is paid,
Participants may forfeit his or her right to the Award paid under the Plan.
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6. ADMINISTRATION
The Plan will be administered by the Committee. The Committee will have the
authority to interpret the Plan, to prescribe rules relating to the Plan and to
make all determinations necessary or advisable in administering the Plan.
Decisions of the Committee with respect to the Plan will be final and
conclusive.
7. CODE SECTION 162(M)
It is the intent of the Company that all Awards under the Plan qualify as
performance-based compensation for purposes of Code Section 162(m)(4)(C) so that
the Company's tax deduction for such Awards is not disallowed in whole or in
part under Code Section 162(m). The Plan is to be applied and interpreted
accordingly.
8. AMENDMENT OR TERMINATION OF THE PLAN
The Committee may from time to time suspend, revise, amend or terminate the
Plan; provided, however, that any such amendment or revision which requires
approval of the Company's shareholders in order to maintain the qualification of
Awards as performance-based compensation pursuant to Code Section 162(m)(4)(C)
shall not be made without such approval.
9. APPLICABLE LAW
The Plan will be governed by the laws of The Commonwealth of Massachusetts.
10. NO RIGHTS TO EMPLOYMENT
Nothing contained in the Plan shall give any person the right to be
retained in the employment of the Company or any of its Subsidiaries. The
Company reserves the right to terminate any Participant at any time for any
reason and without advance notice notwithstanding the existence of the Plan.
11. NO ASSIGNMENT
Except as otherwise required by applicable law, any interest, benefit,
payment, claim or right of any Participant under the Plan shall not be sold,
transferred, assigned, pledged, encumbered or hypothecated by any Participant
and shall not be subject in any manner to any claims of any creditor of any
Participant or beneficiary, and any attempt to take any such action shall be
null and void. During the lifetime of any Participant, payment of an Award shall
only be made to such Participant. Notwithstanding the foregoing, the Committee
may establish such procedures as it deems necessary for a Participant to
designate a beneficiary to whom any amounts would be payable in the event of any
Participant's death.
12. STOCKHOLDER APPROVAL
This Plan shall be subject to approval by a vote of the stockholders of the
Company at the 2001 Annual Meeting, and such stockholder approval shall be a
condition to the right of any Participant to receive any benefits hereunder.
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EXHIBIT C
2001 EQUITY INCENTIVE AND DIRECTOR
DEFERRED COMPENSATION PLAN
1. PURPOSE
The purpose of this 2001 Equity Incentive and Director Deferred
Compensation Plan (the "Plan") is to advance the interests of Reebok
International Ltd. (the "Company") and its subsidiaries by enhancing the ability
of the Company to (i) attract and retain employees, directors, and other persons
or entities who are in a position to make significant contributions to the
success of the Company and its subsidiaries; (ii) reward such persons for such
contributions; and (iii) encourage such persons to take into account the
long-term interest of the Company through ownership of shares ("Shares") of the
Company's common stock ("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant awards ("Awards") in the form of Options, Stock Appreciation Rights,
Restricted Stock or Deferred Stock, all as more fully described below, and by
providing a means whereby Eligible Directors may defer all or a portion of their
directors' fees.
2. ADMINISTRATION
The Plan will be administered by a committee (the "Committee") of the Board
of Directors of the Company (the "Board"). The Committee will determine the
recipients of Awards, the times at which Awards will be made and the size and
type or types of Awards to be made to each recipient and will set forth in such
Awards the terms, conditions and limitations applicable to it. Awards may be
made singly, in combination or in tandem. The Committee will have full and
exclusive power to interpret the Plan, to adopt rules, regulations and
guidelines relating to the Plan, to grant waivers of Plan restrictions and to
make all of the determinations necessary for its administration. Such
determinations and actions of the Committee, and all other determinations and
actions of the Committee made or taken under authority granted by any provision
of the Plan, will be conclusive and binding on all parties. Nothing in this
paragraph shall be construed as limiting the power of the Committee or the Board
to make adjustments under Section 14 or to amend or terminate the Plan under
Section 19.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Grants of Awards under the Plan may be made prior
to that date, subject to such approval of the Plan.
The Plan will terminate ten years after the effective date of the Plan,
subject to earlier termination of the Plan by the Board pursuant to Section 19.
No Award may be granted under the Plan after the termination date of the Plan,
but Awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 14 below, (i) the maximum
aggregate number of Shares of Stock that may be delivered for all purposes under
the Plan shall be 5,000,000, (ii) the maximum aggregate number of Shares of
Stock which may be issued under the Plan pursuant to the exercise of ISOs (as
defined in Section 7 below) shall be 1,000,000 and (iii) in any calendar year,
Participants may be awarded Options, SARs, Restricted Stock, Deferred Stock, or
any combination of each, for no more than 1,000,000 Shares.
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If any Award requiring exercise by the Participant is canceled or
terminates without having been exercised in full, the number of Shares of Stock
as to which such Award was not exercised will be available for future Awards.
Shares of Stock tendered by a Participant or withheld by the Company to pay the
exercise price of an Option or to satisfy the tax withholding obligations on the
exercise or vesting of an Award shall be available again for Awards under the
Plan. Shares of Restricted Stock forfeited to the Company in accordance with the
Plan and the terms of the particular Award shall be available again for Awards
under the Plan.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional Shares of Stock will be delivered under the Plan and the Committee
shall determine the manner in which fractional share value will be treated.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to participate in the Plan ("Participants") will be persons
in the employ of the Company or any of its subsidiaries ("Employees"), directors
who are not officers or employees of the Company and who are not holders of more
than 5% of the outstanding Shares of Stock of the Company nor persons who are in
control of such a holder ("Eligible Directors"), and other persons or entities
who, in the opinion of the Committee, are in a position to make a significant
contribution to the success of the Company or its subsidiaries. A "subsidiary"
for purposes of the Plan will be a corporation in which the Company owns,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock.
6. DELEGATION OF AUTHORITY
The Committee may delegate to senior officers of the Company who are also
directors of the Company (including, without limitation, the Chief Executive
Officer and/or President) its duties under the Plan subject to such conditions
and limitations as the Committee may prescribe, except that only the Committee
may designate and make grants to Employees (i) who are subject to Section 16 of
the Securities Exchange Act of 1934 or any successor statute (the "Exchange
Act"), including, without limitation, decisions on timing, amount and pricing of
Awards, or (ii) whose compensation is covered by Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Chief Financial Officer of
the Company, as the designee of the Committee, shall act as the administrator
(the "Administrator") of the deferred compensation provisions for Eligible
Directors and shall have authority to prescribe forms and procedures in
connection with any election to defer compensation made under the Plan.
7. OPTIONS
Nature of Options. An Option is an Award entitling the Participant to
purchase a specified number of Shares at a specified exercise price. Both
"incentive stock options," as defined in Section 422 of the Code (referred to
herein as an "ISO") and non-incentive stock options may be granted under the
Plan. ISOs may be awarded only to Employees.
Number of Options. The Committee may from time to time award Options to
any Participant subject to the limitations of Section 4. In addition, each
Eligible Director, upon his or her first election to the Board, shall be awarded
Options covering Shares with a Fair Market Value on the date of such election
equal to six times the average annual cash compensation received by all Eligible
Directors for the immediately prior calendar year. On April 28 of each year each
Eligible Director shall be awarded for each year of service Options covering
Shares with a Fair Market Value on the date of such grant equal to three times
the average annual cash compensation received by all Eligible Directors for the
immediately prior calendar year. If less than one full year elapses between an
initial grant and an annual grant, the Eligible Director shall receive Options
covering Shares for each quarter (or portion thereof) of service with a Fair
Market Value on the date
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of grant equal to one-fourth of three times the average annual cash compensation
received by all Eligible Directors for the immediately prior calendar year.
Exercise Price. The exercise price of each Option granted to an Eligible
Director shall be 100% of the Fair Market Value of a Share at the time the
Option is granted. The exercise price of each other Option shall be determined
by the Committee, but in the case of an ISO shall not be less than 100% (110% in
the case of an ISO granted to a ten-percent shareholder) of the Fair Market
Value of a Share at the time the ISO is granted; nor shall the exercise price of
any other Option be less than 100% of the Fair Market Value of a Share at the
time the Option is granted except that (i) Options may be granted to
Participants who are not Eligible Directors nor executive officers of the
Company at less than Fair Market Value, (ii) in connection with an amendment of
an Option which, in the opinion of the Committee, is or may be treated for tax
or for the purposes of Section 16 of the Exchange Act as a new grant of the
Option, the exercise price of such amended Option may be equal to the exercise
price of the original Option even if such exercise price is less than Fair
Market Value, and (iii) in connection with an acquisition, consolidation, merger
or other extraordinary transaction, Options may be granted at less than Fair
Market Value in order to replace existing Options at comparable value; provided,
that, in no case shall the exercise price of an Option be less, in the case of
an original issue of authorized Stock, than the par value of a Share. For
purposes of this Plan, "Fair Market Value" shall mean, except as provided below,
the closing price of a Share as reported on the New York Stock Exchange on the
date of the grant (based on The Wall Street Journal report of composite
transactions) or, if the New York Stock Exchange is closed on the date of grant,
the next preceding date on which it is open or, if the Shares are no longer
listed on such Exchange, such term shall have the same meaning as it does in the
case of ISOs. In the case of ISOs, the term "Fair Market Value" shall have the
same meaning as it does in the provisions of the Code and the regulations
thereunder applicable to ISOs. For purposes of this Plan, "ten-percent
shareholder" shall mean any Employee who at the time of grant owns directly, or
is deemed to own by reason of the attribution rules set forth in Section 424(d)
of the Code, Stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any of its subsidiaries.
Duration of Options. The duration of any Option granted hereunder shall be
determined by the Committee at the time the Option is granted, except that in
the case of an ISO, the duration shall be no more than ten years from the date
the Option was granted (five years in the case of an ISO granted to a "ten-
percent shareholder" as defined in (c) above).
Exercise of Options and Conditions. Options granted under any single Award
will become exercisable at such time or times, and on and subject to such
conditions, as the Committee may specify. The Committee may at any time and from
time to time accelerate the time at which all or any part of the Option may be
exercised.
Payment for Stock. Stock purchased under the Plan shall be paid for as
follows: (i) in cash or by certified check, bank draft or money order payable to
the order of the Company, (ii) through the delivery of Shares having a Fair
Market Value on the last business day preceding the date of exercise equal to
the purchase price; (iii) by a combination of cash and Shares as provided in
clauses (i) and (ii) above; or (iv) by delivery of a properly executed notice
with an undertaking by a broker to deliver promptly to the Company the amount of
sale proceeds to pay the exercise price. Payment may be made pursuant to clauses
(ii) through (iv) above only if such method of payment is approved by the
Committee with respect to such payment.
8. STOCK APPRECIATION RIGHTS
Nature of Stock Appreciation Rights. A Stock Appreciation Right (an "SAR")
is an Award entitling the recipient to receive payment, in cash and/or Stock,
determined in whole or in part by reference to appreciation in the value of a
Share. In general, an SAR entitles the recipient to receive, with respect to
each
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Share as to which the SAR is exercised, the excess of the Fair Market Value of a
Share on the date of exercise over the Fair Market Value of a Share on the date
the SAR was granted. However, the Committee may provide at the time of grant
that the amount the recipient is entitled to receive will be adjusted upward or
downward under rules established by the Committee to take into account the
performance of the Shares in comparison with the performance of other stocks or
an index or indices of other stocks.
Grant of SARs. SARs may be granted in tandem with, or independently of,
Options granted under the Plan. An SAR granted in tandem with an Option which is
not an ISO may be granted either at or after the time the Option is granted. An
SAR granted in tandem with an ISO may be granted only at the time the Option is
granted.
Exercise of SARs. An SAR not granted in tandem with an Option will become
exercisable at such time or times, and on such conditions, as the Committee may
specify. An SAR granted in tandem with an Option will be exercisable only at
such times, and to the extent, that the related Option is exercisable. An SAR
granted in tandem with an ISO may be exercised only when the market price of the
Shares subject to the Option exceeds the exercise price of such Option. The
Committee may at any time and from time to time accelerate the time at which all
or part of the SAR may be exercised.
9. RESTRICTED STOCK
A Restricted Stock Award entitles the recipient to acquire Shares, subject
to certain restrictions or conditions, for no cash consideration, if permitted
by applicable law, or for such other consideration as determined by the
Committee. The Award may be subject to such restrictions, conditions and
forfeiture provisions as the Committee may determine, including, but not limited
to, restrictions on transfer; continuous service with the Company; achievement
of business objectives; and individual, unit and Company performance. Subject to
such restrictions, conditions and forfeiture provisions as may be established by
the Committee, any Participant receiving an Award will have all the rights of a
stockholder of the Company with respect to Shares of Restricted Stock, including
the right to vote the Shares and the right to receive any dividends thereon.
10. DEFERRED STOCK
A Deferred Stock Award entitles the recipient to receive Shares to be
delivered in the future. Delivery of the Shares will take place at such time or
times, and on such conditions, as the Committee may specify. The Committee may
at any time accelerate the time at which delivery of all or any part of the
Shares will take place. At the time any Deferred Stock Award is granted, the
Committee may provide that the Participant will receive an instrument evidencing
the Participant's right to future delivery of Deferred Stock.
11. ELIGIBLE DIRECTOR DEFERRED COMPENSATION
Deferral of Fees. Any Eligible Director may elect to defer in either cash
or Stock all or a portion of the annual retainer and meeting fees ("Fees")
payable by the Company for his or her services as a director for any calendar
year by delivering a deferral election to the Administrator not later than (i)
December 31 of the year immediately preceding the year to which the deferral
election relates, or (ii) with respect to an Eligible Director's first year or
partial year of service as a director, thirty days following the date on which
such director first became a director. The election form shall specify the
amount or portion of the Fees to be deferred; whether and to what extent such
Fees are to be deferred in cash or in Stock; the manner of payment with respect
to such deferred amounts; and if such Fees are deferred in cash, the date on
which the deferred amounts shall be paid in a lump sum or in which installment
payments shall commence or if such Fees are deferred in Stock, the date on which
such Stock shall be distributed. Such election shall remain in force for
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such calendar year and for each year thereafter until changed or revoked by the
director by written notice to the Administrator not later than December 31
immediately preceding the year to which such change or revocation relates. A
deferral election may not be changed or revoked after the beginning of the year
to which it relates.
Accounts; Interest and Dividend Credits. On the first day of each calendar
quarter (the "Credit Date"), an Eligible Director who elects to defer his or her
Fees shall receive a credit to his or her deferred compensation accounts (the
"Deferred Compensation Accounts") under the Plan as hereinafter provided. Any
portion of a Participant's Fees which are deferred in cash shall be credited to
the Participant's Cash Deferral Account. The amount of the credit shall equal
the amount of Fees deferred in cash by the Participant during the immediately
preceding calendar quarter. Any portion of a Participant's Fees which are
deferred in Stock shall be credited to the Participant's Deferred Stock Account.
The amount of the credit to such Deferred Stock Account shall be the number of
Shares (rounded to the nearest one hundredth of a Share) determined by dividing
the amount of the Participant's Fees deferred in Stock during the immediately
preceding quarter by the closing price of a Share as reported on the New York
Stock Exchange on the Credit Date (based on The Wall Street Journal report of
composite transactions) or, if the New York Stock Exchange is closed on the
Credit Date, the next preceding date on which it is open.
On the first day of each calendar quarter, an amount shall be credited to
each Participant's Cash Deferral Account equal to the Interest Rate (as
hereinafter defined) on the balance credited to the Cash Deferral Account during
the immediately preceding calendar quarter. Interest shall accrue on the balance
of each Participant's Cash Deferral Account commencing with the date the first
payment is credited thereto and ending with the final payment therefrom. For
this purpose, "Interest Rate" shall mean, with respect to any calendar quarter,
the Merrill Lynch Corporate Bond Rate then in effect.
Each time a dividend is paid on the Stock, a Participant who has a positive
balance in his or her Deferred Stock Account shall receive a credit to such
Account. The amount of the dividend credit shall be the number of Shares
(rounded to the nearest one-hundredth of a Share) determined by multiplying the
dividend amount per Share by the number of Shares credited to the Participant's
Deferred Stock Account as of the record date for the dividend and dividing the
product by the closing price per Share reported on the New York Stock Exchange
on the dividend payment date (based on The Wall Street Journal report of
composite transactions) or, if the New York Stock Exchange is closed on the
dividend payment date, the next preceding date on which it is open.
Payment. The balance of an Eligible Director's Deferred Compensation
Accounts shall be paid to the director (or, in the event of death, to his or her
designated beneficiary or estate) as follows: (1) in the case of a Cash Deferral
Account such balance shall be paid, at the director's option, either (i) in a
single lump sum as soon as practicable following the earlier of (x) the date on
which the director ceases to serve as a director of the Company or (y) the date
specified by the director as the distribution date (such earlier date shall be
referred to as the "Distribution Date"), or (ii) in annual installments over a
period, to be specified by the director, not to exceed ten years commencing as
soon as practicable after the Distribution Date, and (2) in the case of a
Deferred Stock Account, such balance shall be distributed in Stock on the
Distribution Date. If an Eligible Director's Cash Deferral Account is paid in
installments, the amount of each installment shall be (l) the balance of the
Cash Deferral Account on the Distribution Date divided by the number of
installments plus (2) interest credits. Upon the death of an Eligible Director,
the Administrator may elect to pay any remaining benefits in a single lump sum.
Designation of Beneficiary. Each Eligible Director may designate in
writing a beneficiary to receive such portion, if any, of the director's
Deferred Compensation Accounts as remains unpaid at the director's
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death. In the absence of a valid beneficiary designation, that portion, if any,
of an Account remaining unpaid at the director's death shall be paid to his or
her estate.
Nature of Promise. The Company shall not be required to segregate or
earmark any funds or Stock in respect of its obligations under Section 11 of the
Plan. No Eligible Director nor any other person shall have any rights to any
assets of the Company by reason of amounts deferred or benefits accrued under
this Plan, other than as a general unsecured creditor of the Company.
No Assignment. Rights to benefits under this Section 11 of the Plan may
not be assigned, pledged or otherwise alienated, other than in accordance with
the beneficiary designation provisions of Section 11(d) above.
12. TRANSFERS
In general, no Award (other than an Award in the form of an outright
transfer of cash or Stock) may be assigned, pledged or transferred other than by
will or by the laws of descent and distribution and during a Participant's
lifetime will be exercisable only by the Participant or, in the event of a
Participant's incapacity, his or her guardian or legal representative. However,
an Award to an Eligible Director or any other Award so providing by its terms
may be transferred by the Participant through a gift to any or all of the
following: any child, stepchild, grandchild, parent, stepparent, mother-in-law,
father-in-law or spouse of the Participant, any trust in which these persons
have more than fifty percent (50%) beneficial interest or a foundation in which
these persons (or the Participant) control the management of assets. In such
case the Award may be re-transferred by any of these permitted transferees back
to the Participant.
13. EFFECT OF TERMINATION OF SERVICE
The Committee shall provide in the Award for the disposition of outstanding
Awards in the event of a Participant's death, disability, or other termination
of service to the Company.
14. ADJUSTMENTS
In the event of a stock dividend, stock split or combination of Shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, after the
effective date of the Plan, the Committee will make any appropriate adjustments
to the maximum number of Shares that may be delivered under the Plan and to any
Participant under Section 4 above.
In any event referred to in paragraph (a), the Committee will also make any
appropriate adjustments to (i) the number and kind of Shares of Stock or
securities subject to Awards then outstanding or subsequently granted, (ii) any
exercise prices relating to Awards, (iii) any other provision of Awards affected
by such change, and (iv) any Eligible Director's Deferred Stock Account. The
Committee may also make such adjustments to take into account material changes
in law or in accounting practices or principles, mergers, consolidations,
acquisitions, dispositions or similar corporate transactions, or any other
event, if it is determined by the Committee that adjustments are appropriate to
avoid distortion in the operation of the Plan.
15. RIGHTS AS A STOCKHOLDER
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Shares. However, the Committee may,
on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends
C-6
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that would have been payable on any or all Shares subject to the Participant's
Award had such Shares been outstanding.
16. CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any Shares pursuant to the
Plan or to remove any restrictions or legends from Shares previously delivered
under the Plan until, (a) in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with, (b)
if the outstanding Shares are at the time listed on any stock exchange, until
the Shares to be delivered have been listed or authorized to be listed on such
exchange upon official notice of notice of issuance, and (c) until all other
legal matters in connection with the issuance and delivery of such Shares have
been approved by the Company's counsel. If the sale of Shares has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations and
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Shares bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Shares pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
17. TAX WITHHOLDING
The Company will have the right to deduct from any cash payment under the
Plan taxes that are required to be withheld and further to condition the
obligation to deliver or vest Shares under this Plan upon the Participant's
paying the Company such amount as it may request to satisfy any liability for
applicable withholding taxes. The Committee may in its discretion permit
Participants to satisfy all or part of their withholding liability by delivery
of Shares with a Fair Market Value equal to such liability or by having the
Company withhold from Stock delivered upon exercise of an Award, Shares whose
Fair Market Value is equal to such liability.
18. MERGERS; ETC.
(a) In the event of any merger or consolidation involving the Company, any
sale of substantially all of the Company's assets or any other transaction or
series of related transactions as a result of which a single person or several
persons acting in concert own a majority of the Company's then outstanding Stock
(such merger, consolidation, sale or other transaction being hereinafter
referred to as a "Transaction") except as provided below or provided by the
terms of the Award (i) all outstanding Options and SARs shall become exercisable
and each outstanding Share of Restricted Stock and each outstanding Deferred
Stock Award shall become free of all restrictions and conditions prior to the
consummation of such Transaction and the Committee shall take all necessary
actions to ensure that Options and SARs remain exercisable for a period of at
least 20 days prior to consummation, (ii) any outstanding balance in an Eligible
Director's Cash Deferral Account shall be paid in a lump sum and any outstanding
balance in an Eligible Director's Deferred Stock Account shall be distributed in
Shares of Stock prior to the consummation of such Transaction, and (iii) upon
consummation of the Transaction, all outstanding Options and SARs shall
terminate and cease to be exercisable. There shall be excluded from the
foregoing any Transaction as a result of which (a) the holders of Stock prior to
the Transaction retain or acquire securities constituting a majority of the
outstanding voting common stock of the acquiring or surviving corporation or
other entity and (b) no single person owns more than half of the outstanding
voting common stock of the acquiring or surviving corporation or other entity.
For purposes of this Section, voting common stock of the acquiring or surviving
corporation or other entity that is issuable upon conversion of convertible
securities or upon exercise of warrants or options shall be considered
outstanding,
C-7
41
and all securities that vote in the election of directors (other than solely as
the result of a default in the making of any dividend or other payment) shall be
deemed to constitute that number of shares of voting common stock which is
equivalent to the number of such votes that may be cast by the holders of such
securities.
(b) The Committee may, by vote of a majority of the members of the
Committee who are Continuing Directors (as defined below), (i) arrange, in lieu
of the action described in paragraph (a) above, to have an acquiring or
surviving corporation or entity in the Transaction, or an Affiliate (as defined
below) thereof, grant replacement Awards to Participants holding outstanding
Awards and (ii) make such adjustments to the treatment of Awards described above
as it deems appropriate, upon advice of the Company's certified public
accountants, in order to avoid the occurrence of an unintended material adverse
effect on the Company's income statement or to avoid violation of the pooling of
interests requirements when a proposed Transaction would otherwise qualify for
pooling of interests treatment.
The term "Continuing Director" shall mean any director of the Company who
(i) is not an Acquiring Person or an Affiliate of an Acquiring Person and (ii)
either was (A) a member of the Board of Directors of the Company at the time the
Plan is approved by stockholders or (B) nominated for his or her initial term of
office by a majority of the Continuing Directors in office at the time of such
nomination. The term "Acquiring Person" shall mean, with respect to any
Transaction, each Person who is a party to or a Participant in such Transaction
or who, as a result of such Transaction, would (together with other Persons
acting in concert) own a majority of the Company's outstanding Common Stock;
provided, however, that none of the Company, any wholly-owned subsidiary of the
Company, any employee benefit plan of the Company or any trustee in respect
thereof acting in such capacity shall, for purposes of this Section, be deemed
an "Acquiring Person". The term "Affiliate", with respect to any Person, shall
mean any other Person who is, or would be deemed to be, an "affiliate" or an
"associate" of such Person within the respective meanings ascribed to such terms
in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended. The term "Person" shall mean a corporation,
association, partnership, joint venture, trust, organization, business,
individual or government or any governmental agency or political subdivision
thereof.
19. AMENDMENTS AND TERMINATION
The Committee will have the authority to make such amendments to any terms
and conditions applicable to outstanding Awards as are consistent with this Plan
provided that, except for adjustments under Section 14 hereof, no such action
will modify such Award in a manner adverse to the Participant without the
Participant's consent except as such modification is provided for or
contemplated in the terms of the Award.
The Committee may at any time discontinue granting Awards under the Plan.
The Board may at any time or times amend or terminate the Plan. In the event of
termination of the Plan, the Board may elect to satisfy all obligations under
Section 11 of the Plan by distributing remaining Deferred Compensation Account
balances in immediate lump sum payments in cash, in Stock or in such other
manner as it may determine.
20. MISCELLANEOUS
This Plan shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts.
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42
[REEBOK LOGO] THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
MARCH 26, 2001
DEAR SHAREHOLDER,
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD AT 10:00 A.M. ON TUESDAY, MAY 1, 2001 AT THE CORPORATE HEADQUARTERS OF
REEBOK INTERNATIONAL LTD., LOCATED AT 1895 J.W. FOSTER BOULEVARD, BOSTON,
MASSACHUSETTS. THE ACCOMPANYING NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
CONTAIN DETAILED INFORMATION AS TO THE FORMAL BUSINESS TO BE TRANSACTED AT THE
MEETING.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING, IT IS IMPORTANT THAT
YOUR SHARES BE VOTED. ACCORDINGLY, PLEASE COMPLETE, SIGN AND DATE THE PROXY CARD
ATTACHED BELOW AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
SINCERELY,
DAVID A. PACE
CLERK
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
PLEASE MARK YOUR
A [X] VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
FOR ALL WITHHELD FROM
NOMINEES ALL NOMINEES
1. Election of NOMINEES: Paul R. Duncan THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
Class II [ ] [ ] Richard G. Lesser PROPOSAL 2. FOR AGAINST ABSTAIN
Directors. Deval L. Patrick 2. To approve the Executive [ ] [ ] [ ]
The undersigned hereby GRANTS authority to Norman Axelrod Performance Incentive Plan.
elect as Class II directors the nominees
listed at right.
- ------------------------------------------
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL 3. FOR AGAINST ABSTAIN
3. To approve the 2001 Equity [ ] [ ] [ ]
Incentive and Director
Deferred Compensation Plan
providing for the issuance
of up to 5,000,000 new shares
of common stock.
PLEASE DO NOT FOLD THIS PROXY.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT [ ]
LEFT
Signatures(s) Dated: , 2001
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NOTE: Please sign exactly as your name(s) appear hereon. When signing as
attorney, executor, administrator, trustee, or guardian, please sign your full
title as such. Each joint owner should sign.
- --------------------------------------------------------------------------------
43
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PROXY
ANNUAL MEETING OF REEBOK INTERNATIONAL LTD.
MAY 1, 2001
The undersigned hereby constitutes and appoints KENNETH WATCHMAKER and
DAVID PACE, or either one of them with power of substitution to each, proxies to
vote and act at the Annual Meeting of Shareholders to be held at the Corporate
Headquarters of Reebok International Ltd., located at 1895 J.W. Foster
Boulevard, Boston, Massachusetts on May 1, 2001 at 10:00 a.m., and at any
adjournments thereof, upon and with respect to the number of shares of Common
Stock of the Company as to which the undersigned may be entitled to vote or act.
The undersigned instructs such proxies, or their substitutes, to vote in such
manner as they may determine on any matters which may come before the meeting,
all as indicated in the accompanying Notice of Meeting and Proxy Statement,
receipt of which is acknowledged, and to vote on the following as specified by
the undersigned. All proxies heretofore given by the undersigned of said meeting
are hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Unless
otherwise specified in the boxes provided on the reverse side hereof, this proxy
will be voted IN FAVOR of all nominees for director and FOR proposals 2 and 3 in
the discretion of the named proxies as to any other matter that may come before
the meeting or any adjournments thereof.
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SEE REVERSE CONTINUED AND TO BE SIGNED ON THE OTHER SIDE SEE REVERSE
SIDE SIDE
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